Blamer-in-Chief

By Alan Caruba

We teach children to acknowledge and accept blame when they do something wrong. It is an important and useful trait in life. Those who do not learn this remain emotionally stunted children their entire life. I am, of course, speaking of President Barack Hussein Obama and I shudder to think of the continued damage he can do to the nation during his remaining months in office.

As Fox News’ Doug McKelway wrote in August 2011, “Obama has suggested that blame for the stagnant U.S. economy lies in places other than the Oval office. The latest example occurred Monday when the President said, “There will always be economic factors that we can’t control, earthquakes, spikes in oil prices, slowdowns in other parts of the world.”

The greatest slowdown has been at home, the national economy, is the only one of concern to Americans. Three and a half years into his first (and hopefully last term), Obama is still blaming it on former President Bush.

As recently as April 18, Obama returned to his favorite theme. Urging a tax increase on millionaires, Obama said that tax cuts enacted “eight years before I took office” had contributed to a “global economic crisis.”

It is worth recalling the financial crisis occurred in September 2008 in the final months of Bush’s second term.

At the time:
The Dow Jones closed at 12,621.77
The GDP for the previous quarter was 3.5%
The Unemployment rate was 4.6%

George W. Bush's economic policies set a record of 52 straight months of job growth. So, Obama is not only trying to distract voters from the actual facts, but lying about them as well.

In point of fact the Democrats had taken control of Congress on January 3, 2007, at the start of the 110th Congress

In December 2011, Investors Business Daily opined that Obama was “no longer content to blame President Bush for the country’s economic ills” but was accusing “his Democratic predecessor of being a co-conspirator.” That would be former President Clinton!

In a “Sixty Minutes” segment, Obama had said the economy was suffering from “structural problems that have been building up for two decades.” Most observers concede that both Clinton and Bush43 did a good job in guiding the economy during their terms, but not Obama.

The segment also included his prediction that “If I don’t have this done in three years, then there’s going to be a one-term proposition.” The likelihood that Obama can be reelected with 8.6% unemployment, $4 gas at the pump, massive housing loan foreclosures, and a still stagnant economy grows smaller by the week.

Consider the many ways this President has found everyone else to blame for his failures. Oil prices were blamed on the “uncertainty about what’s going on in Iran and the Middle East”, but prices stayed moderate during all the years of conflict in Afghanistan and Iraq.

Despite the horrid waste of taxpayer’s money on the various green energy firms that keep failing, Obama blamed the Solyndra debacle on the Chinese who “were subsidizing their solar industry and flooding the market in ways that Solyndra couldn’t compete.” That was well known before the Solyndra half billion dollar loan guarantee was made, followed by still more to other solar companies.

Even the deficits that have grown under his administration weren’t his fault. In November 2011, he said “Obviously, this (reducing government waste) is even more important given the deficits that we’ve inherited and that have grown as a consequence of the recession.”

The key word here is “inherited.”

Of course it was inherited and Obama knew that as he campaigned to be the President who would solve the financial crisis. In February 2010 he said “If we had taken office during ordinary times, we would have started bringing down these deficits immediately.” Instead, his stimulus program tripled the national deficit in his first year in office

Regarding the debt, Obama in March 2011 said, “I inherited a big debt.”

In April 2011 he said, “much of it I inherited when I showed up.”

In August 2011 he said “I inherited a big debt.”

The message, repeated ceaselessly, is that the increase is not his fault.

No matter what the problem is, it is NEVER his fault.. This isn’t just habitual. It’s pathological. And it bodes ill if he is reelected.

© Alan Caruba, 2012

Treasury's Geithner: We have no plan, but we don't like yours

Working Into the Grave

By Alan Caruba

Believe it or not, there was a time when, if you turned 65 and retired, you could expect to live in reasonable comfort. Social Security covered a portion of your expenses; your savings account yielded a modest amount of interest, and, if you had made investments, stock dividends provided a safety cushion. Not so anymore.

“More Elderly Find They Cannot Afford Not to Work” was a January 21 headline of an article in The Wall Street Journal, noting at one point that an 87-year-old woman who had retired in 2003 was now earning $7.25 an hour, four hours a week, collecting tickets at a movie theatre in my former New Jersey hometown. I had lived there for 62 years.

Thanks to ever-rising property taxes, I sold my home before prices plunged in the wake of the 2008 financial crisis. I parked the money in an annuity.

I am fortunate that there is no age limit on the ability to write for a living. The writing trade has always been a tough one. The former market for magazine articles is a shrinking pool paying little for one’s labors. Self-published books, particularly fiction, have flooded the marketplace and mainstream publishers rely on older, established authors with a following. As often as not, bestselling non-fiction is written by people who anchor television news or have some other form of celebrity.

As the Wall Street Journal article noted, “In 1981, Social Security paid 52% of the average worker’s pre-retirement earnings, according to the Social Security Administration.” I turn 75 this year and my Social Security is little more than “grocery money.” Interest on my savings account is a joke.

For too many of my fellow senior citizens, not working is not a choice The Wall Street Journal notes that “The unemployment level among Americans 75 and older—measuring the number of people seeking work—is relatively low but twice what it was five years ago. The rate was 5.6% last year…compared with 2.5% in 2006.”

When I was born in 1937 it was in the depths of the Great Depression. I have lived long enough to be swept up along with everyone else in the Great Depression 2.0.

Naively, I and many others of my generation thought the years of economic growth that began in the 1950s would go on forever. We survived a number of investment “bubbles” and predictable, but short-lived recessions, but this one is different. It has been exacerbated by an ever-growing federal government, job-killing “environmental” regulations, and burdened by “entitlement” programs whose cost understandably keep increasing along with the nation’s growing population of older Americans.

“”Federal spending on Social Security and Medicare is rising,” said the Journal article. “both in total dollars and percentage of the budget. Social Security made up 20% of the federal budget in the 2010 fiscal year, up from 13% in 1962. Combined spending on Social Security and Medicare represents 9% of GDP and is projected to grow to 12% in 2035.”

The nation’s debt now equals its Gross Domestic Product. The U.S. is broke and so are Europe’s nations with the exception of Germany. That is simply not sustainable—something the Congressional “super committee” discovered when it punted on any solution to the nation’s fiscal woes.

Part of the problem is the nation’s aging population. No one anticipated that health care would improve to the point of extending people’s life expectancy from 65 in the 1930s to an average of 78 years today. As it is, both my parents lived into their 90s, I have an older brother in his 80s, and a nephew in his late 40s who just became a father again.

We can thank short-sighted “social justice” programs such as Fannie Mae’s and Freddie Mac’s appalling “sub-prime mortgage” programs and “bundled assets” that sank banks from sea to shining sea. The U.S. taxpayer has had to bail out these two “government sponsored entities” to the tune of billions and they keep coming back for more.

In the space of just three years, President Obama has increased the nation’s debt by five trillion in horribly misspent, wasted dollars. Since 2010 when control of the House was returned to Republicans, they have fought against pressures to raise taxes that would suck more money out of the economy and have put forth sensible plans to restructure Social Security and Medicare. Naturally, they have been accused of being heartless.

Any senior citizen who votes for Obama or a Democratic Party candidate is putting themself at further risk of having to work until they die or seeing their savings eaten by illness or other rising costs before that occurs.

Editor’s Note: The author’s editorial services site is here.

© Alan Caruba, 2012

Spending More has Never Worked!

By Alan Caruba

Ask any financial advisor what to do when you are drowning in debt and they will tell you to spend less and pay down your debt. This is just common sense. However, if you ask politicians what to do, they will advise that the nation spend more and borrow more.

Despite a huge national debt and deficit, the federal government just concluded its biggest spending year with its second biggest annual budget deficit. For fiscal 2011 which ended September 30, the government spent $3.6 trillion, an increase over the $3.52 trillion posted in 2009.

The budget “deficit” is the difference between the revenues that government took in and what it spent. The “debt” is the accumulation of yearly deficits. The U.S. has a debt of $15 trillion and this grows by billions daily due to the interest that must be paid on the amount of borrowing required to sustain its operations. Fully 40 cents of every dollar the government spends is now borrowed.

