Wednesday, October 26, 2016

Obama and UNESCO. Go Putin! Can Trump Get To 270?

Illegals flood our country. Democrats arrange for them to receive tax payer funding.  It is a subtle way to expand voters beholden to Democrats. The problem is they are not citizens legally able to vote. What to do?  Change voting laws allowing non-legals to vote.  This is how little California Democrats care about the sacred right to vote. Many such bizarre  ideas hatched in California eventually ooze their way east, then the virus spreads nationwide and eventually becomes acceptable.

But it does not stop there. Other benefits like free education, health care etc. are also extended to these "illegal citizens."  Welfare programs expand amoebic-ally and contribute greatly to our rising deficits which will ultimately bring our nation to its financial knees as interest rates begin to rise, most probably beginning in December.

If this is not bad enough, we then have the pernicious social consequences which have led to personal dependency, destruction of the family unit, unemployable skills which lead to increased narcotics traffic and ultimately medical deaths and shootings.

The lines are never as direct as I have portrayed but the linkage is there nevertheless.

This is the nation, fuzzy misguided thinking of radical liberals and progressives, is helping to create and , so-called, conservatives have stood by and allowed it to happen because they too have reaped benefits. 

A pox on both houses and parties and this is Trumps' message and appeal.  Are there enough disaffected to get Trump to 270 Electoral Votes?   Will Obamacare's collapse and rising costs in combination with Hillary's lies, corrupt behaviour and Obama's failures allow this to happen? 

In a week we will know the answer.

Some economic cold water. (See 1 below.)
Will Obama cut ties with UNESCO? (See 2 below.)
More and more e mail releases from WikiLeaks continues to put Hillary in a bad lying light but, since we already know Hillary is a pathological liar, I doubt it will do anything to convince voters to change their view of Trump.  The only new thing is the fact that, in all likelihood, Obama knew about Hillary's use of an unauthorized computer.

Meanwhile, her defenders continue to blame Russia is undermining our Republic. Of course the content of the e mails tells the story so if Russia released the truth then they have done us a favor because the truth never is going to come from the Clinton's. Truth from whatever source still remains the truth.  Go Putin!
1) Hoisington Management Quarterly Review and Outlook, 3Q 2016
By Dr. Lacy Hunt and Van Hoisington

Deficit and Debt

The Congressional Budget Office has estimated that in the fiscal year ending September 30, 2016, the U.S. budget deficit jumped to $590 billion, compared with $438 billion in the prior fiscal year. However, over the same time period the change in total gross federal debt surged upward by $1.4 trillion, more than twice the annual budget deficit measure.
This difference between the increase in the deficit and debt is not a one-off fiscal policy event but instead part of an historical pattern. From 1956 until the mid-1980s, the change in gross federal debt was always very close to the deficit (Chart 1). However, over the past thirty years the change in debt has exceeded the deficit in 27 of those years, which served to conceal the degree to which the federal fiscal situation has actually deteriorated. The extremely large deviation between the deficit and debt in 2016 illustrates the complex nature of the government accounting.
To better understand why there is a gap between the increase in the deficit with the change in gross federal debt, we examine a recently available breakdown and analysis of data on the federal budget deficit from Louis Crandall of Wrightson ICAP, which consists of the year- over-year change ending June 30, 2016. The increase in debt for that period was over $1.2 trillion while the deficit was $524 billion, a near $700 billion difference. The discrepancy between these two can be broken down as follows (Table 1): (a) $109 billion (line 2) was due to the change in the treasury cash balance, a common and well understood variable item; (b) $270 billion (line 3) reflects various accounting gimmicks used in fiscal 2015 to limit the size of debt in order to postpone hitting the Debt Limit. Thus, debt was artificially suppressed relative to the deficit in 2015, and the $270 billion in line 3 is merely a reversal of those transactions, a one-off, non-recurring event; (c) $93 billion (line 4) was borrowed by the treasury to make student loans, and this is where it gets interesting. Student loans are considered an investment and therefore are not included in the deficit calculation. Nevertheless, money has to be borrowed to fund the loans, and total debt rises; (d) In the same vein, $70 billion (line 5) was money borrowed by the treasury to increase spending on highways and mass transit. It is not included in the deficit calculation even though the debt increases; (e) $75 billion (line 6) was borrowed because payments to Social Security, Medicare and Affordable Care Act recipients along with the government’s civilian and military retirees were greater during this time frame than the FICA and other tax collections, a demographic development destined to get worse; (f) Finally, the residual $82 billion (line 9) is made up of various unidentifiable expenditures including “funny money securities stuffed in various trust funds”.
As noted, these last four items discussed above (lines 4, 5, 6 and 9), which total $320 billion, fund activities and raise debt, but they are not in the deficit. Instead they are categorized as something else. Under the principles of economics, they are in fact cash expenditures that raise federal debt.
The future does not look any better. In January 2015, the nonpartisan Congressional Budget Office (CBO) said that the cumulative ten- year U.S. budget deficit (2015 to 2025) would total $8.1 trillion. In their August 2016 projection, the CBO places the current ten-year deficit at a much higher $9.2 trillion. If history is any indicator, the actual increase in debt is likely to be much greater than $9.2 trillion. In the past ten years, the cumulative budget deficit was “only” $7.9 trillion, but the increase in debt was $10.9 trillion, a 38% difference. Using the same math, by 2025 the debt increase will be in the neighborhood of $13 trillion, based on the $9.2 trillion deficit increase projected by the CBO. Additionally, the CBO’s economic projections rely on acceleration in economic growth from the pace thus far in this expansion, without adequate support for their forecast.

