With the special election victory in Virginia's Fourth CD on February 21 Democrat Jennifer McClellan fills the House vacancy caused by former Congressman Donald McEachin's death due to colorectal cancer last November after he won reelection. This returns the House to the full 435 Members.
McClellan won her race over 3-time repeat losing candidate Leon Benjamin campaigning on racial justice, access to abortion, & climate change while Benjamin emphasized crime, parental rights in education, & energy independence.
McClellan is just the type of candidate that wins liberal districts 75% to 25% (81,304 votes to 28,040 votes) wanting to fight climate change rather than fight crime. The race was called within a half hour of the polls closing.
I estimate the turnout to be about 22% meaning McClellan was vulnerable if Benjamin could have organized a surprisingly good ground game. Benjamin had received more votes than McClellan's 81,304 in both of his prior defeats to McEachin in 2020 (149,625) & 2022 (87,409). Statistics say a Benjamin victory was possible but human nature says highly improbable.
The balance in the House is now 222 Republican & 213 Democrat so Speaker Kevin McCarthy still has a very small majority to work with in trying to block Biden's progressive agenda let alone trying to establish a program to run on in the future.
But with all of this considered, McCarthy has done a better than expected job so far or @ least has not done anything yet to upset any of the twenty Republicans that he promised everything but the kitchen sink to in order to obtain their votes for Speaker. McCarthy won the Speakership, 216 to 212 with six (Andy Biggs, Lauren Boebert, Eli Crane, Matt Gaetz, Bob Good, & Matt Rosendale) voting present that cleared the way for McCarthy on the 15th vote on the 5th day of the 118th Congress.
McCarthy has been consistent in saying to Biden that spending cuts must be part of any agreement that raises the debt ceiling - which will be needed by around the 4th of July. And McCarthy recently toured the Arizona border in preparation of honoring one of his concessions to bring up legislation that would bolster border security & limit asylum.
In response to some comments I had received from subscribers who were in low spirits from the prospect of a BO - Romney presidential race, on January 31, 2012 I posted four answers to "what is it we are looking for & certainly have not found in the leading presidential candidates that will ensure America's prosperity." The real answer, then as it is now, is a candidate who will promote a change in mindset from a "you deserve, you're entitled to" mindset to one of (even limited) personal responsibility - not dependent or looking to government for everything they need.
My four solutions, then as they are now, - 1) a nominal dollar subsidized "premium support" system to replace the existing Medicare system, 2) replacement of the wage index with the Consumer Price Index in determining the initial monthly benefit when a person enrolls in Social Security, 3) capping federal spending @ 18% of GDP in Ken Blackwell's "cut, cap, & balance" program in which projected borrowing is cut in half the first year, & 4) replacement of the IRS & all federal taxes on individual & business income with the FairTax.
I am happy to say that all four topics are @ least getting some mention & without McCarthy & the Republicans slimly controlling one half of one third of the federal government this would not be so.
Biden has said he will not negotiate any spending cuts when the debt ceiling is reached but what better time to talk about the deficit spending that brought about the $31.4 trillion national debt problem. Why wait until the 11th hour three months from now with a government shut-down looming to see which political party is more out of step with the financial reality that hangs over the country?
Biden chided Republicans in the State of the Union speech, with a public parley with Republicans in the House chamber over Medicare & Social Security entitlements - Biden's position being Republicans want to cut both programs & Republicans' position being they want to save the programs from the cuts that are soon to be brought about by existing law.
For instance, through 2021 the Social Security annual statement, available to everyone online & mailed to people over 60 who do not have an online account, clearly stated in bold letters on page 2 the reductions in benefits to be expected under existing law when the accounting of the fictitious Trust Fund is completely spent down. Starting on June 1, 2022 the Social Security administration redesigned the statement & hid the shortfall information with a link not prominently displayed. See display from statement link that shows a 22% reduction in benefits is expected in 2034 under current law.
Now it sounds like Biden is on your side saying he will not touch Social Security but how compassionate is it to the two thirds of seniors who depend on Social Security as their main source of income or the one in five seniors where it is the only source of income to just let the Trust Fund balance run out followed by a 22% cut in benefits? Without Social Security half of all seniors would be living in poverty.
This same type of phenomenon has been playing out in France as French President Emmanuel Macron has been working, against resistance from many French lawmakers & millions of protesters, to gradually raise the legal retirement age from 62 to 64 by 2030.
Macron's proposal passed under an Article 49, paragraph 3 of the French Constitution maneuver that lets a bill pass without a vote of the National Assembly, but only after a deliberation of the Cabinet. Lawmakers filed a no-confidence motion that needed 287 votes to override Macron's bill & fell only nine votes short of rejecting the bill & forcing Macron to resign under the terms of the French Constitution. There is one additional step before the bill can be signed into law - the Constitutional Council's review to be sure the bill is constitutional.
