Government Shutdown? If Only!

Tuesday, October 1, AD 2013

government-shutdown

 

Well, time for a phony government shutdown.  I say phony because all essential, and many non-essential, functions of government will keep ticking away.  The media will be filled with pictures of the Statue of Liberty being shut down and commentators damning Republican members for their “intransigence” in not recognizing that every whim of Obama is eternal law.  All humbug.

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4 Responses to Government Shutdown? If Only!

  • I saw this heart-wrenching story in the NY Times yesterday:
    For the Washington Area, a Second Lightning Strike
    http://www.nytimes.com/2013/09/30/us/politics/government-shutdown-would-hurt-economy-of-washington-area.html?hpw

    “When it became clear sequestration wasn’t going to be resolved, we stopped putting money in the kids’ college fund and put it in an emergency fund,” Mr. Nudd said, adding that he had started looking for a job outside the government. “We’ve cut back on a number of things. We canceled cable, we got rid of our land line, we cut out luxuries, the housekeeper’s not coming — things like that.”

    Boo [expletive] hoo.
    Company towns have been dying all over the country for decades — at least government can’t be outsourced overseas — or can it?

    “After three years of frozen pay, unpaid furloughs, huge increases in retirement costs for new employees and the threat of massive layoffs at the Department of Defense and elsewhere, Congress and the administration need to keep their hands off of federal employees once and for all,” said J. David Cox, the national president of the American Federation of Government Employees, which represents about 650,000 federal employees.

    Gee, and you mock Tea Partiers with signs telling the gov’t “keep your hands off my Medicare”.

  • “For the Washington Area, a Second Lightning Strike:”

    Not so!

    In fact, US median household income has dropped 7% from 2006 to 2012. Meanwhile, DC median household income has soared 23%.

    I need to go to DC two or three times a year. Unlike the rest of us, the the restaurants and saloons are packed, housing prices are near 2006 bubble highs, and everywhere you look are cranes and new construction.

    Last one out, pull the plug.

  • There is no crisis.

    “The U.S. 10-year yield increased four basis points, or 0.04 percentage point, to 2.65 percent at 5 p.m. New York time, according to Bloomberg Bond Trader prices. The price of the 2.5 percent security due in August 2023 fell 11/32, or $3.44 per $1,000 face amount, to 98 22/32. The yield rose as high as 2.66 percent. It dropped yesterday to 2.59 percent, the lowest since Aug. 12”

  • “Targeted” cuts– to make sure that folks notice the shutdown.

    On the upside, they’re being so obnoxious that it’s annoying folks, and even NPR has pointed out that the gov’t has shut down more than a dozen times in the “youth vote’s” lifetime.

2 Responses to Not An April Fools’ Day Joke, But It Should Be

  • “The Greatest Show on Earth”
    One problem.
    We’re the suckers.
    How do we Occupy Washington?
    How do we get 90% + taxpayers to Stop shelling out $ to fund this big top show?
    How do we get the stink out of the tent?

    Sorry folks. It’s this hypocrisy from D.C. that makes me want to demand a refund from the smiling ring leader and his circus clowns.

  • Well, Nancy Pelosi and the president have both declared that “we (that is,
    they) don’t have a spending problem”. Which explains why this administration
    has yet to pass a budget for itself.

    To paraphrase the late Leona Helmsley, “budgets are for little people”.

    Time for me to get back to work.

Illinois Taught Obama All He Knows About Governing

Sunday, January 27, AD 2013

8 Responses to Illinois Taught Obama All He Knows About Governing

  • Silver Lining Department:

    IL is number one in horseradish production.

    And, with a little effort, IL can improve its number three ranking (behind CA and NY) in the “most politically corrupt state” category.

  • What’s worse is that the pension liability problem COULD be alleviated considerably, were it not for the fact that IL has become so dependent upon short-term borrowing that when the bond houses say “jump,” we have no choice but to say “how high”? For this reason alone, some common-sense measures that wouldn’t risk massively expensive legal action are kept off the table.

    The unfunded pension liability is a problem that didn’t develop overnight (it’s been around for decades), can’t be blamed entirely on any one person, party or group of people, and can’t be solved overnight without doing considerable injustice to retirees, taxpayers, or both. The reasons for this are kind of complicated and I can explain them in later posts if anyone is interested.

  • ….more silver lining; University of St. Mary of the Lake in Mundelein IL. And Marytown.

    My point is ” where sin abounds grace abounds all the more.” One of the greatest retreat centers is Marytown. Perpetual Eucharistic Adoration for over 85 years in this Holy sanctuary. IL. has it’s challenges sure, but it also has sacred homes that Abe would be lifting his head and heart to.

  • I was not aware that he ever learned anything moral about governing.

