Your taxes, and mine, ARE going up...

The Community Organizer may have pledged not to raise taxes on the middle class, but House Democrats say that they are not bound to his pledge.

DISCLOSE Act - attacks free speech.

Why is it the Democrats do not even understand that thou shalt not infringe upon the 1st Amendment?

DISCLOSE Act - Expect legislation infringing on the First Amendment rights of all Americans to hit the House floor this Thursday.  The Hill reports, "Democrats are hoping to wrap up work this week on the Disclose Act, a piece of legislation meant to abate the impact of a Supreme Court decision freeing up corporate and labor spending in elections." Conservatives argue that the DISCLOSE Act is an unconstitutional regulation of free speech.

It is! If enacted, the Supremes will just strike it down again.

On the job

 

Bloomberg: Merkel Tells Obama Spending Cuts to Boost Economy, Not Put Brake on Growth

Merkel Tells Obama Spending Cuts to Boost Economy, Not Put Brake on Growth

By Tony Czuczka - Jun 22, 2010

• 
  

Chancellor Angela Merkel championed German export strength as "the right thing" for her country, spurning President Barack Obama's call to boost private spending as both leaders prepare for Group of 20 talks.

Merkel, addressing a business audience in Berlin today, said she told Obama in a phone call that cutting government debt is "absolutely important for us," exposing a second point of contention ahead of the June 26-27 G-20 summit in Canada.

Reducing the budget deficit by 10 billion euros ($12 billion) per year "won't put a brake on the world's economic growth," Merkel said, relating what she told Obama yesterday. Germans are more likely to spend money if they feel the government "is taking precautions" to ensure solid finances, she said.

Four days before world leaders meet in Toronto, Germany is heading for conflict with the rest of the G-20 over tighter financial regulation, a banking levy and U.S. calls to boost growth rather than cut debt.

The G-20 must "safeguard and strengthen" the economic recovery and promote "global demand growth that avoids the imbalances of the past," Obama said in a June 16 letter to fellow G-20 leaders. He expressed concern about "heavy reliance on exports by some countries," which he didn't name. Treasury Secretary Timothy F. Geithner called on June 5 for "stronger domestic demand growth" in European countries like Germany that have trade surpluses.

'Export Strength'

The German government is ready to consider measures to strengthen the service industry and help the jobless back into work to bolster consumption, Merkel said.

"But what we certainly can't do is influence our export strength," she said. "It's a fact. It's the right thing."

Asian countries are driving economic growth and "an export nation like Germany benefits from that very nicely," she said. "But that doesn't mean we can let up on the issue of competitiveness."

Merkel said on June 11 that she expects to have a "hard time" from fellow leaders at the G-20 meeting, where Germany and France are leading Europe's push for a global commitment to impose bank levies and a tax on financial transactions.

The G-20 faces a test of unity on the banking levy, a German government official said earlier today, warning that leaders can either pull together or split into two camps over the tax. The official spoke to reporters on condition of anonymity.

'I Will Fight'

Merkel pointed out that countries such as Canada are resisting a bank levy and said it's uncertain whether the G-20 will agree on a financial-transaction tax. "I will fight, but I also have to say that I can't say anything about the outcome today," she said.

Obama's letter urged the G-20 to reaffirm its "unity of purpose to provide the policy support necessary to keep economic growth strong," saying order to public finances should be restored in the "medium term."

Obama's appeal "isn't anything that goes against what we are doing," Merkel told reporters yesterday. "If we don't get onto a path of sustainable economic growth but have rather a growth bubble, then if the next crisis comes we won't be able to pay for it."

To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net

Perhaps Krugman himself can explain why he disagrees with himself all the time. Maybe he can come up with not just one explanation, but two, each contradicting the other.

Paul Krugman, the Self-Contradicting Economist

By Arvind Kumar

An argument that questions the credibility of economists in general is that there are a number of disagreements among many economists, and not all of them can be right at the same time. In the case of Nobel Prize-winning economist Paul Krugman, these disagreements come from Krugman himself, as he holds contradictory opinions on a large number of topics.

