College Corruption Federal Debt Truth

Biden Will Eventually Cancel College Debt, And So Enrich The Squad

By Rod Thomson

Tax-sucking Congressional socialists continue to pressure kinda sorta President Biden to cancel at least $50,000 in student debt via executive order. Despite the enormous strain other Democrat policies have had on hard-working American families, this bailout to college grads will almost assuredly happen because this presidential anomaly’s handlers cannot or do not want to stand up to the radical left for long.

There are endless problems with this, which were well hashed out when Sen. Bernie Sanders made this college grad bailout a hallmark of his campaign. 

First, the fairness issue. Millions of Americans over many generations, myself and wife included, paid off student debt from college over the years. And now this crop of entitled college kids want a bailout, even as a college degree has diminishing value — and no real value in several degree areas. 

Second, the $1.6 trillion price tag is just another completely irresponsible load of national debt on a system that may not be far from buckling from already existing astronomical debt.

But there is also a little known element: Many of the most outspoken proponents of canceling student debt themselves have substantial college debt. They would directly benefit financially from their vote. If there was such a thing as a conflict of interest in Congress, this would be at the top of the list. But such unabashed corruption is simply accepted in D.C.

Make no mistake, every dollar of this debt will fall to the federal government, which is eventually paid by American taxpayers.

As members of Congress, these folks pull down $174,000 in taxpayer money, plus gold-plated benefits that literally no other Americans get. And now they also want taxpayers such as coal miners, convenience store clerks, maids, lawn service guys, roofers, road workers, pavers, pool installers, along with bankers, lawyers, doctors and business owners, to pay off their college debt. In fact, they want to force them to.

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It’s all pretty unconscionable on a moral level, but also the sheer chutzpah of socialists who supposedly want to help the little guys by spreading the wealth, demanding the little guys help pay off debts they can clearly afford to pay off themselves. A $174,000 annual salary makes them 5 percenters, making more than 95 percent of Americans — who they want to pay off their debt. This puts the lie to the whole schtick. Like every socialist ever in power, they simply want more for themselves.

And it’s right out there in plain sight. For instance, Democrat Rep. Rashida Tlaib owes $70,000 in college debt for her law degree and is one of the biggest proponents for Biden to sign away $50,000 with an executive order, as many, such as Senate President Chuck Schumer and Sen. Elizabeth Warren along with a bundle of others, say he has the authority to do so. (Obviously Constitutional authority is not what they are referring to.)

To blunt the obvious corruption in her position, Tlaib struggles up onto her self-righteous high horse and claims she didn’t become a lawyer to make money or buy “bougie cars,” but she went into the nonprofit world and worked as a lawyer for the good of the community. For that oh-so noble reason, her debts should be forgiven. (Probably should point out that many non-profits make more than most business owners or average lawyers, so, ah, no.)

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But it is classic socialist philosophy: Individuals are not responsible for the consequences of their actions, which parenthetically is why they favor releasing criminals based on skin color and not actions. They want the communal whole, via government, to pay for their consequences.

It’s not just Tlaib. Rep. Alexandria Ocasio-Cortez and Rep. Ilhan Omar both have substantial college debt and are vocal proponents of wiping out all college debt. There may be others. Since that is not going to happen in Congress, they favor Biden’s pen. 

Two-face socialist authoritarians just being true to themselves.

Rod Thomson is an author, former journalist, past Salem radio host and ABC TV commentator and Founder of The Revolutionary Act and The Thomson Group. Twice banned on TikTok. Follow him on Instagram. Like Rod on Facebook.

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Economics Federal Debt Truth

Why Inflation Is Minimal Is Why The Middle Class Is Struggling

By Victor Sperandeo

From 2008-2018, U.S. debt virtually doubled while the M2 money supply compounded at 6%. This should have caused rapid inflation. It didn’t. In fact, inflation decreased to 56-year lows during the period from 2009 to 2017.

The Federal Reserve and leading economists say they don’t know why. Here’s the explanation.

To have inflation, commodity prices must perform better. Commodities are non-correlated to stocks and bonds while they are highly correlated to inflation, volatile interest rates, and high or rising GDP growth rates. All of these were at historic U.S. 240-year lows over the last nine years. Using the CPI to represent inflation, inflation made continuous new lows ending in 2017 at a compounded rate of 1.61% on a 10-year rolling annual basis. The five-year rolling annual rate also made new lows but has since recovered by 7 basis points. Since 1961 the five-year low was 1.36% (2012-2016), but now from 2013-2017 is 1.43%.

