FLASHREPORT

People and businesses make economic decisions every day. To spend or not to spend; to borrow or not to borrow; to lend or not to lend; to invest or not to invest. In making these, and arguably almost any decision, we weigh whether the benefits and return from taking that action outweigh the costs and risks. If you believe that your potential return on an investment is greater than the risks, then you are likely to do it. If you think the benefit of buying something is equal to or greater than the cost, then you will spend that money.

On a macro-economic scale, there are a lot of risks out there right now. There is a lot of talk about potential disinflation or deflation, but yet the mounting debt augurs for monetization and rampant inflation in the future. We may have a “double dip” recession, or perhaps not. Gold may stay at its record highs and interest rates at their record lows, or it could all reverse. In the words of Federal Reserve Chairman Ben Bernanke, the current economy is “unusually uncertain”.

Uncertainty increases the perception of risk and analysis of costs when making those economic decisions. So, the uncertainty causes people and businesses to be reluctant to spend, invest, lend, or borrow when they do their risk/return analysis.

Enter the federal government. What the government should be doing, is trying to reduce cost and risk and increase returns as best it can to encourage more economic activity. But instead, almost every action of this Congress and the Obama administration has been to increase risk and uncertainty, thereby causing more people and businesses to pull back or stand still, thereby depressing the economy and costing millions of jobs. No one in America knows for sure what their income tax rates will be starting in just over 4 months, but they fear that they will be up, and perhaps up substantially. If you are planning for your estate or a family member’s estate, your death taxes could be as high as 55% for everything over $1 million, but you don’t know. You and your employer will almost certainly be paying more for health care next year and the year after, but you really don’t know how much, or when, or what other parts of that 2,200 page bill will affect you. From cap and trade to the gulf drilling moratorium, the country’s energy policy is more uncertain than ever except that everything points to energy costs being higher in the future. If you are a bank, the financial regulatory reform bill will require 10 times more regulations to be written than did the Sarbanes Oxley bill and you have no idea what they will be or what you are currently doing which may be called into question.

And I haven’t even talked about the huge federal debt and how that might impact interest rates and the value of the dollar going forward. No wonder businesses are reluctant to take risks, expand, or hire people. It’s no wonder that individuals are husbanding cash; they may need it to pay every higher tax and energy and health care cost coming down the pipeline. The Obama/Pelosi/Reid cabal is bringing on a double dip recession and causing job losses by doing precisely the opposite of what they should be doing. They are adding uncertainty, risk, and cost to virtually everything making those things more likely to outweigh the return and benefits. People will not risk money if they think that it is harder to make money because of regulatory costs and requirements and, even if they do turn a profit, they will keep less than half after taxes. It just makes more sense to hold on to what you’ve got. But holding on isn’t growth. Instead, we should be enacting policies that reduce risks and increase potential returns in order to unlock the natural creative and entrepreneurial spirit of the American people. Our people and our businesses want to grow and challenge themselves with new ventures, but the current leadership is doing all they can to dampen that spirit.

We are in very uncertain and challenging times. But Washington is making it worse, not better. That needs to change….and quickly.

Money from the ill-concieved $1 trillion stimulus bill is still pouring out. Remember that since we were already in deficit before the stimulus, 100% of these funds are being borrowed. So, just what are they being spent on? Well, Vice President Biden is kind enough to send each member of Congress a periodic statement of what stimulus money has been spent on in that member's congressional district. Last year, the VP's list to me included $2.6 million to install a "green roof" on a nearly vacant building which was being considered for demolition. The list he sent me this year had a total of 15 items totaling $24,878,506. By far, the biggest single award was to UCI for $14,090,736 for "pell grants" which are tuition subsidies for low income students. The remainder included $3.8 million to 4 local governments for "energy efficiency" in government buildings and "community development". There's $1.7 million to CalTrans for "pavement upgrades”, $99,986 to a private company named Metrolaser, Inc. for an Army research contract, and $4.5 million for 3 colleges for "energy efficiency" or further tuition subsidies. The remaining $541,000 is on two contracts to a private consulting firm for the environmental assessment of the City of Cambria in San Luis Obispo, and for a survey to assess damages to an existing breakwater.  NOTE: For your convenience, several of the figures above have been rounded.

That's it. That's the whole list.

OK, maybe there's nothing totally outrageous in this list. But here's what is outrageous. Just how many long term sustainable jobs does this create? Sure weather proofing a window pays somebody to install it, but after it's done has any sustainable growth been generated? No. And the worst part is that we have borrowed all of this money and will be paying interest on it for decades. So, 30 years from now we will still be paying for some student's tuitions subsidy in 2010.

I'm not saying that government has no role in creating economic growth. It does. But only when it creates an environment or infrastructure from which long term sustainable private sector growth is or can be created. Two specific examples and ideas about which you will hear from me over the next year are as follows. Create a 21st interstate "highway system" by installing free broadband wireless internet service in the largest 300 markets in America as well as across the existing interstate highways. Just as the original highways spawned motels, restaurants, theme parks, and all kinds of private sector growth and ideas, imagine what the technology community might come up with if all Americans had the ability to access this new highway virtually anywhere for free. The second idea is to give a significant tax break via the existing master limited partnership law (MLP) for such MLPs that invest in public infrastructure. This could include roads, water projects, energy projects, pipelines, sewers, or any number of other elements of infrastructure. Governments have no money and no borrowing capability and they will likely not recover for a very long time. As we spend more and more money on transfer and welfare programs, governments have nothing left for the services many of them were originally created to provide. Under this idea, the private sector could fund rehabilitation of our crumbling infrastructure without using any government borrowing capacity. The MLP would receive accelerated depreciation as a tax advantage and some increment of fees from users of the infrastructure. New and improved infrastructure will promote tremendous private sector growth using this newly refreshed, improved, or created capacity in water, transportation, and power. You will see a bill from me later this year on this idea.

