California’s state auditors recently released an unflattering look at the state’s finances, part of their annual report. Issued several years in arrears, the assessment showed nearly $2 billion in deficit spending for the 2011-2012 fiscal year, piling more borrowed money onto what Gov. Jerry Brown has called a figurative “wall of debt.” 

“The report, which covers the fiscal year ending June 30, 2012, says that the state’s negative status — all of its assets minus all of its liabilities — increased that year, largely because it spent more than it received in revenue,” the Sacramento Bee reported. “About half of the $127.2 billion in accumulated red ink came from the state’s issuing general obligation bonds and then giving the money to local governments and school districts for public works projects, the auditor pointed out. The assets built with the bonds remain on local balance sheets while the bonded debt accrues to the state.”

Wrestling with debt

Over the past several years, however, Gov. Brown’s effort to keep debt from ballooning has made something of an impact. “California’s debt service ratio is on track to drop below 5 percent over the next several years,” as the Bee observed last month, citing the state’s nonpartisan legislative analyst: 

“The ratio, an indicator of the state’s debt burden, reflects how much general fund revenue and transfers go to pay off past borrowing. It rose to 6 percent in the late 2000s after voters approved tens of billions of dollars in borrowing for roads, schools and parks. But the ratio has declined to about 5 percent as general fund revenue grew, debt was refinanced, and the payback cost for some borrowing, such as transportation, was shifted to special funds.”

Nevertheless, California’s fluctuating income has remained a steady concern. “Brown’s administration urged caution in the face of sluggish state revenue in the summer and fall. October tax collections were $381 million, or 4.7 percent, below projections,” the Associated Press recalled in November, when revenue was “$1 billion below projections since the administration’s most recent forecast in May.”

Next year, the legislative analyst predicted, California will pull in a surplus of nearly $3 billion. But the specter of public pensions has not been diminished by the estimate. “The Governmental Accounting Standards Board and Moody’s, a major bond credit rating house, have been pushing states and localities to include unfunded retiree obligations in their balance sheets and were they to be added to California’s, it could push its negative net worth down by several hundred billion dollars,” the Bee cautioned. 

String of challenges

The auditors’ budget report continued a critical streak this year. Earlier this month, they found that “at least 184 complaints against registered nurses, which include practitioners and specialists, were still waiting to be assigned to nursing board investigators,” as ABC 10 recalled. “About 40 percent of those complaints involve ‘high-priority allegations’ such as patient death or criminal activity. Complaints come from a variety of sources, such as patients and the media.” (Nursing board oversight officials have insisted all complaints are now being reviewed.)

Before that, another audit targeted a key component of the state’s criminal justice bureaucracy. “In an August report, the California State Auditor examined how inadequate oversight had led to a badly compromised database” collecting gang membership records, according to the San Francisco Chronicle. State agencies, the auditors concluded, “lacked adequate support for 13 of 100 people we reviewed in CalGang and for 131 of 563 of the CalGang criteria entries we reviewed,” the Chronicle continued, noting the auditors “also found privacy violations, a failure to purge old records and transparency problems.”

And last month, they hit out at the state’s public school system for falling short on books. “Sampling school libraries in Sacramento, San Bernardino and Tulare counties, California state auditor Elaine M. Howle found schools with no librarians, non-teaching staff providing library services and lack of oversight of library services,” the San Jose Mercury News reported. 

The California State Teachers’ Retirement System, one of the world’s largest pension funds, has found itself in the spotlight. Recently, state Democrats ensured that CalSTRS divested from coal and guns. But diminishing returns on investment have grown the pension fund’s unfunded obligations, according to a report issued by an independent auditor. “As of June 30, 2015, the net pension liability for the State Teachers’ Retirement Plan increased by $8.9 billion to $67.3 billion due to lower investment returns during fiscal year ended June 30, 2015 as compared to last year,” the report noted.

Drawing fire

Critics pounced on the news, characterizing it as effectively an off-ballot issuance of debt equal to what’s on offer this coming November. (“On school construction, a proposed $9 billion bond issue has qualified for the November ballot,” as George Skelton observed at the Los Angeles Times.) “The $9 billion addition is as real as any other debt. Arguably it’s more real because, as the Stockton decision demonstrated, bankruptcy courts are more likely to cut bond obligations than pension obligations,” warned Govern for California co-founder David Crane, referencing the recent high-profile determination that the city of Stockton would not renegotiate pension deals in order to help it emerge from bankruptcy.

