February 8, 2010
A lot of people are very upset about the rapidly increasing U.S. national debt these days, and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system.
It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.
And the U.S. government would still be massively in debt.
So why doesn't the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?
Well, for one very simple reason: That is not the way our system works.
You see, for more dollars to enter the system, the U.S. government has to go into more debt.So that is how the U.S. government gets more green pieces of paper called "U.S. dollars" to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on.
The U.S. government does not issue U.S. currency—the Federal Reserve does.
The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers.
If you will pull a dollar bill out and take a look at it, you will notice that it says "Federal Reserve Note" at the top. It belongs to the Federal Reserve.
The U.S. government cannot simply go out and create new money whenever it wants under our current system. Instead, it must get it from the Federal Reserve.
So, when the U.S. government needs to borrow more money (which happens a lot these days), it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes.
The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days).
So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger.
Are you starting to get the picture?
As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure ...
So the bottom line is this:
- If all money owned by all American banks, businesses and individuals was gathered up today and sent to the U.S. government, there would not be enough to pay off the U.S. national debt.
- The only way to create more money is to go into even more debt which makes the problem even worse.
It is a game designed so that the U.S. government cannot win. As soon as they create more money by borrowing it, the U.S. government owes more than what was created because of interest.
If you owe more money than ever was created you can never pay it back. That means perpetual debt for as long as the system exists.
It is a system designed to force the U.S. government into ever-increasing amounts of debt because there is no escape.
We could solve this problem by shutting down the Federal Reserve and restoring the power to issue U.S. currency to the U.S. Congress (which is what the U.S. Constitution calls for). But the politicians in Washington D.C. are not about to do that.
So unless you are willing to fundamentally change the current system, you might as well quit complaining about the U.S. national debt because it is now mathematically impossible to pay it off ...
February 8, 2010
White House apologists were quick to point to the unemployment rate decline from 10 percent to 9.7 percent as evidence that the recovery is gathering momentum and that President Obama's policies -- especially his $787 billion economic stimulus bill Congress approved last February -- are "working." But the back story behind the figures provides cold comfort.
First, the drop to 9.7 percent unemployment does not reflect the creation of new jobs that normally accompanies an economic recovery. The number of new jobs is actually declining. Total nonfarm payroll employment, for example, dipped by an additional 20,000 positions after a December decline of 150,000 positions.
The unemployment rate the day Obama took office last year stood at 7.6 percent and 134.6 million people had jobs. When he signed the economic stimulus, Obama promised the bill would bolster the economy sufficiently to keep unemployment below 8.0 percent. But the unemployment rate has exceeded 8.0 percent since last fall, and total employment stands at only 129.5 million. The stimulus has been a bust.
Second, anybody who thinks the job situation is going to improve dramatically in coming months is not paying attention to what's going on behind the unemployment rate. The Hudson Institute's Diana Furchtgott-Roth notes that:
“This is a better employment report than last month’s report, yet the economy is still not creating jobs. The percent of the unemployed who are out of work for 27 weeks or more exceeded 41%, an all-time high. This is unacceptable and shows that Congress and the the President need to focus on job creation, rather than on expanding government, because the tax increases and borrowing used to expand government reduce overall job creation and create uncertainty."Furchtgott-Roth further notes that "the labor force participation rate is the lowest since mid-1985." This means that fewer Americans are in the labor force.
Third, among the few sectors of the economy showing net employment growth over the past year is the federal government. The federal civil service is rapidly expanding as Obama increases the size of government, with 33,000 new positions being added in January alone. Only 9,000 of those new slots were for temporary census jobs. In other words, what we are seeing is good times for the public sector and the growing prospect of a continuing and perhaps even deepening recession for everybody else.
According to the Bureau of Labor Statistics, more than 1.8 million civilians work for the Federal Government, excluding the Post Office ...
With about 2.0 million civilian employees, the Federal Government, excluding the Postal Service, is the Nation's largest employer. About 85 percent of Federal employees work outside the Washington, DC metropolitan area.
