Since your impeccably dressed Congressman or Congresswoman refuses to level with you and since the News Media thinks you can’t handle the truth and since the President lacks credibility even if he would share this with you, that leaves it to me, just an old retired fighter pilot, to break it to you gently.
Nations rise and nations fall. On December 25th, 1991, Soviet President Mikhail Gorbachev, the last undisputed leader of the Soviet Union, resigned, declared his office extinct, and handed over its attributes, including control of the Soviet nuclear missile launching codes, to Russian President Boris Yeltsin. That evening at 7:32 p.m., the Soviet flag was lowered from the Kremlin for the last time and replaced with the Russian Flag. During the preceding five months, 13 of the 15 republics had already seceded from the union.
Don’t think it can’t happen here and don’t expect a warning. Even the nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress. Democrats and Republicans in Congress are completely agreed that the following information should not get out to the American people, namely, that the present value of the United States government’s off-budget liabilities is over $200 trillion.
If you are a middle class American and your spouse put your family 100 million dollars in debt, he or she might be reluctant to break the news to you. That’s not like forgetting to take out the garbage.
The Congressional Budget Office has a way to avoid telling Americans the damning truth, namely, to cease publishing the statistics that allow economists to expose the real condition of the United States government. The suppression of information and the incomprehensibility of statistics has become a government science.
The CBO has two sets of books. This is what any Ponzi scheme requires. It releases one set of books to the rubes in the financial media, who are perfectly content to quote from it, when they are even aware of it. This is called the Extended Baseline Forecast or EBF.
The second set of books is called the Alternative Fiscal Scenario or AFS. Here’s the difference.
In past years, the CBO simultaneously released what it calls its Alternative Fiscal Scenario. This forecast is what CBO actually projects future taxes and spending to be given not just the laws in place, but also how Congress and the Administration have been bending and changing the laws through time. In short, the Alternative Fiscal Scenario (AFS) is what the CBO thinks we’re facing absent a truly dramatic and sustained shift in fiscal policy.
Because of People like Boston University Economics Professor, Laurence Kotlikoff, the CBO decided this year not to publish it. Professor Kotlikoff said, “The country is in worse fiscal shape by many miles than Detroit. So, the country is essentially bankrupt.”
Suffice it to say that those of us who love America enough to look beyond what the heroic nightly news anchors spew are very fearful for our country. The national media, which generally “covers” fiscal affairs by repeating what it’s told, missed this omission entirely. Indeed, it spent an entire news cycle discussing the EBF figures as if they had real meaning.
The CBO did not get away with this, at least not to the extent that it had hoped. There were complaints. Kotlikoff says that enough people did complain to persuade the CBO to release a summary of the projections in an obscure spot in the CBO’s spreadsheet. The CBO posted this information, but it did not alert the financial media to the update.
The CBO’s projections on the deficit has the fiscal gap at $47 trillion. That is an enormous chunk of change but even that is a low-ball estimate. The financial media doesn’t care one way or the other, because they never heard of the CBO, let alone the ESB. The American public won’t be alarmed until they go to the cupboard and the cupboard is bare.
Using the AFS figures, the unfunded liability is $205 trillion. This is the figure that the CBO does not want the general public, meaning the financial media, to be aware of.
Understand, this is not the unfunded liabilities added up in all future years. This is the present value of the unfunded liabilities, discounted to today. This means that the government needs $205 trillion, cash on hand, to invest in the private sector, in order to fund its legal liabilities. This is not the deficit long after we are dead. This is the present value of the deficit long after we are dead.
The $205 trillion fiscal gap is too enormous for the average college graduate to begin to understand. It’s 10% of the present value of all future GDP. Equivalently, it corresponds to 10% of GDP year in and year out for as far as the eye can see. To raise 10% of GDP each year, some have said we could raise all federal taxes, immediately and permanently, by 57% while cutting all federal spending, apart from interest on the debt, by 37%, immediately and permanently, or do some combination of the two. Of course, we are seeing the result of having the highest corporate taxes in the world right now as companies flee overseas.
Accordingly, my solution and my solution only is this: Cut the United States Federal Government to the size it was in 1961, the year I graduated from high school. That was also the year before prayer was banned in school. The image below shows the Departments that did not exist when I was born and all except the Department of Defense were established after 1961.
That’s right, the United States managed to fight WWI and WWII without that behemoth called the Department of Defense. The Veterans also were cared for from the beginning. During the six years between the Revolutionary War and the inauguration of George Washington as President, Washington was President of the Society of the Cincinnati, a Veterans Organization that made sure disabled veterans were cared for along with widows and orphans. The members of the Cincinnati became our Founding Fathers. After WWI the Veterans Bureau was formed and then the Veterans Administration. After WWII Omar Bradley ran the Veterans Administration and told the employees, “We are dealing with veterans, not procedures; with their problems, not ours.” Wow, things have dramatically changed with the U.S. Department of Veterans Affairs!
We managed to get along without the Department of Homeland Security. In fact, in 1961 we didn’t have 20 or 30 million illegal aliens roaming our streets and devouring our children’s future. If you factor in the illegal’s, the $205 trillion figure becomes too small.
I’m not fooling myself, the President, Congress and Supreme Court we have right now would rather be waterboarded than cut one red cent or uphold the Constitution. We’re sunk and only a few hundred thousand even know it. If the grocery store shelves became bare tomorrow and somebody came by with a sack of beans, most Americans would still starve not even knowing what beans are or how to cook them.
We have helped almost every country in the world but I doubt that any country would come to our aid except perhaps for a couple. Some people store food in preparation for exigencies. That is just common sense because a natural disaster could occur anytime. As a nation, we are not prepared and if a visionary person ran for office the voters would not even think about voting for him or her. We are sunk.
This conspiracy to hide the truth to keep ourselves and our kids in the dark about what the politicians are really doing has been going on for a long time. We refuse to handle the crisis so our kids will handle it. They will elect people to Congress who will vote to stop paying the seniors and their physicians, the vast majority of whom will be dependent on Medicare payments. Get used to the term DEFAULT. This will have profound consequences politically, economically, and socially. It will be the end of the Keynesian welfare state. The Keynesians will be left holding the empty bag.
This is how all Ponzi schemes end. But those deluded souls who buy into them refuse to face statistical reality until the scheme blows up, leaving all of us empty-handed.