Friday, March 11, 2011

Please Read What Porter Has Written-Think About it!

This is a non-political simple lesson on economics and why our country will continue to sink into fiscal oblivion if we do not recognize the Genesis of our problem(s.)

Porter is far more eloquent and factual than I am but our message is the same - there is no free lunch and the one from the government is both too costly and destructive of our freedoms. Also a nation whose citizens have no skin in the game will not survive.

I hope, if you read nothing else I post, you read this and that is why I am including only a few other supportive and confirming articles.

Have a great weekend and think about what Porter has written. (See 1 below.)

(Ironically these union members had plenty of skin in the game because they were skinning Wisconsin taxpayers. However, what Porter is talking about is what leads to 1a and 1b below.)

Japan was just devastated by a natural Tsunami. Ours will be of our own making and will be fiscal and monetary in nature. High gas prices and inflation are two indicators of the gathering storm. (1c below.)

I am leaving the country mid next week returning April 7 so you have another memo reprieve.
1)Weekend Edition
How to Stop the End of America

It is a quirk of human nature that most people don't want to learn anything new and react negatively to anyone who challenges their deeply held views (even when they're obviously wrong).

You'll know I'm truly a glutton for punishment when you realize the subject of today's essay: Our country's severe financial crisis.

Writing about this topic has led to far greater problems than cancellations. I've gotten threatening letters and angry e-mails from folks who seem to believe that pointing out these dangers is tantamount to causing them.

More than two years ago (December 2008), I first warned in my newsletter that America would eventually lose its world reserve currency status and our debt crisis would lead to a massive inflation. I call this complex series of issues the "End of America."

Not because I believe it will lead to the end of our political union (though it might), but because I believe we're heading into a crisis that will be far worse than anyone has yet realized. The crisis will result in a significant decline in our standard of living. These are deadly serious issues and I meant every word I wrote.

Even so, two years ago, lots of folks actually laughed at me – including a few in my own office. Not anymore. If you saw the Wall Street Journal headline last week ("Why the Dollar's Reign is Near an End") or if you saw Sam Zell (the most successful real estate investor of all time) last week on CNBC, you know many of the smartest folks in our country take my warning seriously. Said Zell:

My single biggest financial concern is the loss of the dollar as the reserve currency. I can't imagine anything more disastrous to our country… you're already seeing things in the markets that are suggesting that confidence in the dollar is waning… I think you could see a 25% reduction in the standard of living in this country if the U.S. dollar was no longer the world's reserve currency. That's how valuable it is.

So today, I want to update some key figures of my End of America report. I want you to know where we stand. This is important enough to risk the inevitable criticisms (and refunds). But I want to take one criticism out of play right now. Don't bother writing to complain about my "politics."

This has absolutely nothing to do with politics. This matter is purely about economics. The facts, as you'll see, are completely clear to anyone who bothers to learn them. We are spending way beyond our means – both publicly and privately. Worse, this spending has warped the incentives in our economy, resulting in not only debts we can't afford, but outcomes we don't seek.

At the heart of this crisis, there's a knowledge problem. Most Americans don't understand even the most basic facts about our country's financial position, nor do they take the time to consider the likely outcome of poorly structured government programs.

So please, don't write to me about politics. I don't care about the Democrats, Republicans, or even the Tea Partiers. I don't care whose "fault" it is, because these debts belong to all of us. I care about the people who live in America… people who are going to be wiped out because of feckless leadership and genuine ignorance. I can't do anything about our leadership – that's up to you. I can try to do something about the ignorance.

In our search for facts and solid financial thinking, let's start with Warren Buffett, who is neither feckless nor stupid. Buffett is the world's best investor. He got that way primarily by figuring out how to correctly value equities and allocate assets… and because he learned one of the most valuable financial secrets in modern finance: why insurance companies are so valuable. (Hint: It's the float. But that's a discussion for another day.)

