Lessons From A Declining California

I love the state of California. Its my home state. It is a state that has everything. Picture perfect beaches, amazing mountains and world famous deserts. It has a strong diversity of people and a wide range of activities for tourists and citizens to enjoy. 

So, why are so many people leaving the state? 

The Daily Beast provides us with some clues: 

Californians needs to ask if the state has started a cycle of decline, in which a loss of jobs to other states leads to a loss of tax-paying residents, and in turn to a deterioration of the public services that make the state even less desirable for businesses. This “toxic state syndrome,” as it might be called, could be very difficult to shake. The businesses that bring jobs (or take jobs with them when they leave) look for certain things: a skilled work force, relatively low costs, sound infrastructure and public services, and—maybe most important of all—some assurance that these conditions will stay the same.

A state in chronic fiscal distress can’t offer such predictability, and California is a very distressed state. For most of the past decade, its credit rating has been at or near last place in the nation; currently it is rated the lowest by Standard & Poor’s, and Moody’s ranks only Illinois lower. Texas, on the other hand, is just one notch from the top on the S&P scale.

However, California could turn things around. But with Jerry Brown at the helm with a Democrat majority legislature, recovery will not happen if Jerry Brown's tax increases takes place:

Californians could make things worse this November when voters decide on a measure, backed by Gov. Jerry Brown, to raise its income tax rates (already near the highest in the nation) to prevent deep cuts in school spending. That might produce a temporary burst of revenue but leave the state even more dependent on a volatile revenue source. Then again, if the tax hike doesn’t pass, schools will take a hit that could leave California that much less attractive to employers and employees.

What may be most damaging about California’s tax debate is its tone of desperation. The state is like a man at the end of his rope who has taken hostages—in this case, the schools. Meanwhile, Texas and other states are poaching California jobs with tax incentives at a scale that California state and local governments can’t afford, most recently with the $36 million package of tax breaks and investment funds that convinced Apple Inc. to expand in Austin and add some 3,600 jobs.

Raising taxes is a good way to make a state's terrible financial situation even worse.  Frank Rich in an article that appeared in the Wall Street Journal explains why:

Nearly half of California's income taxes before the recession came from the top 1% of earners: households that took in more than $490,000 a year. High earners, it turns out, have especially volatile incomes—their earnings fell by more than twice as much as the rest of the population's during the recession. When they crashed, they took California's finances down with them.
Mr. Williams, a former economic forecaster for the state, spent more than a decade warning state leaders about California's over-dependence on the rich. "We created a revenue cliff," he said. "We built a large part of our government on the state's most unstable income group."

Frank Rich discovers that California addicted to raising taxes on the rich because they think that the rich will stick around and continue to pay these taxes:

"These revenues have a narcotic effect on legislatures," said Greg Torres, president of MassINC, a nonpartisan think tank. "They become numb to the trend and think the revenue picture is improving, but they don't realize the money is ephemeral." 

However, what California and other states don't realize is that raising taxes on the rich leads to the government receiving less revenue in taxes.  As John Stossel mentioned in a television special , “Tax The Rich”, “Maryland’s millionaire tax was supposed to bring in $106 million. Instead revenue went down by $257 million. Many millionaires just left the state.”

The Democrats in California as well in other states and in our Federal government want to soak the rich because they believe that the myth that the rich don't pay their fair share is real.

Its a simple lesson that liberals, progressives and Democrats don't understand. Raising taxes doesn't fix a state's or a nation's financial problems. It only makes it worse for the following reasons:  they rely on the rich to pay taxes while those in lower income taxes pay little to no income taxes at all, they spend more money than they earn in revenue and think they can sack the rich to atone for their irresponsible spending habits, the rich make money in good times but lose a lot of it in bad times, rich people will leave the state if they are taxes or demonized too much and create laws that make it harder for business to employ people to work.

California can turn around only if they learn the simple lesson of stop taxing the rich, spend with in your means and create a business friendly environment in which job creators, innovators, investors and rich people want to stay. 

Which leads me to our current financial problems in the Federal Government. The United States is facing a huge tax increase that conservatives are calling "Taxmageddon" is a one-year $494 billion tax increase slated to strike the economy on January 1, 2013. The reason why taxes would be going up dramatically is because end of the Bush-era tax cuts that are scheduled to expire at the end of this year while its also the start of new taxes like ObamaCare and other taxes that target the rich. The Congressional Budget Office and International Monetary Fund have also both issued warnings regarding these incoming tax hikes.

Unless our elected officials in California and Washington D.C. learn the lessons above and engage in real tax reform, we will face a huge financial mess of our own making. As Paul Ryan said, these problems are avoidable and we can do something about it. But it must be done NOW.

Deval Patrick: Mitt Romney Flipped Flopped On Gay Mariage But Obama Didn't

Current Massachusetts Goveneor Patrick Deval has claimed that Mitt Romney has flipped flopped on gay marriage while Barack Obama didn't flip flop but "evolved" on the issue of gay marriage:

Massachusetts Democratic Gov. Deval Patrick slammed Mitt Romney as a flip-flopper on Sunday while defending President Obama as leading through “convictions,” a reversal of the attacks launched by many Republicans against Obama.

“I think what we know is that Mitt Romney has occupied many positions on many issues, and he has, you know, back in 1994, when he was running for the United States Senate he said publicly that he would be better than Ted Kennedy on gay and lesbian issues. He takes a different position in front of a different audience today,” he said on ABC’s This Week.

Alternately, Patrick said that Obama “is running on and leading through a set of convictions.”

Patrick was referencing Obama’s admission that he supports gay marriage, a position that many critics have called a flip-flop on the issue, with Democrats defending it as an “evolution.” But Patrick’s statements make it clear that neither candidate is free from the accusation of flip-floppery.

Deval Patrick knows about flip flopping since he took Mitt Romney's $ 2 billion surplus that he left at the end of his term as governor and flipped it to a whopping $101, 908, 205, 432 debt (as I write this post) for the state of Massachusetts. Governor Patrick Deval has taken Mitt Romney's surplus and squandered it and is on track to be about 1.5 or 2 billion dollars in debt. What's even more amazing is that Governor Deval has been receiving $7 billion in federal stimulus funds for the las two years and Massachusetts which hasn't helped reduced the deficit.

In fact, his spending is so outrageous since he blew money on himself and his staff which made the citizens of the state very unhappy. Thanks to Deval Patrick's leadership, Massachusetts is in debt. And what's his solution to fix the problem? More spending. 

Govenor Duval has flipped the state back to the same level of debt before Mitt Romney became Governor of Massachusetts and he hasn't improved the state financially but regressed back to the same old problems. 

This is a very clear indication of poor financial leadership.

Who Has A Better Economic Record: Obama Or Romney?

