The federal government is constantly out of money and always needs more. It resembles the cartoon character “Wimpy,” a friend of Popeye. Wimpy is a mooch and scam artist. He was always out of cash, but his voracious appetite for hamburgers forced him to ask all – “I’ll gladly pay you Tuesday for a hamburger today.” The federal government constantly asks taxpayers, “I’ll gladly properly manage your money on Tuesday for more taxpayer money today.” The proper management of taxpayer monies never happens; only more promises from our politicians to reform their government mismanagement.

The federal government is very blase about its $35 trillion national debt, and Congress uses its annual budget games to hide unnecessary expenditures in the proverbial weeds. The federal government’s budget is a camouflage to hide its financial condition – it is de facto bankrupt. Its adversaries and the BRICS (Brazil, Russia, India, China, and South Africa) understand the federal government’s financial stress more than American politicians. The BRICS  are attempting to create a competing reserve currency and eventually replace the dollar as the world’s reserve currency. If this ever happens, the U.S. will rapidly sink into second-class status.

Since 2000, the dollar has declined in use and acceptance as the world’s reserve currency from 71% to 60%. The more the federal government uses the dollar to punish foreign adversaries for policies the U.S. dislikes, the more nations seek to displace the dollar to protect their own currencies.

It’s now time for American citizens to focus on this financial disaster facing this nation before it drifts into a financial crisis our government cannot easily fix. The BRICS know the U.S. lives on borrowed time, sustained only by its printing press and a large supply of paper and ink.

A book exposing the perils of the federal government’s fiscal health is written annually but rarely read. If the federal government and Congress won’t read it, it is time for citizens to read it and start taking control of their country.

The book  is titled “The Financial Report of the United States Government” or the “Financial Report.” While federal government agencies prepare their chapters, the significant aspect of the report is that the composite report is audited by the General Accounting Office (“GAO”), an independent arm of Congress. It is not a regurgitation of the budget, focusing on deficits, surpluses, and debt. The Financial Report focuses on the government’s net operating costs, i.e., the differences between real revenues and real costs.

How broke is the federal government? In its latest report (2022), the gross cost of the federal government was $ 7.4 trillion. While it collected $4.9 trillion in taxes, the actual net cost of government is $9.1 trillion since it must recognize an additional future expense of $2.2 trillion, which it incurred by underestimating the cost of employee and veterans’ benefits. Fortunately for the federal government, since it will not have to pay the employee and veterans benefits immediately, accounting standards allow it to show a deficit of only $1.37 trillion for 2022.

What is the value of all the federal government assets? On the asset side of the ledger, the federal government has only $4.962 trillion in assets. This amount consists of $878 billion in cash, inventory valued at $407 billion, and $1.2 trillion in property, plant, and equipment. Its largest asset is “Loan Receivable, Net,” valued at $1.434 trillion. Of that amount, $1.3 trillion is the Federal Student Loan program that President Biden wants to forgive, an act that would immediately reduce federal assets to $3.62 trillion.

What is the bottom line? After GAO makes all adjustments, total federal assets are $5 trillion, and total liabilities are $40 trillion. The federal government is in the hole for $35 trillion. Moreover, the GAO report does not consider, for audit purposes, any unfunded liabilities for Social Security and Medicare, which are estimated at $76 trillion.

If most families live paycheck to paycheck, the federal government lives from every withholding tax payment to the next. If the average American family has difficulty paying the bills, they should be terrified that for every U.S. citizen, including infants, their share of the national debt is $100,000. For families, their share is over $250,000. At some point, Mr. and Mrs. America and the kids must realize the government is penniless. It is borrowing from our children so it can gorge itself today. The federal government, like Wimpy, is a “deadbeat,” a person or entity “that is not willing to pay debts or accept responsibility.”

Every time the federal government takes money out of a paycheck for its wastefulness, it tells the taxpayer, “I’ll gladly pay you on Tuesday for your hard-earned money today.”

William L. Kovacs, author of Devolution of Power: Rolling Back the Federal State to Preserve the Republic. The book received 5 stars from Readers’ Favorite. His previous book, Reform the Kakistocracy, received the 2021 Independent Press Award for Political/Social Change. He served as senior vice president for the U.S. Chamber of Commerce and chief counsel to a congressional committee. He can be contacted at wlk@ReformTheKakistocracy.com

William L. Kovacs author of Devolution of Power: Rolling Back the Federal State to Preserve the Republic. Received 5-Stars from Readers’ Favorite. His previous book Reform the Kakistocracy received the 2021 Independent Press Award for Political/Social Change. He served as senior vice president for the U.S. Chamber of Commerce and chief counsel to a congressional committee. He can be contacted at wlk@ReformTheKakistocracy.com

The post How Broke Is the Federal Government? It’s Penniless! appeared first on The Libertarian Republic.

Congress needs to read “The Federal Spending Diet Book.”

The Federal Spending Diet Book

Reducing federal spending is about responsible governance, not Republican or Democrat power. There are relatively commonsense efforts to reduce the debt. Chapters 1 through 9 are the easy steps to reduce federal spending by a trillion dollars or more annually. Chapter 10 is for those serious dieters who want to “Make America Great Again.” It sets out a tax system that transforms a federal government from one of picking winners and losers to one that simply collects taxes to pay the necessary bills of the government.

If “[The] journey of a thousand miles begins with one step,” our federal government needs to start walking.

 Chapter 1: Do not fund laws that have not been authorized.

The easiest set of budget cuts would be to refrain from funding laws that Congress has not authorized. “In FY 2021 appropriations, the Congressional Budget Office identified 1,068 authorizations of appropriations, stemming from 274 laws, tolling $432 billion, that expired before the beginning of the fiscal year 2022.” Since House Rules prohibit such appropriations, it should be an easy savings of almost one-half trillion dollars.

Chapter 2: Review and vote on every expenditure of the Judgment Fund.

The Judgment Fund is the mother of all slush funds. It is a permanent, indefinite, and unlimited congressional appropriation continuously available to pay money judgments entered against the United States and settlements of cases in or likely to be in litigation with the United States. It is an indefinite appropriation, so secret that Congress no longer even debates what the amounts are for. The amounts are appropriated, no matter what the amount. The Department of the Treasury just pays the claims upon the receipt of the paperwork. This is the fund that President Obama used to deliver $1.7 billion in cash to Iran as a bribe to sign the Iran nuclear deal. Why should our government officials have billions in a secret fund to cover up illegal activity? Having Congress approve each judgment and settlement as it did before 1956, the U.S. could save taxpayers tens of billions of dollars.