  • Aside from the fiscal lunacy and greedy corruption:
    Chicago has a Life Dept. !
    Hope for IL in an organized, spirited group in numbers that could probably fill two buses. My group was uplifted by walking near them for a time on Friday afternoon on Constitution Ave. with the snow beginning to fall. I’ll try to describe, although the impact was their creative variety of chants, for which I wish I took notes.
    Yellow hooded sweatshirts with LIFE on the backs in white, arm emblems on the idea of fire or police depts. – red four petals with Chicago Life Dept. in center.
    A couple of drummers to accompany as if a march.
    An arch of yellow balloons and a couple of clustered ones.
    Led by a ‘boat’ with wheels that could be raised by a few people, made of sturdy branches with a platform for the chant leader, festooned with yellow balloons.
    They were spirited and singing out their messages for all around to hear. (Great for tired, cold ones around them … )
    They stopped at the steps to the Russell Senate Ofc. bldg., which sported a camera on the second floor balcony and guards on the roof.
    Being short on memorizing powers, I noted they had at least ten chants, as well as patriotic songs. There was: Hey, hey, ho, ho; Roe v. Wade has got to go. And from a rock song, We will, we will, Save you. Salve Regina – first verse.
    We tarried for a while, the sons and daughters of some in our group paying attention and talking about next year…
    I wonder where they stopped next, we had a bus waiting – schedules to follow.

  • Illinois Taught Obama All He Knows About Governing

    Well done, Don 😆

  • “Chicago has a Life Dept.”

    Wonder if they were the same group that staged a pro-life “flash mob” event in Daley Plaza a couple of years ago, coinciding with a Planned Parenthood “Walk for Choice” event, cultminating with a release of yellow “LIFE” balloons.

    http://wdtprs.com/blog/2011/02/chicago-pro-life-flash-mob/

  • PM-
    Thanks for the remembrance. The chant, We will Save you, is perfect. It is going to happen. The end of legalized abortions will take place.
    We must keep at it. Prayer and action.
    Thanks for sharing some of the event with us.

Of Trillion Dollar Coins, Prancing Unicorns and Paul Krugman

Tuesday, January 8, AD 2013

 

 

 

I have written before of a truly wacked out nostrum popular among bloggers on the Left in this country to have a coin minted with a trillion dollar value in order to “solve” the debt crisis.  Go here to read my post on the subject.  Now economist Paul Krugman, Nobel laureate and barking mad Leftist moonbat, has endorsed the proposal:

Enter the platinum coin. There’s a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector’s items — but that’s not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all.

So why not?

It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically. That may sound reasonable — if you’ve been living in a cave for the past four years.Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin.

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32 Responses to Of Trillion Dollar Coins, Prancing Unicorns and Paul Krugman

  • Actually, that authority (set the values of coins) is (Constitution) reserved to Congress.

    Common sense is subversion.

    Out of control class war spending led to ruinous deficits. Democrats and the lying, vile media/propaganda arm are running the country to the ground with ever more humongous government spending that requires ever more ruinous borrowing to fund ever more spending, etc. ad infinitum; and the Federal Reserve aids and abets this insanity as it keeps real interest rates negative and monetizes (prints dollars) the debt. This destroys the people’s wealth.

    Now, they want to coin a trillion dollar platinum piece to repay a part of the gargantuan debt: insane. How does this differ from printing a trillion bill?

    And, they are no better. Last week, the cowardly GOP refused to stop lunatic tax hikes but agreed to keep disastrous borrowing/spending.

    The truth is treason.

  • Pixie dust for everyone!
    If the imposters in Washington go through with this what could loom around the corner?
    Maybe a presidential wand that would transform Republicans into Democrats….wait, that already exists.

  • Oh! Paul krugman is a crazy person with credentials. That he was awarded a Nobel prize tells more about the Nobel prize than about the lunatic.

  • Krugman actually did do some very good academic work on trade and specialization which was the basis for his Nobel price, but he hasn’t done much of any real academic work in 10+ years, now he’s a talking head and an increasingly crazy one. That he is endorsing the trillion dollar coin idea is arguably a new low even for him.

    One of the deeply troubling things is that this line of thinking (that it’s utterly hopeless to try to govern the country in cooperation with the opposing party so it’s better to look for ways to subvert the law in order to govern without dealing with the other half of the country) has become increasingly standard on the left in recent years.

  • “(that it’s utterly hopeless to try to govern the country in cooperation with the opposing party so it’s better to look for ways to subvert the law in order to govern without dealing with the other half of the country) has become increasingly standard on the left in recent years.”

    A similar spirit prevailed in the latter half of the 1850’s Darwin. I trust we will benefit from our history during that cataclysmic time, but considering how widespread historical illiteracy is now I fear that such may not be the case.