With the general election underway in which Mitt Romney will challenge Barack Obama for the Presidency, both candidates will try to make the case that they are the one who can turn this economy around.

Unfortunately, Obama cannot make that case because he's never been serious about improving the U.S. economy. And it shows. Now that Obama has been in office for almost four years, his economic record is something that Americans are not proud of. 

Obama's reelection strategy is to blame the previous administration for the current problems. If that's the strategy he wants to use in this election, its not a very good one because he hasn't done anything to fix the problems he has inherited from the Bush Administration. Take a good look at the chart below and you'll see why: 

When Mitt Romney was governor of Massachusetts, the previous administration had left him with a terrible financial mess for him to deal with. When Mitt entered into office in 2003, he was a left with a massive deficit of approximately $3 billion. Mitt Romney did not complain about the previous administration nor did he attempt to place the blame on anyone else. He simply went to work to balance the budget. By 2005, Mitt Romney had a budget surplus of $1 billion and by the time he left office in 2007, he left the state had a $ 2 billion surplus. Moreover, when the state was threatened with a loss in credit rating, Mitt Romney took swift action to take care of the problem.

Mitt Romney's economic record stands in stark contrast with Barak Obama's. Our economy is in grave danger and we need a candidate who knows how businesses work, knows how to create jobs, and how to whip a government back into financial shape. 

The choice for who should be the President is clear. We need Mitt Romney in the White House. You can make that happen by voting for Mitt in November.

Mitt Romney To Give Major Speech About Spending On November 3rd

Mitt Romney has revealed that he will be giving a major speech on government spending on November 3rd:

Former Massachusetts Gov. Mitt Romney, the frontrunner for the Republican presidential nomination, will be in Exeter on Thursday, Nov. 3, to “deliver a major policy speech on spending,” according to an e-mail sent out Sunday night by Doug and Stella Scamman.

Romney announced his candidacy for president in June at the Scammans’ Bittersweet Farm in Stratham. Both Doug and Stella Scamman are former state representatives. Doug served two terms as House speaker.

According to the Scammans, the event will be held at 5:30 p.m. at Exeter Town Hall, 10 Front St., Romney was last in Exeter in August, when he appeared at a small forum at the Exeter Historical Society.

In his 2008 presidential bid, Romney led the early polling in New Hampshire, but was beaten by the party’s eventual nominee, Sen. John McCain. Romney enjoys a sizeable lead in the 2012 New Hampshire polling but is fighting tough battles with Herman Cain in Iowa and South Carolina and is facing intense attacks from former Gov. Rick Perry, who is trying to claw his way back into the race after some early missteps.

Mitt Romney has given lots of policy speeches on this issue. Yet, from the way I understand this, this is going to be something much more bigger and more significant than the speeches he's given in the past. Team Romney hasn't revealed the details of his speech yet but the fact that they have only stated that it was about spending has me excited and curious about what more he could say on this subject since he has written extensviely on the subject of spending government spending in his book, No Apology: Believe in America and provided voters with 160 page economic plan which includes ways he will rein in excessive government spending.  

However, Mitt Romney has revealed his underlying guiding principle that is foundation of each of his economic proposals: 

Each proposal is rooted in the conservative premise that government itself cannot create jobs. At best, government can provide a framework in which economic growth can occur. All too often, however, government gets in the way. The past three years of unparalleled government expansion have retaught that lesson all too well.

As a result, we can be confident in what Mitt will say on November 3rd. Like most Americans, I look forward to hearing Mitt Romney's speech on Thursday. 

The 53% of America Are Responding To The 99% Protesters

The Blaze had an article up that I want to repost in its entirety. Read it below: 

Meet The 53%. Who are they?  The term 53% refers to the people who are actually paying taxes for themselves and the rest of the country.

The 53% is a group of responsible young people organizing across the country. However, this group is not camping out in parks around the country and demanding the entire capitalist system be destroyed. These men and women have jobs (most of them work at more than one job in order to make ends meet), but they are talking about attending the Minneapolis Occupy Wall St. protest scheduled for today – Friday, October 7th.

Here’s a statement from their web page;

So, like, when you’re, like, community organizing for solidarity and stuff, it’s totally cool to have this little hashtaggy thingy when you’re on twitter, so other people, like, totally know what you’re talking about and stuff. So if you’re, like, totally gonna spread the word about being one of the 53% of people who actually, like, pay taxes in America and don’t just, like, hang out protesting stuff all day… like, here’s the hashtaggy thingy. See you at the protest!   #iamthe53

Filmmaker Mike Wilson (the man who gave us “Michael Moore Hates America“) maintains the page. We spoke with Wilson this morning and he explained that the 53% tumblr page came from his brain and the clever minds of his pals, Erick Erickson of Red State and Josh Trevino.

Reports out of Minneapolis say that a protest is expected today in front of the Government Plaza in downtown Minneapolis. The movement states they are going to try and reclaim and rename this area “The People’s Plaza.” Members of the 53% have mentioned that they will be in attendance to offer a counter opinion to the protest.

As we were talking, Wilson explained that he was loading up his camera and headed to the Minneapolis protest to capture it on video. The Blaze will link to Wilson’s coverage as it comes in.

Mike Wilson told us the group was in the very early stages of organizing, but it is happening online – mostly because they have jobs, families, and a sense of personal responsibility. And the 53% have responded to the people alleging to represent 99% of the country. Based on these photo messages, the 99% is patently wrong in their claim.

While the 99% protesters are angry at the 1% of Americans who have accumulated a lot of wealth through their own hard work, they forget about the 53% Americans (which includes the 1%) who pay taxes that pays for the government services that the 47% of Americans enjoy yet pay no taxes for. 

If there is any unfairness or inequality, its the fact that 47% feel that they have no obligation to pay taxes and feel that they are entitled to the benefits that the government provides that is paid for by the majority of people. 

What's worse is that they want more government services despite the fact that we can't afford it. And they want the 53% to pay more taxes to somehow cover up for the debt that is accumulating at the local, state and federal level. Not only that, but they want an increase in government control in every aspect of our lives and that the 53% happily accept the burden of more taxes in exchange for a reduction in our personal freedoms. 

The colonialist protested against England because they were getting taxed without having any voice in Parliament. Thus, the famous rallying cry, "no taxation without representation" helped launch the American Revolution. Yet, the "99% protesters" want representation without taxation. However, The 99% is really the 45% of America who do not pay taxes. Yet, they expect their demands to be heard and granted. 

This is unacceptable. It it is a perversion of the American way of governance.

The 53% expressed their anger and disgust in our government who have mismanaged the taxpayer's money to such an extent that we are massively in debt. That's what the TEA party was all about.

However, we need to make our voices heard again to remind the 45% that they do not represent America. Instead of occupying a plaza or park, lets liberate it this November 12th. 

