Call me crazy but I had a sinking feeling while our skipper and national bandleader spoke last night, telling how that even though the New Orleans portion of our ship of state had taken on water, the pumps were working and not to worry because New Orleans, and America are, after all, unsinkable.
(Editor's warning: Yes, I am going to beat another bad analogy to death. Sorry.)
What Bush did not mention last night, or for that matter even seem to recognize, was that New Orleans is only one of many leaks in his ship of state. Granted, it's a pretty damn big leak, adding another 250 billion gallons of red ink, but that's a drop in the bucket compared to what's already rushed in through other holes. Either the skipper is in deep denial or his officers are afraid to tell him the terrible truth -- the ship is going down.
Let's take a little tour below decks and assess the accumulated damage already inflicted by this reckless crew.
Social Security: The present value of all future costs and obligations for that program less expected taxes in perpetuity is estimated at $13.7 trillion. If you believe the $1.7 trillion supposedly being held in the Social Security trust fund actually exists, then the unfunded liability is $12 trillion. (Ref)
Medicare: Bush's new unfunded drug benefit, which kicks in this January, will add another $720 billion over its first 10 years, with costs reaching $100 billion annually by 2015. According to estimates by Medicare's chief actuary total expenditures for the prescription drug benefit will reach $1.2 trillion between 2006 and 2015. (Ref)
The Pension Benefit Guarantee Corporation (PBGC): You might have noticed that this week two more major US airlines are dumping their penision liabilities in the lap to the underfunded PBGC. It's a trend. Unfunded pension liabilities for private companies have skyrocketed from $26 billion last year to a staggering $111 billion this year, This represents a 425% jump in unfunded liabilities that can only be covered by taxpayers. (Ref)
The list of revenue leaks goes on and on and on. The war in Iraq is working it's way towards $300 billion, New Orleans another estimated $250 billion to $300 billion.
Pretty soon we, as has been said, we start talking real money. Even before Katrina some worried economists started adding up our national obligations for which no funding exists and came up with was a number only Carl Sagen could love... trillions upon trillions upon trillions...
$51 trillion, to be precise
Economist Larry Kotlikoff of Boston University thinks the unthinkable in his analysis of the long-term viability of federal spending obligations in the latest issue of The Milken Institute Review. “With the new drug benefit,” Kotlikoff writes, “the fiscal gap now totals roughly $51 trillion. Roughly speaking, that’s five times the United States GDP and – perhaps most chilling – far larger than total U.S. private wealth. “Coming up with $51 trillion through any means will be extraordinarily unpleasant,” he adds. “One way would be to raise federal personal and corporate income taxes immediately and permanently by 78 percent. Another option would be to cut all Social Security and Medicare benefits in half.” (Ref)
And hey, if anyone should know an unfunded liability when he sees one, it's Mike Milken! That study was done a year ago. So you can be sure that even that bone-chilling figure is even larger now.
I'm no economist. I'm just a 60-year old guy who pays off his credit card balance each month. I fear only two things – hard work and debt. I view debt as the financial equivalent of a pre-cancerous lesion just waiting for chance to grow like tumor and bury me. So, call me old fashion. But I sleep well at night. (Hell, these days I can even catch a few winks during the day as well.) Debt free and relaxed. That's me.
But look, George W. Bush is relaxed too, even though he has 51 trillion reasons to be nervous. In fact, if Bush were at all normal he'd be one big walking nervous twitch. I sure know I would be.
But Bush remains calm and cool as cucumber Does he know something I'm missing? Or is he just trying to look calm so as not to cause a financial panic? The American economy is indeed a marvel, but no economy can operate forever with that kind of overhanging liability, unless revenues are raised to cover them. Does Bush understand that? What makes this guy tick? What makes him think he can cut taxes and pay every bill that comes along, even a foriegn war and a whopper of a natural disaster, by just saying "Charge it.?"
Here's a clue.
When I was working on my book, Inside Job: The Looting of America's Savings and Loans, I interviewed a lot of Texas high-rollers. Those half-baked, wild and crazy, cowboy/businessmen never had it so good as they did after Ronald Reagan deregulated federally-insured thrifts in 1981. All those pesky federal rules about how much money could be borrowed by a single borrower, how much in assets they needed to qualify for millions, even hundreds of millions, in loans, were gone. It was pig heaven for cowboy developers. At the height of the building boom one of them was asked how he chose the land he would borrow to develop. "I take my huntin' dog out there and when he pisses on a rock I buy all the land around that rock," he drawled -- the Texas version of market research.
Another Texas developer, who also inevitably went belly-up, gushed to me that if he couldn't make the payments on his millions in loans, his good-ole boy banker would just roll the missed payments into his loan balance, "The beauty of it (deregulation) is that I can borrow all this money and never have to pay it back," he gushed, explainng, "because a rolling loan gathers no loss."
Of course those loans did gather loss, just not to the wild and crazy bastards who borrowed and squandered all that money. That little exercise in supply-side, less-government, pseudo-capitalism came to a roaring end with re-regulation, but only after costing taxpayers $165 billion.
