The $26 billion mortgage settlement announced yesterday is bad news for “bond investors including pension funds, according to Pacific Investment Management Co.’s Scott Simon,” notes Bloomberg News.  He says that the settlement rips off innocent investors and pension funds in order to reduce the banks’ costs of bailing out delinquent mortgage borrowers and others.  (As we noted earlier, the Justice Department, state attorneys general, and the biggest banks reached an agreement to provide $26 billion to delinquent mortgage borrowers and others, such as left-wing housing counseling similar to ACORN — in what the New York Post calls a “deadbeat bailout”).  As Simon notes,

“They’re using other people’s money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load.”

Asset managers are frustrated with the deal because, in addition to the debt the banks own, it gives credit to the lenders for changes to loans they hold no interest in and oversee for investors. That “treats people’s 401(k)s and pensions,” which hold mortgage securities, “like perpetrators as opposed to victims,” Simon said. The deal comes after all 50 states announced a probe into foreclosures in 2010 . . . costing bondholders as liquidations of bad debt were delayed.

“Think about this, you tell your kid, ‘You did something bad, I’m going to fine you $10, but if you can steal $22 from your mom, you can pay me with that,’ ” Simon said yesterday. . .

Laurie Goodman . . . who has advocated for mortgage forgiveness in testimony to Congress, joined him in criticizing the agreement yesterday. . .“There is a difference between principal reductions and giving banks credit for spending others’ people money.”

As we noted earlier, by ripping off mortgage investors, this deal will make investing in mortgages more risky, which will in turn drive up interest rates that homebuyers have to pay in the future.  This deal only covers borrowers at certain banks, not those borrowers who mortgages are held by the government-sponsored mortgage giants Fannie Mae and Freddie Mac, which (unlike the private banks) have never repaid their bailout, and are currently still being bailed out at an ever-increasing tab of $170 billion.

This deal is not the only way that federal and state officials are messing up the housing market.  The Obama administration is forcing banks to make risky loans (in the name of “fair lending”), thus planting the seeds of a future financial crisis. The Justice Department is suing banks that refuse to do so, and forcing them both to award preferential loans based on race, and to cough up money in “settlements,” some of which goes to left-wing “community” groups.

The Obama administration recently launched a multibillion dollar bailout for speculators. Bloomberg News reported that the administration is vastly expanding aid for certain “delinquent homeowners,” paying banks up to 63 cents for every dollar in principal they write off for such homeowners.  Speculators will benefit, because bailout recipients don’t even have to live in a house to get its mortgage principal reduced at taxpayer expense.

The Justice Department, state attorneys general, and the biggest banks have reached an agreement to provide at least $26 billion to delinquent mortgage borrowers and others, such as left-wing housing counseling groups similar to ACORN. But if you were financially responsible, you very likely won’t benefit from this settlement, but may actually be harmed by it. It only benefits a small fraction of people who were foreclosed upon, as well as some underwater borrowers, most of them delinquent, whose mortgages were serviced by certain banks. You likely won’t get any money or principal reduction under this settlement if you paid your mortgage on time, especially if you were thrifty enough to make a large down payment (which usually prevents you from ending up underwater on your mortgage unless there is a huge decline in housing values). Instead, you may suffer, because the settlement may lead to mortgage interest rates rising in the future.  (Politicians’ desire for this settlement was based on voodoo economics).

One feature of the agreement is that some delinquent borrowers who are underwater will see their mortgage principal reduced. But the cost of these principal reductions may be borne heavily by innocent third parties, not just the banks: the banks only retained a fraction of the mortgages they originated, selling the rest to mortgage investors (including some pension funds). So the banks are going to write off mortgage principal that is not wholly theirs, but rather the property of third-party investors, raising serious contractual and property rights issues. The settlement contains provisions which reward the banks for cutting mortgage principal balances through a specified formula, creating a serious conflict of interest between the banks and the investors on whose behalf the banks service the loan.