For instance, we learn that when deficits are high, interest rates are low. However, we also learn that when governments run up a deficit, interest rates rise. So deficits cause interest rates not only to go up, but also to go down! In 1985, Krugman argued that the higher national debt and spending were bad for people early in their careers, as they would have to pay for it later in life. Nearly twenty-five years later, he argues that the national debt is not a problem, as it never needs to be paid off. According to him, we merely have to stabilize the debt instead of repaying it.

In the recent past, Krugman has been selling the idea that it is the debt-to-GDP ratio that matters and not the debt itself, but this claim flies in the face of his open letter to Alan Greenspan in which he asserted, "...you obviously realize that the ratio of debt to G.D.P. is a highly misleading number."

Deficits and spending are not the only topics on which Krugman has opposed himself -- he has claimed that the Social Security program is unsustainable, and also that it is sustainable; he has criticized those who have suggested that the Social Security funds be used for investing in private funds, while he has also advocated the idea that the Social Security funds be used to invest in private assets. He once opposed government-run health care before supporting government-run health care, and he also opposed the bailout of Fannie Mae before congratulating the government for the bailout of Fannie Mae.

His arguments on the issues of labor unions and minimum wage, too, run both ways. Labor unions and higher wages cause unemployment, while labor unions create a stable middle class, and lower wages have a contractionary effect on the economy. Krugman has also argued that governments do not cause recessions and are not responsible for business cycles, as it is the Fed that is responsible for business cycles, but he also blames the Bush administration for the current recession. 

Likewise, Krugman proffers the argument that nothing the government has ever done has had an impact on the economy, and he claims that government actions are like using a water pistol to shoot an elephant -- but he also claims that the "big government" has saved us. He also certified himself silly when he claimed that workers' fears of losing jobs to workers in China and India due to globalization aren't irrational. Earlier, he had declared that those who blamed the global economy for the loss of jobs were silly.

To be fair to Krugman, his inconsistent statements are not deliberate, but subconscious. It would be wrong to attribute malice to his arguments when they can easily be explained by his ignorance of the subject. That would, however, not excuse the Nobel Prize Committee, which awarded its prize to a quack. Perhaps Krugman himself can explain why he disagrees with himself all the time. Maybe he can come up with not just one explanation, but two, each contradicting the other.

Below is a collection of actual quotes from Paul Krugman with links to sources. The quotes are arranged by topic and are in pairs (with an additional quote in one case), with the two quotes in a pair making arguments for contradictory positions.

Minimum wage and unemployment

Would cutting the minimum wage raise employment? - New York Times, Dec 16, 2009

...the belief that lower wages would raise overall employment rests on a fallacy of composition. In reality, reducing wages would at best do nothing for employment; more likely it would actually be contractionary.

Training touted to close widening wage gap - Milwaukee Journal Sentinel, page 8A - Feb 6, 1996

Stanford University economist Paul Krugman, however, said raising the minimum wage and lowering barriers to union organization would carry a trade-off --- increased unemployment.

Institutional finance: Bad banks

1998 interview of Krugman - Business Standard (India)

Close the weak banks and impose serious capital requirements on the strong ones...You see, it may sound hard-hearted, but you cannot keep unsound financial institutions operating simply because they provide jobs. There can be a huge amount of damage a bad bank can create. There is a cruelty to our market system, but that cruelty cannot be eliminated. The alternative is fraught with danger, that of carrying on with the weak banks.

Depression Economics [Paul Krugman interview] - Newsweek, Dec 3, 2008

Letting Lehman fail-letting the market work, as some people said-basically brought the entire world capital market down.

Bailouts

Workouts, Not Bailouts - New York Times, Aug 17, 2007

Many on Wall Street are clamoring for a bailout -- for Fannie Mae or the Federal Reserve or someone to step in and buy mortgage-backed securities from troubled hedge funds. But that would be like having the taxpayers bail out Enron or WorldCom when they went bust -- it would be saving bad actors from the consequences of their misdeeds... Say no to bailouts - but let's help borrowers work things out.

Is saving our Fannie enough? - Seattle Times, Sep 9, 2008

The just-announced federal takeover of Fannie Mae and Freddie Mac, the giant mortgage lenders, was certainly the right thing to do - and it was done fairly well, too... So Fannie and Freddie had to be rescued...

Deficits and interest rates

Deficits and interest rates - New York Times, Aug 14, 2009

It turns out that there's a strong correlation between budget deficits and interest rates - namely, when deficits are high, interest rates are low ... On reflection, it's obvious why...

