Phony Budget Baloney

Phony budget deals orchestrated months ago in the holy name of compromise have failed to derail the big spenders in Washington.  In the fiscal year that ended last month, the federal government spent more than $3.6 trillion, breaking U.S. records for budget busting excess. 

The spending binge topped the previous mark of $3.52 trillion in 2009 that was posted by the Democrat-controlled Congress and the party's leader President Obama.   Last year's spending ogre was 4.2 percent higher than the 2010 budget. 

This must be news to most Americans who thought the country had ushered in a new era of fiscal austerity.  The truth is taxpayers have been duped by both Republicans and Democrats, who were aided and abetted by the mainstream media's coverage.
  
In the last fiscal year, the Belt Way Bunch added another $1.3 trillion to the federal deficit.  This marks two years of record deficit spending that was touted as necessary to promote economic recovery.  Does anyone believe Washington has purchased economic prosperity?

To pay for its reckless spending, the government borrowed billions of dollars, raising the nation's interest payments on its debt by 16.7 percent.  This growth in servicing the debt accounted for the largest percentage increase in last year's federal budget.

Meanwhile, Obama and Team Democrat have continued to demand increases in tax revenues to solve the deficit problem.  However, this ignores the fact that federal tax receipts grew by 6.5 percent in fiscal 2011.  Taxpayers are sending more money to Washington, but the government is spending it faster than the Internal Revenue Service can empty our wallets.   

As Washington has continued to borrow to finance spending, the nation's debt has spiraled to a historic level of $14.8 trillion.  That works out to $132,435 per taxpayer.  In just a single day, the government piled on another $238 billion in debt, the largest one day increase in the nation's long history.  That occurred on August 3 moments after the ink dried on the agreement to lift the debt ceiling.

For their part, President Obama and his Washington regime have continued to falsley blame George Bush for the mountain of debt.  During Bush's last two years as president, Washington added $618 billion in debt, according to the Office of Management and Budget.  Obama doubled that amount in just the last fiscal year.

Despite their claims to the contrary, Obama and Democrat Party lawmakers have no intention of curtailing government spending.  The so-called super committee formed after the budget deal is nothing more than another Washington charade.  Committees are an excuse to defer tough budget decisions.

Meanwhile, the Congressional Budget Office has forecast that the country will run up another $1.1 trillion in deficit spending for fiscal 2012.  That would mark three consecutive years of deficits of more than $1 trillion.  Before Obama became president, single year deficits had never approached $1 trillion.

The country's mood has turned sour over the excessive spending.  A recent poll by The Hill newspaper found that 69 percent of Americans believe the country is in decline.  More than 8 in 10 Americans are worried about the country.

As the polls indicate, Americans are fed up with the deceit and duplicity in Washington. They are demanding real budget reform, not more counterfeit compromises that only offer the illusion of fiscal responsibility. 

   





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The Ugly Politics of Envy And Scapegoating

Barrack Obama and Democrats are counting on anger over wealth inequality in the country to save the embattled president and his party. That's why both are  openly courting the Occupy Wall Street protesters in an attempt to parlay the energy from the demonstrations into support for Obama's reelection.

The  president tipped his hand at a recent press conference, showering praise on the leaderless demonstrations.  "People are frustrated," Obama told reporters.  "Protesters are giving voice to a more broad-based frustration of how our financial system works."

In the days that followed, the president climbed on his sleek, multi-million-dollar, armored campaign bus and traveled to visit friendly crowds recruited by his party.   At each stop, he used the occasion to declare war on wealth, reciting his angry anthem about how the rich are sticking it to the middle class and poor.

His words echoed the single cogent theme emerging from the unruly Wall Street demonstrations.  Based on interviews with protesters and a reading of the placards they are waving, the nascent movement views the wealthiest one percent as scapegoats for all the country's ills from bailouts to budget cuts.

Sensing an opportunity to fuel the protests,  the mainstream media has teed up stories about the yawning gulf in the United States between the richest one percent and the 99 percent of the rest of Americans. Reporters from MSNBC and Rolling Stone magazine have been outed for exchanging emails with protesters, advising them on how to improve news coverage and focus their message.

In the fawning rush to support the demonstrators, sycophant journalists have trampled all over the facts. As just one example, they are dead wrong on their claims that the rich control a larger share of the wealth today than ever before.

