Wednesday, February 25, 2009

Pay me now or pay me more later.

Have you ever heard the phrase "Pay me now or pay me more later." It simply means that if you put of paying the price for something now, it will cost more in the future. For every dollar the government, our representatives we elected, borrow, it will cost us money just like a credit card, student loan, mortgage or car loan. Money is not free.

So far the government on your behalf has borrowed over $35,000 that you will be paying interest on until the last penny is paid back. In 1957 the interest on the national debt amounted to less than 4% of the federal budget. It was common to have large surpluses. The debt accumulated during WWII was nearly paid in full by 1957. However, beginning in 1958 things changed. Our elected representatives borrowed money to pay for services that current tax revenues could not cover. It was not really anything new, because it had occurred before. The government we elected would run several years of deficits followed by several years of surpluses, thus keeping the national debt at a manageable level with its cost at less than 5% of revenues.

In 1959 they again borrowed money to pay for services and benefits that general tax revenues could not cover. This went on for decades and finally they lost track of what a balanced budget was. They began to include social security and Medicare surpluses to hide the fact the national debt was increasing. They came up with a unified budget to mask their negligence. They even for a short time attempted to mask the decreasing saving rate by including both Social Security and Medicare payroll taxes into the savings calculation because they were deferred benefits. The problem is these deferred benefits have a steep price tag. Without ever paying the price in the year they came due, they borrowed more money.

In the end we have had 52 years of consecutive deficits resulting in interest payments taking a full 50% of all federal income taxes each year. The amazing thing is, had the national debt been controlled, the $600 Billion spent on interest now each year would have covered the deficit of past years. In simple terms our economic problems are the direct result of not paying our bills when they came due. The little sacrifice back in 1957 in terms of increased taxes or reduced services would have eliminated our plight today.

So now this generation bears the full burden of past generations negligent fiduciary responsibility. So instead of paying the price today, we are again borrowing money to ease our burden which will require future generations to pay ever more for our greed and selfishness.

Why do I say greed and selfishness? Those who are now 40 are paying for the greed and selfishness of those of 1968 and before. The trillions borrowed today will benefit those today, but not those in the future who must pay the ultimate price for those borrowed funds.

Each generation has a fiduciary responsibility to leave this country in the same if not better condition than when they inherited it. What are you doing to preserve the United States? Do you vote intelligently for elected representatives?

Obama's Social Security Plan

Obama wants to tackle Social Security. I support this 100%. However, he appears to be accepting the defeatist attitude that Social Security must continue to pay current and soon to be retirees promised benefits. This is the same attitude taken in every reform package since 1950. They protect soon to be retirees and retirees at the expense of the worker and future workers.

His idea is to create retirement accounts so Americans can save for their future. Wow, this is nothing new. This is where the Individual Retirement Account came from in the late early 80’s. The concept was to create an account that had incentives for people to save. Did they save, no? What happened was that those with savings simply shifted those savings to IRA accounts and those who were saving opened up IRA accounts. Did it increase savings, no? Those who had no discretionary income to save were out of luck.

Another variation was created and tried. The 401K was born with the concept of providing workers more incentive to save, but the same identical problem occurred. Those with savings with kids in college were not saving so they spent down their savings to allow them to contribute to 401K’s. Did this increase savings, no it simply shifted where the resources were. Those who were already savings simply shifted current savings from taxable accounts to tax deferred 401K’s. Those with too little discretionary income still were left out in the cold.

The basic problem is simple; if you do not have any discretionary income, then you have nothing to save after meeting necessities. However, if you fall into this category, you still continue to pay the payroll tax to support Social Security and Medicare. Two programs that will provide you a negative return on your contributions. Therefore, had these programs been eliminated, workers would have had increased take home wages, creating discretionary income to save.

Until these two programs are dramatically reduced in cost, there cannot be any increased savings by workers. Without increased savings, the standard of living of future retirees will decrease.

Obama's Stimulus for banks

I disagreed with was his idea that freeing up capital for loans to people to buy cars, homes, credit cards and college is the way we reenergize the economy. The reason for our poor economy is that we as a nation are indebted up to our eyeballs.

The Federal Government has nearly $11 Trillion in debt. Families have credit card debt, car loans, mortgages and college loans. We as a country have mortgaged our current life style for years to come. Taking on more debt makes us more susceptible to recessions. We must first pay down our debt, which will increase our credit worthiness. The reason why banks are not loaning money is that they perceive borrowers as risky. The reason is simple; they have too much combined debt. They have maxed out their credit worthiness. Yet President Obama wants banks to loan them more money to get the economy going.

When a family borrows money today it limits its future standard of living. Borrowing today, reduces purchasing power in the future. The only sure way for a secure economy in the future is to take our medicine now and reduce debt and live within our means.

President Obama's Good statements

President Obama’s address to the Nation was telling. Some parts I agreed with and others I found discouraging. Let’s start out positive. He says we as a nation must be energy independent and that for decades we have failed to make this happen. His proposal includes renewable energy such as wind, solar and bio. Energy initiatives will also include clean coal. Obama also included plug in cars which is not an energy source but a consumer of energy. I agree with wind power, but this has a serious problem. General Electric is the largest producer of wind turbines. They have a significant back log. A back log means they have more orders than they can ship at the current time. I am sure they are doing everything they can to meet this new increased demand. They are in the business to sell and make money.

