Obama's Urges Will Not Lead to Act Of Congress

The actual headline from the NY Times was "Obama Urges Congress to Act to Stave Off Cuts."  No matter, the President again fails to lead, choosing merely to demagogue his opponents without proposing anything meaningful.

“They should at least pass a smaller package of spending cuts and tax reforms that would delay the economically damaging effects of the sequester for a few more months,”

So let's parse this.  The President refuses to offer any specific spending cuts.  He just got an increase in the tax rate on the rich, as well as an increase in their capital gains rate.  Now he wants more tax increases, but obfuscates his meaning with the words, "tax reform."  Further, he missed the deadline to propose a budget to Congress, by which he could have clarified his position. 

The final paragraph of the article hits the heart of the matter.  

While the budget office forecast that annual deficits will decline significantly as the economy recovers, the budget office once again emphasized that the deficit will rise later in the decade, beginning in 2016, and continue do to so as the population ages and health care prices rise.

The President refuses to countenance any reform to social security or medicare and his party demagogues those who suggest that the issue must be addressed.  He is harming the country.  The problem won't go away on its own.  Further, the sequestration battle deflects attention from a solution.  As a Democrat, Obama could save the nation by proposing sensible reform, because only bipartisan reform of these two largest entitlement programs will stave off fiscal catastrophe.  That he thinks only to use the issues for political gain does not speak well of him.

Fiscal Toboggan Ride Assured

The news from tonight's WSJ web site is that a deal has been struck to avoid the "fiscal cliff."  As previously predicted, it changes little in the grand scheme of things, other than my debt clock at right will continue to move in the upwards direction for a decade or more.  Here is the analysis of the results.

The deal doesn't do much to control the U.S.'s long-term budget woes, which are driven largely by entitlement spending, especially on health care, which were left untouched in this agreement. And depending on the budget math and the ultimate fate of the spending cuts, it may not do much for the short-run deficit either. 

By waiting until the last minute, and reaching a deal on a much smaller scale than either side once envisioned, Washington also deferred many of its thorniest questions for perhaps as little as a few weeks. In late February of early March, the Treasury Department will run out of extraordinary measures to deal with the government's borrowing limit—which it reached on Monday—and Congress would need to approve an increase.

Welcome to government by crisis, lurching from one deadline to the next with no plan to solve the long term issues and not even a budget against which to measure progress.  By ensuring a series of legislative crises, the Congress and the President are guaranteeing that a real crisis will develop.  With public and private debt levels high and inflation heating up, there are no reserves to deal with fresh economic pressures.  I went grocery shopping for New Year's supplies, buying things I haven't bought in a while, and I was shocked at how much prices have risen on some items.  I don't care what the official numbers say, my experience is telling me that they are understating inflation right now.

Next crisis, the debt ceiling increase.

The Fiscal Cliff is Your Fault

. . . and mine as well.  Why? Because we have not made up our minds about the overall direction of government.  We have elected a divided government.  The President won re-election with a small majority, not a mandate, even though the radical change he desires would require a mandate.  In the meantime, the House continues under Republican control, with a healthy majority.  We the people have spoken, and said, we're not sure what we want.

Further, the political coalitions that form the basis of the two parties obscure the real desires of the electorate.  For example, the Republican party gets outsized support from agricultural communities that are very socially conservative.  However, they are also huge net recipients of government aid in the form of crop insurance or price supports.  So farm state Republicans have an incentive to trade pork for farmers rather than reducing spending.  On the Democratic side, Hispanics and Blacks voted decisively against gay marriage in California in 2008; even while they elected Democrats who have worked to undermine Proposition 8.  Silicon valley entrepreneurs gave heavily to Obama in 2008, despite the predictable result that stifling regulation would stunt new business development in this country.

It will take a crisis to cause the nation to coalesce around a path forward.  In the meantime, the problem gets worse.  The debt clock on the right side of my blog is not going to go backwards any time soon.  If it reverses at any time this decade, I will be shocked.

