Thoughts on Potential “Debt Deal”

For the record: I am in total agreement with Vox Day and Karl Denninger–and others who are either Austrian-schoolers or otherwise cognizant of the mathematically dishonest nature of the “debt compromises” that are on the table right now.

(1) The much-dreaded “downgrade” (by Moody’s and/or S&P) will eventually happen anyway.
(2) The debt problem will be no closer to resolution, and–in fact–a default will be even more likely if the debt limit is extended.
(3) At best, any “debt compromise” will stave off the inevitable, and–in fact–will make the eventual reckoning even worse, as the laws of mathematics are not going to be up for repeal in the foreseeable future.

That said, if a “debt deal” is passed, let’s look at the bright side: for those who are aware of the problem, they are buying us time to prepare.

If I’m one of the GOP candidates, I need to be talking soberly to the American people about these realities. Whether or not that gets me elected is irrelevant. This is not about my election; it is about the survival of our country.

Americans need to hear the truth now, so that–when things go really really bad–they’ll know who is really in their corner and capable of providing appropriate leadership.

As for those who know there’s a lot coming down: the clock is ticking.

Some MSM Voices Start Telling the Truth, Sort Of..

Peter Coy, writing for Bloomberg, sort of gets it.

There is a comforting story about the debt ceiling that goes like this: Back in the 1990s, the U.S. was shrinking its national debt at a rapid pace. Serious people actually worried about dislocations from having too little government debt. If it hadn’t been for two wars, the tax cuts of 2001 and 2003, the housing meltdown, and the subsequent financial crisis and recession, the nation’s finances would be in fine condition today. And the only obstacle to getting there again, this narrative goes, is political dysfunction in Washington. If the Republicans and Democrats would just split their differences on spending and taxes and raise the debt ceiling, we could all get back to our real lives. Problem solved.

Except it’s not that way at all. For all our obsessing about it, the national debt is a singularly bad way of measuring the nation’s financial condition. It includes only a small portion of the nation’s total liabilities. And it’s focused on the past. An honest assessment of the country’s projected revenue and expenses over the next generation would show a reality different from the apocalyptic visions conjured by both Democrats and Republicans during the debt-ceiling debate. It would be much worse.

That’s why the posturing about whether and how Congress should increase the debt ceiling by Aug. 2 has been a hollow exercise. Failure to increase the borrowing limit would harm American prestige and the global financial system. But that’s nothing compared with the real threats to the U.S.’s long-term economic health, which will begin to strike with full force toward the end of this decade: Sharply rising per-capita health-care spending, coupled with the graying of the populace; a generation of workers turning into an outsize generation of beneficiaries. Hoover Institution Senior Fellow Michael J. Boskin, who was President George H.W. Bush’s chief economic adviser, says: “The word ‘unsustainable’ doesn’t convey the problem enough, in my opinion.”

Even the $4 trillion “grand bargain” on debt reduction hammered out by President Barack Obama and House Speaker John Boehner (R-Ohio)—a deal that collapsed nearly as quickly as it came together—would not have gotten the U.S. where it needs to be. A June analysis by the Congressional Budget Office concluded that keeping the U.S.’s ratio of debt to gross domestic product at current levels until the year 2085 (to avoid scaring off investors) would require spending cuts, tax hikes, or a combination of both equal to 8.3 percent of GDP each year for the next 75 years, vs. the most likely (i.e. “alternative”) scenario. That translates to $15 trillion over the next decade—or more than three times what Obama and Boehner were considering.

You start to see why, absent signs of a serious commitment to deficit reduction, the rating services are warning they may downgrade the federal government’s triple-A rating even if Congress does meet the Aug. 2 deadline. Fortunately, our debt hole is escapable. But digging out requires that leaders of both parties come to terms with just how deep it is.

Good start, although he gets a couple of matters wrong: (a) there was no serious attempt to cut the debt in the 1990s, as it was a combination of gridlock and the revenue windfall from the dot-com bubble that gave a false impression of how good things really were, and (b) the Bush tax cuts resulted in an increased–not decreased–revenue base and therefore did not contribute to the debt problem. It was SPENDING that killed us.

