FUNDAMENTAL TRUTH #78: “It’s a dishonest politician that sneaks sneaky legislation into a bill.” -Old Pithy

Posted by PITHOCRATES - August 9th, 2011

The Devil is in the Details and the Sneakiness is in the Fine Print

You know what they say.  Buyer beware.  Because they’re out to get you with their sneaky advertising.  Which you need to read closely.  Because the devil is in the details.  And the sneakiness is in the fine print.  That print that no one reads.  Like credit cards that send you those checks. 

They may offer 0% interest for six months when you write yourself a check for $5,000.  Wow.  Sounds great.  But if you don’t pay that off in that 6 month period look out.  Through the miracle of compound interest, that $5,000 debt will grow.  And that growing starts the moment you cash that check.  Because in the fine print the credit card company notes that after the 6-month period they will begin charging interest at 27.24% APR.  Starting on day one of the 6-month period.

People may wonder how credit cards can make any money if they don’t charge interest.  Well that’s the secret of the zero-interest offers.  They don’t expect you to pay it off within in that 6-month period.  And the second that 6-month period ends they book $720.84 of interest income on that $5,000 they loaned you.  That’s a short-term loan that yields 14.42%.  And there ain’t any 6-month investment out there that can match this yield.  But it doesn’t end there.  The yields on the credit card loan will continue to grow.  If you owe that $5,000 for 1 year, that yield rises to 30.91%.  And instead of owing $5,000 you now owe $6,545.59.

A zero-interest offer seems to be good to be true.  That’s because they are too good to be true.  Which you’ll see when you read the fine print.  If you read the fine print.

You have to be Sneaky to get People to Agree to Things that will Hurt Them in the Long Run

Now it’s obvious why they do this.  Be sneaky.  Because they can make a lot of money by doing this.  And the more people that take them up on these zero-interest offers the more money they can make.  So they put the things that would sour most people on using these checks in the fine print.   In hopes few will read it.  And few do.

You see, you have to be sneaky to get people to agree to things that will hurt them in the long run.  You just can’t be honest.  They can’t tell you that this loan will cost you nothing at 11:59 PM on the last day of the 6-month period.  And that it will cost you $720.84 one minute later.  Worse, your minimum monthly payment will jump about $125 as they calculate this loan into your payment.  And compound interest will make that credit card balance swell like a beached whale to the point that you’ll never be able to pay it off. 

You’ll lose sleep as your minimum monthly payments grow.  You’ll struggle to get that balance to go down.  Of course it never will.  And the more those minimum payments grow the less money you have for groceries and gas.  So then you’ll start paying less than the minimum due so you can put food on the table and drive to work.  Then the collection calls start.  It’ll get to the point that your stomach turns every time you hear the phone ring.

So you can see why they put this kind of stuff into the fine print.  I mean, if they advertise that they are going to ruin your life, are you going to use one of those checks?  Probably not.

The Founding Fathers hated Democracy with a Passion

So you really have to be sneaky and devious to get people to voluntarily destroy their lives.  And speaking of politics, politicians are the worst.  For a credit card company may try to get as much money from you as possible.  But that’s just business.  And they don’t swear oaths to protect you.

Thomas Jefferson hated bankers and merchants.  Partly because he was forever in debt.  But mostly because they can buy themselves favors.  And the seller of favors is, of course, government.  Jefferson was a well read man.  He knew history.  And he saw how combining money and government led to bad things.  Corruption.  Patronage.  Privilege.  War.  Money gave government power to do its worse.  And allowed a ruling minority to oppress the people for personal gain.  Now even though America was founded on the principle that all men are created equal, Jefferson knew that money could, and would, change that.  This is one of the reasons why the nation’s capital was located on a swamp a long, long way from the nation’s financial center.  New York.

This is also a reason why the nation is a republic.  And not a democracy.  We have representative government.  Not direct participation.  For the Founding Fathers hated democracy with a passion.  Why?  Because all democracies fail.  Once the people learn they can vote themselves whatever they want.  That’s why the Founding Fathers put enlightened/educated representatives between the treasury and the people.  Who will be rational and logical.  And not give in to base desires.

But the Founding Fathers were a special breed.  Who came along at just the right time and place.  And they created something perfect as far as governments go.  But as they passed from memory, the ways of the Old World became hard to resist. 

You have to let Others Steal from the Treasury if You want to Steal from the Treasury

As the nation grew so did its tax base.  More people meant more tax revenue.  First through import tariffs.  Then the income tax.  And other various taxes.  A little bit of tax from a huge population meant a lot of money for politicians to play with.  And play they did.  With the power to control these vast sums of money, they played God.  Just as Jefferson warned.  Money and government created a ruling minority.  Or a Ruling Class.  Much like the Founding Fathers fought so long and hard to end in the New World.