A fiscal train wreck - New York Times, Mar 11, 2003

But we're looking at a fiscal crisis that will drive interest rates sky-high. A leading economist recently summed up one reason why: ''When the government reduces saving by running a budget deficit, the interest rate rises.'' 

National debt

Quote Without Comment - Lakeland Register, Oct 18, 1985

It's a very good deal for those close to retirement who will never see the taxes that will have to be levied to pay it (the national debt), but it's a very bad deal for people early in their careers. A 30-year old, if she understood it, should be pretty upset, because when she hits peak earnings at age 50, she will be paying for spending now through higher taxes then." -- Paul Krugman, an economist at the Massachusetts Institute of Technology, commenting on the national debt climbing to the $2 trillion mark.

In 2003, Krugman held the same view that debts would affect future generations when he wrote in his article titled Passing it Along in New York Times on Jul 18, 2003:

And tarnished credibility, along with a much-increased debt, is a problem that Mr. Bush will pass along to other Congresses, other presidents and other generations.

The burden of debt - New York Times, Aug 28, 2009

How, then, did America pay down its debt? Actually, it didn't... But the economy grew, so the ratio of debt to GDP fell, and everything worked out fiscally... Which brings me to a question a number of people have raised: maybe we can pay the interest, but what about repaying the principal? ...But why would we have to do that? Again, the lesson of the 1950s - or, if you like, the lesson of Belgium and Italy, which brought their debt-GDP ratios down from early 90s levels - is that you need to stabilize debt, not pay it off; economic growth will do the rest.

Debt to GDP ratio

On the Second Day, Atlas Waffled - New York Times, Feb 14, 2003

Dear Alan Greenspan:

...Moreover, since you advocate accrual accounting, you obviously realize that the ratio of debt to G.D.P. is a highly misleading number.

A couple of notes on the 40s and 50s - New York Times, Aug 30, 2009

I think they're missing the point - if even Italy can handle debt/GDP ratios of 100 percent, we should be able to do it too.

Impact of governments on recessions

TWO CHEERS FOR THE WELFARE STATE SURE, IT'S GOT PROBLEMS. BUT DESPITE WHAT THEY THINK THEY WANT, THE VAST MAJORITY OF AMERICANS WOULD BE SORRY TO SEE IT GO. - Fortune, May 1, 1995

The fact is, all these promises are silly: Administrations don't cause recession and recoveries--if anyone is in charge of the business cycle, it's the nonpartisan technocrats at the Federal Reserve. 

What didn't happen - New York Times, Jan 17, 2010

Mr. Obama could have done the same - with, I'd argue, considerably more justice. He could have pointed out, repeatedly, that the continuing troubles of America's economy are the result of a financial crisis that developed under the Bush administration, and was at least in part the result of the Bush administration's refusal to regulate the banks.

Sustainability of social security

TWO CHEERS FOR THE WELFARE STATE... - Fortune, May 1, 1995

So by all means, let's have a vigorous national debate about reforming Social Security; it can't be sustained in its present form. 

About the Social Security trust fund - New York Times, Mar 28, 2008

But the privatizers won't take yes for an answer when it comes to the sustainability of Social Security... Social Security, with its own dedicated tax, has been run responsibly; the rest of the government has not. So why are we talking about a Social Security crisis?

Investment of social security funds

Fabricating a Crisis - New York Times, Aug 21, 2001

The outlines of a plan that would sustain Social Security without destroying it are clear: Allow the system to invest some of its surplus in private assets, and close the system's modest long-run financial shortfall by making minor adjustments to benefits and rescinding part of the recent tax cut. 

Gambling with your Retirement - New York Times, Feb 4, 2005

A few weeks ago I tried to explain the logic of Bush-style Social Security privatization... you should borrow a lot of money, buy stocks and hope for capital gains... So people are expected to take a loan from the government and use it to buy stocks, and if that turns out to have been a mistake -- well, too bad...Do you believe that we should replace America's most successful government program with a system in which workers engage in speculation that no financial adviser would recommend? Do you believe that we should do this even though it will do nothing to improve the program's finances?

Privatization of social security

Notes on Social Security from Personal website of Paul Krugman

None of this says that privatizing Social Security is necessarily a bad idea.