One sign that this cost-shift is real is that the stock price of Bank of America, the bank that will reduce the largest number of mortgages under this settlement, actually went up today, even as most banks’ stock price went down, despite bad news on other legal fronts for Bank of America. Once this cost-shifting happens, mortgages will become a more risky, less attractive investment for Wall Street investors and pension funds in the future, and banks will get less money from investors for them at any given interest rate — which will lead to banks charging a higher interest rate to borrowers to offset the increased risk. AEI’s James Pethokoukis, a former Reuters financial reporter, discussed earlier how Obama’s proposed mass refinancing proposal might have a similar effect that would backfire on America’s borrowers and home purchasers and result in increased interest rates in the future.

So essentially, responsible people are being tapped once again to bail out the irresponsible. As The New York Times notes, “Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure.”

Curiously, while the government apparently wants to milk innocent third party investors to finance the settlement, government agencies and government-controlled mortgage giants are not chipping anything in yet. As USA Today notes, the settlement’s principal reductions “will not include any loans owned by mortgage giants Freddie Mac, Fannie Mae, or the Federal Housing Finance Administration.” This is in contrast to 2009, when the Obama administration made these government-sponsored mortgage giants run up $30 billion in losses bailing out even high-income mortgage borrowers. The Obama administration earlier lifted the $400 billion limit on bailouts for Fannie Mae and Freddie Mac, so that they could continue to buy up junky mortgages at taxpayer expense, and showered their executives with $42 million in compensation. The administration has spent $170 billion propping up these two government-backed mortgage giants, which helped spawn the financial crisis, and has given them competitive advantages over private enterprises.

Meanwhile, the Obama administration is forcing banks to make risky loans (in the name of “fair lending”), thus planting the seeds of a future financial crisis. The Justice Department is suing banks that refuse to do so, and forcing them both to award preferential loans based on race, and to cough up money in “settlements,” some of which goes to left-wing “community” groups that are allied with the Obama administration.

The Obama administration recently began a multibillion dollar bailout for speculators. Bloomberg News reported that the administration is vastly expanding aid for certain “delinquent homeowners,” paying banks up to 63 cents for every dollar in principal they write off for such homeowners, a tripling of what banks can currently get under the HAMP bailout program. Speculators will benefit, too: they don’t even have to live in a house to get its mortgage principal reduced: “Investors who rent out their properties would be eligible to refinance under the new rules.”

Even reporters at the famously-liberal Los Angeles Times have soured on California’s $100 billion-plus rail boondoggle, whose cost will far outstrip whatever the state will get from the $800 billion stimulus package to build it.  But the paper’s editorial board, which supported the stimulus package, continues to back the project, which has ballooned in cost from $33 billion to over $100 billion.  (Managing to see the bright side of even the most pernicious government waste, the paper’s board cited other boondoggles with approval, like Boston’s disastrous Big Dig project, which resulted in motorist fatalities. It praised that infamous project for replacing “what used to be an expressway” with “a downtown park”, despite the fact that it caused “severe delays” for motorists and had a skyrocketing price tag of more than $15 billion.)

But as its own reporter, Steve Lopez, recently noted, there is no telling how much the project will ultimately cost, or when it will actually be completed:

The projected completion date has gone from 2020 to 2033. The anticipated cost has ballooned to as high as $117 billion, and no one seems to have a clue where the bulk of the money would come from. The state auditor and the state Legislative Analyst’s Office have raised serious concerns, and the rail authority’s own peer review group said the project represents “an immense financial risk” to the state. And two weeks ago, the railroad authority’s top executive resigned.To top it off, a poll last fall said nearly two-thirds of registered voters would run this train off the rails if they had a chance to vote again.

The rail project won’t even be useful or economically viable once it’s finished, since travelers will be able to travel more cheaply by road or air than by taking the train.  As syndicated columnist Amy Alkon notes, “this is a totally unnecessary train (and I say that as a train lover). It’s $59 from LA to SF on Southwest if you book in advance,” less than a train ticket will likely cost.  And although the project is misleadingly called a “high-speed” rail project, it turns out that “the train couldn’t really run high speed” after all.

As Tim Cavanaugh noted in Reason, the Los Angeles Times reporter, Steve Lopez, had

the good fortune to answer to the newsroom rather the opinion section, where bullet-train belief still reigns as supremely as it does in Gov. Jerry Brown’s rumpus room. The important thing is that one more prominent Golden State blowhard is sealing the case against the vacant and bankrupt high-speed rail project. . . . In a piece I missed earlier this month entitled “Keeping faith with California’s bullet train,” the ed board praised the High-Speed Rail project because it is similar to Boston’s notorious Big Dig and the building of the pyramids by slaves.

