Detroit

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I was born and reared in the state of Michigan, and its affairs remain very interesting to me. I regard Detroit’s bankruptcy as the virtually inevitable result of events I’ve been witnessing throughout my life.

First there was the triumph of modern labor-management relations, which kept the price of labor sky-high, as long as junky cars could be unloaded on a market largely free of good-quality foreign goods. With the help of union-friendly politicians, labor disputes were settled amicably, usually with an enormous increase in benefits for labor. When there actually was a strike or layoff, which happened so rarely that it was regarded as a kind of natural disaster, challenging the existence of God, Michiganians were treated to constant interviews with baffled assembly-line workers, who informed the 10 o’clock news that if this thing continued for even a day longer, they couldn’t meet the mortgage on the house at the lake, and they might even have to sell the boat. It was hard, really hard, to meet the payments on three cars. As for savings, who could keep money in the bank, considering all these expenses?

Such were the rewards of unskilled labor. So why should anyone learn any skills? Then came the nervous collapse of both labor and management, once genuine competition took hold.

But something else had happened, simultaneous with the monopoly of the Big Three automakers and their inseparable companion, the United Auto Workers. This was the triumph of Great Society liberalism and the new class of managers and planners who purveyed it. Many of the big chiefs came from auto company management. Remember Robert McNamara? He’s a sample. These people demonstrated that they could be failures in civic planning as well as business planning. After the 1967 race riots in Detroit, they backed every sorry, money-losing civic improvement project they could think of, applying social engineering to the city’s problems. You can guess how well that worked.

Tax money that is used to do anything more than protect your rights is going to be devoted to building things that will violate your rights by taking yet more taxes.

The logical product of the Great Society was the flight from Detroit of everyone, white or black, who could possibly escape and buy a home in the suburbs. The city’s population went from 1,850,000 (1950) to 701,000 (2010). The escapees left behind them an inner city that was poor in productive workers but rich in people who voted for a living. The natural product of that was a chronically corrupt political class, keeping itself elected by class warfare and racial resentment.

Now the city of Detroit is so poor that it is letting large areas of formerly choice real estate go back to the fields and forests. It is arranging not to keep the streets open, not to keep the power running in whole sections of the city. The people I feel for most are the African-American families who have hung on, kept their modest houses and modest jobs, survived the violence and criminality of their neighbors, and now find that their own jealously guarded homes are to be abandoned by the city they struggled to keep in operation. Looking down Woodward Avenue, once the Champs Élysées of the Midwest, I see block after block of emptiness — or worse: wonderful early 20th-century housing, places to live that would be worth a fortune to almost anyone, anywhere else, but that are now hopelessly derelict.

I suppose that most people understand these things, in general. But one factor that should be emphasized, and almost never is, except in a way that contrasts with the truth, is the influence of that mundane but vicious thing, the tax. It is oft lamented that Detroit’s taxes can’t keep up with its expenditures. The problem is that the taxes existed at all.

Right now, Detroit’s municipal income tax is 2.4% for residents and 1.2% for nonresidents who work in Detroit (if that be not a contradiction in terms). Before 1999 these taxes stood at 3.0 and 1.5, respectively, and were authorized by a special provision in the state tax law allowing cities with populations of more than 600,000 (of which Michigan has only one) to exceed the statewide cap of 1.0 and 0.5%. In 1999, Detroit began slowly and minutely reducing tax rates in accordance with a deal, politically extorted from the state, that gave the city a whopping special subsidy from the revenues of Michigan as a whole.

I say “special,” not just because Detroit was getting a deal that, say, Muskegon didn’t get, but because Michigan had already, for many years, been subsidizing major Detroit projects and institutions — something that did not prevent Detroit politicians from erecting giant signs in front of them, bearing their own names.

Anyhow, in 2011, which is about the time when the probability of a Detroit bankruptcy became common talk in Michigan, the Detroit income tax represented about $230 million out of the city’s $1.2 billion general fund revenue. This means that the average man, woman, or child connected with this impoverished town was somehow generating over $1,700 in revenue for the city alone, about $330 of it from income taxes. Overlapping with the income tax, of course, are many other taxes, including property taxes, which generate several hundreds of millions of dollars and would generate more if the owners of half the land parcels in the city were still paying their property taxes, which they aren’t.

