Studying for The Bar: Will Be Back Soon

I am currently studying for the California Bar exam and I am unable to blog until after I take the exam in July.

Wish me luck!

Obama Admits The U.S. Doesn't Have Any Money To Spend

The Drudgereport has posted a portion of a transcript of Obama's interview with C-SPAN in which the President admits that the Government has run out of money to spend. I am reposting the that trasncript since its likely to be taken down in a few hours:

SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?

OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we've made on health care so far. This is a consequence of the crisis that we've seen and in fact our failure to make some good decisions on health care over the last several decades.

So we've got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it's putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.

So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don't reduce long-term health care inflation substantially, we can't get control of the deficit.

So, one option is just to do nothing. We say, well, it's too expensive for us to make some short-term investments in health care. We can't afford it. We've got this big deficit. Let's just keep the health care system that we've got now.

Along that trajectory, we will see health care cost as an overall share of our federal spending grow and grow and grow and grow until essentially it consumes everything...

SCULLY: When you see GM though as “Government Motors,” you're reaction?

OBAMA: Well, you know – look we are trying to help an auto industry that is going through a combination of bad decision making over many years and an unprecedented crisis or at least a crisis we haven't seen since the 1930's. And you know the economy is going to bounce back and we want to get out of the business of helping auto companies as quickly as we can. I have got more enough to do without that. In the same way that I want to get out of the business of helping banks, but we have to make some strategic decisions about strategic industries...

SCULLY: States like California in desperate financial situation, will you be forced to bail out the states?

OBAMA: No. I think that what you're seeing in states is that anytime you got a severe recession like this, as I said before, their demands on services are higher. So, they are sending more money out. At the same time, they're bringing less tax revenue in. And that's a painful adjustment, what we're going end up seeing is lot of states making very difficult choices there...

SCULLY: William Howard Taft served on the court after his presidency, would you have any interest in being on the Supreme Court?

OBAMA: You know, I am not sure that I could get through Senate confirmation...

UPDATE: (5.24.09): Here's video of Obama's interview on C-SPAN:

Future of American Economy: Not So Good

There has been a huge amount of news coming out about different aspects of the American economy and its important to tie the various bits of information together so that we can get a good picture of what is going on for the American economy.

It has been recently reported that unemployment is on the rise in 44 states and is expected to peak over 10% according to the Congressional Budget Office (CBO). For those of you who do have jobs, you might be disappointed to learn that the US Dollar is decreasing in value in comparison to other currencies. This means that inflation is around the corner.

We all know that the U.S. national debt is increasing exponentially under the Obama administration but as a result of all this borrowing and spending, America is on the verge of losing its AAA credit rating and that stocks are moving on a downward trend after learning that the government faces higher interest rates to finance the various bailout plans and spending sprees. A possibility of losing the AAA credit rating is a very serious matter and is the kind of news that shouldn't be ignored.

Rush Limbaugh makes a good observation about America's future financial crisis by pointing out that if you want to see what the economic future of America will look like, take a look at California and the current economic mess it is in. Despite how you feel about Rush Limbaugh, he does have a very compelling point.

Of course, U.S. Federal Reserve Chairman Ben Bernanke recently said the future of the U.S. economy will be fine.

Somehow, I don't believe him.

No on 1A-F: California Taxpayers Win In A Landslide!!

Rejected!!

Obama & Biden: Debt?! Yes We Have!

Is there really a correlation between the way a politician manages their own personal finances and how they manage the finances of the Federal Government? It has recently been disclosed that Biden and Obama have both been living beyond their means prior to being elected to the White House.

'We Can't Keep Borrwing'; Obama Says; Except for Plastic is the headline for the Los Angeles Times' business section. The LA Times makes a good point that there is a lack of consistency between Obama's concern about the credit card debt of Americans and amount of debt our federal government is in, especially the amount of debt he racked up since he's been President.

Do you think that there is a relationship between the amount of debt a Washington D.C. politician has and how big or small a price tag a federal bill has attached to it. In other words, is it true that the bigger a politician's debt is, the more likely they will vote for bigger spending projects in comparison to a politician who has a smaller debt and will more likely to vote against big spending projects?

NYT: Social Security & Medicare Closer To Insolvency

The New York Times just released an article a few minutes ago about how the current poor economic climate has increased the moment when Social Security and Medicare will go insolvent.

The interesting thing about this article reports quotes from various politicians and bureaucrats who want to keep these kinds of programs running even when the funds are no longer available:

"The shorter deadline for Social Security insolvency does not mean that future retirees would receive nothing after that date.

The trustees noted that even when the Social Security trust fund is exhausted in 2037, tax revenues will presumably continue to come in. But benefits would be limited to the amount paid in that year, and would probably continue at only 75 percent of their promised level — 3 percentage points less than was projected in last year’s report."

