Last week, the nation learned that Mitt Romney, at a private fundraiser in Florida earlier this year, suggested that 47 percent of the American electorate consider themselves “victims who believe that the government has a responsibility to care for them” and “believe that they are entitled to health care, to food, to housing, to you-name-it.”
That, most certainly, was not the best way to make a point about the rise of our nanny state, and Romney has since conceded that his comments were “not elegantly stated.” But it is true that between 46 and 51 percent of the American people pay no federal income tax. And since this group receives much more in federal benefits than they pay in taxes, there is no reason to expect that they would vote to change their position for the worse. Nevertheless, labeling half of the electorate as “victims” was not the best choice of words. Chalk this up as Romney’s “bitter clinger” moment.
Not surprisingly, the Obama campaign—eager to talk about anything but Barack Obama’s record as president—quickly rebuked Romney’s flub, finding it “shocking” for a presidential candidate to be so divisive. (Never mind the divisiveness that is regularly fomented by our current president and his campaign.) As a consequence, the political focus momentarily shifted to this faux controversy that has almost no relevance to the presidential election—Romney’s gaffe does not change the fact that our nation is on a path toward fiscal insolvency (an “unsustainable” path, as twice described by Obama’s Treasury Secretary, Tim Geithner).
Amid all the hype over this “shocking” statement, however, there was something lost in Romney’s private comments that should shock us all, or, at the very least, wake us up to our frightful economic reality. In his remarks, Romney identified a financial calamity that is drawing near on account of the federal government’s massive deficit spending and the Federal Reserve’s incessant debt purchases in the last few years. Describing a conversation he had with John Whitehead, the former head of the New York Federal Reserve, Romney said:
[Whitehead] said as soon as the Fed stops buying all the debt that we’re issuing—which they’ve been doing, the Fed’s buying like three-quarters of the debt that America issues. He said, once that’s over, he said we’re going to have a failed Treasury auction, interest rates are going to have to go up. We’re living in this borrowed fantasy world, where the government keeps on borrowing money. You know, we borrow this extra trillion a year, we wonder who’s loaning us the trillion? The Chinese aren’t loaning us anymore. The Russians aren’t loaning it to us anymore. So who’s giving us the trillion? And the answer is we’re just making it up. The Federal Reserve is just taking it and saying, “Here, we’re giving it.” It’s just made up money, and this does not augur well for our economic future.
Some frightening facts: When President Obama took office, our national debt totaled $10.6 trillion. And in the 3 ½ years since then, the national debt has passed $16 trillion and continues to rise. So who is lending us this enormous amount of money? According to a Wall Street Journal opinion piece, foreign Treasury bond purchases since 2009 have fallen almost 70%—countries like China and Japan are no longer willing to fund our government excesses. And in the same timeframe, private sector Treasury bond purchases (those made by U.S. banks, mutual funds, corporations, and individuals) have dropped by 85%. In truth, most lenders and foreign nations think that buying our debt is much riskier today, and many ratings firms agree. S&P downgraded U.S. debt in August 2011; Egan-Jones downgraded U.S. debt in April 2012 and again in September 2012; and Moody’s has threatened a downgrade in 2013 if the U.S. debt continues to rise.
If so few financiers in the real world think that buying our debt is a safe bet, then how can we continue to increase our debt at record levels? The answer, as Mitt Romney pointed out, is that the Federal Reserve is printing money to buy U.S. Treasury bonds.
Former U.S. Treasury official Lawrence Goodman observed that, in 2011, “the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis.” In effect, the Fed has filled the void left by market participants who are no longer willing to lend money to the U.S. Treasury. And because the Fed’s large debt purchases have kept interest rates artificially low, there exists no pressure on the U.S. government to curtail its massive spending—the low rates make deficit spending relatively cheap, and they give the appearance that there is a high demand for Treasury bonds when the exact opposite is true. Goodman wrote, “This not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.”
By its actions, the Fed is aiding and abetting an impending financial crisis in the United States. And this is nothing new. As I wrote in my new book, The American Ideology, the Federal Reserve has worked alongside the federal government to encourage or exacerbate the greatest financial crises in our nation’s history. So if the Fed today will once again do nothing to pressure the U.S. government to amend its excessive ways, then we must be that force.
Mitt Romney understands this. In his private remarks, he also stressed the need to reform Social Security and Medicare—the two biggest expenses for the federal government. He said:
If we don’t change Medicare or Social Security, the tax rate—you know what the payroll tax is now, it’s 15.3 percent—if we don’t change those programs, that tax rate will have to ultimately rise to 44 percent. The payroll tax. Then there’s the income tax on top, which the president wants to take to 40 percent. Then there’s state tax in most states. And sales tax. So you end up having to take 100 percent of people’s income.