Of course, people won’t willingly support a Ruling Class that oppresses them.  So they have to be sneaky.  And hide much of what they do from the general public.  By burying it deep in pages of legislation.  Pork barrel spending we call it.  To get a part of the population to support you by promising them free stuff.  Then you honor that pledge by attaching a rider to a bill to house and feed orphans, for example.  When the final bill gets passed into law not only do we house and feed orphans (which everyone supports), but we also shower select constituencies with federal dollars for their help in getting out the vote during the last election (which only those select constituencies support).

Of course you know how this plays out.  If you oppose the excess spending in this bill you hate orphans.  And who wants to be labeled an orphan hater?  Probably not many.  But chances are few will oppose it.  Because to get pork you have to give pork.  You have to let others steal from the treasury if you want to steal from the treasury.  And this is why representatives and senators vote to pass thousand page bills without reading them.  They know they’re full of shameless pork barrel spending.   But as long as they include their pork they don’t care.

Short-Term Gratification with Long-Term Consequences

Politicians are a lot like those credit card companies.  Promising great short-term gratification.  With long-term consequences that will be a bitch.  They both want our money.  The credit card companies want us to go on a spending orgy so they can book fat profits on the interest they charge us.  Politicians just want to go on a spending orgy with our money.

So who’s worse?  The politicians, of course.  They’re supposed to be looking out for us.  Besides, when the credit card companies are screwing us, at least we get to enjoy the ride before the crash.  Taxpayers don’t.  Because their money typically goes to people who don’t pay income taxes.  So they don’t get to enjoy the ride.  They just suffer the crash.

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Only Obama can make the U.S. Default on its Debt Obligations

Posted by PITHOCRATES - July 15th, 2011

$172.4 Billion is a lot of Money

Still no closer to a budget agreement to raise the debt limit.  Obama wants more taxes and more borrowing.  The Republicans want a little fiscal sanity.  Because something is definitely wrong in Washington when $172.4 billion a month isn’t enough (see August Invoices Show U.S. Treasury’s Limited Choices by David Rapp posted 7/12/2011 on Bloomberg Government).

The U.S. government, whose legal authority to borrow money expires on or about Aug. 2, expects to take in $172.4 billion next month — enough to cover little more than half of its bills due then, according to a study for the Bipartisan Policy Center, a research organization.

The U.S. may not have to default on outstanding debts or withhold interest payments for that month; it may be able to cover $29 billion in anticipated interest due on Treasury securities with its cash receipts…

Jay Powell, undersecretary of the Treasury for Finance under President George H.W. Bush, calculated for the policy center that $306.7 billion in bills will come due after Aug. 2. They include Social Security benefits, defense vendor payments and military active duty pay, along with federal pay for every department and agency, in addition to the interest payments.

I think we’re missing the bigger picture here.  The government collects $172.4 billion but spends $306.7 billion.  That is, for every dollar it collects it spends $1.78.  In other words, the government’s spending is 78% over their cash budget.  Managers in the corporate world get fired for performances like this. 

That is either a big spending problem.  Or a big revenue problem.  So are taxes too low?  I don’t think so.  I mean, $172,400,000,000 is a lot of money.  How much?  It’ll buy 542 of the new Boeing 747-8 jetliners.  Or 149 Dallas Cowboys Stadiums.  Or 27 nuclear powered aircraft carriers.  It’ll even pay for the Apollo moon program with $41.3 billion left over.  $172.4 billion is an enormous amount of money.  You couldn’t spend this much money if you tried.  Even if you bought the best houses, cars, jewelry, clothes, island, etc.  And if you had the mother of all drug addictions.  It’s just a staggering amount of money.  And if you’re collecting in taxes more money than the cost of the Apollo moon program each month, guess what?  You don’t have a revenue problem.  You have a spending problem.

Bloomberg has a nifty little calculator on their website.  You can put checks on the things you want to pay.  And leave the things you don’t unchecked.  It’s an interesting list of bills coming due this month.  There’s a lot of stuff we can cut easily to save $47.1 billion.  Federal salaries & benefits ($14.2 billion).  Small Business Administration ($0.3 billion).  Education Department ($20.2 billion).  Department of Housing and Urban Development ($6.7 billion).  Energy Department ($3.5 billion).  Labor Department ($1.3 billion).  Environmental Protection Agency ($0.9 billion).  What taxpayer would miss any of these?  Cuts to Social Security and Medicare, on the other hand, will be a little more difficult.  For they actually do something.  And people will miss them.

Incidentally, interest on the debt is $29 billion.  Though a lot of money, it’s not too high for the $172.4 billion to cover.  So if the Obama administration doesn’t pay this and causes a downgrade in our credit rating, President Obama will have some ‘splaining to do.