Then there’s the income that the city gets from government-licensed gambling and, ah yes, the income it gets from corporate taxes. In 2012, the city council doubled the corporate income tax rate, taking it from 1 to 2%. The excuse was a threatened 10% pay cut for municipal workers. “I can't in good conscience,” said one council member, “ask city employees to give back 10% and not ask the corporate community to share in the sacrifice by raising their taxes." Oh. OK. I see the logic.

Meanwhile, the state of Michigan has been cooperating with Detroit in attempting to create a new stadium for the Red Wings hockey team, a stadium that, its advocates insist, will generate “as much as $1 billion in economic development over 30 years.” It won’t, of course. People will just keep driving into Detroit to see the games, then driving out again. But over the same 30-year period, the taxpayers of Michigan will have to pay $444 million for bonds to subsidize this scam. Let’s see . . . if there were a billion dollars of economic development (over 30 years, of course), and it were highly profitable (which it won’t be), it might possibly earn, say, 10% on investment, which means an average profit of maybe $22 million a year (it can’t all happen at once), from which the taxpayers of the state of Michigan would receive, in taxes from the grateful beneficiaries of their subsidy, something less than $1 million a year.

So that’s the way — not bread and circuses, but welfare and hockey. Isn’t there an old saying about castles being erected on the ruins of cottages?

The more Detroit taxed, and the more Michigan taxed and subsidized, the worse things got. And continue to get. But why oh why? Because, as Isabel Paterson explained long ago in The God of the Machine, tax money that is used to do anything more than protect your rights is going to be devoted to building things that will violate your rights by taking yet more taxes. The things it builds may simply be dead weight, from an economic point of view, and will therefore have to be supported by continued taxation. Or, more likely, they will be institutions devoted to extracting yet more money from the productive members of society.

The illness of Detroit has been blamed on “white flight,” as if whiteness were some magic elixir.

These may be institutions such as the welfare industry. These may be institutions such as Detroit race politics, which long defended and empowered every crook in the city government, so long as he or she was an African-American, and is currently demanding that Detroit’s debts be “canceled,” thus neatly averting the consequences of bankruptcy. Or these institutions may be government-“stimulated” businesses, erected by subsidies and continually devoted to extending them.

But two things are certain. The beneficiaries will not “give back.” And they will never, never be the productively working black, white, or Asian population of anywhere. These are the people who are tricked into voting for the money-extraction industry, told that more taxes are needed to support the schools or the police or the fire department or something, or defeating the hated Republican Party, and then, mysteriously, find that every increase in taxes is turned into more guns aimed against them.

The illness of Detroit has been blamed on “white flight,” as if whiteness were some magic elixir. If you had any thoughts along those lines, the social history of Detroit will show you that it isn’t. The illness has also been blamed on mysterious “changes” in the auto industry. That’s not the cause either. Business and labor that aren’t on the take from subsidies — subsidies in the form of bailouts, friendly legislation, and noncompetitive labor laws, all of which the Detroit auto industry got, and fattened on, and sickened on — can “change” without doing grave damage to their communities. And the illness has been blamed on “massive corruption,” as if corruption could be massive without the profits it derives from laws and taxes.

Enough. Just look at who’s taking money from whom.




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Beware the Incredible Shrinking Deficit!

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As reported by the Congressional Budget Office, the federal budget deficit is shrinking – and fast. From a high of $1.4 trillion (10% of GDP) in fiscal 2009, it has shrunk to an expected $642 billion (4% of GDP) for fiscal 2013. In other words, the deficit has fallen by about 60% in only four years. Moreover, the CBO sees the deficit declining to about 2% of GDP by 2015. Good news, right? Well, let’s look a bit more deeply.

The brightened fiscal picture is the result of a recovering economy. In February the CBO estimated the deficit would be about $200 billion higher than it now projects. Better than expected revenues caused the CBO to revise its forecast in May. About $100 billion is accounted for by increased individual and corporate tax receipts. The other half comes from payments to the Treasury by Fannie Mae and Freddie Mac, the result of an improving housing market. A continued slow to moderate expansion of the US economy, together with the tax increases and spending cuts enacted earlier this year, will, the CBO says, get us to a deficit that’s only 2% of GDP by 2015.

