Wednesday, February 24, 2016

'I Would Rather Be Saved From Drowning By A Muslim Who Could Swim....'

'Help! I need someone who can swim to save
me from drowning!'
'...than by a Christian who couldn't'.

So goes a quote by Protestant Reformer Martin Luther.*

What is the relevance to today's American Republican Presidential primary campaign?


Many observers were somewhat stunned that Donald Trump received 41% of the registered evangelical vote in South Carolina last weekend. He has received similar numbers in Iowa and New Hampshire and apparently last night in Nevada along with virtually every other poll that has been taken in other primary states over the past 4 months at least.

Texas Senator Ted Cruz trailed Donald Trump in South Carolina with 37% of their vote even though he has assiduously targeted evangelicals in every state as the basis for his road to the GOP nomination.

We don't know what his target was when he started the campaign but it had to be at least 50%+1 of the evangelical vote if not 60% or more in order to make the numbers towards nomination work for him.

We know he didn't count on coming in second to Donald Trump or anyone else in South Carolina or any other state in the 'evangelical lane' as some are starting to call it as if this was some sort of horse race or NASCAR race.

So what is going on out there anyway?

We think the same things that are driving evangelicals to vote for Trump are the same things driving others in both parties to vote for the most outsider of all outsiders they can find in this 2016 presidential primary season:

Lack of confidence that the US economy is working as it should and America is safe from all attack.

It is one thing to vote for a candidate who has impeccable religious credentials when things are going well and we all want a leader to exemplify the epitome of American values, character and beliefs.

George Washington held that kind of sway over the American voting population for two elections where he ran unopposed for President. He also had the added benefit of leading the new nation to independence and victory over the hated British who 'only' had the most powerful armed forces the world had ever known to that point in time.

Jimmy Carter ran as an outsider to the entire Washington political apparatus in 1976 and was able to position his campaign as 'looking out for the little guy' in the wake of the resignation of President Richard Nixon and the subsequent pardon by President Gerald Ford. He was able to portray himself as the 'Man From Plains, Georgia' much like Bill Clinton became 'The Man From Hope (Arkansas) in 1992 but President Carter also benefited from being able to speak fluently and without reservation about his role as a Sunday School teacher even while a sitting Governor.

His term in office is routinely referenced as being one of the least successful four years of any of our 44 US Presidents today. 21% interest rates; 12% annual inflation; skyrocketing gas prices and 52 hostages from our US Embassy in Tehran being held by Iranian fundamentalists for 444 days will do that to a Presidential legacy.

We think evangelical voters in the GOP primary have seen and felt and heard the same things other disgruntled voters have seen and felt and heard over the past 7 years under President Obama:
  1. Very low annual rates of job creation and opportunity
  2. Very low annual GDP growth by any estimation relative to other Presidents
  3. Sense of weakness and a diminishing of American strength, power and presence overseas.
  4. Heightened sense of unease due to ISIS threats to kill American citizens anywhere in the world including on American soil.
  5. A recognition that we may be in the same sort of 'malaise' under President Obama that we were living in under President Carter.
They all want it to get better. On all accounts. Soon.

American voters have come to realize that because someone can recite the Bible at the drop of a hat is not a 100% indicator as to whether they can fix the economy or keep America safe from threats. The depth of someone's spiritual life and devotion is no real direct indicator of whether they understand how to balance the budget; reduce the national debt or fix our public education systems, just to name a few major problems we face today.

That is why we think so many evangelicals, along with other segments of the Republican Party as well as independents, unaffiliateds and blue collar workers formerly known as 'Reagan Democrats' are flocking to Donald Trump.

They don't hear his insults, lack of specificity on issues or his constant repetition of him leading in the polls.

They hear him say: 'I am going to fix this. I am going to 'Make America Great Again!' and that is enough for anyone tired of the malaise we have seen over the past 7 years.

As political commentator Alex Castellanos said about evangelicals in South Carolina voting for Trump over Cruz:
'Cruz has taken for granted that evangelical voters would support the most evangelical candidate. When the bus is racing towards a cliff, however, evangelicals want more than a minister to offer a prayer.
They’d like somebody who knows how to drive to turn the bus around.'
Americans want someone to lead them who is inherently optimistic and positive about the future of America. Not someone pointing out the faults of America all the time and apologizing for everything America has done in the past whether it is justified or not.

