President Obama wants to have it both ways.  He wants to appear to be fiscally responsible and he knows that to do so, that something has to include Social Security.  However, to try to keep as many Democrats in office that he can he has to play that other favorite card of the Democrats, that Republicans want to push grandma in her wheelchair down the stairs by privatizing Social Security.

In a campaign stop in Racine, Wisconsin the president had this to say, “”I’ll fight with everything I’ve got to stop those who would gamble your Social Security on Wall Street. Because you shouldn’t be worried that a sudden downturn in the stock market will put all you’ve worked so hard for—all you’ve earned—at risk.”  Oh, really, Mr. President?  Then perhaps you can show us where all the Social Security money is that you don’t want to put at risk.  The problem is that the government spent it all.  That’s right, there’s no lock box, no account, no bank vault, no hole in the ground were the money is buried, earning nothing.  I only wish I was able to put “at risk” all the money that the government took out of my paycheck along with my employer’s contributions. 

Based on my last annual statement from the Social Security administration, the government collected about $170,000 from me and my employers on my behalf.  Had I the opportunity to put that “at risk” in the stock market, the Dow Jones 30 industrials to be precise, including all the ups and downs, that $170,000 would be worth about $800,000 today.  Thank you Democrats for keeping me safe from accumulating that amount of wealth and instead “investing” it in ethanol, turtle crossings in Florida, bridges to nowhere, airports in John Murtha’s district that no one flies to, etc.  By Social Security estimates, that money they took from me and my employers, will be paid back to me and run out about ten to twelve years before I expire.  So instead of having a real nest egg that I can live off of and pass the rest on to my heirs, my getting Social Security will depend on the next generation getting taxed to the eyeballs to pay me and they can hope the next generation does not rise up in arms when they get the bill.

Everyone who supports the Social Security system as it is today, acknowledging that we have to fulfill our commitment to those who have retired or are very near to retiring, should join Bernie Madoff in cell block C, for the Ponzi scheme the government created.  President Obama, it is time to stop lying to the American people.  We don’t want government to run our lives.  You have crammed your left wing agenda down our throats and we will give you our rebuttal on November 3.  Then your one term will be up two years hence.

Many states have a constitutional requirement to balance their budgets while the federal government has no such limitation.  As such, a number of stately are longingly looking toward Washington to throw some cash their way so they don’t go bankrupt.  It is not going to get better.

If you think Washington awash in debt, is a problem, it is chump change compared to what is brewing at the state level.  Trillions in unfunded pension liabilities are looming and those who are benefiting from those generous plans or who are going to, don’t care about the rest of us who have to pay for them and then go provide for ourselves.

Lawsuits are starting to be filed to stop states from altering the terms of these plans.  The time to act is sooner rather than later, but that is lost on one teacher in Colorado who says, “Why is the state so quick to break its promises.”  Perhaps we should explore how these promises were made, in both directions. 

Unions backed Democrats almost exclusively.  Democrats riding union support into office had a debt to repay.  They repaid it by supporting the kinds of contracts that the unions wanted and the unions returned the favor with their loyalty.  Who paid the bill?  The rest of us.  How much say did we have in the process, next to none.  In private industry, unions negotiate with management.  Unions have almost no say in who gets hired into management and will sit across from them at the bargaining table.  So the adversarial relationship has management supporting the shareholders and unions backing the workers.  As management became more enlightened and took better care of their employees, the need for a union middleman faded away.  That is why in private industry union representation is down to about 7% and falling while in the public sector is around 37% and growing.

The public employees argue that their generous pension plans is merely deferred compensation to make up for their salaries during the time they worked.  The only problem is that the unions did a good job not only on the pensions but on the salaries as well, so that the average public sector employee makes about 34% more than his private sector counterpart.  Fair being fair, our public sector friends would probably recognize their good fortune and agree to help fix the problem, right?  No chance.  As one put it, “I shouldn’t be responsible for past pension underfunding and foolish risks managers made with my money long after I retired,”  Okay, let’s give that a closer look.

Why do you think the pension is underfunded?  Could it be that the government entity could not afford to make the extravagant  payments the union contract required and still balance the budget?  If they tried to raise taxes to cover the shortfall then even the unions with all their political muscle couldn’t get those responsible re-elected.  So it was better to sweep it under the rug for a future administration to deal with.  What about those risky investments?  Well, with risk goes reward.  If you need bigger payoffs on your pension assets to make up for the shortfalls in funding that you didn’t want to make, you may take bigger chances to make a bigger payoff.  But if you are wrong, instead of fixing the problem, you make it worse.  So the real problem is that the unions and the politicians they fought to elect negotiated contracts that were unrealistic and unsustainable.  What does the union member say. “I’ve got mine, you go get yours.”

