As usual, I have a few opinions to share on both sides of this. But first let me tell you a story about a bus system.

The “T”
For those of you who don’t know much about Lawrence, let me give you a quick overview of our community. We’re a college town with a population of less than 100,000. Lawrence is a liberal community embedded in a conservative state. The views of our community are much different than they are for most of the Midwest. We have more in common philosophically with San Francisco than we do Wichita.

Several years ago we were deciding on whether or not Lawrence should have a public transportation system. Liberals explained how important the bus system would be to the community, and how it would be financially self-sustaining within a few years. Conservatives countered that Lawrence was just too small, and didn’t need a bus system. My point at the time was that there was no way that public transit would be self-sustaining financially, and that the debate needed to be on whether or not we, as a community, were willing to pay for a bus system.

The voters supported the bill, and Lawrence Transit, typically referred to as the “T”, was born.

To make a long story short, ridership has been abysmal. Lawrence has been losing approximately $2.5 million per year on the “T”. And at the last major election we were asked to vote for a significant sales tax increase in order to keep public transit afloat. And like good liberals, we voted for the tax increase to save the bus system.

So my question is this: Did our city’s liberals really believe that the bus system would be self-sustaining? Did they talk themselves into believing their wildly optimistic revenue projections? Or were the projections just distractions to begin with? Financial slight of hand so to speak. The truth is probably a little of both. Some of the liberals believed the financial projections because that’s what they wanted to believe. And others probably didn’t care. They were so determined that our city “needed” a bus system that they didn’t care about the future costs or flawed revenue projections.

Liberals wanted what they always want, and that’s for the government to step in and right social wrongs. Lawrence liberals felt like it was wrong for us not to offer public transportation to our community. But instead of debating the merits of public transportation in a city of less than 100,000 people, many of whom were already being served by KU’s bus system, they focused on their wildly optimistic projections of revenues to explain how there was no reason NOT to create a public transit system. At the time I viewed their reasoning as flawed and intellectually dishonest.

Give the Democrats their Props
The republicans were in control of Congress from 1994 to 2006 and failed to solve our country’s health care problems. I give a lot of credit to the democrats for moving forward and attempting to solve this problem. I think it’s interesting that often we condemn politicians for doing what’s in their own self-interest, and not doing what’s best for the country. But in this case we’re witnessing the democrats commit political suicide as they attempt to pass what they perceive as a solution to our country’s health care problems. And now many on the right are condemning the democrats for sticking to their principles.

But a word to democrats, your cry of republican obstructionism is lame. The democrats decided to throw a big party and didn’t invite the republicans. Don’t blame the republicans for whining about it. With significant majorities in the Senate and the House, and a democrat in the White House, democrats viewed this as their opportunity to pass a massive federal program to “fix” health care. They knew that fiscal conservatives would never get onboard with their plans, so they didn’t invite them to the party. They thought that they could force this legislation through Congress without the republicans. And now democrats are whining because they haven’t been able to pass this legislation despite majorities in the Senate and the House.

Liberals want what they always want, and that’s for the government to step in and right social wrongs. Liberals want nationalized health care, and this legislation is a significant step towards a single-payer, government run solution. I don’t begrudge liberals for this. But I do begrudge the intellectual dishonesty of many of their arguments for this legislation. I’ve already covered several in past posts, but here are a couple more.

Financial Slight of Hand #1: The president has repeatedly talked about the 10 year and 20 year projections for costs associated with their plan. But the numbers are flawed and misleading. In the first ten years, the program is paid for because we have almost ten years of tax increases and Medicare cuts, but most the benefits only kick in during the second half of this ten year projection. So we’re paying for the plan for ten years, but only receiving five years of benefits. Why? Because that was the only way to make the numbers work over the first ten years.

But the financial projections over the first 20 years are just as flawed and misleading. The 20 year projection is based on significant future budget cuts that are not included in the current legislation. Even the CBO recognizes that these budget cuts are never likely to happen, making the 20 year projection irrelevant.

Financial Slight of Hand #2: The administration continues to claim that by adding more people (the currently uninsured) to the health insurance pool, insurance rates will go down, even though most projections still show premiums on the rise with the passage of their bill. The plan is to force all Americans to buy health insurance. The reasoning is that since many of our “uninsured” are actually young, healthy Americans, adding them to the pool will reduce premiums. This is again flawed logic. Many of these young Americans will continue to go without coverage and risk the potential penalties. And it’s possible that forcing Americans to buy health insurance will be found to be un-Constitutional anyway.