These are just a couple of ideas. I have lots more. There is much we can do in government to help foster an environment for growth in jobs and the economy. Unfortunately, the current crowd in charge in Washington is stuck in a mindset of the failed socialist ideas of the mid-20th century. But we can change that.

It's pretty easy to be downtrodden these days. But there is hope. It is on the horizon, if we have the courage and vision to seize it.

Quote of the Week: "No man's life, liberty or property is safe when the legislature is in session." - Samuel Clemens (Mark Twain)

August Recess: The tradition of the August Recess dates back to the very first Congress in 1790. Washington has miserable weather in August with high temperatures and high humidity. It is 96 degrees with humidity to nearly match as I write you this. Abraham Lincoln famously hated DC in August and would have gotten away but for that little matter called the Civil War. In any event, Congress has rarely been in session in August and in 1970, the August recess was actually codified. Very rarely has Congress been called back into session during that period absent declared war or a natural disaster of some kind.

But Nancy Pelosi's Congress is different. We were called back into session this week for a very important purpose - to spend, borrow, and tax even more than we already are. Yes only in this Congress does spending more money, borrowing more money, and increasing taxes become a national emergency.

The bill that we were called back to vote on (you can guess that I strongly opposed it) passed by a vote of 247-161. It will spend $26 billion of new money in the next 60 days. You will hear that this is for salaries of teachers, police officers, and firefighters. But the fact is, most of it is for Medicare and other welfare programs that were increased in the stimulus bill, but that doesn’t make for a good sound bite.  Regardless of what the money is "earmarked" to do, it is going to go to states to plug their budget holes. They can designate the money for whatever they want, but the fact is that such money going to a state is fungible and the states don't have to change anything to receive the money. In the case of California, it will plug the budget hole for about 2 months. That's 60 more days that California can ignore the budget, which is of entirely the government's own making by spending too much. But there are a number of other states where they have budget surpluses and are cutting taxes. They will be subsidizing the badly managed states to some degree since they don't really need or want the money.

And 100% of this $26 billion will be borrowed. In theory, this borrowed money will be partially paid back through a tax increase on multi-national corporations that employ American workers. This new spending will be spent in 60 days and that tax increase will permanently encourage companies to employ more people overseas and leave their profits overseas as well. The rest of the "pay back" is in a reduction in the increase of the food stamp program put forth by the so-called stimulus bill. Notice that this is a reduction of the increase, not an actual reduction over a year ago. But this reduction will not even start until 2014 even though the money will be spent before the end of the year. That's a little like trying to convince your spouse that you can afford that new JetSki right now by simply reducing your spending on groceries between 2014 and 2020. My spouse would not buy that. I suspect yours would not either. But to this Congressional majority, it makes perfect sense.  In spite of that, the Democrats who spoke on the floor said that they had been assured that these "cuts" to the food stamp program will be reversed before they ever take effect.

This bill will increase spending, increase taxes, increase debt, and kill more private sector jobs. Oh, and according to the Congressional Research Service (CRS), this little sojourn back to DC cost taxpayers an additional $15.9 million in expenses to fly us all back there and operate Congress again during the recess. So add that to the cost.

If we don't stop the spending and borrowing spree and start to enact policies that reward private sector growth and risk-taking, this debt load will crush us all, including teachers, firefighters, and people on welfare.

I apologize for the rant, but every time I think that the Pelosi-run Congress will finally stop the madness, instead they double down on it.

Offshore Drilling Moratorium: One of the committees on which I serve is the Joint Economic Committee.  This committee is primarily tasked with studying the U.S. economy, and consider factors which affect it.  Last week, we had a hearing on the subject of energy. One of the witnesses was a professor from Texas A&M University. He made a very interesting point about the Obama Administration’s moratorium on offshore drilling. Ostensibly, the purpose of this moratorium is to reduce the risk of another oil spill until such time as acceptable oil spill prevention activities are in place, if ever. Interestingly however, this professor challenged that supposition. He pointed out that if the moratorium continues, 150,000 very high paying American jobs will be lost to Brazil, India, and other places for a period of at least 2 years. But in addition to that, the US will be forced to import more oil because of the domestic oil production that will be lost. That imported oil will come into the Gulf of Mexico and other ports, in ships. The professor estimated that it will take 1,500 additional tankers full of oil (roughly equivalent to 269 million barrels of oil) to make up for the oil not extracted from existing oil fields. Statistically, the risk of an oil spill is much greater from a tanker than it is from an offshore drilling rig.  Therefore, the U.S. is actually now at GREATER risk of an oil spill because of the Obama administration’s drilling moratorium due to the massive increase of oil being imported on ships. It’s something to think about.

On another note, isn’t it interesting that the Obama administration chose to challenge the State of Arizona for its attempts to enforce immigration laws, when that same administration has taken no action against the so-called “sanctuary cities” that have statutes which specifically prohibit their (local) law enforcement officials from noting or pursuing KNOWN violations of federal immigration laws.

On still another note, lest you thought things had changed on Washington’s spending culture, the Transportation, Housing, and Urban Development spending bill passed by the House last week represents an increase of 38.1% over the FY 2008 level. What’s more, it contains 461 earmarks. Because most Republicans have accepted a no earmark moratorium for this year, 455 of those earmarks were offered by Democrats and 6 by Republicans. But what’s the problem? It’s not like we have a deficit or owe a bunch of money or anything…………. (heavy sigh).

For more on this, tune in tomorrow!

