January 26, 2011

Latest Pajamas Media Column (‘Uncle Sam’s Dangerous Deterioration’)

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 7:35 am

It’s here.

It will go up here at BizzyBlog on Friday (link won’t work until then) after the blackout expires.


Related: For comparative purposes, here are graphics showing the government’s real deficits (referred to as Net Operating Cost) using generally accepted accounting priniciples (GAAP) during the past four fiscal years:



Not that it was anything to be particularly proud of, but the $275 billion GAAP deficit during the 2007 budget year — the last year on which the former GOP congressional majority had a direct impact — was at least tolerable.

It could not be any more clear from the above graphic that serious deterioration began in fiscal 2008, the first budget year over which new Democratic House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid had direct influence, as the GAAP deficit skyrocketed to over $1 trillion. The POR (Pelosi-Obama-Reid) Economy also kicked in during the latter part of that fiscal year. It was aided and abetted by the culmination of the 15-year effort that corrupted the home lending market systematically carried out at “Frauds by Design” Fannie Mae and Freddie Mac.

The decay accelerated even further once Barack Obama became president. Because of his insistence on passing a stimulus bill that ended up stimulating nothing — not even employment — fiscal 2009 was even worse.

As the column explains with the help of this graphic, fiscal 2010, despite accounting trickery with “regular” deficit reporting designed to make the year look better, was far, far worse than 2009. The fiscal 2010 GAAP deficit of over $2 trillion also contains a huge increase in the government’s obligations to insolvent government service enterprises Fannie Mae and Freddie Mac ($268 billion) and in its retirement obligations to military and civilian retirees ($503 billion).

*  *  *  *  *  *  *  *  *  *  *

Last night in his State of the Union speech, President Obama spoke several times about how “we” (meaning taxpayers) are, if he gets his way, going to “invest” and make “investments” of various types. The problem is that American innovation has lagged, and in his view it’s the government which must get innovation back in gear.

He and his party totally don’t get it. Businesses and individuals, when free to benefit from the fruits of their inventiveness, have proven far better at making investments that lead to innovation (Obama’s prime example, NASA, was particularly weak; private contractor innovation and know-how resulting from “huge sums for subcontractors from the private sector” designed and built the spacecraft that took astronauts to the moon). Innovation is lagging because the POR Economy’s current power brokers, the President and Harry Reid, won’t loosen their iron grip. They won’t deliver the type of economic environment that fosters breakthrough innovation in the private sector. They discourage private innovation at seemingly every turn. So, while in essence declaring yet another fictitious private-sector “failure,” they now want to take that over too — and of course spend even more money while doing so.

Meanwhile, our plunge into the financial abyss not only continues, it accelerates. Obama’s driving the car. He won’t slow down. John Boehner’s House constitutionally has the pursestrings, and must stop him.


Also: The $15 trillion-plus drop in long-term Medicare liabilities to $22.8 trillion is supposedly due to the passage of ObamaCare. The Government Accountability Office (GAO) disclaimed expressing an opinion on this year’s figure because of “significant uncertainties,” even though it was fine with the related estimates from previous years. In other words, it’s not buying what the administration is selling. Neither should we.



  1. There is a circular link in the essay. See “especially jobs”. It needs to be relinked. Very scary essay and very well done other than faulty link.

    Comment by Margaret — January 26, 2011 @ 11:39 am

  2. correction, “especially employment.”

    Comment by Margaret — January 26, 2011 @ 11:41 am

  3. I wonder what the FY2011 net operating cost deficit will be as the CBO is now saying the deficit will be $1.5 trillion.

    Comment by steveegg — January 26, 2011 @ 12:36 pm

  4. #1 and #2 Margaret, thanks for the tip. It looks like PJM fixed the link as a result of a comment there before I was able to alert them.

    #3, I’m guessing it comes in at about $2.2 tril, with an outside shot at $2.5 tril.

    Comment by TBlumer — January 26, 2011 @ 2:08 pm

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