Tidbits Quotations on April 29, 2010
To Accompany the April 20, 2010 edition of Tidbits
Bob Jensen at Trinity University


Video on IOUSA Bipartisan Solutions to Saving the USA

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

One take home from the CNN show was that over 60% of the booked National Debt increases are funded off shore (largely in Asia and the Middle East).
This going to greatly constrain the global influence and economic choices of the United States.

By 2016 the interest payments on the National Debt will be the biggest single item in the Federal Budget, more than national defense or social security. And an enormous portion of this interest cash flow will be flowing to foreign nations that may begin to put all sorts of strings on their decisions  to roll over funding our National Debt.

The unbooked entitlement obligations that are not part of the National Debt are over $60 trillion and exploding exponentially. The Medicare D entitlements to retirees like me added over $8 trillion of entitlements under the Bush Presidency.

Most of the problems are solvable except for the Number 1 entitlements problem --- Medicare.
Drastic measures must be taken to keep Medicare sustainable.


I thought the show was pretty balanced from a bipartisan standpoint and from the standpoint of possible solutions.

Many of the possible “solutions” are really too small to really make a dent in the problem. For example, medical costs can be reduced by one of my favorite solutions of limiting (like they do in Texas) punitive damage recoveries in malpractice lawsuits. However, the cost savings are a mere drop in the bucket. Another drop in the bucket will be the achievable increased savings from decreasing medical and disability-claim frauds. These are important solutions, but they are not solutions that will save the USA.

The big possible solutions to save the USA are as follows (you and I won’t particularly like these solutions):



Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


Here is the original (and somewhat dated video that does not delve into solutions very much)
IOUSA (the most frightening movie in American history) ---
(see a 30-minute version of the documentary at www.iousathemovie.com )

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

Watch the World Premiere of I.O.U.S.A.: Solutions on CNN
Saturday, April 10, 1:00-3:00 p.m. EST or Sunday, April 11, 3:00-5:00 p.m. EST

Featured Panelists Include:

  • Peter G. Peterson, Founder and Chairman, Peter G. Peterson Foundation
  • David Walker, President & CEO, Peter G. Peterson Foundation
  • Sen. Bill Bradley
  • Maya MacGuineas, President of the Committee for a Responsible Federal Budget
  • Amy Holmes, political contributor for CNN
  • Joe Johns, CNN Congressional Correspondent
  • Diane Lim Rodgers, Chief Economist, Concord Coalition
  • Jeanne Sahadi, senior writer and columnist for CNNMoney.com

Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


CBS Sixty minutes has a great video on the enormous cost of keeping dying people artificially alive:
High Cost of Dying --- http://www.cbsnews.com/video/watch/?id=5737437n&tag=mncol;lst;3
(wait for the commercials to play out)

U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/

"The Looming Entitlement Fiscal Burden," by Gary Becker, The Becker-Posner Blog, April 11, 2010 ---

"The Entitlement Quandary," by Richard Posner, The Becker-Posner Blog, April 11, 2010 ---

David Walker --- http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)

Niall Ferguson --- http://en.wikipedia.org/wiki/Niall_Ferguson

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.
Niall Ferguson, "An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1
Please note that this is NBC’s liberal Newsweek Magazine and not Fox News or The Wall Street Journal.

. . .

In other words, there is no end in sight to the borrowing binge. Unless entitlements are cut or taxes are raised, there will never be another balanced budget. Let's assume I live another 30 years and follow my grandfathers to the grave at about 75. By 2039, when I shuffle off this mortal coil, the federal debt held by the public will have reached 91 percent of GDP, according to the CBO's extended baseline projections. Nothing to worry about, retort -deficit-loving economists like Paul Krugman.

. . .

Another way of doing this kind of exercise is to calculate the net present value of the unfunded liabilities of the Social Security and Medicare systems. One recent estimate puts them at about $104 trillion, 10 times the stated federal debt.

Continued in article --- http://www.newsweek.com/id/224694/page/1


Niall Ferguson is the Laurence A. Tisch professor of history at Harvard University and the author of The Ascent of Money. In late 2009 he puts forth an unbooked discounted present value liability of $104 trillion for Social Security plus Medicare. In late 2008, the former Chief Accountant of the United States Government, placed this estimate at$43 trillion. We can hardly attribute the $104-$43=$61 trillion difference to President Obama's first year in office. We must accordingly attribute the $61 trillion to margin of error and most economists would probably put a present value of unbooked (off-balance-sheet) present value of Social Security and Medicare debt to be somewhere between $43 trillion and $107 trillion To this we must add other unbooked present value of entitlement debt estimates which range from $13 trillion to $40 trillion. If Obamacare passes it will add untold trillions to trillions more because our legislators are not looking at entitlements beyond 2019.


The Meaning of "Unbooked" versus "Booked" National Debt
By "unbooked" we mean that the debt is not included in the current "booked" National Debt of $12 trillion. The booked debt is debt of the United States for which interest is now being paid daily at slightly under a million dollars a minute. Cash must be raised daily for interest payments. Cash is raised from taxes, borrowing, and/or (shudder) the current Fed approach to simply printing money. Interest is not yet being paid on the unbooked debt for which retirement and medical bills have not yet arrived in Washington DC for payment. The unbooked debt is by far the most frightening because our leaders keep adding to this debt without realizing how it may bring down the entire American Dream to say nothing of reducing the U.S. Military to almost nothing.