Monthly Spending Equivalent to 1.3 Apollo Programs should be Enough

The president has no intention of cutting spending.  Their goal is to make Republicans look bad.  And to better position themselves for the 2012 election.  So the president will lie and spin misinformation in hopes that this stuff is just too complicated for the layperson to follow.  And that they only remember one thing.  That Republicans stopped Social Security checks going out because they’d rather give tax breaks to the rich.  And that they miss the fact that Obama and his Democrats gave us this crisis to begin with.  With the greatest spending orgy of any peacetime president.  So he threatens that if the Republicans don’t pay for his reckless spending, he’s going to tell everyone it’s their fault that the country defaulted (see Obama: Chance for ‘something big’ to calm economy by Jim Kuhnhenn, Associated Press, posted 7/15/2011 on Yahoo! News).

Obama urged Republican lawmakers to make tough calls, too. He attempted to turn their opposition to any tax increases back against them, warning that a government default caused by failure to raise the debt ceiling would increase interest rates, “effectively a tax increase for everybody.”

No, a failure to raise the debt ceiling won’t cause a government default.  Barack Obama will.  If and when he decides to pay something he thinks is more important than the interest on the debt.

Obama sternly rejected any plan of that size that did not include increases in tax revenue.

Apparently spending the equivalent of 1.3 Apollo programs a month just isn’t enough.  Obama gives new meaning to tax and spend liberal.  Pity Ted Kennedy didn’t live long enough to work with his kind of liberal in the White House.  Or see his pet cause, national health care, signed into law.  Then they both could have seen their policies destroy this country.  Don’t believe me?

Spending/Debt so bad it’s bringing back the Gold Standard

Then ask the Chinese communists.  Though their economy is rife with cronyism and will no doubt collapse as the Japanese economy did in the Nineties, they know too much debt when they see it (see Return of the Gold Standard as world order unravels by James Quinn and Ambrose Evans-Pritchard posted 7/16/2011 on The Telegraph).

Xia Bin, an adviser to China’s central bank, said in June that the country’s reserve strategy needs an “urgent” overhaul. Instead of buying paper IOU’s from a prostrate West, China should invest in strategic assets and accumulate gold by “buying the dips”.

Step by step, the world is edging towards a revived Gold Standard as it becomes clearer that Japan and the West have reached debt saturation. World Bank chief Robert Zoellick said it was time to “consider employing gold as an international reference point.” The Swiss parliament is to hold hearings on a parallel “Gold Franc”. Utah has recognised gold as legal tender for tax payments.

A new Gold Standard would probably be based on a variant of the ‘Bancor’ proposed by Keynes in the late 1940s. This was a basket of 30 commodities intended to be less deflationary than pure gold, which had compounded in the Great Depression. The idea was revived by China’s central bank chief Zhou Xiaochuan two years ago as a way of curbing the “credit-based” excess.

So the Chinese, the World Bank, the Swiss, Utahans and a dead John Maynard Keynes agree that the U.S. has a spending problem.  A spending problem that is racking up debt to saturation.  So bad that the once invincible U.S. dollar should no longer serve as the world’s reserve currency.  A sad development indeed.  And painful to hear.  Especially coming from a commie.

Tax Hikes First, then Broken Spending Cuts Promises

And yet the president is in denial.  He doesn’t see a spending/debt problem.  He sees a revenue problem.  Because high taxes and high debt are okay in his world.  As long as they pay for liberal government spending.  That’s why he’s dead set against spending cuts only.  He wants those tax hikes.  He needs those tax hikes.  And will promise almost anything to get those tax hikes.  Because once he does, and mark these words well, he will break every spending cuts promise he made to get them.

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Democrats Seek to Increase the Debt Ceiling, Republicans Prefer Spending Cuts

Posted by PITHOCRATES - January 2nd, 2011

Obamacare Push the Deficit Higher than Reagan’s and Bush’s Combined

Ronald Reagan had deficits of $200 billion.  The Left said that was reckless and irresponsible.  George W. Bush averaged $800 billion deficits.  The Left said that was reckless and irresponsible.  Now Obama’s deficits approach $1,500 billion.  And the Left says, “Let’s raise the debt ceiling.”

It’s a reckless and irresponsible game Obama, Pelosi and Reid have been playing.  During the worst recession since the Great Depression they have gone on a spending orgy.  Hoping to pass as much as possible in as short of time as possible.  The goal being simple.  Get as many people as possible addicted to this new government spending.  Make it political suicide for the opposition to repeal.  Thereby giving the Democrats yet more things to frighten voters about should Republicans win elections.  That those rascally Republicans will take away those benefits they fought so hard to give them.

But they have increased spending to levels impossible to sustain.  Medicaid is bankrupting the states.  Medicare and Social Security are bankrupting the nation.  Despite this, Obama, Pelosi and Reid passed Obamacare.  This on top of stimulus spending that stimulated nothing but unions and Democratic loyalists.  They’re selling bonds and printing money to feed this orgy of spending.  In the process mortgaging our future.  And making the United States credit worthiness on par with a subprime mortgage.

