State of the Union - Detroit's Shining Fiscal Example

As we approach the State of the Union Address when the President is expected to tell us all about income inequality, it seems a good time to talk about bankruptcy. Why? Because the Presidents's agenda to achieve income equality seems to be large-scale bankruptcy; the great equalizer.

I was reading about the ever-looming debt ceiling in the NY Times. In the article discussing a warning from Treasury Secretary Jabob Lew to House Speaker John Boehner, the author says "Last February, government spending reached $230 billion, compared with $45 billion in other months. This year will be worse, because the government shutdown delayed the start of tax season and will concentrate refund payments."

The article is written to suggest that Jabob Lew said it but I added the quotes.

I couldn't believe that the Secretary would be so arithmetically challenged as to say that government spending in 2013 was a mere $725 billion (230+(11*45)). Would that it were true!

Alas, more digging uncovered the actual letter from Lew to John Boehner.

The letter speaks of "net cash outflows" not "government spending"; Lew was saying that deficits will be biggest in February. It was the arithmetically challenged, liberal writer Jonathan Weisman who magically reduced federal spending by more than 80%; were it not obvious that he (and his editors) are pinheads, I'd vote for him for president.

At least this pinhead tried to cut spending!

But the error shows how out of touch the liberal media is with fiscal reality.

As for the cause being the shutdown, this is nonsense since a delay in tax filing would delay net cash outflow, it would not accelerate it. Translation; cheap shot.

Now you may be thinking; what does this have to do with bankruptcy in Detroit?

Well, for one thing, Detroit has been run into the ground by liberal democrat mayors for the last 52 years...and counting. That said, Detroit is a shining model of fiscal conservatism compared to Washington.

For confirmation of this sad fact, compare Detroit with the nation as a whole.

• Detroit has a population of 701 thousand and a debt of $18 billion; debt per capita is $25,677.
• The nation has a population of 317 million and a debt of $17 trillion; debt per capita is $53,627.

Detroit's debt, however, includes unfunded liabilities, the national debt shown above does not include them; including them brings it up to $218,169 per capita.

So I have to ask; what liberal arithmetic can possibly deduce that Detroit is in deep shit but the US is not?

I turned to my favorite liberal economist, Paul Krugman.

Krugman wants us to believe that Detroit "...does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces."

Innocent victim or innocently victimized by bad progressive, liberal, socialist governance?

Krugman cites "...jobs fleeing the urban core even when employment in greater Detroit was still rising, and even as other cities were seeing something of a city-center revival."

Who wouldn't flee a property tax mill rate of 88.178 (in 1991)?

Who wouldn't flee the highest tax rates in Michigan?

Who wouldn't flee a city with an over-sized public workforce?

Why does Krugman ignore job flight to right-to-work states and low-wage, low-regulation countries?

Everything Barack Obama and his allies say today, the corrupt Democrats who destroyed Detroit were saying yesterday (and for the last 52 years). Spending restraint was delayed until it was far too late to make a difference… a point that was reached some years before outright collapse. Benefit entitlements accumulated until there was no way for the private sector to keep its public overlords in the style to which they had become accustomed. Do you like those special Obamacare subsidies handed out to rich Congressional representatives and their six-figure staffers? Detroit politicians have been looting the city’s treasury like that for decades just as Washington has looted Social Security.

Krugman does not argue that Detroit is not or should not be bankrupt yet he continually argues in favor of national deficit spending; completely ignoring the fact that the national finances are eight times worse than Detroit's.

Reader Request
My brother Kel asked me to plot minimum wage hikes on the same chart as unemployment. Here ya go Bro.

The correlation is fairly clear except for the delay in 1967 caused by the industrial boom (and the 10% tax cut in 1965) and 1997 when the tech bubble fueled employment to the highest level in three decades.

In that same post, I showed a linkage between the minimum wage and the cost of living.

I subsequently discovered a better linkage between payments on the national debt and the cost of living.

After having linked cost of living increases to payments on the national debt, I wanted to plot them on the same chart.

