Beyond the Cusp

February 23, 2013

Republicans and the Empty Promise Syndrome

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First off we need to define the Empty Promise Syndrome, sometimes called the Wimpy argument quoting the Popeye cartoon character who was always offering to “Pay you next Tuesday for a hamburger today.” Those cartoons must have had many Republican politicians earning money on the side as extras on the set as Wimpy never seemed to have any shortage of hamburgers to gulp down. To trace the beginning of the Empty Promise Syndrome infecting Republican politicians we need to go all the way back to 1986 of the Reagan Presidency and the Immigration Reform Bill which legalized at a minimum the three-million illegal aliens residing throughout the United States while promising to address and provide for a system of border enforcement which would make the borders of the United States virtually impenetrable. Currently there exist an estimated eleven- million to possibly over eighteen-million illegal aliens, the euphemistically denoted undocumented workers, citizens without papers, undocumented aliens, and any other of a half dozen terms which dance around but would never use such a harsh and loaded term as illegal. Somehow the agreement to grant citizenship today and impose enforcement tomorrow never quite delivered when tomorrow rolled around, a lot like Wimpy who can never be found on Tuesdays. But there are so many other examples that we had best stick to the two latest in the series.


If we were to remember back to just before Thanksgiving and on close to Christmas and then New Years the news reports were all buzzing about some looming doomsday threat called the Fiscal Cliff. The Republicans demanded spending cuts which would be at least equal to any tax increases. They would have preferred, or so they claimed, to have far more of the deficit cut by spending cuts than relying on tax increases. President Obama was insistent that the deficit reduction be levied completely by increased taxes on the rich as they had to be made to pay their fair share. With what were defined in perfect threats from on high was this sequester which would cut spending severely without any concerns for what was necessity and what was less vital and would destroy uncountable programs for the poor, the elderly, the children, the ecology, the Earth, the whatever you cared about and especially the military while ending the great recovery we have been experiencing (though many myself included are loathe to see any solid signs of this recovery unless that is what higher grocery prices are now called). In the end, President Wimpy offered spending cuts by March 1 for taxes on the rich today and the Republicans gave Obama everything he requested and set a new sequester date to force spending cuts as promised.


Well, here we are fast approaching March 1 and President Obama is demanding changes in the code resulting in more tax revenue and attempting to reduce spending cuts in any programs or departments with possible exceptions of certain areas the President finds unnecessary such as the Military. It is likely that President Obama would gladly put off any spending cuts forever and simply rearrange the tax codes and eliminate deductable items or at least reduce them or cap them all in order to cut the deficit without cutting spending. Actually, the President has even proposed that his adjustments to tax deductions and the tax codes will produce so much deficit reduction that he will even be able to propose additional spending with the extra funds his accounting has predicted. If the Republicans allow the President to fiddle with the tax code and tax deductions in lieu of the spending cuts promised at the end of last year’s Fiscal Cliff negotiations, they will have forfeited the collateral supposedly granted them of tax increases on the wealthy then for spending cuts and only spending cuts now. This simply means that if the President insists on increasing tax revenues instead of more spending cuts the Republicans should stand loudly upon the promise by the President that this would be the time for spending cuts and only spending cuts. Force the argument to be either the President reaches an agreement on spending cuts or President Obama will be responsible for the sequestration cuts when they occur. Force the choice on President Obama and the Democrats by passing a spending cuts bill which delivers what was promised and announce that the House of Representatives has met their responsibility and produced legislation for rational and safe spending cuts to reduce the deficit and that it is now left to the Democrat controlled Senate and the President to meet their obligations and keep their promises. After all, it is not like the across the board cuts required by the sequestration alternative would actually be anywhere near as debilitating as has been expressed by the fear mongering going on in some of the media and the White House.


