How Republicans Win 2012 – Options

For my 100th blog post,  I decided to let you in on how the Republicans can create a strategy that will improve our system and economy, resonate with voters, and defend against Democrats.  It all comes down to one thing, giving citizens options.

I love having options, it is essentially a form of freedom.  I believe Republicans need to develop programs where people can choose between the current system and a new system.  Giving citizens the option between old and new eliminates the fear of the new.  Further, Democrat’s entire election campaign is around generating a fear of the Republicans.  For example, they have commercials of a Paul Ryan looking figure pushing granny off the cliff.  Just this past weekend, David Axelrod labeled Republicans a “reign of terror.”

I want to give a you few examples of options:

• Social Security –> the Chilean model essentially privatizes gains and socializes loses.  Basically, people would be given the option to stay with the current system or invest a portion of their social security dollars (instead of paying the full tax) to a private investment.  If the private investment does not meet the payout they would have received with the government social security check, they are paid the difference by the government.  It benefits the citizen because people typically get paid more privately than with social security, less money is paid out to citizens because their investments worked, preventing the system from going bankrupt, and there are still people paying in for those who want to stay on today’s version of social security.
• Medicare –> Did you know it is cheaper for us to pay citizens about $15,000/yr. for them to get their own private insurance than it is for them to be on medicare?  If we give people the option to do the private version, we would save money, even if only 10% did it.  Further, insurance is all about risk for the insurance companies.  If they have a larger pool of people paying in, it reduces the risk for them, increasing their ability to make insurance more affordable..
• Tax Code –> What if we had the ability to choose between the current tax code and paying a straight 20% of earned income without any deductions? If I had the option of paying a straight 20% instead of going through the confusion of our current model, I’d probably choose the easy path.

Obviously, the examples I gave are extremely complicated.  However, I wanted to illustrate some ways that we could create platforms that provide options.

I believe Republicans are trying to convince the American people that we need massive changes.  However, people do not like change, especially big change.  The public opinion of an entire nation cannot turn like a speed boat, it is more like a massive air craft carrier that takes miles to slowly turn around.  By offering options, it allows people time to get comfortable with big ideas.  The great thing about the private options presented is they will naturally become popular because they will typically put more money in people’s pockets.

Romney and Republicans need to market options more than the big ideas.  They need to tell Democrats, “If you like the current system, keep it.  Meanwhile, us 50% of Americans (the Republicans) will take the private options, make more money, and help cut the national budget.  You’re welcome Democrats…you’re welcome!”

Debt Ceiling Increased – the Wins and Opportunities of the Bill

The House and Senate have voted to increase the debt ceiling.  The bill that passed was definitely a compromise. Before I get into the wins and opportunities of the bill, let me just take a second to clarify what is worst about the outcome of this bill and what the democrats stood for in this debate.

The saddest thing about this deal is that we could have saved trillions of dollars against the baseline by simply freezing our budget. Instead, they assume about a 7.5% annual budget increase and their “cuts” are against the 7.5 increase baseline.  As my father said once, “you can never ‘save’ money when you are spending it.”  If you buy a $100 sweater for $75, you did not save $25, you spent $75.  You may have paid $25 less than the proposed value, but you still spent $75.  The United States may have ‘saved’ a few trillion dollars in this debt deal, but they are still spending many more trillions!

The democrats did not support balancing the budget, they wanted to increase the debt limit with no restrictions. People may think I am mean because I am a republican who wants big budget cuts, but I’d rather be mean than reckless.  Democrats ASSUME that we will always be able to borrow money, but would you borrow to someone that owed over $14 trillion and was borrowing roughly $100 billion more every month?  Do you really feel like someone in that much debt is going to pay off their debt?

The reason our credit rating is potentially going down is because we are not a great investment and it does not appear that we are going to pay our debts back.  Our economy grew 0.4% last quarter.  That is not the kind of return you are looking for as an investor.  Russia’s leader called the United States a parasite on the world economy today.  If countries stop borrowing to us, we’ll either have to stop paying for medicare and social security, because we will not be able to afford it, or we’ll have to print money and have massive inflation.  I feel the RESPONSIBLE thing to do is to make the tough decisions now, to avoid a crisis tomorrow.  Wouldn’t you rather see someone get 90% of medicare for the rest of their life than 100% for two years and then 0% afterwards?  I am not mean, I care about those people that are relying on a promise that may not be kept.

Hopefully this debt deal is a really small step in the right direction.  Below are some of the wins and opportunities of the bill.

Major Wins:

• America did not default on paying the bills.
• There were no tax increases.
• President Obama did not get a blank check.
• There are some measures in place to look for more cuts.
• There will be a vote for a balanced budget amendment (which was previously tabled by Senate democrats).

