Can debt create prosperity?
A common question asked these days is, if too much debt caused the financial crisis, how can more debt solve the problem? Most American families know that their basic problem is too little income and too much debt. Common sense tells us that unless debt is balanced by inceasing income to service the payments, the end result is bankruptcy, and this rule applies equally to individuals and nations.
WASHINGTON — Just how much government debt does a president have to endorse before he’s labeled “irresponsible”? Well, apparently much more than the massive amounts envisioned by President Obama. The final version of his 2010 budget, released last week, is a case study in political expediency and economic gambling.
Let’s see. From 2010 to 2019, Obama projects annual deficits totaling $7.1 trillion; that’s atop the $1.8 trillion deficit for 2009.
One reason Obama is so popular is that he has promised almost everyone lower taxes and higher spending. Beyond the undeserving who make more than $250,000, 95 percent of “working families” receive a tax cut.
Consider the extra debt as a proxy for political evasion. The president doesn’t want to confront Americans with choices between lower spending and higher taxes — or, given the existing deficits, perhaps less spending and more taxes.
At best, the rising cost of the debt would intensify pressures to increase taxes, cut spending — or create bigger, unsustainable deficits.
At worst, the burgeoning debt could trigger a future financial crisis. The danger is that “we won’t be able to sell it (Treasury debt) at reasonable interest rates,” says economist Rudy Penner, head of the CBO from 1983 to 1987. In today’s anxious climate, this hasn’t happened. American and foreign investors have favored “safe” U.S. Treasuries. But a glut of bonds, fears of inflation — or something else — might one day shatter confidence. Bond prices might fall sharply; interest rates would rise. The consequences could be worldwide because foreigners own half of U.S. Treasury debt.
The Obama budgets flirt with deferred distress, though we can’t know what form it might take or when it might occur. Present gain comes with the risk of future pain. As the present economic crisis shows, imprudent policies ultimately backfire, even if the reversal’s timing and nature are unpredictable.
Thought Provoking Links
Socialism Coming Back To Haunt U.S.
America is more than a country; it is the ideal of liberty. In economic terms, liberty translates into the entrepreneurial spirit of hard work, risk taking and self-reliance. And this spirit has made America rich beyond compare.
Unfortunately, over the past four decades, much has been undone. Under the guise of a new, “social” justice, political leaders have turned our native ethics upside down. Profit-taking is now seen as gouging; success is greed; businessmen are predators. This creeping socialist transformation of our culture has finally broken the back of the American economy.
What happens when half a century of socialism catches up with the “shining city on a hill”? Start with America losing its Triple-A credit rating, then the dollar free-falling, then interest rates rising into double-digits as a last-ditch effort to restore faith, which may lead to civil unrest — and certainly widespread misery.
Some thoughts on the risks to American liberty based on economic decline and why Asia will become the dominant economic power.
Xanax Nation Beats A Panicked Nation Any Day
May 15 (Bloomberg) — Economic historians like to put some distance between themselves and the events they’re writing about. The Founding Fathers come up for a scholarly re-look a few times each century. The Civil War and the economics of slavery provide endless fodder. The Great Depression is still hotly debated 80 years after the fact.
With any luck, by 2088 we should have a good handle on the Panic of 2008: the causes, cures and curiosities surrounding the subprime collapse that was heard, and felt, ‘round the world.
What will the current crisis look like when viewed through history’s telescopic lens? We can only imagine.
Some good insights into the financial crisis and why government always winds up fighting the last war. The risks of emotional decision making under panic conditions is examined.
As President, Obama Is Unafraid To Disappoint His Allies
Through much of last year’s campaign, Barack Obama enjoyed the acclaim of a politician who seemed adept at making himself all things to almost all people. Liberals, moderates, even some conservatives, Democrats, independents and even some Republicans all found in Obama change they could believe in.
That was the mark of a skillful candidate who leaves enough unsaid to attract the maximum support possible. But it isn’t possible to maintain that posture once presidential decision making begins and choices have to be made.
Typecasting Obama has also proved difficult. His ambitious domestic policies lean decidedly left (unless he turns out to be the deficit hawk he says he wants to be).
The decisions underscored an important facet of Obama’s decision making, which is his capacity to rethink positions and to change his mind as he learns more or conditions change. And he tends whenever possible to seek consensus. Those on the left and right often overlook this aspect of his governing style, though it was one of the factors that drew many people during the campaign.
The other reality that last week’s decisions highlighted is Obama’s willingness to disappoint his allies, which suggests that he feels he owes no group or groups unduly for his victory.
A President cannot rule successfully from the extreme right or left. The capacity to rethink positions based on changing circumstances is better leadership than reacting to events based on some inflexible ideology.
