Economic Lunacy

[philunderwood]

www.qando.net/?cat=9

4 Trillion in debt added under Obama’s term

Published August 23, 2011 | By Bruce McQuain

Deficit spending has risen faster under Barack Obama than any other president in history. That’s not to say other presidents weren’t in the red during their administrations, but in the case of Obama, its over 4 trillion dollars in less than a single term.


The latest posting by the Treasury Department shows the national debt has now increased $4 trillion on President Obama’s watch.

The debt was $10.626 trillion on the day Mr. Obama took office. The latest calculation from Treasury shows the debt has now hit $14.639 trillion.

It’s the most rapid increase in the debt under any U.S. president.

The national debt increased $4.9 trillion during the eight-year presidency of George W. Bush. The debt now is rising at a pace to surpass that amount during Mr. Obama’s four-year term.

The immediate problem isn’t about taxes or revenues, “it’s the spending, stupid!” Byron York echoes the point:


It’s conventional wisdom in Washington to blame the federal government’s dire financial outlook on runaway entitlement spending. Unless we rein in Social Security, Medicare and Medicaid, the conventional wisdom goes, the federal government is headed for disaster.

That’s true in the long run. But what is causing massive deficits now? . . . The bottom line is that with baby boomers aging, entitlements will one day be a major budget problem. But today’s deficit crisis is not one of entitlements. It was created by out-of-control spending on everything other than entitlements. The recent debt-ceiling agreement is supposed to put the brakes on that kind of spending, but leaders have so far been maddeningly vague on how they’ll do it.

Precisely. When treating a badly wounded person the immediate need is to stop the bleeding, not treat them for heart disease. Once the bleeding is stopped, then you can worry about their heart and future treatments.

The spending has to stop. And President Obama is not the man to do that. He blames his spending on everyone but himself which indicates to many that he has no intention of slowing it down:


Mr. Obama blames policies inherited from his predecessor’s administration for the soaring debt. He singles out:
"two wars we didn’t pay for"
"a prescription drug program for seniors…we didn’t pay for."
"tax cuts in 2001 and 2003 that were not paid for."

While there is some truth to what he points too, the last is nonsense unless you believe the government has first claim to your earnings. Those aren’t tax cuts, they’re tax rates. They’ve been in place for almost 10 years for the first and eight for the second. Tax rates are changed all the time, but until recently they’ve never been referred too as “tax cuts … that were not paid for”. Also not mentioned in Mr. Obama’s litany is TARP – something he voted for – and the trillion dollar stimulus bill, not to mention the new health care law which analysis now shows bends the cost curve up.

Just as this economy is all his, so is the 4 trillion in borrowed money he’s spent during his term to little or no effect during his term. And the budget he submitted to Congress this year, the budget that was rejected 97-0, indicated he still doesn’t understand the spending has to stop.

Our debt now stands at 97.6% of our GDP. That’s default territory. Yet there are those who have attacked Standard and Poors for downgrading their rating to reflect that reality. This is serious business that effects or will effect everyone if it isn’t stopped. GOP candidates need to concentrate on the immediate problem and announce and run on their plan to stop the bleeding.

~McQ

[philunderwood]

An Unusual Economy?

By Thomas Sowell

www.JewishWorldReview.com |

Many in the media are saying how unusual it is for our economy to be so sluggish for so long, after we have officially emerged from a recession. In a sense, they are right. But, in another sense, they are profoundly wrong.

The American economy usually rebounds a lot faster than it is doing today. After a recession passes, consumers usually increase their spending. And when businesses see demand picking up, they usually start hiring workers to produce the additional output required to meet that demand.

Some very sharp downturns in the American economy, such as in the early 1920s, were followed quickly by bouncing back to normal levels or beyond. The government did nothing — and it worked.

In that sense, this is an unusual recovery in how long it is taking and in how slowly the economy is growing — while the government is doing virtually everything imaginable.

Government intervention may look good to the media but its actual track record — both today and in the 1930s — is far worse than the track record of letting the economy recover on its own.

Americans today are alarmed that unemployment has stayed around 9 percent for so long. But such unemployment rates have been common for years in Western European welfare states that have followed policies similar to policies being followed currently by the Obama administration.

Those European welfare states have not only used the taxpayers' money to hand out "free" benefits to particular groups, they have mandated that employers do the same. Faced with higher labor costs, employers have hired less labor.

The vast uncertainties created by ObamaCare create a special problem. If employers knew that ObamaCare would add $1,000 to their costs of hiring an employee, then they could simply reduce the salaries they offer by $1,000 and start hiring.