It now appears that FinReg is the generally accepted shorthand name for the financial regulatory reform bill that the president will sign into law this week. As most readers of this missive know, I opposed this bill because it will not solve the problems that led to the 2008 financial crisis and it will make consumer and small business credit more difficult to get and more expensive. Therefore, it will be another addition to the list of bills (health care, cap and trade, stimulus, etc.) which will increase taxes, lower growth, and destroy even more private sector jobs in this country. The bill has 3 basic elements which I will describe briefly below. Also, I will tell you what I think the economic and societal effects will be. When all of this becomes apparent during the next 12 months, remember that this is the piece of legislation driving it.

• Derivatives regulation: I support much of this effort, unfortunately however, the bill fails to create sufficient exceptions for end users of derivatives (such as farmers), who do not use derivatives as an investment, but rather as a "hedge" to insure against market volatility in an non-financial product or material they actually use in their given daily businesses.  So, the unnecessary parts of this section would make it more expensive for end users to do business. That means less growth and fewer jobs.
• Too Big to Fail:  There will still be 'too big to fail,' as this bill more or less perpetuates the current system and its risks. According to the bill, the financial industry (including institutions that are not too big to fail) will be self-funding their bail-out fund, instead of taxpayers (Good!); but there will still be incentive for banks to take big risks knowing that there is an "insurance" fund to "save" the system. Enormous business is only somewhat better for society than enormous government.  If you are that big, you ought to have restrictions and reserve requirements that make your collapse nearly impossible. Such requirements will impact return on investment for such huge entities. So, if you don't want to meet those requirements, then a company can choose to break themselves up.  In my opinion, this bill does not adequately address the underlying problem of systemic risk.
• So-called Consumer Protections: The elements in this bill euphemistically labeled as "consumer protections" are actually the worst parts of it. Consumer and small business loans will be even harder to get and more expensive. Also, get ready for your bank to tell you that your 'small balance' checking account is no longer free. The new regulatory burden and substantial new taxes on banks will make many checking and even savings accounts and loans unprofitable for banks. So, they will either just stop them or charge you more.

Of course, the bill does not deal with the single biggest contributor to the financial meltdown, the structure and excesses of Fannie Mae and Freddie Mac. These entities continue as subsidiaries of the federal government and are unaffected by the bill. Now we wouldn't want to put any regulation or restrictions on a government entity now would we? Heavy sarcasm (:

When all of this happens over the next year, remember who caused it - the people who voted for and supported this bill.

I have been in elected office for 10 years now. And of those 10 years, I have spent half of that time in the California State Legislature and the other half here in Congress. During that time, I have found that a common thread exists amongst elected Democrats. At least part of the reason they ran for and are in office now is to raise taxes on somebody or everybody and then spend that money on people and programs which they deem worthy. A fundamental tenet of the Democratic Party today is that government should tax more and spend more on lots of things.

But that ideology has just run headlong into political reality. Polling shows that one of the top two issues on the minds of Americans these days is the debt and the deficit. The other big issue is jobs and the economy. And Americans realize that the two are related. They understand that our crushing debt burden, up 81% since Democrats took over Congress in 2006, is one of the drags on the economy. So, spending money that increases the deficit and the debt even further is not very popular right now. And of course, there is an election in just over 4 months.

So, if you want to spend new money without earning the rancor of the public, you need to either cut other spending by an equivalent amount or raise taxes by an equivalent amount. Raising taxes is never popular. But it's particularly unpopular after you've just raised them by trillions of dollars in a very public and unpopular health care bill.  And because of the ideology described above, cutting other spending is very difficult within the Democratic Caucus because there are constituencies for every dollar currently being spent, and those constituencies don't want to see it reduced. So, Democrats can't agree to do it.

Hence the Democrat's dilemma.  They want to spend more money on lots of things. They think that the only way to create jobs is to have the government spend more in order to create more government jobs. But they don't want to vote for more deficit spending. They don't want to cut any other spending. And, although they would like to raise taxes, they fear the ire of the voters in November if they do. That's why they won't pass a budget in the House this year for the first time since 1974. They want to spend the money, but they don't want to vote to spend the money.

This is resulting in a form of gridlock here in D.C. as Democrats struggle to marshal the votes amongst Democrats for more spending programs knowing that no Republican will support any of this. Heretofore, Speaker Pelosi has always gotten her way. But it is getting more difficult as the debt rises and the elections loom. Just this week, Majority Leader Hoyer (D-MD) announced that Democrats may not be able to adhere to President Obama's pledge to not raise taxes on families earning below $250,000. Although, it should be noted that this pledge has already been broken on several occasions, it was nonetheless quite interesting to see him admit that there are more taxes to come which will impact everyone. This is a clear signal that given the choice between no new spending, or cutting existing spending to pay for new programs, the Democrats are likely to choose neither and instead add on more and more tax increases or deficit spending or both.

They can't help themselves. It's why they came to Congress. But it's the wrong thing at the wrong time. We can create jobs and lift the economy by cutting taxes and cutting spending and giving the private sector some certainty that if they take risks and succeed they will be rewarded and not punished. But this majority will never go there.

So, we will all be better off for the time being if all these tax and spend ideas just die.

Spending Reductions: The spending lobby, the mainstream media, recipients of taxpayer largess, and virtually all elected Democrats would have you believe that we have already cut spending to the bone and that there is no more to be done and the economy and people will suffer if we cut any more, so you we must pay a bunch more in taxes to prevent this calamity.

Baloney! Rubbish! No Way, Dude!

Don't believe them. Governments at all levels are loaded with fat, waste, abuse,  overpaid employees, and unnecessary programs. Here is a taste of the literally dozens of spending cut proposals that exist in Congress in one form or another. Some of these are relatively small dollars (only in government is $1 million "small") and others are much bigger. This is not an exhaustive list by any means. I present it only to give you a flavor of what is possible.