But the people who are more expensive to cover will certainly enter the health insurance pool. People who cannot afford premiums because of health issues, and those who are currently denied coverage for pre-existing conditions, will drive up health insurance premiums.

Like the Lawrence liberals who focused on wildly optimistic revenue numbers for a public transportation system, democrats would rather make the case for expanding the government’s role in health care based off of flawed financial projections than the merits of the program. I’d call this intellectually dishonest.

Note: Here’s a post I wrote about Congress being empowered by their beliefs in healthcare reform.

And I was incredibly shocked to see President Obama unveil his new plan for health care this week just days before the “bipartisan health care summit”. We’ll come back to this.

Failure of a Plan is often a Failure to Plan
It’s easy to look at what transpired the last few months and point to them as reasons why healthcare reform failed. Waning public support. The backroom deals. Artificial time lines. The lack of certain logical solutions in the plan such as tort reform or to allow insurance companies to compete across state lines. The size of the plan. And general mistrust of the process.

But as with most failed plans, it’s best to look at the beginning of the process, not the middle or the end.

Let’s take a college student preparing for a final exam as an example. The day before her test her car breaks down and she’s unable to spend the necessary time to cram for the test. She fails. Did she fail because her car broke down? Probably not. She failed because of the number of times she skipped class and never completed her homework along the way. She didn’t have a plan from the beginning of the class as how to succeed at the end of the class.

I think that President Obama, Harry Reid and Nancy Pelosi have much in common with the student who flunked because she failed to execute a well designed plan.

Where President Obama Failed
I have spent a significant amount of time studying leadership and management. I have come to understand that leaders and managers require different skill sets to be successful. And that a president of a company, or a country, needs to have strong leadership and management skills to be successful.

There’s a common scenario described in many of the books about successfully managing people. Here’s the basic example:

A bad sales manager meets with his sales staff and tells them he wants them to increase their sales by 10% and walks out of the room.

A good sales managers meets individually with her sales people and asks them what their goals are for increasing their sales, how they plan to get there, and what assistance she can be along the way.

In the first scenario the staff feels disconnected with the goal. It seems arbitrary. There’s no “buy in” of the goal. There is no clear path to achieve the goal. And no support system in place for success.

In the second scenario the staff feels like they’re able to set their own goals and help to develop the process. They “buy in” to the goals because they’re the ones who set the goals. They are now responsible for meeting these goals. And what good managers often find out is that good employees will often set their goals higher than what the manager would have set them to be in the first place.

So what did the president do? He walked into a room and said “I want healthcare reform on my desk by this date” and he walked out. Harry Reid and Nancy Pelosi were now responsible for getting a bill on the president’s desk. But Congress had no “buy in” to the process. And certainly no clear direction as how to succeed.

What should the president have done? What would a good manager do? I can tell you what the good sales manager would have done. She would have pulled in several members of Congress, from the Senate and the House, and leaders from both parties, sat them all around a table, and said: “We need to fix health care. We need to control costs. We need to find a way to cover the people who cannot buy coverage — either because they can’t afford it, or have a pre-existing condition. And we need to maintain the high-quality of care we enjoy today. How do we accomplish this?” She would ask this group to provide an outline of a plan by a certain date, and ask THEM to set a date for when THEY would get a bill on her desk.

You now have “buy in” from both parties to the process. They have set their own goals and time lines. And now feel responsibility for meeting these goals.

Where Congress Failed
I have always thought of myself as a problem solver. I look at a problem with an open mind. Identify the problem. Set a goal. Accumulate information. Develop different scenarios. And then choose a path that solves the problem and accomplishes the goal.

Does anybody believe that this is how Congress, or more specifically Harry Reid and Nancy Pelosi, set out to fix health care?

No. They had a pre-determined outcome in mind — a large government solution. And from there they worked backwards to explain how their “solution” would cure the problems we face with health care. (Here’s a link to a previous post as to why the plan in Congress would lead to a single payer, government run system.)