The Congressional Budget Office noted that the deficit is “greater than in any year since 1945” as World War Two wound down. As a Wall Street Journal editorial expressed it, “The Obama years have racked up the three largest deficits, both in absolute amounts and as a share of GDP, since Hitler still terrorized Europe.”

In the wake of the failed Super Committee, charged with cutting a mere $1.2 trillion over ten years, the editorial noted that “President Obama fiercely resisted even the token spending cuts for fiscal 2011 pressed by House Republicans earlier this year.” He continues to press for higher taxes on “the rich” despite the fact that the rich pay the lion’s share of income taxes already. By Obama’s definition, the rich is anyone earning more than $200,000 a year. By most definitions, that qualifies as middle class, not rich.

We are entering a period that is likely to be called something like the Great Depression Two or 2.0. History usually serves as a guide and, as Hans Bader, counsel of special projects for the Competitive Enterprise Institute has noted, “government spending (and budget deficits) rose dramatically in the Depression under both the Hoover and the Roosevelt administration…(both) increased, rather than cut, spending in the Great Depression.”

It is a dangerous thing to cling to myths about the Great Depression. Bader says “Big government liberalism is a religion, not a school of rational thought. A false understanding of the history of the Great Depression is the cornerstone of left-wing ideology…”

The Great Depression was a series of recessions. In the August 5 New York Times, Bader noted that “In 1937, the Supreme Court upheld anti-business legislation that had been struck down by lower courts, like the National Labor Relations Act, in decisions like National Labor Relations Board v. Jones & Laughlin Steel Corporation. That made unions more powerful, led to a wave of costly strikes and discouraged hiring. The increased wages demanded by unions resulted in employers laying off many workers.”

Does this sound familiar? Efforts by States to rid themselves of collective bargaining, primarily with civil service unions such as Service Employees International Union (SEIU), is a reflection of the way they have drained public coffers with wage, pension and health plans that exceed those of private enterprise. Andy Stern, the former SEIU president, just had a commentary published in The Wall Street Journal in which he urged the U.S. to adopt Chinese Communism!

In Wisconsin, Ohio, and elsewhere, unions representing government workers and others in the private sector have spent millions to defeat such efforts to end collective bargaining. New Jersey Governor Chris Christie gained national attention for his efforts to curb that state’s teacher’s union demands.

What President Obama calls a “do nothing Congress” is one in which his party controlled both houses of Congress until the 2010 elections. It will live in infamy for imposing Obamacare on a nation that has flatly rejected it.

The Supreme Court will hear the suit brought against it by 26 state attorney generals. If permitted to stand, it will destroy what is widely regarded as the world’s best health system along with the historic interpretation of the Constitution’s commerce clause.

As for spending programs, President Obama’s “stimulus” or his “green jobs” program have been a costly failure along with the administration’s waste of billions in loan guarantees to green industries. Worst of all the administration’s thwarting of the nation’s traditional energy industries, as recently seen in the delay of the Keystone XL pipeline, has cost thousands of existing and future jobs.

It is a “perfect storm” of historic and current errors in judgment concerning the nation’s economy. Americans can only hope that Europe’s financial community does not implode before the November 2012 elections, dragging the U.S. and the rest of the world into another Great Depression.

© Alan Caruba, 2012

This Way to the Poorhouse

By Alan Caruba

On Tuesday, September 13, Reuters news service reported “Number of poor hit record 46 million in 2010.” Another new record set by the Obama administration and a President who has been out campaigning to “Pass this jobs bill now.”

“The number of poor Americans in 2010,” Reuters reported, “was the largest in the 52 years the Census Bureau has been publishing poverty estimates.” Obama has the great misfortune of presiding over a government, some of whose agencies report just how bad a job he’s doing. Last month, we were informed that zero new jobs were created in August.

On the same day of the Reuters article, Douglas W. Elmendorf, the Director of the Congressional Budget Office (CBO) was on Capitol Hill, advising the new deficit super-committee to whom Congress has punted the job of reducing the obscene amount of money the federal government wastes every day.

If they don’t come up with a plan, cuts kick in automatically. This basically means that they have to decide what agencies and departments get protected. Otherwise the federal government gets a one-size-fits-all budget cut. That is as dumb a way to run the nation as one can imagine.

There was some fairly desultory media coverage of Elmendorf’s presentation. For most reporters it was just more of the same, but for the rest of us, it was a reasoned description of the utter disaster that faces the nation if a truly massive effort isn’t undertaken to slash government spending.

Aside from spending, there’s the problem of all those old codgers like me. “If current policies are continued in coming years,” Elmendorf said, “the aging of the population and the rising cost of health care will boost federal spending, as a share of the economy, well above the amount of revenues that the federal government has collected in the past.”

Social Security and Medicare have to be significantly reformed. They are bankrupting the nation because, in the words of Margaret Thatcher, “Sooner or later you run out of other people’s money.”

Reform, however, of any part of the federal budget is complicated by “the weakness of the economy and the large numbers of unemployed workers, empty houses, and underused factories and offices.”

Or to put it another way, we’re broke. We are seriously broke. We are $14.3 trillion broke in terms of the national debt. That’s about the same amount of the entire gross domestic product for a year.

We are not only broke, Elmendorf told the committee, “the economic growth for the remainder of this year and next is likely to be weaker than the agency anticipated—with growth in the vicinity of 1 ½ percent this year and around 2 ½ percent next year.” We need at least 3 percent to just break even.

Since both the Democrats and Republicans got us into this jam, it is highly doubtful the super-committee will do anything but dawdle long enough to let the automatic cuts kick in.

Meanwhile, the rest of the federal government is hemorrhaging money.

As this is being written, I received a news release from the U.S. Department of Housing and Urban Development that it has awarded “nearly $100 million to promote jobs, self-sufficiency, independent living for HUD-assisted housing developments.”

Then the U.S. Treasury informed me that “two additional New Jersey community banks receive $22 million to help small businesses access capital, create new jobs.”

And something called the Renewable Energy and Energy Efficiency Advisory Committee is set to “present eleven recommendations to promote U.S. exports of renewable and efficiency technologies to federal officials.”

Folks at the Department of Commerce will be told that green energy and clean energy is the wave of the future. Did anyone tell them that Solyndra, the solar panel company that received a U.S. government loan of more than $500 million just filed for bankruptcy? Or that General Electric builds its wind turbines in China? Or that it shut down the last factory in America that manufactured incandescent light bulbs?

A week ago, the Competitive Enterprise Institute (CEI) released a ten-point plan to create jobs that has nothing to do with shoveling gobs of taxpayer money out the door to banks, housing developments, or wasting time discussing renewable energy.

Among its recommendations were the repeal of the financial “reform” laws, Dodd-Frank and Sarbanes-Oxley. Bank of America isn’t planning to cut 30,000 jobs because it has too little regulation, but too much bad regulation.

CEI urged that proposed or recently finalized federal environmental regulations that will force the closing of power plants and energy-intensive industrial plants be put on hold. The Institute urged the federal government to expedite environmental permitting of natural resource projects (coal, oil, natural gas) projects on federal, state and private lands. Ending taxpayer subsidies for wasteful, inefficient “green” jobs was yet another recommendation.

It’s not that CEI and the U.S. Chamber of Commerce, among other think tanks and trade associations haven’t been telling the Obama administration what needs to be done to energize the economy. It’s more like the administration either isn’t listening or doesn’t care or intends to deliberately put America further into bankruptcy.

© Alan Caruba, 2011

Jobs? Obama? You're Kidding!

By Alan Caruba

America is dying a death by a thousand cuts in the form of hidden and explicit taxation, the insane generation of new regulations, and the resulting massive unemployment. Obama just selected a new economic advisor who is known to favor a value-added tax that would drive up the cost of everything you purchase.

It’s not like solutions to our economic disaster are not known. They are and the Obama administration will not implement them. They do know what they are doing and it is deliberate.