Inventing a crisis - New York Times, Dec 7, 2004

Privatizing Social Security - replacing the current system, in whole or in part, with personal investment accounts - won't do anything to strengthen the system's finances. If anything, it will make things worse. 

Labor unions

Macroeconomics, 2nd ed., by Paul Krugman and Robin Wells, Worth Publishers, 2009 (page 210)

The actions of labor unions can have effects similar to those of minimum wages, leading to structural unemployment.

State of the Unions - New York Times, Dec 24, 2007

Once upon a time, back when America had a strong middle class, it also had a strong union movement. These two facts were connected. 

Globalization

Maverick Economist debunks theories - Eugene Register-Guard, Apr 18, 1996

Lecture: Paul Krugman rankles many when he refuses to blame this nation's woes on the global economy.

Yes, thousands of Americans have lost jobs in some industrial sectors, Krugman says. But global competition isn't to blame... "A lot of what people say about these issues is just dead wrong and silly," Krugman says.

The Trade Tightrope - New York Times, Feb 27, 2004

The accelerated pace of globalization means more losers as well as more winners; workers' fears that they will lose their jobs to Chinese factories and Indian call centers aren't irrational.

Healthcare

TWO CHEERS FOR THE WELFARE STATE... - Fortune, May 1, 1995

That means that, while I believe in free trade and have no sympathy with the sort of liberalism that wants to centralize economic decision-making in Washington (cases in point: Jimmy Carter's energy planners and Bill Clinton's health planners)...

The Swiss Menace - New York Times, Aug 16, 2009

True "socialized medicine" would undoubtedly cost less, and a straightforward extension of Medicare-type coverage to all Americans would probably be cheaper than a Swiss-style system. That's why I and others believe that a true public option competing with private insurers is extremely important: otherwise, rising costs could all too easily undermine the whole effort.

Role of the government in the economy

Benefit of Dole Tax Plan is Hotly Debated - New York Times, Aug 24, 1996

''Nothing Government has done -- for good or evil -- seems to have mattered,'' concluded Paul Krugman, an economist at Stanford University. Given the size of the American economy and the difficulty of altering its course, ''it's like using a water pistol to shoot an elephant.'' 

Saved by Big Government - Guardian, Aug 10, 2009

What saved us? The answer, basically, is big government.

The author can be reached at arvind at classical-liberal dot net.

9 Comments on "Paul Krugman, the Self-Contradicting Economist"

Missouri man's incendiary sign on U.S. 71 draws fire

By DONALD BRADLEY

The Kansas City Star

DONALD BRADLEY | THE KANSAS CITY STAR

Some people have been offended by the message David Jungerman of Raytown had painted on a tractor-trailer.

David Jungerman farms 6,800 acres of river bottom land in western Missouri.

He's not the kind of guy who posts on Twitter or has a Facebook profile.

So when the 72-year-old Raytown man wanted to speak out politically, he used what he had handy: a 45-foot-long, semi-truck box trailer.

Are you a Producer or Parasite

Democrats - Party of the Parasites

He planted the trailer with its professionally painted message in his Bates County cornfield along heavily traveled U.S. 71 about an hour south of Kansas City. He wanted lots of people to see it.

They did. Including at least one with a good case of outrage, matches and a can of gas.

On May 12, Jungerman's trailer was torched. The Rich Hill volunteer fire department responded. A week later, it was set afire again. The firefighters put it out again.

Then flames erupted in an empty farm house that Jungerman owns.

"They don't like free speech," said Jungerman. He put out a $5,000 reward for information leading to an arrest.

The sign is harder to read now because some of the letters are charred; the trailer tires burnt to nothing.

"Things are getting a little out of hand out there," said Chief Deputy Justin Moreland of the Bates County Sheriff's Office.

Local Democrats don't want to be linked to the arsons. Jungerman has every right to speak his mind, said Kay Caskey, a Bates County Democrat and wife of longtime state Sen. Harold Caskey.

"Obviously our country is in disarray now because of economics, jobs and foreclosures," she said. "We are hurting as a country. But there are too many people who want to tear it down instead of build it up. Yes, there is anger out there, and we are a long way from Washington.

"This man has a right to do what he did, but around here some people might wonder at what point do you cross the line?"

