GOVERNMENT OUT OF CONTROL

STATE OF THE U.S. FINANCES


We have very recently passed a law raising the amount of debt that the government can acquire. In exchange, the government has agreed to cut future spending over the next ten years. This means that the government can spend money now but may or may not cut future spending because no Congress can dictate how a future Congress will handle the country’s finances.

Sure enough, our government has just announced that they plan to spend another $447 billion or so to create jobs. The last time they did that, one can argue that the temporary jobs they created cost us about $250,000 per job. Instead of hiring more teachers and public workers, the money was diverted to shore up public union pension funds. And it appears that they plan to do this again.

Poor Taxpayer

Here is where we stand right now. The budget deficit is at 10% of Gross Domestic Product, the Federal Debt is 67% of GDP and Federal spending is 25% of GDP. Keep in mind that we are not talking about the income the Federal government collects in one form or another. We are talking about the Gross Income of all producers in the United States.

A business normally shoots for a net profit margin of 5% of gross sales. So if sales are $100,000 per year, a $5,000 net profit would be ideal. Using the figures above, the government, if it were a business, is spending $110,000, or, $10,000 more than its gross sales. This also means that the business has credit card debt of $67,000 and must also pay $25,000 in taxes to support the government.

Only 58.1% of the population is working and of those 9.1 % unemployed, 45.9% are considered long-term unemployed. The home ownership rate has dropped to 59.7%, even though the foreclosures have been delayed by force of law for the past few years.

Only 49% of taxpayers pay income tax. Most of the 51% who don’t pay are actually receiving refunds called “refundable tax credits” like earned income credits, child care credits, etc. We have made our citizens into slaves because 47% of the population are receiving one or more federal benefit payments. We are punishing those who are productive and rewarding those who do not work.

And we have given our government this power. You hand our politicians a baseball bat and everything looks like a baseball and they’ll swing away just for the fun of it.

The ones who are being hurt the most are the very elderly. Most live on a fixed income and see the prices at the grocery stores rise every week. Dining at fast food restaurants is not something that they can afford anymore. Even plate lunches from lunch wagons are no longer affordable for them.

Does it make sense that the government proposes to spend more? I am of the belief that the elite schools that our elected officials attended no longer teach common sense.

How will the government obtain the $447 billion it intends to spend? From you, of course. The government is a parasite. It has no money of its own. It feeds off of productive people.

They propose to tax the wealthy and the corporations. Most citizens are covered by pension plans and those plans invest in stocks. If the corporations are taxed more, then the corporation earn less and your plans’ investments will decline in value.

Or, the corporation could raise their prices on its goods and services and you pay more when you consume their products and services. It is likely that you will be subjected to both. Stated another way, if you're financially responsible, you pay two ways. Once when your corporations that you invest in pay taxes and again when you consume their goods and services.

A corporation is in business to produce a profit. It has no other purpose for existence. It is not there to provide employment, pay taxes, pay unemployment insurance benefits, provide medical insurance or any of those silly things we’ve forced them to do. If it cannot produce a profit, it goes out of business. Or move to a climate that is friendlier to businesses.

The politicians have taken away our rights under the 10th Amendment. AMENDMENT X: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

We cannot change the politicians. They have demonstrated that they will say one thing and do another. They plan to increase their voter base… those who do not pay taxes so that the politician can be rewarded by getting re-elected.

We can change our behavior. Investing in the short term can produce good returns. As long as the market’s moving one can make money. If you believed that the market will drop as predicted early this summer, you would’ve sold short (sold stocks you do not own) and then buy when the market actually dropped to cover your shorts. If you believe that the market will go up, you would buy when it’s down and sell when it eventually rises.

http://malamakupuna.blogspot.com/2011/06/hawaiis-elected-officials-play-kick-can.html

Nothing will save us in the long term if the politicians continue on the path they’re heading. The currency will collapse. Imagine a society where there is no currency. No public safety, no food at stores, unsafe water because no public workers and no utilities. There will be chaos because those who prepare themselves and plan for this new way of life will be attacked by those who do not.

Hopefully, we can come together as a society and a community to help each other without governmental interference. There will be no care homes and our kupunas have no chance of survival unless we all pitch in.

CAN THE U.S. BE BANKRUPT?

THE SOON TO BE BANKRUPT UNITED STATES

We all know that when we spend $1.20 for each dollar of income, we are headed for financial trouble. Some of us even believe that cash from a loan is income. So to make up the twenty cent shortage, we borrow or make purchases using a credit card. And with this abundance of ignorance, we are happy.

Let’s go over some basic rules that highly trained financial folks like me look at to determine whether a person can pay his bills. Sometimes, what is laid out in the first paragraph simply goes over people’s heads.

If the dollar collapses, at least it can be used for decorative purposes

One of the first things I look for is to see if a person (or a business) has a current ratio equal to 2 : 1. In other words, to be able to pay one’s bills, one must have $2 of current assets for each $1 of current liabilities.