Why Pelosi’s Hypocrisy Matters
WASHINGTON — Earlier this month, I wrote a column outlining two exceptions to the no-torture rule: the ticking time bomb scenario and its less extreme variant in which a high-value terrorist refuses to divulge crucial information that could save innocent lives. The column elicited protest and opposition that were, shall we say, spirited.
Even John McCain says that in ticking time bomb scenarios you “do what you have to do.” The no-torture principle is not inviolable. One therefore has to think about what kind of transgressive interrogation might be permissible in the less pristine circumstance of the high-value terrorist who knows about less imminent attacks.
My column also pointed out the contemptible hypocrisy of House Speaker Nancy Pelosi, who is feigning outrage now about techniques that she knew about and did nothing to stop at the time.
My critics say: So what if Pelosi is a hypocrite? Her behavior doesn’t change the truth about torture.
But it does. The fact that Pelosi (and her intelligence aide) and then-House Intelligence Committee Chairman Porter Goss and dozens of other members of Congress knew about the enhanced interrogation and said nothing, and did nothing to cut off the funding, tells us something very important.
Our jurisprudence has the “reasonable man” standard. A jury is asked to consider what a reasonable person would do under certain urgent circumstances.
On the morality of waterboarding and other “torture,” Pelosi and other senior and expert members of Congress represented their colleagues, and indeed the entire American people, in rendering the reasonable person verdict. What did they do? They gave tacit approval. In fact, according to Goss, they offered encouragement. Given the existing circumstances, they clearly deemed the interrogations warranted.
So what happened? The reason Pelosi raised no objection to waterboarding at the time, the reason the American people (who by 2004 knew what was going on) strongly re-elected the man who ordered these interrogations, is not because she and the rest of the American people suffered a years-long moral psychosis from which they have just now awoken. It is because at that time they were aware of the existing conditions — our blindness to al-Qaeda’s plans, the urgency of the threat, the magnitude of the suffering that might be caused by a second 9/11, the likelihood that the interrogation would extract intelligence that President Obama’s own director of national intelligence now tells us was indeed “high-value information” — and concluded that on balance it was a reasonable response to a terrible threat.
Pelosi is not thinking clearly about what she is saying. High minded moral discussions are fine when imminent threats are not present. One of the government’s primary functions is to provide for the common defense. Defending a nation sometimes involves tactics that are we may not normally condone. If Pelosi cannot do what must be done in a crisis to avoid the needless death of Americans by our enemies, she is not fit to hold elected office.
Thought Provoking Links
Even some loyal Democrats are feeling queasy about what will happen if, as seems likely, Al Franken wins the endless dispute over that Senate seat from Minnesota. With Arlen Specter’s recent conversion, that would give the Democrats 60 seats, or three-fifths of the Senate, which is a filibuster-proof majority.
We have endured gridlocked government for so long that the idea of a president and a Congress from the same party enacting the legislation that they promised to enact while they were running for office seems almost unnatural.
The president and his party in Congress face the terrifying prospect of being able to fulfill their campaign promises. They will have no excuse if there is no health-care reform or energy reform, or if there are and they are disasters.
Now, when the voters demand change, they may well get it. We’ll see how they like it.
America is on the great quest for “change”. Although a great campaign slogan, when faced with the reality of real change, most people are terrified. With what can only be described as near dictatorial power compared to previous Presidents, the Obama administration is likely to bring the status quo to an abrupt halt. The power to act decisively could be a huge positive for the country - time will tell.
Speaker’s Comments Raise Detainee Debate To New Level
House Speaker Nancy Pelosi’s extraordinary accusation that the Bush administration lied to Congress about the use of harsh interrogation techniques dramatically raised the stakes in the growing debate over the Bush administration’s anti-terrorism policies even as it raised some questions about the speaker’s credibility.
Pelosi’s performance in the Capitol was either a calculated escalation of a long-running feud with the Bush administration or a reckless act by a politician whose word had been called into question. Perhaps it was both.Washington is now engaged in a battle royal of finger pointing..
Conservatives say that, if Pelosi was so opposed to torture, she should have spoken out forcefully when she learned that these techniques were being employed.
The president wants the focus kept on the future…
Each side seems to have something to prove. Meanwhile, real issues we face today and in the future are being sidetracked. No one is better than a politician at pointing fingers and blaming others. It’s time to move on to more important issues.
TWO TRILLION dollars in health-care savings, as hailed by President Obama in the White House yesterday, would be nothing to sneeze at.