In 1998, the top five percent owned 59 percent of all wealth, according to U.S. Census data.  Today that same group claims slightly more than one-half.  The top 20 percent today owns 80 percent of all the wealth, compared to 83 percent in 1998.  While one can argue the figures still show a concentration of net worth, the data does not support the assertion that the rich are grabbing a larger share of wealth.

From a global perspective,  a majority of those 99 percent of "deprived" Americans can legitimately be called rich.  According to MarketWatch, total assets of just $2,200 would place most Americans in the top half of the world's wealthiest people.  Households with a modest $61,000 in net worth would qualify for exclusive membership in the world's wealthiest 10 percent club.

That hasn't deterred the Occupy Wall Street mob from scorning fat cat CEO's, making millions of dollars.  Adopting some of the shabby rhetoric used by the president,  the protesters have whined about excessive executive pay as they paraded outside the New York residences of captains of industry.  Interestingly, the demonstrators as well as the president are silent on the enormous wealth of professional athletes and those in the entertainment industry.

Consider that Oprah Winfrey earned $290 million last year, according to Forbes Magazine's annual Celebrity 100 list. Actor Tyler Perry raked in $130 million, while producer Jerry Bruckheimer enjoyed a $113 million pay day.  Singer Lady Gaga and talk show host Howard Stern pulled down $90 million and $76 million, respectively.

Top professional athletes cashed in last year, too.  Golfer Tiger Woods led the pack with $110 million, according to Forbes. Basketball's Kobe Bryant tallied $45 million as did Michael Jordan and race car driver Kimi Raikkonen.  Soccer star David Beckham pocketed $42 million

By comparison, compensation for the top 10 chief executive officers averaged $43 million last year, according to a survey by The Wall Street Journal.  Their pay looks down right skimpy when you consider that the average income of the nation's top 10 celebrities was a stunning $100 million while star athletes rang up an average of $46 million in salary and endorsements.

Apparently, the Occupy Wall Street sheep and their spiritual shepherd Barrack Obama believe demonizing business executives plays better in America than denigrating celebrities and athletes.  Their logic appears to be that not all wealth is created equal.  Yet they complain about the inequality of wealth.

This war on wealth is nothing more than the politics of envy and scapegoating.  It is divisive, tawdry and reprehensible.   And, apparently it isn't working as well as Obama and his marching minions had hoped.

A recent USA Today/Gallup Poll found that most Americans blame the political cesspool in Washington for the current  fiscal stench. Fully 64 percent finger the federal government as the culprit, while only 30 percent pin the blame on financial institutions, according to the poll.

Those results suggest Americans aren't easily swayed by noisy demonstrations and a reckless president.  More importantly, most Americans recognize envy and scapegoating as the staple of despots and totalitarian tyrants.  That kind of despicable rhetoric has no place in a democracy.

Wall Street's Dumb Obsession With Artificial Intelligence

One of the oldest investment cliches is fast becoming obsolete. For as long as stock trading has been around, brokers and financial advisers have preached long-term investing, urging clients to adopt a 10-year horizon to smooth out the inevitable market volatility that effects returns.

As proof of their theory, investment counselors haul out charts showing that over a decade, despite economic ups and downs, stocks average annual returns of around seven to nine percent. The premise is soothing to investors seeking predictability in the performance of their investments.  

However, in the last ten years the stock market has failed to deliver anything approaching those returns. The Standard & Poor's 500 posted a skimpy annual return of 0.4 percent between August 1, 2000, and August 31 of this year. During this ten-year period, the hallmark of the market has been its unpredictability.

The financial industry can dredge up a laundry list of explanations for the market volatility, most notably the near collapse of the country's biggest banks and financial institutions.  Without overlooking those problems, they don't fully explain the market chaos.  Although its hardly ever mentioned, one of the chief contributors to market turbulence is the introduction of artificial intelligence on Wall Street.

Beginning more than a decade ago, big investment houses, financial institutions and brokerage firms began using computers and algorithmic programs to buy and sell large blocks of stock that traditionally were shopped by traders on the floor of Wall Street exchanges. It was done in the name of speed and cost savings as securities firms were able to slash the number of traders they employed.