Chapter 3:  Follow and implement GAO’s Generally Accepted Accounting Principles (“GAAP”).

Congress mandates GAO to perform a GAAP analysis of federal spending and assets and provide recommendations to ensure the financial reporting by an agency is transparent and consistent. Every member of Congress should read these reports on how our money is managed and should implement its findings.  One specific GAO recommendation is for the federal government to address the government-wide improper payments, estimated to be $175 billion.

Chapter 4: Government must operate only for a public purpose.

The issue of Congress giving away our money to private entities has been debated since the founding of the Republic. Opponents of giveaways argue taxpayer money can only be spent on matters enumerated in the Constitution. The government asserts it can spend taxpayer money on anything that promotes the general welfare. Continuing this debate is irrelevant since the courts have made it clear legislatures determine what the general welfare is. To address the excesses of gifts to private individuals, Congress should stop giving money to private parties, including tax credits for fancy automobiles, horse racing, NASCAR, and short-line railroads, and finally eliminate carried interest.

Chapter 5: Members of Congress and the President should imagine their conference tables are merely kitchen tables that invite a family discussion over finances.

The amount of information available to Congress for making smart debt reduction decisions is overwhelming. It is time Congress puts these materials to use. A simple way to approach this task would be for each congressional committee to rank each program within its jurisdiction in order of priority.  The budget and appropriation committees would work with the authorizing committees to ensure the highest-priority programs receive priority funding. The appropriation committees would work down the list until the revenue raised by taxes is expended. At that point, Congress would have to cease spending money on programs for which there is no longer any revenue, e.g., studies of shrimp on a treadmill, or admit to the taxpayers it wants to borrow money to fund programs of lesser value. This kitchen-table process of spending only up to revenues received could save hundreds of billions of wasted dollars.

Chapter 6: Re-constitute the Joint Committee on Reduction of Non-Essential Federal Expenditures, which existed from 1941 to 1974.

This committee was established after World War II to recommend ways to reduce a massive federal budget.  Its goal was to identify non-essential spending. While the committee was only a study committee, requiring its recommendations to be submitted to authorizing and appropriation committees, it had a major impact on budgeting in government. With the inability of Congress to control spending or the states to force a Balanced Budget amendment to the Constitution, an alternative would be to create a similar committee to make recommendations to Congress but require its recommendations be voted on by Congress. This process creates accountability.

Chapter 7: Enact a Base Realignment and Closure Commission (“BRAC”) that applies to general appropriations.

Due to political pressure to locate the military bases in numerous congressional districts, the U.S. constructed an excess of bases but could not close unneeded ones. To address the situation, Congress established BRAC, giving the Commission power to identify unnecessary bases and to send recommendations to Congress. The key to BRAC’s recommendations to Congress is that they became law unless Congress passed a Resolution of Disapproval and the President signed it. Using the BRAC structure, Congress could apply the same concept to all recommended reductions as a means of reducing political support for unneeded programs.

Chapter 8: Establish a Budget & Waste Reduction Director in every agency to identify unnecessary expenditures.

Federal agencies have recycling and permit streamlining directors to help implement certain laws. Due to massive budget deficits, there should be a similar position to identify ways an agency can eliminate unneeded programs. The person should report directly to the head of the agency. All reports must be addressed by the head of the agency, and reasons for “No Action” must be publicly justified. Each director would recommend a 10% reduction in agency expenditures. Give the director a big bonus for meeting the target.

Chapter 9. The federal government needs to seriously re-think the massive subsidies it gives to private parties to buy green products.

In the recently enacted “Inflation Reduction Act,” Congress authorized $370 billion in new tax credits for corporations and individuals if they purchase green energy products or build green energy facilities. The tax credits are to boost sales of electric vehicles, the installation of rooftop solar panels, the development of solar power systems, heat pumps, water heaters, space heating, electric stoves, circuit breaker boxes, additional home insulation, and exterior windows, to name a few private beneficiaries. This is in addition to federal regulations imposing energy efficiency requirements on at least sixty products and $577 billion in tax credits and grants for green energy projects since 2004.

The IRA was passed only a week after Congress authorized $280 billion to incentivize the semiconductor industry to build plants in the U.S. The semiconductor industry is a very profitable $573 billion industry that is expected to grow to $1.4 trillion by 2029 due to high demand for its products.

Chapter 10: Enact a fair, simple tax code that raises money to operate the government rather than legislating personal behavior.

For those in Congress and presidents serious about the future of the United States, its time for Congress to stop using the tax code to pick winners and losers and to let the market allocate the goods and services wanted by consumers.

This simple solution is to repeal the 8-million-word tax code and replace it with the 1913- four-page Form 1040. Few deductions and low rates, but requiring everyone to pay some tax, including the wealthiest. Another benefit of this simple approach is it captures a greater amount of tax owed by closing the Tax Gap.  The IRS defines the tax gap as the difference between true taxes owed for a given tax year and the amount that is paid. The gap is caused by the under-reporting of income, non-filing, and tax evasion. While the exact amount is unknown, the IRS estimates it to range from $574 to $700 billion annually. A complex tax code invites under-reporting and manipulation, whereas a simple tax code fosters greater participation and prevents large-scale manipulation encouraged by complexity.

Starting a diet requires acknowledgment of being overweight and the desire to lose weight. The same is true with overspending. It cannot continue for the health of the nation. If overspending continues, the long-term consequences will be extremely harmful to the nation, especially future generations. While not every step in the diet book needs to be followed, if, however, the federal government implements four or five of the steps, it is guaranteed to reduce spending by a trillion dollars.

The post Shrink Your Bloated Government With This One Easy Trick appeared first on The Libertarian Republic.

2022 is no exception. Since 1991, Congress has failed to pass its twelve appropriations bills. To avoid public failure, Congress takes the easy route. It bundles all spending into the proverbial secret Santa grab bag called an Omnibus appropriation. The corporatists and social advocates, like children opening presents, must wait to find out what they got until they can read the new law. The timing is usually the end of the year before Congress goes home for Christmas.

