Posted: February 13, 2009
11:35 pm Eastern

By Jerome R. Corsi
© 2009 WorldNetDaily

As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the “2008 Financial Report of the United States Government” as released by the U.S. Department of Treasury.

The difference between the $455 billion “official” budget deficit numbers and the $5.1 trillion budget deficit cited by “2008 Financial Report of the United States Government” is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.

But the numbers in the 2008 report are calculated on a GAAP basis (“Generally Accepted Accounting Practices”) that include year-for-year changes in the net present value of unfunded liabilities in social insurance programs such as Social Security and Medicare.

Under cash accounting, the government makes no provision for future Social Security and Medicare benefits in the year in which those benefits accrue.

“As bad as 2008 was, the $455 billion budget deficit on a cash basis and the $5.1 trillion federal budget deficit on a GAAP accounting basis does not reflect any significant money [from] the financial bailout or Troubled Asset Relief Program, or TARP, which was approved after the close of the fiscal year,” economist John Williams, who publishes the Internet website Shadow Government Statistics, told WND.

“The Congressional Budget Office estimated the fiscal year 2009 budget deficit as being $1.2 trillion on a cash basis and that was before taking into consideration the full costs of the war in Iraq and Afghanistan, before the cost of the Obama nearly $800 billion economic stimulus plan, or the cost of the second $350 billion in TARP funds, as well as all current bailouts being contemplated by the U.S. Treasury and Federal Reserve,” he said.

“The federal government’s deficit is hemorrhaging at a pace which threatens the viability of the financial system,” Williams added. “The popularly reported 2009 [deficit] will clearly exceed $2 trillion on a cash basis and that full amount has to be funded by Treasury borrowing.

“It’s not likely this will happen without the Federal Reserve acting as lender of last resort for the Treasury by buying Treasury debt and monetizing the debt,” he said.

“Monetizing the debt” is a term used to signify that the Federal Reserve will be required simply to print cash to meet the Treasury debt obligations, acting in this capacity only because the Treasury cannot sell the huge of amount debt elsewhere.

The Treasury has been largely dependent upon foreign buyers, principally China and Japan and other major holders of U.S. dollar foreign exchange reserves, including OPEC buyers purchasing U.S. debt through London.

“The appetite of foreign buyers to purchase continued trillions of U.S. debt has become more questionable as the world has witnessed the rapid deterioration of the U.S. fiscal condition in the current financial crisis,” Williams noted.

“Truthfully,” Williams pointed out, “there is no Social Security ‘lock-box.’ There are no funds held in reserve today for Social Security and Medicare obligations that are earned each year. It’s only a matter of time until the public realizes that the government is truly bankrupt and no taxes are being held in reserve to pay in the future the Social Security and Medicare benefits taxpayers are earning today.”

Calculations from the “2008 Financial Report of the United States Government” also show that the GAAP negative net worth of the federal government has increased to $59.3 trillion while the total federal obligations under GAAP accounting now total $65.5 trillion.

The $65.5 trillion total federal obligations under GAAP accounting not only now exceed four times the U.S. gross domestic product, or GDP, the $65.5 trillion deficit exceeds total world GDP.

“In the seven years of GAAP reporting, we have seen an annual average deficit in excess of $4 trillion, which could not be possibly covered by any form of taxation,” Williams argued.

“Shy of the government severely slashing social welfare programs, federal deficits of this magnitude are beyond any hope of containment, government or otherwise,” he said.

“Put simply, there is no way the government can possibly pay for the level of social welfare benefits the federal government has promised unless the government simply prints cash and debases the currency, which the government will increasingly be doing this year,” Williams said, explaining in more detail why he feels the government is now in the process of monetizing the federal debt.

“Social Security and Medicare must be shown as liabilities on the federal balance sheet in the year they accrue according to GAAP accounting,” Williams argues. “To do otherwise is irresponsible, nothing more than an attempt to hide the painful truth from the American public. The public has a right to know just how bad off the federal government budget deficit situation really is, especially since the situation is rapidly spinning out of control.

“The federal government is bankrupt,” Williams told WND. “In a post-Enron world, if the federal government were a corporation such as General Motors, the president and senior Treasury officers would be in federal penitentiary.”

Friday, February 13, 2009
By Ryan Byrnes and Edwin Mora

(CNSNews.com) – Sen. Frank Lautenberg (D-N.J.) predicted on Thursday that none of his Senate colleagues would “have the chance” to read the entire final version of the $790-billion stimulus bill before the bill comes up for a final vote in Congress.