Since published debt payment levels only go back to 1988, the plot only goes back that far. I normalized both the cost of living (by CPI) and debt payments (as a percentage of unadjusted GDP) to 1987 and plotted the result.

As I noted previously, CPI doesn't include things like food and energy. If these are included as in the EPI (Everyday Price Index), the result is nearly a perfect match (both currently up by a factor of about 2.4 since 1988). It even shows the 14% increase in debt payments by the Bush administration is it's last three years and the 15% drop in debt payments by the Obama administration starting in 2009.

So, when the liberal media try to tell you that debt doesn't matter and that it helps the poor when we borrow money to give to them, don't be fooled.

Any competent financial planner can tell you about the "power of compounding interest."  It can work for you or against you when you "leverage your money" by "borrowing to invest."   It only benefits you until an untimely "change happens."  Then the "law of compounding interest" turns on you and consumes you for breakfast.

Our "government" has been "using financial leverage" for nearly a century... and it now looks like the "big chicken is coming home to her fiscal coop." When the politicians say they want to invest our money, it's good to keep in mind that government is inherently unprofitable.

Our  "government experts'" assurances that "Our dollar is as sound as the 'Good faith and credit of the United States," sound very similar to the unscrupulous real estate salesman who told you "The good Lord isn't making anymore land... the price of real estate (and your home) can only go up!".

Recall that it was the government policy to expand home ownership by lowering the mortgage bar that led directly to the crash of 2008. 

Also don't be fooled when the President asks Congress to squander even more of our hard-earned cash during the State of the Union Address tonight. Enjoy the circus as those on the President's right applaud and those on his left frown as the rest of us drown in a sea of red ink.

Shibboleths

I read an article using this word and I had to look it up.

shibboleth

Pronunciation: /ˈʃɪbəlɛθ/

noun

• a custom, principle, or belief distinguishing a particular class or group of people, especially a long-standing one regarded as outmoded or no longer important.

Having done so, I was inspired to use it in a post about political leanings on both sides of the aisle.

Education

Conservatives believe in the free market and, therefore oppose the government near-monopoly on education. They also oppose the liberal inculcation of our children.

Liberals love government intrusion and don't believe in letting people grade educators with their wallets. They believe that throwing (other people's) money at publicly financed schools will make them excellent.

Let's try one of Einstein's thought experiments;

• Imagine the best and worst schools in the country. 
• Imagine transplanting the students of both schools, one to the other.
• What happens?

To my knowledge this experiment has never been tried but the probable result should not surprise anybody except for those who proclaim money to be the answer; the students who excelled will continue to excel and those who failed will continue to fail.

  

The Middle Class

Conservatives and liberals love to 'fight for' the mythic middle class.

I say it's a fiction. Where are they?

State taxes and FICA crush the lower half while income taxes crush the middle. The top pays to undo what state taxes and FICA do to the bottom.

Debt payments raise the cost of living for all.

Entitlements

Conservatives believe in personal responsibility and therefore oppose all government-run social programs, only two of which are actual entitlements; Social Security and Medicare.

I say actual because we pay a specific tax for them (FICA) so folks feel entitled to the benefit. The problems with these two are that Social Security is a ripoff and Medicare is woefully underfunded because of a dip in birthrates following the Baby Boom; can you say Ponzi?.

Liberals believe that government-run social programs, and the redistribution of wealth that they represent, are the best things since Das Kapital, the bible of class warfare.

Even after 50 years of experiment here (and more elsewhere) show no improvement in poverty rates, they keep hoping these boondoggles will bear fruit.

Gun Control

Conservatives believe that the Constitution is the go-to authority on this subject and the Supreme Court has agreed.

Liberals ignore DC v. Heller and also ignore logic.

Global Warming

Conservatives don't buy into this for one (or more) of these reasons;

• Contradictory science.
• Consequences for economy.
• We have bigger problems.