The language we use is part of the problem. Every would-be budget balancer in Washington should read “On the General Relativity of Fiscal Language,” a brilliant 2006 paper by economists Laurence J. Kotlikoff of Boston University and Jerry Green of Harvard University (available online from the National Bureau of Economic Research). The authors write that accountants and economists have something to learn from Albert Einstein’s theory of relativity, about how measured quantities depend on one’s frame of reference. Terms such as “deficit” and “tax,” they write, “represent numbers in search of concepts that provide the illusion of meaning where none exists.”

The national debt itself is one such Einsteinian (that is, squishy) concept. The Treasury Dept.’s punctilious daily accounting of it—$14,342,841,083,049.67 as of July 25, of which just under $14.3 trillion is subject to the ceiling and about $10 trillion is held by the public—gives the impression that it’s as real and tangible as the Washington Monument. But what to include in that sum is ultimately a political choice. For instance, the national debt held by the public doesn’t include America’s obligation to make Social Security payments to future generations of the elderly. Why not?

Suppose that instead of paying Social Security payroll taxes, working people used that amount of money to buy bonds from the Social Security Administration, which they would redeem in their retirement years. In such an arrangement, the current and future cash flows would be identical, but because of a simple labeling change the reported debt held by the public would skyrocket. That example alone should generate a certain queasiness about the reliability of the numbers that are taken for granted by budget combatants on both sides of the aisle.

A more revealing calculation is the CBO’s measurement of what’s called the fiscal gap. That figure is conceptually cleaner than the national debt—and consequently more alarming. Boston University’s Kotlikoff has extended the agency’s analysis from 2085 out to the infinite horizon, which he says is the only method that’s invulnerable to the frame-of-reference problem. It’s an approach used by actuaries to make sure that a pension system doesn’t contain an instability that will manifest itself just past the last year studied. Years far in the future carry very little weight, converging toward zero, because they are discounted by the time value of money. Even so, Kotlikoff concluded that the fiscal gap—i.e., the net present value of all future expenses minus all future revenue—amounts to $211 trillion.

Personally, I would suggest that the answer is somewhere between the bandied-about figure of $62T in debt and unfunded liabilities and Kotlikoff’s $211T, but–even if we accept the lower number–the picture is still absolutely terrible. As I pointed out, even at $62T we’re toast.

But at $211T, I hope we’ll all agree that–if that is true–then we’re beyond hosed.

The U.S. is in danger of reaching a generational tipping point at which older Americans have the clout to vote themselves benefits that sap the strength of the younger generation—benefits that can never be repeated. Kotlikoff argues that we may have reached that point already. He worries that the U.S. could become Argentina, which went from one of the world’s richest to lower-middle income in a century of chronic mismanagement.

Yep. And the Argentine outcome may be optimistic.

Here, however, he reverts to the standard conventional wisdom, which disavows what he was saying before:

In April this magazine ran a cover story featuring an alarmed rooster and the headline, “Don’t Play Chicken with the Debt Ceiling.” Washington clearly did not listen. The months of wrangling have dispirited the nation and concerned investors who lend money to the government. The cost of protecting against a U.S. sovereign default in the credit default swap market, while still low, is up 70 percent in the past year. It’s now nearly twice the cost of protecting against Swiss default.

A long, loud debate that produces a meaningful deal would be worth the pain, but a debate that produces next to nothing is worse for the nation than none at all. It simply calls investors’ attention to Washington gridlock. On July 14, Standard & Poor’s made that point when it placed U.S. sovereign debt on CreditWatch for possible downgrade, citing “rising risk of policy stalemate.” S&P said that “U.S. political debate is currently more focused on the need for medium-term fiscal consolidation than it has been for a decade. Based on this, we believe that an inability to reach an agreement now could indicate that an agreement will not be reached for several more years.”

