Monday, April 26, 2010
Can I Please Borrow $100,000? Tea Party says. . . NO!!
by, Andy Badolato
Would you provide a $100,000 loan to a company or an individual who;
1.Has personally guaranteed short and long term debt of $1,630,000.
2.Has $100,000 in questionable non liquid balance sheet assets with no savings.
3.Has current income of $240,000 per year, but is currently spending $350,000 per year on his planned and budgeted bills and expenses. The next 5 years of budgets and financial projections that they provide also show expenses and fixed bills exceeding their income by an average of 30% every single year.
What would your answer be? What would a bank say?
Yet, these are the same ratios of debt, assets, income, monthly obligations and expenditures of our country at this time.
On tax day, April 15th 2010, President Obama addressed the country, and in a mocking way directed criticism and his amusement towards American citizens involved with the Tea Party protests. He was humored and felt it ironic, since taxes did not go up for Americans. Other Democrats, talk show hosts and celebrity left have also been seen smirking and joking about the Tea Party; labeling them as redneck militia, domestic terrorists, and or racists for being so concerned about the economy, national debt and taxes.
These simple actions clearly define how out of touch and clueless the Democratic Party, Obama administration and some mainstream media have become with the American people and the role of government. How they view themselves as elite, above us and looking down upon, entitled, while pompously acting as if they know what is best for us. How stupid they think the average American citizen is, and or being too arrogant and stupid themselves to look at the facts or the bigger picture.
Since the Presidential inauguration, our national debt has increased more than $2.7 Trillion to $12.8 Trillion. We have purposely prepared, budgeted and planned for an additional $7 Trillion of borrowed cash, giving us a $20 Trillion total noose by 2015. This strategic, planned on purpose -$7 Trillion budget was introduced to the American public with big happy smiles, a gloating giddy media, and lots of congratulatory applause. The title is ironically called, "A New Era of Responsibility, Renewing Americas Promise" and the first chapter of the budget presentation is titled "Inheriting a Legacy of Misplaced Priorities". This presentation and budget is directly overseen by the OMB or Office of Management and Budget, the largest department of the executive branch of the White House. The highlighted quote on the front page of the OMB website correlating directly to the $10 Trillion of actual and planned debt increase in two years is from President Obama. He states, "Let’s invest in our people without leaving them a mountain of debt. Let’s meet our responsibility to the citizens who sent us here. Let’s try common sense".
This single paragraph and facts described above should provide a glimpse of the seriously flawed political and economic system we really have, the problems we face in correcting it, and the legitimate beefs of the Tea Party.
Some say the recently passed heath care bill could increase debt another $10 trillion on top of the $108 trillion of unfunded social security and Medicare entitlements just starting to become due. Let’s discuss your share as of today, before it increases. Are you sitting down?
Per Citizen Per Taxpayer
Unfunded liabilities $108.3 Trillion
State and Municipal $2.8 Trillion $9,446.00 $26,449.00
There are many that now point to an improving economy now emerging due to recent economic reports and statistics. I pose the question, "If you personally made $240,000 per year and were handed $270,000 of borrowed cash and told you had to spend it all in one year, do you think your economy might improve slightly?"
Fellow Americans, we have a ticking thermonuclear economic bomb that requires immediate action, not denial or procrastination. Some say it’s too late already, it’s better to avoid all of the madness and worry, buy gold, guns and canned goods, hunker down, buckle your chinstrap and hold on tight. This national debt issue has just recently started to surface the past two years, having been suppressed, ignored, and tossed from president to president like a hot potato. Our political parties have become like the arguing newlyweds after getting the credit card bill from the extended honeymoon and the new furniture bought using the 90 days same as cash promotion. Rather than sensibly and logically attempts to deal with the obvious, they fight over whose fault or idea it was to go, or who signed for the expensive room service and massage while the other wasn’t around or complain about it to their friends. This type of behavior has become the meaning of bipartisanship in our country.