Liberals love the idea of mankind destroying the earth and the liberal politicians are only too happy to use that as an excuse to lighten everyone's wallets. Meanwhile, many liberals live on the coast and happily clamor for government bailouts after floods; if they don't listen to themselves, why should anyone else?

Government Spending

Conservatives favor small government with commensurately small spending.

Liberals favor government intrusion in all aspects of life; and abusing government's taxing (and borrowing) and spending authority to force conservatives to split the costs.

All of government should cost 10%, not 40% of national income.

  

Tax Loopholes

Conservatives want breaks for businesses to promote growth.

Liberals want breaks for consumers to promote consumer spending.

I say get rid of all breaks ($2 trillion/year) and cut all taxes by 30%. Then get rid of social programs and use a flat tax of 10% for all.
  

Healthcare

Conservatives want the free market to provide health insurance.

Liberals want the government to provide health insurance for all.

As a result, we get the clusterf_ck of Medicaid, Obamacare, Medicare and private insurance.

Health care costs balloon (slope of curve below triples after 1965) when taxpayers chip in since this is free money to providers.

Debt, GDP and the Cost of Living

Conservatives believe that people should live within their means; save some for later.

Liberals believe that people should live within the means of others and borrow the rest.

This has led to $17 trillion in federal debt plus $11 trillion in consumer debt $4 trillion in toxic assets plus $1.5 trillion in state debt plus $1.8 trillion in local debt plus $1 trillion in student debt.

$35.3 trillion in all.

Sadly, the spending fueled by government debt makes GDP look good.

When we borrow money, our monthly expenses go up; our cost of living increases.

Moral Issues

Conservatives rant about moral issues like contraception and abortion.

Liberals rant about the same things.

We also have homosexuality, drugs, alcohol, gun control, racism, euthanasia, cloning, slavery, etc.

Government should promote liberty and leave morality to others.

George Washington's reputation as a man of moral fortitude reveals more about America's view of morality than it does about the man himself. Washington was an exceedingly bland heroic leader, embodying an eighteenth-century ideal of republican virtue that emphasized duty, sacrifice and honorable disinterest. 

"Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." -- John Adams

If a nation's government is founded on individual liberty, it will afford to its citizens the opportunity to live securely and to relate to one another in ways that will be mutually beneficial. Liberty, in other words, affords a moral opportunity.

"Liberty... is the great parent of science and of virtue; and a nation will be great in both always in proportion as it is free." --Thomas Jefferson to Dr. Willard, 1789.

"To suppose that any form of government will secure liberty or happiness without any virtue in the people, is a chimerical idea."-- James Madison

Except for alcohol and slavery, the founders didn't have the same issues as we currently have but their solution is just as good today as it was then; promote liberty for the virtuous, those lacking virtue are ungovernable.

Liberal Immigration Reform: Exposed

An op-ed piece last month from my congressman, Jim Himes, illustrates the nonsense we can expect the hear from the fiscal liberals this year.

I've rebutted Mr. Himes on this subject before but he's given me some numbers this time to highlight the ridiculous nature of what we'll be hearing as November approaches.

My rebuttals in red.

Immigration Reform: A Jobs Plan & Fair Reform

Published 5:38 pm, Friday, December 20, 2013

Imagine, in this moment of hesitant economic recovery, a federal jobs law that would put 120,000 people to work every year. Imagine it increasing the annual incomes of Connecticut families by $160 million and breathing entrepreneurial energy into high-tech startups like etouches in Norwalk and corporations like Deloitte and Starwood in Stamford. Imagine if that legislation also dramatically cut our deficit.

Who are the 120,00? How will Connecticut families benefit by $160 million?

While Kool-Aid drinkers everywhere are undoubtedly enthralled by this opening, Himes never shows how these things might come to pass; instead he hopes we won't notice as he changes the focus from Connecticut to a broader defense of the indefensible.

Too good to be true? Far from it. It's there for the taking.

It doesn't really sound too good to be true that Connecticut's 1 million families could earn $160 more per year except that Himes never says how; $3.08/week! Wow, call Guinness!

