------------------------------------------------------------------------------------
The Social Security crisis has resurfaced.
I suspect, Obama will eventually face the same reality Reagan did and Obama will probably seek legislation that will increase the length of time before retirees, born after a certain date, receive benefits and workers and employers will be asked to pay more into the system . We are fast approaching 2 workers for every retiree.
The fact that people are living longer further exacerbates the numbers.
GW suggested those who wished be allowed to place 10% of their contributions in some investment pool and he was hammered so he backed away. Backing away was a mistake in my opinion. GW often backed away.
The Economist believes Obama and Congress are clueless on how to tackle the deficit. (See 1 below.)
Paul Saunders does not believe sanctions against Iran will be imposed, even if imposed, they probably will not be effective because China and Russia will not support them, and a military strike is out of the question or, at best, will only delay the inevitable.
Therefore,Saunders suggests a three point strategy as follows: "...deterring Iran from using nuclear weapons, ensuring that a potentially nuclear Iran would not be emboldened in relations with its neighbors, and preventing Iran from sharing nuclear technology with others."
Saunders seems to be saying having failed at preventing Iran from going nuclear we should try pretty much the same thing after they do go nuclear. Pretty idiotic commentary but Saunders makes the big bucks so I have to ask whether I am missing something? But perhaps not since Saunders previously worked at The State Department.(See 2 and 2a below.)
Allan Meltzer thinks Obama does not understand Keynes.
Today at a campaign stop, Obama shifted his tune and admitted government is limited in what it can do to create jobs. Maybe but Obama has done a pretty good job of filling the rafters with government workers and still asserts he was elected to rebuild our economy.
The problem Obama faces is that more people are out of work for longer periods and thus are dropping out of the government employment numbers.
Eventually Obama might come around to doing what he could/should have done in the first place - cut taxes, eliminate government red tape and dis-incentives and let the free market perform. But then, Obama could not blame GW, because he would be doing what GW did to end the mild recession he inherited from Clinton.(See 3 below.)
Fearing the impact of unemployment on their re-election chances the Dem wits are now pushing for a 'jobs bill' instead of a 'second stimulus.' A mistake by another name is still a mistake.
Oh well, Obama is a community organizer supreme, so we should just lay back, stay cool and let the messiah work his magic. Seven more years sounds about right? (See 3a below.)
The air is going out of Schumer's balloon but he will still be re-elected because New Yorkers remain mesmerized by his slickness. (See 4 below.)
Al Franken frustrated by David Axelrod? Just crack a joke Al!(See 5 below.)
The myth of hope and change has boomeranged and its failure has energized Americans to seek answers from those with integrity, honesty, and hands-on experience in dealing with challenges. In essence Obama's inexperience and arrogance might help elect those in opposition to his snake-oil ways.
You can fool some all the time , all some of the time etc. etc. (See 6 below.)
Meanwhile, how do we overcome the blind spot of doing in public what we would not in private? How do we resolve government redistribution of wealth which often is tantamount to personal infringement and stealing but would never condone such in our own personal behaviour. (See 6a below.)
Dick
1)Neither the president nor Congress shows any sign of knowing how to tackle the deficit
IT WAS never reasonable to expect that Barack Obama’s budget proposal, delivered to Congress on February 1st, would do much to bring down America’s vast deficit in the near term. True, the economy has returned to growth. But a big part of that consists of restocking after a savage downturn that has left inventories depleted. Consumers are still struggling with the collapse in the values of their homes and other assets. And unemployment stands at a stubborn 10%: the administration forecasts see only a fractional fall in joblessness this year.
Unlike other rich countries, America lacks the “automatic stabilisers” that kick in during times of recession to help boost demand. Unemployment benefit is extremely limited. Most states are legally barred from running deficits, so when their revenues fall in times of recession they make painful cuts, firing workers and ending programmes—thus exacerbating the downturn rather than offsetting it. Only the federal government can fill the demand gap, and if it is too parsimonious and the recession returns, the deficit would get much worse.
So the eye-popping $1.56 trillion deficit for the current fiscal year previewed in this week’s budget (see article), to be followed by a further $1.27 trillion in fiscal 2011 (which begins on October 1st), ought mostly to be seen as a consequence of the downturn that Mr Obama inherited. And some of the measures proposed for this year and next make sense, particularly the tax breaks for employers taking on new hires—though in our view Mr Obama is probably adding more stimulus than is needed, especially when it comes to 2011.
What is truly worrying, though, is the medium-term outlook. Mr Obama’s budget reveals a road-map to fiscal catastrophe. At no point over the coming decade will the deficit be below 3.6% of GDP; and after 2018, it starts rising again. The cuts the president has proposed are comically insufficient: a budget freeze on non-security discretionary spending, which amounts to only about 17% of the entire $3.8 trillion budget; and a toothless deficit commission (a better version has already been killed by obstructive Republicans in Congress) whose recommendations will doubtless be ignored.
Entitled to live in debt for ever?
In the medium term there are only two ways to bring the deficit back to a sustainable level—which means no more than 3% of GDP. Either taxes will have to rise, or a serious attempt must be made to rein in the entitlements—legally mandated programmes such as Medicare, Medicaid and Social Security—that constitute the great bulk of spending. Mr Obama is proposing only a bit of the first, and none of the second. Taxes on the rich (those earning $250,000 a year or more) will go up from next January, as the Bush tax cuts expire; but Mr Obama had promised middle America that it will pay “not one single dime” more in tax, and so he is extending George Bush’s budget-busting tax cuts for the remaining 98% of Americans.