The Obama Administration still supports this boondoggle even though it has been criticized by other liberal newspapers like the Washington Post.  That paper, which has not endorsed a Republican for President since 1952, criticized the project in an editorial entitled “California’s High-Speed Rail System Is Going Nowhere Fast.”

As we noted earlier, the small fraction of the stimulus package that was earmarked for transportation was devoted disproportionately to laying the groundwork for wasteful “high-speed” rail boondoggles that are not actually “high” in speed. These multibillion dollar rail boondoogles would provide work at inflated wages for politically-powerful unions. But these projects are expensive white elephants that would be used by very few travelers at an enormous cost per mile, and not enable trains to go anywhere near as fast as they do in Europe, Japan, or China. (Other union-backed provisions in the stimulus package wiped out jobs in America’s export sector.)

Obama relied on exaggerated claims to push through the stimulus package, claiming it was needed to prevent an “irreversible decline” in the economy,  even though the Congressional Budget Office admitted that the stimulus package would shrink the economy “in the long run.” Even an old-fashioned Keynesian stimulus might have been something that America could not afford at a time of record deficits. The Congressional Budget Office, ignoring various flaws in the stimulus package, argued that it would boost the economy in “the short run.” But even the CBO conceded that the stimulus would shrink economic output in “the long run” by increasing the national debt and thus crowding out private investment.

It’s not news that regulators in Utah are often uncomfortable allowing residents to make their own decisions about how, when, or if they engage in morally questionable behavior. The Beehive State has a well-known bee in its bonnet when it comes to alcohol, but what many non-Utahans may not know is that it is just as strict, if not more so, when it comes to preventing residents from gambling — even if they are in their own home. As federal lawmakers and many states edge toward legalizing, regulating, and taxing online wagering, some Utah legislators want to clarify the letter of their state law to make it absolutely clear that their residents don’t have a choice: gambling in Utah is illegal, whether it’s at a business, in your home, or on your smart phone.

As Eric Bianchi over at CalvinAyre.com reported last week, Utah state Rep. Stephen Sandstrom introduced legislation (HB 108) that would make it illegal for residents of the state to gambling over the Internet and on handheld devices. This is the second measure meant to address the increasing ease with which Utah residents are skirting the state’s strict gambling laws. Last month, the Utah House passed a bill (HB 40) that eliminated “vague working in the state law” that Internet cafes had reportedly been exploiting to allow online gaming — or as the bill’s sponsor Rep. Don Ipson charmingly put it, made them “havens for criminal activity.”

Utah is only one of two states in the nation that doesn’t have any form of legalized gambling, such as a casino or lottery (Hawaii is the other). But that doesn’t mean that residents aren’t doing plenty of gambling anyway.

Of course, that’s always the problem with prohibition, isn’t it? Bans never actually stop people from engaging in a behavior, it simply makes them a criminal if they do. If Utah’s Internet gambling ban is approved, especially as other states move toward legalizing the activity, Utahans will continue to gambling on and offline. Utah will lose tax revenue to neighboring states and residents will not have the protections of their government if their rights are violated while engaging in online gambling. Apparently, Utah regulators would rather try to protect the purity of the souls of their constituents rather than doing the job they are charged with which is to protect their right to life, liberty, and the pursuit of happiness.

I generally hold John Tamny’s analysis of economic matters in high regard, so I was surprised to find his take on the American Airlines bankruptcy to be oddly lacking.

In his latest Forbes column, Tamny argues that it wasn’t its pension obligations, but monetary policy, specifically the weak dollar, that pushed American Airlines into bankruptcy.

The immediate reason he cites is high fuel prices, which are caused by the fact that oil is priced in dollars in the global market. High fuel prices have hit nearly all airlines hard, not just American. As Tamny himself notes, “Southwest Airlines was one of the few carriers that properly hedged its exposure to fuel prices that were set to go through the roof.”

What does set American Airlines apart is its pension and labor costs.