We have been living in a fantasy dream world, a delusional economy and sugar credit high, based on phantom money printed out of thin air backed by nothing. It’s as if we received a bunch of credit cards in the mail one day that our parents said to only use for emergency. Then, we quit our day jobs to live lavishly, take vacations and buy new clothes and cars, living off credit and equity line checkbooks to pay our bills. When the monthly payments become due, we paid with credit cards and wrote credit line checks. Sometimes, we transferred the entire balance to another card to make things all look good, keep a good credit rating and pacify our ego. At just the time we finally experience a serious event indicating a potential problem and our conservative friends suggest a debt Rehab clinic or an intervention; we decided to say the heck with it, took a tequila shot and "DOUBLED DOWN", going for broke. We gave our friends a high five, smiled widely and called our travel agent for an exotic vacation. We needed a get away from all the emotional stress, ridicule and hassles we suffered especially from the friends who nagged us to cancel our credit cards. It's easier for us to now deny those friends exist and cut them out of our lives, ignoring them completely. We ridicule and label them as nuts and kooks to others. Besides, it’s easier to get more friends, especially when you have several trillion dollars of money to spend and throw around. Just ask Mike Tyson.
The difference between the Tea party citizens and current elected government is:
• The American citizen knows the responsibilities and consequences of personal debts. Our elected elite politicians do know the consequences of debt, but unfortunately don't really care but still act like they do. They personally don’t have to pay it back, plus they get additional contributions, ribbon cutting invitations and other perks for the favors they provide with our borrowed cash. If it ever does become an issue, they have PR people that advise them who or what to blame, and write their response scripts advising them to be sure to act very angry towards the blamed person or party when asked by the press or on TV. Besides, if this mountain of debt finally one day causes the dollar to collapse or inflation to set in, they have no worries. Congressional, senior government and cabinet pensions automatically are protected for inflation and standard of living inflation adjustments in laws they passed themselves.
• The American citizen generally understands the meaning of how much they make each year and the importance of not spending more. Elected politicians understand, but don't really care and or don't understand sound business principals. Our current President has never run or operated a business as well as many in congress. After all, we elect the people who promise us the most and can give great speeches. Foolish of us to entertain the thought that government is a business and to actually vote for those qualified even if they are not great speakers or look good on camera.
• The American citizen understands the reality and consequences of not being able to pay their debts. Losing homes in foreclosure, lawsuits, liens against assets, utility shut offs, and repossessions all happen when income is not enough to pay debts after monthly bills. Our elected politicians understand but don't really care; being more concerned how they can benefit politically in the NOW rather than later when the debt has to be repaid. Besides, if they don’t say yes to bailouts, vote for pork barrels and pass new laws that help big corporations; they would get blacklisted unable to get $400,000 per year lobbying jobs or corporate speaking gigs when their term is up.
This decision to double down was triggered at a time when the crisis was related only to the debt of the consumer mortgages. The total of these loans are now at $14 trillion after write downs/write offs the past year and giving the banks enough money to cover the loss. Many leading economists indicate that further deeper write downs will be needed and that commercial mortgages are twice the size and magnitude of the residential market waiting to explode. Many blame the mortgage problem on our government as the enabler via the passage of the community reinvestment act. It allowed literally anyone to buy a home and the law made it mandatory and a crime not to provide these loans regardless of traditional qualification approvals. This lit the match and started the beginning of the housing boom as well as low interest cheap money made available by the Fed. The government obligated Fannie Mae and Freddie Mac loans were what brought the banks to negative reserve capital, sending shrapnel everywhere. We may still require further trillions to the banks due to commercial real estate, perhaps triggering other too big to fail corporations that will need more money too. Maybe we have only addressed 30% of the total problem? Unfortunately it gets worse.
