Obama's Dishonest Debate-Framing No Solution To Debt Crisis

Given the looming $14.294 trillion debt ceiling - Treasury expects to hit it mid May - and a Republican-controlled House, President Obama is back to the only thing he does well - campaigning through debate-framing; while his greatest personal deficits are being highlighted - an inability to govern due to a lack of leadership, and a penchant for hypocrisy.

Long on rhetoric but short on solutions, Obama's message - Republicans are heartless but I care - marks an intellectual defrauding of voters heaped on top of the financial defrauding of private sector workers big government activists have been carrying on for decades.

Though Obama has presided over nearly $2 trillion in debt limit increases since becoming President, back in 2006 when he was a Senator and the political winds were blowing in the opposite direction, he had this to say when he voted against raising the debt limit: "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. Government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies."

Just two months ago, Obama proposed his $3.7 trillion 2012 budget - it contains no efforts at deficit reduction or spending controls, much less entitlement reform - thereby ensuring that, before his real proposal was released, he drew the Republican response from House Budget Committee Chairman Paul Ryan (R-Wis).

Obama's new plan is nothing more than a combination of class warfare - soak-the-rich tax hikes - coupled with a perpetuation of the ruinous, job-killing fiscal course Obama already set us on: spending 23.6 percent of GDP in 2012, he calls for a spending increase to 24.2 percent in 2021, and of course no real effort at entitlement reform.

(For the 62 post WWII years before Obama, spending averaged more than 25 percent less - 19.27 percent - than Obama wants to "reduce" spending to by 2021.)

Firmly committed to growing spending and big government under his zero sum (static pie) philosophy - the only way to make the people he deems deserving of protection better off is to make everyone else worse off - Obama took to painting Ryan and the Republicans as uncaring and uncompassionate:

· "The America I know is generous and compassionate..

· [Ryan's] vision ...says America can't afford to keep the promise we've made to care for our seniors...

· Most Americans think we should protect commitments like Social Security and Medicare..."

These observations paved the way for his predictable conclusion: "A serious plan doesn't require us to balance our budget overnight..."

But the truth reveals a starkly different picture: Big government activists (on both sides of the aisle) have defrauded America's working class - private sector workers - out of more than $6 trillion. That's more than the total US public debt was when Obama took office.

Now, Obama didn't start the biggest Ponzi scheme in history - that is, Social Security; but his profligate spending has guaranteed America's workers their stolen savings will never be repaid, and, for good measure, he has done a great job covering it all up.

You see, the $2.5 trillion surplus in the Social Security Trust was stolen by big government activists and paid to people who never paid into the system at all. (That's even worse than a classic Ponzi scheme like Madoff's, where the vast majority of funds paid in by the latest victims go to the earlier investors.)

Since Social Security was last overhauled in the 1980's, payroll taxes paid in exceeded what's been paid out. (In 1940 there were 159 workers paying in for every one getting benefits; now that ratio is just three to one. With 78 million baby boomers getting ready to retire, the heat is really on.)

Sure, the feds gave the Trust back IOU's for the money they stole - intragovernmental bonds called "special issue" bonds. But all that means is that every dollar of IOU owed to the Trust is offset by a dollar owed by Treasury back to the Trust - so there really are no net assets.

And with Washington scrambling just to rein in the Obama-era spending explosion, they'll never repay those IOUs - they're just bookkeeping entries.

Treasury IOUs to the Trust are complete illusions - they can't and won't ever be paid. Obama's exploding public debt guarantees that - the feds must honor the real debt owed to private investors and foreign countries before they repay the Trust.

US debt to the public has skyrocketed under Obama: $5.4 trillion just before President Bush started the TARP spending (most of which has been paid back), it's now $9.5 trillion, up 75 percent in just the last 31 months.

In fact, it's the huge Obama-era spike in public debt that drove credit-rating agency Moody's to issue a warning last month that the US might soon lose its coveted AAA credit rating.

The only way Social Security will ever work is by balancing future payroll taxes paid in with the future retirement benefits paid out. It wouldn't matter one bit if the special issue bonds amounted to $250 trillion instead of $2.5 trillion: that money is gone.

Where did it go?

To the liberals' favorites: more than 100 antipoverty programs such as welfare, food stamps and Medicaid - plus tens of billions each year for " refundable tax credits" to people who pay no income tax.

That is, big government activists stole the retirement savings of the nation's 108 million private workers to grow a leviathan welfare state.