On September 7, in the guise of a jobs speech Obama will offer massive new spending programs. The money for them would have to be borrowed. The interest on that borrowing would sink the nation further into debt.

In the August 31 edition of The Wall Street Journal, an editorial revealed that, when Speaker John Boehner asked the White House to disclose any “major” federal rules in the works with estimated economic costs of $1 billion or more, he was informed that the Obama regulatory agenda for 2011 contains 219 proposed such new regulatory initiatives.

In 2010 the administration had 191 proposed regulatory initiatives in the works which combined with those proposed in 2011 add up to a total of 410. By contrast the first two years of the Bush administration rulemaking accounted for only 103 new, major regulations.

Of seven pending major rules estimated to cost more than $1 billion one includes the Environmental Protection Agency’s ozone regulations, estimated to cost $90 billion if Congress does not step in and put a stop to it. The EPA is trying to eliminate one tenth of all the utilities that provide the electricity the nation needs to function.

The Competitive Enterprise Institute’s experts on regulation have concluded that the present cost of federal regulation to businesses that must comply with them is $1.75 trillion annually.

If you visit USA Action News.com, you will find an issues section devoted to the Cloward-Piven strategy named after two socialist academics who spelled out just what it would take to economically destroy the nation. It is being implemented by the Obama administration.

Why would anyone at this point think that President Obama knows how to create jobs?

Isn’t this the first President in the nation’s history to be in office when its historic AAA credit rating was downgraded?

Isn’t this the President whose original “stimulus” plan is universally regarded as a costly failure?

Isn’t this the President who added more than $4 trillion to the national debt in just two and a half years?

At TheEconomicCollapseblog.com, you will find an article, “Wake Up America! 10 Very Obvious Reasons Why the Devastating U.S. Jobs Famine is Going to Suck the Hope Right Out of America.”

If you lack the time to delve into it, here are some of its highlights:

Citing a recent article in the Wall Street Journal, it turns out that there are more unemployed Americans than the combined populations of Wyoming, Vermont, North Dakota, Alaska, South Dakota, Delaware, Montana, Rhode Island, Hawaii, Maine, New Hampshire, Idaho, and the District of Columbia.

The number of unemployed Americans is larger than the entire population of Greece!

The number of Americans on food stamps has increased 74% since 2007.

Among the reasons cited or suggested by the article were that politicians in Washington, D.C. really don’t care that the nation is bleeding jobs and, to make matters worse, the Obama administration has instituted a “backdoor amnesty” that would make deporting illegal aliens that hold jobs virtually impossible.

As some U.S. States and local governments face the equivalent of bankruptcy, they are shedding jobs “at an unprecedented rate.” The Center on Budget and Policy Priorities estimates that more than half a million such jobs have been lost since 2008. It forecasts that nearly a half million more will be gone by the end of 2012.

U.S. corporations exist to generate profits and dividends for their investors. As such they must compete in a global marketplace where other nations like China pay pennies in salaries while they must undertake mandated costs over and above any salary they have to pay new U.S. employees. So jobs are exported. Unfair trade practices tip the scale of exports to nations like China that, in turn, do not import a comparable amount of U.S. goods.

As for taxes, businesses of all size in America are “being taxed into oblivion” with U.S. corporate taxes being the highest in the world. Between state and other taxes, Americans give up some 42% of their income before they can put their paycheck in the bank.

This is deliberate.

© Alan Caruba, 2011

Democrats and Liberals Keep Calling the Kettle Black

By Alan Caruba

Maybe it’s “just politics” or maybe it’s the fancier psychological term, “projection”—saying that others possess the same traits as oneself—but it is impossible to ignore the way liberals in general and Democrats in particular are quick to label any Republican president or presidential candidate as “dumb.”

In a very real way, it is a form of validation. Michelle Bachmann, when she showed strength in Iowa in its recent straw vote was accused of being a ditz and the great liberal bugaboo, religious. When Texas Governor Rick Perry announced he was in the running, he caught flack for participating in a prayer gathering and actually praying! Predictably, as Perry’s popularity has soared, Politico posted an August 29 article, “Is Rick Perry Dumb?”

Anyone who has given Gov. Perry’s resume even a glancing look knows that he’s not only bright enough to have risen from humble beginnings, but he has never lost an election. And the man is from Texas, just like two previous Bush Presidents and the unlamented Lyndon B. Johnson who managed to not only mire the nation in a war in Vietnam, but to lose it.

In the Bush-Kerry match-up, their college scores were released and it turned out that Bush43 did better than his opponent. Last time I heard, securing a bachelor’s degree from Yale and a master’s from Harvard Business School is no walk in the park

By contrast, two and a half years into his term as President, no one knows what grades Barack Hussein Obama received at either Columbia University or Harvard. Indeed, as far as a “paper trail” is concerned there are still gaps wide enough through which to drive a tank regarding what is actually known about Obama such as, for instance, where did he get his Social Security number? What nation’s passport did he travel on when he visited Pakistan in his youth?

And the biggest question of all, why is he President, given that the Constitution states, “No person except a natural born citizen (that is to say, both parents being American citizens)…shall be eligible to the office of President…” This is not rocket science. A commentary from CanadaFreePress.com cited the following, “As his father was not a U.S. citizen, but rather a citizen of Kenya, Obama inherited by birthright, natural law, his fathers name and citizenship. He is NOT a “natural born citizen” of the US, no matter where he was born.”

So far, he has produced several “birth certificates” that were so bogus that they were instantly revealed as such by experts who meticulously detailed why. Just as with the 2008 campaign, the mainstream media has run interference for this usurper, largely by ignoring the issue.

When it comes to comparing smart versus dumb, how smart is Obama when the record shows that he ignored the problem of the national debt, handing it off to a commission whose findings he ignored until Standard & Poor’s downgraded the nation’s credit rating for the first time ever!

Those in the White House and leading the Democratic Party so obviously regard the American public and, in particular, voters, as stupid that they utter the most stupid things themselves, thinking no one will notice. The new chairwomen of the Democrat National Committee, Debbie Wasserman Schultz, said that Republicans are wrong on illegal immigration because they think “that in fact it should be a crime.” Earth to Debbie, it is a crime.

Vice President Joe Biden, who has become an embarrassment to the White House and Democratic Party, speaking of the decision to kill Osama bin Laden, called it “The boldest decision any president has undertaken on a single event in modern history.” What about all the decisions President Bush had to take following 9/11?

Obamacare was such a disaster that the U.S. Department of Health has had to issue 1,400 waivers. Hardly a day goes by without new revelations of the costs it imposes on the economy or the thousands of bureaucrats that would have to be hired to enforce it. The House of Representatives has already voted to repeal it and 26 States brought a court action against it; the most recent decision on the way to the Supreme Court has found it to be unconstitutional.

The same day a Politico’s article, blogger Burt Prelutsky posted a brief hilarious review of Obama’s gaffes that is well worth reading.

The Democrats have given us the dumbest, most dishonest President ever elected to that office and the race card is already being played. Democrat Representative James Clyburn of South Carolina has said, “people don’t like to deal with it, but the fact of the matter is, the president’s problems are in large measure because of the color of his skin.”

So the kettle is calling the pot black. In the case of the Barack Hussein Obama, Jr., his skin color will provide no protection from his appalling record of incompetence and stupidity.

© Alan Caruba, 2011

Why the US Credit Rating Was Downgraded

By Alan Caruba

To begin with, the debt ceiling was lifted in part to hold onto our historic AAA rating of U.S. securities, but that didn’t work. On August 5th, Standard & Poor’s, one of three major rating agencies, downgraded the U.S. to AA+, the first such downgrade in the history of the nation. The liberal media immediately attacked Standard & Poor’s, but odds are they will be joined soon enough by Moody’s and Fitch.

As the air is filled with charges and countercharges as to who is to blame for the downgrade, and blaming George W. Bush has become a joke (yes, he does share some of the blame), the numbers tell the story. As the Washington Times recently noted, “In 2008, the federal budget deficit was around 3 percent of gross domestic product. In 2011, it’s around 11 percent.”