The result of the fiscal cliff talks are fairly predictable as a result.  There will be tax rate hikes, because Obama is ideologically wedded to the idea and he has an advantage in the negotiations.  But the hikes, whether on $250,000+ or $400,000+, will not produce the revenue predicted.  Even if the predicted revenue did materialize; it wouldn't make much difference in the long term deficit.  The official estimate is that the rise would produce $950 billion in revenue over ten years.  Sounds like a lot, but when put on an annual basis, it doesn't even cover one month's worth of deficit spending.

Meanwhile, whatever spending cuts are proposed will be back loaded; which means they will never be put into effect.  The only sensible outcome appears to be that the useless payroll tax cut will expire.  Useless, because the cut was always known to be temporary, and therefor blew a hole in the social security accounting without actually adding any jobs; it's purported purpose.  Businesses aren't going to hire because of a temporary reduction in labor costs, and they didn't.

Regardless of the exact outcome of a deal, or a temporary measure that gives more time to negotiate, we can expect no meaningful progress on debt reduction.  With debts mounting throughout the Western world, there are no reserves to handle the next crisis.

Programming note: I intend to post regularly again.  If you have been visiting, looking for new posts, I am sorry to have had none.  My personal circumstances left me with little time and energy for blogging, but I feel refreshed from some time off over Christmas and ready to hit it again.

Complaining About the National Debt is well, Racist

The tea party movement still gets tagged with the racist label, which is of course total crap, but its main concern has been the U.S. debt bomb. I have added the U.S. national debt clock to the right to illustrate our main concern. Congratulations, check out how fast your share of the debt is rising under Obama. Meanwhile let's break down the facts. Last fiscal year the federal government reported it had paid $454 Billion on the national debt. The Congressional Budget Office projects that this interest will rise to consume 2.5% of GDP by 2020, up from 1.5% today. But read the fine print, the CBO is using low interest rate projections:

As a result of persistently low interest rates, payments for net interest are expected to remain low despite the burgeoning debt.

Really? Isn't that a nice bedtime story. They are counting on the federal reserve to continue to keep borrowing costs down. The average interest rates the feds pay is around 2%. But the fed's quantitative easing is likely to ignite inflation eventually. As recently as 2000, the treasury paid an average of 6.5%. So instead of a mere $454 billion hole in the budget, under more normal conditions, we might be liable for well over a trillion dollars per year in interest. That would be bigger than the entire defense budget, bigger than social security payments.

The Federal Reserve can't keep interest rates low forever. Eventually, inflation will ignite and force their hand. This debt will become a huge drain on the economy, far greater than the budget projections of the CBO show. Interest rates in the early 80s spiked at the 12% range. It was bitter medicine needed to ring inflation out of the economy, and it worked. Can today's economy survive the almost $3 trillion per year hit that 12% interest rates would cause? That's more than the entire revenue of the federal government in 2011. Who would loan the U.S. money under those conditions? The country survived a hyperinflation scare in the late 70s. We had a much more manageable debt ratio. I don't think we could handle it now.

So, what do you think, bigots? Is this a race tinged discussion or what?

Another Trillion in Debt

The President notified the Congress that he needed some more pocket change to keep the federal government running, to the tune of $1.2 trillion. Under the terms of the misbegotten deal that was struck last August, the President is authorized this last raising of the debt ceiling unless Congress can override a veto that would certainly come if they disapprove.

The deal turned out badly, for many reasons. The Super-Committee failed, and automatic cuts are supposed to kick in, but not until October 2012. Elections are going to intervene before any real change is effected, hence the failure. In hindsight, enabling a super-committee was a bad move tactically and constitutionally. I am sorry I thought it might work to reduce the debt. Deals to continue the payroll tax holiday only make another debt ceiling crisis right before the election more likely.

Speaking of elections, here is the most interesting question. Did the administration miscalculate? Might the debt ceiling actually come into play prior to the November elections, rather than in 2013, as previously predicted? The current limit is $15.194 trillion, which was reached rather quickly, it seems. If the debt ceiling becomes a problem prior to the election, what will the administration do? Here is a hint.

A Treasury Department document shared on Tuesday said that if the limit is reached before the elections, the government could take “extraordinary measures to extend borrowing authority beyond the next elections.” But the department offered no detail.

