your local physicist
Since Aug 24, 2009

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The huge deficits that the administration expects to see in the next ten years are not caused primarily by the wars in Iraq and Afghanistan, but instead they’re caused by out-of-control entitlement spending. We’re in a big mess right now where the unsustainable economic activity generated by making mortgage loans to unqualified home buyers has been stripped out of our economy and now our economy isn’t big enough to pay for all the entitlement spending by congress. Once the economy is in a sustainable recovery, entitlement spending has to be reduced to match the reduced size of the US economy, otherwise all forms of taxation have to increase.

So far, I’m hearing very little from congress and nothing from the White House about reducing entitlement spending. Instead the oligarchy in Washington is just running up more federal debt, which will inevitably result in higher direct taxes, higher interest rates, and higher inflation. There are three forms of taxation: direct taxes, higher interest rates, and inflation. All government spending has to be paid for through those three forms of taxation. So get ready for an increase in all of those types of taxation unless we get entitlement spending under control. There’s no way around it. The government pays for nothing; the American people pay for all spending through direct taxes, higher interest rates, and inflation.

I’m expecting all three forms of taxation to increase in the next ten years. Official inflation is probably going up close to 4.5% in a few years. It’s a slam dunk certainty that oil prices will move back up over $100 and gasoline will increase to at least $3.50 in a few years. If congress stupidly enacts “windfall profits” taxes on oil producers, then oil could go to $150 and gasoline to $5. Inflation is going up for sure to pay for entitlement spending. I’ve been buying a lot of oil producer stocks and some mining companies that produce copper, iron ore, moly, and gold.

We are becoming not a nation of 50 states but a group of 50 colonies ruled by an oligarchy in Washington D.C. and surrounding suburbs, which views us as a source of money and resources that the oligarchs can extract from us through the power of the IRS, federal courts, and federal prosecutors. The ogligarchs then use the money extracted from us to buy votes and campaign contributions to get themselves reelected and maintain their grip on power. The American people have to start understanding that the government doesn’t pay for those entitlement programs. We pay for all of it and we have to take back power from the oligarchy by voting them out of office and electing true fiscal conservatives. I think that will begin to happen in November 2010. I predict that you’ll see the GOP gain about 70 seats in the House next year and about 25 of those folks will be true fiscal conservatives. That will be a good start. Whether or not you like John Boehner, he will be Speaker of the House in 2011.

One simple but powerful step we should take to get entitlement spending under control is to apply means-testing to retirees who have already received more than they paid into the system in social security and medicare benefits. Just calculate the present value, in today’s dollars, of all social security and medicare taxes paid with a reasonable return on investment and an inflation adjustment. Then calculate the benefits received in today’s dollars, just using an inflation adjustment. Anyone who has already received more than he/she paid into social security in today’s dollars would then be means-tested and if they have enough income, their future social security benefits would be reduced or taxed more. Then do the same thing for medicare.

That’s the only fair thing to do for people under 40, because under the present tax and benefit system, higher income people under 40 are being absolutely destroyed financially by social security and medicare. Any person under 40 who earns more than about $60K is effectively an endentured servant of the United States government, which now owns a large part of his/her future income, and these young people will be getting hit with a huge negative return on investment by social security. That huge negative ROI subsidizes the incredibly great deal that social security has been for many affluent seniors.

If any democrats reading this page think I'm a "right wing nut", that just shows that you could be a wacky left-wing extremist. I have a science degree from the Univ. of California (graduated in the top 15% of my class) and a masters degree from a top school. If you don't understand what I wrote here, I suggest you start reading the most popular books written by economist Milton Friedman.

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