Fact is, if Kotlikoff is correct, then nothing you say here matters: it is merely a question of whether we face the music now or at some point in the near future, at compound interest.

Economists at JPMorgan Chase said on July 26 that continued deterioration of the U.S. government’s finances (not just a debt downgrade) might increase Treasury bond yields by 0.6 to 0.7 percentage point over the “medium term,” adding $100 billion a year to the government’s interest expenses. “That’s money being taken away from other goods and services,” said Terry Belton, the global head of fixed income strategy.

This will happen, even if a durable plan is passed. This is because credit contraction MUST happen. And when that happens, a necessary spike in interest rates is a given. Moreover, with rates at historical lows, it is totally delusional to think that we will always have these low rates.

While Washington is absorbed in the composition of a budget deal—how much in spending cuts vs. how much in tax increases—that’s of secondary concern to macroeconomists. The more important figure to them is the size of the deal. The reason so many of the plans aim for $4 trillion in budget balancing is because that’s the amount that would (at least temporarily) stabilize the debt-to-GDP ratio and calm the bond market vigilantes. The downside, of course, is that if such a retrenchment is phased in too quickly it would drag down growth at a time of 9.2 percent unemployment.

Some economists, such as Holtz-Eakin, say any hit to growth would be small and worthwhile. “Weak-kneed Keynesians—I’m not one of those,” he says. Others would favor shifting the balancing until after 2013, when the economy presumably will have strengthened. “In our view, the U.S. does not need an aggressive near-term fiscal tightening,” Ian Shepherdson, chief U.S. economist of High Frequency Economics, wrote to clients on July 21. A third group, led by Princeton University economist and New York Times columnist Paul Krugman, says the economy needs more stimulus in the short run, not less. The logic: Getting the economy back to full speed would increase tax revenue and shrink the fiscal gap more effectively than draconian cuts. Of course, this fiscal debate is moot if the deal on the debt ceiling is just a stopgap that’s too small to have a real impact on the macroeconomy—a prospect that’s pretty depressing all by itself.

Unfortunately, the $4T is the monetary equivalent of fighting a forest fire by pissing into it. This approach won’t work because it is predicated on the expectation that creditors will still pass out debt at the given low rates ad infinitum. That party cannot go on forever.

If America’s long-term budget problems were small, they could be fixed entirely by the Republicans’ preferred method, which is spending cuts, or entirely by the Democrats’ favored fix, tax increases. The challenge is not small, however. That’s why nearly every bipartisan group that’s looked at the problem—including the Bowles-Simpson and Domenici-Rivlin commissions—has concluded that some mix of the two will be required. The precise mixture is a political matter, but one would have to place an exceptionally high priority on the well-being of upper-income taxpayers to conclude that none of the adjustment burden should fall on them.

If the problem is $62T, then the Bowles-Simpson and Domenici-Rivlin plans won’t even scratch the surface. They are good for starting the discussion, but their recommended cuts are way too light.

Republicans in Congress, not wanting to appear to defend the rich, have attempted to block any deal that includes higher taxes on the grounds that tax hikes are “job-killing.” But experience shows that in a period of slack demand like the present, tax hikes are no more job-killing than spending cuts, and probably less so. Cutting spending—say, by firing federal employees or canceling procurement—removes demand from the economy dollar-for-dollar. A dollar tax hike, on the other hand, especially one aimed at upper incomes, cuts demand by less than a dollar. Those who pay the tax cover part of it from their savings and only part by reducing their spending. If lawmakers insist on using the phrase “job-killing,” Roberton Williams, a senior fellow at the Brookings Institution-Urban Institute Tax Policy Center, wrote in a recent blog post, “they should apply it equally to both tax increases and spending cuts.”

Eliminating government jobs would be eliminating jobs that PRODUCE NOTHING FOR THE ECONOMY!

Fact is, the burger-flipper at McDonald’s is producing more for the economy than most government employees.

Moreover, any correct resolution–and reducing the size of government is what is necessary–will result in a severe economic contraction. Tax hikes are not what we need; reducing the size of government is what is needed. That will allow the private sector to grow through innovation and production, at wages and prices that are conducive to real growth.