“Total federal debt was $10.7 trillion at the end of 2008 and is currently $14.6 trillion. Debt as a percentage of GDP was a painful 69 percent at the end of the Bush years, but Mr. Obama is pushing it over 100 percent, another disgraceful historic milestone.”

In the week leading up to the last-minute agreement to lift the debt ceiling the Tea Party movement’s members were being called “terrorists”, a notion so idiotic that it defies belief. As the debt ceiling debate wound down, that was all one heard from Democrat politicians and their mainstream media toadies. It is a measure of their desperation.

Neither the President, nor the leadership of the Democratic Party apparently got the message of the 2010 elections that took away the control of the House and gave it to Republicans and new Tea Party caucus members. The initial Democrat response was to call them “extremists” for wanting to get spending under control, but mostly to repeal Obamacare.

The House, in fact, did vote to repeal Obamacare. The Tea Party movement began with its opposition to that legislative monstrosity. On March 9, 2010, Americans filled the streets of Washington, DC, right up to the stairs of the U.S. Capitol Building. David Axelrod, then a White House consigliore to President Obama, dismissed them saying, “They are wrong.”

They were not wrong then and, in many respects, they are not wrong now. They are, however, impatient. That is historically American because we have always been a people in a hurry. The Tea Party movement rose out of widespread opposition to Obamacare.

At some point the nation has to begin the long hard process of reversing a decades-long spending binge by both the government and individual Americans, many of whom turned their homes into ATMs or purchased homes they could not afford.

The housing bubble burst in September 2008 at the end of President Bush’s second term. It’s worth remembering that, when Bush came into office President Clinton had bequeathed him a budget surplus.

Bush expanded Medicare with a prescription benefit. When 9/11 occurred on his watch, it drained a trillion dollars out of the economy. He responded with a war in Afghanistan and then added a war in Iraq for good measure. They seemed like a good idea at the time, less so now. The Bush tax cuts reduced government revenues and were very popular, but bills must be paid. Massive borrowing ensued.

When the financial crisis hit, President Bush was at the tail end of a long period of U.S. history dating back to the 1930s Great Depression that made it inevitable. Social Security and Medicare/Medicare have become unsustainable. In effect, the housing bubble was just the trigger that revealed a far larger problem. The New Deal of the 1930s, Medicare in the 1960s, and LBJ’s “War on Poverty” were all part of the problem Americans must address today.

It is historic fact that Republicans have presided over a debtor nation for a long time, dating back to the days of Richard M. Nixon. Indeed, a decade ago, it was a Democrat, Bill Clinton, who had a surplus when he left office. Previously, Ronald Reagan had run deficits for his eight years and had increased the budget by 69%. He was followed by Bush41 and Bush43 who also ran deficits. I am not assigning “blame”; just stating facts, because facts are important.

An excellent new book, “Lost Decades” by Menzie D. Chinn and Jeffry A. Frieden has just been published and anyone who truly wants to understand how Democrats and Republicans alike have dug the nation into a deep financial hole should read it.

As the authors note, “Events of the weeks during and after the passage of TARP revealed a chilling fact that the American financial system was effectively bankrupt.”

TARP, an emergency legislative response to the 2008 financial crisis, was designed initially to purchase the “toxic assets” that had been sold throughout the financial system, mostly banks, hedge funds and insurance companies—all rated AAA by Moody’s, Fitch, and Standard & Poor’s…yes, that Standard & Poor’s!

Also revealed has been the fact that the American economy is central to the stability of foreign economies as well. Many other nations had also been engaged in spending too much and were caught up in the housing bubble, ours and their own. England was one. Ireland, Spain, Italy, Greece, and others tottered as billions in alleged value, bundled from countless mortgages and sold as securities, disappeared.

At the urging of two government sponsored entitles (GSEs), Fannie Mae and Freddie Mac, subprime loans were encouraged. They were then “bundled” them and sold as securities. When the housing bubble burst, no one knew who owned what. The assets were often no longer specifically connected to the owners of homes who discovered that their mortgages now exceeded the value of their homes.

Fannie Mae and Freddie Mac own nearly half of all the mortgage loans issued by banks and mortgage firms nationwide. The government was on the hook for billions and stepped in to seize both GSEs. They need to be wound down and eliminated, returning to a time when banks and mortgage firms can rationally make prudent loans. The federal government should not have been in the housing mortgage business and now we know why.

When investment banks like Lehman Brothers declared bankruptcy and the huge insurance company, AIG, faced a similar fate, the Federal Reserve and the Secretary of the Treasury, Hank Paulson, former chairman of Goldman Sachs, stepped in to stabilize the U.S. financial system with loans constituting billions of public funds.

In sum, they had no choice. They had facilitated the problem, but a nation without a functioning banking system is nothing but some borders on a map.

It’s worth pausing to recall that President Clinton’s Secretary of the Treasury was Robert Rubin of Goldman Sachs. He was succeeded by Lawrence Summers, a Rubin protégé and later an Obama economic advisor. Bush’s later Secretary of the Treasury, as noted, was Hank Paulson and his chief of staff was Joshua Bolton, another Goldman alumnus. It’s a very small cliché of men deciding first how Wall Street will benefit and then how, as the expression goes, “to kick the can down the road.”

As noted in the "Lost Decades", “The government depended on access to domestic and international finance to underwrite its own borrowing as deficits grew; the private sector’s vibrancy similarly depended on a continued flow of funds from and through the world’s financial institutions.”

So long as the bubble existed, the politicians found no reason to rein in government spending and to compound the mess its vaunted regulatory apparatus had failed its responsibilities as well. These bubbles and recessions are not exclusively American. Previously, Japan lost a decade as well and other nations, several in South America, experienced even worst financial debacles.

So the debt ceiling vote just put off the problem while the politicians hope and pray that the economy will revive. They are unlikely to do what is necessary to cut the size of the federal government, its spending, and remove the weight of suffocating job-killing regulation. Whole government agencies need to be eliminated.

The Tea Party movement, made up of middle class, sensible, God-fearing and Constitution-loving Americans is all that stands between us and the politicians. The Tea Party needs to be focused. It needs to be patient. We know the current bunch of politicians must be replaced.

As for the theatrics of the debt ceiling debate and vote, we elected these politicians and their predecessors. The deficits they gave us are collectively our deficits, our debts.

In 2012, hopefully we can begin to say goodbye Barack Obama, goodbye Harry Reid, goodbye Nancy Pelosi, goodbye Barney Frank, goodbye Dick Durbin. And thank you, Tea Party Americans.

© Alan Caruba, 2011.

Flirting with the Great Depression 2.0

By Alan Caruba

POLITICO Breaking News:
August 5, 2011

“Credit rating agency S&P has downgraded U.S. debt from AAA, the first debt downgrade in U.S. history, the Associated Press reported.”

When a nation’s debt equals its entire annual gross domestic product, it is bankrupt. It can still produce goods and services, but it will likely encounter fewer customers worldwide as they too are drawn deeper into their own debt crises.

When it must borrow billions daily just to meet its obligations to other nations and individuals who have purchased its treasury notes, it is has reached a point of “moral hazard” that threatens the wealth of every single citizen.

When it raises its “debt ceiling” to $14.58 trillion, the amount its Congress permits, and one day later its Treasury Department announces that its debt reached 100% of its GDP, it is in serious financial difficulty. Not since 1947 when the U.S. was recovering from the cost of World War II have we reached this point.

The nasty “debate” in Washington over the debt ceiling included the Republican demands that we reduce our spending and Democrat demands that we raise taxes. Those advocating sanity were called “terrorists” and “extremists.” The shallow reductions agreed to were stretched over ten years and barely begin to address the immediate financial crisis. Harder decisions were pushed off on a "super committee" that no one expects to agree on anything.

This news is bad enough for the United States of America, but it affects many other nations around the world in exactly the same way the Crash of 1929 did, leading to the Great Depression of the 1930s and putting in motion the events that led to World War II.

