America's True National Debt: $87 Trillion

This piece came out in yesterday's Wall Street Journal, but its content is too important to let it glide past without sufficient amplification. Its authors are Chris Cox (a former Congressman and SEC Chairman) and Bill Archer (the former Chair of the House Ways and Means Committee). Both were members of President Clinton's bipartisan commission on tax and entitlement reform in 1994. As today's politicians bicker over the minutiae of a deal to avert the man-made disaster known as the "fiscal cliff," Cox and Archer warn that America is headed toward a far more dangerous precipice if our entitlement spending isn't responsibly and seriously reined in. Their piece explicates why the record-setting, eye-popping annual deficit and national debt figures that most Americans have heard about -- $1.1 Trillion and $16 trillion, respectively -- don't even approach capturing the magnitude of Uncle Sam's red ink. In short, the government is relying on budgeting gimmicks and practices that would land private sector accountants in jail:

As Washington wrestles with the roughly $600 billion "fiscal cliff" and the 2013 budget, the far greater fiscal challenge of the U.S. government's unfunded pension and health-care liabilities remains offstage. The truly important figures would appear on the federal balance sheet—if the government prepared an accurate one. But it hasn't. For years, the government has gotten by without having to produce the kind of financial statements that are required of most significant for-profit and nonprofit enterprises. The U.S. Treasury "balance sheet" does list liabilities such as Treasury debt issued to the public, federal employee pensions, and post-retirement health benefits. But it does not include the unfunded liabilities of Medicare, Social Security and other outsized and very real obligations. As a result, fiscal policy discussions generally focus on current-year budget deficits, the accumulated national debt, and the relationships between these two items and gross domestic product. We most often hear about the alarming $15.96 trillion national debt (more than 100% of GDP), and the 2012 budget deficit of $1.1 trillion (6.97% of GDP). As dangerous as those numbers are, they do not begin to tell the story of the federal government's true liabilities.

So what does a more complete picture of the government's unfunded liabilities (money spent or promised to be spent, that isn't paid for) look like? It ain't pretty:

The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure. Why haven't Americans heard about the titanic $86.8 trillion liability from these programs? One reason: The actual figures do not appear in black and white on any balance sheet. But it is possible to discover them. Included in the annual Medicare Trustees' report are separate actuarial estimates of the unfunded liability for Medicare Part A (the hospital portion), Part B (medical insurance) and Part D (prescription drug coverage). As of the most recent Trustees' report in April, the net present value of the unfunded liability of Medicare was $42.8 trillion. The comparable balance sheet liability for Social Security is $20.5 trillion.

These are staggering, deeply concerning numbers. Our real national debt is approaching $87 trillion and counting, yet our leaders are squabbling tax hikes on "the rich" that would reap (at best) approximately $82 billion per year. Cox and Archer place the ignorance and folly of the "we have a revenue problem" crowd in stark relief:

When the accrued expenses of the government's entitlement programs are counted, it becomes clear that to collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. That is the total of the average annual accrued liabilities of just the two largest entitlement programs, plus the annual cash deficit. Nothing like that $8 trillion amount is available for the IRS to target. According to the most recent tax data, all individuals filing tax returns in America and earning more than $66,193 per year have a total adjusted gross income of $5.1 trillion. In 2006, when corporate taxable income peaked before the recession, all corporations in the U.S. had total income for tax purposes of $1.6 trillion. That comes to $6.7 trillion available to tax from these individuals and corporations under existing tax laws. In short, if the government confiscated the entire adjusted gross income of these American taxpayers, plus all of the corporate taxable income in the year before the recession, it wouldn't be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities. Some public officials and pundits claim we can dig our way out through tax increases on upper-income earners, or even all taxpayers. In reality, that would amount to bailing out the Pacific Ocean with a teaspoon.

