Thursday, October 22, 2009

In thrall to a long-dead experiment

By Patrick McIlheran

Milwaukee Journal Sentinel

We are all Keynesians now, Richard Nixon is said to have said. Too true, says Hunter Lewis, who's got a new book on how the famous British economist is still messing with your life.

And he is. We are all followers of John Maynard Keynes in the sense that lab rats, learning a maze by electric shocks, are disciples of some psychologist's theory. We no more benefit from this than do the rats.

Keynes, who died in 1946, is fashionable again. Politicians pray for his blessing on their stimulus plans, since Keynes preached that the way out of a slump was for government to spend lots of money. It should borrow vastly, said Keynes, and spend it on anything. He's the guy who first suggested paying some to dig ditches and others to refill them.

Nor just in slumps, said Keynes: Governments should print money, loads of it, to drive interest rates toward zero. This would cause a permanent boom, if only we also tax away money hoarded uselessly by rich people.

Sound familiar? Of course, says Lewis, who explains the doctrine precisely in "Where Keynes Went Wrong." Washington's embrace of Keynes went uninterrupted through Clinton to Bush to Obama. Fannie Mae's loose loans, the Fed's giveaway rates, bailouts, the porkulus: all Keynes, no matter the party.

How has that worked? "There's just no evidence" that this ever cured a recession, Lewis told me. Keynes "wasn't particular interested in evidence."

History suggests he should have been. Keynes was embraced by Franklin Roosevelt in the Depression; this stalled the mid-1930s recovery. Keynes' ideas in the 1970s led to stagflation. Japan stimulated crazily in the 1990s, giving itself the Lost Decades. The cure for the 2001 slump set up the 2008 crash.

Whereas recessions without stimulus - America in 1921, Southeast Asia in the 1990s - were sharp but swiftly over.

When governments pump stimulating rivers of money, they manipulate prices, the economy's gauges. By juking interest rates, the price of money, you're messing with the most critical gauge. The ensuing unreality leads to inflation, dot-com bubbles or foreclosed subdivisions. Stimulus is like curing a hangover with Thunderbird.

Lewis feels Keynesianism, an intellectual bubble, is nearing a pop, if only because Washington is running out of willing lenders. About time, he says. It has punished thrift and encouraged profligacy. It has led government to turn swaths of the economy into federal protectorates. "That's the single thing that worries me most," he said, the way bonds between government and business make the two indistinguishable. It sickens democracy.

Keynes wasn't a clear writer, says Lewis. He was self-contradictory: The solution to bad debt is more debt, for instance. The more you spend, the more you have. Deficits are a kind of savings. Lewis becomes grimly hilarious when he compiles the Keynesian paradoxes now being spouted. You realize our leaders aren't making sense.

Keynesians argue that it does make sense, only you rabble aren't equipped to comprehend. Keynes believed the economy couldn't be left up to rabble, who were ruled by "animal spirits." It had to be run by the wise - by people like him.

"He said, 'If things go too far in the wrong direction, I'll just step in and fix it,' " said Lewis. "Then he died."

We since have learned that governments are ruled by spirits as animal as anyone's, only with bigger paws. No one is so short-term as politicians, thinking of re-election and seduced by an urge to be in charge. This is why Keynesianism has triumphed among them, said Lewis: "It's a rationalization for policies that they'd like to pursue anyway."

So we all live in a $24 trillion experiment in whether, this time, stimulus will work. Two questions from one of the rats:

First, if the government rigs reality by messing with the value of money, how can we expect any other part of the economy to not be distorted and dishonest?

Second, if we abandon simple, comprehensible rules and rely on constant tinkering by wise leaders, what happens when we instead get leaders who, having done no work but rabble-rousing among Chicago's poor, have not the least clue about running an economy?

Revered, Keynes has no answer.

Patrick McIlheran is a Journal Sentinel editorial columnist. E-mail

Monday, October 19, 2009

Record US deficit stokes concern

By Martin Crutsinger Washington

What is $1.42 trillion (R10.4 trillion)? It is more than the US's total national debt for its first 200 years and more than $4 700 for every American man, woman and child.

It is also the 2009 US federal budget deficit, three times more than any other deficit before. Some economists warn that unless the government start to cut spending or raise taxes, it could sow the seeds of another economic crisis.

Treasury figures released on Friday showed that the government spent $46.6 billion more than it received in September, a month that normally records a surplus. That boosted the shortfall for the full fiscal year that ended last month to $1.42 trillion. The previous year's deficit was $459 billion.

As a percentage of US economic output, it's the biggest deficit since World War II.

Forecasts of more red ink mean the federal government is heading toward spending 15 percent of its money by 2019 just to pay interest on the debt, up from 5 percent this year.

President Barack Obama has pledged to reduce the deficit once the great recession ends and the unemployment rate starts falling, but economists worry that the government lacks the will to make the hard political choices to get control of the imbalances.

Friday's report showed that the government paid $190bn in interest over the last 12 months on Treasury securities sold to finance the federal debt. Experts say this tab could quadruple in a decade as the size of the government's total debt rises to $17.1 trillion by 2019.

Without significant budget cuts, that would crowd out government spending in such areas as transport, law enforcement and education.

Already, interest on the debt is the third-largest category of government spending, after the government's entitlement programmes and the military.

As the biggest borrower in the world, the government has been the prime beneficiary of record low interest rates. The new budget report showed that interest payments fell by $62bn this year even as the debt was soaring.

The Congressional Budget Office projects that the debt held by investors both in the US and abroad will increase by $9.1 trillion over the next decade, pushing the total to $17.1 trillion under Obama's spending plans.

The $1.42 trillion deficit for 2009 - which was less than the $1.75 trillion projection that Obama made February - includes the cost of the government's financial sector bailout and the economic stimulus programme. Income taxes also dwindled as a result of the recession. Coupled with the impact of the tax cuts under former president George W Bush earlier in the decade, tax revenues fell 16.6 percent.

"We should be desperately worried about deficits of this size," says Mark Zandi, the chief economist at Moody's "The economic pain will be felt much sooner than people think, in the form of much higher interest rates and much higher rates of inflation." This could result in stagflation - a mix of inflation and economic stagnation.

The administration has pledged to include a deficit-reduction plan in its 2011 budget, which will go to Congress in February.

Monday, September 14, 2009

Newest National Debt Statistics Posted September 2009

Here are the newest National Debt statistics courtesy of (U.S. Treasury Department) effective Sept. 11, 2009.

Debt Held by the Public

Intragovernmental Holdings

Total Debt (9/11/09)

Interest payments
August 2009

Fiscal Year 2009

Gifts to reduce the public debt
July 2009

Fiscal Year 2009

Increase in the past year (since 9/11/08)

Increase since President Obama's inauguration (234 days ago)

Daily rate of increase

Area residents travel to D.C. to protest increasing national debt

The Herald Mail
Hagerstown, Md.

September 12, 2009

HAGERSTOWN — More than 400 people from four states traveled Saturday from Hagerstown to Washington, D.C., joining thousands of others for the March on Washington, a rally protesting big government, both in spending and control.

“It was truly amazing,” said Nancy Allen of Hagerstown.

Allen said she never felt the need to take part in a political demonstration before in her life.

“It is the control the government is trying to exercise over the people, To me, it is very threatening,” Allen said. “I do see this as a (peaceful) revolution. I really do.”
Allen said she left the demonstration “with a great sense of optimism.”

Neil Parrott, organizer of the Hagerstown TEA (Taxed Enough Already) Party, said a caravan of eight buses stopped to pick up people in LaVale, Md., Chambersburg, Pa., Martinsburg, W.Va., Winchester, Va., and Frederick, Md., as well as Hagerstown

Before the buses departed Saturday morning from Hagerstown, a press conference was held featuring U.S. Rep. Roscoe Bartlett, R-Md. Parrott also spoke to the group.

“Today, we will tell elected officials, we will tell the nation and we will tell the world that we care about our freedoms and we care about our nation,” Parrott said in prepared remarks.

“We want our elected officials to listen and to turn their destructive fiscal policies around,” Parrott said. “We want them to quit increasing the national debt and devaluing the dollar. We want to be heard and we want action.”

While acknowledging past deficits and growth of the national debt in previous administrations, Parrott said the rate of the increase in spending in the last two years has been much more alarming to him.

“Our debt has just increased tenfold,” Parrott said Saturday afternoon after the rally.

Harold Carbaugh of Clear Spring said he never had experienced anything like Saturday’s rally.
“I’m on cloud nine,” Carbaugh said after the rally, where he met people from Florida, Louisiana, Texas, Mississippi and other states.

Carbaugh said he began asking people where they were from after realizing the demonstration wasn’t simply by people from the Washington area.

“Basically, what our founding fathers gave us is being eroded,” Carbaugh said of his concerns. “Our Constitution is being stripped out from under us one piece at a time.”

Carbaugh, a dairy farmer, said it was time for good men and women to do something or risk losing what the founding fathers established.

Anne Gray of Frederick, Md., said House Speaker Nancy Pelosi’s criticism of people attending the town hall meetings on health care as being “un-American” inspired her to join the protest.
“It was the biggest summer reunion picnic you ever had,” Gray said of the event’s atmosphere. “I definitely want to become more involved.”

The march was the third event Parrott has participated in since April 15, when TEA Party events were held across the nation.

Earlier this summer, Parrott expressed interest in running for Subdistrict 2B seat in the Maryland General Assembly. The seat currently is held by Republican Christopher B. Shank, who is considering running for the Maryland State Senate seat held by Republican Donald F. Munson.

Monday, September 7, 2009

China alarmed by US money printing

The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy.

By Ambrose Evans-Pritchard, in Cernobbio, Italy
UK Telegraph

Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing".

"We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como.

"If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.

China's reserves are more than – $2 trillion, the world's largest.

"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.

The comments suggest that China has become the driving force in the gold market and can be counted on to
buy whenever there is a price dip, putting a floor under any correction.

Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise.

"Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down."

Mr Cheng said China had learned from the West that it is a mistake for central banks to target retail price inflation and take their eye off assets.