The reasons for the decline in these economic barometers were the policies of President Obama.

The “change” brought to the nation included increased regulations (Todd-Frank), higher taxes for everyone (the end of the Bush tax cuts in 2012), and the creation of Obamacare. The ACA was effectively a huge tax on the middle class disguised as an insurance policy, which was then redistributed to the lower class, who got healthcare insurance policies at way below the market prices, by subsidizing the insurance companies. As a consequence, Obama transformed America into a virtual Corporatist/quasi-Socialist State.

Today the U.S. is essentially an oligarchy of party leaders and federal judges, who are controlled and heavily influenced by multinational corporations and outside special interests. They operate much like cartels. In short, we now have government similar to that of a banana republic.

Therefore, with 0% nominal Fed Funds rates for seven years and three large Quantitative Easing (QE) programs, combined with an increase in the Federal Reserve Balance sheet from $800 billion to $4.5 trillion, why isn’t inflation at least approaching historic compounded levels of 3.10% that were seen between 1913 and 2017?

The primary reason is: when you execute extraordinary amounts of printing of paper money via QE, i.e. buying government debt, and other assets, such as mortgages, the cash created “out of thin air” goes only to the very few investors who own those assets in large quantities. No inflation occurs, as those investors don’t spend that money, but rather invest it in assets such as equities, real estate, other debt and art. Prices for these assets rose to historic levels as a consequence.

This is called “wealth creation” instead of inflation. This Fed monetary and tax policy is also encouraging corporate stock buyback programs, which caused the velocity (or turnover) of money (via M2) to decline to the lowest level in 60 years, or 1.4 times. This, coupled with a lack of investment in new plant and equipment — causing capital expenditures to decline — resulted in a major decline in productivity to 0.7. That in turn led to stagnant medium incomes over the last 20 years. (This doesn’t take into account the Free Trade thinking that caused the 19.8 million manufacturing jobs to decline to 11 million since NAFTA was enacted.)

If the bulk of people don’t get the money, they can’t spend beyond their revolving credit card limits. Household non-revolving credit debt (house equity and auto loans) is at record highs as of January 2018.  Total household debt is $13.2 trillion, also a new record. Credit card interest rates average 19.9% and range from 9.9% (often only as a promotional rate) to 29%.

Contrast this to corporate debt which despite being at record levels costs around 3% to 3.25% on seven-year term debt. This is the rate corporations are paying to borrow money to buy back stock. Inequality exponentially increases while the middle-class standard of living steadily declines; meanwhile low but steady inflation still takes its toll (for which nobody blames the Federal Reserve?).

Since 2008, “financial repression” has been in effect with interest rates below inflation. This is why stocks go up but no major actual inflation occurs. In effect, it is a method of government theft of individual savings; inflation is a stealth tax. So, people hoard more as they earn less and their savings decline. For example, the 90-day Treasury Bill yield at the end of March was 1.71%, while the CPI was 2.36% year over year.

This makes government and corporate borrowing virtually free. Historically (since 1926) T-Bills have traded at a compounded rate of 70 bps above CPI, not 75 to 50 bps below CPI. This is what is meant by “Government is created to serve the rich, while enslaving the poor.”

Moreover, these increases in government debt are not sustainable.

This is an existential threat to our Constitutional Republic’s political structure. Normally a nation with a printing press never defaults by bankruptcy, but rather by hyperinflation. This in turn historically has led to authoritarian dictatorships (see Napoleon and Nazi Germany). I should also mention schemes of “Universal Basic Income” such as Facebook CEO Mark Zuckerberg is proposing would most likely cause hyperinflation, as people would get free money estimated at $36,000 a year per family, and certainly they would spend it.

In June 2017 the CBO projected that total stated debt would grow to $30.7 trillion in 2028 (up from the current $21 trillion). However, in March 2018 that estimate was increased to $33.2 trillion, or an additional $254 billion per year. Interestingly, they also raised their revenue estimate over the same period by over $1 trillion (even after the latest tax cuts). So, these higher debt projections already take into account increasing revenue! This assumes no recession during the period, which I estimate would increase debt by additional $12 trillion (making U.S. debt $45 trillion). Not to mention our unfunded liabilities which could be anywhere from $100 trillion to $220 trillion in 10 years going forward.  

It should be noted that the longest recovery since 1854 — when the NBER began to keep track of such statistics — was 120 months. We would reach 121 months in our current recovery in July 2019. To think (via the CBO projections) the U.S. can go 10 more years in recovery (for a total of 227 consecutive months) is like assuming the U.S. will win the lottery; it may not be impossible, but it is highly unlikely. That is, unless you’re a politician (or the CBO) who lies for a living.