  • And yet the US Treasury 10 year yield is 1.87% (1.31% after tax) and the 2-year is at 27 basis points.

    Given inflation at 1.8%, this means that people are prepared to pay for the privilege of lending money tot he US government, when they could buy investment grade corporate stocks at a forward earnings yield of 8%. They could even buy the S & P at a dividend yield of 2.2% (1.87% after tax) and a maximum tax rate of only 15%, against 30% for Treasuries and that does not count the rest of the earnings.

    Too much government debt? Investors obviously do not think so – Not if they are prepared to buy it at those sort of yields.

  • Krugman did some slipshod academic work on trade a few years back, that has been largely overtaken by game theory and microeconomic modeling. His theories revolved around countries erecting trade barriers on an item but never took into account that other countries might respond to those trade barriers. Then he started criticizing Bush in the NYT and won a Nobel prize.

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  • Not defending Krugman here, but what theory of money do you subscribe to Mr. McClarey? What about a trillion dollar coin is like a unicorn?

    I don’t like that it basically enables a way around the Congressional budgeting process, but I do like that it makes plain that the U.S. government, as a currency issuer, is much different than a household or EMU member–currency users.

    You must understand monetary operations of the Fed and Treasury before you compare them to mythical creatures.

    Doing so would also enable you to better guide public policy toward the common good. Instead, you are letting “leftists” use their better understanding of government monetary operations to seek their own purposes.

    It is not so much your philosophy that I quibble with, or your desire for less government, it is your understanding of money and particularly the monetary operations of currency issuers that I find lacking.

  • “What about a trillion dollar coin is like a unicorn?”

    They are both myths Alex. A trillion dollar coin does not create a trillion dollars of value. It merely adversely impacts the currency already in existence, which I believe is about a trillion, seven hundred billion. It puts us firmly on the path of Zimbabwe and Weimar Germany. Money supply cannot be divorced from economic strength, and attempts to do so are usually disastrous.

  • Someone had to be the first commenter that thinks the proposal has validity.

    Who will be paid with the $1,000,000,000,000 coin? China? the Fed? the Social Security Trust fund? And, who will accept it in exchange thereafter and for what amount of value?

    How is that different than printing a $1,000,000,000,000 paper greenback (not a Federal Reserve Note, denominations are not allowed of over a set amount)?

    An ounce of platinum is worth, I don’t know, say $900. BEing a gold bug: gold is about $1,650.

    How does stamping $1,000,000,000,000 on it make an ounce of plat worth/fair value more than $900 to a typically motivated, knowledgeable buyer?

    After WWI, France, et al imposed on Germany $34 billion in war reparations. The onerous debt was payable in gold or foreign currency so that Germany could not play the print paper marks/platinum/unicorn game. The debt led to Weimar inflation which contributed toi the rise of Hitler, the breakdown of German culture and morality, and WWII.

    I spent the past 36 years at high levels in the financial services industry. I know exactly how the banking, fiscal and monetary systems are supposed to work.

    I have no confidence that governments’ acceptance of paper/platinum in payment of taxes gives money value.

    Money (not US fiat) is a store of value which value is determined by typically motivated, knowledgeable/rational players in the economy each acting in his own best interests.

    Once the Federal Reserve Note (a debt instrimnent) loses the people’s confidence, it’s all over.

    Buy gold and silver; and pray that someone, somehow will save us from Obama’s and Bernanke’s sestructive economic policies.

  • That’s a lot to address, and it has been by MMT’ers. Most MMT’ers are progressives, but there are some who stick to descriptions of monetary operations and try to leave out the prescriptions. So please look into it from their perspective. They’ve studied the operations of the Fed and Treasury thoroughly and are quite aware of the potential for inflation and hyper inflation.

    Nothing about monetary operations is mythical. They may not always be the best for the common good, but they are very real. ‘Value’ is a philosophical musing and not one that can be answered exclusively by economic or material thinking. Money does not determine value, it is a measure of value, or rather an attempt at measuring value created by society. Just like inches measure distance, money measures debts and credits that facilitate trade of real things that we regard as having some value. So adding money (a la deficit spending or trillion dollar coins) without adding real goods can be inflationary, but only if that money uses up the real good capacity of the economy and then tries to use more. We will not have demand-pull inflation until then.

    Since we are below capacity and interest rates and inflation are historically low and haven’t budged, there is no reason to suspect hyperinflation any time soon, but that doesn’t mean we should ignore the possibility.

    If you want a healthy economy then you need a bigger deficit, you can even get smaller government by lowering spending and taxes and keep the deficit.

    Debt ceilings are arbitrary and useless. Debt-to-GDP ratio or overall level of debt does not matter for inflation, inflation depends on current spending vs. current capacity.