“Including interest, this $9 billion debt will devour more than $20 billion that would otherwise benefit schoolchildren. Looked at another way, just one year’s interest on this debt is almost as large as the expected growth in state support for education in the current budget year.”

An uncertain future

But the debt forecast for 2016 has been uncertain. The school construction bond measure has run up against opposition from powerful forces to the left of center. Gov. Jerry Brown, for instance, “is opposed to more bond debt,” as Skelton noted. “And teachers unions don’t want a school bond on the November ballot to compete against their anticipated tax increase proposal.” The CTA, for instance, has so far opted not to take a position on the $9 billion bond. “But the union is working on an initiative to stop the scheduled expiration of some temporary taxes that voters approved in 2012 with Proposition 30,” according to the San Jose Mercury News. “Various proposals are in the works to raise at least $5 billion a year by extending some of those taxes.”

Schools themselves have not been immune from criticism. Seeking a culprit for the derelict condition of many state schools, U-T San Diego blamed “the Legislature’s decision during the Great Recession to suspend the state mandate requiring that districts spend at least 3 percent of their budgets on maintenance.”

“Some districts essentially gave up on such maintenance and have not ramped up maintenance to old levels now that school funding has rebounded. When there is little money in the operating budget for maintenance, some districts — including San Diego Unified — have used borrowed bond money to pay for routine upkeep.”

The controversy over the responsibility of school unions and public pensions for accumulating debt has played out at a time when the costs of CTA’s political influence have increased. “The CTA has become a force in Sacramento by pouring millions into influencing ballot measures and electing lawmakers, then millions more lobbying legislators after they take office,” the Mercury News recalled. “The union’s formidable political operation — spending about $200 million on campaigns and lobbying in the last 15 years — is funded by roughly 300,000 classroom teachers who pay approximately $1,000 each in annual union dues.” In 2016, the union will face two landmark lawsuits — one that has reached the Supreme Court, and another, in California, where the Vergara lawsuit is on appeal.

State Treasurer John Chiang issued a report recently that praises California’s fiscal strides in dealing with debt but also raises warnings that the state is still in the deep end of the debt pool. The issue of debt will be on voters minds as they confront a number of likely ballot issues next year that deal with bonds.

First, the good news from Chiang’s report. The treasurer notes that over the last five years the state has finished paying off economic recovery bonds issued during the fiscal crisis of the last decade, strengthened the state budget rainy day fund, and potentially saved millions with pension reform. All this has lead to increased credit ratings from the credit rating agencies Moody’s, Standard & Poor’s and Fitch.  With the improved ratings the treasurer was able to refinance some of the state’s debt and save taxpayers up to $2 billion.

However, Chiang observed that despite the rise in credit ratings, California still has the third worst credit rating of all the states ahead of only Illinois and New Jersey. He raised concerns about health care and pension costs for public employees that add to the state’s debt.

Chiang, in his report, argued that adding to debt could be a good thing or bad thing depending on how the money is spent. He points to the value of Pat Brown’s State Water Project as a positive use of bonds. But he also warns too much debt can lead to catastrophic circumstances as it did in the cities of Stockton and San Bernardino.

Bonds on the Ballot

State voters will consider adding to the state’s debt in next year’s general election.

Already qualified for the November 2016 election is a school construction bond that came via the initiative process. It is backed by a combination of business and labor. If passed it would allow the state to sell $9 billion in general obligation bonds.

In addition, there is a discussion about another water bond. The argument is that the Proposition 1 water bond of 2014 was not enough to deal with issues related to the drought. The size of this bond proposal is not known. Proposition 1 approved a bond worth $7.1 billion.

There could be more bond ideas coming out of the special session considering ways to improve the roads and other infrastructure. In fact, Chiang touched on infrastructure in his report: “I strongly believe we need to conduct a full accounting of all the state’s capital assets – including its crumbling roads, bridges and levees. We then need to assess the remaining useful life of this deteriorating infrastructure and determine the cost of repairs and ultimate replacement.”

Finally, there likely will be a measure on the November 2016 ballot that will give voters a say on revenue bonds over $2 billion. Voters already have a say in general obligation bonds that are covered with tax dollars. Revenue bonds are repaid with funds generated from the services provided by the projects the bonds are used to build. This measure is controversial and will get much attention.

The issue of debt is once again front and center for California’s voters.

The State of California has found a way to save $270 million — without budget cuts or raising taxes.