Major Opportunities:

• The cuts weren’t large enough – from what I read, there will only be $7 billion in cuts in 2012 and $3 billion in cuts in 2013 (less than 0.1% of the budget).  I could cut that in the blink of an eye and no one would even notice!
• The debt ceiling increase was one of the largest, if not, the largest in United States history.
• President Obama will not have to talk about it again before the next election because of the large increase to the ceiling.
• Spending is still increasing, as was explained earlier.
• There was no transformation on the way Washington works or views taxation and spending.
• We are still the laughing stock of the world (seriously think about watching this from the outside – we are a smart nation who has elected leaders that do not believe in having a balanced budget, despite massive debt!).  They are looking at us like I look at Greece!

The Tea Party did some great things to make this an issue.  The Republicans were in a tough spot and because of their commitment to their beliefs, the democrats knew they had to give in if they were ever going to pass a bill.  So, it was the convictions and principals of  the tea party candidates that made this a better deal, not their politics.  The deal is not even close to perfect, but I hope all of the attention on the debt ceiling puts pressure on candidates in the fall of 2012 to pledge that they will balance the budget.

Spending Cuts in Washington – It Has to Hurt – Part 2

My last article talked about why we need to make cuts that hurt.  This article takes another look closer at where the revenue comes from and how our government spends their money.  When you want to solve a problem, the first step is to figure out the “as-is.”  In short, understand the situation and the problem before you make decisions based on feelings rather than factual information.

I want to show you where we get our money from and how we spend it:

What you need to know:

• In 2010, our government spent $3.456 trillion and had $2.162 trillion in revenue, creating a $1.294 trillion deficit.
• To break even, we would’ve had to reduce our spending by 37% or increase our revenue (taxes) by 60%!
• Social Security/Social Insurance revenue is $865 billion and spending on Social Security/Medicare/Medicaid is $1.494 trillion, creating a $629 billion shortfall in those few programs alone.
• Medicare/Medicaid spending in 2007 was $599 billion and in 2010, it was $793 billion, a $194 billion (32%) increase in just 3 years.
• When Social Security started, there were roughly 30 employees for every retiree, and now there is approximately 2 employees for every retiree, creating budget shortfalls.

Now that you understand the problem a little bit more, do you believe President Obama’s spending freeze is going balance our budget?  Even if we froze our discretionary spending, the increases in Medicare/Medicaid alone are going to bankrupt us.

As you look for 2012 Presidential and Congressional candidates, look for those people that are saying outrageous things because they are probably the ones that really get it.

Why I’m Worried!

I had a liberal friend of mine ask me, “Why are you so worried about this healthcare bill?”  President Obama asked the same question, making the same joke twice about no meteors falling from the sky and that it is not armageddon.  When I sum up my thoughts on why I am so worried about our country and this bill, it essentially comes down to trust.  My trust has been broken by all of the broken programs that are filled with broken promises that are now financially broke.

There are two main reasons I am worried: past failures and current spending trends.

Past Failures:

It is difficult to say exactly what is going to happen with healthcare.  I have my viewpoints, but I cannot know for sure what is going to happen.  I can merely take what has happened in the past as an indicator of what is to happen in the future.  Here is what I have seen in the past:

• The U.S. Postal Service was established in 1775 and has a projected loss of $238 billion over the next decade.
• Social Security was established in 1935. Some experts say it is already broke, while others state that it will be broke in 2018 because there is a reserve fund that isn’t gone yet.
• Fannie Mae was established in 1938 and Freddie Mac was established in 1970.  In my opinion, they caused the housing crash and they are broke.
• “War on Poverty” started in 1964. Around $1 trillion each year is transferred to “the poor” who now feel entitled to programs.  In 2008, we still had 17.9% below 125% of poverty level.
• “War on Drugs” started in 1969 and right now 40% of our penal system is people in for drug use.
• Medicare and Medicaid were established in 1965. If you were to include the money they owe doctors and hospitals, they have an extreme amount of debt.
• The Department of Energy was created in 1977 to lessen our dependence on foreign oil. It has ballooned to 16,000 employees with a budget of $24 billion a year and we import more oil than ever before.

As you can see, this is not a Republican or Democrat issue, this is a government issue.  All of these programs have had years to be fixed by politicians and they just keep getting worse.  I simply do not trust that our government will do a good job with healthcare.

Current Spending Trends:

Over time, our government has continued to expand regardless of what party was in control.  Most people do not realize that our debt is getting so bad, that we may never be able to pay it off.  If our credit rating gets bad enough and countries do not think we’ll be able to pay it back, countries will stop lending to us.  I want to illustrate our unsustainable trends through charts.  While the trend shows that it is a government problem, not only an Obama problem, the failure of Obama to stop this trend and actually make it worse is what concerns many people.

It is pretty easy to see that we have a spending problem.

As you can see, our taxes continue to rise over time.

The CBO projected in January of 2009 that each person would have to pay $56,000 to pay off our debt.  That number rose to $72,000 in March, and now they are projecting that number will be at $170,000/person in 2020.  Some analysts think this number is conservative and that it could be much higher.

The bottom line is that conservatives are not just angry about the healthcare bill, they are angry and worried about the future of our country as a whole.  Looking at our past programs’ failures and our current spending trends, I think it is fair and logical to be worried…I know I am.