    Currency issuers can spend via trillion dollar coins, they are not mythical.

    Would you rather government spending serve the public purpose from the moral subjectivist point of view or would you rather it serve the public from the Catholic Social Teaching view of the common good?

    T. Shaw–
    The proposal has validity in that the White House can and will use it if necessary. That doesn’t mean it is necessarily a good thing, but it certainly isn’t a myth.

    Much of your claims are leftovers from the gold standard, which no longer exists. I regret that your 36 years of experience has not taught you otherwise.

    I come here and comment, not to trash your views, but to help you understand how monetary operations work, so that you can use that knowledge to better educate and pursue the common good. I feel quite alone as a Catholic in the MMT camp which is composed mostly of atheist, subjectivist, progressives. I share some of their desires, but contrast greatly with their philosophy and world views.

    We must understand money correctly to better make our case to the general public and to fellow Catholics and Christians who may be persuaded by progressives (with a correct understanding of money) because they care about about their own economic situation more than a good and moral society.

    We can have both a good society and a good economy, but only if we understand fiscal and monetary operations in a modern money society. Your understanding of money is outdated and no longer applies. I come in peace to share what I know so that we can work together.

    I engaged Darwin in a debate a little over a year ago over employment policy with the same intention. So please don’t dismiss me as a progressive trolling your blog. I read and comment because I care.

  • T. Shaw-
    “Your understanding of money is outdated and no longer applies.”
    I’ll use those exact words if I decide to stop paying on my loan.
    I’ll tell them Alex sez it’s all good.
    We have the “obamacoin.”

    The old adage applies: “If it sounds to good to be true it probably is.”

  • Alex-
    You sound sincere. How does it help the common good to use a loophole (coin) to wave away real debt. What are we teaching our future responsible citizens?

  • Alex,

    I desire the Virtue of Patience (Fourth Sorrowful Mystery – The Carrying of the Cross).

    The unicorn metaphor is less apt than the “ostrich head in the sand” metaphor.

    The hole they’ve dug is very deep. Some consequences are too horrid to contemplate. There is no easy, painless solution. There will be some sort of “great reset.” It could be apocalyptic.

    At some point the pedal hits the metal. The rubber meets the road.

    Think Zimbabwe.

    Think central planning, central control, and command economy. And, ponder how well that worked everywhere it was imposed.

    They abandoned the gold standard (invented by Isaac Newton: he also invented Calculus) and US inflation went ballistic (think jet fighter climbing near vertical). That’s an exaggeration.

    They replaced the GS with the PhD/idiot politician standard.

    We are going to learn (the hard way) that the delusions of credentialed crazy men and dishonest/idiotic politicians will be far worse for the common good than the GS and free market.

    Obama and his gang have pretty much destroyed everything: the economy, the dollar, the culture, common morals, and tragically the ties that once bound us as a nation.

    Eat, drink and be merry for in the near term the SHTF.

    If Obama (save us!) deigns in his plenipotentiary power, for the common good (the alibi of all tyrants) to coin a trillion dollar coin, will the coin weigh, say, 1,000,000,000 troy ounces, or will the market value of platinium meteorically rise to $1,000,000,000,000 a troy ounce?

    Er, why waste the platinum, just print a trillion-dollar bill. Put Michelle’s face on it.

    How do destroying the private sectior and debauching the currency advance the common good?

    I think your professors are ideologues (use “truth” to advance their opinions) and not scholars (seek the absolute truth).

    Here’s the reason they’re 24/7 talking about gun control and not the coming economic zombie apocalypse. The USA credit rating is AA- (when Egan-Jones dropped it from AA in Sep 2012 when they announced QEternity). That means the likelihood of a US default is about 10,000 times more likely than you will be shot by an assault weapon.

  • philip–
    your debt and the debt of the currency issuer are much different operationally. Currency issuers can always pay their debts denominated in the currency that they issue. Your not an issuer of the dollar, and so you don’t have that same ability. Being financially responsible means different things for currency users and currency issuers.

    There is no necessary financial constraint to a better economy. (Inflation is a real phenomenon not a nominal phenomenon. It comes when there isn’t enough capacity to meet aggregate demand). This isn’t “too good to be true”. Unemployment and low growth because of low demand is unnecessary, or is rather created by the currency issuer taxing too much for how much they spend. This doesn’t mean the end of suffering, or that we can have whatever we want, but it does mean that we don’t have to suffer from a poor economy induced by lack of demand.

    I am not in favor of the coin, but would prefer it to needlessly and voluntarily defaulting on our financial obligations. I would rather Congress repeal the debt ceiling as it serves no (economic) purpose and decide on a budget together. I would rather see lower taxes, especially highly regressive payroll taxes, and lower overall spending, especially in defense, with more spending on what government does best–infrastructure. It is not good to have to unilaterally use a loophole to prevent economic catastrophe, but neither is it good to cause it needlessly because we can’t get along or agree on anything.