The cuts below total $16 billion worth of savings, and this doesn't even include the major reform of the entitlement programs (Medicare, Medicaid, and Social Security) where the really really big, long-term dollars are.  

Eliminate "Community Development" Programs:  This proposal would eliminate all programs under the Community Development Fund at an annual savings of $4.45 billion.

Eliminate Essential Air Service (EAS) Program:   This proposal would eliminate spending for the EAS program, at an estimated annual savings of $150 million.

Eliminate the International Trade Administration:  This proposal would eliminate the International Trade Administration at an estimated annual savings of $447 million. 

Eliminate the Technology Innovation Program (TIP):  This proposal would eliminate the Technology Innovation Program (TIP) at an annual savings of $70 million. 

Eliminate the Manufacturing Extension Partnership Program:  This proposal would eliminate the program at an annual savings of $125 million. 

Eliminate Trade and Development Agency:  This proposal would eliminate funding for the Trade and Development Agency at an annual savings of $55 million.

Eliminate the New Starts Transit Program:  This proposal would eliminate the New Starts Transit Program at a savings of $2 billion annually. 

Exchange Programs for Alaska, Natives Native Hawaiians, and Their Historical Trading Partners in Massachusetts:  This proposal would eliminate the program at a savings of $9 million annually. 

Eliminate Intercity and High Speed Rail Grants:  This proposal would eliminate Intercity and High Speed Rail Grants at a savings of $2.5 billion annually. 

Eliminate Amtrak Subsidies:  This proposal would eliminate subsidies to Amtrak at a savings of $1.565 billion annually. 

Eliminate Title X Family Planning:  This proposal would eliminate Title X Family Planning at an annual savings of $318 million. 

Appalachian Regional Commission:  This proposal would eliminate this program, saving taxpayers $76 million annually. 

Eliminate the Economic Development Administration (EDA):  This proposal would eliminate spending for the EDA at an estimated annual savings of $293 million.

Eliminate Subsidy to Corporation for Public Broadcasting:  This proposal would eliminate taxpayer subsidies to the Corporation for Public Broadcasting at an annual savings of $445 million. 

Eliminate National Endowment for Arts (NEA) Subsidy:  This proposal would eliminate this taxpayer subsidy at an annual savings of $167.5 million.

Eliminate National Endowment for the Humanities (NEH) Subsidy:  This proposal would eliminate this taxpayer subsidy at an annual savings of $167.5 million.

Eliminate Funding for National and Community Service Act:  This proposal would eliminate federal funding for this purpose at an annual savings of $1.15 billion. 

Eliminate the Energy Star Program:  This proposal would eliminate the Energy Star Program at a savings of $52.5 million annually.  

Eliminate International Fund for Ireland:  This proposal would eliminate taxpayer funding for this program at a savings of $17 million annually. 

Eliminate U.S. Agency for International Development:  This option would eliminate the U.S. Agency for International Development, saving taxpayers $1.39 billion annually. 

Eliminate Economic Assistance to Egypt:  This option would eliminate Economic Support Fund aid to Egypt (Foreign Military Financing Program assistance would continue), saving taxpayers $250 million annually.

Eliminate Subsidy for Washington Metropolitan Area Transit Authority:  This proposal calls for eliminating this special subsidy to the Washington Metropolitan Area Transit Authority at a savings of $150 million annually.

Last week, I mentioned that over my next few blogs, I would provide some short observations on the state of things here in Washington, D.C...and here is a group of several additional observations.  Enjoy!

• For decades, the assumption has been that government employees were paid less than their private sector counterparts. But the tradeoff was that the public sector jobs were more secure and  often times, you can't be fired without gross malfeasance. That has since changed. Big time. The American Enterprise Institute, just completed a study which showed that the average government employee now makes significantly more than their private sector counterparts when pensions, generous vacations, and other benefits are taken into account. Equivalent workers in the private sector only make half that much! This is on the heels of another study which showed that government employees now earn about 25% more than private sector workers in straight salary without taking benefits into account. And of course, the whole issue of it being harder to get fired in government is still true. So, if you work in the private sector and run into a friend who works for the government, ask them why you need to pay more taxes and sacrifice so that they can get paid double what you make?
• I like golf, although I'm not very good at it. But I haven't played in almost 3 years because I just don't have the time. The first President Bush was widely criticized by the press for playing golf while soldiers, sailors, airmen, and Marines were fighting in the Gulf War. Accordingly, George W. Bush stopped playing golf after 9/11. President Obama has no such compunction. According to London's Daily Telegraph, Obama played 32 rounds of golf in his first 15 months in office, about the same as Bush 43 played in his entire 8 years in office. American soldiers, sailors, airmen, and Marines are still fighting in Iraq and Afghanistan. Where is the press outrage?
• As you undoubtedly know, I think that the Socialized Medicine Bill passed earlier this year is a disaster for the country on several levels. But what you may not know is that it is universally acknowledged that there are a number of elements in the bill that just don't work or create consequences that even supporters of the bill never intended. But rather than fix them, Energy and Commerce Committee Chairman Henry Waxman (D-CA), decreed that no hearings would be held this year on the Health Care Bill because it might give the impression that the just passed bill has problems. Now, we wouldn't want to give that sort of impression would we.....especially since it's TRUE!
• Socialized Medicine Bill factoid you probably don't know: You used to have to have income below a certain amount and a net worth below a certain amount to qualify for free health care under Medicaid. Not anymore. The wealth cap has been completely removed. So, if you have little income, you can live in a $2 million house that you own free and clear and still get all your health care for free.
• Another Socialized Medicine Factoid you probably don't know: In order to give the illusion that this bill somehow reduces the deficit, Democrats needed revenue sources. One of the ones that is now law is a requirement that every business create a 1099 for anyone (business or individual) who buys more than $600 in goods or services in a tax year. and send a copy to the recipient and the IRS. This is supposedly going to raise $17 billion in new money as companies who are not reporting income now will have to report it. But, what will be the costs to the private sector to generate these documents for every check they write? Another huge job killer here.
• The Democrat majority in Congress may not be able to produce a budget, but the Republican Study Committee has. That budget reduces the deficit every year and creates surpluses by 2019. Oh...and it actually lowers taxes by making the 2001/2003 tax cuts permanent and by permanently keeping the alternative minimum tax at its present level. You can read more about it on the RSC's website by clicking here: FY 2011 RSC Budget Plan
• Did you hear about the SEC employees who were caught watching internet porn on their government computers almost 8 hours a day while at work during the financial crisis? OK, watching porn on a government computer is bad enough, but what bothers me the most is that some of these guys were making $200,000 a year and spending 8 hours a day NOT WORKING and did it for a long time while the SEC was telling Congress that they didn't have enough money or people to do the job. Unbelievable.

