Hey, Government: Stop Lying to the American People!

As a CPA, I am disgusted by the financial games being played in Washington by our elected officials, and their continual lying to the American people.

Republicans and their tax-pledge protector Grover Norquist are incorrect in saying ending the Bush tax cuts is a tax hike in the middle of a recession. Or maybe upon their 2001 enactment, Republicans were lying about the cuts being “temporary.” The truth is, these tax cuts are a temporary 12-year tax stimulus program expiring in the middle of a slow recovery.

Since the 2008 presidential election, Republicans have been campaigning and negotiating hard to make the Bush tax cuts permanent for all tax brackets, in spite of the deficit climbing out of control. Is it part of Norquist's tax-protection pledge to trick Congress, the President and taxpayers into temporary tax cuts and later insist they be made permanent, otherwise Congress will break their tax pledge? If that's the case, Congress can never again pass a temporary tax cut as part of stimulus or otherwise. Perhaps that's why the Republicans appear to be blocking President Obama's efforts to extend temporary payroll tax cuts set to expire soon. Republicans have said temporary tax cuts don't work and are a waste of money. Blocking the President on all fronts may be part of their campaign playbook too. Somehow, the Bush tax cuts feel like more like a political hot potato and campaign issue than tax policy.

On the spending side of the ledger, the debt talks are a charade. Both parties are not even talking about real cuts to spending, but rather reductions in the growth rates of spending. That's not a spending cut but a smaller spending increase. Why the deception?

This reminds me of Democrats using the verbiage “cutting tax expenditures” to mask what they

mean: raising taxes by eliminating tax deductions and credits. When they target a tax break for closure, they call it a “tax loophole,” giving the impression it was always inappropriate.

In the same way Republicans want to make temporary tax cuts permanent, Democrats want to make temporary stimulus spending permanent too. Is that permanent government stimulus, state central planning and crowding out of the private economy? Democrats want to extend unemployment benefits for the long-term unemployed, beef up spending on infrastructure and hire back public-sector union teachers and first responders.

It's no surprise that Republicans want to keep taxes low on business and richer people and Democrats want to help the middle-class and poor. Both parties are paying back their special voting and donation interests. But lying to the American people does us a great disservice.

The Republican mantra for all ills is to spur growth with cuts to tax rates, regulation red tape and spending. Using supply-side economics, Republicans have argued that tax revenues increase and benefits trickle down to the 99%. Democrats have never bought this argument and it's hard to prove. Yes, it works in some limited cases, especially when tax rates start out very high, but it may not work now. It's not a strong enough argument to be Republican mantra.

Republicans assert that with cutting taxes and red tape (including Obama health care) – business will flourish and unemployment may fall to under 7% soon. That's a lie to promise that with any certainty. In reality, with the current state of global competition from emerging markets – with much lower wages, almost no regulation and very low taxes – even with reasonable cuts to taxes and regulations, we will still be uncompetitive in many industries and jobs won't reappear meaningfully anytime soon. Serious Republicans know this, so pushing out Republican propaganda is another deception.

Democrats are lying when they re-label stimulus and spending as a required “investment.” Spending trillions more on our current unionized education fiasco and on infrastructure is for the most part throwing good (borrowed) money after bad. We then owe interest too and interest rates will eventually skyrocket when the bond vigilantes view the U.S. like Italy.

Education takes three to tango: students willing to kill themselves to learn and get ahead, parents prepared to ground their children for not getting straight As and to spend lots of time helping them succeed and teachers accountable to their customers (students and parents), rather than their crony unions and benefits.

I've seen a lot of stimulus spending on infrastructure — filling the same potholes over and over with three trucks and 10 guys, with six of them on unending coffee breaks. Most of this money is spent to prop up public-sector unions — cronyism with some fraud too.

The U.S. deficit is at a tipping point and close to unleashing bond vigilantes demanding sky-high interest rates. That would put America on a default/bankruptcy path like Greece and Italy. Much of the stimulus spending has been on band-aids rather than structural solutions – which only the free market can really provide anyway. Keynesian spending may have worked in prior times, but again, this time is different. Jump-starting the U.S. economy with a spark is not enough; we need to fix our competitiveness on a global scale. Democrats want to keep spending to keep lining the pockets of their cronies and constituents. It must stop now.

When Republicans heard that tax reform could be a fundamental part of deficit reform, they figured they could bypass expiration of the Bush tax-rate cuts, and get lower tax rates than they have now.

The Deficit Commission proposed flattening the tax code as part of tax reform, with significant rate reduction to 23%. Republicans jumped on that concept to infer that flattening meant a narrowing of progressive tax rates and they realized that could be tantamount to a huge tax cut on the rich. Republican presidential candidates Cain, Perry and Gingrich borrowed that flat-tax concept for their tax plans too. Democrats claim flattening

means making the code more regressive, falling on the middle-class.

It's no surprise Democrats wouldn't go for flattening with lower tax rates on the wealthy. Plus, Democrats have campaigned for several years on not extending the Bush tax cuts for this group. With expiration of the Bush tax cuts extended or punted until the end of 2012, just after the next election, that sword of Damocles doomed the Congressional super committee to failure.

Even the “grand bargain” debt-ceiling negotiations between President Obama and Speaker Boehner were doomed to failure over the Bush tax cuts. Republicans figured these tax increases were already baked into the debt-negotiation cake, so they wanted trillions in spending cuts only.

