Time For Debate on the Role of Government

January 3, 2012 at 2:39 pm

Considering our current state of affairs, I’m beginning to think that the only course of action is to force a national debate on the role of government. As the current president and his party are for big government, maximum entitlements and dependency, and generation choking deficits, the opposing candidate should present the exact opposite. The Republicans or Independents should nominate a pure candidate that presents clear issues and choice. A brokered Republican convention or third party candidate may provide a way to offer that debate. A centrist candidate will not offer the clear choice we need.

Consider the WSJ editorial, The Spenders Won in 2011. Republicans controlled the House yet failed to get any significant reduction in spending. Deficits generated by a Democrat controlled Congress were $2.98 Trillion in 2008, $3.52 Trillion in 2009, $3.45 Trillion in 2010; and even with a Republican House are $3.59 Trillion in 2011 and  projected to be $3.65 Trillion in 2012. We are over $15 Trillion in national debt. This is debt that we will pass onto our children and grandchildren. How moral is that? We take handouts that our grandchildren will pay for!

There must be a debate on the role of government. It does everything as Obama, Pelosi and Reid propose. Or is is limited as our constitution suggests. If the nation opts for the “free lunch,” our nation will become another Greece. If the nation chooses the moral course of eliminating the “free lunch” our children and grandchildren will have a chance to live productive lives in this country.

Short of a moral decision in an election on that all-encompassing issue, those of us who want a better future for our children are left with only two options: revolution or individual expatriation! The only alternative is to continue on the current unsustainable path with either party in control or gridlocked by the other. This is Friedrich Hayek’s Road to Serfdom! 

The centrist position, the middle ground, is what constantly gets us into trouble. In essence, Republicans equal Democrats; neither party can say no; neither can cut spending. We need to get off the treadmill. We are stealing from our grandchildren. This is immorality near its height.

Boomerang–A Great Read

November 5, 2011 at 10:56 am

I just finished Michael Lewis’s latest, Boomerang and can highly recommend it. As a non-economist reporter he tells the story of a world awash in cheap money and easy credit and tells it with reference to a few developed countries. Starting with Iceland, the first to go belly up when its fishermen decided to become investment bankers with credit advanced by European banks, he goes to the current zombie Greece. The Greeks borrowed not to invest but just to take exorbitant salaries and long vacations. Now the Irish, bless them, decided to become real estate developers in Ireland this with the funds borrowed from Irish and European banks; unfortunately the government decided to guarantee the banks against horrendous losses on the worthless real estate developments. Onto Germany whose citizens are disciplined not to over borrow or over spend, but whose banks were perfectly willing to lend to the Greeks and Irish without proper credit evaluation.

When he heads home to the US he focuses on his home state of California which is essentially bankrupt. First to fail though will not be the state government but the local municipalities the worst of which is Vallejo which filed for bankruptcy in May of 2008. There is, of course, more to come. Here’s a brief interview with the author:

Supply Side Analysis of Obama’s Latest Stimulus Plan

November 4, 2011 at 7:43 pm

Obama’s incessant campaign call for the past months had been to demand the “Republican Congress” PASS IT NOW. The “It” is, of course, another stimulus plan, excuse me, “jobs bill;” you see the word “stimulus” has, by fiat, been stricken from the Democrat’s lexicon–must be something to do with the pejorative connotation generated by the last stimulus! Anyway, the new stimulus consist of: 1. Temporary payroll tax cuts, 2. Temporary extension of unemployment benefits to two years, 3. Additional debt to finance public sector jobs, and 4. Higher taxes on “the rich.” That this is an insincere reelection effort on his part can be of little doubt, since he knows it would not pass even his Democratic controlled Senate, much less the House.

Stimulus by whatever name it is called should, nonetheless, be subjected to economic analysis and Art Laffer, that infamous supply-sider, has obliged in the current issue of National Review. Laffer calls it a “four point plan for failure.” His article is worth a summary here, with full attribution:

Payroll tax: This is broad-based but effects only the moderately paid workers; it stops at a bit over $100,000 of annual compensation. Broad-based, low-rate taxes are generally good since there is little incentive to avoid them, so a reduction in these taxes presents little incentive to work or not to work, to hire or not to hire. Laffer points out that a reduction in this tax will not effect the decision makers typically earning over the $100K limit and much of that in dividends and capital gains. Laffers point is that cutting the payroll tax, temporarily, will not effect hiring or seeking employment. In other words, it doesn’t effect any job creation.