Obviously, an annual budget deficit equal to 2% of GDP is preferable to one that equals 10% of GDP. But we will still be borrowing hundreds of billions of dollars every year, even during a time that is expected to be relatively peaceful and prosperous. The CBO has trimmed some $600 billion dollars from its ten-year (2014–2023) deficit projection. Under this rosy scenario we will still be borrowing a total of over 6 trillion dollars to keep the federal government running. That’s on top of the 16 trillion or so of government debt (federal, state, and local) that we have already accumulated. All of it is money that our children and grandchildren will have to pay back.

Already voices can be heard crying out that fiscal restraint has gone too far; that there is in fact no deficit or debt crisis; that changes in entitlements are not required; that more public spending, not less, is needed.

Worse, the CBO sees the deficit growing in the latter part of the next decade, reaching 3.5% of GDP by 2023. Rising entitlements and higher interest rates (which make it more expensive for the government to borrow) will cause deficits to expand in the future. Indeed, the current low cost of borrowing is responsible for both the economic recovery (tepid though it is) and the government’s ability to continue living beyond its means. Even a modest increase in rates would likely snuff out the recovery and cause deficits to soar once again.

We are, so to speak, temporarily becalmed, with a fiscal tempest on the horizon. Yet already voices can be heard crying out that fiscal restraint has gone too far; that there is in fact no deficit or debt crisis; that changes in entitlements are not required; that more public spending, not less, is needed if America is to sail into a brighter future. These voices are coming from the port side of the ship, with the irrepressible scribbler Paul Krugman shouting loudest.

The Krugmanite argument is not merely a call for steady as she goes, but an appeal to stoke the fires and sail full speed ahead into that tempest on the horizon. Steady as she goes is probably a justifiable short-term policy, given the iffy nature of the recovery. But stoking the deficit fires is a course pointed at eventual shipwreck. The Krugmanites see government, and specifically government spending, as the solution to our economic and fiscal problems. More spending, not less, is their mantra. But in reality we need to free up the American economy to promote growth and innovation. And that can only be done by shrinking government.

I’m no anarchist. I believe there are certain functions that government must perform in a civilized society. Moreover, I’m not opposed to any and all government spending to stimulate economic activity. For example, I would favor major spending on infrastructure, a crucial and long-neglected component of our economy. But such spending should be offset by major reductions and restructuring elsewhere. Entire government departments (Energy, Commerce, and Education, for example), should be radically modified or abolished. Entitlements must be means-tested. The tax code requires thoroughgoing reform, with rates lowered for both individuals and corporations, deductions capped, and loopholes and accounting gimmicks abolished completely, or almost so.

Finally, while we should not simply retire within our own borders, we must shrink the warfare state. We currently have bases in over 100 countries, and account for three-quarters of the NATO alliance’s military spending. A minimum 25–30% reduction in the US Defense budget, implemented over a five to seven year period, with concomitant changes in outlook and mission, would be most desirable. We have managed to ignore the crisis in the Congo, where some 7 million people have died in a civil war that began in 1997. If we can ignore those millions, why should we be exercised about the Syrians or the Afghans? No, the time has come (indeed, is well past) to admit that we cannot right every wrong in the world, that interventionism is too expensive and only rarely successful.

To continue as we have will almost certainly lead to fiscal and economic ruin in the 2020s or 2030s. The short-term shrinking of the deficit is an unexpected gift that we must not squander. We are being given a brief span — a few years only — to correct the errors of the past half-century. If we listen to the Krugmanites we may not become Greece writ large, but we will doom our descendants to less prosperity and a burden of debt that they had no part in creating, and that may, eventually, crush them.




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The Budget Charade

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On April 10 President Obama submitted his fiscal 2014 budget to Congress. Sixty-five days late and 2,400 pages long, it calls for $3.77 trillion in spending, with a projected deficit of $744 billion. It turns off the automatic budget cuts imposed by sequestration, and thus increases federal spending by some $160 billion over fiscal 2013. Its projections assume that over $5 trillion will be added to the national debt during the next ten years.

One never quite gets used to these figures; they boggle the mind. Only 50 years ago the federal government’s annual budget was under $100 billion (about $700 billion in today’s money), and deficits were small. Then the irresponsible policies of Lyndon Johnson (guns and butter: massive domestic spending increases and a major war fought without raising taxes) and Richard Nixon (fiat money replacing gold) began America’s descent into virtual bankruptcy. Johnson opened the floodgates of deficit spending. Nixon launched the lamentable decline of the once almighty dollar.

