Monday, December 3, 2012

And Now a Word From Our Sponsors - The Lenders

And Now a Word From Our Sponsors - The Lenders
Ron Boat

"Never a borrower nor a lender be." Remember those words? Polonius had it right. But seems like someone in government forgot because over the years they lent money to unstable situations which later defaulted or the US forgave the debt. AND... as we are all more painfully aware, they continue to borrow without any sense of responsibility, restraint or remorse.

Without the ability to create debt, no one would own a house or in some cases even a car. Debt is a part of business allowing it to grow sensibly and responsibly. Governments routinely borrow - even though they probably shouldn't - in order to make it through slow times or they issue bonds (which are in fact a debt) to get money so they can build stadiums, schools and new monoliths to their own self-believing government efficiencies. Unfortunately, borrowing has become looked at like taxes... "there's an endless supply of money so... let's spend it."

What irresponsible people and governments seem to forget is that 1) debts are to be repaid, 2) you need to plan and make sure there's a means of paying it back (like a job or tax revenues) and 3) there's a cost associated with the debt - the interest.

When you have too much debt, you should cut spending in order to pay it back. Something current lawmakers seem unwilling to do or are unknowledgeable about how. Let's see how the government's numbers translate to ordinary people:

* U.S. Tax revenue: $2,380,000,000,000

* Fed budget: $3,793,000,000,000

* New debt: $ 1,650,000,000,000

* National debt: $16,330,000,000,000

* Recent budget cuts: $ 38,500,000,000

Let's now remove 8 zeros and pretend it's a household budget:

* Annual family income: $23,800

* Money the family spent: $37,930

* New debt on the credit card: $16,500

* Outstanding balance on the credit card: $163,300 (how high is your personal "debt ceiling?")

* Total budget cuts: $385

Got It?

If a husband or wife truly love their spouse and family, they don't make financial decisions that will cost them their futures and everything they own. I look at the country the same way. If the man (and men) in charge really cared about America, they would act responsibly in their duties and not overburden its citizens with ever growing piles of unrepayable, unsustainable obligations. And remember that the senate has not passed a budget in three and a half years and even the president’s own submission some years back was rejected… even by Democrats.

As a taxpayer and while reading this, you now owe, thanks to the government, about $150,000 – some have put it over $220K (about $8,000 to the Chinese). That's for the current national debt which stands at about $16,330,130,500,284 and is growing at the rate of about $179,000 every 4 seconds. (almost $4 Billion / day)

And who are our financial benefactors?
China (the biggest foreign lender), Japan, UK, Caribbean Banking Centers, Oil Exporters, Brazil, Russia, Hong Kong, Luxembourg, Taiwan, Switzerland - and on down to the $128 we individually owe Chile, the $113 we owe Malaysia and the $108 we each owe the Philippines ending up at each other's aging grandmother because the America public holds the majority of the national debt.

What people keep forgetting and don't want to even think about is the scary little thing known as "unfunded liabilities (debts)." Those pesky little future payments for things like Social Security, Medicaid and Medicare, and other very real obligations that have no current predictable and steady revenue stream but will come due at some point. Sit down and grab your martini because they make our current $16 Trillion dollar debt look like a car payment. Consider that number is now nearly $90,000,000,000,000 - Yes $90 Trillion. And some have even estimated upwards of $120 Trillion or more. (The numbers in all this keep moving)

The National Debt will grow an additional $9 trillion over the next decade, to around $25 trillion, as Congress tacks on trillions for health care, cap and trade, new federal stimulus programs, and other yet to be identified spending programs. The most recent Trustees' report puts unfunded Medicare liability at around $42.8 Trillion and Social Security around $20.5 trillion. In theory, the Medicare and Social Security trust funds have at least some money to pay a portion of the bills that are coming due. In actuality.... the cupboard is bare: 100% of the payroll taxes for these programs were spent in the same year they were collected. In other words, the money in the S.S. bank is Zero, Zip, Zilch, Nada.

And what happens when they're short to pay the bills? Normally, in exchange for the payroll taxes that aren't paid out in benefits to current retirees in any given year, the trust funds got nonmarketable Treasury debt. But now, as the baby boomers' promised benefits swamp the payroll-tax collections from today's workers, the government has to swap the trust funds' nonmarketable securities for marketable Treasury debt. The Treasury will then have to sell not only this debt, but far more, in order to pay all benefits and debts as they come due.

And the disappointing fact for taxpayers? To collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. In 2011, we collected about $2.3 Trillion in taxes but of course spent over $3 Trillion hence.... we borrowed AND are still behind.

To pay the debt liberals are always willing to invoke the "tax those mean old rich people" mantra. But consider: The Gov't costs about $9.69 Billion a day to run and if we taxed Barbra Streisand, George Clooney, Michael Jordon and all the other rich at 100%... it raises $82.4 Billion a year or… resulting in only about 9 days of operating capital. Hummmm short again.

So the bottom line to this exercise? We're under a huge gun and the bullet is aimed at the America public. I could pull out my conspiratorial hat and say that any president that not only allows this to happen but facilitates it has an agenda which is not pro-American (Remember “overwhelm the system?”). But I'll save that for another time. We MUST cut spending, waste, fraud, abuse, loss, misappropriation, oh how I could go on but... without changes, the current mythical fiscal cliff in January is just a momentary diversion from the real fate that awaits America. And it's not a cliff, it's a chasm, a gulf, a canyon… an abyss beyond belief.

I ask myself where are all those real changes the newly elected conservative congressional members were to make when elected in 2010? Guess they missed that memo.

Romeo Romeo, wherefore art thou Romeo? Cometh hither to me and bring thy checkbook.

Your own feedback is always invited, and God bless and help us.


And just FYI:

•Our national debt, in hundred dollar bills, would carpet Washington DC eight times, and you would still have enough left over to carpet Tiananmen Square over 40 times.

•Americans owe an amount equal in value to over twice all the gold in the world, even at today's record high prices.

•If you spent $11 million every day in payment of the national debt for the next 4000 years, you still would not pay off the debt. (forget about the interest)

•If you laid $16.5 trillion in $100 bills end to end on their side at the equator, the line would circle the earth 627 times.

•A child born today starts out life owing about $50,000 - about the price of two years of college, on average.

•How did our parent’s generation leave us? A child born in 1950 was on the hook for about $1700 at birth.


turk182 said...

Obama and Geithner both say that spending is at an usustainable point, and yet they keep increasing the supply of money and raising the debt ceiling. They are either incompetent or stupid...which do you think?

Ron Boat said...

Turk, IF they were incompetent or stupid i would not fear as much for those shortcomings can be overcome with effort and help from the conservative side. But from the beginning of Obama's time in our White House it was evident that a subversive effort was being waged to destroy - or as Barry said himself "transform America." A look at his background, mentors, history, actions, writings, etc will give you all you need to know of his goals an it's not by accident or stupidity. - Ron