Does history repeat itself? Apparently so.

What is happening in America is happening around the world. Greece, a nation of 11 million people, had by 2009 managed to run up its debt to more than $500 billion. Its fellow members of the European Union took notice even though Greece accounted for only two percent of the EU’s economy. A year earlier, the tiny nation of Iceland, population 300,000, had literally bankrupted itself when its debt went from $8 billion in 2001 to more than $48 billion in 2007.

On September 29, 2008, the Irish cabinet held an emergency session by phone because the implosion of its housing market threatened to bring down its financial system. To avoid a bank run, it guaranteed all deposits and, not long after, England did the same thing.

Many people find history boring, but it does provide lessons and what America and its lenders all face is the potential for The Great Depression 2.0. The gyrations on Wall Street and worldwide are evidence of global fears.

In America, the Congress merely applied a band-aid to a gaping wound, the result of the “solutions” instituted during the Great Depression of the 1930s, the entitlement program of Social Security and, in the 1960s, the addition of Medicare. In the 1930s, the federal government guaranteed mortgages by creating Fannie Mae and later Freddie Mac.

When the financial crisis arrived in 2008, they owned half of all the mortgages issued by the nation’s banks. The government was forced to step in and seize both “government sponsored entities” to avoid bringing down the nation’s financial system. At the same time, it agreed to buy up the “toxic assets” owned by a number of banking firms and by the insurance giant, AIG. Billions in public funds were allocated to this.

There probably was no alternative.

In the same way the government in the 1930s initiated all manner of programs to put Americans back to work, the Obama administration created a “stimulus” program while, at the same time, taking ownership of Chrysler and General Motors. The Federal Reserve reduced interest rates close to zero, lending banks and nations billions. By contrast, during the Great Depression the government had allowed hundreds of banks to fail which, in hindsight, contributed the nation's ills.

Franklin D. Roosevelt had been elected to end the Depression, but after nearly eight years of the New Deal has passed, FDR’s Secretary of the Treasury, Henry Morgenthau, Jr., addressed the House Ways and Means Committee on May 9, 1939, to say, “We have tried spending money. We are spending more than we have ever spent before and it does not work.” Unemployment remained high and would remain high until World War II intervened in 1941.

Much has changed since the 1930s, but much has not.

In 2010, power in the House of Representatives was returned to the Republican Party, but the debate over the debt ceiling revealed the difficulty it had marshalling support for raising it. Many new Tea Party caucus Representatives opposed it. Others argued that only massive spending cuts could remedy the growth of the nation’s debt. In the Senate, controlled by the Democrat Party, any deal that did not include raising taxes was dead on arrival.

Other than the so-called “stimulus” programs, the President devoted all of 2009 to legislation dubbed Obamacare that would have created a government takeover of twenty percent of the nation’s economy. By May 2010, a million people marched in Washington, D.C. to protest it. It has since been repealed in the House and has 26 States allied against it in the courts.

In the 1930s, efforts to keep the world’s economy from imploding found little political support for the measures needed to sustain an integrated world economy. In the modern era of globalization, the same problems have been encountered and, sadly, the United States has shown little taste for reducing its spending as it continues to borrow until, at some point, other nations decide to put their money elsewhere. So far that has not happened.

The United States’ financial future is in peril without a significant downsizing of the federal government and the international economy faces similar challenges as nations share similar debt levels that exceed their ability to meet their obligations.

It will take a minimum of a decade to meet the USA’s present need to reduce spending and reduce the burden of its borrowed debt. Let us hope the voters in 2012 take the first steps toward the political resolve needed by returning power to the Republican Party in the Senate and the White House. Then let us hope they show real political courage.

Let us hope it doesn’t take another world war to focus our attention on survival of a different kind.

Editor’s Note: This commentary was greatly aided by data in the “Lost Decades” by Menzie D. Chinn and Jeffry A. Frieden, recently published by W.W. Norton & Company.

© Alan Caruba, 2011

There Goes the Neighborhood

POLITICO Breaking News: August 5, 2011
-------------------------------------------------
Credit rating agency S&P has downgraded U.S. debt from AAA, the first debt downgrade in U.S. history, the Associated Press reported.

Washington's Magical Thinking

By Alan Caruba

The term, “magical thinking”, has been around a while to describe what individuals do to cope with the vicissitudes of life. I, for example, regularly buy a Mega Millions lottery ticket in the hope of winning when, logically, rationally, I know the odds are millions to one of that ever happening.

Magical thinking can be found in all aspects of life and it is surely magical thinking that caused America’s politicians, starting back around the turn of the last century, to believe that a really big government could take care of everyone when, prior to that, self reliance, support from the family structure, and hard work were the early guiding principles.

Indeed, the U.S. Constitution is testimony to the Founding Father’s intense distrust of a centralized government—hence checks and balances—and the fallibility of individuals entrusted with power over others. It turns out they were right because now there is no aspect of our lives into which government does not intrude.

A lot of this can be traced to the rise of Communism, the handiwork of Karl Marx, and its adaptation into Socialism, a modified form. In 1917 Russia had Communism imposed on it during the Bolshevik Revolution as the antidote to the rule of the czars. In time it utterly failed, but few have taken a lesson from that. It wreaked havoc and death on Russians for over seventy years.

Indeed, throughout the last century, wars were required to defeat various forms of totalitarian rule. Even the Peoples Republic of China eventually embraced its own form of Capitalism while retaining power in the hands of a centralized government.

Communism is a kind of magical thinking based on collectivism that always seems to come back to a handful of men ruling by coercion.

In 1908, the Socialist Party nominated Eugene V. Debs to run for president. A dedicated unionist, Debs had studied Marxism while in jail. What he believed then is still prevalent today. “When I joined the Socialist Party,” said Debs in accepting the nomination, “I was taught that the wish of the individual was subordinate to the party will, and that when the party commanded it was my duty to obey.”

“I am not satisfied with things as they are,” said Debs, “and I know that no matter what administration is in power, even were it a Socialist administration, there will be no material change in the condition of the people until we have a new social system based upon the mutual economic interests of the people; until you and I and all of us collectively own those things that we collectively need and use.” Debs was soundly defeated.

The election of Franklin D. Roosevelt, however, brought socialism to its zenith of power in America. He remained in office from 1933 until his death in 1945. Social Security is collectivism. Medicare and Medicaid is collectivism. Government “make work” programs are collectivism.

A government that owns an auto company is collectivism. A government that can shut down oil drilling in the Gulf of Mexico is collectivism. A government that decides how much mileage the car you buy must achieve is collectivism. A government that thwarts the building of new utilities to meet the needs of a growing population and then instructs people to reduce their use of electricity is collectivism.

And a government that believes it can continue to borrow and borrow and borrow from the rest of the world to maintain sixty percent of its annual budget for “entitlement programs” is engaged in magical thinking.

It is magical thinking to believe that the same ratings organizations, Moody’s and Standard and Poor’s, should be trusted. They both granted top grades to the “government entities”, Fannie Mae and Freddie Mac, which plunged the nation into a huge financial crisis. Indeed, the rating organizations never saw the implosion of Wall Street institutions coming until billions in public funds were needed to keep a complete collapse from occurring.

Spending more to get out of debt is magical thinking and yet that is the only “plan” the Democrats and the President offer the public. A July 25 Wall Street Journal editorial, “Toying with Default”, provided an insight to this saying, “Here’s a number for the debt history books: Mr. Obama’s final offer in the Biden talks was a $2 billion cut in 2012 discretionary spending. The federal government spends more than $10 billion a day.”

At a time when European nations are imposing major austerity programs, the Republican Party is charged with having to save the nation from a Democrat Party that has reluctantly concluded that a reduction in spending is necessary and increase in taxes is not achievable..

As a nation, if we are to survive, we must disengage ourselves from a century of “progressive” programs that are not based in reality. Debts must be paid. Entitlement programs must be revised and eventually abandoned. Government must be reduced in size and scope. Private enterprise must be set free to function and thrive.

