George Rebane
[This editorial appears today (13 February 2010) in The Union’s print and online (here) opinion sections. This is the submitted version.]
While we’re all told to keep our eyes on the bloating $22 trillion national debt during the next decade, that no one knows how to pay off, you are not to notice the more $60 trillion of liabilities (out of about $130 trillion total) that will start coming due during the same time frame from unfunded entitlements. The government just announced an epochal milestone that very few people caught – Social Security has now started paying out more than the workers are paying in. From now on the difference will be paid out of the general fund. But the general fund already has an annual shortfall of about 40% which has to be borrowed from folks overseas.
To make ends meet on all the planned social engineering programs, the President tells us we will have to somehow fund annual deficits exceeding 5.5% of GDP. And God help us all if the economy doesn’t grow at the planned 3.5% rate or higher to keep the projected deficits at such a low level (cue nervous laughter). Because then the fraction of government spending, that’s already gone through the roof, will go into orbit. Meanwhile, our kids will try to figure out how they can drop us into the nearest river and not be nailed for murder one.
The progressives have already trotted out their tried and true solution – more taxes on the rich. Everyone from Oprah on down knows that the evil rich are the ones taking food from the mouths of the poor and not paying their fair share. Without the rich, a more equitable economy would really soar. In the face of this, economists, universities, and think tanks like the Claremont Institution are trying to tell us that raising taxes on corporations and the rich will actually lower government revenues.
The liberal politicians will have none of this, they know better. Believe it or not, many are still pointing at California as the role model for the national economy. To the cheers from progressive coastal districts, Sacramento continues to raise taxes on everyone. Never mind the effect this policy has had on businesses and the ‘rich’ who are already heading for greener pastures. To liberals all that is just conservative claptrap.
Speaking of Oprah, she’s the poster child of those in the know. That woman spends more time living in one of her out-of-state houses than in her California home, just so she doesn’t have to pay our 10+% state income tax. You can bet she’s one astute lady.
But let’s get back to some serious pocketbook issues. California is already federalized toast. For years we have sent a bunch of howling rock apes to Sacramento who haven’t had a clue on how to manage state finances. Now they, and we, have been reduced to begging billions from Congress to help us get through the current year. And no one seems to understand that after this year comes another one. I guess we’ll just burn that bridge when we come to it.
Congress and those clever people in DC have come up with a brilliant solution to the problem of insolvent states – they have discovered cost sharing. Seat belts fastened? They promise us dollars with rules that say, ‘first you have to agree to spend money that you don’t have, then we’ll send you money that we don’t have.’
And this brings us back to the Chinese. To be sure, they have problems of their own. But more and more America looks less like a solution to their problems. They see our moronic future and don’t want to continue financing it. So if overseas borrowing forever (Plan A) will no longer work, what’s a progressive government to do?
Well, the honorables in Washington have looked around for a Plan B, and they have found it in your IRAs, 401Ks, and other retirement accounts. There’s almost $4 trillion of real cold cash in those accounts invested in such silly things as stocks and corporate bonds contributing to growth. And those wily coyotes know they can grab that cash by passing another law or two at the dawn’s early light while we’re snoozing. Then they can mandate, for our own good of course, that we have to convert a hefty hunk of our retirement accounts into those long-term Treasuries. You know, the ones that didn’t pass the Chinese sniff test. They’ll make it look like we’re buying Victory Bonds.
[16feb10 update] Stratfor reports today, "The U.S. Treasury Department reported Feb. 16 that foreign holdings of U.S. Treasury securities — that is, government debt — increased by $16.9 billion in December 2009. However, China, previously the leading holder of U.S. debt, shaved its holdings of short-term securities (T-bills) by $34.2 billion for a 4.3 percent drop in total holdings, putting it behind Japan as the largest holder of U.S. debt for the first time since September 2009."
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