Dec
17
2011Last night, the Senate voted to approve an omnibus spending bill totaling $915 billion written on 1,221 pages. The bill arrived 15 minutes before the roll call was taken and it passed. The House voted for a very similar bill the day before in the same fashion. Congressman Sullivan voted for the bill, while Senator Coburn voted against the bill. I would have voted against it. Here’s why:
1. I wouldn’t vote for anything without reading it.
2. This bill doesn’t cut spending or move us toward a balanced budget.
3. The Senate bill raises taxes. It includes $35.7 billion in new taxes on new homeowners for the “general revenue.” These new taxes are disguised as “fees” that Fannie Mae and Freddie Mac will levy on mortgage lenders. The lenders, of course, will charge them to new homeowners. So, if you are buying a home, I recommend you close before the President signs this bill.
4. The new taxes on homeowners are being used to compensate for the payroll tax holiday, which is Social Security’s only source of revenue. Social Security, which was created to be a self-sustaining, stand-alone, savings mandate for individuals, is being fundamentally transformed into a wealth transfer program as a result of this legislation.
5. This bill spends $3.5 billion on DoD programs that the DoD neither wants nor needs. Senator Coburn, who appropriately voted against this bill, said the funds will go to the friends of lawmakers. I am a pilot in the U.S. Navy. My operational squadron is being cut for lack of funds, while lawmakers hand out billions of dollars for unwanted programs that benefit political favorites and do not improve war fighting capability.
6. The Senate bill includes a provision that requires the President to decide on the Keystone Pipeline within 60 days. This provision has no teeth. What will happen if 60 days pass and the President fails to make a decision? Nothing. Instead, the House and Senate should pass separate legislation mandating that the Keystone Pipeline be built now. They should send it to the President and force him to veto it in an election year. He won’t veto it and the pipeline will be built. This is not a taxpayer funded pipeline and there is no sound reason not to build it.
This discretionary spending bill is the type of legislation we receive when our representatives wait until the brink of a government shutdown before appropriating funds. Congress cannot solve its spending problem with last minute deals to prevent a government shutdown. Our debt level, which is greater than our GDP, has made it more difficult for the Treasury Department to sell securities to fund the government. The Federal Reserve has attempted to assist by buying treasuries with newly created money. While this has funded the government, the Fed’s policy has greatly weakened the U.S. Dollar and thwarted new investment in Dollar denominated assets. Without investment, businesses are not created and do not grow. Joblessness mounts. Bottom line – Congress needs to quit spending. This bill doesn’t even come close. Senator Coburn voted correctly.
Dec
05
2011President Obama and Senator Reid are proposing to extend the payroll tax holiday. Payroll taxes are Social Security’s only source of revenue. They say they are going to “pay for” the extension with a millionaire surtax. Here are the problems:
- Nothing our government does is “paid for.” After this plan is passed, the U.S. will still be borrowing 40 cents of every dollar we spend. Only after our budget is balanced can they claim something is “paid for.”
- With this policy, the Obama Administration is shifting Social Security from an independent retirement program funded by payroll taxes to a wealth transfer program funded by the general revenue of the United States.
- Social Security has $6.5 trillion worth of unfunded obligations over the next 75 years. Instead of fixing Social Security, the proposed plan sets the precedent for using general revenues to pay for the long term unfunded obligations of Social Security.
- Unfortunately, Congress is already indirectly funding Social Security with general revenue since it has borrowed and spent all the money in the Social Security Trust Fund.
A payroll tax cut makes a bad problem worse. Once politicians officially decide that Social Security will be funded by general revenue, they will move the burden to future generations. Today, the older generation is paid by the younger generation. Tomorrow, the older generation will be paid by generations that are yet to exist. This will be done through the issuance of debt. Of course, nobody will buy our debt (lend our government money), so the Fed will create new money and lend it to the Treasury (quantitative easing). The U.S. Dollar will continue to be diluted and weaken while capital flows to countries with more stable fiscal and monetary policies. Without capital formation in the U.S., companies will not grow or be created and joblessness will mount. Our future generations will pay the price.
These problems can be averted by sound fiscal policies. We cannot let politicians play around the edges while our country faces serious fiscal problems.