Jungerman said he didn't mean to direct his sign at local Democrats. Many of those are old-fashioned Harry Truman Democrats, he said.

"They're more conservative than many Republicans," he said. "I should have put an ad in the paper to explain that. No, I meant the national Democrat parasite base that is sucking this country dry. The ones that just take from the government and not give anything back."

Jungerman says he's not even a die-hard Republican. He voted for Claire McCaskill when she won a U.S. Senate seat in 2006.

He put the sign out to make a point, but also to stir up some fun.

"You should have heard the truckers talking on the CB radio," he said with a chuckle. "One would like the sign and another would tell him to pull over up ahead so he could whup him."

Jungerman grew up on a farm, but got tired of the tail of a Jersey milk cow hitting him in the face so he told his father he was going to town to get a job.

"I've worked 80 to 90 hours a week ever since," he said.

He's a staunch believer in personal responsibility. In 1990, he and his daughter confronted four teens they caught fishing in a pond on their Raytown land. The boys called them names and threatened them, Jungerman said, and one spit on Jungerman's daughter.

Jungerman pulled a snub-nosed .38-caliber and held them until police arrived.

The police, however, arrested him, took his Rolex watch and threw him in jail. The next day when he made bail, police did not return the watch. They said they didn't remember him having one.

He pleaded guilty to a misdemeanor gun charge.

Five years later, against advice, he sued the city of Raytown for the value of the watch. He represented himself in a three-day trial that he won. But the judge overturned the verdict and the jury's award of $9,175.

Jungerman appealed, won again and got his money.

Today, he owns a baby furniture company called Baby-Tenda Corp. at 123 S. Belmont in Kansas City's Northeast area. He manages to get down to his farmland two or three times a week.

His problem now is that corn is looking good. Soon, it will obscure his trailer sign from highway traffic.

"Well, I would have pulled it out of there by now if they hadn't burned the tires off."

To reach Donald Bradley, call 816-234-4182 or send e-mail to dbradley@kcstar.com.

Posted on Mon, Jun. 21, 2010 11:25 AM

Read more: http://www.kansascity.com/2010/06/19/2029960/missouri-mans-incendiary-sign.html#ixzz0rcVwChZT

Watch out old man!

I thought I'd pass this along:

Older men scam Women often receive warnings about protecting themselves at the mall and in dark parking lots, etc. This is the first warning I have seen for men. I wanted to pass it on in case you haven't heard about it. A 'heads up' for those men who may be regular customers at Lowe's, Home Depot, Costco, or even Wal-Mart. This one caught me totally by surprise. Over the last month I became a victim of a clever scam while out shopping. Simply going out to get supplies has turned out to be quite traumatic. Don't be naive enough to think it couldn't happen to you or your friends. Here's how the scam works: Two nice-looking, college-aged girls will come over to your car or truck as you are packing your purchases into your vehicle. They both start wiping your windshield with a rag and Windex, with their breasts almost falling out of their skimpy T-shirts. (It's impossible not to look). When you thank them and offer them a tip, they say 'No' but instead ask for a ride to McDonald's. You agree and they climb into the vehicle. On the way, they start undressing. Then one of them starts crawling all over you, while the other one steals your wallet. I had my wallet stolen Mar. 4th, 9th, 10th, twice on the 15th, 17th, 20th, 24th, & 29th. Also Apr. 1st & 4th, twice on the 8th, 16th, 23rd, 26th & 27th, and very likely again this upcoming weekend. So tell your friends to be careful. What a horrible way to take advantage of us older men. Warn your friends to be vigilant. Wal-Mart has wallets on sale for $2.99 each. I found even cheaper ones for $.99 at the dollar store and bought them out in three of their stores. Also, you never get to eat at McDonald's. I've already lost 11 pounds just running back and forth from Lowe's, to Home Depot, to Costco, Etc. So please, send this on to all the older men that you know and warn them to be on the lookout for this scam. (The best times are just before lunch and around 4:30 in the afternoon.)

You can't be too careful.

Feds knew about BP well's trouble in February

Feds knew about BP well's trouble in February

both BP and MMS were well aware of the high risk of a blowout at that particular well. BP and its subcontractor Transocean had in fact been fighting against a blowout for over two months, and MMS was well aware of the situation...