Even in a House of Representatives frozen in dysfunction, comprehensive immigration reform, which passed the Senate in June by a 68-32 margin, would easily pass the House if it were brought to a vote.

Cheap shot at Republicans who disagree with Himes; a classic liberal tactic.

It's not up for vote because it's a bad idea, though Himes would apparently vote for it; no surprise there.

The economic benefits of well-regulated immigration are not controversial. They are the story of America, and many of us have lived them. Foreign-born Americans are twice as likely to start a small business as the native born. Think of your local restaurants, car washes, and delis. Two in five companies on theFortune 500 were started by immigrants or their children. Think of Andy Grove of Intel and Sergey Brin of Google.

True but irrelevant except when he says that well-regulated immigration is the story of America; if so, why the kerfuffle?

The non-partisan Congressional Budget Office (CBO) believes that passage of immigration reform would add $1.4 trillion to our GDP in the next ten years.

Given that GDP includes government spending and each illegal immigrant costs $14,148/year (so 11 million of them cost $155 billion/year; $1.55 trillion over 10 years), this statement is of dubious value; their contribution is less than their cost.

The long-term strength of Social Security and Medicare would be improved by the expanded legal workforce and youth of our immigrant population. The CBO estimates that the Senate immigration bill would cut deficits by $200 billion over 10 years.

For $200 billion in 10 years, we're talking $20 billion/year in taxes. If we assume that half of the 11 million illegals actually have jobs, this represents $3,636/each. This represents the equivalent of FICA (15.4%) on an average income of $23,612; these folks are poor and are thus likely to consume far more in benefits than they pay in taxes.

In addition, $200 billion is less than 15.4% of $1.4 trillion so these numbers don't add up at all. 

Finally, with jobs scarce and 11 million more low earners, deficits are more likely to increase, especially for states whose Medicaid rolls would swell.

Critics of immigration reform, or of immigration itself, argue that immigrants, legal and illegal, consume social services, getting benefits for which they do not pay. The undocumented are prohibited by law from using federal safety net programs such as food stamps or Medicaid. They do use hospital emergency rooms and free clinics and do therefore "cost" the system $4.3 billion per year. However, most of the undocumented actually do pay income and payroll taxes, estimated at $11.2 billion.

Unpaid medical bills were $55 billion/year in 2008 so the illegals apparently consume 8% of this even though they represent only 3.5% of the population; a decidedly unhealthy lot that will consume even more in Obamacare subsidies or Medicaid; just what liberals need to further their well-intentioned but ill-considered agenda of economic destruction.

Illegals can only pay taxes if they have fraudulent SSNs, and many do.

It's no stretch that some use them to get welfare as well as jobs; it's a felony but being caught results in free room and board (prison) costing taxpayers an average of $45,000/year; far more than they won't pay in taxes. I'm not advocating imprisonment; deportation is cheaper.

Himes is misstating the $11.2 billion number anyway, the estimate is for sales and fuel tax, not payroll tax and damned little income tax, if any, based on assumptions.

In any event, this is more an argument for immigration reform than against it. Legalizing the undocumented through a rigorous earned path would help them stay employed and reduce the ills associated with living in the shadows. The alternative is wholesale deportation, an alternative widely regarded as unrealistic and extraordinarily expensive.

I beg to differ; Himes' rigorous path is to let them stay and continue consuming more than they produce. Our economy can't even keep legal workers employed. They chose to live in the shadows, nobody forced them.

Even with these inflated figures, deportation is attractive with payback in less than two years.

The immigration bill awaiting action in the House does three big things: it allocates significant money (some say too much) to border security; it creates a system that simplifies the ability of employers to determine employment eligibility; and it provides a tough earned path to legalization for the nation's 11 million undocumented immigrants.

Good; keep more from entering. Good; easier to find potential deportees although it should not be entrusted to employers. Bad; unless the path includes exit and reentry by legal means.