    The common good involves both morality and economics, among other things. I find that leftists often care less about morality and conservatives want morally responsible economics but don’t understand just what exactly that means–mostly because of their poor understanding of monetary operations.

  • T. Shaw–

    You use a lot of metaphors and so it can be hard to know exactly just what you are saying. We can see inflation coming before it gets anywhere close to hyperinflation and have the tools to prevent it just as we have the tools to boost aggregate demand when it is low.

    We abandoned the gold standard because of the volatility it caused financial markets and the economy as a whole. The free market is way more unstable with a gold standard and without fiscal stabilizers.

    I, too, think many politicians and phD’s aren’t very bright or have some ulterior motives. Neither are very comforting.

    The coin is platinum because that’s what the loophole allows, at least that’s my understanding of it, but that doesn’t mean it will use $1 trillion dollars worth of platinum. No coin in the US is worth its weight in whatever metal its made out of–nominal value of coin doesn’t have to equal its real value. A trillion dollar platinum coin won’t do anything to the price of platinum.

    My professors may be ideologues, but they do have the monetary system right. Maybe as a scholar you should seriously consider learning it too so that we can pursue truth together and not let ideologues steer the country toward their end.

    I don’t know why you bring guns into this, but the probability of US default is zero, unless they voluntarily declare it (for example, by not minting the coin and not repealing the debt ceiling and thus hitting the ceiling) which I will grant you seems sort of likely, which is quite unfortunate since it is so unnecessary.

    As an aside, I must say that you speak in lots of hyperbole, so it is hard to take you seriously. I don’t know your profession and I know this is just a blog, not a paper, but as a teacher, I penalize my students heavily for speaking/writing in hyperbole. It is a tactic for fear-mongering or hate-mongering, and I do not tolerate it or respect it at all.

  • It is worth bearing in mind that there is no difference in principle between a government’s bond issue and its issue of currency notes, except that the latter are issued in smaller denominations and pay no interest to the holder.

    The central bank’s note issue is wholly or largely backed with government bonds and the more it holds, the more notes it can issue; in other words, it can print the notes necessary to cover the cost of purchasing the bonds.

    Besides, fractional reserve banking means that currency is the small change of commerce; the note issue has very little to do with the money supply.

  • Obama is President because George Bush ran up the debt with two unfunded wars, unfunded Medicare part B, and a tax cut for the wealthy. The “damage” has been surveyed. I think between you and Krugman I will go with the Nobel Prize winner. Some of these comments are funny, “He really hasn’t done much since…”. Can you say arm chair quarter back? There is a reason he writes for the times and you are writing a blog. Haha! The fed has had their boot on our neck since 1913. Only sheeple would hear the coin idea and freak out and sweat their panties wet. The money has ALREADY BEEN SPENT. IT’S ALREADY BEEN SPENT. What they are arguing about is whether or not to write the check to pay the bills that have already been incurred. So the argument that this will increase inflation is RIDICULOUS. Our country did best when we issued our own currency. I think some of you need a serious history brush up lesson.

  • “Obama is President because George Bush ran up the debt with two unfunded wars, unfunded Medicare part B, and a tax cut for the wealthy.”

    The shelf life of blaming Bush for the bad Obama economy ran out last year.

    “I think between you and Krugman I will go with the Nobel Prize winner.”

    A man making an idiotic suggestion who has a Nobel Prize is still a man making an idiotic suggestion.

    “There is a reason he writes for the times and you are writing a blog.”

    His lack of sanity and/or the lack of sanity of the powers that be at the Times?

    “Only sheeple would hear the coin idea and freak out”

    Actually those who have even a cursory knowledge of economic history would view this idea as bizarre and completely destructive tp the economy.

    “So the argument that this will increase inflation is RIDICULOUS.”

    Of course. Creating a trillion dollars out of thin air could not be inflationary because the prancing unicorns radiate an anti-inflationary aura. It all makes logical sense.

    “I think some of you need a serious history brush up lesson.”

    I think you need your first history lesson. You might start with the fate of the Continental Currency, the Confederate Currency and contemporary Zimbabwe.

  • Alex,

    The problem with ideologues masquerading as scholars is they poison young minds. You know what to think, not how to think. If you had that faculty you would disbelieve any validity in a $1,000,000,000,000 platinum coin.

    If you could, think supply and demand.

    The governments you prefer can print fiat money and make the serfs use it. Also, they can line up serfs against walls and shoot. And, fly drone over them and zap. It’s all the same: raw, unlimited power.