Any serious attempt to tackle entitlements now looks doomed. Health care offered a chance to do so (broader coverage could come with tougher cost controls). But a weak administration and a greedy Congress conspired to produce a baggy monster of a bill which, from a fiscal point of view, might have made things worse. No one dares touch defence, in a troubled world. The Social Security pension scheme is deemed sacrosanct by nervy politicians. It is a deeply depressing picture—and Mr Obama did nothing this week to lighten it.
2)Prepare for a Nuclear Iran
By Paul J. Saunders
Everyone wants a silver bullet to resolve America’s policy dilemmas in dealing with Iran and its nuclear ambitions. Unfortunately, none of the popular candidates—engagement, military action, sanctions or regime change—seems sufficiently likely to succeed to be the basis of prudent government policy when vital U.S. national interests are at stake. Instead of hoping for a silver bullet that will make the problem go away, or at least push it down the road, policy makers should start to develop a serious plan to manage the most likely future: an unreformed and nuclear-capable Iran.
The United States has tried and failed many times at engagement with Iran. The attempts have generally been necessary and appropriate, but as Tehran continues to move forward with its nuclear program, there is little time left to try to work with a government that seems more focused on running out the clock than genuine negotiation. Iran’s complex domestic politics made talks difficult even when the regime was relatively stable; last fall, the country’s weakened government was perversely under attack by reformist leaders for negotiating with Washington over fuel for a research reactor.
At the other end of the spectrum, military action appears both unlikely and, if undertaken, unlikely to succeed. The Obama administration, including the Pentagon, appear loathe to launch air strikes against Iran that could potentially inflame not only Iraq and Afghanistan, but much of the region without even considering the impact on domestic energy prices during a global recession. Israel, upon which many advocates of an attack seem to pin their hopes, faces even greater obstacles, including limitations on the range of its aircraft, geography requiring flights over Arab states, and blowback in the Islamic world and (because of energy prices) possibly the United States as well. And if one of the two actually does attack Iranian nuclear facilities, the strikes will at best delay the program while sparking outrage at the attacker and potentially buttressing a fractured political system.
Tighter economic sanctions, usually seen as a way to apply pressure short of military action, are also quite unlikely. China displayed for all the world its view of consultations with other permanent members of the United Nations Security Council and Germany on new sanctions by sending a low-level diplomat to recent talks in New York. Russia is similarly unlikely to support the “crippling” sanctions that Secretary of State Hillary Clinton seeks, fearing an unstable Iran or a pro-Western Iran more than a nuclear Iran. Even the European Union is unable to unite behind strict sanctions, largely as a result of differing economic interests inside the group.
Recognizing the odds against engagement, military action, and sanctions, and encouraged by Iran’s internal turmoil, many argue that a strategy of regime change—overt, covert, or both—is the only remaining policy option. Unfortunately, it is also an illusion. Iran’s regime is clearly weakened and may indeed collapse at some point. No one knows when, however, or what system would emerge afterwards. No one really knows how to bring down Iran’s regime, how the Iranian people might react to outside efforts toward that end, or what the Iranian government would do to protect itself domestically or take the fight to the enemy internationally. And no one knows what might happen to Iran’s nuclear scientists, technology, and materials in the process. Regime change as a strategy is a desperate gamble.
Rather than counting on one or another long-shot solution to the Iran problem, Washington should quickly develop a real strategy to manage Iran, including a nuclear-capable or even a nuclear-armed Iran. Such a strategy would have three core components: deterring Iran from using nuclear weapons, ensuring that a potentially nuclear Iran would not be emboldened in relations with its neighbors, and preventing Iran from sharing nuclear technology with others. Operationally, this would mean publicly reaffirming America’s extended nuclear-deterrence relationship with its allies, working to build a regional security system, and strengthening counterproliferation systems such as the Proliferation Security Initiative. The multinational anti-piracy fleet already operating in the Indian Ocean could be a starting point in developing some of these activities.
Taking these steps openly now is essential to prepare for a possible nuclear Iran, but it would also have two other important advantages. First, the United States would be in a stronger position in dealing with China, Russia, and others on Iran. If Beijing and Moscow do not want sanctions or military action, and they are uncomfortable with the idea of a nuclear-capable or nuclear-armed Iran, they should come to the table to discuss practical solutions in the region, where many are deeply troubled. Second, and more important, it would demonstrate to Iran’s leaders and people that having nuclear weapons will not necessarily increase their nation’s security or its international standing. This may or may not change minds in Tehran, but could at least deflate an issue the regime has used to rally domestic support.
Some might charge that developing a strategy like this is “accepting” a nuclear Iran because it recognizes a nuclear Iran, or at least a nuclear-capable Iran, as a likely outcome of current trends. It is in fact exactly the opposite: a sensible strategy that will allow America not to accept a nuclear Iran if one should emerge despite our best efforts. If we do not follow this course or another credible plan, when the time comes we will have no choice but to accept a nuclear Iran.
Paul J. Saunders is Executive Director of The Nixon Center and Associate Publisher of The National Interest. He served in the State Department from 2003 to 2005.
2a)Obama security adviser: Sanctions looming for Iran
In Munich, Jones says Tehran must meet its responsibilities or face wider sanctions, increased isolation. US Defense Secretary Gates says Tehran has done nothing to reassure international community it is willing to stop progress towards nuclear weapon
Iran must satisfy the demands of the international community over its nuclear program or face fresh sanctions and increasing isolation, US National Security Adviser James Jones said on Saturday.
"The unprecedented degree of international consensus ... demonstrates that Tehran must meet its responsibilities or face wider sanctions and increasing international isolation," Jones said at the annual Munich Security Conference.
He was speaking after Iran's foreign minister said on Friday he was confident of a deal soon with world powers on exchanging some of Tehran's low-enriched uranium for higher-grade fuel it could use in a reactor producing medical isotopes.
