To my readers: This is a long article, I know. I tried to divide it in two but decided that it would detract from its power to shock and to call for action. It is the result of a long and painful research, and the facts clamored to be put together. Please read it at your pace, in installments if necessary, keeping in mind the general idea. Your comments are always welcome. Thanks, Isaac”
By Isaac Yetiv, Ph.D
A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.” –Alexander Tyler
LA JOLLA, California –In my opening article in this series, “SOS America,” I posited that, because of our huge national debt of $14.3 trillion, growing with an annual deficit of 1.6 trillion, and the two (and maybe a third) long protracted wars, we could not continue to be “the sugar daddy of the world and its policeman.” In this and the following articles, I will present an analysis of these two topics:
“Sugar Daddy” no more !
The freedom to create, invent, and innovate; the rule of law; the ardent fervor and enthusiasm of the successive waves of immigrants who endured hardships and sacrificed in order to achieve the American dream; all these have made the U.S.A. a powerhouse and a producer of wealth unequaled in the annals of economic history.
It was, of course, inevitable that the free and unrestrained capitalism would also create widening gaps between rich and poor. This was taken care of by successive legislation that provided the disadvantaged with”safety nets” now called “entitlements” (Medicare, Medicaid, Social Security etc.) But, with the passage of time, especially these hard financial times, what was meant as a corrective became an entrenched system of transfer of assets from those who produce, the “makers”, to those recipients of subsidies, the “takers.” And what makes it worse is that, because of the aging population and the reduction of the number of births, now lower than the replacement level, the number of takers increased very substantially while the number of makers shrank ominously.
One would think that the powers that be would remedy the situation by reducing the spending and reforming the system, but in fact, the federal government, notably the Obama administration, continue to spend without counting, to borrow and give, domestically, and universally. In the new budget proposed by the president, 44% is borrowed money. This is unheard of. We already owe China more than a trillion dollars; we owe Japan many hundreds of billions but when Japan is hit by an earthquake and tsunami, we borrow more money from China to help Japan. Silly, isn’t it !
The financial crisis in the world, coupled with Obama’s leftist ideology of “equalization and redistribution of wealth” aggravate the situation. Welfare and subsidies are not limited to the indigent and the destitute, as intended, but have become a way-of-life: welfare to the poor, welfare to the rich, and our profligacy extends beyond our borders, feeding and nation-building friend and foe, even our sworn enemies. Let us consider a few domestic examples :
.- When Medicare was adopted in 1965, the Johnson administration estimated the cost to be $ 500 million a year. In 2010, the projected cost was $ 500 billion ( 1,000 times higher), and the real cost may be even higher. Social security and Medicaid are in no better shape. Acoording to David Walker, US Comptroller General, the total burden of entitlements amounts to 53 Trillion dollars in “unfunded” liabilities ( Medicare alone: 36 trillion.) By some other estimates, it is 75 Trillion.These numbers are mind-boggling !
.- We continue, stupidly, to subsidize the rich, as was shown by John Stossel’s excellent TV program. He told us how the federal government paid him , and other wealthy people, to replace his beach house which was destroyed in a natural disaster (why don’t they buy insurance to protect their property?).
.- We continue to pay rich “farmers” (most of them, now, wealthy companies) to not grow anything !!
.- We allow multibillion-dollar companies to relocate in Ireland or Switzerland to avoid paying 3 % taxes in the US compared to 12-13% abroad. (Why can’t we reduce the local tax?) We watched on TV the CEO of Cisco explain why he did this when his company has 40 billion dollars of sales in the US? He said, in substance, “because we can.”
No tariffs, no compensation for the hundreds of thousands of unemployed Americans whose job was given to workers overseas. US manufacturing base has been hollowed out.
It has been reported that $1.2 trillion have left the U.S. and have created millions of jobs overseas, and we, the taxpayers here, are saddled with the unemployment compensations to our idle workers.