Certainly, the borrowed times we live in will not be the future we assume we know.

At the bottom line are two fallacies. The first is the idea that paper money wealth will protect you, and what you see in asset prices around the world is accurate. Interest rates are manipulated by governments to the extremes in the history of civilization. Therefore, we come to the second fallacy: the belief that prices are real — based on a real foundations.

How is this mindset allowed to persist, and why is this growing danger consistently ignored? This kind of thinking is based on “perception policy” to keep the sham going. The situation was best described by Ayn Rand in her novel The Fountainhead: “The hardest thing to explain is the glaringly evident, which everybody has decided not to see.

Victor Sperandeo serves as the President and CEO of Alpha Financial Technologies, LLC (AFT), is a founding partner of EAM Partners L.P. (EAM), and serves as the President and CEO of its general partner, EAM Corporation. Sperandeo is a trader, index developer, and financial commentator based in Dallas, Texas. He has over 45 years’ Wall Street experience trading both independently and for many notable investors. He is widely regarded as an expert in commodities, particularly in the energy and metals sectors. His market crash prediction in a September 1987 Barron’s interview earned him great recognition and highlighted his deep understanding of financial markets. Author of several books detailing his philosophy: Trader Vic — Methods of a Wall Street Master; Trader Vic II — Principles of Professional Speculation, and Trader Vic on Commodities: What’s Unknown, Misunderstood, and Too Good To Be True. He was a 2008 Inductee into the Trader Hall of Fame by Trader Magazine and included on Ziad Adelnour’s list of top 100 Wall Streeters.

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Constitution Economy Federal Debt Truth

Dear Democrats, Media, Everyone: The Problem is SPENDING

Rod Thomson

Yes, reducing the corporate tax rate on U.S. companies is essential for keeping them competitive with most of the countries who have lowered their own rates considerably below ours. That’s good for businesses, jobs and the economy. Well done.

However, the rest of the tax reform package is largely a sop to class envy and ongoing social engineering, using the tax code to encourage or discourage behavior. Those are not conservative principles and should never have been part of tax policy. And they are not a blueprint for making America great again.

Why should the federal government require some Americans to subsidize other Americans, whether it is home ownership or college tuition? (If you don’t own a home, you are subsidizing those who get mortgage and property tax deductions in funding the federal government because they are paying less than you due to the deduction. Ditto on college tuition and the rest, including no-income tax states subsidizing high-income tax states.)

While this is on Republicans right now to fix, it is pretty farcical to see again just how little Democrats even bring to the debate — almost any debate. With virtually every tax plan of any kind at any stage, Democrats have one response: “It’s a tax cut for the rich.” And so, even when this one is demonstrably not that, it’s still the mantra because they simply have an empty tank philosophically.

Democratic Sen. Chuck Schumer said: “It’s little more than an across-the-board tax cut for America’s millionaires and billionaires.” Democratic Sen. Claire McCaskill told NBC: “This is a tax cut for wealthy people…” Oh wait…That was on the bill to repeal Obamacare. Sorry, they just offer so little they use the same lines for multiple issues.

So it’s up to Republicans to be the responsible adults, and they’re not really making the grade when they fail even to see that Congress should not dictate winners and losers through the tax code.

However, not surprisingly the entire tax package debate misses the central, endemic problem facing federal government finances: It’s not mostly about taxes, it’s mostly spending. And the problem with spending is that Congress and presidents are addicted to it for their own personal gain —political gain, popularity gain and financial gain.

In reality, most Americans are actually damaged right now by the taxers-and-spenders in D.C. And eventually all Americans will be hurt by them when it all collapses. And yet they go merrily on, destroying the prospects for a brighter future for our children so they can get what they want now. They are aided in this charade by a media that — like Democrats — can only report tax and spending issues one way: who loses and who wins. They pretty much mimic Democrats’ vacuous take.

NPR does “thoughtful” reporting by referring to the Tax Policy Center, which found that “nearly three-quarters of the savings from the tax overhaul would go to the top 20 percent of earners — those making more than $149,000.” Well duh, those are the people paying most of the taxes. Pretty sure both the Tax Policy Center and NPR know that. Also pretty sure they never give that context.

There are two sides of the ledger. Let’s go through the numbers on both sides and see if it is a problem of low taxes or high spending.


