Having received ample warning of icebergs ahead, some of the crew of the HMS Titanic proposed changing course to avoid them.

But the captain objected.

“Making that maneuver would end this cruise as we know it.  It would disrupt the passengers’ peace of mind, discomfiting them as we turn and swerve, especially those below decks in steerage,” the captain told them.  “There is no immediate jeopardy and I am appointing a commission to consider other options.”

The captain then activated the ship-wide public address system and announced, “This is the captain speaking.  We are happy to have you aboard the greatest and most unsinkable ship ever built.

“I am told there are icebergs ahead, but as you can tell we have not hit any and we are still afloat.  To avoid them will require sacrifice, but not at the expense of our passengers in steerage, who include seniors, poor children, and the disabled.

“This really has to do with two different visions of our ship’s future.  Are we going to continue to invest in going full steam ahead to win that future – with an on-time arrival in a land where children are well-educated, the streets are clean, and everyone loves their neighbor?

“Are we going to live within our means as a ship, but in a way that ensures that no one is jostled about by sudden ship movements?

“However, should anything go wrong, we will jettison all passengers in first-class, who don’t need our limited supply of lifeboats or life preservers and who already have enjoyed the trip enough.  And to make our next trip better, I have asked for funds to bridge the Atlantic with high-speed rail.”

In similar fashion, President Obama is sailing full steam ahead with his plans, publicly ridiculing those who say we cannot afford them.  Meantime, the actuaries for Medicare report that its condition continues to worsen and its bankruptcy is getting closer.  The federal government has topped out its $14.3-trillion credit line and President Obama wants to borrow more without linking it to spending cuts or reforms.  While he travels in Air Force One and motorcades, his energy policies drive gasoline prices up and up.  Our dependence on foreign oil increases while drilling and hiring in America suffers.

He accuses his critics of lacking vision.  Obama says he prefers to be “big and bold and passionate . . . . about what America can be.”

Big and bold and passionate.  That description also matched the HMS Titanic.

Congressional Republican leaders have been encouraging an “adult conversation” about government entitlement programs, and Medicare, in particular. And, while some of them have backed away from this conversation for political reasons, i.e., let’s wait until after the 2012 election, Congressman Paul Ryan has demonstrated that he possesses the political courage to get the ball rolling. The crux of the “adult conversation” is the following: that the now anticipated demise of Medicare, as we have known it since its initiation in 1965, is primarily the result of several factors which pertain to both principles of government, as well as finances:

a) Enough previous generations of American taxpayers allowed Congress to save their money for them in government accounts;

b) Program funds, i.e., revenues obtained, as taxes, through automatic deduction from payrolls, have been used, over the years, by Congress without the express permission of American citizens, to pay for other projects;

c) Liberal politicians have been successful at convincing unthinking Americans that the government can make their lives easier and better through continued government programs, like Social Security, Medicare, and Obamacare.

d) Medicare is going broke; health care costs are increasing; and some physicians are choosing to not be Medicare providers, due to cuts in reimbursements, leading to limited access to care.

Many liberal Democrats and, yes, some conservative Americans, have demonized Mr. Ryan for “taking away their Medicare.” Of course, the Democrats hope to gain from convincing senior citizens that Republicans want them to “die,” even though President Obama’s solution to lower Medicare costs is to bring on board the panel of government bureaucrats who will ration care.

So, if there is no change in Medicare, and you are already receiving its benefits, or approaching the age of eligibility, and expect to use Medicare as your health insurance plan, it is not anticipated that you will have coverage any longer in about 12 years from today. If President Obama remains in office and his rationing panel is enacted, you will likely not receive enhanced medical treatments if you are over the age at which the “panel” deems they are “too costly.”