US Defense Secretary Robert Gates said on Saturday he saw no sign that such a deal was.
"I don't have the sense that we're close to an agreement," Gates told reporters in Ankara, where he met Turkish leaders. "If they are prepared to take up the original proposal of the P-5 plus one of delivering 12,000 kilograms of their low enriched uranium, all at once to an agreed party, I think there would be a response to that.
"But the reality is they have done nothing to reassure the international community that they are prepared to comply with the NPT or stop their progress towards a nuclear weapon, and therefore I think various nations need to think about whether the time has come for a different tack," Gates added.
Iran's foreign minister, Manouchehr Mottaki, said on Friday he saw good prospects for clinching a deal with world powers on exchanging some of its low-enriched uranium for higher-grade fuel.
US Secretary of State Hillary Clinton told CNN Friday that a nuclear Iran and North Korea constitute a major threat. In an interview that is schedule to be aired Sunday, Clinton said Iran has yet to produce nuclear weapons but its conduct indicates a clear intent to obtain them.
2a)With war increasingly more likely, seditious Israeli anti-Israel group exposed
By Caroline B. Glick
A regional war may well be approaching. The actions and statements of Iran and its Syrian, Lebanese and Palestinian proxies over the past week or so indicate that this is what Israel's enemies are gunning for. In preparing for this growing threat, Israel's leaders need to consider more than just the military challenges it faces. They must consider the political actors at home and abroad that limit the IDF's ability to fight to victory and develop strategies for neutralizing those actors.
The latest developments are menacing. Last Saturday Iran's unelected president Mahmoud Ahmadinejad threatened to open up a new round of hostilities on February 11. Then Wednesday Iran launched a new missile into space. Israeli and US missile experts claim that the missile launch signals that Iran is developing intercontinental ballistic missiles and building the capacity to launch nuclear warheads on ballistic missiles.
Following the missile launch, Syria's President and Foreign Minister issued incendiary comments threatening Israel with war. Notably they did so the same day the US informed Syria of its intention to send an ambassador to Damascus for the first time in five years.
Hamas for its part sent barrels of explosives drifting to the Israeli coastline - exposing new ways it can kill us. And Fatah for its part decided to kiss Hamas's ring this week. Senior Fatah official Nabil Shaath's obsequious visit to Gaza Wednesday was a graphic demonstration of Hamas's preeminence in Palestinian society.
Then there is Hizbullah. In a speech on January 15, Hizbullah leader Hassan Nasrallah pledged that the next war will "change the face of the region." This may not be an exaggeration. It isn't simply that under the blind-eye of UN peacekeepers Hizbullah has replenished and expanded its arsenal to include long-range missiles. It isn't simply that in the three and half years since the war Hizbullah has taken control over the Lebanese government. Hizbullah has also build up a formidable ground force. In the event of war, these forces may be deployed as an expeditionary force inside of northern Israel.
And if the precedent of former MK Azmi Bishara - who fled Israel after learning that he was about to be indicted for serving as a Hizbullah agent in the 2006 war - is any indication of Hizbullah's modus operandi, Israel may also face the specter of Israeli Arab fifth columnists assisting Hizbullah forces inside the country.
Assuming for the moment that the IDF and the government are prepared to contend with these mounting military threats, Prime Minister Binyamin Netanyahu and his colleagues must take the necessary steps to withstand and minimize the effectiveness of the far-Left's expected political warfare against Israel. As the past decade has made clear, the aim of that warfare is to delegitimize Israel's right to defend itself in order to make it impossible for Israel to pursue the war to military and political victory.
As in the military arena, so in the political arena, Israel's foes have grown from nuisances into strategic threats over the past decade. The UN-sponsored Goldstone report, which effectively denies Israel's right to defend itself and criminalizes Israel's military efforts to secure its citizenry and its territory is evidence of the gravity of the threat Israel faces as our leaders plan for the coming war.
On this latter plane, the past week has been an eventful and hopeful one. The latest developments offer guidance for how the government must proceed as the winds of war blow ever stronger. Late last week the Zionist student movement Im Tirzu published a detailed report demonstrating that 16 anti-Zionist organizations funded by the post-Zionist New Israel Fund worked hand in glove with the UN Human Rights Council and Richard Goldstone to bring about the establishment of the Goldstone committee and give credibility to its allegations that Israel committed war crimes during Operation Cast Lead. According to the Im Tirtzu report, 92 percent of Israeli allegations that Israel committed war crimes in its campaign against Hamas came from these 16 NIF-funded organizations.
Im Tirtzu's report was prominently covered by Ma'ariv last weekend. The media coverage provoked calls in the Knesset this week to investigate the NIF and its operational arms in Israel both through regular committee hearings and perhaps through a parliamentary investigative panel.
These calls are extraordinary because they represent the first time in a decade that the legitimacy of these organization has ever been seriously scrutinized.
Since the Palestinians began their terror war against Israel in September 2000, NIF-sponsored groups have worked steadily to intimidate political leaders, law enforcement officials and military commanders to toe their anti-Zionist line. In the wake of the PLO-incited riots in the Israeli Arab sector in October 2000, the overtly anti-Zionist NIF-funded Adalah group agitated for the formation of the Orr Commission. Charged with investigating the police who quelled the rioting rather than the rioters whose violence forced the prolonged closure of major highways to Jewish traffic throughout the country, the Orr Commission had a devastating impact of the police's morale and organizational culture.
Adalah successfully cowed the Barak government into agreeing to rules of inquiry for the commission that denied police officers even minimal rights of due process. They were not allowed to confront or question their accusers. In the aftermath of the commission's public hearings - which amounted to little more than show trials - the careers of several committed officers were destroyed. As a consequence, police commanders began curtailing their law enforcement activities in Arab villages. Everything from illegal building to livestock theft to incitement to war against Israel has gone uninvestigated and unpunished.