Americans want someone 'who can swim' to save them from drowning, give them CPR and help them get up off the sand and back to their family, friends and home where they can lead normal productive interesting lives.

Even Martin Luther might agree with that.
'Gosh! I wonder for whom I would vote in this
2016 Republican Campaign for POTUS if I
was alive and registered to vote as a US

*I hope. I seem to recall reading this in one of the biographies I have read about Martin Luther but failed to keep the exact quote for record-keeping and future reference for some reason. However, any cursory reading of Martin Luther will yield many other similar pithy-isms such as this one below I did verify in a previous post from 'Bonhoeffer: Pastor, Martyr, Prophet, Spy' with attribution to Eric Metaxas so it is not totally out of the question that Luther could have written such a statement, which I wish I had saved if he had written it, of course.

If he didn't write the quote I used in the post above, he should have.

If I had been a Jew and had seen such dolts and blockheads govern and teach the Christian faith, I would have sooner become a hog than a Christian.’ (actual quote from Martin Luther confirmed in Metaxas' book)

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Wednesday, February 17, 2016

John Kasich: 'He Was Right Dere In It!'

John Kasich, Governor of Ohio
We have written about how the Republicans on the House Budget Committee in 1993 started the ball rolling downhill towards balanced budgets from 1998-2001 in the past.

I was working as an associate on the House Budget Committee at the time with former Congressman Alex McMillan (R-NC9, Charlotte) who was serving as the 2nd-ranking Republican beside Ranking Minority Leader John Kasich of Ohio.

As Ernest T. Bass would brag to Ramona: 'I was right dere in it!'

(click through title link if you can't see the video clip; see quote at 3:17 in clip)

I mean, 'right dere in it' meaning sitting 3 feet away from John Kasich and his staff in every committee hearing plus hundreds upon hundreds of hours in conference rooms for 2 straight years.

The Budget Agreement of 1990 set the table and laid out the parameters for the process with the institution of PAYGO and hard spending caps on discretionary (non-entitlement and net interest) spending for the next decade.

But it was the efforts of the intrepid 16 GOP Members of the House Budget Committee in 1993 under the leadership of then Congressman John Kasich of Ohio which really set the course for the budgets to be balanced in the latter part of the last decade of the 20th century.

Since John Kasich is now running for President of these United States, we thought we would recount how he led this group of 16 Republicans in 1993 to come up with a solution to our over-spending problems.

If you are anything like us, you know that we have got to elect a President who will make balancing the budget an ultra-high priority during their first term, and possibly their second term.

John Kasich is the only one out of all remaining candidates on either side who has not just talked about doing it somehow some day.

He has actually done it.

In January, 1993, former Congressman Alex McMillan said he thought the House Budget Committee should do what any self-respecting business executive would do if they were facing a round of spending cuts which was to list them out specifically in line-item fashion for his executive team and board of directors to see.

This was quite a risk given that the Republicans were still in the minority after about 40 years. Revealing any or all of their proposed spending cuts might hurt their chances of ever winning the majority in the US House, which, in January of 1993, still seemed like a far-off pipe-dream.

After consulting with Congressman McMillan, John Kasich agreed and set about the task of finding $500 billion in spending cuts, eliminations and reductions from the baseline in the federal budget. The federal budget in FY 1993 was 'only' $1.15 trillion. John wanted the cuts to take place over a 5-year period which was the long-term budget time horizon back then as opposed to the 10-year time frames now considered normal by CBO and budget experts.

$500 billion in spending reductions, reforms etc. out of close to $7.4 trillion in spending over a 5-year period meant a 6.7% reduction from the baseline as established by CBO. Not a huge cut but a reduction from the status quo which always causes problems for proponents of higher federal spending.

John wanted to call this package 'Cutting Spending First' mainly because that is the only tried-and-true way to balance any budget: control spending before raising revenue simply because you can control spending.

Practical Solution #1: Practice what you preach. Do what you say you are gonna do.

John asked the committee of 16 members to sign up for various task forces they wanted to work on to find the cuts and spending programs among the thousands of programs in each broad general issue area. Defense/national security/foreign affairs was one of them; education/welfare/social services was another; Medicare/Medicaid/other federal health programs was another.