But, since it will take years to create all the regulations required to carry out ObamaCare, employers today don't know whether the ObamaCare costs that will hit them down the road will be $500 per employee or $5,000 per employee. Even businesses that have record amounts of cash on hand are reluctant to gamble it by expanding their hiring under these conditions.

Many businesses work their existing employees overtime or hire temporary workers, rather than get stuck with unknown and unknowable costs for expanding their permanent work force.

As unusual as 9 percent unemployment rates may seem to the current generation of Americans, unemployment rates stayed in double digits for months and years on end during the 1930s. Franklin D. Roosevelt's administration followed policies very similar to those of the Obama administration today. He also got away with it politically by blaming his predecessor.

[Ritty77]

Oil is at about $86 a barrel, yet the price is still $3.60 a gallon.

Why? Regulations, taxes, moratoriums, fossil fuel-hating, spread-the-wealth Marxists in power is my guess.

I try to be optimistic, but the brainwashed, embedded stupidity of so many has me worried.

[philunderwood]

Me too.

[philunderwood]

www.qando.net/?cat=58

Disaster relief and budget offsets

Published September 24, 2011 | By Bruce McQuain

I guess I just don’t get this, given our fiscal shape. Yesterday the GOP House passed a continuing resolution to fund the government until November (since we haven’t had a budget passed in the House for almost 3 years). In it is a provision that pays for disaster relief by cutting spending elsewhere. In other words, it tries to balance new spending on one side, even if the spending is on disaster relief, by cutting planned spending on the other side. It is called prioritizing. We all do it. If the car breaks and it is going to cost $1,500 we may shave $1,500 dollars worth of vacation off of the planed vacation. Household economics. The car is a greater priority than a full 2 weeks of vacation.

However, when it comes to the government it seems that normal everyday concepts like living within your means somehow becomes a “dangerous precedent”. Really? Here’s TPM’s take:


But the bill received almost no Democratic support and faces an uncertain future in the U.S. Senate because Republicans have used the funding bill as a vehicle for disaster relief money, and insisted it be paid for by slashing funds for jobs programs Democrats support. Dems say the GOP legislation provides insufficient aid, and sets a dangerous precedent by requiring those funds to be offset with partisan budget cuts.

Yes indeed … removing the lefty modifiers to get to the real heart of the point, you are left wondering “why is this a bad thing”


“Dems say the GOP legislation provides … aid, and sets a … precedent by requiring those funds to be offset with … budget cuts”.

Uh, yes, yes, a thousand times yes. Please, set the precedent, by all means. That’s how all the rest of us do our business daily for heaven sake.

Oh, and it is precisely the message the GOP candidates who won in the 2010 landslide were charged with doing. Never mind the partisan nonsense from the Dems – insufficient aid is a matter of opinion obviously, the precedent is dangerous only because it requires disciplined spending offset by like cuts elsewhere and “partisan” budget cuts are only partisan to the side who’s ox is being gored.

The fact remains that this is how the House needs to routinely do business. When something comes along that takes priority over something else for which spending was planned, the plan is changed. The answer is rarely “go borrow money and do both”.

When it is, you end up in $14 trillion dollar debt. I still don’t understand what it is about that concept that Democrats just can’t seem to grasp.


"It would be my hope that there would be some split the difference, the Republicans would come out and say we’re not going to go as high as you wanted…and we will have no offset. That I think would be a reasonable place to be," Pelosi said.

Yeah, that’s business as usual. That’s why we’re in debt up to our necks. No. No thank you, Ms. Pelosi. From a thousand little compromises like that grows economy crushing debt. We’re there. We’ve proven that. No more. That is no longer (not that it ever was) a “reasonable place to be”. And it isn’t “radical” or “extreme” to point it out or ask that offsets be a part of any spending plan.

It’s sane.

~McQ

[Ritty77]

Biden’s Fourth-Grade Economics
How to justify unaffordable and inefficient stimulus

By Mark Steyn
October 22, 2011

In one of those inspired innovations designed to keep American classrooms on the cutting edge of educational excellence, the administration has been sending Joe Biden out to talk to schoolchildren. Last week, it was the fourth grade at Alexander B. Goode Elementary School in York, Pa., that found itself on the receiving end of the vice president’s wisdom:

Here in this school, your school, you’ve had a lot of teachers who used to work here, but because there’s no money for them in the city, they’re not working. And so what happens is, when that occurs, each of the teachers that stays have more kids to teach. And they don’t get to spend as much time with you as they did when your classes were smaller. We think the federal government in Washington, D.C., should say to the cities and states, look, we’re going to give you some money so that you can hire back all those people. And the way we’re going to do it, we’re going to ask people who have a lot of money to pay just a little bit more in taxes.

Who knew it was that easy?

