The American Spectator : Pinko Economics Delivers More Red Ink

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The Obama Watch

Pinko Economics Delivers More Red Ink

Fiscal insanity never had it so good.

We're already on the hook for about a half million dollars per household just to pay for the unfunded liabilities in Social Security and Medicare, according to David M. Walker, former comptroller general of the United States and head of the Government Accountability Office from 1998 to 2008.

"The Peterson Foundation calculated the federal government accumulated $56.4 trillion in total liabilities and unfunded promises for Medicare and Social Security as of September 30, 2008," states Walker, president and CEO of the Peter G. Peterson Foundation. "The numbers used to calculate this figure come directly from the audited financial statements of the U.S. government."

Explains Walker, breaking down this liability to per family and per capita levels, "If $56.4 trillion in financial commitments is too big a number to digest, think of it as $483,000 per American household, or $184,000 for every man, woman and child in the country."

Actually, it's double that, more like $1 million per household, for the top half of the nation's income earners who pick up the lion's share of the federal tab. For tax year 2007, the Internal Revenue Service reports that the top 50 percent of income earners paid 97.11 percent of total amount collected in income taxes.

Digging deeper and faster into this fiscal hole, President Obama's proposed budget raises the nation's level of red ink by record-breaking amounts over the next 10 years.

"The proposed budget over the next decade would rack up $45.8 trillion in new spending, $9.1 trillion in deficits and more than $2 trillion in higher taxes on Americans," states Investor's Business Daily. "It will double the national debt held by the public to over $18 trillion, while raising taxes on 3.2 million small businesses and upper income taxpayers -- the very people the administration is counting on to pull us out of recession."

Obama's big idea is that we can beg and borrow our way to an America with more windmills, tinier cars, costlier schools and more jobs, all while making things more equal by taking more money out of the pockets of the people who create the jobs.

"Jobs will be our number one focus in 2010 and we're going to start where most new jobs do, with small business," explained Obama last week. "Small businesses have created roughly 65 percent of all new jobs over the past decade and a half and I think we should make it easier for them to open their doors and hire more workers."

And making it "easier" is somehow supposed to be in tune with his call for higher income taxes on the top two brackets, new health insurance mandates, higher taxes on dividends, more unionism, higher inheritance taxes, and higher energy costs via cap-and-trade.

On just the income tax proposal, the Tax Foundation estimates that Obama's proposed tax increase on the top two income brackets would amount to a $30 billion annual tax hike on the owners of small businesses.

Explains Susan Eckerly, senior vice president of the National Federation of Independent Business, the nation's leading small business organization, linking the agenda of Obama and the Democrats in Congress to the lack of job growth, "Until small businesses are confident that Washington will not increase the cost of doing business through higher taxes, healthcare mandates and increased energy costs, small business owners will continue to stay on the sidelines when it comes to hiring and expanding their businesses."

The result? Unsustainable debt and a botched recovery.

topics:
Federal Budget, Entitlements, Unfunded Liabilities

About the Author

Ralph R. Reiland is the B. Kenneth Simon professor of free enterprise and an associate professor of economics at Robert Morris University in Pittsburgh.

Letter to the Editor View all comments (39) | Leave a comment

Ret. Marine| 2.8.10 @ 8:09AM

If the little o had a real job before he proclaimed to know everything but, you can tell me your part, he would know what he is doing will never in a million years work, let alone produce jobs out of thin air. It is truely sad to hear a pretender of nothing go about his business of ruining this country with the hopes of turning it into something most of us would not reconize.
Some one please explain to me, or rather the little o, just how going into debt at the tune of $500K per household is going to produce jobs, with a large part of these same households currently out of work. This is worse than insanity, it is deliberate.
Anyone who does not understand that digging a larger hole of debt equates to adding jobs out of thin air has no moral authority to govern a society such as this Capitalist one. I do not want to see the society at large suffer for any reason but, today, the ones who placed this fool into the position of the leader of the free world will not have my pitty for them when that pink slip arrives at their door, matter of fact, I only pray they never in their life make such a bonehead move again. If they do, they do not deserve to be called my countrymen/ladies. Go your way for I do not seek your councel and forget anyone ever called you a Patriot. Just another reason for term limits on all of them.
Typical politician, typical liar, typical fool and not so typically normal.