A substantial number of job openings will arise as many Federal workers are expected to retire over the next decade; competition is high during times of economic uncertainty, however, when workers seek the stability of Federal employment.
Wage and salary employment in the Federal Government is projected to increase by 10 percent over the 2008-18 period.
Federal employees working in the continental United States receive locality pay. The specific amount of locality pay is determined by survey comparisons of private sector wage rates and Federal wage rates in the relevant geographic area. At its highest level, locality pay led to an increase of as much as 34 percent above the base salary in 2009.
In March 2009, the average earnings for full-time Federal employees were $74,403.
Accounting for What Families Pay in Taxes and What They Receive in Government Spending, September 21, 2009
February 10, 2010
Government is taking us a long way down the Road to Serfdom. That doesn't just mean that more of us must work for the government. It means that we are changing from independent, self-responsible people into a submissive flock. The welfare state kills the creative spirit.
F.A. Hayek, an Austrian economist living in Britain, wrote "The Road to Serfdom" in 1944 as a warning that central economic planning would extinguish freedom. The book was a hit. Reader's Digest produced a condensed version that sold 5 million copies.
Hayek meant that governments can't plan economies without planning people's lives. After all, an economy is just individuals engaging in exchanges. The scientific-sounding language of President Obama's economic planning hides the fact that people must shelve their own plans in favor of government's single plan.
At the beginning of "The Road to Serfdom" Hayek acknowledges that mere material wealth is not all that's at stake when the government controls our lives:
"The most important change ... is a psychological change, an alteration in the character of the people."Statism's illogic exposed for all to see in F.A. Hayek's "The Fatal Conceit: The Errors of Socialism"
This shouldn't be controversial. If government relieves us of the responsibility of living by bailing us out, character will atrophy. The welfare state, however good its intentions of creating material equality, can't help but make us dependent. That changes the psychology of society.
According to the Tax Foundation, 60 percent of the population now gets more in government benefits than it pays in taxes. What does it say about a society in which more than half the people live at the expense of the rest? Worse, the dependent class is growing. The 60 percent will soon be 70 percent.
Rep. Paul Ryan of Wisconsin seems to understand the threat:
He's worries that "more people have a stake in the welfare state than in free enterprise. This is a road that Hayek perfectly described as 'the road to serfdom'" ...
By Robert Morley, Philadelphia Church of God
Originally Published on October 8, 2007
“Give me liberty or give me death!” Patrick Henry said famously. This Founding Father would likely have been shocked at the litany of taxes imposed on the modern citizens of the nation he helped shape.
Today’s Americans pay federal and state income tax, state and local sales tax, state and local property tax, federal and state unemployment tax, Social Security tax, Medicare tax and school tax. Some pay capital gains tax, dividend tax, interest tax, luxury tax, gift tax, and utility taxes such as phone tax, which includes state and local tax, state and local surcharge taxes, federal excise tax, universal service fee tax, possibly also minimum usage surcharge tax, and recurring and non-recurring charges tax—whatever that is. They also pay tax for the privilege of getting married, for purchasing a car, for licensing a trailer, for having a water well or septic tank, even for sitting down at home and enjoying a glass of wine with dinner. The list doesn’t come close to ending there.
And Americans are hardly the world’s most heavily taxed people. Many Western nations are burdened with effective tax rates in excess of 30 percent per year. In some countries, such as Sweden and Israel, the rate is closer to 60 percent.
But don’t governments need high taxes to operate? The answer, believe it or not, is no.
An entirely different system requires a simple 10 percent on your annual earnings, 10 percent saved for your family to spend at special celebrations, and then every third year an additional 10 percent to support widows and orphans. No other complex, confusing taxes. No fishing for loopholes. No 16,000-page irs tax code. Efficiency and simplicity!
Which sounds more ideal to you?
This contrasting system, used by the ancient nation of Israel, is called tithing. You can read about it in Leviticus 27:30-33 and Deuteronomy 14:22-29.
