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Trump Draining the Economic Swamp

If you go back in time and look at the footage of citizen Trump, you will find that Donald Trump has been on point from day one. From the Oprah interview to the NY supreme court as an expert witness during the S&L crisis and everything in between. As stated by Q, America needed to be resurrected. Our Constitutional Republic needed to be restored. Back in 2014, the plan was set and the rest is history. Trump has come aboard to restore the power to the people as intended by our founding documents. And so, along with many other areas being addressed, draining the economic swamp has now begun.

The global financial reset is underway, albeit mostly behind the scenes. The market meltdown may now have been delayed ensuring a Trump victory in 2020 as Trump now is controlling the Fed. Dangers and opportunities through this reset are evident and I will post on this over the months and short years ahead.

The existing controlled and rigged debt based economic and monetary model is being disassembled. You cannot MAGA without controlling your currency. Trump is now going for the jugular and he, (we), will win once again. Let the force be with you sir.

Now I get it, many say this cannot and will not happen and I for one completely disagree. We have been programmed to believe this. And I too, was in that camp, pre-Trump. Well, my friends it’s a new day dawning. The great awakening is upon us as is the light of God. We are winning and draining the economic swamp will soon be (perhaps within a couple of short years), another item to be filed here, in promises kept.

No Longer

The old model of which Trump and company has begun to seize control, will soon be taken out. No longer will there be a debt based monetary system. Sound money will be restored. No longer will the bankers fund both sides of endless manufactured wars, reaping the profits and the harvest. No longer will our constitution and bill of rights be shredded. No longer will we the people be controlled by debt, debt slaves. Face it. We are debt slaves. No longer will we be taxed on our income. No longer will a private for profit banking cartel control our currency as this is in fact a violation of our constitution. Yes, President Trump will lead us back to sound money. Gold may become the de facto currency, so watch gold (and silver) as Trump restores in due time , sound money and crushes the power of the central banks. No more digital fiat. Over the many months to come, the President will expose the Fed and the central bank debt based monetary system. Watch. You will see. This will take some years, but this too will soon come to light. Now it may be confusing along the way. There will be many mixed signals and signs day by day along the way. So stay truly informed. In order to do this you must change the channeland build an arsenal of truth news versus fake news. Americans are  starving for truth. Seek and ye shall find. This will restore your faith, hope and trust. This will help raise your tone level from apathy, anger, fear etc., to perhaps becoming an informed, empowered and engaged and active citizen. If nothing else, you will at least feel better.

In Closing

I will keep this post short and sweet as this is a subject that is rather complex as Trump takes on the Federal Reserve, IMF and the Central Banking Rothschild dynasty. I will be posting content along the way to play my part in keeping us informed. Put on your seat belts. Be prepared. And get some popcorn and enjoy the show! Visit these supportive and insightful links below. Stay the course. Trust the plan. Pray for and support our President.

Q Plan to Save the World

Q We are the Plan

Q From Dark to Light

Video: Global Reset I

Video: Global Reset II

Global Financial Reset

Weekly Address: Draining the Economic Swamp

EDITORS NOTE: This John Michael Chambers column with images is republished with permission.

Will America Ever Have A ‘Wise And Frugal Government’ Again

Sometimes it is said that a man cannot be trusted with the government of himself.  Can he then be trusted with the government of others?  Recent history has proven that to be very true.  No one of with any measure of moral conscience will deny the recent history of government being shepherded toward oblivion by proponents of evil.  ­I hate to bring it up, but the Obama administration is perhaps the premier example of a man that cannot be trusted and should not be have been granted the privilege of governing our republic.  But unfortunately therein lies another problem that must be addressed as we engage perhaps the most important election in our nation’s history.

As “We the People” prepare to choose who will lead our republic, perhaps we should take a closer look at ourselves and refine our vision of what kind of America do we want going forward.  To aid in our search let us consider what do we want to leave for our children.  History will answer that question loud and clear with the results of our decisions.  If we do not reconnect with the Christian based values that were the foundational building blocks of our America we shall witness the completion of the destructive mission of the progressive enemies from within our population ranks.  Let us as Americans with courage and confidence pursue our own federal and republican principles.

As part of his 1801 Inaugural address, President Thomas Jefferson stated: Enlightened by a benign religion, professed, indeed, and practiced in various forms, yet all of them inculcating honesty, truth, temperance, gratitude, and the love of man; acknowledging and adoring an overruling Providence, which by all its dispensations proves that it delights in the happiness of man here and his greater happiness hereafter.  With all these blessings, what more is necessary to make us a happy and prosperous people? (I couldn’t help but pause here and ask this question.  Have you noticed how the further Americans are indoctrinated against the principles and beliefs that made the United States the  envy of the world, she is actually both less happy and prosperous?)

Still one thing more, fellow citizens—a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned…You should understand what I deem the essential principles of our government…. Equal and exact justice to all men, of, whatever state or persuasion, religious or political…the arraignment of all abuses at the bar of public reason; freedom of religion; freedom of the press, and freedom of a person under the protection of the habeas corpus and trial by jury impartially selected…

Unfortunately, our nation has succumbed to the lowest common denominator when it comes to morality, government function, individual liberties, as well as the economy and other relevant concerns.

If our republic is to reemerge as a beacon of light and liberty, to the teeming masses that would want to come to America legally to become Americans, our nation will first have to return to being the actual America that good and decent people around the world would want to be a part of.  Think about it, as our nation has become increasingly immoral, she has also degenerated from a land of liberty into a semi big government police state over every aspect of our lives.  In other words, the government takes over a people that don’t use self-control.

Without any effort, immorality replaces under utilized or untaught morality.  That is why the immoral from around the world are the majority of individuals now filing illegally into our nation with the permission of a corrupt government that appeases our enemies who want to come in and wreak havoc at taxpayer expense, just to add insult to injury.  That is why the Obama administration was ready to take Arizona to court and put a hurting on Texas for daring to protect the border with Mexico since the immoral federal government has gone loco.

Despite all of the negative developments over the past several decades that have culminated in the worst administration in our nation’s history and could potentially harm our nation beyond repair.  (After all, Obama did say he wanted to fundamentally change America.)  Obviously, his interpretation of changes could not have even been enacted before the turn of the century.  I believe that I have witnessed the real beginning of renewal in our country.  Many people of faith are finally becoming interested enough to learn about and care what happens to the United States of America.  Remember, it was an active, brave and intelligent church that was an integral part of the fight for independence and later against slavery.

Remembering the wise words of orator, author statesman, and abolitionist Frederick Douglas: The Declaration of Independence is the ringbolt to the chain of your nation’s destiny; so, indeed, I regard it.  The principles contained in that instrument are saving principles.  Stand by them on all occasions, in all places, against all foes, and whatever cost.  I wholeheartedly agree with Mr. Douglas.  America, if you are to be great again, you must first seek to be good, for it is then you shall make better decisions and take right actions that will recalibrate our destiny from utter disaster to undeniable recovery and greatness.