In the face of narco-trafficking and terrorism, the importance of border security is self-evident. However, secure borders can go only so far in stopping illegal immigration since almost half of undocumented immigrants overstay a visa rather than sneak across a border. And, as the saying goes, as long as employers are willing to hire the undocumented, 50-foot walls along our border will spawn 52-foot ladders.

This is because government is not doing what we pay it to do; Himes, for example, wrote this piece of crap on our dime.

We paid $16 billion for border patrol and immigration control last year but, despite deporting nearly 2 million over the last 5 years, we still have an estimated 11 million illegals.

How can he say half are visa overstays if the count is a guess in the first place? No documents, remember?

Immigration reform would address this problem by expanding the E-Verify system so that employers could confirm employment eligibility online with better and more secure documentation. Those employers then breaking the law would be subject to serious penalties. Immigration reform would also improve the immigration system for highly educated immigrants to be sure that they complement rather than crowd out native workers.

Leaving this up to employers is tantamount to leaving the fox in charge of the hen house. Why aren't employers subject to serious penalties already for aiding and abetting? Remember, these employees are criminals. Treasury should be verifying the SSNs of all who pay FICA and conducting spot-checks in all of the likely workplaces instead of snooping on conservative groups.

Finally, the earned path to legalization, while controversial, offers real economic benefits as the undocumented move into the legal economy, while ending the expensive and inhumane aspects of a deportation-oriented system. Deportations, which are at historically high levels, cost taxpayers $18 billion a year and serve mainly to push the undocumented further into the shadows, to live lives of fear and abuse. "Successful" deportations often tear families apart, result in long stretches of expensive incarceration and tie up the courts. In response to this suffering, the Catholic Church, the Unitarian Universalists, the American Jewish Council, and many other religious institutions have urged passage of immigration reform.

The figure of $18 billion/year is nonsense; $47,368 per deportee for Obama's 1.9 million over 5 years? Even the inflated estimate here is only $25,900 per deportee. However, $18 billion is still a lot less than $155 billion. Again, nobody here forced them to be criminals.

Then again, considering the $11 trillion over budget that Obama spent on bailouts and toxic securities... 

If the religious groups feel so strongly about it, fine; let them subsidize the $155 billion yearly cost of the illegals (they're probably non-profits that pay no taxes so by doing so, they can feel good about themselves, a basic liberal theme). Otherwise, this is like Saudi Arabia urging the US to continue wasting blood and treasure policing their neighborhood; put up or shut up.  

Less controversial is the idea that DREAMERs, young adults who as children were brought to America by their parents, should have access to an earned path to citizenship. Many DREAMERs know no other home. Some do not speak the language of their native country. Immigration reform establishes a path for them, through either education or military service, to work toward citizenship while contributing to our communities.

Few would hold children responsible for the crimes of their parents. That said, it begs the question; how do we sort out the 20-year-old recent arrival from the 20-year-old brought here illegally by his parents? There's no documentation, remember?

Who will pay to educate them? College is hugely expensive because of subsidies; does Himes propose more of the same?

If liberals succeed in decimating the military, how can it absorb millions of illegal immigrants? In addition, proficiency in English and civics is required; how many can meet those requirements given the pathetic performance of our publicly financed school system?

More rhetoric without serious thought behind it.

The proposed earned path is a far cry from amnesty. Undocumented immigrants would be placed at the end of a 13-year line behind legal applicants to receive a green card and, subsequently, eligibility for citizenship. During this period, they would need to stay gainfully employed, pay all taxes, stay out of trouble, and pay a $2,000 penalty for their initial immigration violation.

This is utter nonsense on several fronts.

The waiting line varies from 0-24 years. It is not fixed at 13 years.

Not even citizens can remain gainfully employed that long (at least 16 years after the initial 0-24 year wait with our 675,000 annual quota). Many are dropping out of the job market because of the impact of dumb policies like this.

Fining a child brought here illegally by parents is morally wrong but fining the parent $2,000 for 0-24 years of taxpayer cost at $14,148/year is an affront to all taxpayers. This shows that Himes does not represent taxpayers' interests, he just wants more democrat voters; he's banking on US bankruptcy occurring after he retires.