If the federal government does nothing to change its ways that have fostered our rising nanny state—if, as a nation, we continue to blindly march “forward” down our current path, as President Obama encourages us to do—then a more devastating economic crisis looms in our future. Our current monetary and political policies are setting us up for failure, and if unchanged, they could trigger a dramatic market collapse. And that is truly shocking.
Visit Brian Vanyo at brianvanyo.com!
Brian Vanyo, The Schilling Show's newest contributor, discusses Mitt Romney's 47%. Were you shocked?
The storm clouds are already on the horizon. I just hope it's not too late already to stop it.
(And) Who in the background would simultaneously profit from a triggered dramatic market collapse? Does the name George Soros come to mind?
And…Obama hasn't made any stupid remarks…(Oh yes, caught on open mile telling the PM of Russia…to wait until his next term and he would….
@ Brian Vanyo,
What is truly shocking is that any responsible adult would think that electing Mitt Romney President would save this country from the dire consequences you mention. The Republican party shares as much or more blame for the mess we are in as the Democrats. Sadly, like most Americans, you have no idea who the real power brokers are in this world.
@ Diane Faulkner,
If you think Romney is going to avert the storm, you are as delusional as the people who think Obama will. You need to do some homework. Take a look at the the growth in the size of the federal budget and the federal deficit over the last 40 years. It has not made a lick of difference whether Republicans or Democrats were in office, the growth of govt and debt has proceeded almost without interruption. There is no rational argument for voting for Romeny or Obama. You know the definition of insanity, and you Diane, are insane.
I encourage you to tune in to The Schilling Show today as I’ll be on to discuss my new book, The American Ideology, http://brianvanyo.com/the-american-ideology/
I, for one, don’t believe that one person (Mitt Romney included) can save our country–that is the mindset of a servant. We, the people, rule this country, and only by our pressure on our representatives in government can we effect the change necessary to turn our country around. The article I wrote was not meant to cheerlead for the Republican Party–it was merely intended to shift the attention from a trivial issue about Romney’s private comments to the important issue he actually discussed.
Finally, a word of advice: insulting others is not persuasive and does nothing to advance the cause of liberty.
@ Brian Vanyo,
“Finally, a word of advice: insulting others is not persuasive and does nothing to advance the cause of liberty.”
You might want to pass this piece of advice along to Rob Schilling, who insults people on a daily basis.
You can pressure Republicans and Democrats all you want, but it won’t lead to any meaningful change, as history shows. The pressure to which they respond comes from those who actually wield power. The elected office holders are puppets. It will make little difference which of these two puppets, Obama or Romney, is elected, as history shows. This circus is put on to make us think we have a choice. The same power brokers control both parties, and these brokers are going to benefit from the coming crises, so they have no interest in avoiding them.
What kind of pressure are you going to apply? You think you can use votes to pressure these people? If so, then again I say you have no idea who and what you are up against. Throughout history, power has rarely been held by the nominal leaders. Leaders can only remain “in power” as long as there is an “apparatus” to keep them there. It is in that apparatus that the real power resides, even in the US (consider the fate of JFK). And the apparatus and the people within it are beyond your vote.
As for your book, it is just another in a sea of “me too” books that states the obvious, misdiagnoses the problem, and misdiagnoses the solution.
The article I wrote . . . was merely intended to shift the attention from a trivial issue about Romney’s private comments
A presidential candidate’s opinion – and ignorant opinion at that – about 47% of the population is not trivial.
46 and 51 percent of the American people pay no federal income tax
That figure of course includes low-income seniors who paid it all their working lives, low-income students who will pay it in the future, injured military veterans, people who have lost their jobs to outsourcing or because of the crash caused in part by the deregulation so beloved by Romney and other conservatives, etc. Furthermore, these people pay state and sales taxes.
Here’s what economist Nancy Folbre writes in today’s NY Times: “When all taxes (rather than merely federal income taxes) are taken into consideration, the share of all taxes paid by different income groups corresponds pretty closely to their share of total income.” Don’t just keep airing your resentments, conservatives. Refute the facts about the people you accuse.
Normally yes Brian. Yet with all the relativism in general, what’s normal anymore?
Is it possible someone might mistakenly believe, George Soros is NOT beyond the grasp of any insults? Don’t take this wrong but… I’d also add another bit to your advice for avoiding insult to not unnecessarily dash faintest hope either. Emphasis on faintest there.