The Fiscal Cliff and Constitution in Crisis
29 Minutes, 39 Slides
The Political Foundation of the status quo in America is based on a Grand Bargain of Complicity between the top 25% who pay approximately 90% of the taxes, and the bottom 50% who draw on the benefits that come from government. James Madison in the "Federalist Papers" outlined this complicity in the "Tyranny of the Majority". What is becoming painfully evident is that the political elite in America have falsely over-promised on the entitlements that can be delivered, which is now surfacing in the political turmoil of the Fiscal Cliff negotiations and has the potential to quickly lead towards a constitutional crisis.
Meanwhile the very top 1% of Americans, that pay 25% of the taxes and control most of the productive wealth in the nation, are securing and exercising increasing powers within the government, through what is becoming increasingly identified as 'Crony Capitalism" and "Corporatocracy". Thomas Jefferson also warned us about this potential constitutionally destabilizing influence which could emerge within the structure of the 'separation of powers'.
Out of a population of 315 million, presently only 115 million Americans have full time, non-government funded jobs. This is the same as 12 years ago and before an additional 33 million students, immigrants, single parents of others attempted to enter the workforce. It is now fracturing the social compact and the revealing the delusion of the American dream being available to all who are willing to work for it. There is no work, and certainly insufficient work which pays a wage which will support what is expected as a middle class standard of living.
This Grand Bargain is now rapidly fraying as 75 million baly boomers begin retiring and find the promises made to everyone cannot possibly be met. As the Fiscal Cliff crisis is blatantly bringing to the public's attention, for those who can read between the carefully crafted lines, funding for Social Security, Medicare/Medicaid, National Security and Interest on the debt is consuming more than can be realistically raised through taxation.
To collect enough tax revenue to avoid going deeper into debt would require over $8 trillion in tax collections annually. Expropriating the entire income of the top 25% of households that pay almost 90% of the tax and all corporate taxes would only bring in $6.7 trillion.
"The actual liabilities of the federal government -- including Social Security, Medicare, and federal employees' future retirement benefits -- already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion" - Chris Cox and Bill Archer, Former Congressmen - WSJ 11-26-12
Claims on welfare and disability programs are skyrocketing at the same time that the demographics of an aging populace are causing 10,000 people a day to enter Social Security and Medicare, the two costliest government programs. Meanwhile, the upper-middle class that pays most of the taxes has been slammed with lower income and a devastating drop in their housing-based net worth. Compounding this is the fact that the disillusioned wealthy have slowed dramatically their invested CAPEX (Capital Expenditures) in productive assets in the US.
This above confluence and much more discussed in the video, indicates that is is leading to a Constitutional Crisis by the end of the decade.
This is the fourth in the MACRO ANALYTICS video series entitled "Constitution in Peril" available at GordonTLong.com
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Author: Gordon Long
Gordon T. Long
Publisher - LONGWave
Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public.
Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL - Canada); Vice President Engineering & Officer, Motorola (Codex - USA).
After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech start-up and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager.
In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition.
Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. GordonTLong.com is a wholly owned operating unit of the LCM Groupe.
Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Co-operative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.
Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.
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