Congressional Millionaires Get Government Healthcare Paid For By Taxpayers

In the last Congress, more than half of all members (261) were millionaires. About 1 in 5 of had average calculated wealth of at least $10 million in 2009. And eight of the 261 were in the $100 million-plus range.

However, only about 1 percent of the overall US population qualify as millionaires.

The median wealth of a representative was $765,010, while that of a senator was almost $2.38 million.

And, even during a deep recession, the collective personal wealth of congressional members increased by more than 16 percent between 2008 and 2009.

In contrast, U.S. median household income dropped 3 percent to $50,221 between 2008 and 2009, the second straight decline, according to the Census Bureau.

These findings were detailed in a report by the Center for Responsive Politics back in November.

The study also indicated that a significant portion of Congress owned shares of major players in the health-care and financial-services sectors, which were the subject of major reform legislation during the period.

Meanwhile, this body of millionaires, who all get government-sponsored health care — which many of them vigorously oppose — have decided that their first act in the new term will be to vote to repeal the health care reform that gives affordable care to 32 million Americans.

According to the Office of Personnel Management, the federal government pays 69 percent of the health care premiums for members of Congress.

This isn't an argument in favor of the health care law, which is riddled with problems; the bill is 2,400 pages long and was written by/with the insurance and pharmaceutical industries.

But it is quite ironic that politicians who have derided the health care law as 'socialist', or 'fascist', or any number of derogatory names, see this system as perfectly acceptable for themselves.

So, government-sponsored health care is good enough for the millionaires in Congress, but not for anyone else. Got that?

With this in mind, Senator Charles Schumer (D-NY) is calling on his colleagues to give up their government-sponsored health care.

"It was a central value to us when we passed health care, and a central value to the American people, that members of Congress should get the same health care as everyone else. It seems unfair that house Republicans want to deprive middle-class Americans of the same health care as members of Congress but to keep it for themselves."

While this may be viewed as grandstanding by Schumer, the simple fact is... he's right.

US Defense Secretary Is A Master Illusionist

Defense Secretary Robert Gates seemed to perform the impossible today when he announced $100 billion in defense spending cuts, while also unveiling a plan to grow military spending.

How's that for amazing?

The money the armed forces save from their budgets by canceling projects can be plowed back into their budgets for other programs. Gates found $100 billion in savings over five years, but allowed the Pentagon to keep that money.

Cory Shockey, who served on the National Security Council under President George W. Bush, sees Gates as somewhat of a magician.

"My sense is that he's actually pulled off one of the great Houdini acts of our time. Everybody's talking about this $100 billion cut in the budget. But what Gates has actually done is moved $100 billion from his existing budget, to his existing budget," says Shockey.

The Military-Industrial Complex is dedicated to its own self-preservation. There are numerous people in government, even elected officials, who will fight to no end for its survival — even if it means sinking the federal budget, and America itself.

Case in point; just days ago, Senator Lindsay Graham (R- South Carolina) said he wants American officials to consider establishing permanent military bases in Afghanistan.

Apparently, Sen. Graham hasn't seen the federal budget, the deficit, or the $14 trillion national debt.

Believing that the US can continue to spend more on its military than every other nation in the world — combined! — is plainly delusional.

The combination of defense spending and Homeland Security amounts to the single largest expenditure in the federal budget.

To truly save this nation from financial ruin, that simply cannot continue.

Anyone who is serious, and sincere, about reducing the deficit and the debt, must admit this.

And they must also take steps to thwart people in government like Robert Gates and Lindsay Graham.

The Military-Industrial Complex must be broken in order to save America.

Texas Is In Trouble, With A Capital 'T'

According to the Center on Budget and Policy Priorities, 39 states have projected budget gaps for the 2012 fiscal year.

With its projected $28 billion deficit, California has gotten most of the attention nationally. Illinois, New York and New Jersey have also received plenty of press.