A recent Rasmussen poll found that 48% of voters see a need to make major cuts in defense spending, Social Security, and Medicare. Yet, some seniors, even some Tea Party seniors, who claim to want smaller government, assert that Medicare is not an “entitlement” program like Medicaid, that they “paid into it” during their working years, and that, on that basis, they deserve government health care. Nevertheless, according to Eugene Steuerle, former Treasury Department official, “An average couple retiring today has paid just a little over $100,000 in Medicare taxes,” throughout their working lives. However, this average couple is receiving “about $300,000 in benefits,” even after the adjustment is made for inflation.

The questions we might ask ourselves are:

Should seniors who use Medicare as their only health insurance plan receive, dollar for dollar, what they paid into the program? In other words, are those who are receiving Medicare benefits “entitled” to take more than they “saved” in the program? After all, those who are using more than they paid into the program, are spending the revenues that have been collected from those who are working right now. If Medicare is not changed, should these younger citizens be denied their saved revenues given to today’s seniors? Should seniors, and those approaching the age of Medicare eligibility, be expected to pay for, or plan for, their post-retirement health insurance benefits outside of government health care? When does personal responsibility for one’s health care begin?

For those of us who were not around when Congress enacted Medicare, the program was originally meant to be a program to provide medical and hospital insurance for those over the age of 65. It was never intended to be a “social justice” program for younger individuals, as it often seems to be used today, and, very likely, was never intended to be the “universal healthcare” program for all Americans, as Obamacare will eventually become if it is not repealed. Those who argue that Medicare is about “taking care of the elderly,” might spend more time visiting their aging parents and grandparents.

This leads to the issue that some conservative/libertarians have with Congressman Ryan’s Path to Prosperity Medicare plan; that his proposal to keep Medicare as it is for people who are currently over 55, simply does not go far enough. They would prefer the more ambitious plan he mapped out in his Roadmap for America, which better accounts for the mandatory revenues being collected from current younger taxpayers.

Whatever Americans may think about Congressman Paul Ryan’s Medicare plan, the fact is that he has allowed the “adult conversation” to begin. Perhaps more importantly, he is preparing all of us for the big changes in Medicare that lie ahead.

While the agency maintained the country’s top AAA credit rating, it said “Authorities have not made clear how they will tackle long-term fiscal pressures.” S&P said the move signals there is at least a one-in-three chance that it could cut its long-term AAA rating on the United States within two years.

What would a credit rating downgrade mean to the average citizen?  Immediately following a downgrade, the interest required to refinance our debt would climb dramatically and the Federal Reserve would have to print more money resulting in a sharp devaluation of the dollar.  If you think $4 per gallon for gasoline is an outrage, try $8 per gallon or higher.  If you think that your 401(k) took a hit in 2009, how about a permanent hit due to the United States currency losing its value?  Food, energy, clothing, housing and all other staples of life will experience sharp and permanent price increases.  Unemployment will also rise as businesses attempt to adjust to a new and uncertain economy.

It should be absolutely clear that the growing national debt and continued federal budget deficits are a threat to our economy and a clear and present danger to our way of life.  President Obama took office with a $10 trillion debt and a $740 billion federal budget deficit.  Two years later the national debt is $14.2 trillion and the federal budget deficit has reached $1.6 trillion.  Mr. Obama and the Democrats insist that we need to keep spending, even though our debt will exceed our Gross Domestic Product (GDP) before the end of this year.  They insist that rolling back the George Bush era tax cuts for those making more than $250,000 per year and reductions in defense spending is the path to a solution.

The truth is that the additional revenue potential from rolling back those cuts would only equal a maximum of $64 billion per year.  The risk to jobs in our economy by increasing tax rates on many small businesses that are taxed as individuals, S-Corporations, is extremely high.  There could easily be a spike in unemployment as those business owners adjust their planning to preserve their net income.

If Congress and the President were to cut defense spending was by 20%, a number that would be dangerous with our armed forces involved in three current conflicts and the continued terrorism threat to our country, the maximum savings would be $150 billion per year.  The security risks of doing this would likely win the argument, with actual savings being significantly less.