"This is where Greenspan went wrong from 2000 to 2004," he said. "He thought everything was alright because inflation was low, but assets absorbed the liquidity."

Mr Cheng said China had lost 20m jobs as a result of the crisis and advised the West not to over-estimate the role that his country can play in global recovery.

China's task is to switch from export dependency to internal consumption, but that requires a "change in the ideology of the Chinese people" to discourage excess saving. "This is very difficult".

Mr Cheng said the root cause of global imbalances is spending patterns in US (and UK) and China.

"The US spends tomorrow's money today," he said. "We Chinese spend today's money tomorrow. That's why we have this financial crisis."

Yet the consequences are not symmetric.

"He who goes borrowing, goes sorrowing," said Mr Cheng.

It was a quote from US founding father Benjamin Franklin.

Tuesday, August 25, 2009

Newest National Debt Statistics Posted August 2009

Here are the newest National Debt statistics courtesy of

As of Aug. 24, 2009

Debt Held by Public

Intragovernmental Holdings

Total Debt:

Interest payments:
July 2009

FY 2009

Gifts to reduce the public debt:

June 2009

FY 2009

Increase from previous month:

Increase from previous year:

How much has the National Debt increased in the 216 days of the Obama Administration?

[$5,056,406,837.74/per day increase]

Sunday, August 16, 2009

Washington Times: A Failed Single Term?

Saturday, August 15, 2009

President Obama is on the way to joining an exclusive club. It is the club of failed one-term presidents.

During the presidential campaign, Mr. Obama sold himself as a pragmatic moderate. In fact, he is the very opposite. He is an internationalist socialist whose policies will lead to ruin at home and defeat abroad. They will also doom his re-election efforts. He is flirting with political disaster.

Despite his many flaws, former President Bill Clinton established the model for successful Democratic administrations. Mr. Clinton governed as a liberal centrist. He realized that veering too far to the left early in his presidency was detrimental: His support of Hillarycare and gays in the military resulted in the 1994 Republican takeover of Congress. Mr. Clinton changed course by embracing free trade, welfare reform and balanced budgets -- combining fiscal responsibility and social liberalism. This formula prevented the Republican Party from recapturing the White House in 1996.

Mr. Obama is the anti-Clinton. He is a leftist ideologue who has surrounded himself with radical and inept advisers. Mr. Clinton had political counselor Dick Morris and Treasury Secretary Robert E. Rubin. Mr. Obama has David Axelrod and Timothy F. Geithner.

As a result, Mr. Obama's presidency is starting to look like the worst in 100 years. His $787 billion fiscal stimulus has failed to restore economic recovery. Unemployment remains high. Growth is anemic.

His massive spending is projected to yield record budget deficits of $1.8 trillion this year and $1.3 trillion next year. Over the next decade, according to the Obama administration's own estimates, the debt will explode by more than $10 trillion. These soaring deficits threaten to cripple our long-term prosperity and economic security. No country has sustained this kind of massive borrowing and spending without becoming a second-class nation. America is going the way of Argentina.

Mr. Obama's government-run health care plan is too expensive: It will saddle taxpayers with more than $1 trillion in costs. If enacted, it will do what socialized medicine has always done: ration care, extend waiting lines to visit a doctor and deny lifesaving, costly treatment to those deemed the weakest and most unproductive members of society -- the elderly. It is why so many seniors rightly oppose Obamacare.

National health care will force Mr. Obama to break his tax pledge. His signature campaign promise was not to raise taxes on families making less than $250,000 a year. However, Mr. Obama has boxed himself in, vowing that any health-insurance overhaul must be paid for without adding to the deficit. Hence, his administration is exploring soak-the-rich schemes such as higher income and capital gains taxes and a "wealth surtax." The problem remains that even these policies can't generate nearly enough revenue to fund Mr. Obama's ambitious expansion of the welfare-entitlement state.

This leaves him with only one option -- raising taxes on the middle and working classes. Already, key administration officials are considering a 10-percent national sales tax, also known as a value-added tax (VAT). In other words, a European-style health care system inevitably leads to European-level taxation -- and, consequently, European-style high unemployment and low growth rates.

Mr. Obama's energy policies will also undermine the economy. If passed, his cap-and-trade initiative will impose huge indirect taxes on businesses. It will punish manufacturing, oil-producing and coal states. Its goal is to increase the costs of gas and electricity, thereby discouraging their use.

Consumers will be paying more not only at the pump but also on everything from food to heating and electric bills. Mr. Obama's green socialism threatens to erode our standard of living, trigger skyrocketing inflation and stunt job creation.

Yet, the biggest danger is in foreign policy. Mr. Obama is pouring another 21,000 U.S. troops into Afghanistan. American forces are bogged down in a protracted guerilla campaign. The Taliban are resurgent. They have reclaimed their stronghold around the southern city of Kandahar. Insurgents are waging bold and deadly attacks even in the northern and western parts of the country -- formerly stable areas. The fighting is spreading, U.S. casualties are soaring, and public support for the war is ebbing.

The problem in Afghanistan is that terrorists are able to blend in with the native population. American soldiers find it increasingly difficult to distinguish civilians from combatants. The administration does not have a coherent counterinsurgency strategy. Hence, the Taliban are winning, and Washington is clueless on how to change the grim results on the ground.

Mr. Obama is frequently portrayed as the heir to Franklin D. Roosevelt. The more apt analogy, however, is Lyndon Baines Johnson. Just like Mr. Obama, President Johnson believed he could have guns and butter. He sought to implement the Great Society while escalating America's military involvement in Southeast Asia. Unable to choose, Mr. Johnson lost both: His domestic agenda and prosecution of the Vietnam War proved to be disastrous. His reckless ambition reduced his administration to political rubble, costing him any chance for re-election in 1968. This is why he (smartly) decided not to run again.

Social democracy and interventionist nation-building do not work. They destroyed the Johnson presidency and are on the verge of destroying Mr. Obama's as well.

Jeffrey T. Kuhner is a columnist at The Washington Times and president of the Edmund Burke Institute, a Washington-based think tank.

Monday, July 27, 2009

Newest National Debt Statistics posted July 2009

Here are the newest National Debt Statistics for July 2009 as reported at

As of July 23, 2009

Publicly held debt:

Intragovernmental holdings:

Total Debt:

June 2009 Interest payment

Fiscal Year 2009 Interest

Gifts to reduce the public debt
May 2009: $51,546.51
FY 2009: $2,909,454.76

Increase in the debt since President Obama's Inauguration:

Rate of increase each day in the 184 days of the Obama Administration:

Monday, July 6, 2009

Money and kids: Raising responsible spenders in a debt-driven world

by Jamie Richardson

The national debt is now about $11.4 trillion, according to USA Today. That is about $37,000 per person. And the number is rising quickly.

How can parents teach their kids to do better than the deep-pocketed politicians?

Here are 3 tips on teaching kids fiscal responsibility.

1. Teach the values of money early. Consider a rewards bank for good behavior. Like an earned allowance for an older child, this is the perfect starting point to let younger ones understand that things are earned, not just given freely. Give a dime for each good act, take one away for misbehavior. When the child has earned enough, take them to a dollar store and let them pick out their own reward. Let them pay the cashier to allow them the full experience of earning and buying.

2. Let them make some choices at the grocery store. For older kids, let them know how much money is allotted for the things on their breakfast or lunch table. With that money they can choose either their favorite chips, cookie, or cereal, but they only have that much money to spend on "fun" food. If the children are not old enough to read price tags, that does not eliminate them from the smart shopping experience. Give them options. Timmy can have either the name brand cereal OR the fruity candy, but not both. Or Timmy can get the store brand of both for the same price. The package may not have his favorite cartoon character on it, but he will learn to make decisions based more on flavor than advertising.

3. Cash is king. The movie Confessions of a Shopaholic gave me a whole new perspective on credit cards. The star is remembering back to her childhood and watching all the well-off ladies in the stores. She thought they were princesses and they did not even need "real money" because they had magic cards. As an adult, she chose to have 12 of those magic cards and she did not have full respect for their power until she wracked up thousands of dollars in debt that she could not afford.

And while the credit card debt per household is holding steady at about $10,000, Americans really are passing along this impression of a magic card to the next generation. For a child to truly respect money, kids need to see the power of actual money. If they see that the same money is spent on groceries and lunches, and toys and treats and that there is a limited supply of money, they catch on much faster to having a finite amount to spend.

Saturday, July 4, 2009

MOUNTAIN OF DEBT: Rising debt may be next crisis


WASHINGTON (AP) - The Founding Fathers left one legacy not celebrated on Independence Day but which affects us all. It's the national debt.

The country first got into debt to help pay for the Revolutionary War. Growing ever since, the debt stands today at a staggering $11.4 trillion - equivalent to about $37,000 for each and every American. And it's expanding by over $1 trillion a year.

The mountain of debt easily could become the next full-fledged economic crisis without firm action from Washington, economists of all stripes warn.

"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth," Federal Reserve Chairman Ben Bernanke recently told Congress.

Higher taxes, or reduced federal benefits and services - or a combination of both - may be the inevitable consequences.

The debt is complicating efforts by President Barack Obama and Congress to cope with the worst recession in decades as stimulus and bailout spending combine with lower tax revenues to widen the gap.

Interest payments on the debt alone cost $452 billion last year - the largest federal spending category after Medicare-Medicaid, Social Security and defense. It's quickly crowding out all other government spending. And the Treasury is finding it harder to find new lenders.

The United States went into the red the first time in 1790 when it assumed $75 million in the war debts of the Continental Congress.

Alexander Hamilton, the first treasury secretary, said, "A national debt, if not excessive, will be to us a national blessing."

Some blessing.

Since then, the nation has only been free of debt once, in 1834-1835.

The national debt has expanded during times of war and usually contracted in times of peace, while staying on a generally upward trajectory. Over the past several decades, it has climbed sharply - except for a respite from 1998 to 2000, when there were annual budget surpluses, reflecting in large part what turned out to be an overheated economy.

The debt soared with the wars in Iraq and Afghanistan and economic stimulus spending under President George W. Bush and now Obama.