Not only do we have to pay hundreds of billions in interest on our debt , but a good part of our assets is owned by foreigners. Just by 2002, foreigners owned 78% of our GDP , including 13% of our equity markets,22% of corporations, 24% of corporate bonds, and 48% of US Treasury market. Today, it is certainly much worse.
.-The government recently paid $ 50,000 each to “farmers” (who happen to be African-Americans) as a “settlement” of a complaint that, many years before, they were denied a loan (!). This largesse cost us a few billions. The real victims among those farmers complained on TV that a great number of recipients never farmed anything and had no right “to cheat and abuse the system.” .
.-Almost a trillion dollars was spent to bail out the rich corporations who paid their CEOs hundreds of millions, thus rewarding failure. Frank Raines(Fannie Mae) received 90 millions: O’Neal (Merrill Lynch) received 161 millions; Richard Field (Lehman) received half a billion dollars from 1993 to 2007. The bubble that ended in the financial meltdown was not an act-of-God but a man-made calamity, with many to blame, notably Fannie Mae and Freddy Mac. Foreign money poured in. We drowned in debt — the government and the people owed $9.77 trillion –but felt good about it. Private banks were forced to give mortgages to the “poor” , without down payment or verification of income, until the day of reckoning, and the ” discovery” that the emperor wore no clothes, which led to the meltdown, the foreclosures, and the rest. Many billions are still unaccounted for; nothing of public interest was achieved except 127,000 new government jobs, thank you very much, and a dangerous inflation.
As I wrote before, this was the result of stupid ideology that started in 1977 with Carter’s “Community Reinvestment Act” to help the
“minorities” become homeowners. It was continued in 1999 with Clinton’s “improvement” aimed at “easing the credit” for the poor and the minorities,” and followed in 2003 with Bush’s more explicit purpose “to help 5.5 million minority to become homeowners.” As you see, both Democrat and Republican presidents cooperated in this financial disaster.
.- We continue to pay for other people’s mortgages “under the water,’ many of which should have never been allowed in the first place,
or have already made a good profit due to the appreciation during the crazy bubble.
. .-General Electric did not pay any taxes this year (maybe other years, too.) Its CEO, Jeffrey Immelt, a good friend of Obama, who instructed its affiliate , NBC, to act as a propaganda outlet to elect and defend Obama, could not answer how, and why, he was so lucky.
.- The 67,204 pages Tax Code, often called an “abomination,” allows loopholes to the rich (see G.E. above) , exemptions, deductions, credits, and it squeezes the middle-class to cover the “losses.” Besides, it is so complexed that , in 2006 for example, it took 6.65 billion hours to comply with the IRS rules, regulations, exceptions etc. and it cost the American people $156.5 billion, a transfer of assets from the working people to the hordes of lawyers and government functionaries. The tax code should be abolished and replaced with one page only . All income , minus personal exemptions only, should be taxed according to 4 tiers: 0, 5%, 15%,25%.
. The “cash for clunkers,” and “the homebuyers’credit” ( that cost the taxpayer 326 million dollars,) were proven wrong and many thousands of beneficiaries of the programs did not qualify for them in the first place. Like the bailouts, they were a waste of taxpayer money and a gift to a few.
And now, some examples of our “universal largesse:”
We have become the first responder of the world, whether to natural disasters or to man-made tribal conflicts thousands of miles from our shores. Why? The politicians’ response is: “Because we can, because we are the only superpower in the world, because we are the only nation with the necessary equipment, manpower, and speed to respond.” But the truth is that we can’t anymore !
.-Our federal government (under George W. Bush) pledged $15 billion to fight AIDS in Africa.
.-We sent our aircraft carriers and our nuclear specialists to Japan at a cost of billions. We did the same with other countries , rich and poor like Haiti. Japan is a rich country to which we owe hundreds of billions of dollars. Why don’t we deduct our expenses from
our debt? Why do we have to borrow from China to help Japan? Why don’t we establish a fund at the UN to handle these misfortunes?