While Republicans claim they want to stop the next giveaway, they want their share of gifts even more. For this year’s share, several Republicans will likely help the Democrat business community keep their prize gifts, favorable tax treatment for research and development, and carried interest. The social activists want billions of dollars of higher childcare tax credits. The final deal is always more spending, never less.

Since the beginning of the republic, there has been a debate over the scope of Congress’s power to spend our money and then tax us to generate more money for Congress to spend. James Madison argued Congress could only spend on the items enumerated in the Constitution. Alexander Hamilton argued the Constitution’s Spending clause is independent of the enumerated powers, thus allowing Congress to tax and spend as it deems necessary. The only limitation – spending must be for the general welfare, and Congress is the only institution that determines the general welfare.

Continuing to debate the limits of Congressional spending is a waste of time. The Supreme Court has made it clear that Congress can spend on whatever it wants as long as it promotes the general welfare.

Such a broad interpretation of Congress’ ability to tax and spend has resulted in a massive expansion of government and a $31 plus a trillion national debt.  The growth of the national debt will likely force posterity into involuntary servitude to the federal government. Most troubling is that the general welfare has morphed from building canals, bridges, and highways to make the U.S. an economic superpower into trillions of dollars of gifts to special interests and friends. These gifts to private entities come in the form of grants, tax credits, low rates, loan forgiveness, and paycheck protection plans.

Listed below are a few of the thousands of congressional gifts to private parties.

Suspending  $20 billion of student loan payments for two years and now seeking $600 billion more in student loan forgiveness based on the Higher Education Relief Opportunities Act of 2003, an act that addresses national welfare emergencies.

$ 721 billion was given in grants to states as a bribe to manage federal programs enacted outside the constitutional authority of Congress to legislate.

Forgiving tens of billions of dollars of federal Paycheck Protection Program loans made to organizations controlled by the elite rich such as Paul Pelosi (husband of the Speaker of the House); Khloe Kardashian, Tom Brady and Reese Witherspoon, Forbes Media, Ruth Chris Steakhouse, The Washington Times, and more than a few members of Congress.

$16 billion was given in farm aid to offset losses suffered by farmers on tariffs imposed on products sold to China. The top 10% of farmers receive 70% of the subsidies. This top 10% includes insurance companies, multinational corporations, and corporate farms.

Flood insurance subsidies are given to insure high-end housing in flood-prone areas, i.e., beach front properties. This insurance program is potentially liable for $1.3 trillion in flood claims while only collecting $3.5 billion in annual premiums. The program already has $25 billion in losses taxpayers will have to pay.

The $330 billion prescription drug industry received $64 billion in federal research funding, along with  immunity for any harm their drugs may cause.

Most recently, through the falsely named “Inflation Reduction Act,” Congress authorized $370 in new tax credits for corporations and individuals if they acquire green energy products or build green energy facilities. These tax credits are in addition to federal regulations imposing energy efficiency requirements on at least sixty products and $577 billion in tax credits and grants for green energy projects since 2004. The tax credits are to boost corporate sales of electric vehicles, the installation of rooftop solar panels, the development of solar power systems, heat pumps, water heaters, space heating, electric stoves, circuit breaker boxes, additional home insulation, and exterior windows, to name a few beneficiaries.

A week before the passage of the IRA, Congress authorized $280 billion to incentivize the semiconductor industry to build plants in the U.S. and invest in new research. The $ 573 billion semiconductor industry is expected to grow to $1.4 trillion by 2029 due to high product demand.

With a $31 trillion-plus national debt, citizens need to appreciate that every taxpayer owes $247,882 as their portion of the debt.

Christmas gifts to children are rewarding when parents see happiness in their eyes. Unfortunately, as some of these children grow up, they still expect gifts from the real Santa Claus, the federal government. The federal government likes playing Santa but never considers the immutable fact that the only money the federal government has is what it takes from taxpayers. The federal Santa game is simple. The federal government sees the glimmer in the eyes of its friends when they find out about the billion-dollar gifts they received for doing nothing. This tradition is the true meaning of a Washington, DC Christmas.

The post Yes, Virginia, The Federal Government is the Real Santa Claus appeared first on The Libertarian Republic.

It will be a trying time since the loudest voices will seek retribution against Democrats through much-needed investigations. Undertake a few very well-structured investigations to expose the corruption in the Biden administration, but, please do not forget your Commitment to America. Some of it can be accomplished with control of only the House. Republicans promised to right the ship of state. You will be doing this for the country, not to satisfy primal urges of revenge.

As part of your Commitment to America, you pledged to “Curb wasteful government spending that is raising the price of groceries, gas, cars, and housing and growing our national debt.” A similar promise was made by the Republicans in its1994 Contract with America. The national debt in January 1994 was $4.4 trillion. The national debt in 2022 is almost $31 trillion. Most concerning, Republican administrations increased the national debt during that period by $14.05 trillion, about 53.6% of its increase. Democrats increased the national debt by $12.15 trillion, about 46.4% of the additional debt in that period.

Worst still, 97% of our national debt has increased dramatically since the end of the presidency of Jimmy Carter, the last president to preside over a national debt of less than a trillion dollars. In those forty years, using fiscal year calculations, the Republicans added $17.46 trillion to the national debt (59%), and the Democrats added $12.15 trillion (41%). It is imperative that the national debt matter to Republicans when they have the power to do something about it. Pontificating about it on cable television is not sufficient.

Interest payments on the national debt over the next 30 years are estimated to exceed $66 trillion. Each taxpayer’s share of the national debt today is $245,191. The average personal income in the U.S. is $63,211. If Americans are concerned with inflation, wait until they get the bill for the national debt. The national debt will become so burdensome to future generations that it will undermine democracy. If the federal government taxed current citizens the amounts needed to pay for today’s government, a tax revolt would topple the government.

How did the government put us in this position?

The framework of our Constitution has few guardrails for the type of government formed by our elected leaders. Today’s federal government combination of capitalist, socialist, oligarchy, kakistocracy, and woke cult. Moreover, the federal government can tax us as much as it needs to satisfy its wants. From 1932 to 1981, the marginal tax rate in the U.S. ranged between 63% – 91%.