Over my next few posts, in no particular order, will be a bunch of miscellaneous facts or observations from yours truly on various aspects of the state of things in Washington, D.C. today. Unlike some of my ramblings, these will all be short. I'm not sure that this is accurate to say, since this stuff emanates from the seat of the nation's enormously bloated government, but I'll say it anyway - Enjoy!

• Apparently, Congress will not take up or pass a budget this year. The Budget Act requiring an annual budget was passed in 1974. The House has never failed to produce and pass a budget since then...until this year. The person responsible for producing that budget, Budget Committee Chairman John Spratt (D-SC) famously remarked in 2006 "if you can't budget, you can't govern." I guess the Democrat majority can't govern. Can you say dysfunctional?
• The so-called Financial Reform Bill has now passed both the House and the Senate.  But the versions are quite different from one another, so a conference committee is currently resolving those multiple differences and it will have to pass both chambers again in order to get to the President, who has called for it to be on his desk by July 4th. We need financial reform. I do not want to go through what happened in September/October of 2008 again.  But yet again, this bill is another partisan travesty. It will not fix the problem. It will make consumer loans, which are already hard to get, even more expensive and even harder to get, which will further reduce jobs. The President will say exactly the opposite of what I just did. But then he also said that the health care bill would lower the deficit and cut costs in health care. (heavy sigh)
• Some of the biggest contributors to the financial collapse in 2009 were Fannie Mae and Freddie Mac. Both are now owned by the government. The Financial Reform Bill doesn't even address them.
• Louisiana Governor Bobby Jindal first asked President Obama for the federal help to protect the coast from the oil spill on May 10th. It has arrived only just recently.
• Our Republican Conference has set up a website with a cool new technology to gather input from Americans everywhere on what the agenda of Congress should be right now instead of the job-killing, deficit-creating, unstable track we are on right now. You can visit it at www.americaspeakingout.com.  Go there and weigh in on your thoughts about what we should really be doing and where we should be going.  You can also share your thoughts on my Facebook page at www.facebook.com/johncampbell.

Greek Tragedy: There has been much publicity as of late, particularly among the financial community, about the fiscal problems in Greece. The Greek government has spent far more money than it has taken in and done it for enough years that they now have a huge deficit and an even bigger debt. There are fears that Spain, Portugal, Italy, and Ireland could be next. Stock markets around the world lurched downward out of fear that these systemic debts and deficits may not be able to be repaid and that these countries may need to default on their debt.

But they are not alone. Here are the current year deficits (2010) and outstanding national debt as a percentage of that country's Gross Domestic Product (GDP) for Greece, the largest European countries and the U.S.:

Country	Deficit as % of GDP					Public Debt as % of GDP
United States	10.3%					90.9%
Greece	9.4%					130.1%
Spain	11.5%					67.4%
Italy	5.3%					119.6%
United Kingdom	12.8%					78.1%
Germany	5.6%					77.1%
France	8.4%					84.4%

As you can see, our deficit this year is actually larger than Greece's, although the accumulated debt is lower. But our accumulated debt is greater than that of any other country on the list except Greece and Italy (As a percentage of GDP). And our annual deficit and debt is greater than both Germany and France. In other words, our fiscal situation is far worse than the average in the Euro zone.

So, why then has the dollar been rising in the last few weeks and the interest rate on our debt dropping even as Greece approached default? In the past, when countries spent too much and got into debt problems, they often printed money like crazy and inflated their way out of the debt by paying it down with much cheaper "dollars" than they had borrowed. This works, but it does so by inflating away the wealth of their nation in what is a very uneven and inequitable way. Several South American countries did this in the 1980s. But Greece does not have that option because they do not control their own currency. They cannot unilaterally inflate the Euro, and the rest of Europe won't do it for one of their member's problems. That is why they are in such trouble. If they can't inflate it away, the only other option (other than cut spending which we will get to in a minute) is to default on the debt and not pay it all back. That's what had the markets really freaked out.

But the US and UK each have their own currencies and can inflate that currency if they want to. So, there is no panic yet on US bonds. And, because the US bond market is so huge and so liquid, that it has a "lesser of evils" appeal to it.

But that appeal won't last forever. On the path laid out by President Obama and Speaker Pelosi, we will be at Greek levels of debt and deficit in just a few years. Eventually (I fear sooner rather than later), markets will begin to worry about the safety of US debt and a crisis will ensue that will be very very severe. We will either have to create inflation to pay the debt or be crushed by it.