Deficit spending and fiat money have a symbiotic relationship; they march together on the path to fiscal doom. The policies of every succeeding president have only made these problems worse. Needless to say, Congress has been equally irresponsible, whether under Democrat or Republican leadership. It is the votes of Congress, after all, that transform bad economics into law.

Only 50 years ago the federal government’s annual budget was under $100 billion (about $700 billion in today’s money), and deficits were small.

The president’s budget proposals were preceded by those of the Senate and the House. In late March the Democrat-controlled Senate passed a budget that increases taxes by almost $1 trillion over ten years, while still adding over $5 trillion to the national debt. “The only good news is that the fiscal path the Democrats laid out in their budget resolution won’t become law,” said Senate Republican leader Mitch McConnell. That’s true, but on the other hand I can’t see the Congress passing a budget that will be much of an improvement over the Democrats’ plan. Certainly the Republican-led House provided nothing but faux leadership on the issue.

The Republicans in the House unveiled their budget a few days before the Senate acted. House Budget Committee chairman Paul Ryan produced a plan based on political impossibilities. It repeals Obamacare. It turns Medicare into a voucher program. Neither of these ideas has the slightest chance of becoming law anytime soon, and Ryan knows it. Ryan’s budget reduces the top tax rate from 35 to 25%, eliminates the alternative minimum tax, and repeals the tax increases contained in Obamacare, yet assumes that revenues will remain level. It says nothing about which loopholes it will close and which deductions it will eliminate to make the revenue projection real. In other words, it is a through-and-through political document, and not a serious plan designed to bring spending and deficits under control. Even if its fantastical proposals were enacted, it would still require ten years to bring the budget into balance.

Given the Great Recession, it is practically impossible to balance the budget in ten years’ time — the risk of sending the economy into a tailspin of 1930s proportions is just too great. But no officeholder has put forward a serious proposal to balance the budget on any timetable. The one attempt to do so, flawed though it may be, is the plan offered in 2010 by the Simpson-Bowles commission. Unfortunately, the politicians, led by the president (Obama) who created the commission, have done nothing to implement its recommendations. Simpson-Bowles allows 40 years to get to a balanced budget. Yet no politician will touch it, beyond giving it mild and passing praise. The “sacrifices” it entails are apparently too great for politicians to contemplate.

In his budget Obama proposed a change in the way in which cost-of-living increases for Social Security recipients are figured. This small, helpful step saves a few billion a year, but does not address the root problem, which is demographic. And while Obama claims he will cut $400 billion from Medicare over ten years, the savings are supposed to be found by cutting payments to providers, a sure recipe for reducing the number of doctors who will take Medicare patients. In any case, if this is all the Democrats are prepared to do on entitlement reform (and the left wing of the party is up in arms about even these small changes), then surely insolvency (for Medicare at least) is inevitable.

We have a spending problem. It’s a problem that cannot be resolved by simply raising taxes. Both the welfare and the warfare state require drastic reform, as does the tax code. And generational oppression — the old sucking up resources at the expense of the young — must be curbed. Yet where is the political will or wisdom to accomplish these necessary things? It is utterly lacking. What then does the future hold?

I predict that the idea of inflating our way out of debt will at some point take hold in political, academic, and media circles. Such a course would deal a death blow to the dollar, and leave wage earners, savers, and other responsible people even worse off than they are now. But it might get the politicians off the hook, at least temporarily. The pols will blame anyone and everyone but themselves for the inflation they have created, and retire on indexed pensions while the rest of us eat grass.

We seem set on this course already. In the 1980s Federal Reserve chairman Paul Volcker killed the inflationary dragon that had plagued the world economy for a decade and more. It has until now stayed dead; indeed, deflation is the worry of the moment. But in the wake of the Great Recession, central bankers, egged on by politicians, have been printing money like crazy. With the Federal Reserve, the Bank of Japan, the European Central Bank, and the Bank of England all engaged in “quantitative easing,” the return of the dragon looks inevitable at some point. A world awash in fiat money must suffer inflation eventually.

Where is the political will or wisdom to accomplish these necessary things? It is utterly lacking.

