Americans by and large have benefited from 40 years of irresponsible bookkeeping. The great problem of our republic is that Americans don't have a problem with entitlements. In point of fact, they rather like their entitlements. They just don't want to pay for them. The bottom 51% of taxpayers pay no federal income taxes on average. If you're getting a tax credit for your children, chances are you'll take in far more in refunds than you ever paid in to the system in taxes.
Debt is as American as apple pie, and what most Americans don't realize is just how bad the problem has been over our nation's history. From the dawn of our republic, our government has run deficits left and right. There are two attitudes towards this: one which says that this historical reality is proof positive that deficits don't really matter; and another which says that deficits are just philosophically wrong because you should pay as you go with government programs.
It is a great irony of our two major entitlements that they are pay as you go programs with withholding taxes specifically designated to fund their operation. Social Security and Medicare are paid for upfront out of withholding taxes that are taken out of the paychecks of current workers in order to fund the benefits that go out to current retirees. As a man who does not believe in redistribution schemes, I object to both programs on those grounds. I call redistribution what I believe it to be: theft. You take from Peter to pay Paul, with the justification that Paul was once plundered to pay James back when Paul was a young man who was still working. Only in politics can two wrongs give rise to a right.
However, the fundamental soundness of the two programs cannot be doubted. Unless you have chronic high unemployment, the two are self-funding and self-sustaining. In point of fact, both would have a huge windfall right now if it weren't for the fact that under Reagan, the hike in withholding generated a surplus that is loaned to Congress automatically by law. As a result, in addition to our catastrophic national debt of some $14 trillion, we have an IOU to Social Security of over $2.5 trillion. If that $2.5 trillion had been locked away, managed and invested properly in steady yields, we wouldn't be questioning the long-term solvency of Social Security.
Americans need to understand that they can have whatever they want so long as they pay for it; moreover, they need to understand that even in the event they pay for it upfront, they'll have to keep a vigilant eye on Congress, whose members are always looking for more money to plunder in order to cover their deficits and overruns. We have 535 elected thieves, and if Social Security were a private retirement program, all 535 of its overseers would be in jail right now for breaching their fiduciary duty and embezzling the surpluses of the retirement fund they bore a fiduciary duty to oversee.
Having 535 career thieves overseeing your money is never a good move, especially when those thieves are elected in a system that on average returns over 90% of their peers to office when election time comes. Incumbency is a problem, and an indicator of just how difficult it is to effectuate change in Washington.
Likewise, we don't tend to look at a significant portion of our federal budget as an entitlement, but the truth of the matter is that all federal funding becomes an entitlement in one way or another over time. Our defense budget is nothing more than a gigantic subsidy to defense contractors. Given the sheer size of our military spending, and its relationship to our deficits and overall debt, our military is a threat to our economy. Allow me to explain what I mean.
The American economy depends largely on private investment to grow and renew itself. When the federal government spends money it doesn't have, it has to borrow money from the marketplace that would otherwise go to investment in private enterprises. That money doesn't go towards starting new businesses, or research and development into new products or ideas; instead, it goes to perpetuate a metastasizing federal government that consumes nearly a quarter of our GDP. Combined with state and local governments, government spending consumes a little over half of everything we produce in this country. Since much of that is financed with deficit borrowing, the bill is actually much more substantial, because it has to be paid back over time with interest.
Our military spending exceeds the entire military expenditure of every other country in the world combined. Our navy is bigger than the next 13 navies combined, and 11 of those navies are possessed by our allies. We are told that we must spend so much money because we are threatened by enemies abroad, and those enemies are funded by nations like Iran, Syria, and North Korea. The significance of those three nations in this argument is simple: their combined military expenditures do not total more than 1/60th of our military expenditures.
9/11 cost $500,000. The greatest military and intelligence apparatus in the world was undone by a group of men whose entire operation cost a mere half a million dollars. Due to the political sensitivity of our relationship with Saudi Arabia, we couldn't trust our government to follow the money trail wherever it would lead. As a result, there are responsible parties who played a role in funding the deadliest attack on American soil in history who are at large and they are likely funding more attacks as we speak.
You don't need more money to combat that. You need common sense and willingness to pursue American interests without regard for the relationships between the Carlyle Group and the Bin Laden family. Our government has thrown gobs of money at a War on Terror that has done little to address the issue of terror. In point of fact, humanitarian aid is siphoned off by the Taliban in Afghanistan to the tune of $1 billion a year. That's how much we pay the Taliban to allow us to shuttle humanitarian aid through the portions of Afghanistan we don't control. It's counterproductive to our national security, and an insult to the American taxpayer.