The good news is that this speeding vehicle does have brakes—if Washington would only use them. Eliminating deductions would broaden the base of income that’s subject to taxation and increase revenue. On the spending side, it’s crucial to change the incentives that lead to overconsumption and inefficiency in health care. At the same time, cuts in benefit formulas for Medicare and Social Security are painful but necessary. And they should apply at least in part to current beneficiaries. Given how hard-pressed young workers are, it’s unfair to put all the adjustment on them while completely insulating today’s elderly.

Raising taxes will only encourage the rich people to dump money into munis, and this would only feed unproductive sectors of the economy while causing an erosion to tax revenues at the worst possible time.

And if you start playing fast and loose with the deductibility of municipal bond investments, you’ll bring a mother lode of unintended consequences to state and local governments, already under stress due to pension shortfalls.

Moreover, if the situation is as bad as you say at the outset, then the “brakes” are not sufficient to stop this train from imminent wreck.

Surely You Must Be Kidding, Mr. President

In the last 3 years, we have embarked on a spending/nationalization spree, presumably to stave off economic Armageddon.

(1) We’ve effectively nationalized Fannie and Freddie, putting American taxpayers on the hook for at least $5T in assets, about half of which are worthless.
(2) We’ve bailed out the big banks–some of them foreign banks–with TARP (add another $1T after compound interest).
(3) We’ve had the Obama stimulus. Add another $1T.
(4) We’ve had HAMP and Cash for Clunkers. Both were duds
(5) We’ve effectively nationalized student loans, in order to keep the cash flowing into universities while students toil for degrees as they hope the job market will be recovered when they graduate. (Oh, and we’ll be on the hook when that racket goes Tango Uniform.)
(6) We’ve taken unemployment–designed for 26 weeks–and extended benefits to 99 weeks.

What this spending and nationalization binge has bought us?

It has staved off disaster for 3 years, at compound interest.

The GDP is anemic. Minus government spending, we’ve been in a depression for 3 years, and haven’t run a positive GDP for the last 30. If we counted unemployment honestly, we’d be staring at a jobless rate close to 20%.

A lotta-freakin-good the bailouts have done!

Now, with all the circle-jerkery about the debt ceiling, our political leaders–from Boehner to Reid to Obama–are telling you that, unless we give them another couple trillion dollars of credit, this will be the difference between economic recovery and the mother of all economic Apocalypses.

Surely you must be kidding me, Mr. President.

(1) you are betting that the debt ceiling will keep the economy from totally melting down until after the election.

(2) failing that, you are spinning this so that–if there is a collapse–it will be because the Republicans “played fast and loose with our full faith and credit”.

(3) Your holy grail is before you: unilaterally increase the debt ceiling without Congress, if nothing is passed. The House will impeach you, but that will die in the Senate. After that, your re-election will be the last issue at hand, as Americans will be fighting for bare survival.

As for the Republicans, it is the same game.

(1) the GOP knows that there will be a crash no matter what; so they are jockeying to get the debt debate framed so they can blame the Democrats for the fallout.

(2) the Tea Party folks–like Sen. Rand Paul (R-KY)–want to balance the budget some day, but would rather push the really painful decisions past next year’s elections. What they refuse to acknowledge: you can never–EVER–trust in a promise of spending cuts in the future. As President Reagan found out–the hard way–the cuts never materialize.

(Youdathunk Boehner would have figured that out after he was rolled in the last budget fracas.)

(3) the Republican leadership–yes, Rep. Boehner (R-OH) and Sen. McConnell (R-KY), I’m talking about you–is just hoping the Tea Party will go away. Unfortunately, they are missing the point: the Tea Party only exists because enough Americans are fed up with the dishonest games, as they get reamed every step of the way.

The problem is that there is no pretty way out of this mess.

We can’t “invest” our way out of it, as there is no real asset in which to invest that isn’t grossly over-priced.