    Central planning, central control and command economies are not metaphors, they are actual historical crimes against humanity, which produced massive misery wherever imposed.

    {I deleted my qualifications. You don’t have a need to know.}

    My advice: never leave the classroom.

    d says:

    “Obama is President because George Bush ran up the debt with two unfunded wars, unfunded Medicare part B, and a tax cut for the wealthy.”

    Points of information:

    In the year before the financial bailouts/crisis, the deficit was reduced to $164 billion. Since then, deficits have been $1 trillion plus for five years (unbeleivably continuing three years after the recession ended in June 2009).

    In fact, Obama pretty much persisted in doing that which did Bush. And, BHO ran against John McCain, not George W. Bush.

    In fact, the two wars were funded by Congressional resolutions.

    In fact, at the time Part B (a liberal wet dream) was imposed, Medicare cash inflows were higher than outflows. In order to fund Part B, Bush would have raised the Medicaid tax. Are you in favor of higher payroll taxes?

    In fact, 85% of the Bush tax cuts benefited lower earners’ tax brackets (percentages). From day one, the shrieks of “Bush tax cuts for the rich” were compete lies fomented by lying, vile scum/journolists and only believed by Obama-worshiping idiots.

  • Flash from Tyler Durden at Zerohedge: The Central Bank of Mars has expressed interest in purchasing 100, $1,000,000,000,000.00 US platinum coins.

    “A small cadre of analysts suspect the Martian Central Bank naively believes the fantasy that the arbitrary creation of assets, either via platinum coins or electronic entries in the Federal Reserve’s balance sheet, creates actual value. Though this credulity borders on the fantastic, these analysts point to the many commentators in the U.S. who have bought into the platinum coin fantasy. If Paul Krugman et al. have swallowed the fantasy that something of real value can be created from nothing, then why not the Martian Central Bank?”

  • Interesting “Ace of Spades” read: “Enron and the Trillion Dollar Coin.”

    http://ace.mu.nu/archives/336406.php

  • Alinsky Rule #5:

    Recent Frank J. Fleming Tweet: “Mint a bunch of trillion$ coins and give 3 to the elven kings, 7 to the dwarf lords, and 9 to mortal men to rule them all!”

    I promise. I’ll stop, now.

  • T. Shaw–
    I do not know why you are so hostile.

    I reject the idea that I know only ‘what to think’, unless you think that my education at well respected Benedictine College taught me nothing.

    I also don’t accept everything my professors teach me–I am not an atheist, I am not a Marxist, and I am not a pragmatist. I am quite critical of all three.

    Despite my professors’ beliefs or ideologies, they are quite good at being open to competing ideas–I am the fourth student in the past 5 years to be writing a dissertation on Catholic Social Teaching at UMKC.

    So you can reject them and me out of hand if you like, but it doesn’t change the fact that you are wrong about money and until you take understanding it more seriously, you will be just an ideologue.

    I care too much to follow your advice. I will teach both in and out of the classroom.

  • It perhaps would take a while to go through all of your links. I find it interesting that the two page brief on CST linked at your site mentions nothing of the rights of people not to be made dependent on the govt., that excessive taxation not be placed on people, that subsidiarity is a function of lower levels of govt. and not of groups of persons and makes no mention that the rights of unions are limited by the common good.

    Another link talks about the errors to the “naturalistic” approach of, what is, Aquinas. Instead citing the integrated approach of De Lubac. Of course there are many, many theologians that think that De Lubac, and the political course that some take on these errors, is fundamentally wrong. In fact it seems that there is much left out that is in CST and that ultimately may be false in Catholic theology.

    Thus it seems that one may find your conclusions on a platinum trillion dollar coin to be only a prudential judgment of CST and perhaps even only marginally supported by Catholic theology.

  • Alex,

    I apologize. But, you commented that I don’t know squat.

    I don’t mean to reject you.

    I reject the Trillion Dollar Coin trope; and, concomitantly, anyone that thinks there is an iota of validity to this outrageous scam.

    Think the United States of Enron.

    Here goes.

    It is a tyrannical/unlimited government executive branch power-grab wherein the Executive, with no check or balance from the Legislative or the Judiciary, creates/prints one trillion in fiat money/Federal Reserve Notes/green confetti; exceeds the Congressionally-enacted legal debt limt, has another trillion to pay for power; etc.

    And, here is how it works to debase the currency and destroy the middle class.