The Power Of Captialism: Making People's Lives Better And Healther

Capitalism provided people with the freedom to make major discoveries in science, medicine, nutrition and technology which has increased the life expectancy and wealth of individuals all over the world over a long period of time. Hans Rosling explains: 

Another video takes a different approach in making the same point about how capitalism has helped improve the qualify of life for people: 

Another video demonstrates that capitalism provides the freedom for wealth to expand which makes it possible for living standards to rise for everyone, not just the rich only.  Capitalism has made it possible for the poor today to enjoy things that previous people in poverty could never enjoy before. The video shows how capitialism has raised the income of rich and poor people alike in just the last 40 years. What makes the video you're about to see even more powerful is that not only do we see a comparison between the rich and the poor in the United States but goes one step further by comparing the American poor and the average citizen in Europe, Asia, and Africa:

As shown in these videos above, capitalism has done more to improve the lives of humankind than any other political, social or economic system invented by mankind.

The Occupy Wall Street protesters do not realize that we stand on the shoulders of the men and women in the past who made these amazing discoveries which has led to further discoveries that made it possible to enjoy the life we live today. In fact, these protesters fail to see the irony in their protests against capitalism. One photo demonstrates the irony perfectly:   

In attempt to get the world to wake up to the flaws of capitalism, they are unknowingly promoting the benefits of capitalism by using products created by business organizations who have the economic freedom to create products and services in their protests against capitalism.

Obama's Dismal Economic Record

Unfortunately for Americans, we are enduring the consequences of Obama's inexperience in handling the economy. To make matters worse, Obama is a progressive which means his views on economic matters is not a political philosophy that promotes economic growth. 

Obama's record since he's been in office has never been good. Ace, a fellow conservative blogger, serves up a nice infographic that demonstrates a discrepancy between what Obama's statements on the economy places it next to current economic statistics. The infograph is an eyeopening look at how Obama's incompetence has affected the economic health of our country.

America: Get A Grip On Your Debt Problem

As we all know by now,  raising the ceiling allows us to spend more but it doesn't fix the underlying problem  of American's national debt. America needs to get a grip reducing the debt. If Congress doesn't find a solution by August 2nd to raise the debt ceiling in exchange for financial responsibility, we won't like the consequences. 

Moody's and other credit rating companies have been threatening to reduce America's credit rating for a long time now if we don't get a grip on reducing our national debt. They warned us that it would reduce our credit rating back in January of 2011 and repeated their threat a month ago. They just issued another warning almost two weeks ago on July 13 in which they will look to see if they will make a downgrade in our credit rating. Moody's isn't the only credit rating that is threatening to reduce our credit rating. Fitch made a similar threat a week ago. 

These credit rating companies might actually follow through with their threats. The downgrade in our credit rating my happen as early as this upcoming Friday. If that happens, it would be bad news for America. 

Despite these repeated warnings, the Obama administration is trying to ignore them. The reason why these credit rating companies are considering a downgrade is because of the way our government spends our money:

That is why we need to either pass the balanced budget amendment because we need a permanent solution to our deficit problem that forces Congress to spend the tax payer's money wisely. If we don't, the consequences won't just be a down grade in our credit rating, but America's light on a hill will have grown dimmer.

Obama Now Irrelevant On The Economy

Not only does Obama like to lead from behind on foreign policy but that is also his preferred leadership style when it comes to handling the economy. However, as Charles Krauthammer points out, "leading from behind" really means an abdication of leadership.

When things get tough, Obama likes to walk away from his role as leader. A prime example is when Obama was negotiating with the Republicans on a tax deal in December and he left Bill Clinton all by himself at a press conference to explain the deal to the public:

With the debt ceiling crisis, Obama has demonstrated the same leadership style of leading behind on the economy. When Obama was presented with a bipartisian plan that was approved by both Democrats and Republicans in the house, the President rejected it. Despite the fact that Obama has not offered a solution to this problem, except to insist that any deal contain tax increases, he decided to lecture Congress for being left out in the cold by Democrats and Republicans in Congress who are determined to solve this problem without Obama. 

By whining like a girl about about not being involved in a deal between Democrats and Republican, his 15 minute speech had the opposite effect that he wanted. Instead of being invited back into the negotiations, Congress grew even more firm in shutting Obama out: 

Obama’s Friday appearance had a gigantic unintended consequence. It brought members of Congress together. They decided to take control. The White House is now on the sidelines. Democratic and Republican Congressional leaders are negotiating directly with one another. 

Obama's refusal to offer any plan himself and getting upset about being left out in the cold by Congress isn't just another example of him leading from behind. Obama isn't leading here. He's abdicating his duty to the point that he's becoming irrelevant on the debt ceiling crisis: 

Obama repeatedly blasted Republicans for not agreeing with his approach while providing no plan at all, and modeled the need for compromise with … a campaign speech.  Anyone listening to Obama’s fifth foray in front of the cameras this month — by far the most intense public-relations campaign Obama has conducted in more than a year — could be forgiven for wondering why the President didn’t spend at least some of that time actually developing and presenting his own plan. 

The simple answer: Obama doesn’t want the responsibility for raising the debt ceiling, cutting spending, and/or raising taxes.  This is what passes for leadership in the era of Hope and Change — voting present. 

Obama has worked hard to make himself irrelevant over the last few weeks, and he’s about to get his wish.

Leading from behind is a weak but tolerable way to lead. However, abandoning your job as a leader is unacceptable. But Obama has gone beyond voting present on this issue, he's made himself irrelevant which is unforgivable politically or electorally.

Obama desperately wants to be reelected. Yet, he's demonstrating to the American people that he doesn't want to be a leader. What's worse, he's made himself irrelevant on one of the most important issues in American history. With a crappy economic record and the fact that the economy has never been a top priority of his administration, Obama will be a one term President. 

 

The Consequence Of Churches Promoting Entitlement Programs

As the August 2nd deadline to raise the debt ceiling comes closer everyday and as our politicians squabble on entitlement reform, its important to remember that there was a time in America when our government was not involved in running entitlement programs. Charity used to be a private enterprise. However, all of that changed when some religious organizations lobbied for government intervention:

The American experiment sought to wed the idea of freedom and virtue without the need or desire for a strong government to administer the details of life for every citizen. The American idea was an elimination of restraint by the government to be replaced by the constraint of virtue taught by institutions in society other than the government. The home, the church, the school and other voluntary associations were to be the primary relationship of life through which order and honesty were maintained.

The Great Depression, with its widespread economic emergencies, tested this idea and caused many to desire a government-run economy where predictability and security would be normal because most (if not all) personal and business decisions would largely be regulated by a governmental bureaucracy. New Deal legislation brought with it price controls on food, government insurance, monetary subsidies for bad years on the farm or in business, tight regulation on industry, new and expensive regulations for business and high tax rates.

