Saturday, December 18, 2010
Our wonderment over this 'grand compromise' is similar to the one Clara Peller, the great lady who did the Wendy's commercials in the early 1980's, had when she said: 'Where's the 'Beef'?
Our 2010 questions are these:
1) Where's the 'Compromise'?
2) Where's the 'Courage'?
3) Where's the 'Sacrifice'?
It is 'easy' to strike a compromise when every party gets everything they want in the final deal. It is far more difficult to get a deal with 'shared sacrifice for the long-term good of the nation', apparently, once again.
Let's go to the videotape:
Check out the official CBO scoring of this tax extender/jobless benefits extension.
Unless our eyes deceive us, it is pretty clear that the cumulative effect of extending these tax cuts for 2 years, and the unemployment benefits for 13 months and, of course, the usual gang of earmarks and excessive spending to the tune of close to $337 billion by some accounts, is just under $1 trillion.
Or about $892 billion more in debt over 5 years, give-or-take a few billion dollars here and there.
So what is that amongst friends, huh? We'll just borrow close to $1 trillion more from the Chinese or the Saudi Arabian sovereigns at least until they wise up and demand 10-15-20%+ in interest costs to cover the risk of holding our bonds or dollars, both of which could continue to slide in value.
Best of all, we'll just steal it out of our children and grandchildren's piggy banks and they'll never even know we did it! How great is that?
So congratulations, President Obama and the out-going U.S. Congress! You have successfully managed to somehow come up with another $1 trillion in deficit-spending for the next 2 years, over and above the $5 trillion you have already rung up in the last 2 years which the voters supposedly 'rebelled against' in the November elections!
Is there a gas leak under the entire city of Washington, DC?
The official debt estimates have now jumped from a measly $14 trillion as of two days ago to $15 trillion the second President Obama signed this tax cut/job extension package into law yesterday. In the blink of an eye.
Because until yesterday, the 'official' budget scoring did not include the extension of the tax cuts beyond December 31, 2010. Nor did it include the extension of unemployment benefits for 13 more months on top of the 99 weeks already spent. So once President Obama's pen left the paper after signing the bill yesterday, we loaded up close to another $1 trillion in debt obligations on ourselves and especially our children to pay off.
The heck of it is that it could have been avoided. Very easily in some regards and without almost any current 'pain' or 'suffering' by those of us who are working nowadays.
Long-time readers of this blog will know that federal budgeting is completely nuts and contrary to almost every other known system of accounting since the cave men started marking inventories of carcasses and nuts on the walls of their caves with charcoal.
In this case, a very subtle thing could have been added in this bill as a spending offset that would not even take full effect until say, years 6-10 of the 10-year budget window typically used by CBO to score the costs of new legislation.
Something as innocuous as raising the retirement age of SS and/or Medicare by a matter of a few days by the year 2020 would have most likely offset or 'paid' for this entire tax cut/jobless benefits extensions of close to $1 trillion. Seriously.
With such a measly but powerful spending offset in the out-years, this entire bill could have been 'paid for' in budget terms and our national debt would not be going up again in a dramatic fashion. Perhaps the rest of the world would have seen that adult leadership had returned to Washington in the wake of those long-forgotten already 'transformative' elections of 2010 after the budgetary Romper Room atmosphere in Congress and the White House for the entire first decade of the new millennium.
Adult leadership has yet to return, apparently.
Instead of having to reach age 67 for SS benefit eligibility, you might have had to reach age 67 and 30 days or so by 2020. Would that have been so 'painful' to do to keep our nation from financial insanity?
'Where's the Beef?' indeed.
Tuesday, December 14, 2010
We find it amusing when we read that some wag has tagged a politician with a short-hand slap such as 'RINO' (Republican-in-Name-Only) and then slaps himself on the back for being 'so clever and funny'.
Many times, the facts just don't support the insinuations.
'RINOs' are Republicans who apparently stray from the doctrine in place at the time, whatever it may be. The most egregious of all heresies a RINO of 2010 can commit is to vote for any tax increase, or in the case of the current debate over the extension of the Bush 43 tax cuts, allow them to expire under current law as of December 31.
President Ronald Reagan signed laws that raised taxes 11 times: 1982 was the largest hike in history at that time. The 1983 Social Security payroll tax hikes are still with us in the form of the infamous 'SS surplus' which is ephemeral and only took in far higher payroll taxes than were necessary to pay current SS benefits for the past 26 years.
So was one of the most revered iconic figures of the American Conservative movement, President Ronald Wilson Reagan, an idiot; a communist or worse, a 'Progressive'?
Reagan signed these bills as part of his strategy to shrink government size and influence in our lives. Did he succeed or not? That remains for history to decide but he definitely had the overall goal of less government in mind in virtually all that he did while President from 1981-1989.