And Obama has done all he can to conceal this massive and outrageous fraud: His director of the White House Office of Management and Budget, Jacob Lew, recently wrote an op-ed in USA Today in which he said that Social Security would remain solvent for the next 26 years.

But Lew's statement is based on the lie that the Trust has $2.5 trillion in it, that's just not there. And the theft of their forced "savings" is not the only thing private sector workers need to fear: Unfunded state and local pension obligations now amount to $3.8 trillion (when calculated using realistic investment performance assumptions).

The only way the lavish defined benefit plans given to state and local workers will ever get paid is through a federal bailout because the states are broke and they can't print money like the feds.

That means, under Obama's "vision" of America, private workers will one day have to reduce their Social Security benefits not only to account for the $2.5 trillion the feds stole and gave away, but also to make room for the $3.8 trillion in federal subsidies needed to protect the public workers' lavish retirement benefits. That's a total rip-off of private sector workers amounting to $6.3 trillion.

FDR put Social Security into effect as a "safety net" - Americans couldn't be trusted to save for their retirement, so Big Brother would do it for them. Years later, the same big government activists who forced workers to save stole those savings, and gave back IOUS that, thanks to Obama, are now worthless.

To boot, Obama big-labor Dems at the state and local level, to keep union campaign funds flowing, continue to promise public workers they can retire in opulence at the expense of the rest of us, who must rely on a Social Security system that's been raided and is broke.

It's all so predictable. Big government activists and state Dems rip off 108 million private sector workers to the tune of $6.3 trillion, and what does Obama do? Call for no change - the opposite of his campaign slogan - and paint Ryan and the Republicans as the enemies of working class.

Obama's soak-the-rich tax hikes are likewise based on a distorted view of reality. Hiking the ordinary income and capital gains tax rates paid by joint filers with $200,000 or more of adjusted gross income - $50,000 less than Obama's definition of "rich" - to the Clinton-era high of 39.6 (instead of 35) percent and 20 (instead of 15) percent, respectively - would only raise about $50 billion.

And that's disregarding the historical data proving that when rates are raised the "rich" divert or tax-shelter their income. Regardless, given Obama's penchant for trillion and half dollar annual deficits, what good is a tax hike that pays for just 3 percent of the deficit?

So how does Obama justify his never ending class warfare? His old standard: debate-framing. Of Ryan's way, he said: "There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires."

Then of course, there's the government shut-down hysteria over Republican's refusing to raise the debt ceiling absent real spending cuts. Obama warned the Republican's failure to raise the debt limit would "plunge the world economy back into a recession."

Nonsense. Obama's 2012 budget - with the Bush tax cuts in place - shows $2.6 trillion of receipts and only $240 billion in interest. We could easily service all existing debt, and still have nearly $2.4 trillion left over. Of course, we could not keep on spending more than we take in, since doing that would require new borrowings and without a raise in the debt ceiling we could only rollover our existing debts.

That is, refusing to raise the debt limit would not force the US into default - or even shut down government; rather it would simply force entitlement reform and spending cuts now - that is, an immediate balancing of the budget resulting in a reduction, not a shutdown, of government.

To recap:

·    The America Obama really knows "is generous and compassionate" only to welfare recipients and the political class; the working class has been defrauded and left out in the cold;

·    Ryan's "vision" only involves not keeping the "promise we've made to our seniors" because big government activists like Obama have stolen their savings and replaced them with IOUs that now cannot be paid thanks to reckless Obama-era spending;

·    It's not true that "most Americans think we should protect our commitments like Social Security and Medicare," but reducing spending and repaying our debts is the best way to maximize the benefits we can afford to pay retiring baby boomers;

·    Calling the current tax rates "tax cuts" is baloney. Thanks to billions in "refundable tax credits" adopted and expanded by Obama and the Dems since Bush left office, our tax code is more progressive than it has ever been: the top one percent pay 40 percent, more than the bottom 90 percent do, and the bottom 50 percent pay almost no taxes.

Ryan's way is the only way: the ticket to prosperity is austerity; a bigger pie not redistribution is what we should be after.

Bernie Madoff's prison shrink assured him he's not a sociopath because "he felt remorse." Feeling any remorse Mr. President?

Mr. Meister is a partner at Meister, Seelig and Fein, LLP, and the author of "Commercial Real Estate Restructuring Revolution" (Wiley 2010).