Furthermore, the Adalah-instigated and orchestrated Orr Commission empowered the most radical voices in Israeli Arab society. Supported by Arab political leaders, Adalah published a manifesto calling for the destruction of Israel as a Jewish state. Bishara's suspected espionage for Hizbullah, and the legal establishment's self-evident fear of prosecuting him for treason are also the direct consequence of the Orr Commission.
As for the IDF, NIF-funded organizations have played a key role in organizing the weekly violent riots at flashpoints like Nahalin and Bi'ilin and to the recent expansion of these riots to other places in Judea and Samaria like Neve Tzuf. Supported by anti-Israel activists from Europe and the US, these riots have had a devastating impact on the IDF's morale and its ability to defend Israeli communities.
The NIF-funded pro-Palestinian group B'tzelem provides the rioters with video cameras with which they regularly shoot distorted footage. Their canned films portray Israeli civilians seeking to defend themselves from the rioters as attackers. They portray IDF soldiers trying to keep order and protect Israeli civilians as violent bullies. B'tzelem gives these snuff films to its supporters in the Israel media which broadcast them as credible footage and demand that the IDF open investigations against its officers for carrying out lawful orders.
On the defensive, the IDF is compelled to curtail its operations and Israeli civilians, now demonized are viewed as legitimate targets for terror attacks. One recent film of the rioting outside of Neve Tzuf posted on YouTube shows border guards simply fleeing the scene and leaving the residents of the community to fend for themselves.
Im Tirtzu's offensive against the NIF sparked outraged protest among the NIF's supporters on the far left in Israel and in the US. Everyone from Ma'ariv's in-house anti-Zionist reporters Maya Bengal and Meirav David to J Street have piled on attacking Im Tirtzu's financial backers and seeking to demonize the organization by referring to its as extremist, far right, racist, fascist, out-of-the-mainstream and all the other routine far-left terms used to demonize Zionists.
What is most encouraging about the aftershocks of the Im Tirtzu report is that the Left's attempts to demonize it have so far failed. Indeed, the loudest voices calling for an investigation of NIF and its sponsored organizations have been MKs from Kadima.
The harsh truth is that the main cause of Israel's poor performance in Cast Lead and the Second Lebanon War was the Olmert government's ideological dependence on the far Left and its central contention that it is Israel's presence in contested areas rather than our enemies' commitment to Israel's destruction that causes wars. Owing to their allegiance to this falsehood, Ehud Olmert and Tzipi Livni were unable to prosecute the wars to victory militarily, justify the limited steps they did take to defend Israel diplomatically, or discredit the rising chorus of Israeli NGO's arguing that Israel had no right to defend itself politically.
Since Cast Lead however two important things have happened. First Kadima was replaced by Likud. Prime Minister Binyamin Netanyahu rightly recognized the Goldstone report as a strategic attack against Israel. If Israel has no right to defend itself; if its moves to do constitute war crimes, then Israel cannot fight, cannot win and will be destroyed. Rather than give credence to the report, Netanyahu has made discrediting it one his primary aims in office. And to counteract its force, among other things, for the first time since the start of the Oslo peace process with the PLO, Israel's government is asserting the Jewish people's right to Judea and Samaria.
Beyond that, Kadima itself has changed its tune. Now in the opposition, Kadima no longer needs to defend its rejected plan to unilaterally withdraw from Judea and Samaria. Abbas's refusal of Olmert's offers to withdraw Israelis civilians and military personnel from nearly all of Judea and Samaria and to cede sovereignty in Jerusalem discredited the notion that it is possible to make peace with the Palestinians. Most importantly, the fact that Goldstone castigates Livni and Olmert as war criminals requires Kadima to fight all forces - including the far Left it previously supported - that give credibility to Goldstone.
These developments clear the way for the Netanyahu government to take steps to neutralize the potency of these groups. The government should move swiftly to order the police and the IDF to enforce the laws against these groups and their allies. It must also provide the political support to police and military commanders in the field to empower them fulfill their orders without fear that they will be persecuted for doing their jobs.
If the government seizes the opportunity to weaken these subversive groups, not only will it be making it clear that political open season on Israel is over. It will be clearing the way for any future war to end not only in military victory, but in political victory for Israel as well.
JWR contributor Caroline B. Glick is the senior Middle East Fellow at the Center for Security Policy in Washington, DC and the deputy managing editor of The Jerusalem Post.
3)Limits of Blaming Bush
By Veronique de Rugy
In his latest budget request, President Obama added roughly $1.6 trillion in spending over the next ten years on top of what he requested last year. Can President Obama blame that extra $1.6 trillion on former President Bush?
President Obama has been in the White House for more than a year now, but he hasn’t yet gotten tired of telling the American people that the terrible fiscal outlook is the product of the Bush administration’s policies. This is an excerpt from his budget message released on Monday (see p. 3): "On the day my administration took office, we faced an additional $7.5 trillion in national debt by the end of this decade as a result of the failure to pay for two large tax cuts, primarily for the wealthiest Americans, and a new entitlement program. We also inherited the worst recession since the Great Depression—which, even before we took any action, added an additional $3 trillion to the national debt."
The Bush-era deficits were bad. I spent a great deal of time in the last eight years protesting our last president’s lack of fiscal responsibility (here and here, for instance). And yes, a large part of the fiscal 2009 deficit was the result of policies instituted by Bush during his last year in office.
But those are hardly reasons to keep adding to the deficit.
Using data in President Obama’s budget request for fiscal 2010 and data from the fiscal 2011 budget request, the following chart projects spending each year from fiscal 2010 until fiscal 2019. The purple bars represent the spending amounts the president requested in February 2009. The orange bars represent the growth in the projected spending request between February 2009 and February 2010.