A Global Trend

The deteriorating U.S. fiscal situation is duplicated in Europe, the United Kingdom, Australia, Canada, Japan and China. Moreover, calls for more “fiscal stimulus” in the U.S., the EU and Japan have increased. In The Wall Street Journal article “Let’s Get Fiscal” published August 10, 2016, well-respected journalist and economics editor Mike Bird wrote, “After years of austerity, governments in the developed world are becoming more relaxed about loosening their purse-strings and engaging in a bit of fiscal stimulus.” And in an article entitled “Monetary Policy in a Low R-star World”, John C. Williams, President of the Federal Reserve Bank of San Francisco, published in the bank’s Economic Letter of August 15, 2016 wrote “... fiscal and other policies must also take on some of the burden to help sustain economic growth.”
The exceedingly ironic aspect is that such prominent figures think government spending has been constrained. According to the latest tabulations from the Organization for Economic Cooperation and Development (OECD), government debt-to-GDP ratios are at record highs in the U.S., the EU, the UK, Japan and a large number of other countries. No austerity has occurred, and consequently, even higher debt-to- GDP ratios will continue to be the norm in the ensuing years.

Counterproductive Fiscal Actions

If new fiscal measures are enacted, debt- to-GDP ratios will be increased and will further depress growth, thereby causing interest rates to move lower, not higher. In a highly incongruous development, governments will therefore be able to finance their new debt offerings at lower costs. While this may seem to be a good thing for the individual governments, the great majority of their constituents will be harmed. The higher debt will set off a chain reaction of unintended consequences. The 70-75% of the households
that receive the bulk of their investment income from interest bearing accounts will have fewer funds for retirement. This, in turn, will cause older members of the workforce to work longer and save more, blocking job opportunities for new entrants into the labor force. Thus, fiscal decisions, which result in higher deficits, are likely to perpetuate and intensify our underlying economic problems.

Textbooks Versus Reality

Textbooks have historically hypothesized that government expenditures lift economic growth by some multiple of every dollar spent through a positive government expenditure multiplier. As such, deficit spending has long been considered to be a positive for economic expansion. If the expansion lasts long and generates faster actual and expected inflation, bond yields should rise via Irving Fisher’s equation (Theory of Interest, 1930).
Impressive scholarly research has demonstrated that the government spending multiplier is in fact negative, meaning that a dollar of deficit spending slows economic output. The fundamental rationale is that the government has to withdraw funds, via taxes or borrowing, from the private sector, to spend their dollars. When that happens, the more productive private sector of the economy has fewer funds to use to make productive investments. Thus the economy slows along with productivity when government spending increases. Further, studies show that government debt-to-GDP as low as 50% can begin to have a negative impact on growth. More substantial deleterious consequences are seen when government debt-to-GDP reaches the 70%- 90% range, and the negative effects become non- linear above that level. As an economy becomes more over-indebted, additional government spending slows growth even more due to “non- interest economic costs” such as misallocation of saving, reduced productive investment, weaker productivity growth and eventually a deterioration in demographics. Slower growth will cause underutilized resources to build, bringing down inflation and subsequently interest rates. Therefore, increasing deficits have, and will continue to result in lower, not higher, interest rates.