Niall Ferguson,
"An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1

This matters more for a superpower than for a small Atlantic island for one very simple reason. As interest payments eat into the budget, something has to give—and that something is nearly always defense expenditure. According to the CBO, a significant decline in the relative share of national security in the federal budget is already baked into the cake. On the Pentagon's present plan, defense spending is set to fall from above 4 percent now to 3.2 percent of GDP in 2015 and to 2.6 percent of GDP by 2028.

Over the longer run, to my own estimated departure date of 2039, spending on health care rises from 16 percent to 33 percent of GDP (some of the money presumably is going to keep me from expiring even sooner). But spending on everything other than health, Social Security, and interest payments drops from 12 percent to 8.4 percent.

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force. Which is why voters are right to worry about America's debt crisis. According to a recent Rasmussen report, 42 percent of Americans now say that cutting the deficit in half by the end of the president's first term should be the administration's most important task—significantly more than the 24 percent who see health-care reform as the No. 1 priority. But cutting the deficit in half is simply not enough. If the United States doesn't come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.

Video:  "The Decline of Classic Maya Civilization: A Systems Perspective," by Jeremy Sabloff ---

The decline and abandonment of many key cities in the Southern Maya Lowlands around A.D. 800 has long attracted scholarly and public attention. While archaeologists now understand contrary to previous thought that Maya civilization did not collapse at this time, as a number of Maya cities continued to thrive up until the 16th century Spanish Conquest, the causes of the relatively rapid demise of cities such as Tikal, Palenque, and Copan remain of great interest. New archaeological, epigraphic, and environmental information have enabled archaeologists to form better models that provide more systemic perspectives on this decline than ever before. Sabloff examines the new data and models and discusses their potential relevance to problems facing the world today.

What is the importance of the Stanford University logo on a research study that is a political bomb shell?
What do accountancy pension experts think of this study?

"Pension Bomb Ticks Louder:  California's public funds are assuming unlikely rates of return," The Wall Street Journal, April 27, 2010 ---

The time-bomb that is public-pension obligations keeps ticking louder and louder. Eventually someone will have to notice.

This month, Stanford's Institute for Economic Policy Research released a study suggesting a more than $500 billion unfunded liability for California's three biggest pension funds—Calpers, Calstrs and the University of California Retirement System. The shortfall is about six times the size of this year's California state budget and seven times more than the outstanding voter-approved general obligations bonds.

The pension funds responsible for the time bombs denounced the report. Calstrs CEO Jack Ehnes declared at a board meeting that "most people would give [this study] a letter grade of 'F' for quality" but "since it bears the brand of Stanford, it clearly ripples out there quite a bit." He called its assumptions "faulty," its research "shoddy" and its conclusions "political." Calpers chief Joseph Dear wrote in the San Francisco Chronicle that the study is "fundamentally flawed" because it "uses a controversial method that is out of step with governmental accounting standards."

Those standards bear some scrutiny.

The Stanford study uses what's called a "risk-free" 4.14% discount rate, which is tied to 10-year Treasury bonds. The Government Accounting Standards Board requires corporate pensions to use a risk-free rate, but it allows public pension funds to discount pension liabilities at their expected rate of return, which the pension funds determine. Calstrs assumes a rate of return of 8%, Calpers 7.75% and the UC fund 7.5%. But the CEO of the global investment management firm BlackRock Inc., Laurence Fink, says Calpers would be lucky to earn 6% on its portfolio. A 5% return is more realistic.

Last year the accounting board proposed that the public pensions play by the same rules as corporate pensions. But unions for the public employees balked because the changed standard would likely require employees and employers to contribute more to the pensions, especially in times when interest rates are low. For now, it appears the public employee unions will prevail with the status quo accounting method.

Using these higher return rates for their pension portfolios, the pension giants calculate a much smaller, but still significant, $55 billion shortfall. Discounting liabilities at these higher rates, however, ignores the probability that actual returns will fall below expected levels and allows pension funds to paper over the magnitude of their problem.

Instead, the Stanford researchers choose to use a risk-free rate to calculate the unfunded liability because financial economics says that the risk of the investment portfolio should match the risk of pension liabilities. But public pensions carry no liability. They're riskless. That's because public employees will receive their defined benefit pensions regardless of the market's performance or the funds' investment returns. Under California law, public pensions are a vested, contractual right. What this means is that taxpayers are on the hook if the economy falters or the pension portfolios don't perform as well as expected.

As David Crane, California Governor Arnold Schwarzenegger's adviser notes, this year's unfunded pension liability is next year's budget cut—or tax hike. This year $5.5 billion was diverted from other programs such as higher education and parks to cover the shortfall in California's retiree pension and health-care benefits. The Governor's office projects that, absent reform, this figure will balloon to over $15 billion in the next 10 years.

What to do? The Stanford study suggests that at the least the state needs to contribute to pensions at a steadier rate and not shortchange the funds when markets are booming. It also recommends shifting investments to more fixed-income assets to reduce risks.