Earlier generations fought a Revolution to free ourselves from the British monarchy and parliament. Earlier generations fought a Civil War to preserve the Union. A present-day older generation of Americans fought two major wars against totalitarian governments and lesser ones in Korea, Vietnam, and most recently in Iraq.

The present generation of Americans must empower Republicans in Congress to save the nation from the errors of the past, the wild spending, and the confiscatory effort to “transform” the nation into a collectivist society that mirrors failed “progressive”, Communist and Socialist thinking and programs.

© Alan Caruba, 2011

Obama is Determined to Destroy America

By Alan Caruba

It is astonishing that Barack Obama seemingly learned nothing from the 2010 national elections in which the Republicans regained control of the House with a net total of 63 seats. For the Democrats it represented the greatest loss in the House midterm election since 1938, which occurred nearly ten years into the Great Depression.

It is the House that determines the spending and borrowing to maintain the nation, though the President traditionally sends a budget. Obama did not. Indeed, as Speaker of the House, John Boehner, has said, Obama has never put anything on paper. Negotiating Obama's demands have changed week to week and now day to day.

What has happened to “No drama Obama”? The present impasse, topped by an angry press conference late Friday afternoon is entirely of his making. Neither the White House, nor the Democrats in Congress have put forth any plans, let alone any numbers, other than to propose tax increases, now euphemistically called “revenue” increases.

The 2010 Democrat losses in the House are largely attributed to the passage of Obamacare, a piece of legislation that was not only widely protested, but that led to the Tea Party movement and new members of the House representing its common sense agenda. The House subsequently voted to repeal Obamacare and it is being contested in the courts by 26 States.

What Americans have witnessed over the first two years of his term is Obama’s continual blaming of all problems on either his predecessor or the Republicans in Congress. What they are witnessing is the duplicity of a man who appears incapable of telling the truth from day to day.

The nation is in for a week of “high drama”, all of which could have been avoided had Obama agreed to any of the proposals put foreword by Republicans from Paul Ryan to members of the so-called “gang of six.” In the Democrat controlled Senate there has been nothing but obstruction.

One senses that this is exactly what Obama wants. While saying he does not want the U.S. to default on its obligations, what better way to destroy the nation than to destroy its “full faith and credit” regarding its debts?

The emphasis the Founding Fathers put on the necessity to meet the nation’s debts can be found in Article VI of the Constitution. “All debts contracted and engagements entered into, before the adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the Confederation.”

Article I, section 7, states “All bills for raising revenue shall originate in the House of Representatives, but the Senate may propose or concur with amendments as on other Bills.”

There is no mystery as to how the U.S. can recover from the present recession. Government spending must be reduced. Tax rates must be reduced for corporations and the middle class to encourage investment, growth and more employment. Entitlement programs will have to be revised to ensure they can meet their obligations. They represent sixty percent of all government expenditures.

A government that must borrow forty cents of every dollar to pay its debts and whose current debt of $14 trillion equals the entire annual gross domestic product of the nation is endangering the present and future economy for present and future generations of Americans.

At this writing, it looks as if Obama intends to deliberately implode the nation’s ability to meet its obligations and he has used the most raw fear tactics to achieve his goal, falsely claiming that Social Security checks would not be sent, that the military would not be paid.

If ever a President was begging for impeachment the time for such action has arrived. The evidence that he was ineligible to run for office and to hold it is beyond question, if only because he was not a “natural born” American whose both parents were citizens. His father was a citizen of Kenya.

Raise the debt ceiling. Impeach Obama. America must be set free. What he is attempting to bring about is the worst “change” imaginable in the nation’s history.

© Alan Caruba, 2011

Scary American Stats

By Alan Caruba

Rasmussen Reports maintains a daily presidential tracking poll and, as of Sunday, July 10, President Obama’s Approval Index rating was minus-19. If he wasn’t such a narcissist this might bother him, but one gets the impression he is so convinced of his ability to lie his way out of any situation, that he will continue his present trajectory.

The kabuki dance regarding the negotiations over raising the debt ceiling limit provides a useful insight to the workings of Washington, D.C., and the principles—or lack of them—that drive the Republican and Democratic parties.

Democrats want to raise taxes. Republicans want to cut spending. The latter course of action is the only one that will pull the nation back from the brink of default and insolvency. The U.S. now owes so much interest on what it borrows that economists say it will take a decade just to pay it, let alone address the principal.

Here are some scary stats about America and its citizens that say something about how a great nation has slid into bad habits, bad behavior, and bad judgment :

We have the highest rate of illegal drug use in the world.

We have more reported rapes, murders, and total crimes in the world.

We have the largest prison population of the entire world.

Between December 2000 and 2010, the U.S. ran the largest trade deficit in the world every year, $6.1 trillion dollars. The U.S. has had a negative trade balance every year since 1976.

The U.S. has accumulated the biggest national debt the world has ever seen and it is getting worse, expanding at a rate of $40,000 per second.

On Sunday, the tracking poll showed that 21% of voters “Strongly Approve” of the way Obama is running the nation. That’s just short of one-in-four voters and is a fairly constant number reflecting those voters who are (a) too stupid to realize just how much trouble the nation is in, (b) too devoted to Obama to see any flaws, and (c) too committed to the Democratic Party to step back and ask why we are in the midst of a depression.

Why those who analyze and comment on public issues will not call it a depression escapes my understanding. We have unemployment rates that are comparable to those of the 1930s, home foreclosures from coast to coast, and, most importantly, a consumer confidence rate that is in the basement.

All the Democrat talk of “shared sacrifice” is just nonsense, given the fact that the top earners—the millionaires and billionaires—pay the largest amount of the taxes (the top 10% pay 68%) while somewhere close to 40% or more pay no taxes. Rewriting the U.S. tax code would bring everyone closer to actually sharing the burden of providing Washington the revenues politicians routinely waste.

The “social justice” programs of the 1930s and 60s, Social Security and Medicare, need to be fixed or, better still, phased out. It must, of course, be done with regard to a huge population of seniors who paid into these programs, neither of which even comes close to being “voluntary.”

They are about as voluntary as Obamacare’s demand that you buy health insurance even if you don’t want to. Meanwhile, it will continue to wreak havoc on what is arguably the best health system in the world. This might account for why 26 states have joined in a court case against it and why the House has already voted to repeal it. It is the Democrat controlled Senate that is the obstacle.

It also accounts for why 40% of the voters Strongly Disapprove of Obama’s performance in office at this time. The majority of voters are not stupid. Rasmussen reports that “55% of voters nationwide believe that cuts in government spending are good for the economy.” In addition, “54% also believe that raising taxes will hurt the economy.”

What these statistics reveal is that there is a shift in the direction of common sense and an understanding of fundamental economics. It also explains why voters in the 2010 election returned political power in the House to Republicans. What remains to be seen is how many of those newly-minted GOP representatives keep their pledge not to raise taxes.

It is troubling, though, that “Overall, 46% of voters say they at least somewhat approve of the president’s performance” while “53% at least somewhat disapprove. “Somewhat”? What does it take to get people to look at Obama and see the worst President of the modern era?

Historians will look back at this period and rightly conclude that the nation was politically very sharply divided between liberals and conservatives. Look to the Obama administration to play heavily on the fears of those who believe that their Social Security checks will be cut or not arrive at all. They will suggest all manner of other cuts and changes as well that slow the welfare train. It is classic Chicago-style and Democrat politics that depends on buying votes.

The worst of this is that it is precisely the “redistribution of wealth” that has gotten us to this point along with a housing bubble created by government entities, Fannie Mae and Freddie Mac. Together they distorted the housing market by providing the mechanism for low-cost loans to people who did not qualify to receive them. Unbelievably, they are still in business.

The stats tell us that it is the slim majority of voters that will determine the future and tucked in among them are the independents upon whom everything depends.