The Best Way to Stop a Spending Crisis is to Stop Spending

The Left is now concerned.  They see spending is unsustainable.  With the current debt ceiling.  So they want to raise the debt ceiling (see Obama aide: Debt limit fight could be “catastrophic” by Caren Bohan posted 1/2/2011 on Reuters).

White House economic adviser Austan Goolsbee accused Republicans of “playing chicken” with the nation’s financial credibility.

“This is not a game. You know, the debt ceiling … is not something to toy with,” Goolsbee told the ABC News program “This Week.” “If we hit the debt ceiling, that’s … essentially defaulting on our obligations, which is totally unprecedented in American history.”

“The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008,” he said.

Interesting.  When we get ourselves in trouble by maxing out our credit cards, what do debt counselors tell us?  To solve our problem by getting another credit card so we can keep spending?  Or do they tell us to cut all of our credit cards and sell everything we own to pay our bills?

When spending gets you in trouble you stop spending.  You don’t keep spending.  It’s what we the people do.  And it’s what our government should do.  Because the nation, the states and even our cities are all having spending and debt problems.

Big Government Spending Destroys Some of our Biggest Cities

Big Government at every level is failing.  Destroying great cities in its wake (see American Cities That Are Running Out Of People by Michael B. Sauter posted 1/1/2011 on Yahoo! Finance).

New Orleans has lost more than a quarter of its population in the past 10 years as the result of Hurricane Katrina. The rest of the cities that have lost major parts of their population have seen their flagship industries, which include coal, steel, oil, and auto-related manufacturing, fall off or completely collapse.

The big losers?  Flint, Michigan.  Cleveland, Ohio.  Buffalo, N.Y.  Dayton, Ohio.  Pittsburgh, Pennsylvania.  Rochester, N.Y.  Big, blue cities.   Big labor unions.  And big public sectors.  Is there any surprise that these cities are dying?

Targeted Tax Cuts and Incentives Don’t Stimulate

The evidence is all around us.  Government spending may get you votes in November, but it is bankrupting the nation, the states and the cities.  And you don’t fix that problem with more taxing.  And more spending.  Even liberal Democrats know this (see Goolsbee: Obama to Make ‘Tough Choices’ on Budget by Mary Lu Carnevale posted 1/2/2011 on The Wall Street Journal).

Mr. Goolsbee, chairman of the White House Council of Economic Advisers, said on ABC’s “This Week” that the administration is focusing on spurring investment and improving U.S. exports and innovation to boost economic growth. And he said that steps already taken, such as cutting payroll taxes by two percentage points and giving small businesses new tax incentives, should soon provide some economic fuel.

They know that cutting taxes stimulates the economy.  They admit as much by cutting payroll taxes.  And by offering tax incentives.  But they target everything.  It’s never across the board.  Because across the board tax cuts don’t offer tit for tat.  And what good is a tax cut to a politician if it doesn’t get you something in return?

Repeal Obamacare, Forget about Raising the Debt Ceiling

Cutting taxes will stimulate the economy.  It worked for Harding.  For Kennedy.  For Reagan.  And for Bush.  Reagan doubled tax receipts with his cuts.  But he still had $200 billion deficits.  Why?  Because the Democratic Congress spent the money faster than it came in.  And they reneged on their promised spending cuts.  Lesson learned?  You have to cut spending.

There’s hope.  Thanks to the Republican ascendancy at the 2010 midterm elections.  The Republicans have the power of the purse.  And a lot of Democrats lost their seats for voting for Obamacare.  You add this up, and you can take tough words about repealing Obamacare seriously (see House to vote early on health care repeal by Jake Sherman posted 1/2/2011 on Politico Live).

Incoming House Energy and Commerce Chairman Fred Upton (R-Mich.) says the new Republican-controlled House will look to repeal Democratic health care overhaul legislation before President Barack Obama delivers his State of the Union address later this month.

“We have 242 Republicans,” Upton said on “Fox News Sunday.” “There will be a significant number of Democrats, I think, that will join us.”

Upton, whose committee will key in the GOP’s effort to roll back the law, said that he believes the House may be near the two-thirds majority required to override a presidential veto. Short of repeal, Upton said the House will “go after this bill piece by piece.”

Social Security, Medicare and Medicaid are political third rails.  Too many people are dependent on them for significant reform.  But Obamacare is a no brainer.  No one is dependent on it now.  Repealing that will be pain free.   Other than a bruised ego.  But Obama can get over that.  When he retires in 2012.

You repeal Obamacare and our debt crisis all of a sudden gets a whole lot easier to manage.  So let’s cut that credit card.  Before we build up a balance that we’ll never be able to pay off.

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