In his latest budget request, President Obama added roughly $1.6 trillion in spending over the next ten years on top of what he requested last year. Can President Obama blame that extra $1.6 trillion on former President Bush?
To be sure, the president's new budget data admits to a gigantic deficit in fiscal 2010. But it insists that smaller deficits are in our future. In fact, the president projects that the deficit will shrink to $700 billion in fiscal 2013.
I would take these projections with a grain of salt. Again, in February 2009, President Obama projected that the deficit for fiscal 2010 would be $1.2 trillion (Table S-1). This year, we find out that the deficit for fiscal 2010 will actually reach $1.6 trillion (Table S-1). And spending, which was projected to go down in fiscal 2010 to $3.6 trillion from its $3.9 trillion fiscal 2009 level, will climb by an estimated 6 percent by the end of the fiscal year to $3.7 trillion.
Overall, the president might have inherited a large deficit. But he has been adding to it as fast as he possibly can.
Veronique de Rugy is a senior research fellow at The Mercatus Center at George Mason University.
FURTHER READING: De Rugy regularly illustrates the follies of government spending for THE AMERICAN. She recently asked, “So How Is the Stimulus Working Out?” and has explained “The High Cost of No Price” for healthcare. “Why Reform Will Cost Taxpayers More, Much More” looks at some of our recent cost overruns in government-driven medical spending. The author explains the “State of the Stimulus,” how “The Jobs Picture Crashes Into Debt Realities,” and offers “A Peek Inside the Deficit.” And the American Enterprise Institute’s John Makin reviewed the U.S. economy and government policy in “Post-Crisis Risks.”
Image by Darren Wamboldt/Bergman Group.
3a)How Obama got Keynes wrong
Interview by Shawn Tully
The Obama White House likes to say that the theories of John Maynard Keynes form the foundation for its fiscal policies. Most notably, it draws upon the legendary British economist's idea of spending big to pull out of a recession.
But one economist says the administration has gotten Keynes only half right. Allan Meltzer of Carnegie Mellon is one of the most influential monetarists of the past 50 years. He has served in the Department of the Treasury under President Kennedy and on the Council of Economic Advisors during the Reagan Administration. He also authored the book, Keynes's Monetary Theory: A Different Interpretation.
While the Obama team is laying out huge sums of money, Meltzer says it's neglecting a key part of Keynes' plan: You can't run up a debt without a way to cover it.
Meltzer recently sat down with Fortune editor-at-large Shawn Tully. Below are edited excerpts from their conversation.
If Keynes were alive today, what would he think of President Obama's fiscal policies?
He would roll over in his grave if he could see the things being done in his name. Keynes was opposed to large structural deficits. He thought that they chilled rather than stimulated the economy. It's true that we're stuck with large deficits now. The goal should be to reduce them, not to take on new spending that makes them worse.
Today, deficits are getting bigger and bigger with no plan to significantly lower them. Keynes understood what the current administration doesn't understand that the proper policy in a democracy recognizes that today's increase in debt must be paid in the future.
We paid down wartime deficits. Now we have continuous deficits. We used to have a rule people believed in, balanced budgets. And now that's gone.
Keynes wanted deficits to be cyclical and temporary. He wouldn't have been in favor of efforts to raise tax rates in a recession to eliminate deficits. He viewed that as suicidal. He was opposed to the idea that governments should balance the budget during a downturn, and advocated running short-term deficits to spur the economy.
The type of stimulus he advocated was very specific. He said it should be geared towards increasing private investment. He viewed private investment, as opposed to big government spending, as the source of durable job creation. He also said that the deficits should be self-liquidating, so that the increased economic activity caused by the stimulus inevitably generated a combination of extra tax revenues and lower unemployment payments. With higher revenues and lower outlays, the deficit would disappear.
The Obama administration's main objective, in the name of Keynes, is boosting consumption. That sounds very different from the focus on investment that you say Keynes advocated.
Keynes didn't favor at any time that I know spending to increase consumption. He didn't want that, and in fact he believed that was taken care of by the marketplace.
Keynes wanted to increase employment by smoothing the amount of investment through the up and down parts of the business cycle. He knew that recessions cause a decline in investment, and that the fall in investment caused unemployment to rise. So he wanted the government to stabilize investment through a recession.
What specific policies did Keynes advocate for smoothing investment?
Keynes is very vague on the subject. He believed that the government should plan and direct investment, but not nationalize it. He talked about how well utilities were run under state regulation in Britain. Keynes wanted to apply that model to more of the economy. He thought government planning of investment was the best way to reduce risk for private companies and lower interest rates to spur investment.
Did Keynes champion tax cuts or government spending increases in a recession?
Again, he was extremely vague. On spending, he did say that deficits should be temporary and self-liquidating. He clearly did not advocate long-term spending in excess of revenues, since that causes structural deficits. Nor did he specifically recommend tax reductions for individuals or companies. Those types of cuts, however, are an obvious way to achieve his goal of boosting investment in a recession. And it's been used with great success by his Keynesian disciples. For example, the Kennedy Administration tax cuts were championed by Keynesian economists, and proved very successful at raising investment.
And one of the leading Keynesians, Franco Modigliani, developed a theory of consumption stating that temporary tax cuts are mainly saved or used to reduce debt. Milton Friedman, the ultimate champion of free markets, independently developed an alternative model that came to the same conclusion. The temporary reductions under Carter, George W. Bush and Obama were all failures, since people spend more only when they're confident their take home pay will rise permanently.
This is standard economic theory that the current administration ignores.
What would Keynes think of Obama's stimulus plan?