My Advice to the President
I have been in favor of this “bipartisan health care summit”. Get the leaders from both parties, and from both the House and the Senate together. Sit them around a big table. President Obama needs to walk into the room with a large Hefty bag filled with shredded paper, throw it on the table, and say: “We’re starting over. We need to fix health care. We need to control costs. We need to find a way to cover the people who cannot buy coverage — either because they can’t afford it, or have a pre-existing condition. And we need to maintain the high-quality of care we enjoy today. How do we accomplish this?”

The Last Word
Well this would have been my advice. But now the president has unveiled his “new” health care plan just days before the summit. Republicans who had approached the summit with skepticism were right. It was all a ploy.

Deficits vs Debt
I think this is the primary area where people get confused. People think these two terms mean the same thing. Or accidentally use these words interchangeably. But they are very different. The deficit is the one year snapshot of how much more our government spends than it receives. The converse would be a surplus which doesn’t appear to be a problem in the foreseeable future. The debt is like the ongoing scorecard of our deficits and surpluses.

Example: You make $40,000 this year. You spend $50,000 this year. You have a deficit of $10,000. Doesn’t sound that bad. But do that for ten years straight, and you now have debt of $100,000, plus interest (servicing the debt).

So saying that the deficit next year is going down to $1.3 trillion, still means we’re adding another $1.3 trillion to our debt.

Budgets and Deficits
The president puts together a proposed budget for the federal government, and passes it along to Congress. But it’s really Congress that has the power at this point. The Congress decides how much to spend, and where to spend it. Sometimes they pretty much do what the president has asked. And sometimes they ignore the president’s proposed budget and do what they want. Of course they also typically pass new spending bills throughout the year that were not included in their original budget.

Our government also has to project how much money they will receive through tax revenues — the lifeblood of government. The difference between revenues and expenditures is either a surplus or a deficit. These numbers are still just projections at this point. It’s not until the following year that we know for sure how much was spent, and how much was collected.

Guns and Butter
The old debate in government spending was how much to spend on guns (national defense) and how much to spend on butter (domestic programs). But as our debt grows, so does the amount of money it takes to service the debt. The more money we spend servicing our debt, the less money we have for guns AND butter.

Example: Many of us have gotten over our heads in credit card debt. I’ve done it twice in my life. You think I would have learned the first time. You reach the point where you’re barely able to make the minimum payments, and you realize that all you’re really doing is paying the interest, and not paying down the debt.

The dollars that will soon be required for servicing our national debt are staggering. A significant portion of our tax money is already spent servicing our debt. Not on guns. Not on butter. And not on paying down the debt.

Did You Know?
Did you know that our national debt is more than $12.3 trillion and growing?

Did you know that we have run federal deficits every year since 1969 except for four? See this report from the CBO. The four years of surpluses were from 1998-2001.

Did you know that are government’s “plan” is to grow our debt by another $1.56 trillion this year?

Did you know that in 2009, the Treasury Department spent $383 billion of our money on interest payments on our national debt? Compare that to how much is spent on other items such as NASA ($19 billion), education ($53 billion) and the Department of Transportation ($73 billion).

Large deficits and debts are the enemy to a robust economy. Want to fix the economy? Washington needs to get its own house in order. And economic prosperity has a chance to return.

“In 2008, Bush ran a deficit of $485 billion. By the time the fiscal year started on October 1, 2008, it had gone up by another $100 billion due to increased recession-related spending and depressed revenues. So it was $600 billion. That was the real Bush deficit.

“But when the fiscal crisis hit, Bush had to pass TARP in the final months of his presidency which cost $700 billion. Under the federal budget rules, a loan and a grant are treated the same. So the $700 billion pushed the deficit — officially — up to $1.3 trillion. But not really. The $700 billion was a short term loan. $500 billion of it has already been repaid.

“So what was the real deficit Obama inherited? The $600 billion deficit Bush was running plus the $200 billion of TARP money that probably won’t be repaid (mainly AIG and Fannie Mae and Freddie Mac). That totals $800 billion. That was the real deficit Obama inherited.

“Then…he added $300 billion in his stimulus package, bringing the deficit to $1.1 trillion. And falling revenues and other increased welfare spending pushed it up to $1.4 trillion.

“So, effectively, Obama came close to doubling the deficit.”

If anybody has any numbers different than this, I’d like to see them. This quote is from Dick Morris’ website.