State Treasurer John Chiang recently announced that his office had completed the sale of $1.93 billion in general obligation bonds, which will deliver hundreds of millions of dollars of savings to taxpayers. Like homeowners refinancing their mortgage, the overwhelming majority of funds were used to refinance approximately $1.54 billion of existing debt.

“I am very pleased at the result of this sale, which will save taxpayers such a substantial sum over the remaining life of the refinanced debt,” Chiang said in a press release announcing the bond financing deal. “Recent credit upgrades have increased the market’s confidence in the state’s credit worthiness and individual and institutional investors alike continued to demonstrate faith in California.”

Market volatility affects savings

Recent volatility in the stock market, according to Chiang’s office, made the substantial bond savings harder to achieve.

“This is a particularly favorable result, given the tremendous volatility in global equity and debt markets over the past several weeks,” he said. “In the face of this volatility, which saw unusual swings in bond yields, the issue met with good success.”

Earlier this summer, the state treasurer’s office announced that the state had made its final interest payments on the economic recovery bonds approved by voters in 2004.

According to KQED, the state had been paying more than “$1 million a day, every day, for 11 straight years.” Proposition 57, which was drafted at the behest of then-Gov. Arnold Schwarzenegger, adopted $14 billion in borrowing – with roughly $5 billion paid in interest payments and fees.

California’s improved credit rating

Ratings by the independent agencies affect the interest rates paid by the state, and in turn, how much it costs taxpayers to service billions of dollars worth of bond debt. The state’s credit rating for general obligation bonds varies with each of the three major credit ratings agencies.

In July, Standard & Poor’s Ratings Services raised California’s grade for general obligation bonds from “A+” to the higher “AA-.” The upgrade was credited to the state’s swift action on the state budget. In late June, Brown signed a $115.4 billion spending plan less than a week after lawmakers approved an on-time budget.

S&P’s summer upgrade followed a February uptick from Fitch Ratings, which raised the State of California’s general obligation rating to “A+” from “A.” According to the State Treasurer’s office, Fitch welcomed the state’s “continued improvement in its fundamental fiscal position, institutionalized changes to its fiscal operations, and ongoing economic and revenue recovery” as motivation for its credit ratings upgrade.

Moody’s Investors Service, the final of the three major bond ratings agencies, classifies California with an “Aa3” rating. That rating has not changed since June 2014.

California’s Long-Term Debt Picture

As of August 2015, the state has roughly $155 billion in authorized bond debt. Of that amount, $77.4 billion in long term outstanding bond debt has already been issued.

However, the state’s total debt burden is much larger than its outstanding bond obligations. State officials peg the total state government debt at $263 billion, or 12 percent of the state’s $2.2 trillion gross domestic product. The much-maligned, debt-burdened nation of Greece, by comparison, had a debt to gross domestic product ratio of 177 percent – prior to this summer’s implementation of capital controls, according to the Wall Street Journal.

Although the state’s debt burden is nowhere close to Greece, some financial experts caution that deferred maintenance on infrastructure as well as unfunded health care and pension liabilities add to the state’s total debt – raising the debt ratio to 50 percent.

“Of course, the official numbers sit at the low end of the estimates,” argued the LA Times’ Jon Healey. “They leave out $66 billion in deferred maintenance on infrastructure, $31 billion worth of bonds that have been authorized but not yet issued and roughly $10 billion owed to the federal government for unemployment insurance benefits.”

“Even using these worst-case-scenario numbers, though, the state’s debt-to-GDP ratio is less than 50 percent, compared with 175 percent in Greece,” he wrote earlier this year.

The next state general obligation bond sale is expected to occur in October.

Dueling Democrats

“California lawmakers on Monday approved a budget with $2.2 billion more in spending than proposed by Democrat Jerry Brown,” Business Insider noted, “the latest move by progressives to nudge the fiscally moderate governor to the left amid improvement in the state’s economy.”

“The general fund spending plan for the fiscal year that begins July 1 cleared the Senate 26-13 and passed the Assembly 52-28,” the San Jose Mercury News reported. “But Gov. Jerry Brown has not yet signed off on the deal, setting up the possibility of a nasty fight over a tiny fraction of the budget.”

What is small in relative terms, however, may be sizable in absolute numbers. Party leaders sought to spend $750 million beyond Brown’s budget on reducing the debt, plus nearly $1.5 billion in social services funding that Brown refused to restore to his $115 billion annual budget. Democrats justified the increases by estimating about $3 billion more in anticipated revenues than Brown and the Republicans expect, according to the Mercury News.