.-Did you know that, according to EMTALA (Emergency Medical Treatment and Active Labor Act), our hospitals must treat everyone, insured or not, legal or illegal, even an ambulance coming from Mexico. Why not bill the Mexican insurance, or the government of Mexico via its consulate, as is done in many countries? Try, as an American citizen, to get sick or go to a hospital in Mexico, or other countries, even in Europe!
.-Even our declared enemies are, inexplicably, the recipients of our largesse. The US government has given $ 900 million to Hamas, under the guise of the Palestinian Authority, to help rebuild Gaza after the war with Israel which Hamas had provoked by dispatching thousands of murderous rockets and killing hundreds of Israeli civilians. This misplaced generosity is not only very costly but also rewards terrorism and encourages its repetition.
How many Americans know that, for more than six decades, the US treasury has been paying 31% of the budget of UNRWA to the “Palestinian refugees.” It has amounted to hundreds of billions. As I wrote elsewhere, these are the only refugees of international conflicts who have not been resettled among their kins with same language, culture, religion, but deliberately kept to fester in squalor as a political pawn against Israel, fed and clad and educated and healthcared by the UN with the US taxpayer picking a third of the tab.
This is strategically inexplicable, morally reprehensible, and financially ruinous. And it should stop.
We could find some consolation if the situation were improving however slowly. But the opposite is true. Two thirds of the American people believe we are going in the wrong direction. Why is it so? Simply because, for ideological reasons, we put a stop to certain economic activities that would have produced a lot of wealth, put hundreds of thousands to work and become taxpayers rather than recipients, and reduced our expenses. The most salient example is the moratorium on drilling for oil and gas.It has been reported last week that the total amount of potential energy (oil, gas, coal etc.) in the U.S. surpasses the huge reserves in the Middle-East.
Rather than exploiting our underground and undersea resources, we (borrow and) spend more than $700 billion a year to enrich the potentates of the Middle-East, and we pay unemployment benefits (increased from 6 months to two years) to about half a million workers who could have found jobs in the industry and its affiliates.
With the cost of a barrel reaching $120 , the Middle-East oil is no longer a bargain, especially if we factor the military expenses to
secure the oil and protect the dictators, and the casualties of the several wars we have to fight. Not to mention the millions of oil dollars
that end up in the coffers of terrorist organizations whose declared aims is to kill Americans (and others).
We should note that 1% of increase in unemployment translates into $60 to 80 billion added to the deficit.
Another phenomenon that will add to the deficit is the coming entry en masse (10,000 a day ! ) of the babyboomers in the pool of recipients of Medicare and Social Security for which the country is not prepared financially. Again, hundreds of thousands of taxpaying workers will morph into “takers,” of course legitimately. And the bickering Congress and Government have done nothing to smoothe the transition.
The most expensive “adventures” are, of course, the two wars in Afghanistan and Iraq (and the mission creep in Libya that may lead to a third) which do not show any sign of fading away. For years, I have been advocating their end under a controlled scenario rather than a panicky flight a la Saigon. There is no end in sight because they are in essence tribal civil wars, and our vital interests can be secured by a military force outside their borders rather than “boots on the grounds,” military occupation, and a very onerous nation-building. I would have respected the president if he had made good on his pre-electoral promises, and the wish of a majority of his constituents, to extract us from these quagmires rather than continuing what he himself called ” his predecessor’s failed policies.” I am very disappointed by Democrats and their leaders who give Obama a pass and would have crucified Bush W. for doing the same thing. Thuth should trump politics in both parties.
The two wars have already cost us $1.5 trillion (!) and we continue to borrow and pay for them. As for the Libyan hesitant intervention, “we have no vital interests,” in the words of Secretary of Defense Gates (who has decided to resign, certainly because of that.) The Chinese and the Europeans buy most of the Libyan oil. Let them fight for it. Again, why do we have to borrow from China to safeguard China’s interest? Some time ago, I watched a Chinese TV piece in which they mocked the naivete of the American government and laughed at our stupidity that has enriched them.