We have got to dramatically cut federal spending everywhere, and soon. Otherwise, everyone in this country will pay a large price for inaction. I watched the government employee union members out in front of their parliament protesting any reductions in their pay or pensions. Sound familiar? Countries all over the world are in fiscal trouble because of the growing entitlement mentality, where people feel they are entitled to a whole bunch of stuff that somebody else is supposed to pay for. They don't care who pays, as long as it's not them. Free health care; retirement at 50 with your highest salary for the rest of your life; government administrative employees who earn the same as doctors but with no risk or accountability; free money for all kinds of things; waste and fraud in every department. We can't afford it anymore. And everyone's standard of living and opportunities will fall in order to maintain some free or unjustified stuff for a few if we don't act soon.

The good news is that the public gets it, and this sentiment is starting to creep into Washington. Two incumbents: one Republican and one Democrat were defeated in primaries in the last week apparently because both liked to earmark and spend money. The Democratic leadership pulled an $85.6 billion spending bill from the floor last night when a Republican amendment passed to reduce what had been a 31% increase in spending down to 0%. It appears the Democratic leadership pulled the bill because they want to try to find a way to get their spending increase back.

But can you believe that in the current environment we would be increasing spending on ANYTHING by 31%!!!  Even if you believe that the solution to all of this is to raise taxes (which it isn't), you would have to raise everyone's taxes at every level by more than 60% to pay for that AND the debt.

Last month, the federal deficit was $82.7 billion for the MONTH.  That is the highest monthly deficit ever. That was an annual deficit not that long ago.

Mr. Obama and Mrs. Pelosi, is this the change we can believe in? They don't get it, or they don't care. But you do.

If you want to have a little fun and help us send a message about cutting spending go to the website for the latest project, which we are calling YouCut. On the site, you can vote on one of 5 proposals to reduce spending. The winning proposal will be brought to the floor for a vote under the only procedural option available to the minority party to do so, and we will be doing this for the next several weeks. These are small amounts that will not solve the problem right away. But Washington is overrun every day with people asking for money for this program and that project and a salary increase and a cost of living increase (When I was first elected, 90% of every meeting that people requested to have with me was someone asking for an earmark or some form of federal money for their company, agency, project, or program. Now because of my earmark stand, it's down to about 50%, but that is still way too high.)  We need to start to balance out those spending voices with the voices of the vast majority of Americans who want us to stop squandering their future. This is a way to start to change that culture of spending. Please log on and help us by clicking here.

Quote of the day "..a miracle....We consider health reform to have been an important battle and a success of his (Obama's) government." - Praise for the recently enacted health bill from the Cuban  communist dictator Fidel Castro.

Foreign Policy: It is stunning how the Obama administration is fervantly pursuing a foreign policy that praises those who would destroy us yet punishes our allies and friends. The president's multiple snubs of Israeli Prime Minister Netanyahu at the White House have been well publicized. The snubs included the conspicuous absence of public appearances with the Prime Minister, rudely making him wait in the White House while Obama had dinner, and unwarranted public criticism of the Israeli settlements in Jerusalem, and all the while we continue to engage the regimes in Iran and Syria.  These actions show just how backwards this administration has things. Rather than criticize the Jerusalem settlements, I believe that the U.S. should move our Embassy from Tel Aviv, where it is now located, to Jerusalem. After all, the Israeli government is located in Jerusalem and we should have our diplomats there as well.  This will serve both a practical purpose and signal support to Jerusalem as the current and historical capital of the country.

Unfortunately the Obama administration's snubs of our friends are not limited to just Israel. Recently, Secretary of State Hillary Clinton offered to help "negotiate" the fate of the Falkland Islands between Argentina and the United Kingdom. You may remember the 1982 Falklands campaign which earned then British Prime Minister Margaret Thatcher the title of the 'Iron Lady'. These island's occupants are 100% British either by birth or descent and their inclusion as a part of Britain predates Argentina's existence as a country. What the Obama administration is doing here is the equivalent of the British government offering to "negotiate" the Hawaiian Islands between the U.S. and Japan in 1941, since the Japanese clearly thought that they were entitled to them. Here is a link to an article I wrote recently for London's Daily Telegraph newspaper on this subject.

The "special relationship" between the U.S. and the U.K. has existed for decades through presidents and prime ministers of all parties in both countries. However, President Obama appears not to believe in either American exceptionalism or the 'special relationship' with the U.K., who is unquestionably our closest ally on earth. As this President inexorably tries to wreck all that is good about America, I refuse to stand by and watch. As Co-Chairman of the U.S./U.K. caucus in Congress, we will be stepping up efforts to establish close relationships between Members of Congress and Members of Parliament of all parties and in all regions of both countries. We can keep this relationship special through Congress regardless of what President Obama may do.

The Tax Man Cometh: I am sure most of you loyal readers of this missive do not need a reminder, but yesterday was April 15, and you know what that means...Tax Day.  If you think your taxes are bad now...you need to take a look at the lists below. 

Tax Increases Enacted since January 2009

This list, totaling more than $670 billion in tax increases includes the Health Care Bill, SCHIP, the Stimulus Package, and several other pieces of legislation which have been signed into law by President Obama.

Pending Tax Increases if Congress Takes no Action

2010:

• The exemption for the Alternative Minimum Tax (AMT) will decrease from $46,700 to $33,750 for single filers and from $70,950 to $45,000 for married couples filing jointly.
• Taxpayers will not be allowed to deduct their state and local general sales taxes from
  their federal income tax.
• Businesses will not be able to claim a tax credit for research, experimentation, and
  development activities.
• Taxpayers will not be able to claim a deduction for qualified tuition and related expenses.
• School teachers will no longer be able to write off books, supplies and other equipment
  that they purchase with their own money for the classroom.
• Five year depreciation of farm business machinery and equipment will expire.
• Business property on Indian reservations will no longer be depreciated at an accelerated
  rate.
• Donations of books to public schools (K-12) will no longer be eligible for an enhanced
  charitable deduction.
• Corporate contributions of computer equipment for educational purposes will no longer
  be eligible for an enhanced charitable deduction.
• The minimum required distribution rules for IRAs and defined contribution plans will no
  longer be waived.
• Tax-free distributions from individual retirement plans for charitable purposes will no
  longer be allowed.
•  The tax credit for first-time DC homebuyers will expire.
• Tax incentives for investment in DC, including the DC Zone employment tax credit, will
  expire.
• "Renewal Community" tax incentives will expire.
• The net operating loss (NOL) carryback period for small businesses will decrease from 5
  years to 2 years.
• The first-time homebuyer credit will expire at the end of April 2010.