Brazil Is the New Greece by Tyler Cowen

At 70% of GDP, public debt is worryingly large for a middle-income country and rising fast. Because of high interest rates, the cost of servicing it is a crushing 7% of GDP. The Central Bank cannot easily use monetary policy to fight inflation, currently 10.5%, as higher rates risk destabilising the public finances even more by adding to the interest bill. Brazil therefore has little choice but to raise taxes and cut spending.

Too often, at the popular level, there is a confusion between “austerity is bad” and “the consequences of running out of money are bad.”

Sophisticated analysts of fiscal policy do not make this mistake.

By the way, here is a long study of how Brazilian fiscal policy has been excessively pro-cyclical.

And how is Brazilian output doing you may wonder?

By the end of 2016 Brazil’s economy may be 8% smaller than it was in the first quarter of 2014, when it last saw growth; GDP per person could be down by a fifth since its peak in 2010, which is not as bad as the situation in Greece, but not far off.

Two ratings agencies have demoted Brazilian debt to junk status. Joaquim Levy, who was appointed as finance minister last January with a mandate to cut the deficit, quit in December.

Any country where it is hard to tell the difference between the inflation rate — which has edged into double digits — and the president’s approval rating — currently 12%, having dipped into single figures — has serious problems.

Don’t forget this:

Since the constitution’s enactment, federal outlays have nearly doubled to 18% of GDP; total public spending is over 40%. Some 90% of the federal budget is ring-fenced either by the constitution or by legislation.

Constitutionally protected pensions alone now swallow 11.6% of GDP, a higher proportion than in Japan, whose citizens are a great deal older. By 2014 the government was running a primary deficit (ie, before interest payments) of 32.5 billion reais ($13.9 billion).

Brazilian commodity prices have fallen 41% since their 2011 peak, so I say Ed Prescott has earned his Nobel Prize right there.

The first underlying article/op-ed also is from the Economist. Without intending any slight to their other recent issues, the January 2-8 issue is one of their best in a long time. (I am very pleased to have bought it in advance at the airport rather than waiting to get to my copy back at home.)

This post first appeared at Marginal Revolution.

Tyler CowenTyler Cowen

Tyler Cowen is an American economist, academic, and writer. He occupies the Holbert C. Harris Chair of economics, as a professor at George Mason University, and is co-author, with Alex Tabborak, of the popular economics blog Marginal Revolution.

PODCAST: You Cannot Multiply Wealth By Dividing It

A sermon given in 1984 by Dr. Adrian Pierce Rogers, Baptist Pastor, Author, and Political Commentator titled, “God’s Way to Health, Wealth and Wisdom.”

“You cannot legislate the poor into freedom by legislating the industrious out of it. You don’t multiply wealth by dividing it. Government cannot give anything to anybody that it doesn’t first take from somebody else. Whenever somebody receives something without working for it, somebody else has to work for it without receiving. The worst thing that can happen to a nation is for half of the people to get the idea they don’t have to work because somebody else will work for them, and the other half to get the idea that it does no good to work because they don’t get to enjoy the fruits of their labor.”

Please listen to Dr. Roger’s entire sermon “God’s Way to Health, Wealth and Wisdom“:

Big Government Is Still Young by Alberto Mingardi

I am reading Charles Murray’s By the People. Rebuilding Liberty Without Permission. By the way, it is quite an engaging read.

Right at the beginning of the book, Murray struggles to give some measure of the extent of increase in government involvement with everyone’s life.

Here’s a passage:

Until the 1930s, the federal government remained tiny. The federal budget of 1928 totalled $38.0 billion, expressed in 2010 dollars. …

Of that total budget in 1928, $9.4 billion went to defense. Of non-defense spending, another $9.4 billion went to repayment of the national debt and $9.0 billion went to pensions and the Veteran Bureau. That left $10.2 billion for everything else — all the expenses associated with the White House, the federal judiciary, and the Departments of State, Treasury, Justice, Commerce, Labour, Interior, the Post Office, and all the independent agencies of the federal government.

Expressed as per capita spending in constant dollars, that $10.2 billion amounted to 1.0 percent of comparable federal spending in 2013. Think about it: one one-hundredth.

Murray has quite a few similar “facts from the past” that turn out to be rather surprising for the contemporary reader. To me, the most striking thing is how fast government expansion was accomplished. I fear we very often forget that.

In Western countries, most people today think pensions are a most common feature of human life — and yet human beings had compulsory savings and pension systems for a minuscule fraction of their history.

If government grows fast, however, culture changes fast too. The sense of entitlement takes root easily in society.

For one thing, looking back makes us think that big government is not inevitable: after all, government was capricious, tyrannical, arbitrary during most of human history, but it never was this intrusive and expensive.

For the other, it is remarkable how easy we get used — perhaps, we become addicted? — to new government programs, and how strongly they can permeate society and change culture.

First published at © Econlog. Reprinted with permission.

Alberto Mingardi

Alberto Mingardi

Alberto Mingardi is Director General of Istituto Bruno Leoni, Italy’s free-market think tank.

What Greek “Austerity”? by Steve H. Hanke

greek president

Greek Prime Minister Alexis Tsipras

It’s hard to find anything written or spoken about Greece that doesn’t contain a great deal of hand-wringing about the alleged austerity — brutal fiscal austerity — that the Greek government has been forced to endure at the hands of the so-called troika (the European Central Bank, the European Commission, and the International Monetary Fund).

This is Alice in Wonderland economics. It supports my 95% rule: 95% of what you read about economics and finance is either wrong or irrelevant.

The following chart contains the facts courtesy of Eurostat.

Social security spending as a percentage of GDP in Greece is clearly bloated relative to the average European Union country — even more so if you only consider the 16 countries that joined the EU after the Maastricht Treaty was signed in 1993.*

To bring the government in Athens into line with Europe, a serious diet would be necessary — much more serious than anything prescribed by the troika.

* Ed. note: The treaty created the EU and the euro and also obligated EU members to keep “sound fiscal policies, with debt limited to 60% of GDP and annual deficits no greater than 3% of GDP.” Ha!

Steve H. Hanke

Steve H. Hanke is a Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.

The Greek “OXI” (NO) vote is all over the news. But, what’s next? by LaRouchePAC

Revive the Glass-Steagall Act — It’s time for our own United States to take the next historic steps to free the world of austerity.

If you don’t know what the Glass-Steagall act is, please take a moment and review the background of the law, and what it did.

Lyndon LaRouche’s call to action, below,  is our historic responsibility not only to other nations of the world, but to ourselves, so that we might give a future to the next generations.

LaRouche: To Save the Trans-Atlantic Region, Implement FDR’s Glass Steagall Act Now

July 6, (EIRNS) — Lyndon LaRouche today responded to Sunday’s landslide rejection by Greek voters of the Troika’s genocidal austerity program, by clearly spelling out how the United States can play a decisive role in solving the otherwise irreversible collapse of the entire British-run trans-Atlantic financial system. LaRouche called for the United States to immediately adopt a return to President Franklin Delano Roosevelt’s original Glass Steagall policy.

