Obama is Nothing but a Public Sector Maddof

Politicians Addicted to Taxation and Borrowing Must Sustain their Government Habit

Soon Government will not be collecting sufficient taxes from constituents.  As shown by California’s Legislature government cannot cut its social programs that have created a sea of red ink on its balance sheet.  Now that prosperous times are over the liberal progressives in control of government cannot bear to cut the pork from their precious welfare and environment entitlement programs.  The California taxpayers in a liberal state cannot take any more taxation, they have proven they are mad as hell and are watching their representative’s actions for the necessary spending cuts to non-essential programs.

Liberal progressive priorities are out of touch with common sense as the California’s Governor is calling for borrowing from property tax revenue from cities and counties.  The only cuts discussed are from schools, letting prisoners out early, and cuts in police and fire.  Were governments to attack the massive inefficiency due to absurd labor contracts there may be a start to reform.  For example, state workers at prisons who are “boiler engineers” will not sweep the floor, screw in a light bulb, or do anything that is not in their job description.  If a bolt needs tightening in another department it will not be fixed by a boiler engineer, he will sit at his desk with his feet up and say “not my job!”

Comrade President Obama has ensured labor a seat at the head of the government table with a redefining of contracts where government can subjugate the law to its own power demands.  Governments process of corporate debt restructuring and recent interventions in such restructurings as Chrysler and GM is leading to market concerns that rights of senior creditors such as bondholders are being undermined by preferential treatment of junior creditors  union pension liabilities as junior lien holders are now in senior positions.

The US government is about to lose its triple A bond rating due the disastrous financial shape it has created by debt creation and California has been downgraded my Moody’s such that it cannot even get a loan without guarantees by the Federal Government.  This will do nothing to assist the Federal government’s bond rating and no matter what the Washington politicians say Moody’s analysis will be a ringing bell above the eloquent tongue flapping of Obama.  The US government is now following the State of California because of politicians that will not cut spending but rely on tax increases so that government can survive and politicians can stay in power.

The liberal progressives in power on the state and federal levels will not cut spending.  They have been paid by special interests for years to create these programs in the first place.  The lobbying to keep programs over cutting programs will be extremely intense but will not follow the rule of common sense but of special interest money. The need to find the easy way out via taxation and borrowing that has been the hallmark of government will continue until the population faced with abject tyranny revolts at the voting booth.  As California looks to pilfer revenues from Cities and Counties as Stated by Governor Schwarzenegger, so will the Federal Government steal from the States.

The CBO estimates that US public debt to GDP ratio will rise from 40% to 80%, or about $9 trillion dollars. Should long term rates increase to 5%, the resulting increase in the interest rate bill alone would be about $450 billion or 3% of GDP. This can only be offset by an increase in taxes or cutting government spending or theft of dollars collected by the Federal Government that are then returned to states via programs like Medicare and Medicaid.

To prevent an unsustainable Maddof scheme like the Federal Government is now pulling off by massive increases to the stock of public debt as a share of GDP the debt bubble will soon burst. The burden of trillions of dollars of high debt levels will soon only be financed by default, a capital levy on the wealthy, the use of inflation to wipe out the real value of money, more public debt, and an increase in taxes at all levels of society.  Although it may be possible for government to reduce spending and cut programs this is a sacred cow that cannot be slaughtered unless it is for military spending.