So let’s see if I follow the vice president’s thinking:

The school laid off these teachers because “there’s no money for them in the city.” That’s true. York City School District is broke. It has a $14 million budget deficit.

So instead Washington, D.C., is going to “give you some money” to hire these teachers back.

So, unlike York, Pa., presumably Washington, D.C., has “money for them”?

No, not technically. Washington, D.C., is also broke — way broker than York City School District. In fact, the government of the United States is broker than any entity has ever been in the history of the planet. Officially, Washington has to return 15,000,000,000,000 dollars just to get back to having nothing at all. And that 15,000,000,000,000 dollars is a very lowball figure that conveniently ignores another $100 trillion in unfunded liabilities that the government, unlike private businesses, is able to keep off the books.

So how come the Brokest Jurisdiction in History is able to “give you some money” to hire back those teachers that had to be laid off?

No problem, says the vice president. We’re going to “ask” people who have “a lot of money” to “pay just a little bit more” in taxes.

Where are these people? Evidently, not in York, Pa. But they’re out there somewhere. Who has “a lot of money”? According to President Obama, if your combined household income is over $250,000 a year you have “a lot of money.” Back in March, my National Review colleague Kevin Williamson pointed out that, in order to balance the budget of the United States, you would have to increase the taxes of people earning more than $250,000 a year by $500,000 a year.

Okay, okay, maybe that 250K definition of “bloated plutocrat” is a bit off. After all, the quarter-mil-a-year category includes not only bankers and other mustache-twirling robber barons, but also at least 50 school superintendents in the State of New York and many other mustache-twirling selfless public servants.

So how about people earning a million dollars a year? That’s “a lot of money” by anybody’s definition. As Kevin Williamson also pointed out, to balance the budget of the United States on the backs of millionaires you would have to increase the taxes of those earning more than 1 million a year by 6 million a year.

Not only is there “no money in the city” of York, Pa., and no money in Washington, D.C., there’s no money anywhere else in America — not for spending on the Obama/Biden scale. Come to that, there’s no money anywhere on the planet: Last year, John Kitchen of the U.S. Treasury and Menzie Chinn of the University of Wisconsin published a study called “Financing U.S. Debt: Is There Enough Money in the World — and At What Cost?”

Don’t worry, it’s a book with a happy ending! U.S.-government spending is sustainable as long as by 2020 the rest of the planet is willing to sink 19 percent of its GDP into U.S. Treasury debt. And why wouldn’t they? After all, if you’re a Chinese politburo member or a Saudi prince or a Russian kleptocrat or a Somali pirate and you switched on CNN International and chanced to catch Joe Biden’s Fourth Grade Economics class, why wouldn’t you cheerily dump a fifth of your GDP into a business model with such a bright future?

Since 1970, public-school employment has increased ten times faster than public-school enrollment. In 2008, the United States spent more per student on K–12 education than any other developed nation except Switzerland — and at least the Swiss have something to show for it. In 2008, York City School District spent $12,691 per pupil — or about a third more than the Swiss. Slovakia’s total per-student cost is less than York City’s current per-student deficit — and the Slovak kids beat the United States at mathematics, which may explain why their budget arithmetic still has a passing acquaintanceship with reality. As in so many other areas of American life, the problem is not the lack of money but the fact that so much of the money is utterly wasted.

But that’s no reason not to waste even more! So the president spent last week touring around in his weaponized Canadian bus telling Americans that Republicans were blocking plans to “put teachers back in the classroom.” Well, where are they now? Not every schoolmarm is down at the Occupy Wall Street drum circle, is she? No, indeed. And in that respect York City is a most instructive example: Five years ago (the most recent breakdown I have), the district had 440 teachers but 295 administrative and support staff. If you’re thinking that sounds a little out of whack, that just shows what a dummy you are: For every three teachers we “put back in the classroom,” we need to hire two bureaucrats to put back in the bureaucracy to fill in the paperwork to access the federal funds to put teachers back in the classroom. One day it will be three educrats for every two teachers, and the system will operate even more effectively.

It’s just about possible to foresee, say, Iceland or Ireland getting its spending under control. But, when a nation of 300 million people presumes to determine grade-school hiring and almost everything else through an ever more centralized bureaucracy, you’re setting yourself up for waste on a scale unknown to history. For example, under the Obama “stimulus,” U.S. taxpayers gave a $529 million loan guarantee to the company Fisker to build their Karma electric car. At a factory in Finland.

