E-Newsletter No. 13
January 2015
If not us, who?_____If not now, when?

As we anticipated in last month’s newsletter, the US House of Representatives and US Senate recently passed “Continuing Resolution” legislation that funds most of the departments of the federal government through the end of the government’s fiscal year on September 30, 2015. While this legislation helped to prevent another government shutdown, the country is virtually guaranteed to incur another deficit this year.

In President Obama’s 2015 budget, payroll tax receipts for Social Security are expected to be $756 billion, and spending will be $896 billion, for a deficit of $140 billion. Medicare payroll tax receipts are expected to be $231 billion, and the outflows for Medicare/Medicaid are budgeted to be $860 billion.

We are also sorry to report that the country passed another new milestone this past month – – the cumulative US debt has now risen above $18 trillion.

Thomas Jefferson once wrote – I wish it were possible to obtain a single amendment to our constitution; I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its constitution; I mean an additional article taking from the federal government the power of borrowing.

There is another quote that is often attributed to either Alexis de Tocqueville (1805-1859, a French historian most famous for his work Democracy in America) or to Alexander Fraser Tytler (1747-1813, a Scottish history professor at the University of Edinburgh) – A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. Another variant of this quote is – The American Republic will endure until politicians realize that they can bribe the people with their own money.

Margaret Thatcher (the Prime Minister of the United Kingdom from 1979-1990) gave us her own perspective on the issue – The trouble with Socialism is that eventually you run out of other people’s money.

The link between all three of these quotes is that there has been a collective failure of our country’s elected officials, who have chosen to ignore the advice of one of our country’s Founders. Instead, they have pushed a huge financial burden onto future generations.

As we noted in our inaugural newsletter a year ago, David Walker, the former Comptroller General of the US Government, put it this way – This is not just a financial issue. This is not just an economic issue. This is an ethical and moral issue… We are mortgaging the future of our kids and grandkids at record rates… and it must stop.

The next key date occurs in March, when the country’s debt ceiling needs to be addressed by our elected “leaders”. We will keep you posted….

US Debt Clock – – December 1st – $56,266 per citizen / January 1st – $56,356

E-Newsletter No. 12
December 2014
If not us, who? _______ If not now, when?

OK, so the November elections are over – Now what? The newly elected Senators and members of the House of Representatives take office on January 3, 2015. But before then, the existing “Continuing Resolution” that funds the federal government expires on December 11th. Therefore, sometime during the next few weeks Congress must pass an appropriations bill to keep the federal government operating. A Continuing Resolution doesn’t make any changes to the country’s spending levels, but merely continues the pre-existing appropriations at the same level as the previous fiscal year. As we noted in our May newsletter, the president’s proposed budget for the current fiscal year anticipates an additional deficit of $564 billion, which will further add to the cumulative US debt.

The next key date in 2015 is March 16th, when the country’s debt ceiling is re-instated. As we noted last February, the US Senate and House of Representatives “kicked the can down the road” to the new Congress and suspended any limitations on the US debt until March 2015. In effect, they wrote themselves a blank check that has allowed the federal government to continue borrowing money at the expense of future generations. It is our Editorial Board’s hope that the new Congress will begin to make the difficult decisions that need to be made, to begin curtailing the size and spending of the federal government and begin repaying the cumulative US debt.

US Debt Clock – – November 1st – $56,065 per citizen / December 1st – $56,266

E-Newsletter No. 11
November 2014
If not us, who?_______If not now, when?

Election Day is Tuesday, November 4th. Our Editorial Board encourages you to support those candidates who are running for office to solve our country’s growing debt problem. Thomas Jefferson once wrote “If we can but prevent the government from wasting the labours of the people, under the pretence of taking care of them, they must become happy.” In the upcoming election, we have an opportunity to choose whether we want to stay on the current path of larger, ever-expanding government, or if we want to heed the advice of one of our country’s Founders.

Unfortunately, this past month (which was the first month of our federal government’s new fiscal year) our country passed a new threshold. The cumulative US debt now stands in excess of $17.8 trillion, which equates to an amount in excess of $56,000 for every man, woman, child and retiree.

Please give your support to those candidates who are more concerned about our country’s future (rather than their own future re-election chances), and who are committed to Fix the Debt, rather than push this growing problem onto future generations.