Based on this success, every financial company began recruiting mathematicians, engineers and computer science professionals, while dumping millions of dollars into computing, networking and software. As a result, lightning-fast super computers began assuming a larger role in discovering stock opportunities, identifying subtle market trends, figuring when to execute trades and cracking the trading strategies of their competitors.

These moves turned the financial industry on its head.  Major financial firms began relying more heavily on artificial intelligence than human intelligence for every conceivable task.  The trend has become even more pronounced in the last two years with computer-aided trading now accounting for about 70 percent of the total volume on the stock exchanges.

But this reliance has come at a steep cost. Stocks have lost $4 trillion in value since the peak in 2007 as huge market swings have dealt crippling blows.   The largest was logged May 6 of last year when the Dow Jones Industrial Average plummeted 573 points in a mere five minutes.  Most market watchers now believe the so-called "flash crash" was created by powerful, swift computers that spiraled out of control in a series of cascading trades based on algorithmic formulas. In essence, the machines took over the market.

In the aftermath of the crash, dizzying drops in the stock market have become routine and impossible to predict. For instance, this year the S&P 500 has lost more than two percent of its value on 15 days, 14 of those occurring just since July. Stock volatility indices have reached levels last experienced at the trough of the bear market in 2009.

Explaining the dramatic dips is getting harder for financial pros, leading investors to conclude that the stock market is incomprehensible. That has fueled an investor stampede for the exists. In 2010, investors yanked $37 billion out of the market. This year has witnessed further erosion in market confidence as investors have fled stocks for the safety of gold, bonds and other financial instruments.

For a good laugh, listen each day as financial pundits stumble to dissect the market's performance.  They offer up reasons like natural disasters, world debt woes, labor unrest, or insurrections in some obscure country to explain market oscillations.  No doubt these forces and others have impacted the stocks of some companies, but the truth is that computerized investing and trading has fueled much of the dysfunction on the exchanges.

That is because every process from finding the right stock to the timing of selling and buying is done without human involvement.  It is true that humans wrote the software codes and developed the algorithms for the computers, but machines are increasingly driving the stock market unfettered by human intervention.

This is not a comforting thought for the millions of Americans invested in stocks through 401K plans, pensions or mutual funds. Some are calling for the government to get more involved beyond its traditional watchdog role. But the solution lies not in Washington.

It is the responsibility of the financial industry to restore investor confidence by addressing the volatility issue as it relates to computerized trading.  The answer is not to shelve the computers because prudent use of technology allows the market to function efficiently.

However, the industry needs to curb its obsession with technology and ensure that human intelligence has the ability to override computerized trading decisions.  If they fail to do so, then individual investors have every right to Occupy Wall Street.  Unlike the current crop of demonstrators, investors would actually have a legitimate reason for their protest.

President's Jobs Kill Bill

If the President's lofty promises about his new jobs bill sound familiar, it's because he has recycled the same tired, old rationale he used to cajole Congress to approve his $787 billion stimulus boondoggle shortly after he took office.

To refresh your memory, the Obama administration's economic team predicted that the president's stimulus package would create three to four millions jobs by the end of 2010.  They boldly forecast that the unemployment rate would peak at just under 8 percent in 2009.

Many Democrats now deny these claims were ever made.  However, the numbers are contained in a report entitled, "Job Impact of American Recovery & Reinvestment Plan," published January 9, 2009.  The authors were Christina Roma, then chairwoman of the President's Council of Economic Advisers and Jared Bernstein, the vice president's top economic counselor.

Their predictions, used to justify the massive spending, were grossly inflated.  Unemployment peaked at more than 10 percent in early 2010.  It remains today at 9.1 percent.  As far as those promised jobs,  even Vice President Joe Biden has given up trying to use creative math to prove the stimulus delivered on the administration's prophecy.

Now the president is on the road again clamoring for Congress to buy into new promises of economic nirvana.   In speeches, he continues to claim his job proposal will grow the economy two percent and create two million new jobs.  Obama will need more than snake oil to convince wary Republicans and Democrats that his forecasts are any better than they were the last time he trotted out an economic recovery plan.

In fact, there is evidence that the new jobs bill will harm rather than help the economy.  The chief reason is the president's plan would finance the $447 billion scheme mainly by limiting the percentage of income the top wage earners can write off their taxes.   For example, the same write-offs that average taxpayers use would be reduced for high income households and individuals from 35 percent of their earned income to 28 percent.  That would include donations to charitable organizations.