American’s pension liabilities are so enormous, at $10 billion, that to deny they were a major factor in the airline’s bankruptcy is contrarian to the point of absurdity. Tamny argues that those liabilities didn’t drive American to bankruptcy based on the notion that they would have been reflected in the airline’s stock price. However, that argument fails in the face of the dodgy accounting which many unionized companies with defined benefit pensions apply to those pensions. Information cannot get out into the market when it is suppressed or obscured.

Then there are labor costs, on which American spends $800 million more a year than its main competitors.

Finally, there’s the problem of management decisions that simply go awry. In that regard, last weekend’s interview of Alaska Airlines CEO Bill Ayer in The Wall Street Journal is worth reading. All too often, airlines place too much focus on gaining greater market share—usually through debt-fueled growth—and not enough on common sense strategies such as working to reduce per-mile costs.

In one important way, another section of the IPO already does so in communicating the incredible burdens on companies attempting to go public — burdens that create difficulties even for companies as big as Facebook and almost insurmountable for smaller firms. On page 30 of the S-1 (page 37  if counting the total number of pages), Facebook specifically singles out the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010 as “risk factors” that will impose substantial costs to the company and its shareholders and divert resources from the firm’s core mission of innovation.

In bold lettering, Facebook announces, “The requirements of being a public company may strain our resources  and divert management’s attention.” The prospectus goes on to explain:

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (Exchange Act), the Sarbanes-Oxley Act, the Dodd-Frank Act, … and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources.

Regarding Sarbox, Facebook registers a complaint similar to that of many entrepreneurs, investors, and scholars of the economy about the law’s burden. The filing notes that the company is “in the process of designing, implementing, and testing the internal control over financial reporting required to comply with” Sarbox’s infamous Section 404,”which process is time consuming, costly, and complicated.”

Facebook is far from the only firm — big or small — that has found Sarbox to be “time consuming, costly, and complicated.” According to John Battelle’s book The Search, considered a definitive history of Google, Sarbox was “hell for a company like Google, which made its money literally pennies at a time, from millions upon millions of micro-transactions.”

Battelle reports that Sarbox compliance significantly delayed Google’s 2004 IPO. “According to engineers involved in the work, Google had to significantly restructure its advertising report system from the ground up.”

And if Sarbox makes life difficult for humongous firms such as Facebook and Google, we can only imagine the toll it takes on smaller firm seeking to raise capital by going public. And these are the very firms that could be the next Facebook or Google or start the next retailing wave like Home Depot.

And with specific regard to Home Deport, the firm’s co-founder Bernie Marcus has said many time the company likely never could have gotten off the ground if Sarbox and other of today’s regulations had been in effect. “We could never succeed today,” Marcus bluntly told radio host Hugh Hewitt in June.

In contrast to Facebook and other IPOs this year that launched when the firms already had billion-dollar market valuations, Marcus explained that when Home Depot went public, it was nowhere near a billion-dollar company. In fact, it had just four stores to its name.

IPOs of this size were fairly typical in the pre-Sarbox world. AOL founder Steve Case, a member of President Obama’s Council on Jobs and Competitiveness,  recently noted in a Washington Post op-ed, “Initial public offerings of less than $50 million were 80 percent of IPOs in the 1990s but just 20 percent in the 2000s.”

Another key difference between the pre-and post-Sarbox era, is that when small firms went public, they did so to raise the capital they needed to grow. Today, when companies the size of Facebook, Groupon, and LinkedIn launch IPOs, they do so mainly so their limited number of wealthy investors can realize the value of the growth that has already occurred. As Zuckerberg wrote in his letter in the S-1, the primary purpose of the IPO is to make the stock “worth a lot and make it liquid” for existing investors and employees.

Nothing wrong with that, but because Sarbox and Dodd-Frank prevent smaller firms from having the same access to the public markets, job creation suffers. As Case notes in his op-ed: “90 percent of job creation typically happens after a company goes public — and all too often, the alternative is for a company to be sold. While job growth accelerates after an IPO, it decelerates when a firm merges or is acquired.”

The good news is a package of bills passed the House overwhelmingly – with more than 400 votes and, in some cases, the Obama administration’s endorsement – in November to allow Facebook-like innovations such as “crowdfunding,” in which smaller firms can raise some seed capital free of much of the red tape from Sarbox and Dodd-Frank. The bad news is, as House Speaker John Boehner noted in a statement today, these bills have stalled in Harry Reid’s Senate. It’s time to “friend” solutions that allow small entrepreneurs and investors to take full advantage of the Facebook age.