US Debt Clock – – October 1st – $55,812 per citizen / November 1st – $56,065

E-Newsletter No. 10
October 2014
If not us, who?________If not now, when?

As we have noted on our website, our Foundation supports the efforts of the Campaign to Fix the Debt. We have provided a link on our Home Page to the Campaign’s website, and we encourage all citizens to digitally sign the Petition to Fix the Debt. The Campaign has recently published a two-page summary about the Debt Threat, along with another paper that lists some of the Common Myths about the US Debt. There are several reasons why it has become critically important that our elected officials begin to fix this growing problem.

Ever-growing levels of debt threaten citizens’ and families’ economic well-being in a number of ways –

An Increased Likelihood of a Fiscal Crisis – Failure to get the national debt under control could precipitate a crisis… International examples suggest there could be large investment losses, tanking markets, sharply rising interest rates, mass unemployment, rapid inflation, and/or devastating austerity, causing sharp drops in public investment.

Some of the common myths about the growing debt problem include –

The amount of the annual deficit is falling, and therefore, debt is no longer a concern.

There is no harm in waiting to solve our debt problems.

As our country’s citizens prepare to head to the polls next month, we encourage you to download these publications from the Campaign’s website and share them with your family and friends –
The Debt Threat
http://www.fixthedebt.org/uploads/files/national%20debt%20and%20you%20final.pdf
Common Myths About the Debt
http://www.fixthedebt.org/uploads/files/Debt%20myths%20and%20facts%20final.pdf

And we encourage you to support those candidates who are campaigning to solve our country’s growing debt problem, who are more concerned about the country’s future (rather than their own future re-election chances), and who are committed to Fix the Debt, rather than push this growing problem onto future generations.

US Debt Clock – – September 1st – $55,528 per citizen / October 1st – $55,812

E-Newsletter No. 9
September 2014
If not us, who?_______If not now, when?

As we discuss on our website in the conversation piece on Universal Health Care, Medicare (like Social Security) should be viewed as being an “intergenerational social contract” – – it is not a conventional health insurance program, because the “premiums” paid by senior citizens for their coverage are not a market-based premium. In fact, the primary reason Medicare was established in 1965 is that many senior citizens were no longer able to acquire a health insurance policy at any cost. However, nothing is free, so this cost must be borne by somebody (more on that later).

Similar to Social Security, Medicare’s “trust fund assets” (i.e., employees’ Medicare payroll tax withholdings, along with their employers’ contributions) have already been paid out for past benefits, or have been “loaned” (spent) for other federal government purposes.

Medicare and Medicaid were signed into law on July 30, 1965 by President Lyndon B. Johnson, as part of LBJ’s “Great Society” domestic social programs. Medicaid is a welfare program, as there are no cash inflows into the Treasury for Medicaid, other than general tax receipts.

Information on the annual cost of the federal government’s healthcare programs can be found in President Obama’s proposed budget for fiscal 2015 (the link is in our May newsletter). For the current fiscal year ending this month of September, it is projected that the difference between the cash outflows for Medicare and Medicaid ($513 billion + $308 billion = $821 billion) will exceed the $219 billion collected via Medicare payroll taxes, for a difference (deficit) of $602 billion. Medicare/Medicaid account for nearly all of the $628 billion deficit projected for fiscal 2014.

Unless changes are made to Medicare/Medicaid, this annual deficit amount will grow over the next ten years to $1.135 trillion by 2024 – – the outflow of $947 billion in 2024 for Medicare, plus $556 billion for Medicaid equals $1.5 trillion, versus the projected Medicare payroll tax receipts of $368 billion.

Similar to the Social Security Trustees’ report, the Medicare report also includes an estimate of the present value of the “off book” debt amount for Medicare (which is for Medicare only, excluding Medicaid). Please keep in mind that the current cumulative “on-book” US debt amount for our past deficit spending is $17.6 trillion. As we reported in last month’s newsletter, the present value of the “off book” debt for the Social Security benefits that have been promised is $11.1 trillion. The “off book” debt for the present value of Medicare benefits that have been promised is $28.5 trillion.

