Beyond the Cusp

February 10, 2013

President Obama Inadvertently Identifies Historic Economic Ailment

President Obama continued his assault on Congress threatening that they could be responsible for a murder. The victims of this Congressional threat are, according to President Obama, thousands of jobs and the continued improvement we have supposedly been enjoying in the economy. The method with which Congress will bludgeon the economy and jobs to death is the death by thousands, nay, millions of cuts via sequestration. According to President Obama, if the Congress does not accept his proposal to match any spending cuts with equal measure of tax increases through the removal of loopholes and credits, then uncountable numbers of jobs will be lost or never filled as without government subsidies sectors of the economy will relapse into a recession-like collapse. This is the fate the Congress will force on a hapless country where its people are thirsting for the continued supply of government milk to suckle and care for them supplying them with jobs and seeing to their every need. Well, at least this would be reality if those who believe in big government as the solution for everything were to have their way. What President Obama has managed to do with his threats is to point to one of the most dire situations confronting the United States today. Actually, this has been a growing problem since Franklin Delano Roosevelt and greatly enhanced by Lyndon Baines Johnson and numerous other assists along the way to the present. The pinnacle of this monster which has been built one bad idea after another was the farce that some companies, banks, investment, insurance, and other chosen favorites of those in power being sold as too big to fail and thus deserving of millions upon millions of taxpayer’s money. Since the too big to fail was not an Obama original but was inspired by the original bailout which was committed with the approval and blessings of President George W. Bush.

The problem is that such a large percentage of the economy and way too many of our major companies rely almost entirely on government largess, tax allowances, contracts, and in a surprising number of cases, their entire margin of profit. That is one of the problems which rarely is discussed when the entitlement debate comes under scrutiny. There are always numerous pundits willing to blame it on Social Security, Medicare, Medicaid, Welfare, Food Stamps, and any of the other programs which assist individuals. When was the last time the evening news covered the amount of farm aid that goes to ADM, a huge agricultural conglomerate, or timber allotments granted to Weyerhaeuser and Georgia Pacific, or the any of the numerous generous funding of other industries or the customs, tariffs, and other regulations which are used to give advantages to the chosen few? No, the only government funding which is ever challenged are those which go to people, which many will claim are bad enough, and never those given to industrial giants and other large firms who often hold numerous politicians hostage to the funding these firms can put together come campaign time. The story about whose funding pig gets gored when the government decides to take austerity measures to avert fiscal crisis will almost always end with the piggy with the least cash affords the least protection. It is the same game as local, city, county and state governments take when they face times of economic hardship. The first cuts that are threatened are always police, firefighters, libraries, teachers, and the closing of parks and other recreational facilities. They never discuss ending their personal Lear Jet used to fly around the state, the limousines used to take them to dinners and other functions, the helicopter used to make grand entrance at public gatherings, or any of the myriad of perks many of which we regular people would never ever dream exist but are what makes their positions so prized that they make careers out of “public service”. I have always defined their “public service” as the elected potentates allowing the peasants to pay above and beyond the necessary so that they may feel their privileges to which they have become accustom.

Actually, there is a very cozy relationship between big business and big government, something which we were warned would be the end of the American experiment by, of all people, President Dwight David Eisenhower. Yep, Dwight D Eisenhower, the President who gave us such Constitutional projects as the Defense Highway Bill establishing the Interstate Road System for emergencies where it would allow the transport of any and all military transport and fast response by government and which in such times the public would be barred from utilizing, and the Defense College Scholarship Act which gave promising students scholarships in order to assure that we would have sufficient numbers of well-educated youth for use in an ever more advanced weapons and other systems which would be necessary for the competent operation of the military. President Eisenhower claimed to care about the Constitution and sold these programs not as being giveaways to the public for their private betterment or any such nonsense, these were purely programs which would supply necessary and desirable results for the competent and efficient utilization of the United States Military. So, the man who warned us about the, his words, “Military-Industrial Complex” also used the military in order to fund the interstate highway system and give student grants and scholarships because such investments were necessary for an adequate military of the future. Talk about your self-fulfilling prophesies.

The problem with a coupling of big government with big business is that such an arrangement discourages inventiveness, competition, efficiency, and eventually economic growth. If certain companies have an arrangement with government, nothing formal or written, just an understanding between the leadership of both parties and the ownership of the companies, sometimes the two are one and the same as many of our Congressional leaders are heavily invested in the same companies, then it becomes much more difficult if not impossible for a smaller company to come along and compete. As soon as a small company gets a foothold and gives the slightest of hints that they might pose a challenge, a threat to the larger established company, if that company can utilize government to change the playing field making it more difficult on the smaller company, then innovation and other possible benefits of competition are snuffed out. Imagine if the carriage industry of the horse and carriage era had an undue influence on government such that laws could be passed which made it impossible to operate motor vehicles on public roads, we would still be watching carefully where we stepped when crossing the street. Companies such as Ford, Packard, Studebaker, and others would never have been allowed to replace the horse drawn vehicles as government could have enacted laws preventing such progress. This sounds ridiculous but there were such laws implemented in some places. Motor carriages were required to have a man walk ahead of them with a flag by day and a lantern by night warning any people who were riding in their horse drawn carriages that a noisy, smelly, frightening motor vehicle was coming.

So, thank you President Obama for pointing out one of the difficulties plaguing our economy, namely that too much of our economy and too many companies are completely addicted and dependent on government monies which damages the competitiveness and equality of opportunity which damages economic progress. With your plea to the Congress, you have, likely inadvertently, made likely the strongest argument in favor of allowing sequestration to strike government spending thus cutting the effect of government on everything back in size. Perhaps, once we find we can survive just fine with less government across the boards, then we might enact planned sequestrations for the future and continue to make cuts with such abandon until government has been shrunk down to a more manageable size. Who knows, if we allow this to go far enough we might even actually return to Constitutional governance and thus return the real American dream. In case you have lost sight of the real American dream, allow us to remind you. The Founding Fathers had a new and previously unimagined idea which had never before been attempted in the history of mankind. Their revolutionary idea was that man; regular, everyday, run-of-the-mill man was capable of governing themselves. Mankind did not need a King or an oligarchy of his betters to lord over him and direct his life because without their higher wisdom and abilities the common man would be lost and all would fall to pieces in ruination. Instead, the Founding Fathers saw mankind as being fully capable of knowing what was best for him and through self-government they would be able to provide adequate, nay, superior governance than that or any potentate or collection of self-righteous individuals who placed themselves above the common man. Simply put, they did not find the simple man to be that simple. Today we are faced with a megalomaniacal governance that had run afoul of the Constitution and no longer believes in the common man but does believe that the common man must be ruled over by his superiors. We do not need superiors and anyways, you in government are supposed to be working at our pleasure, not the other way around. Read the Declaration of Independence, it is also a founding document if not the founding document. Right there it explains the place of government, to serve at the pleasure of the people having only those powers delegated to it by the people. Perhaps it is time to have a vote of the public and let the people once again decide how much government we need. That is our right and someday soon we just may exercise that right.

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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