Heated rhetoric

For their part, Republicans did not miss their opportunity to take advantage of the disagreement between Brown and members of his own party. “Legislative Republicans were united in their opposition and called Monday’s vote a ploy to make sure lawmakers don’t miss a paycheck,” noted the Orange County Register. “Under state law, legislators had until midnight to pass a balanced budget or they would have had to forfeit pay.”

Given Gov. Brown’s continued resistance to Democrats’ expanded budgetary plans, some GOP lawmakers characterized the vote as a charade. “Is this a real budget we’re voting on today? Or is this just a sham budget?” asked state Sen. Jeff Stone, R-Temecula, the Register reported.

Despite the heated rhetoric, Republicans were careful to underscore how much common ground they maintained with the governor. “Again and again and again, we found ourselves as Republicans agreeing with the governor, and the governor agreeing with us,” remarked state Sen. Jim Neilsen, R-Gerber, according to the Mercury News. But Brown’s office made clear that a deal with legislative Democrats was expected within a matter of days, according to Business Insider:

“H.D. Palmer, the governor’s spokesman on budget and finance issues, said the administration was optimistic that an agreement would be reached soon. ‘Productive discussions with the Legislature on the state budget have continued throughout the weekend and into today,’ Palmer said.”

New and bigger programs

When negotiations have finished, Brown and Democrats will have argued their way through several multi-million-dollar initiatives meant to increase entitlements and restore public funding pared back in the wake of the 2008 financial crisis.

Under the new budget legislation, for instance, health care spending would rise by $40 million for unlawfully present children and $82 million for higher Medi-Cal reimbursement rates, as the Sacramento Bee reported. Other hikes, according to the Bee, include $261 million to expand childcare and preschool, $228 million to compensate in-home caretakers, and over $100 million “to eliminate a maximum state welfare award meant to discourage low-income women from having additional children.”

This is important for California because something around half of the state budget — the total amount — comes from the federal government. When the feds begin cutting back spending sharply, as inevitably they will, then California will see sharp cuts in Medicaid/Medical, AFDC, SNAP/food stamps (more than the recent cuts), education/No Child Left Behind/Race to the Top, etc.

Kotlikoff recently was interviewed by Financial Sense Newshour. And Bob Wenzel provides a transcript of some of it:

Officially, the federal deficit is $17 trillion. Where is it really more than $205 trillion?

Kotlikoff:

The liabilities the government owes are mostly off the books. We have a true debt picture which is about $205 trillion. This is recording all the future obligations the government has, whether they are official obligations or not, such as paying for your social security benefits, mine, or your mother’s Medicare benefits, defense spending, etc. All of these things are really obligations that aren’t recorded on the books as debt, whereas paying off future principal and interest payments on Treasury bills and bonds are recorded. So, anyway, if you take the value of all of those commitments and subtract all the taxes coming to pay those commitments, the difference is what’s called the fiscal gap; and that fiscal gap in the U.S. is now $205 trillion. So, the true debt is $205 trillion; the official debt is only $17 trillion. So, most of the problems we’re facing, most of the debt we have, the vast majority of it is off the books and Congress has done bookkeeping to make sure the public doesn’t see it.

Why is that not well known?

Kotlikoff:

The Clinton administration—we put out the fiscal gap studies for a couple of years on the President’s budget. The Clinton administration then censored it. The guys who’s now head of the National Economic Council, the Chief Economic Advisor to President Obama, was the one who did the censorship back in 1994. President Bush’s Treasury Secretary O’Neil wanted us to do a fiscal gap accounting for the President’s budget in 2003 and he was fired in December 7, 2002, and that study was censored two days after he was fired. So, this is not accidental. This is more or less a conspiracy to hide the truth to keep ourselves and our kids in the dark about what the politicians are really doing, which is trying to garner the votes of older people and then get reelected and leave a bigger mess for our kids to handle.

But the bills are starting to come due as the Baby Boomers keep retiring.

By Chris Reed

When the press release came out Monday that the California High-Speed Rail Authority had recruited a top executive away from the California Public Employees’ Retirement System, a Tweet from former Los Angeles Times journo Joe Mathews asked me if my head had exploded. A Schwarzenegger administration official sent me an email titled “You Can’t Make This Stuff Up.” He wrote, “Of course the California High Speed Rail Authority would hire CalPERS’ CFO. Who better to cover up a nearly $100 billion budget hole?”

