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Archive for July 27th, 2010

Republican is a dirty word for many African-Americans, often for good reason. But blacks should be equally hostile to Democrats – at least if actual results count for anything. This is the basic message of this video sent to me by a black friend. 

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Professor Larry Kotlikoff has some very sobering analysis of America’s fiscal status. Instead of just looking at current deficits, he examines the “present value” of all future expenditures and revenues. Simply stated, America is in worse shape than Greece because of the long-term burden of entitlement programs. Kotlikoff’s conclusion that America is “one foot away from a deep and permanent economic grave” may be a bit too strong, but he is certainly correct that unrestrained spending is going to cause serious damage.

Greek long-term government bond yields are running 700 basis points above comparable US Treasuries. The inference is that America is in far better fiscal shape than Greece. Nothing could be further from the truth. Greek debt totals 120 per cent of gross domestic product, twice the US figure. But debt alone tells us little about a country’s fiscal condition. …During the past half-century, the US has sold tens of trillions of unofficial IOUs, leaving it with liabilities to pay Social Security, Medicare and Medicaid benefits that total 40 times official debt. …Fortunately, theory suggests a label-free measure of fiscal status: the fiscal gap, or the present value difference between all future expenditures and receipts. The Greek fiscal gap is staggering. Calculations developed with my colleagues at Freiberg University put it at 11.5 per cent of the value of Greece’s future GDP. And this huge figure already incorporates Greece’s recently legislated fiscal policy retrenchment. But the US figure, based on the Congressional Budget Office’s just-released projections, is even larger: 12.2 per cent. Clearly, Greece is in terrible fiscal shape. To get its books in order it would have to pull in its belt each year by another 11.5 per cent of GDP. This provides new meaning to the word draconian. But the US is in much worse shape, because the CBO’s projections that reveal the 12.2 per cent fiscal gap already assume a 7.2 per cent of GDP belt-tightening by 2020. …Wishing won’t fix America’s fiscal mess. The US is one foot away from a deep and permanent economic grave. It is far past time to do meaningful long-term fiscal planning, level with the public, and implement radical reforms that permanently put America’s fiscal house in order.

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Advocates of limited government generally focus on domestic spending, pork-barrel projects, and entitlement programs. This is target-rich territory, to be sure, and especially inviting because most of the relevant programs and department shouldn’t exist. But just because national defense is a legitimate function of the federal government, that doesn’t mean that national security outlays are somehow immune from waste, fraud, and abuse. Here’s an all-too-typical story from Federal News Radio about the Defense Department being unable to account for a staggering 95 percent-plus of the funds channeled through the Development Fund for Iraq.

The Defense Department is unable to account for $8.7 billion of the $9.1 billion in Development Fund for Iraq monies in received for reconstruction in Iraq. This according to a study published today by the Special Inspector General for Iraq Reconstruction. …The Special Inspector General for Iraq Reconstruction (SIGIR) finds that only one Defense organization actually set up the accounts required by the Treasury. “The breakdown in controls left the funds vulnerable to inappropriate uses and undetected loss,” SIGIR says. The study recommends that the Secretary of Defense create new accounting and reporting procedures to avoid such mistakes in the future. It also recommends designating an executive agent to oversee progress, establishing measurable milestones, and determining whether any DoD organizations are still holding DFI funds.

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