S&P said it clearly, it is all about “large budget deficits and growing government indebtedness” and the only answer is to accept the fact that we have a spending problem.  Entitlement spending is the major driver of the problem and can no longer be ignored.  Mr. Obama is rapidly becoming a modern day Nero with the Democrats, and many Republicans, in Congress all happy to play harmonious violins while the nation burns.

The time for political rhetoric is over.  Mr. Obama’s lack of leadership on this issue is disgraceful and he no longer has the luxury of voting “present” while taking shots at the real entitlement reform ideas that were put forth by Representative Paul Ryan.  That said, even the Ryan plan still continues to grow the national debt over the next ten years.  It does so much less than what Mr. Obama originally presented, but it still grows the debt by several trillion dollars over that period.  Hence, both the parties need to accept the reality that the federal government needs to spend no more than it takes in.  The debt has to stabilize immediately, with a clear path to reduction visible enough to protect the AAA credit rating of the United States.

The American people also have a role to play.  In fact, the American people will ultimately drive this debate.  Entitlement reform is not just prudent, but is critical.  Accepting a retirement age of 70 that would start ten years from now; understanding that Medicare will require more premium participation in the future; eliminating the federal bureaucracy and moving responsibility for Medicaid to the states in the form of block grants; and eliminating countless discretionary spending by limiting the federal government to the seventeen enumerated powers granted in the Constitution are far better than a serious devaluation of the dollar.

S&P has ended the debate.  Spending is the problem.  Our children’s future is on the line.

Robert Allen Bonelli is the author of “Liberty Rising,” an accomplished business executive, public speaker and involved citizen.

Our budget, which we call The Path to Prosperity, is very different. For starters, it cuts $6.2 trillion in spending from the president’s budget over the next 10 years, reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt. Our proposal brings federal spending to below 20% of gross domestic product (GDP), consistent with the postwar average, and reduces deficits by $4.4 trillion.

A study just released by the Heritage Center for Data Analysis projects that The Path to Prosperity will help create nearly one million new private-sector jobs next year, bring the unemployment rate down to 4% by 2015, and result in 2.5 million additional private-sector jobs in the last year of the decade. It spurs economic growth, with $1.5 trillion in additional real GDP over the decade. According to Heritage’s analysis, it would result in $1.1 trillion in higher wages and an average of $1,000 in additional family income each year.

Here are its major components:

• Reducing spending: This budget proposes to bring spending on domestic government agencies to below 2008 levels, and it freezes this category of spending for five years. The savings proposals are numerous, and include reforming agricultural subsidies, shrinking the federal work force through a sensible attrition policy, and accepting Defense Secretary Robert Gates’s plan to target inefficiencies at the Pentagon.

• Welfare reform: This budget will build upon the historic welfare reforms of the late 1990s by converting the federal share of Medicaid spending into a block grant that lets states create a range of options and gives Medicaid patients access to better care. It proposes similar reforms to the food-stamp program, ending the flawed incentive structure that rewards states for adding to the rolls. Finally, this budget recognizes that the best welfare program is one that ends with a job—it consolidates dozens of duplicative job-training programs into more accessible, accountable career scholarships that will better serve people looking for work.

As we strengthen and improve welfare programs for those who need them, we eliminate welfare for those who don’t. Our budget targets corporate welfare, starting by ending the conservatorship of Fannie Mae and Freddie Mac that is costing taxpayers hundreds of billions of dollars. It gets rid of the permanent Wall Street bailout authority that Congress created last year. And it rolls back expensive handouts for uncompetitive sources of energy, calling instead for a free and open marketplace for energy development, innovation and exploration.

• Health and retirement security: This budget’s reforms will protect health and retirement security. This starts with saving Medicare. The open-ended, blank-check nature of the Medicare subsidy threatens the solvency of this critical program and creates inexcusable levels of waste. This budget takes action where others have ducked. But because government should not force people to reorganize their lives, its reforms will not affect those in or near retirement in any way.

Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy. Future Medicare recipients will be able to choose a plan that works best for them from a list of guaranteed coverage options. This is not a voucher program but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.

Read the whole thing here. It will take one or two more election cycles before anything close to this has a chance of passing. I mean, the Democrats are squealing over a few billion in cuts from this year’s budget. Still, it is important to lay down a marker. Unless, of course, this is just a diversion meant to distract from the GOP’s near-certain vote to increase the nation’s debt ceiling. As they say, time will tell.

The major reason for this crisis is clear, but there is little courage in Washington, D.C. to address it.  Here it is.  Medicare expenditures have grown 81% since 2000 and Medicaid expenditures have grown 87% since 2000.  It gets worse.  Today there are 39 million Americans over the age of 65, but that number has been growing at the average rate of 10,000 per day since January 1^st of this year and will continue to grow at this rate for the next ten years.  Why?  Baby Boomers born between 1946 and 1955, approximately 36 million, will turn 65 over that period of time and become eligible for Medicare.  With life expectancy at 78 for men and 80 for women, we can safely assume that there will be almost twice as many Americans over the age of 65 by 2021.

Persistent slow growth in the economy due the drag of massive federal debt combined with heavily restrictive regulations on business will continue to suppress job growth and force more citizens on Medicaid.  By 2021 the other half of all federal income tax revenue will be required to pay for Medicare and Medicaid.  Even if we assume that Social Security will pay for itself, which will require substantial tax and benefit reform, where will we find the money to fund all other government expenses – including defense and other entitlement programs such as food stamps?  There is not enough rich, middle-class, corporate or any other income that can be taxed more in order to solve this problem.

The only answer is Medicare and Medicaid reform.

Ignoring this fact or falsely believing that there is some hidden pool of income that can be taxed to pay for the sharply increasing costs, will lead to a financial collapse of our entire economy.  For those who think that our Gross Domestic Product (GDP) will grow enough to provide the additional income, recognize that without significant reform of these programs the U.S. economy would have to grow faster than the economy of China to simply maintain a GDP equal to our debt over the next ten years.  This is not remotely possible for a country as developed as we are.

There are several areas of reform we should be debating in order to intelligently avert the crisis we are definitely facing.  We need to begin by recognizing that we are living longer and with a higher quality of life.  We need to increase the eligibility age for Medicare, but without any changes for those in the program or about to become eligible for the program.

With regard to Medicaid, income level eligibility needs to be reviewed on a state by state basis in order to adhere to the original intent of the program to help the most disadvantaged of our citizens.  Since age eligibility is also a factor for Medicaid, reform of this requirement should be the same for Medicaid as for Medicare.

In order to reduce the massive administrative costs for both Medicare and Medicaid, the federal bureaucracy should be eliminated and block grants provided to the states.  Each state can then establish a leaner more effective administrative structure closer to the source of need.

Another important issue we need to consider is serious tort reform across our entire health care system in order to reduce costly defensive medicine, which is comprised of tests that are not medically necessary but help defend medical mal-practice cases.

Rigorous reform is necessary to target the estimated $48 billion in fraud and abuse that is present in both programs today.  The size of this number will grow in proportion to the overall growth of the programs and will worsen the crisis each year.  The use of block grants will help by localizing administration of the programs at the state level, allowing for smaller amounts of money to be more effectively managed and making it more difficult to hide fraudulent practices. This idea and the previous suggestions are practical ways of successfully reforming Medicare and Medicaid without impacting those relying on these programs today.

This essay concludes my series on Financial Reality.  My purpose was to encourage common sense debate on the role of government in our lives, the size of the central government and on reforming Social Security, Medicare and Medicaid.  The fiscal crisis our nation is facing is real.  It threatens the liberty of our generation and that of generations to come.