    The President instructs the Secy. of the Treasury to mint a one-ounce platinum coin with $1 trillion stamped thereon. That piece of platinum (worth, say, $900 in the free market) is deposited at the Fed Bank of NY: debit cash, credit UST checking account. That is the same as when you deposit $900 in cash to your checking account, except you actually give your bank $900 in hard-earned cash. Here, again, the FRB credited the Treasury with $1,000,000,000,000 to spend from the Fed UST checking a/c for a deposited $900 piece of platinum. The Treasury then spends/distributes the $1 trillion to Federal agencies which spend it/give it to polkitically connected banks, crony capitalists and dependents. And, a $trillion more confetti is in the economy: almost none goes to the middle class .

    Here is how this destroys the middle class: largely, they don’t get any of the money (the politticially connected, lobbysists, super-rich, banks, and government dependents get the trillions) but if you earn what you eat, drive with or heat your home with prices rise (B.B. median family income declined each year since Obama took over). Each month more middle class families are ruined. They are going to runout of taxpayers.

    POOF! $1 trillion cash in the market place is created out of thin air. The same thing happens when the Fed directly (monetizes the debt) buys UST securities; debit UST security, credit UST checking account. Alternatively, Obama could order the Secy to print a $1 trillion FR Note OR print 1,000,000,000,000 ones. It’s all the same: printing money out of thin air.

    I don’t reject you. But, I can’t help noting your inability to recognize this massive excrement sandwich.

  • T Shaw

    But “monetising the debt” is simply substituting one instrument of debt for another.

    As I said earlier, there is no difference between a government bond and a currency note, except one pays interest and the other does not. Both are equally government liabilities

  • Michael PS:

    Absolutely, agree.

    The issues are inflation and somehow paying government liabilities.

    We do not have a convertible currency/government debt instruments, aka, liabilities, i.e., one that can be exchanged/redeemed by the issuer for something of value like gold or silver; or land.

    When they stopped issuing greenbacks, early in the last century, they exclusively went to Federal Reserve Notes. They also stopped redeeming “dollars” with UST debt instruments (instead of gold).

    So what backs the buck? Pick one or more: the “full faith and credit of the US Government” (power to issue more debt and confiscate/tax); and its power to print/coin and circulate ad infintum: like a trillion dollar ($900) coin.

    In addition, “monetising the debt” is much more than substituting one debt instrument for another. It is also creation of one debt instrument with another that is used as the national medium of exchange. If it” was substitution, there would be no increase in the amount of outstanding debt or dollars in the economy.

    This increase in “government liabilities” (likley soon to be green confetti) that are running about in the economy: adds inflationary pressures, which have been held in check because little of this created money gets into the hands of the middle class, whose median income is declining. Go figure.

    It’s similar to what happened in the recent housing bubble. Say you had a home with a $200,000 mortgage. The RE agent tells you your house is worth $600,000 and you can substitute your $200,000 mortgage note with a $500,000 mortgage note. If you did, you substituted that debt and put $300,000 in your picket to spend on a lake house, a yacht, BMW’s, etc. The probkem arises if you couldn’t afford the payments on $500,000 debt. Only difference from the US is you cannot repay the note with scrip your print.

  • T Shaw

    Nothing shows this more clearly than the Bank Return, issued by the Bank of England, every Thursday

    http://www.bankofengland.co.uk/publications/Documents/bankreturn/2013/130109ids.pdf

    The more Ways & Means Advances and Bonds & other securities are increased, the more notes can be issued.

    The converse is also true. Notes in circulation can be reduced by selling securities or other assets and holding the proceeds in the Banking Department.

    Also, compare the total note issue of £58bn with, say, the liabilities of Barclay’s Bank alone of £1,498bn – 25 times the whole of the note issue. RBS’s balance sheet is similar.

    That is what I mean by calling the currency (notes and coins) the small change of commerce.

  • Michael PS:

    Best regards,

    You and I cannot affect the decisions taken by unlimited/unchecked governments. We can rationally act in our own best interests.

    I’m overjoyed each day to roll out of bed, say my prayers, and note that the plumbing and etc. are still working.

The Actual Fiscal Cliff

Wednesday, January 2, AD 2013

 

Well the so-called Fiscal Cliff was avoided through the mechanism that I predicted back in November:

 

What will happen I suspect is that the fiscal cliff will be avoided through taxes increasing on “the rich”, that will produce revenue that amounts to a rounding error in today’s federal budget, with completely illusory spending cuts.  In short, the can will be kicked down the road.  Unfortunately for the nation, the end of the road is almost here.

 

85 Republicans in the House voted for the Fiscal Cliff deal, and 151 voted against it.  The Deal passed courtesy of 172 Democrat votes in the House.

The main  terms of the agreement are as follows:

1.  The Bush tax cuts were made permanent for single filers below 400,000 and married filers below 450,000.

2.  The Alternative Minimum Tax has been permanently fixed by adjusting it for inflation.

(I would note that these portions of the deal should be considered as victories for the GOP.  Permanently extending the Bush tax cuts for 98% of the population takes away from Democrats the opportunity to use this as a stick against Republicans.  The Republicans have fought for a permanent inflation fix to the the Alternative Minimum Tax since it was first proposed in 1969.)