But what the public-pension giants find "political" and "controversial" is the study's recommendation to move away from a defined benefits system to a 401(k)-style system for new hires. Public employee unions oppose this because defined benefits plans are usually more lavish, and someone else is on the hook to make up shortfalls. Calpers and Calstrs are decrying the Stanford study because it has revealed exactly who is on the hook for all of this unfunded obligation—California's taxpayers.

Bob Jensen's threads on accounting for pensions are at

The two articles below confirm my own suspicions that arose as Ed Whitacre Jr. started broadcasting his latest GM commercials about paying off the government loan 5 years early. I grow nauseous every time that commercial is replayed.

I also heard NPR Sunday news speak to this issue raised by THE WASHINGTON TIMES, to assert that GM has not come close to paying back the 'loan' regardless what Whitecare says.

This may backfire into doing more harm than good for Government Motors. I just don’t understand the strategy of making this deceptive announcement unless Whitacre (who really is a good guy in my opinion) thinks it will help sell more cars. I think Whitacre, the former CEO and Chairman of the Board of AT&T when I still lived in San Antonio) took on the GM job for the money. He has more than he’ll ever want or need. I’m certain that this tried and true Texan would prefer not to have to make so many commuting trips from San Antonio to Detroit after he does this public service for President Obama.


Maybe he’s just trying to save face as he speeds up his retirement from GM.

Somebody should tell him that deceptive accounting is a bad idea.

The Writedowns Revisited:  Commerce Secretary Gary Locke owes CEOs an apology

Rep. Waxman has since canceled those hearings with much less dudgeon or media fanfare, and the report from his own staffers explains his retreat. "The companies acted properly and in accordance with accounting standards in submitting filings to the SEC in March and April," they write. "These one-time charges were required by applicable accounting rules." This may stand as the first time in history that Mr. Waxman has admitted a mistake.
Scroll Down for Update on April 29

Ketz Me If You Can
Another One from That Ketz Guy (this time questioning the reasoning of our Secretary of Commerce)
"Does Gary Locke Support Accounting Lies?" by: J. Edward Ketz, SmartPros, April 2010 ---

I just don't understand the current administration. You would think that after the last decade of financial thievery and accounting mischief, the Obama administration would not tolerate a return to such prevarications. But if one listens to his Secretary of Commerce Gary Locke, that might not be the case.

Mr. Locke wrote an op-ed (“Don’t Believe the Writedown Hype”) that appeared in the Wall Street Journal April 1, 2010.  At least the date of publication was appropriate.

He repeats the political dogma that the recently passed healthcare act will reduce the number of uninsured, it will invest $5 billion in a reinsurance program, it contains a number of reforms that will slow the rate of increase in health care costs, and it creates a board that will restrain Medicare costs.  Locke then asserts that these changes will benefit corporations as well as individuals.

While I believe these assertions exaggerate the benefits of the bill and ignore its dysfunctional components, for the sake of argument, let’s assume that Gary Locke is correct.  So what?  Any cost reductions will be accounted for in the future when the business enterprise actually enjoys cost reductions.  Accountants don’t dream of fewer expenses and then book them.  We wait for history to prove their validity and to correct any errors.

Locke then criticizes commentators for focusing on a “minor” provision in the legislation that increases health-care costs.  He then asserts without proof that the actual impact will be “quite modest.”  What puffery!

What motivated this discussion was various 8-Ks issued by corporate America.  On March 24, AT&T informed investors that it would take a charge of about $1 billion.  Specifically, it stated:

Included among the major provisions of the law is a change in the tax treatment of the Medicare Part D subsidy.  AT&T… intends to take a non-cash charge of approximately $1 billion in the first quarter of 2010 to reflect the impact of this change.  As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health care benefits offered by the company.

I find it interesting that Locke calls this a “minor” provision but AT&T calls it “major” because it involves an expense of $1 billion.  I guess it depends on one’s perspective.  To AT&T’s investors, $1 billion is probably significant as it reduces quarterly earnings by one-third.  But to the government which creates budget deficits of trillions of dollars per year, maybe $1 billion is immaterial.

I would think that the administration would applaud the honesty by AT&T’s managers.  FAS 106 specifies the accounting for other postemployment benefits (OPEBs), including their tax effects.  As this legislation removes a tax subsidy from corporations (I’ll leave it to others to debate the merits of this part of the bill), the firms do indeed incur higher healthcare costs.  And these costs are immediate and persistent.  (There also is interaction with FAS 109, accounting for deferred taxes, but that need not concern us.)

The investment community needs honesty and I hope the administration does too.  Accordingly, Mr. Locke should not be so critical of the immediate recognition of additional costs by corporations which are real and immediate and should be recognized in income statements.  And he should not be pushy for the recognition of cost reductions until they materialize—if they in fact materialize.

Other companies are also issuing 8-Ks and announcing similar writedowns:  Caterpillar, $100 million; Deere, $150 million; and Boeing, $150 million.   Some estimate that when all is said and done, such writedowns will amount to $15 billion or so.  Additionally, some corporations are doubtless considering whether to reduce the OPEBs they offer employees.  I would not characterize these effects as “quite modest.”

On March 26, Henry Waxman announced that he would require corporate executives to appear before his committee on April 21 to determine whether they are playing politics through these 8-Ks.  Unless Mr. Locke supports accounting lies, he too should make an appearance and explain to Mr. Waxman how investors and creditors appreciate more honesty and transparency in the accounting reports.  Of course, it is possible that some members of Congress would prefer accounting shenanigans if they don’t reveal some of the costs of the recently passed legislation.