Robert Allen Bonelli is the author of “Liberty Rising,” an accomplished business executive, public speaker and involved citizen.

Entitlements are the major contributor to the spending crisis and Social Security has long been the most protected of all entitlements.  It needs to be reformed in order to reduce its growing burden on our economy.  The reforms being discussed will not result in anyone currently receiving, or about to receive, benefits having any less than they are expecting.  The Democrats will cry that restructuring Social Security will hurt those who have planned for it, but this is a lie.  All reform options being discussed will only impact those who will have the time to plan for the changes.  The truth is that if Social Security is not reformed, the program will fail.

Democrats point to a $2.3 trillion Social Security Trust Fund surplus.  This is not a cash surplus. It was spent on general government expenses and replaced with Treasury Bonds.  Who is responsible for payment of those bonds? The taxpayer is responsible.  Yes, the Social Security Trust Fund surplus is nothing more than a government I.O.U.  Bernard Madoff could not have done better.

Before the recession accelerated in the fall of 2008, Social Security payroll taxes exceeded benefits paid each year.  Surplus cash, though diverted and replaced with bonds, was being generated.  However, since the labor force lost eight million jobs in the recession, Social Security benefits now exceed payroll taxes collected each year.  With the surplus nothing more than part of the national debt, we have to borrow to make up the difference.

It gets worse.

It now takes three people working to pay for each beneficiary.  Since January of this year, as the baby boomers started to turn sixty-five, we are adding 10,000 new beneficiaries each day.  Hence, 30,000 new jobs need to be created each day to support these retirees.  It is expected that there will be an approximate net increase of 25 million new beneficiaries over the next ten years.  To support those additional retirees, our economy will have to create a total of 75 million new jobs, or 625,000 new jobs per month, over that period.  During our best economic times, beginning with Ronald Reagan and ending with Bill Clinton, our economy only created an average of 320,000 new jobs per month.

We cannot support Social Security without realistic reform because there is not enough income to tax; not enough economic strength to create the new jobs to cover the growing number of beneficiaries; and there is no cash surplus.

When Social Security was signed into law in 1937, life expectancy was sixty-three and the retirement age was sixty-five.  The program was designed to provide a few years of benefits to those who paid into it.  Since then, Social Security was extended to provide benefits for surviving spouses and children and to provide disability benefits.  Life expectancy today is seventy-eight for men and eighty for women.  Social Security beneficiaries retiring at sixty-five, or their spouses, can easily receive benefits for fifteen years or more.  The only answer is that the retirement age must be made higher.  If we ignore this fact, the entire program will collapse and there will be nothing for anyone.

There is no doubt that the earnings ceiling on Social Security payroll taxes will also have to increase, but remember that the employer’s share increases exactly that same amount as the employee’s share.  This means that the cost of adding new jobs will rise and new job creation will face another hurdle.

Some politicians are considering reducing benefits for those retirees who have other sources of retirement income.  This is called means testing.  The only problem is that the Social Security contract details specific benefits for a particular level of paid taxes.  In order to fairly enact means testing, politicians are going to have to allow for some form of private accounts.  Money put in those accounts will belong to the account owners regardless of their future means.

You now have the complete truth.  The talking points of the Left are meaningless and do nothing to advance the debate.  It is time to understand that our economy will collapse under the weight of entitlement spending.  Reform of Social Security is a necessary part of resolving the crisis.

Robert Allen Bonelli is the author of “Liberty Rising,” an accomplished business executive, public speaker and involved citizen.

Sure, the majority of Americans claim to be for reducing the size of the state to get our fiscal house in order, but do they really understand just how drastic an impact reverting back to a more laissez-faire market-oriented national model would have on their lives?  Certainly, if the transcript of the SOTUS I skimmed through yesterday is any indication – and, most revealing, where the applause breaks are noted – I think we have a way to go yet.