Actually, this system was in use long before Israel was founded. It was practiced by Abraham (Genesis 14:20) and Jacob (Genesis 28:20-22). Much later, the apostles and Jesus Christ Himself (Matthew 23:23) followed this system in addition to submitting to Roman taxes (Matthew 22:21).
The results of rejecting this system are clearly evident, historically and currently. The people of ancient Israel rejected God’s simple system of government. They demanded a king and an administrative system like other nations. Consequently, they and their descendants have paid the price ever since. (For documentation regarding where the modern-day descendants of ancient Israel are today, request a free copy of The United States and Britain in Prophecy.)
“This will be the manner of the king that shall reign over you: He will take your sons, and appoint them for himself, for his chariots, and to be his horsemen … and will set them to ear his ground, and to reap his harvest, and to make his instruments of war …. And he will take your daughters to be confectionaries, and to be cooks, and to be bakers. And he will take your fields, and your vineyards, and your oliveyards, even the best of them, and give them to his servants. And he will take the tenth of your seed, and of your vineyards …. And he will take your menservants, and your maidservants, and your goodliest young men, and your asses, and put them to his work. He will take the tenth of your sheep: and ye shall be his servants” (1 Samuel 8:11-17).Under poor kingship, Israel’s governmental support system quickly grew from simple tithing to the confiscation of property and businesses, the young being drafted into the army, and the people being heavily burdened by the rulers.
Just two generations after rejecting God’s form of administration, taxes and big government under King Solomon were instrumental in causing the northern tribes in Israel to revolt and split from Judah (1 Kings 12). Yet revolution did not solve any problems, because it never fixed the cause of burdensome government and high taxes.
Origins of the Welfare State
America, like many nations, finds itself in a similar situation today. It has become a nation of big government and big taxes. Contrary to the principles set forth by America’s Founding Fathers—principles involving a small, efficient, service-oriented government; principles that helped make the American republic great—America has morphed into a social welfare behemoth.
And truth be told—forget King George, the American Revolution and the Boston Tea Party—today Americans love taxes. In fact, a huge swath of Americans wouldn’t know how to survive without taxes. Shocked? Disagree?
Ask yourself: What is the root cause of taxes and big government? Once you realize what it is, you will see why America is addicted to taxation, and why that is so bad for the nation.
According to author Durham W. Ellis, this is what historian Alexander Tyler said about the fall of the Athenian Republic:
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasury. From that moment on, the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy ….”That succinctly sums up why America’s financial condition is deteriorating so quickly.
Both Republicans and Democrats have become parties of big government. The main difference is that some Republicans claim they are for small government, while Democrats are open about their support for increased government and entitlement spending—though even this difference is fast disappearing.
As Wall Street Journal editor Bret Stephens recently wrote:
“[W]e have a 40-year history of Republican policy, which says, We’re in favor of what the Democrats are in favor of, only less so.”The fruits prove this out. Not one administration since 1960 has balanced its budget, and government spending continues to grow unabated. The continually elevating federal debt ceiling, which has become a farce, is breached year after year. In July, Treasury Secretary Henry Paulson warned Congress that unless the cap was raised again, the United States would be unable to pay its bills. The last breach came in March 2006, when Congress was forced to approve an additional $781 billion in federal debt.
Last year, federal, state and local governments spent a massive $4.6 trillion, according to Michael Hodges’s Grandfather Economic Report. The gross domestic product of the U.S. is only $13.1 trillion. That means 35 percent of the economy now depends on government spending.
Government employment has also bloomed, vastly outstripping population growth. Federal, state and local governments now employ one out of every seven workers in the country, according to the Daily Reckoning. That is more than any other sector of the national economy.
In 1946, there were 2.3 state and local government employees per 100 citizens. Today there are 6.4. If government today had the same proportion of employees with respect to its population as it did in 1946, there would be 12.2 million fewer government salaries that current taxpayers would have to pay (Grandfather Economic Report, March 2007).