Gary Locke admonishes readers to “look past the hype and the overheated rhetoric.”  I suggest he read his own sentence.  I also suggest he include investors and creditors in the business community, for without their capital, the business of America ceases to operate.  As Commerce Secretary, he should applaud the recent 8-Ks that managers are releasing.  The information is invaluable to investors and creditors.

Rep. Waxman has since canceled those hearings with much less dudgeon or media fanfare, and the report from his own staffers explains his retreat. "The companies acted properly and in accordance with accounting standards in submitting filings to the SEC in March and April," they write. "These one-time charges were required by applicable accounting rules." This may stand as the first time in history that Mr. Waxman has admitted a mistake.
"The Writedowns Revisited: Gary Locke owes CEOs an apology," The Wall Street Journal, April 29, 2010 ---

Another day, another never-mind ObamaCare moment. Earlier this week, House Democrats concluded that the deluge of corporate writedowns—amounting to about $3.4 billion so far—were in fact the result of ObamaCare, not the nefarious CEO conspiracy that the White House repeatedly cited when it was embarrassed soon after the bill's passage.

Commerce Secretary Gary Locke rushed to attack AT&T, Verizon, Caterpillar and many others reporting losses from a tax increase on retiree drug benefits as "premature and irresponsible." He later took to these pages to denounce those who noticed these writedowns as "disingenuous" and peddling "overheated rhetoric."

Meanwhile, House baron Henry Waxman vowed to summon the offending executives to his committee because their actions "appear to conflict with independent analyses, which show the new law will expand coverage and bring down costs."

Mr. Waxman has since canceled those hearings with much less dudgeon or media fanfare, and the report from his own staffers explains his retreat. "The companies acted properly and in accordance with accounting standards in submitting filings to the SEC in March and April," they write. "These one-time charges were required by applicable accounting rules." This may stand as the first time in history that Mr. Waxman has admitted a mistake.

The larger question is what motivated the White House to unleash this assault. Democrats were amply warned about the destructive consequences of these tax changes, and if they really thought these companies were acting out of political motives, then they didn't understand what was in their own bill. Or at least that's one possibility.

More likely is that they did know and were simply trying to intimidate business and mislead the public in the early days of what was supposed to be the rapturous response to ObamaCare's passage. Instead, the public has turned even more negative on the bill as Americans discover that it won't control costs but will raise insurance premiums and taxes. No wonder Democrats want to change the subject to immigration and Goldman Sachs.

Bob Jensen's threads on health care are at




The Washington Times 

Originally published 07:44 p.m., April 23, 2010, updated 08:00 p.m., April 23, 2010

EDITORIAL: Government Motors repayment fraud

General Motors lost $3.4 billion in the fourth quarter of 2009 and is still struggling to reorganize so the company can try to eke out a profit. This grim reality didn't stop GM from making hay last week for supposedly paying back a $6.7 billion government loan five years ahead of schedule. What was left unsaid was that the automaker used another kitty of taxpayer cash to pay off the earlier government loan. This is an accounting shell game, not progress.

Previously unreleased documents supplied to The Washington Times reveal that GM specifically used funds it received from the Troubled Asset Relief Program to pay off the government loan. According to Neil Barofsky, the special inspector general for TARP, $4.7 billion of $6.7 billion - 70 percent - of what GM paid back came from TARP money the company received. "The one thing a lot of people overlook with this is where they got the money to pay the loan," Mr. Barofsky told Fox News' Neil Cavuto on Wednesday. "It isn't from earnings." The numbers are based on a quarterly report Mr. Barofsky's office provided to Congress last week.

Jared Bernstein, chief economist and economic policy adviser to Vice President Joseph R. Biden Jr., disputes the special inspector general's findings. "That is not correct, I don't think that is correct," Mr. Bernstein told The Washington Times. "[General Motors] repaid with funds from their own cash accounts, from their own earnings." The cash used by GM to pay back the loan "is the property of General Motors, there is no question about that," he insisted. Some of the money used to pay off the loans may have originated from TARP funds, but "it is really hard to know," he equivocated, because the funds are mixed together and "it is like trying to put an omelet back together again."

The Treasury Department's press office also disagreed with Mr. Barofsky's characterization that GM paid off one credit line with another credit line. The watchdog, however, won't budge. When asked how to tell whether the $4.7 billion used to pay off the government loan came from TARP funds and not some other source, a spokesman for the Special Inspector General's Office explained: "We have a letter from General Motors requesting that they take the money out of escrow and pay the other debt down. And the money in the escrow was clearly TARP funding." That letter has been released by the Special Inspector General's Office.

Despite misleadingly rosy propaganda fed to the press, the sad saga of General Motors' transformation into Government Motors continues. As a ward of the state, GM has to do the bidding of its Washington masters and stay in lock step with the Democrats' claims about the company's condition. The truth is that GM's condition remains poor.

The only reason the company has been able to pay off its government loan is because the Obama administration has given GM more money than it has been able to spend. Hence, proceeds from one loan are sitting around to be used to pay down another loan. That's hardly evidence that GM has been a good investment. To the contrary, the shell game makes clear that the Obama administration is wasting billions of taxpayer dollars on a carmaker that is careening toward a cliff.