The odometer-style "debt clock" near Times Square - put in place in 1989 when the debt was a mere $2.7 trillion - ran out of numbers and had to be shut down when the debt surged past $10 trillion in 2008.

The clock has since been refurbished so higher numbers fit. There are several debt clocks on Web sites maintained by public interest groups that let you watch hundreds, thousands, millions zip by in a matter of seconds.

The debt gap is "something that keeps me awake at night," Obama says.

He pledged to cut the budget "deficit" roughly in half by the end of his first term. But "deficit" just means the difference between government receipts and spending in a single budget year.
This year's deficit is now estimated at about $1.85 trillion.

Deficits don't reflect holdover indebtedness from previous years. Some spending items - such as emergency appropriations bills and receipts in the Social Security program - aren't included, either, although they are part of the national debt.

The national debt is a broader, and more telling, way to look at the government's balance sheets than glancing at deficits.

According to the Treasury Department, which updates the number "to the penny" every few days, the national debt was $11,518,472,742,288 on Wednesday.

The overall debt is now slightly over 80 percent of the annual output of the entire U.S. economy, as measured by the gross domestic product.

By historical standards, it's not proportionately as high as during World War II, when it briefly rose to 120 percent of GDP. But it's still a huge liability.

Also, the United States is not the only nation struggling under a huge national debt. Among major countries, Japan, Italy, India, France, Germany and Canada have comparable debts as percentages of their GDPs.

Where does the government borrow all this money from?

The debt is largely financed by the sale of Treasury bonds and bills. Even today, amid global economic turmoil, those still are seen as one of the world's safest investments.

That's one of the rare upsides of U.S. government borrowing.

Treasury securities are suitable for individual investors and popular with other countries, especially China, Japan and the Persian Gulf oil exporters, the three top foreign holders of U.S. debt.

But as the U.S. spends trillions to stabilize the recession-wracked economy, helping to force down the value of the dollar, the securities become less attractive as investments. Some major foreign lenders are already paring back on their purchases of U.S. bonds and other securities.

And if major holders of U.S. debt were to flee, it would send shock waves through the global economy - and sharply force up U.S. interest rates.

As time goes by, demographics suggest things will get worse before they get better, even after the recession ends, as more baby boomers retire and begin collecting Social Security and Medicare benefits.

While the president remains personally popular, polls show there is rising public concern over his handling of the economy and the government's mushrooming debt - and what it might mean for future generations.

If things can't be turned around, including establishing a more efficient health care system, "We are on an utterly unsustainable fiscal course," said the White House budget director, Peter Orszag.

Some budget-restraint activists claim even the debt understates the nation's true liabilities.
The Peter G. Peterson Foundation, established by a former commerce secretary and investment banker, argues that the $11.4 trillion debt figures does not take into account roughly $45 trillion in unlisted liabilities and unfunded retirement and health care commitments.

That would put the nation's full obligations at $56 trillion, or roughly $184,000 per American, according to this calculation.

Thursday, June 25, 2009

Newest National Debt Statistics posted June 2009

The newest National Debt Statistics are as follows. My apologies for the late posting, I usually try to get these posted as soon as the report is made public.

According to, the National Debt on June 23, 2009 is as follows:

Publicly held: $7,127,688,946,496.39
Intragovernmental Holdings: $4,280,284,814,654.63
Total: 11,407,973,761,151.02

This represents a per capita debt of approximately $37,159.52 for each man, woman and child in the United States (using a U.S. Population of 307,000,000 as a variable).

In May 2009, taxpayers paid $20,600,287,859.26 in interest payments alone, and $214,037,868,013.27 for the entire fiscal year to-date.

In April 2009, the bureau of the public debt received $2,857,908.25 in gifts to reduce the public debt.

Since President Obama took office, the debt has grown by $779,092,275,640.79. This represents a daily growth of $5,059,040,750.91 increase per day during the 154 days he's been in office.

Monday, June 8, 2009

Could US Debt Reach 100% Of GDP?

by Douglas A. McIntyre

Bill Gross, the chief investment officer of bond management firm Pimco, makes the case in a letter to investors that the US national debt could easily reach 100% of GDP, perhaps as quickly as in five years. His calculations are that the Treasury would have to pay 5% or 6% on the national debt to attract enough investors to fund it.

The consequences of the debt being that high could be that foreign governments including China would slow their purchases of America debt due to concerns about the US eventually defaulting.

China will probably find that there is nowhere other than Treasury-issued debt to put its money, even if the rating on that debt goes below “AAA.” The hundreds of billion of dollars that the US will borrow over the next several years will likely be the only pool of bonds large enough to accommodate China’s need to put its capital somewhere outside its own borders. America will have to pay a higher yield. The Chinese will take it, viewing Treasury debt as still by far the safest place that it can invest what may become its growing surplus.

It is obvious what the American government will have to do as the deficit balloons. It could hope to rely on its stimulus package to accelerate the economy to the point where GDP growth is routinely above 4%. That is the assumption of the Administration and Congress has gone along with it to the extent that it has approved the funds for the $787 billion investment in turning around the US economy.

There are a number of skeptics who believe that at sharp rebound in GDP is nearly impossible because the American economy has been so terribly weakened in the last two years. Lack of access to credit and rising unemployment may have crippled the chance for consumer spending to improve.

The 1981/1982 recession drove unemployment to over 10% for two quarters, but by 1983 and 1984, GDP was growing at a healthy rate again. A great deal of this was due to inflation and the US may end up “inflating” itself out of the current recession as well. That will cause the costs of goods and services to rise, but it will also probably increase corporate revenue and personal income. The extent to which the economy suffers inflation-based damage will be based on whether inflation is at modest 5% or at a much, much higher rate. The Fed can hope to mitigate inflation by manipulating rates, but that is based on a very inexact science, the application of which has not always been successful in the past.

The Treasury’s only other real alternative to bringing down debt is to sharply increase taxes to both individuals and businesses. Most economists believe that high taxes suck so much capital out of the private sector that business and consumer spending cannot recover. That pushes GDP down further.

The odds are high that the Treasury can rely on the fact that the economy will get some benefit from the huge stimulus package and that taxes will have to go up. Those two factors would have to work nearly perfectly in tandem to stop the increase in the national debt. “Perfect” sets that bar very high, perhaps too high to clear.

Friday, May 29, 2009

LTTE: Time to start paying down national debt

The following Letter to the Editor appeared in the May 24, 2009 edition of the Bellingham Herald in Bellingham, Washington.

In eight years in office George W. Bush acquired a national debt of $5 trillion. Not to be outdone, Barack Obama has indebted us to the tune of $1.375 trillion.

I believe this is totally unacceptable. We are giving economic stimulus packages to different businesses when we should be thinking of possibly raising taxes to pay off this enormous debt.
It is estimated that if each person in America was taxed to pay the debt it would amount to four hundred thousand dollars each.

Michael Coleman

Thursday, May 21, 2009

When to plug Fed's flow?

By Tom Raum • The Associated Press • May 17, 2009

This item appeared in the Cincinnati Enquirer

WASHINGTON - The federal government has committed trillions of dollars to domestic bailouts and propping up the recessionary economy, much of it borrowed, much created out of thin air by the Federal Reserve.

How much longer can all this go on? That's the pressing question facing policymakers, and one without a clear answer.

At some point, "You have to take away the punchbowl, as someone once said, in order to avoid the inflation risk," said Federal Reserve Chairman Ben Bernanke, paraphrasing William McChesney Martin Jr., who served as Fed chairman in the 1950s and '60s under five presidents.

But change course too soon, and it could nip a fragile recovery in the bud. Wait too long, and runaway inflation and gargantuan federal debt could be the sequel to the worst downturn since the 1930s.

While nobody thinks the current combination of near-zero interest rates, bank and auto bailouts and trillion-dollar annual deficits is a sustainable economic model, knowing just when to take away the punchbowl is the problem.

For now, the Bernanke Fed is still filling the punchbowl. And President Barack Obama and the Democratic-controlled Congress are doing the same with government spending.

One reason the Fed has been so aggressive in slashing rates and taking unconventional recession-fighting steps is because "we are trying to avoid another form of price instability, which is deflation," Bernanke told a Fed financial conference last week.

The risk of deflation - a widespread and prolonged decline in retail prices, wages and real estate and other asset values - is "receding, but it certainly needs not to be ignored," Bernanke said.

Despite some recent glimmers of hope, evidence is mixed on whether things are getting better or still worse. Disappointing reports Wednesday on falling retail sales and a jump in foreclosures fueled continuing uncertainties and helped push stocks down.

"You've got to take the stimulus off at some point. I don't think that point is this year," said David Wyss, chief economist at Standard & Poor's in New York. He said Wednesday's reports on weak retail sales for April point to a continuing recession, despite some recent encouraging signs.

Government and most private economists expect the recession, which began in December 2007, to end later this year, although they expect high levels of joblessness to continue beyond.

In the meantime, recent developments are complicating efforts to tame the deficit once the recession does end:

White House budget officials said recently that the deficit would widen to a record $1.8 trillion this year, $89 billion more than their estimate in February. They blamed the recession.

With nearly 80 million baby boomers nearing retirement, the government reported that Medicare and Social Security will face insolvency sooner than previously projected because of the recession - for Medicare in 2017 and for Social Security in 2037.

A potential $90 billion shortfall opened up in paying for Obama's health care proposal. The gap comes from congressional reluctance to go along with his proposal to help pay for the plan by limiting high-income families' charitable-giving and other tax deductions. House Speaker Nancy Pelosi said the health care bill will be on the House floor before the August recess.

The administration asked Congress on Tuesday to add $100 billion in new U.S. contributions to the International Monetary Fund as part of a war-spending bill.

Obama proposed just $17 billion in new spending cuts earlier this month, representing savings of less than one-half of 1 percent in his $3.4 trillion budget. Republicans scoffed - and some top Democrats criticized him for targeting popular programs in recessionary times.

By some accounts, the sum of all the U.S. grants, loans, guarantees and new money created electronically by the Fed since the financial crisis began totals some $11 trillion - roughly equal to the country's national debt.