No one, and I mean, NO ONE, wanted the federal health care task force. So, of course, Congressman McMillan took it since he had a nose for spending control being a former CEO of Harris-Teeter Supermarkets.

We plowed through various publications such as 'Spending and Revenue Options' published annually by CBO. (Go ahead, click on the link yourself and take a look at the options yourself. They are not rocket science or advanced calculus problems)

We also met with staff of various authorizing committees to see where they may have tried to curtail spending in the past to no avail.

When we reconvened, John told everyone that we would discuss every option the task forces brought forward. After they were all presented, he would take a vote of the members on the committee as to which ones they would keep and which ones they would not keep.

On top of that, John said that the only proposals that would stay in the final package would be the ones where 60%+ of the members supported it. His reasoning was that if we couldn't get 60%+ of the Republicans to support the various measures, we were not going to be successful in getting any Democrats to support it in which case, the entire package was going nowhere since the Democrats still controlled the US House by 82 votes over the Republicans in 1993.

Practical solution #2. John Kasich knew the value of getting bipartisan support for any proposal or else it would be doomed to failure.

Over a period of months, we reconvened regularly to see what could be added to the package to get to $500 billion in spending reductions over 5 years. Congressman McMillan presented a list of changes to Medicare and Medicaid that amounted to $177 billion in spending savings over 5 years simply because any moderate reduction or policy change to either exploding program would yield enormous savings. For example, imposing a $3 co-pay on home health care visits saved tens of billions of dollars.

Everyone on the committee had to catch their breath and reach for some oxygen upon hearing of the $177 billion spending reductions in Medicare and Medicaid. 'That is close to 50% of our $500 billion target!' one member said.

'Of course it is!' Congressman McMillan replied. 'Entitlements are making up close to 40% of the budget (in 1993) as it is right now! Of course spending reductions from the 2 large federal health care programs are going to make up close to half of our savings! If we ignore entitlements, we will NEVER balance the budget!'

Eventually, we got to the $500 billion target with clearly defined policies and proposals that could be taken to each authorization and appropriation committee to introduce to various bills that session of Congress. There were some tough moments and some funny moments such as when former MLB Hall of Fame pitcher and then-Congressman and then-Senator Jim Bunning threatened bodily harm to 'anyone who touched the $500 million Appalachian Regional Commission budget!'

'Ok, Jim! Settle down! No need to throw a bean ball at anyone over this!' John said full-well knowing that Jim Bunning was well-known for the number of high-and-inside fastballs he threw that hit opposing hitters in the head during his long career in the major leagues.
Jim Bunning-160 Hit By Pitches

John introduced it in the House Budget Committee as an alternative to the Democrats budget in 1993. We got 15 of the 16 Republican votes on the committee, since Rick Lazio of New York bailed on us because he was already planning to run against Hillary Clinton in a US Senate race in New York far down the road apparently.

We got hammered in the committee by the 24 Democrats on the majority side.

John took it to the floor of the House where I think only 35 brave Republicans voted for the 100% pure spending reduction package. We came back again in 1994 and maybe got 75 votes then.

Practical Solution #3: John kept hammering in the House Budget Committee as the Chairman when the GOP took over control of Congress in 1994 for the first time since Ike was President.

Persistence is a virtue.

Congressman McMillan had decided to retire before they crossed over into the Promised Land in 1994 but John kept bringing up the core of 'Cutting Spending First' in the Budget Committee and on the floor of the House in 1995 and 1996 until, in 1997, former chief of staff to President Bill Clinton, Erskine Bowles, began meeting regularly with John and Newt Gingrich, Dick Armey and Tom DeLay to hammer out what became The Balanced Budget Act of 1997.

Which incorporated the vast bulk of 'Cutting Spending First' put forward in the spring of 1993.

Which led to the creation of the only balanced federal budgets most of us have had in our lifetimes in 1998, 1999 and 2000.

Practical Solution #4: Getting results, versus promises and political bromides, is what we all want in our elected leaders, yes?

There is a myriad of reasons why people vote for some particular person to become our next US President. Some has to do with keeping our nation safe. Some has to do with social policies. Some has to do with just plain old likability factors such as Ronald Reagan over Walter Mondale or Jimmy Carter or Barack Obama over John McCain.