"Democrats at the Edge of the Cliff: Democrats are spending trillions at the worst possible," by Daniel Henninger, The Wall Street Journal, April 22, 2010 ---

There was always something eerie about the way the Democrats said their health-care legislation was what the American people had waited "70 years" for. Invoking the ghosts of 1939 was kind of creepy. Then when the moment in history finally arrived, history got no votes from the other party. Whatever the politics, there was something ominous about all this. One felt something else was going on.

A Pew Research Center report just out, the one that says trust in government is at an "historic low" of only 22%, looks like the something else.

Dig past the headline of the Pew study and one discovers why Bill Clinton is insinuating that "demonizing" government could cause another Oklahoma City bombing. If these numbers are at all close to reality, something one can hardly doubt just now, the American people have issued a no-confidence vote in government, at both the national and state level. To the extent one believes in the "consent of the governed," consent is being eroded.

This report isn't bad news for the Democrats. It's Armageddon.

The survey compares views sampled in 1997 with now. The "now" is the Democrats' problem. The survey took place this mid-March. After one year of the charismatic, ever-present Barack Obama, after passage of the party's totemic health-care bill, after spending zillions on Keynesian pump-priming, the American people—well beyond the tea partiers—have the lowest opinion ever of national government.

A year ago, 54% said government should exert more control over the economy; a year later it's 40%.

Some 58% say Uncle Sam is interfering too much in state and local affairs; 53% want "very major reform" of the federal government. After health care passed in March, Pew re-sampled in early April: Trust in government rose—to 25% from 22%. Inspector Clouseau would call that a "bmp."

Pew concludes: "A desire for smaller government is particularly evident since Barack Obama took office." That's pin-the-tail-on-the-donkey without blindfolds.

Democrats could cite one passage in Pew to mitigate this dire portrait. Historically, the report notes, whichever incumbent party is standing next to a big disaster gets pulled down in the undertow. Thus Bush and the Iraq war and Katrina. They can argue that Mr. Obama and the Democrats are getting hit with the legacy of the Bush downdraft and the after-shocks of the financial meltdown of September 2008. Once that passes, and after the inevitable November losses, the economy will stabilize and by 2012 the playing field will reset to normal.

I don't buy this. Something unique happened in the first Obama year, about the last thing the Democratic Party needed: The veil was ripped from the true cost of government. This is the ghastly nightmare Democrats have always needed to keep locked in a crypt.

Before the Internet, that was easy. Washington, California, New York, New Jersey—who knew what the pols were spending? The Democrats (and their Republican pilot fish) could get away with this. Not now. Email lists, 24/7 newspapers, blogs, TV and talk radio—the spending beast is running naked.

When the financial crisis piled in atop a recession, the Democrats' academic/pundit economists blandly convinced the party to wave a $787 billion stimulus at the problem in early 2009. Then, on April 30, the Democrats passed an FY 2010 budget of $3.5 trillion. This year the FY 2011 budget hit $3.8 trillion, reaching a post-World War II high of 25% of GDP. In March, they passed the trillion-dollar health-care bill. Total headline spending commitments in one year: about $9 trillion. That's a lot of "trust" to ask for during a recession with 9% unemployment. And now a sense is building of some broad middle-class tax grab. After soaking the rich, comes the deluge.

Demonization? No need. They did it to themselves.

Barack Obama's speeches are filled with the Democrats' core claim to legitimacy: Government must and will do good. It must "act." But in a crucial period when voters across the political spectrum were losing faith in that core claim, the Democrats lost any self-protective sense of what they were doing with public budgets. Barack Obama took a rising reservoir of public trust for his party (62% said they liked the Democrats in January 2009), and emptied it. Since he took office, the percentage of people who want smaller government and fewer services has risen, to 50% from 42%.

A Quinnipiac poll released yesterday has the Obama presidential approval rating down to 44%—after health care, after the arms treaty with Russia, after the 47-nation, anti-proliferation convocation in Washington.

He insists on more government. People want less, and don't trust what they've got. They want reform. Here's the Pew blowout data:

In 1994 when the Democrats lost over 50 House seats at mid-term, the party's favorable rating was 62%, and for the Congress they controlled it was 53%. They still got killed. Now the party's favorable is 38% and Congress's approval is 25%. The Republicans' numbers are low, too, but they're not in charge.

The Democratic Party is on the edge of an electoral cliff with a long fall to the bottom. No wonder they're seeing a demon under every bed.

"Two Cheers for General Motors:  Yes, it's paid back $6 billion and is more efficient. It still owes taxpayers about $52 billion," by Paul Ingrassia, The Wall Street Journal, April 23, 2010 ---

"Smart Aleck-in-Chief? There may be good reasons for Obama to go negative, but doing so could wreck his presidency," by Daniel Henninger, The Wall Street Journal, April 29, 2010 ---

Here's a quiz: For which of the following reasons is the 44th president of the United States bad-mouthing Mitch McConnell, John Boehner, Sarah Palin, Rush Limbaugh, bankers, mine operators, insurers, Glenn Beck, the tea party, the Supreme Court and whoever he hammers as we go to press:

a) He's rallying his base.

b) He's rallying the Democrats' base (one overlaps but does not equal the other).

c) He's changing the subject from 9% unemployment.

d) To reverse his sinking approval ratings.

e) It's what Saul Alinsky would do.

f) It's what Barack Obama likes to do.