It's unbelievable that a man whose main theme was to smooth investment comes to be the proponent of redistributing income away from the people and companies who do the investing.
My advice on the stimulus plan was, don't do it. Let's look at the plan. First, a lot of the money was used to reduce the deficits of state and local governments by increasing the federal debt. It was simply money transferred from the federal government. The economic multiplier effect was zero. Second, the temporary tax cuts went to paying off credit cards and other debts, not spending that would have increased economic growth.
4)Facing Re-election, Schumer Draws Breath
By MICHAEL POWELL
The usually unavoidable-for-comment, if-it’s-Sunday-here-is-my-press-release senior senator from New York is being a little tetchy about going on the record.
Charles E. Schumer has had a not-so-hot run recently. Mayor Michael R. Bloomberg accused him of failing to deliver enough federal health care dollars for New York, and the city’s titans of finance at a recent closed-door meeting accused him of being insufficiently pro-Wall Street; one indignant fellow stood up and demanded his donation back.
Some Democrats whisper that he plays the too-aggressive kingmaker, shoving aside challengers to Kirsten E. Gillibrand, the appointed junior senator. And a recent Marist College poll suggested that Mr. Schumer’s favorability ratings had leaked helium, falling to 47 percent.
Is this fatal to the senator as he seeks his third term? That seems highly, deeply, profoundly unlikely, even according to those same pollsters and to senior state Republicans, who prefer to place Ms. Gillibrand in their cross hairs for the fall of 2010. But a harsh wind is howling for incumbents, and Mr. Schumer, who has been running for office since just about the day he left Harvard, does not like talk of any Democrat’s political mortality, particularly his own.
So he carefully measures out his verbs and nouns for a reporter, trying not to say what he knows: It’s been a rough year.
“There was another poll this same week that had much different numbers, so you can’t rely on polls,” he says, striving for a studiously bland manner.
In truth, even Lee M. Miringhoff, head of the Marist College Institute for Public Opinion, agrees it is not the end. He has sifted the poll numbers and divines mostly agita for Mr. Schumer.
“It’s not the usual fluctuations, but neither do I think it puts him in electoral jeopardy,” he said. “It’s more that it speaks to a lack of enthusiasm in his electoral base.”
Still, for a man who might be the next Senate majority leader, and who is credited with masterminding the strategy that oh so briefly put 60 Democrats in the Senate, to see bubbles of discontent in his own state is a strange business. His Web site features a map of New York with green thumbtacks on towns he has visited in the last year, a virtual forest of green from Ogdensburg to Niagara Falls to Utica. In New York City he has appeared at 10 City Council installations, 5 firehouses, 7 schools, and so on and on.
In his version of Where’s Waldo, the answer is everywhere.
Wall Street’s current disaffection is intriguing, as Mr. Schumer served for 30 years as Horatio at the bridge, guarding against too many incursions against the financial industry. He artfully sidetracked an effort to tax hedge funds and pushed for repeal of legislation that prohibited commercial banks from engaging in risky investments like trading stocks or mortgage-backed securities. And he helped craft a bank-friendly bailout. In return, he has taken in more money from the securities and finance industry over the course of his career than any Democrat other than Senator John Kerry of Massachusetts.
Of late, Mr. Schumer has put a little flannel in his pinstripe love. He favors an Obama administration proposal to tax large banks. He has spoken out about “outrageous” bank overdraft policies.
So the prevailing mood on Wall Street is of wounded innocence: Et tu, Chuck? The Partnership for New York City, a plutocratic chamber of commerce, recently met with the senior senator. “This disappointment was very high; he’s walked away from our industry and that’s unconscionable,” said a member, who nonetheless did not feel so emboldened as to want to be identified.
Mr. Schumer, by this account, took umbrage at their umbrage. Do you, he asked, really think it’s better to be rhetorically pro-Wall Street or anti-Wall Street? Be realistic. Financial institutions did much wrong, he suggested, but cautioned against getting vindictive.
“Chuck has been a champion for our financial industry and for our state,” said Kathryn S. Wylde, the partnership’s president. “But it’s a quarrel in the family with unrealizable expectations of unconditional love.”
A few, including that fellow who rumbled about desertion, talked privately of funding a challenger to Mr. Schumer. As Mr. Schumer could become Senate majority leader, and therefore the third most powerful Democrat in the nation, such militancy struck others as daft. “What are you going to do for a new king?” asked one.
Some have seized on a passive-aggressive way of torturing the senior senator. They want to finance a Democratic primary challenge by Harold E. Ford Jr., whom they happen to admire, to Senator Gillibrand, whose patron is Mr. Schumer. Mayor Bloomberg, who was not pleased that Ms. Gillibrand edged out his choice, Caroline Kennedy, appears not unopposed to this turn, as his former pollster and campaign manager are advising Mr. Ford.
And yet, and yet, if Mr. Schumer were a racehorse, you’d be hard put to find anyone willing to place a bet on his losing. Republican leaders tend to view Lawrence Kudlow, the conservative television commentator and champion of Wall Street who has talked of running, as a highly verbal and entertaining lamb to the slaughter.
And Park Avenue cannot offer a plurality to anyone.
“Let me get this straight: The public is infuriated with the banks, so the way to beat Chuck Schumer is to run a right-wing, pro-Wall Street economist against him?” said Bob Master, political director of District 1 of the Communications Workers of America.
Mainly, primarily, Democrat after Democrat warned that questions about Mr. Schumer’s putative weakness seem likely to accomplish but one thing: to push Mr. Schumer, whose love of press conferences and taste for the most remote corners of New York is inextinguishable, to travel and talk and travel even more.
“He has only one reaction to this stuff,” says a former staffer with some evident affection, as well as relief that he no longer labors there. “God help him, but mainly, God help his staff.”