The United States, LaRouche declared, should set the example for Europe, by immediately reinstating FDR’s Glass Steagall.

“The U.S. should solve the problem of the European mess, starting with the mess in Britain, by a Glass Steagall reorganization, clearing out the oversized and useless debt. Cancel all the debt with no intrinsic value, by going back to President Franklin Roosevelt’s successful model.  Only by such a debt cancellation can there be any prospect of a longterm recovery, in real physical economic terms.”

In his weekly live broadcast dialogue with LPAC’s Policy Committee, on July 6, LaRouche elaborated on his call for immediate Glass-Steagall:

“What has happened, as a result of the Greek operations during yesterday and today, has created a situation in which… Europe, most nations in Europe, and also the United States, are implicitly bankrupt. This is number one.

“Now what I mean on number one, on the bankruptcy, is that Wall Street in particular, and everything that coordinates with Wall Street, is now actually worthless.  That will be shown in due course, that we hope we can get this thing under control. What this means, we have to go to a Glass-Steagall action.  The only way we can do this, is a Glass-Steagall action.  That means, in the trans-Atlantic region, I’m talking about right now the trans-Atlantic region:  The situation is that the United States in particular is in a collapse.  That is, Wall Street and the things which are associated with Wall Street, are now actually worthless, which means a great amount of what is called money, among the business community, especially the financial business community, is worthless, and it is going to be very difficult for Wall Street and President Obama, both, to try to cover things over in this matter.

“Now the other side of this situation is, that it is perfectly possible for us in the United States itself, and with cooperation with certain circles in Europe and elsewhere, we’re quite capable of solving the problem.  And the solution is obviously, Glass-Steagall, Franklin Roosevelt’s own Glass-Steagall.  That is essentially the key thing.

“And the only way that the United States and the people of the United States could possibly escape from a general breakdown of the financial system of the United States, is to go back to Glass-Steagall.  That would mean we would simply cancel most of everything that’s called Wall Street, or anything like it; just cancel it.  It’s rubbish.  It has no intrinsic value.

“And therefore we have to go back to Franklin Roosevelt’s policies in order to save the United States economy.  Now, it’s going to be a tough row to hoe, because we have very poor skills available in the U.S. population.  The productive power of labor, in the United States’ population, has collapsed to a great degree…

“We see that, when people say, ‘well, some people are poor, they’re not worth keeping.’ Well, that’s not the problem, that’s not the truth of the matter. What they’re trying to do is kill off people, as in the case of California.  What’s happening in California, is actually an intentional determination, to kill off as many people in California and adjoining areas as possible. That’s what the policy is; that’s plain talk, no beating around the Bush.  And the Governor of California is one of the leaders, who is leading toward a campaign for mass-slaughter of people in California and adjoining areas.  That’s the reality!

“However, if we go to Glass-Steagall, Franklin Roosevelt’s Glass-Steagall, with means which I’m fully aware of as feasible, we can prevent that.  But the key thing now that’s driving it, is the fact that the European economy is going into a spin, downward, and this includes the British system itself, and it means other areas.”

RELATED ARTICLES:

What’s Wrong With the Latest Greek Bailout Deal

3 Tough Questions the Eurozone Will Face Over Greek Financial Crisis

Majority of Greek Voters Rejected Reasonable Offer to Let Them Stay in Eurozone. What’s Next.

Good Luck Finding a Place to Hide as Global Markets Crumble

Greece: How Did It Get Into This Mess?

RELATED VIDEO: Farage: Isn’t the EU quite as bad as the USSR, Mr Tusk?

Greeks Prepare to Be Pillaged by Jeffrey A. Tucker

In the world of banking, a “holiday” means you can’t get your money. It’s been a few years since we’ve seen that happen in any developed world economy, but that is exactly what the Greek government is doing, starting now, to stop a massive bank run.

Greece owes the International Monetary Fund a payment of $1.5 billion, due tomorrow, from the last time the government was bailed out. But, of course, governments can’t make wealth, and the money didn’t just magically materialize. They have to beg, borrow, and steal to get it, and Greece has finally found those limits.

Athens had hoped that it could once against tap the European Commission. But drained and fed up, other governments refused to extend yet another loan to Greece unless they agreed to reform their bloated and corrupt welfare state.

Unfortunately for Greeks, the ruling coalition in Greece swept into power in January on the platform of stopping “austerity” and rolling back budget cuts. They balked at the EU’s (and especially Germany’s) conditions for the next round of bailout money.

As a result, Athens has really and truly run out of money, and they will default on their debts starting tomorrow — and the European Central Bank has said it will cut off emergency credit to Greek banks if the government fails to pay its debts.

The news that no deal would be reached sent bank depositors into a panic, and thousands have been lined up at ATMs all over the country since Friday.

Prime Minister Alexis Tsipras announced that he was closing all banks for at least a week as a way to stem the tide. Many ATMs are empty; the rest, by government order, will only dispense €60 per person per day. The government is now imposing capital controls to stop cash from leaving the country.

One thing needs to be said about this frantic authoritarian approach: It never works. Bank closings add to the atmosphere of panic. They are often followed by an announcement that the government is going to devalue or outright steal people’s money. Whatever trust remains in the system is drained away along with the value of the currency.

But there’s another factor in play, for the first time. People are looking at Bitcoin as a way to store and move money.

There is now a Bitcoin ATM in Athens that is reportedly doing a brisk business. Redditors are sharing tips. And, of course, the exchange rate of Bitcoin is on the move again.

This past week, I was out of touch of the news entirely because I was at the New Hampshire liberty retreat, Porcfest. There you can buy almost anything with Bitcoin, so I was checking the price often. I noticed the upward price pressure, and I had an intuition that something serious was happening.

Sure enough, this morning I was awakened by a call from Russia Today. They wanted me on a two-hour segment today to talk about the meltdown in Greece. I turned them down because I haven’t followed it closely enough (though that doesn’t usually stop most commentators!).

But when I looked into it, I suddenly understood: Sure enough, Bitcoin is on the move for a reason.

Many price watchers are predicting another spike in the exchange rate if Greece actually defaults and leaves the euro. Maybe, maybe not. It actually doesn’t matter. The exchange rate can be anything; it doesn’t affect the utility of having access to a global currency and payment system that is outside regional banking systems — one that can’t be closed, controlled, confiscated, or devalued at the whim of desperate regimes.

Cryptocurrency is here to stay. It is the world’s new safe haven, displacing the role that gold once played. The reasons are rather obvious: Bitcoin is more liquid than gold. It takes up no space, weighs nothing, and is more secure. Once you are an owner, nothing can take away what you own — and you don’t have to rely on a third party such as a gold warehouse or a bank (or a government) to take care of your money.

Given all of this, there is supreme irony in the announcement made by the Greek central bank last year that consumers should be wary of Bitcoin. Bitcoin is vastly more safe and reliable than any national currency, including the euro and the dollar.