Immediately following Roosevelt's speech in San Francisco, many theological journals and Christian denominations used the exact phrases of the soon-to-be president in their publications. Many discarded traditional interpretations of key Scripture texts to support a new political theology which mirrored Roosevelt's revolutionary New Deal. The close connections were not noticed at first, but after the laws were passed, it clearly was seen that without the church, much of the legislation could not have passed Congress. The president designed the policies, the church applied the pressure and the nation inherited the consequences.

The fact that many pastors and religious institutions encouraged the government to take over their role in providing charity has not come without terrible consequences for religious institutions: 

What is disturbing when reviewing the history of this time is how many Christian ministers defended the actions of government as fulfilling Holy Scripture's mandates to care for the poor, provide for parents in their old age and give to those who ask of you.

With this shift of thinking, the state began to function in roles once reserved for the church—to the detriment of any who would question the legitimacy of the legislation on theological grounds. The same reception awaits those in the modern day who seek to resist any "progressive" social policy in any way for fear that they will be branded as uncaring or un-Christian in their ideas.

Has government power expanded to such a degree that the church now has no voice at all in the public square? Perhaps, but the modern era of public policy reveals just how much the government has gained and how much the church has lost.

Its worth noting that the consequences of churches abandoning their role in providing charity are not limited to religious and private institutions. It has come at a huge cost to the American people. Look at the chart below: 

As you can see from the chart above, the explosive growth of spending on entitlement programs are startling. However, what's even more startling is the future of these entitlement programs:

What private institutions have done is lay a financial burden on the American people that grows larger and larger until it becomes financially unsustainable. As you can see by these graphs above, there is no dispute that entitlement programs are the single largest driver of our nation's deficit.

The reason why the costs of entitlements have sky rocketed is because these progressive and liberal churches weren't content with just getting social security into law in the 1930s. As time marched on into the 60's and 70s, many churches pressed for government intervention in medical care, housing, and education. As a result, our government had spend to spend more of our tax payer money as more entitlement programs were being created.

These churches promoted a culture of dependency on government rather than on religion. Everyone knows that  dependencies develop quickly. If you want to kill a bad entitlement, kill it quickly before expectations calcify. However, thanks to private institutions like churches and private insurance companies in the 1930s, they didn't work hard to kill these entitlement programs in its infancy but labored diligently to ensure that its existence would calcify into a permanent fixture in American government.

Yet, what is so fascinating about entitlement programs is that they are considered mandatory spending programs even though it is really a discretionary program:  

People are often shocked to learn that Social Security and Medicare are not “entitlements” at all.  Congress could pass a law stopping all Social Security and Medicare payments tomorrow, and no citizen would have a legal claim against the government based on how much payroll tax he or she had paid into the so-called “Trust Fund.”  Because Medicaid is financed by general tax revenue, its constitutionality under the general-welfare clause is even more secure, according to current legal reasoning.

Given that America's dependency on these entitlement programs have calcified, the idea of government stepping away from the enterprise of helping others isn't politically feasible or acceptable. As a result, entitlement reform is not only necessary but should be easy to do. However, the reason why they've become the third rail of American politics is that politicians are afraid to make the crucial and necessary reforms to entitlement programs for fear of provoking the wrath of those who rely completely or partially on these programs.   

At some point, we have to realize that these programs are not mandatory and that spending doesn't have to be on autopilot. Politicians and citizens alike will realize that the third rail of American politics was as only as dangerous as we believed it to be. As a result, the biggest reform we will have to make is not with the entitlement programs themselves but in changing the hearts and minds of the American people.

That means we need to educate people about the real history of charity in America. I highly recommend two books that look at what America was like before the government became involved in entitlement programs. Those books are The Charity Organization Movement in the United States; A Study In America Philanthropy and The Tragedy of American Compassion.  

It also means we need to promote a culture of independence not dependence. That means we need to teach self-reliance, independence and accountability at home, in churches and in school. The more people learn that they can make their own success and that if they ever fall on hard times, they rely on individuals and private institutions who will work to ensure that they get back on their feet again. 

We also need to push for a greater role in private institutions in helping people out and reduce, but not eliminate, the government's role in helping people. There was a time when private corporations and religious institutions provided social security, rent assistance and medical assistance and that time needs to come back again.

People don't mind helping the poor, the elderly, the sick and the disadvantaged and they will continue to help people long into the future. The problem is that one institution is not suited or capable of helping people while the other institution is. Governments cannot provide that kind of service at the same quality or cost that private institutions can. 

Governments can still play a role in helping people but its role must be minimal. The government can't take care of everyone which it has promised with the passage of all these entitlement programs. If we can make entitlement reforms, reduce the government's role in helping people while increasing the role of private institutions in helping people and reintroduce the ideas of self reliance and accountability, our national deficit would be reduced, if not, eliminated completely.

Which Program Is The Efficient Use of Tax Payer's Money: Defense or Entitlement Programs?

With the budget ceiling deadline coming soon on August 2nd, Obama is meeting with Congressional leaders to find some kind of solution on the real issue of reducing the national debt. So far, no deal has been reached. Some are pointing fingers at House Speaker John Boehner for walking away from $ 4 trillion deficit reduction deal. However, John Boehner did the right thing by walking away from this "grand bargain" because Obama reneged on the deal by insisting on more taxes and withdrew his support for entitlement reforms:

The White House dished out the spin that suddenly the Tea Party crowd had nixed a deal. In reality, the White House had upped the ante on taxes. A Republican House aide told me that the White House “started to backpedal on entitlement reforms too.” He explained, “They [the White House] had started to go back on some of the Medicare and Medicaid reforms they had previously said they were ok with.” In other words, either the White House never intended to present a viable grand bargain, or, if Obama did, the left got to him. 

The Republicans insist that they can reduce the deficit without raising taxes by simply cutting the budget. However, the Democrats insist that they can turn the economy around by raising taxes, keeping the status quo on entitlement programs and slashing the defense budget. 

It isn't a surprise that Democrats want to raise taxes and preserve entitlement programs. It isn't surprise that they want to make deep cuts in military and intelligence programs. But their insistence on cutting the defense budget is unrealistic and stupid since no one disputes that entitlement programs, in the long run, will increasingly consume a larger share of the United State's income. At some point in the future, the only thing can spend money on is entitlements and we won't be able to spend money on anything else such as education, defense, transportation, or anything else. The Democrat's denial of our country's dire need for entitlement reform is dangerous for America. 