It's hard to imagine that we will be presented with a better opportunity any time soon to create jobs, reduce our deficits, and return to an immigration system more reflective of our national and religious values. On the heels of strong bi-partisan support in the Senate, it's time for the House of Representatives to say yes to this opportunity.

This idea will not create jobs outside of government, it will not decrease deficits and it may well be morally reprehensible. That said, the religious among us are welcome to pony up or shut up. As for the House, this is one giveaway too many; vote no!

Jim Himes is the U.S. representative from Connecticut's 4th Congressional District.

In the spirit of hope and change; hopefully this will change.

Oxymoron: The Liberal Economist

I chose the title of this post because economics is about supply and demand but liberals focus strictly on the demand side of the equation; they constantly demand that more be taken from those who earn and given to those who don't.

I confess that I read the New York Times every day. I read it because the journalism is far superior to my local paper and because its left-leaning bent gives me fodder for this blog.

One of the regular contributors to the editorial (opinion) pages is Paul Krugman. This guy is so far left that he makes Keynes look like a right-winger. The Times likes to tout him as a Nobel Laureate but, technically, there is no Nobel prize for economics; just physics, chemistry, medicine & peace. The Times likes to inflate itself while Krugman yammers on about deflating our wallets.

The thing that irks me most is his constant call for more deficit spending to boost the economy. It would indeed boost the economy as measured by GDP but recall that GDP is a faulty measure designed to make socialist policies look good by including government spending (but not borrowing). The accumulated debt caused by this reckless behavior yields an average annual cost of living increase of 5.5%, dwarfing the currently anemic GDP growth rate of about 2%.

Here is Krugman's latest load of bullshit with my rebuttal.

OP-ED COLUMNIST

Fiscal Fever Breaks

By PAUL KRUGMAN

Published: December 29, 2013 

In 2012 President Obama, ever hopeful that reason would prevail, predicted that his re-election would finally break the G.O.P.’s “fever.” It didn’t.

No surprise since the president is frequently wrong.

This is what hopeful gets us:

Justice; Fast & Furious, AP spying, Fort Hood, banks fined but no one jailed....
State/Intelligence; Benghazi, Susan Rice, Snowden, Syria, North Korea, Iran...
Defense; Drones, Guantanamo, sexual harassment, Al Qaeda's resurgence...
Treasury; Tea Party bashing, $4 trillion in toxic assets at Federal Reserve, debt...

And last but not least; the Obamacare train wreck with a net loss of 3 million insured so far accompanied by a large expansion of Medicaid that will further cripple state finances when federal funding (but not taxation) stops.

Fred R. Conrad/The New York Times

Paul Krugman

But the intransigence of the right wasn’t the only disease troubling America’s body politic in 2012. We were also suffering from fiscal fever: the insistence by virtually the entire political and media establishment that budget deficits were our most important and urgent economic problem, even though the federal government could borrow at incredibly low interest rates. 

Bullshit. Most media is liberal and they love it when the government borrows vast sums for social engineering programs. The interest rates matter little if you can't afford the principal. Those who insist that deficits are bad (like Fox News) are quite correct.

Instead of talking about mass unemployment and soaring inequality, Washington was almost exclusively focused on the alleged need to slash spending (which would worsen the jobs crisis) and hack away at the social safety net (which would worsen inequality).

Bullshit. This administration has done more to cause inequality than any in recent history despite the fact that more than 80% of the federal budget goes to social engineering programs. The bank and auto bailouts and low interest rates helped shareholders but did nothing for the bottom 50%. In addition, our population is aging as boomers near retirement and older workers simply earn more than younger ones; experience pays. 

Take away the safety net, target some programs for use-fees and trim the fat and the federal government costs $600 billion, not $3.8 trillion.

All federal spending except for the borrowed part (21% this year) is confiscated from the private sector where real jobs are created.

Get rid of sales, property, sin and fuel taxes and make FICA (Social Security and Medicare) a forced savings plan that can be inherited (401K-like) instead of a redistribution plan and we won't need a safety net.