Then there is another repeat performance being played out in Congress and that is once again immigration reform. This is forming up to be a complete and exact repeat of what occurred during the second half of President Reagan’s time in the White House and many of the exact same players are simply dusting off their old scripts and adjusting a few numbers and going through the same motions using the same terms and offering the same old lies as promises. As the old adage says, “Fool me once, shame on you. Fool me twice, shame on me.” There is absolutely no reason for the Republicans, and any Democrats who actually care about the rule of law and the safety of the United States, allowing any form of amnesty or forgiveness and allowances to remain inside the borders, let alone working, for the approximately eleven million illegal aliens until there exist in place solid and uncompromising enforcement procedures that include security controls, observation abilities, formidable border barrier systems, and every possible technique applied and utilized to prevent any further illegal infiltrations. There can be no allowance of we will secure the border next Tuesday for total amnesty, or whatever sly and misleading name it be given, today. That was the basic promise which was never intended to be kept in 1986 and will likely be the offer given once again with every single amount of deceit included today.


There is one large and very unfortunate problem with the above. The truth be told there are many Republican who desire the lie of enforcement later for allowance and a path to citizenship today as that way they can unfurl the banner of supporting a closed border while not actually getting a closed border. Both sides, the Democrats in order to gather more voters for their candidates and the Republicans to provide less expensive labor for certain industries and businesses, honestly work together to guarantee that those they allowed into the United States are rewarded every so many years with citizenship and at the same time keep the border porous letting in the next wave of voters and workers enter the United States illegally to the benefit of both sides coffers and votes for reelection. One should not be too surprised then when once again we will witness a deceitful front played by those for whom taking a strong stand against illegal immigration and its effects upon the United States once again feign disgust when their votes allowing for immediate forgiveness in any form for the illegal immigrants currently in the country allowing them to remain, keep their jobs, and eventually gain an easy path to full citizenship while enforcement of our laws and control of the border are put aside to be addressed later. Of course later never comes as it is always now and later is, well, later. Do not expect this round to result in anything which falls far from the indecency pulled over on the American people in 1986 when Reagan allowed amnesty on the promise of future enforcement. We are still waiting for that later enforcement and who knows which later will arrive first; the last one or the one we can expect in the near future when the grand immigration compromise is announced with great fanfare and applause all around. My bet is neither enforcement will materialize before the Congress and some future President assure us that these thirty-some-million undocumented citizens will be the last and by allowing them legalization and documentation it will facilitate their soon enforcing our laws and border, and then there will be three soon to come promises.


Beyond the Cusp


January 3, 2013

They Surrendered to President Obama and Passed on Promises

Well, as everybody who has functioning senses probably knows by now, the Congress has given President Obama a good measure of everything he desired without extracting even a single sacrifice from the White House. Alright, so they pared the salary up from $200,000.00 for singles and $250,000.00 for couples and families all the way to $400,000.00 for singles and $450,000.00 for couples and families to be punished for their success with higher taxes. The good news about this is now it will be only those making closing in on half a billion dollars who will now move the vast percentage of their investments overseas where they will be safe from the increased penalties from increasing taxes instead of those making around a quarter of a billion dollars. Even so, with estate taxes being raised significantly and capital gains taxes also being raised measurably, these will force the investor class to place their monies in safe havens and pass them on to their descendants in measured ways which work around the estate taxes. By increasing the capital gains and estate taxes the government will likely cause the opposite of what they have been peddling to the public and the government will actually receive less in revenues from these taxes than had they left them at the lower rate where it was not cost effective to play the avoidance games. They extended unemployment insurance for an additional year without bothering to figure out how to pay for it leaving it to be simply added to the deficit. It will not be that much money so it will hardly be noticed. But all of this is the least of the disappointments.