The Democratic position to save entitlement programs at any and all costs at the expense of our nation's national security at a time when our President has engaged in another war on humanitarian grounds is illogical and unrealistic. You can't simultaneously maintain entitlement programs and make cuts in defense spending while keeping our military in Iraq, Afghanistan, Libya and other places around the world. Yet, the President and the Democratic Senate insist this is possible. But it isn't.

The liberal and progressives want to reduce what we spend on the military in order for us to afford the entitlement programs we have. One blogger, Omri Ceren, points out that this approach to fixing the economy shows that Democrats are incompetent on the economy because they're pouring the taxpayer's money into programs that will not help the economy or reduce the debt:

In fact, everything else being equal, Democrats are politically and institutionally inclined to divert resources to the least efficient sectors of the economy, which is where their permanent constituencies have quite literally set up shop. Those groups — construction unions, green tech companies, etc. — not coincidentally, require government intervention to remain financially viable. That’s the deal they have with the Democratic Party. Democratic politicians insulate uncompetitive constituencies from the market via onerous regulations and the occasional wave of government fiat. In turn, those groups mobilize electorally for Democratic politicians. So we end up in a situation where progressive groups targeted for Democratic largesse are in sectors that have been most distorted by government intervention. Maybe that’s justifiable on social grounds — unions are the bedrock of the middle class, green tech will save us from rising oceans, whatever — but it’s flawed economic policy.

I'd like to point out that while defense and intelligence programs are not known for being efficient spenders of taxpayer's money but that is acceptable because we don't look at the defense industry for economic prosperity but for national security.  Which is why we we will spend money on national defense regardless of how the economy is doing. As a result, the tax payers are willing to tolerate such the excesses of military spending because its the one part of government that produces tangible results of having the best and most advance military on the planet. The tax payer knows their money is being put to good use even the money isn't handled more efficiently as it could be. 

Omri Ceren explains that if Democrats wanted to put tax payer money to good use while minting their support for bigger government, they put it in defense spending: 

The defense sector isn’t completely efficient and defense procurements are notoriously Byzantine. But at least it’s not a part of the economy that’s designed by regulation to be economically inefficient. The defense spending multiplier is usually pegged at somewhere between .05 and 1, which isn’t great but is a lot more than the zero we get from funding education and plugging up state budget shortfalls. And we can be certain that defense appropriations will be spent quickly on stuff, which is what Keynesians are looking for anyway. In the worst case, we can just ship weapons over to our NATO allies, who — thanks to decades of propping up their welfare states at the expense of their militaries — are now running out of bombs to drop on Libya. At least they’re guaranteed to be used.

In contrast, entitlement programs are a poor investment for American taxpayers. These programs are designed to be inefficient. like most government programs but they also produce inefficient results. American doesn't get benefit from these programs financially or socially. These programs get bigger and bigger and require more and more money to keep it afloat. Furthermore, many of these programs produce dependency on the government rather than self reliance on one's own skills, education and character to be financially independent. 

A blogger named Ace gives us the best explanation of why entitlement programs are economically and mathematically unsustainable: 

It is not wrong to wish that every citizen have free health care, free food, free housing, and some money to spend even if they have no job. It's not wrong; it's just impossible. Health care is a service that has huge costs associated with it. These costs cannot be "magicked" away just because we find them inconvenient. Food must be grown, transported, packaged, and prepared -- all costs that must be accounted for. Shelter does not precipitate out of thin air. We cannot delude ourselves into thinking that "the government" can provide these things to us at no cost, because "the government" must pay for these things just as individuals do, and because the government has only one source of wealth -- the citizens -- that's where it must go for the money. So if Bob is given 'free' health care, 'free' food, and a 'free' apartment, the government isn't paying for it; Tom, Jane, Howard, and Sue are paying for it. And at a vastly inflated cost due to the innate governmental inefficiency that dilutes every dollar that passes through their hands. Soon the social welfare costs eat up the money intended for good and necessary governmental expenditures like the military, the police, and infrastructure. Social welfare becomes a beast that eats everything.

Its not just that these entitlement programs are inefficient but it has given life to liberal/progressive programs, causes and organization that survive directly or indirectly from entitlement programs. In fact, Omri Ceren, points out that the taxpayer's money often times doesn't go to the very programs the democrats claim they are defending: 

But academic Keynesian economists don’t direct stimulus funding. Elected big government liberals, beholden to permanent Democratic constituencies, are those who actually make the decisions. So as a matter of policy, if not economic theory, money ends up getting diverted into progressive causes rather than into expansionary programs.

In the end, there is only one true solution to the deficit problem. The Republicans know it and the Democrats refuse to believe it because they're blinded by the special interest groups that they're beholden to. 

Democrats insist that America should keep on investing in these entitlement programs and remain loyal to these very programs that are bankrupting us. They demand that we make no major or substantial changes in the programs that are the main drivers of our national debt while taxing the rich and cutting defense in order for us to afford the entitlement programs we have because its they only way they can keep these liberal/progressive organizations afloat. 

The Democrats plan for reducing the debt is really just accelerating our downward spiral towards bankruptcy by shoveling more and more money to keep entitlement programs going. What this really means is that they're ballooning the deficit just to keep the liberal/progressive special interest groups happy and financially sound while making it harder to afford other government programs in the future. Not only will we not be able to afford defense spending, but other government programs.

Americans can accept the the fact that our government will use taxpayer money inefficiently if we get a major benefit from these programs. However, Americans cannot and will not tolerate taxpayer money that is being used for programs that produce little or bad results while it benefits liberal and progressive organizations.

Its obvious that the Democrats haven't learned their lesson from the Republican victories of the 2010 midterm elections. Its clear that they need to learn those lessons again in 2012.

Who Is Right: About What Is The Biggest Driver Of Our Deficit: Obama or The CBO?

During President Obama's twitter townhall meeting yesterday, he made an astounding claim: 

"I will say that today, welfare payments are not the big driver of our deficit or our debt. There are work obligations attached to welfare," President Obama said at his Twitter Town Hall.

Yet, the Congressional Budget Office, known as the CBO, explicitly states in its findings that entitlement programs are the biggest drivers of our national debt: 

The retirement of the baby-boom generation is a key factor in the nation’s long-term fiscal outlook. It portends a significant and sustained increase in the share of the population receiving benefits from Social Security, Medicare, and Medicaid. Moreover, under current law, per capita spending for health care is likely to continue rising faster than spending per person on other goods and services.

As a result, if current laws remained in place, the federal government’s spending on Social Security and the major mandatory health care programs (Medicare, Medicaid, the Children’s Health Insurance Program, and the health insurance subsidies that will be provided through insurance exchanges) is projected to grow from roughly 10 percent of GDP today to about 15 percent of GDP 25 years from now. (By comparison, spending on all of the federal government’s programs and activities, excluding interest payments on debt, has averaged about 18.5 percent of GDP over the past 40 years.) That combined increase of roughly 5 percentage points of GDP is equivalent to about $750 billion today.