And now that President Obama has 'given in' and agreed to extend the Bush tax cuts, he is being savaged by the Left and being called, guess what? A 'DINO'--'Democrat in Name Only'.
What is going on here?
There is a difference between 'campaigning' and 'governing' in a pluralistic democratic republic such as ours, the 'worst' form of government ever devised, or so says a luminary such as Winston Churchill.*
We think the problem we have today is the way politicos identify and describe our current political differences. It used to be, going back to the Founders' times, that political parties centered around the basic fundamental differences between those who wanted more centralized power in Washington and those who didn't, namely those who wanted states to reign supreme.
'Big Government Versus Small Government'. That was the marquee billing for most of our nation's history in our political debates and disputes.
But long about 1988 or so, presidential politics started turning more towards issues of 'character' when doubts about Democratic presidential candidate, Governor Michael Dukakis of Massachusetts, were raised concerning his support of a weekend furlough program for a convicted prisoner guilty of murder named Willie Horton who then raped a woman and assaulted her fiance while on furlough.
And since then, we have not really had a rip-roaring debate about any of the major issues facing us such as the budget deficits or reforming Social Security or Medicare, all critical issues that can make-or-break our economic future.
The bottom-line in these arguments would be thusly stated: If Democrats pass legislation that leads to 'bigger government', as in Obamacare, they 'win'. If Republicans would pass comprehensive legislation that leads to smaller government, they 'win'. It would be pretty clear delineation of political philosophies put that way and debated out in the open public.
Instead of defining a person as a 'small government' Republican first and foremost nowadays, here is the litmus test you have to pass in order to be considered true to the cause today in 2010:
2) Anti-Gay Rights
3) Anti-Illegal Immigrants
4) Pro-Gun 2nd Amendment Freedoms
5) Pro-Tax Cuts, any time; anywhere; anyway....
25) Small(er) Government (or at least smaller than the Democrats want)
Priority #10,000,000,000) Balanced Budgets
Priority #10,000,000,001) Elimination of National Debt
And if you don't want to be a 'DINO', you have to adhere to the following set of core values as a Democrat or else you are banished into exile:
2) Pro-Gay Rights
3) Pro-Illegal Immigrant Amnesty
4) Anti-Gun Second Amendment Freedoms
5) Pro-Tax Hikes any time; anywhere; anyway...
25) More Big Government Programs to Fix Whatever Ails This Nation
Priority #10,000,000,000) Balanced Budgets
Priority #10,000,000,001) Elimination of National Debt
We think the reason why we now have such vacuous national and local campaigns is precisely due to the fact that these big issues are so complicated and painful to talk about. Each of the big issues are so fraught with risks of 'offending the senior citizens', all of whom vote in each election, for example, that politicians just default to the more simple issues and use them as proxies to convey to the voters who they are and what their core values are.
And here we are $14 trillion in debt later, soon-to-become $16 trillion when these tax cuts and unemployment benefits extensions pass Congress.
Something had got to change. Let it start to change with the way you define your own political beliefs and how you talk to your friends and political adversaries.
* 'No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.'
--Winston Churchill in a speech in the House of Commons, 11 November 1947
Tuesday, December 7, 2010
We have been intrigued by the on-going debate/tirade/jeremiad (take your pick) by some people and a lot of Tea Party affiliators regarding the role of the Federal Reserve in America.
Don’t pat yourself on the back for thinking you have brought up this issue for the first time. The very issue of a central national bank goes back to Alexander Hamilton himself during the debates in the Constitutional Convention (he won) and through the various iterations of the First National Bank of the US (BUS) in the early 19th century; the 2nd National BUS throughout the early-mid 1800’s and the creation of the Federal Reserve Bank in 1913.
It is perhaps the one political issue that has persisted throughout all of American history which generates disproportionately the highest degree of venom and bile relative to the underlying public comprehension of its complexities….bar none.
And to those of you who want to abolish the Fed tomorrow...who do you want running monetary policy in America in its stead? The Congress of the United States? Can you imagine Charlie Rangel setting interest rates and monetary policy as the head of the House Ways and Means Committee?
It is sorta like the parents of a new player to youth lacrosse…they yell and scream even though they don’t know the rules to the game at all.
‘It is still fun to yell at the refs!’ one new parent to lacrosse told me one day. Same is true in America politics, isn’t it?
Here’s the truth about the Fed: ‘If we had any sort of consistent adult leadership in Washington over the past 30 years or on Wall Street, or Detroit or in the state capitals of debt-ridden California and about 40 other states, NO one would have ever even heard of the Federal Reserve in the United States, ever!'