If you’re wondering how giving half a billion dollars to a Finnish factory stimulates the U.S. economy, well, what’s a lousy half-bil in a multi-trillion-dollar sinkhole? Besides, in the 2009 global rankings, Finnish schoolkids placed sixth in math, third in reading, and second in science, while suffering under the burden of a per-student budget half that of York City. By comparison, America placed 17th in reading, 23rd in science, and 31st in math. So the good news is that, by using U.S.-government money to fund a factory in Finland, Fisker may be able to hire workers smart enough to figure out how to build an unwanted electric car that doesn’t lose its entire U.S.-taxpayer investment.

In a sane world, Joe Biden’s remarks would be greeted by derisive laughter, even by fourth graders. Certainly by Finnish fourth graders.

— Mark Steyn, a National Review columnist, is the author of After America: Get Ready for Armageddon. © 2011 Mark Steyn

www.nationalreview.com/articles/280986/biden-s-fourth-grade-economics-mark-steyn?pg=1

[philunderwood]

Committee Finds Savings By . . . Adding To Deficit?

By Mark Steyn

www.JewishWorldReview.com |

Have you been following this so-called supercommittee? They're the new superhero group of superfriends from the super-Congress who are going to save America from plummeting over the cliff and into the multitrillion-dollar abyss.

There's Spender Woman (Patty Murray), Incumbent Boy (Max Baucus), Kept Man (John Kerry) and many other warriors for truth, justice and the American way of debt. The supercommittee is supposed to report back by the day before Thanksgiving on how to carve out $1.2 trillion dollars of deficit reduction and thereby save the republic.

I had cynically assumed that the superfriends would address America's imminent debt catastrophe with some radical reform — such as, say, slowing the increase in spending by raising the age for lowering the age of Medicare eligibility from 47 to 49 by the year 2137, after which triumph we could all go back to sleep until total societal collapse.

But I underestimated the genius of the superfriends' supercommittee. It turns out that a committee created to reduce the deficit is instead going to increase it. As the Hill reported:

"Democrats on the supercommittee have proposed that the savings from the end of the wars in Iraq and Afghanistan be used to pay for a new stimulus package, according to a summary of the $2.3 trillion plan obtained by the Hill."

Do you follow that? Let the Congressional Budget Office explain it to you: "The budget savings from ending the wars are estimated to total around $1 trillion over a decade, according to an estimate in July from the Congressional Budget Office."

Let us note in passing that, according to the official CBO estimates, a whole decade's worth of war in both Iraq and Afghanistan adds up to little more than Obama's 2009 stimulus bill.

But, aside from that, in what sense are these "savings"? The Iraq War is ended — or, at any rate "ended" at least as far as U.S. participation in it is concerned. How then can congressional accountants claim to be able to measure "savings" in 2021 from a war that ended a decade earlier?

And why stop there? Why not estimate around $2 trillion in savings by 2031? After all, that would free up even more money for a bigger stimulus package, wouldn't it? And it wouldn't cost us anything because it would all be "savings."

Come to think of it, didn't the Second World War end in 1945? Could we have the CBO score the estimated two-thirds of a century of "budget savings" we've enjoyed since ending that war?

We could use the money to fund free master's degrees in complacency and self-esteem studies for everyone, and that would totally stimulate the economy. The Spanish-American War ended 103 years ago, so imagine how much cash has already piled up! Like they say at Publishers' Clearing House, you may already have won!

Meanwhile, back at the Oval Office, the president is asking for your votes for the 2011 SAVE Award. To demonstrate his commitment to fiscal discipline, he set up a competition whereby federal employees can propose ways to cut government waste. A panel of experts (John Kerry, Paula Abdul, etc.) then weigh the merits, and the four finalists go up on the White House website to be voted on by members of the public: It's like "Dancing With the Czars."

Last year, Marjorie Cook of Michigan, a food inspector with the Department of Agriculture, noted that every year USDA inspectors ship 125,000 food samples to its analysis labs by "next day" express delivery, and that a day or two later the labs ship the empty containers back to the inspectors using the very same "next day" service.

Marjorie suggested that, as the containers are empty, they can't be all that urgent, and should be mailed back at regular old ground delivery rates.

But this reform was way too radical, so it didn't win. And happily, even as we speak, mail couriers are rushing empty containers back and forth across the USDA-inspected fruited plain at your expense.

This year's SAVE Award nominees include Faith Stanfield of Toledo, Ohio, a "general technical expert" with the Social Security Administration. As someone who's technically expert in a very general sense, she sees the big picture. It's on the front of the SSA's glossy magazine.

Did you know Social Security has its own glossy magazine? It's called Oasis and it's sent out to 88,000 SSA employees plus about a thousand government retirees. It's like Vogue or Vanity Fair, but without the perfume and fashion ads, because who needs Givenchy and Yves St. Laurent to fund your mag when you've got the U.S. taxpayer?