We can’t “cut back a little” and allow the economy to grow out it. This is because the level of growth required to support our unfunded liabilities is not even close to realistic.

We can’t “tax the rich” and expect the economy to grow out of it. There aren’t enough rich people in the world to fund this party.

Even if we freeze spending at current levels–or even 2010 levels–we still would be running enormous deficits that would only add to the debt.

S&P has already warned of a downgrade unless we started realistically addressing our debt, and the $4T figure was just a start.

If we raise taxes, we will destroy what is left of our economic engine.

The only way out of this is to face the music.

Mr. President, you called on Congress to “eat their peas”. Perhaps you should follow your own advice, as you have spent more in one term than Bush did in two.

Mr. President, you called for “shared sacrifice”. To that, I say “Amen!”

The private sector has felt no small amount of pain for the last 3 years.

State and local governments have felt no small amount of pain for the last 3 years.

The only sectors that have been spared thus far: the Big Banks and the federal government.

It’s time for them to start sharing in the sacrifice.

You Gotta Be Kidding Me!

Browsing through various discussions regarding Game during my lunch break, I cam across this video.

Note: I counted at least 75 F-bombs in less than 5 minutes of video. You might not want to watch this with your kids anywhere around.

For guys like that who desire to be married and can’t find a mate, they have only the guy in the mirror to blame.

He’s a morbidly obese excuse of a boy who can’t accept that he’s at least 95% of the reason why he can’t get a gal.

Sexual Double Standard

Susan Walsh–posting at Alpha Game (one of Vox Day’s blog spaces)–offers this commentary.

Her last paragraph hits the nail on the head:

The sexual double standard evolved for good reasons. If Ted had had an inkling his wife was banging this asshat casually when she was getting together with him, he might have made a different choice than to flip a coin and marry her.

Hugo Schwyzer and Jill schemed to steal that choice from him.

If you want to screw around, have at it. But be prepared to stand up for what you believe in – your right to have sex without consequences. Then prepare for the consequences. As Helen Fisher said, “Sex is never casual.”

As I often say, “free love” is too expensive.

How to Find a Mate — from Farmer Tom

Everyone does not have to take this approach, but it is ingenious, especially if you live in a remote area and the selection of potential mates appears to be thin.

I attended Bible college for two years. Very much enjoyed it, made many great friends, both male and female, and generally failed at completing much of the required course work because I was having too much fun.

After I choose not to continue college, but return to the farm, I found my options for dating/marriage were non-existent. My small town church had no other singles who desired to live for Christ. The closest person to my age was a married gal who was 9 years younger than her husband, and they had four kids.

So I began driving 70 miles to Des Moines for church on Sunday nights. I was elected to the my churches deacon board, but I told the church that I would be going to Des Moines for church on Sunday nights in the effort to find someone to date.

Over the period of a couple of years I met several young singles at the church in Des Moines who also lived through out Iowa who were also not having success in the dating/marriage department.

So we formed a group, called Central Iowa Singles. It was associated with a specific church association, but we invited singles from any denomination who would agree with our core principles.

Within another year or so, we were having an event once a month. Sometimes it was volleyball, with a devotional, then going out for pizza. I invited the entire group, 70 or 80, for a hayride/cookout on my farm. A good friend did a whole hog roast. They went canoing once on the Cedar River, I couldn’t go because I had to do something on the farm. We had a retreat at a Bible Camp.

Several months ago I happened to talk to one of the ladies who helped organize the CIS group. She met her husband at CIS, I met my wife at CIS, and after going over the list of regular attendees we could come up with between 20 and 25 couples who got married at least partly because of CIS.

If you live in a area with numerous churches, and do not want to switch churches, I would suggest forming a singles group. Set up some basic Biblical guidelines for personal behavior, doctrinal convictions and who is eligible, advertise in all the churches which meet the established criteria doctrinally and start meeting some new people.

It worked for me.

HT: Boundless

Quote of the Day

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure…It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies… This rising debt is a hidden domestic enemy, robbing our cities and States of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on.