© Alan Caruba, 2011

How to Avoid a Fiscal Train Wreck

By Alan Caruba

In the wake of the agreement to avoid shutting down the government, both sides have claimed to be winners and, depending on whether you are a Democrat or Republican, both sides have generated the usual prose to support that contention.

In truth, all that occurred was a brief stop on the way to a fiscal train wreck.

There were no winners. There are only losers. They are the American taxpayers. The government of the United States of America has been mismanaging its financial affairs for decades, most notably dating back to the creation of a private central bank called, ironically, the Federal Reserve.

As the columnist, Jimmy Breslin, once observed, the last successful government program was World War Two.

Avoiding a shutdown and raising the debt ceiling ignore the fact that, sooner or later, the government will not be able to borrow enough, let alone tax enough. Raising taxes only represses the investment needed to start new businesses and expand existing ones. Without either, unemployment will remain high. Meanwhile, the cost of commodities is rising in a world where the U.S. has real competition for them.

The nation now owes $14 trillion in debt and that is equal to every dime and dollar earned by the sale of our products and services, the gross domestic product. The U.S. government, in addition to the taxes it collects, exists only because other nations still buy our Treasury notes.

While the shut down argument was over how many billions would be cut from spending, the nation at the same time was borrowing many times more billions. That is completely unsustainable.

What else is unsustainable?

The two real wars in which we have been engaged for a nebulous “war on terror” and the new one, a gift from a President who ignored the U.S. Constitution and the U.S. Congress to go to war in Libya. A week later he handed it off to NATO. If the U.S. had not founded NATO and was not a part of NATO, there would be no NATO. None of these wars will have a good ending for the United States.

The U.S. provides some twenty-two percent of the regular budget of the United Nations and twenty-seven percent of its laughable peacekeeping activities. That should have ended long ago.

The government should, of course, eliminate the millions wasted on duplicated programs in various departments and agencies.

The government should rid itself of the Environmental Protection Agency, the greatest obstacle to growth and development with its huge and growing matrix of regulations. The monitoring of the nation’s air and water could be undertaken by the States and, for all practical purposes, is.

Foreign aid should be greatly reduced. It is little more than bribes. It does little to secure the level of cooperation and support attributed to it. Foreign nations need to be responsible for their own development. We need to pay down our debt.

All pork projects initiated by members of Congress should be eliminated. Mandating that non-essential airports and bridges be built is a pernicious practice. If States want to build such things, they should fund them themselves. Why taxpayers in Texas should help fund something built in Minnesota defies understanding.

All manner of non-essential spending such as that for National Public Radio should be eliminated. Let NPR compete in the marketplace. Funding Planned Parenthood is funding abortions. Lots of them.

Funding for dubious “science” research such as the $50 billion wasted on proving that “global warming” was real should be eliminated. By contrast, science that contributes to providing new technology for national defense or the elimination of disease deserves support.

The services of the U.S. Postal Service should be privatized, as should obstacles to the provision of private healthcare insurance; it would provide the same savings to consumers as occur in other insurance areas. Social Security, while grandfathering those who have paid into it, should be eliminated at some point in favor of encouraging private savings and retirement planning.

The Department of Education should be eliminated. The word “education” does not appears anywhere in the U.S. Constitution and has always been a state and local responsibility.

There are more ways that the size and expense of government can and should be reduced. Too many people work for the government, while fewer and fewer are involved in manufacturing, the source of all real wealth.

It is time to stop listening to all the economists and their failed theories, and apply common sense before we end up like Zimbabwe with paper money that has lots of zeros signifying that a loaf of bread will cost a thousand dollars.

© Alan Caruba, 2011

Raising Taxes is a Very Old, Very Bad Idea

By Alan Caruba

The absurdity of raising taxes in the midst of a recession that increasingly looks and feels like a depression only underscores the Democrat’s historic and failed policies from the past; the same ones they continue to push these days.

In “New Deal or Raw Deal? How FDR’s Economic Legacy has Damaged America”, historian Burton Folsom, Jr., examined the many ways the Great Depression was prolonged and deepened. In his first week in office, Roosevelt took America off the gold standard and “issued an executive order, under penalty of a fine or a prison term, forcing Americans to surrender all their gold to the U.S. government in return for paper dollars.”

Today, in an era of economic uncertainty, the television airwaves are filled with advertisements to buy gold.

Roosevelt was all about high taxation while portraying himself as a friend of the people and an enemy of “economic royalists”, by which he meant business, industry, banks and Wall Street. Historians and economists point to FDR’s tax policies for the failure of the nation to recover from the Great Depression. By 1936, the new tax rate started at 5% on low income taxpayers and skyrocketed to 79% on top incomes.

The Great Depression began in October 1929 when the stock market crashed. A year later my older brother was born. Our father was a Certified Public Accountant, a profession people need in good times and bad. The experience of the Depression left an indelible impression on both my parents.

My Father never bought any stock. His biggest investment was the home he bought in 1942 in a posh New Jersey suburb. My Mother used to tell me of the large bill they ran up at the butcher’s during the Depression. World War Two imposed strict rationing because food and other items were scarce. In all the years after the war our refrigerator was always kept filled with food. Those memories imprint themselves on people.

I don’t think there is much historical or institutional memory left in America. The educational system, the media, and what passes for news these days has erased “the way it was” for most Americans in that era. Only the senior citizens and their children recall it. The nation, however, is repeating all the previous errors.

It is difficult to believe that the nation is on the brink of financial collapse, but it is.

Not surprisingly President Obama and the Democratic Party want to tax more, particularly “the rich.” Efforts to cut spending and reduce the size of a bloated federal government are fought by Democrats even if cutting a few billion is a teaspoon in an ocean of debt

Robert Williams of the Tax Policy Institute was interviewed on an April 14th National Public Radio program. Using 2009 as his baseline, he pointed out that “about 47 percent of Americans will not pay any federal income tax for 2009.” They included families with children, the elderly, low income households, and those who benefit from all the deductions, credits, and exemptions in the income tax.

People with incomes over $500,000, said Williams, represent about 24% of tax revenues collected and those earning a bit above $100,000 represent about 56% of all income and pay about 70% of all taxes. “About 75% to 80% of us pay more payroll tax than income tax.” Taxing the rich instead of instituting a fair tax, based on consumption, is a very bad idea.

In a collection of essays from his popular blog, The Daily Reckoning, Bill Bonner’s latest book “Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas” provides a wealth of insight regarding the way the Federal Reserve and other central bankers have created financial havoc since 1913.

Writing in February 2011, Bonner said, “Probably the most remarkable proposition of the whole decade came into focus in the past six months. It was the idea that the Fed could spur a recovery by creating money out of thin air.” This is what is meant when you hear the term “quantitative easing.”

QE, by November 2010, had added $2.3 trillion to the nation’s monetary supply. Fed Chairman Ben Bernanke, a reputed expert on the Great Depression, added three times as many dollars to America’s core money supply as all the Treasury secretaries and Fed chairmen who came before him put together!


There is and always has been only one way money retains confidence and that is by manufacturing and selling goods and services. Therein lies true value, not the idiocy of simply printing dollars.

“In 1913,” notes Bonner, “the dollar was worth about the same thing it had been worth 100 years before. Now, almost a hundred years later, it is worth only three cents.”

Bonner noted that “The Great Depression may have been an accident, but the debasement of the dollar certainly was not. It was a matter of policy...The gold standard stood in the way; it was abandoned like a bad neighborhood”; a policy completed under President Nixon in 1971.

Writing on July 30, 2010, Bonner said, “Mainstream opinion is contradicted by the facts. Fewer people are employed today in the United States than when the stimulus program began. Sales are down. Growth is failing. Credit is contracting. Even hairstylists and cab drivers know something is wrong.”

John Maynard Keynes: the economist whose theories FDR and other administrations have based their policies upon, “thought consumer spending was the key to prosperity; he saw savings as a threat. He had it backward. Consumer spending is made possible by savings, investment, and hard work—not the other way around.”