It is safe to say that unless our elected officials begin to make fundamental changes to our country’s finances to eliminate deficit spending, this debt (and more) will fall to our children and grandchildren. Our elected officials need to change their focus towards fiscal responsibility, rather than their own personal re-election concerns. Our federal government’s first step needs to be the elimination of deficit spending, and once that is accomplished, we then need to begin re-paying the “on book” debt.

US Debt Clock (the “on book” debt) – – August 1st – $55,273 per citizen / September 1st – $55,528

E-Newsletter No. 8
August 2014
If not us, who?______If not now, when?

This past month the trustees of the Social Security and Medicare “trust funds” released their annual report on the current and projected status of these federal government programs. The trustees’ Summary Annual Reports can be found at www.ssa.gov/OACT/TRSUM/index.html

In this month’s newsletter, we will focus on Social Security. (Medicare is next month). On our Foundation’s website (in the Conversation Piece about Social Security) we discuss the fact that this federal government program is not a Ponzi scheme, but it is not the same as a funded pension plan. Instead, it should be viewed as being an “intergenerational social contract”. Unfortunately, many citizens have been misled by the terminology used by our public officials, when they read about Social Security’s “trust fund assets”. They incorrectly believe that their payroll tax withholdings (along with their employer’s contributions) have been set aside in a separate investment pool that will be used to pay future benefits (to which they are “entitled”) once they retire. The inconvenient truth about Social Security is that the only “assets” owned by the trust are intergovernmental loans receivable. The payroll taxes paid into Social Security have already been paid out for past benefits, or have been “loaned” (spent) for other federal government purposes.

To make matters worse, the annual expenditures for Social Security now exceed the program’s inflows, and this adds to the cumulative US debt. In addition, based on President Obama’s 2015 budget and the projections through 2024, the annual shortfall grows and compounds each year.

So…. How did this “well intentioned” government program, which was established during the height of the Great Depression, evolve into its current state? There are two key issues – – one “actuarial” problem and one “demographics” problem. The actuarial problem is that people are living longer lives, compared to when Social Security was established in 1937. This “actuarial problem” is not unique to Social Security – it has the same, significant effect on any type of retirement/pension plan. If Social Security were to be accounted for in a manner similar to what is required for corporations’ pension plans, the estimated present value of the unfunded future benefits that have been promised is approximately $11.1 trillion. This liability for this “pay as you go” program is over and above the “on book” US debt of $17.6 trillion, which already equates to $55,273 per citizen. (And keep in mind that this amount is for Social Security benefits only – – it excludes the “off book” liability for Medicare, which is a much bigger number – – but that is the topic for next month’s newsletter).

The demographics problem is that the relative number of retirees continues to grow as the Baby Boomers move into their retirement years. Once the country got past the Great Depression and World War II, the number of workers for each retiree in 1950 was 16 workers per retiree. In 2014, that ratio is now down to approximately 3, and by 2030 will be down to approximately 2.

Here are some key passages from the trustees’ annual report –

For the past several years, the annual Trustees Reports have warned lawmakers and the public of the financing shortfalls facing the Social Security and Medicare programs, emphasizing that continued delay in legislating corrective measures is likely to make the challenge ever more difficult to resolve…

While Social Security has not been the object of significant financing reforms since 1983, its need for additional measures has been recognized for over two decades. Now, in the middle of the second decade of the 21st century, the adverse consequences of delaying necessary corrections in both programs are beginning to be realized.

Lawmakers should address the financial challenges facing Social Security as soon as possible. Taking action sooner rather than later will leave more options and more time available to phase in changes so that the public has more time to prepare.

It is interesting to note that the “average Joes” and the “average Jills” who understand these issues (and the associated math) are justifiably concerned about the status of these programs and the country’s finances. Unfortunately (as we noted in last month’s newsletter) our Editorial Board believes that because many of our elected officials are more concerned about their own re-election issues, it is easier for them to kick this can down the road to future generations (some of whom cannot even vote yet) rather than pursue the implementation of policies that they know are vitally important to the country’s future.

US Debt Clock (the “on book” debt) – – July 1st – $55,149 per citizen / August 1st – $55,273

E-Newsletter No. 7
July 2014
If not us, who?_______If not now, when?