Astute readers instantly saw that the answer is, all of the above. (Incidentally, the left's notion that Mr. Obama had to prove he could "stand up" to the Republicans must be laughable to the man who stood down the Clinton machine to win.)

Republicans such as Mitch McConnell, a target of Obamian invective, are calling it conduct unbecoming a president. They are right. Carter, Reagan, both Bushes and Ford didn't do it. People assume the hyperpolitical Bill Clinton did it, but if memory serves, his public persona was presidential to a fault, even as he brimmed with Vesuvian anger.

But as Bill Clinton once explained to Bob Dole, in politics today you do what you've gotta do. On current course, Barack Obama's approval rating is heading toward 40% and an almost certain Democratic wipeout in November. The result would be a moribund first term. The Obama White House has seen this movie before. It was called the second Bush term.

Bush 43 famously, and convincingly, said he didn't care about polls. What got a little weird was that he kept saying this even when in 2007 his approvals plowed toward 30% and the Iraq War raged on. If you walk the halls of Congress now and ask the minority Republicans "Do you miss him yet?"—the answer is: no. Presidential deference killed them in 2008. When Vice President Dick Cheney was finally able to launch a counterattack, it was 2009.

Perhaps uncertain where his own vice president would go with such a killer assignment, Mr. Obama has decided to take down the opposition himself. This may be the Obama version of "you do what you gotta do," but politics has a brutal truism even bigger than that: Will it work?

Let's look at the reasons to justify going negative.

• The Obama base. Modern Politics 101: Fail to max out with the base and you lose. The 2008 Obama victory was a miracle of base-raising. Minorities, neophyte voters, labor, wannabe lefties and suburban women voted for Mr. Obama at record levels. The bad news: That victory was rock-star politics, and if you're the man, then the audience wants more of whatever fire drove them into the arena. In this hot new political world, a mere president may be boring. Crank them up, or lose. Go negative.

• The Democratic base. This is the party's bedrock: public-sector unions, plaintiffs lawyers, community organizers, the left-wing blogosphere, NGOs, Big Pharma. The fact that their economic interests are yoked forever to Democratic power ensures maximum effort. Do or die. For most of them, go-negative is chromosomal.

• Unemployment. Top 10 reasons why the White House lies awake at night: The economy is reviving but employment is not. Solution: Attack Sarah Palin and Glenn Beck. The White House knows that every day the media is writing or talking about their man's cat fights with conservative celebrities, it isn't doing stories about "Depression-like" unemployment. Go negative.

• Presidential approval ratings. At the time of his Inauguration, Mr. Obama's Gallup approval stood at 69%, the highest since JFK. Today his RealClear Politics Approve/Disapprove aggregate is 48.3/46.0. He's four points from 50% disapproval, which would be a benchmark of disaster for Democrats in November. Go negative? Maybe not.

There may be any number of good, political reasons for Mr. Obama to let it rip. But let's cut to the real reason this is happening. The answer is (f): It's what Barack Obama likes to do.

And it's a mistake.

Even Achilles had a heel, and Mr. Obama's may be his decision to be his own Saul Alinsky. Defining, demonizing and making a mockery of one's opponents was one of Alinsky's main rules for community organizers. But community organizers, though often charismatic, can also be annoying jerks.

The only Barack Obama the American people have ever known is the one presented to them from January 2007 onward—the amazing, improbable fellow in "Dreams from My Father." Candidate Obama was about as perfect as it ever gets. The best since JFK.

JFK, an imperfect man, worked hard to stay perfect in public. So did FDR and Bill Clinton and Ronald Reagan. For Barack Obama to believe that any persona he offers the public will be OK with them is hubris. Showing voters a side of him that he enjoys, but many of them may not, is flirting with disaster. If all the positive vibe that held up his presidency on its first day ever breaks, the fall could be fast.


Thomas Jefferson Quotations forwarded by James Don Edwards

When we get piled 
upon one another in large cities, as in Europe, 
we shall become as corrupt as Europe.

Thomas Jefferson 


The democracy will cease to exist 
when you take away from those 
who are willing to work and give to those who would not. 

Thomas Jefferson 


It is incumbent on every 
generation to pay its own debts as it goes. 
A principle which if acted on would save 
one-half the wars of the world. 

Thomas Jefferson 


I predict future happiness for 
Americans if they can prevent the government 
from wasting the labours of the people under the 
preteens of taking care of them. 

Thomas Jefferson   


My reading of history convinces me 
that most bad government results from too much 

Thomas Jefferson 


No free man shall ever be debarred 
the use of arms. 

Thomas Jefferson 


The strongest reason for the 
people to retain the right to keep and bear arms 
is, as a last resort, to protect themselves 
against tyranny in government. 

Thomas Jefferson 


The tree of liberty must be 
refreshed from time to time with the blood of 
patriots and tyrants. 

Thomas Jefferson 


To compel a man to subsidize with 
his taxes the propagation of ideas which he 
disbelieves and abhors is sinful and tyrannical.. 