However, another state — one that hasn't gotten nearly as much attention — also faces an enormous and troubling debt.

Texas has long prided itself on its low-tax, business-friendly model. And its governor, Rick Perry, has boasted that this has led to a more robust economy and sounder finances than other states.

However, the Texas budget deficit may have now spiked to level as high as $25 billion. The actual figure will be announced this month.

The state budgets in two-year cycles. It's next budget will be around $95 billion. So, a $25 billion deficit is just massive.

Texas is among seven states with no personal income tax, and raising taxes is not an option for its Republican, anti-tax, governor. Falling sales taxes account for about 65 percent of revenue.

The Texas constitution requires a balanced budget, so the state faces scaling back already lean budgets for education, healthcare and public safety, all of which previously underwent cuts in 2003.

Education accounts for 55 percent of state spending. Healthcare accounts for 25 percent of spending. And public safety accounts for roughly 10 percent.

Further cuts would be devastating. At present, 26 percent of Texans are uninsured – a higher percentage than in any other state. The estimated average salary of public school teachers ranks 39th among states, with state and local expenditures per pupil in public schools ranking 44th.

There simply isn't much lower to go in each of these categories.

The Lone Star State is in big trouble.

Texas appears poised for a fiscal meltdown, and that has the potential to rock the bond markets in 2011.

State Budget Crises: A Storm On The Horizon

Back in August, the Independent Report featured a story about the tattered balance sheets of the states. Even then, it was quite obvious that trouble was brewing.

However, the dire condition of state budgets across the nation is something the mainstream media has largely ignored — until now. The problem has reached such catastrophic proportions that it can no longer be ignored.

In fact, 60 Minutes recently featured a story highlighting the unfolding crisis.

Meredith Whitney, one of the most respected financial analysts on Wall Street, warned 60 Minutes about the next financial meltdown — in state and local governments.

Whitney, who made her reputation by warning that the big banks were in big trouble long before the 2008 collapse, was blunt.

"It has tentacles as wide as anything I've seen. I think, next to housing, this is the single most important issue in the United States, and certainly the largest threat to the U.S. economy," she told 60 Minutes.

New Jersey Governor Chris Christie concurs.

"It's not like you can avoid it forever, 'cause it's here now," said Christie. "And we all know it's here. And the federal government doesn't have the money to paper over it anymore, either, for the states. The day of reckoning has arrived. That's it. And it's gonna arrive everywhere. Timing will vary a little bit, depending upon which state you're in, but it's comin'."

Nationwide, state and local governments are now sitting on a mountain of debt that has reached an all-time high of 22 percent of U.S. GDP.

Historically, municipal bonds have been viewed as the safest of investments. However, many analysts are now openly talking about the possibility of a municipal bond market crash in 2011.

If such an event does occur, things such as roads, sewer systems, water systems, etc., would no longer be repaired, much less constructed. State and local governments would have to raise taxes significantly. Even then, it's likely that many would still be unable to meet their funding needs.

New Jersey faces a $10 billion deficit.

California faces a $19 billion budget deficit next year and its credit rating approaches junk status. It now spends more money on public employee pensions than it does on the state university system.

And Illinois spends twice much as it collects in taxes and is unable to pay its bills. The state currently owes about $5 billion and has no credible solution to its problems. State Comptroller Dan Hynes calls Illinois "a deadbeat state".

Nationwide, the generous retirement and health care packages given to public employee unions are now grossly underfunded. Two prominent university professors have calculated that the combined unfunded pension liability for all 50 U.S. states is approximately 3.2 trillion dollars.

According to Whitney, no one really knows how deep the holes are. She and her staff spent two years and thousands of man hours trying to analyze the financial condition of the 15 largest states. She wanted to find out if they would be able to pay back the money they've borrowed and what kind of risk they pose to the $3 trillion municipal bond market, where state and local governments go to finance their schools, highways, and other projects.

