The New Deal (again)

"Why does the Speaker look like the cat who just ate the canary? Because he did."

Oh - before I get started - Happy New Year! In government terms, we started our new year on October 1st. For the geeks, our new year is called GFY 16 (that is government fiscal year, 2016). For the rest of us, it is just another year of more spending, more taxes and more debt. And for those who were wondering if our outgoing speaker is a statist, well, this two year "agreement" should cement the deal.

Well the Speaker and the President once again showed they know how to make out with each other. A two year deal has been crafted which will allow the status quo to return to normal. How normal? We can get rid of the closest thing having had to a smidge of budget discipline. We can get rid of the sequester cuts. Everybody wins (except that is, the taxpayers). The debt limit is raised, the printing presses are going crazy, and programs with life everlasting, continue to roll.

Before we all hide in our storm cellars and wait for the crash to come, let us citizens have some frank talk. Talk about budgeting which makes sense. For example:

• Defense - You bet we need a strong defense. However, there are plenty of areas in this closet which are full of clutter. For example, we could save hundreds of billions just by getting rid of most of our overseas bases. Some go back to post WW II. Don't need them anymore. Japan and Germany are staunch allies with good economies. They can provide for their own coastal and air defenses, thank you. Some of those savings would be offset by having two more nuclear powered carriers. We need them to offset the growing China and Russia incursions. Even with that, we could still save a ton of bucks. The waste, fraud and abuse in the Defense Department is simply staggering. Trust me - I worked with them for decades.
• Medicare - What a cornucopia of fraud, waste and abuse this one is! And the irony is, most seem to know it. Including those in the government. And yet nobody has the will to do anything about it. The number I keep hearing about or reading in various resources is jaw dropping. The amount of waste in this program could be as high as 20%! With a GFY 16 budget of almost $600 billion, that means the amount that could be saved would be over $100 billion a year.
• Medicaid - This younger sibling of Medicare ($350 billion) also has huge fraud problems. How much? Nobody seems to really know. However, the number is big enough to focus some real budget discipline on. Trust me - savings are in here.
• Social Security - Don't worry. I did not forget about the 600 pound gorilla in the room. In GFY 16, the budget for Social Security is $938 billion. Bigger than our Defense budget. Oh yes - we are getting very close to hitting that $1 trillion dollar a year mark. This wonderful leftover from the New Deal is now eating up more of our annual budget than anything else. Is there waste, fraud and abuse in this program also? Yup - sure is. Not as much as estimated in Medicare however. This program by itself is going to kill the golden goose if we don't do something about it - and quickly. 

One more thing worth mentioning. In this House of Cards, this Game of Thrones world of Washington DC, one thing is abundantly clear. I don't care if we have Elmer Fudd as the Chair of the Federal Reserve, the rates are not going up. They can't. With the cost to service our debt now at $300 billion a year with a 2.5% rate, any additional interest expense would be a financial back breaker. It would crash the system. In other words, the fix is in. 

So once again, Happy New Year everyone! Relax and enjoy the party! Life in the matrix is good, very good. Will the crash come? Oh, yea. Will it be big. Again, you betcha. But for right now, just enjoy the show. It will be over soon, so stay awake and enjoy it.