There is no government anywhere that would decline to shut the banks if their ruling class feared financial meltdown. That’s what’s happening in Greece. That could happen in any European country, and it could happen (and has happened) in the United States, too.

In the end, government regards itself as the ultimate owner of all a nation’s currency and the wealth it carries.

It’s wise to have another option, and people have long known that. The question is: What is that option? Today, not for the first time, and not for the last, Bitcoin is here to save the day.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.

Grexit? A flesh wound compared to Frexit (exit of France from EU)

The Telegraph reports this morning that Greek economic minister Varoufakis now threatens to sue in a higher court if the EU attempts to force Greece to leave the EU (our thanks to G. in the UK for this tip).

The article quotes French President François Hollande as follows:

“What is at stake is whether or not Greeks want to stay in the eurozone or want to take the risk of leaving,” said French president Francois Hollande.

Now you would think from this bold statement that Hollande heads up a country that pays its bills to the EU on time, wouldn’t you? After all, financial pundits are all saying that if Greece leaves the EU, Spain, Portugal and perhaps even Italy could be next. No one mentions France.

However, there’s a colossal French debt that no one wants to talk about, except some brave journalists like Francis Journot at the site Agora, who shows that France is actually the elephant in the EU room.

My translation of the opening paragraph of this extraordinary article follows:

The French State’s public debt has reached 6 trillion euros, equivalent to 5 years of tax receipts and nearly 300% of GDP. The process of extravagant financial operations [tentative rendition of cavalerie financière, see below] on the public debt that are available to the government since the banking law of Jan 3, 1973 exposes France more than ever to the volatility of the financial markets and to a default. More-confidential commitments, off the balance sheet and allowed by the State, for payment of retirement pensions of government employees and the like, could also prove impossible to meet in the long run. An exit from the EU could eventually be the only way out of a fraudulent system that is threatening to blow up. [my highlighting] [original text below]

This debt has been constantly fed by new loans to ensure reimbursement of the elderly and their interests, as well as new deficits. The amounts kicked down the road in this way are far greater than those payable by the Greeks. But the off-the-books debt is no less than the debt shown on the books. The author makes it clear, citing authorities, that this debt could never be paid without major growth through new investment in industry. Some of the debt is owed to the IMF and hence, represents US exposure.

One rendition of the term I rendered as “extravagant financial operations” is “Ponzi scheme” and that is just a more direct way of saying the same thing.

Now, if a Grexit is a threat to the integrity of the EU, a Frexit would spell certain doom to the already-shaky entity, and the entire globe is exposed.

Original text:

La dette publique de l’État français atteint 6 000 milliards d’euros, équivaut à plus de vingt années de recettes fiscales et près de 300% du PIB. Le processus de cavalerie financière de la dette publique auquel les gouvernements ont recours depuis la loi bancaire du 3 janvier 1973, expose plus que jamais la France à la volatilité des marchés financiers et au défaut de paiement. Des engagements plus confidentiels, hors-bilan et portés par l’État, pour le paiement des pensions de retraites des fonctionnaires ou assimilés, pourraient également s’avérer, à terme, impossibles à honorer. Une sortie de l’UE pourrait s’imposer comme l’unique voie de sortie d’un système de cavalerie qui menace d’exploser.   

End quote

Cavalerie financière is a fraudulent financial practice based on the discrepancies between the amounts and periods for recording income and outflows to mask a failure between resources and debt owed. Other possible renditions include “can kicking” and “Ponzi scheme.”

RELATED ARTICLE: The euro is a straitjacket for Greece

The Obama vs. Obama Debates

While listening to a local talk-radio show recently, I heard a self-declared liberal caller tell the host, “You guys will go after Obama for anything.” I thought this was an interesting comment considering that devoted liberals will rarely challenge President Obama on anything!

Any reader of this website, or consumer of the variety of conservative and libertarian media outlets, will quickly realize that there are no sacred cows amongst true conservatives and libertarians. Conservative Review® dedicates a significant amount of its limited website space, its contributor’s time, and its financial resources to challenging not only President Obama, but Republicans as well. A simple search through Conservative Review’s archive will provide all of the evidence you need.

When will that “Road to Damascus” moment happen for the media/liberal establishment class? How many times are they going to be misled by President Obama before they mimic the conservative movement and wake up, realizing that they’re being manipulated for the gain of the political class? I recorded a podcast recently, which uses audio from President Obama to drive home this point. I called the episode the “Obama vs. Obama” debates. In it, I ask the question “If you are a supporter of President Obama, then which President Obama do you support?”

It’s stupefying how many times President Obama has publicly taken the exact opposite stance on an issue important to millions of Americans, yet retains unquestioned support on that issue from the same millions.

Although the list is long, here are just a few:

On Marriage

2004 President Obama said, “marriage is something sanctified between a man and a woman.”

2012 President Obama said, “For me personally, it is important for me to go ahead and affirm that I think same-sex couples should be able to get married.”

On Immigration

2013 President Obama said, an Executive Action bypassing the Congress would be “violating our laws” and would be “very difficult to defend legally.”

2014 President Obama said about an Executive Action bypassing the Congress “Today, I’m beginning a new effort to fix as much of our immigration system as I can on my own, without Congress,”

On the Debt Ceiling

2006 Senator Obama said, “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. … I therefore intend to oppose the effort to increase America’s debt limit.”

2013 President Obama said, “I think if you look at the history, getting votes for the debt ceiling is always difficult, and budgets in this town are always difficult.”

On Executive Orders

2008 Candidate Obama said, “I take the Constitution very seriously. The biggest problems that we’re facing right now have to do with [the president] trying to bring more and more power into the executive branch and not go through Congress at all. And that’s what I intend to reverse when I’m President of the United States of America.”

2013 President Obama said, “America does not stand still, and neither will I,” He continued. “So wherever and whenever I can take steps without legislation to expand opportunity for more American families, that’s what I’m going to do,”

And, the coup de grace, on Obamacare

2009 President Obama said, “No matter how we reform health care, I intend to keep this promise:  If you like your doctor, you’ll be able to keep your doctor; if you like your health care plan, you’ll be able to keep your health care plan.”

2013 President Obama said, “What we said was, you can keep (your plan) if it hasn’t changed since the law passed.”

Clearly there is a level of serial dishonesty here and the dishonesty is not about largely inconsequential issues. These are significant issues affecting your life such as your healthcare, the breakdown of our Constitutional system of separated powers, who enters the country and how, and the financial health of the country. If you uncritically accept this dishonesty what else are you willing to accept?

Whenever I point out these dramatic inconsistencies to Obama supporters and I ask them which President Obama they support, they typically respond by redirecting the question as they say “Well; all presidents lie.” So, that’s it? Is this where we are as a country? Have we “evolved” to where President Obama has set a new standard of dishonesty to the point where we should no longer pay mind to being consistently lied to by the most powerful man in the world?