The $108 trillion unfunded liabilities Grim Reaper has been patiently sharpening and honing his scythe, ironed his new black cloak and just landed in town as the first of the baby boomers reached retirement age earlier this year. This 65 year old Reaper is quite angry at us. He knows we have already collected these monies and made promises to set it aside, but instead we decided to spend it all along the way. This eye opening reality now means that every single United States citizen (man, woman and child) is liable jointly for $350,000 starting in 2010, ending in 2029. Since only 1/3rd of the US citizens pay income taxes, this means each would be responsible for $985,000 paid out over the next 19 years. This makes you really wonder about the smiling widely, yet reserved denials of the "death squads" political debate when the Heath care bill was being discussed. PS. Dear Granny; bring your shotgun and sleep with one eye open.
Based upon our current national debt projections of $20 Trillion by 2015, and assuming balanced budgets thereafter, the interest payments alone are $1 Trillion at 5% interest. This would be 41% of our government’s total revenues if they stayed the same as they were today and 83% if interest rates were 10%. Remember, that not too long ago interest rates were 18%. The money that is left over has to be used for the unfunded liabilities of Medicare and social security, military expenditures and homeland security now at almost $1 Trillion, and the rest allocated to the government Departments and Services overseen by the Czars at the Heath and human services, Transportation, Veterans affairs, housing, education, Energy, agriculture, Justice, commerce, labor, Treasury, interior, EPA, Corps of engineers, small business, Science, HUD, and community Services.
Oh, and don’t forget about figuring out how to pay for our personal debts of mortgage, consumer and credit cards totaling $16 trillion averaging $53,000 per citizen, and keeping our States, counties and cities operating smoothly that will need $2.8 trillion to pay off their loans.
Any sensible American taxpaying citizen with even half a brain and can use a calculator knows that there is an extremely tough rocky road ahead, a huge price to pay, and most definitely additional tax increases required. This was the case even before our national debt was increased by our elected leaders from $9 Trillion to $20 Trillion in just 2 years. We have reached our credit card limits already and may not have enough. Who is going to give us this money? There is no more equity line available or assets to leverage. As of April 2010, our country’s combined personal, business and corporate assets are valued at $72 Trillion dollars. This includes the stock market valuations and we all know what that would be worth if there was a serious or even a rumored sovereign debt problem. The total of Federal, State, municipal, personal, business and corporate debt is $71 Trillion. We have on paper a positive $1 Trillion in assets. But the problem is we still have $20 Trillion in debt and still owe $108 Trillion in unfunded liabilities.
Does this make you understand the views of the Tea Party a little better?
It seems as if all of our elected politicians have either become like; Nero playing the violin and sipping champagne while Rome burns, or crew members of the Titanic arguing over how to reorganize the chairs on the deck. A more appropriate analogy of the actions of our political leaders is; the crew members of the Titanic looting, robbing and stealing from us before taking our life jackets and lifeboats all the while smiling to us telling us things are OK and they are saving and protecting us. A great movie to watch that further explains our country's economy, culture, society, political system and how we got here is www.generationzeromovie.com
The insinuation and sheer madness of those in our country, that would laugh, joke and make fun of American citizen Tea Party groups that have legitimate concerns about national debt and the future of their country is appalling and embarrassing actually. They want to know why their government continues to spend more money and discuss even more programs.
The extreme polarization, differences, increasing antagonism, brewing resentment and irrational interpretations by the political parties and our media that is happening in our country is just the beginning. Just wait till the time when we can't borrow more, or interest rate costs increase enough to consume a majority or all of our current or projected revenues. We can’t keep printing money either, or the dollar will become virtually worthless setting off massive price inflation. Any of these events occurring will be the time when the hard decisions and the real hardball politics and finger pointing starts. Who to pay and why, and who to cut and why. Thus, a form of economic triage of decisions that will be made that possibly could literally mean life and death for many. In the meantime, it’s still easy to maintain status quo using the credit cards and fighting over how to spend trillions of borrowed money.
We are at a crossroads that cannot be compared to any other time in history. We are entering just the first phase that will indelibly redefine our future.
Note: Mr. Badolato currently serves as chairman, CEO of the Renewable Corporation. He has extensive experience in venture capital, technology transfer, and development stage start-up companies. You can check his company out at: http://www.therenewablecorp.com/