Beyond the Cusp

December 29, 2012

What Actually Predicated the Fiscal Cliff?

The media, talking heads, politicians and presumed experts have been feeding the public the story that the Fiscal Cliff was made possible, if not inevitable, by the Congress and the President put on hold addressing the deficit spending and debt ceiling difficulties and all the rest of the economic woes by passing a resolution setting this New Year as the deadline where the Bush Tax Cuts would automatically be rescinded and sequestration would cut spending across the board with a significantly larger cut being imposed on the Military parts of the budget. Unfortunately, this simplistic view leaves untold the reason that we are running more than a trillion dollar per year deficit spending. The rush to blame the other party or the other branch or house of government has obscured the springboard that launched the budget into this predicament. The truth is there is more than enough discrediting blame to go around and cover both the Democrat and Republican Parties. The originating start that placed us on the path to eventually hit a wall where spending would outstrip any possibility of taxes and fees being able to cover the spending by the Federal Government once allowed to spend outside of the Constitutional limits began almost from the inception of the constitution replacing the Articles of Confederation. This diversion from the strict limitations placed by the Constitution began very early in the history of the United States but the egregious disregard for Constitutional limitations began with the legislations and Presidential executive orders implemented to address the Great Depression of the 1930s.

The three signature programs that got their start as part of the New Deal under the economic policies of President Franklin Delano Roosevelt were Social Security, Unemployment Insurance and the Minimum Wage. The next major damage done by the politicians in Washington were enacted as parts of the Great Society proposed by President Lyndon Baines Johnson with much of it touted as instrumental in the War on Poverty. After these two initial significant increases in the social spending by the Federal Government and the companion spending which was required or adopted by the individual States we have simply added additional coverage under these laws and programs with the occasional new program but as these existing programs had such an enormous cost that each addition seemed minor in comparison. Of course there were some programs which did add significant cost or set up situations which would eventually explode and destroying the societal economic wellbeing. One such program was the Community Reinvestment Act which was passed into law and signed by President Jimmy Carter. This law was used to intimidate banks and other mortgage lenders to make loans to marginally qualified buyers. Under President Clinton the CRA was expanded which set the housing market on the fast-track to forming a bubble which would crash in 2008. Under President George W. Bush we were given the Medicare Prescription Drug, Improvement, and Modernization Act which added excessively to the costs of Medicare. The latest major spending program is still being implemented and is the signature program put forth by President Barack Obama, called the Affordable Care Act. The full impact of this legislation will not be felt until later in this decade when it becomes fully implemented and all of its institutions and coverage have been instituted. These were just some of the most costly of the many new programs that have been instituted by the Federal government almost nonstop since the 1930s with the purpose of eradicating poverty in the United States or providing the social and financial safety net for all.

All of the above and the other items instituted over the years have had their individual and collective effect in pushing spending by the Federal Government beyond the ability of the economy to cover no matter what the tax rate. There is one last action which has to be discussed and is very likely the single most important contribution in causing the Fiscal Cliff yet has been overlooked by the majority of pundits, journalists and the rest of the coverage of the presumed coming disaster. This event was more of a procedure which was executed over the first eighteen months of President Barack Obama’s first term in office. It all is a part of the disregard for the financial, fiscal, and budgetary requirements of the Constitution by President Obama, his administration and the totally controlled Democrat Congress as they did not pass an actual budget during his first term. Instead of meeting this requirement the Congress in cooperation with President Obama passed individual spending bills which made allotments by department or program without forming an all-encompassing budget which covered and identified a budget for each department, program and other expenditures. This allowed for President Obama to stipulate a series of spending increases for those departments of the Federal Government which he favored large spending increases. Through this subterfuge that the President committed with the willing cooperation of a rubber-stamp Congress enabled for an increase of as much as thirty percent increase in the baseline budget of virtually every social program and their overseeing agencies. This forever increased spending in these selected departments and programs without ever needing to actually propose additional spending as the initial increase was used as the new baseline spending onto which the COLA annual increases would be applied as well as whatever the standard increase was applied to the entire budget if and when the Federal Government returns to actually passing budgets as required by the United States Constitution.