2011:

• The marginal income tax rates will increase as follows:
•  35% bracket will increase to 39.6%
• 33% bracket will increase to 36%
• 28% bracket will increase to 31%
• 25% bracket will increase to 28%
• 10% and 15% brackets will condense to 15%
•  Dividends will no longer be taxed at the capital gains rate for individuals, thereby
  increasing the double taxation of dividends by as much as 164%.
• The personal capital gains tax will increase to 20% and 10% (from 15% and 5%).
• The child tax credit will decrease from $1,000 to $500.
• The standard deduction for couples as a percentage of the standard deduction for singles
  will decrease from 200% to 167%--restoring the marriage penalty.
• The top end of the 15% marginal income tax bracket for couples as a percentage of the top
  end for singles will decrease from 200% to 167%--restoring the marriage penalty.
• The "death" tax using the "stepped up" basis will return with a 55% maximum rate
  (including surtax) and a $1 million exemption, after years of decreasing "death" tax rates,
  increasing exemptions, one year using the "carryover" basis to calculate the tax due, and one
  year of total elimination (2010).
• The Section 179 business expensing cap will decrease from $250,000 to $125,000 (plus
  inflation after 2008), and the starting point for the phase-out of this deduction will decrease
  from $800,000 to $500,000.
• The dependent care tax credit will decrease from $3,000 to $2,400.
• The American Opportunity Tax Credit will expire.
• No longer will individuals be able to receive a credit to purchase energy efficient home
  appliances.
• The tax credit to hire unemployed veterans and disconnected youth will expire.
• The Work Opportunity Tax Credit, which allows employers to credit up to 40% of the
  first-year wages of a new employee, will expire.
• The $400 "Making Work Pay" Tax Credit will expire.

2012:

•  The adoption tax credit will decrease from $13,170 to $5,000.
• The credit for electric drive motorcycles, three-wheeled vehicles, and low-speed vehicles
  will expire.
• The conversion credit for plug-in electric vehicles will expire.

2013:

• The tax credit for cellulosic biofuel producers will expire.
• The tax credit for the production of Indian coal will expire.
• The election to claim the energy credit in lieu of the electricity production credit for wind
  facilities will expire.
• The special depreciation allowance for cellulosic biofuel plant property will expire.

Quote of the day: "It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat." - Theodore Roosevelt, April 23rd, 1910

Now what?: Unless you have been hiding somewhere for the last 24 hours, you know that ObamaCare passed late last night. So now what?

First of all, lawsuits are already being filed by states and others challenging the constitutionality of various provisions in the bill.  The provision attracting the most attention is the one requiring that you buy health insurance approved by the government or face a fine and/or imprisonment.  You may ask if this is not similar to the state requirements that people buy car insurance. Those car insurance laws have been ruled constitutional because you don't have to buy it unless you want to drive your car on a public road. It is essentially a cost for the "privilege" of driving on a public road. If you only use private roads, you do not need to buy insurance. But this health insurance provision requires everyone to buy simply because you take breath.  As an aside, notice how effective the car insurance mandates have been. We all still have to pay for uninsured motorist coverage because so many people still drive without insurance. Imagine how difficult and intrusive it is going to be in order to enforce this health insurance mandate.  And, by the way, there is no cost or funding in the bill for that enforcement, which is supposed to be done by the IRS.

Secondly, the provisions of the bill, both taxes and benefits, will all phase in between 6 months after enactment and 2018. So, there is still time to stop it. I, along with virtually, if not all Republicans, are already calling for repeal. As a practical matter, even if the public were to entrust us with the majority in Congress this November, it is unlikely that President Obama would sign a repeal of his signature piece of legislation. So, unless that veto could be overridden with a 2/3rds majority in both Houses, the bill cannot be repealed before 2013. However, one of the tricks employed by Democrats in order to give the illusion that this thing is fiscally responsible is that they did not fund any of the agencies, enforcement, and implementation of the bill. For example, the massive federal health exchange, where most of us will have to get coverage eventually, has no funding for any employees. A Republican controlled Congress could block implementation of the bill by simply not funding this and many other provisions in the bill, thereby providing leverage to replace it with something else.

Unfortunately, there is no way to stop the taxes, fees, and penalties outside of outright repeal. The tax increases begin next year and are fully phased in by 1/1/2013.

So what will Congress do for the rest of the year? Not good things, I fear. Obama, fresh off his victory of last night, is already talking about a partisan regulatory reform bill which will be a disaster for anyone who wants to borrow money, and an amnesty bill for illegal aliens. That amnesty bill will likely make illegal aliens eligible for free health care.

Unbelievable, and stunningly out of touch.

I must confess that I was pretty despondent last night. These last 2 weeks have been long and emotional. I am running on little sleep and lots of fear for the future right now. But I have to pick myself up and go back in the arena and fight again. And I will. And you all will too. This crowd in charge here is doing all the wrong things in all the wrong ways. But America gets it.

We can change the direction of this country. We must change the direction of this country. With all of you pulling together, we will change the direction of this country.

Quote of the Day: "I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them." - Thomas Jefferson

The Vote: As of now, it looks like the final vote on $1 trillion in new taxes, $2 trillion in new spending, socialized medicine, and the confiscation of much of your freedom will be voted on at about 10:00 PM Eastern time tonight. I don't know what is going to happen. I fear they will win. I pray they will not.