These figures underscore the profound and alarming lack of seriousness that has gripped our politics. The president prattles on about the "Buffett Rule" and "fair shares," but those associated revenues amount to mere snowflakes in the face of the biggest debt avalanche in history sliding down our national mountain. Sure, taxing the rich might make some people feel good (click here for an unvarnished articulation of liberals' class envy agenda), but it does absolutely nothing to fix the real problem. The Republicans have at least put a serious plan, with bipartisan origins, on the table to begin to address these issues. Democrats have screamed "no!" yet they continue to put forth no realistic, specific ideas of their own. Frustratingly, this cynical strategy has worked out pretty well for them at the ballot box in recent years, but at some point the jig will be up. I'm sure it will all be the Republicans' fault then, too, but unlike politicians and the media, the arithmetic doesn't lie.

http://townhall.com/tipsheet/guybenson/2012/11/28/americas_true_national_debt_87_trillion

Obama the Job-Killing Owl-Killer

By Michelle Malkin

Welcome to the pretzel logic of liberal environmental protection: In order to "save" owls, the Obama administration is going to shoot them dead.

This is not -- I repeat not -- an Onion parody.

Over the Thanksgiving holiday, the White House released a big fat policy turkey: its final critical habitat rule for the endangered northern spotted owl. The Obama plan will lock up 9.6 million acres of land (mostly, but not all, federal) in Oregon, Washington and northern California. This is nearly double the acreage set aside by the Bush administration. Thousands of timber workers (along with untold thousands of related support jobs) will be threatened in the name of sparing a few thousand spotted owls from extinction.

As House Natural Resources Committee Chairman Doc Hastings, R-Wash., pointed out earlier this year, timber-dependent counties hit hard by the federal land grab and unending environmental litigation remain racked by high unemployment. "The loss in economic activity caused by the original spotted owl plan caused an astounding decrease in federal tax receipts of nearly $700 million per year -- all from rural Northwest communities."

Despite two decades of massive government intervention and the near-destruction of the northwest timber industry, the furry bird is vanishing faster than ever. According to the Smithsonian Magazine, "(t)imber harvest on 24 million acres of federal land had dropped 90 percent from its heyday" by the year 2000. Yet, northern spotted owls are now "disappearing three times faster than biologists had feared." Indeed, spotted owl populations in key parts of Washington State "are half what they were in the 1980s." And overall, the bird has seen a 40 percent decline over the past 25 years, according to the U.S. Fish and Wildlife Service.

Punishing loggers and bringing the timber industry to its knees have made vengeful environmental groups fat and happy. But the northern spotted owl they claim to care so much about is catastrophically worse off thanks to green zealotry. One root cause: habitat loss (thanks in part to raging wildfires resulting from poor forest management and green opposition to thinning/controlled burns).

The other major, nonhuman culprit: the barred owl.

These barred owls began migrating from the East Coast in the 1950s, and the USFWS reports that the larger, more aggressive and more adaptable birds "are known to displace spotted owls, disrupt their nesting and compete with them for food." Barred owls are more prolific breeders, less finicky about their food and less picky about where they live. They also don't bow down before the Endangered Species Act or the hallowed "threatened" status of its weaker brethren. They are brutal predators known to slam into spotted owls, slicing them with their talons and decapitating them in their nests.

Conservation groups whine that barred owls are victims of "scapegoating." But USFWS Director Dan Ashe spoke the truth earlier this year: "We can't ignore the mounting evidence that competition from barred owls is a major factor in the spotted owl's decline."

Instead of admitting failure and letting nature take its course, however, command-and-control bureaucrats have appointed themselves Mother Nature's judges, juries and executioners. Their "main priority" is "reducing competition from barred owls." How? By gunning them down. Final details are still in the works, but the agency has floated past removal schemes that involve "luring territorial barred owls into close range ... using recorded calls and an owl decoy. ... A shotgun would be used to prevent wounding and ensure rapid and humane death." Experts say such an eradication plan would need to continue for centuries.