Drew| 2.8.10 @ 12:46PM

So you are concerned about the $500,000 (or so) per household of unfunded liabilities. Me too. Lets see how that breaks down, shall we?

(Take a look at http://www.usatoday.com/news/w.....dget_N.htm for details)

Out of that half million or so, Medicare makes up $255,000. Social security $144,000, and military benefits make up $25,000 and change.

Which of these programs, as a retired Marine, do you suggest cutting?

If, as I suspect, you aren't in favor of cutting social security, medicare, or veterans benefits (and I wouldn't either, were I in your position) - then it seems to me that the only "fiscally responsible" answer to the debt crisis would HAVE to be raising taxes. No? I mean, if you want to decrease the unfunded liability in the Social Security trust fund - then the only way (short of cutting benefits) would pretty much HAVE TO BE raising the amount workers and employees contribute.

If you have an alternative solution, please let me know what it is.

Ryan| 2.8.10 @ 1:28PM

Several items:

Social security was intended as an income supplement to retirement, with a targeted age group. There's a good case that the age for it needs to be raised.

Medicare shouldn't be a required supplement; should be based off of bid contracts (there's far too much no-bid stuff going on); and should probably apply to far fewer people.

Drew| 2.8.10 @ 1:55PM

Both ideas with some merit.

But do you honestly think that any national politician would raise them as serious topics for discussion?

During the Health Care debate, the idea was floated of allowing Medicare to pay for end-of-life counselling. In other words, if a person wanted to discuss living wills and DNR orders with their doctor - that Medicare would pay for it. And how did the right respond? Screaming (and Twittering) about "death panels." Or Fox News ginning up the thousands of Tea Party protestors with their "Keep your Govt. Hands of My Medicare" signs.

Yeah: $59 trillion in unfunded liabilities is a huge and scary number. But if we, as a nation, are going to deal with it - then a lot of the people participating in the discussion are going to have to start being a) honest and b) a little more courageous.

This American Spectator article isn't helping matters.

Ryan| 2.8.10 @ 2:38PM

Few, if any, national pol is going to raise it - look how W was raked over the coals for even bringing up changing social security.

Ummm...the "death panels" deal was a mild exaggeration. The way the payments were structured and such, it looks like the government was back-dooring doctors into pushing patients toward that end. It was a LOT less voluntary than the left was making it out to be.

You criticized a conservative for complaining, then try and push on me for suggesting the changes that aren't raising taxes. What is your solution? What am I supposed to do and think here? Is there anything that is realistic AND reasonable?

Drew| 2.8.10 @ 6:00PM

George w. Bush got raked over the coals for suggesting privatization of social security ie. allowing people to put their contributions into the stock market. And seeing how most people's 401(k) accounts have done since then, I think most Americans are very glad GW's idea didn't go very far.

You know how we can fix Social Security? Everybody takes a little bit of a hit. Retirees maybe see some slowing in the rate at which their benefits rise (say CPI minus 0.5% for twenty years.) And employees see a small rise in the tax rate, the extension of taxes to all earned income, and raising the retirement age - for some occupations - by a year or two to reflect today's longer lifespans.

But you know who is going to support that? No one. Its always much easier to either blame the other guy (like this article does) - or throw out "pie in the sky" ideas (cutting business taxes..) that rely on unproven, economically questionable visions of an future nirvana that nevers comes to pass.

Interested Conservative| 2.8.10 @ 9:40PM

A serious question on the SS "privatization", in whatever form it may have taken.

Is there a possibility that my 401 has performed better than SS since W's proposal? Arguably, yes - even though it's down 20% from its high in 2008. Consider that SS, for those of us 10 or more years from retirement, is simply a promise to pay, while a 401k is an actually performing account.

Which would you trust to be a more accurate representation of present value?

Tony in Central PA| 2.9.10 @ 2:53PM

With regard to SS, either the benefit amounts are lowered or the age requirement is raised. It might be possible to create some kind of combination of these two. Demographics are such that there's no way it can be continued in its current form.