Current assets are cash, assets convertible to cash in 30 days, receivables and inventory. Current liabilities are short-term liabilities that are payable within a short period of time, like credit cards and portions of long-term liabilities that are due and payable in 30 days.

The more critical ratio is the quick or acid test ratio, which is the relationship of current assets minus inventory as it relates to current liabilities. If this ratio is less than 1 : 1, then the person or business is considered to be insolvent and cannot pay his bills. If that person approaches you for a loan, you will be giving such a loan at your own great peril because I can assure you that he won’t be able to pay you back.

If  we use this tool to determine financial stability, the Federal, State and County governments can be determined to be insolvent. If they were individuals, their credit rating would likely be below 400. The only thing they have going for them is their power to confiscate from the citizens using their taxing powers.

Standard and Poor did not downgrade the credit rating of the Federal Government because the politicians did not compromise, but did so because they did compromise.

Here’s what happened. It was already determined that the Federal government could not meet its obligations. Rather than get these ratios in line with responsible financial management, they raised the debt ceiling, meaning that they could borrow more, thereby increasing the current liabilities.

There was an agreement to cut future spending in exchange for the ability to borrow more and to spend more today. In other words, they opened up another credit card so that they can spend more today in exchange for the promise to cut future spending within the next ten years.

Not a responsible move. No Congress can dictate what future Congresses can or cannot spend. Each Congress has the Constitutional power to set its own budget.

Contrary to what politicians would like to have you believe, compromising was a bad thing.

Let us assume that one has a child who is 5 years old and that child is a borderline diabetic. It is one hour before dinner and there are five pieces of cake that the child wants to eat. The child whines and throws a tantrum.

In the interest of being deemed to be reasonable, the parent compromises and allows the child to have two pieces of the cake and the child happily stops whining. The child is overloaded with sugar and goes into shock. Not very  responsible on the part of both the child and the parent.

This is what our politicians did. One side announced that they planned to spend more in order to get our economy going and the other side compromised and allowed for the debt ceiling to be raised in exchange for FUTURE spending cuts. S & P rightfully deemed this to weaken the government’s ability to pay and lowered the credit rating.

Politicians, do what they do best and immediately began trashing S & P for lowering the rating.

Our economy is based upon monetarist economics, or Keynesian economics. It measures growth or productivity using phony money. The government hires and pays a person $100 to dig a ditch. The next day, that person is paid another $100 to fill in the ditch he dug the day before. The government then announces that productivity was $200, but in reality, nothing of value was created.

http://www.investopedia.com/terms/k/keynesianeconomics.asp#axzz1W0n78MVC

Raising more revenue by increasing the tax rates for the rich is one solution that those who advocate more spending offered. They consider  the individuals and corporations that make more than $250,000 a year are rich. If you are covered by a pension plan or have a 401 K plan, you are likely owners of these “rich” companies because you own these companies through your plan. A raise in tax rates would diminish your return on your investments.

You further end up paying more when you buy the products and services you consume because these businesses will have to raise their prices to pay the additional taxes. Companies that are profitable are left with fewer dollars and would be unable to expand or hire more employees. Unemployment will remain high or will go higher.

The dollar will erode further and those on fixed income like our Kupunas, will have to pay more for goods and services or do without. Those who feel entitled to government funds could riot. They’ll even trash those who drive luxury cars or live in expensive homes. What they’ve done in Europe is what could happen here.

Kupunas won’t be able to defend themselves and their property. Flash riots are hard to prepare for and to defend against.

Right now, there is no safe place to invest your money other than into hard assets. We need to wait and see what the markets are going to do when the investors come back into the market after Labor Day. More importantly, we need to see if we can get past September 11 safely and without a major terrorist attack. An attack will cause a market crash, putting further downward pressure on an already vulnerable dollar.

Meet an outstanding person

JULIE PERALTA… YET ANOTHER INSPIRING PERSON

I was at Saint Francis West Hospice a couple of weeks ago and a young lady came into the lobby with a patient in a wheelchair. She parked him about 5 feet from the piano and settled in to listen to my offerings for the remainder of my hour.

While they listened, she was massaging the patient, doing dance moves and singing along with the music. Both were, I guessed, to be Filipino, so I played whatever Filipino music I had with me that day. They danced to Ma Ala Ala Mokaya, Ikaw and a few more numbers. They were having so much fun that I wanted to stop playing and join them. The young lady’s personality was intoxicating.

Most of the patients in a hospice are admitted if they're expected to pass within six months. The majority actually pass within two weeks because they're in a state where they deteriorate quickly. Many can't laugh or even smile. If they tap their feet to the musical beat, we know they're enjoying themselves. So laughing and carrying on is something I've not seen in my 8+ years that I've entertained at hospices.