Our number one main issue has always been to elect an adult who can and will run our country in a sane, business-like, common-sense, fiscally responsible course. Balancing the budget is the paramount thing any sane person running for President should be able to do.

John Kasich is the only person running this year who has done it at the federal level. It is relatively 'easy' to do at the state level simply because states have constitutions that demand balanced budgets simply because states can't print their own currency or act like the Fed and make up money out of thin air to pay their bills.

We have absolutely no doubt that every single day in the White House during his term, John Kasich would wake up each and every morning brimming with energy and enthusiasm to find ways to reduce federal spending and make every single taxpayer dollar go as far as possible to meet our collective public policy goals and needs.

It is very, very, very difficult to do at the federal level. We saw John in action and can attest to his tenacious leadership and persuasive skills that led to those balanced budgets mentioned above. He did it with a constant sense of purpose and duty and he did it with a great sense of humor and humanity to boot.

'He was right dere in it'. Doing the job we want any leader to do.

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Friday, February 12, 2016

'Let's Assume The Next Congress Knows Absolutely Nothing...'

'Just Keep It Simple!'
'...but I repeat myself' as Mark Twain might have said.

We have tons of problems we want the next president and the next Congress to fix. The economy. The budget deficit. The national debt. Jobs. Racial discord. NFL replay.

(Why not? Just drop instant replay and play the game straight-up if they are not going to reverse bad calls like that first pass by the Panthers in the Super Bowl)

Let's assume that the next President and every Congressman and US Senator elected this fall knows absolutely nothing at all about microeconomics, macroeconomics, federal budgeting or tax policy-making process, business, investments, monetary policy or international trade and finance.

It isn't hard if you try.

What could they possibly do that would help get us out of this mess we find ourselves in now 8 years after the Crash of 2008?

As surprising as it may seem, the next President and the next Congress and US Senate really do not have to do a whole lot in order to get a massive result in terms of job creation, deficit-reduction and a general return to economic prosperity and economic growth.

  • We don't need another 'New Deal' which came out of the 'Square Deal' of Teddy Roosevelt.
  • We don't need another massive tax cut which President Obama signed into law permanently after President Bush and the Republicans passed two rounds of Bush Tax Cuts in 2003 and 2004.
  • We have proven that, in the absence of any other changes, massive tax cuts do not, in and of themselves, produce a massive economic boom. If massive tax cuts worked by themselves, we would have had massive economic growth under W and then under Obama when he signed them into law permanently.
  • We have empirical proof that, in and of itself, extremely low interest rates do not cause a massive economic boom or even a boomlet. If low interest rates did, we would have had the most explosive economic explosion ever over the past 8 years with rates at or near zero.
  • We have solid evidence that lower oil prices, in and of themselves, do not cause an economic boom of the highest order. If they did, we would be falling all over ourselves today in new jobs with the oil market being ripped apart with $28/barrel oil prices and prices at the pump hitting $1.79/gallon in many places.
Nope. We don't need a super-dupercalifragilisticexpialidocious omnibus COBRA/TEFRA/ALPHA tax and budget bill like so many politicians want to concoct to show they 'are really doing something about the economy!'

In fact, we would like to suggest that the first bill coming out of the 115th Congress in 2017 be called the KISS Bill...'Keep It Simple Stupid!'

So maybe electing politicians who don't know anything about all the high finance part of federal budgeting and tax policy might finally be an advantage instead of a hindrance.

We think the next Congress and President can and should do the following things:
  1. Restore confidence to the business community and private sector.

How do you do that, you say?

You do it by not threatening to regulate and tax everything that walks, moves or burns, as the Chairman of the House Energy and Commerce used to explain his expansive jurisdiction.

You do it by repealing, reversing or rescinding almost all of President Obama's executive orders and return to 'regular order' meaning 'The President proposes and Congress disposes'. That has worked pretty well for most of our history; it will work again if we have a President who understands the priority our Founders placed on setting up the legislative system as Article I of the Constitution, not second behind the executive branch.

Once the next President and Congress are seen as being friendly to the economic realities of our free enterprise system, and business owners and investors and entrepreneurs get a whiff of a firm breeze blowing into their sails from behind versus a gale force wind blowing right into their faces every day, they will start investing more and hiring people and creating jobs and expanding more rapidly than we have seen under now 7 years of the failed Obama top-down economic policies.