The White House has emphasized repeatedly that health-care reform is entitlement reform — that is, an answer to the nation’s long-term fiscal challenge. Yet, so far, it is backing a plan to expand coverage that would cost taxpayers between $1 trillion and $1.5 trillion over 10 years, while it has proposed health-care savings of only $309 billion. There is a danger that the administration and Congress alike will be tempted to “pay for” actual government expenditures with presumed but unspecified savings, like those promised yesterday. In fact, even as they promise cost control, a number of the groups that met with the president yesterday also have argued that health-care reform should not be held to Congress’s pay-as-you-go rules.
The White House has stated clearly that any reform bill should be fully paid for. To ease suspicions that the associations he met with yesterday are only talking a good game on cost control to ensure a seat at the bargaining table of health-care reform, the president will have to reaffirm his commitment to pay fully for health care and get to that goal without gimmicks.
In 2007 the U.S. bill for health care amounted to 17% of gross domestic product (GDP), compared to 11% in Switzerland and Germany and 10% in Canada and France. There is no evidence in terms of over all health or longevity that suggests the U.S. is getting any benefit for spending almost twice as much on health care as other industrialized nations. Savings on health care are, of course, theoretically doable but getting there will be the hard part. One person’s “savings” usually means a cost or pay cut to someone else - and that “someone else” is likely to resist.
Why are we overweight?
The world is full of tough questions, but why we are overweight is not one of them. In fact, most of us know the answer - we put on excess pounds when we consume more calories than we burn. The problem is, of course, that unless you keep an exact daily list of what you eat and record the corresponding calories, it is very easy to exceed daily caloric requirements. From the Wall Street Journal, here’s something that may help many of us.
Massachusetts adopted broad rules requiring restaurant chains to post calorie counts on their menu boards, joining California and New York City in a move that the restaurant industry has opposed.
The Massachusetts regulation, which applies to chains with at least 20 restaurants in the state, will take effect in November 2010. Restaurants must post the number of calories in each menu item near the menu listing or price.
Advocates say they hope that posting calorie counts will lead consumers to make healthier eating choices, although evidence so far is scant on that point. About two-thirds of U.S. adults are overweight, according to the Centers for Disease Control and Prevention.
Federal health guidelines recommend consumption of 1,600 to 2,400 calories a day for non-exercising adults.
For those of us trying to maintain a healthy weight, knowing the caloric content of what we consume is critical. I am frequently shocked at the amount of calories in various menu items at popular restaurant chains. A soda, appetizer and an entree can easily add up to more than twice the calories one needs in a full day.
The key to losing weight is not rocket science - consume fewer calories than you burn = weight loss. This can be done without exotic diets and books and pills.
One of the best ways to lose the extra pounds is to 1) calculate how many calories a day you burn and 2) record the calories of every item you eat in a day to ensure that the total is less than your daily caloric need. Consider the following useful research:
You aren’t what you eat. You’re how much.
That’s the message from a two-year National Institutes of Health-funded study that assigned 811 overweight people to one of four reduced-calorie diets and found that all trimmed pounds just the same. It didn’t matter what foods participants ate, but rather how many calories they consumed.
The study, published Thursday in the New England Journal of Medicine, put participants on one of four diets:
After two years, they had lost nine pounds on average and trimmed two inches off their waists regardless of which diet they followed.
The message is that dieting may be “much simpler” than everyone thought, says Catherine Loria, a nutritional epidemiologist at the NIH and co-author of the study. Along with choosing healthful foods, “all you have to do is count your calories.”
The findings could influence public policy through efforts to require more disclosure of calorie counts in prepared food, she says. New York City, for instance, recently required chain eateries to put calorie counts on menus. “For the first time, people are seeing that the muffin they used to have in the morning is 400-plus calories
In the NIH study, participants used a Web-based, self-monitoring tool that tracked how their daily food intake met their calorie goals. Debbie Mayer, of Brockton, Mass., says this helped her stay disciplined. “I’d just see the numbers and say, ‘I can’t eat anymore today.’”
Many times simple is better. Some time ago, I decided that I did not want to be overweight anymore. After some reflection, I came up with the method described above, prior to the National Health Institutes’s multi year and multi million dollar study. It works - I lost around 40 pounds and five years later have not gained it back.
Thought Provoking Links
Obama Says US Long-Term Debt Load “Unsustainable”
May 14 (Bloomberg) — President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.
“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”
Is this honest straight talk out of Washington or just paying lip service to concerns about the long term finances of the US? Perhaps we have a President who understands that the United States cannot continue to borrow unlimited trillions of dollars without consequence.
It is difficult, however, to reconcile the President’s concerns with unsustainable debt to his proposed budget with a $2 trillion deficit. What’s the old saying - watch what they do, not what they say?