These slyly placed spending increases are a major portion of the items which have pushed spending causing the United States Federal Government to be running over a trillion dollar per year deficit which also resulted in constantly crashing into the debt ceiling. The main reason that the taxation and spending consequences were put off in such a way that the time would eventually arrive where the Democrats would get everything they dreamed of and the blame would be placed on the Republicans, what could be better? What is interesting is if one inspects the previous times when similar fiscal difficulties have struck the Federal Government and where the blames have been placed. When there was a budgetary war fought between the Democrat Congress and Republican President Ronald Reagan the media laid the blame for the impasse on President Reagan and allowed the Democrat Congress to get a pass. The next conflict over a budget came as a disagreement between Speaker of the House Newt Gingrich and President Clinton. The entire fault was reportedly due to the intransigence of Republican Speaker of the House Gingrich and no blame fell upon Democrat President Clinton. Now we are facing the dreaded Fiscal Cliff and once again it is the Republicans in the House of Representatives who are to blame while Democrat President Obama along with a Democrat majority Senate are given a pass. There does appear to be a pattern here.

Meanwhile, back to the perfect situation the media is giving the Democrats and President Obama by placing all the blame for the lack of an agreement on the Republican House as if the President would approve any budget and solution the Republicans would send to him. In some manner that is a true statement but solely because even if Speaker of the House Boehner managed to marshal the votes to pass a budget, it would never even get heard in the Senate as per the promise of the Democrat Majority Leader of the Senate Harry Reid. Between the protective shield provided by Senator Reid and the Senate and the media and their favorable reporting gladly placing all blame for anything fiscal at any time squarely on the Republicans, the President can afford to take a vacation and grandstand claiming to return early to get serious when the only seriousness the President will demonstrate is rolling up his proverbial sleeves. Otherwise, the only actions that President Obama has taken has been to demand that he get everything he demands and anything in the way of a compromise is out of the question.

Looking at the situation which directly caused the Fiscal Cliff we get a far different picture than the media has laid out for us to consume. The initial steps on the path which has gotten us to the precipice of a cliff were made a long time ago. This extra-Constitutional spending by the Federal government started long ago even before President Theodore Roosevelt began purchasing lands placing them under Federal Government ownership as Federal Parks denying the sovereign States of their right to utilize the lands within their borders as they saw fit. The huge steps taken which was the base-work in establishing the concept of social spending being under the purview of the Federal Government were done under President Franklin Delano Roosevelt and subsequently by President Lyndon Baines Johnson. The problem has been further expanded and exasperated by virtually every President and Congress since LBJ. The Community Reinvestment Act was instrumental in setting up specific criteria which would be expanded eventually leading to massive failures to pay on loans leading to a run of foreclosures which resulted in a crash of the real estate market causing bank and other financial institutions to fail as they held what had become toxic mortgages where the properties were worth a mere percentage of the loan value. This difficulty was handled in what may prove to have been the worst possible manner by initiating a Federal Bailout which was the brainchild of President George W. Bush. Doubling down on this troublesome solution was reapplied to cover even larger sectors of the economy of the United States was initiated by President Obama. At the same time, President Obama used the existence of a super majority in the Congress which precluded any possible meaningful opposition by the Republican minorities in his plan to vastly increase social spending. President Obama managed to repeal all the reforms placed on welfare, food stamps and other Federally mandated social programs that had been passed in compromises between a Republican Congress largely led by Speaker of the House Newt Gingrich and President Clinton during his second term. President Obama then directed that these programs begin a special enlistment project to maximize their coverage rolls. This push became most noticeable in the increase in Food Stamp recipients. President Obama also pushed to increase spending in every program he favors and tasked others to perform some forms of social functions replacing their previous primary functions with these new priorities. The special additional investments in social programs led to an unusually large increase in the spending on these programs and subsequently on their parent departments. This set a new inflated base spending in these areas which has now led to the problem in balancing the new baseline budgets with the available funding. Procrastination was used to set a trap that is now about to be triggered. When facing this fiscal nightmare the Congress along with the President decided that it might be easier to address the new budget slowly and with greater care and thought and so the trap was set. The trap agreed to was that if the Congress and the President were unable to find a compromise by the end of the year, then the Bush tax cuts would be allowed to expire, a Democrat dream objective ever since these lower tax rates were passed, and sequestration cuts would be made across the board in every department with an extra measure to be taken from the Pentagon and military budgets. Now we are facing the consequence of this agreement and time is growing short. What to expect?