That sum does include loan guarantees that might not be needed, money that hasn't been spent, various revolving accounts and U.S. investments in bad mortgages and other toxic, hard-to-value securities that could someday return money to taxpayers. Still, staggering amounts are involved.

"We are creating a government debt bubble that we're going to have to deal with in a massive way," suggested Rep. Kevin Brady of Texas, the senior Republican on the Congressional Joint Economic Committee.

History shows the dangers of calling the end of economic downturns too soon.

President Franklin D. Roosevelt made this mistake in 1936 when, believing the Depression largely over, he sought to pare back public spending and to balance the federal budget. It torpedoed a fragile recovery and pushed the economy back under water in 1937.

Japanese leaders made a similar mistake in the 1990s when they prematurely - and temporarily - withdrew government stimulus spending, helping to prolong Japan's recession to one that lasted a full decade.

At the White House, presidential spokesman Robert Gibbs dismissed suggestions by some, including Liz Ann Sonders, chief investment strategist for brokerage Charles Schwab, that the recession may have ended.

"I can report nobody has intoned that message" at daily White House economic briefings, Gibbs said. "There's much work to be done."

Veteran budget analyst Stanley Collender said increases in public spending are an important fiscal tool and that "a bigger deficit is justified in the current economic environment."
Furthermore, Collender added, if Obama doesn't push his agenda for more health care, energy and education spending now, when will he?

"He's got a 60-percent-plus approval rating. And Democrats are willing to work with him. He should go for it now. He's never going to get a better chance," Collender said.

Monday, May 18, 2009

Obama's Risky Debt

By Robert J. Samuelson
Washington Post
Monday, May 18, 2009

Just how much government debt does a president have to endorse before he's labeled "irresponsible"? Well, apparently much more than the massive amounts envisioned by President Obama. The final version of his 2010 budget, released last week, is a case study in political expediency and economic gambling.

Let's see. From 2010 to 2019, Obama projects annual deficits totaling $7.1 trillion; that's atop the $1.8 trillion deficit for 2009. By 2019, the ratio of publicly held federal debt to gross domestic product (GDP, or the economy) would reach 70 percent, up from 41 percent in 2008. That would be the highest since 1950 (80 percent). The Congressional Budget Office, using less optimistic economic forecasts, raises these estimates. The 2010-19 deficits would total $9.3 trillion; the debt-to-GDP ratio in 2019 would be 82 percent.

But wait: Even these totals may be understated. By various estimates, Obama's health plan might cost $1.2 trillion over a decade; Obama has budgeted only $635 billion. Next, the huge deficits occur despite a pronounced squeeze of defense spending. From 2008 to 2019, total federal spending would rise 75 percent, but defense spending would increase only 17 percent. Unless foreign threats recede, military spending and deficits might both grow.

Except from crabby Republicans, these astonishing numbers have received little attention -- a tribute to Obama's Zen-like capacity to discourage serious criticism. Everyone's fixated on the present economic crisis, which explains and justifies big deficits (lost revenue, anti-recession spending) for a few years. Hardly anyone notes that huge deficits continue indefinitely.

One reason Obama is so popular is that he has promised almost everyone lower taxes and higher spending. Beyond the undeserving who make more than $250,000, 95 percent of "working families" receive a tax cut. Obama would double federal spending for basic research in "key agencies." He wants to build high-speed-rail networks that would require continuous subsidy. Obama can do all this and more by borrowing.

Consider the extra debt as a proxy for political evasion. The president doesn't want to confront Americans with choices between lower spending and higher taxes -- or, given the existing deficits, perhaps both less spending and more taxes. Except for talk, Obama hasn't done anything to reduce the expense of retiring baby boomers. He claims to be containing overall health costs, but he's actually proposing more government spending (see above).

Closing future deficits with either tax increases or spending cuts would require gigantic changes. Discounting the recession's effect on the deficit, Marc Goldwein of the Committee for a Responsible Federal Budget puts the underlying "structural deficit" -- the basic gap between the government's spending commitments and its tax base -- at 3 to 4 percent of GDP. In today's dollars, that's roughly $400 billion to $600 billion.

It's true that since 1961 the federal budget has run deficits in all but five years. But the resulting government debt has consistently remained below 50 percent of GDP; that's the equivalent of a household with $100,000 of income having a $50,000 debt. (Note: Deficits are the annual gap between government's spending and its tax revenue. The debt is the total borrowing caused by past deficits.) Adverse economic effects, if any, were modest. But Obama's massive, future deficits would break this pattern and become more threatening.

At best, the rising cost of the debt would intensify pressures to increase taxes, cut spending -- or create bigger, unsustainable deficits. By the CBO's estimates, interest on the debt as a share of federal spending will double between 2008 and 2019, to 16 percent. Huge budget deficits could also weaken economic growth by "crowding out" private investment.

At worst, the burgeoning debt could trigger a future financial crisis. The danger is that "we won't be able to sell [Treasury debt] at reasonable interest rates," says economist Rudy Penner, head of the CBO from 1983 to 1987. In today's anxious climate, this hasn't happened. American and foreign investors have favored "safe" U.S. Treasurys. But a glut of bonds, fears of inflation -- or something else -- might one day shatter confidence. Bond prices might fall sharply; interest rates would rise. The consequences could be worldwide because foreigners own half of U.S. Treasury debt.

The Obama budgets flirt with deferred distress, though we can't know what form it might take or when it might occur. Present gain comes with the risk of future pain. As the present economic crisis shows, imprudent policies ultimately backfire, even if the reversal's timing and nature are unpredictable.

The wonder is that these issues have been so ignored. Imagine hypothetically that a President McCain had submitted a budget plan identical to Obama's. There would almost certainly have been a loud outcry: "McCain's Mortgaging Our Future." Obama should be held to no less exacting a standard.

Saturday, May 9, 2009

Newest National Debt Statistics posted May 2009

Here is the newest National Debt report courtesy of - the website of the U.S. Treasury Department.

As of May 7, 2009:

Publicly Held Debt:

Intragovernmental Holdings:


Interest paid, April 2009:

Interest paid, Fiscal Year 2009:

Gifts to reduce the public debt March 2009:

Gifts to reduce the public debt FY09:

Amount of increase in the debt since Obama began presidency:

Daily increase since Obama began presidency:
$5,809,121,801.30 per day

Tuesday, May 5, 2009


From Domenico Montanaro and Abby Livingston

The House will act likely on Wednesday on legislation that would include a commission to examine the financial meltdown, according to Democratic and Republican Capitol Hill sources.

"The details of the commission language are still being worked out between the Judiciary Committees between the House and the Senate," said Nadeam Elshami, spokesman for House Speaker Nancy Pelosi. "That language could be similar to the Senate, but it is in the process of intensive legislative discussions."

The options for the bill are either:
1. The House passes its own House version, and then go to conference with the Senate, or
2. Pass essentially the same bill between the House and Senate that would be ready quickly for the president to sign, which is what they're working on.

Both sides want to move quickly and negotiations are centering on "working off the Senate version."

The way the commission could work, according to preliminary details, is as follows:
(1) It would be bipartisan,
(2) Members of Congress would be excluded
(3) There would be at least eight people on the committee, and perhaps one to two more. (Each leader would get one person on the committee. There are four leaders. And each financial committee chair -- Banking in Senate, Financial Services in House -- and ranking member would get a pick. That's four more for a total of eight and maybe one to two others.

The office of Congressman Darrell Issa (R-CA) said the legislation would be identical to the Senate-passed (S. 386) and according to an Issa spokesman, the House will pass Wednesday. Issa's office contends that the commission will be comprised of 10 members, precludes elected officials from serving on the board and would have subpoena power.

Issa's office also described the development as a "rare case where everyone set aside partisan measures."

For historical context, there was a commission in the early 1930s called "the Pecora Commission" that investigated the 1929 Crash. The revelations uncovered led to many reforms, including Glass-Steagall Act of 1933. With that context, in March, First Read questioned why in this town that loves its bipartisan blue-ribbon panels, there wasn't a greater movement for a financial panel.

Thursday, April 30, 2009

Stalking The Fed

King Banaian of SCSU Scholars just posted a very informative post regarding H.R. 1207, a bill that would instruct the General Accounting Office to audit the Federal Reserve. As an economist, he argues against it. You can find out why by clicking here.

Tuesday, April 28, 2009

Treasury needs record $361B April-June borrowing


WASHINGTON (AP) — The Treasury Department said Monday it will need to borrow $361 billion in the current April-June quarter, a record amount for that period.

It's the third straight quarter the government's borrowing needs have set records for those periods.

Treasury also estimated it will need to borrow $515 billion in the July-September quarter, down slightly from the $530 billion borrowed during the year-ago period. The all-time high of $569 billion was set in the October-December period.

The huge borrowing needs reflect the soaring costs of the $700 billion financial rescue program and the recession, which is nearing a record as the longest in the post World War II period.

The slump has cut sharply into tax revenue and boosted government spending for benefit programs such as unemployment insurance and food stamps.

The administration is projecting the federal deficit for the entire budget year ending Sept. 30, will total a record $1.75 trillion. A deficit at that level would nearly quadruple the previous record of $454.8 billion set last year.

To cover the government's heavy borrowing needs, Congress in February boosted the limit for the national debt to $12.1 trillion as part of the legislation that enacted President Barack Obama's $787 billion economic stimulus program. The national debt now stands at $11.1 trillion.

The government released its estimate of borrowing needs for the quarter before a news conference Wednesday when officials are scheduled provide exact details of how much debt the government plans to sell next week and in what maturity levels as part of Treasury's regular quarterly debt auctions.

The $361 billion estimate for borrowing this quarter compared with borrowing needs of just $13 billion in the year-ago period. Normally the government's borrowing needs shrink sharply in the April-June quarter because of all the tax revenue being collected.

The government announced in February that it was bringing back the seven-year note and doubling the number of 30-year bond auctions it would hold each year to help finance the surging borrowing needs.

Debt Day Comes Sooner This Year

by Congresswoman Michele Bachmann

For Americans from coast to coast, Sunday, April 26 marked our nation's Debt Day. Debt Day is the day during the fiscal year – which runs from October 1, 2008 to September 30, 2009 this year – on which government spending exceeds revenue for the first time during the year.