And to support increased government spending and employment, citizens must work additional hours. This year, “Tax Freedom Day” fell on April 30, which means if you gave the government all your earnings beginning in January, and worked every day including weekends, you wouldn’t have been able to keep a dime until May. One third of the year (120 days) goes just to pay taxes—more than the days spent working for food, clothing and housing combined (105 days). In contrast, back in 1900 you only had to work 22 days to pay your yearly taxes.
If you live in the United Kingdom, or Canada, tax freedom arrived even later—June 1 and June 20, respectively.
Yet, even with all the taxes collected each year, the government continues to spend much more than it takes in, borrowing to make up the difference.
Big Government = Big Spending
In fact, big government coupled with even bigger spending is so rapidly degrading the nation’s finances that David Walker, the government’s top financial auditor, says it will be virtually impossible for the economy to grow fast enough for America to meet its financial obligations. He says the economy would have to grow at double-digit rates for the next 75 years to meet its obligations. During the 1990s, the economy averaged 3.2 percent per year.
So why can’t the spending stop?
Simple: As Alexander Tyler indicated, once people learn that they can vote themselves handouts, politicians learn that the best way to get elected is to promise more than their opponents—more services, more benefits, more spending, whether or not the nation can afford it. Voters punish those who might actually slash spending or reduce government employment by cutting government waste—in essence, anyone supporting financial responsibility. Voters enjoy the short-term benefits of big spending and leave the consequences for the next generation.
There are only two ways government programs can be paid for: additional taxes or increased borrowing—and increased borrowing just means even more taxes in the future.
In other words, every time they vote themselves more government –sponsered gofts, voters indirectly ask for more taxes.
That’s the problem with the American system; as Frédéric Bastiat put it:
“Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone.”Political vote-buying has spiraled out of control. Politicians have promised Social Security and Medicare benefits to Americans to the tune of $70 trillion; that is money America does not have and can’t hope to get. Again, the whole economy is only valued at $13.1 trillion.
Between 78 and 100 million baby boomers are rapidly approaching the date when they can quit their jobs and rely on Social security and Medicare. That’s a growing wave of retirees, nearly the size of Japan, that will not dissipate until around 2027. These people have based their retirement plans on government promises that can’t be kept.
The economic consequences of vote pandering are about to be felt. Yet the price of becoming a welfare state may be much steeper than many realize.
There are also huge social consequences.
Government has become so large and all-encompassing that it acts like a big mother hen still nurturing her 40-year-old children who refuse to leave the family nest.
This big-mother approach promotes a culture of irresponsibility.
Despite the welfare reforms of the late 1990s, the U.S. government still requires the state to meet every material need of a child despite the actions of his or her parents. The welfare solution is to provide money for disadvantaged children by taxing everyone else. Nobody considers that by rewarding certain lifestyle choices, welfarism only encourages negligent behavior by detaching it from its consequences.
Welfare continues to act as a giant engine powering the production of fatherless children, and consequently child misery and poverty.
Millions of young girls get pregnant out of wedlock—and the state, instead of focusing on the cause of the fatherless children, deals with the effect by providing a range of welfare benefits including generous “income disregards,” government accommodation, and in-home visitation by nurses. Other young girls see their peers experiencing a life that looks appealing; young men see no consequences.
So there is little deterrent, and the welfare cycle continues, drawing in more young mothers and creating more fatherless, disadvantaged children.
In essence, welfare programs often undermine the role of the father in the home. The welfare culture tells recipients that the father is not necessary to the family; the breadwinner is a welfare check.
But an ethereal state figure cannot provide authority and love that helps build proper character that keeps adolescents out of crime.
The welfare mentality has also eroded basic individual responsibility for things like planning for the future and determining how you will put food on your own table once you retire.