“We remind readers,” Bonner wrote in 2003, well before the 2008 financial crisis, “when the Fed creates money out of thin air, it does not create any corresponding wealth. The world’s supply of services or swimming pools does not magically increase when Ben Bernanke turns up the dial on the printing press. What it does is create an illusion of wealth.”

That illusion, that nightmare is now understood by a majority of Americans who also understand that the President they elected in 2008 has been focused on expanding government ownership and control of vast elements of the economy from General Motors to AIG to the nation’s health system.

And now the President wants to raise taxes. It is as if nothing was learned from the Great Depression, from the entire history of the New Deal, and from the collapse of the communist Soviet Union in 1991.

© Alan Caruba, 2011

The Week In Review

By Alan Caruba

It often seems to me that the constant flow of news diminishes our ability to take it all in and make sense of it. I was thinking about this as I read the weekend edition of The Wall Street Journal last Saturday.

It was the day after the drama surrounding the potential shutdown of the federal government. At the eleventh hour, President Obama announced that an agreement had been struck to keep it going. What kind of government do we have that cannot create a budget for the year ahead and keep itself going in a rational fashion?

It wasn’t about funding, though. It was about the clash between the conservatives who want to save a government from further profligate spending and eventual doom, and the liberals who have controlled the Congress since 2006 when the general unhappiness with the wars in Afghanistan and Iraq, and other factors weakened confidence in the Bush administration..

The numbers tell the story. With Barack Obama installed in office, the debt has soared to levels that threaten the existence of the greatest republic on earth. Dick Morris, the political commentator, summed it up in October 2010. “From the moment George Washington took the oath of office until Obama did, America had borrowed $9 trillion, Under Obama, it has borrowed $3.2 trillion more, in less than two years”

Consider the advice of Cicero to the Roman Senate in 55 P.C., "The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."

In 2008, too conveniently just before the election, a financial crisis hit the nation. It’s been downhill ever since and there are a lot of people who have been happy to see the world’s only superpower slip into debt and be led by a fool who cannot distinguish its friends from its enemies.

The headlines of articles in the Journal’s weekend edition are worth thinking about.

• Deadline Drama Over Budget
• Farm Subsidies: Sacred Cows No More
• Obama’s Budget Aim Was to Stay Above the Fray
• Debt Ceiling Looms as Next Big Fight
• Activists Give Boehner a Nod of Approval
• Inflation Drives the Markets

In world news the headlines were:

• Egypt Rallies Swell Against Military
• Syria Kills at Least 20 Protesters
• Bahrain Divisions Grow, Fanning Fears
• Rebels Fight U.S. For Funds It Seized (Libya)
• Portugal’s Bailout to Require Deep Cuts

You can draw your own conclusions from this snapshot from last week, but for me it is a picture of a nation is serious trouble with a very unserious President in the Oval Office. Elsewhere in the world nations where Islam is the predominate religion appear to have wearied of the current crop of despots that have held all the power, but they have few other options than their military, part of the oppression, or Islam, another form of oppression.

In the Journal’s “World Watch” section with four short news items, one was about Secretary of Defense Robert Gates, in Iraq for a few days to discuss the scheduled departure of U.S. troops in December. He told the Iraqi leaders, “The U.S. is willing to stay beyond 2011, if invited.”

Unmentioned is the way Iraq’s Prime Minister, Nouri al-Maliki, has centralized all power in his office and his cabinet. The parliament has been stripped of its participation in setting policy. Some might call that a dictatorship. Little changes in the Middle East except the players. As often as not, the choice is between the bad and the worse.

I think it is time America stop trying to solve everyone else’s problems and begin to pay some serious attention to our own. It will be painful. From 1776 when the American Revolution commenced through to June 21, 1788 when the Constitution became official there never was a year when Americans did not face painful choices.

The Civil War was painful. The hundred years of segregation that followed was painful. The Great Depression from 1929 until the beginning of our participation in World War Two in 1941 was painful. In 1945 all we wanted was peace, but the specter of communism forced us to enter upon a near half century of Cold War until the Soviet Union collapsed.

We will not be of much use to the rest of the world if we do not put our own house in order. We will have betrayed our children and grandchildren if we do not. Last week’s headlines about our domestic affairs began in the wake of the Great Depression when the nation turned to socialism. It was continued by the generation of the 1960s and by their children.

It must end before America too suffers the fate of failed empires and failed states.

© Alan Caruba, 2011

Pie Chart

The Fog of Numbers

By Alan Caruba

There are several reasons why Rep. Paul Ryan and his fellow Republicans in Congress want to cut four trillion dollars from the 2012 budget. Here are just four of them:

• The 1994-1996 Social Security Advisory Council

• The 1995 Bipartisan Commission on Entitlement and Tax Reform.

• The 1999 National Bipartisan Commission on the Future of Medicare

• The December 2010 bipartisan Commission on Fiscal Responsibility and Reform.

Most of us have heard of “the fog of war” in which the participants have difficulty finding the enemy, get disconnected from their own lines, suffer “friendly fire” deaths because of the confusion of the battlefield, and must contend with the awful fear that war embodies.

Lately, I’ve been thinking about the fog of numbers as Americans struggle to understand just how seriously our entire national economy is threatened. Like some weird kabuki theatre, we watch politicians engage in insane disputes over cutting a few billion from the torrent of spending and borrowing that has got us to this point.

In late March, the Cato Institute published Policy Analysis No. 673, authored by Michael Tanner. The title was “Bankrupt: Entitlements and the Federal Budget.” I grant you this does not have the enticement of an article about Charlie Sheen or Kim Kardashian, but it does have the mordant power of reading one’s own obituary in advance.

Tanner begins by noting that the U.S. government “is about to exceed its statutory debt limit of $14.3 trillion” noting that “if one considers the unfunded liabilities of programs such as Medicare and Social Security, the true national debt could run as high as $119.5 trillion.

To put this in perspective, the entire annual gross domestic product, GDP, of the United States is about $14 trillion, so the debt limit means that the government needs every single dollar earned from the sale of all products and services just to meet its current debt limit. Some limit! And Congress will have to increase it in order to avoid having the U.S. default on the trillions it has borrowed.

Starting with the Roosevelt era during the Great Depression Congress looked for “a safety net” that would protect seniors who had worked their entire life. The answer was Social Security, but at the time, most people died well before the payback began at age 65. The government got to keep all the money they were required to pay in. What no one anticipated was that people in 2010 would have a life expectancy of 78 years of age and many lived well into their 80s and 90s.

This was followed by Medicare, an expansion of the Social Security program to provide health insurance coverage to people 65 and over or for those meeting other special criteria. It was signed into law on July 30, 1965 by Lyndon B. Johnson, famed for the failed “War on Poverty” and the failed Vietnam War which he escalated while in office.

Now add to those programs the fact that the Bush43 and Obama presidencies “have been the two most profligate political eras of modern times. Federal government spending has nearly doubled over the last ten years. As a result, we now face budget deficits that are unprecedented in the post-World War II era.”

A deficit is the difference between the revenue the government takes in and what it pays out. “In Fiscal Year 2011, the federal government will spend $1.65 trillion more than it takes in…this represents the second largest budget deficit in the last 65 years.”

You will hear that the cost of the wars we have been fighting since 9/11 is to blame, but those coasts are in actuality “only a small fraction of the deficits.” What you probably have heard is that government workers are actually making more money than those employed in the private sector.

Here, too, the numbers are scary. Those employed producing goods of all kinds peaked in 2000 at 24.6 million. By 2007 the numbers for government works and private sector workers were about equal at 22.2 million. By March 2010 the private sector workers had decreased to 18.6 million, but the government employees had increased. We are reaching a point where too few people are making things and they are being taxed to pay for government workers who push paper.

These are numbers worth keeping in mind as we begin the early stages of the 2012 election campaigns and we watch the present Congress address an unsustainable situation created by previous congresses going back to the 1930s.

The Republican caucus will announce its budget and it will seek to trim trillions over the next decade. That’s all to the good, but it may not be enough if government continues to grow and continues to spend.

© Alan Caruba, 2011