Either we will go over the Fiscal Cliff, a meaningless consequence that has been pumped up and made into a huge and scary monster, or the Republicans will compromise and be censured by the media for not giving in sooner and their constituents for compromising their principles. The question people need to remember the answer to is why would the Democrats compromise when what they really desire is for huge cuts to the military, NASA and other nonsocial budgets with minimal cuts to welfare, food stamps, and other social spending along with tax increases on everybody. The Democrats get their wildest dreams coming true simply by doing nothing but refusing to cooperate and they can count on a media which will absolve them of any blame while thoroughly scorning and condemning the Republicans as solely responsible for the refusal of a compromise being attained. After this pretend emergency has passed, just like the pretend disasters previously when shutting down the government because of lack of agreement on a budget was supposed to bring on the apocalypse, life will continue and the consequences of the miserable handling of the economy and spending will still not yet be evident. All the hoopla and grandstanding about the Fiscal Cliff is much ado about nothing and the consequences that led to this situation will continue unmentioned by the media because they are adverse to reporting the shortcomings and shenanigans committed by their hero, President Obama.

Eventually the consequences of the fiscal extravagances that have been the main fare of the Federal Government for much of the last century will come crashing down upon our heads and thin out our wallets. Thus far we have been spared by another group whose irresponsible actions have facilitated the extravagant overspending by the Federal Government simply by keeping the interest rates deceptively at their current low level. This charade cannot be kept up forever and eventually the rates will need to rise to their natural level. The only reason the Federal Reserve has escaped harm from their deceptive ploy keeping interest rates so low is because the Federal government has adjusted how inflation is measured in order to obscure their real levels. Why else did the measurement of inflation be adjusted in such a way that food, energy, and petroleum prices were not considered as essential elements of our lives and thus not included? I know I eat and use energy and have to feed my vehicle, but apparently the Government does not believe I have any need to purchase such things. This sin of forcing the interest rates to remain low is not only the fault of the United States as Europe and much of the rest of the world gladly goes along with the charade as they also get to enjoy cheap money due to low rates on their loans. When the future point is passed and the interest rates must rise or inflation will destroy every economy and there is no longer any choice, then everybody will pay for their sins. Whenever this event comes to fruition it will be best if you have absolutely no outstanding loans, especially credit cards. Long term loans such as car loans and mortgages which have fixed rates will be safe but any adjustable rate debt will become unaffordable as interest rates are very likely to become prohibitively high, possibly reaching or exceeding twenty percent. Let this be a wise warning that the day will soon arrive when adjustable debt will become an anchor that drags your finances into the deep and they will drown you. The governments of the world will pay for their excesses but there is no reason that we as individuals must be as irresponsible as our governments have been.

Beyond the Cusp

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March 15, 2012

Santorum Wins, Newt Soldiers On, Romney Still in the Lead

The first report I heard this morning on last night’s primaries in Alabama and Mississippi along with caucuses in Hawaii and American Samoa just had to mention Mitt Romney after referencing any of the other candidates. It went something like this; Santorum won both southern primaries in Mississippi and Alabama while Romney came in a competitive third also coming in behind Gingrich. Romney swept the caucuses in Hawaii and American Samoa. Santorum will pick up around forty delegates while Romney will garner fifty. Gingrich coming in second will add over thirty delegates to his count leaving Romney still comfortably in the lead.

