Thursday, November 3, 2016

November, 2016, Part 2, Political Class Insanity: The Fiscal PLight of Social Security, A Lawless Presidency, and Another Housing Market Crisis

It is the beginning of another month which means it is again time to review the latest political class insanity from Washington and around the world. Political class insanity takes many forms including the wasting of taxpayer wealth, criminal fraud within government programs, inane and stupid political quotes and actions, the inability to create and implement effective and efficient government programs, stupid and ill performing economic policies and strategies, and other forms of insanity that continue to evolve and surprise and shock us.

The current monthly record for the number of posts that were needed to cover one month's worth of insanity is ten. We equaled that record last month when we needed ten days to cover one month’s worth of political class insanity. There is a very good chance that the ten day record could fall this month since as we get closer and closer to the election, the volume of ineptness grows almost exponentially. 

But today and for all of the insanity posts this month, let’s start off with a welcome piece of honest political dialog. It comes from a State Department spokesperson. Mark Toner, who is about to start the daily State Department press briefing. In a joking matter, he makes the following quote: "Welcome to the State Department. I think we have some interns in the back. Welcome. Good to see you in this exercise in transparency and democracy." 

He then burst out laughing at his own quote, indicating he also knew what a joke the Obama administration has been, especially Mr. Toner’s State Department, when it comes to cover ups, lack of transparency, denial of Freedom of Information Act requests, the prosecution of whistleblowers, etc. But at least it was a little refreshing to finally hear some actual honesty out of Washington as we see from the actual clip of the news conference:

With that context of honesty, let’s see what other insanity has been going down:

1) Yesterday, we discussed the reality that unless the current trend of Federal government spending is sharply curtailed, by 2046 every American family will be paying an incremental $12,000 a year in Federal taxes to cover the cost of the national debt interest payments and the rest of the Federal government expenses. One of the prime drivers of these ever escalating Federal government costs is the Social Security Administration. 

How bad is the fiscal condition of the Social Security process? Consider an article by Lauren Bowman and Romina Boccia that was written for the Heritage Foundation on October 3, 2016:

  • The title of the article kind of says it all: “Projections Differ, but Social Security is in Deep Trouble.”
  • Social Security is on a path to be fiscal insolvency that will result in both deep payment cuts and large payroll tax increases.
  • The latest Congressional Budget Office estimates project that the program’s Old Age and Survivors Insurance and Disability Insurance trust fund will run out in 2029.
  • The Social Security Trustees are a little more optimistic but they still believe that the fund will run out of funny pretty soon also, in 2034.
  • While the assumptions used in each forecast differ slightly (e.g. the Trustees’ model assumed a fertility rate of 2.0, the CBO assumed a rate of 1.9), each model predicts disaster within the next 18 years.
  • While these two models illustrate how bad things are, readers of this blog know that things are already worse than this. Social Security has been in a negative cash flow situation for a number of years now, paying out more in benefits than it collects in taxes. 
  • The trust funds are really nothing more than a Federal government Ponzi scheme since neither of them contain any real wealth. They are just a mountain of worthless IOUs that the Treasury acknowledges it took from the Social Security administration over the past five decades to help finance the wasteful spending of the Washington political class.
  • So the trust funds are nothing more than an accounting gimmick that cover up the fact that general tax funds are already being used to fund the Social Security shortfall. And this shortfall will get larger and larger over time as the cash flow shortfall worsens and more and more Baby Boomers retire. 

Ways to fix the system are pretty clear: raising the retirement age for those that can afford to hold off on receiving Social Security payments (means testing), denying Social Security payments to the likes of Bill Gates, Warren Buffet, Hillary and Bill Clinton, Donald Trump, etc., folks who are wealthy beyond our dreams and who will never need a Social Security payment, cleaning the massive fraud that likely costs the Social Security process upwards of $100 billion a year, and implementing economic strategies that results in a robust and growing economy, that will increase the amount of Social Security taxes flowing into the system. Easy steps on paper, probably never to implemented by a cowardly and inept Washington political class.

2) We have often classified the Obama administration as the most unlawful, un-Constitutional Presidency of all time. We listed out our reasons in the following post:

Apparently, we are not alone in that assessment when you total up how many times the Obama administration has had its actions and executive orders slapped back at him by the Supreme Court and lower courts, as listed out by an article by Fred Lucas, writing for the Heritage Foundation on October 7, 2016:

  • According to an analysis by Ilya Shapiro of the Cato Institute, Obama has only had a win rate of 45% for cases brought before the Supreme Court.
  • His five predecessors had a win rate between 60 and 75% in front of the Supreme Court.
  • In Shapiro’s opinion:“Every president ratchets up executive power, it’s what Congress and the courts have allowed to happen over the years. President Obama has pushed beyond that in pushing administratively what he failed to do legislatively. This reflects an Obama administration pattern of ignoring the rule of law and usurping the role of Congress,” 
  • Alden Abbott, deputy director of the Meese Center for Legal and Judicial Studies at the Heritage Foundation agreed with this lawless Presidency argument conclusion: “The U.S. Supreme Court and lower federal courts have overturned Obama administration actions that went beyond constitutional and statutory limits at an unprecedented rate, as documented by statistical studies. This reflects an Obama administration pattern of ignoring the rule of law and usurping the role of Congress—as illustrated, for example, in its unauthorized efforts to rewrite the immigration laws and the Obamacare statute without congressional authorization,” Abbott said.
More agreement with us that this has been a very lawless, arrogant, and reckless administration relative to do things it was not legally allowed to do. A partial list of the major court slap downs include the following wide ranging spectrum of where the Obama administration got out of control: 

1. Executive Amnesty
2. School Gender Identity Restrooms Mandate
3. Appointing Without Confirmation (unanimous Supreme Court slap down)
4. Delayed Carbon Regulations
5. Searching Cellphones
6. Obamacare Judicial Setback On Subsidy Funding
7. Regulating Water

Most lawless President in my lifetime, the courts back me up.

3) One last piece of depressing government fiscal irresponsibility for today. Remember how the Federal government, via Fannie Mae and Freddie Mac, got all entangled with the housing market, so much so that when the housing market bubble popped the American taxpayer had to bail out these two government entities to the tune of hundreds of billions of dollars? Remember how Obama and the Democratic Congress was going to fix all of that so that the American taxpayer never again would have to step in and bail out these two mortgage giants in the event of another housing meltdown? 

Well, eight years after the housing market collapse, the same collapse that took down Fannie and Freddie, nothing has apparently changed. According to an article from the Economist, that was summarized in the September 2, 2016 issue of The Week magazine, the Federal government now controls and is responsible for backing the vast majority of new mortgages being issued in the country today. Thus, if the housing market collapses again and home borrowers stop paying their mortgage payments, it is the American taxpayer who will get stiffed, not investors or mortgage issuers.

To quote the article: “We presume that the mortgage-debt monster has been tamed. In reality, U.S. taxpayers are more at risk than ever.” Nice going, Washington. You initially botch up the entire housing and mortgage market, force taxpayers to bail you out of your mistakes, and then turn around and to the exact same thing again, possibly even worse. Insanity.

Another day, another set of insanity: risking all again in the housing market, a lawless President confirmed, and Social Security still hurtling towards insolvency. More insanity and idiocy tomorrow.

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