The depression many fiscal conservatives are feeling today has to do with the lack of spending cuts, not exactly lack as complete dearth of spending cuts or even reductions of increases. The vote to pass this legislation, which has laughably been referred to as a compromise, had one defining item, the kicking of budget cuts down the road, even the presumed ones that were to take effect as part of the fiscal cliff, making for another crisis now scheduled for around March 1, 2013. This is more serious than it will be reported as it will lead to another round of panic, screaming and insanity which will allow President Obama and his Democrat allies in Congress along with a compliant media to again assail the Republicans with charges of obstructionism. In the end there will be yet another compromise which will give mere lip service to spending cuts while gaining concessions from the Republicans which will bring them that much closer to their goals of tax increases back to the Clinton administration levels for those earning $200,000.00 to $250,000.00 annual incomes. The likelihood that even come March the compromise will once again kick the spending cuts can down the road is far too high. One has to realize that we are expecting a Congress in which the Senate is still under the direction of Harry Reid who has refused to even allow a budget to reach committee, let alone come to the floor for a vote, in over three years. Does anyone honestly believe that anything will change during the second term of President Obama? The President and his facilitators in the Congress have realized that by not passing a budget and instead voting for continuing resolutions to keep the government running they are able to increase spending in whatever department they feel favorably towards simply by giving it an increase every few months when it comes up for its turn for a continuing resolution. By this method they can actually increase spending beyond inflation and have done so already with the largest increases coming in the first eighteen months of President Obama’s first term when the Democrats had unopposable majorities in both Houses of Congress. This fiscal cliff so-called compromise is simply another of those continuing resolutions under a different name and the next few will all be called fiscal cliff compromises but a continuing resolution by any other name is just as damning to those Republicans who allow such to pass in the House of Representatives. This little fact leads me to what I find the most distressing of the maneuverings and sleight of hand going on in the Halls of Power.

There exists one thing which those who are still voting for responsible governance and honestly wish to gain control over spending and actually address deficit spending and the national debt can still do that will make those willing to go along rather than take a principled stand have to pay a price. Every time when the House of Representatives reach the critical vote on one of these boondoggles, we need to insist that the news sources publish lists in order to tie every Representative to their vote so when they stand for reelection in the next elections they have to explain their vote. This may not have much of an effect on the final vote taken now, but it has the potential to give the voters in the home district know if their Representative was voting as they had hoped they would. This opens up the possibility for candidates to be proffered to their constituents who is willing to take the hard principled stand and better represent the desires of the people. Making each member of the House of Representatives answer to their name with a Yes or Nay vote which can be recorded and played during the next campaign may be the best medicine to wake up some of the wayward Representatives and bring them back to walking the line. And if such does not convince some to vote to uphold their election promises, then so be it and may we find a brave and solid candidate to replace them. That is the way to make progress, make every member vote on the record and note where each stands when the chips are down and their backs are against the wall.

Beyond the Cusp

November 15, 2012

The Secret Behind President Obama Plan to Tax Only the Rich

We are all familiar with one of President Obama’s signature proposals, “Tax the rich.” We have all heard how the rich needs to pay their fair share. And who can forget President Obama exclaiming that we all must play by the same rules or that Warren Buffet, the multi-billionaire, pays a lower tax rate than does his poor secretary who, by the way, collects a six figure income. But there is one item that has always intrigued me, namely that the dividing line between we the normal people and them, those wealthy slackers who need to pay more, is set at $250,000 a year in earnings. I have spent some time considering this arbitrary dividing line, or was it so arbitrary? Well, as it turns out, the $250,000 threshold may as well be an arbitrary line pulled out of the thin air when one finally realized the truth of why the tipping point is completely unimportant. The only difference the dividing line between those who are doing their fair share and the evil rich in the end will only determine how soon everybody, even those on Government support such as unemployment, welfare, or disability, will cross into the classification as rich and having to pay their fair share. The real story will become more evident with time but has, for now, been dampened and kept in check as if what is coming in our future had gotten out of control before the election, President Obama would never have had even the slightest chance of reelection. So, what is this coming catastrophe?

Most of us have heard of Quantitative Easing, especially if you have been reading BTC for some time. Quantitative Easing is usually abbreviated as QE followed by a number to denote which version one is referring. In QE1 the Federal Reserve took control of $175 billion of agency debt securities, $1.25 trillion of mortgage-backed securities and additionally some Treasury Notes. This was done in order to relieve the banking system of questionable and bad securities allowing them to climb out from under the dead weight of these mostly defaulted debts. As bad as QE1 may have appeared, at least there existed some equity in these debts which, where it did not totally offset the entirety of the debts owed, did provide some cushion guarding against a total loss which could have made recovery impossible without severe consequences.