“No, I don’t think anyone will have the chance to [read the entire bill],” Lautenberg told CNSNews.com.

The final bill, crafted by a House-Senate conference committee, was posted on the Website of the House Appropriations Committe late Thurday in two PDF files.

The first PDF was 424 pages long and the second PDF was 575 pages long, making the total bill 999 pages long. The House is expected to vote on this 999-page bill Friday, and the Senate either later Friday or Saturday. [Editor's note: The first PDF, as posted on the House Appropriations Committee website as of 8:20 AM Friday morning, had grown by 72 pages to 496 pages, increasing the length of the total document to 1,071 pages.]

Of the several senators that CNSNews.com interviewed on Thursday, only Sen. George Voinovich (R-Ohio) claimed to have read the entire bill–and he was speaking of the preliminary version that had been approved by the Senate, not the final 999-page version that the House-Senate conference committee was still haggling over on Thursday afternoon.

When CNSNews.com asked members of both parties on Capitol Hill on Thursday whether they had read the full, final bill, not one member could say, “Yes.”

And only one–Voinovich–volunteered that he had actually read the version of the bill that had passed the Senate.

Both Republicans and Democrats told CNSNews.com they were eager to read the unseen bill–once they could get get their hands on a copy of the final legislation.

Nonetheless, members from both sides of the aisle in both the House and Senate admitted they doubted they would have adequate time to read the bill before they actually voted for it.

“Certainly I hope to have the opportunity to go through [the bill] before the vote takes place,” said Sen. Bob Corker (R-Tenn.) told CNSNews.com. “But that’s something I’ve found doesn’t always happen around here.”

Some lawmakers said one of the reasons they would not vote for the bill was because there would be no time to study it before it came up for a vote.

“The Democrats have thrown this at us very last-minute,” said Rep. Zach Wamp (R-Tenn.). “That’s why the rule of thumb in the United States Congress should be, ‘When in doubt, vote no,’ because the devil is in the details and that’s why this stimulus is not worthy of support.”

Rep. John Boozman (R-Ark.) shared that sentiment. “The American public expects for us to get in and know what we’re voting on,” Boozman said. “But there are very few members from Congress that are going to have time to actually read this thing.”

“This is not light reading,” Boozman added. “It’s difficult reading, it involves policy and things.”

“Right now, because of those things, I will probably vote against it,” he added.

Sen. Roland Burris (D-Ill.), President Barack Obama’s successor in the Senate, seemed baffled by the thought of actually reading the entire bill–as did his press secretary.

“I think it’s about 800 pages,” Burris’s press secretary said before laughing lightly. “We’ll do the best we can.”

Sen. John Thune (R-S.D.) said that due to the hasty process, he may not have time to read the whole bill.

“I will, as much as I can, get through all the changes that occurred in the conference committee,” says Thune.

“That’s assuming we have time to review it prior to the vote,” he added, “This is a very rushed process, the whole process, starting from the beginning has been very rushed.”

Voinovich, the only member of Congress who told CNSNews.com that he had taken the time to read through every line of the stimulus bill that had been initially approved by the Senate, said he planned to do the same for the final version of the bill that had been approved by the House-Senate conference committee.

But the Ohio Republican wasn’t sure if his colleagues would be as meticulous as he had been. “I don’t know,” he said, when asked if he thought others would read every line of the bill. “You’ll have to ask them.”

The bill is expected to land on President Obama’s desk no later than Monday, and the president is expected to sign it into law–whether the nation’s lawmakers have read it or not.

By Martin Wolf

Published: February 10 2009 18:06 | Last updated: February 10 2009 18:06

Has Barack Obama’s presidency already failed? In normal times, this would be a ludicrous question. But these are not normal times. They are times of great danger. Today, the new US administration can disown responsibility for its inheritance; tomorrow, it will own it. Today, it can offer solutions; tomorrow it will have become the problem. Today, it is in control of events; tomorrow, events will take control of it. Doing too little is now far riskier than doing too much. If he fails to act decisively, the president risks being overwhelmed, like his predecessor. The costs to the US and the world of another failed presidency do not bear contemplating.

What is needed? The answer is: focus and ferocity. If Mr Obama does not fix this crisis, all he hopes from his presidency will be lost. If he does, he can reshape the agenda. Hoping for the best is foolish. He should expect the worst and act accordingly.

Yet hoping for the best is what one sees in the stimulus programme and – so far as I can judge from Tuesday’s sketchy announcement by Tim Geithner, Treasury secretary – also in the new plans for fixing the banking system. I commented on the former last week. I would merely add that it is extraordinary that a popular new president, confronting a once-in-80-years’ economic crisis, has let Congress shape the outcome.