The Government Expenditure Multiplier

Just completed scholarly studies strengthen our conviction that deficit spending and elevated government debt levels are a force for weaker economic activity. Although the statistical evidence against the positivie government spending, or Keynesian, multiplier has been overwhelming for a long time, the possibility did exist that these estimates were picking up a reverse correlation or a feedback bias due to the possibility that government spending increased in a recession causing a positive correlation to the business cycle. In technical terms this is called the endogeneity bias, a point strongly rejected by this latest research. William Dupor and Rodrigo Guerrero (“Government Spending Might Not Create Jobs, Even in Recessions”, The Regional Economist, July 2016) tackled this issue very creatively. They were able to use data developed by Michael T. Owyang, Valerie Ramey and Sarah Zubairy (“Government Spending Multipliers in Good Times and in Bad: Evidence from U.S. Historical Data”, Working Paper, 2016).
Dupor and Guerrero, of the Federal Reserve Bank of St. Louis, examined the efficacy of government spending at increasing employment in relation to over 120 years of U.S. military spending. Defense spending has the advantage of eliminating feedback loops because it is likely to be determined primarily by international geopolitical factors rather than the nation's business cycle.
To control for potential “anticipation effects”, Owyang, Ramey and Zubairy used historical documents to construct a time series of military spending news shocks. Economics professors Ramey and Zubairy (University of California-San Diego) and Owyang (Texas A&M), were thus able to disentangle the time of military spending from when the public learned that military spending was going to change in the future. The output response to the spending shocks was minimal and the outcome did not depend on whether the economy was slack. Employing a similar methodology, Dupor and Guerrero found that military spending shocks had a small impact on civilian employment. Following a policy change that began when the unemployment rate was high, if military spending increased by one percent of GDP, then total employment increased by between zero percent and 0.15 percent. Following a policy change that began when the unemployment rate was low, the effect on employment was even smaller. As such, countercyclical government spending may not be very effective, even when the economy has substantial slack.
Other rigorous new research by Alberto Alesina, Carlo Favero and Francesco Giavazzi corroborates that the tax and government expenditure multipliers are both negative, with the tax multiplier more negative. A negative tax multiplier means that a dollar decrease in the marginal tax rate will result in higher GDP growth and vice versa. These conclusions are supported by domestic as well as international data. The study entitled, “The output effect of fiscal consolidation plans”, is forthcoming in the peer reviewed Journal of International Economics, but the working paper is available on the internet. Alesina is a Professor at Harvard while Favero and Giavazzi are professors at IGIER-Bocconi.