"The lack of transparency with the state disclosure is the worst I have ever seen," Whitney says. "Ultimately we have to use what's publicly available data and a lot of it is as old as June 2008. So that's before the financial collapse in the fall of 2008."

The deficit problems of the states have become the problems of local governments, which depend on their state for a third of their revenues. Whitney is convinced that some cities and counties will be unable to meet their obligations to municipal bond holders who financed their debt.

"There's not a doubt in my mind that you will see a spate of municipal bond defaults," Whitney predicted. "You could see 50 sizeable defaults. Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars' worth of defaults."

That's a frightening prospect. Since huge numbers of municipal bonds are held by big banks, even a few defaults could affect the entire financial market.

According to Whitney, there's a gathering storm on the horizon.

"It'll be something to worry about within the next 12 months," she warns.

This spring, the $160 billion in federal stimulus money that has helped states and local governments limp through the great recession will run out. The states will need additional help and will almost certainly ask for another bailout.

However, right now, bailouts are political dynamite in Washington. That's because the federal government is also broke and facing a national debt that has now reached $14 trillion.

These problems have been mounting for many years and now the moment of reckoning has finally arrived.

We're in for some rather ugly political battles, and even worse outcomes. A total economic collapse is quite likely, if not inevitable.

Home Prices Continue To Decline, Threaten Overall Economy & Recovery

The latest news from the housing sector continues to be bad. Home prices declined sharply in October.

The non-seasonally-adjusted S&P/Case-Shiller 20-city composite home-price index fell 1.3% on a monthly basis and 0.8% on an annual basis in October.

Prices hadn’t dropped on an annual basis since January and are 29.6% below their 2006 peak.

Six cities — Atlanta, Charlotte, Miami, Portland, Seattle and Tampa — hit their lowest levels since home prices started to fall in 2006 and 2007.

The Case-Shiller report is based on prices over a three-month period, so this report included prices from August, September and October. That makes it more accurate in revealing trends than a single month report.

According to Bank of America Merrill Lynch, there’s an inventory of 7.2 million homes, or roughly 21 months of supply, nationwide. That includes homes that are in, or close to, foreclosure.

Think about that; there's nearly a two-year supply of foreclosures either on the market or headed to market. What will that do to home prices? Imagine what this portends for stable owners seeking to sell their homes? There's a lot of competition from very cheap foreclosures out there.

And then consider the fact that banks are holding onto foreclosed properties without listing them for sale. They're doing this with the hope that these homes will recover their lost value. The banks are hoping to at least break even, if not make a profit.

They may be waiting for years.

If banks were required to report the true value of the homes on their books, and thereby report their true losses, many more of them would be insolvent. As it stands, 157 US banks have already gone under in 2010. But even some of the biggest banks, the Mega Banks, are on very shaky ground.

The price declines will inevitably push even more mortgages underwater. At present, nearly a quarter of all homes with a mortgage already have a lesser value than they are mortgaged for. That number will only increase.

The process of price discovery, which is necessary to determine the final value of housing, is still years away. Prices will continue to fall in 2011 and in 2012.

That's because there's still the problem of option-ARM loans that will reset over the next two years. Option ARMs — which became widespread in 2005 — let borrowers choose to make very low payments for the first five years.

During that initial period, borrowers were allowed to pick their payment option, including just the interest. According to Fitch Ratings, 94 percent of option ARM borrowers elected to make minimum payments only.

The bulk of option ARMs reset dates are spread out from 2010 through 2012, meaning the foreclosure waves will drag on for at least the next two years. That has federal and state officials bracing themselves for the next tidal wave of foreclosures

Almost all the homes with mortgages have already lost value, thereby lowering the homeowner's equity. Most of them will have a difficult time refinancing as a result.

The artificially low interest rates set by the Fed are still masking true home values. Easy money is still providing at least some incentive to buy, yet even that cannot thwart the brutal combination of price declines and falling demand.

