PETER KATT: LET THEM PLAY TENNIS
http://www.familysecuritymatters.org/publications/detail/let-them-play-tennis?f=must_reads
My son is a senior at a relatively small Catholic school. He is on the tennis team that rents courts at one of the three middle schools of a large public school district. Our private school lacks funding for such things as courts, football field, etc. The tennis complex we use has eight excellent courts and I noted at the first match last week that the fencing around them was freshly painted. This school district recently constructed a beautiful new high school. It has two basketball annexes, with four courts each, running track and exercise rooms. These annexes are in addition to the schools’ regular athletic facilities. No expense (actually debt at $122 million) is too much for our common core kidlets. The citizens of this district (my family included) really exemplify the civil society our Founders foresaw. While living our lives none of my peers have any awareness that America, Europe, Japan etc. are insolvent. We are still painting our tennis court fences every year like we have unlimited digital currency.
Through little fault of our own we have been encouraged to live way beyond our means, and we have obliged. 70 percent of GDP is consumer spending and political and financial leaders (sic) have cheered us on. Whether spending our own funds or the government-dependent groups spending collectivist bucks, we have made these leaders very happy. But this party is coming to an end.
While the popular- themed Federal Deficit amount is an “astounding” $17 trillion, this isn’t even close. Including all of the unfunded obligations, the true amount of debt is more than $100 trillion. Every so often a figure close to this wanders into the MSM and is quickly surrounded and attacked, like a bacteria. Usually two points are made to remove the scare from $100 trillion. First, this amount will be needed over many decades, so no problem. Secondly, we owe it to ourselves. Nothing to see here, just keep driving to the mall.
Well, the MSM is 0-for-two on this. The $100 trillion is the present value of the future unfunded obligations (future benefits minus future revenues, discounted at a specified amount, say, 4.5 percent). That is $100 trillion is the amount owed as of 2014. More than half are obligations for Social Security and Medicare. I know it is quaint to believe that our FICA and FUCA taxes are sitting in their trusts paying benefits, but actually they have been spent for general Federal obligations. The trusts have IOUs, nothing more.
“Owing it to ourselves” would be a keen argument if, for example, seniors would just agree not to receive benefits. The collective paid their FICA/FUCA taxes and as a collective we can just not pay. ‘Cmon, just be good citizens and go fishin’. But of course the beneficiaries aren’t a collective – we aren’t the Borg (Next Generation, Star Trek lingo), we are individuals. All the unfunded obligations are owed to entities or individuals.
But what about the charging stock market, falling unemployment and improving economy. The stock market’s rise is due to massive corporate stock repurchases (for example, http://www.zerohedge.com/news/2014-08-13/cisco-quarter-nutshell-terminating-6000-while-buying-back-15-billion-stock) and the Fed’s QEs. The stock and bond markets are at all-time high bubbles. When they burst every pension funds’ assets in America will be cut in ~ half, making the unfunded obligations…well it is all going to collapse anyway so who cares. And about that unemployment – if the “gave up looking” are added to the labor force (as they should be) the rate would be ~ 25 percent not 6.3 percent. There is the same bad news for the “improving economy”. The statistics are so manipulated so we don’t notice. Even after fudging the figures the first quarter decline was 2.9 percent that is probably closer to minus 7 percent. We have been in depression since 2008 that has been covered-up and papered over with digital currency.
Well, all we need is a Republican president in 2016 and control of Congress. Then we can implement the Ryan ten year budget and we are back, right? Ah, no. the Ryan budget is a RINO joke (though it causes Democrats to claim death to seniors and starving children). Over the 10 years of Ryan’s magic, spending goes up 38 percent, tax revenues go up 68 percent and the $17 trillion deficit increases by 25 percent. But we end up balancing the $17 trillion in 40 years (snicker, snicker). We would need to bring back Gore’s Social Security lock-box from the 2000 campaign for this to work. Not mentioned by Ryan is the real 2014 deficit of $100 trillion.
OK, so let’s roll up our sleeves and tackle that $100 trillion monster. You know for the grandkids and all. I calculate that to get the math to work out, taxes would have to permanently go up 77 percent and benefits permanently go down by 63 percent and no further borrowing (selling bonds). I refer to this as the math because politically, socially and economically this simply can’t happen. For one thing, remember that 70 percent of GDP is consumer spending. Huge increase in taxes and unfathomable drop in benefits would crater GDP. Taming this beast wouldn’t work with taxes of 100 percent and zero benefits. We are terminal, ya get it?
In my essay, Don’t Look Down (http://www.familysecuritymatters.org/publications/detail/dont-look-down), I assert that we cannot avoid financial collapse. It could happen tomorrow or up to a decade from now. In my piece Last Dinosaur (http://www.familysecuritymatters.org/publications/detail/last-dinosaur?f=must_reads), I argue that considering how far down the Marxist/progressive path we are, collapse is a good event for self-reliant, independent citizens of good character. Though it would be a brutal and bloody fight (we do have a standing citizen army of ~ 100 million), it is our chance to carve out civil society enclaves. The alternative is serfdom in a banana republic.
FamilySecurityMatters.org Contributor Peter Katt is a nationally recognized insurance expert who has authored more than 200 columns and articles on various insurance issues
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