Before big government welfare programs and the mandated Social Security tax, “social security” meant family, a good work ethic and responsible planning. If an aging parent could no longer work, his children would provide for his needs. Family came together to take care of Mom and Dad. Elderly parents weren’t left for the state to pay for. If someone slipped through the cracks, these real needs were taken care of by charitable organizations and churches. (Again, the biblical economic model does have a system of welfare to provide for the truly needy.)
With Social Security, because the government has plundered the Social Security fund to finance its spending, the younger generation is taxed, effectively, to pay today’s retirees. It is a similar situation with Medicare and other government-sponsored programs. Aging parents don’t need kids—the state takes care of them. And kids don’t want to care for parents because it is cheaper and easier to foist them on the state—which is actually the taxpayers.
The problems with welfare in America are even worse in Britain. Commenting on that system, Melanie Phillips wrote:
“It is the welfare state which, more than anything else, has created a culture of incivility, irresponsibility, family breakdown and disorder …. Yet no politician, even Conservative ones, will go near this subject. For all the windy rhetoric about irresponsibility and state interference, the root cause of these problems—the welfare state—remains a political untouchable” (Daily Mail, April 26).Man’s Solutions Inept
Welfare and big government are untouchable issues because politicians are more worried about their own party interests than those of the nation or the people they are supposed to serve.
That is why democracy is doomed to fail. Voters just don’t seem to realize that you can’t get something from nothing no matter how much politicians might like you to believe otherwise. Eventually, all government-promised benefits must be paid for. And as they are, the tax burden will steadily grow, and more people will experience financial hardship.
If history stays true, voters will be only too happy to elect the next politician promising the quick fix of additional government programs. How those programs are to be paid for and their social consequences will be lost in the euphoria.
Any nation that succumbs to this trap will continue to experience the effects of big government and oppressive taxes that Samuel warned about in 1 Samuel 8. God says He will let that nation suffer the consequences of rejecting His rule.
“And ye shall cry out in that day because of your king which ye shall have chosen you; and the Lord will not hear you in that day” (verse 18).God is letting America and the world in general get sick and tired of man’s rule, but He has a purpose ...
March 1, 2010
The so-called "Great Recession" has left Americans depending on the government dole like never before.
Without record levels of welfare, unemployment and other government benefits as well as tax cuts last year, the income of U.S. households would have plunged by an astonishing $723 billion — more than four times the record $167 billion drop reported last month by the Commerce Department.
Moreover, for the first time since the Great Depression, Americans took more aid from the government than they paid in taxes.
The figures show the devastating results of the massive job losses last year and indicate that the economic recovery that began last summer is tenuous and has a long way to go before many Americans resume life as normal, analysts said.
Economic growth typically depends on consumer spending, which is fed by wages, rents, interest and other forms of income. But the tentative revival of consumer spending in the second half of last year appears to have been fed largely by an extraordinary flood of government spending, as growth in other kinds of income has disappeared.
"Governmental support was critical in keeping the economy, particularly consumer spending, from completely collapsing during the crisis," said Harm Bandholz, an economist at Unicredit Markets.He said he is concerned that so much of the economic rebound is a result of government spending rather than a revival of private income and jobs. That situation is unsustainable, he said, because the government has had to borrow massively to prop up the economy and cannot continue that binge for long.
While wages and other job-related income fell by a record $206 billion last year to $7.84 trillion, transfer payments from the government such as unemployment checks and Social Security burgeoned by $231 billion to $2.1 trillion. Meanwhile, the amount of taxes that individual Americans paid plummeted by $325 billion to $2.1 trillion as a result of middle-class tax cuts and because nearly 6 million people were thrown out of work and are no longer paying payroll taxes.
Commerce economists said last year's unprecedented drop of $256 billion in private wages — the mainstay of consumers in ordinary times — was particularly dramatic, and was more than 40 times larger than the drop in wages during the entire 2001 recession.
Equally dramatic, a measure of income that closely tracks the ravages of the recession also plummeted by an unprecedented $384 billion. That measure excludes transfer payments and adjusts for inflation. It has stabilized at $9.1 trillion since the middle of last year, in a sign that the worst of the job and income losses are over.