Last year's Debt Day fell more than three months later, on Aug. 5.

Judging by the penchant for spending we've seen from Congress and the White House, I think it's safe to say that this infamous day will be creeping earlier and earlier for the next several years. It's simply another symptom of a government that spends too much, borrows too much, and taxes too much.

I come from the strong Minnesota culture of thrift, spending only what I truly can and eschewing debt. But, the trend in Washington is just the opposite. It’s very much a “spend now, and our children will pay later” attitude. That’s why I voted against the trillion-dollar-plus so-called stimulus bill, the nearly-half-a-trillion “omnibus” spending bill, and the multi-hundred billion-dollar Wall Street bailouts.

It’s high-time your family budget took priority here in Washington – and that means not just looking out for your finances today, but also looking out for your children’s futures.

Friday, April 24, 2009

Dave Ramsey: The Stock Market Will Rebound

by Dave Ramsey

History proves we’re going to make it through this recession.

Bear markets—when stock prices decline by 20% or more over at least two consecutive months—are no fun, but they have historically set up the market to bounce back and surpass its previous highs. And it might happen sooner than you think it will. Just look at the past bear markets the stock market has overcome.

What you see below is a graph of past bear markets and how they affected the S&P 500. The graph shows, on average, how long a bear market lasted and how much the stocks improved after it ended.

As you can see, the average bear market lasted around 13 months. Even more revealing is that, on average, the S&P 500 recovered all of its value and more within one to two years after the bear market ended.

If you cashed out your investments during one of those bear markets, you would have missed out on about a 50% gain. That’s a lot of money!

So what does history teach us?
1. Don’t cash out your investments during a bear market. If you do, you may lock in the losses and miss the rebound of the stock market.

2. Never give up hope. This recession and the bear market will end. You and your investments will be stronger in the long run.

Wednesday, April 22, 2009

Thune: Use TARP repayments to reduce national debt

The Daily Republic
Published Wednesday, April 22, 2009

U.S. Sen. John Thune, R-S.D., introduced legislation today that would require the secretary of the treasury to use taxpayer funds returned by financial institutions under the $700 billion Troubled Assets Relief Program (TARP) to reduce the national debt, according to a news release from Thune's office.

From the release:

"Several financial institutions that received TARP funding have returned or expressed an interest in returning billions in taxpayer funding.

“'Congress is responsible for allocating taxpayer dollars and this legislation will prevent the Obama Administration from attempting to turn this money into a revolving slush fund,' said Thune. 'TARP was designed for the President to report back to Congress and seek approval for additional funding. This legislation ensures the returned funds are not reallocated by the administration for other priorities. Instead, this bill would work to reduce the size of the national debt in this country, something that seems to be a forgotten idea with the current Democrat leadership.'

"Recently, Secretary of the Treasury Timothy Geithner has indicated that he intends to spend these funds on additional TARP activities without Congressional approval."

Friday, April 10, 2009

Newest National Debt Statistics posted April 2009

Here are the newest National Debt Statistics as of April 9, 2009:

Held by Public:

Intragovernmental Holdings:

Total Debt:

Gifts to reduce the public debt:

February 2009: $31,067.03

Fiscal Year 2009:

Fiscal Year 2008 (comparison):

Increase in Debt during FY2009:

Increase in National Debt since 'HOPE and CHANGE' of Obama Adminstration began:

($6,868,219,380.95 per day rate of increase)

Tuesday, April 7, 2009

Communities print their own currency to keep cash flowing

By Marisol Bello, USA TODAY
A small but growing number of cash-strapped communities are printing their own money.
Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.

The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency.

Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.

Ed Collom, a University of Southern Maine sociologist who has studied local currencies, says they encourage people to buy locally. Merchants, hurting because customers have cut back on spending, benefit as consumers spend the local cash.

Wednesday, April 1, 2009

Zogby: The Modest Majority

Forget the personal debt horror stories--most Americans are living within their means.

by John Zogby

It's no secret that Americans have become addicted to credit in order to maintain an artificially high standard of living. According to a recent survey of 55,000 consumers, 13% of Americans have credit card balances of more than $25,000.

Have we lost our way when it comes to credit? Now celebrating my 25th year as a pollster, I've learned to read statistics with a bit of dyslexia, taking a look at them backward and upside down. So I discovered that almost half of that 13% were people who could well afford to carry that much credit card debt--which meant to me that approximately nine in 10 Americans were living within their means with regard to credit card debt. The real truth here is that most Americans are living their lives modestly, but this does not make a dramatic headline.

But Americans have bought into the misconception that most of us are overextended. Taking into account a household's overall financial picture, a Zogby Interactive survey conducted in March 2008 found that 79% of Americans believe they themselves live within their means financially, given their current personal financial situation.

This same survey found that 87% believe that most other Americans are living beyond their financial means. Our more recent polling shows Americans have been trimming their budgets in response to today's financial reality--on entertainment, major purchases, even groceries. The Great Recession has not created a new mindset, because it was already here.

It's not so much that we're a nation of debtors--though there are a lot of us with too much debt--but that we're not a nation of savers. On the surface, it would appear that Americans have an insatiable appetite for things they cannot afford. The Economist reported in 2008 that household and consumer debt was up from 100% of gross domestic product in 1980 to 173% by 2007.

But consider the reality that much new debt has been caused by students who graduate from college with unmanageable credit card payments, and that a substantial burden is being carried by these college graduates well into their thirties. Much of this growing debt is in start-up costs for young people and added penalties and interest rates.

There are many of us working for less, and many who have come to the realization that they cannot achieve the American Dream on a buy-now pay-later basis. The Great Recession is not creating a new trend but rather accelerating one I have noted over the last decade: a move away from easy credit, away from buying what we can't afford, away from seeking out fantasy.

Top 10 States in Budget Trouble

Click here for the Top 10 States in Budget Trouble, as reported at Real Clear Politics and cross posted from Obama Alert blog.

Monday, March 30, 2009

Sen. Gregg: Obama's budget plan 'will lead to immense national debt'

Sen. Judd Gregg, once President Barack Obama's choice to be commerce secretary, yesterday said the President's proposed budget "spends too much, taxes too much, and borrows too much."

New Hampshire's senior senator, the ranking Republican on the Senate Budget Committee, delivered the weekly Republican address.

The President focused his weekly address to the nation yesterday on the flooding in the Midwest, laying out the multi-agency federal response to the natural disaster.

He praised the efforts of thousands of volunteers who have pitched in to fill sandbags, build levees and provide other support -- and used their example to renew his call for community service.

"In the face of an incredible challenge, the people of these communities have rallied in support of one another," Obama said. "And their service isn't just inspirational -- it's integral to our response."

Gregg began his six-minute address by acknowledging the "difficult times" and "the efforts being made by our President and his seriousness about addressing these issues."

But, he said, the administration's budget would increase the national debt, taxes and government spending.

In contrast, Gregg said, Republicans "believe you create prosperity by having an affordable government that pursues its responsibilities without excessive costs, taxes or debt, that it is the individual American who creates prosperity and good jobs, not the government."

Gregg also said the Obama administration wants to create what he called "a new national sales tax on everyone's electric bill."

Republicans have criticized the administration's proposal to create a "cap and trade" system, which would require companies to purchase credits for carbon emissions.

The administration proposes using revenues generated from such a system to fund clean energy technology, and pay for a tax credit for Americans who earn less than $250,000 a year, a key campaign pledge for Obama. White House officials have said the "Making Work Pay" tax credit would compensate middle-class Americans for any increased utility costs under such a system, according to published reports.

The White House budget includes funding for that tax credit for 10 years. However, current House and Senate budget proposals cut funding for that tax credit beyond 2010, according to published reports.

Yesterday, Gregg warned that Obama's budget plan "will lead to an immense national debt that not only threatens the value of the dollar and puts at risk our ability to borrow money to run the government," but also places the next generation "at a huge disadvantage as they inherit this debt, which will make their chances of success less than those given to us by our parents."

Near the end of his five-minute address, the President hailed Congress' passage of a bill that promotes national service. "In facing sudden crises or more stubborn challenges, the truth is we are all in this together -- as neighbors and fellow citizens," Obama said.

And he closed by offering thoughts, prayers and "our continued assistance" to those dealing with the flooding.

NOTE: When first posted, this article misidentified the Cabinet post that Judd Gregg turned down.

National debt needs viable solution

Melanie Thomas

America, let’s be serious.

It’s not the war in Iraq, party discrepancies, or ideology that is our biggest threat.

In recent months the economy has been the sharpest pain that the United States has been enduring. It’s hard to fathom that in order for us to balance our national budget we would need $53 trillion.

The documentary I.O.U.S.A, recently screened on campus, outlined what is contributing to this economic mess. Certainly, there seems to be no easy solution to eliminate the debt.

Annually, the national budget increases by two to three trillion dollars. The U.S. government continues to borrow money from various countries that it will never be able to pay back in order to cover expenses.

But the reality is clear: ultimately the countries we owe debt to may one day have a ruling voice in U.S. policy.

Within less than ten years, an unequal balance between individuals receiving social security and those paying into it will begin. We won’t be able to take care of the people who took care of us.

According to I.O.U.S.A, “In 2008, the United States spent $610 billion on Social Security benefits, $330 billion on Medicare, and $204 billion on Medicaid.”
A step in the right direction for solving the budget deficit would be to tighten up guidelines for those who qualify for Social Security. I believe that Social Security requirements need to be reviewed and revised.

Only people with legitimate health concerns and issues should qualify for benefits.
If we could reform Social Security successfully, our deficit could be reduced by up to $7 trillion.

Another major factor pertaining to the nation’s debt is our inability to save. Many individuals simply do not live within their own means and saving money has become a practice of the past.

Everyone wants to live comfortably and the leaders in this country have a tendency to make us believe that this is realistic.

What they fail to tell us is the truth. We shouldn’t be lied to anymore. Fiscal irresponsibility shouldn’t be allowed.

