One skill at which experienced politicians excel is obfuscation – presenting issues in ways that manage to confuse and mislead voters. A less polite, but more direct, description of that in which our leaders excel is “lying”.
A great example of our leaders “excelling” has been on full display during the past couple of years –while the country has been dragged through a long, tortuous series of debates over federal debt limits, income tax policy, and ongoing budget deficits.
Putting aside partisan politics, the key points upon which the American people need to keep focused include these:
1) During the past four years, the U.S. has accumulated the highest additional amount of federal debt in its long history; any financial expert will assure us that such deficit spending is absolutely not sustainable;
2) The left-leaning Tax Policy Center projects that boosting taxes on the wealthiest 2% will only bring in additional revenue of $58.1 billion (in 2013) http://seekingalpha.com/article/1006461-higher-taxes-on-the-rich-would-barely-dent-the-deficit, while the CBO estimates the federal deficit will be over $1 trillion. Talk about a virtual “drop in the bucket”!
3) Clearly what is most needed is a sizeable reduction in expenses! And it, irrationally, reporting on and shaping of the debate has dwelled almost entirely on the tax issues (which don’t help much, as you’ve seen).
4) To make matters worse, the few “expense cuts” proposed by both sides include a large proportion of illusory or “phony” cuts – such as including as reductions the elimination of expense that have already been planned and approved for many months! Even more misleading, within the past two weeks, one plan included additional expense reductions from a projected decline in interest rates.
a. However, our country is currently sitting on record low interest rates – a fact of which senior citizen, fixed-income savers are painfully aware. As the U.S. continues to sit in the crosshairs of concerned rating agencies (such as Moody’s, S&P, and Fitch), who have made it clear that the U.S.’s current “Double A” credit rating is at risk, the direction of interest rates is much more likely to be higher!
b. The use of such deceptions and tricks with regard to the financial integrity and health of the United States should make any clear-thinking voter wonder how dumb Congress and the President think the American people are.
I know that what I have just written is absolutely “non PC”, and anathema to politicians and opinion shapers across the land. However, overriding that is my certainty that the global bond market is very aware of (and disappointed by) the financial profligacy of Congress and the Federal Reserve.
To finance all of our debt and deficits, the Treasury issues more and more bonds, of which our own Federal Reserve is the steadiest buyer. So, what is the one sure and certain consequence of taking on more debt?
Yes, the sure and certain consequence is increased interest payment expense!
However, most readers will immediately presume that “interest expense” is only a minor portion of our federal budget. Those readers would be dead wrong!
Consider the budget categories on which we spend less money than we do for interest payments: 1) the amount spent on all military personnel around the world; 2) the combined total bill for unemployment insurance, the earned income credit and child tax credit, and housing assistance to the poor.
The total currently spent on just federal interest rate payments is over $220 billion (6.31% of the budget)! http://www.advisorone.com/2012/12/28/interest-rate-risks-ticking-time-bomb-news-analysi?t=the-retiree&utm_source=dailywire122612&utm_medium=enewsletter&utm_campaign=dailywire If one projects the possibility of a debt downgrade and an increase in rates of just 50% (not out of the question), the consequence would be an increase in expense of $110 billion (twice the increased revenue from “wealth taxes”) – pushing interest expense to approximately 10% of the budget!
So beware of politicians who obfuscate – especially when they obfuscate so boldly that the only way to label it is deception, trickery… lies!