Central bankers believe that they will know when to turn off the printing presses. They envision themselves acting at just the right moment to prevent the outbreak of serious inflation. This seems about as likely as an investor timing the market correctly — that is, the chance of getting it right appears very small. The question of timing aside, turning off the presses is certain to cause a crash in the bond market and a rise in interest rates, with dire consequences not just for the arbitrageurs, but for the world economy. History provides little comfort for those who believe in the capacity of central bankers to prevent economic catastrophe. Volcker may have saved the world economy back in the early ’80s, but he stands almost alone. The behavior of central bankers today reminds one of Alan Greenspan’s abysmal performance during his last decade as Fed chairman. One may even be justified in comparing the central bankers of today to John Law.

A bargain (grand or otherwise) between Democrats and Republicans over the federal budget is unlikely to do more than put off the day of reckoning. The necessary, thoroughgoing reforms are so politically unpalatable that they will almost certainly never be enacted. The budget process in Washington is a charade. And so I ask myself, can I learn to like the taste of grass?




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The Tea Party House Roller Coaster

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So Speaker Boehner decided that the danger of the fiscal cliff destroying the economy was a graver risk than letting Obama and the Democrats collapse America into a statist nightmare of never-ending deficit spending and ever-higher taxes. Tea Party darlings Paul Ryan and Grover Norquist both supported the fiscal cliff deal, and they had some legitimate arguments: taxes were permanently lowered for most Americans, taxes went up only on the rich, and the Tea Party House can use the automatic sequestration, in March, and the coming debt ceiling showdown in February, as leverage to extract spending cuts from the Democrat-controlled Senate and Obama.

But what does it all mean? I think there is no reason why the showdowns to come later this year will be any different from the fiscal cliff, New Year's Day drama. We are headed for a hellish roller coaster ride on which we face dangerous, potentially disastrous duels between the president and the Tea Party House over whether America is headed toward bigger or smaller government.

Obama's ultimate goal is a less free, more state-controlled economy, of which Obamacare was only the beginning. The Tea Party was our best chance at stopping his socialist agenda. But because anxiety and fear are always resented, and the Obama vs. Tea Party House confrontations are portrayed as scary by the mainstream media, the American public will probably come to hate the Tea Party House, and the Tea Party may pay a steep price for brinkmanship in the 2014 Congressional elections.

Who will win in deciding America's future? I think Obama has already won. The Democrats will always use the scarecrow of the supposed disaster that will happen if the federal government shuts down to pressure the House into raising the debt ceiling and ending sequestration. Speaker Boehner, by bringing the Senate deal to a floor vote over the Tea Party's objection, has already proven that he buys this argument. If the federal government's vastly bloated bureaucracy is viewed as "necessary," then the debate over America's future is over before it has begun. Look forward to a coalition of the House Democrats and the “moderate” House Republicans, with the Speaker's help, neutralizing the Tea Party-conservative alliance for the next two years, with truly disastrous results for the United States and our economic policy.

The Tea Party may be able to get some spending cuts, but can it seriously alter the structure of American statism? I doubt it. At this point only a series of electoral victories by the Libertarian Party to give the LP legitimacy would pose a true challenge to the dominance of the American Left, and that seems implausible. The Tea Party consists of good people, but the Republican Party as a whole is too soft to win this duel, and the Tea Party has not yet been able to realize its goal, taking control of the GOP from within.




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Governments Finally Outsourcing

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A report out on a small Michigan city points the way for other school districts to deal with their looming fiscal problems.

The city is Highland Park, which faces a major problem with its school district, consisting of three schools and 1,000 students. The system ranks near the bottom in the state academically, and it is facing a fiscal fiasco.

In fact, only a wretched 22% of the system’s third-grade students passed the state’s reading exams, and a pathetic 10% of them passed the math exams, last year. Only 10% of its high school students tested proficient on reading, and 0% — yes, precisely none of them — tested proficient in math.

This, in a district that last year spent over $16,500 per student, which is 80% more than the average per student expenditure for the state (which last year was about $9,200 per pupil)!

Moreover, despite the fact that its student population has plummeted by two-thirds in the past five years, the district’s deficit has exploded — reaching over $11 million last year.