When QE1 proved insufficient stimulus and the economy began to run out of steam, the Federal Reserve felt the need to act again. Initially they remonetized the equities they held from QE1 and purchased Treasury Notes thus supplying the government with additional funds. This expanded its balance sheet by $600 billion, all of which was new monies invented electronically out of thin air as the securities utilized to make this purchase of dollars was basically worthless by this time. It was taking a loan on the assets which you had previously used for a loan elsewhere, which is illegal for you or me to do. Thus far all of these additional dollars have been left sitting in the regional banks and kept from being introduced into the money supply but instead sitting idle supposedly in reserve. Eventually, when the economy really begins a true recovery the pressure for releasing these monies into the local banks allowing it to be loaned and thus giving it the initial shove resulting in it now having velocity. We can picture QE1 and QE2 funds as a huge rounded bolder sitting above our country on a high plateau really close to the edge but still safely in place. When the monies from QE1, QE2, and also QE3 (we will get to this in a moment) are made available for loans and injected into our economy, then somebody is going to give that bolder a little shove. The shove will continue to be more vigorous as more and more of the new monies are injected into circulation. This will eventually push the bolder past the flat and onto the steep slope leading directly into our country and its economy. Once this starts it will gain a life of its own just like the bolder picks up speed rolling down the hill. Now, this would have a limited effect if the bolder was not too large compared to the size of our GDP and other economic indicators and measurements. This is where QE3 comes into play.

Now we are in the middle of QE3 which is an ongoing purchase of bonds, presumably mortgage bonds, at the rate of $40 billion a month, every month until there is a sizeable downturn in the unemployment numbers, the real unemployment numbers and not the relative numbers used to make us believe things are not as dire as they actually are. The second half of this one two punch is that at the same time there is an intent to force the interest rates for banks to remain at or just above zero through 2015. At some point these actions will trigger a burst in the economy which will appear to catch fire and simply take off. This will initially appear to be the end of the doldrums that the economy has been suffering through for the last five years, but this elation will be short lived. This burst of activity will begin the charging of all these additional dollars that were invented electronically (the way we print money in this computer age) out of thin air giving them velocity which will then begin doing what any healthy economy does, act as a multiplier on the available money supply as it gets deeper into the economy. So, what does all this mean?

As the economy recovers with the increased money supply grown through each stage of QE1, QE2, and especially QE3, these dollars become active and get loaned, increasing economic growth which makes those funds available for loaning again and again speeding the economy wildly due to the millions of injected dollars. Now, when there is a great amount of additional money and the economy grows leading to increased purchasing, what happens to the prices of items we will purchase? Their process will begin to increase and they will increase at a rate proportional to the available money supply which has been greatly expanded by the Federal Reserve and our Government through QE1, QE2, and QE3. As prices begin to run away there will be a demand by employees for greater pay and salaries will begin to increase. This will allow more purchasing leading to more inflation and the circle begins to spin faster and faster. This leads to hyper-inflation which is a situation where people begin to realize that saving money is counter-productive and spend every penny they earn. These additional purchasing speeds everything further and eventually the whole thing spins completely out of control, unless there has been some check put in place to draw off these excess dollars and calm the excited economy bringing it back under control. There are two main routes which can be utilized to remove the extra dollars, either raised interest rates or higher tax rates. With everybody’s salaries increasing due to inflation they all pass the minimum qualification for being amongst the rich and this is where making the rich pay their fair share comes in to play. If President Obama could have his way, he would likely raise the tax rates on the rich by setting new tax rate levels, likely every $250,000. So what we would have is a tax rate of 40% on salaries from $250,000 to 499,999; tax rate of 55% on salaries from 500,000 to 749,999; tax rate of 80% on salaries from 750,000 to 999,999; and a tax rate of 99% on all salaries over 1,000,000. Oddly enough, such a system might actually work to prevent the runaway hyper-inflation even though I have my doubts that this was part of President Obama’s actual plan. President Obama is using class warfare to separate Americans into different groups at each other’s throats as it is easier to conquer a divided people. That his tax warfare system might inadvertently have a positive result, it is not likely President Obama planned a check be put in place to counter the reckless financial decisions made by himself, his administration, and the Federal Reserve.

Beyond the Cusp

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