Posts Tagged ‘Deficits’

Certain news stories are guaranteed to appear in the Liberal mainstream media. One of those is the fiction that “…deficits have gone down during Obama’s tenure…”.

National Debt under Obama


Never mind that the national debt has increased from $10 trillion when George Bush left office to over $19.2 trillion right now — we are still subjected to this kind of blatant propaganda / Lies (emphasis added):

But Americans just don’t get his economic achievements, he [Obama] insisted to the New York Times Magazine last month.

“If you ask the average person on the streets, ‘Have deficits gone down or up under Obama?’ Probably 70% would say they’ve gone up,” Obama said “with some justifiable exasperation,” according to the magazine, because the deficit has declined during his presidency. <Los Angeles Times, link>

The deficit has declined? Obama wants credit for reducing the deficit?

I don’t see a year of decline in the above chart, do you?

Of course not, and Americans know this even in a general sense:

Polls show that a large majority of Americans believe the opposite to be true, setting up a challenge for the White House truth-squadding campaign.

Ha ha, “setting up a challenge for the White house….” What challenge is that, convincing people that Up is really Down?

Not only have we had huge deficits in each year, the total debt at this point is bigger than the entire U.S. economy.

Debt Clock 2016

For shame.


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I have written a few times that the United States does not deserve the strength of its currency or its ability to borrow more money to fund more reckless deficit spending if looked at in pure economic terms:

  • Our balance sheet is a disaster, thanks to Barack Obama, with now more than $18.3 trillion in debt in an economy that is about $17.4 trillion in size.
  • The Federal Reserve has kept interest rates near zero for over SIX YEARS, fueling a stock market bubble and robbing itself of any power to influence the economy if it slips back into recession (the Fed cannot drive interest rates below zero).
  • Meanwhile, the current and future costs of entitlements, which now include the monstrosity known as Obamacare, are skyrocketing, leaving over $100 trillion in unfunded liabilities for the nation to default on as we all grow older.

And yet our massive federal deficits each year continue to be financed in large part by foreign nations….their willingness to hold dollars defies the fundamentals of our situation.

And at the same time the Federal Reserve can print dollars 24/7 without fear of trashing the currency in world foreign currency markets, as would happen to any other nation that flooded its economy with so much paper currency.

And So not only can the USA print its own money, even wildly, with no consequences, it can also borrow itself blind, with no apparent consequences.

How can this be?

There is only one reason, and it is not a reason that you’ll see in economics text books: The United States can get away with this reckless conduct because it is the dominant global superpower, possessing large military forces enabled by the most advanced military technology.

Yes, The American fighting man is the reason that politicians can continue to throw orgies of runaway spending and flood the economy with dollars without consequences.

Marines raising the stars and stripes on the battlefield

Now, do we like to borrow money and then thumb our nose at the lenders of that money, because we are a superpower?

Stephen Colbert apparently does.

He said this to Donald Trump last night:

At a certain point, does it even matter how much we owe, because it’s like trillion, quadrillion what does it matter? Come and get us, we’ve got the armies, right? What are they going to do?

Yes, he actually said the phrase “what does it matter” about the serious issue of our national debt, and touted the great American military as the ultimate backstop against accountability.

Let’s recall who else used a similar phrase, “what difference does it make”:

Hillary what difference does it make on Benghazi

Here’s the thing, Stephen: our federal debt, now heading towards $20 trillion and bigger than our entire annual economic output since the early years of Obama’s first term, DOES matter, and to say it doesn’t undermines the notion that you are somehow a savvy commentator.

Or maybe no one believes you are a savvy commentator, I don’t really know.

But you have a voice being heard in the media, and need to own when you take a shameful Hillary Clinton “what does it matter” stance on things that do matter.

So if you are a Liberal, and you are proud of Obama’s latest infamy — accepting thousands of Syrian refugees — just know that (a) we cannot afford to take them, we are bankrupt, and (b) the only reason there is the illusion of wealth in this country is because of that thing you probably hate: the U.S. Army, Navy, Air Force, and Marines.