 

The main themes of the news last night appeared to be that despite winning both primaries, Rick Santorum was still going to lose ground because of the delegates being assigned in the Pacific Islands. It was further pointed out that Rick Santorum can only win should Newt Gingrich leave the race and that possibility was hashed out until after Gingrich spoke showing all indications of continuing to the bitter end. This slid the conversation to how Mitt Romney winning the nomination was now guaranteed and an overly long string of attempts to rationalize the reasoning behind Newt Gingrich remaining in the race. I thought maybe I might share my insights on the rest of the Republican delegate race heading for the Convention.

 

I have a little difference of opinion with the so-called experts and pundits about Gingrich remaining in the race will solely work to thwart any chance for Rick Santorum to win the nomination outright. The reasoning for this line of thinking is based upon the primary belief that almost every vote won by Gingrich would have otherwise been a vote for Rick Santorum. I find this a difficult point to swallow. While I will grant that very likely three fourths of the Gingrich support is diverted from Santorum with fifteen to twenty percent are taken from Romney, the remainder very probably would have sat out the primaries. Some of my thinking has been due to the fact that in many states the numbers of votes being cast in the Republican Primaries have been higher than the average as the race is tighter and more competitive and thus stirring up increased participation. The real question is what is Newt Gingrich thinking which has him believing that he can actually win the nomination?

 

My theory has it that Newt Gingrich does not believe he is going to win the nomination any more than does Ron Paul. Newt also resembles Ron Paul in that he believes he is the only candidate representing his views which is a vitally necessary message which must be professed no matter what the consequences. I suspect Gingrich has another reason to remain to the bitter end, and that is because he believes that he and Santorum together can garner sufficient delegates to prevent a first round nomination of Mitt Romney thus leading to that mystical political state, a bartered convention. Should the Republican Convention end up unable to give any of the candidates over fifty percent of the vote, then the bartering and maneuvering begins. If the divide is such that Romney has less than fifty percent, say forty-five percent, with Santorum a close second at say thirty-nine percent and Gingrich holding fourteen percent with Ron Paul holding the remaining 2 percent, insufficient for Ron Paul to put anybody over the top. This places Newt Gingrich in the spot of king-maker as whoever he backs would easily win with their delegates added together. My suspicion is even more absurd as I can easily envision Newt Gingrich presenting himself to the Convention as the sole candidate not destroyed by the process as both Rick Santorum and Mitt Romney had focused their aim on each other leaving Newt safely on the sidelines away from the mud-slinging.

 

For those who claim that the only result that can come out of Newt Gingrich remaining in the race taking most, but not all, of his votes and delegates from supporting Rick Santorum thus keeping him from winning outright have overlooked a small matter. My thought is that when Mitt Romney falls short of the necessary delegate count we will find that this will be due to the small but still measurable number of votes and delegates stolen away by Newt Gingrich and simply having the votes he took away from Santorum being insufficient to have put him over the top anyways. So, it is possible that it will be better for Santorum to have Gingrich in the thick of things instead of dropping out of the race. Finally, should we end up with a brokered convention, actually a convention that goes past the first vote casting before reaching a nomination, it is more likely that Rick Santorum would be able to enlist the support from Newt Gingrich than would Mitt Romney. The drawback would be that after a certain number of ballots have been held, some states release their delegates from their elected obligations allowing them to vote for whoever they choose. This would very likely lead to the so-called Republican elites making the decision on who would be the candidate. Even if this was not the real reason for a Romney win, it would be suspected should he not have reached the magic number of delegates through the primary process and a perceived back-room deal appeared responsible for a Romney candidacy. Such a perception would weaken Mitt Romney’s campaign from the outset which might affect the outcome of the national election in November. The best result for the Republican Party is for one candidate, whichever one is less important than the manner, to win the nomination outright through the primary votes and not reliant on super delegates or other non-elected delegates being the deciders.