Julie Peralta, it turned out, was a volunteer and has been volunteering at St. Francis Hospice since this past April. She is a caregiver by trade and decided to volunteer to help with the elderly, sick or handicapped. She is hoping to be a volunteer at the Community Living Center at the Tripler Army Medical Center.

At St. Francis, she assists wherever there is a need for help. She provides companionship, assists the staff in personal care of the patients, feeding and taking the patients out for fresh air.

http://www.stfrancishawaii.org/Hospice/Pages/InpatientFacilities.aspx

Julie was born and raised in the Philippines. She grew up in a farming village high in the mountains and earned a degree in Animal Science and in Agriculture. She was employed by the Philippine Government, working in farm communities helping with sick animals as well as introducing technologies to help the farmers to improve their crops.

Julie went through the Red Cross training program for nurse’s aids when she arrived in Hawaii with her then husband. She soon developed an allergy to latex while working in a nursing home and went back to the Philippines in 2000 because the allergies made her severely ill and she was unable to work. The fresh air at the village’s 7,000 foot elevation and the care her family gave her brought her back to good health.

She and her son came back to Hawaii and she has been working as a personal caregiver since 2005. Her son is in his fourth year at the University of Hawaii, majoring in electrical engineering. She beams with pride when talking about him.

Most of her work comes from referrals from those in the industry, the Child and Family Services and from a home health agency. She struggles to get by but is grateful that she is healthy and able to also give of herself to help others through her volunteering activities.

But life is not all work for Julie. She’s involved in ballroom dancing and is a member of the Hawaii Ballroom Dance Association. If she dances with the same gusto and enthusiasm that I’ve observed in her interaction with patients, she’s likely very good.

Our community is indeed lucky to have people like Julie giving so much of herself to her adopted community and country. She's certainly a jewel of a human being.

Using our Kupunas for political gain

WILL WE THROW OUR KUPUNAS UNDER THE BUS?

Only if our politicians believe that it will hurt the other party.

The Federal Government receives over $200 billion each month in tax payments. That is enough to pay the interest on the bonds they’ve issued, pay Social Security obligations and make good on the paychecks for those serving in our military.

Social Security is a program that required citizens to pay in to under force of law. In exchange, the government promised to pay benefits when the citizen retired. That’s an obligation and our government shouldn’t be so chicken sh arrogant as to threaten to withhold payments on it.

Those who serve in our military should not be second guessing as to whether they’ll get paid. They risk their lives so we can enjoy our Constitutional freedoms. When a person is deployed, he shouldn’t have to worry if his family has enough to pay for food, clothing and shelter. He has enough to worry about. For our country to threaten to withhold that is pilau despicable.

Paying the interest on the bonds that our government issued also must be done. And we have enough coming in that these obligations can be met each month. There is no threat of default if the interest is paid.

If an individual has loans on credit cards amounting to 70% of his income, we can all agree that he’s in serious trouble. He can’t go to the bank and demand that they lend him more money so he can spend more. Unless, of course, he went to private school or to an elite university. All our top dumbbell  much respected government officials went to Punahou and  Ivy League schools.

Our government does exactly that. They pass a law increasing the amount that they can borrow because they can’t control their spending habits.

Where can they cut? As a proud graduate of the prestigious Farrington High School, I'll explain it to you.

1. Suspend all payroll payments to all elected officials and their staffs until the budget is balanced.

2. Suspend all EPA regulations and funding for the agency indefinitely. You will immediately see investors build more refineries and energy prices will go down. You may even see ferries operating in Hawaii, transporting goods and people between the islands.

3. Suspend all regulations and funding that is required by the Americans with Disabilities Act.

4. Suspend all programs and tax credits used for social engineering, like subsidizing farmers to produce ethanol. Tax credits for installing energy efficient systems should also be suspended indefinitely. Make everyone pay some income tax and suspend all tax credits which amount to welfare payments. If everyone pays something, they take pride in, and ownership of the country.

5. We can save an additional $20.2 billion if we suspend the Department of Education budget. They pay for 10% of each school’s budget but make up 100% of the rules. When the Federal Government collects $1 for anything, only 27 cents actually is distributed to the recipient. The rest is used for bureaucratic payroll and for administering their rules and regulations. Very inefficient.

6. HUD is also another department that we can do without. The sole function of HUD is to enrich community organizers who redistribute wealth. That’s $6.7 billion each month.

If we need to cut more, then the Justice Department could be trimmed some.

“We, the People of the united States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

Any department that doesn’t fit in with the above Preamble should be shut down. That includes Social Security, by the way, but the United States Government forced this contract upon the people so that obligation must be fulfilled. Bernie Madoff tried the exact Ponzi scheme and was quickly sent to prison. http://en.wikipedia.org/wiki/Ponzi_scheme Something only our dedicated government officials can get away with.