The banking programme seems to be yet another child of the failed interventions of the past one and a half years: optimistic and indecisive. If this “progeny of the troubled asset relief programme” fails, Mr Obama’s credibility will be ruined. Now is the time for action that seems close to certain to resolve the problem; this, however, does not seem to be it.

All along two contrasting views have been held on what ails the financial system. The first is that this is essentially a panic. The second is that this is a problem of insolvency.

Under the first view, the prices of a defined set of “toxic assets” have been driven below their long-run value and in some cases have become impossible to sell. The solution, many suggest, is for governments to make a market, buy assets or insure banks against losses. This was the rationale for the original Tarp and the “super-SIV (special investment vehicle)” proposed by Henry (Hank) Paulson, the previous Treasury secretary, in 2007.

Under the second view, a sizeable proportion of financial institutions are insolvent: their assets are, under plausible assumptions, worth less than their liabilities. The International Monetary Fund argues that potential losses on US-originated credit assets alone are now $2,200bn (€1,700bn, £1,500bn), up from $1,400bn just last October. This is almost identical to the latest estimates from Goldman Sachs. In recent comments to the Financial Times, Nouriel Roubini of RGE Monitor and the Stern School of New York University estimates peak losses on US-generated assets at $3,600bn. Fortunately for the US, half of these losses will fall abroad. But, the rest of the world will strike back: as the world economy implodes, huge losses abroad – on sovereign, housing and corporate debt – will surely fall on US institutions, with dire effects.

Personally, I have little doubt that the second view is correct and, as the world economy deteriorates, will become ever more so. But this is not the heart of the matter. That is whether, in the presence of such uncertainty, it can be right to base policy on hoping for the best. The answer is clear: rational policymakers must assume the worst. If this proved pessimistic, they would end up with an over-capitalised financial system. If the optimistic choice turned out to be wrong, they would have zombie banks and a discredited government. This choice is surely a “no brainer”.

The new plan seems to make sense if and only if the principal problem is illiquidity. Offering guarantees and buying some portion of the toxic assets, while limiting new capital injections to less than the $350bn left in the Tarp, cannot deal with the insolvency problem identified by informed observers. Indeed, any toxic asset purchase or guarantee programme must be an ineffective, inefficient and inequitable way to rescue inadequately capitalised financial institutions: ineffective, because the government must buy vast amounts of doubtful assets at excessive prices or provide over-generous guarantees, to render insolvent banks solvent; inefficient, because big capital injections or conversion of debt into equity are better ways to recapitalise banks; and inequitable, because big subsidies would go to failed institutions and private buyers of bad assets.

Why then is the administration making what appears to be a blunder? It may be that it is hoping for the best. But it also seems it has set itself the wrong question. It has not asked what needs to be done to be sure of a solution. It has asked itself, instead, what is the best it can do given three arbitrary, self-imposed constraints: no nationalisation; no losses for bondholders; and no more money from Congress. Yet why does a new administration, confronting a huge crisis, not try to change the terms of debate? This timidity is depressing. Trying to make up for this mistake by imposing pettifogging conditions on assisted institutions is more likely to compound the error than to reduce it.

Assume that the problem is insolvency and the modest market value of US commercial banks (about $400bn) derives from government support (see charts). Assume, too, that it is impossible to raise large amounts of private capital today. Then there has to be recapitalisation in one of the two ways indicated above. Both have disadvantages: government recapitalisation is a bail-out of creditors and involves temporary state administration; debt-for-equity swaps would damage bond markets, insurance companies and pension funds. But the choice is inescapable.

If Mr Geithner or Lawrence Summers, head of the national economic council, were advising the US as a foreign country, they would point this out, brutally. Dominique Strauss-Kahn, IMF managing director, said the same thing, very gently, in Malaysia last Saturday.

The correct advice remains the one the US gave the Japanese and others during the 1990s: admit reality, restructure banks and, above all, slay zombie institutions at once. It is an important, but secondary, question whether the right answer is to create new “good banks”, leaving old bad banks to perish, as my colleague, Willem Buiter, recommends, or new “bad banks”, leaving cleansed old banks to survive. I also am inclined to the former, because the culture of the old banks seems so toxic.

By asking the wrong question, Mr Obama is taking a huge gamble. He should have resolved to cleanse these Augean banking stables. He needs to rethink, if it is not already too late.