Because, as Dean often states, Constitutional Republics, are like, hard. I think the political fall out from the Treasury taking such action would be bad for Obama, so he might be forced to grandstand on the issue and take this to the Congress. It would give him an opportunity to run against Congress, instead of the Republican nominee. I hope Boehner is thinking this one through, but I am worried.

The winners of next November's elections will face very tough decisions; we are running out of room to maneuver. That makes these elections the most important in our lifetime.

Super Difficult Draconian Security-Threatening Cuts to Start. . . in 2013

Well, no wonder they failed. In political terms, 2013 is a lifetime away. Obama will probably not be President by then. There is no immediate impact other than to credit ratings. It gives the new President and a new Congress time to deal with the problem. It even gives the current President and Congress time to deal with the problem. If pork barrel spending in their districts was going to end next month, maybe some compromise would have been reached. For all of the press and attention given to the so called Supercommittee, the actual immediate impact will be nil.

Billy House of The National Journal got the important fact correct.

But the nation’s debt crisis will continue – with the deficit now at about $15 trillion. It also is likely no coincidence that the committee waited until the financial markets closed for the day to make the announcement. The Dow Jones industrial average had already tumbled by more than 300 points earlier in the day partly in anticipation of the acknowledgement of failure.

In case you thought that the Supercommittee meeting its goal would be a significant victory for deficit reduction, consider this.

By law, 18 percent of the automatic savings are assumed to come from interest costs the government would save from reducing the debt. If the Super Committee fails completely, out of the $1.2 trillion in automatic savings, $216 billion would be assumed interest savings.

That would leave $984 billion in automatic spending cuts over 10 years. That works out to around $55 billion annually each from defense and domestic programs though a CBO analysis shows that comes out to 10 percent of the Pentagon budget in 2013 alone, a huge hit.

$55 billion annually? Really? The national debt is increasing at a pace of close to $2 trillion per year, with an official budget deficit of $1.5 trillion per year. (I never figured out that discrepancy, the official deficit is always less than the annual increase in debt, go figure.) To put this into household terms, its as if you were borrowing close to $200,000 against your house, year after year, and an adviser came up with bold plan to reduce your expenditures by $5,500 $11,000* per year. Not even a really credible first step. What a game politicians, with the connivance of the press, are playing on us all.

Only serious decreases in spending and increased revenue from a recovering economy are going to fix this. So every job killing, economy destroying decision by this administration starting with Obmacare, the Boeing plant in SC, ending most recently with killing the Keystone XL pipeline, has hurtled the country towards increased and unsustainable debt.

The Democrats were their usual retarded selves in this deal, but I thought the Republicans could have smarter about offering some revenue increases that would accrue to eliminating loopholes/deductions as a step towards comprehensive tax reform, earlier in the process. It appears that Sen. Pat Toomey (R-PA) offered such a plan at the last minute, but it didn't raise enough revenue to satisfy the Democrats.

Toomey’s plan would raise $300 billion in new tax revenues while overhauling the federal tax code. Republican officials say it would drop the top tax rate on personal income to 28 percent from the current 35 percent. It would reduce or eliminate some well-known itemized deductions and reduce the corporate tax rate.

If Republicans had offered the plan earlier, and got agreement to score it with dynamic, not static analysis, it would raise far more revenue than the $300 billion advertised, and we might have been much closer to a deal. The Republicans are right to keep trying to push down marginal rates, but they should be coupled to eliminating deductions to move towards more of a flat tax, because this will also be a reform that reduces corporate influence on Capitol Hill.

Just in case there was any doubt about my discussion on the fact that spending and revenue are both problems, but spending is more of the problem, I offer this chart from the Heritage Foundation.



*Post publication correction. I failed to account for the fact that there are two categories of spending reduction, so the total per year needed to be doubled. However, $11K per year against a household deficit of $200K per year is still pathetic.

Why We Are Bound to be Disappointed

I was listening to Rush Limbaugh this morning and he made a great point about the debt ceiling negotiations. He said that any ten year deal can be undone by next year's Congress. That should be obvious to all of us following the debate. Examining the data in my previous post, it is obvious that we are not going to balance the budget this year. This is going to disappoint many tea partyers, but we have to face the facts about the situation.