Since it is unlikely, we will pay off the national debt in our lifetimes, our federal government and every American must recognize, we are living on the future productivity of those who have no say in creating our debt. The national debt is unjust to those who will have to pay tomorrow for our spending today.

What can House Republicans do today without control of the presidency?

Our Constitution reads, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”

For Congress to spend more of the taxpayer’s money, it must appropriate new money by enacting a law that requires the approval of both Houses of Congress and a Presidential signature. To spend no money, however, one House of Congress merely needs to do nothing. No provision in the Constitution gives anyone the power to force Congress to spend money. Moreover, Congress is the only government institution controlling the nation’s purse. The House of Representatives can shut the purse.

A few simple ideas for a Republican House to cut almost one trillion dollars from the budget by Just Saying “No.”

Do not fund unauthorized laws. Almost a half-trillion in savings can be achieved by following congressional rules prohibiting the funding of laws that are not authorized. All Congress needs to do is refuse to fund unauthorized laws.

The Congressional Budget Office annually issues a report on “Expired and Expiring Authorizations of Appropriations” for the Fiscal Year. While CBO prepares this report according to the Congressional Budget Act of 1974, the report is to assist lawmakers in complying with House rules by identifying unauthorized laws that should not be funded. Its 2022 report identifies 1,118 authorizations of appropriations that expired before the beginning of FY 2022 and an additional 111 that will expire during FY 2022.

CBO estimates Congress appropriated $461 billion in 2022 to fund unauthorized laws. Moreover, CBO identifies each committee of Congress that has failed to authorize laws under its jurisdiction and the amount of money appropriated to fund these unauthorized statutes. Forty-four percent of the unauthorized laws being funded expired over a decade ago. If Congress is unwilling to review these laws and reauthorize them, that lack of interest alone should be sufficient to let them expire.

Reduce agency budgets for refusing to provide Congress with the information requested. Congress has a constitutional responsibility to oversee federal agencies. Many times, however, federal agencies refuse to provide Congress with the information requested. Usually, Congress, especially the party in opposition to the Executive, must live with the refusal until a president from its party occupies the White House. Then matters are reversed. One mechanism for addressing this issue would be for the House of Representatives to reduce the agency’s appropriations by some percentage each time an agency fails to provide the information requested.

Use spending power as bargaining power. Since Congress cannot be compelled to spend money on any activity, it needs to leverage this power to ensure the Executive implements the policies Congress enacted. From day one the Biden administration refused to protect the southern border of the United States. The border is open to all comers, no matter how much the Republicans complain. By being in charge of the House, however, Republicans have solid leverage to negotiate with the administration by withholding money for programs Biden deems essential.

The leverage should be the Department of Education (“DOE”) since it is owned and operated by Biden’s most significant political supporters, the teachers’ unions. The DOE is a perpetual pay-off to the teachers’ unions. The teachers’ unions donated $43 million to liberal groups in the 2020 election cycle.

By controlling DOE, teachers’ unions foster the teaching of Critical Race Theory, impose mask mandates, and torture children’s minds by telling them they are born racists. The mere possibility of the teachers’ unions losing this power will likely persuade Democrats to accept the reality that building the border wall and enforcing immigration laws is a cheap price to pay to keep DOE.

If Biden concedes, the House Republicans will get the border wall and immigration enforcement. If Biden refuses to negotiate, the Republicans get to eliminate the agency they have wanted to eliminate since 1980, when it was created.

Require all federal agencies to implement GAO’s Generally Accepted Accounting Principles (“GAAP”) or suffer budget cuts. Congress mandates GAO to perform a GAAP analysis of federal spending and assets and provide recommendations to ensure the financial reporting by the agency is transparent and consistent. One specific GAO recommendation is for all agencies to address the government-wide improper payments, estimated to be $175 billion. A Republican House should refuse to fund agencies failing to implement this recommendation.

By implementing these four recommendations, Republicans can reduce the budget by over $850 billion. Only time will tell if Republicans mean what they promise in their Commitment to America. Republicans’ this is your “put up or shut up” moment.

William L. Kovacs, author of Reform the Kakistocracy, winner of the 2021 Independent Press Award for Political/Social Change, and former senior vice president at the U.S. Chamber of Commerce.

The post Republicans Win the House. It’s Time to Honor their Commitment to America appeared first on The Libertarian Republic.

Congress pontificates about reducing its massive national debt of $30 trillion, but each year it gets bigger. Diet books don’t help one lose weight. Only by reducing food intake can weight be lost. The same is true for budgets. Bloviating about the national debt on cable TV will not reduce the debt. Only by cutting programs and reducing laws can Congress reduce the national debt.

In 2021, our federal government spent $6.82 trillion in a $22.4 trillion economy. Simply, 30% of all economic activity in the U.S. is federal spending.  Another $3.3 trillion was spent by state and local governments. Forty-five percent of our entire economy is government spending. The Government Accountability Office (“GAO”) informed Congress that the growth of the national debt is unsustainable and a risk to our future. It’s now time to stop spending and start reducing the nation’s debt to ensure a sustainable nation for our children.

A diet that takes trillions off the federal spending scale without disrupting a lifestyle.

The nation’s goal should be to reduce the national debt with as little disruption as possible. Starvation diets don’t work. The nation just needs to cut out the junk food but keep a good helping of vegetables on our plate. This is doable by recognizing we don’t need to eat every time we see food. Likewise, Congress does not need to spend money every time it sees a perceived “problem.”

Once in this mindset, Congress needs to identify what the American people do not need. Five categories of spending literally jump off the plate.