Nassim Nicholas Taleb points out in his book, The Black Swan, the risks of contagion in an information-rich society. Bad information spreads quickly in our new information environment but, when we ignore that information, and blindly accept what is told to us by the insider political class purely because of the partisan label they choose, we become what the founding fathers feared most, subjects.

EDITORS NOTE: This column originally appeared in the Conservative Review.

We’re Number Two

The U.S. was the world’s number one economy prior to World War II, but it took off big-time after the war and there has not been a day of my long life in which we were not number one—until now.

The International Monetary Fund recently released its calculations regarding the world’s economy and concluded that China is the number one economy, producing $17.6 trillion in terms of goods and services, as compared with the U.S. producing $17.4 trillion. It’s not an overwhelming gap, but it is a warning that our economy is going in the wrong direction and has been before and since the financial crisis of 2008.

Writing in Market Watch, Brett Arends, put it succinctly. “As recently as 2000, we produced nearly three times as much as the Chinese.”

As discomforting as the IMF news is, the worst news has been significantly under-reported in the nation’s media. The U.S. is now $18 TRILLION in debt.

In February of 2014, CNS News reported that “The debt of the U.S. government has increased $6,666 trillion since President Barack Obama took office on January 20, 2009, according to the latest numbers released by the Treasury Department.”

President Obama has been responsible for more debt over the course of his two terms to date than all previous U.S. Presidents in the first 227 years combined.

Writing in the Daily Caller, Tracy Miller, an associate professor at Grove City College, noted that “Over the first five years of Obama’s presidency, the U.S. economy grew more slowly than during any five-year period since just after the end of World War II, averaging less than 1.3 percent per year. If we leave out the sharp recession of 1945-46 following World War II, Obama looks even worse, ranking dead last among all Presidents since 1932.”

Why was this man reelected in 2012? One is inclined to find common ground with ObamaCare “architect”, Jonathan Gruber, who called voters “stupid.”

I prefer to believe, however, that the voters have been subjected to a non-stop campaign in the national media to get the first black American elected President and then to ignore some truly horrible facts about his two terms in office thus far.

The voters are not stupid, but they have been deliberately misled by the careful exclusion of news about the actual state of the economy.

Reality caught up with Obama in the two midterm elections of 2012 and 2014. The voters shifted power in Congress to the Republican Party. In the most recent midterms thirteen of the Senators who had voted for ObamaCare were defeated.

As December began, CNS News reported that “The labor force participation rate remained at a 36-year low of 62.8 percent in November, according to the Bureau of Labor Statistics.”

The BLS measures the percentage of “non-institutional population” in the labor force, those 16 years or older who were not in the military or working in a governmental job, i.e. the private sector. In September, the rate was the lowest since February 1978!

To put this in perspective, by November, the number of beneficiaries on the Supplemental Nutrition Assistance Program—food stamps—had topped 46,000,000 for 36 straight months according to data released by the Department of Agriculture. The Census Bureau reports that there are 115,048,000 households in the nation as of August 2014. That means the number of households on food stamps equaled 19.75% of all the households in the nation; one out of five. Those on this program outnumber the entire populations of nations such as Poland or Argentina.

It doesn’t stop there. On December 3 CNS News reported “The total number of people in the United States now receiving federal disability benefits hit a record 10,982,920 in November, up from the previous record set in May, according to newly released data from the Social Security Administration.”

How bad is the U.S. economy? In August, CNS News’ Terence P. Jeffrey reported that “109,631,000 Americans lived in households that received benefits from one or more federally funded ‘means-tested programs’—also known as welfare—as of the fourth quarter of 2012.” The data came from the Census Bureau. That was the same year Obama was reelected and it represented 35.4% of the entire U.S. population at the time. By the end of 2012, it had increased to 49.5%!

Means-tested government programs include Social Security, Medicare, railroad retirement, unemployed compensation, worker’s compensation, Veteran’s compensation and Veteran’s educational assistance. The largest of these programs are Social Security and Medicare.

Why does the U.S. have an $18 TRILLION dollar debt?

Consider that, in fiscal year 2013, the federal government paid out more than $2 TRILLION in benefits and entitlements according to data from the Bureau of the Fiscal Services’ Monthly Treasury Statement. You don’t have to be a mathematician to conclude that, if more Americans were working, there would be less need for many of the benefits programs and the largest among them would be more financially sound.

News of new jobs is always welcome, but it hides the deeper problem of too many unemployed and while Congress continues to debate what to do about Obama’s effort to give work permits to illegal aliens and protect them from deportation, the Center for Immigration Studies announced in June that “Since the year 2000 all of the net increase in the number of working-age (16 to 65) people holding a job has gone to immigrants (legal and illegal).” Should the U.S. make five million or more illegal aliens eligible to compete for jobs with its native-born and naturalized population?

The U.S. must pay billions in interest on its debt. The failure of Congress to address the need to reform the tax code, reduce the deluge of regulations negatively affecting the business and industrial sector, and get control over spending has dug the nation a very deep and dangerous hole.

Statistics can be daunting, but we all can feel that something is terribly wrong with the economy despite the news about a vigorous Wall Street. The fact remains that Main Street is in trouble. The nation requires an economy in which new businesses are created and existing ones can afford to expand. That is not happening.

That is why we are Number Two.

© Alan Caruba, 2014

Rave reviews for the Wealth Building Home Loan

The Wealth Building Home Loan (WBHL), a new approach to home finance, opened to rave reviews at the American Mortgage Conference held September 8-10.  Six leaders of national stature made favorable comments from the podium.

Lewis Ranieri, considered the “godfather” of mortgage finance, in his keynote address praised the WBHL:  “Fundamentally, what I find exciting is the wealth building nature of the product.  Anyone who knows me knows how concerned I am that too often the mortgage has been utilized as an ATM for a boat or big screen TV, as opposed to building equity; if we’re to meet the needs of Americans who desire a home, this type of SAFE experimentation will be critical.”

Carol Galante, FHA commissioner,David Stevens, Mortgage Bankers Association CEO and former FHA commissioner, Joseph Smith, monitor of the National Mortgage Settlement of the State Attorneys General and Lenders, and James Lockhart, former director of the Federal Housing Finance Agency also made note of the innovative approach taken by the WBHL.

Bruce Marks, CEO of the Neighborhood Assistance Corporation of America (NACA), announced that the WBHL, which provides low-income borrowers a straight, broad highway to building wealth based on a 15-year, fully amortizing, fixed-rate loan, will be available in an initial rollout undertaken by NACA and the Bank of America within 60 days.

Long-time industry observer Tom LaMalfa, in an email, stated:

“In an industry in which few agree on much, there was remarkable agreement on the value of the WBHL among an array of industry leaders speaking at the AMC this week.”

Stephen Oliner (codirector of AEI’s International Center on Housing Risk) and I announced that additional WBHL pilots are in the works with lenders around the country.