It means a charitable gift of $100,000 would save a donor $28,000 in taxes, which is $7,000 less than the write off allowed under today's formula.  The lower deductions would apply to households earning at least $250,000 and $200,000 for individuals.  Studies have shown that individual giving is influenced to varying degrees by the tax write-off.

Not only would the change have a chilling effect on donations, it also could impact jobs at one of the nation's top employers. "Nonprofits employ almost 10 percent of the workforce nationwide and in many states nonprofits are the largest employers.  In our view, cutting the deduction is like cutting off your nose to spite your face," protested William Daroff, vice president of Public Policy at the Jewish Federation of North America.

If donations decline as a result of individuals cutting back on their giving, charitable groups will be forced to cut expenses, making employee layoffs likely.  Even more worrisome, the poor, sick and elderly who benefit from the charitable organizations' outreach programs will lose a safety net.

Yet the charitable deduction issue is not even the most egregious example of flawed logic contained in the bill.  The president's plan also includes extending unemployment benefits for another year for recipients at a taxpayer cost of $62 billion  Most credible economists argue that extending benefits will discourage the unemployed from seeking work.  At the very least, it further delays their job search until benefits run out.  Either outcome will negatively impact job growth.

None of this will deter Obama.  He appears obsessed as ever with the idea that bigger government and more spending will solve the country's economic problems.  After being hoodwinked on the stimulus plan, Congress must not allow itself to succumb to Obama's empty promises a second time.

Snapping Up Food Stamps

Even as Washington grapples with snipping the federal budget, spending on government entitlement programs continues to spiral out of control. One of the worst offenders is food assistance, a program with an insatiable appetite for taxpayer funds.

Already, the program's growth has outstripped nearly every other government assistance scheme. More than 43 million Americans now receive food stamps, renamed Supplemental Nutritional Assistance Program (SNAP) in 2008 to shed its image as a plan riddled with waste and fraud. One out of every eight Americans or 15 percent of the population receives SNAP assistance, a staggering increase of 74 percent since 2007.

A major reason for the runaway growth is the change in emphasis. Approved by Congress in 1964, the food stamp program was designed to feed poor households by providing ducats to redeem for groceries. A key feature of the early program was to allow clients to purchase surplus food produced by American farmers at a steep discount.

Most of those receiving food assistance had no job and existed on welfare. But as recently as 1999, wage earners outnumbered welfare families getting food benefits. With regular adjustments in income eligibility requirements, most single parent wage earners now qualify for food assistance. The benefit has become a de facto subsidy for low-wage jobs.

As the program has lowered its requirements, the cost to taxpayers has soared. In 1964, the annual funding for the food stamp program was $75 million. In the 2012 federal fiscal year, which began in October, funding is scheduled to reach $85.2 billion. That's more than double the 2010 spending level. This is what happens when entitlement programs are left unchecked.

But the growth is unsustainable with federal budget deficits stretching as far as the eye can see. Yet there is little Congress can do from a budgeting standpoint. As an entitlement program, Congress does not decide each year to increase or decrease SNAP funding. Instead, the budget appropriation is determined by estimations of how many people will apply and be eligible for food assistance. The only way to influence the budget is a Congressional vote to alter eligibility for the food assistance program.

That is almost impossible to do. Food stamps have normally been insulated from politics because any attempt to decrease benefits raises the spectre of poor people eating cat food to survive. That image is prepetuated by Democrats and the media to scare away advocates of food assistance reform.

Meanwhile, food program waste and fraud continues unabated. In fiscal year 2009, so-called improper payments cost taxpayers nearly $2.2 billion, according to the U.S. Department of Agriculture. Since most fraud goes undetected, the financial impact is likely much higher than reported.

Republicans have poked around the issue this session. As recently as June, a House Agriculture Subcommittee began looking for ways to trim the SNAP budget while using funds more efficiently to tackle legitimate needs. But Democrats have so far sidetracked reform by characterizing the effort as a Republican scheme to deny food to hungry infants and old people.

In the past, these emotionally-charged arguments have trumped common sense in the debate over food assistance. However, Congress can no longer ignore the facts as it faces pressure to reduce the burgeoning federal deficit. An overhaul of SNAP is long overdue. But like most entitlement programs, the prospects for meaningful reform are as dim as the arguments from fear mongers.