1. Do not fund laws that have not been authorized. The easiest set of budget cuts would be to refrain from funding laws that Congress has not authorized. “In FY 2021 appropriations, the Congressional Budget Office identified 1,068 authorizations of appropriations, stemming from 274 laws, tolling $432 billion, that expired before the beginning of the fiscal year 2022.” Since House Rules prohibit appropriations to fund laws not authorized by Congress, just letting those unauthorized laws expire is an easy savings of almost one-half trillion dollars. If Congress is so unwilling to perform oversight on expired laws or the public has so little interest in a law being reauthorized, Congress should follow House rules and not fund the expired laws.
2. Review and vote on every expenditure in the Judgment Fund. The Judgment Fund is the mother of all slush funds. It is a permanent, indefinite, and unlimited congressional appropriation continuously available to pay money judgments entered against the United States and settlements of cases in or likely to be in litigation with the United States. It is so secret that Congress no longer even debates what the amounts are for as an indefinite appropriation. The amounts are appropriated, no matter what the amount. The Department of the Treasury just pays the claims upon the receipt of completed forms.This is the fund that President Obama used to deliver $1.7 billion in cash to Iran as a bribe to sign the Iran nuclear deal. Why should our government officials have billions in a secret fund to cover up illegal activity or to held terrorists? Having Congress approve each judgment and settlement as it did before 1956, the U.S. could save taxpayers tens of billions of dollars by rejecting settlements the executive branch makes with its friends that bring suit against the government knowing of a friendly settlement or with terrorists.
3. Enact a fair, simple, tax code that focuses on raising money not legislating behavior. Another easy way to reduce the deficit is to get rid of the 8-million-word tax code and replace it with the 1913- four-page Form 1040. Few deductions and low rates, but everyone pays something, including the wealthiest. The benefit of this simple approach is it captures a greater amount of tax owed by closing the “tax gap.”  The IRS defines the tax gap as the difference between true taxes owed for a given tax year and the amount that is paid. The gap is caused by the under-reporting of income, non-filing, and tax evasion. While the exact amount is unknown, the IRS estimates it to range from $574 to $700 billion, annually. A complex tax code invites under-reporting and manipulation, whereas failing to pay taxes in a simple system, could easily place one in a position of defending a fraud or tax evasion charge.
4. Follow and implement GAO’s Generally Accepted Accounting Principles (“GAAP”). Congress mandates GAO to perform a GAAP analysis of federal spending and assets and provide recommendations to ensure the financial reporting by the agency is transparent and consistent. Every member of Congress should read these reports on how our money is managed and should implement its findings when mismanagement is identified. One specific GAO recommendation is for the federal government to address the government-wide improper payments, estimated to be $175 billion.
5. Congress should make a kitchen-table list of what programs are most important to our Republic. The amount of information available to Congress for making smart debt reduction decisions is overwhelming. It is time Congress puts these materials to use. A simple way to approach this task would be for each congressional committee to rank sequentially, each program within its jurisdiction, with the most important programs having the lowest number. The budget committee would still allocate a budget for appropriations and the highest-priority programs will be funded first. The appropriation committees would work down the list until the revenues raised by taxes are expended.At that point, Congress would have to cease spending money on programs for which there is no longer any money, e.g., studies of shrimp on a treadmill, or admit to the taxpayers, it wants to borrow money to fund programs of little value. This kitchen-table process of spending only up to revenues received could save another $1plus-trillion annually, even if Congress expended a few hundred billion on some lower value programs.

These five modest proposals for reducing the national debt do not disturb any of the programs Congress views as a “must fund.” The reductions all come in areas where Congress has little interest, settlement of lawsuits that should not be settled, making sure everyone pays their fair share on income tax, requiring agencies to only pay authorized recipients, and not spending money on stupid programs.

Is anyone in Congress willing to put the national debt on a diet?

The post Reducing National Debt by Trillions with a 5-Step Diet appeared first on The Libertarian Republic.

Baby Boomers seem to enjoy borrowing money. At some point, however, someone confronted with having to pay off the debt will object since those future generations will not have had any say in the creation of the debt. What does the nation do when it reaches that point?

The last three presidents of the U.S. (George W. Bush, Obama, and Trump) have imposed  $22 trillion in additional National Debt out of a total of $29 trillion of debt. These three presidents are responsible for 76% of the nation’s entire National Debt from the founding of the Republic. Each person’s share of just the National Debt is $85,423 and for every household, it is $221,321. In his first year in office, President Biden (FY 2021) has increased the National Debt by $1.5 trillion and is now proposing many trillions more in new social programs.

At what point does this massive national debt become so burdensome that it is an unjust law on the citizens of the U.S. by placing them in servitude to the federal government?

There is a passage in Martin Luther King, Jr’s Letter from Birmingham Jail, on unjust laws that should be mandatory reading for every lawmaker. It extends far beyond the heinous evils and unjust nature of racial discrimination. It is a timeless analysis of the fundamental attributes needed in structuring “just laws” in a democracy.

King is asked: “How can you advocate breaking some laws and obeying others?” He replied, “…there are two types of laws: there are just laws and there are unjust laws.” He explained the moral basis for the distinction. But it is his two examples of the differences that provide insight into structuring “just laws” in a democracy.

To Dr. King, an unjust law is a law the majority imposes on a minority but not on itself. A just law is one that applies to all equally.

Secondly, an unjust law is one inflicted upon a group that had no part in its passing; e.g., the group was deprived of the right to vote.

While these principles apply to racial discrimination, they can also be applied to the rapidly increasing, massive national debt that is being imposed on future generations who have not been given a “say” or “vote” in the process. Future generations are being told, “pay our bills.”

Republicans and Democrats are equally responsible for the National Debt. Actually, Republicans, through the Trump presidency, for all their righteous calls for fiscal restraint, are responsible for about 60% of the National Debt. Biden is quickly moving the split into a 50-50 tie. Both parties relish spending our money and using budget gimmicks to impose more debt on us while lying to our faces. For example, Congress and past administrations lie about the increasing debt by keeping the cost of continuing wars off the books or passing Continuing Resolutions.

It is highly unlikely that present politicians and voters will pay off this debt in their lifetimes. This means we citizens are living on the future productivity of those who have no ability to participate in creating the debt.

Other than the writings of Dr. King and a few leaders of peaceful resistance movements, the discussion of “unjust laws” is left for philosophers and ethicists. The immenseness of the national debt and its impact on future generations requires discussion today—especially by federal candidates.

The national debt could become so burdensome to future generations that it undermines democracy. We can no longer separate questions of morality from the consequences of legislative actions like thoughtless increases in the debt ceiling and new open-ended programs.

We can easily claim there is nothing we can do—our elected leaders control the budget, spending, and continuing increases in the debt ceiling. Moreover, those borrowed funds go to “good causes” supporters claim must be addressed, arguing it would be immoral not to take care of the least among us.