Buffett has become a sort of "rich uncle" to America, giving helpful advice about financial matters. And he recently said something that struck me as profound – something I'd wager almost everyone else ignored. Buffett explained why the buyers of his mobile homes (Clayton Homes) default at rates (1.86%) much lower than the national average for homebuilders (more than 25%). That's true, even though the buyers of his mobile homes typically have low incomes, less job stability, and lower credit scores than the buyers of conventional housing. If you read nothing else in today's essay, please pay attention to what Buffett says here:

Our borrowers get in trouble when they lose their jobs, have health problems, get divorced, etc. The recession has hit them hard. But they want to stay in their homes, and generally they borrowed sensible amounts in relation to their income.

In addition, we were keeping the originated mortgages for our own account, which means we were not securitizing or otherwise reselling them. If we were stupid in our lending, we were going to pay the price. That concentrates the mind. If homebuyers throughout the country had behaved like our buyers, America would not have had the crisis that it did. Our approach was simply to get a meaningful down payment and gear fixed monthly payments to a sensible percentage of income. This policy kept Clayton solvent and also kept buyers in their homes…

… A house can be a nightmare if the buyer's eyes are bigger than his wallet and if a lender – often protected by a government guarantee – facilitates his fantasy. Our country's social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.

Pretty simple, eh? Don't sell houses to folks who can't afford them. And make sure both the lender (who kept the note) and the borrower (who made a down payment – equity) have plenty of "skin in the game."

You don't want to create any incentive for the deal to go bad. You want both parties to have a powerful incentive to do what they've promised. After ignorance, almost all our country's core problems come back to these same issues: a lack of equity and poorly designed incentives. Remember these concepts. You'll see them again: skin in the game (equity) and properly designed incentives.

Let me take on the toughest problem first: Medicare/Medicaid. Since the government established this program in 1965, it has amassed a $5.6 trillion deficit. This program alone accounts for 40% of our government's total debt. If you could erase these debts, our most recent two foreign wars (Iraq/Afghanistan), and the losses associated with the recent financial crisis, you could eliminate more than half our entire federal debt – a debt threatening to destroy our way of life.

Whether you'd choose to eliminate these debts by eliminating these programs is a political question. I'm not going to discuss politics here. The point I'm trying to make is, regardless of what you'd choose, we have to make a choice. We can't afford to do all of these things.

Like the subprime buyers in the housing bubble, we've bought a government we cannot afford. That's a simple fact. It should be obvious to any thinking person that when government spending makes up 45% of GDP (as it does today) and there's one government employee for every six households, something has gone terribly wrong with America.

When my parents were born, America was still the land of the free. The incentives people faced were different. Before World War II, the federal government made up only 3% of GDP. It didn't provide health care. People had to maintain their health, as best they could. People didn't depend on Ponzi finance (Social Security) for their old age – they had to save. They had to take care of their families and help take care of the unfortunate in their communities.

We didn't spend a lot on the military, either… which gave us an incentive to mind our own business. In fact, back then, our presidents promised to keep us out of foreign wars. Both Wilson and Roosevelt came to power promising to keep us out of the war in Europe. They lied. Almost every other president since has sent our boys to die for others wherever they could. War is good for business… and good for the government.

Lots of people reading this e-mail will say, "I don't want to live in a country like that, where the government doesn't provide a social safety net." Other readers might say, "I don't want America to be 'isolationist.' We need more troops overseas to fight terrorism." OK… So maybe 3% of GDP is not enough for the government we will choose. But 45% of GDP is much too large – again that's not a political choice; we simply cannot afford it.

So how then will we decide? My suggestion: Pay more attention to incentives. And demand much more equity from the voters.

Here are some interesting facts:

In 1965 – when Congress created Medicare/Medicaid and greatly expanded the federal government's role in health care – about 13% of Americans were obese. Today, 32% of Americans are obese.

Before the government enacted Social Security, Americans typically saved between 15% and 20% of their incomes. Today? Almost nothing. In fact, for many years, the savings rate in America was actually negative.

Before the Great Depression, there wasn't any government unemployment insurance. Not surprisingly, there was almost zero long-term unemployment.

One more interesting fact… the U.S. didn't experience a Great Depression until the Federal Reserve was created. The main purpose of the Federal Reserve is to ensure that banks don't fail. Sounds good. But it provides a perverse incentive for banks to act recklessly, which causes bigger booms and busts – just like the one we're experiencing right now.