On what basis should we judge any deal? I think only two criteria need be applied:

1. Does the plan cut current spending significantly? By which I mean cuts measured in hundreds of billions in discretionary spending.

2. Does the plan change the structure of an entitlement to reduce its cost. For example, if medicare is cut by proposing reductions in reimbursement rates to doctors, an Obamacare tactical lie, then the structure of the entitlement is not changed, because the benefit is unchanged. But if the age at which individuals become eligible for medicare is raised to 67 from 65, then that is real structural reform, because it reduces the entitlement itself.

It would be a side benefit to get tax code simplification out of the deal, but that is really icing, not the main goal of cutting the size of government.

We Don't Need More Taxes, We Need More Taxpayers One Tea Party Plan for the Deficit

No one can deny that growth of the federal debt is exploding under Obama's Presidency, and indeed started to climb after Democrats took control of Congress in 2006. The question before us, with the debt limit about to be reached, is what spending could be cut as part of a deal to increase the debt limit. Michele Bachmann, who is well like by many tea partyers, has said that she would vote against increasing the debt ceiling no matter what deal was cut.

I have to respectfully state that her position is folly, because there is not enough current spending cuts available to balance the budget instantaneously without vast cuts to social security, medicare, unemployment and defense spending. One might desire such cuts, but immediate and massive cuts in these areas are such political suicide as to be beyond reasonable expectation. This is why most tea partyers are going to be disappointed with whatever deal gets cut. A little about the numbers. Total federal receipts are estimated at $2,170 billion for fiscal year 2011. Medicare, Social Security (including their costs of operations) and income security account for $1,870 billion. Income security includes civil service retirement and disability, railroad retirement, unemployment insurance, food stamps, and other public assistance programs. Defense is the next big ticket items at $770 billion, which does not include another $180 billion or so for the ongoing costs of war. The current budget deficit is about $1,500 billion, with total outlays projected at $3,800 billion. Defense and entitlements more than eat up all current spending. This information comes from my analysis of spreadsheets at the government's budget website. A graph that shows this from 2010 follows, the pattern is not very different in 2011.


This hole is too deep to get out of with short term gimmicks. But long term solutions need teeth to ensure that future politicians can't easily revert to form. Spending must be cut, and that is a long term problem that absolutely must be addressed. But what about revenue? It seems clear to me from these facts, heresy that it may be, that federal revenue needs to increase. How do we increase revenue without damaging economic growth?

The first and most important observation is that any policy change must be permanent and stable to be effective. For example, the temporary reduction of social security withholding rates has been a disaster. It was intended to provide a hiring incentive, but because it was not permanent, businesses discounted the future social security tax into their current plans and haven't hired. Further, it has deprived the federal treasury of much needed revenue.

The secret to increasing revenue was discovered by Ronald Reagan in the 1980s, lower tax rates with fewer deductions, and hence a simpler tax code. This concept applies to both individual income taxes and corporate income taxes. This is where the money really comes from to fund the federal government. I created this chart from the same federal budget site:





Unless you increase the payroll tax for social security and medicare, individual and corporate income taxes are where the money comes from. But increasing the tax rate for zillionaires doesn't really raise more revenue, despite the President's rhetoric. Nor will taxing corporate jets. The public knows this. The problem with both the corporate and individual tax codes is the complexity results in huge disparities. Most large companies pay nowhere near the published 35% tax rate. The tax attorneys at these large companies are considered a "profit center," seeking ways to legally game the system and allow companies to retain more profits through tax avoidance strategies. Individuals are also affected. The tax advantage of owning a home provides an additional incentive that leads people in to home ownership who perhaps shouldn't make such a decision. Wouldn't we all be better off the tax code were simple and didn't distort economic decisions. Simplifying the tax code would increase revenue by stimulating the economy. Further, lower marginal tax rates would encourage more people to enter the work force. Here is one example, a married couple where the husband earns enough to be in 33% bracket, but the wife stayed home as the kids grew up. Re-entering the work force, she can not initially earn a big salary. But her marginal tax rate will include the 33% income tax, California tax of 9.55%, FICA tax of 7.65%, SDI of 1.2% for a grand total of 51.4%. If she went to work full time at a relatively low wage of $15 an hour working full time, she might increase the family take home by only 10%. Why bother?