But therein lays an important clue into Bush's mindset. He is a the product of a clan and culture that routinely breaks the laws of economics but never faces the music. During George W. Bush's own short foray into the world of business he never made a single dime of genuine profit. And he never had to repay a single loan with his own money. And, no matter how poorly his ventures proformed, he was never allowed to fail. (It's an amazing and infuriating tale and you can read about in gut-wrenching detail right here. I wrote that piece over a dozen years ago and not a single fact in it has ever been challenged.)
All of which explains why George W. Bush is so comfortable with debt. Debt has never been his problem. Any debt he accumulated was always repaid by someone else. And that's how he views the mushrooming national debt as well. It's not his problem now and never will be. Someone else will deal with it; us, our kids, and their kids. Worrying about debt is simply not something Bush has any personal experience with.
This mindset runs throughout the Bush family. I recall covering the federal hearings that looked into his brother, Neal's, stint as a director of Silverado Savings and Loan in Denver. While on the board Neil's business partner was granted about a $100 million in loans, all of which went into default later. That same business partner made Neal a $100,000 personal loan and then "forgave it." When asked by the committee if he saw that as conflict of interest Neal looked confused, even stunned for moment. Finally he leaned into the microphone. "No sir, I don't," he replied. "It happens all the time."
Neal was under oath so he couldn't lie, he told the truth, the whole truth and nothing but. Because, in the Bush family, such things do "happen all the time." It's just a simple matter of well-heeled, well-connected friends helping friends help one another out. And rarely with their own money, but other people's money, investors, taxpayers or foreign interests looking to plug into the lucrative Bush clan circle jerk.
"It happens all the time." and happening again now in New Orleans -- another $250 billion in debt someone else will have to repay. Gotta rebuild an entire US
city? Bush's solution: "Just charge it."
What about raising some money for a change? You know, like raise taxes.
Why do that when there seems no end to the cash that can be borrowed?
Bush-enomics reminds me of the joke about the dumb blond who, when told by her bank that her checking account is overdrawn, replied, "But I can't be out of money, I still have checks."
The only trouble with that – and it's a big one -- is those checks Bush keeps writing -- all of them, Iraq, New Orleans, Medicare, you name it -- are being covered by the Chinese and Japanese. And if you think CitiBank gets cranky when you miss a payment, wait until you see how the Chinese react. They'd like nothing better than to the USS America flounder.
And all the Chinese need to do to make that happen is to be no-shows at future U.S. Treasury bond auctions. That very day, our bow would disappear beneath the surface, our stern begin to rise and those who did not make it to the lifeboats in time would have no choice but to tread the frigid waters of depression and pray someone comes along and throws them a line before they sink too.
There's still time to save the ship. But it depends on whether the red ink has risen enough to motivate the number of Republicans and Democrats in congress needed to pass a veto-proof tax increase and cut our expenditures in Iraq. But more Republicans seem concerned about mounting deficits than Democrats. One would think this, of all times, would be the time Dems would be screaming bloody murder about the Bush tax cuts. But no.. not a peep. Why?
I think I can help you with that mystery too. When I was last in DC back in 2002 I spent some time pleading with a high-ranking aide for then Democrat Senate leader, Tom Daschle. I pled for him to push for a repeal of at least a portion of Bush's $1.6 trillion in tax cuts. He hemmed and hawed for a while and I pushed more. Finally he blurted out the truth. "The Senator can't do that, Steve. Too many of our own members voted for those tax cuts."
Yeah. I see. That would an embarrassment – a well-earned embarrassment. Way to go....
MEMO TO DEMOCRATS
Got Guts? If so this would sure be a good time to prove it. Demand that the portion of Bush tax cuts that benefit the top 1% of taxpayers be repealed. You need to start pumping some the red ink out. You know, like you did during the Clinton administration. Remember those days? When you raised taxes and had budget surpluses instead of triple-digit annual deficits? We even had enough left over after paying our bills to begin paying down the trillions in debt left behind by the Reagan and Bush-One administrations. I think we can all agree, that was good thing.
I know you hate doing unpopular things, but sometimes you have to. It's called leadership. You remember leadership, don't you. It's what you promised you'd provide if we voted for you. But, instead of leadership look what we got -- a bunch of round-heeled pols who, at every critical moment in the last five years, when they should have stood up to these neocon-pseudo-capitalists, tossed their legs in the air put out for them. (Don't you feel dirty? Ashamed? Used? You should.)
Okay, that was yesterday. You can still redeem yourselves. But you have to lead -- if you can. If Democrats can't make a compelling argument for rolling back Bush's tax cuts at a time like this, when can you? We have a war that's running up a tab of $5 billion a month, we have to rebuild an entire chunk of our nation and, just over the near horizon lurks the Baby Boomers, poised to descend on Social Security like a biblical plague of locusts. If you can't lead with ammo like that, when can you?
Then, maybe you never could, in which case you would be not just bad leaders, but liars too boot. That would mean what we have are a pack of pseudo-leaders and pseudo-capitalist running the show. In which case we truly are screwed.
We await. But, we are no longer interested in what you say. We are only watching what you do... or don't do.
So there have it -- another maritime analogy beaten to a bloody pulp, a few mixed metaphores some cowboys and even mules thrown in for flavor. Where else can you read crap like this?.
Have a nice weekend. I'll see you next week.
In the meantime I think I'll just grab my lifejacket and mosey on up to the lifeboat deck. They say you can still hear the band playing from up there.