I'm not arguing government spending is the primary cause of any of these problems. But I am saying you'd have to be a fool to believe incentives don't play a big role in human action. Think about why all politicians try to spend more than they collect in taxes. They have a huge incentive to promise more than they can deliver – and to make up the difference by borrowing against future taxes or printing more money.

The problems created by the perverse incentives of collectivist actions are well known. They are as old as the ideas themselves. They explain why socialism and communism always lead to failure. And yet… we seem eager to pursue these policies in an almost mindless pursuit of bankruptcy. Why? That's not hard to figure out either.

What's the No. 1 reason people make bad decisions? They don't have to suffer the consequences. Which investors made worse decisions during the mortgage bubble? Was it the private hedge-fund managers, whose entire net worth was made up of the assets in their own funds and whose friends and families had invested alongside them? Or was it the senior managers of publicly owned banks, whose creditors were protected by the federal government and who owned little of their own company's equity?

That's easy to answer, even if you knew nothing about the financial crisis. Unless people have a stake in the outcome of an event, they are very likely to choose poorly or recklessly.

The most difficult problem we face today is, far too few Americans have any equity in our government. Less than half of all Americans pay any federal taxes. Don't listen to the nonsense about how almost everyone pays payroll taxes. It's true, but it's irrelevant. Payroll taxes don't come close to covering the costs of the entitlement programs they support.

Cutting government spending will be easy compared to trying to increase the average citizen's equity in government. But we must. People will always demand more from the government until they realize how expensive government solutions really are. And the only way to show them is to share the burdens of government more equally.

Now, I know what you're thinking… I'm making a political argument to reduce the progressive nature of our tax system. I'm not. I'm pointing out a simple fact: When half the voters don't pay for any of the true costs of the government, your society is going to suffer terrible governance.

A democracy that concentrates the overwhelming burden of government on a tiny minority of the population is no different than an investment bank making bad loans and then selling them to someone else. You can't separate the people making the decisions from the costs and the risks of those decisions. And yet, that's what we've done.

We've reached a point where we can no longer continue on our current path. America spends 800% more than its nearest rival on its military. We spend 200%-300% more per capita on health care than any other similarly wealthy country. Are we safer? Are we healthier? I honestly don't think so.

And even if you believe we are, can we afford it? Here are the simple numbers. Americans now owe $56 trillion in total debt, much of it held by foreign investors. We must spend $3.5 trillion each year on interest. That is already more than the federal government spends, in total.

I do not exaggerate when I tell you we cannot afford these debts. We will never be able to repay these debts – already equal to roughly four times our country's GDP. The largest components of the debts we owe are government debts… and they are growing rapidly and show no signs of stopping.

The only way to stop the debt crisis we face is to reduce the total level of government spending – immediately and permanently. We have to stop giving our citizens improper incentives. We have to increase the "skin" voters have in the game by spreading the burden of government more equally. And most important, we must take away the politicians' ability to debase our currency.

You see… politicians believe, as Dick Cheney famously said, deficits don't matter. They believe these debts can be safely printed away – which is what the Federal Reserve is doing right now.

How can we accomplish these goals? I believe we need three simple amendments to our Constitution. First, we should have a balanced budget amendment. It's hard to imagine why anyone would object to this, regardless of his politics. Politicians ought not to have the right to burden future Americans with debt. It's disgusting that we would leave a burden like this for our children and grandchildren.

Next, we need a constitutional amendment that ensures sound money. If you tell the politicians they're not allowed to borrow, they'll inflate instead. There is no reason Americans shouldn't enjoy the stability and safety of sound money.

Every argument you'll hear against backing our currency with gold comes from bankers and swindlers who need the ability to be bailed out so they can make risky bets with enormous amounts of borrowed money. Let's put a stop to this, once and for all.

The American government is the world's largest holder of gold. Let's put it to work for us, right away, in the form of sound money.

Finally… we need a logical way to put a stop to the narrowing of the tax base. Everyone who votes should share in the burdens of government – otherwise the incentive will always exist to vote for more government spending.

I suggest a constitutional amendment limiting tax rates and abolishing all taxes except for income tax. Tax every adult under the age of 65 20% of his income – whatever the source. Give everyone a $24,000 annual personal exemption. Above that, everyone pays. No other deductions. We could get rid of the IRS. You could do your taxes on a post card. How much did you make? Send the government 20% of it.