If the state imposed the full amount of taxes on citizens needed to pay for all the programs it provides, there would be a tax revolt against “unjust taxes.” Tax revolts have happened since the government first imposed taxes on people. But the accumulation of massive debt is different from imposing taxes on people. Accumulating and deferring the payment of debt allows the state to avoid taxing voters by shifting the cost of our wants to future generations.

Each dollar expended by us today without earning that dollar is a dollar our posterity will have to repay for us. Is there a point at which the debt imposed on future generations is so massive that it converts the social obligation of paying reasonable taxes into involuntary servitude to the government?

Citizens in a democracy are responsible for the actions of the state. Those taking state action are our servants. We have the ability through our vote to control them.  As we continue to amass debt, we are telling future generations they “have no rights.” This is the essence of an “unjust law.” Worse than being a Kakistocracy, we are becoming an unjust country that is willing to inflict servitude upon future generations so that we can avoid living within our means.

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First, don’t expect government to look out for you. Government will do what is best for itself, citizens be damned. Government will do whatever it takes to retain power, including incurring more debt, printing as much money as needed, notwithstanding its value, devaluing its currency, or even defaulting on its debt. If debt reaches unmanageable proportions and the federal government is forced to take action, it will take the easiest path to preserve its power, including defaulting on the debt owed to the general public, which is most likely, you the reader.

Part I of this series uses a chart to illustrate that the National Debt is bipartisan, both parties engage in massive spending without any known way to pay for it. Part II discusses the underlying assumption of the Progressives’ Modern Monetary Theory, i.e., massive debt is irrelevant if it is in the currency of the sovereign. The sovereign merely needs to print money from “thin air” to pay it off.

This Part III identifies who is impacted by a federal default. The consequences of default are a critical piece of information the federal government needs to tell citizens. Ignoring the massive national debt will only make a future crisis worse. The Congressional Budget Office estimates the debt will be double the nation’s GDP by 2051, or $42 trillion.

Interest payments in 2020 were $325 billion. They are estimated to rise to $928 billion by 2029. If the Fed raises rates only 1%, that will increase add another $19 trillion over ten years to the national debt.

Our elected representatives are doing nothing to address the national debt, not even bloviating about it. Even the Modern Monetary Theorists recognize that inflation is the one event that could upend their theory that debt does not matter to a country with its own currency. Inflation is starting to rise. More government giveaways and fewer commodities and products due to the pandemic will only fuel inflation. In the 1970s, interest rates hit 20% under President Carter. A twenty percent interest rate on bonds today would require the federal government to pay $6 trillion a year in interest, an amount larger than the budget of the U.S. The U.S. would be crushed by debts it could not pay. It would have to default or render the dollar worthless against world currencies.

A more realistic 2% or 3% interest rate could add another $38 trillion to the national debt in ten years.

So, who gets hurt if the federal government defaults on its debt obligations?

As of March 31, 2021, the U.S. National Debt exceeded $28 trillion. Twenty-one trillion of the debt is owned by the American public or 78% of the debt. Seven trillion of the debt is owed to foreign countries.

Put aside the $7 trillion in foreign debt. It will be renegotiated. The real concern is what happens to citizens whose retirement rests on the government’s promise to make payments on its financial obligations. Unfortunately, federal agencies collected trillions of excess dollars from federal programs like social security. These agencies then lend the money to the federal government to spend. The citizens paying these social security taxes only received promises from the federal government to repay the borrowed funds at some future time. That money, or a large portion of it, will be lost in a default.

There is nothing citizens can do about it if the federal government defaults. Yes, nothing! Government can change pension laws at will to relieve itself of a debt problem. Only the government is sovereign. Moreover, the doctrine of sovereign immunity protects the government from its citizens. Government wins, citizens, you lose. An easy proposition to understand.

The magnitude of what the federal government owes citizens is staggering:

• $10.81 trillion is owed to the Federal Reserve and government agencies that gave cash from certain programs like Social Security to the federal government to spend.
• $3.5 trillion is owed to mutual funds.
• $1.09 is owed to state and local government pension plans.
• $784 billion is owed to private pension plans.
• $253 billion is owed to insurance companies.
• $147 billion is owed to owners of U.S. Savings Bonds.
• $2.28 trillion is owed to a variety of individuals, government-sponsored enterprises, banks, and other investors.

Most of the beneficiaries of these debt instruments are Social Security recipients, pensioners, mutual funds investors, bondholders, and insurance companies. These beneficiaries are expecting repayment from the federal government for survival.

Would Social Security recipients, mutual fund investors, pensioners think the same about all the “free” federal money today if they knew their retirement savings were being put at risk by their government?

The federal government is pitting Americans against Americans as to who gets a piece of the American pie and when. Does the federal government give away the entire pie now, and let those who invested in the nation live without pensions? For how long can the federal government provide enhanced benefits to people with children, the unemployed, or provide a universal basic income for all? What happens to these people when the money runs out?  How high can taxes go before people abandon the country? How much can we cut from the military before the U.S. can no longer defend the itself?

Is a massive national debt what we should be leaving posterity? If the national debt is not addressed soon, our posterity will live in involuntary servitude to the federal government.

The post Who Pays When the US Government Defaults On its Debt? appeared first on The Libertarian Republic.

The U.S. Dollar has dropped to ninth place in the strongest dollars in the world, behind the likes of the Kuwaiti Dinar, Bahraini Dinar, Omani Rial, and some of the currencies of large countries like the Euro and the Pound Sterling. Our debt to GDP ratio is the seventh highest in the world. The U. S. has more debt than the next five largest debtors combined (Japan, China, United Kingdom, Italy, and France).

Is anyone, yes, anyone worried about the consequences?

Obviously not! The U.S. recently finished an election for president, the entire House of Representatives, and one-third of the Senate.  Not one candidate for federal office in 2020 made serious mention of our $28 trillion national debt. $24 trillion or 84% of our $28 trillion national debt has been created since the presidency of George W. Bush. Part I charts out the debt by president.

On top of the current debt, President-elect Biden is proposing $11 trillion in new spending. Every president has an excuse for massive debt. Trump had the pandemic; Obama the 2009 financial crisis; George W. Bush had 9/11. Biden just wants to spend so history remembers him as restructuring the country. Might history remember Biden as the president who destroyed the Dollar and bankrupted the nation?