Decelerating Economic Growth

From a fiscal and Keynesian perspective, 2016 should have been a year of accelerating economic activity. There was no crisis in passing the 2016 budget. There was a nonpartisan deal to accelerate military and civilian spending as well as a deal to hike outlays for highways. The increased expenditures and debt were going to occur after two years of slower growth in nominal GDP, which according to its advocates meant that the timing was right. Nevertheless, the economy sputtered (Table 2). This once again confirms the existence of a negative government spending multiplier.
The outward evidence indicates that this “stimulus” was, at best, extremely fleeting, if it was beneficial at all, since the economy’s real growth rate is on track to slow significantly in 2016 versus 2015. A $1.4 trillion jump in federal debt was paired with both weaker economic growth and falling treasury yields.
Unfortunately, the 2017 economic horizon is clouded by the rising likelihood of further increases in government spending and debt. The inevitable result will be slower economic growth and declining interest rates, a pattern similar to the 2016 experience.
     Van R. Hoisington
     Lacy H. Hunt, Ph.D.
2)Kirk, Colleagues Urge Obama to Cut Ties with Anti-Israel U.N. Organization
CHICAGO – U.S. Senators Mark Kirk (R-Ill.), Marco Rubio (R-Fla.), David Perdue (R-Ga.), and Johnny Isakson (R-Ga.) today sent a letter urging President Obama to suspend ties with the United Nations Educational, Scientific and Cultural Organization (UNESCO) following its adoption today of another shameful, anti-Israel resolution denying any connection between Jews, Christians and holy sites in Jerusalem, such as the Temple Mount and Western Wall.
“At a time when the Middle East is in turmoil and historical heritage sites are being destroyed by groups such as ISIS, it is imperative that the U.S. stands with Israel, our closest ally and the sole democracy in the region,” states the Senators’ letter to the president. “Recent UNESCO resolutions that deny Jewish and Christian ties to holy sites in Jerusalem not only reinforce the necessity of withholding American funding from this counterproductive U.N. organization, but also call into question future U.S. membership in UNESCO.”
“In 1984, the U.S. severed ties with UNESCO due to disparities between American foreign policy goals and UNESCO’s agenda,” the Senators concluded.  “BecauseUNESCO continues to deviate from its founding mission and adopt one-sided, anti-Israel resolutions, it is time for the U.S. to stand with Israel and suspend our ties with UNESCO.
Earlier this month, Senators Kirk and Rubio urged Secretaryof State John Kerry to oppose and condemn UNESCO’s anti-Israel resolution “Occupied Palestine” that also denies Jewish and Christian ties to holy sites in Jerusalem.
In December 2015, Senators Kirk and Rubio convinced Senate and House Republican leadership to deny the Administration’s push to ignore U.S. laws that forbid American taxpayer money from going to UNESCO.
October 26, 2016
President Barack Obama
The White House
1600 Pennsylvania Avenue NW
Washington, D.C. 20500 
Dear Mr. President:
We write to express grave concern about continuing efforts by member states of the United Nations Educational, Scientific, and Cultural Organization (UNESCO) to delegitimize Israel. Today, UNESCO’s World Heritage Committee adopted “Old City of Jerusalem and Its Walls,” another resolution that denies any historical connections of Jews and Christians to Jerusalem’s holiest sites, including the Temple Mount and the Western Wall. Authored by Palestinian and Jordanian delegations and submitted by Kuwait, Lebanon and Tunisia, this inflammatory resolution also repeatedly describes Israel as “the Occupying Power.” Given that U.S. law already forbids American taxpayer money from going to UNESCO, we urge your administration to join Israel in suspending ties to UNESCO.                                                          
In October 2011, after UNESCO admitted the non-state actor of “Palestine” as a member, the United States withheld funding from UNESCO pursuant to U.S. law. Under U.S. laws passed in 1990 and 1994, your administration is required to withhold funding to any United Nations organization that grants membership to the Palestine Liberation Organization or “any organization or group that does not have the internationally recognized attributes of statehood.” UNESCO’s acceptance of “Palestine” as a member state undermines the core tenant of U.S. policy in the region, which mandates direct negotiations as the only solution to the Israel-Palestinian conflict.
As you know, UNESCO’s Executive Board voted on October 13, 2016, to adopt “Item 25:  Occupied Palestine,” an inflammatory, anti-Israel resolution authored by the Palestinian delegation and submitted by Algeria, Egypt, Lebanon, Morocco, Oman, Qatar, and Sudan. Both this resolution and the UNESCO World Heritage Committee’s resolution are deeply divisive and further damage UNESCO’s credibility. They also set back the prospects of a lasting peace between Israelis and Palestinians. We are further disturbed that several U.S. allies in UNESCO voted in favor of these and other recent resolutions rooted in ignorance and bigotry. 
At a time when the Middle East is in turmoil and historical heritage sites are being destroyed by groups such as ISIS, it is imperative that the U.S. stands with Israel, our closest ally and the sole democracy in the region. Recent UNESCO resolutions that deny Jewish and Christian ties to holy sites in Jerusalem not only reinforce the necessity of withholding American funding from this counterproductive U.N. organization, but also call into question future U.S. membership in UNESCO.
In 1984, the U.S. severed ties with UNESCO due to disparities between American foreign policy goals and UNESCO’s agenda. BecauseUNESCO continues to deviate from its founding mission and adopt one-sided, anti-Israel resolutions, it is time for the U.S. to stand with Israel and suspend our ties with UNESCO.


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