As we have noted on our Foundation’s website, our Editorial Board believes that our country’s Founders did an excellent job in preparing the “social contract” between the citizens and their government (i.e., the US Constitution). We also noted that in several of the Federalist Papers that were written prior to the ratification of the Constitution, our country’s Founders recognized the need to guard as effectually as possible against a perversion of power to the public detriment…. The means relied on… for preventing their [elected officials] degeneracy are numerous and various – the most effectual one is such a limitation on the term of appointments as will maintain a proper responsibility to the people.

In addition to our Foundation, there are several other organizations that also support the concept of Term Limits. Please visit the US Term Limits (USTL) site at www.termlimits.org. USTL’s purpose is to support a government of the people, by the people, and for the people, not a tyrannical ruling class who care more about deals to benefit themselves, rather than their constituents. We encourage you to sign the USTL Congressional Term Limits petition, and support the passage of the Term Limits Amendment put forward by US Senator Jim DeMint.

It should be noted that the counter-argument to Term Limits is that there already exists a means to limit an elected official’s time in office – – it’s called the election cycle. While there is some merit to this line of thinking, our Editorial Board rejects that argument, because we question why any group of citizens would ever want to vote out of office an elected official that their efforts helped put into that office. As we all learned in school, George Washington was adamantly opposed to the idea of an “imperial presidency” and vowed to serve at most only two terms. [His presidency was nearly 200 years prior to the ratification of the 22nd Amendment].

Although Term Limits will never be the sole solution to our country’s political problems, our Editorial Board believes that Term Limits will serve to combat many of the ills that have crept into our country’s political process – – Pork, Pork Barrel Politics, Bringing Home the Bacon, Influence Peddling, Lobbyists, Pandering, Conflicts of Interest, Patronage, Nepotism, Cronyism, Graft, Corruption, etc. We believe that Term Limits are appropriate for all Executive and Legislative positions at both the federal and state level. For legislative positions especially, it is highly unlikely that the constituents of a district would ever vote out an incumbent, as long as that person is effective in Bringing Home the Bacon.

We The People need to take back control of our governmental units from career politicians, whose power and influence only grows larger, the longer they are in office. We need to return to the original intent of the country’s Founders – a government of the people, by the people (the citizenry) rather than career politicians. Our Editorial Board agrees with the following well-known quote, which is attributed to Lord Acton (a British historian) – Power corrupts, and absolute power corrupts absolutely.

The primary benefit of Term Limits is that limiting the time someone is in office should serve to shift the focus of our elected officials away from the “expedient” and towards the greater good for the country as a whole. Our elected officials should not be focused on their next re-election and doling out money to their constituents. Term Limits would allow our elected officials the freedom to pursue policies that might be unpopular with their constituents, but which they know are vitally important to the greater good of the individuals who comprise our nation (such as eliminating deficit spending and then reducing the cumulative US debt).

US Debt Clock – – June 1st – $55,072 per citizen / July 1st – $55,149

E-Newsletter No. 6
June 2014
If not us, who?_______If not now, when?

So, the question seems to be – – Does the annual deficit and the cumulative US debt really matter? It is apparent that many of our elected officials believe that the answer to this question is “No”. As we mentioned last month, President Obama has submitted his proposed budget, which shows a continuation of annual deficits for at least the next ten years. And as you recall, in February the members of the US Senate and the US House of Representatives decided to “write themselves a blank check” and suspend the country’s debt ceiling until after the 2014 elections. (More on Term Limits in next month’s newsletter).

One of the reasons why our elected officials can avoid addressing the growing debt problem is that most US citizens are not aware that our federal government has run up a + $17 trillion cumulative debt (an amount in excess of $55,000 per citizen). But the US economy continues to recover from the Great Recession, so the cumulative US government debt must not be an issue – – right??

One of the reasons why the growing debt problem has not yet affected the US economy is because the US dollar is (currently) the “world’s reserve currency” – – the US dollar is widely held around the world, and most international transactions are conducted and settled using the US dollar. Because of the dollar’s status as the world’s reserve currency, this has allowed the US government to simply print more dollars, and over the past several years, the Federal Reserve has purchased this new money (through “Quantitative Easing”) which has kept interest rates artificially low. The thinking seems to be that as long as inflation and interest rates can be successfully manipulated downward, there will never be a day of reckoning for the growing debt problem. Beside, the US dollar is backed by “the full faith and credit of the US government”.