What a brilliant idea!? Lets keep funding these programs even when they've gone bankrupt!! Its nice that politicians want to keep these programs from going insolvent and by working in a bipartisan manner to find a solution:

"The Treasury secretary, Timothy F. Geithner, said in a statement on Tuesday that the new projections underscored the need for a bipartisan approach to shoring up the two programs, through what he said would be “difficult but achievable changes.”

“That is why even as this president has focused on pulling our nation out of economic recession, he has made clear his commitment to working in a bipartisan way to address the long-term health of Medicare and Social Security” and, he added, “not simply pass on our debts.”

However, it is foolish to think that the leaders in Washington D.C. won't pass on our debts to younger generations in attempt to "save" these welfare programs. The truth is that politicians and bureaucrats will ALWAYS pass on the debt to the next generation. President Ronald Reagan did it in 1983 when he approved a $165 Billion bail out for Social Security. In the eyes of our elected leaders, the only solution to save Social Security is to spend more of the taxpayer's money.

The best and most wise solution to fixing this problem is to let these welfare programs (and others like it) die out when they become bankrupt. These programs should not be revived for the simple reason that welfare programs violate the U.S. Constitution.

President Franklin Pierce, in 1854, explained why such programs are unconstitutional:

"[I must question] the constitutionality and propriety of the Federal Government assuming to enter into a novel and vast field of legislation, namely, that of providing for the care and support of all those … who by any form of calamity become fit objects of public philanthropy ... I cannot find any authority in the Constitution for making the Federal Government the great almoner of public charity throughout the United States. To do so would, in my judgment, be contrary to the letter and spirit of the Constitution and subversive of the whole theory upon which the Union of these States is founded."

In 1887, President Grover Cleavland made this statement about the unconstitutionality of government welfare programs:

"I find no warrant for such an appropriation in the Constitution, and I do not believe that the power and the duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit.

The friendliness and charity of our countrymen can always be relied upon to relieve their fellow citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the Government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood."

It is a shame that we used to have politicians who were faithful to the Constitution and refused to waste the tax payer's money. They understood that is the people, not the government, who are in the best position to help the downtrodden. They knew that it was the local community and private institutions who are the most efficient in providing relief to those who need it.

We need politicians who understand these principles. Where are they?

UPDATE: CNN had an expert come out and talk about how Medicare is the real danger, not social security. Riiiiiiight.

UPDATE #2 (5/14/09): Here's a nice blog explaining why Medicare is a real danger but Social Security is still a problem.

What!? The Deficit Is Greater Than Expected!?

In January of 2009, the Congressional Budget Office (CBO) director Douglas W. Elmendorf projected a $1.2 trillion deficit for this year. The CBO director has posted a revision of the deficit on his blog that the deficit is now projected at $1.8 Trillion for 2009 which is 50% greater than previously expected. What this means is that the US government is borrowing 50 cents for every dollar it spends.

However, the fact that projected deficit is 50% higher is only half of the shocking news. In reading the CBO Director's blog, we learn several interesting things which are highlighted in bold:

• As estimated by CBO and the Joint Committee on Taxation, the President’s proposals would add $4.8 trillion to the baseline deficits over the 2010–2019 period. CBO projects that if those proposals were enacted, the deficit would total $1.8 trillion (13 percent of GDP) in 2009 and $1.4 trillion (10 percent of GDP) in 2010. It would decline to about 4 percent of GDP by 2012 and remain between 4 percent and 6 percent of GDP through 2019.
• The cumulative deficit from 2010 to 2019 under the President’s proposals would total $9.3 trillion, compared with a cumulative deficit of $4.4 trillion projected under the current-law assumptions embodied in CBO’s baseline. Debt held by the public would rise, from 41 percent of GDP in 2008 to 57 percent in 2009 and then to 82 percent of GDP by 2019 (compared with 56 percent of GDP in that year under baseline assumptions).
• Proposed changes in tax policy would reduce revenues by an estimated $2.1 trillion over the next 10 years. Proposed changes in spending programs would add $1.7 trillion (excluding debt service) to outlays over the next 10 years. Interest costs associated with greater borrowing would add another $1.0 trillion to deficits over the 2010–2019 period.
• Our estimates of deficits under the President’s budget exceed those anticipated by the Administration by $2.3 trillion over the 2010-2019 period. The differences arise largely because of differing projections of baseline revenues and outlays. CBO’s projection of baseline deficits exceeds the Administration’s estimate (prepared on a comparable basis) by $1.6 trillion.

Those of us who have been fiercely opposed to bailouts and other excessive government spending are justified in saying, "see I told you so!" We warned that deficit spending would get us deeper in debt and increase the public debt and take up a larger share of the GDP. Our predictions have come true and if our government continues this path of irresponsible spending, things will only get worse.