The country also needs to change its trading habits. This country has a tendency to consume or import more than it produces or exports. Living with excess is not only bad for the economy but causing an even bigger environmental problem.

Everything that affects the economy can be connected to other serious problems that we face. It’s way past time for our country reign things in and not be foolish. One president is not the solution for this disaster. We need so much more reform.

We literally went from a balanced budget with President Clinton to an $8.7 trillion deficit.

As Americans we need to make sure that we are voting for those truly interested in the betterment of this nation and not let those who have been dishonest in the past get their hands on spending our dollars or lie to us about the severity of the problem.

Even if we ended the war in Iraq, earmarks and pork barrel spending were eliminated, and Bush tax cuts were allowed to expire, we would still not be able to solve the national debt.

The mess that America has created will not be solved easily. We must travel a long path filled with bumps and obstacles in order to maintain our status. If our national debt is not addressed in the near future, we will fail as a nation.

Saturday, March 28, 2009

Deficit Accountability Act of 2009

I think this is a novel idea. Please take time to contact your member of Congress today and request that they co-sponsor this legislation. Congress should not get a pay increase if they can't balance the books! This was introduced by Rep. Cliff Stearns (FL-6) and co-sponsored by Rep. Howard Coble (NC-6).

Deficit Accountability Act of 2009 (Introduced in House)

HR 201 IH


1st Session

H. R. 201
To provide that no automatic pay adjustment for Members of Congress shall be made in the year following a fiscal year in which there is a Federal budget deficit.


January 6, 2009
Mr. STEARNS introduced the following bill; which was referred to the Committee on House Administration, and in addition to the Committee on Oversight and Government Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


To provide that no automatic pay adjustment for Members of Congress shall be made in the year following a fiscal year in which there is a Federal budget deficit.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,


This Act may be cited as the `Deficit Accountability Act of 2009'.


Section 601(a) of the Legislative Reorganization Act of 1946 (2 U.S.C. 31) is amended--

(1) in paragraph (2)(A), by striking `Subject to subparagraph (B),' and inserting `Subject to subparagraph (B) and paragraph (3),'; and

(2) by adding at the end the following:

`(3) An adjustment under paragraph (2) otherwise scheduled to take effect in a calendar year shall not be made if, as determined by the Office of Management and Budget, there was a deficit (as defined by section 3 of the Congressional Budget and Impoundment Control Act of 1974) in the preceding fiscal year.'.

Friday, March 27, 2009

A List of US Reps who Voted for HR 1586, Imposing a 90% Tax on Bonuses for TARP Recipients

What follows is a list of the US Reps who succumbed to populist fervor and voted for H.R. 1586, imposing a 90% tax on bonuses received by employees of certain TARP recipients (the bill was sponsored by Rep. Charles Rangel, D-NY, and co-sponsored by 51 other Democrats)

The bill, which passed 328-93, is widely believed to be an unconstitutional 'bill of attainder.'

243 Democrats and 85 Republicans voted for the bill; 6 Dems and 87 Repubs voted against it. 6 Dems and 4 Repubs did not vote.

Here is a list of representatives who voted, "Yea" on the bill. See if your congressman is on the list:

Yea HI-1 Abercrombie, Neil [D]
Yea NY-5 Ackerman, Gary [D]
Yea AL-4 Aderholt, Robert [R]
Yea NJ-3 Adler, John [D]
Yea LA-5 Alexander, Rodney [R]
Yea PA-4 Altmire, Jason [D]
Yea NJ-1 Andrews, Robert [D]
Yea NY-24 Arcuri, Michael [D]