The unpopular truth: the rich are paying more than their fair share

This is not popular to say — which is why politicians from both parties avoid saying it — but it is factually undeniable: Wealthy Americans are actually carrying the rest of us when it comes to income taxes. They pay so much more than they get from the federal government, it’s almost embarrassing. In a rational conversation not laden with emotions and envy, we would actually be thanking them.

The New York Observer sums up the numbers, a.k.a. facts, this way:

“The latest federal income tax data reported by the IRS shows that the top 1 percent of income earners pay 39.5 percent of all federal income taxes, nearly twice the 20.6 percent share of national income they earn. The entire bottom 50 percent of all taxpayers pay 2.7 percent of federal income taxes, which is only a small fraction (about one fourth) of their share of national income.

“The top 1 percent, indeed, pay a much bigger share of federal income taxes than the entire bottom 90 percent of income earners, who pay only 29.1 percent of federal income taxes, while earning 53 percent of national income. That means as well that the top 1 percent pay a bigger share of income taxes than the entire middle class combined, defined as the middle 20 percent of income earners.”

That’s why the Democrats’ charges of tax cuts for the rich, and the media coverage is just so lame. One unfortunately expects politicians to be dishonest. It’s just a shame the media is also by not reporting the context of “tax cuts for the rich.”

This chart from the American Enterprise Institute puts it visually, explaining the net amount of taxes each 20 percent (quintile) of tax-paying households pay after taking out what they receive from the federal government in direct benefits. The bottom 60 percent of American taxpayers receive more than they pay in taxes, meaning only the top 40 percent even pay net taxes. And most of that top 40% is paid by those at the high end.

Suffice to say that the squawking from the left on tax cuts for the rich is because it is only the rich who are net income taxpayers to the federal government. You can’t give tax breaks to people who are not paying taxes.

But resentment and envy are emotions not easily remedied by facts, and so this trudges on.


The problem is spending other people’s money

An intrinsic risk at every level of government is that politicians spend taxpayer money to essentially buy voter support. This risk is magnified as government grows and expands both its authority and its responsibilities. When that magnification happens with the government overseeing by far the largest economy on the planet, we have a problem. And when that is happening in a dynamic of diminished personal moralities, greatly diminished Christian influence and epically bad leadership — we’re headed for disaster.

This concept was well understood by a wise, older Tennessee farmer with “incorruptible integrity” who upbraided then-Congressman Davy Crockett for voting to give public money to help victims of a natural catastrophe. The farmer made the point that regardless of the merits of helping the people — which he believed Congressmen should do personally — it was wrong for Congress to do. There was no (and still is no) Constitutional authority for charitable giving by the federal government. Crockett was so convinced by the farmer that he regretted his vote and promised never to do it again. Here is the invaluable original story from 1867.

Unfortunately it is a totally foreign concept to modern American ears.

A Heritage Foundation study of the federal government’s unsustainable spending programs plots out this phenomenon over the past 50 years: “The continuous level of deficit spending has increased public debt, which…rose from 33.7 percent to 73.6 percent of the gross domestic product (GDP).” Measuring as part of the Gross Domestic Product is a way of making it apples to apples over time in terms of affordability.

If we took every penny earned and generated in the United States’ $19 trillion economy, which is one-fourth of the entire world economy, we could not pay off our nearly $21 trillion debt — half of which was run up during Obama’s two terms.

Pew Research broke down the broad federal government spending nicely:

“In fiscal year 2016, which ended this past Sept. 30, the federal government spent just under $4 trillion, and about $2.7 trillion – more than two-thirds of the total – went for various kinds of social insurance (Social Security, Medicaid and Medicare, unemployment compensation, veterans benefits and the like). Another $604 billion, or 15.3% of total spending, went for national defense; net interest payments on government debt was about $240 billion, or 6.1%. Education aid and related social services were about $114 billion, or less than 3% of all federal spending. Everything else – crop subsidies, space travel, highway repairs, national parks, foreign aid and much, much more – accounted for the remaining 6%.”

Most of our spending is entitlements, and that is the category growing the fastest. Not a good recipe.

So we see that while tax revenue continues to increase to the federal government, spending increases even faster and most of that spending is on some form of transfer payment from some Americans to other Americans. Remember up higher we pointed out that the bottom 60 percent of income-earners pay no net income taxes after factoring in direct benefits from the federal government (and, of course, those who do not work at all obviously do not pay any taxes) and we see the problem at the ballot box. Recipients of the government’s forcibly taking money from some to give to others are able to vote for the small-minded politicians who will continue taking and distributing that money in exchange for votes.