The only thing that has 'trickled down' from the Obama years has been a stagnant economy where millions more people have left the workforce instead of joining it and finding great new jobs in an expanding economy.

'Trickle down economics' works both ways you know. Our economy either expands and grows depending on whether the country feels like someone who knows what they are doing are in charge, or it contracts or becomes crippled when they feel like those who are in elected leadership positions don't know what they are doing.

It is like day following night. Or vice versa.

The other reason why 'The KISS Solution' might be the best tack to take in January 2017 is that all we need is to exceed economic projections for economic growth and job creation by just a little to make a world of difference in our budget and fiscal picture and outlook.

We try to read these reports so you don't have to but here they are anyway: The Long-Term Budget Outlook 2016-2026 by CBO and publications from OMB in the White House that accompany the President's budget submission to Congress each year. 

If you take a look at the appendices, tables, charts, graphs and analytical perspectives at the end of both publications, you can usually find some really interesting stuff that could help people in public office make better, more rational decisions.

If they would read them, that is.

In the two clips copied below (highlights in red), you will find some interesting discussion about various outcomes using sensitivity analysis which really means 'what would happen if this happens, or that happens, or another thing happens, all holding everything else the same'.

We want to know what would happen to our fiscal and financial house if, say, more people went back to work and started paying taxes on earned income again and left the welfare rolls or Medicaid and were able to provide for themselves and their families instead of relying on government to do it.

Just to show you the power of having a robust, expansive, job-creating economy versus the one that moves like a sloth we now have, consider this:

If we can just unleash the power of the American economy and allow it to grow in real GDP terms by little more than an extra 0.3% per year for the next 10 years, we will virtually eliminate federal budget deficits with no tax hikes, no tax cuts, no spending cuts and no spending hikes.

Imagine that. We could elect a new President and a new Congress and US Senate, ask them to do nothing other than restore confidence in the private sector as noted above, and we could solve at least our fiscal problems in 10 years.

After all, our elected officials in Washington have been pretty good at getting 'nothing' done for the past 15 years on the big issues that face us: immigration, economy, jobs, budget deficits and the national debt. Why not tap into that 'talent' (sic) and just tell them to do 'nothing' for just a little while longer?

If we could fix our entitlement growth especially in Medicare and Medicaid, revamp or repeal Obamacare and replace it with something more in tune with what works in the American health care system (see numerous previous posts) and cashier this archaic IRS system and move to a more manageable consumption-based tax, for one example, we might grow at 10% per year and see jobs erupting out of the economy like flowers in the springtime.

Wouldn't that be nice to see after all these years?

***Alternative Scenarios****

The rules of thumb described above can be used in combination to show the effect on the budget of alternative economic scenarios. Considering explicit alternative scenarios can also be useful in gauging some of the risks to the current budget projections. For example, the strength of the recovery over the next few years remains highly uncertain. Those possibilities are explored in the two alternative scenarios presented in this section and shown in Chart 2-3.

The first alternative scenario assumes that real GDP growth and unemployment beginning in 2013:Q4 follow the projections in the February 2014 Blue Chip forecast for the period through the end of 2015, and are extended through 2024 from the semi-annual October 2013 Blue Chip report. In this case, after 2013, the level of GDP remains lower than the Administration’s forecast throughout
the projection period. This alternative includes a smaller real recovery from the loss of output during the 2008-2009 recession. Growth returns to normal, but without a substantial catch-up to make up for previous output losses.

The second alternative is the average of the highest 10 real GDP projections of the Blue Chip forecasters, also based on the February and October forecasts. This forecast is slightly higher than the Administration’s forecast through 2017 with the high-10 Blue Chip growth exceeding the Administration’s considerably in the out years. 

Table 2-6 (below) shows the budget effects of these alternative scenarios compared with the Administration’s economic forecast. Under the first alternative, budget deficits are significantly higher in each year compared with the Administration’s forecast. In the second alternative, the deficit is modestly higher than the Administration’s projection in the near term, but results in a substantially lower deficit in the long run and cumulatively over 10 years.

Many other scenarios are possible, of course, but the point is that the most important influences on the budget projections beyond the next year or two are the rate at which GDP and employment recover from the recession.

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