Extending unemployment benefits to almost two years: Laffer uses a time tested analogy to the Department of Agriculture payments: pay farmers to grow and they grow; pay them not to grow and they don’t grow. Simple: people respond to economic incentives. Obama wants to pay people not to work for almost two years. Obviously, they will take the money. And, by the way, not look very hard for that next job. In short, this is a big negative to job creation.

More deficit stimulus spending: Here we get in to the so-called Keynesian multiplier: the recipients of the extra federal dollar will spend a portion of it thereby creating new jobs which induce more spending thus more new new jobs. This “marginal propensity to consume” gives us the “multiplier;” or $1 divided by $1 minus that marginal propensity to consume. So if the marginal propensity to consume is only 50 cents, the multiplier effect is $2 for ever $1 borrowed! Thus the Keynesians have magically created money!

Wow! What’s missing here? Well, to get that dollar of federal largess, the federal government must take that dollar from someone else. In this case it must take not only that dollar, but it must run that dollar through the federal bureaucracy, then it must pay interest on that dollar because it borrowed the dollar. In short, the economic effect is to rob Peter, waste part of the loot on bureaucracy and interest, and pay Paul the balance. The economic effect is not neutral but is NEGATIVE. It destroys jobs, the jobs that would otherwise be created by Peter via his spending or investment! Look no further for proof than Obama’s last stimulus expenditures.

To cap off the point Laffer offers the “Slutsky equation:” This aggregates the deficit financed stimulus, both debits and credits. “By taking resources from those who produce and giving resources to those who don’t produce, government reduces the incentives to work for both parties. Output, employment, and production will fall.”

Higher taxes on “the rich:” It’s hard to tell if Obama wants to raise revenue or merely redistribute income with this effort. If raising income is the goal, increasing tax rates at the highest brackets will have the opposite effect; lowering tax rates on that bracket however will raise revenue. The simple reason is that those earners in the highest tax brackets have the ability to minimise marginal taxes by converting income to capital gains, deferring income, and shifting income; and they have access to tax accountants, investment advisors and attorneys to help in this process. If, on the other hand, he merely wants to redistribute income or wealth, he succeeds in his election tactic of creating class warfare but he fails in his so-called job creation purpose. And this for the same reason suggested by the “Slutsky equation.” Taking money from the producers and giving it to the non-producers has a negative effect on both; it’s a double disincentive!

In sum, our President is a campaigner who has a negative record on which to run. He has created a straw man with his rants against the “Republican Congress” failing to mention the Democrat controlled Senate which is fully one-half of that Congress. And he has come up with a sure-to-fail stimulus plan which he will use to deflect voter attention away from his abysmal record.

Immigration Follow-Up: Face Reality

October 30, 2011 at 11:14 am

After seeing this morning’s RGJ article on the L.A. mayor coming to Reno on Harry Reid’s orders, to pander to Hispanic Americans for votes, I think an immigration follow-up on this month’s dinner is justified.

As I listened to Michael Savage, a right-leaning Ph.D. talk show host, rant on illegal immigration the other night, I wondered when the conservatives and indeed the Republican candidates would wake up to reality. The reality is that we live with immigrant Americans, some of whom are illegal and impart a cost to the system. But they are here and most are trying to be productive members of society. They have good family values, are honest and have excellent work ethics. These latter traits are in contrast to those found in many natural born entitlement types.

More important, the reality is that the 40 million legal immigrant Americans vote and are influenced in those votes by the redneck rants. The reality is that if we don’t deal with some of the more extreme rightist, redneck positions, they will vote with the socialists now in control of the Senate and executive branch. We must face reality: we will not as a society deport 11 million illegal immigrants.

The way to deal with the immigrants may be in small bites. Jim Clark offered a DREAM act that required only military service, knowing full well that even the military has educational requirements and, in fact, teaches as part of its programs. There may be other potential DREAM act entry routes such as, starting a successful business for a period of years. There are suggestions for programs that offer green cards to immigrants who would invest in real estate. Perhaps that could be expanded to those who invest in businesses that employ other illegals over a period of years. In each case, assimilation with proficiency in English should be a sine qua non.

