In this issue

Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review Jan. 2, 2013/ 20 Teves, 5773

The 'fiscal cliff' was scary? Guess what's coming next!

By Mort Zuckerman

Mort Zuckerman

http://www.JewishWorldReview.com | All eyes have been on the clear and present danger of the fiscal cliff—understandably—but there's a sound in the mountain range that's even scarier than the cliff. It's the sound made by an avalanche, the trillions of dollars of debt that's heading our way, gathering speed and mass. For most people, it's out of earshot now, and that's the way our government prefers to play it in its financial statements. Liabilities are not set out there in accordance with the well-established norms of the private sector, where this overhang of liabilities would set off alarm bells in the markets, with boards of directors in emergency sessions.

We'll come to why that's not happening, but let's consider first why we should regard our predicaments as gravely as any private company does on the path to bankruptcy.

We are on a trajectory of cumulative fiscal deficits that cannot possibly be sustained. We have gone from being the world's largest creditor nation, with no foreign debt at the end of World War II, to the world's largest debtor, with roughly half of our public debt held by foreign lenders. Over the last four years, our national debt has grown by more than $5 trillion to over $16 trillion. We have to service that debt. The Federal Reserve is keeping rates historically low but here's the cost of paying interest on the debt for fiscal 2012: $359,796,008,919.49

What do you get for that? Nothing.

The greatest fiscal challenge to the U.S. government is not just its annual deficit but its total liabilities. Our federal balance sheet does not include the unfunded social insurance obligations of Medicare, Social Security, and the future retirement benefits of federal employees. Only in the small print of the financial statements do you get some idea of the enormous size of the unfunded commitments. Today the estimated unfunded total is more than $87 trillion, or 550 percent of our GDP. And the debt per household is more than 10 times the median family income.

The public doesn't know about these awesome liabilities because the totals appear only in actuarial estimates. As Chris Cox, former chairman of the Securities and Exchange Commission, and Bill Archer, former chairman of the House Ways and Means Committee, recently noted in the Wall Street Journal, the real annual accrued expense of Medicare and Social Security alone is $7 trillion. The government's balance sheet does not include any of these unfunded obligations but focuses on the current year deficits and the accumulated national debt. Cox and Archer reported that the annual budget deficit is only about one fifth of the more accurate figure.

If the American public saw our financial statements in the same way that public companies report their pension liabilities, it would clearly see the magnitude of danger represented by the future borrowings that these liabilities to an aging population imply—borrowing on a scale that would not only bankrupt the programs themselves but the entire federal government. And to a worrying extent, we are locked into continued escalation by the fact that social insurance programs, as well as other mandatory programs, carry payments that are in accordance with automatic formulas written into law and are not subject to an annual spending limit. Today, less than 40 percent of our budget is actually decided by Congress and the president, down from 62 percent 40 years ago.

If we continue in these irresponsible ways, an eventual reckoning cannot be avoided. The liabilities are so huge, and multiplying so fast, that there will be one unavoidable demand as the various bills come to their due date. Show us the money!

How will the bills be honored? Let's remember that 100 percent of the payroll taxes for Social Security and Medicare are spent in the year that they are collected, leaving no leftovers for the unfunded obligations. And this doesn't take into account other risks, hardly minimal, like the fact that the Federal Housing Authority confronts a $16.3 billion net deficit after its latest audit that may force a taxpayer bailout for the first time in its 78-year history. And just four years from now, in 2016, the Disability Insurance trust fund will be fully depleted.

None of these gigantic debts is in plain sight, any more than the unstable overhang of tons and tons of snow is visible from the valley. The full extent of the liabilities won't be realized by the country unless and until the government publishes financial statements in ways the private sector is forced to present them. At the end of 2011, the administration published the financial statements on the web on a Friday before the holiday break, without a press conference, still less a presidential appearance, thereby deliberately attracting a minimum of attention.

Quite simply, the government has grown too big, promised too much, and waited too long to restructure itself. Large and growing deficits represent deferred taxes that will have to be paid. In effect, we have a massive taxation without representation for future generations, the people who are too young to vote.

What saves the day for the federal government is that it incurs its debt in the currency that it alone may lawfully print. Of course, this assumes that the world will forever be willing to accept any amount of dollars in payment that the Federal Reserve seems willing to supply.

Merely to avoid going deeper into debt, to cope with the speed at which compound interest is growing the real debt annually, we would have to collect $8 trillion in taxes each year, Cox and Archer point out. And here's the nub of it: All individuals filing tax returns in the country with incomes over $66,198 have a total adjusted gross income of about $5.2 trillion. The total corporate taxable income (at its peak in 2006) amounted to $1.6 trillion. This means that we have a maximum of roughly $7 trillion available if the government confiscated the entire gross income of individuals and corporations—not nearly enough to cover the yearly growth of U.S. liabilities.