Thomas Jefferson 


Thomas  Jefferson said in 
'I believe that 
banking institutions are more dangerous to 
our liberties than standing armies.
If the American people ever allow 
private banks to control the issue of their 
currency, first by inflation,
 then by 
deflation, the banks and corporations that will 
grow up around the banks will deprive the people 
of all property -
 until their children 
wake-up homeless on the continent their fathers 


Half the Households in the United States Pay 96% of the Income Taxes

"Taxes and Votingm" by Walter E. Williams, Townhall, April 21, 2010 ---

According to the Tax Policy Center, a Washington, D.C., research organization, nearly half of U.S. households will pay no federal income taxes for 2009. That's up from the Tax Foundation's 2006 estimate that 41 percent of the American population, or 121 million Americans, were completely outside the federal income tax system. These Americans pay no federal income tax either because their incomes are too low or they have higher income but credits, deductions and exemptions that relieve them of tax liability. This lack of income tax liability stands in stark contrast to the top 10 percent of earners, those households earning an average of $366,400 in 2006, who paid about 73 percent of federal income taxes. The top 25 percent paid 86 percent. The bottom 50 percent of taxpayers paid less than 4 percent of federal income taxes collected.

Let's not dwell on the fairness of such an arrangement for financing the activities of the federal government. Instead, let's ask what kind of incentives and results such an arrangement produces and ask ourselves whether these results are good for our country. That's a question to be asked whether or not one has federal income tax liabilities.

Having 121 million Americans completely outside the federal income tax system, it's like throwing chum to political sharks. These Americans become a natural spending constituency for big-spending politicians. After all, if you have no income tax liability, how much do you care about deficits, how much Congress spends and the level of taxation? Political calls for tax cuts and spending restraints have little appeal. Survey polls revealed this. According to The Harris Poll taken in June 2003, 51 percent of Democrats thought the tax cuts enacted by Congress were a bad thing while 16 percent of Republicans thought so. Among Democrats, 67 percent thought the tax cuts were unfair while 32 percent of Republicans thought so. When asked whether the $350-billion tax cut package will help your family finances, 59 percent of those surveyed said no and 35 percent said yes. Tax cuts to many Americans mean just one thing: They pose a threat to the federal handouts they receive.

Here's my perhaps politically incorrect question: If one has no financial stake in our country, how much of a say-so should he have in its management? Let's put it another way: I do not own stock, and hence have no financial stake, in Ford Motor Company. Do you think I should have voting rights or any say-so in the management of the company? I'm guessing that the average sane person's answer is no. You say, "Williams, just where are you heading with this?" I'm not proposing that we take voting rights away from those who do not pay taxes. What I'm suggesting is that every American gets one vote in every federal election, plus another vote for each $20,000 he pays in federal taxes. With such a system, there'd be a modicum of linkage between one's financial stake in our country and his decision-making right. Of course, unequal voting power could be reduced by legislating lower taxes.

This is not a far-out idea. The founders worried about it. James Madison's concern about class warfare between the rich and the poor led him to favor the House of Representatives being elected by the people at large and the Senate elected by property owners. He said, "It is nevertheless certain, that there are various ways in which the rich may oppress the poor; in which property may oppress liberty; and that the world is filled with examples. It is necessary that the poor should have a defense against the danger. On the other hand, the danger to the holders of property cannot be disguised, if they be undefended against a majority without property."

Jensen Comment
Although I support some type of VAT tax for the United States given the fact that we must tax more and borrow less to survive as a nation, it should be noted that the VAT tax will hammer virtually 100% of the households due to increases in "prices" that accompany sales taxes.

Price Controls on Insurance Rates Are Not Enough Since Price Allowances Must Cover Costs
"What Megatrends in Health Care Mean for the U.S. Agenda," by George C. Halverson, Harvard Business Review Blog, April 21, 2010 ---

The megatrends in global health care selected by the Harvard Business Review highlight a stark reality: Health care is changing rapidly and — unless we do the right things and do them well, care will become entirely unaffordable.

In the United States, the new law to reform health insurance is a huge step forward in the struggle to improve the quality of care and bring its cost under control. But that universal coverage bill is just the first step. It opens the door to the next two levels of reform. We need to significantly improve care and we need to significantly moderate the increase in the cost of care. Frankly, we need three agendas to ensure that we keep moving down the path to better and more affordable care.

Agenda One: Provide Universal Coverage

We are the only industrialized country in the world that doesn't cover all of its citizens. The reform law doesn't get us all the way there, but it will go a long way toward fixing that problem.

It's very hard to improve care of people until they have insurance and the bill moves us nicely in that direction.

If we very carefully and skillfully build and implement the new insurance market exchanges mandated by the law, they will give Americans much better choices. People should be able to use the exchanges to choose care systems and teams that will double their chances of surviving cancer, triple their chances of surviving strokes, and quadruple their chances of surviving major heart surgery.

Agenda Two: Provide Better and Safer Care

American health care is plagued by major performance problems. Consider the following facts:

Clearly, we need to make care vastly better and a lot safer. We can do that just by focusing in a very practical way on a few things. For starters, we need to target a major reduction in infection deaths and we need to mandate team based care for patients with multiple medical conditions.

Agenda Three: Make Care Much More Affordable

We spend twice as much as any other country in the world for basically the same care. We also obviously need to fix that.

We need to do a couple of very basic and practical things to slow or even stop the growth of new cases of diabetes or heart disease. We know what those few basic things are. We just need to make them a priority.