In an astounding show of arrogance, House Speaker Nancy Pelosi and a posse of her fellow Democrats chose to walk right through the group of people still protesting against the bill and for their civil and constitutional rights. They could have taken the tunnels under the Capitol, they clearly did this on purpose. She did this while holding a giant over-sized Speaker's gavel in a gesture intended to taunt the assembled multitude. I'm not sure it is possible to overestimate the arrogance of this ruling majority. Their sense of omnipotence and their dismissal of the Constitution, the will of the people, the facts, and all pretense of equity makes me so angry that my hands are shaking as I write this. If you don't believe me, here is the video:

Click Here to View Video in Full

Just to show that the Democrats are still spending your money, socializing all of American society, and still cutting special deals for their friends, here's another tidbit for you. As part of the Health care bill, Democrats included a provision having nothing to do with health care. Under the bill, no student loans will be permitted except as a loan from the government. They will eliminate all private lenders from the student loan program. This, by the way, completes the 4 year quest by Democrats to totally socialize all student loans. That is exactly what they will do with Healthcare now and very likely the banks in the future. Oh.........but there is one exception: The bank of North Dakota, you can't make this stuff up. Only one privately owned bank in the country will be permitted to make student loans in the future if this passes, and that is the Bank of North Dakota. The entire state of North Dakota, by the way, is represented by a Democrat, Earl Pomeroy. Coincidence?

This is what the future under Obama/Pelosi/Reid rule looks like. Government controls more and more of your life; you have less and less freedom, and you get to keep less and less of your money. But if you are a friend of one of our rulers, you may get a special deal. Then, you can do what no one else can, you may not have to pay the taxes everyone else does and generally live under a different set of laws than the rest of us. Wasn't the American Revolution about stopping that very practice?

I pray Congress does the right thing tonight and kills this bill. If we don't, I pray for all of us.

"So tonight, to you, the great silent majority of Americans, I ask for your support." - President Richard Nixon, November 3, 1969

However, this time, I think that the majority of Americans who in every poll oppose this health care travesty are not and will not be silent. I thank you for that. And remember, there is strong bipartisan opposition to this bill. The partisan side is the extreme left wing of the Democratic Party who are driving this thing and will not work together with the rest of us who want to go in a direction which will not hasten our economic failure. The word is that Speaker Pelosi still has not persuaded enough Democrats to vote for the bill against their constituents and in many cases against their own beliefs.

Tax Increases: The "final" bill came out yesterday afternoon. Here is a partial list of the tax increases included in this reprehensible and immoral bill:

• A new 3.6% tax on all investment income including capital gains. That means that the capital gains tax rate (including California state tax) will rise to 33.9%. The tax on dividend income will rise from 15% today to 53.7% including California tax. 
• Additional Medicare tax on self employment income and wages.  This removes the current cap on wages subject to this tax and it will effectively move the top income tax rate from 35% to 43.4% within a couple of years. Add in the California tax again and would then be close to a 54% marginal tax rate.  I believe that this is the highest of any major industrialized country. But because spending is so high we would still have $1 trillion dollar annual deficits even after this tax.
• There is a 2.9% tax on all medical "devices", which basically means everything used in a doctor's office or hospital. Including gowns, syringes, and the like.  This will increase health care costs for everyone who does not get free government insurance.
• The deduction for Medical expenses is currently limited to those expenses that exceed 7.5% or your income. This will be raised to a threshold of 10% of your income. This means that fewer people will get any tax relief from medical expenses they pay for themselves.
• There are various taxes on anything a person might do to pay for their own medical expenses. Things like Health Savings Accounts, Cafeteria Plans, and Flexible Savings Accounts are ways for people to save their OWN money for their OWN medical care on a pre-tax basis will be limited and taxed. This is all part of the way that President Obama gets to government run health care by making it illegal or costly to pay for your own care so you have to go to the government.
• A 10% tax on tanning services. I call this the "Jersey Shore tax". This one has to be really upsetting to 'The Situation', Snookie, and Pauly D.
• A tax on self-insured health plans. This is another penalty on those who try to pay for their own health care.
• A new tax on pharmaceutical manufacturers. This will raise the price of drugs for everyone who does not get them from the government for free.
• A new tax on "Cadillac" health plans. This is an up to 55% tax on any health insurance that costs over about $800 per month including employee and employer contributions. This tax does not apply if you are a union member or your plan is from AARP or Blue Cross Blue Shield of Michigan. These are major Democratic constituencies and they exempted them. For everyone else, this discourages comprehensive health coverage. Isn't that what the President says he is trying to achieve? Like most of what the President says, his actions are not even close to his words.
• There is a new tax on all 'for-profit' health insurance companies (except for a few favored ones).  This will also raise the costs of premiums for everyone not getting free care from the government.
• If you don't buy health insurance (as dictated acceptable by a new federal czar), you will be fined up to 2.5% of your income even if you pay all of your medical expenses yourself. If your company does not provide said health insurance to all employees, the company will be fined up to $2,000 per employee.

All of this will cause growth and jobs to decline, medical costs to go up, deficits and debt to increase, and quality doctors and providers to leave the business. It will cause fewer people to pay for their own care, and more to seek government care. And that is exactly what the authors want.

In spite of all of these taxes, this bill will create deficits of at least half a trillion dollars MORE than what we already have at the federal and state levels over the next 10 years, and a great deal more after that. So, lots more taxes, lots more spending, and lots more deficits.  The time at which the Treasury will not be able to sell debt any more, except at a huge rate, is approaching fast. America, in my opinion with this bill, is much more likely to collapse under the weight of our own fiscal excess than to be seriously threatened by any external force.