By John R. Lott, Jr.
“Freedomnomics” author/Senior Research Scientist, University of Maryland

As the final push for the 778 page, $827 billion stimulus package faces votes today and tomorrow in the Senate, President Obama is hammering his opponents and pushing hard for the bill. On Friday, Obama pointedly reminded Republicans that he won the November election and had the right to get his policies enacted. But the stimulus bill bears little resemblance to his campaign promises. It bears little resemblance his many promises he made just a month ago.

If Obama claims a mandate, shouldn’t it be related to what he campaigned on?

At the very end of the presidential campaign Obama “proposed a $175 billion plan with tax-rebate checks for consumers as well as spending on school repairs, roads and bridges, aid to states, and tax credits for job creation.”

The current bill is not only spending 4.7 times what he promised in November, but gone are the tax-rebate checks and tax credits for job creation. The new additional programs have nothing to do with roads and bridges. Yet, a package that Obama never hinted at a couple of months ago is now considered sacrosanct. The Associated Press described Obama’s position on the stimulus plan this way: “Stopping just short of a take-it-or-leave-it stand, Obama has mocked the notion that a stimulus bill shouldn’t include huge spending.”

Take an emphatic promise that Obama made just a month ago, well after the heat of the presidential campaign had passed: “We are going to ban all earmarks — the process by which individual members insert pet projects without review.” That wasn’t a new promise. During the third presidential debate on October 15, 2008 Obama bluntly promised: “they need to be eliminated.”

But now take Obama’s testy defense of those same earmarks last Friday. Obama reportedly “also defended earmarks as inevitable in such a package.”

During the third presidential debate Obama promised to rein in the budget deficit. When moderator Bob Schieffer asked Obama what he was going to do about the deficit Obama promised to cut the it: “But there is no doubt that we’ve been living beyond our means and we’re going to have to make some adjustments. Now, what I’ve done throughout this campaign is to propose a net spending cut.”

Or take the second presidential debate on October 7, 2008. Obama noted that eliminating earmarks was “important,” but even more important “I want to go line by line through every item in the federal budget and eliminate programs that don’t work and make sure that those that do work, work better and cheaper.” This was his constant theme during the presidential debates to cut government.

So how do you go from campaigning to cut government spending and ban earmarks before the election on November 4 to start talking about a $500 to $700 billion stimulus plan in mid-November. What changed?

What exactly did he learn immediately after the election about the economy that caused him to go from a budget cutter to proposing the biggest increase in spending ever? Prior to the election, Obama was already regularly claiming that the economy was in the worst financial crisis since the depression. Do you cut spending when you are in the worst financial crisis since the depression, but massively increase it if you can claim that things have gotten a little worse?

Now Obama is saying that we will be facing trillion dollar deficits “for years to come.” There was no hint of these policies on November 4, 2008.

Some economic logic is required here. Some explanation for these changes within weeks is needed. When will someone in the press ask Obama to explain what his economic view of the world is that made him support positions right before the election that he then reversed right after he won.

I don’t know of any economic theory that explains Obama’s different policy positions. The most likely explanation is a simple one: Obama told voters what they wanted to hear during the campaign, not what he planned to do. Obama’s short Senate record tells us that he really was the most liberal member of the senate.

While the stimulus bill is going to increase federal government spending by over $800 billion, there is one place that Obama has so far announced a cut — defense spending. A 10 percent cut might be fine, but during the presidential campaign defense spending was one area where he promised to “increase” spending.

Disappointingly, no one is asking Obama to explain any of these changes. Possibly everyone has gotten so distracted or tired trying to catalogue Obama’s broken ethics promises that they are missing the littered field of broken campaign promises.

If Obama merely waited until after the election to make his policy views known, he can’t claim a mandate for his “new” policies. What should be questioned is Obama’s truthfulness to the American people.

By Mark Pittman and Bob Ivry

Feb. 9 (Bloomberg) — The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged to provide up to $5.7 trillion more if needed. The total already tapped has decreased about 1 percent since November, mostly because foreign central banks are using fewer dollars in currency-exchange agreements called swaps. The Senate is to vote early this week on a stimulus package totaling at least $780 billion that President Barack Obama says is needed to avert a deeper recession. That measure would need to be reconciled with an $819 billion plan the House approved last month.

Only the stimulus package to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates approved in 2008 have been voted on by lawmakers. The remaining $8 trillion in commitments are lending programs and guarantees, almost all under the authority of the Fed and the FDIC. The recipients’ names have not been disclosed.