Here’s ‘proof': Name the Federal Reserve chairmen before Alan Greenspan going back, maybe 5 of them. (and no fair Googling them in the sidebar!) We think that Alex Trebek could have a field day embarrassing his guests with a column in ‘Double Jeopardy’ titled: ‘The US Federal Reserve System’ and ask questions that go back to the ‘glory days’ of the Fed pre-Bernanke and pre-Greenspan. No one would get one question right.
The simple truth of the matter is that the ONLY reason why ANYONE in America today knows that Chairman Bernanke even exists on the face of the earth is because the Fed has been forced to play clean-up after these elephant and donkey parades of debt have been put on by Congress; Wall Street; Detroit; the various state capitals and the American business community in general over the past 30 years.
-Congress had run annual balanced budgets since 1980.
‘There would be no ($14 trillion, soon-to-be $20 trillion) debt below us; above us only sky.
You may say that I'm a dreamer, but I'm not the only one
I hope someday you'll join us, and the world will be as one’
'Without these enormous imbalances in annual deficits we are running; the gargantuan national debt we are building up and the lackadaisical oversight of Congress over Fannie Mae and Freddie Mac and all the mortgage companies that Congress was actually encouraging to over-lend during the 1990’s and 2000’s, the only thing the Fed would have to do is turn on the printing presses for the US dollar to allow for the growth in the population, or about 3% per year….and then go home.'
So if you hate the Fed, and despise Chairman Bernanke, tell your elected reps and senators in Congress to balance the budget and pay off this national debt as soon as possible.
Then you will never have have to know that Paul Volcker, G. William Miller, Arthur Burns and Charles S. Hamlin ever even existed. (all past Fed Chairmen)
picture courtesy of blog.ps119amersfort.com
Friday, December 3, 2010
‘Ok, These Monstrous Budget Deficits Really ARE The Fault of The US Constitution and Those Nutty Founders’
‘It is all the Founders’ fault!’
Those wacky guys James Madison, Alexander Hamilton, George Mason and Ben Franklin….they just plain forgot to put any words relating to balancing annual budgets; insuring that annual spending matched annual revenues or even putting in some archaic 18th-century clause such as ‘protection of the national fisc’ in our US Constitution.
Not a one. Not one single word relating to financial and fiscal sanity. They made clear that Congress would 'lay and collect taxes' and 'pay the debts' but said nary a word about balancing annual budgets which would certainly obviate the need to raise taxes to pay back debt in the first place.
Maybe they were all out drinking every night with the brilliant but oft-inebriated Luther Martin of Maryland. Apparently, they were rendered unable to include any fiscally-sound budget language clauses in the draft language the following mornings.
Surely they must have have presumed that all American 'leaders' (sic) who would follow in their illustrious and esteemed footprints over the next 220 years would never allow our collective national debt to escalate out of control as we have done over the past 10 years. Mr. Jefferson wrote profusely about the dangers of excessive national debt and not incurring any debt that they would not pay off themselves in terms of higher taxes within their living generation, or 20 years roughly.
But since Mr. Jefferson was in France trying to find money to help pay off the America debts from the War and negotiate trade treaties so the economy could recover, he was not in Philadelphia to insure that a balanced budget clause got inserted into the US Constitution. That is too bad.
Surely after their experience of living on the precarious cliff of insolvency to fight their War of Independence and going to the Dutch on bended knee begging for help to alleviate their debt crisis, the Founders must have assumed that no succeeding generation of Americans would ever be so stupid and dense as to follow that dangerous course of action.
Apparently, every one of those highly-educated, learned men in Philadelphia just decided that the US Constitution was not the place to muddy up with lots of entangling language on maintaining balance in annual federal budgets.
Go ahead. Take a look at the sacred document itself, the U.S. Constitution. Read every single word of it and come back and tell us if you found one single word or phrase that mandates that the US federal government ever has to balance their annual budget.
Or restricts spending to below what annual revenues will be. Or calls for the government to be below a certain proportion of GDP or any other metric you can think of.
You can not find it. We have tried. Really, we have tried very hard to find the words. And when we did not find it in the Constitution or the Amendments, we were horrified.
With that in mind, we are not quite sure it is proper to castigate and point fingers at Progressives who all along have been advocating higher spending at the federal level. After all, the United States Constitution says pretty darned clearly in English that Congress shall ‘promote the general welfare’ and take all ‘necessary and proper’ actions to do so, doesn't it?.
On top of that, we have Conservatives advocating tax cuts ‘to stimulate the economy and provide new jobs’ (‘promote the common welfare’ again) and that these actions are ‘necessary and proper’ at this ‘critical point in American history’ (today for example)
And they almost never pair those tax cuts with commensurate spending reductions.