What’s Modern Monetary Theory about?

MMT asserts when a nation has a sovereign currency, debt can be accumulated since it is owed to itself.  Money can be simply credited to another’s account (printing money in old-fashioned terms) without having to sell bonds that require interest payments. This magic process involves keystrokes on a computer. New digits are created electronically on a balance sheet allowing government to spend whatever it needs.

The foundation for such MMT magic is the belief that government creates all wealth by spending money into existence. Government spends to incentivize citizens to want more of what government wants us to have. And by commanding that all taxes be paid in the currency controlled by the government, everyone needs to earn money to pay taxes for the government services they want.

MMT economists view money creation as a valuable economic tool that does not automatically devalue currency when used to address an underperforming economy. By creating new money, jobs are created, and productivity increases. According to Federal Reserve chairs, “…government can print all the money it needs, and nothing bad happens.” Simply, MMT economists posit that when an economy has unemployment, government is not spending enough money and can spend until full employment is reached.

Under MMT, inflation is the primary risk of spending more than needed to reach full employment. When inflation occurs, MMT recognizes it will need to raise taxes and interest rates to control inflation, yet proponents ignore the implications of such recognition. However, as long as the Federal Reserve keeps interest rates near zero, there is not a need to repay the debt since no interest is due. But is there a point where the accumulated debt is so great that it cannot reasonably be serviced if interest rates rise?

Our Constitution does not authorize free money by keystroke

While our Constitution does not mandate any specific economic system, it does specify how government acquires, values, and spends our money. Politicians should understand how MMT squares with our constitutional structure before promising unlimited free money without increasing taxes or interest rates.

Our constitution starts with the words “We the People of the United States”  have created a government with certain limited powers. As to currency, our government is authorized to coin money, and regulate its value and relation to foreign currency. Our government can borrow money on the credit of the United States; however, money cannot be drawn from the treasury unless Appropriations are made by law and all expenditures accounted for. These limits impose constitutional accountability by limiting government action.

Since the currency of the United States is only as valuable as the credit of the government supporting it, there is no provision allowing government to magically create an unlimited money supply by a keystroke, and then by another keystroke use the magic money to pay bills or debt.

In the world of finance, MMT resembles a money-laundering scheme, i.e., concealing the origins of money, then passing it through a complex sequence of transfers to make the money appear legitimate. By illustration, the Federal Reserve creates money from” thin air” and transfers it to the Federal government through a series of transactions. It works like this—the Social Security Trust Fund collects more real money in taxes than it pays out. Social Security uses its excess money to purchase U.S. Treasuries from the federal government. This transaction immediately gives the federal government real money to spend. The Federal Reserve then buys the U.S. Treasuries from Social Security using the money it created out of thin air. The only real money is collected by Social Security and it goes to the Federal government, which immediately spends it. The risk of this money laundering scheme is that Social Security, its pensioners, and the Fed hold promises of repayment based on the creditworthiness of the U.S. which is constantly printing more money out of thin air and laundering it through the system.

As more dollars are made out of thin air, they become less valuable unless needed as a source of exchange in the United States. Since the Constitution contemplates international commerce and a valuable currency supported by the credit of its government, MMT is far outside the Constitutional framework that requires a strong currency for trading with the nations of the world. In fact, MMT will force the U.S. to become an insular society to ensure its currency remains valuable to citizens.

It is easy to see why Progressives are so enthralled with MMT. They believe since government creates all wealth, it has the right to tax back all wealth, after all, it’s the federal government’s money. Citizens merely exist to do what the government wants them to do. Citizens merely buy—and now are give—the services government wants them to buy or have. Such a system could be termed communism. Unfortunately, it is not communism; it is raw Democracy. People, through their representatives, just vote themselves money.

Franklin was right, we are heralding the end of the Republic.

The post I’ll Take My Share of the Money, Now! MMT Part II appeared first on The Libertarian Republic.

Polls establish a large majority of Americans certainly support the federal government spreading money to all who want it, all who apply for it, and all the businesses using the Federal Reserve as a bottomless free money pit.

Not one word in the campaign from any candidate about our massive debt or who will pay it off.  Worse, the Biden administration keeps proposing new programs that will add trillions more dollars to the debt. These programs include free community college, college loan forgiveness, increases in tax credits for child care, raising the minimum wage, extending unemployment, more subsidies to education that give the federal government more control over it, and cash to poorly run or criminally run pension plans. These programs are in addition to the Biden administration’s proposal to fund its multi-trillion-dollar Green New Deal and climate change agenda.

Does it end? How does it end?

With the end of the fiscal year (“FY”) 2020 and estimates for FY 2021, the facts are clear. Republicans cannot claim they are concerned about the national debt.  Republicans have incurred more debt than Democrats up to FY 2021. This fact could quickly change with the many massive spending proposals of the Biden administration. The calculations are based on FY rather than annual spending, to calculate only debt attributable to the presidential budget responsible for it.

*The FY deficit numbers for each President are based on the FY deficits stated by The Balance, update March 2021. For FY 2021, the estimate is for Trump through January 20, 2021, and thereafter the estimate is attributed to Biden.

What do these calculations show?

81% of our entire national debt was incurred by the last four presidents; George W. Bush, Obama, Trump and now Biden. Two Democrats, two Republicans.

Republicans are responsible for 60% of the national debt; Democrats 40%. President Biden is proposing multi-trillion-dollar infrastructure plans that would increase the national debt by another $ 2-3 trillion. Estimates have the national debt rising between now and 2050 from 102% of GDP to 195% of GDP. Interest on the debt is estimated to rise from below 2% today to 2.5% by 2030. On a minimum of $30 trillion in debt, annual interest payments could easily reach $750 billion, about one-half of  FY 2020 discretionary spending. In FY 2021, each person’s share of the national debt is $85,049. The average household’s share of the national debt is $218,614.

All presidents have an excuse for their debt—Biden, the pandemic and need for more stimulus; Trump, pandemic and need to build-up the military; Obama, to address the financial crisis; Bush, 9/11, and on and on. The difficulty with excuses is that all presidents have them and none even try to address the growing national debt. Moreover, not one candidate for federal office in the 2020 elections even discussed the massive national debt.