White bikes and socialism doesn't work

US musician John Lennon (R) and his japanese wife 
Yoko Ono.... ...had to leave the comfort of their bed to try out 
a Provo white bicycle which had been presented to them today. 

I don't know why this old photo came up in a search at DayLife but it should be a textbook example of why socialism is flawed. 

The white bicycle program in Amsterdam was how my generation was going to prove our superiority to our capitalist elders. The idea was that these community bicycles would be shared by all. When you needed to go somewhere you just found a white bike and took it to your destination. You then left the bike on the street for the next comrade to use. Our cooperation and love for our fellow man would ensure that the bikes were not abused. (remember, this was 1966, we had love in abundance, the streets were clogged with it) 

That's what it was supposed to be. But human nature was involved. Why leave the bicycle on the street for the next guy when you knew you were going to have to make a return trip? What if it was gone when you came back? Best to take it inside then. And maybe take it inside when you got home too, because you know you've got to get to work early tomorrow... And maybe it'd be best to paint the thing black so that the busybody across the street will quit giving you a hard time about hoarding the bicycles. 

Course everyone who used the bikes was in the same situation. And in the end, self interest trumped brotherly love. Within a month all the white bicycles were either stolen or thrown in the canals. Experiment over. Idealistic youth (including me) disillusioned. 

Well some were disillusioned. Others refused to learn from the evidence and became stuck hippies.

This picture is great though, because it illustrates another aspect of the socialist experiment: preferential treatment for the elite. Hey, he's John Lennon; he gets the bike. Maybe grab one for his band-killer wife too. 

via via

The boot-on-the-neck, kick-ass administration

VDH:

As the administration keeps up the rhetoric against corporations, more and more businesses are hoarding their cash, not hiring, and postponing spending, out of fear of new taxes or entitlements, or some new "initiative" from a boot-on-the-neck, kick-ass administration.

Once again Victor Davis Hanson nails it. Read it.

The boot-on-the-neck, kick-ass administration. We are the boot we have been waiting for.

commuter bike trails

The'll print anything that smack's of 'go-green' in the newspaper, even my rant:

http://www.post-gazette.com/pg/10158/1063700-110.stm

I wonder if I had taken the position that we should 'not-spend' government money, if they would have printed it?

BP eye cries an Obama Oil Tear

Excellent image from Bob...

As the people of the Gulf States suffer, our President continues using this situation to sell us Bigger Government, more taxes, and more pipe dreams of "Green Energy" sources, that he pretends either exist now or will shortly in the future. More lies, more wasted time, more oil on our shores, and more policies to bankrupt our nation and erode our liberties... 

The only "Change" this represents is a fundamental departure from everything that made our country great. 

http://www.youtube.com/watch?v=jrwJMMsF110

I wonder of that oil slick he is complicity responsible for hinders his golf game?

 

The government spending problem is way worse than it really appears

At some point, young people are simply going to say: Screw You Old People,

No pensions, no SS, no Medicare any longer for you, because we don't have the money.

Problem solved.

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June 14, 2010 12:00 A.M.

The Other National Debt

Kevin Williamson

This article originally appeared in the June 21, 2010, issue of NR.

 

About that $14 trillion national debt: Get ready to tack some zeroes onto it. Taken alone, the amount of debt issued by the federal government — that $14 trillion figure that shows up on the national ledger — is a terrifying, awesome, hellacious number: Fourteen trillion seconds ago, Greenland was covered by lush and verdant forests, and the Neanderthals had not yet been outwitted and driven into extinction by Homo sapiens sapiens, because we did not yet exist. Big number, 14 trillion, and yet it doesn't even begin to cover the real indebtedness of American governments at the federal, state, and local levels, because governments don't count up their liabilities the same way businesses do.

Accountants get a bad rap — boring, green-eyeshades-wearing, nebbishy little men chained to their desks down in the fluorescent-lit basements of Corporate America — but, in truth, accountants wield an awesome power. In the case of the federal  government, they wield the power to make vast amounts of debt disappear — from the public discourse, at least. A couple of months ago, you may recall, Rep. Henry Waxman (D., State of Bankruptcy) got his Fruit of the Looms in a full-on buntline hitch when AT&T, Caterpillar, Verizon, and a host of other blue-chip behemoths started taking plus-size writedowns in response to some of the more punitive provisions of the health-care legislation Mr. Waxman had helped to pass. His little mustache no doubt bristling in indignation, Representative Waxman sent dunning letters to the CEOs of these companies and demanded that they come before Congress to explain their accounting practices. One White House staffer told reporters that the writedowns appeared to be designed "to embarrass the president and Democrats."

