Friday, February 5, 2010

Social Security, Medicare Update: Problems Start Now

I have referred to the dire warning sent out by John Lewis a few months ago about Social Security, Medicare, and Federal Spending. Dr. Lewis used a report written by a former government budget official, which was based upon current information at that time. Well, surprise, the recession has had an impact.

According to a report (here) Social Security is experiencing a shortfall in its revenue this year, many years before the last Social Security report expected. It will need to draw on the “Trust Fund” this year. The SSA won’t need much to meet its needs, but the real problem is that SSA revenue was expected to exceed it needs and add to money to the Federal Budget. So the deficit will be larger than they expected.

Further, as long as the number of workers contributing to Social Security remains less than needed to meets its needs, we will see Social Security dipping into income tax revenue and the deficit will become larger.

I am sure that there is consternation in the Treasury Dept. I am sure that BO and most of his gang aren’t paying any attention.

It doesn’t mean that the problems that John Lewis warned us about will happen that much sooner, because that mess is more dependent upon the age of the population.

What we will see is larger deficits, larger Treasury Bond auctions, more resources removed from real economic activity, slower growth, slow job growth, more recession, more made-up money being created, and probably higher price inflation.

Wednesday, February 3, 2010

The Question of Obama

When I look at the next few years, one of the big questions that I have is the real nature of Obama. Every time he presents another of his ideas it seems more extreme than I could have expected, more cut off from the real world, more bazaar, more like we are living in Venezuela. I am serious, Obama is envious of Chavez, just as FDR was envious of Mussolini. Therefore, I want to ask a question:

Does Obama have any sense of restraint? Can he restrain himself?

I ask because I have seen no restraint in any of his actions so far. In each of his major proposals and attempts to push forward his program, he seems to go for the full effect at once.

His health care plan was nearly full socialism. And in spite of growing resistance to his health care plan, he still seeks a way, any way, to pass the thing.

In the face of an economy that is showing no real start of a recovery, he has presented a budget that will spend outrageous amounts. Actually, I don’t have an adjective that fully expresses the audacity of the “thinking” that is behind this budget.

With no sign that his previous “stimulus” packages have provided any benefit, he is demanding a big new one.

With the Supreme Court sitting immediately in front of him, he criticizes their pro-free speech ruling.

He barges into the Republican retreat and plays gangster, and then pleads with to give him all the power he wants to do things his way.

He criticizes people for wanting to have fun and offends another Dem.

He verbally attacks anyone who he thinks the public will allow him to bludgeon, like banks or major corporations.

Practically in the same day he demonizes the banks for taking on too much risk and then for not taking risks when he wants them to do so.

I am sure that the list can go on a lot longer, but you’re saying, “yes, we know”.

What is he going to do when he becomes really frustrated? What is he going to do later in the year or next year when it is clear that the economy is not going anywhere? What is he going to do when low tax revenues are making the Treasury borrow sums of money that is causing the market to choke and long-term interest rates go soaring. And then criticism becomes more severe. Is BO going to retreat? Or is he going to become more aggressive, call on his still loyal, younger supporters and demand change. Is he going to instruct his loyal people in the administration to nationalize the businesses that are not bending to his will? Is he going to …?

What is he going to do?

I don’t know. In the past we have been confident in the willingness of politicians to follow the legal procedures of office. But we have seen actions in the last two years that completely ignore property rights and there has been no real protest within the Washington establishment. It began with Bush, and BO is quite willing to follow in Bushes footsteps and beyond. I wonder if BO has any restraint. I wonder if BO is willing to accept any significant opposition to his desires.

Do you have a feel for the man? Will he accept frustration? If, as I suspect now, that in the next election he will lose the majority he has in at least one House of Congress, will accept defeat?

What do you think he will do?