So the Highland Park school district has taken a bold step: it is borrowing a tool commonly employed in private industry, outsourcing — the process by which one company hires a second company to handle some part of its operations. For example, a major retailer (such as Walmart or Costco) will often hire industrial janitorial firms to handle the cleaning of their stores, rather than hiring janitors within their own companies.

Outsourcing has a number of benefits, most importantly improving efficiency and increasing accountability. It improves efficiency because the company that outsources operations will be able to hire a company that specializes in that aspect of business. It improves accountability, because if the company outsourcing doesn’t see an improvement in that aspect of its business, it can terminate the service and hire another contracting firm to do the job. This puts pressure on the contracted company to do the job properly and within the price negotiated.

Highland Park is outsourcing its entire school system to the charter school company Leona Group.

The Leona Group runs 54 schools in five states. While almost half the students in them don’t score at standard levels, that is on average better than the public schools they replace. And in Michigan, 19 of 22 schools that Leona runs do meet state standards. Moreover, Leona’s contract is for five years, so if it doesn’t dramatically improve student outcomes, it can easily be replaced. That is the missing factor in district-run schools: accountability.

Charter schools have some major advantages over district-run schools. While the charters are overseen and funded by the district, they have substantial freedom when it comes to setting union contracts, curricula development, and teacher standards. And precisely because they are not controlled by teachers unions, they are usually much less costly to the taxpayer.

Indeed, Leona Group will charge the district only $7,100 per student, plus an annual management fee of $780,000 — dramatically less than what the district is currently paying.

Public school outsourcing is a growing trend. Highland Park is the second district in Michigan to outsource its schools to charter schools. Several districts in Georgia have also done the same thing. Of course New Orleans has already converted most of its schools to charters (which has already produced a dramatic increase in graduation rates) and even allows its students to use the newly issued state educational vouchers.

Other districts are now eyeing this novel idea — novel, that is, only in the world of government; it has been a staple of private industry management forever. In Michigan alone there are 48 districts in fiscal peril (with a collective $429 million in annual deficits).

Naturally, the teachers unions are fighting outsourcing fang and claw, but given the looming financial disaster, the pressure for extensive education outsourcing is increasing rapidly.

Outsourcing district-run schools to charter school companies is a tool that many districts can and should consider, especially as more and more of our cities declare bankruptcy.




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Social Insecurity

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I feel remiss in not reporting lately on the most recent news concerning the crown jewel of the progressive liberal welfare state: Social Security. It is the ur-program from which all the other major programs (such as Medicare) were spawned. Over the years, I have periodically reported on its looming fiscal crisis, but I haven’t said much during the past year.

So it’s time to check up on the program that has elected so many generations of Democratic politicians. Surprise, surprise — it is accelerating downwards!

Start with that cesspool of fraud, Social Security Disability Insurance (SSDI). A report in the estimable Investor’s Business Daily informs us that Obama has set another new record. Not only is he the Debt President (having added more to the federal deficit in his short time in office than any other chief executive — nearly $5 trillion, more than the big-spending Bush spent in 8 years), the Food Stamp President (having added to the rolls of food stamp recipients more than twice the number of new recipients per year — over 4 million — than even the prior record-setter, Bush, who added 1.84 million yearly), and the Emigration President (having presided over a political economy in which a record number of Americans renounce their citizenship — nearly 1,800 last year, compared to about 200 in 2008). In addition to those titles, Obama is now the Disability President.

Yes, a record number of people have gone on SSDI during Obama’s benighted reign — a whopping 5.4 million. And the number is growing at a rapid clip: from January of this year through last month, an astonishing 540,000 more have been granted disability, and more than 750,000 have applied. Of the total (10.8 million) now on SSDI, half joined under Obama. America’s seemingly endless high unemployment is clearly taking its toll. Doubtless this will hasten the projected day of SSDI’s insolvency, scheduled already for 2018.

Turning to the Social Security retirement program (i.e., the main one), the news is grim again. As recently as 2007, the Social Security program ran a surplus of $186 billion. This dropped to a mere $3 billion the next year, and became a $49 billion deficit in 2009, in the depths of the recession. However, last year — a “recovery” year — Social Security ran a deficit of $45 billion. The program’s trustees now forecast a deficit of about $66 billion on average for the next six years. After that, the trustees project triple-digit billions in deficits. In 20 years — three years earlier than projected last year, the so-called trust fund (a bogus pile of IOUs from the federal government to itself) will be gone, at which point benefits will have to drop by 25%.