Why do I think 20% is the right rate? The church has always asked for 10%. Surely the government can survive on twice what God needs. And… we should word the constitutional amendment to make clear our intentions: Every U.S. citizen has the right to keep 80% of his income. Let the feds and the states fight over your tax dollars. Remember… your assets and income are part and parcel of your freedom. A man cannot have his liberty without his property and the right to his wages.

By the way, the U.S. Constitution already decrees all citizens should be equal under the law. Making the tax code truly equal will merely be living up to the obligations our Constitution is already placing on the government. Likewise, the Constitution says Congress shall have the right to coin money. It says nothing about printing or the Federal Reserve.

And finally… the founding fathers of our country once rebelled over a 2% tax on sugar, and they expressly forbid income taxes in their Constitution. Can you imagine what they would think of marginal income tax rates in excess of 50% on people in certain states? These new amendments I'm suggesting aren't really new at all: They're simply a return, a restoration, of the real America – the greatest country in history.

If you like these ideas… please share this essay. I'm sure it would be difficult to get these amendments passed. But if things in America get as bad as I think they're going to, maybe people would be willing to rethink our government's structure.

Sooner or later we have to learn to live within our means. Sooner or later, a preference for sound money will appear because inflation will have destroyed our currency. And sooner or later, the idea that you can live at the expense of your neighbor (through progressive taxation) will lead to a collapse. My preference would be to learn these lessons sooner, so the pain of this transition can be minimized.

I'm interested in organizing a conference about these ideas… maybe call it The Project to Restore America. I'd host it personally (and invest heavily in this effort). I don't know where yet… but I know when – sometime later this year. My goal will be to get as many well-known people as I can to endorse these ideas and speak about them in public at the conference. I'll try to lure my friends in the media (I have a few) to join with us… plus business leaders… plus regular folks across America.

If we want the government to listen to us… we have to start talking with one, unified and loud voice. I've got a pretty loud microphone here with my publishing company, but I can't do it alone. I need your help. Please pass this essay around to folks who you think will be willing to read it.


Porter Stansberry

1a)No wonder Wisconsin voters turned against Democrat politicians in the last election... All the stuff below is going on in Wisconsin!

Source: WLUK-TV, 3/3/11

Teachers Receiving Two Pensions

Due to a 1982 provision of their collective bargaining agreement, Milwaukee Public School teachers actually receive two pensions upon retirement instead of one. The contribution to the second pension is equal to 4.2% of a teacher’s salary, with the school district making 100% of the contribution, just like they do for the first pension. This extra benefit costs taxpayers more than $16 million per year.
Source: February 17, 2010 Press Release, Process of developing FY11 budget begins Milwaukee Public Schools

Almost $10,000 Per Year for Doing Nothing

While the Green Bay Emeritus Program actually requires teachers to at least show up for work, the Madison Emeritus Program doesn’t even require that. In addition to their pension payouts, retired Madison public school teachers receive annual payments of at least $9,884.18 per year for enrolling in the Emeritus Program, which requires ZERO days of work.

When this program began, 20 days of work per year were required. Through collective bargaining, the union successfully negotiated this down to zero days.
Source: Madison Teachers Inc. Website

No Volunteer Crossing Guards Allowed

A Wausau public employee union filed a grievance to prohibit a local volunteer from serving as a school crossing guard. The 86-year-old lives just two blocks away and serves everyday free of charge.

Principal Steve Miller says, "He said, you know, this gives me a reason to get up in the morning to come and help these kids in the neighborhood."
But for a local union that represents crossing guards, it isn't that simple. Representatives didn't want to go on camera but say if a crossing guard is needed, then one should be officially hired by the city.
Source: WAOW-TV, 1/27/10

$6,000 Extra for Carrying a Pager

Some state employees, due to the nature of their positions, are required to carry pagers during off-duty hours in order to respond to emergency situations. Due to the collective bargaining agreements, these employees are compensated an extra five hours of pay each week, whether they are paged or not.