We've thrown a dollar at a problem that required a dime spent wisely. Wise spending has never been our government's strong suit. It took us almost nine years to get Osama bin Laden, when he was living in a mansion in Western Pakistan for three of those years.
I have a government whose agencies can listen in on the conversations of anyone in the world due to their sophisticated communications surveillance abilities, but it took them nine years to locate the world's most famous terrorist leader. We can take pictures of license plates from outer space with satellite reconnaisance. We know where all the terror training camps are located because our ability to surveil using satellites, but we aren't taking them out. Are we really that concerned with the national sovereignty of Pakistan, so much so that our own national security and interests have to be placed on a backburner to appease a regime whose leaders and establishment offer aid and comfort to our enemies?
It's absurd. The problems that confront us are not insignificant, but they are also not as complicated or intractable as our leaders make them out to be. It's not like we don't know how to go about solving the issues that confront our nation, either fiscally or militarily. The problem is that the personal agendas and partisan interests of our elected officials, appointed bureaucrats, and government employees are making it virtually impossible to steer the ship of state in any direction conducive to America's long-term interests and short-term needs.
Let me give you a few illustrations of where we might begin to cut our nation's spending:
We have a Pentagon who failed to prevent 9/11, failed to prevent the first World Trade Center bombing, failed to prevent or foresee either of those two attacks plus the African embassy bombings or the attack on the U.S.S. Stark. We have an intelligence apparatus in the NSA and the CIA whose employees did not generate enough actionable intelligence to prevent the aforementioned attacks, or the Christmas Day bomber. Ordinary Americans prevented that young man from detonating a bomb in his underwear. We have an ATF in Tuscon, Arizona that is smuggling guns over the border to the Mexican drug cartels. We have a DEA that has failed miserably at making a dent in the drug trade over the past thirty years. We have a Minerals Management Service whose employees were too busy sleeping with the employees of the companies they were supposed to be overseeing. They were also doing crystal meth and watching porn on the job, which explains why they failed to prevent an ecological disaster at the Deepwater Horizon.
We have the Securities and Exchange Commission, whose employees were too busy watching porn at work to foresee and prevent the financial crisis. Back at the Pentagon, the employees were busy watching and swapping child pornography in a scandal that also reached over to NASA employees. We also have a Pentagon that lucked up on 9/11, because on 9/10, Defense Secretary Donald Rumsfeld had to admit before the press that Pentagon couldn't account for $2.3 trillion in spending. That's right, they lost more money than the entire federal budget outlayed in 2001.
We have the United States Postal Service, which hemorraghes some $4 billion a year on average. We could take that money and invest in making the United States a WiMax hotspot, virtually rendering the Postal Service even more obsolete than it already is. I can pay my bills online, e-file my taxes, communicate instantaneously with any friend or relative on Facebook, and the Post Office isn't relevant to my life. I can do this at any coffeeshop or bookstore I frequent for free. At most, I can buy a drink for a buck or two, and pay every bill I owe in a month, an act which would cost me at least three dollars in stamps if I chose to mail those bills.
We have the Department of Education, whose leadership got into hot water for paying columnists to praise No Child Left Behind in speeches, editorials, and on television as pundits. As a former teacher, I can tell you the legislation should have been entitled Every Child Held Back. The federal government essentially passed the legislation and then failed to fund it for a couple of years, which effectively meant that states had to come up with the funding to meet the regulatory requirements of the legislation on their own. We spend more money than any other OECD nation per pupil on education, only to rank in the thirties on our outcomes.
We have the NSA, which, as I mentioned before, could tell you about my online habits right down to my jaunts over to xhamster.com to watch a little porn every now and then, but that agency could not have told you a damned thing about the 9/11 hijackers and their phone communications that would have prevented 9/11. They can read your emails, listen in on your phone calls, and access your private information, and they did so in violation of federal law quite frequently during the Bush Administration. They also wasted over a billion dollars on a search program that didn't pan out before going back to an earlier program developed in house that cost exponentially less. Oh, and their directors and upper management were going back and forth between the NSA and the private contractor who developed that waste of a billion dollars program.