And today, the White House unveiled its new budget. According to Yahoo News:

“If Congress goes along with Obama’s election-year plan, the nation would still end the year with unemployment pushing double digits at 9.8 percent and this year’s pool of government red ink deepening to $1.56 trillion — by the administration’s accounting.”

That would basically be a doubling of our federal deficit in just two years. This is not fiscal responsibility. This is out-of-control expansion of our federal government.

There was amazingly little press coverage. But of course why would the press be interested in such boring things as our nation’s debt when it could be talking about the iPad, Toyota or Lady Gaga.

Our nation’s debt should be one of our biggest concerns right now, and Congress just wants to keep on spending. The President talked about a new jobs bill that would cost billions of dollars. The last one worked so well. The President talked about a spending freeze on a very small percentage of the government’s overall budget, but that wouldn’t start till 2011. The President promised to veto bills filled with pork. He hasn’t. I guess his definition of pork and mine are a bit different.

Here are my thoughts on our debt and debt ceiling posted in mid-December.

Learning from History
Bill Clinton won the presidency in 1992 after receiving only 43 percent of the popular vote. He entered his first term on shaky ground. He wasn’t well liked by democrats or republicans in Congress. And he certainly didn’t have much public support on his side. Dick Morris has often told the story about how President Clinton had wanted to work with both sides of the aisle in Congress, but was quickly pulled aside by democratic leaders and told no. Democrats controlled Congress, and for the first time in a dozen years controlled the White House. This was their time to push their agenda.

During the first two years of his presidency, Clinton is probably best known for his failures in healthcare reform (socialized medicine) and allowing gays in the military. The American people spoke loudly against these two liberal policy initiatives and voted the democrats out of Congress in 1994. Clinton’s support remained low.

Does any of this sound similar to our current situation? It should.

I have long contended that Clinton was more a creature of politics than a creature of ideals. Despite his other shortcomings, I’ve always believed that Clinton wanted what was best for the country. I think it was more important to him to get good work accomplished, than it was to promote a specific “liberal” or “moderate” or “conservative” agenda. He worked closely with the new republican leadership in Congress on welfare reform and several other policy initiatives. And in convincing fashion won re-election in 1996. This time Clinton received more than 49% of the popular vote. While not a majority, keep in mind that Ross Perot received more than 8% of the popular vote (down from about 19% in ‘92). Clinton beat his republican adversary Bob Dole by nearly 10 points.

In ‘94, Bill Clinton looked like a one-term president. But after moving to the middle and working with Congress in a bipartisan manner, Clinton easily won re-election in ‘96.

President Obama Has a Choice
It is certainly true that President Obama entered office with significantly more public support than Bill Clinton. But like Clinton, Obama has bowed to the powers that be in Congress. A democratically controlled Congress. He’s allowed Harry Reid and Nancy Pelosi to dictate the direction of policy initiatives, from the budget and economic stimulus, to healthcare reform. There has been no attempt at “transparency” or “bipartisanship” coming out of Washington as Obama had promised on the campaign trail. The stimulus hasn’t worked. People are out of work. The budget and size of the federal government is spiraling out of control. The deficit is ballooning. People still don’t support socialized medicine. And Americans are angry.

The republicans have already taken a few special elections from the democrats with wins in New Hampshire, Virginia and now Massachusetts. And they will most certainly pickup seats in both the senate and the house later this year. But this brings us back to President Obama. Is he a creature of politics like Bill Clinton? Or a creature of ideals glued to a liberal agenda? The liberals might be able to explain away the losses in New Hampshire and Virginia, but Massachusetts was a significant blow to the democrats. Will Scott Brown’s victory be a wake-up call to the President?

If this week was any indication, it appears that President Obama will continue to blame others for our current situation. I’ve never found the blame game very appealing. But to Obama and his inner circle, the economy is still Bush’s fault. And the failure to pass healthcare reform was because of misinformation spread by rightwing organizations. In Obama’s world, American voters who oppose Obama-care are misguided and misinformed.

The President’s State of the Union speech this week will give us a glimpse into how Obama plans to spend his next few years. He still has time to alter the course of his agenda and win a second term. The clock is ticking.