Strange to say, the Obama administration is far more concerned about whether Romney engaged in a mean prank half a century ago than about Social Security’s lack of solvency. Obama’s economic record is so wretched that one can see why he refuses to discuss the entitlement crisis. But why do the mainstream media refuse even to mention the government’s own report? Surely this report should be of immediate and vital concern to all the public. . . Oh, yeah — I forgot. The mainstream media, formerly noted for “investigative journalism,” has become the Amen corner of the Church of Obama.




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How Unpatriotic Can You Get?

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One of the classic attacks by leftists on rightists is the assertion that people on the right typically question the patriotism of their opponents. In my experience, it is typically the leftists who resort to that particular ad hominem trope.

We have no better illustration than our current National Healer, Barack Obama. Obama, a master of the ad hominem attack, famously called Bush “unpatriotic” for running up nearly $4 trillion in national debt. (That included TARP, which was repaid by the banks with interest, early in Obama’s reign.)

Now, however, Obama has quietly requested another $1.2 trillion rise in the national debt ceiling. That would raise the current national debt to $16.4 trillion. In his three years in office, he has already added $4.6 trillion to the debt, far more than Bush did in eight years. Obama makes Bush look like a miser — no easy feat. He is increasing the national debt at an average of $4.24 billion a day, and will have added $6.2 trillion to the debt in his first (and, I hope, his last) term.

That would mean that Obama will have added more to the national debt than all the presidents preceding Bush — from Washington to Clinton — combined. To use another epithet he hurled at Bush, his spending has been nothing short of “irresponsible.”




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A Call to Repentance

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Are there libertarians who still regard President Obama with affection?

I understand that some people voted for him because they wanted to punish Bush and his fellow Republicans. The Republicans were warlike, and they were spendthrifts.

Well, if punishment is on the agenda, I want to be first in line to give some. Plenty, in fact. I’ll never get over George Bush’s ability to lie, lie, and keep on lying. But did you expect something better from Obama, you who supported him?

You did. I know you did. I heard you — at length.

As you said, Bush went to war, twice. But Obama continues running both wars, and he started a third one, the marvelously useless war in Libya. If he doesn’t get us involved in Somalia or Haiti, it will be a wonder.

As you said, Bush spent too much money. But Obama started off by spending a trillion dollars on a feckless economic program. He instituted a healthcare scheme that, basically, nobody wanted, which will cost at least half a trillion more and will give us notably less effective healthcare.

On August 8, Obama addressed the nation’s economic problems by demanding higher taxes and accusing those who don’t (such as you) of having caused the present economic distress. While he was talking, the stock market dropped like a rock. It lost 634 points that day.

But perhaps those who expected something libertarian out of Obama were right in one respect. His presidency has been wonderful for the gold market.




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The Perfect Ending

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After an agonizingly protracted battle, congressional leaders and the president reached an agreement to raise the debt limit, with some minor cuts in spending now and supposedly more cuts in the future, cuts that will be determined by a bipartisan panel.

There has been considerable rending of clothes and gnashing of teeth on both the left and the right sides of the political spectrum. But really, the agreement probably captures the mood of the majority of Americans.

As I have noted before, people are only just beginning to see the entitlement spending iceberg towards which the nation’s economy has been sailing for decades. But polls show that the public — including self-described Tea Party members — still strongly support the major culprits in the fiscal follies with which the country is beset: the entitlement programs, especially Social Security and Medicare.

In sum, the public is beginning to see the problem, but remains clueless — or, to wax Nietzschean for a moment, deliberately blind — to the real cause of the problem.

The agreement had immediate effects; though not ones, I daresay, that were comprehended by the supercilious solons who spawned it. And I’m not talking about the Standard & Poor’s downgrade.

First, as the US Treasury reported, the national debt immediately shot up $238 billion to a grand total of $14.58 trillion, officially hitting the mark of 100% of GDP. We as a nation have hit that mark only once before, right after World War II, the biggest foreign war we ever fought. We are now there again, in a time of comparative peace. As the report drily notes, this debt level puts us in the league of countries such as Italy and Belgium.