But what happens if the rest of the world begins to lose faith in the creditworthiness of the US dollar? The British pound used to be the world’s reserve currency, but once the British pound lost that distinction, there were significant, severe effects on the British economy, which took many painful years to fix. History is full of examples where a government’s mis-handling of its economy and its currency has had dire consequences – – Germany in the 1920s, the United Kingdom in the 1970s, Argentina in the 1980s, Argentina from 1999 to 2002, Iceland in 2008, Greece in 2009 – – the list goes on and on.

Although the US economy / US dollar appropriately earned its position as being the world’s reserve currency, there is no guarantee that this will continue in the future. In fact, the process has already begun – – the Euro has replaced the US dollar for cross border transactions within Europe, and many other international transactions are now being conducted and settled using currencies other than the US dollar. In addition, the major credit rating agencies downgraded the US in 2011, primarily because the US government increased the debt ceiling (and the cumulative US debt has increased substantially since then).

So…. How long can the Federal Reserve and the US government print money and manipulate interest rates downward? Our Editorial Board members are not economists, and we do not possess a crystal ball that provides the answer to that question. However, we bring a business perspective to our analysis of the government’s fiscal policies, and we agree with David Walker (the former Comptroller General of the US government) that the trajectory of the cumulative US debt is on an unsustainable path. As a country, We The People cannot borrow and spend ourselves into prosperity. Once interest rates begin to rise again, for every 1% increase in interest rates, the US government’s annual interest cost will go up by $170 billion, and this amount would get layered on top of the existing annual deficit, which is budgeted to be another $564 billion for fiscal 2015. The question is not “if” the growing US debt is a problem – – the questions are “when will it become a severe problem” and “how severe”?

US Debt Clock – – May 1st – $55,069 per citizen / June 1st – $55,072 (a relatively “good” month)

E-Newsletter No. 5
May 2014
If not us, who?______If not now, when?

As we noted last month, President Obama has submitted his proposed budget for fiscal 2015. The link to the president’s proposed budget is http://www.gpo.gov/fdsys/pkg/BUDGET-2015-BUD/pdf/BUDGET-2015-BUD.pdf

The budget document includes projections for the next ten years, all of which show a continuation of annual deficits. The estimated deficit for the current fiscal year ending on September 30, 2014 is $649 billion and the deficit anticipated for fiscal 2015 is $564 billion. These deficits represent an additional amount of debt per citizen (for every man, woman, retiree and child) of $2,000 for fiscal 2014 and $1,800 for next year, which get added on top of the current amount of $55,000 per citizen. David Walker, the former Comptroller General of the US government (see our January newsletter) calls this an “unsustainable path”. We agree.

The following is an overview of the US government’s budget, along with the average compound growth rates that take us 10 years into the future, from 2014 to 2024 (in billions) –

___________2014____2024____Ave CGR
Receipts___$3,002___$5,478_____6.2%
Outlays ____3,651____5,912_____4.9%
Deficit ____$(649)____$(434)

On our website, we have noted the ever-expanding growth of the US government in comparison to the economy as a whole. The president’s budget is built to continue this ever-expanding role. While we “applaud” the reduction in the amount of the deficit, we are dismayed that there continues to be a deficit each year. And we question why the government’s receipts need to increase faster than the growth of the overall economy. The US government’s Receipts as a percent of GDP increase from 17.3% in 2014 to 19.9% in 2024.

So what is driving this shift, and what is driving the US government’s role in our economy to even higher levels in the future? Two of the major components of the amounts shown above are Social Security and Medicare/Medicaid –

Social Security –
____________2014_____2024___Ave CGR
Receipts____$ 732____$1,191____5.0%
Outlays______ 852 ____ 1,499____5.8%
Deficit______$(120)____$(308)

Medicare / Medicaid –
_____________2014_____2024___Ave CGR
Receipts______$ 219____$ 368____5.3%
Outlays _______821_____1,503____6.2%
Deficit______$ (602)____$(1,135)

A wise journalist once wrote – You can either have Big Government or you can have Lower Taxes, but you can’t have both. Unfortunately, our elected officials in Washington continue to try to circumvent this basic fact. To their credit, our elected officials have been somewhat successful in accomplishing this feat, however, they have accomplished this by “borrowing” these funds from future generations (some of who cannot yet vote, and some who have not even been born yet).