A few discreet whispers from better-informed Democrats, along with a helpful explanation from The Atlantic's Megan McArdle under the headline "Henry Waxman's War on Accounting," helped to clarify the issue: The companies in question are required by law to adjust their financial statements to reflect the new liabilities: "When a company experiences what accountants call 'a material adverse impact' on its expected future earnings, and those changes affect an item that is already on the balance sheet, the company is required to record the negative impact — 'to take the charge against earnings' — as soon as it knows that the change is reasonably likely to occur," McArdle wrote. "The Democrats, however, seem to believe that Generally Accepted Accounting Principles are some sort of conspiracy against Obamacare, and all that is good and right in America." But don't be too hard on the gentleman from California: Government does not work that way. If governments did follow normal accounting practices, taking account of future liabilities today instead of pretending they don't exist, then the national-debt numbers we talk about would be worse — far worse, dreadfully worse — than that monster $14 trillion–and–ratcheting–upward figure we throw around.

Beyond the official federal debt, there is another $2.5 trillion or so in state and local debt, according to Federal Reserve figures. Why so much? A lot of that debt comes from spending that is extraordinarily stupid and wasteful, even by government standards. Because state and local authorities can issue tax-free securities — municipal bonds — there's a lot of appetite for their debt on the marketplace, and a whole platoon of local special-interest hustlers looking to get a piece. This results in a lot of misallocated capital: By shacking up with your local economic-development authority, you can build yourself a new major-league sports stadium with tax-free bonds, but you have to use old-fashioned financing, with no tax benefits, if you want to build a factory — which is to say, you can use tax-free municipal bonds to help create jobs, so long as those jobs are selling hot dogs to sports fans.

Also, local political machines tend to be dominated by politically connected law firms that enjoy a steady stream of basically free money from legal fees charged when those municipal bonds are issued, so they have every incentive to push for more and more indebtedness at the state and local levels. For instance, the Philadelphia law firm of Ballard, Spahr kept Ed Rendell on the payroll to the tune of $250,000 a year while he was running for governor — he described his duties at the firm as "very little" — and the firm's partners donated nearly $1 million to his campaign. They're big in the bond-counsel business, as they advertise in their marketing materials: "We have one of the premier public finance practices in the country, participating since 1987 in the issuance of more than $250 billion of tax-exempt obligations in 49 states, the District of Columbia, and three territories." Other Pennsylvania bond-counsel firms were big Rendell donors, too, and they get paid from 35 cents to 50 cents per $1,000 in municipal bonds issued, so they love it when the local powers borrow money.

So that's $14 trillion in federal debt and $2.5 trillion in state-and-local debt: $16.5 trillion. But I've got some bad news for you, Sunshine: We haven't even hit all the big-ticket items.

One of the biggest is the pension payments owed to government workers. And here's where the state-and-local story actually gets quite a bit worse than what's happening in Washington — it's the sort of thing that might make you rethink that whole federalism business. While the federal government runs a reasonably well-administered retirement program for its workers, the states, in their capacity as the laboratories of democracy, have been running a mad-scientist experiment in their pension funds, making huge promises but skipping the part where they sock away the money to pay for them. Every year, the pension funds' actuaries calculate how much money must be saved and invested that year to fund future benefits, and every year the fund managers ignore them. In 2009, for instance, the New Jersey public-school teachers' pension system invested just 6 percent of the amount of money its actuaries calculated was needed. And New Jersey is hardly alone in this. With a handful of exceptions, practically every state's pension fund is poised to run out of money in the coming decades. A federal bailout is almost inevitable, which means that those state obligations will probably end up on the national balance sheet in one form or another.

"We're facing a full-fledged state-level debt crisis later this decade," says Prof. Joshua D. Rauh of the Kellogg School of Management at Northwestern University, who recently published a paper titled "Are State Public Pensions Sustainable?" Good question. Professor Rauh is a bit more nuanced than John Boehner, but he comes to the same conclusion: Hell, no. "Half the states' pension funds could run out of money by 2025," he says, "and that's assuming decent investment returns. The federal government should be worried about its exposure. Are these states too big to fail? If something isn't done, we're facing another trillion-dollar bailout."

