Saturday, August 6, 2011

We could have avoided the debt downgrade

Two items seem to be missed in media reporting of the S&P long-term US debt downgrade:

The first is that S&P wanted to see at least a $4 trillion cut over 10 years as a good faith "down payment" on getting the debt explosion under control.

The second is that S&P wanted to see cuts in entitlements.  They specifically state:
"...the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability."
And they don't see the government as being capable of cutting entitlements.  The whole aim of politics these days is to promise everyone free money.  One in five dollars of income that people in the US receive comes from entitlements.  To cut any of that is political suicide.  In fact, Obama was elected by promising more money to be given away -- basically buying his way into power.  Obamacare is a prime example.

This is consistent with the Cloward-Piven strategy that Obama was taught by his various Communist mentors since he was 12 years old:  Raise expectations that the government will do more and more.  When crises arise, solve them by promising even more so that each crisis sets the stage for a new crisis later on.  When the economy fails, blame the rich.  When the whole capitalist system finally fails due to these engineered series of crises, it can then be replaced with socialism.

See my previous post The Economic Recovery is Engineered Wrongly April 15, 2010  where I talked about the next Cloward-Piven crisis being caused by sovereign debt.

I find it very interesting that if the original Tea Party Republican debt plan had been passed and signed into law, it would have met all of S&P's criteria:  Four trillion dollars in cuts with reductions in entitlement programs.  But "progressive" Democrats could not bear to "go backward in time" with programs that were "part of the decades-long struggle to take care of all the people".

If the Tea Party would have won, US long-term debt would not have been downgraded.

So this is all Obama's fault.  And again, it is setting the stage for more severe crises later on, just as the stimulus "solved" the economic crisis three years ago, setting the stage for the present crisis.

If Obama wanted to destroy the US, what would he be doing differently?


My solution?  Take a look at the US federal budget for, say, 1950.  Adjust it for inflation, and compare it to this year's budget.  Fund every line item for next year the same as in 1950. Delete anything that was not funded in 1950 (i.e. delete the Great Society stuff, and all the entitlements that have been added since 1950).  This is the initial baseline.

Then adjust however you want, but make sure the budget adds up to the same total.  Fix the income tax at 10% with no deductions or incentives for anything.  Adjust the budget if the 10% tax doesn't cover it.  Do not increase the budget if the 10% tax provides additional revenue above the budget requirement.  (Even the Roman Emperors only required 10%.)  Pass a balanced budget amendment.  And prohibit the government from providing entitlements of any kind.  (In other words, the government has to work within the highly limited powers it was given by the Constitution).

Within a few years this policy will bring vast national wealth, with an unprecedented economic expansion.  There won't be enough people to fill all the jobs that will be created.  Even the poorest among us will be rich.  There will be no disenfranchised for the Democrats to exploit.

But politicians would never pass it, because it gets rid of their power to buy votes with entitlements.  They like people to be poor.  And they despise true freedom.


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