Raising taxes seems to be the default answer for so many people, as if whatever problem we find ourselves confronting it was created in the first place by a deficiency of taxation. I am surprised that so many economists seemingly can't comprehend that increasing taxation affects human behavior, specifically business activity within our borders. Increased taxation also ends up rewarding failure, as it is so commonly assumed in Washington that government programs fail only because they are underfunded.

Alan Brooks| 2.8.10 @ 9:07PM

"This American Spectator article isn't helping matters."

Agreed; AS is tops at politics; mediocre at economics. But then it is billed as a journal of politics, not economics.
And what can be done? no one wants to means-test their grandparents out of expensive vacations to the Caribbean in winter..

Ryan| 2.8.10 @ 9:01AM

What's amazing is that the easy solution - simple, across-the-board corporate tax breaks, particularly on small businesses (which they have little to no idea how to define), doesn't occur to them.

It's either "targeted" or the money has to be lent through banks. Just letting small businesses keep their own money doesn't occur to them.

Howard| 2.8.10 @ 9:02AM

Such is the arrogance of liberals and liberalism, that these elites, i.e. Obama, Pelosi, etc. know what is "right" for us. They "know" that we "need" more government and higher taxes to make us a better country. Come this November, let us shown them what we "know". They should be scared, really scared.

Tenn Slim| 2.8.10 @ 9:07AM

Digging deeper and faster into this fiscal hole, President Obama's proposed budget raises the nation's level of red ink by record-breaking amounts over the next 10 years.
Opine
Bt
Rep Tanner, Tn, House, has introduced a Fiscal Sanity set of Rules. The PDF file is available on his site. Dedicated, since his announced retirement to reinstute sanity, his rules make good business sense. Recc all take a look. Here is a sample.
bt
A plan to balance the budget, cut spending and secure America’s future
1. Restore Pay-As-You-Go budget rules. The first step we can take to ensure that government does
not spend beyond its means is to restore the proven, bipartisan pay-as-you-go (PAYGO) rules that
effectively brought about budget surpluses in the 1990’s.
2. Put the lid on federal spending. In addition to balancing the federal checkbook, Congress should
set limits on discretionary spending. Just like American families who make tough decisions every
day, Congress must learn to live within its means.
3. Cut programs that don’t work. Congress must work with the Administration to identify and cut
programs that don’t work. A commonsense budget enforcement tool, “expedited rescission” was
passed by the House with bipartisan support in the 1990’s.
end
Semper FI

ACynic| 2.8.10 @ 10:20AM

FDR was advised by a group of pinko academic economists enamoured with the social and industrial policies of Stalin, Hitler and Mussolini.
(All before WWII of course. )
This gave the USA the New Deal, which basically took Hoover's disasterous economic policies and continued them through the onset of WWII.
The Great Depression was caused and lengthened by the policies implemented by Congress, FDR and Hoover, and the Federal Reserve.
Millions of Americans suffered because the left wing elitists wished to use their "unimaginable" power to order society as they deemed necessary.

Today, they are at it again. Print money in the trillions, tax and tax and regulate, and spend and spend and spend.

By some miracle this will create prosperity.

ACynic| 2.8.10 @ 10:20AM

Today, they are at it again. Print money in the trillions, tax and tax and regulate, and spend and spend and spend.

By some miracle this will create prosperity.

davelnaf| 2.8.10 @ 11:19AM

With the conjunction of Obama and his Chicago gang in the White House and a financial crisis (that Democrats were largely responsible for) it is clearer than ever to Americans that their financial well-being is now in jeopardy and possibly in hoc to the semi-criminals in Beijing with a chip on their collective shoulders. But the real problem is the way Washington spends money and has spent money for decades. It’s unlikely that anything serious will be done about this and in all fairness spending is so ingrained in Congress it probably could not pull it off even if it tried. So, the Democratic Party—the party of government—will be the first to take a huge hit, beginning this November and again in 2012. But in case members of both parties have somehow managed to dismiss the results of the off-year elections they had better take what might happen in November as an existential threat. The rising tide of anger against Washington for its innumerable ineptitudes threatens a lot more than just the two parties. People have begun to realize that Washington’s way of doing things puts an ever more expensive surcharge on everything it does and this activity is generating debt to the point of unsustainability. The really bad part—at least for big government advocates and members of Congress—is that when a majority of people start thinking their government is a gross liability in their lives—as indeed appears to be the case with most Americans—it portends change of possibly seismic magnitude.