Despite the overwhelming evidence that entitlement programs are, indeed, the single largest driver of the U.S. Debts, politicians like Obama are wrong in continuing to ignore the truth by proposing cuts in areas that could use budget cuts but really won't make real dent in reducing the deficit. 

For example, there are rumors that defense and national security spending could face a $700 Billion cut. While we can debate on whether or not making drastic cuts is a good, necessary or wise idea, there is no dispute that these cuts will not have any significant or substantial impact on shrinking the national debt. Those who are seeking reductions in defense spending as a compromise to the debt ceiling debate are foolish and reckless. Making these cuts while in the middle of fighting terrorism around the globe will not make our country safer nor will it fix our deficit problem. 

Another foolish compromise that some politicians are willing to make is to raise taxes in exchange for tough austerity measures to reduce the debt. It boggles my mind that they are willing to raise taxes at a time of high unemployment when most people don't have jobs which makes it possible for government to collect revenue. Moreover, only half of America pays taxes which means that taxes will go up for 50% of Americans that do pay, especially the wealthy. Yet, it won't change the amount that the government collects in revenue. Tax reciepts have traditionally remained around 19% to 20% of  our GDP. 

Finally, Senator Marco Rubio makes a great speech about how raising taxes will not create jobs: 

Here's the bottom line: These tax increases they're talking about. These so-called revenue enhancers, they don't solve the problem. So what do we do then? Because clearly we have to do two things.

"One, we have to hold the line on spending, if you keep digging yourself in the hole, the hole is going to bury you, the other thing is how do you start generating revenue for government so you can start paying down this debt? That’s what the debate should be about.

“We already know these taxes don't work. Here is what I suggest works in a balanced approach, using the President's terminology. Let's stop talking about new taxes and start talking about creating new taxpayers, which basically means jobs.

“Here in Washington, this debt is the number-one issue on everyone's mind, and rightfully so. It is a major issue. But everywhere else in the real world, the number one issue on everyone's minds is jobs. …

“We don't need new taxes. We need new taxpayers, people that are gainfully employed, making money and paying into the tax system. Then we need a government that has the discipline to take that additional revenue and use it to pay down the debt and never grow it again. That's what we should be focused on, and that's what we're not focused on.

“You look at all these taxes being proposed, and here's what I say. I say we should analyze every single one of them through the lens of job creation, issue number one in America. I want to know which one of these taxes they're proposing will create jobs. I want to know how many jobs are going to be created by the plane tax. How many jobs are going to be created by the oil company tax I heard so much about. How many jobs are created by going after the millionaires and billionaires the president talks about? I want to know: How many jobs do they create?

So while our political leaders in Washington D.C. plan to "go big" on budget cuts, they're going to do it with bad and failed solutions that will have no impact on reducing the national debt. Cutting the military and intelligence budget isn't going to shrink the debt. Raising taxes isn't going work either. Both will have a minimal impact on reducing the debt.

The only thing that will eliminate the national debt is reforming and/or cutting entitlement programs. Although Obama doesn't believe that entitlements are the single largest driver of the U.S. Debt, he is on the right track in proposing substantial reforms to our welfare programs.

In fact, entitlement reforms should be the only topic our politicians should be talking about in their discussions over raising the debt ceiling. Once they agree to these reforms and actually follow through on their agreements, then we can talk about making changes/reductions to the budgets of other government agencies and tinkering with the tax code.

The Only Solution To Reducing The Deficit Is Entitlement Reform

With the political showdown over raising the ceiling, President Obama, Ron Paul and Gary Johnson and others would have you believe that best way to get out of the red and into the black is to reduce defense spending rather than reductions in entitlement spending. 

For example President Barak Obama and Ron Paul are in agreement that America ought to withdraw from Afghanistan because of the cost incurred in fighting that war. However, the cost of fighting in Afghanistan is a small drop in the bucket compared to the amount of money we spend on entitlements:

Next year the Pentagon plans to spend $107 billion in Afghanistan—this, in comparison to the $3.7 trillion that the Obama team plans to spend overall. Put another way, Afghanistan amounts to all of 0.75 percent of the nation’s $14.1 trillion GDP. So, no—war bonds, scrap drives, and rationing won’t be necessary. Quite the reverse: while the government spends $100 billion on America’s fighting men and women in Afghanistan, it will funnel 20 times that—more than $2 trillion—to its citizen-spectators through Medicare, Social Security, Medicaid, and other varieties of domestic spending.

The amount we spend in fighting terrorists, not just in Afghanistan, Iraq, or Libya but around the globe is tiny in comparison to the amount we spend on entitlements: 

Despite these facts, the anti-war left and right stubbornly contend that defense spending is the main driver of our national debt. They point to the fact that since 9/11, America has increased the amount of money it spends on defense spending. Here's a chart that gives a visual demonstration of their argument: 

While it is true that we have increased our military spending since 9/11, they neglect to give you a fuller picture of how much money we spend on defense in comparison to how much we spend on entitlements:

The problem with entitlement spending is that that it consumes more than half of what we spend currently and we can't even afford it now since these programs are already set to run annual deficits starting this year until it is completely drained in 2037. Furthermore, the amount we will spend on entitlements will continue to grow until we won't be able to afford it in the future. 

The graph above projects that entitlement spending will consume all revenues by 2052. However, there are other projections that predict that we won't be able to afford entitlements much earlier:

Regardless of the timing of when welfare spending will consume all revenues, the fact remains that while our defense budget has increased since 9/11, it is only a small fraction of the amount we currently spend on and it will continue to be a small fraction of the government's expenses in the future. In fact, we would have to engage in a multitude of wars before defense spending starts to eclipse all the revenue we receive. Conversely, we could eliminate all defense and national security spending, it still wouldn't make a dent in our national debt. 

Even more daring, we could eliminate all spending except entitlement spending and it still won't solve our debt problem.

The truth is that we have been reducing spending on defense while increasing the amount on entitlements since the 1960s:

Ladies and gentlemen, the reality is that defense spending is not something that on course to exceed government revenue. Nor will it ever. Furthermore, defense spending is not on autopilot like entitlement spending is right now. We can control what we spend on wars, weapons, troops, intelligence gathering, research and development and administrative agencies but we can't control what we spend on welfare programs because those expenses are locked in and mandatory. They're automatic. No questions asked.

It amazes me that there are politicians on the left and the right that want cuts in the defense budget despite the mountain of evidence that entitlement spending is the real driver of our deficit and will be in the future. Even the CBO acknowledges this fact.