For an employee earning an average salary of $50,000 per year, this requirement can cost more than $6,000 in additional compensation.
Source: 2008-09 Agreement between the State of Wisconsin and AFSCME Council 24

Arbitrator Reinstates Porn-Watching Teacher

A Cedarburg school teacher was reinstated by an arbitrator after being fired for viewing pornography on a school computer. The school district ultimately succeeded in terminating the teacher only after taking the case to the Wisconsin Supreme Court at great cost to the taxpayers.
Source: Milwaukee Journal Sentinel, 8/23/08

‘Outstanding First Year Teacher’ Laid Off

Milwaukee Public Schools teacher Megan Sampson was laid off less than one week after being named Outstanding First Year Teacher by the Wisconsin Council of English Teachers. She lost her job because the collective bargaining agreement requires layoffs to be made based on seniority rather than merit.

Informed that her union had rejected a lower-cost health care plan, that still would have required zero contribution from teachers, Sampson said, “Given the opportunity, of course I would switch to a different plan to save my job, or the jobs of 10 other teachers.
Source: Milwaukee Journal Sentinel, 6/14/10

Union Opposes Cost-Saving Lawn Mowing Program

As a cost cutting measure, Racine County began using county inmates to cut the grass in medians and right-of-ways at no cost to the taxpayers. A county employee union filed a grievance indicating it was the right of government workers to cut the grass, even though it would cost the taxpayers dramatically more.
Source: Racine Journal Times, 5/12/10

The $150,000 Bus Driver
n 2009, the City of Madison’s highest paid employee was a bus driver who earned $159,258, including $109,892 in overtime, guaranteed by a collective bargaining agreement. In total, seven City of Madison bus drivers made more than $100,000 per year in 2009.
"That's the (drivers') contract," said Transit and Parking Commission Chairman Gary Poulson.
Source: Wisconsin State Journal, 2/7/10

$150,000 Correctional Officers

Correctional Officer collective bargaining agreements allow officers a practice known as “sick leave stacking.” Officers can call in sick for a shift, receiving 8 hours of sick pay, and then are allowed to work the very next shift, earning time-and-a-half for overtime. This results in the officer receiving 2.5 times his or her rate of pay, while still only working 8 hours.

In part because of these practices, 13 correctional officers made more than $100,000 in 2009, despite earning base wages of less than $60,000 per year. The officers received an average of $66,000 in overtime pay for an average annual salary of more than $123,000 with the highest paid receiving $151,181.
Source: Department of Corrections

Previously the Governor’s office released these examples of the fiscal impact of collective bargaining:

Paid-Time off for Union Activities

Milwaukee County alone, because the union collectively bargained for paid time off, fourteen employees receive salary and benefits for doing union business. Of the fourteen, three are on full-time release for union business. Milwaukee County spent over $170,000 in salary alone for these employees to only participate in union activities such as collective bargaining.

Surrender of Management Rights

Because of collecting bargaining, unions have included provisions in employee contracts that have a direct fiscal impact such as not allowing management to schedule workers based on operational needs and requiring notice and approval by the union prior to scheduling changes. As County Executive Walker attempted to reduce work hours based on budget pressures and workload requirements by instituting a 35 hour work week to avoid layoffs, which the union opposed. Additionally, government cannot explore privatization of functions that could save taxpayers money.

WEA Trust

Currently many school districts participate in WEA trust because WEAC collectively bargains to get as many school districts across the state to participate in this union run health insurance plan as possible. Union leadership benefits from members participating in this plan. If school districts enrolled in the state employee health plan, it would save school districts up to $68 million per year. Beyond that if school districts had the flexibility to look for health insurance coverage outside of WEA trust or the state plan, additional savings would likely be realized.
Viagra for Teachers

The Milwaukee Teachers Education Association (MTEA) tried to use a policy established by collective bargaining to obtain health insurance coverage that specifically paid for Viagra. Cost to taxpayers is $786,000 a year.
Unrealistic Overtime Provisions

On a state level, the Department of Corrections allows correctional workers who call in sick to collect overtime if they work a shift on the exact same day. The specific provision that allows this to happen was collectively bargained for in their contract. Cost to taxpayers $4.8 million.

