And the band played on – letter to the editor

My local newspaper printed my letter to the editor based on the theme of a recent post. Please feel free to adapt and use it, if you agree with the concept.

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I feel like citing the song lyric “and the band played on” in reference to elected leaders ignoring problems which will only get worse. On climate change, environmental degradation, increasing US debt, aging infrastructure, and insufficient gun governance, we have ticking time bombs. The kids get what is needed on climate change, environment and guns. But, debt and infrastructure must also be dealt with. And, not addressing the former makes the latter harder.

These are the questions we must be asking our politicians. If they are evasive or give poor answers, do not vote for them. We don’t need a wall. We need safe bridges and railways.

 

Debt and more debt

The following is a brief sample letter to the editor on the US debt problem that is being unwisely ignored. Please feel free to adapt and use if you agree.

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The last time we had a balanced budget was when Bill Clinton left office, but we still had debt. Now that debt is about $21.5 trillion and is expected to grow by almost $12 trillion by 2027. The tax reduction law passed last December will increase the debt by $1.5 trillion and the spending bill from the spring will add to it as well.

The annual deficit is once again approaching $1 trillion, which is about 30% of our annual tax revenue. I believe it was poor stewardship to increase the debt with the tax change and now I understand another tax bill is in the works. We cannot cut our way out of this problem – we need both spending cuts and more tax revenue.

A day of reckoning will come and future legislators will have to address this poor financial stewardship by three Presidents and their Congresses.

That nagging math problem

Dwarfed by other news yesterday, the Congressional Budget Office (CBO) updated their budget projections reflecting the new tax law and spending plan. Over the next ten years, the just over $21 trillion debt is expected to increase by $11.7 trillion bringing it to about $33 trillion. Before these two changes, it was expected to increase to about $31 trillion.

The CBO also said the deficit should rise to $804 billion by 2018 fiscal year end. Last year it was $665 billion. Further, the annual deficit should pass $1 trillion by 2020 and stay there.

There are many in Congress today who have screamed bloody murder in the past over rising debt and got elected under the banner of the Tea Party. I have seen footage of members who called this a crisis when it was only $8 trillion and then $13 trillion. They were right then, but now debt and deficit don’t seem to matter as many voted for a law to increase it.

I have seen some recent discussion about the need for a balanced budget amendment. To be frank, that won’t do. We need more revenue than expenses. The tax law passed in December is projected to increase the debt by $1.5 trillion, but Congress knew that then and still passed it, even many of these Tea Partiers.

I said this before, but I believe the tax law passing is extremely poor stewardship, even malfeasance. We are borrowing from our future to try to make an economy, that was in a 103 consecutive month growth period with seven consecutive years of 2 million plus job growth, even better.

To be frank, we cannot cut our way out of this problem. The math will not work. We must also have more revenue than we had before the tax cut. At some point, a future Congress and President will get all the flak for abruptly addressing this problem. Yet, they will be the better stewards, far better than the current President, Congress and their predecessors have been.

Bill Clinton takes a lot of heat for his womanizing, rightfully so, but he handed a surplus budget and smaller debt to George W. Bush. Bush went against the advice of his Treasury Secretary and passed a tax cut and then we invaded two countries draining our budget. And, my biggest criticism of Barack Obama is he shelved the Simpson-Bowles Deficit Reduction Committee report failing to use it as very good starting point for change.

Folks, like climate change, this math problem is not going away. We must address our debt now or it will be much more severe later. And, if people think it does not matter, that country we are imposing tariffs on owns a lot of our treasury bonds, bills and notes. They have floated the idea of stop buying them even before the tariff war. That also makes it a security risk as well.

Let’s speak plainly

After watching a few newscasts with politicians using words that sound nice, but lack substance, I am in the need of some plain spoken comments. Here are a few to start the conversation. Please let me hear some of yours.

The US President and Congress are speaking of Tax Reform, but what I am hearing are tax cuts. We have a debt of $20 Trillion and an annual budget deficit. There is no way in hell to reduce either with lower tax revenue. We need spending cuts and tax increases, but no politician has the stomach to do what is needed.

Steve Bannon is the latest White House departure to say the President likes for his direct reports to compete for his attention and favor. People say this is how he likes to run his businesses. Two comments. First, I have witnessed this model as an employee, manager and consultant and it is a highly unproductive model. Second, biographers and financial reporters have all said Trump’s business record is spotty. He is a great salesman, but the word great is rarely used to describe his management style. It shows in the level of chaos and incompetence in the White House. General Kelly has helped, but it is a tall hill to climb.

While I understand the reasons for Brexit, I have been very concerned by the consideration and vote to exit the EU. From the outset, financial experts forewarned of the British leaving the EU. They spoke of EU headquarter movement, less investment, and less collaboration. This is already occurring in plans of the exit. I understand Former PM Tony Blair has an idea to govern immigration better without leaving – my strong suggestion is to hear him out.

Along these lines, those who want to retrench from global markets need to know a truism – it is very hard to shrink to greatness. I understand middle income workers in flourishing economies feel the brunt of globalization, but a large part of that is due to and will continue to result from technology gains. Retraining is a must. Shoring up wages is a must. But, we need to be careful about retrenching from global markets, that also add jobs here.

What are your thoughts? Do you agree with these comments? If you do not, let me know why?

 

Expansion of the Chris Rock Solution

One of the funniest, yet provocative routines performed by the comedian Chris Rock is his proposal to solve gun violence. Price the bullets at $5,000 per bullet. He goes on to describe, as only he can, that shooters will become very judicious with how they use ammunition at that price point.