Eventually, home prices will fall back to levels not seen since the 1990s, the 1980s, and perhaps even the 1970s in some areas.

Millions of prospective buyers are currently sitting on the sidelines, believing that the bottom has not yet been touched. They may be left waiting for a while. And the longer they wait, the longer it will take to see any meaningful sort of recovery.

At best, it is probably still years away.

US Recovery Facing Strong Headwinds In 2011

Though the recession officially ended in June 2009, when the economy started to grow again, many Americans still feel the lingering after effects.

Gross domestic product, the broadest measure of the country’s output, grew at an annualized rate of 3.7 percent in the first quarter of 2010. But then it stalled, with the rate falling to a mere 1.7 percent in the second quarter and 2.6 percent in the third quarter.

Some believe that the $858 billion tax-cut compromise between President Obama and Congressional Republicans will stimulate the economy by putting more cash in the hands of consumers.

Additionally, unemployment insurance benefits for the long-term unemployed were extended, yet again. This will keep these people afloat and recirculate that money back into the economy.

However, these moves have only inflated the government’s huge debt burden (now $13.9 trillion) and pushed onerous decisions further off into the future, when they will be even more difficult to grapple with.

Analysts at large bond brokerages say the extension of the Bush tax cuts will push the federal deficit to about $1.4 trillion in fiscal 2011.

After the tax extension was signed into law, Moody's Investors Service warned that the tax deal raises the chance that it would issue a negative outlook on the U.S. government's AAA credit rating.

Unemployment benefits have overwhelmed many states, who have turned to the federal government for help.

According to the Economic Policy Journal, over 60% of Americans receiving state unemployment benefits are getting these directly from the US government, as 32 states had borrowed $37.8 billion from Uncle Sam to fund unemployment insurance as of May. Obviously, the problem has grown worse since then.

Roughly 15 million Americans do not have jobs, which is cutting into tax revenues, increasing unemployment payouts, and hurting consumer spending. At 9.8 percent, the unemployment rate remains at its highest level since the early 1980s.

Unfortunately, even the optimists recognize that unemployment is likely to remain above 9 percent through all of next year. And even if the economy managed to grow at 4 percent in 2011, that would hardly alter the unemployment picture.

Economists estimate the economy would need to grow by 5 percent for a full year to push down the unemployment rate by a full percentage point.

There are many reasons to question the ability of a recovery to take truly hold.

The US economy is overly reliant on consumer spending, which accounts for a whopping 70 percent of GDP. With so many people out of work, earning less, and working only part-time, spending is strained and will remain so until those problems are rectified.

The housing market remains anemic, and continues to be a drag on the economy. Nearly a quarter of all mortgages are under water. Home ownership continues to decline. Foreclosures are up. Demand is down. And home values are also down; US homes will lose a whopping $1.7 trillion in value in 2010.

Aside from the housing market, financial markets and the US banking system also remain vulnerable to the continued fallout from the European debt crisis. So far, the problems have been limited to the smaller economies of Greece, Ireland, and Portugal. Should a larger economy (such as Spain) reveal similar strains, the ensuing panic could be widespread and the effects crippling.

Then there is the mounting concern about the tattered balance sheets of state and local governments. At least a few — such as California, Illinois, New York, Michigan and even Texas — may eventually require a federal bailout. Given the current political environment, such an outcome would be deeply unpopular.

After gutting budgets, many states have no reasonable way to further reduce deficits and spending. They face a quandary that seems to lack a solution. No US state has defaulted since Arkansas, during the Great Depression. That could change in the next year or so.

States continue to borrow in order to fund their day-to-day operations, continually worsening their already burdensome deficit problems. The states are truly too big to fail, and that is the horrific prospect currently facing the federal government.

The state deficit problems are enormous and unwieldy, making them the next bubble to inevitably burst. The Center on Budget and Policy Priorities estimates that the cumulative state budget shortfalls are somewhere around $425 billion for fiscal 2009 through fiscal 2011.