Trey Kovacs assisted with the post.

The Chronicle of Higher Education reports that a team of eight law firms have just “sued a dozen more law schools across the country, accusing them of luring students with inflated job-placement and salary statistics and leaving graduates ‘burdened with debt and with limited job prospects.’ The lawyers . . . said they planned to file 20 to 25 new lawsuits every few months . . . the lawsuits had been filed on behalf of a total of 51 graduates, and each suit was seeking class-action status. The targets of the latest round of lawsuits” include  “Brooklyn Law School,” “Chicago-Kent College of Law,” “DePaul University College of Law,” “Golden Gate University School of Law,” “Hofstra Law School,” “University of San Francisco School of Law,” “Widener University School of Law,” and several others. As the Chronicle notes, “Disgruntled law-school graduates who can’t find jobs are increasingly taking their complaints to court, asserting that the schools duped them into enrolling with misleading statistics about their chances of landing well-paying jobs when they get out. Last year similar lawsuits were filed against New York Law School, Thomas M. Cooley Law School, and Thomas Jefferson School of Law.”

As I noted earlier, much of what law schools teach their students is useless drivel, and law schools routinely exaggerate their students’ job prospects. Accordingly, there is no reason to require people to attend law school before sitting for the bar exam. As law professor Paul Campos notes, legal education is often a rip-off, since the typical law professor has little real-world experience practicing law, and “knows nothing about being a lawyer.” But since most states require people to attend law school before sitting for the bar exam, law schools have been able to increase tuition by nearly 1,000 percent since 1960 in real terms. For its part, the Obama Education Department has implemented policies that encourage colleges to jack up tuition and charge students even more, even as college students are learning less and less.

As a Bloomberg News commentary notes, large numbers of people who are not poor are getting food stamps, due to perverse incentives that encourage states to deliberately classify people as eligible in order to draw federal money to their state.  People are eligible in some states even if they are not poor at all, but merely received an “informational brochure” for welfare, or a tiny amount of state money that the state deliberately gave them that they didn’t even need, in order to qualify them for food stamps:

As the article notes, food stamp rolls have risen by 29 million people in recent years:

[A] troubling reason for the increase is that state governments have found it easy to get their constituents federal money — that is, money mostly raised from current and future taxpayers in other states — by making more people eligible for food stamps. According to a mid-2010 report from the Government Accountability Office, 35 states have no limit on the amount of assets a food-stamp recipient can possess. More and more states — the count was 36 at the time of the report — are providing “categorical eligibility” for food stamps to anyone who receives welfare services. Merely getting an informational brochure from the Temporary Assistance for Needy Families program counts as receiving a service.

Another way that states and localities can get federal money flowing to them is by providing token amounts of assistance with home heating bills. Even a dollar of energy subsidies can make someone eligible for food stamps, or increase the benefit level for someone already on SNAP. Vermont, for example, sends $5 checks to public-housing residents, even though their subsidized rent already covers heating, to qualify them for food stamps. Liberal activists call this strategy for getting federal money “heat and eat.”

The Obama administration didn’t create these perverse incentives, but it did magnify them (in legislation such as the $800 billion stimulus package, which largely repealed the 1996 welfare-reform law, as Slate’s Mickey Kaus and the Heritage Foundation have noted). The Obama administration is busy cracking down on states that attempt to reduce food stamp fraud, as James Bovard noted in The Wall Street Journal. Food stamp fraud costs America billions of dollars. This is remarkable, since eligibility requirements are so lax that no fraud is even needed for many undeserving people to collect food stamps. As Bovard noted in the Journal, the Obama administration has encouraged states to abolish asset tests for food stamps, leaving even unemployed millionaires able to qualify: “Millionaires are now legally entitled to collect food stamps as long as they have little or no monthly income. Thirty-five states have abolished asset tests for most food-stamp recipients. These and similar ‘paperwork reduction’ reforms advocated by the United States Department of Agriculture (USDA) are turning the food-stamp program into a magnet for abuses and absurdities.” There are now a record 47 million people on food stamps.