Nick| 2.8.10 @ 11:42AM

Great headline!

Whoever wrote it gets a gold star.

It would make a great title for a book.

Mike| 2.8.10 @ 12:09PM

I heard something remarkable over the weekend.

David Stockman, Henry Paulson and Alan Greenspan all said that in order to deal with the national debt, Americans are going to have to endure decreased spending and increased taxes. All agreed that the timing of tax increases is important so as not to repeat the mistake that was made by FDR in the course of the Great Depression. Finally, some adult talk.

Among the consistencies I have seen from Bush to Obama is the fact that neither administration has been willing to talk about sacrifice. I think any reasonable person recognizes that sacrifice is our only way out of our financial mess. Yet, the Democrats insist on continuing to play Santa Claus and the Republican continue to insist on nurturing our greed by championing their only real public policy agenda - cut taxes.

To point out how both parties are contributing to our financial demise is to invite invective from both the right and the left.

To suggest that the angry, inchoate movement known as the tea party will somehow redeem our politics is, in my estimation, fantasy. The tea party is not about a third way, about sacrifice. It is essentially about not paying taxes.

We may be doomed.

Ryan| 2.8.10 @ 1:37PM

Raising taxes should always be a final measure. Government spending needs to be cut first, always. Neither side seems to be willing to take the step.

I partially agree about the tea party movement - I simply think we'll see a surge of conservative republican candidates in office.

However, it's not "greedy" to believe that the government is taking more than its fair share when it cannot responsibly manage its pocketbook.

Don't cast aspersions where there aren't any. We're not asking for something unreasonable. We're asking for both fair taxation and a fiscally responsible government.

I'll believe my taxes need to be raised when the government can prove that it spends my money wisely. It doesn't.

C.K. Amos| 2.8.10 @ 7:07PM

"To suggest that the angry, inchoate movement known as the tea party will somehow redeem our politics is, in my estimation, fantasy. The tea party is not about a third way, about sacrifice. It is essentially about not paying taxes."

Respectfully, the Tea Party Movement is about more than just not paying more taxes.

And while the TPM may not "redeem our politics" fully, it at least represents something different than the two sides of the same coin that Democrats and Republicans seem to represent.

Margie| 2.8.10 @ 9:13PM

The Democrat & Republican parties are not 2 sides of the same coin. The Republican party's platform is correct for our country. Limited government, a strong Military, lower taxes, free market enterprise, and pro Constitution. The Democrat party is now so totally to the Left it is impossible to support.
And actually the tea parties represent conservative thought and a desire to return to the same platforms that the Republican party has.
Why do you think there have been the successes in the party of the elections of Republicans? Conservatives do not wish to vote Democrat, but to take back our own party.

Tim| 2.8.10 @ 2:36PM

Massive inflation is the only thing that can "save" us from the debt. That's where we're headed.

Bill| 2.8.10 @ 3:32PM

We need to restore taxes to the way they were under Eisenhower until the economy recovers.

Ryan| 2.8.10 @ 4:39PM

Bull. 90%+ tax rates would suck out of productivity and massively stifle growth. We need to put money in the hands of people who know how to put it to work - the net producers of America.

C.K. Amos| 2.8.10 @ 7:02PM

"The result? Unsustainable debt and a botched recovery."

Those are anti-American, anti-capitalist, megalomaniac, Chicago thugocrat, dumb-as-a-rock-about-economics and all-around banana-republic-dictator Obama's goals, aren't they?

Yosemeti Sam| 2.9.10 @ 4:58AM

Quick - buy a load of Monopoly games.

Pay off your 'debts' with the included funny money.

LOL.

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