But what about those Social Security taxes? Can we increase that revenue item without harming the economy? Of course we can. Any number of Obama's policies, from Obamacare to the NLRB suing Boeing to prevent the hiring workers in South Carolina are damaging businesses' ability to hire workers. Additionally, the tax code is in continuous flux, with Bush era tax cuts only temporarily extended. How can business gauge the profitability of investments when future tax rates are unknown? Growing the economy will grow social security revenue.

But wait, there's more. The other way in which we can both grow the economy and increase the number paying social security taxes is through legal immigration of a skilled workforce. I have discussed this before, but doesn't our fiscal crisis deserve fresh thinking. Look at these demographic curves, because I consider India a possible source of large numbers of skilled immigrants:

Note the U.S. baby boomer bulge moving into retirement causing strain on the economy. India, by contrast has a large, young population, facing no such challenge.

So here is what is needed to increase revenue, and what I meant by the title.

• Simplify the individual tax code, eliminate deductions and lower marginal rates. This will increase the number of taxpayers in the three ways. More people will enter the work force. Rising economic conditions will bring taxpayers who do not pay income taxes now to levels of income where they do. As the unemployed enter the workforce, they will pay FICA taxes.
• Simplify the corporate tax code by lower marginal rates to and eliminating loopholes. This will increase the number of corporations paying taxes and actually bring in more revenue as corporations change behavior. Profits will increase, even if tax attorneys are laid off, which will also generate revenue.
• Vastly increase legal immigration of skilled workers and professionals. This will grow the economy, while at the same time add new taxpayers to the rolls, increasing revenue from social security and income taxes. It is important that they be skilled workers, because there is a question as to whether unskilled workers don't consume more in public services than they pay in taxes.
  

Spending cuts are still needed, because these supply side reforms aren't going to solve all of the problems, and if we don't cut spending, politicians will just find new ways to devour the revenue we might get from these reforms. Here are some quick hitters of both a short and long term nature that I find attractive. Many of these have been discussed by Boehner, the President or others.

• Repeal Obamacare, the cost estimate of which, just keeps rising. Ok, so that's a non-starter until 2013.
• Across the board cuts to all federal agency budgets back to 2008 levels.
• Cut farm subsidies.
• Cut medicaid.
  
• Increase eligibility ages for Medicare and Social Security.
• Means test social security and medicare.
• End Libyan operations.

That is one tea party proposal to deal with the deficit. I hope some of this catches on.

Deficit Woes

. . . are worse than you think. And you probably think they're pretty bad, if you read this column. In yesterday's WSJ, Lawrence Lindsey makes the case:

• Interest on the national debt will get worse when interest rates inevitably rise.
• Future growth is over-estimated in all budget estimates. 4% in 2012? Really? Maybe if Obama declares he's not running for re-election.
  
• Obamacare costs have been underestimated. How many times can I say really?
• Tax increases won't produce more revenue.

The whole article is worth a read, but we need drastic action now. We'll see if Boehner plays his hand well.

Obama Hits the Easy Button

Today the President announced a proposed pay freeze for Federal workers for the next two fiscal years. This was on my list of easy ways to cut spending immediately. Glad the President was paying attention. From my previous post:

Really easy spending cuts:

• End all stimulus spending. Return all unspent funds to the Treasury.
• End all TARP spending. Return all unspent funds to the Treasury.
• Freeze the pay of federal workers, since the CPI stayed flat last year, so too should have federal pay, but it went up. (Full disclosure, I work for the federal government.)
  
• De-Fund all of the committees, czars and regulatory boards for Obamacare.
• De-fund the Department of Education, for starters, since it doesn't educate anyone.

We presume that a majority of federal workers supported Obama, certainly their unions did. One of those unions immediately opposed the move, of course. Too bad, federal workers are supported by taxpayers who are also suffering, a pay freeze is unfortunately equitable under those circumstances.

Interestingly some Democrats didn't get the message from this month's election and are also opposing pay cuts.