As the Bloomberg article notes, some Republican lawmakers want able-bodied adult food stamp recipients “to abide by work requirements,” “but the Obama administration hasn’t been interested.”

If food stamp handouts were low in dollar value — just enough to avoid hunger — middle-class people who don’t need them wouldn’t find it worthwhile to apply for them. But food stamps are not stingy, which is why growing numbers of people who are in no danger of ever going hungry have applied for them, and now receive them. Recently, “The average food stamp benefit was $133.80 per person” — which is more than I spent on food as a bachelor — “and $283.65 per household”  — which is more than my family typically spends on food in a month.

Earlier, I wrote about how it is not difficult to live on a food stamps budget. The Washington Post ran a story in its health section about how various people, such as the chef for a law firm and a natural foods store owner, were able to live quite well on a food stamps budget. For example, Rick Hindle, executive chef for the Skadden, Arps law firm “showed recently that you don’t have to spend hours in the kitchen to prepare healthful food for $1 or less per meal.”

To divert attention from this fact, liberal groups have created something called the “Food Stamp Challenge.” This “challenge” is a misleading PR exercise where a wealthy liberal like a high-paid bureaucrat or congressman who is used to spending huge amounts on food, lives for a week on a food stamp budget and stupidly buys junk food (or nothing but bread or pasta) rather than cheaper nutritious foods (like potatoes) in order to falsely make it seem like it is hard to eat on a food stamps budget (even though, as Warren Kozak notes in the Wall Street Journal, hunger is virtually non-existent in America). The only thing this bogus “food stamp challenge” actually shows is that privileged people who eat out in restaurants all the time are often unaware of what nutritious foods are cheapest; or they stupidly think that cheap  nutritious foods, like baked potatoes, are unhealthy, or not as good as white bread or pasta, even though baked potatoes, unlike white bread or pasta, have all 8 essential amino acids, and lots of vitamins and minerals, like 40 percent of your day’s supply of vitamin C, potassium, and B vitamins. This ignorance about food is shared by the Obama administration:  So great is its nutritional ignorance that it banned white potatoes from the WIC program, even as it permitted food stamps to be used for sugary sodas, and used tax dollars to subsidize junk food and fatty and sugary foods.

Meanwhile, the cost of the food stamp program has exploded.  As Bovard pointed out, the costs of the food stamp program have more than doubled since 2007 to $77 billion from $33 billion even as fraud has soared:

Wisconsin food-stamp recipients routinely sell their benefit cards on Facebook . . . ‘nearly 2,000 recipients claimed they lost their card six or more times in 2010 and requested replacements.’ USDA rules require that lost cards be speedily replaced . . . Thirty percent of the inmates in the Polk County, Iowa, jail were collecting food stamps that were being sent to their non-jail mailing addresses in 2009 . . . The Obama administration is responding by cracking down on state governments’ antifraud measures. The administration is seeking to compel California, New York and Texas to cease requiring food-stamp applicants to provide finger images. The food-stamp poster boy of 2011 is 59-year-old Leroy Fick. After Mr. Fick won a $2 million lottery jackpot, the Michigan Department of Human Services ruled he could continue receiving food stamps . . . ‘the winnings were considered ‘assets’ [rather than income] and aren’t counted in determining food stamp eligibility.’

As Michael Tanner noted this weekend in The New York Post, “the current state of our union can be summed up in just two words: We’re broke.”  In his State of the Union address,

The president devoted just 189 words to the deficit and our growing national debt, but the fact is that once again this year we will borrow 32 cents out of every dollar we spend. Overall, our national debt now tops $15.2 trillion (with Congress raising the debt ceiling to $16.4 trillion last week). And that doesn’t count the unfunded liabilities of Social Security and Medicare. Throw those in, and our total indebtedness exceeds $120 trillion.

That means that if one counts only the official national debt, every man, woman and child in America owes $48,700. Include the unfunded liabilities of Social Security and Medicare, and every one of us is in debt to the tune of $189,000. . . measured as a percentage of [our economy,] our budget deficit is roughly a quarter larger than France’s. In fact, among European countries, only Greece and Ireland have larger deficits this year than we do.