Consider:  One out of six Americans now receives some form of government assistance.  [U.S.A Today.]  Fifty million are on Medicaid, a record high.  Food stamp enrollment now stands at 40 million, or one in seven people. Ten million Americans receive unemployment benefits, and 4.4 million get direct cash assistance.  And these numbers are from only four of the more than seventy welfare programs funded by the federal government!  These figures are not anomalies caused by a recession, but a reflection of the trend towards an entitlement culture that has been growing steadily since the 1960s “Great Society” pipe dream.

This is a recipe for doom yet no politician, from the President on down, Democran or Republicrat alike, will ever muster the courage to address the meat and potatoes of our spending suicide…so they will whip up ire aimed at the parsley garnish like private jets and federal salaries instead.  So a tipping point is at hand.  Almost 50% of Americans pay no income tax, yet so many in this country suckle up to the government teat in one form or another courtesy of the American taxpayer that I see no possibility of this entrenched political system of careerists doing a necessary ‘reset’ to bring us back to a sustainable, market-driven model.  Rather it will be the eventual verdict of raw and unfeeling mathematics that imposes what we refuse to do voluntarily in the form of defaults, declining and eventually disappearing government services, and reduced if not eliminated entitlement benefits.

Here’s where I look to the SOTUS for insight, yet I find nothing but more of the same platitudes.  Setting aside bloated defense budgets for now (an article all on its own) I did a word search and found the words “medicare” and “medicaid” just once in the entire text of  Obama’s 7,000 word address to the nation.  And here’s what the President had to say about these budgetary elephants in the room:

“This means further reducing health care costs, including programs like Medicare and Medicaid, which are the single biggest contributor to our long-term deficit. The health insurance law we passed last year will slow these rising costs, which is part of the reason that nonpartisan economists have said that repealing the health care law would add a quarter of a trillion dollars to our deficit. Still, I’m willing to look at other ideas to bring down costs, including one that Republicans suggested last year — medical malpractice reform to rein in frivolous lawsuits. (Applause.)

So Obamacare is the way to “slow rising costs”?  More government and bureaucracy?  Wow.  How about cutting costs?  Anyway, Obamacare has been shown by anyone with a calculator to be a potential budget busting bomb.  Yet, all of a sudden, repealing it will somehow lob the real fiscal grenade?  Well, onwards and upwards then!

Social Security has been unmasked for the ponzi scheme it is for this is the first year it will take in less in taxes than it pays out in subsidies.  So what, then,  did the SOTUS have say about this alarming Social Security development?  (Again, “social security” just one hit on a word search).

“To put us on solid ground, we should also find a bipartisan solution to strengthen Social Security for future generations. (Applause.) We must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market. (Applause.)”

In other words, we must find a bipartisan solution to overcome the equation 2-3 = -1 and make that sum positive!  Yes…we…can!!

So this in a nutshell is why I don’t bother to tune in to the SOTUS anymore.  It means nothing.  If I want mindless feel-good theatre, I can watch reruns of any sit-com starring Alan Thicke.  I wanted the President to just once give it to us straight.  Like we’re adults.   Instead, he chose to avoid the heart of the matter which is that without draconian across-the-board and very painful cuts (call them austerity measures if you will) we are headed towards the same fate as our European friends rioting in the streets as their social utopia merry-go-round is finally grinding to a halt after barely half-a-century of defying mathematical inevitabilities…a blip in the historical timeline really.

Rather than offering yet another rah-rah a campaign speech, Obama could have addressed the numbers head-on and even challenged the new GOP fire-brands to come up with spending cuts that hit every single government program…even the sacred cows.  But the new House Speaker prefers to be reduced to tears on his own terms.

As for the American public, they wasted an hour of their lives listening to flowery but in the end empty rhetoric when they could have been watching the Military Channel’s profile of Sherman’s “March To The Sea.”  Somehow the burning of Atlanta seemed closer to reality than anything this President had to say about where we’re headed.