The problem, Professor Rauh explains, is that pension funds are used to hide government borrowing. "A defined-benefit plan is politicians making promises on time horizons that go beyond their political careers, so it's really cheap," he says. "They say, 'Maybe we don't want to give you a pay raise, but we'll give you a really generous pension in 40 years.' It's a way to borrow off the books." The resulting liability runs into the trillions of dollars.

Ground Zero for the state-pension meltdown is Springfield, Ill., and D-Day comes around 2018: That's when the state that nurtured the political career of Barack Obama is expected to be the first state to run out of money to cover its retirees' pension checks. Eight years — and that's assuming an 8 percent average return on its investments. (You making 8 percent a year lately?) Under the same projections, Illinois will be joined in 2019 by Connecticut, New Jersey, and Indiana. If investment returns are 6 percent, then 31 U.S. states will run out of pension-fund money by 2025, according to Rauh's projections.

States aren't going to be able to make up those pension shortfalls out of general tax revenue, at least not at current levels of taxation. In Ohio, for instance, the benefit payments in 2031 would total 55 percent of projected 2031 tax revenues. For most states, pension payments will total more than a quarter of all tax revenues in the years after they run out of money. Most of those pensions cannot be modified: Illinois, for instance, has a constitutional provision that prevents reducing them. Unless there is a radical restructuring of these programs, and soon, states will either have to subsidize their pension systems with onerous new taxes or seek a bailout from Washington.

So how much would the states have to book to fully fund those liabilities? Drop in another $3 trillion. Properly accounting for these obligations, that takes us up to a total of $19.5 trillion in governmental liabilities. Bad, right? You know how the doctor looks at you in that recurring nightmare, when the test results come back and he has to tell you not to bother buying any green bananas? Imagine that look on Tim Geithner's face right now, because we still have to account for the biggest crater in the national ledger: entitlement liabilities.

The debt numbers start to get really hairy when you add in liabilities under Social Security and Medicare — in other words, when you account for the present value of those future payments in the same way that businesses have to account for the obligations they incur. Start with the entitlements and those numbers get run-for-the-hills ugly in a hurry: a combined $106 trillion in liabilities for Social Security and Medicare, or more than five times the total federal, state, and local debt we've totaled up so far. In real terms, what that means is that we'd need $106 trillion in real, investable capital, earning 6 percent a year, on hand, today, to meet the obligations we have under those entitlement programs. For perspective, that's about twice the total private net worth of the United States. (A little more, in fact.)

Suffice it to say, we're a bit short of that $106 trillion. In fact, we're exactly $106 trillion short, since the total value of the Social Security "trust fund" is less than the value of the change you've got rattling around behind your couch cushions, its precise worth being: $0.00. Because the "trust fund" (which is not a trust fund) is by law "invested" (meaning, not invested) in Treasury bonds, there is no national nest egg to fund these entitlements. As Bruce Bartlett explained in Forbes, "The trust fund does not have any actual resources with which to pay Social Security benefits. It's as if you wrote an IOU to yourself; no matter how large the IOU is it doesn't increase your net worth. . . . Consequently, whether there is $2.4 trillion in the Social Security trust fund or $240 trillion has no bearing on the federal government's ability to pay benefits that have been promised." Seeing no political incentives to reduce benefits, Bartlett calculates that an 81 percent tax increase will be necessary to pay those obligations. "Those who think otherwise are either grossly ignorant of the fiscal facts, in denial, or living in a fantasy world."

There's more, of course. Much more. Besides those monthly pension checks, the states are on the hook for retirees' health care and other benefits, to the tune of another $1 trillion. And, depending on how you account for it, another half a trillion or so (conservatively estimated) in liabilities related to the government's guarantee of Fannie Mae, Freddie Mac, and securities supported under the bailouts. Now, these aren't perfect numbers, but that's the rough picture: Call it $130 trillion or so, or just under ten times the official national debt. Putting Nancy Pelosi in a smaller jet isn't going to make that go away.

— Kevin D. Williamson is deputy managing editor of National Review, in whose June 21, 2010, issue this article first appeared.