 

Beyond the Cusp

 

March 7, 2012

Super Tuesday and My Opinion for What it’s Worth

We are looking at a night where the presumed authorities all said that the only primary which counted was Ohio as all the others were preordained by early predictions. So, what does the virtual tie which will split the delegates almost right down the middle mean in the long look at the race? We learned that you can buy a victory, something I am personally very familiar with from my one dip in the wading pool of national politics. My third party candidacy for the House of Representatives, the one in Washington DC, I lost in the vote count but won if you determined number of votes per dollar spent on the campaign. My friends tell me even getting on the ballot was a victory which is more comforting today than back then. But after comparing that my two opponents spent a combined amount in excess of $5,000,000.00 against my huge outlay of $33,000 you find my spending was a less than 0.75% of what was spent. Somehow I received just over 3% of the vote, kind of embarrassing but I can still claim to have gotten more votes for my dollar. Granted, Mitt Romney is outspending Rick Santorum and the rest of the candidates by somewhat less than my opponents outspent my campaign, but over 10 to 1 is a significant difference for such a minor victory. Romney does not have much to crow about.

 

The real story so far in this primary campaign season has been the coverage of the race more than the races themselves and the trial of using proportional representation in many states in assigning their delegates. The proportional delegate assignments is going to be a real plus should this be continued as it will force closer races to actually be represented as such instead of the race being done on super Tuesday. Tonight the talking heads are trying to make the slight Romney win as a sign of the end of the race making him the odds on favorite if not already nominated Republican candidate. The delegate count is nowhere near at a point where anybody is even within sight of the needed count to win the nomination on the first ballot. Yet, I keep listening to these talking heads telling me to go to bed and not bother with the election until November. The only thing I can relate is it is not over and the fat lady has not even been out on the stage as of yet. Should Romney continue and actually win the nomination solely dependent on his deep pockets and disproportional spending and still only manage squeakers splitting the delegates almost sown the middle, how can he expect to beat President Obama who will easily outspend the Republican candidate similarly to Romney’s primary strategy. Considering the investment one would expect Mitt Romney to easily be winning 65% or even 75% of the votes and thus winning entire delegate counts from these states, not sharing evenly with a candidate that was all but unheard from just a few weeks ago. The talk at the front end of these primaries generated questions as to why Rick Santorum had not simply taken the hint and gone home, yet now we are discussing Rick Santorum as making a race out of these primaries and there may still be a few more surprises in store for the talking heads. Much may depend on whether or not Newt Gingrich continues on through to the very end. To be fair, the other way to stop Mitt Romney might be for Santorum to drop out giving his delegates to Newt Gingrich, or they could both drop out and give their delegates to Ron Paul. I think we all know that Ron Paul is in the race to the very bitter end. My hope is that the race soon becomes a three candidate race though I will not hold my breath.

 

The most important singular item is the proportional assignment of delegates which is going to prolong this race well beyond this week. Without this change we would not even be discussing the Republican primaries as it really would be just about all over. By going to a more representative delegate system the Republicans have very likely stretch out the campaign and will thus achieve exactly what was the aim, more people having their say count and the race going much deeper into the primaries. The talk about a bartered Republican Convention was all the talk early on and predicted to be a definite possibility. This prediction was assessed back before even the Iowa caucuses and has proven to have been a premature fear that is no longer likely. The assignment of delegates has run fairly even between Mitt Romney and Rick Santorum with Newt Gingrich holding a small share of delegates. Well, guess now all we can do is wait and watch. With any luck it will continue to be, if nothing else, informative and anything but boring. So far it has been anything but predictable as we have watched a parade in which we went through every candidate as the non-Romney and only time will tell if any more grand changes in the tides of battle are in the future.

 

The last item from Super Tuesday came from the caucus in North Dakota. Mitt Romney was predicted to take that caucus by many due to his greater sized organization. Something went horribly wrong according to the reports I heard and Rick Santorum was chosen in the North Dakota caucus. The race continues and sooner or later we will know who will be chosen to be the Republican candidate to run against President Obama this fall. The final win count for Super Tuesday was Romney with 5, Santorum with 3, and Gingrich with 1. As close as those numbers are, the delegate counts will, once all has settled out and been computed, be even closer between the two leaders, Santorum and Romney. At least it has not been a clean sweep as last primary cycle otherwise I would have one less subject to write about.

 

Beyond the Cusp

 

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