That means we have a spending problem. Entitlements have taken on a life of its own unless we do something about it. Any denial that entitlement spending is the main driver of our deficit reveals the astounding inability to assess the seriousness of our financial problems and fundamentally skewed set of priorities on what to put on the chopping block. 

We've been cutting defense for a long time now.  We have never made any cuts since the we've started the war on Poverty.  Instead, we've been increasing spending on this war and somehow we're supposed to make more reductions on defense in the real wars we're fighting overseas.  That doesn't make any sense.

Thus, any politician, both on the left or the right, who is too cowardly to take on entitlement reform is not worth remaining on office. Politicians are more concerned alienating the check takers rather than the taxpayers. As a result, they're putting the entire nation at risk, both financially and militarily,  if we do not fix entitlements, just to keep these programs afloat.

The only solution to reducing the deficit is entitlement reform. No other austerity measure will have an impact on shrinking the deficit. The sooner we get on our way to making these reforms, the better our future will be.

Failing To Learn From Europe

As President Obama meets with Congressional leaders to squabble on whether or not to raise the debt ceiling, I am amazed at how our leaders fail to learn the lessons of what is going on in Europe.  As we argue about the ramification of raising or not raising the debt ceiling, how much government spending we should have and what our tax rate should be, we act as if what is going on in Europe will not happen to us here. 

For example, France, Ireland and Italy have either had their credit rating lowered or are under threat of having their credit rating lowered by Moody’s Investors Service. Moody's isn't the only one lowering the credit rating of these nations. Other companies have lowered them too. For example, one company has lowered Greece to junk bond status.

Yet, we act like the consequences of the reduction in credit ratings felt by these countries won't happen to us despite the fact that Moody's and other credit rating companies have been threatening to reduce America's credit rating.  Moody warned us that it would reduce our credit rating back in January of 2011 and has just recently issued another warning. Having our credit rating would be bad news for America and yet we continue to ignore these warnings.

As as result of massive debt and a loss in credit ratings, many countries in Europe such as Spain, Portugal, Ireland, England, France, Italy, Latvia, and many other European countries have enacted tough austerity measures in order to reduce their public debt. Yet, many of these countries are experiencing massive social unrest because people are unhappy with the austerity measures. Greece is constantly getting rocked by protesters who demand to keep the status quo. Spain is now experiencing protesters too. 

John E. Silvia, chief economist at Wells Fargo, has warned that the United States is on a path of insolvency much like Greece and Portugal are: 

To me—being in Europe for a few days—the plot in Greece and Portugal sounds an awful lot like the same plot that's going on in the United States. But the characters have different names," he said.

As the deadline for a budget agreement looms in Congress, Silvia told CNBC that the US must recognize that the moderate economic growth forecast by most economists for the country will fail to generate the tax revenue necessary to fund long-running government entitlement spending.

"We have to make some arrangements in terms of cutting back the promises that were made by prior politicians for these entitlements," Silvia said.

"(We've had) forty years of political promises to give people certain entitlements, certain benefits. And we've now come to understand that the United States is in a very difficult position than it was in the early post-World War II period. We're not the dominant economy. And our pace of growth has moderated. Our ability to finance this is all limited." 

Judd Gregg (R-Nh) is another voice who has raised concerns about the U.S. spending and how it contributes to the increasing U.S. deficit. He has stated that the financial future of the United States looks grim unless makes major changes in its spending habits:

Chief among Gregg's concerns is the massive deficit under which the U.S. is currently operating. Gregg says the economy is on an "unsustainable track" that, if continued at its current pace, "will double the federal debt in five years, and triple it in 10 years." Gregg compared financial problems here in the U.S. to those Greece is currently having, noting that while the U.S. is a "more vibrant nation, we are still on the exact same track" as the troubled country when it comes to finances.

Gregg insists we need to cut spending, especially as the nation gets ready to take on "70 million retirees" as opposed to the "35 million retirees" the U.S. is currently sustaining via Social Security, Medicare and Medicaid programs.

The Dallas Federal Reserve Bank President Richard Fisher has issued the same warning as well stating that unless we make serious changes now, then the debate will revolve around when will America go bankrupt:

"If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when," Dallas Federal Reserve Bank President Richard Fisher said in a question and answer session after delivering a speech at the University of Frankfurt. "The short-term negotiations are very important, I look at this as a tipping point."

But what is going on in Europe will happen here, if we fail to take immediate action to fix our economy. We have the ability to avoid the problems that Europe is going through. There are many people who have been warning us that we are following down the same path as Europe. 

However, the President doesn't want to learn from Europe. He wants to emulate Europe by enacting expensive programs like starting new rail road projects, ObamaCare, and a host of other unfordable government projects. 

George Santayana famously said that "those who do not learn from history are doomed to repeat it." Unless we learn from the mistakes of Europe, then we are doomed to repeat it too. 

The Welfare State Is The #1 Leading Killer Of Modern Nations

In modern history, the #1 killer of modern nations is the welfare state. The concept of the welfare state exists in many different forms such as Nazism, Socialism, Communism, or Progressivism. The common theme among the different variations of the welfare state is that it always fails in the end. Even states that attempt to mix different economic systems cannot survive long since it will be corrupted by its own welfare programs. 

The welfare state is a failure both in theory and application. It produces misery in so many different forms. It can come in the form of brutality, oppression, poverty, death, and misery as demonstrated by former Communist Russia, China, Eastern Europe, Cuba and North Korea.

It can also come in the form of reducing human beings to immature children as the nanny state looks to their every need and want. As a result, it robs human beings of the ability to be free to make decisions for himself. Immanuel Kant explains the tragedy of the welfare state:

"It is so easy to be immature. If I have a book to serve as my understanding, a pastor to serve as my conscience, a physician to determine my diet for me, and so on, I need not exert myself at all. I need not think, if only I can pay: others will readily undertake the irksome work for me. The guardians who have so benevolently taken over the supervision of men have carefully seen to it that the far greatest part of them (including the entire fair sex) regard taking the step to maturity as very dangerous, not to mention difficult. Having first made their domestic livestock dumb, and having carefully made sure that these docile creatures will not take a single step without the go-cart to which they are harnessed, these guardians then show them the danger that threatens them, should they attempt to walk alone. Now this danger is not actually so great, for after falling a few times they would in the end certainly learn to walk; but an example of this kind makes men timid and usually frightens them out of all further attempts.

Thus, it is difficult for any individual man to work himself out of the immaturity that has all but become his nature. He has even become fond of this state and for the time being is actually incapable of using his own understanding, for no one has ever allowed him to attempt it. Rules and formulas, those mechanical aids to the rational use, or rather misuse, of his natural gifts, are the shackles of a permanent immaturity."

However, the fundamental flaw of the welfare state is that it violates the immutable mathematical or economic laws of the universe. The philosophically behind the welfare is complete failure because it thinks it can overcome the inflexible rules of  nature. As a result, the welfare state is a story that never ends well. 

