The US is Broke — Not!

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September 10, 2012

The US is Broke — Not!

By Richmond Shreve

Fears that the US is going broke abound and are unfounded. But there is a whisper campaign afoot to amplify them for political gain. This cynical belief is convenient and useful to the GOP in their bid for power in November. One element of the fear campaign is a video reportedly produced by a retired IBM accountant that shows [old news] that US tax revenue is insufficient to operate the government after entitlements are paid.

The conservative network of viral emails has been buzzing about a short video done by a retired accountant that shows our revenue to be insufficient to support any of the Federal discretionary budget once our obligations for debt service and entitlements are paid.  Evidently this is news to many people and the video is presented in a context of shock, fear and great urgency.  My spouse, Marguerite, emailed one of our mutual friends to allay his fears and put the matter in perspective.  Here is what she said:

Dear Jim–I apologize for delaying getting back to you.  I’ve wanted to do some research of my own before I responded.

I’ve sent an email to SNOPES. com (an independent, non-partisan fact-checking organization) to check this out.  I’ll let you know what I hear.  However, the charts that Richmond sent you say a lot of what I’m going to say, and I have a few items to add:

– first and foremost, especially during the campaign election season, I take EVERYTHING I read and ask “Says who?”  If the source is anything except a reputable, non-partisan fact-checking organization, I take it with a grain of salt.  The recent AARP Magazine suggested two fact checkers: (from the U. of Penn. Annenberg Public Policy Center) and (from George Washington University);  I also like,,,;  there are so many outright lies going around the Internet that people (including ME!) have passed on, only to find later that I was passing information that was completely false

– check out The Story of Broke (;  one of the great lies is that our country is “broke” (item below from Van Jones–to read the entire article go to
Our economy today is almost as big and rich as all of Europe’s COMBINED — including economic powerhouses like Germany. Our economy today is almost twice as big as China’s. (And we have only one third of the Chinese population.) No other country even comes close to our wealth.

If that is so, then how come only some of us are hurting? How come big corporate profits are at an all-time high while people are out of work? Why are Wall Street banks thriving while folks are losing their homes?

One reason: global corporations and big banks are hoarding so much cash, refusing to recirculate it in the form of fair taxes and good wages. Instead, they use a few of their extra bucks to buy elections and elected officials — Paul Ryan is just the worst example, not the only one.

Those politicians then try to convince us that we should all accept more misery, while their mega-donors stockpile more cash than the Pharoahs ever dreamed about having.

Enough is enough.

If someone tells you we’re too broke to do anything positive, ask them where the money went. Ask them who got a big bonus last year. Who got a new private jet? Ask about the Bush tax giveaways for the rich. Ask about the bailouts for Wall Street. Ask about tax shelters, subsidies for polluters, Halliburton expense accounts, or the massive bill for two wars.
– on the revenue side, there are many ways to increase revenues;  one that’s gaining great support nationwide is the so-called “Robin Hood tax”;  identified by Robert Reich, the Robin Hood Tax would put a less than 0.05% tax on Wall Street financial transactions and would raise $350 BILLION each year.  Many pressing social needs could be addressed through this tiny tax on the excesses of Wall Street speculators (speculators whose transactions allow them to bet against their own investors!);  according to BlackRock, one of the largest private equity firms, the principle basically is “of every 20 deals, 17 are expected to fail under the added debt; two have to survive and one has to hit big for the firm to have a fairly strong return on its private equity fund.”  Comments Ron Suskind (see his credentials below), “It’s hard to find any product, save crack cocaine, that causes ruin for 85%of its users.”

–  on the mandatory expense side, there are many ways to decrease spending without harming those who most need critical social programs; for example, one of the refinements of the National Health Care bill that got lost in the partisan politics was the work of Jack Winnberg at Dartmouth College.  Trained at Johns Hopkins, he began to do research on the huge data bank that Medicare and Medicaid created.  What he found was that thousands of risky and expensive procedures were being performed each year without any likely medical value.  He founded the Darmouth Atlas Project and a new school of “evidence-based” medicine….  With accountability and data-driven rigor, Dartmouth’s findings point the way toward improved treatment at lower costs….  If even a fraction of the Dartmouth methodologies were implemented, health care would be improved and the federal budget rescued.” (pp 138-139 from Confidence Men:  Wall Street, Washington & the Education of a President by Ron Suskind–a Pulitzer Prize winning journalist); just to show the magnitude of the waste, the Medicare Prescription Drug Improvement and Modernization Act of 2003, added costs of $500 BILLION over 10 years, a massive handout to the pharmaceutical industry.