GE’s sales in wind power increased 11% over last quarter which in this economy is very good. The blades used in wind turbines are precision composite blades. They are machined using machines, I am told supplied, from two companies. The companies making the blades have significant backlog themselves as do the companies who make the machines to make the blades which are used in wind generators. The blade companies would like to make more, but they need more machines. Therefore, it is not simply enough to throw money at wind power to make it happen, but the need to first make the machines that make the blades. It is not something that can be done in two years, but I am sure with such a demand, there will be more incentive to expand production of these machines. Can wind power be a major player in the production of electricity, YES! Will it make difference in two years, probably not. However, if we never start, it will never be.

As for as clean coal technology, what is it? First it does not exist yet. It is a concept with an initial $4 billion price tag for research into how it might be practical and implemented. It will then cost billions more to implement in power plants, ultimately driving up electrical costs. Instead of spending tens of billions on clean coal technology, would it not be better to build machines to make the blades for wind turbines which would ultimately produce electricity at 1/3 the cost of clean coal? The lead time to develop clean coal is a decade away and to implement it even further.

I liked his statement that everyone must complete high school and that when they do not, they are not productive citizens. This is a true statement I agree with.

Indiana BMV is messed up big time

Here is one for you. A driver is pulled over for a burned out front left turn signal at 1:00 am. The state sheriff’s deputy asks for license and registration. The driver hands over the information. The deputy then informs the driver his license has been revoked. Wow, huge surprise to the driver. The driver asks why it was revoked. The deputy answers “no social security number on file.” The driver explains he went through the hearing process and received a notice from the Indiana State BMV stating they had received the new information and that his licenses was good until its expiration in 2012. The driver also says he has never received any notice from the state his driver’s license was revoked. The deputy states the Indiana State BMV does not notify driver’s when they revoke their license. The only way to find out if your license is revoked is to be pulled over and they check it on the spot. Had the BMV suspended the license then they would inform you in writing that they did so and the reason. They let the driver continue driving.

Is this un-American or what?

Wednesday, February 18, 2009

Obama's Stimulus Song

(Sung to the tune of Janice Joplin's: O Lord won't you buy me a Mercedes Benz)

By Scott and Dave

OBama, won’t you pay off my mortgage for me? My payments have risen; they want to take my home. I lied about my income, but they still made me the loan. So OBama won't you pay off my mortgage for me?

OBama, won’t you buy me a HD TV ? The airwaves are digital, now static’s all I see. I can’t miss the next thing you offer us for free, So Obama, won’t you buy me a HD TV ?

OBama, won’t you buy me a hybrid SUV? My car is a junker. Its rusting out on me. We all know autos must be green and gasoline free, OBama, won’t you buy me a hybrid SUV?


OBama, won’t you pay off my mortgage for me? My payments have risen; they want to take my home. I lied about my income, but they still made me the loan. So OBama won't you pay off my mortgage for me?

Tuesday, February 17, 2009

I am off line if no one has noticed

A couple of weeks ago, I stopped blogging due to a family matter. We will all eventually go through this. My priorities for the moment our focused some where else right now. I will be back. For those who have posted recently, thanks for your imput and comments.

God bless and may your families and friends have good health.

Best regards,


Monday, February 02, 2009

Can Anyone Just Say No?

As our elected representatives debate and pass legislation with the intent to stimulate the economy, I would like to offer this bit of knowledge. The national debt as of September 30, 2007 was $9,007,653,372,262. As of September 30, 2008 the National debt was $10,024,724,896,912. The budget deficit was $1.017 Trillion!

How much is a Billion Dollars? Sounds like a lot of money. To put this into perspective, $1 billion of taxpayer’s money to bail out an entity is equivalent to $10 out of each American Families pockets. The $825 Billion stimulus package is $8,250 per family. The $810 Billion bank bailout cost each family $8,100. Fannie Mai Freddie Mack was about $5,000 per family and the amount is even larger.

Some politicians say that our children will have to pay it back or that we will have to pay higher taxes in the future. Who are we kidding? The budget surplus was in 1957, 52 years ago. Every single year since 1958, our elected representatives have spent more than they took from us in taxes. We never paid a single penny in interest, but borrowed the money to pay the interest on the national debt. In fact we have not paid one penny towards the money borrowed since 1957, but our representatives have borrowed on top of this.

They say that for every $1 dollar of stimulus, it will increase the GDP by $1.57. This sound good, but let us look at the $1 dollar we borrowed. First, from past observations, this is never paid back and we pay interest. This means that the $1 in 1957 has cost us $11.04 in interest and has not been paid back. If w take the $1.57 in increased GDP, and raise the tax to repay the $1 borrowed, we need to tax 67% of the incremental increase in GDP in the first year or raise taxes even more.

Ronald Reagan cut taxes, Bush said no new taxes, Clinton raised a few taxes, Bush Jr. cut taxes and Obama is trying to provide tax incentives and tax credits. Past history does not support the notion that higher taxes will be used to pay back borrowed money that increased the national debt. So who is going to pay this borrowed money back? I can give you a hint. Just take a look at the shape our economy is in. We are paying for the sins of our predecessors through a lowering of standard of living, jobs being out sourced and inflation.

We cannot borrow our way out of this mess anymore than we can spend our way out. We got to this point through too much debt. As I stated in the Debate with Souder and Montagano, I was against any bailout. Now Souder is saying anymore bailouts are bad. If you give them a buck, they will take all you have.

NBC-33 Debate poll results from 2002