US Debt Clock – – April 1st – $55,228 per citizen / May 1st – $55,069
Please do not be overly encouraged by the decrease noted above. This effect typically happens during early April. Tax refunds are sent out over the course of the tax filing season, however, taxpayers who owe money typically don’t pay their remaining balance due until shortly before the tax filing deadline. We will give you another update on the amount of debt per citizen in next month’s newsletter.

E-Newsletter No. 4
April 2014
If not us, who? ____ If not now, when?

As we noted last month, President Obama, in his State of the Union speech, discussed the need to find a solution to the problem of “income inequality”. One of his proposals is to raise the minimum wage to $10.10 per hour. However, based on the Congressional Budget Office’s analysis of his proposal, it is a much better “sound bite” than an effective policy. Increasing the minimum wage would serve to decrease the country’s poverty rate by less than half a percent, and the $31 billion “extra tax” on businesses would not go to only low-income families, because many low-wage workers are not members of low-income families. Just 19% of the $31 billion would accrue to families with earnings below the poverty threshold, whereas 29% would accrue to families earning more than three times the poverty threshold. [The remaining 52% of the $31 billion would also go to families above the government’s poverty threshold]. Our Editorial Board believes that there are more effective ways to address poverty in America.

Some of our readers may be aware that a documentary was released last fall, which was entitled Inequality for All. It features the viewpoints of Robert Reich, who was Secretary of Labor during President Clinton’s first term. Our Editorial Board agrees with a number of Mr. Reich’s observations, but we also take exception to some of his conclusions. Early in the documentary, Mr. Reich acknowledges that within the US economy “some inequality is inevitable” – – it is the essence of capitalism. Capitalism fosters innovation, creativity and enterprise, and it rewards taking personal responsibility for your own economic well-being. We agree with Mr. Reich’s observation that the U.S. economy is not a purely capitalistic / purely “free market” system. We agree that one of the roles of government is to set the rules and regulations by which the market functions, and therefore (rightly or wrongly) the government’s rules help determine who benefits and who is hurt by those policies and programs.

We also agree with Mr. Reich’s observation (and the underlying data) that the inflation-adjusted income of the average US worker began to flatten out during the 1970s, primarily due to the effects of globalization and new technologies. Robotics, self-scanning check-out lines, and other changes in the workplace have eliminated certain jobs. Some people curse the effects of progress and change; our Editorial Board embraces creativity, innovation, progress and change. However, this raises an interesting question – Does this mean that workers today (more so than at any other point in time) need to continue learning after they finish their formal education? Absolutely.

Here are some of Mr. Reich’s other observations about income inequality – – The disparity in annual income/wealth between “the Top 1%” and the average/median for the country as a whole has steadily increased over the past 30-40 years, and peaked in 2007 – – we agree with the data. America’s overall economy has grown tremendously during the past 30-40 years. Therefore “income inequality” is primarily a mathematical result – – when the economy has grown tremendously, and the average/median income has grown only slightly, there is an increase in the mathematical disparity.

One of Mr. Reich’s hypotheses is that this concentration of wealth leads to “speculative investments” (ie, in housing) which contribute to the formation of various “asset bubbles” which inevitably burst, and which led to the great recession of 2008-2009. However, he does not acknowledge that the government’s own loosening of the rules relating to the requirements/qualifications to obtain a mortgage also significantly contributed to this asset bubble. In addition, as Mr. Reich correctly points out, many people did not diligently pay down their mortgage balance (to ensure that they would never lose their home) but instead used their home as an ATM. (Plus, the government allows mortgage interest to be a deductible expense for tax purposes). It is generally accepted that sub-prime mortgages were one of the major triggers that led to the great recession. As we noted above, we agree that the government does have an important role to play in establishing rules and regulations to protect the public (in this case, from ourselves).