We have the FBI, which now creates homegrown terrorists by soliciting alienated teenagers to engage in bomb plots in Washington state. This is reminiscent of that ATF program which used your tax dollars to run guns over the border to the Mexican cartels, and one of those guns was used to kill a Border Patrol agent, just so you know. We have a Department of Homeland Security, under whose auspices the TSA now gropes six year old girls, searches infants in diapers, and engages in naked X-ray surveillance of airline passengers. The TSA had a little problem when one of its employees got a little angry at his coworkers for making fun of his small penis after they saw his goods during a training session on the scanner.
We also have the reality that our FBI and our financial regulators knew that fraud was rampant in the lead up to the mortgage crisis, but did little to utilize their considerable resources and legal authority to prosecute those responsible before they imploded the world economy. We have a government that spent $23.7 trillion in loans, guarantees, and outright giveways to bail out bad mortgages that totaled a little over $7 trillion. The entire U.S. mortgage market is a tad north of $21 trillion. The reason they had to do that was the fact that our government legalized rampant securitization of those mortgages, thereby exacerbating the problem.
In the aftermath of those bailouts, every major bank is still massively leveraged and their profits are nothing more than an accounting trick, one that is now legal courtesy our regulators that enables the banks to avoid reporting their toxic assets. We have 9% official unemployment, and real unemployment in the neighborhood of 16-20% .
In essence, it's not that we don't have places to cut, given the fact that we're clearly overspending for a product that doesn't deliver as promised. We have plenty of places to cut, but we can't because the great impetus for government spending or cutting comes not from the hoi polloi, but rather from the faux capitalists who line our corporate boardrooms.
Everytime someone slides their debit card to spend their welfare benefits, J.P. Morgan gets a fee because J.P. Morgan administers the debit card in various states. State welfare programs are administered by defense contractors like Raytheon and Northrop Grumman. If you think that these companies are going to support cutting welfare programs when those programs are generating fees for their stockholders, think again.
However, like everyone else, these companies don't want to pay for the gravy train. They avoid the corporate income tax rate of 35% and pay on average some 20%. In fact, some of them make a profit on their taxes by getting billions of dollars in refunds, like G.E. Now, as someone who proposes abolishing the corporate income tax altogether in order to avoid the situations we had under George W. Bush, where we took in $150 billion or so in corporate tax revenues while giving out $170 billion in corporate welfare, I was surprised at how resistant businessmen are to getting a free ride on their taxes. They want those refunds, and they're willing to keep the existing corporate taxation regime in place to keep their spots at the public trough.
All of the posturing, and all of the bloviating, and all of the rhetoric is just nonsense on both sides of the partisan divide. This country needs an enema. We have plenty of places to cut spending, and we have plenty of places to raise revenue by eliminating graft and waste. We also have the ability to raise revenue by closing tax loopholes and turning away from gimmickry like mortgage tax credits that underwrite the down payments of people who arguably shouldn't have been buying a house in the first place...because they lacked a down payment!
Democrats and Republicans alike are going to have to come to terms with the fact that the enemy is the political class. There are a few decent people on Capitol Hill, but the fact of the matter is that they aren't effective at doing anything other than highlighting the obvious. If you aren't getting the job done, you don't need to be on the job. It's time for us to eliminate this issue once and for all by banning remuneration for elected representatives. That's right, being a representative or a senator is a volunteer proposition. You're doing it for free. And while we're at it, we can eliminate the conflicts of interest by requiring those who do get elected to divest themselves of all investments. As it turns out, members of Congress do a lot better than average investors in the stock market, and I wonder why that is, given that they sit in oversight positions of the companies they invest in and have access to information average investors do not have access to. Martha Stewart served time for insider trading, but given the rates of return most Congressmen achieve in their investing, it's common sense to assume that something foul is afoot. And term limits need to be imposed as well, given that we have a 90% or higher reelection rate on average over the past 50 years to both houses of Congress.
No pensions, no healthcare, nothing. If you want to go to Washington, D.C., and serve as an elected representative, you'd better have an additional source of income. I'll be reasonable and propose a daily per diem for Congressmen who are in session, much like we had in the early years of our nation. It wasn't until 1855 that Congressmen started making an annual salary. Given that our Congress doesn't really stay in session for more than half a year, and many Congressmen miss their obligations during that time to go schmooze at fundraisers and golf junkets, I don't think we need to be paying them $174,000 a year. Maybe we could have dormitories for them.
It's time for our government to change it's attitude and it's time for us to reclaim that government. It won't happen overnight, but the best message we can send in 2012 is a message against incumbents. Vote them all out, regardless of their affiliations and your personal feelings. Send them home, because they aren't getting the job done and they haven't for some time.