America’s Triple A Credit Rating - At The Precipice?
Our Nation has avoided the decline into the abyss that many have been predicting during the economic crisis. At the cost of approximately $13 trillion in government bailouts and guarantees the system has been held together but at a very high cost that future generations will bear through higher taxes or a much lower standard of living.
Has “saving” our economy destroyed our economic future?
As Cheney Seizes Spotlight, Many Republicans Wince
Today Cheney is the most visible — and controversial — critic of President Obama’s national security policies and, to the alarm of many people in the Republican Party, the most forceful and uncompromising defender of the Bush administration’s record.
“This isn’t about partisan politics, it’s about what’s right for the country,” said Liz Cheney, the former vice president’s daughter and a former State Department official. “Every American, whether you’re a Republican, Democrat or independent, would agree that before critical decisions are made about national security of the nation, we ought to have a full and fair debate.”
Liz Cheney strongly disagreed with the claim that her father’s vocal defense of Bush administration policies has caused significant unrest within the GOP.
Rarely has an official from one administration moved so quickly and aggressively to criticize a new president.
Cheney may not be the best spokesman here, but at the present time, he seems to be the only one willing to initiate debate on major policy issues.
George F. Will - The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness.
In February, California’s Democratic-controlled Legislature, faced with a $42 billion budget deficit, trimmed $74 million (1.4 percent) from one of the state’s fastest-growing programs, which provides care for low-income…
But the Service Employees International Union collects nearly $5 million a month from 223,000 caregivers who are members. And the Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.
The Obama administration’s agenda of maximizing dependency involves political favoritism cloaked in the raiment of “economic planning” and “social justice” that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail. The administration’s central activity — the political allocation of wealth and opportunity — is not merely susceptible to corruption, it is corruption.
Apparently the rules don’t count, if the end result is deemed sacred.
Obama’s Big Fat Fibbing Budget
Is the White House lying to the American public about the economy? Or, if not outright lying, is it being awfully stingy with the truth?
They see April’s lousy retail numbers and record foreclosure rate. They see unemployment at 8.9%, state tax revenues facing double-digit declines, and a 14% fall in home prices last quarter.
So how can National Economic Council boss Larry Summers, Council of Economic Advisers chief Christina Romer or Treasury Secretary Tim Geithner still believe in a 7.9% unemployment rate and 3.2% GDP growth for 2010…
It isn’t that President Obama wants to mislead the public on the economy. He probably thinks he has no other choice. He has a hugely ambitious agenda that requires huge amounts of money and a hugely aggressive budget.
And by the summer, when the Office of Management and Budget revisits its budget assumptions, the Obama economic mess will be apparent to all.
Sure, it was a mess he inherited. But with his big, fat, fibbing budget, Obama is making that mess his very own.
If the economy does not start to recover, the budget fibs will be the least of our problems.
Across the private sector, workers are swallowing hard as their employers freeze salaries, cancel bonuses, and institute longer work days.
Call it a tale of two economies. Private-sector workers — unionized and nonunion alike — can largely see that without compromises they may be forced to join unemployment lines. Not so in the public sector.
The results of such efforts are evident in the rich rewards that public-sector employees now enjoy. A study in 2005 by the nonpartisan Employee Benefit Research Institute estimated that the average public-sector worker earned 46% more in salary and benefits than comparable private-sector workers.
But the real power of the public sector is showing through in this economic crisis. Some five million private-sector workers have lost their jobs in the last year alone, and their unemployment rate is above 9% according to the BLS. By contrast, public-sector employment has grown in virtually every month of the recession, and the jobless rate for government workers is a mere 2.8%. For anyone who thinks such low unemployment numbers are good news, remember that the bulging public sector must be paid for with revenues that most governments don’t currently have. This is one reason for a spate of state and local tax increases, such as $5 billion in tax increases New York state passed in April, and $12 billion in tax increases California’s legislature agreed to …
In the private sector such efforts will still be subject to the demands of the marketplace. Employers who are too generous with pay and benefits will be punished. In the public sector, however, more union members means more voters. And more voters means more dollars for political campaigns to elect sympathetic politicians who will enact higher taxes to foot the bill for the upward arc of government spending on workers. That will be the pattern for the indefinite future unless taxpayers find a way to roll back the enormous power public workers have acquired.
The disparity between public vs. private employees in compensation, benefits and job security has reached outrageous levels - life should be so good for all of us. Few are benefiting hugely at the expense of many.
There is a reason why private enterprise cannot match the compensation levels of public employees - they would be bankrupt. This issue is starting to get a lot of attention since the unsustainable cost of public sector employees is starting to bankrupt many state and local governments.
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