So the good news is that this fever, unlike the fever of the Tea Party, has finally broken.

Bullshit. The government is still sucking the life out of the economy and conservatives like me keep screaming that things must change.

True, the fiscal scolds are still out there, and still getting worshipful treatment from some news organizations. As the Columbia Journalism Review recently noted, many reporters retain the habit of “treating deficit-cutting as a non-ideological objective while portraying other points of view as partisan or political.” But the scolds are no longer able to define the bounds of respectable opinion. For example, when the usual suspects recently piled on Senator Elizabeth Warren over her call for an expansion of Social Security, they clearly ended up enhancing her stature.

Bullshit. Warren is piled on because she is an idiot. She wants to increase benefits by increasing taxes or borrowing. This is precisely the behavior that led to the largest municipal bankruptcy in US history; Detroit. It has also led to municipal insolvency elsewhere.

Deficits are bad, and as the president would say, period.

But the liberals keep hoping that, some day, their dumb ideas will work despite all evidence to the contrary.

What changed? I’d suggest that at least four things happened to discredit deficit-cutting ideology.

First, the political premise behind “centrism” — that moderate Republicans would be willing to meet Democrats halfway in a Grand Bargain combining tax hikes and spending cuts — became untenable. There are no moderate Republicans. To the extent that there are debates between the Tea Party and non-Tea Party wings of the G.O.P., they’re about political strategy, not policy substance.

Bullshit. Most republicans are moderate and that's part of how we got into this mess. 

Tea Party means fiscally conservative, states rights and adherence to (Article 1, Section 8) the Constitution. 

There is about $1 trillion in tax loopholes, subsidies and credits that could be swapped for the same amount of property, sales, sin, fuel and income taxes. Neither side has the political will to do what needs doing.

Besides, we don't need any tax hikes. We need spending cuts deep enough to make real progress in paying off all the debt we've accumulated (more than $20 trillion across three levels of government). This will necessarily drive up the cost of living but, the sooner we do it, the least painful it will be.

Second, a combination of rising tax receipts and falling spending has caused federal borrowing to plunge. This is actually a bad thing, because premature deficit-cutting damages our still-weak economy — in fact, we’d probably be close to full employment now but for the unprecedented fiscal austerity of the past three years. But a falling deficit has undermined the scare tactics so central to the “centrist” cause. Even longer-term projections of federal debt no longer look at all alarming.

Bullshit, technical foul. Borrowing plunged from $1.4 trillion to $0.8 trillion on income of $3 trillion. It's still WAY too high at 21% (-5% is needed); meanwhile, the debt marches on. The federal portion of the debt is now approaching six times the income of the federal government.

Unemployment figures are bullshit too and everyone knows it. There are 171 million Americans between 20 and 65 years old and 144 million have jobs; this is more than 15% unemployment and that doesn't count the 19 million part-time workers, many of whom would prefer full-time employment.

Of jobs created this past year, 75% were part-time.

How can it be austerity when more than 80% of federal spending and 50% of state and local spending is for social programs? After subtracting Social Security and Medicare ($1.6T) we spend about $3 trillion/year on welfare and Medicaid.  Over 50 million poor this is $60,000 each (the median income is $40,000).

Of course, the poor receive only a tiny fraction since most is sucked up by government salaries, health insurance, retirement, buildings, utilities, blah, blah, blah. What we're doing does not work.

Safe Bet

Most sane people would agree that $17 trillion in federal debt plus $4 trillion in toxic assets plus $1.5 trillion in state debt plus $1.8 trillion in local debt is pretty alarming. Especially alarming since government is a black hole for cash.

Of course, casting doubt on liberal ideas violates an important dictum:

“Never argue with an idiot. They will drag you down to their level and beat you with experience.” 

Speaking of scare tactics, 2013 was the year journalists and the public finally grew weary of the boys who cried wolf. There was a time when audiences listened raptly to forecasts of fiscal doom — for example, when Erskine Bowles and Alan Simpson, co-chairmen of Mr. Obama’s debt commission, warned that a severe fiscal crisis was likely within two years. But that was almost three years ago.