“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”

Financial Rescue

The pledges, amounting to almost two-thirds of the value of everything produced in the U.S. last year, are intended to rescue the financial system after the credit markets seized up about 18 months ago. The promises are composed of about $1 trillion in stimulus packages, around $3 trillion in lending and spending and $5.7 trillion in agreements to provide aid.

Federal Reserve lending to banks peaked at a record $2.3 trillion in December, dropping to $1.83 trillion by last week. The Fed balance sheet is still more than double the $880 billion it was in the week before Sept. 17 when it agreed to accept lower-quality collateral.

The worst financial crisis in two generations has erased $14.5 trillion, or 33 percent, of the value of the world’s companies since Sept. 15; brought down Bear Stearns Cos. and Lehman Brothers Holdings Inc.; and led to the takeover of Merrill Lynch & Co. by Bank of America Corp.

The $9.7 trillion in pledges would be enough to send a $1,430 check to every man, woman and child alive in the world. It’s 13 times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office data, and is almost enough to pay off every home mortgage loan in the U.S., calculated at $10.5 trillion by the Federal Reserve.

‘All the Stops’

“The Fed, Treasury and FDIC are pulling out all the stops to stop any widespread systemic damage to the economy,” said Dana Johnson, chief economist for Comerica Inc. in Dallas and a former senior economist at the central bank. “The federal government is on the hook for an awful lot of money but I think it’s needed to help the financial system recover.”

Bloomberg News tabulated data from the Fed, Treasury and FDIC and interviewed regulators, economists and academic researchers to gauge the full extent of the government’s rescue effort.

Commitments may expand again soon. Treasury Secretary Timothy Geithner postponed an announcement scheduled for today that was to focus on new guarantees for illiquid assets to insure against losses without taking them off banks’ balance sheets. The Treasury said it would delay the announcement until after the Senate votes on the stimulus package.

Program Delay

The government is already backing $301 billion of Citigroup Inc. securities and another $118 billion from Bank of America. The government hasn’t yet paid out on any of the guarantees.

The Fed said Friday that it is delaying the start a $200 billion program called the Term Asset-Backed Securities Loan Facility, or TALF, to revive the market for securities based on consumer loans such as credit-card, auto and student borrowings.

Most of the spending programs are run out of the Federal Reserve Bank of New York, where Geithner served as president. He was sworn in as Treasury secretary on Jan. 26.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and then Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. The Federal Reserve so far is refusing to disclose loan recipients or reveal the collateral they are taking in return. Collateral is an asset pledged by a borrower in the event a loan payment isn’t made.

Fed Sued

Bloomberg requested details of Fed lending under the Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral. Arguments in the suit may be heard as soon as this month, according to the court docket. Bloomberg asked the Treasury in an FOIA request Jan. 28 for a detailed list of the securities it planned to guarantee for Citigroup and Bank of America. Bloomberg hasn’t received a response to the request.

The Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).

You know, whether you’re a Democrat or a Republican, the “Stimulus” bill that is being pushed through Congress is nothing more than a spending bill and a burden that will fall squarley on our children and grand children. That is just plain obscene and demonstrates how little the people of this country care about what they force on the coming generations, because this will not be repaid literally for a century or more. 

The $700 Billion TARP rescue package that was pushed through Congress by the Bush administration has now exceeded $2 Trillion in spending. That doesn’t include interest on the money that has to be borrowed in order to pay for it.Those who got some of this money spent it frivolously on comforts, bonuses, or acquisitions to make themselves too big to fail. The voter base did not support it but it was voted through anyway, and the members of Congress who did it were re-elected. So, are we really that stupid?

The current $825 Billion stimulus package pays for $500 rebates to illegal immigrants, ATV trails, new grass on the mall, Honeybee, Sexually Transmitted Disease, Fish barriers, Arts and Humanties, I mean what part of this stimulates anything more than our ire. Well it’s a spending bill and it has nothing stimulative about it, but apparently we’re this stupid too.

Consider this: Without any additional collateralization the money supply has been increased 1000% or more just to flood the marketplace with currency just since last September. The national debt exceededs $15 Trillion. The dow is down %50 in just the last 6 months. Inflation on an unprecedented scale looms around the corner and the dollar itself may collapse with this kind of fiscal leadership. I ask the question again: Are we all this stupid?

How not to use PowerPoint.

Looks like somebody was able to hack one of our message post and insert some foreign Flash code over the past week. Sorry but I did not notice it until yesterday so once I cleaned up the website I decided to go ahead and do a full upgrade of the system. Everything looks good to me but if you find anything not functioning please let us know.