Basic questions remain. Can the U.S. create money out of thin air and forever borrow at near-zero interest rates so it and the American people do not suffer the cost of borrowing? If not, what are the consequences if inflation or interest rates rise significantly? Is there anything concerned citizens can do to address what might be an existential threat to the nation? Should our government care about future generations? Why should politicians care about the debt and future generations since their sole goal is to be elected? Should citizens care?

Perhaps Franklin is right. We are voting ourselves all the money we want. Americans are forgetting, however, that they own 78% of the public debt. A default will harm Social Security payments, mutual fund returns, private and government pension fund payments, owners of government bonds, banks, and the purchases of the federal reserve. And yes, the politicians who gave us the money we asked for, will be on the beach having a drink on taxpayer-funded pensions.

This topic deserves a great deal of attention and it is not receiving it. Part II of this article will explore the reasonableness of the current assumption that a nation with its own currency can print an unlimited amount of its currency without consequence.

Is there a limit to the national debt Congress and presidents can impose on citizens? The facts show each household’s share of the debt is $218,614. Who pays?

Image: TLR composite; Flickr FutUndBeidl

The post Are We Proving Ben Franklin Right by Voting Ourselves Money? appeared first on The Libertarian Republic.

Citizens reject socialism, but with the coronavirus crisis, they increasingly support universal health care (45%-41%) and are now almost split on providing citizens a basic level of income support (40%- 43%). Both political parties spend and regulate as if socialists. Big corporations lobby hard for bailouts to socialize losses and manipulate implementing regulations to limit competition.

Gallup polls finds 43% of Americans view “some form” of socialism acceptable. While there is growing acceptance of socialist’s policies, there is the question – Is Socialism acceptable under the U.S. Constitution?

Broad, Vague, Massive Federal Powers

Other than individual liberties protected by the Bill of Rights, the Civil War Amendments (XIII, XIV, XV) and voting rights amendments, the U.S. Constitution grants wide-ranging powers to the federal government over the economy.

The Constitution grants the federal government power to create money, lay and collect taxes, borrow and spend money, regulate commerce, declare war and support armies, call forth the militia to execute the laws of the union and make all laws necessary and proper for carrying into execution all powers vested in government by the Constitution.

There is not a word requiring government to foster free enterprise, capitalism or any type of economic system. Yes, the Fifth Amendment of the Constitution provides we cannot be deprived of property without due process of law, nor can private property be taken without just compensation.

Due process is mostly a procedural right.

Just compensation means, if the government wants your property, you must take what the government offers unless you have more money than government to litigate over the value of it.

The federal government can tax us as much as it needs to satisfy its wants. From 1932 to 1981, the marginal tax rate in the U.S. ranged between 63% – 91%.

If the government incurs too much debt, it can manipulate interest rates. With low interest rates, government pays lenders little for the money it spends. High interest rates allow the government to devalue assets.

The Federal Government and its Citizens Promote Free Money

There is no constitutional limit on federal borrowing. The national debt is now $23.5 trillion and projected to run over a trillion-dollar annual deficit for the next ten years. Seventy-five percent of this deficit was incurred since 2001. That year our national debt was only $5.791 trillion. Clearly, borrowing, no matter the cost to future generations, is the preferred approach.

The Coronavirus Aid, Relief, and Economic Security Act, (“CARES Act”) Demonstrates Printing Money Is Government’s Answer to All Problems

To address the spread of the highly contagious coronavirus, federal and state governments imposed restrictive measures such as social distancing, travel restrictions, stay at-home orders and work closures. To relieve the personal economic hardships imposed by government regulation, the federal government passed a $2.2 trillion financial aid package, i.e. individuals receive extended unemployment payments, grants; big business was allocated $510 billion and the Federal Reserve can leverage these funds by a factor of ten. All monies are borrowed from future generations.

The President Has Massive Power to Regulate the Economy

Congress has given the president power to declare national emergencies under the Emergencies Act of 1976. Once the President declares a “national emergency”, government can control the activities of Americans, including internet communications, gatherings, domestic unrest, spying.

Under the Defense Production Act, the President, for national defense purposes, can force business into mandated production and supply activities; allocate materials and services; control the civilian economy, implement wage and price controls, and control credit.

These massive powers allow the president to control the national economy by claiming an emergency exists. The only question is what excuse justifies government economic control of the nation? To address coronavirus, Democrats already demand the administration to take over much more of the private economy.

Socialism Is a Big Business State of Mind

Certainly, big-business lobbies hard for corporate bailouts. From experience, Wall Street knows to “sell-off” until an acceptable bailout package is passed. Big-business has a long tract record for demanding and securing bailouts: Lockheed, 1971; Franklin National Bank, 1974; Chrysler, 1980; Continental Illinois Trust Company, 1984; the S&L crisis, 1989; the Airline industry 2001; Bear Sterns, Fannie Mae/Freddie Mac, AIG, 2008; Citigroup, and the entire financial industry in 2008; Auto industry, 2008; Bank of America, 2009 and today CARES.

A writer describes the federal allocation of capital to address the coronavirus as the “… largest step toward a centrally planned economy the U.S. has ever taken. And it socializes only losses. Profits, when they come, remain private.”

Government relishes having the power to control us.  Big-business relishes cash from government socialism. Both get what they want and future generations get the bill.

What Is the State of Mind of Us?

Wall Street, corporations and citizens are recipients of the borrowed funds that comprise the national debt. CARES is just another financial aid package, although very needed. But there is always great need for financial aid; just never the money to pay for it.

Our Constitution allows us to organize as free marketeers, capitalists or socialists. We can have big government or small government. We can have a responsible government or a kakistocracy (rule by the least able or least principled citizens). Our Constitution gives us that choice.

As a country, if we recognize we have to pay for what we get, we have some tough choices to make.

However, if we continue passing the bills to our children, new, costly, government benefits are free to us. Every bailout makes it easier to give ourselves more “needed,” unpaid for, benefits. Next will be universal health care, a minimum income level, green mandates to save the planet, and more government manufacturing orders for our planned economy.

If we stay on the path of borrowing from future generations so we can spend today, we will soon realize that massive debt is actually the graveyard for our country.

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When Atlas Is Washing His Hands

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