The ongoing budget debate in Washington is "really a food fight between Democrats and Republicans in order to shield what's going on, which is we are stealing from our kids," Kotlikoff says. "What these guys in Washington are doing is just wasting time."

As with Columbia's Jeffrey Sachs and many others on both sides of the political spectrum, Kotlikoff is frustrated with President Obama and Congress for bickering about relatively small portions of the budget while failing to deal with the true causes of the deficit.

Including projected payments for Social Security, Medicare, Medicaid and other entitlement programs, America's true budget gap is $202 trillion, or 14 times GDP, Kotlikoff says. That's far worse than the 9% of GDP reported in 2010 and official projections of 90 percent of GDP in 2020.

Worse Than Advertised

America is in "worst fiscal shape than Greece, Ireland, Portugal" or just about any other developed economy, he says. "The unofficial debts are staggering. Our implicit debts, the ones hidden off the books by Enron accounting show a much worse picture than the official debt."

To close the federal budget deficit, the professor and author of Jimmy Stewart Is Dead, says the government could take the following steps...

It is very important that we wind down Fannie Mae and Freddie Mac at a careful and deliberate pace," Treasury Secretary Tim Geithner said at a hearing on Capitol Hill Tuesday.

Geithner was mainly preaching to the choir: If there's consensus on anything in America these days, it's that "something" must be done about Fannie and Freddie, which have received nearly $160 billion in government aid since 2008.

The problem is there's little or no consensus as to just <I>what</I> should be done about the government-sponsored housing giants.

"They all want to wind them down. There's lot of plans and lots of talk but there's nothing sold out there," says Paul Muolo, executive editor of National Mortgage News and author of Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis. "It's all theoretical."

The problem with winding down Fannie and Freddie is the GSEs buy about 70% of all mortgages originated in the U.S. and there just isn't enough capital or risk appetite in the private sector to fill the void.

"You can't pull that much liquidity out of the mortgage market without crashing it," Muolo says. "If you crash it, home prices will fall by 50% and we'll be in a worse situation than we were three years ago."

Given that and the political calendar, Muolo predicts there will be a lot of talk but very little action on Fannie and Freddie before 2012, at the earliest.

"They're kicking this can down the road as long as they can," he says.

New York Fed President William Dudley got an earful this week at town-hall style meeting in Queens earlier this week. When the former Goldman Sachs chief economist tried to explain why the Fed looks at "core" inflation, which excludes food and energy, he drew a hostile response, according to wire service reports.

"You have to look at the prices of all things," Dudley said. "Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful."

This "prompted guffaws and widespread murmuring from the audience," Reuters reports: "I can't eat an iPad," one attendee declared. Another asked: "When was the last time, sir, that you went grocery shopping?"

I mention this exchange in the context of my recent conversation with Columbia economics professor Jeffrey Sachs.

"The top 1% is cut off from the rest of society," he says in the accompanying video. "They don't know what's going on in America anymore. For them life couldn't be more booming [but] it's falling apart" for ordinary Americans.

 "What we're seeing is the top [1%] is winning in international markets, winning in the bailouts, winning in government favors and winning in tax cuts," he says. "It's win-win-win."

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There's been a lot of talk, here and elsewhere, about whether the standoff in Wisconsin was about pure economics or partisan politics. (See: Wisconsin Lt. Gov: This Is About Balancing the Budget, Not Political Payback)

"It's pretty clear there's an agenda nationwide: Republican governors backed by the Koch Brothers [and] extreme right wing money want to crush the unions," says Columbia Professor Jeffrey Sachs. "The public is against it, but public opinion doesn't count much in this country these days." (Editor's note: The Koch Brothers have denied our repeated requests for an interview.)

But Sachs says the "real story" is much bigger than Wisconsin: It's about stagnant wages of public and private sector workers alike, and the increasing and increasingly pernicious role of big money in politics.

The following statistics speak to Sachs' first point:

• Since 1973, the median take home pay of full-time workers is virtually unchanged on an inflation-adjusted basis.
• The top 11,000 households in America have more income than the bottom 25 million.
• Since 1976, 58% of real income growth has gone to the top 1% of Americans.

"We've reached the greatest income [and] wealth inequality in history," Sachs says. "This is a new ‘Robber Baron' era, of course."

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Odds are members of this year's freshman class in Congress have more money than you… lots more.  Sixty percent of the new Senate class and 40% of the House freshman are millionaires, according to the Center of Responsive Politics (CRP).