1b)Privatize Education
By Bruce Walker

The obnoxious and disruptive conduct of public employee unions shows how bad labor unions in general have been for America. Republicans, if they are wise governors of states and brave political warriors, will defang organized labor by passing right-to-work laws in all six of the states in which Republicans now have the muscle to do so -- Ohio, Pennsylvania, Michigan, Indiana, Wisconsin, and Maine.

Unions are a huge drag on our economy and a major cause for the flight of good jobs out of our nation. More repulsive is the fact that the teacher-goons in Wisconsin who spew hate in Madison have been entrusted with the education of our children. Is there harm in these creepy folks striking? Actually, there may be more harm in them returning to work.

Is there any alternative to this totalitarian, soul-destroying apparatus of leftist-controlled public education? Sure: privatize education. Create systems of competing and overlapping education by letting out contracts to private vendors to teach our children. Allow these vendors to be as creative and informal as they wish. Education should evolve as technology and society evolves. Create performance criteria for these contracts which focus on how well students do on standardized tests and, just as importantly, how these students improve their test scores. The bugaboo among the anti-vouchers crowd has been the use of vouchers for religious schools. Fine: require that these vendors be as secular as public schools are now.

We have created a gargantuan image of school which includes vast buildings, huge bureaucracies, endless rules, political correctness, genuflections to professional associations -- and all for what? Schools were intended to give our children the core skills necessary to continue learning. That involves little, really: reading comprehension, writing skills, and a general grasp of the basics of science, math, and history. The instillation of moral and social values should be the province of families, faith, and neighborhoods. The sports, social, and recreational activities which schools now provide could come more easily through private organizations.

Is there anything we require of the empire of public schools which could not be done more easily, more cheaply, more quickly, and more cleanly by private vendors in a community? What would happen if we privatized education? Any plan should include several competing vendors in a particular area. Have more than one educational system in a town or community. Let people, by their vouchers, choose which one works best. This may well mean "which one works best for me." This approach would take away the "one size fits all" approach to public education and let students learn where they learn best.

Public schools could remain, but the tax dollars these schools get would have to be dependent upon the schools' actual popularity among students and parents. How would teachers "organize"? They wouldn't! In fact, many of the private vendors might involve a partnership of several experienced educators who together run the school and share the profits of their enterprise. The whole vast, corpulent mass of public school administrators would be thrown into competition for scarce public school resources with the teachers who, right now, have every interest in supporting "more money for education" as a reflexive battle cry.

The entire education system would be compelled to become market-oriented, results-oriented, and focused on an economy of effort. Schools would cease to be the center of social life, to be replaced by churches, synagogues, scout troops, sports clubs, and all of these other natural outlets for young minds and bodies which now must compete with the huge treasury and compulsory attendance of public schools.

The left cannot utter the talismanic word "diversity" often enough to satisfy themselves. Well, this would create a wonderful, true, and balanced flourishing of diversity in the lives of those inmates of schools. Look again at the ugliness, the meanness, the narrowness of those anointed to teach young America. Will there be hope for us when this savaged generation of reeducated drones takes over?

Forget for a just a moment the bankrupting cost of public education. The greatest cost of the public education system is the public education system itself.

Bruce Walker is the author of Poor Lenin's Almanac: Perverse Leftist Proverbs for Modern Life.

1c)Can America Survive a Catastrophe?
By Steve McCann

Japan has experienced one of the worst earthquakes in recent history, the Middle East is in flames and turmoil, the threat of a war in that region becomes more of a reality by the day, China is flexing its muscle and plans to dominate Asia and the world, the US national debt is approaching 100% of the Gross Domestic Product, the annual federal budget deficit will exceed an unimaginable $1.6 Trillion and the current leader of the United States, safe in his plush bunker, is without a clue and is more interested in his re-election and the trapping of office.

President Obama either fails to understand or is deliberately oblivious to the fact that the major responsibility of those in government is to be certain a country is capable of surviving a worst case scenario such as war, massive economic downturn or a catastrophic natural disaster.

It has been predicted that California has a 99% chance of a major devastating earthquake in the next 30 years. The central part of the United States extending to the east coast, in an area that has recorded four of the largest earthquakes ever in North America, could experience a cataclysmic earthquake sometime in the next 50 years. The cost of these events may well be in the multi-Trillions of dollars.