We can't escape by using the same thinking as when we created the problems. For example, we might think, "well, we'll just grow the economy." A significant and sustained rise in GDP would help for sure, even given present tax rates, but the speed and scale of debt utterly overwhelms any feasible growth. It is years too late to imagine we can grow the economy fast enough to solve the problem painlessly. The conclusion is unavoidable—but it is avoided year in and year out, from one election cycle to another. We have to get moving fast on reform of entitlements, of all the programs viewed as the third rail of American politics. Why won't our politicians touch it? Because they think our people are themselves unready and unwilling to risk their security, which is precisely what brought us to where we are today. That in part reflects the lack of transparency in government financial statements, by which our insolvent ways have remained hidden from policymakers and the public.

We have yet to learn how to think of the federal deficit in personal terms. If you constantly live beyond your means by increasing your credit card balance and bank borrowing, eventually your debt rises to a level where all you are doing is paying the interest on your credit cards and loans. Sooner or later, your credit will be so bad that no one will lend you any money. Then your standard of living will decline as you try to reduce your expenses dramatically or alternatively file for bankruptcy. This is what is facing the United States. Unless we make changes, by 2055 interest costs will be the only thing that the United States will be able to pay for with available revenues and resources.

The parties have been locked in a dance of death, with Republicans shrinking from raising taxes and Democrats from controlling entitlements. Once we recognize that unsustainable commitments cannot be ducked any longer, we will recognize that we need both correctives: expenditure cuts and higher tax revenues. There are a variety of ways to minimize the downside of raised taxes (discouraging effort and encouraging capital flight). We have not had a rewrite of our tax code in 25 years, leaving us with a tax system that is massively inefficient, leads to gross misallocation of resources, impedes our economic growth, and rewards consumption at the expense of savings and investment.

Of course, we can go on whistling in the dark until we run into the reality of a crisis we sometimes hear vaguely mentioned, when it is mentioned at all. It is not so much a matter of politicians meeting in the small hours to raise the debt ceiling (or refuse to raise it). It is what will happen when investors lose confidence in the ability of the federal government to put its finances in order. That will be reflected in their unwillingness to buy our debt at current low levels of interest. Look at Greece, where the interest rate on bonds went from about 5 percent to more than 16 percent in a short time. Look at how much more Greece has to pay on its bonds by comparison with Germany.

The question is not whether we must make the tough choices to put our nation's finances in order. The question is whether we will do so before the market forces us to do so.

The result of a debt crisis would be not only a significant increase in the interest rates we have to pay (and think of what that would do to the "recovery"), but also a potential decline in the value of the dollar. We have managed to keep up appearances, but the performance is less and less credible. Investors who have relied on the good faith and trust of the U.S.A. look at how we fudged and fumbled and name-called to the edge of the fiscal cliff, and they're focused on what we do or not do. No one knows when investors will lose confidence in the willingness and the ability of the federal government to put its financial house in order. No one knows how much interest rates would go up, but we do know it would be just as sudden and dramatic as it has been in the endless Eurozone crises. Nobody knows precisely when and if this crisis will occur, but for now we'd do well to rely on the sagacity of one character in a Hemingway novel, who, when asked "how did you go bankrupt?" responds: "Two ways. Gradually and then suddenly." That's what we face when investors lose confidence. Interest rates will surely rise quickly, and each percentage point will force the federal government to pay an additional $150 billion annually in interest.

Doing nothing to address this level of fiscal irresponsibility is simply not an option. We can't inflate our way out, for inflation doesn't solve our Social Security and Medicare challenges. We can't raise taxes beyond the point where they curtail growth, not to mention that a punitive level of taxation is neither culturally or politically acceptable.

We will know if the government and Congress have finally gotten the message when we see:

  • How far they can agree to go on spending cuts in almost all major budget categories, with exceptions only for Social Security and interest on the federal debt.
  • How far they agree to broaden the tax base by eliminating deductions, and enforce a means test on entitlement programs by increasing contributions and raising the eligibility retirement age of Social Security (especially considering that life expectancy is rising at least one year every decade and it is now 78.5 compared to the 60 it was when the program was initiated in 1935).
  • How far they devise and enforce statutory control of our healthcare costs. Three-quarters of the nation's annual debt, sooner or later, will be due to the spiraling cost of Medicare and Medicaid.

We must change course now, before we are engulfed, with devastating consequences for tens of millions of Americans. As skiers and mountain folk know, by the time the distant sound becomes a roar, it's too late to get out of the way.

Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

Comment by clicking here.

Mort Zuckerman is editor-in-chief and publisher of U.S. News and World Report.


© 2012, Mortimer Zuckerman