In summary: Recent polls show that 70% of Americans believe that the country is going in the wrong direction. The main indicators confirm this gloomy prospect:
.- Our national debt has doubled since 2000 ( from $7 trillion to more than $14 trillion) and is growing ( Last report put it at 14.6 TR.) And the White House and Congress are haggling about “raising the debt ceiling” the way a heroin addict raises the dose of narcotics.
.- The official rate of unemployment is still around 9% (the REAL rate is 16%.)
.-Oil and gasoline prices have skyrocketed and continue their ascent: Since Obama’s election, the barrel of oil went from $ 38.5 to 113 (almost tripled). And ,at the pump, the gasoline average price went from $ 1.84 to 4.19 a gallon.
.- In the recent budget submitted by the White House, out of a total of $ 3.7 trillion, there is a deficit of $1.65 trillion to be borrowed. Just to stay afloat, the federal government is borrowing $5 billion a day (!!) which we can never be able to repay without drastic and painful changes in our bad habits and addictions. Otherwise, we face a panicky worldwide run against our dollar. Already, Standard and Poor has issued a severe warning about the degradation of our financial faith and credit and its dire consequences.
What is the president doing to remedy this ominous situation? He occulted it, and instead of “presiding,” a job for which he was hired at $400,000 a year, he went “campaigning” for his re-elecion 19 months before November 2012 . He flew to Chicago to launch his campaign, a trip that cost $ 600,000 of taxpayers’ mone , Sugar Daddy giving a gift to himself. This expense should be charged to the election campaign fund that is purported to reach…$1 billion? And, with the campaigning mode, comes the campaigning demagoguery: He will reduce the deficits and the national debts by just augmenting the taxes on the rich, in a cynical defiance of arithmetic because he knows, or should know from his armies of expensive advisors, that even if he confiscates all incomes of “the rich,”he will collect only $1.3 Trillion , not enough to cover even the projected deficit of this year, as shown above. A few percentages of their incomes will not make a dent.
Besides, the old “socialist” idea of “soak the rich,” has been tried in the past and failed lamentably because it is antithetical to the essence of America and the American dream. As opposed to Europe, for example, the aspirations of the” poor” in America have never been to take from the rich but to become rich themselves. Just look at the millions of “rags to riches” stories which freedom and hard work and sacrifices have made possible in all walks of life, in business, sports, entertainment, and other industries.
Class warfare and demagoguery can only inflame the situations, raise false hopes, and distract from the real solutions.
What is needed is a line-by-line review of all spending, the merciless elimination of useless programs, duplications, waste, mismanagement, and fraud.. We also need truth telling by the leaders, beginning with the president, not pandering and demagoguery.
Sugar Daddy’s ATM machine provides largesse not only to the reigning president but to former ones whose pensions, security need, and other perks cost big to the taxpayers. Time has come to rein in on these gifts to those who don’t need them, having made fortunes from writing books, lecturing, and other very lucrative activities. While we are at it, the Congress which holds the purse strings should put a limit to the spending of the non-elected presidents’ spouses. It is outrageous that Mrs Obama’s recent vacation to Spain
has cost the taxpayers $ 242,000, traveling on Air Force II with 70 secret service agents, and staying at hotels for $2,500 a night.
According to the Government Accounting Office, the plane cost $ 11,351 an hour to operate, consumes 47,500 jet fuel and emits 1032 tons of CO2. The argument that “other first ladies did the same” does not provide consolation. They,too, are equally to blame, and the Congress , both parties, are the greatest culprit to allow such abuse.
Before America takes care of the world, it should first put its house in order. Like the mother traveling with her child in an airplane, who is instructed, in case of emergency, to put her oxygen mask first before doing the same for her child, the greatest nation on earth should solve the problems plaguing it, and only then turn to remedy other peoples’ situations.
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Yetiv is a La Jolla-based freelance writer and lecturer on current affairs. He may be contacted at isaac.yetiv@sdjewishworld.com