But you owe it all to them, and never forget that.

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I received a spam comment on my essay about Paul Krugman’s recent arrival at Clown-central, and if you want to see a deficit-lover hang himself, check out the comment section of Fauxiconman Krugman in Full Self-Parody Now, Career as Economist RIP.

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Once more, with feeling:

No argument on the subject of deficit spending can be made without two key issues being discussed:

  1. What is the borrowed money being spent on
  2. Who is lending the borrowed money

It is not sufficient to rally behind econo-gimp Krugman without addressing these two points.

On the first one, the object of the spending matters a very great deal, which can be seen with a simple example: paying people to dig holes, and then paying other people to fill them up again. Do you think this would “stimulate” the economy and “solve unemployment”? If you do, then you fail to understand wealth creation and you also must confine yourself to the sidelines when an economic debate is going on; you just can’t play in the sandbox anymore.

The key point here is that spending on entitlements and pork projects that have no investment value (i.e., payoff over future years) is not productive and will eventually bankrupt a country.

The second point concerns national sovereignty, or, in simple terms, Who’s Your Daddy? It used to be that Americans borrowed from other Americans to finance deficits. In this mostly historical case, at least the landlord and the tenant were in the same “family”, which matters a lot if their is a default or a threat of default. But now……..now is different: a substantial portion of our deficit financing comes from two nations: China and Japan. If the USA faces default, it will have to go begging foreign powers for leniency.

This is a loss of sovereignty, as we are witnessing in real time (some photos) with Germany and its beehotch (the country formerly known as Greece). The Germans have bailed out Greece in exchange for brutal belt-tightening that is being imposed on Greek citizens. And it’s not that Greek citizens shouldn’t have to make do with less after decades of throwing money down the rat hole of socialism, it’s that they shouldn’t be having to be made to do it by a foreign power. But that’s where their government led them.

Our government, as led by mr Obama, mr Geithner, and as cheered on by econo-gimp, would like to lead us down the same path. Do you want to follow them? Or should we tell this trio of dumb, dumberer, and dumbest,

You gotta let [’em] know
[We] ‘aint a bitch or a ho..

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Baracky Doc Doc, that quack, and his stooge Tim Geithner, have told European leaders that their recent display of fiscal responsibility is most unwelcome, most unwelcome:

In a public letter in advance of the group’s summit, the president makes it clear that he disapproves of Europe’s pullback in spending

It seems the sight of countries trying to act responsibly instead of following in the bankruptcy footsteps of Greece upsets the Impostor-in-chief.

... alarmed by the sovereign debt woes in Greece and some other countries, European leaders have turned their focus on getting their fiscal budgets in order, passing tough spending and other social policies that analysts say will crimp public and private consumption in Europe and slow global economic growth.

Many economists, including Federal Reserve Chairman Ben S. Bernanke, have warned about the dangers of the large budget deficits in the U.S. as well, and lawmakers in both parties, reflecting the public’s concern about deficit spending, have been reluctant to back Obama’s calls for additional fiscal economic stimulus.

So we have Tim Geithner and Barack Obama on one side (SPEND SPEND SPEND MORE!!!!!) and we have European nations and the Fed Chairman on the other side (“Maybe there is such a thing as too much debt…we don’t want another Greek crisis, do we??).

I have been saying for awhile now that the USA debt level, and the percentage of it financed by foreigners such as the communist Chinese, is excessive by historical standards and in absolute terms when unfunded liabilities such as Social Security, Medicare, Medicaid, and now Obamacare are thrown in. But many people still tend not to get it (including the president and Treasury Secretary…), so I am going to shift gears and talk about a different pending bankruptcy in the USA: state pension funds.