When this economic domino falls, or any of the aforementioned, the prospects of recovery will fall with it.

Housing Is The Bellwether Of Our Economy, And The News Isn't Good

Ownership Is Down. Foreclosures Are Up. Supply Is Up. Demand Is Down. And Values Are Down.

Housing is not recovering, and until it does there can be no economic recovery in the US.

Home ownership has declined in the US for the third year in a row. And since 2005, home ownership has declined by 3 million households, according to a report from the US Census Bureau.

A combination of spiking foreclosures, high unemployment, falling wages and a lack of savings for a down-payment (once again a required 20 percent) have eroded the American dream of home ownership.

The share of households that own their homes has been sliding since the housing bubble burst in 2006. The rate fell again in the second quarter of this year to 66.9 percent — the lowest since 1999 — from a peak of 69.4 percent in 2004, the Census Bureau says.

However, millions of houses on the verge of foreclosure threaten to send homeownership to its lowest level in 50 years. According to new industry estimates, the rate could plummet to about 62 percent as early as 2012 and almost certainly by the end of the decade. Homeownership rates haven't been that low since they hit 61.9 percent in 1960.

There are not enough first time-buyers, or those with adequate credit, to thwart the slide.

More than half of applicants (53 percent) don't have a high enough FICO score to get the best mortgage rates. Even worse, 35 percent of US consumers—some 70 million people—are now considered sub-prime and simply cannot qualify for credit. This huge segment of Americans cannot get a mortgage and are not participants in the housing market. That, alone, significantly hurts demand.

Some Americans cannot afford to own a home. Others see ownership as a bad investment, at present. And millions more have lost, or are about to lose, their homes. The combination is crushing home ownership.

Yet, even those who own their homes, and who do not appear to at risk of losing them, are facing their own unique struggles.

CoreLogic reports that 10.8 million, or 22.5 percent, of all residential properties with mortgages were in negative equity at the end of the third quarter of 2010, down from 11.0 million and 23 percent in the second quarter. However, this decline is due primarily to foreclosures of severely negative equity properties rather than an increase in home values.

During this year the number of borrowers in negative equity has declined by over 500,000 borrowers. An additional 2.4 million borrowers had less than five percent equity in the third quarter. Together, negative equity and near-negative equity mortgages accounted for 27.5 percent of all residential properties with a mortgage nationwide.

That will eventually spur even more defaults and foreclosures. As it stands, the housing inventory data is muddled due to the number of foreclosures that are not yet listed for sale.

The decline in ownership is having a negative effect on prices. Supply is easily exceeding demand. The Census Bureau reports that 18.8 million homes are currently vacant.

US homes will lose a whopping $1.7 trillion in value in 2010. About $9 trillion has been lost since June 2006, according to report from Zillow.com. These losses are simply stunning.

Worse, Fitch Ratings forecasts that home prices will drop an additional 10 percent next year.

An excess housing supply—due to defaults, pending foreclosures, or vacant homes—is holding down home prices. And, according to many analysts, there is every indication that excess supplies and falling prices will continue into next year. It's not hard to imagine.

The so-called 'shadow inventory' continues to grow. According to Morgan Stanley, 8 million foreclosure-bound homes have yet to hit the market.

Laurie Goodman, senior managing director at Amherst Securities, reports that 1 in 5 distressed homeowners in the US faces, or may face, foreclosure. She says 11.5 million home loans are non-performing or highly distressed at present.

All of that excess inventory will eventually push housing prices even lower than they already are, which will result in even lower equity for millions of homeowners. That could, in turn, make millions of homeowners more vulnerable to foreclosure.

Homeownership has generally built personal assets. But for millions of Americans, that is no longer the case. The most valuable asset of millions of Americans continues to decline.

With unemployment hovering near 10 percent, and housing showing no signs of a bottom, any sort of recovery seems like a very distant prospect.