Twenty years of regulatory salvation have failed the northern spotted owl. Who believes that another top-down government exercise in species engineering -- this time backed with bullets -- will do the trick? When the government picks winners and losers, taxpayers always get screwed. No matter the job losses.

No matter the death toll. Arrogant and unaccountable central planners never give a hoot.

http://townhall.com/columnists/michellemalkin/2012/11/28/obama_the_jobkilling_owlkiller/page/full/

Obama administration blissfully ignorant on Egyptian powergrab

If ignorance is bliss, the Obama administration is living in a permanent state of euphoria.

Despite the fact that Egypt’s Mohammad Morsi recently granted himself far-reaching dictatorial powers, the U.S. State Department is insisting there’s nothing to see here, folks:

As we called for last week, when confronted with concerns about the decree that he issued, President Morsi entered into discussions with the judiciary, with other stakeholders in Egypt. As I said, I think we don’t yet know what the outcome of those are going to be, but that’s a far cry from an autocrat just saying my way or the highway. …

We are continuing to gather an understanding of precisely what’s been agreed, precisely what the impact is, as are Egyptians who are continuing to try to understand this. So I’m not going to opine any further till we have more information.

I’m pretty sure the tear-gassed Egyptians rioting in Tahrir Square have a clear picture of what Morsi’s decrees mean for the Arab Spring’s promise of “freedom.”

Sure the guy decreed that all of his decisions as president are not subject to any appeal in any court or by any other authority. Sure he bestowed complete immunity for his Islamist friends who are now drafting a new constitution. But sure, he’s a far cry from an autocrat.

Uh-huh.

http://www.theblaze.com/blog/2012/11/28/obama-administration-blissfully-ignorant-on-egyptian-powergrab/

MSM Starting to Notice Democrats' Recklessness in Fiscal Cliff Talks

One of Democrats' enduring, systemic political advantages a mainstream media whose levers are overwhelmingly controlled by people who agree with them on most issues. But sometimes Democrats push their luck, and many in the press cannot help but notice. In the midst of a deluge of Republicans showing flexibility on "revenues" -- for better or worse -- Democrats have thus far been unwilling to commit to, well, much of anything at all. Compromises require real, tangible concessions from both sides, and a number of MSM stalwarts are beginning to point out that Democrats aren't doing their, ahem, fair share. The Washington Post's editorial board is urging Congressional Democrats to get serious and calling on President Obama to fill the leadership vacuum, essentially echoing what the GOP has been saying for years:

Democrats, meanwhile, are sounding more and more maximalist in resisting spending cuts. Many insist that Social Security, Medicare, Medicaid and education — pretty much everything except the Pentagon — are untouchable. Senate Majority Whip Richard J. Durbin (Ill.), who had been one of the more reasonable Democratic leaders, said Tuesday that, while he favors reform of entitlement programs, it shouldn’t be part of the negotiations on the fiscal cliff. The Post’s Greg Sargent reported that union leaders and other liberals came away from a White House meeting encouraged that administration officials agree. “They expect taxes to go up on the wealthy and to protect Medicare and Medicaid benefits,” one attendee said. “They feel confident that they don’t have to compromise.” Don’t have to compromise? Elections do have consequences, and Mr. Obama ran on a clear platform of increasing taxes on the wealthy. But he was clear on something else, too: Deficit reduction must be “balanced,” including spending cuts as well as tax increases. Since 60 percent of the federal budget goes to entitlement programs such as Medicare, Medicaid and Social Security, there’s no way to achieve balance without slowing the rate of increase of those programs.