Yea CA-43 Baca, Joe [D]
Yea WA-3 Baird, Brian [D]
Yea WI-2 Baldwin, Tammy [D]
Yea GA-12 Barrow, John [D]
Yea TX-6 Barton, Joe [R]
Yea CA-31 Becerra, Xavier [D]
Yea NV-1 Berkley, Shelley [D]
Yea CA-28 Berman, Howard [D]
Yea AR-1 Berry, Robert [D]
Yea IL-13 Biggert, Judy [R]
Yea CA-50 Bilbray, Brian [R]
Yea FL-9 Bilirakis, Gus [R]
Yea GA-2 Bishop, Sanford [D]
Yea NY-1 Bishop, Timothy [D]
Yea OR-3 Blumenauer, Earl [D]
Yea MO-7 Blunt, Roy [R]
Yea OH-16 Boccieri, John [D]
Yea CA-45 Bono Mack, Mary [R]
Yea AR-3 Boozman, John [R]
Yea OK-2 Boren, Dan [D]
Yea IA-3 Boswell, Leonard [D]
Yea VA-9 Boucher, Frederick [D]
Yea FL-2 Boyd, Allen [D]
Yea PA-1 Brady, Robert [D]
Yea IA-1 Braley, Bruce [D]
Yea AL-2 Bright, Bobby [D]
Yea FL-3 Brown, Corrine [D]
Yea SC-1 Brown, Henry [R]
Yea FL-5 Brown-Waite, Virginia [R]
Yea FL-13 Buchanan, Vern [R]
Yea NC-1 Butterfield, George [D]
Yea CA-44 Calvert, Ken [R]
Yea MI-4 Camp, David [R]
Yea VA-7 Cantor, Eric [R]
Yea LA-2 Cao, Anh [R]
Yea WV-2 Capito, Shelley [R]
Yea CA-23 Capps, Lois [D]
Yea MA-8 Capuano, Michael [D]
Yea CA-18 Cardoza, Dennis [D]
Yea MO-3 Carnahan, Russ [D]
Yea PA-10 Carney, Christopher [D]
Yea IN-7 Carson, André [D]
Yea LA-6 Cassidy, Bill [R]
Yea DE-0 Castle, Michael [R]
Yea FL-11 Castor, Kathy [D]
Yea KY-6 Chandler, Ben [D]
Yea MS-1 Childers, Travis [D]
Yea NY-11 Clarke, Yvette [D]
Yea MO-1 Clay, William [D]
Yea MO-5 Cleaver, Emanuel [D]
Yea SC-6 Clyburn, James [D]
Yea TN-9 Cohen, Steve [D]
Yea VA-11 Connolly, Gerald [D]
Yea MI-14 Conyers, John [D]
Yea TN-5 Cooper, Jim [D]
Yea CA-20 Costa, Jim [D]
Yea IL-12 Costello, Jerry [D]
Yea CT-2 Courtney, Joe [D]
Yea FL-4 Crenshaw, Ander [R]
Yea NY-7 Crowley, Joseph [D]
Yea TX-28 Cuellar, Henry [D]
Yea MD-7 Cummings, Elijah [D]
Yea PA-3 Dahlkemper, Kathleen [D]
Yea AL-7 Davis, Artur [D]
Yea IL-7 Davis, Danny [D]
Yea KY-4 Davis, Geoff [R]
Yea CA-53 Davis, Susan [D]
Yea OR-4 DeFazio, Peter [D]
Yea CO-1 DeGette, Diana [D]
Yea CT-3 DeLauro, Rosa [D]
Yea PA-15 Dent, Charles [R]
Yea FL-21 Diaz-Balart, Lincoln [R]
Yea FL-25 Diaz-Balart, Mario [R]
Yea WA-6 Dicks, Norman [D]
Yea MI-15 Dingell, John [D]
Yea TX-25 Doggett, Lloyd [D]
Yea IN-2 Donnelly, Joe [D]
Yea PA-14 Doyle, Michael [D]
Yea OH-1 Driehaus, Steve [D]
Yea TN-2 Duncan, John [R]
Yea MD-4 Edwards, Donna [D]
Yea TX-17 Edwards, Thomas [D]
Yea MI-3 Ehlers, Vernon [R]
Yea MN-5 Ellison, Keith [D]
Yea IN-8 Ellsworth, Brad [D]
Yea MO-8 Emerson, Jo Ann [R]
Yea NY-17 Engel, Eliot [D]
Yea CA-14 Eshoo, Anna [D]
Yea NC-2 Etheridge, Bob [D]
Yea CA-17 Farr, Sam [D]
Yea PA-2 Fattah, Chaka [D]
Yea CA-51 Filner, Bob [D]
Yea LA-4 Fleming, John [R]
Yea VA-4 Forbes, James [R]
Yea NE-1 Fortenberry, Jeffrey [R]
Yea IL-14 Foster, Bill [D]
Yea MA-4 Frank, Barney [D]
Yea NJ-11 Frelinghuysen, Rodney [R]
Yea OH-11 Fudge, Marcia [D]
Yea CA-24 Gallegly, Elton [R]
Yea PA-6 Gerlach, Jim [R]
Yea AZ-8 Giffords, Gabrielle [D]
Yea TX-20 Gonzalez, Charles [D]
Yea VA-6 Goodlatte, Robert [R]
Yea TN-6 Gordon, Barton [D]
Yea FL-8 Grayson, Alan [D]
Yea TX-9 Green, Al [D]
Yea TX-29 Green, Raymond [D]
Yea AL-5 Griffith, Parker [D]
Yea AZ-7 Grijalva, Raul [D]
Yea KY-2 Guthrie, Brett [R]
Yea IL-4 Gutierrez, Luis [D]
Yea NY-19 Hall, John [D]
Yea IL-11 Halvorson, Deborah [D]
Yea IL-17 Hare, Phil [D]
Yea CA-36 Harman, Jane [D]
Yea FL-23 Hastings, Alcee [D]
Yea NM-1 Heinrich, Martin [D]
Yea NV-2 Heller, Dean [R]
Yea CA-2 Herger, Walter [R]
Yea SD-0 Herseth Sandlin, Stephanie [D]
Yea NY-27 Higgins, Brian [D]
Yea IN-9 Hill, Baron [D]
Yea CT-4 Himes, James [D]
Yea TX-15 Hinojosa, Rubén [D]
Yea HI-2 Hirono, Mazie [D]
Yea NH-2 Hodes, Paul [D]
Yea MI-2 Hoekstra, Peter [R]
Yea PA-17 Holden, Tim [D]
Yea NJ-12 Holt, Rush [D]
Yea CA-15 Honda, Michael [D]
Yea MD-5 Hoyer, Steny [D]
Yea WA-1 Inslee, Jay [D]
Yea NY-2 Israel, Steve [D]
Yea IL-2 Jackson, Jesse [D]
Yea TX-18 Jackson-Lee, Sheila [D]
Yea TX-30 Johnson, Eddie [D]
Yea GA-4 Johnson, Henry [D]
Yea IL-15 Johnson, Timothy [R]
Yea NC-3 Jones, Walter [R]
Yea WI-8 Kagen, Steve [D]
Yea PA-11 Kanjorski, Paul [D]
Yea OH-9 Kaptur, Marcy [D]
Yea RI-1 Kennedy, Patrick [D]
Yea MI-5 Kildee, Dale [D]
Yea MI-13 Kilpatrick, Carolyn [D]
Yea OH-15 Kilroy, Mary Jo [D]
Yea WI-3 Kind, Ronald [D]
Yea IL-10 Kirk, Mark [R]
Yea AZ-1 Kirkpatrick, Ann [D]
Yea FL-22 Klein, Ron [D]
Yea FL-24 Kosmas, Suzanne [D]
Yea MD-1 Kratovil, Frank [D]
Yea OH-10 Kucinich, Dennis [D]
Yea NJ-7 Lance, Leonard [R]
Yea RI-2 Langevin, James [D]
Yea WA-2 Larsen, Rick [D]
Yea CT-1 Larson, John [D]
Yea IA-4 Latham, Thomas [R]
Yea CA-9 Lee, Barbara [D]
Yea NY-26 Lee, Christopher [R]
Yea MI-12 Levin, Sander [D]
Yea CA-41 Lewis, Jerry [R]
Yea GA-5 Lewis, John [D]
Yea IL-3 Lipinski, Daniel [D]
Yea NJ-2 LoBiondo, Frank [R]
Yea IA-2 Loebsack, David [D]
Yea CA-16 Lofgren, Zoe [D]
Yea NY-18 Lowey, Nita [D]
Yea NM-3 Lujan, Ben [D]
Yea MA-9 Lynch, Stephen [D]
Yea NY-25 Maffei, Daniel [D]
Yea NY-14 Maloney, Carolyn [D]
Yea IL-16 Manzullo, Donald [R]
Yea CO-4 Markey, Betsy [D]
Yea MA-7 Markey, Edward [D]
Yea GA-8 Marshall, James [D]
Yea NY-29 Massa, Eric [D]
Yea UT-2 Matheson, Jim [D]
Yea CA-5 Matsui, Doris [D]
Yea NY-4 McCarthy, Carolyn [D]
Yea TX-10 McCaul, Michael [R]
Yea CA-4 McClintock, Tom [R]
Yea MN-4 McCollum, Betty [D]
Yea WA-7 McDermott, James [D]
Yea MA-3 McGovern, James [D]
Yea NY-23 McHugh, John [R]
Yea NC-7 McIntyre, Mike [D]
Yea WA-5 McMorris Rodgers, Cathy [R]
Yea CA-11 McNerney, Jerry [D]
Yea FL-17 Meek, Kendrick [D]
Yea NY-6 Meeks, Gregory [D]
Yea LA-3 Melancon, Charles [D]
Yea FL-7 Mica, John [R]
Yea ME-2 Michaud, Michael [D]
Yea MI-10 Miller, Candice [R]
Yea CA-7 Miller, George [D]
Yea NC-13 Miller, R. [D]
Yea WV-1 Mollohan, Alan [D]
Yea KS-3 Moore, Dennis [D]
Yea WI-4 Moore, Gwen [D]
Yea VA-8 Moran, James [D]
Yea KS-1 Moran, Jerry [R]
Yea CT-5 Murphy, Christopher [D]
Yea PA-8 Murphy, Patrick [D]
Yea PA-12 Murtha, John [D]
Yea NY-8 Nadler, Jerrold [D]
Yea MA-2 Neal, Richard [D]
Yea VA-2 Nye, Glenn [D]
Yea MN-8 Oberstar, James [D]
Yea WI-7 Obey, David [D]
Yea MA-1 Olver, John [D]
Yea TX-27 Ortiz, Solomon [D]
Yea NJ-6 Pallone, Frank [D]
Yea NJ-8 Pascrell, William [D]
Yea AZ-4 Pastor, Edward [D]
Yea NJ-10 Payne, Donald [D]
Yea CO-7 Perlmutter, Ed [D]
Yea VA-5 Perriello, Thomas [D]
Yea MI-9 Peters, Gary [D]
Yea MN-7 Peterson, Collin [D]
Yea WI-6 Petri, Thomas [R]
Yea ME-1 Pingree, Chellie [D]
Yea PA-19 Platts, Todd [R]
Yea CO-2 Polis, Jared [D]
Yea ND-0 Pomeroy, Earl [D]
Yea NC-4 Price, David [D]
Yea FL-12 Putnam, Adam [R]
Yea WV-3 Rahall, Nick [D]
Yea NY-15 Rangel, Charles [D]
Yea MT-0 Rehberg, Dennis [R]
Yea WA-8 Reichert, Dave [R]
Yea TX-16 Reyes, Silvestre [D]
Yea CA-37 Richardson, Laura [D]
Yea TX-23 Rodriguez, Ciro [D]
Yea TN-1 Roe, David [R]
Yea KY-5 Rogers, Harold [R]
Yea AL-3 Rogers, Michael [R]
Yea MI-8 Rogers, Michael [R]
Yea CA-46 Rohrabacher, Dana [R]
Yea FL-16 Rooney, Thomas [R]
Yea IL-6 Roskam, Peter [R]
Yea FL-18 Ros-Lehtinen, Ileana [R]
Yea AR-4 Ross, Mike [D]
Yea NJ-9 Rothman, Steven [D]
Yea CA-34 Roybal-Allard, Lucille [D]
Yea CA-40 Royce, Edward [R]
Yea MD-2 Ruppersberger, C.A. [D]
Yea IL-1 Rush, Bobby [D]
Yea WI-1 Ryan, Paul [R]
Yea OH-17 Ryan, Timothy [D]
Yea CO-3 Salazar, John [D]
Yea CA-39 Sanchez, Linda [D]
Yea CA-47 Sanchez, Loretta [D]
Yea MD-3 Sarbanes, John [D]
Yea IL-9 Schakowsky, Janice [D]
Yea MI-7 Schauer, Mark [D]
Yea CA-29 Schiff, Adam [D]
Yea OH-2 Schmidt, Jean [R]
Yea IL-18 Schock, Aaron [R]
Yea OR-5 Schrader, Kurt [D]
Yea PA-13 Schwartz, Allyson [D]
Yea GA-13 Scott, David [D]
Yea VA-3 Scott, Robert [D]
Yea NY-16 Serrano, José [D]
Yea PA-7 Sestak, Joe [D]
Yea NH-1 Shea-Porter, Carol [D]
Yea CA-27 Sherman, Brad [D]
Yea IL-19 Shimkus, John [R]
Yea NC-11 Shuler, Heath [D]
Yea NJ-13 Sires, Albio [D]
Yea MO-4 Skelton, Ike [D]
Yea NY-28 Slaughter, Louise [D]
Yea WA-9 Smith, Adam [D]
Yea NJ-4 Smith, Christopher [R]
Yea TX-21 Smith, Lamar [R]
Yea OH-18 Space, Zachary [D]
Yea CA-12 Speier, Jackie [D]
Yea SC-5 Spratt, John [D]
Yea CA-13 Stark, Fortney [D]
Yea FL-6 Stearns, Clifford [R]
Yea MI-1 Stupak, Bart [D]
Yea OH-13 Sutton, Betty [D]
Yea TN-8 Tanner, John [D]
Yea CA-10 Tauscher, Ellen [D]
Yea MS-4 Taylor, Gene [D]
Yea NM-2 Teague, Harry [D]
Yea MS-2 Thompson, Bennie [D]
Yea CA-1 Thompson, C. [D]
Yea OH-12 Tiberi, Patrick [R]
Yea MA-6 Tierney, John [D]
Yea NV-3 Titus, Dina [D]
Yea NY-21 Tonko, Paul [D]
Yea NY-10 Towns, Edolphus [D]
Yea MA-5 Tsongas, Niki [D]
Yea OH-3 Turner, Michael [R]
Yea MI-6 Upton, Frederick [R]
Yea MD-8 Van Hollen, Christopher [D]
Yea NY-12 Velazquez, Nydia [D]
Yea IN-1 Visclosky, Peter [D]
Yea OR-2 Walden, Greg [R]
Yea MN-1 Walz, Timothy [D]
Yea TN-3 Wamp, Zach [R]
Yea FL-20 Wasserman Schultz, Debbie [D]
Yea CA-35 Waters, Maxine [D]
Yea CA-33 Watson, Diane [D]
Yea NC-12 Watt, Melvin [D]
Yea CA-30 Waxman, Henry [D]
Yea NY-9 Weiner, Anthony [D]
Yea VT-0 Welch, Peter [D]
Yea FL-19 Wexler, Robert [D]
Yea KY-1 Whitfield, Edward [R]
Yea OH-6 Wilson, Charles [D]
Yea VA-1 Wittman, Rob [R]
Yea VA-10 Wolf, Frank [R]
Yea CA-6 Woolsey, Lynn [D]
Yea OR-1 Wu, David [D]
Yea KY-3 Yarmuth, John [D]
Yea FL-10 Young, C. W. [R]
Yea AK-0 Young, Donald [R]
Not Voting LA-7 Boustany, Charles [R]
Not Voting TX-7 Culberson, John [R]
Not Voting TN-4 Davis, Lincoln [D]
Not Voting MA-10 Delahunt, William [D]
Not Voting NY-22 Hinchey, Maurice [D]
Not Voting CA-42 Miller, Gary [R]
Not Voting CA-38 Napolitano, Grace [D]
Not Voting TX-22 Olson, Pete [R]
Not Voting CA-19 Radanovich, George [R]
Not Voting IN-3 Souder, Mark [R]

Update: Michelle Malkin has a broken out a list of the 85 republicans who voted for the bill.