The second effect was not a stock market rally created by the exuberant joy of investors, relieved that disaster had been averted, but instead a massive sell-off, caused at least in part by the recognition that disaster looms.

All this brings to mind the old adage: a country gets the government it deserves.




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End of the Beginning or Beginning of the End?

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After much huffing and puffing, the barons on Capitol Hill have reached a deal that prevents the US government from defaulting on its debt. At the same time they staved off, for the time being at least, a downgrade in America’s credit rating. The president, our Othello, was offstage as the deal was struck, and now finds himself a diminished actor, even as he prepares for his most challenging role as a candidate for reelection.

What in fact has occurred? The United States government has been pulled, kicking and screaming, into taking its first baby step toward fiscal responsibility. Elections, we find, do matter. For, love them or hate them, it is the Tea Party Republicans elected to Congress in 2010 who compelled Uncle Sam to stand up and walk. They and they alone managed to force the issue over the debt ceiling. Of course, they got nothing like the deficit reduction they were looking for. But they have both changed the debate in Washington and achieved a modest first step toward fiscal sanity.

The squeals of distress emitted by Democrats and their supporters in the media (most notably the New York Times) make plain just how much the tide has turned in Washington and, perhaps, the country at large. The consequences of spending beyond one’s means were brought home for the average American in the Panic of 2008. As a result of that financial meltdown, it became common wisdom that out-of-control government spending must, at some point, lead to disaster. It was this realization, as much as opposition to “Obamacare,” that led to the Tea Party sweep in 2010.

Nevertheless, great dangers remain for the Republicans. The second round of spending cuts mandated under the just-passed legislation amounts to a drop in the ocean of American debt. We are still looking at trillions of new debt being added over the coming years — an unsustainable level of deficit spending and borrowing. To solve this problem, revenues must indeed be on the table. The Republicans should come out strongly for real tax reform, with a lowering of both personal and corporate rates tied to the elimination of loopholes and other steps to broaden the tax base. If the Republican Party’s plan is to allow General Electric, for example, to continue to reap billions of dollars in profits without paying any federal tax, they will be signing their own political death warrant.

Additionally, some Republicans are clearly opposed to major cuts in the defense budget. That the people will accept austerity except in defense is an illusion. The United States is not seriously threatened militarily by any power on earth. We currently spend about the same amount of money on defense as the rest of the world combined. The global commitments of the United States must shrink. When Republican Senator Lindsey Graham said, as he emerged from the Senate vote on the debt ceiling, that America must finance Egypt’s transition to democracy, he revealed himself as doubly out of touch, for it is equally absurd to believe either that American dollars can create democracy in the Arab world, or that the average citizen is willing to throw away his hard-earned money on such a will-o’-the-wisp.

Congressional Democrats, on the other hand, are acting as if they have solved the deficit-debt problem, and are talking about moving on “to what Washington does best — creating jobs and opportunity for Americans.” If this is what they truly believe (and it certainly appears that many of them do think this way), then they too are barreling down the road to self-destruction.

The president is talking about a balanced approach, but does he mean it? He ignored the opportunity to move toward a balanced budget in the wake of the Bowles-Simpson commission’s report and the mandate for fiscal responsibility given to Congress by the voters in 2010. And even if he is serious, does it matter? He overreached himself in pushing for revenues in his one-on-one negotiations with Speaker John Boehner, and was then reduced almost to a cypher as Congressional leaders forged a deal largely on their own. His poll numbers are down and his political relevance is in question. The mediocrity of the Republican presidential field is his one comfort.

There is, of course, a dirty secret out there, unspoken but quietly acknowledged by many thoughtful people. It is that nothing the politicians can do will prevent another serious economic crisis, one perhaps much worse than 2008. The debt and deficit issues are not resolvable without draconian cuts and revenue increases, which taken together must derail any prospects for sustainable economic growth and job creation. Resorting to the printing press, as in 2008, is impossible given the level of government indebtedness. In any case it would only postpone the day of reckoning. A Keynesian jobs program was tried in 2009 and largely failed, at a cost of nearly a trillion dollars. Vast numbers of people lacking the education or skills needed in an economy that has been transformed by globalization will be left with nowhere to turn. The private sector cannot use them; the public sector will no longer be able to support them. Therefore we face . . . what? We certainly seem fated to live in “interesting times.”




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