While Rome is burning, Congress, state and local governments don't even talk about giving up their fat-cat salaries and benefits. These benefits include outrageous “defined-benefit pension” plans, which often include a full salary paid for life. Extremely few private sector workers get this type of rich pension plan anymore.

Governments don't have the funds to pay these outrageous promises. According to

report

, “the gap between the promises states have made for public employees' retirement benefits and the money set aside to pay for them grew to at least $1.26 trillion in fiscal year 2009—a 26 percent increase in one year.” “State pension plans were 78 percent funded, declining from 84 percent in 2008.” The problem has grown worse in 2010 and 2011.

Puny risk-free investment returns can't possibly make up that missing underfunded money, either. We also can't afford for pension plans to continue making crazy bets on sub-prime debt and junk bonds to make higher returns. Ultimately, they lose and again taxpayers must make up the difference.

Why focus on all these lies and deception, when we should instead focus on this cold truth and reality. Fix this public-sector pension problem first.

Workers in the private sector were converted decades ago to “defined-contribution plans.” Define the contribution percentage each year, figure around 15% - with a cap on 401k and other types of plans - and pay funds into a tax-free savings account until retirement. There's no possibility of significant unfunded promises, often done out of the public's view. With a defined-benefit plan, workers goose their salaries just before retirement years and the government must pay them close to that higher full salary amount for the rest of their life.

While public-sector unions may be a small percentage of the public now, their underfunded defined-benefit plans and promised health insurance benefits are a significant percentage of our deficits and exploding debt bombs. State and local governments can't run a deficit either. It's very inappropriate for unions to finance elected officials who propagate this scheme further. Fix it now.

Convert all public-sector workers from defined-benefit plans to defined-contribution plans, so they are on par with private sector workers. They make similar salaries and other benefits too.

Write off all underfunded amounts and take back those unfunded promises. They were made inappropriately and in some cases fraudulently. Simply take whatever funds are on hand - the 78% in 2009 - and divide it up between the workers, placing those funds in worker-controlled defined-contribution plans.

Many government leaders don't need fat-cat pensions, as they become millionaires from bootstrapping their government service as well, often with conflicts of interest.

Many government leaders conduct inappropriate lobbying for big bucks after and in between public (really self) service. Speaker Newt Gingrich was recently called out for earning millions from Freddie Mac for lobbying, even though he tries to claim it was a history lesson and general simple advice. That inappropriate lobbying deal should disqualify Gingrich from being President in my opinion. Especially after reading popular Republican thinking about how Fannie Mae and Freddie Mac were the main guilty parties in causing the housing meltdown. In

, Gretchen Morgenson explains how government leaders were buttressed by these GSEs with political donations, and the leaders returned the favor looking the other way to fraud and outrageous GSE compensation. Government fraud 101.

Others in public service become millionaires inappropriately from insider trading and special “friends and family” insider deals, like the ones

accused Minority Leader Rep. Nancy Pelosi of making. There are the revolving doors with cushy law firm and investment-banking partnerships, endless $25,000 speaking fees, billion-dollar charity positions, million-dollar book advances and much more. Even our esteemed President Obama marshaled his popularity in making several million from his campaign-for-president book deals.

As a CPA, I view governments' “sugar bowl” accounting method as being entirely inappropriate. Why shouldn't government use Generally Accepted Accounting Principles like business and taxpayers do? Yes, government is different, but the accounting methods must be reformed, perhaps a modified GAAP. Their accounting is mostly about smoke and mirrors, hiding unfunded off balance sheet items to the tune of trillions of dollars. Government accounting covers up lies, fraud, waste, abuse and deception.

It's time for a pre-packaged bankruptcy and restructuring in America. Throw out existing management, and that means our current leaders in Congress including Leader Reid, Republican Leader McConnell, House Speaker Boehner, Minority Leader Pelosi, and Senators Frank, Durbin, Schumer and Kyle. Next, pass term limits. Why do we have senile or aging Congressmen for life? Is it because we have to pay them full salaries through pensions for life anyway?

I prefer to address our real problems and ferret out all lies and deception.

Don't extend the temporary Bush tax cuts for anyone. Let them expire at the end of 2012 — which is already two more years than scheduled. The tax savings was last projected to be around $3.8 trillion over 10 years. Around $800 billion of that saving comes from those making over $250,000 per year, so the real savings comes from everyone together. No more class warfare and division.

Match that tax savings with 3 to 1, or at least 2 to 1 spending cuts now, not later on after we hope the economy recovers more to our satisfaction. That may never be the case. A sputtering economy propped up by government deficit spending is not worth the risk and price.

With close to $4 trillion of tax revenues, and $8-12 trillion of spending cuts, we can pay off the $15 trillion dollar deficit and return to surplus.

Personally, I don't want to see my taxes go up, and I will be very upset if government doesn't deliver actual spending cuts to match higher taxes. Republicans don't trust government to deliver actual spending cuts, so they are not willing to cave-in on tax increases first. With all the above lying by government, how can we taxpayers and voters ever return to an environment of trust?

So Buffett, Gates and Soros can put their tax money where their mouths are, we should ask them to give up their billion-dollar charity tax dodge.

Disallow them from taking charitable tax deductions on the appreciated value of their property contributed, and insist they pay capital gains taxes when they part with that property, too. (They currently do the reverse and it's a double-dip tax loophole.) In effect, they have been asking the middle class to subsidize their charitable contributions. Start with that simple flattening of the tax code and closing of egregious tax loopholes.