It's the magazine that says you're cool, you're now, you're living the SSA bureaucrat lifestyle. But Stanfield thinks they should scrap the glossy pages and only publish it online.

Ooh, I dunno. Sounds a bit extreme to me. Could result in hundreds of Social Security lifestyle editors being laid off and reduced to living on Social Security.

Anyway, the winner of the SAVE Award gets to meet with the president to discuss his or her proposal. The proposal then gets submitted to a committee for further discussion on whether to set up a committee to discuss discussing it further. But, unlike the superfriends' supercommittee, the lunch expenses are cheaper.

What with the proposal to use the nearly two centuries of budget savings from the end of the War of 1812 to fund the construction of high-speed monorails and the plan to turn the Social Security Administration's in-house glossy into an in-house virtual-glossy, it's no surprise that the president himself has got the deficit-reduction fever.

On Wednesday, he signed an executive order "Promoting Efficient Spending" — and ending government waste. Just like that! According to Section Seven: "Agencies should limit the purchase of promotional items (e.g., plaques, clothing and commemorative items), in particular where they are not cost-effective."

Sounds like someone's seen one amusing Janet Napolitano bobblehead too many at the DHS holiday party. About to stick in one of those giant commemorative plaques on the side of the road saying "These next three miles of single-lane scarified pavement brought to you by the American Recovery & Reinvestment Act"? Don't even think about it.

Fresh from launching the war on tchotchkes, the administration then proposed a 15-cent tax on Christmas trees in order to fund a federal promotional campaign to promote the sale of Christmas trees. Possibly Commerce Department research showed that there's a dramatic fall-off in the sale of "holiday trees" round about Dec. 26 every year, and Obama figured a little stimulus surely couldn't hurt.

He was forced to rescind the proposal, presumably after an ACLU chum pointed out that settling the Bureau of Christmas Tree Promotion lawsuit would wipe out all the budget savings from the French and Indian Wars.

Meanwhile, as these ruthless austerity measures start to bite, the government of the United States continues to spend one fifth of a billion dollars it doesn't have every hour, every day, every week, including Thanksgiving, Christmas and Ramadan.

And remember, folks, Rick Perry is the dummy because he wants to abolish so many government departments, he can't keep track of them all. Keep it simple, Rick. Just stick to a campaign pledge to set up a supercommittee to report back on the possibility of using savings from mailing back empty specimen beakers by three-day ground service to fund Medicare. Then people will take you seriously.

[Ritty77]

The chart below is the first one in an article titled The 7 most illuminating economic charts of 2011.

The chart is the same one prepared and used to sell Obama's "stimulus" spending spree in 2009.
Right Sphere added the red dots to indicate the actual numbers.

[philunderwood]

www.qando.net/?tag=abuse

How out of control is government spending?

Published January 17, 2012 | By Bruce McQuain

This out of control.

Obviously what I’m about to list isn’t going to make or break us as a nation in terms of monetary outlay. Each taken individually is but a drop in the sea of $16 trillion dollar debt we now float in. But the fact remains that each is an indicator of why we’re in that deep of a hole. Each points to another area where government has no business, especially spending taxpayer, or more likely borrowed money. Or it points to an expenditure not made on its reasoned merits, but on bureaucratic inertia, lack of control or monitoring or any of a great number of reasons the payment shouldn’t have been made. Doug Bandow provides us with the list.

Now, on with the show:

~The U.S. Agency for International Development (U.S. AID) spent $30 million to spur mango production and sales in Pakistan—and failed utterly.

Yup, mango production … in Pakistan.

~The Air Force spent $14 million to switch three radar stations to wind power; poor planning forced cancellation of one turbine and consideration of the same for the other two.

Because we all know windpower is proven and reliable.

~The Federal Aviation Administration devoted $6 million to subsidize air service at small, underused airports.

Market smarket … we’ll just create one. Until the money runs out, of course.

~A federal grant for $765,828 went to—I am not making this up, to quote Dave Barry—bring an International House of Pancakes franchise to Washington, D.C.

Because bringing IHOPs to DC is a primary function of the United States government and worthy of every dollar spent.

~The Department for Housing and Urban Development (HUD) provided a $484,000 grant to build a “Mellow Mushroom Pizza Bakers” restaurant in Texas.

Because it is not the market’s job to decide what restaurants should exist in a certain area, it’s the job of government.

~Another HUD grant, this one for $1 million, went to a foreign architectural firm to move its headquarters from Santa Monica to Los Angeles.

Because we knew you’d want us to do it. You need to move? Tough cookies.

~NIH gave the University of Kentucky $175,587 to study the impact of cocaine on the sex drive of Japanese quail.