On Wednesday’s U-T San Diego editorial page, I weighed in on the topic.

“Here’s a quick quiz: What two state agencies have a long history of providing misleading and deceptive accounts of their tangled, troubled finances to the public and the Legislature? A history of depicting legitimate criticism as being ideologically driven and mendacious? A history of resisting reform and fighting to maintain a wrongheaded status quo? A history of refusing to acknowledge past fiascoes?

“If you said the California Public Employees’ Retirement System and the California High-Speed Rail Authority, pat yourself on the back. Given their poor records, if these agencies were looking for executive talent, one would assume they’d bring in an outsider with a strong history of oversight and independence – someone willing to stand up to the bureaucratic forces of inertia.

“But then that’s what the agencies would do if they were honest about their records. Instead, inexplicably, both the pension giant and bullet-train shepherd think they’re doing a great job. And so it was no surprise to learn this week that the rail authority has hired CALPERS’ acting chief financial officer, Russell Fong, as its CFO. How tidy.

“Expect the same management culture to continue at both agencies. Arrogance and denial: It’s the CalPERS/CHSRA way.”

We will see if anyone in the mainstream media picks up on the bullet train-CalPERS parallels. But I wouldn’t get my hopes up. To paraphrase H.L. Mencken, no one ever went broke underestimating the ability of the California media to miss the obvious.

By John Hrabe

SACRAMENTO — Meeting in the state capital this weekend for its spring convention, the California Republican Party is deep in the red. The party’s debt problems are so bad it’s not even clear how much money it owes creditors.

The Sacramento Bee reported the tab could be as high as $800,000. One state party officer told CalWatchDog.com on Friday afternoon, “The number is probably closer to half a million, when it’s all said and done.”

It could take incoming state Republican chairman Jim Brulte months to get the party into the black. Or the party’s financial problems could be resolved with as few as four phone calls to longtime Republican officials who currently sit on millions of dollars in active campaign committees.

Will quartet come to their party’s aid?

Four former Republican members of Congress — Wally Herger, Elton Gallegly, David Dreier and Jerry Lewis — retain more than $2.2 million in combined cash on hand in federal campaign accounts. Federal campaign finance rules allow retired members of Congress to make unlimited transfers to state party committees. Pegging the party’s debt at a half-million dollars, the party could resolve its financial problems with as little as 22 percent of the retired members’ reported cash on hand, still leaving them with more than $1 million to spend as they see fit.

“After decades of serving the people of California and the Republican Party, this is a splendid opportunity for them to generously give back — to help revive the California Republican Party,” said Shawn Steel, California’s Republican National Committee representative. “I have no doubt, in terms of their political legacy, they’ll want to make one final contribution to the state party.”

Retiring members of Congress are eligible to make “unlimited transfers to any national, state or local political party committee,” according to the Federal Election Commission’s Campaign Guide for Congressional Candidates and Committees, published in August 2011.

California’s outgoing Republican chairman, Tom Del Beccaro, told reporters on Saturday that he has been frustrated by the congressional delegation’s lack of financial support and believes that the four recently retired members of Congress should help alleviate the party’s debts.

At a Saturday morning press conference, when asked whether the retired members should aid the party, Del Beccaro answered simply, “Yes and yes.”

“Jim Brulte will be a better chairman when it comes to those types of things,” he added.

Few federal limits on ex-lawmakers’ use of leftover campaign cash

Within the first six months of a candidate leaving office, congressional committees are authorized to use their campaign committees to pay for “the costs of winding down the office of a former federal officeholder,” which can include moving expenses, payments to committee staff and gifts to individuals. If funds remain after six months, federal officeholders are eligible to make unlimited contributions to political parties and charitable organizations as well as contribute to state and local candidates, pursuant to state law. About the only restriction on federal officeholders: no expenditures for personal use.

Lewis, frequently described as “one of California’s most powerful Republicans,” ended his 34 years in Washington with $856,407 in the bank.

Dreier, who was recently appointed chairman of the Annenberg-Dreier Commission at Sunnylands after 32 years in Congress, has nearly $750,000 in his congressional account.

Gallegly, who represented Ventura County for 12 terms, retired with just shy of $600,000 in cash on hand.

Herger, who represented Northern California’s 2nd congressional district for 13 terms, maintains the lowest cash on hand, a little more than $82,000.

State party Treasurer Mike Osborn said the party could use the help.