Dave Ramsey: How to deal with setbacks

by Dave Ramsey

(You can catch Dave Ramsey on a radio near you - or go to the FoxBusiness Network to watch his show)

Failure? I never encountered it. All I ever met were temporary setbacks. —Dottie Walters

We’ve all encountered setbacks. They’re just a part of life. But one thing makes the difference between a setback and a failure—your attitude. If you don’t believe that, hello! This is your wake-up call! members Carl and Tricia in Indiana are an amazing example to us all. For several months, they and their three youngest children have been surviving on as much as a 60% pay cut, all while maintaining a fully funded emergency fund and learning how to live on $60-a-week grocery budget. How have they done it?

According to Tricia, the biggest help has been simply having a plan and a six-month emergency fund socked away. They have made substantial sacrifices to maintain their long-term financial goals. Eating out has become a rare, almost celebratory occasion. Tricia cooks nearly all of their meals from scratch. She’s a true home economist who not only hunts for bargains but also home schools her three youngest children. They have avoided Murphy a couple of times thanks to a tax refund and squeezing extra dollars out of their monthly budget.

In addition to day-to-day family obligations, Tricia and Carl have been proactive in their community by helping their neighbors who are financially hurting and losing their jobs. They have hosted a money workshop and Financial Peace University, and they have also been mentoring four families in their hometown. They invite other couples over for dinner, discuss the Baby Steps, and show them how to apply the proven principles to their lives.

While most people would have interpreted Carl’s income drop as a devastating blow, Tricia and Carl have seen it as an opportunity to pass on the knowledge they’ve gained and continue to live on less than they make. Because of their dedication to planning and saving, their family is taking a vacation this year to the Grand Canyon!

See, there’s nothing flashy to it. Your attitude and decisions make a world of difference every day, despite everything going on around you. It takes discipline, creativity and sacrifice to win in all areas of your life. No one ever said it was easy, but most things in life that are worth it are not easy.

Monday, March 16, 2009

On this date in 1959...

March 15, 1959:
An 11-year-old girl living in Miami, Fla., sent her savings of $61 to President Dwight Eisenhower to be used to pay down the rising national debt. The fifth-grader had been saving for a horse. The debt had reached $285,578,690, not including another $422.6 million not subject to statutory limit.

Complaints pile up against debt collectors

The Atlanta Journal-Constitution
Sunday March 15, 2009

Consumers complain that a Marietta debt collection firm uses deceit and abusive tactics to collect money, even when it isn’t owed, records show.

Enough complained that the Georgia Governor’s Office of Consumer Affairs began investigating last fall. It ordered Frederick J. Hanna & Associates to answer questions about collection practices, consumer disputes and what it does to ensure the validity of debts.

But for three months the state’s top consumer watchdog agency and the debt collector have been in a standoff.

Frederick J. Hanna & Associates says its tactics are none of the state agency’s business. Because it’s a law firm, the debt collector contends it is outside the consumer office’s jurisdiction. It refuses to answer the agency’s questions.

“We don’t feel like they’re entitled to anything. Period,” Frederick Hanna said. He said his firm gets 50,000 new debt files each month and its collection methods are legitimate.

The consumer office says it has a right to investigate whether the firm’s tactics are breaking state law. “If we perceive an infraction of the law, we don’t believe your status as a law firm will protect you,” said Bill Cloud, a spokesman for the consumer office.

A hearing is scheduled March 30 in Cobb County Superior Court and the outcome could have a significant impact on thousands of Georgia consumers targeted by debt collectors — especially those who don’t owe money.

Here and across the nation, consumers complained more about debt collectors than any other industry in 2008, according to new data from the Federal Trade Commission’s Consumer Sentinel Network.

The network, used by law enforcement, tracks complaints to the FTC, as well as to groups such as the Better Business Bureau, FBI, U.S. Postal Inspection Service, Social Security Administration and the National Consumers League.

Last month the FTC issued a report saying the debt collection legal system needs reform and the 1977 Fair Debt Collection Practices Act needs to be modernized to reflect changes in technology, debt and the collection industry.

While the FTC said timely payment of debts is important, it said the law needs changes to better ensure that collectors are going after the right people for the right amounts of money. The law also needs to mandate that collectors give consumers better information about their legal rights.

Complaints about debt collectors are on the rise and some of the tactics firms use are already illegal, Cloud said.

“A lot of them are buying up ‘zombie debt.’ It’s old debt you cannot collect anymore by normal means,” Cloud said. “It’s essentially debt renewal. To get you back on the hook they try to intimidate and try to berate you.”

Zombie debt, like the name implies, is debt — legitimate or not — that refuses to die. It may be debt that resulted from identity theft years ago that the original creditor wrote off. It may be a legitimate debt that is several years old, was already paid off or has been legally erased by bankruptcy. The debt gains new life when sold to a collection agency for pennies on the dollar.

In November, the state consumer office served an investigative demand notice, similar to a subpoena, on Frederick J. Hanna & Associates. It asked for documents about the firm’s collection practices, including those involving zombie debts. Officials with the consumer office declined to give details about the complaints they have received about the firm, citing the ongoing investigation.

The firm has an “F” rating with the BBB because of its complaint history, including failing to respond to consumer concerns, according to BBB records.

State officials are investigating potential violations of Georgia’s Fair Business Practices Act, according to the notice, including allegations the firm engaged in abusive or oppressive tactics prohibited under state and federal laws and allegations the firm used misleading and deceptive methods. The notice does not provide details or examples.

Hanna said Friday that if the consumer office wants to review a few specific files, he’d allow it. But he said he has hundreds of thousands of files and it is unreasonable to provide them all, as has been requested.

Until recently, it was unclear whether the state Fair Business Practices Act could be applied to debt collectors. In 2007, the Georgia Court of Appeals held that collection of a debt is a consumer transaction covered by the law.

Frederick J. Hanna & Associates, in documents filed in Cobb County Superior Court, says the consumer office is asking for an unreasonable amount of information. But beyond that, the debt collection law firm contends that the consumer office has no jurisdiction over the practice of law and therefore no jurisdiction over its activities. The consumer office is seeking an order from the court to force the firm to comply with its demand for documents and information.

State consumer officials have opened a similar investigation of Mann Bracken, a national debt collection law firm with an office in Atlanta. Mann Bracken also contends the consumer office doesn’t have jurisdiction, according to Fulton County court records. Lawyer conduct is regulated only by the State Bar and the Supreme Court of Georgia, the firm said in documents filed in court.

Hanna said Spotlight should not be focusing on debt collection firms. The problem is the debtors and the amount they owe, he said, adding that consumers should try to work with people like him.

Cloud warned that consumers should be careful about anything they say to a debt collector. Insist the firm send you written proof you owe the money, he said.

“If this is an old debt and you do not believe you owe this money, do not in any way, shape or form reaffirm this debt,” Cloud said. “They are probably recording you.”



The federal Fair Debt Collection Practices Act prohibits debt collectors from using abusive or deceptive practices, such as threats of harm, harassing phone calls or misrepresenting what you owe. Here are some tips from the Federal Trade Commission:

Proof of debt: All collectors must send you a “validation notice” within five days after they first contact you. It must include how much you owe and what you need to do if you don’t think you owe the money.

Managing calls: Collectors can’t call you at inconvenient times, such as before 8 a.m. or after 9 p.m., unless you agree to it. They also can’t call you at work if you’ve told them that you are not allowed to take personal calls there.

Calls limited to others: Collectors are generally prohibited from discussing your debt with anyone besides you, your spouse or your attorney. They can only contact other people to find out your address, your home phone number and where you work.

For more information about your rights, go to:



David Vallin of Canton was one of the 4,430 Georgia consumers who complained about debt collectors last year to agencies in the FTC’s Consumer Sentinel Network.

Vallin said a firm with a Michigan address began calling and sending letters last fall, ordering him to pay $322 for cellphone bills unpaid since 2006.

Vallin assumed T-Mobile, where he’d once had an account, had simply made a mistake. “I knew I’d paid it off,” he said.

But after a few calls, Vallin said it was clear the bills weren’t his. They were for two separate accounts and five phone lines. But his name and Social Security number were on the accounts.

“I have no idea how they got my information,” said Vallin, 23, who complained to the BBB last fall and then turned to a private identity theft protection firm to help him freeze his credit against further fraud and sort out the debt collection mess.

Vallin said he learned last week that the matter is nearly resolved; he said the ID theft protection firm told him that T-Mobile has agreed that the accounts were fraudulent and is calling off the debt collector.

T-Mobile officials said they can’t comment on individual accounts. The company issued a statement saying such situations are rare and that the company has safeguards to prevent identity thieves from opening accounts.

Georgians filed 10,748 complaints last year about various types of identity theft — many involving the fraudulent opening of accounts or use of credit. Nearly 1,200 complaints involved phone or utilities fraud; 1,900 involved credit card fraud, according to the FTC’s data.

“Identity theft, that’s our No. 1 consumer education item,” said Fred Elsberry Jr., president of the BBB serving metro Atlanta, Athens and northeast Georgia.

You can find help at the Governor’s Office of Consumer Affairs’ detailed help guide. The FTC’s tips are at



Whether it’s an abusive debt collector, a problem with identity theft or one of the many scams consumers encounter each year, these groups can help:

Governor’s Office of Consumer Affairs (Georgia): 1-800-436-7442.

Better Business Bureau (Georgia): 404-766-0875,

Federal Trade Commission:



Georgia residents filed 27,470 complaints in 2008 with government and nonprofit watchdog agencies about fraud and other consumer issues. Here are the top categories:

Issue type Complaints

Debt collectors: 4,430

Internet services (providers, Web hosts) 1,455

Credit bureaus, report issues: 1,439

Shop-at-home, catalog sales: 1,239

Television, electronic media (reception, installation, billing, etc.): 1,229

Foreign money offers, counterfeit check scams: 1,017

Banks, lenders (predatory lending, overdraft charges, customer service, etc.): 911

Prizes, sweepstakes, lotteries: 861

Telecom equipment and mobile services: 844

Business opportunities, work-at-home, employment agencies: 712

Source: FTC Consumer Sentinel Network,

National Debt Clock