The debt figures paint an even grimmer picture. If one includes all the unfunded liabilities of pension and health-care systems, Greece’s total debt equals 875% of its GDP. . .The United States, however, now owes 885% of GDP, more than any other industrialized country.

Rather than come to grips with America’s fiscal crisis, President Obama gave a State of the Union address littered with costly giveaways, and full of false claims about outsourcing and corporate taxes. (Ironically, for all his denunciations of outsourcing, Obama has spent billions of dollars on foreign “green energy” firms: “79 percent” of all green-jobs subsidies in the stimulus package “went to companies based overseas,” noted the Investigative Reporting Workshop at American University.)

Massive budget deficits and mushrooming entitlements increased the federal government’s long-term obligations by $4.2 trillion in 2011 — more than three times the $1.3 trillion official figure for the federal budget deficit, noted a Washington Post article. (Even the official budget deficit is more than eight times the size of the budget deficit back in 2007.) The Obama administration has run up the biggest budget deficits in history. Obama’s $800 billion stimulus package, which benefited public-employee unions, will actually shrink the size of the economy in the long run, the Congressional Budget Office says, although it temporarily pumped up employment among government-employees. (By contrast, two economists argue that it wiped out the jobs of a million private-sector employees by diverting money from the private sector to the public sector.) Congress recently failed to block the Obama Administration from raising the national debt ceiling by another $1.2 trillion.

As an article in the Financial Post noted, if Mitt Romney were Canadian, he’d pay less tax than he does in America.

That’s because most of Mitt Romney’s income is from investments.  Much of the world taxes investment income far less than the U.S. does, while taxing consumption more, through a Value Added Tax (VAT). Those countries are more generous to savers, unlike our tax code, which favors spenders.

The belief that the richest 1 percent in Europe and Canada subsidize all of the other 99% is a common delusion on the American Left. It’s the basis for their fantasy that vast new government programs can be paid for simply by taxing the rich. But as Romney’s situation shows, it has no basis in reality.

Europe and Canada finance their more extensive welfare states heavily through VATs, taxes paid mostly by the middle and working classes, since VATs tax consumption, and lower-income people spend a higher percentage of their income than rich people do. Those countries don’t force rich people to pay 90 percent tax rates, as some Democratic lawmakers, like Congressman Jerry McNerney, have recently advocated.

They don’t attempt to tax even wealthy people’s investment income at confiscatory rates, because they have learned from painful experience that doing so discourages people from saving money or starting a business, and lowers investment and economic growth.

The U.S. tax code is already more progressive than most countries’ tax codes.  And it is getting more so.  Next year, a new 3.8 percent tax on investment income goes into effect to pay for the 2010 healthcare law, one of an array of new taxes contained in that law.

Moreover, our tax code discriminates against savers both by taxing them on all their capital gains, but not taking into account some of their losses, and by taxing them on paper “profits” that are not real income but rather the product of inflation that increases nominal asset values even when their real value is falling, leaving the investor poorer.

Even if taxes were jacked up to 60 percent on the wealthy, it wouldn’t begin to pay for recent increases in federal spending, which have led to trillion-dollar budget deficits as far as the eye can see. (By 2010, the national debt was growing each month by as much as it did in entire years like 2007.)  Only broad-based taxes on the middle class can generate enough revenue to pay the costs of big government and expanding welfare entitlements.

As accountant Jamie Golombek pointed out in the Financial Post:

If Romney were filing Canadian taxes, we estimate he would have paid even less . . . Romney would have paid $2,973,021 of Canadian federal tax in 2011 . . . which translates to an effective federal tax rate of only 14.2%, more than a percentage off the 15.4% he is forecast to pay. . . .    In Canada, dividend income is eligible for a dividend tax credit while capital gains are only half taxable. In other words, for a top income earner, Canadian dividends are taxed a top federal rate of only 17.72% (2011) while capital gains for a high income earner would be taxed at half the top marginal tax rate or 14.5% (i.e. 50% X 29%). Charitable donations above $200 are eligible for a 29% federal donation tax credit.

(Romney made “$4 million of charitable gifts” in 2011, and $3 million in gifts in 2010, Golombek noted, which would reduce his tax due under both the U.S. and Canadian tax codes.)