Like the U.S., the French have a pay-as-you-go system & an aging population that is living longer with fewer active workers funding the current retirees' pension benefits. This is the same terrible pension funding recipe as in the U.S. but with an even faster decline in active workers for the French.
Taxes in France are already too high to raise them to fund even greater pension benefits without hurting the economy in other ways. The French pension fund is on schedule to run a deficit this year & increasing into the indefinite future because the benefits are very high (compared to the U.S. & other countries). See following graphic that shows the net pension replacement rates for government programs in leading countries.
But also like in the U.S., where people ignore or are oblivious to the Social Security shortfall problem & our irresponsible politicians do nothing to help, the French unions are protesting Macron's minimalist proposal loudly with strikes like the recent garbage collection strike where tons of garbage have piled up on Paris sidewalks & streets.
No matter how clear the evidence is that the American & French retirement programs are destined for failure in the not too distant future, the general populations & all but a very small handful of elected politicians in both countries, are content to let the game of musical chairs continue hoping that they will be out of office when the music stops thereby letting someone else take care of the inevitable.
France spends about twice as much money on pensions as the U.S. does on Social Security (14.5% of GDP versus 7.5%), so the French really can only redress their program through restrictions & reductions. If the U.S. does not follow suit now we will one day be in the same predicament as the French currently are - a sluggish socialist country. The biggest French proponents of not taking the baby step of raising the retirement age two years is a coalition of French socialists, communists, & greens.
The actuarial problem with Social Security & the French pension plan is that they were designed as defined benefit programs not defined contribution programs. To be on sound footing the benefits should have been based on what the beneficiary paid into the system rather than determined by a formula for drawing out benefits from the current income of younger people who have little prospect of having the favor returned when they are in their senior years.
On March 9, with the above as backdrop, Biden released his 2024 Fiscal Year Budget Proposal. Biden knows the budget proposal has no chance of passing the Republican House - it is more an expression of how he will campaign for the presidency in 2024 & even more importantly how he will govern if he wins reelection & has a Democrat Congress sans Manchin & Sinema, both up for reelection in 2024.
Of course Biden's 176 page budget proposal never once mentions the word liberty & has only one reference to freedom & that pertains to the Middle East with the U.S. providing $259 million for assistance to Palestinians. It tremendously expands government & covers the added expenses by raising taxes on corporations & successful people with high incomes.
Most egregious is an unconstitutional 25% tax on wealth of unsold appreciated assets supposedly applied only to the top 0.01% of income earners, an effective doubling of the capital gains tax rate from 20% to 39.6%, a raise of the corporate income tax rate from 21% to 28%, & a surcharge to 5% on the existing ObamaCare 3.8% Medicare surcharge (i.e. a surcharge on a surcharge) on top of a marginal tax rate increase that brings the highest federal marginal tax rate to 44.6% from the current 37% rate. There is also a quadrupling of the tax on corporate stock buybacks & a doubling of the tax rate of U.S. companies' foreign profits.
And naturally, even with all of these tax increases the additional revenue still is not enough to satisfy the Marxist Socialist Biden & the Democrats because the associated federal government spending is so great that trillion dollar deficits continue as far as the eye can see & the national debt increases with no intention to bring it down including later this summer when the debt ceiling will need to be raised.
Now the U.S. has run annual deficits for most of its history. Alexander Hamilton started a program of paying down the debt due to the Revolutionary War - $75,463,475.52 as of January 1, 1791.
In his last State of the Union address, in January, 1825 President James Monroe, our best president, itemized the government's major expenditures that year in accordance with the Constitution & explained that the continuance of his plan to extinguish the national debt by selling federally owned western lands & blocking unconstitutional spending on such things as infrastructure projects would result in "the last portion of the public debt . . . be(ing) redeemable on January 1, 1835." President Monroe's successors John Quincy Adams & Andrew Jackson followed this plan & in January, 1835 the entire national debt was paid off - the only time in the country's history that has been accomplished.
From the text of the budget Biden says that the budget proposal "protects & strengthens Social Security & Medicare . . . so (millions of seniors) can retire with dignity" & "can access the benefits they have earned."
But Biden doesn't explain how charging the exorbitant tax increases listed above that finances & "extends the Medicare Trust Fund by @ least 25 years" brings about this dignity & earned benefits. In fact, his statement & reasoning shows that Medicare is an entitlement not an earned benefit that people have paid for - otherwise why does it need an infusion of money from high earners to redistribute to other Medicare beneficiaries.
It also shows how financially impractical the idea of Medicare for All is including lowering the eligibility age to 60.
When GW Bush took office the national debt was $5.66 trillion. The national debt increased 89% under Bush to $10.70 T. It increased 87% more under BO to $19.98 T & another 39% under Trump to $27.75 T. During Biden's first two years in office the national debt had increased an additional 13% to 31.42 T. Don't let the percentages fool you - Trump presided over the largest deficit spending of $7.77 T in any four years & if you add Biden's first two year actual figures to his projected deficits shown on page 135 of the Biden budget proposal, as indicated in the table below, the Biden deficit per year average for four years is $1.78 T just below the Trump record of $1.94 T.