We also agree with one of Mr. Reich’s main warnings about income inequality – – the increasing concentration of wealth does create a danger to democracy. With money, comes the possibility to control government. The Inequality for All documentary was fairly even-handed in that it identified several wealthy individuals who have made significant contributions to either liberal causes or conservative causes (according to each contributor’s tendency). Unfortunately, the Supreme Court has ruled that campaign contributions by corporations and wealthy individuals, in effect, cannot be limited, because this represents a restriction on the freedom of speech. There is a reason for the expression “Money talks”, and money does buy influence. As an alternative, our Foundation supports the concept of Term Limits. We need to find different ways (i.e., CHANGE THE RULES) to reduce the possibility that our elected officials become entrenched, and become beholden to special interests, rather than to the interests of the country as a whole. We believe that if our elected officials are elected for a set (limited) period of time, they will have a greater tendency to serve the public good, rather than focus on worrying about their next re-election.

So, who is the “Top 1%”? The income level for the Top 1% is an annual income over $380,000. The Top 1% includes some professional people (doctors, lawyers), some entrepreneurs/business owners/venture capitalists/risk takers, some corporate CEOs, certain elected officials at both the national and state levels, professional athletes, entertainers, etc.

One last set of data to be considered (this is IRS tax data for 2011) – – The Top 1% of US taxpayers paid a greater share of all federal income taxes in 2011 (35.1%) than the entire bottom 90% (31.7%). The 1,366,000 taxpayers in the Top 1% (who earned approximately 20% of the country’s total personal income) paid over 35% of the total income taxes paid to the federal government, so it’s not like the Top 1% isn’t already covering a relatively higher share of the total tax load. We agree that they should – – Please re-visit our website and see our Conversation Pieces on Tax Rationalization, Tax Reform, and Tax Simplification issues. Just to clarify… There were approximately 136.6 million personal income tax returns filed for 2011. This is substantially less than the US population of 317 million US citizens, primarily due to “Married Filing Jointly” tax returns (with or without dependent children), along with a number of citizens who do not file an income tax return.

Having said all that…. We also agree with the comments that were made by Warren Buffet and Nick Hanauer in the documentary – – The US tax code is screwed up – – they only paid an effective tax rate of 17.7% / 11% on their incomes, which were in excess of $10 million. As Mr. Reich points out, it is the US government that sets the rules. At the end of the day, this is what the political process is all about. This is why We The People need to Join the Conversation and get more involved in the process, to debate (and find better solutions to) the issues that are being discussed.

– – – – –

Our Editorial Board also recently reviewed a commentary that was published a few months ago by one of our favorite columnists, Cal Thomas – – Income Inequality is Part of the Entitlement Philosophy. The primary points that Mr. Thomas makes in his commentary are that certain political leaders want us to accept a false premise: that if I earn more money than you, I “owe” you some of my money to make things “fair”….. “Income inequality” is a part of the greed-envy-entitlement philosophy promoted by liberals who want to addict more people to government….. There was a time when Americans would have been ashamed to take, much less ask for, anything from their fellow citizens…. Envy, greed and entitlements are not the things that built America….. The concern should not be how much others make, but how much you can make if you apply yourself and adopt the values embraced by successful people. Thank you, Cal – we couldn’t have said it any better.

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On March 4, President Obama submitted his budget for fiscal 2015. We will address the president’s proposed budget in next month’s newsletter. The unfortunate news is that, for each of the next ten years projected in the president’s budget, there is not a single year that shows anything other than a continuation of annual deficits. Evidently, our country’s game plan is to let the amount of debt per citizen continue to grow each year. Our Editorial Board believes that (contrary to the president’s plan) we CAN get this fixed.

OK, one more set of data – – Even if the US government were to “appropriate” (i.e., steal) the entire net worth (the accumulated wealth) of the country’s Top 100 billionaires (Bill Gates, Warren Buffet, George Soros, Oprah Winfrey, Mark Zuckerberg, etc.) the government would be able to pay-off only a fraction (less than 7.5%) of the $17.5 trillion “on book” US debt (which excludes the future negative cash flows for Social Security and Medicare benefits that have also been promised). Even the very richest people in the country cannot begin to pay off our country’s cumulative debt, so who is going to pay it off? This intergenerational debt obligation (which is being pushed onto our children and grandchildren by our federal government) is immoral. We MUST get this fixed.

US Debt Clock (the “on book” US debt) –
March 1st – $54,729 per citizen / April 1st – $55,228