Marget Thatcher famously quipped that the "the problem with socialism is you run out of other people's money.” In other words, the ultimate fate of all welfare states is financial death. Whenever government extracts money from one segment of society and gives it to another segment of society, it is ultimately bound to fall. A blogger known as Ace explains why:  

As in France, we have let an enormous segment of our population -- perhaps as much as half -- fall into a state where they depend on government largesse for a substantial part of their income. This is not money they earned themselves, not wages or savings, but rather money squeezed from the more productive half of the country. Half of our citizens pay no income taxes at all. An increasing number will draw public-sector pensions, Social Security, and medical insurance (Medicare/Medicaid) in amounts that far exceed what they contributed to those plans. Half of the US population, in short, lives not by the fruits of their own toil but by the (coerced) charity of others, as filtered and distilled through the hand of the government. This can not -- it can not, by the laws of economics and simple physics -- continue. The mathematics of the problem trump even philosophical issues of fairness, of governance, of ethics or law. The mathematics simply will not allow it.

In other words, entitlement programs are mathematically unsustainable. Governments cannot get around the immutable laws of economics and mathematics. Period. Why? Ace provides the answer:

It is not wrong to wish that every citizen have free health care, free food, free housing, and some money to spend even if they have no job. It's not wrong; it's just impossible. Health care is a service that has huge costs associated with it. These costs cannot be "magicked" away just because we find them inconvenient. Food must be grown, transported, packaged, and prepared -- all costs that must be accounted for. Shelter does not precipitate out of thin air. We cannot delude ourselves into thinking that "the government" can provide these things to us at no cost, because "the government" must pay for these things just as individuals do, and because the government has only one source of wealth -- the citizens -- that's where it must go for the money. So if Bob is given 'free' health care, 'free' food, and a 'free' apartment, the government isn't paying for it; Tom, Jane, Howard, and Sue are paying for it. And at a vastly inflated cost due to the innate governmental inefficiency that dilutes every dollar that passes through their hands. Soon the social welfare costs eat up the money intended for good and necessary governmental expenditures like the military, the police, and infrastructure. Social welfare becomes a beast that eats everything.

America would do well to understand how that story ends.  Just as prophets who came to Jerusalem to warn its inhabitants of imminent dangers were ignored in Jerusalem, I fear that many of those voices who warn of imminent financial dangers are being ignored today.

Europe: The Canary In The Coal Mine

However, one doesn't have to receive messages from a heavenly source or be a financial wizard to know that America is on a dangerous course to financial collapse. We don't even need to look to the past or the future to see what might happen to us. All we have to do is look across the ocean to Europe. And we've been seeing the warning signs for a long time. 

Take a look at the chart on the right side of this article. It is a long list of government debt held by each European country. 

In 2008, Iceland was the first European nation to financially collapse. Greece almost fell until it received a bailout from other European nations. Ireland is also on the edge of a financial collapse and is looking for a bailout from Europe. Other countries like Spain, Portugal, France and England are also struggling with debt and may be next in line to need a bailout or face a financial meltdown. 

Europe is quickly realizing socialist programs do not work. They are finding that they must slay the entitlement beast by enacting austerity measures if they wish to survive. Which is why nations around the world are scrambling to reduce their debts. England is making huge budget cuts which have not been done since World War II while France faced some riots when Nicolas Sarkozy reformed the state's pension system and is working to reduce its debt. Voters in Latvia voted to reelect their government that cut public-sector workers' pay by 50 percent.

Another consequence of Europe's debt due to massive government programs and financial irresponsibility is that their credit rating gets down graded. Countries like France and Ireland have either had their credit rating lowered or are under threat of having their credit rating lowered by Moody’s Investors Service.

Even countries outside of Europe are recognizing that the welfare state is unsustainable. Especially the few countries who remain communist today.  Cuba is recognizing that its communist system is financially unsustainable. North Korea is flirting with capitalism since this welfare state cannot feed its own people. Those countries that have not engaged in financial reform are alive only because of brutal totalitarianism and outside economic assistance. For example, Communist Russia would not have lasted as long as it did had United States provided economic and agricultural assistance. 

The Economic Crisis In America  

What does Europe have to to with America's debt crisis? Well, the common denominator in Europe's financial woes is that each country was spending more money than they had on social programs. And that same problem that exists in Europe is the same problem that exists here in America.

Judd Gregg (R-Nh) is merely another voice who has raised concerns about the U.S. spending and how it contributes to the increasing U.S. deficit. He has recently stated that the financial future of the United States looks grim unless makes major changes in its spending habits:

Chief among Gregg's concerns is the massive deficit under which the U.S. is currently operating. Gregg says the economy is on an "unsustainable track" that, if continued at its current pace, "will double the federal debt in five years, and triple it in 10 years." Gregg compared financial problems here in the U.S. to those Greece is currently having, noting that while the U.S. is a "more vibrant nation, we are still on the exact same track" as the troubled country when it comes to finances.

Gregg insists we need to cut spending, especially as the nation gets ready to take on "70 million retirees" as opposed to the "35 million retirees" the U.S. is currently sustaining via Social Security, Medicare and Medicaid programs. 

In other words, the financial story of America will not end well unless we do something about it.  Social programs makes up the largest bulk of America's government spending as indicated in the pie chart below: 

No nation, business or family can survive financially when almost 60% of its budget is going  paying mandatory bills. If America does not find the will or courage to touch the third rail of American politics and either reduce or eliminate its entitlement spending, we will collapse financially. 

Any other budget cut  for another other program will not solve the problem. Even if you did cut all other programs, including the military, our nation will still be in debt due to our irrational commitment to entitlement programs. Why? Because if enlistment spending is left unchecked, it will become the beast that will consume all of our available finances at some point in the future as seen in the chart below:

Today, Moody's has expressed concern about our debt and may have to down grade our credit rating. Which is very bad news for America. As I said, we don't have to look into a crystal ball for what happens if we loose our credit rating because we were unable to get our entitlement spending under control. All we have to do is look to Europe.

Some people feel that we are witnessing the end of the welfare state in Europe and round the world as governments make a mad dash to avoid financial collapse. However, that remains to be seen. It could go either way. Some states will insist on maintaining the entitlement state while others will ditch it altogether.  

But a choice has to be made: either the entitlement programs die or the entitlement state dies. 

And there is no middle ground. Mix economies eventually fail too since they eventually morph into a welfare state and then its only a matter of time before they are on their way to financial collapse. In the end, they all collapse because the very programs that they use to support the people can no longer support the state.

America risks falling into same sad story of welfare states. The important question for America is whether or not we can let the story be written for us or do we dare to change the story? How do you want the great American story to end?