–Sen. Barack Obama (D-IL), 2006

How Many Generations Will It Take?

They have all kinds of names, the most common of which is “helicopter parents”. This article (while quite lengthy) is chalk full of good commentary.

I do have to wonder, how many generations will it take to undo the damage? If you ever take any sort of education class, the first thing you learn is that you will teach how you are taught. Same thing for parenting.

Now Amir & I, while very similar in the ways that matter, are vastly different in ways that make life interesting. One of the ways we’re different is how we were parented. Amir was not coddled. So not coddled. Not coddled at all.

Then there was my upbringing: if it didn’t make me happy, I didn’t have to do it. And the teachers in the public school system praised me up and down. They would get frustrated that I wouldn’t turn in my homework, but they were in awe of my potential. Every single year they were in awe of my potential. I was allowed to believe that potential was enough to get you through life if you act on it at some point.

Nowadays, it’s not enough to be happy—if you can be even happier. The American Dream and the pursuit of happiness have morphed from a quest for general contentment to the idea that you must be happy at all times and in every way. “I am happy,” writes Gretchen Rubin in The Happiness Project, a book that topped the New York Times best-seller list and that has spawned something of a national movement in happiness-seeking, “but I’m not as happy as I should be.”

Happiness is a very elusive thing. It waxes and wanes. What can make you happy one day, will not necessarily make you happy the next day. This nebulous concept of happiness creeps into the Church as well. It’s often used as the gauge as to whether or not the Lord has called you to something. In recent years, I’ve begun to wonder if the less attractive road is what you should use as the gauge.

When you make set your child(ren) up as your idol, it results in things like this:

Wendy Mogel says that colleges have had so much trouble getting parents off campus after freshman orientation that school administrators have had to come up with strategies to boot them. At the University of Chicago, she said, they’ve now added a second bagpipe processional at the end of opening ceremonies—the first is to lead the students to another event, the second to usher the parents away from their kids. The University of Vermont has hired “parent bouncers,” whose job is to keep hovering parents at bay. She said that many schools are appointing an unofficial “dean of parents” just to wrangle the grown-ups. Despite the spate of articles in recent years exploring why so many people in their 20s seem reluctant to grow up, the problem may be less that kids are refusing to separate and individuate than that their parents are resisting doing so.

I remember being told pithy things about “independence” when I was growing up. I also remember the moment I decided I was not going to return to Michigan for awhile. It was the summer of 2002. The only reason why I came back was because I was having jaw surgery and I needed to stick around for follow-up appointments. I knew it was time for me to not return home the next summer. I told my mother that I was going to work at my alma mater the next summer. It was a personal insult. How I could I do that to her!?!? It was an emotional tumult. She was unhappy and it was all my fault.

In revolting against such upbringing, I have adopted a different mentality. I was talking the Children Ministry’s Director at our church yesterday. I help out the preschool age kids. We were talking about tactics to use for when children cry for their parents. I use a variety of tactics, but being “mean” is a tactic that is not beyond me. I will let a child sit in a chair and cry. It is an effort to get them to see that they have options: they can play with their friends or they can cry.

I work in part-time in a preschool, so I get my fill of whiny, over-indulged children. Limits and boundaries are popular with me. I’ll admit that I probably say “No” more often than I should.

This article is chalk-full of good cultural commentary. It’s amazing at how much of this has crept into the Church. I still have many thoughts swarming around in my head that yet have words to match them.

Ceiling Schmeiling…

Let’s get a few things straight about this wrangling over our precious “Debt Ceiling”:

(1) Rep. John Boehner (R-OH) is a total disgrace. With Republicans like him, who needs Democrats? He talks a nice talk, but his numbers don’t add up. He’s fixated on a “plan” that does nothing to reduce the debt, does nothing to address the structural problems of the warfare state, the welfare state, and a government infrastructure that–in totality–cannot be supported in its current form by the American taxpayer.