Alexander Fraser Tytler, was a Scottish judge, writer, historian and Professor of Universal History, and Greek and Roman Antiquities at the University of Edinburgh during the early years of the infant American Republic. He reputedly said:

“A democracy cannot exist as a permanent form of government. It can only exist until the people discover they can vote themselves largess out of the public treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the public treasury, with the result that democracy always collapses over a loose fiscal policy — to be followed by a dictatorship.”  

It is possible we have reached such a point. If we cannot find and elect honest, principled people who will put the good of the republic and its future above their immediate self interests, then it seems a likely path to our eventual downfall or minimization will be financial collapse.

The roots of that will not be hard to trace.

Rod Thomson is an author, TV talking head and former journalist, and is Founder of The Revolutionary Act.

Federal Debt Government Truth

Federal Debt is Killing Middle America

By Jim Ley

For the last 10 years of my career as a public administrator, I preached fiscal responsibility for two reasons.

First, I was concerned that we were approaching a cyclical recession and I wanted to build reserves so that service levels could be maintained and property tax increases could be avoided during a challenging financial period.

Second, I was fully aware that, at best, the intertwined fiscal and monetary policies of the federal government were devaluing the purchasing price of the dollar, affecting not only municipalities’ purchasing power, but that of the taxpayer. I was concerned that municipalities’ labor forces, facing this reality, would demand more wages and that the taxpayer would be hurt even worse through increased property taxes.

Little did I know that the inevitable recession would be the worst since the Great Depression and the fiscal policies would devalue the purchasing dollar even further.


Debt machinations boil away buying power

I often wonder if we as taxpayers are clueless.

We have been conditioned to look at the ever growing federal debt number as meaningless because nothing bad seems to be happening in any visible fashion that we can translate into our lives. And we believe the politicians who spin the same stories so that they don’t have to do their real job, because it is what we want to hear.

But whether a frog is boiled to death by being immersed in boiling water, or whether it is boiled to death as the temperature is slowly increased to boiling — the frog is still dead. At least in the former case, the frog is at least incentivized to jump out of the boiling water, as opposed to adapting to the increasing but eventually deadly temperature in almost total ignorance of its imminent demise.

We have gone through a period of time where the lower and middle class in this country has seen the value, the purchasing power of their paycheck, decreased by as much as 20 percent. Retirees have seen their retirement funds sit stagnant, while the lack of return on their savings accounts permits inflation to eat into the value of their savings. They can buy less and less.

Anyone with a simple understanding of economics should be able to see what is happening. With a trillion dollar deficit each year, the federal government has to borrow roughly $83 billion a month. How does it do that?

From a little office in Washington, D.C. it auctions off that debt to bankers and governments around the world. As long as things stay relatively depressed economically, and given the good faith and credit of the United States, the interest payment demanded is kept low — thank God. 


Irresponsibility will bring it to a crash

The debt doesn’t always sell, or a concern arises that too much of our debt is owned by a foreign power, possibly giving them an economic weapon.

So who buys it then? The U.S. Treasury Department looks to the Federal Reserve, which it funds through the printing of dollars, to buy the remaining debt. So more money is printed to buy the debt. The Fed now owns about $4.5 trillion in U.S. Treasury Bonds on its balance sheet. To control the supply of money in circulation, the Fed promulgates a spider’s web of regulation and control requiring banks to reserve large sums of money to cover the risk associated with future obligations.  

Exploring this system of controls, and the impacts the system has had on our financial well being, would require way more space to explain than I have here.

Everyone knows that China owns a huge chunk of our debt — $5 trillion. And of course, there is the debt the Fed owns. But who do you think, what entity do you think, also owns a huge chunk of the federal debt? It is the Social Security and Medicare trust funds with $2.8 trillion. Rather than investing these funds in instruments that could return more to their trust funds, thus ensuring their long-term solvency, these funds are used by the federal government to lower the overall cost of borrowing.

If nothing else, it is a fiduciary conflict of interest. But Congress does not require itself or the federal government to operate under the same rules with which private and nonprofit fiduciaries must comply.

Too bad for all the rest of us.

Because all of these machinations combine to diminish the purchasing power of the dollar, severely impacting the working middle class.

Jim Ley has more than 35 years in public service, the last 25 of which were in top level administrative positions in two of the more dynamic counties in the U.S. Jim served two terms as President of the National Association of County administrators and was a leading “small government” voice in the profession. His administrative focus has been on financial sustainability and accountability to the taxpayer.

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