The Post praises Durbin for being "more reasonable" than many of his fellow partisans when it comes to entitlement reforms. One wonders if they'll ever notice how impossibly vague his statements have been on the subject. Still, some accountability here is better than none at all. Before you write the Post crew a thank-you note, however, read their humorous "fact check" of Republicans who correctly claim that Democrats' unserious tax-the-rich gambit would only fund a single week of federal spending. (Verdict: This talking point is mathematically correct, but the "context" makes it less than true. One Pinocchio. Groan). The Post also vastly understates the problem and the silliness of Obama's fanciful notion of "balance," but that sin isn't unique to them; not by a long shot. Meanwhile, the Associated Press reports that even if the GOP lines up and salutes on new revenues, Democrat infighting could very well sink the Good Ship Compromise:

Deep divisions among Senate Democrats over whether cuts to popular benefit programs like Medicare and Medicaid should be part of a plan to slow the government's mushrooming debt pose a big obstacle to a deal for avoiding a potentially economy-crushing "fiscal cliff," even if Republicans agree to raise taxes. Much of the focus during negotiations seeking an alternative to $671 billion in automatic tax increases and spending cuts beginning in January has centered on whether Republicans would agree to raising taxes on the wealthy. President Barack Obama has insisted repeatedly that tax increases on the wealthy must be part of any deal, even as White House officials concede that government benefit programs will have to be in the package too. "It is the president's position that when we're talking about a broad, balanced approach to dealing with our fiscal challenges, that that includes dealing with entitlements," White House press secretary Jay Carney said Tuesday. But even if GOP lawmakers agree to raise taxes, there is no guarantee Democrats can come up with enough votes in the Senate to cut benefit programs — as Republicans are demanding.

Politico is picking up on the same dynamic. Let's close with a recommendation to peruse this USA Today editorial excoriating Democrats for using misdirection and false assertion to try to convince the public that Social Security is in fine shape, and has nothing to do with our debt troubles. An excerpt:

Do Democrats really believe Social Security doesn't contribute to federal deficits and the national debt? They're certainly saying it a lot: "Social Security does not add one penny to our debt, not a penny," Sen. Dick Durbin of Illinois, the No. 2 Democrat in the Senate, insisted Sunday on ABC's This Week. During Monday's briefing at the White House, press secretary Jay Carney repeated the theme: "We should address the drivers of the deficit, and Social Security is not currently a driver of the deficit — that's an economic fact." Well, saying it's a fact doesn't make it so. Durbin, Carney and others making that claim should take a look at the president's own budget to see what's really going on. On page 465 of the budget's "Analytical Perspectives," they'll find a chart showing that Social Security ran a deficit of $48 billion last year. This year, Social Security will come up $50.7 billion short. In 2015, as more Baby Boomers retire, the gap between cash in and cash out is expected to reach $86.6 billion. Need a second source? In a report released last month, the Congressional Budget Office said Social Security benefits began exceeding payroll tax revenue in 2010, and without changes, the program will never get back into balance.

For much more on this front, read (or re-read) this.

UPDATE - Republicans are turning to Erskine Bowles -- the Democratic co-chair of President Obama's debt commission and Bill Clinton's former Chief of Staff -- for leverage in this fight. Smart move:

Speaker John Boehner (R-Ohio) is turning to an unlikely ally — President Clinton’s former chief of staff — to try to get the White House to put big entitlement changes in a fiscal-cliff deal. Erskine Bowles, the former co-chairman of Obama’s debt commission, will meet on Wednesday with Boehner and other top Republicans. The GOP is using the occasion to call out liberal Democrats for working against benefit cuts to Medicare, Medicaid and Social Security. “The problem is that congressional Democrats are drawing lines in the sand against the substantial spending cuts and reforms that are crucial to any agreement. We have to highlight the fact that the president’s own party is the roadblock here,” said a House GOP leadership aide.

http://townhall.com/tipsheet/guybenson/2012/11/28/msm_starting_to_notice_democrats_recklessness_in_fiscal_cliff_talks

From The Heritage Foundation: 4 Reasons Warren Buffett Is Wrong on Tax Hikes

Let’s talk taxes. In a New York Times op-ed yesterday, famed investor and Berkshire Hathaway CEO Warren Buffett once again argued that the wealthy should be taxed more.

This isn’t the first time Buffett has made the case for higher taxes, and it’s not the first time he’s been wrong. Here are four reasons he is wrong to push for tax hikes.