5)Franken lays into Ax over health bill
By Manu Raju and Andy Barr
Sen. Al Franken ripped into White House senior adviser David Axelrod this week during a tense, closed-door session with Senate Democrats.
Five sources who were in the room tell POLITICO that Franken criticized Axelrod for the administration’s failure to provide clarity or direction on health care and the other big bills it wants Congress to enact.
The sources said Franken was the most outspoken senator in the meeting, which followed President Barack Obama’s question-and-answer session with Senate Democrats at the Newseum on Wednesday. But they also said the Minnesotan wasn’t the only angry Democrat in the room.
“There was a lot of frustration in there,” said a Democratic senator who declined to be identified.
“People were hot,” another Democratic senator said.
Democratic senators are frustrated that the White House hasn’t done more to win over the public on health care reform and other aspects of its ambitious agenda — and angry that, in the wake of Scott Brown’s win in the Massachusetts Senate race, the White House hasn’t done more to chart a course for getting a health care bill to the president’s desk.
In his public session with the senators Wednesday, Obama urged them to “finish the job” on health care but did not lay out a path for doing so. That uncertainty appeared to trigger Franken’s anger, and the sources in the room said he laid out his concerns much more directly than any senator did in the earlier public session.
The private session was set up in a panel format, with Axelrod joined at the front of the room by Democratic National Committee Chairman Tim Kaine and Democratic strategist Paul Begala.
A Democratic source said that Franken directed his criticism solely at Axelrod.
“It was all about leadership and health care and what the plan was going to be,” the source said.
Franken — a comedian turned liberal talk show host — vowed to keep a relatively low profile when he arrived in the Senate over the summer after a protracted legal battle with former GOP Sen. Norm Coleman. But he has developed a reputation among his colleagues as one of the more aggressive personalities on the Hill.
Last November, after Tennessee Republican Sens. Bob Corker and Lamar Alexander authored an op-ed in a local paper defending their opposition to a Franken amendment, Franken confronted both men on the floor — and grew particularly irritated with Corker.
He lashed out at Corker and a staff member in a follow-up meeting about the matter, several people said. Franken also clashed with South Dakota Sen. John Thune, No. 4 in GOP leadership, last month in a scathing speech during the health care debate, and staffers have reported other run-ins.
The White House, the Democratic National Committee and Franken’s office all declined to speak on the record about Wednesday’s session.
6)Beyond Hope and Change
By Steve McCann
According to a recent Rasmussen poll (January 24), only 29% of Americans believe the country is on the right track. This loss of confidence is driven not only by the dire prospects of the debt time bomb and the economic and security devastation that would bring, but by the fear of government intrusion into every aspect of daily life.
Trillion-dollar annual deficits, high unemployment rates, a bleak tomorrow for future generations, and unprecedented erosion in the public's trust of the nation's leaders are becoming the legacy of President Obama and his administration.
The Obama presidential campaign ran on and promoted the cynical slogan of "Hope and Change." This catchphrase was designed to appeal to both the basest and most optimistic parts of human instinct: the desire of something for nothing and a guarantee of a prosperous future without pain or strife.
Hope is often defined as a feeling that something desirable is likely to happen. Around that expectation was built a web of deceit made up of promises that could not be fulfilled and of soothing words meaning nothing but spoken in a calm, reassuring manner. The messenger, a cool yet accomplished reader of prepared speeches trading on his ethnicity and demeanor, became the first part of the equation to sell this deception to the electorate.
The balance of the strategy was to utilize the useful idiots at the once mainstream media to continue unabated with the demonization of the Bush Administration. The inability or deliberate abdication on the part of the Bush White House to aggressively counter the lies and innuendos made the task all the easier.
Coupled with the concerted efforts of the Democratic Party operatives and donors, it became an effortless undertaking to portray the United States as a country in disrepair, unfair and uncaring, and in need of an undefined "change."
Change has turned out to be a president and his policies driven by an adamant adherence and unwavering belief in big government/socialist ideology (which the vast majority of Americans oppose). Hope has evolved into a sense of foreboding for the future of the country.
The American people now awaken from decades of indifference; they have begun to cast their eyes toward solutions and the politicians that can provide and execute them. But no real problem-solving is possible unless the people can trust their representatives and have confidence in the future.
If the United States is to reclaim its position as the leading nation in the world, the electorate must be able to have faith in the integrity, honesty, and dedication of the politicians in Washington, D.C. and the various state capitals. The current well-placed cynicism by the electorate, further exacerbated by President Obama and the Congress, toward the government can be overcome only by a new generation of candidates willing to run for office in 2010 and 2012.
These candidates must be judged on their integrity, honesty, and hands-on experience in dealing with challenges. In turn, they must understand that the future of the country, as no time before in its history, rests in their hands. They must not be averse to propose, explain, and enact the harsh measures needed to reverse the present course the ship of state is sailing. Reelection and personal aggrandizement cannot be at the forefront of their thinking.
The founding fathers wrote the Constitution with citizen-legislators in mind. They knew that holding office for a lifetime or a career was anathema to the trust necessary between the citizen and the government. Difficult decisions cannot be made if allegiance to party or self rises above the best interest of the people.
Today, trust in our elected officials must be reestablished; then and only then can the public begin to have confidence that there is a light at the end of the tunnel. That path must be based on shrinking of the size and scope of government, resulting in less dependence on the largess of Washington, D.C. and the state capitals.
The majority of the American people would be willing to endure the hardships necessary to bring unsustainable spending and debt into line if the path were clearly and equitably laid out before them.
More importantly, these steps would reestablish confidence in the future of the country and spur the economic engine that is capitalism.