Because we’re sure Japanese quail are the next target of drug dealers. Or something. But this is important … important enough to up the debt over and don’t you forget it.

~The Federal Highway Administration (FHA) gave $916,567 to underwrite horse-drawn carriage exhibits and survey shipwrecks in Wisconsin.

Because, well, we couldn’t think of anything else to do with the money.

~The Oregon Cheese Guild received $50,400 to promote cheese.

Because obviously the Oregon Cheese Guild wouldn’t be able to promote cheese without this.

~Uncle Sam spent $111,000 to send brewery experts to conduct classes in China.

Because the folks making Tsing Tao obviously couldn’t handle that.

~The ever busy NSF devoted $300,000 to developing a dance program to illustrate the origins of matter.

Because without it … oh nevermind.

And my personal favorite:

~Washington helpfully gave almost $18 million in foreign aid to China—money effectively borrowed from China.

The circle is complete. Borrowing money to give money back to the entity from which we borrowed it while still owing the balance.

Brilliant.

Your government at work. Be sure to read the rest of the top 100 wastes of money that Sen. Tom Coburn has helpfully put together. And remember. They’re the top 100. There are plenty more than just didn’t make the cut.

~McQ

[philunderwood]

Economic Chaos Ahead

By Walter Williams

www.JewishWorldReview.com |

Let's think about the kind of mess that we're in. Federal 2010 Medicare and Medicaid expenditures totaled $800 billion. The projected annual growth of both programs is about 7 percent. Social Security expenditures are more than $700 billion a year. According to the 2009 Social Security and Medicare trustees reports, by 2030, 49 percent of federal revenues will go for Social Security and Medicare payments. The unfunded liability of both programs is already $106 trillion.

But not to worry. The Congressional Budget Office estimates that it's possible to sustain today's level of federal spending and even achieve a balanced budget. All that Congress would have to do is raise the lowest income tax bracket of 10 percent to 25 percent and the middle tax bracket of 25 percent to 66 percent and raise the 35 percent tax bracket to 92 percent. That's a static vision that assumes that people will have no response and they'll work just as hard and send more money to Washington. If Congress did legislate such tax increases, it would be the economic equivalent of committing national hara-kiri.

Professor Daniel Klein, editor of Econ Journal Watch, and Professor Tyler Cowen, general director of the Mercatus Center, both based at George Mason University, organized a symposium to promote a better understanding of the U.S. debt crisis. The symposium's title, "U.S. Sovereign Debt Crisis: Tipping-Point Scenarios and Crash Dynamics" (http://econjwatch.org), is a strong hint about the seriousness of our nation's plight.

Professor Cowen introduced the symposium pointing out that in 2011, the major crisis was in the eurozone, where Greece, Italy, Spain, Portugal and Ireland dealt with the risk of default. The survival of the eurozone is now seriously doubted. Cowen added: "When it comes to a sovereign debt crisis, it is no longer possible to say 'it can't happen here.' Right now, we are borrowing about 40 cents of every dollar the federal government spends, and the imbalance has no end in sight."

Jeffrey Rogers Hummel, associate professor of economics at San Jose State University, says that a default on Treasury securities appears inevitable. He says that the short-run consequences for the economy will be painful but that the long-run consequences, both political and economic, could be beneficial. That's because an economic collapse is the only way we will come to our senses. That's a tragic statement about the foresight of the American people.

Participant Garrett Jones, associate professor of economics at George Mason University, is a bit more optimistic, seeing default as being less likely. But he argues that "default is still possible, and the GOP offers a uniquely American path to default: an unwillingness to raise taxes."

Dr. Arnold Kling is a member of the Financial Market Working Group at the Mercatus Center and tells us that the "U.S. government has made a set of promises that it cannot keep." He says that the "promises that are most important to change are Social Security and Medicare."

Joseph J. Minarik is senior vice president and director of research at the Committee for Economic Development. He argues that a "U.S. financial meltdown today is eminently avoidable. The wealthiest nation on earth, despite a painful economic slowdown, maintains the wherewithal to pay its bills. The open question is whether it maintains the will and the wisdom."

Peter J. Wallison holds the Arthur F. Burns chair in financial policy studies at the American Enterprise Institute. He agrees with Kling that "the most likely source of a U.S. sovereign debt crisis ... is a failure of the U.S. political system to address the growth of the major entitlement programs — Social Security, Medicare and Medicaid."

My translation of the symposium's conclusions is that it is by no means preordained that our nation must suffer the same decline as have other great nations of the past — England, France, Spain, Portugal and the Ottoman and Roman empires. All evidence suggests that we will suffer a similar decline because, as Professor Cowen says, "the American electorate has dug in against both major tax increases and major spending cuts."