While most of the government benefits — including Social Security, welfare, Medicaid, food stamps and regular unemployment benefits — are sent automatically to those who qualify, Congress is debating an extension of some benefits enacted as part of the stimulus package last year. Those include jobless benefits and health insurance subsidies for the unemployed.
The Senate on Friday failed to pass an extension of jobless benefits for up to 99 weeks for workers in states with high unemployment rates. Long-term jobless benefits expired Sunday, leaving many Americans dependent on those payments in limbo. With more than 8 million workers laid off during the recession, unemployment benefits have quadrupled from $34 billion in January 2008 to $124 billion at the end of last year.
"Millions of Americans are now relying on unemployment benefits as their only source of income other than food stamps," said Ross Eisenbrey, vice president of the Economic Policy Institute. "They are unable to find work because there are more than six job seekers for every opening. There is literally nothing that most of these workers can do to get a job today. Unemployment benefits are often the only way they can make ends meet for their families and keep a roof over their heads."The proposed extension in long-term jobless aid was held up Friday by Sen. Jim Bunning, Kentucky Republican, who objected that it added $10 billion to the budget deficit. As a result of record U.S. government borrowing, total debt in the United States has soared to an all-time high of 370 percent of yearly economic output, far exceeding its peak of 300 percent during the Great Depression.
"If we cant find $10 billion somewhere for a bill that everybody in this body supports, we will never pay for anything," Mr. Bunning said.Democrats vowed to renew the unemployment aid this week to minimize disruption for more than 1 million jobless people who would begin to exhaust their extended benefits on Monday.
"The simple fact of the matter is that this is an emergency situation and should be treated as such," said Senate Majority Whip Richard J. Durbin, Illinois Democrat. "The most vulnerable families in America are going to suffer because of this political decision by one senator. … We will be back, we will try to get this done. And to those families: Hang in there."The massive shift into dependence on the government, while essential in promoting an economic revival last year, has postponed a reckoning for many consumers who went too far into debt to maintain their lifestyles during the boom years, Mr. Bandholz said.
While the government was lavishing aid, banks were cutting credit to consumers by a record $250 billion, nearly as much as the amount consumers gained from government transfer payments.
"This shift only postpones a solution to the problem" by substituting government debt for consumer debt, Mr. Bandholz said. "These elevated debt loads will at least result in sluggish growth rates for the time being — and if the problem is not tackled with determination, it might very well lead to another crisis."Some economists say the big shift toward dependence on government spending and borrowing is only temporary.
"Sure, temporary government transfers played a role this past year. But that's OK," said Bernard Baumohl, chief global economist at the Economic Outlook Group.He noted that Americans also accumulated a record amount of savings last year as they stowed away funds out of fear of losing their jobs.
The increase in savings now enables many consumers to increase spending, while the 90 percent of workers who still have jobs can spend more because they are accumulating more income from overtime hours, he said.
"It's a combination and interaction of all these forces — not just one — that will promote more future spending by households and keep the economy going later without government aid," he said.Jobless benefits and other welfare spending for the unemployed will start to decline when job growth returns. Many economists predict that employment will increase this spring or summer in the next stage of the recovery. Because of bleak job prospects during the recession, some people were forced to go more permanently on the government dole.
In particular, many workers who were nearing retirement age and got laid off started drawing Social Security benefits. The number of retirees taking Social Security at age 62 grew by a record 19 percent in the past year, helping to push up Social Security outlays by $100 billion. Analysts expect those spending levels to stay high and continue to increase as more baby boomers retire.
Rash of retirements pushes Social Security to brink
Social Security Marks First Deficit in Decades
100,000 civilian federal employees owe the IRS $962 million in back taxes
Federal Government Outpaces Private Sector in Job Creation
Middle Class Is Abandoning Obama: He Gets Majority Approval Rating Only From Americans Making Less Than $24,000 Per Year
Updated 6/21/10 (Newest Additions at End of List)