Republicans welcomed the pay freeze but it drew silence from most top Democrats.
. . .
Representative Steny Hoyer, the No. 2 Democrat in the House, offered a lukewarm reaction to the pay freeze. Hoyer, whose Maryland district includes many federal workers, said he would "review closely President Obama's proposal.

At least they had the good sense not to directly oppose.

There are those who will say that this does not go far enough in controlling federal spending. I wholeheartedly agree; but it's a step.

Solving the Deficit Crisis

In my previous post on this subject, I tried to give a sense of how vast and difficult solving our deficit problem has become. To recap, even with draconian measures, closing the gap to 2.2% of GDP is the best that the co-chairs of the deficit commission can come up with. Putting it into family budget terms, it is like having a family income of $100,000, spending $150,000 and funding the difference with a line of credit on which you already owe $575,000. Except it's even worse, because that only includes the debt that is admitted to, other unfunded liabilities might put your future liabilities closer to $4,500,000.

Clearly drastic action is needed, but it will not be enough. As the graph below shows, the gap is monstrous. What is to be done?

It seems obvious to me that trying to increase tax receipts by raising the tax rate that each individual pays is self defeating. This is because those taxes become a drag on economic growth, and because people are incredibly ingenious at avoiding them. KT has often blogged on the need to avoid debt in financing the government, and I agree. But that need not imply that raising marginal tax rates is a particularly good way of doing so. Further, we have seen an historical trend where federal income tax receipts have been unable to break the 20% of GDP barrier, regardless of the marginal rate structure. I previously discussed Hauer's Law last June and why increased tax rates are useless.



But the need for additional receipts can not be denied. This is why I believe that aggressive action is needed to grow the economy and the work force. Lest the reader think that I am suggesting that growth alone will pull us out of this crisis, I am not. The recommendations of the deficit commission co-chairs or something like them will also be needed. The problem has grown so large that growth alone won't solve it. But it is also so large that it is unlikely that the cuts proposed will not solve it either.

In broad brush, the federal budget requires many more people to contribute to receipts. That means that work force participation must rise dramatically from where it is today. By work force participation, we must mean in the legitimate work force, because that is what generates the revenue. Getting Americans back to work is key, but so is increasing the total size of the work force. Look at this graph from economicpopulist.org


We are on a scary trend line that is causing federal receipts to fall. Is part of the trend demographic? In other words, is an aging U.S population causing the labor force participation rate to fall? Since those 65 and over have only a 15% chance of being employed, this sound plausible.

It seems likely that the only way to bring in new receipts to the federal government to close the deficit is to bring participants into the work force. Where should they come from?

The Unemployed. This is the most pressing need. The official unemployment rate is at 9.6%, but this vastly understates how bad the problem is. economicpopulist.org says it best:

U6, defined as total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force, (table A.15), was 17.0%, a -0.1% decrease from last month. This number is obscene.

Getting these people back to work has to be the most important task. However, as Sharon Angle pointed out, government can not directly create the needed jobs, but has to get out of the way. Government can promote business by the consistent application of the rule of law and protection of property rights. Here are some things to aid in job creation.

• Uncertainty over the effects of Obamacare and other new regulation. A moratorium on new regulation for at least four years is needed.
• The housing market was not allowed to hit bottom. Only when prices are low enough to attract investors will new money pour into the market. I have seen this locally, where prices are not low enough for me to want to invest. Prices are still sitting at well over 20 times rent. Bust up Freddie and Fannie and let housing prices fall. With new investors in the market, then home improvement will start helping the economy.
  
• Stop rattling the markets with inflation fears through quantitative easing. I don't agree with the abolish the fed movement, but if they keep this up, I might change my mind. The fed should be most interested in a stable money supply, which will help businesses plan. Drudge links to a supposedly secret Walmart study that inflation is already here.
  
• Simplify the tax code or better yet, abolish the income tax and replace it with a value added tax (having both is unacceptable, however.) The efficiency of the tax code is relevant to economic growth, because it allows people and business to plan their economic activity in a non-distorted manner. Further, the more complex the tax code the more chicanery and bribery accrue to those getting the tax breaks. It is no coincidence that Reagan and Rostenkowski's success in simplifying the tax code and reducing rates resulted in one of the great uninterrupted economic expansions since World War II.
• Repeal Obamacare since it is responsible for both new complexity in the tax code and absurd amount of new regulation.
  