[philunderwood]

Gradual insolvency about to speed up

By Mark Steyn

www.JewishWorldReview.com |

I was in Australia earlier this month, and there, as elsewhere on my recent travels, the consensus among the politicians I met (at least in private) was that Washington lacked the will for meaningful course correction, and that, therefore, the trick was to ensure that, when the behemoth goes over the cliff, you're not dragged down with it. It is faintly surreal to be sitting in paneled offices lined by formal portraits listening to eminent persons who assume the collapse of the dominant global power is a fait accompli. "I don't feel America is quite a First World country anymore," a robustly pro-American Aussie told me, with a sigh of regret.

Well, what does some rinky-dink 'roo-infested didgeridoo mill on the other side of the planet know about anything? Fair enough. But Australia was the only major Western nation not to go into recession after 2008. And in the past decade the U.S. dollar has fallen by half against the Oz buck: That's to say, in 2002, one greenback bought you a buck-ninety Down Under; now it buys you 95 cents. More of that a bit later


I have now returned from Oz to the Emerald City, where everything is built with borrowed green. President Obama has run up more debt in three years than President Bush did in eight, and he plans to run up more still – from ten trillion in 2008 to fifteen-and-a-half trillion now to 20 trillion and beyond. Onward and upward! The president doesn't see this as a problem, nor do his party, and nor do at least fortysomething percent of the American people. The Democrats' plan is to have no plan, and their budget is not to budget at all. "We don't need to bring a budget," said Harry Reid. Why tie yourself down? "We're not coming before you to say we have a definitive solution," the Treasury Secretary told House Budget Committee chairman Paul Ryan. "What we do know is we don't like yours."

Nor do some of Ryan's fellow conservatives. Texas Congressman Louie Gohmert, for whom I have a high regard, was among those representatives who appeared at the Heritage Foundation to express misgivings regarding the Ryan plan's timidity. They're not wrong on that: the alleged terrorizer of widows and orphans does not propose to balance the budget of the Government of the United States until the year 2040. That would be 27 years after Congressman Ryan's current term of office expires. Who knows what could throw a wrench in those numbers? Suppose Beijing decides to seize Taiwan. The U.S. is obligated to defend it militarily. But U.S. taxpayers would be funding both sides of the war – the home team, via the Pentagon budget, and the Chinese military, through the interest payments on the debt. (We'll be bankrolling the entire People's Liberation Army by some point this decade.) A Beijing-Taipei conflict would be, in budget terms, a U.S. civil war relocated to the straits of Taiwan. Which is why plans for midcentury are of limited value. When the most notorious extreme callous budget-slasher of the age cannot foresee the government living within its means within the next three decades, you begin to appreciate why foreign observers doubt whether there'll be a 2040, not for anything recognizable as "the United States."

Yet it's widely agreed that Ryan's plan is about as far as you can push it while retaining minimal political viability. A second-term Obama would roar full throttle to the cliff edge, while a President Romney would be unlikely to do much more than ease off to third gear. At this point, it's traditional for pundits to warn that if we don't change course we're going to wind up like Greece. Presumably they mean that, right now, our national debt, which crossed the Rubicon of 100 percent of GDP just before Christmas, is not as bad as that of Athens, although it's worse than Britain, Canada, Australia, Sweden, Denmark, and every other European nation except Portugal, Ireland and Italy. Or perhaps they mean that America's current deficit-to-GDP ratio is not quite as bad as Greece's, although it's worse than that of Britain, Canada, France, Germany, Italy, Spain, Belgium, and every other European nation except Ireland.

But these comparisons tend to understate the insolvency of America, failing as they do to take into account state and municipal debts and public pension liabilities. When Morgan Stanley ran those numbers in 2009, the debt-to-revenue ratio in Greece was 312 percent; in the United States it was 358 percent. If Greece has been knocking back the ouzo, we're facedown in the vat. Michael Tanner of the Cato Institute calculates that, if you take into account unfunded liabilities of Social Security and Medicare versus their European equivalents, Greece owes 875 percent of GDP; the United States owes 911 percent – or getting on for twice as much as the second-most insolvent Continental: France at 549 percent.

And if you're thinking, wow, all these percentages are making my head hurt, forget 'em: When you're spending on the scale Washington does, what matters is the hard dollar numbers. Greece's total debt is a few rinky-dink billions, a rounding error in the average Obama budget. Only America is spending trillions. The 2011 budget deficit, for example, is about the size of the entire Russian economy. By 2010, the Obama administration was issuing about a hundred billion dollars of Treasury bonds every month – or, to put it another way, Washington is dependent on the bond markets being willing to absorb an increase of U.S. debt equivalent to the GDP of Canada or India – every year. And those numbers don't take into account the huge levels of personal debt run up by Americans. College debt alone is over a trillion dollars, or the equivalent of the entire South Korean economy – tied up just in one small boutique niche market of debt which barely exists in most other developed nations.