Smith spoke extensively about the challenge in providing access to credit and home ownership, particularly among low- and moderate-income borrowers.  He asked:

“[I]s the thirty year fixed-rate mortgage what we need?  Contrary to the opinion of many people whom I admire and respect, the thirty year fixed rate mortgage is neither a Constitutional nor human right…. While it is a proven ‘affordability product’ of long standing, the thirty-year fixed-rate mortgage does not build equity very quickly. Further, a lot of things can happen to a borrower over those thirty years – job loss, health problems, divorce. [a]s Monitor of the National Mortgage Settlement, I have done a lot of listening in the last two and a half years; including to distressed borrowers, the people who represent them, and public officials who deal with the fallout from increased foreclosures and bankruptcies. What I have heard confirms what I know from prior experience: that one or two of those life issues – or, in many, many cases, the trifecta – have resulted in real financial crisis on a large scale. Absent substantial home equity at the outset, the thirty-year fixed rate mortgage increases the fragility of a borrower’s overall financial position and puts the borrower at risk for a very long time.”

Smith went on:

“The traditional answer to the concerns I have just expressed is to require a substantial down payment. That’s certainly effective – for the people who can afford it. But it reduces access to credit and home ownership, particularly among low- and moderate-income borrowers.  If we want to keep homeownership an option for an expanding portion of the population, we should build some additional features into the mortgage product to reduce fragility. At the very least, we should consider the inclusion of product features that allow and even encourage early equity build-up. In that regard, I am pleased to note AEI’s Wealth Building Home Loan.”

Steve and I created the WBHL to serve the twin goals of providing a broad range of homebuyers – including low-income, minority, and first-time buyers – a more reliable and effective means of building wealth than currently available under existing policies, while maintaining buying power similar to a 30-year loan.

A WBHL has a much lower foreclosure risk because of faster amortization and common-sense underwriting. Its monthly payment is almost as low as 30-year, fixed-rate loan while providing the buyer with more than 90 percent of the buying power. It requires little or no down payment and has a broad credit box, meaning sustainable lending for a wide range of prospective homebuyers. While the WBHL is designed to reduce default risk for all borrowers, this is a critical importance for borrowers with FICO scores in the range of 600-660.

The WBHL will help these borrowers reliably and sustainably build wealth.

EDITORS NOTE: The featured image is courtesy of SNMC.

America, Our Debt-Ridden Nation

Let’s look at just some of the latest news about the U.S. economy:

  1. According to the Treasury Department’s Bureau of Fiscal Services, the federal government paid $2,007,358,200,000—over $2 trillion—in benefits and entitlements in the 2013 fiscal year, October 1, 2012 to September 30, 2013. Most of the benefits, 69.7% came from non-means tested government programs that provide them to recipients who qualify regardless of income. That would include Medicare, Social Security, unemployment compensation, veteran’s compensation, and railroad retirement, to name a few.
  2. The total federal government spending in 2013 totaled $3,454,253,000,000—over $3.4 trillion—encompassing defense, highway and transportation costs, public education, immigration services, and government worker salaries, to name a few.
  3. An astonishing amount of that spending constitutes wasted taxpayer money. In July the Government Accountability Office (CAO) testified before Congress that federal agencies made more than $100 billion in improper payments in 2013. That is an amount comparable to the combined total budgets of the Coast Guard, U.S. Immigration and Customs Enforcement agency, Border Patrol, Secret Service, and the Federal Emergency Agency, et cetera. Improper payments result when people collect money from government programs for which they are ineligible.
  4. By August, the total U.S. federal debt had increased to more than $7 trillion during the five and a half years since Barack Obama has been President. That is more than the debt increased under all U.S. Presidents from George Washington through Bill Clinton—combined! More debt than was accumulated in the first 227 years from 1776 through 2003.
  5. During the time President Obama has been in office the number of unemployed reached 37.2%, a 36-year high for those 16 or older who do not have a job and are not actively seeking one. From December 2013 through May of this year, the labor participation rate had been at 62.8%. The last time the labor participation rate was that low was February 1978 when Jimmy Carter was President.
  6. As the nation sank deeper into debt by the end of 2012 there were 109,631,000 Americans living in households that were receiving one or more federally funded “means-tested programs”, more generally referred to as welfare. Combined with those receiving non-means-tested benefits and it added up to 49.5% of the population.

Money BombIt is always tempting to blame everything on the President and, despite the usual rebound from a recession that has occurred in the past, it has not occurred during his first term, nor into his second at this point. In fact, the latest data reveals that the U.S. economy shrank at a 2.9% annual rate during the first quarter of 2014. Its long-run average rate of growth has been 3.3%, but the highest since Obama took office was 2.8%.

According to the World Bank, in 2013 the U.S. Gross Domestic Product, the value of its goods and services, was $16,800,000,000,000. The federal, state and governments took their share via taxation on income and/or property. The rest was saved or spent by those either holding a job or receiving government benefits; very nearly half of the population old enough to be employed if there were jobs for them.

The problem that affects all of us is the imbalance of the U.S. budget where more money is going out than coming in. The difference is deemed the “deficit.” In order to pay bills, Congress has to agree to raise the limit on how much the nation can borrow.

Nick Dranias, the constitutional policy director for the Goldwater Institute, has come up with a proposal, “The Compact for a Balanced Budget”, and it was been published by The Heartland Institute, a free market think tank, in July.

As Dranias points out, “The U.S. gross federal debt is approaching $18 trillion. That figure is more than twice what was owed ($8.6 trillion) in 2006, when Barack Obama was a junior U.S. Senator from Illinois and opposed lifting the federal debt limit.” It represents more than $150,000 per taxpayer.

“What if states could advance and ratify a powerful federal balanced budget amendment in only twelve months, asks Dranias. His proposal is “a new approach to state-originated amendments under Article V of the U.S. Constitution.

Two states, Georgia and Alaska, are expected to establish a Balanced Budget Commission, an interstate agency dedicated to organizing a convention—before 2014 ends—to propose an amendment to achieve a balanced budget. The amendment would put “an initially fixed limit on the amount of federal debt.” It would ensure Washington cannot spend more than tax revenue brought in at any point in time, with the sole exception of borrowing under the fixed debt limit. It would force Washington to reduce spending long before borrowing reaches its debt limit, preventing any default on obligations; something threatening many other nations as well.

Suffice to say, the proposed amendment involves some complex elements and, if the Compact does not receive sufficient support from many more states than just the two that have signed on, it won’t see the light of day.

What the rest of us understand, however, is that federal spending is out of control at the same time as the amount of money it takes in is more than what it “redistributes.” Add in a sluggish economy, not growing at its usual rate, and you have a recipe for a lot of trouble ahead.

Republicans are usually credited with being more financially prudent. If true, we need to elect a Congress controlled by the GOP in November and a Republican President in 2016. If we don’t, all bets are off.

© Alan Caruba, 2014

The Best Debt in the World by Emma Elliot Freire

Hard to believe, but Britain’s student loan problem is worse than the Yanks’.