"On balance members of Congress are just exponentially wealthier than the constituents that they represent," says David Levinthal, editor of CRP's OpenSecrets.org in this accompanying clip.

Don't be fooled by those new House Representatives sleeping in their office; with an average wealth of more than $570,000, most can probably afford to rent a place.
The latest batch of new Senators are even wealthier, averaging a net worth of $3.96 million. In total, the combined new class is worth half a billion dollars, according to CRP.

The data was primarily calculated by the Center based on personal financial disclosure reports released by the officials in 2009.

Sen. Richard Blumenthal (D-CT.) is the richest new member on Capitol Hill, with an estimated worth just shy of $95 million. Other rich politicians new to Washington include...

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Add PIMCO founder Bill Gross to the list of wealthy Americans who think they aren't being taxed enough, already.

"Of course we should" pay higher taxes, Gross says. "Higher income groups have enjoyed an enormous privilege ever since the Reagan tax cuts...and actually ever since Kennedy began the process back in the ‘60s."

Gross admits it's difficult to know what constitutes "wealthy" in America or what federal income tax rate serves as a disincentive to those at the top of the food chain. "But I don't think it's 36%," he says. "I think high-income earners would work well into the 50% tax rate. That would certainly help balance the books going forward."

In addition to tax hikes on the wealthy, "let's raise corporate taxes too," the famed bond fund manager says, a view that runs in direct opposition to the current discussions in Washington.

"Corporations complain and complain and complain and have got the Obama administration suggesting there should be some corporate tax reform," Gross notes. But at just 1% of GDP, corporate taxes are "historically low."

Gross goes on to accuse corporations of "holding governments basically hostage" by threatening to move to another state, or country, if taxes go up. "That's faulty logic and should be tested by politicians going forward. "

Editor's note: Gross comments on taxes came at the end of a wide-ranging conversation with the so-called Bond King. Stay tuned for additional segments.

Tick Tock. Tick Tock.

That’s the sound of Washington’s budget countdown clock ticking down the days to another potential government shutdown.

After a temporary resolution -- including $4 billion in cuts -- was passed and signed by the President last week, Democrats and Republicans are nearly as far apart as ever on how to move forward on this year’s budget.

The White House has proposed an additional $6.5 billion in cuts, but any more will likely be a sticking point with Senate Democrats, said Senate Minority Whip Dick Durbin (D-IL) over the weekend.

Tech Ticker’s Aaron Task caught up with Congressman Thaddeus McCotter (R-MI.) last week to get his take on the budget debate. “The public knows that what we are doing is non-sustainable right now with the deficit and debt crisis and they want action taken,” he says, emphasizing that Tea Party candidates ran and won the mid-term elections on a platform to cut $100 in spending from the budget this year.

The House came close to fulfilling that mandate last month when it passed legislation that would have stripped $61 billion from the budget. But Senate Democrats and President Obama would never allow for such drastic cuts so quickly in this economic climate.

As far as McCotter is concerned, House Republicans have come close to succeeding what they promised they were going to do.  Now, he says, it is time for Democrats to demonstrate to voters how they propose to solve the fiscal crisis.

Meanwhile, he concedes that in one regard both parties have not done such a great job. “To a large extent both parties have failed to explain the context of the times of which we are in,” McCotter tells Aaron in the accompanying clip. “If you don’t show them what the end result is, it is just abstract pain.”

For more on budget battle see:

Barney Frank: GOP Budget: Bad for Consumers...Investors and the Economy"

Michele Bachmann vs. Barney Frank: Reps Square Off on Budget, Economy 

Last week's budget agreement averted a government shutdown, but there's a major political showdown coming ahead of the new March 18 deadline.

In addition to the battle over Obamacare, entitlement programs and the tax code, there's a big fight brewing over funding for the SEC, Commodity Futures Trading Commission (CFTC) and other financial regulators.

If Republicans get their way "both individual consumers and the financial system will be back at risk," says Rep. Barney Frank (D-Mass.), one of the chief architects of the financial reform legislation passed last year.

"We passed a good bill to deal with derivatives and deal with investor protection and [House Republicans] withheld the funds," he says in the accompanying video. "They weren't doing it to save money, they were doing it because they ideologically believe derivatives should be unregulated."