– then there’s the matter of wealth accumulation:  when most of the nation’s household spending power is accumulated among the top 1%, who can buy the goods and services that keep the economy growing? as Henry Ford demonstrated so effectively, when his workers could afford to buy the cars they built, Henry Ford sold a LOT more cars!

so greater equity benefits EVERYONE, as well as the economy

Sometimes, there is elegant simplicity that allows a complex point to be made, but in the case of the Federal Budget, I think your source has missed some key elements.

Blessings, Marguerite

How Scary is US Debt?

I suspect the accountant’s video is being circulated for political reasons, even though it is not obvious that it is political.  The GOP has a platform of “returning to fiscal responsibility” and economic fears and alarms serve to forward their agenda — unless one looks more deeply at the facts about where the deficit spending came from.(These are the charts that Marguerite refers to above.)

Source: Talking Points Memo

Romney is fond of saying in his stump speech that Obama has delivered four consecutive trillion dollar deficits, implying that he created the problem.  This is not correct in fact or interpretation.  As I write this on Sept 10, 2012 Obama is concluding his third budget year. That first trillion dollar deficit was one of the GOP years. The GOP and George Bush delivered an economic collapse and initiated huge spending to bail out the banks. Even the conservative Cato institute agrees that the mess was initiated on Bush’s watch and left for Obama to fix. Clinton was paying down the debt with budgets that produced a surplus. Had Bush not … well that’s spilt milk. We have those deficits deficits because we don’t collect enough revenue to cover the costs of our government.

GOP apologists make haste to point out that there is plenty of blame to go around, often mentioning Harry Reid and Nancy Pelosi in derogatory ways.  No pass.  If they blame Obama for the last four years they can’t in the next breath claim that all must share equally in the blame for the prior eight.

Source: Business Insider

Our tax revenue, as a percent of the gross domestic product is small compared to other nations.  This suggests that we can afford to pay more taxes even though we don’t want to.At the same time, our debt is three and a half times our present low revenue, a number that rivals the ratio that burdens Greece. But in Greece taxes are already at 37% of GDP and as their economy sinks deeper into recession, that percentage rises.  The difference is this: at 37% they do not have much capacity to raise taxes further, at only 15% the US economy can absorb more tax burden.

Most all taxes are levied as a percentage of economic activity: they are computed on profit, income, sales or value added — all of which decline as the economy contracts.  So the fix for deficit spending is a very tricky balancing act where you raise taxes, cut spending, borrow when you must to keep meeting public payroll and to pay current bills.

Too much austerity is self-defeating because the revenue shrinks as the reduction in spending causes economic shrinkage.  Hard times in business force management to walk a tight rope of keeping productive capacity while whittling costs to remain viable.  The US is nowhere near not being viable. But the GOP would have us act like we were Greece and at the limit of what our economy can bear in taxation.

We can afford higher taxes and we can and should revoke the Bush tax cuts. We could and should run publicly funded health care more efficiently (Obama Care is a start), we could cut subsidies (oil, corn, etc.); but instead the GOP wants to slash social programs that protect our most vulnerable elderly and poor.

What is really scary to me is the GOP leadership that is operating on a a radical belief system and not on knowledge and real world experience. Ayn Rand made it sound like “you’re on your own” would work in her novels, but novels are fantasy and fiction, not hard data.

Today’s GOP is a patchwork of opportunist groups, each of whom has a dominant single-issue agenda: “clean” coal, lower taxes, anti-abortion, anti-populist, cheap energy, guns, agribusiness subsidies, oil drilling rights, gas fracking rights, etc. These groups are not interested in what is best for the commonwealth of the US, they seek advantage over others in their narrow special interests.  Even GOP leaders who want to do the right thing will feel huge pressure from these groups that comprise their political base.

There are strong currents of fear fueled by a flood of disinformation coming from the conservative side of this election.  The content is mostly wrong or distorted to play to prejudices or fears and reenforces pre-conceived notions of how the world economy works.

Dismissing this stuff and not countering it with reason and fact is a mistake.  Silence implies acceptance and strengthens the misconception. Engage and challenge your conservative friends; don’t become a part of their community of cynical agreement.

Submitters Bio:

Richmond Shreve is a citizen journalist and former Senior Editor at He is a published author of fiction (Lost River Anthology, Amazon) and training materials (Instructor Candidate Manual, and A retired business executive, Shreve’s career began in electronics and broadcasting in the 1960s. He has maintained a hobby interest in amateur radio (W2EMU), and the audio-visual arts while working in sales and marketing. For the past thirty years he was co-owner and CEO of the MiddleBrook Crossroads business park (Edmar Corporation) in Bridgewater, NJ. His calling card describes him as a “generalist” because his career and experience encompass diverse disciplines in arts and science including high performance driving, broadcast engineering, graphic arts, information technology, marketing, and business development. He lives with his wife of 30+ years in Cape May Point, NJ and Newtown, PA.