In last weekend’s New York Times magazine, the weekly “The Way We Live Now” column focuses on public pension funds, which are “massively short of money”. Let’s enjoy a few bon bons from the unlta-Liberal New York Times (i.e., for you Liberals, it’s not so easy to dismiss the thesis):

…for years, localities and states have been skimping on what they owe. Public pension funds are now massively short of the money to pay future claims — depending on how their liabilities are valued, the deficit ranges from $1 trillion to $3 trillion. <sasoc emphasis>

Hey, there’s that “T” word again…

Pension funds subsist on three revenue streams: contributions from employees; contributions from the employer; and investment earnings. But public employers have often contributed less than the actuarially determined share, in effect borrowing against retirement plans to avoid having to cut budgets or raise taxes. <sasoc emphasis>

Yes, “borrowing against retirement plans to avoid having to cut budgets or raise taxes.” Where have we seen this before? Hmmm, perhaps Social Security, as I discussed here? Seems politicians and voters have a hard time making the tough choices on spending, preferring to defer defer defer the cuts into the future when it will be someone else’s problem…

According to Joshua Rauh of the Kellogg School of Management at Northwestern, assuming states make contributions at recent rates and assuming they do earn 8 percent, 20 state funds will run out of cash by 2025; Illinois, the first, will run dry in 2018.

Did you catch the “…assuming they do earn 8 percent…”?  This is an assumption about investment returns on pension fund cash balances invested in the markets. And what if they return less than 8 percent per year, which in the recent financial environment is not hard to imagine? The states will run out of money sooner, of course.

According to Rauh, if the unfinanced portion of all public pension obligations were converted to debt, total state indebtedness would soar from $1 trillion to $4.3 trillion. Such an explosion of debt would threaten desperate governments with bankruptcy.

Ooooh, there’s that “B” word, bankruptcy. But I know, Dumb and Dumber and Dumberer (Krugman) will tell you that here in the USA, we’ll never go bankrupt!! Not us!! The rules don’t apply here, so pretend you didn’t read that last sentence. For the rest of us sane-minded citizens, what might the implications be?

Illinois, once its funds were depleted, would be forced to devote a third of its budget to retirees; Ohio, fully half. This would impoverish every social (and other) program; it would invert the basic mission of government, which is, after all, to serve constituents’ needs.

Ohhhh, there’s that concept of finite resources (mis)managed by government: some will benefit while the majority will do without. Sounds good, yes? But here is my favorite line from the article:

Government’s greater ability to borrow enables it to defer hard choices but, as Greece discovered, not even governments can borrow forever. <sasoc emphasis>

So let’s all celebrate the latest Obama humiliation of the United States in front of other world powers: Dumb and Dumber, alone in the wilderness, advise everyone to spend and borrow, spend and borrow; boy it makes you proud, doesn’t it?

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I received this comment yesterday, and there is so much worth discussing, and so much in the reply, that I thought it should be its own post.  Here is the reader comment:

I know you can do it, so I am asking you to explain whether or not we should abandon all socialist elements of our somewhat democratic society (it is largely a corprotocracy, so I think we’re a democracy in name only, but not for the reasons you seem to think).

Public schools?
Public transportation?
Police force?
Medicare? (I think I know)
Medicaid? (I think I know)
National Parks?
Regulatory Agencies (I think I know, at least w/r/t/ the Financial Agencies)

And so on…

I suppose we could privatize them. And then let everyone keep their tax dollars and figure out how to manage it all themselves.

Your concern over our fiscal future is well-founded. And I think it shameful that this wasn’t paid for upfront or at least that the costs were not presented clearly. Bu that doesn’t change my support for this bill. This LAW. I think it’s a much better place to put our money than the Iraq war was (is and will continue to be). And if it had been accounted for accurately we’d probably be having a different debate right now (of course, if it had been argued for honestly, we’d probably still have some money in our coffers)

Your seemingly short memory w/r/t Bush’s free-spending administration colors your commentary. We’re in a tight spot, but blaming BHO and his healthcare reform for it is ridiculous.