In late 2010, tens of thousands of British students took to the streets of London. They protested government plans to cut direct funding of higher education and raise the cap on tuition from £3,290 ($5,500) to £9,000 ($15,000). Some of them occupied government buildings and clashed violently with police. Hundreds were arrested.

Maybe they shouldn’t have gotten so worked up. It’s now becoming clear that most of them won’t repay their loans in full. Some of them will even be getting their education for free.

The UK government’s student loan scheme is more generous than its American counterpart. Any British student who is accepted to a university is automatically entitled to a government loan for the entirety of their tuition. Most universities are charging £9,000 per year. British students can also get loans for their living costs, which range from £4,418 to £7,751 per year. The average student will graduate £44,000 ($74,000) in debt.

The core difference between the British and American systems lies in the terms of repayment. American students typically have to start repaying 6 months after they graduate. Opportunities for loan forgiveness are extremely limited, and loans cannot be discharged via bankruptcy. By contrast, British students don’t have to start repaying until they are earning £21,000 ($36,000) per year. They must then pay 9 percent of their gross income as long as they stay above the threshold. Their outstanding balance is automatically forgiven 30 years after it became eligible for repayment. Also, the loans do not appear on their credit report. 

“The thing people worry about with debt is that they won’t be able to pay it back. The way this is structured means that is not a worry ever, and it doesn’t follow you around until your old age,” says Sam Bowman, Research Director at the Adam Smith Institute, a free-market think tank. 

Bowman finds it helpful to understand loan repayment as a tax. “You can either think of it as a graduate tax or it’s the best debt in the world,” he says. “It makes sense to think of it as a graduate tax, a specific kind of tax on a specific action that is designed to offset the cost of that action.”

Uncharted waters for repayment

The first students to take on the new, larger type of loans have yet to graduate, so it is hard to estimate what repayment rates are likely to be. However, the Institute for Fiscal Studies (IFS), an independent research center, is already projecting that 73 percent of students will not repay their loans in full. They believe the average amount written off will be around £30,000 ($50,500).

report released in July by a committee of the British parliament reached similar conclusions. “By providing favourable terms and conditions on student loans, the Government loses around 45p [cents] on every £1 it loans out.” When the new policies were first announced in 2010, the government projected it would only lose 28p per £1 loaned out. The report notes that government loans to students are expected to total £330 billion by 2044. “We are concerned that Government is rapidly approaching a tipping point for the financial viability of the student loans system,” says the report.

By and large, students still think of themselves as having “real debt” for their education. “One valid criticism of the loan system is that students don’t realize how generous it is,” says Nick Hillman, director of the Higher Education Policy Institute. “Students think they’re paying for the entirety of their education when actually they’re not. Taxpayers are covering quite a lot of the cost.”

The IFS report notes that the lowest-earning 10 percent of graduates will only repay £3,879 (in 2014 prices). A survey earlier this year showed that 40 percent of graduates are still looking for a job 6 months after leaving university. If this trend continues, some graduates may never start earning £21,000.

A few savvy individuals are learning to work the system. British financial advisors encourage parents who could contribute to their child’s education to have their kid take out government loans instead. Martin Lewis, who runs the popular website moneysavingexpert.comwrites, “If a parent pays the £27,000 tuition fees upfront, and their child becomes a poet and never earns above £21,000, the whole £27,000 would have been wasted.”

The only people who can expect to repay their loans plus interest in full are the small group who take high-paying jobs soon after graduating and get regular pay increases for the next 30 years. These individuals are thinking hard about whether they need a degree. “The only income group that has gone to university less are the richest. That might be surprising, but what the debt does is it imposes some cost on people for going to university,” says Bowman. “So if they have other options, they take them. Maybe they could skip college and join their parent’s business or their parents can find them jobs.”

This is one immediate impact of the new loan scheme. There will undoubtedly be unintended consequences that may only become evident years or decades from now. For example, Britain may see an increase in the number of stay-at-home parents. Loan repayment is tied to an individual’s income. Spouse’s earnings are irrelevant. Child care is already very expensive. For some families, the extra 9 percent they would lose in loan repayments will be enough to push one parent out of paid employment.

Loans without borders

Loan repayments are collected by Her Majesty’s Revenue and Customs, the British equivalent of the IRS, via withholding from a person’s paycheck. This makes it fairly simple to collect money from anyone working for a British employer. Things become harder when a graduate leaves the country. 

“There is no way that the government can collect money from people who go abroad,” says Bowman. “There is a big incentive for them to stay away. Say you’re an English graduate and you go to America for a couple of years to work. If you have this debt waiting for you when you get home, there’s a big reason for you to stay abroad for as long as possible.”

The number of students who would actually permanently leave is probably very small. “It would be a much bigger problem than the student loan book if we were seeing Irish levels of emigration,” says Bowman. However, a determined few will be able to dodge repayment.

And then there’s the question of students who come to Britain from other European Union countries. Since 2006, EU law has required Britain to offer these students the same loan deals for tuition, though not for living costs. It is a tradition in British politics to blame problems that are largely homegrown on the widely-hated EU. As the issues with loan repayment have come to light, stories about EU students borrowing money and then “going to ground” have also been hitting the headlines.

This problem is still fairly small, since EU students have only been receiving loans since 2006. Hillman says that about half of EU students who study in Britain choose not to borrow or repay their loan in full before they leave the country. Many EU students enroll at British universities because they want to work in Britain later. Thus, they have a strong incentive to repay. However, data is now emerging that shows unpaid loans in the low millions. “The issue is less about what has happened to date but what might happen in the future because there aren’t many people yet who are liable to repay, but it’s growing all the time,” says Hillman. 

“If a French or Dutch person studies at a British university then goes home and gets a job, we can certainly chase them through the French or Dutch courts because they’ve signed a legal contract and they should repay,” Hillman says. “But the trouble is that it’s an incredibly expensive business. The person may owe £27,000, which is a lot of money, but chasing someone through the courts can easily cost that much.”

One way to address this problem would be an EU-wide agreement. “But there’s no real incentive for other European countries to do this because other European countries don’t use loans in the same way we do,” says Hillman. 

Relative improvement

Despite the problems, both Hillman and Bowman say the new system is an improvement over the way British higher education used to be funded. Tony Blair’s government only introduced tuition in 2004. “Before loans and fees came in, British taxpayers paid 100 percent of the cost of going to university. Now they don’t. But they still fund part of the loan cost,” says Hillman.

Bowman says it is important to remember the overall British context. “The alternative is not a kind of free market where you have everybody paying their own way and banks privately making loans to people. The alternative is going back to a situation where the government pays for everything, and that’s a disaster,” he says. “The political climate in the UK is very hostile to any kind of marketization of anything. That’s not going to change for a couple of years, at least until we’re growing rapidly, and we all feel rich and safe again.” 

Potential Solution

One interesting idea put forward by David Willetts, a Member of Parliament and former Minister of State for Universities, is to sell government student loans to universities, making them responsible for collecting repayment. This approach would address a problem that afflicts both American and British higher education: Universities collect tuition upfront and then have little incentive to ensure loans are repaid. 