(2) President Obama is a bald-faced liar. (No news there.) For all his talk of “compromise” and all of his “demands” of Congress, he has yet to produce a plan of his own. If he really supported “compromise”, he would have thrown his support behind the “Gang of 6” plan, and strong-armed his fellow Democrats in the Senate to vote for it. (That plan sucked–and I’m glad it failed–but, still, it was “compromise”.)

(3) President Obama WANTS to destroy the economy. This is why he keeps warning of “default” if no debt extension is passed–even though no such risk exists.

The United States has the best credit rating in the free world; that “risk-free rate of return” is a fundamental part of the Capital Asset Pricing Model (CAPM) that many firms use to estimate the economic value of financial assets. When the leader of the free world talks openly of the most reliable debtor “defaulting”, he is feeding unnecessary volatility into the financial markets.

If the debt limit is not extended, any “defaults” will be ELECTIVE, not forced. There is sufficient money to pay the debt service, the Social Security, and Medicare checks. (While we must address those two programs, they won’t go broke immediately.)

We WOULD, however, have to cut entire agencies, and fire tens of thousands of federal workers and contractors. We would have to stop funding state and local projects that depend on federal monies.

While none of this would be pleasant, we’ll have to face it sooner or later. We’re only debating over the when and not the what.

But make no mistake: any “default” would be due to specific policy by Obama, NOT due to any creditor demands.

(4) “Cut, Cap, and Balance” is a farce. If there is anything you can take away from the political realities of the last 50 years, it is this: NEVER, EVER TRADE A LARGE FORTUNE FOR A SMALL ONE!

If you’re going to go to the wall, then do it with an honest plan. Coburn was on his way to doing that when he rolled out his $9 trillion plan, then he ran away from it and threw his support behind the “Cut, Cap, and Balance” scam, EVEN THOUGH HE KNOWS IT’S A SCAM!

With the latest debacle, Coburn should revisit that $9 trillion plan. It’s one plan more than Obama or the Democrats have presented, and it’s the only one to date that–while still a bit optimistic–truly addresses the economic realities.

(5) Speaking of economic realities, Republicans need to take the lead and call the Democrats to an honest discussion of our real debt situation.

Fact is, this $62 trillion is optimistic. Let’s accept it for now and do the math:

That’s 62 times 10 to the 12th power.

You have a population of 300 million. (That’s 300 times 10 to the 6th power.)

Assume the labor participation rate is 70%. (Apologies to Denninger: I know it’s optimistic, but let’s err on the side of optimistic. As you’ll see: it won’t matter.)

That comes out to a debt load of over $295,000 per person.

Amortized over 30 years at 5% interest, your MONTHLY payment is almost $1,600–for federal debt alone. How many of you can afford that? I didn’t think so.

Amortized over 30 years at 6% interest, your MONTHLY payment is almost $1,800.00–for federal debt alone. How many of you can afford that? I didn’t think so.

Amortized over 30 years at 7% interest, your MONTHLY payment is almost 2,000.00–for federal debt alone. How many of you can afford that? I didn’t think so.

Here’s the rub:

(1) That amount exceeds the average mortgage. It is also unsecured debt.

(2) My upper interest rate–7%–is likely too optimistic to assume. Interest rates are at historical lows, and have been much higher over the last 30 years. Any ramp in such rates would impact the service payments.

(3) This assumes the programs won’t grow beyond what they already promise. We all know that politicians like to make new promises and spend new money.

(4) if the median household income is $46,000, then that translates to a minimum of 42% of your income subject to taxation for federal debt alone. What about state taxes? Local taxes? House payments? House repairs? Property taxes? Oh…and what about minor things…like food and energy?

(5) While “taxing the rich” and “making the rich pay their fair share” is a popular sentiment, fact is there aren’t enough rich people to fund this madness. They are also the sector of the economy that provides the capital that drives a lot of the investment and innovation.

My challenge to the naysayers: the burden is on you to make the mathematics work.

At this point, neither of the political parties have told the truth about this 9,000 pound elephant that is crapping all over our living room floor.