Ty Cobb recently alerted us to this NY Times article suggesting several other small steps that would be directly beneficial to the society and economy:Beyond 2012 Field, Nuanced G.O.P. Views on Immigrants, by Jennifer Steinhauer.

We who are concerned with the future of this country should let our voices be heard.

Obama’s Attack Watch

September 16, 2011 at 8:39 am

Help Dear Leader: Spy on Your Friends and Family!

Rubio on Obama’s Leadership….or lack thereof!

July 18, 2011 at 8:27 pm

Obama’s Recovery Summer

June 29, 2011 at 4:52 pm

Andrew Klavan, On the Culture:

Ethanol Whores

June 16, 2011 at 10:47 pm

There is no better current intersection of economics and the environment than ethanol. The rent-seeking corporate farmers in the U.S. and their political employee representatives in Congress and the White House have been able to (i) subsidize, (ii) mandate, and (iii) restrict imports of the environmentally harmful gasoline additive. Even Al Gore, now that he’s made his money, calls ethanol a fraud.

So why in this time of sky high deficits and unsustainable debt burdens we are laying on our grandchildren, do so-called Republican candidates support the ethanol fraud? Votes in corn producing states! It’s that simple.

Newt Gingrich, if he’s still a viable candidate, is an ethanol whore. He supports it. Mitt Romney, that smooth talking flip-flopper who developed the fore runner of Obamacare, is an ethanol whore. He supports it.

In fact, Mitt supported it publicly in Iowa as a follow-up to Tim Pawlenty’s gutsy Iowa statement that we can’t afford ethanol subsidies. So not only is Mitt a ethanol whore, but he’s a cheap one at that.

I expect Obama to win in 2012, if Mitt Romney, father of ObamneyCare, is leading the Republican field. When you think of it, Mitt should be running as a Democratt!

It’s heartening to see that the Senate today voted to end ethanol subsidies. That means it’s probably time for another Mitt Romney flip-flop. Get ready!

Pawlenty Announces

May 23, 2011 at 2:39 pm

Kyle Meintzer alerted me to this gutsy hat’s in the ring announcement. “Whoa, baby!

“Tim Pawlenty first announced his candidacy on this video, then later today called for an end to ethanol subsidies. He did that in IOWA! Tomorrow he’s going to Florida and call for changes in Medicare and for raising the Social Security retirement age.”

The ethanol tack slaps Gingrich directly in the face, as Newt sucks money from our ethanol tax dollars!

Hey, the truth may in fact work!

Is the Leftist Media Disenchanted with Obama?

April 30, 2011 at 9:11 pm

This from the left coast’s San Francisco Chronicle: “White House Credibility Gap on Press Coverage.” WOW, Obama’s own media, in Pelosi’s home town, calling foul? What’s the story?

Seems that a Chronicle reporter took a video of the anointed one with her cell phone during a political fundraising event. Evidently that’s forbidden. So obviously, she must pay the price. Fair enough, rules are rules, she violated them, she gets canned from further coverage of the President.

“The White House communications operation has a credibility problem. On Thursday, key people in that office told The Chronicle in plain language that reporter Carla Marinucci would be banished as a pool reporter for future presidential visits because she shot video of a protest inside an Obama fund-raising event in San Francisco. The White House further threatened “retaliation to Chronicle and Hearst reporters if we reported on the ban,” said Editor Ward Bushee. On Friday, the White House flat-out denied that such exchanges took place.”

Well, you just don’t push the Fourth Estate around that easily. After Josh Earnest told Politico.com that threat was not true, Bushee said in effect, liar liar pants on fire! So, in this “he said, she said” spat between adored and adorer, who’s right?

Or, does that really matter? Where would the Chronicle go if not to the anointed one? The answer is simple, they have no place to go, no one to turn to. They and their comrades put him in and now he’s theirs!

The post concludes with: “In fact, the exclusion of electronic journalists itself represents an overbearing attempt by the Obama White House to control what the public sees and hears of presidential visits. The ability to cover the president with 21st century reporting tools should not be subject to White House whims.”

Seems the Chronicle and its MSM fellow travelers should have asked about Obama whims long ago.