For example walking 30 minutes a day five days a week cuts the new cases of diabetes by half. Medicare would be saved financially if half as many people became diabetic. Walking also can cut the number of strokes and kidney failures and can improve the survival rates of people with several kinds of cancer.

We also need to make a couple of changes in our food intake. Saturated fats for example, should be labeled and avoided. Lives will be saved.

To make care affordable for the next decade, we also will need to understand why we spend twice as much for each unit of care compared to other industrialized countries. Unit prices for hospital days, CT scans, prescription drugs, and basic medical procedures all cost two or three times as much per item as they do in France, Germany, Canada, and the Netherlands. Health care costs in the U.S. would drop from 17.3% of the GDP to under 12% if we paid Canadian or Dutch prices.

Why are unit costs of care so much higher in America? No one knows. It has never been studied. What we do know is that American caregivers could not survive economically with European or Canadian fee levels. So we obviously can't just cut fees. As a macro-economic issue, we do need to recognize that fees drive costs and that higher fees are the number one cost difference between the U.S. and every other country. We don't need to reduce fees — but we will have absolutely no hope of ever getting to more affordable care in the U.S. if we don't find a way to constrain future increases in fee levels.

What do you think the megatrends in global health care mean for the United States? What do you think should be the immediate priorities for improving the health of Americans, improving the quality of care in the U.S., and lowering its cost?

George C. Halvorson is chairman and chief executive officer of Kaiser Permanente, the nation's largest nonprofit health plan and hospital system. He is also the author of Health Care Will Not Reform Itself.

Bob Jensen's threads on health care controversies are at

"Myths About Capitalism," by John Stossel, Townhall, April 21, 2010 ---

I won 19 Emmy Awards by reporting a myth: that business constantly rips us off -- that capitalism is mostly cruel and unfair.

I know that's a myth now. So I was glad to see the publication of "The 5 Big Lies About American Business" by Michael Medved.

I invite him on tomorrow's Fox Business Network show to talk about that.

"You can only make a profit in this country by giving people a product or a service that they want," he says. "It's the golden rule in action."

Medved used to write about the movies, so he's familiar with the businessman as villain. I'll play a clip from the movie "Syriana," in which an oil tycoon makes this ridiculous speech:

"Corruption keeps us safe and warm. Corruption is why you and I are prancing around in here instead of fighting over scraps of meat out in the street."

"What's interesting," Medved commented, "is that in the old days, Hollywood would have businesspeople who were very positive: George Bailey, the Jimmy Stewart character, is a banker in 'It's a Wonderful Life.'"

No longer. Today's movie capitalists are criminals or playboys. Apparently, Hollywood writers think it's plausible that CEOs have lots of time to sip cocktails and chase women.

"In school, we all studied a book called "The Theory of the Leisure Class," which ... indicted the leisure class and these people who were out there exploiting other people and really had nothing to do except sit on their yachts and go to their swimming pools and their vacations."

In real life, that's nonsense.

"The higher up on the income scale you go, the less leisure time you have. You make money in this country by working hard."

Medved's second myth is that when the rich get richer, the poor get poorer. This is the old zero-sum fallacy, which ignores that when two people engage in free exchange, both gain -- or they wouldn't have traded. It's what I call the double thank-you phenomenon. I understand why politicians and lawyers believe it: It's true in their world. But it's not true in business.

"If you believe that when the rich get richer, the poor get poorer, then you believe that creating wealth causes poverty, and you're an idiot," said Medved. "One of the things that I hate is this term 'obscene profits.' There are no obscene profits ... . (The current economic downturn shows) "that when the rich get poorer ... everybody gets poorer."

Myth No. 3: Government is more fair and reliable than business.

"Remember the last time you went into Starbucks, and then remember the last time you went into the DMV to get your license," Medved said. "Where did you get better treated? And it's not because the barista is some kind of idealist or humanitarian. She wants a tip. She wants you to come back to the Starbucks ... ."

But the left doesn't get it.

"This is the suspicion of the profit motive -- the idea that if somebody is selflessly serving me, they're going to treat me better than somebody who wants to make a buck," Medved said. But "(i)f you think about it in your own life, if somebody is benefiting from his interaction with you ... it's a far more reliable kind of interaction than someone who comes and says I'm in this only for you."

Myth No. 4: The current downturn means the death of capitalism.

"Capitalism is alive and well," Medved said.

I'm also bugged when people argue that today's problems prove that capitalism "failed." What failed? We had a correction. A bubble popped. But from 1982 to now, the Dow rose from 800 to 11,000. Had it happened without the bubble, we'd say this is one of the great boom periods.

Medved added: "This is one of the biggest lies -- the idea that because of capitalism, we're all suffering. ... Poor people in America today, people who are officially in poverty, have a higher standard of living in terms of medical standards, in terms of the chances of going to college, in terms of the way people live, than middle-class people did 30 years ago. It's an extraordinary achievement of technology and of the profit sector."

Continued in article ---



Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

Return to the Tidbits Archives ---


Shielding Against Validity Challenges in Plato's Cave ---

Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
By Bob Jensen

What went wrong in accounting/accountics research?  ---

The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---


Bob Jensen's threads on accounting theory ---

Tom Lehrer on Mathematical Models and Statistics ---

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---

Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/