Barack Obama
As a quick reminder, Obama served three terms in the Illinois Senate from 1997 to 2004. He was elected to the U.S. Senate in 2004, but it was his impressive speech at the Democratic National Convention that year that catapulted him into the national spotlight. The party knew they finally had found a young, charismatic star, and immediately started to position him for a run at the presidency in 2008. As they say, the rest is history.

Scott Brown
Brown’s rise to prominence has been almost as impressive. Elected to the Massachusetts House of Representatives in 1998, Brown served in this capacity until winning a special election in 2004 to fill a vacated seat in the Massachusetts Senate. Last night Brown won in another special election filling Ted Kennedy’s old seat in the U.S. Senate. If you don’t follow national politics it’s difficult to understand what a big win this was for the republicans. Massachusetts hasn’t elected a republican senator since the ’70s. Democrats outnumber republicans in the state by a margin of about 3-1. Few saw this coming until polls the last few weeks showed Brown making a run at democrat Martha Coakley. Last night, Brown was energetic, charismatic, funny and likable. When was the last time you could say that about a republican candidate?

Democrats Beware
I’ve been surprised for months about the democrats’ reaction to the anger in this country. When Nancy Pelosi called the conservative groundswell “astroturf” instead of grassroots, she angered many. When democrats belittled the tea parties as rightwing propaganda, they angered a lot of independents. When democrats criticized everybody who criticized health care reform, they angered a lot of voters. They really don’t seem to get it. Real people are angry in this country. And not just the rightwing extremists as the democrats would like to believe.

Republicans Beware
If the republicans think of Brown’s win primarily in terms of the national debate over the economy and health care, they will struggle in the 2010 and 2012 elections. Sometimes it’s easy to forget that it’s the candidate that makes the difference. The GOP will certainly gain seats in both the House and the Senate in 2010, but how many will depend on the quality of the candidates, not just the anger of the voters.

Why the Pundits Will Get This Wrong
The national pundits and political activists will be talking for days about Brown’s win against the democrats. The left will be forced to downplay the significance of Brown’s win. It will be interesting to see how they try to spin the loss. They likely will throw Coakley under the bus and talk about what a poor campaign she ran. The right will say that this is a referendum against Obama’s failed economic policies, and against the healthcare legislation currently in Congress. And they’re all partially correct. But many seem to have missed one simple fact. Brown was by far the more likable candidate in Massachusetts. He ran on a fairly populist platform. And independents liked him better.

Tax revenues are the lifeblood of the federal government. It’s through the taxation of the American people and businesses that our federal government has the funds to support our military, protect our country, create social programs and run federal organizations such as the FDA and the EPA.

So the question is: What happens when we cut taxes?

If you ask a liberal politician, their (myth) answer is: “This will reduce the amount of money we have to spend on important social programs. We’ll have to fire teachers and policeman because we won’t have enough money to pay them. We won’t be able to take care of the elderly, the poor and needy children…”

If you ask a conservative politician, their (myth) answer is: “Our federal government is too big already. We’re wasting our money on all of these pork programs. By cutting taxes we can reduce the size of our federal government…”

We hear this from our politicians every time we discuss tax cuts. They’re both wrong.

Let’s take a quick look at the last 50 years. In this time, we’ve had three presidents who have promoted and passed sweeping tax cuts: Kennedy in the ’60s, Reagan in the ’80s, and Bush in the ’00s. (These figures below are provided by the Tax Policy Center, and have been adjusted to 2009 dollars.)

John F. Kennedy was elected in 1960. Though he was killed in ‘63, the tax cuts he championed were passed into law in 1964. In 1964, the government collected $112.6 billion. By 1970, just six years later, the federal government collected $192.8 billion. That’s an increase in tax revenues of more than 70%.

In 1980, Ronald Reagan was elected president, and passed sweeping tax cuts in 1981. In 1981, the federal government collected $599.3 billion. What year do you want to compare for future tax revenues? Within six years (1987) the fed was now collecting $854.4 billion, an increase of more than 42%. Tax revenues continued to grow every year. By 1992 when Bill Clinton was elected, the federal government collected $1,091.3 billion in tax revenues. That’s an increase of of more than 82% in about a decade.

And lastly, George W. Bush was elected in 2000, and lead the charge for a series of tax cuts in 2001, 2002 and 2003. In 2000 when GWB was elected, the fed collected $2,025.5 billion. And by 2008, the fed collected $2,524.3 billion, an increase of more than 25%.