What are some of the onerous changes that states are asking for?  In New Jersey, Chris Christie asked for a one-year freeze on public employees pay and for them to contribute 1.5% of their salary toward their retirement.  Outrageous!  How about in Colorado where they asked for a 2% cap in the Cost of Living Adjustment (COLA) for retirees instead of 3.5%, in an environment with 0% inflation.  Dastardly!  One individual’s justification was that he does not and cannot pay into Social Security so the pension is all retirees have to live on.  He fails to point out that being prohibited from contributing to Social Security puts 6.2% more of his salary in his pocket, since he pays no Social Security taxes, and if he had the self discipline to take that and invest it in the Dow Jones Industrial Average he would have far more money of his own than he would ever get from Social Security.

This problem is not going away.  Once upon a time, public sector employees did earn less in salary than those in the private sector, but those days are long gone.  They earn more, can retire earlier, can retire with more money for longer periods of time and put the burden on all taxpayers who have to cover their pension while providing for their own.  Their “too bad” attitude is shameful.

When will our President come to the realization that the government does not have any money save that which is provided by its citizens?  If he understood that, he wouldn’t have said this:

“Just as it would be a terrible mistake to borrow against our children’s future to pay our way today, it would be equally wrong to neglect their future by failing to invest in areas that will determine our economic success in this new century,” Mr. Obama said at the White House.

Let me posit a translation: we shouldn’t borrow against our children’s future, so we should borrow against our children’s future.  And let me add another pet peeve and that is how the statists have redefined the word “invest”.  What they really mean is spend, but invest sounds so much more grown up.  However, most intelligent people understand invest to mean when you put your money into something with the belief you will get all your money back plus a premium.  You don’t invest in the stock market with the idea you will never see your money again and will subsequently put more money into it next year.  You invest in a house with the idea that you will sell it later for more money.  You don’t invest in a house if you expect it to go down in value.  But our elected representatives would have you believe that pouring money down a rat hole is an investment.

Immature and Irresponsible

Like a child caught standing over his mother’s prized china lying shattered on the floor, President Obama wants us to believe it’s not his fault, no, we are going to have trillion dollar plus deficits for the next ten years because of Bush and the Republicans.  He is one year into his presidency.  This is his budget, not Bush’s.  If he can’t handle the job he should resign and turn it over to, er, Biden?  Check that.  Perhaps he can just go watch television in the White House for the next three years and leave the rest of us alone.  Doing nothing would cause less damage than what he has planned.  He jacked up spending 24% and then “courageously” instituted a freeze on that spending for three years.  Think about it.  If I gave you a 24% raise on Monday and then came back on Friday and said, “Gee, I’m really sorry to have to do this, but times are really tough.  I’m going to have to freeze your new salary for the next three years.  Can you ever forgive me?”  Could you not burst out laughing?

We’re Going to Make Some Tough Decisions…Next Year

We are in a fiscal crisis, but don’t think for a moment you are going to see any tough decisions in an election year, particularly when so many Democrats are in danger of having to find jobs in the real world.  So this year is tough talk.  Next year we get busy!

Democrats or Republicans or maybe the Tea Party movement is going to have to act, sooner rather than later.  Here is how the federal government breaks down:

• Medicare and Medicaid — 33%
• Social Security — 21%
• Interest on the Debt — 8%
• Defense — 20%
• Non-Defense Discretionary — 18%

The first three items continue to grow with no signs of slowing and interest will really take off when the Fed stops the easy money program.  Defense can shrink as Iraq and Afghanistan stabilize, but not a lot as this is still job number one for the federal government.  So do you see the problem?  You can thank Democratic President Lyndon Baines Johnson for the first ticking time bomb above.  You can thank Democratic President Franklin Delano Roosevelt for the second ticking time bomb.  You can now thank President Barack Obama for what is becoming the third ticking time bomb and that is without his Health Care, and Cap and Trade.

So how is President Obama going to “solve” this problem?  By tinkering with the last item, Non-Defense Discretionary spending.  But don’t worry, he will also tax those evil rich and make sure they pay their fair share.  But before he goes too far down that path I have a suggestion for him:

1. Listen closely to the Beatles song “Taxman“
2. Ask yourself why the members of the band moved to the United States?

High tax states like New York and California are finding that a significant number of their wealthy citizenry are moving to lower tax states, exacerbating those states’ fiscal problems.  If you look at the percentage of the population that pays the lion’s share of the taxes you will quickly see that if a relatively small percentage of the population, who can afford to live anywhere, actually decide to leave the United States of Tax the Rich, the resulting fiscal problem will be very, very severe. Obama can only poke his tax stick in that cage so long before he gets a nasty reaction.