I think there are important questions and observations here, and in all the hostility to socialism it may appear that people like me do not believe in any government at all. But this is off-base and only an unfortunate byproduct of style. In fact I am a believer in government at three levels: local, state, and Federal, and believe each of the levels has a vital role to play in a healthy society. Unfettered capitalism destroys itself and is inefficient, and so I admire Presidents like Teddy Roosevelt, who broke up the trusts and leveled the playing field. Furthermore, the question of whether to “nationalize” (socialism/fascism/communism) or “anarchize” (no government at all) is a false one: each of the things on your list lend themselves to some role for government, but the question is, how much and at what level.

I propose using the following analytical framework to answer “how much and at what level”: three measuring sticks that include one theoretical, one practical, and one philosophical.

Theoretical.  The theoretical one is to observe the degree of permutations of interactions of individual agents, which is a fancy way of saying “how complex a system is it and will a central authority be able to manage it (plan and anticipate outcomes) efficiently”. The more complex the system, the less appropriate is central government control, which can be shown mathematically. For example, in the field of business (the economy) we have literally billions of agents (millions of businesses, millions of competitors, and billions of customers) interacting in a vast web of transactions, and raw materials and resources are transformed into goods and services of almost infinite variety. This system has enough permutations of interaction to overwhelm any central authority no matter how powerful the computers used to try to model all the behavior. This theoretical conclusion is borne out by experience (see below).

In contrast, take the number of variables involved in fighting fires. Buildings catch fire and the fire department sends firemen to come and put them out, usually with water. The number of fires occurring at any one time is small. Building types number in the hundreds, materials in the thousands, but nothing in the millions or billions. Therefore, there are fewer variables involved in putting out fires than in some of the other things on your list, and knowing this helps answer the question.

Practical. But we don’t need to rely only on the theoretical…that’s the beauty of human experience, and  for each item on your list we can look at real-live examples of governments trying to get things done. We can see what has been tried and make note of what works and what does not work. For example, in the case of putting out fires, local governments tend to do well with tax-payer funded fire departments, while the Federal government tends not to do so well with disaster relief (Katrina).

However, in the case of business, central governments have never, ever, been able to manage it. On the contrary, they have created mass poverty, starvation, and death, and this is NO JOKE. Mao killed an estimated 16 – 40 million people by collectivizing agriculture (his “Great Leap Forward”) while Stalin is “credited” with killing between 5 and 10 million people with state control of farming in Russia. The irony is that both men believed that nationalization of industry was going to create vast wealth to feed their imperial ambitions. Business systems are too complex for central planning, and as a result should never be made subject to a power elite in the hopes that they can manage it better.

These historical examples should suffice (shouldn’t they?), but perhaps you are not convinced. So we have two real-time examples that are also helpful: China and Vietnam. These are communist countries that have ABANDONED attempts to centrally plan their economies and have chosen instead to implement capitalist/free market reforms. They made this change out of necessity: when you have 1.3 billion mouths to feed, you had better pick the most productive system. Both countries have been selling off State-Owned Enterprises (SOEs) to private industry and both countries are enjoying the massive productivity, efficiency, and wealth increases that come from letting millions of economic agents run their businesses without State control. China and other emerging markets are now considered the main growth engine of the world. When it comes to managing business and economies, there is no debate on this point: central planning fails, period.

Philosophical. Every time we put ourselves in the government’s hands, we forfeit a degree of freedom. Sometimes this matters a little, and sometimes a lot. A key criterion in this regard is how many incidences of choice are involved (and taken away under government management) in a particular sphere of control. For example, how many active choices do you make per year regarding the work of the police? Unless you are planning to commit a crime, I would say it’s probably zero. Last year, I made not one personal choice that involved the work of law enforcement. As the government (usually local) goes about its law enforcement responsibilities, it does not interfere in the choices I make in my life every day.

If this is not clear, just compare it to the number of personal choices you make involving healthcare (and there are very many), such as when to go to a doctor or nurse or clinic, which one to go to, which professionals to listen to and which ones to ignore, which medications to ingest, which courses of treatment to take, whether to access and pursue preventative care (some of which may have its own risks) or wait until a problem exists, and the thousands of permutations involved in each of these choices and their interactions with each other.