In addition to the pushback on derivatives legislation, Rep. Frank cited oversight of hedge funds, and funding for the Consumer Financial Protection Bureau as areas where the GOP wants to "re-deregulate the economy." (See: New Consumer Agency Under Attack: "This Is About Cops on the Beat," Warren Says)

"Our efforts to get at the shadow banking system... will be made very difficult by the Republican's budget," Rep. Frank says. "Their view [is] ‘let's keep the shadow banking system in the shadows'. It will be bad for consumers, bad for investors [and] ultimately bad for the economy."

Rep. Frank is, of course, a partisan player and a highly controversial figure. But on this issue, at least, he's got the support of The Financial Times, which is not exactly a bastion of radical liberalism.

"The pressure to cut the SEC and CFTC budgets is part of the Republican war on the White House," according to The FT's editorial board. "Dodd-Frank is not perfect, but it improves on what came before. It cannot work, however, if politicians do not support regulators' efforts. If the Republicans want another financial crisis, they are going about it the right way."

"We're broke," Wisconsin Lt. Governor Rebecca Kleefisch tells Dan Gross and me in the accompanying clip. "We're in dire fiscal times. Nobody will question that."

Indeed few, if any, observers will question the state's fiscal difficulties. But the Governor's methods? Well, that has caused a bit of a stir, to put it quite mildly. (See: Wisconsin Labor Fight Spreads to Ohio, Oklahoma and Indiana)

Tuesday's budget is for fiscal 2012. For the current fiscal year, Gov. Walker has proposed a separate "budget repair" bill, which even Kleefisch admits has "generated a lot of controversy."

The "budget repair" bill is the one that calls for steep concessions from public sector unions as well as severe restrictions on union rights to collectively bargaining. The bill also includes authorization for the state to refinance $165 million of debt that otherwise comes due on May 1.

The nonpartisan Wisconsin Legislative Fiscal Bureau has set a March 16 deadline for the refinancing, which typically takes about two weeks complete, The WSJ reports. The state had originally planned to do the refinancing deal either this week or next and Gov. Walker has been threatening even steeper budget cuts and mass layoffs of state employees, should the state be unable to get the deal done.

"We are looking at some potentially horrible options," including massive layoffs and an inability to make Medicare payments, Kleefisch says. "We urge those Democratic Senators to return because we need them to do what they were elected to do."

The state's 14 Democratic Senators have been holed up in Illinois since Feb. 17 where they remain as of this writing, effectively blocking a vote on the bill, which requires a forum in the State Senate.

"We urge them to return [because] we need this budget repair bill passed," Kleefisch says. "We know good things will happen once the wheels of democracy finally start to regenerating and moving the right direction."

In fact, Kleefisch says the so-called repair bill will give school districts, counties and local municipalities the "tools with which they can deal with those cuts" in the fiscal 2012 budget. And by "tools," she means restrictions on unions' collective bargaining rights -- a highly controversial issue we discuss with the Lt. Governor in more detail in part two of this interview.

Aaron Task is the host of Tech Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com

The standoff between Wisconsin Gov. Scott Walker and public-sector employees comes to a head today as the Governor’s ultimatum runs out for the 14 state senate democrats who fled to Illinois to avoid a budget vote .

If the Senators do not return home and vote on Walker's budget -- which includes ending public unions' right to bargain collectively on pension and health-care benefits -- the state will face dire consequences.

Elizabeth Warren, special adviser to the Consumer Financial Protection Bureau and fervent supporter of America’s middle class, agrees.

When Tech Ticker’s Aaron Task sat down with Warren in Washington last week, he asked about our recent interview with the president of the International Fire Fighters’ Association Harold Schaitberger. The union chief finds it galling that some Wall Street “single-year bonuses exceed the average life time benefits” of the average firefighter and paramedic.  (See: "This is All About the Money": Pension Fund 'Crisis' a Red Herring, Union Chief Says)

Her response: “The middle class has been under assault now, really, for a generation.”

The 1-2 Punch

The middle class got hit by a "one-two punch" of rising daily living expenses plus flat wages, Warren tells Aaron in the accompanying clip. The world became a “far more dangerous” for American families when Congress “deregulated credit and turned the lender loose," starting in the 1990s, she continues. 

As more people turned to buying the necessities with plastic -- including health-care, college tuition and groceries -- Americans became inundated with debt and “more of them started falling over the cliff financially,” she says. “We’ve got a middle class that is under assault from multiple directions.” 

Union critics blame the public-sector for ballooning state deficits and lack of jobs. But, Warren says those arguments are simply not supported by the facts. 

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