We’re All Standing On the Third Rail

Social Security has been called the third rail of politics, but the reality is that we are all standing on the third rail trying to keep our balance and if anyone slips and touches the ground, we’re all fried.  We have to suck up the courage to address Social Security, Medicare, and Medicaid.  If we can’t slow the growth of these programs so that they take a smaller amount of the budget pie each year, we are toast.  None of those programs is in the Constitution, but the liberals/progressives created them with empty promises of benefits without costs.  This should have been the first clue:

“Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits.”

Ida May Fuller was the first recipient of monthly S.S. checks when she retired in 1940. She lived to be 100.

She almost got paid back in full with her first check. She got 926 times more than what she paid in. That’s a 92,600% return on “investment.” Not bad, huh?

She got back almost everything she paid in with her first check.  Instead of ringing alarm bells all over the country, politicians patted themselves on the back for the great system they created.  We sent Bernie Madoff to jail, why should Congress be exempt?  What Bernie Madoff did was child’s play in comparison.  Where he fell short was that he couldn’t force people to participate through payroll taxes, and he couldn’t print money.  So why is what he did criminal and what Congress is doing not?  He had to get his participants to voluntarily turn over their money.  He promised returns of 40% per year.  Ida may got 92,600% return on her investment.

Burn the Ships

There is the story of a general who landed on a beach to face an formidable enemy.  He ordered that the ships that brought them there be burned.  By doing so, he knew his men would fight ferociously because there was no escape, either they fought to win or they died.  Perhaps we should do the same with Congress and President Obama.  Fix Social Security and Medicare/Medicaid or you join Bernie Madoff in Cell Block “C”, for running a massive Ponzi scheme.  What has kept Congress from fixing this in the past is the fear of not getting reelected.  Let’s raise the stakes so that not getting reelected would pale in comparison to incarceration.  It’s time our elected officials started paying attention to the people and not their perks.  The disaster train is going downhill and picking up speed, headed for a cliff.  It’s time ALL politicians put the country first and fixed this problem that, after all, they created.  It’s fun to give out the goodies, but this is a crisis that cannot be shunned.  It must be dealt with head on.

Well, Charlie Rangel, Chairman of the House Ways and Means Committee, the committee that writes the tax laws, seems to have forgotten to pay his income taxes on a villa that he owns in the Dominican Republic.  More recently we learn that Timothy Geithner, Obama’s nominee to be Treasury Secretary, didn’t pay Social Security and Medicare taxes for several years.  The Treasury Department includes the Internal Revenue Service which enforces the tax laws that Mr. Rangel’s Committee writes and collects the money.

So if the tax laws are so complicated that the individual in charge of writing the tax laws cannot understand them enough to follow them, and they are so complicated that the individual in charge of enforcing those tax laws, doesn’t understand what he is charged with enforcing, don’t you think it’s time we simplified the tax laws?  If these highly educated, very experienced, extremely intelligent people cannot comply with the tax code, what hope does the average Joe have?  Perhaps that is why it is estimated we spend $200 billion per year in tax compliance.  Couldn’t that money be more productively be employed elsewhere in the economy?

What do you think?

Today, Obama added some clarification by saying that although some people may not pay income taxes, they do pay all kinds of taxes.  All right, so how does his plan work?  Anyone who has a job pays a 6.2% payroll tax that goes for Social Security.  Senator Obama is proposing a refundable tax credit (meaning you get it even if you have no tax liability) of 6.2% of wages up to $8,000, which equates to $500 and if you are married up to $1000.  So here’s the twist, what this is really is a credit against Social Security taxes.  But it is political suicide to suggest that you are actually going to take money out of the Social Security trust fund, when that fund is a financial ticking time bomb.  So let’s call it an income tax rebate, even though they don’t owe any income taxes to rebate.  Are you keeping up with this?  If not, Andrew G. Biggs can spell it out in greater detail in his blog.

To sum it up:

• Biggs says it’s technically not welfare because it is a refundable income tax credit to compensate for payroll taxes.
• If Obama wants to cut payroll taxes he should cut payroll taxes, but then again he wants to get elected and cutting payroll taxes would end that quest in short order.
• If Obama were to be honest and say he wanted to cut payroll taxes, there’s probably not may people who would agree with him especially when it is projected to cost $710 billion over ten years.

Are you listening, seniors?  And that means you, Baby Boomers, who will soon be senior citizens.