"We are headed for the most predictable economic crisis in history," says Paul Ryan. And he's right. But precisely because it's so predictable the political class has already discounted it. Which is why a plan for pie now and spinach later, maybe even two decades later, is the only real menu on the table. There's a famous exchange in Hemingway's "A Place In The Sun." Someone asks Mike Campbell, "How did you go bankrupt?" "Two ways," he replies. "Gradually, then suddenly." We've been going through the gradual phase so long, we're kinda used to it. But it's coming to an end, and what happens next will be the second way: sudden, and very bad.

By the way, that decline in the U.S./Australian exchange isn't the only one. Ten years ago the U.S. dollar was worth 1.6 Canadian; now it's at par. A decade ago, the dollar was worth over 10 Swedish Kroner, now 6.7; 1.8 Singapore dollars, now 1.2. I get asked with distressing frequency by Americans where I would recommend fleeing to. The reality is, given the dollar's decline over the past decade, that most Americans can no longer afford to flee to any place worth fleeing to. What's left is the non-flee option: taking a stand here, stopping the spendaholism, closing federal agencies, privatizing departments, block-granting to the states – not in 2040, but now. "Suddenly" is about to show up.

[philunderwood]

Milk of Human Blindness

By John Stossel

www.JewishWorldReview.com |

The Denver Post warns, "Milk, food prices could rise if Congress fails to act."

Congress is working on a farm bill, which, among other things, will set limits on how high or low milk prices can be in different regions of the country.

Politicians from both parties like to meddle in agriculture. When the Heritage Foundation told Republicans not to pass any farm bill, "conservative" politicians banned Heritage from their weekly meetings.

But why should politicians be involved in agriculture? Why should they set food prices, any more than they set the price of books or staplers? The market decides most prices, so we don't have to wait with bated breath for politicians to make up their minds.

In a normal market, sellers charge the highest price their customers will pay — and then lower the price when they lose customers to sellers who charge less. Competition keeps prices low, not generosity or warm-heartedness. Or government.

The price of milk, on the other hand, is decided by regulators, using complicated formulas. They set one price for wholesale milk used to produce "fluid" products and another for milk used in making cheese. It's a ridiculous game of catch-up, in which the regulated prices never change as fast and efficiently as they would in a market, one buyer and seller at a time.

Next week, California will hold public hearings about milk price negotiations, as if more arguing will reveal the "correct" price. The agricultural news site Agri-View reports that dairy farmers filed a petition with the California Department of Food and Agriculture (CDFA), demanding it implement an earlier, massive milk-price compact agreed to by cheesemakers and legislators.

Under the agreement, cheese processors must kick in an additional $110 million to a statewide pool of money used to pay dairy farmers, who are upset that they've been paid less than what farmers get in surrounding states.

Rob Vandenheuvel of the state's Milk Producers Council says, "Government has the responsibility to keep us in line with what the rest of the country is making, and they're not doing it. It gives us no choice but to spend money on lawyers."

Great. How many lawyers does it take to produce a gallon of milk?

The dairy farmers say some dairy farms lose money, which proves milk prices are too low. But cheesemakers say they can barely stay in business, proving milk prices are too high.

Why is any of this the legislature's business? It shouldn't be. Prices should be decided by buyers and sellers.

Prices are not just money. They're information. Rising prices tell farmers to produce more; that increases supply and prices go back down. Falling prices tell producers to invest in other products. This system works well for plums, peaches, cars and most everything we buy.

But bureaucrats and lobbyists say milk is "special."

Vandenheuvel says cows can't be subject to market demand because "there are several years of lead time between when you decide to buy a cow and when that cow produces milk."

The CDFA agrees because: "Milk is a perishable product and must be harvested daily," and "Milk continues to be viewed as a necessary food item, particularly for children."

I say, so what? It's not "lead time" or being "perishable" or even being "necessary" that makes milk unique. Plums and newspapers are perishable and harvested daily. It takes long lead times to build assembly lines to make cars. No entrepreneur has a guarantee of market demand once the factory is complete. All business is risky.

The CDFA wails that without price controls, "no other regulations would be in place to assure an adequate supply of milk."

Give me a break. It's in planned economies, like Venezuela, North Korea and the former Soviet Union that shortages occur. When politicians micromanage markets, consumers suffer.

Milk isn't "special." Almost no product is. Let competition set the price.