‘Because the US Constitution doesn’t say they have to do it!’
And that has to be changed, in our humble opinion.
Like maybe by passing a Balanced Budget Amendment to the Constitution once and for all?
Amendment 28- ‘Congress shall pass annual federal budgets that are balanced between spending and revenues, except for times of war and economic recessions, in which case they will provide a plan to balance the budget within 10 years of the end of either war or the recession.’
Mr. Jefferson himself might support that one.
The last Amendment passed in 1992. We are about due for another one….and this one would be far more important than whether a Congressman can vote themselves a pay raise (#27) or people can buy liquor or not (#18 Prohibition passed/ repeal of Prohibition #21)
Don’t you think?
Wednesday, December 1, 2010
We think we already have perhaps the greatest economic ‘redistribution’ of wealth system the world has ever known, 'free-market capitalism'.
So why mess it up with a bunch of needless government intervention from Washington?
We are afraid that the advocates for such idealistic change would screw it up and actually get the exact opposite results through the immutable laws of unintended consequences and damage the golden goose of all redistributionist economic systems by passing needless regulations and interference from theorists in ivory towers.
Capitalism allows people to make investments and take risks on their own accord. Some work out for the best and succeed and live long lives and make lots of money. Many, however, perhaps 90% of them, don’t survive as viable businesses for over 5 years.
What happens in the event of any new investment in a business? People get hired, and get paid, by the entrepreneur and the managers of the business, which is the very definition of ‘transferring wealth’ from the wealthier person (the owner with access to the money or investment capital) to the less wealthy person (the worker/employee).
The money to pay those salaries could come from the entrepreneur himself from success in a previous business or, horror of all horrors! from an inheritance from one of his wildly successful ancestors such as the Vanderbilts, the Dukes or the Carnegie-Mellons.
(Ever wonder why so many colleges and universities get named after very successful, very wealthy entrepreneur families? Gee, if these rich people were so ‘terrible’, why did all these people give their money away to start so many fine institutions of higher education, hospitals, libraries or museums? We wouldn’t even have Duke basketball to cheer for or a medical center that can do wondrous things for cancer, heart and leukemia patients among others. All of these represent, yet again, a 'transfer of wealth from the very wealthy to every single person who draws a paycheck from any of these institutions, from the scientist to the doctor to the teacher to Coach K himself' (except for his Nike endorsements, of course))
America is, in its very essence, the ‘Greatest Wealth Transfer Station of All Wealth Transfer Systems in History!’
What is up with business managers anyway? Are they some sort of crazy ‘secret socialists’ who are trying to give all their money away in some sort of humanitarian gesture?
Nope. Far from it. They want to make a product or sell a service for more than it costs to make it, plain and simple. And if they hit the right niche in the market and succeed, they hope to make money and provide a better life for their family, friends and neighbors.
What happens when a business fails? The employee loses his/her job, that is for sure, but the entrepreneur loses his entire cash investment and the bank that loaned him money to grow won’t get paid back. So that is a double-whammy success hit in the eyes of the proletariat against the big, bad business interests…the employees get their salaries and benefits from the rich owner AND 'the dirty, low-down rotten big banks' before they both declare bankruptcy and write off these losses.
One thing you never hear in the news about the disparity between the rich and the not-so-rich: the composition of the top 10% of the wealthy in the U.S. is not static and doesn’t stay the same year after year. Bernie Madoff was once considered a ‘rich’ man in America before he was convicted of outrageous malfeasance and sent to rot in prison for the rest of his natural-born days but he is no longer in the top wealth percentile of Americans. So he will no longer be a component of the 'fabulously wealthy' in America, thankfully.
People sell their farms or small businesses and jump up into a high-income category in one year only to fall back into middle-income status for the next 10 years. So your next-door neighbor might be statistically a modern-day King Croesus in 2010…and then after paying all his bills, college tuitions for his children and fixing his barn, a mere commoner in 2011.
For those of you who vehemently despise wealthy people, have you ever read the biblical account of the rich man trying to get into heaven? ‘Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.’
One word comes to mind: ‘Ouch!’
Maybe being fabulously wealthy is not all that it is cracked up to be.
Still, without enterprising, energetic risk-takers, investors and business-builders, we would have very little to redistribute through the fundamental market mechanisms, philanthropy or through tax policy that funnels money from wealthy people to other people (who are not necessarily even close to being ‘poor’ as we have seen in the case of Medicare and Social Security benefits going to Bill Gates and Warren Buffett….but more on that later)
The private sector is the only place where wealth can be created out of thin air. Let it work to continue its remarkable redistributionist processes that have brought us from the time of feudal monarchies controlling everything to the largest number of pretty well-off citizens the world has ever known.