Those over 65 currently not working. It may seem cruel, and I am not advocating using force, but many of those over 65 are still able to work. Note the trends in this graph:


Labor force participation is already on the rise for those over 65. We need to look at policies that discourage that trend. For example, we tax social security benefits based on earnings of those already receiving social security. This discourages work by the elderly. Wouldn't we be better off if they were working. Raising the retirement age is a good idea, but will take significant time before that has any impact.

Immigrants. Here is the sticky wicket. First, illegal immigrants mostly participate in the labor force, however, only two-thirds of them pay social security taxes according to the only source I could find on this subject. While the article was emphasizing the two-thirds who do pay, I am concerned about adding 4-5 million people to the roles who do not.

But right now, we can't solve this problem, because we will undermine the rule of law through an amnesty. The American people deserve a secure border. But the secure border can also allow us to have the discussion needed about the role of immigrants. Those who are here illegally should not be granted citizenship, that would reward their illegal behavior, but we need to get them to all pay their share of social security taxes.

Further, a discussion of legal immigration is also needed. To help prevent the outsourcing of jobs and to increase the ratio of those paying social security taxes to those receiving, we need a massive influx of new immigrants with salable skills. The H-1B visa program has been a joke for a long time, more a lottery than a policy. I would like to see us bringing 5 million new young, skilled immigrants per year to jump start the economy. That will make a significant dent in the deficit gap and also create more jobs in America. This country still provides the greatest opportunity for upward mobility in the world. Attracting skilled immigrants should not be a problem.

I have put out a lot of opinion that is sure to be controversial. But we Tea Partiers said that we were serious about tackling the deficit. The problem is massive and challenging. Cuts alone won't do it. Cuts and tax hikes won't solve the problem. Time to think out of the box and create some growth.

Debt and the Deficit

In the video linked in the post below, Pam Stout reminds us that a big reason that the Tea Party came into being was a sense of dread over the size of the national debt and deficits. At just the right moment Donnald B. Marron puts this into scholarly perspective with pictures in National Affairs. (As an aside, those, like Letterman, who complain that the Tea Partiers weren't active when Bush was President, should notice how much worse the trends are under Obama.)

First, to help me get your attention I offer two graphs from the article.

Obama towers over his predecessors.

Obama - Up, Up and Away!

Unfortunately, voters still aren't paying attention and don't seem to care about the impending disaster. However, just as a Republican might have won the 2008 Presidential election if they had listened to Rasmussen and positioned themselves on economic issues, so now, Republican candidates could start winning, and positioning by taking on the debt issue. More from Mr. Marron:

Before we can hope to make a dent in our deficits and debt, there must be broad agreement among the public and the governing class that we even need to. There are still some commentators on both the right and the left who continue to insist that deficits and debt do not matter much. It is important to understand why they are mistaken.

Running deficits can certainly be appropriate — and even beneficial — at times of particular stress, such as wars and recessions. But in the long run, persistent large deficits and growing debts undermine our nation's prosperity.

He goes on to point out seven key reasons why long term deficits and debt hurt the United States. Summarizing:

1. Debt undermines growth by crowding out investment.
2. Debt fuels inflation, a hidden tax and destroyer of wealth.
3. Foreign holding of our debt gives them leverage to negotiate in other areas.
4. Use of shorter and shorter term debt puts interest rate risk on the budget.
5. Rising debt limits our ability to raise money to combat a new crisis or our ability to go to war (not always a bad thing I guess.)
6. Due to the magic of compound interest, debts grow on their own. Especially when you are financing current operations out of debt.
7. We're screwing our children and grandchildren. (Marron uses the PC "intergenerational fairness.")

This is why we should applaud Jim Bunning for his insistence on pay-go. This is why we should mock every stimulus boondoggle. This is why we should demand an end to earmarks. This is why we should demand less spending everywhere. This is why we need to get the Democrats out of the majority in Congress and Obama out of the White House.