1. Buffett says tax hikes won’t hurt jobs.

Fact: Tax hikes, especially those he espouses, hurt jobs.

Buffett cites periods when tax rates were high and says that “Under those burdensome rates,” employment “increased at a rapid clip.”

This country has an employment problem right now, and tax rates aren’t even as high as Buffett wants. The tax increases President Obama champions would hit small businesses that create jobs. According to Treasury figures, 1.2 million Americans who employ people are paying their taxes through the individual income tax, and they would be hit head-on. The amount that their taxes would go up could be roughly equivalent to one employee’s salary, meaning that’s one person they can’t hire in the new year. A study by Ernst and Young estimates that these tax hikes would kill 710,000 jobs.

2. Buffett says tax hikes won’t stop investors from investing.

Fact: Any time you tax something, you get less of it.

Buffett says: “So let’s forget about the rich and ultrarich going on strike and stuffing their ample funds under their mattresses if—gasp—capital gains rates and ordinary income rates are increased. The ultrarich, including me, will forever pursue investment opportunities.”

Let’s think about what taxes are intended to do. The cigarette tax is intended to curb smoking. Proponents of a carbon tax want to curb the amount of carbon emissions we are producing. In Washington, D.C., a plastic bag tax is intended to curb the number of plastic bags people use.

When you tax something more, people do less of it. This is how taxes work. It doesn’t change because the behavior being taxed is investing rather than smoking.

3. Buffett says the wealthy aren’t even paying a minimum tax.

Fact: We already have an Alternative Minimum Tax.

Buffett says, “We need Congress, right now, to enact a minimum tax on high incomes.”

We already have this. It’s called the Alternative Minimum Tax. As Heritage’s Curtis Dubay explains:

Congress passed the Alternative Minimum Tax (AMT) in the early 1970s to ensure that a few high-income taxpayers did not reduce their tax liability too much by taking advantage of all the deductions, exemptions, and credits Congress put in the tax code. But Congress did not index for inflation the income threshold over which families qualify for this extra tax. So now Congress must annually “patch” the AMT by raising the threshold to correct this mistake. Even with the patch, the AMT still ends up falling on almost 4 million taxpayers; Congress initially intended for it to hit only a few hundred.

The top 10 percent of earners in the United States already pay more than 70 percent of federal income taxes. To move forward in this debate, those who argue that we just need to “tax the rich” will have to get real. We can’t close the budget deficit by taxing the rich. Even though Buffett also claims…

4. Buffett says we need to raise taxes to bring in more revenue for the government.

Fact: The problem is government spending, not government revenue.

Buffett says, “Our government’s goal should be to bring in revenues of 18.5 percent of [gross domestic product] and spend about 21 percent of G.D.P.”

Revenues are lower now today than normal, not because of tax rates, but because of the slow-growing economy. As the economy recovers, so will revenues. And they will continue to grow as the economy thrives. Why? Because more people are investing, saving, working, and enjoying higher wages. The nifty little benefit for the government of a strong, growing economy is that people pay more in taxes.

But on to spending. The White House already estimates that federal spending will be 23.1 percent of GDP this year—well above Buffett’s target. But, unlike taxes—which will return to the historical levels Buffett aims for, spending will continue to spiral ever upwards. In 25 years, spending will be 35.7 percent of GDP. In 2025, the big three entitlements will gobble up a full 18.5 percent of GDP—the entire amount of revenue that Buffett would like to raise.

In Buffett’s world, then, after funding entitlements, that leaves only 2.5 percent of GDP for everything else (assuming that interest rates don’t go through the roof). The fact is that ever-growing entitlements have put spending on a trajectory toward a European-level implosion. If they are not reined in, taxes on everyone will have to rise perpetually just to keep pace.

While Warren Buffett is right about many things, he is wrong about tax hikes. Which leads us to the real questions: Why are we even talking about tax hikes? Where are the spending cuts?