Bullshit. How soon we forget the positive aspects of sequestration; $85 billion/year in automatic federal spending cuts. Not much (2.2% of federal spending) but proof of concept.

Krugman always whines about sequestration (but not in this context!) but not about the $415 billion in 2013 debt payments (10.9% of federal spending but only 2.57% of debt); probably less than the interest.

Obama has repaid less debt percentage than any predecessor since records were kept (less than 3% of GDP per year compared to Bush (41) at 7.75%). This is why the recent cost of living has been so low as the debt blossoms since Obama has also added more debt ($7 trillion) than any politician in history.

Finally, over the course of 2013 the intellectual case for debt panic collapsed. Normally, technical debates among economists have relatively little impact on the political world, because politicians can almost always find experts — or, in many cases, “experts” — to tell them what they want to hear. But what happened in the year behind us may have been an exception.

For those who missed it or have forgotten, for several years fiscal scolds in both Europe and the United States leaned heavily on a paper by two highly-respected economists, Carmen Reinhart and Kenneth Rogoff, suggesting that government debt has severe negative effects on growth when it exceeds 90 percent of G.D.P. From the beginning, many economists expressed skepticism about this claim. In particular, it seemed immediately obvious that slow growth often causes high debt, not the other way around — as has surely been the case, for example, in both Japan and Italy. But in political circles the 90 percent claim nonetheless became gospel.

Bullshit. This is the economic equivalent of the Mohammed video; pure sleight of hand.

Debt has been close-to or greater than 100% of GDP for quite some time; our debt of $17 trillion is greater than our GDP of $16 trillion. This doesn't count the $4 trillion in toxic mortgage assets held by the Federal Reserve. Does anyone beside Krugman doubt the economy still languishes despite spending (wasting) $11 trillion we don't have?

Besides, nobody listens to economists except other economists (sorry Clare) for the reason cited by Krugman; additionally, God forbid that somebody vets their work.

Then Thomas Herndon, a graduate student at the University of Massachusetts, reworked the data, and found that the apparent cliff at 90 percent disappeared once you corrected a minor error and added a few more data points.

Now, it’s not as if fiscal scolds really arrived at their position based on statistical evidence. As the old saying goes, they used Reinhart-Rogoff the way a drunk uses a lamppost — for support, not illumination. Still, they suddenly lost that support, and with it the ability to pretend that economic necessity justified their ideological agenda.

Bullshit. Who vetted Herndon's work? Also, see Tyler Cowen's comments and Reinhart and Rogoff's rebuttal. Of course, Krugman doesn't expect his liberal followers to double-check him.

Still, does any of this matter? You could argue that it doesn’t — that fiscal scolds may have lost control of the conversation, but that we’re still doing terrible things like cutting off benefits to the long-term unemployed. But while policy remains terrible, we’re finally starting to talk about real issues like inequality, not a fake fiscal crisis. And that has to be a move in the right direction.

Bullshit, bullshit, bullshit! Except the part about terrible policy. 

Of course it matters; debt service drives up the cost of living. Increased cost of living hurts everyone, especially the poor and those on fixed incomes (the elderly and the disabled), those these policies are supposed to be helping.

Long term unemployment is being fueled by dumb government policies like Obamacare and the tax increases that come with them. Part-time work is on the upswing for the same reason.

What do the liberals mean by inequality? Should a newborn have the same assets as an neurosurgeon? How about a burger-flipper and a franchise owner? How about a teacher's assistant and a principal? Inequality is a fact of life unless you are a drone in the Borg collective.

I prefer capitalists.

If they're talking about equality in opportunity, the US has always been the land of opportunity.

The son of Jamaican immigrants becomes National Security Advisor; Powell.
A woman becomes National Security Advisor and member of Augusta; Rice. 
The son of Cuban immigrants becomes Senator; Rubio.
All conservatives.