All three presidents pursued tax cuts to stimulate the economy. And it worked every time. Taxes were cut. The economy was stimulated. And tax revenues went up.

So why is this important now? The Bush tax cuts will expire soon. And if they expire, the net effect is a tax increase, which will further damage our economy. The debate will begin soon. And expect to hear the same old misrepresentations from each side of the aisle.

The Debt Limit
By law, Congress cannot surpass our federally imposed debt limit. So whenever our debt begins to get close to our debt limit, Congress just votes to increase that limit. Don’t you wish you could do that?

Congress is discussing raising our debt limit from $12.1 trillion to almost $14 trillion. This isn’t anything new. Congress has repeatedly raised the debt ceiling over time. In 2006, Congress raised the debt ceiling to almost $9 trillion. And they’ve raised it several times since.

Since 2006 and the democratic takeover of Congress, we’ve watched as Congress has raised the debt limit at least five times. I say at least because this has been a difficult subject to research. Congress tends to sneak these debt ceiling increases into other bills, making them hard to track. And our media does not always spend much time reporting on national debt. It’s not sexy news.

The most recent increase came earlier this year with the passage of American Recovery and Reinvestment Act of 2009 (the stimulus bill), which was signed into law on February 17, 2009. This bill raised the debt limit to around $12 trillion, where it now stands. At the time, this was the third increase within a year.

The Politics of Raising the Ceiling
U.S. Treasury Secretary Timothy Geithner began asking Congress to raise the debt ceiling a couple months ago. As we are quickly coming up on the cap, it appears likely that Congress will raise the debt ceiling before the end of the year.

So let’s do the math. In 2006 our debt limit was just under $9 trillion. And by late 2009, Congress will have raised our debt limit to almost $14 trillion. Which means they’ve raised our ability to go into debt by more than 50% in just over three years.

In a purely political move, the democrats are doing two things that I find distasteful:

1. They plan to raise the debt limit by $1.8 trillion so that they won’t be faced with having to vote for another increase before next year’s elections.

2. They’re including the proposed debt ceiling increase into a bill for the funding of our troops in order to make sure that the republicans must vote for it as well.

My goal isn’t to pick on the democrats. I’m an independent and have no love for either party. But Congress controls our government’s expenditures. And this Congress loves to spend our money.

Debt as a Percentage of GDP
These numbers are so big that they’re difficult to fathom. I have always found it more relevant to look at our debt as a percentage of our GDP (gross domestic product).

During the recent Bush years, this rate was on a slow but steady increase:

2000: 58.2%
2001: 57.74%
2002: 59.9%
2003: 62.31%
2004: 63.57%
2005: 64.29%
2006: 64.98%
2007: 65.67%
2008: 70.49%

Now look at the projected numbers for this year and next (projections from this site that tracks government spending):

2009: 90.36%
2010: 98.15%

So once again, look at the numbers since 2006 when democrats took over Congress. At the end of 2006, our debt was basically 65% of GDP. And it’s projected to be more than 90% by the end of this year. That’s an increase of almost 40%. And at almost 100% of GDP within a year, which would be an increase of more than 50%.

And in case you don’t trust this website, here’s information from the CBO (Congressional Budget Office) and their long-term budget outlook. Notice that both of their budget scenarios have significant increases in our debt level compared to GDP.

The Ugly Truth
The estimated population of the United States is 307,453,688 so each citizen’s share of this debt is $39,352.74. The National Debt has continued to increase an average of $3.84 billion per day since September 28, 2007!

What does all of this mean? We are witnessing one of the largest and most aggressive expansions in our federal government in the history of our country.

“Just 38% of voters now favor the health care plan proposed by President Obama and congressional Democrats. That’s the lowest level of support measured for the plan in nearly two dozen tracking polls conducted since June.”

The report goes on to say, “The latest Rasmussen Reports national telephone survey finds that 56% now oppose the plan… Intensity remains stronger among those who oppose the push to change the nation’s health care system: 21% Strongly Favor the plan while 43% are Strongly Opposed.”

As Scott Rasmussen, president of Rasmussen Reports, wrote in the Wall Street Journal: “The most important fundamental is that 68% of American voters have health insurance coverage they rate good or excellent. … Most of these voters approach the health care reform debate fearing that they have more to lose than to gain.”