Bowman supports the proposal. “Making universities responsible for whether people repay might make them more willing to turn people away if they’re not a great bet in terms of their future earning, and that might counteract some of the qualification inflation. Right now, you need a university degree for any job that isn’t blue collar manual labor.”

He believes Willetts’ idea is politically viable. “Britain has lots of middle-class people who think of themselves as being working-class. They feel like they’re fighting against the man when in reality they are the man. You could say to them that we don’t want people who haven’t gone to university picking up the bill in any way for people who have gone to university.” 

The only question is whether universities would go along with it. Right now, they have a very beneficial arrangement. 

Much will depend on how loan repayment rates develop in the next few years. Graduates will probably soon grasp that they have the best debt in the world. Maybe taxpayers will start to realize this debt isn’t such a good deal for them. 

ABOUT EMMA ELLIOTT FREIRE

Emma Elliott Freire is a freelance writer living in England. She has previously worked at the Mercatus Center, a multinational bank, and the European Parliament.

RELATED ARTICLE: Can You Pay Student Loans With a Credit Card?

EDITORS NOTE: This column with images is republished with permission. The featured image is courtesy of FEE and Shutterstock.

Tragedy of the Healthcare Commons: The Affordable Care Act contributes to an already unsustainable situation by D.W. MacKenzie

Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the healthcare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor-supply issues. Give the mounting difficulties with and growing concerns about the ACA, it is worthwhile to reconsider the main issues regarding this program.

The Congressional Budget Office (CBO) recently published a report examining some of these problems. It contains nothing new. Many commentators have discussed the projection of lower labor-force participation. Obamacare subsidies will allow lower-income Americans to work less. People do in fact work less if their costs are shared. The tendency of people to withhold work from collective undertakings is known among economists as a tragedy of the commons.

Reduced labor-force participation means both lower total tax revenue and higher spending on government benefits. The CBO’s long-term forecasts report serious imbalances between tax revenues and federal spending. Federal deficits are projected to remain high, but “manageable,” for about a decade.

The costs of entitlements, along with regular budget items (defense and non-defense), are relevant to any discussion of the ACA’s affordability. The retirement of the baby boomers, though, will result in steadily rising costs for older entitlement programs. Taxpayers are already legally responsible for a national debt of $17 trillion (which  will hit $20 trillion by the time Obama leaves office). Interest payments on the national debt are low for the time being, but they won’t stay that way forever. The Medicare trustees have admitted to a long-term deficit of $34 trillion, but independent estimates run much higher. Social Security has an unfunded liability of more than $12 trillion. These costs pile on top of the current regular budget of $3.5 trillion, not to mention projected growth in this budget. Taxpayers are also responsible for the ACA’s cost overruns. Section 1342 of the ACA makes taxpayers responsible for bailing out insurance companies if the need arises.

Taxpayers are legally obligated to finance all of the above-mentioned expenditures, debts, and unfunded liabilities. People who believe in individual liberty reject the idea that people are morally obliged to fund ever-rising Federal expenditures. But the dispute over whether American taxpayers should fund projected federal spending is rendered academic by the fact that younger Americans will not be able to afford to pay for all of it. The commons created out of the New Deal and the Great Society is collapsing.

Economist Larry Kotlikoff estimates that average rates of taxation would have to rise 56 percent to cover projected increases in federal expenditures. Kotlikoff’s estimate may be high, but even a lower figure would leave Americans in dire financial straits. Taxpayers simply will not be able to fund all projected increases in all current federal programs. Bond investors will not finance our rising national debt in unlimited amounts. The ACA’s increased spending and lower labor-force participation, on top of these increases, makes national bankruptcy that much more likely.

National bankruptcy is not inevitable. The U.S. government is heading toward bankruptcy superficially because politicians have failed to set rational budget priorities, and fundamentally because citizens expect far too much of the public sector. The ACA was created out of concern that financial considerations bar access to healthcare to many people. And Americans do spend a large percentage of national income on healthcare.

The good news is that “we” have a substantial amount of leeway to save money on healthcare. Data on the overall effectiveness of public healthcare spending is clear, but not nearly as well known among voters. For example, The RAND Corporation conducted a health insurance experiment from 1974 to 1982, which showed that making healthcare “free,” or available at no personal marginal cost, does lead people to buy more. Much of this extra healthcare is inappropriate or largely unneeded, however. When people pay for more of their healthcare out of pocket, they tend to waste less money. The RAND study concluded, “In general, the reduction in services induced by cost sharing had no adverse effect on participants’ health.” Many other studies cast doubt on the effectiveness of providing healthcare at no private cost. According to another study, “Medicare enrollees in higher-spending regions receive more care than those in lower-spending regions but do not have better health outcomes or satisfaction with care.” Studies of people with health savings accounts (HSAs), as compared with people with plans like PPOs, show HSA holders control premium inflation better than their PPO counterparts.

Having people pay deductibles or bear other out-of-pocket costs causes us to economize on healthcare. Health insurance pools risks and creates a type of commons, whether done privately or publicly. The private commons of insurance companies does, however, have limits. Private insurance companies deny some types of coverage, depending on how much insurance people contract for in the first place. In other words, private insurance is not an open commons—it specifies the extent to which each policy holder can draw out of the insurance pool.

Public insurance programs lure people in by promising more benefits than private insurance plans offer. Yet public programs ultimately run into the basic problem of scarcity. The ACA pushes people out of very basic insurance plans into plans with higher levels of coverage, but excessive coverage is a major source of high healthcare costs. Americans spend a sizable portion of GDP on health expenses (17.9 percent in 2011). The overconsumption of healthcare by overinsured Americans is both a major source of excessive costs and a cost that can be cut with little adverse effect.

The tendency of people to waste money in open-access healthcare financing is simply going to produce another tragedy of the commons. Too few young people have been signing up at Healthcare.gov because younger Americans are mostly smart enough to avoid paying into a commons. Americans are signing up mainly because they expect to draw subsidies out of this commons.

Problems with managing a commons in healthcare financing are serious. Once someone enters into a life-threatening medical condition, they and their family will want every possible available step taken to save this person—provided that “someone else” pays. Passing costs onto someone else is, aside from being morally dubious, unworkable in the aggregate because we are each “someone else” to everyone else.

There are many costs associated with government intervention into the healthcare industry: administrative and regulatory compliance costs, elevated costs of litigation and court rulings, lobbying costs, costs of perverse incentives. The perversities associated with treating health as an open-access and politicized commons have, along with other, government spending programs, created an unsustainable fiscal situation. The unaffordability of the Affordable Care Act leaves us with two main options: Congress can repeal the ACA immediately through the legislative process, or we can all wait for the repeal process of national bankruptcy.

ABOUT D.W. MACKENZIE

D. W. MacKenzie is an assistant professor of economics at Carroll College in Helena, Montana.