“All our party members have future plans,” said Osborn, who is seeking reelection to his post. “It would be much appreciated if they could find a way to help the party.”

The former congressmen have yet to embrace the idea of bailing out the state party. Last July, a spokesman for Lewis told CalWatchDog.com that the congressman was still considering his options. “He has not made any final decisions on the distribution of his campaign account at this point,” said Jim Specht, then Lewis’ deputy chief of staff.

A spokesman for Gallegly told CalWatchDog.com last summer that the congressman was considering his options, which was affirmed in January.

“We’re working very closely with the [Federal Election Commission] to make sure what we do is appropriate and make sure that when the final decision is made, it’s going to be one that can best serve the community,” Gallegly told his hometown paper,  the Ventura County Star.

No new campaigns seen for ex-congressmen

It’s unlikely that any of the four congressional retirees would run for another office. All four retired from Congress in 2012 rather than face tough reelections in new district’s created through the state’s decennial redistricting process.

Rancho Santa Margarita Councilman Jesse Petrilla, a Republican candidate in the 73rd Assembly District, believes that the retired members of Congress should contribute to the party’s debt along with everyone else in the state party.

“They should chip in whatever they can,” said Petrilla, who serves as a convention delegate. “But we’re going to need support from more than just a few individuals. We need everyone to reach into their pockets and dig deep.”

On Sunday, party delegates will consider a resolution proposed by Republican delegate and activist Carl Burton that would thank all retiring Republican members of Congress, including the four members, “for their service to citizens of California and to the United States of America.”

Noticeably absent from the resolution: any mention of their service to the California Republican Party.

By John Seiler

I’m looking forward to President Obama’s acceptance speech tonight. I’m not a fan of his policies. But for all I pay for our Brobdingnagian Government, the least I can get is the entertainment of a well-delivered political speech by one of my tax-stuffed “servants.” Bill Clinton certainly delivered the goods last night. I expect the current White House occupant will as well.

What explains President Obama? A glowing USA Today profile, based on an interview with him aboard the president’s magic carpet, Air Force One, explained a lot.

On Mitt Romney’s complaints about the harshness of Obama campaign ads, the president giggled, “I would say that it’s a little ironic for a candidate who won the primaries telling his opponents not to whine, who just had a convention that was primarily devoted to going after me in ways that every media outlet has said bend the truth, and whose entire campaign has been built around assertions that don’t jibe with the facts — that he would want to spend most of his time talking about how tough we have been on him.”

Touche. You might remember how Romney ripped up Newt Gingrich, Rick Santorum and other GOP rivals.

‘Fair shot’

The topic came up of Obama saying to businessmen, “You didn’t build that.” The article didn’t provide his direct answer of the Republican attack on his statement.

But he did say how his speech tonight will be about how the country needs to “continue on a path that will lead us to a strong, secure middle class, robust economic growth, and a sense that our government is working on behalf of ordinary people to make sure everybody gets a fair shot, everybody is doing their fair share, and everybody is playing by the same set of rules.”

The president, away from the Telepromptr, has a tendency to string together phrases that don’t stick together syntactically. But here’s the key: “a sense that our government is working on behalf of ordinary people to make sure everybody gets a fair shot, everybody is doing their fair share, and everybody is playing by the same set of rules.”

Translation: Government is going to totally run everybody’s lives, all in the name of a “fair shot” and “fair share” and “the same set of rules.” It’s the government, and the government alone, that determines what is “fair” and how the “rules” are interpreted.

And if you don’t agree with what the government determines is “fair” and its interpretation of the “rules”? Then too bad. Then the government will take care of your business, your job, your family, your life. If you resist, then you can end up like the Branch Davidians, or spend the rest of your life in an orange jump suit at Leavenworth U.S. Penitentiary.

That’s certainly not the Old, Free America, where government only impartially enforced long agreed upon rules (in theory, anyway).

Fortunately, there’s good news. The amount owed by the federal government isn’t the $16 trillion debt mark just passed, which Republicans bring up to attack Obama.

The amount of unfunded liabilities — Social Security, Medicare, military pensions, federal-worker pensions, etc. — is $222 trillion. That’s with a “t.” There’s no way that can be paid off.

It’s like having a personal income of $70,000 and owing $1 million on your credit cards.

The federal government is bankrupt and soon will be downsized massively.

No matter who is president.

I can’t wait.

By Brian Calle

Here’s my interview with Investor’s Business Daily financial writer Andrew Malcolm. It’s on America’s staggering debt and the economic situation.