The economy, so wedded to the world financial structure and socialist economic policies, has a very high probability in the short and long-term of repeating the wreckage the country has recently undergone.

Yet the current regime in Washington D.C. does not seem to understand or care that the policies they are pursuing will leave no margin for error in the event of an apocalyptic natural or man-made calamity.

The wealth of the United States has always been its fallback position in order to come through wars and recessions or cope with natural disasters. The country's enormous gross domestic product (GDP) has allowed the government to spend (by reducing taxes if necessary and borrowing) whatever monies were necessary to offset the losses incurred from these events and/or to re-start the engine of the economy.

This nation has had an unlimited credit card and until recently used it somewhat wisely. As long as the United States maintained a reasonable debt to GDP ratio (less than 50%) and kept the annual budget deficit to less than 3% of the GDP, then it always had the ability to survive a tragedy of unimagined proportions.

The Obama administration and their fellow travelers in Congress appear to care little for the long term survival of this country. They are in the process of squandering the nation's wealth and thus its wellbeing in their headlong determination to "fundamentally change the country".

This, let the consequences, unintended or otherwise, be damned approach to governing will put the United States in a position where it will not have at its disposal the funding and economic activity necessary to recover from whatever overwhelming debacle the country may encounter in the future.

At the end of 2008 the total publicly held debt of the US Government stood at 65.2% of GDP. In the four years of the Obama administration the debt will increase $5.8 Trillion (equal to the entire debt incurred by the United States since its inception up to and including 2001). This will result in the country having a debt to GDP ratio of 105% by 2012, a mere 21 months from now.

It has been acknowledged by a consensus of economists that unemployment, as a result of the Obama agenda, will remain in the 8-9 percent range over the next three to four years. This government refuses to recognize the need for spending reduction, opting instead to adopt new entitlement programs and, as part of its war on wealth, dramatically raise any and all taxes on the private sector. That component coupled with the massive new regulations already passed and proposed will result in inflation adjusted stagnant GDP growth.

Without significant repeal of the Obama tax and regulatory policies and changes in the entitlement programs and overall reduction in government expenditures, the current spending proposals and impact of the trillions needed for Obamacare, Social Security, and Medicare and interest payments will result in the debt to GDP ratio exceeding 135% by 2019.

Recently the bond ratings of Greece, Portugal, Ireland and Spain have been downgraded (Greece to junk bond status). Not only is the entire European Union threatened with collapse because of the excessive debt and budget deficit policies of these countries, but the entire world economy. In the case of Greece the debt to GDP ratio is 125% and the annual budget deficit is 13.6% of the GDP. Greece can no longer borrow money (except at excessively high interest rates) and must turn to the European Union for a bailout in order to pay debts.

By comparison, the United States, if it remains committed to the Obama agenda, will experience a debt to GDP ratio of 100% and an annual budget deficit of 11.5% of GDP this year. This nation is becoming the next Greece.

In the event of a disaster, the United States, unlike Greece or Ireland, will not have the European Union or the IMF to turn to, where then will the monies come from if the worst occurs?

How do we pay the recovery costs associated with a catastrophic natural disaster? From whom do we borrow the money without paying a usurious interest rate and forcing the country into further decline? Can we expect our traditional allies, who will find themselves in a similar situation, to come to our aid?

As to a dramatic economic downturn, the traditional tools used to come through a recession or depression will not be available. Would the debt holders of the bonds of the United States concur with significant tax reductions to spur the economy, or would they agree to finance more debt as a stimulus?

Would the United States choose as an alternative hyper-inflation by continuing to printing more dollars in order to mitigate the debt, in a potential repeat of the devastating experience within the Weimar Republic in the 1920's? A strategy which would ultimately plunge the citizenry into a dramatically reduced standard of living, excessive unemployment and societal upheaval.

If the United States continues on its present course, these are the only choices the country will have, yet never in the history of this nation have we had an administration and a political party so willingly, and with no second thoughts, place their agenda and philosophy ahead of the survival of the United States. This may well border on treachery of the worst sort, as it violates the allegiance owed by our elected leaders to preserve and protect the long-term welfare and well-being of the people and the nation.


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