By knowing that government policy, taxes, and regulations will be scaled back and the oppressive hand of Washington, D.C. withdrawn, the natural entrepreneurial drive of the American citizen will come to the fore. Small businesses and the job creation that comes from them will flourish.
The United States would again become attractive to new investment and venture capital, opening the door to new technology development thus creating jobs and industries.
By growing the economy, the revenue to the government would naturally increase, making the difficult withdrawal from uncontrolled government spending easier to tolerate. It would also move the country closer to a balanced budget in the near term.
Nothing is more important to the future of a nation than its citizenry having unbounded confidence that the years ahead will be better than the present. It is how the United States became the greatest country in the history of mankind. But confidence is a fragile thing, and it can be easily destroyed.
We are witnessing such wreckage today.
By deceiving the public as to his real agenda, ignoring virtually all his campaign promises, dealing with his cronies and contributors behind closed doors while rewarding their loyalty, and by his profligate spending, President Obama has done more to destroy faith in the future of the United States than any of his predecessors.
Instead of the cynical cereal-box slogan of "Hope and Change," we must promote and understand the indispensable need for "trust and confidence." If we do not, then the wrong track 71% of the people believe the country is on will never be corrected, and inevitable second-class world status for the United States will become a reality.
6a)Our National Blind Spot
By Mark W. Hendrickson
Nobody will dispute the fact that there are differences between private and public behavior. We can all think of things that we do privately that we would never consider doing in public.
This holds true in politics, too. Specifically, the vast majority of Americans would never dream of stealing from another person, yet they have no compunction about wanting government to take property from some citizens to give it to others.
Friends with whom we would entrust the keys to our house and all our worldly goods are often enthusiastic supporters of government programs that redistribute wealth. Few of us would imagine that a Washington lobbyist would peek out his window at home, wait for his neighbors to leave, and then sneak into their houses to take their possessions. The very image is absurd. And yet, those same lobbyists spend their working hours trying to persuade politicians to grant favors to them and send the bill to someone else.
Decades ago, the oldest free-market think tank, The Foundation for Economic Education, Inc., published Lewis Love's short parable, "A King of Long Ago." In the story, an artisan, a mason, and a lame beggar petition their king for aid. The artisan can't attract enough customers to meet his sales goals, the mason isn't getting hired very often, and the beggar isn't receiving sufficient alms.
They implore the king to correct this unsatisfactory state of affairs. The king commands that each petitioner be given a sword. He then authorizes the three to "go forth in the land and compel those who will not voluntarily deal with them to obey their command."
"No! No!" the three men demur. "We are men of honor and could not set upon our fellow man to compel him to our will. This we cannot do. It is you, O King, who must use the power."
"You ask me to do that which you would not do because of honor?" questioned the king. "I, too, am an honorable man, and that which is dishonorable for you will never be less dishonorable for your king."
Besides illustrating the ideal of the rule of law -- in which everyone, regardless of wealth, rank, and position, is equally constrained from infringing the rights of others -- this little parable shows the inconsistency of believing that private citizens should respect private property, but government leaders need not. Is that which is personally immoral politically moral?
What causes otherwise-honest people to condone the political plunder and redistribution of personal property? Immorality? That's too harsh for my taste. I prefer to say that there is a blind spot in their thinking.
Maybe what we're dealing with is mob psychology. Perhaps it's rationalization. "It's for a worthy cause," we tell ourselves, oblivious to the fact that the Eighth Commandment doesn't say "Thou shalt not steal ... except by majority vote or unless it's for the poor."
Perhaps the explanation for this blind spot is self-delusion. We see nothing wrong with receiving benefits from the state. What we remain blissfully unconscious of is that the state has nothing to give us but what it takes from our fellow citizens. Indeed, Bastiat called the state "the great fiction through which everybody endeavors to live at the expense of everybody else." It is a dream, a myth, and a fiction to believe that government gives you wealth out of its own productive bounty. Governments don't produce wealth; they only take it and redistribute it, substituting the political judgment of the few (the governing elite) for the economic verdict of everyone (a genuinely democratic process) acting in free markets.
Many reason that democracy somehow sanctifies and legitimates the forcible redistribution of wealth. For them, democracy sanitizes and civilizes the process of taking someone's honestly earned property. They don't perceive this as robbery.
But if this isn't robbery, then what is it? If the state's would-be victims resist being plundered, the state will retaliate by confiscating even more of their property and/or incarcerating them. The democratic process rests on force and the implied threat of force every step of the way.
We don't bat an eye anymore when someone glibly proposes "spreading the wealth." In fact, many Americans enjoy spreading the wealth, as long as it isn't their own. In a recent survey, three out of four Americans agreed that Obama and Congress should raises taxes on that minority of Americans with annual incomes above $200,000. Apparently, most Americans believe that Obama, Pelosi, Reid, and their minions have more of a right to spend those dollars than the citizens who earned them.
If you think this line of thought is crazy, then let me ask you a question: What percentage of a person's honest income should he or she be allowed to keep? The only guidelines I am aware of are "all of it" (the original American way, since income taxes were unconstitutional until 1913) or nothing beyond what anybody else (except the governing elite) can keep, according to the communist principle "from each according to his ability to each according to his need."
Between those two polar extremes, any percentage one chooses would be arbitrary. In practice, the degree to which property is redistributed depends on whatever shifting political coalition has enough votes -- enough power -- at any given moment. Stripped of grandiose pretenses and specious idealism, contemporary political life has descended into a constant, contentious squabble to see who gets what at the expense of whom.
Somehow, we're going to have to find a way to correct this ethical blind spot if we ever hope to avoid national bankruptcy and to live in greater harmony than we do today.
Mark Hendrickson teaches economics at Grove City College and is Fellow for Economic & Social Policy at the College's Center for Vision & Values.
No comments:
Post a Comment