In summary, the national debt will be 6.16 times larger by the end of the first four year term of the fourth president of the 21st century than it was in the first 212 years of our constitutional republic.
The Biden budget calls for an anemic 0.6% real GDP growth in calendar year 2023 & an average puny annual real rate of 2.0% thereafter through 2033. Every one of these years has a deficit larger than $1.5 trillion bringing the "debt issued by the Treasury" category on page 168 to over 50 trillion dollars meaning Biden does not forecast prosperity returning any time soon.
Contrast this with the Republican House Freedom Caucus looking to cap nondefense discretionary spending @ FY 2022 levels for the next decade, rescind the $80 billion approved for the expansion of the IRS with 80,000 new agents, & halt Biden's plan to forgive student debt that is now being decided by the Supreme Court.
The Biden budget plan is an insult to what America used to be. It is an attack on prosperity, freedom, business, & successful people.
This is why Speaker McCarthy & his very slim Republican House majority are our best chance of holding the line until America gets another chance in 2024.
Hi Doug - Enjoyed reading your latest article. The country is in deep trouble and we have to live through these troubled times.
ReplyDeleteAs usual good analysis.
ReplyDeleteBottom line, this country needs to feel the pain over the next few years. People are going to die or be victims of crime, due to the lawlessness our leaders have allowed, an absolutely imbecilic legal system and a weird self-love narcissistic society, but unfortunately that appears to be the only way we have a chance to turn this around.
And hopefully those totally enamored with Trump start getting the message that he is off the rails. If his latest barrage where he speaks of "death and destruction" does not bring the realization to his followers that his day is past, and he gets nominated then we officially can re-name ourselves; "the Banana Republic of the United States.
Hi Doug
ReplyDeleteI agree with all 4 solutions you posted, especially the Fair Tax. When implemented, Fair Tax will result in significantly reversing the growing extremely damaging progression to Government control of capital markets, to unleashing greater free market capitalism that will catapult the economy ahead approaching its potential of annual GDP growth rates of 5% from current 1%.
But to pass the Fair Tax and implant all 4 of your solutions, We must do all we can to educate our electorate of what policies are in their best interests. Many are not aware.
And many are not aware of the Following (part of a long letter I sent to my NJ Democrat Representative Mikie Sherrill). Not only must we educate many unaware voters, but we must also ensure our representatives are aware we understand our current economic risks and that we demand solutions to fix the mess we are in.
part of letter to Mikey:
What can cause the trigger of a $ collapse with China emerging as the world’s premier currency?
This danger is real! Our exploding debt (unchecked) will render our Treasuries as not reliable safe havens. Exacerbating this are Congress budgets (Dems & GOP) and spending rapidly, shifting more of US capital investments to Government instead of private businesses and especially entrepreneurs. The latter have much higher return on investments, generate more wealth and thus Treasury revenues.
The current US banking crisis may be another cause. There may be great pressure for the Fed to print more $ to remedy bank crisis spread. The extra $ printing may render the US currency as more and more unreliable.
The current US Banking crisis has largely been caused by Congress passing bills that require unprecedented issuing of Treasuries to finance debt. In 2021, majority of Treasury debt was purchased by the Fed. This increased aggregate demand with no supply increase resulting in rapid inflation that peaked at over 9%. The Fed was late to stop the excessive $ printing and then reversed course rapidly to reduce inflation. The resulting rapid interest rate increases resulted in significant losses in Treasury prices. So, a ticking time bond was created.
SVB with extreme holdings of long-term Treasuries and mortgage securities + poor risk management was the bomb. The SVB debacle was then the trigger that led to more client bank withdrawals with Credit Suisse collapsing and First Republic Banks on the brink.
Perhaps greater factors than the above may be below.
(1) China brokering reestablishment of Diplomatic relations between long term enemies - Saudi Arabia and Iran- may be a major step in China progression to supplanting US as the number 1 super power.
(2) A more ominous factor may be fact that odds are high that soon (months or weeks?) Saudi Arabia - China oil trade will shift to using China’s Yuan as currency.
What would happen if this (Yuan as main world currency) would occur?
The US $ might drop 20% or more in few hours. Foreign and domestic holders of Treasury Bills and Notes likely would immediately dump Treasuries to limit losses and shift investments to China, their own nations, and emerging markets.
In the US, the most impacted would be middle- and low-income classes. Entitlements would need to be decreased immediately. The Treasury Dept would be required to sharply increase interest rates when issuing new Treasuries to find willing investors risking capital, in order to finance our debt.
Please lead the China Select Committee to counter these events that have high probability of tanking our economy and weakening US world influence. Please respond with concrete proposals.