This is a philosophical criterion because there is no law that says human beings must have a lot of choice. The USA was founded on principles of freedom of choice that did not exist in the feudal societies of Europe, and I believe that being free to choose is one of the great innovations of America and why it serves as a beacon in a dark world. But that is a value judgement; some people find “choice” to be oppressive and prefer the yoke. In my answer to your question I apply this third criterion as someone who places the highest value on being free to choose (a great book by Milton Friedman, incidentally). Therefore, the things on your list that involve a lot of direct personal choices do not score high as candidates for Federal Control because more government bureaucracy means less choice.

Scoring System. I have applied these criteria to your list and added a few elements as well. In the following chart, green cells represent a “GOOD” result (for example, practical experience might show that government does a good job on that item), whereas pink indicates a strike against central planning for that element (for example, if an element has a high degree of complexity, making it hard for central planners). Keep in mind that if an element scores well it does not necessarily mean that Federal control is best; it could mean that local or state control is best.

You can see from the chart that many elements score high enough to warrant direct government involvement of one kind or another – usually local and state but sometimes Federal. I left off regulatory agencies because they are a different kind of thing. That is, they stand alongside industry, not in place of it; the existence of the SEC is not the same as owning and running the banks, etc.

But take a close look at the last four items: Medicare, Medicaid, Healthcare, and the Economy: these have no green and fail across all three dimensions. They (1) are extremely complex, with hundreds of millions of individuals accessing millions of others on a frequent basis, leading to infinite permutations of transactions and outcomes; (2) have a high incidence of personal, direct choice in each of our daily lives, and (3) have numerous examples of monumental failures in the real world from all corners of the globe. In short, they fail on theoretical, philosophical, and practical terms. Three strikes, and they are out. If you support them, you have to (1) believe the government can handle the complexity, (2) not mind that your personal choices will be dramatically curtailed, and (3) ignore the evidence of failure of similar systems everywhere they have been tried.

Deficits. As for George Bush, I do not have a short memory at all. This is a man who added the prescription drug entitlement to Medicare, an already insolvent program that will devour us all (but of course it won’t: the baby boomers will be told there just isn’t enough money and so here’s some morphine to make your last six months manageable before your untimely death…). Just to be crystal clear, I view Bush 41, Felonious Clinton, Bush 43, and Barack Hussain Obama as an unbroken line of big-spending statists, with BHO poised to deliver the death blow, and I await the next Reagan to save this great nation from the damage done by these men. In the meantime, BHO is pursuing massive Federal programs that are his choice, and the resulting fiscal insanity is very much his own. You yourself acknowledge the brazen chicanery pursued by BHO and his cabal in the budget accounting for Obamacare. The truth is downright terrifying, and he owns it (not that he will pay the bill……).

Value for Money. Finally, you say that Obamacare is a better place to put our money, but this makes no sense because it presupposes that what we will get for that money will be as good or better than what is being destroyed (employer-based healthcare insurance). It will not be, and I view it as criminal that an already-overextended Federal government is going to pretend to be able to administer a program like this. And even if the money existed (it DOES NOT), it would still fail given what we know from real live experience. Ask someone from the UK, or South Africa, or Canada, or Israel, as I have done recently. The trillions that will be spent on Obamacare will go down a rat hole and the services that we all will need in the future will not be available to us. We will all face a fork in the road: pay cash and get care now (what reimbursement?), or wait for care and see how your health holds up in the meantime. A system like that is a feudal system, where money and patronage buy you access. That is not America, and it will be deadly for many.

Cure worse than the Disease. In the end, the “cure” – Obamacare, with its fascist elements, untold price tag, and more – is worse than the disease (the flaws of our current (soon-to-be-destroyed) healthcare system). It doesn’t have to go this way. The flaws can be fixed without resorting to a system doomed to be far worse. Perhaps we will get a second chance through the courts or through the coming election. I hope so, because sometimes the patient is killed by the medicine and not the ailment. If you were a doctor and knew this, would you inject the drug?

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