I was thinking of his idea today and thought it might be a good strategy on other things that are causing problems in America. Civil protest need only require a permit, yet if you bring a weapon that will cost extra. Bring a bat, baton or stick and that will be $5,000 per weapon per person. Bring a knife, sword, dagger, etc., that will be $10,000. Bring a hand gun or rifle that will be $25,000. Someone has to pay for the police cost.

If Congress wants to fund raise on our tax dollars, that will be $5,000 for two hours worth of calling payable by the political party. In person fund raising will be $10,000. If a lobbyist wants to talk with you, they must pay Treasury $25,000.

As for making people tell the truth, if a news agency tells a falsehood and doesn’t visibly retract a story, $100,000 fine. If a President or member of Congress tells a falsehood without a visible retraction, $25,000. If a story is repeated, the fine is tripled. If the politician hits ten lies, the fine is tripled, as well.

The job to collect national fines will be imposed on the Secretary of the Treasury. Local fines can be collected by the City Tax Collectors. Failure to pay, will double the fine and require public disclosure by name and party. This may cause folks to think about how they use their time. It would also help with our deficit and debt.

Being safer is harder when we lose focus

Our new President used fear as one of his key marketing messages to get elected. Let’s face it, fear sells especially to an uninformed audience. He feels obligated to act on those selling points as a show of force – build that wall, limit travel and focus on Islamic terrorists. It is not unlike a gorilla beating on his chest before a fight. They are largely symbolic than effective.

The dilemma is not only are these efforts not going to make us safer, they will actually have the opposite effect. Conservative columnist David Brooks said not only was the travel ban rolled out with equal parts chaos and incompetence, the ban will accomplish nothing except make us look poor in the eyes of the world and be used against us by terrorists. The best defense against extremists is a welcoming and flourishing diverse society.

The same is true with the heightened focus using the words “Islamic Terrorists” at the expense of funding of other terrorism fighting within our borders. Per an editorial in The Charlotte Observer called “In war on terror: look closer to home,” the following quote struck me.

“Charles Kruzman, who teaches sociology at the University of North Carolina at Chapel Hill, and David Schanzer, director of the Triangle Center on Terrorism and Homeland Security at Duke University, say that 74% of the law enforcement agencies surveyed listed anti-government extremism as one of the top three terror threats in their jurisdictions – compared with only 39% who felt the same about Al Qaeda and like groups. And, with good reason: an average of nine American Muslims per year have been involved in terror plots since 9/11, in contrast to the 337 per year by right-wing extremists.”

There are over 1,000 domestic terrorist groups in the US that range from right-wing extremists to anti-government to white supremacists groups. Yet, the President feels we should focus less on this problem preferring to use the funding to fight a much lesser problem. To me, this is the direct influence of Steve Bannon who catered his Breitbart website to alt-right extremists.

Finally, building a wall between us and Mexico is symbolic more than it will be effective. The cost will likely be higher than the recent Homeland Security estimate, as that does not include land acquisition and cost overruns tend to occur. Plus, the annual maintenance is not factored in. Yet, illegal immigrants are largely here and the flow of immigrants has slowed. The ones that are here are accretive to the economy buying goods and paying taxes. If the President thinks building a wall will solve a problem, knock yourself out.

So, our President is focusing on three things that will do little to make us safer. Yet, these bumper sticker solutions were boasted about on the campaign trail, so he feels he must beat on his chest and say look what I have done. Since our money is dear with almost $20 trillion in debt, we could be spending that money more wisely in my view actually using a data driven analysis on where it would be most helpful to make us safer. The problem it is hard to put data driven analysis on a bumper sticker, or Tweet.

Big Issue #1 – Dealing with our Debt

A topic that was discussed very little during the campaign and debates is our ticking time bomb problem of US debt. At almost $20 trillion and growing, it deserves its ranking as Big Issue #1 as it will impact everything we do as interest cost becomes an even greater part of our annual budget.

Let’s start with a few quick numbers in our 2015-16 fiscal year for context:

Current Debt = $19.8 trillion
Annual Revenue = $3.267 trillion
Annual Expenses = $3.854 trillion
Annual Deficit = $0.587 trillion
Annual Interest Cost = $0.284 trillion

Note, the annual interest cost is included in the expenses. If we did not spend one cent outside of paying the interest cost, it would take almost seven years to pay down the debt. But, we do have major and minor expenses, so it will take a concerted effort that will need to include some revenue increases, as cost cutting will not get us there unless we are prepared to make significant cuts to defense and major programs like Social Security and Medicare, the top three cost items.

What is troubling is our President Elect’s economic and tax plan has been measured by two non-partisan groups – The Committee for a Responsible Federal Budget and The Tax Foundation – to increase our debt by $5.3 trillion over the next ten years. Quite simply, we cannot afford to do that.

So, we must be smart about what we do it or we will make the problem much worse. The President Elect has said we will make it up in an expanded economy, but several  economic modeling firms, such as UK based Oxford Economics and US based Moody Analytics, project his plans as creating from malaise to recession in our economy.

We are at the point where we must set campaign rhetoric aside and govern off real data and analytics. There are things we can do to decrease the debt. Two non-partisan organizations – The Concord Coalition (www.concordcoalition.org) and Fix the Debt (www.fixthedebt.org) – have good exercises where you can value the impact of certain changes on the expense side and revenue side.

It should be noted, like Corporations, there are areas where we need to increase spending such as on infrastructure investment, while we make cuts in others. Also, as we are an aging country that is the most obese country in the world per the World Health Organization, there will be upward cost pressures on health related programs.

This is not an easy exercise, but one we must do. Cutting revenue through less taxes is an easy thing to promise during the campaign season, but we are at the point where we must make tough decisions and decreasing revenue is one we probably should avoid. And, the longer we wait, it will become even tougher to solve this problem.