3.  Yet another showdown over mandated spending cuts was set up for two months down the road.

4.  The tax increases on those earning over 400,000 for single filers and 450,000 for married couple will bring in an estimated 35 billion a year.

5.  Capital gains tax will go from 15-20 percent on those earning 400,000 for single filers and 450,000 for married couples.

6.  The Estate Tax goes from 35%-40%.  (The estate tax only applies to estates over five million dollars.)

7.  Factoring in the estate tax increase and the capital gains tax increase estimated additional taxes come to 60 billion a year.  For comparison purposes the deficit last year was 1.2 trillion dollars.

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3 Responses to The Actual Fiscal Cliff

  • Folks,

    I am not trying to change the subject of this post, but I cannot resist asking: how much of the revenue from this fiscal crisis bill, if any, will go into making our country energy independent, thereby relieving us of the burden to get involved in wars of foreign adventurism to secure the steady supply of mineral slime from lands of Islamic fascism?

    We could build hundreds and hundreds of passively safe new nuclear power plants immune to events like Fukushima, Chernobyl and TMI, and use the energy therefrom to produce via either the Fischer–Tropsch process as much liquid hydrocarbon fuels from our abundant coal reserves or, via the silver iodine thermo-chemical process, as much hydrogen from water as we could possibly need for tens of thousands of years.

    Again, I cannot resist. Here is the GEH ESBWR (click on the triangle in the Media Gallery field at the following web link to watch the animation):

    http://www.ge-energy.com/products_and_services/products/nuclear_energy/esbwr_nuclear_reactor.jsp#

    Or the Westinghouse AP-1000 (the animation isn’t as polished, but just click on the triangle beneath the diagram to watch the passive core cooling system in action here):

    http://www.ap1000.westinghousenuclear.com/ap1000_psrs_pccs.html

    And to consume the long lived actinides from the used nuclear fuel (forever making long-term geologic repository a moot point), there’s the GEH PRISM (there’s only a PDF file on this; no really good animation that I have found so far):

    http://www.usnuclearenergy.org/PDF_Library/_GE_Hitachi%20_advanced_Recycling_Center_GNEP.pdf

    Low cost, safe, clean, abundant energy is a key prerequisite to economic prosperity. But what do we do? Tax and spend with no real planning for the future. There will be more wars for natural resources because of our greed. As St. Paul states in 1st Timothy 6:10, “For the love of money is a root of all kinds of evil.”

  • Mac,

    This is an outstanding post.

    Next, we can anticipate a USA credit-rating agency downgrade.

    Uncertainties and risks accompanying today’s stock market euphoria: annually $1,000,000,000,000.00 deficits/more debt, $60,000,000,000.00 more tax receipts. Does nothing to curb spending.

    This doesn’t improve the economic outlook. In couple months they will confront another debt ceiling fiasco – dems focus will be on tax increases: will target deductions, credits and so-called loop-holes. This will be adverse for the economy, cuts consumer spending and cash flows, it will not touch the real crisis: government spending; and likely America will go two months without being able to incur an additional dollar in debt courtesy of the debt ceiling.

    In conclusion, perpetual (Why still needed three years after the recession ended?) fiscal and monetary stimuli are unsafe, unsound, and unsustainable.

  • If I heard it correctly, the bill also enacts $1.5 billion of spending cuts per year, a ratio of 20:1. Republicans had been complaining about a plan that with a 1:5 ratio a few months ago. Nice job negotiating, fellas.

I am Shocked! Shocked!

Friday, December 21, AD 2012

In the Age of Obama, California under Governor Moonbeam is a reliable predictor of where the nation is headed:  Bankruptcy.

On Tuesday, California released a report that revealed state tax revenues have plummeted even further below Gov. Jerry Brown’s (D) estimates, even after residents voted to increase taxes via Proposition 30 in November’s elections.

At the end of November, “taxes were 3% short in the fiscal year that started in July,” which is “a gap of $936 million.” The state was 0.7% short a month before.

H.D. Palmer, a spokesman for the state’s Department of Finance, spun the poor numbers by saying Facebook’s stock vested earlier than expected, and “boosted October taxes higher, while decreasing November revenue.”

But the report found that tax revenues were below estimates nearly across the board, as total “year-to-date revenues are $936 million below the initial forecast.”

 

According to the report, personal income tax revenues were “$827 million below the month’s forecast of $4.387 billion.” Sales and use tax receipts “were $9 million below the month’s forecast of $1.601 billion” and the year-to-date sales tax revenue was $8 million below forecast.

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8 Responses to I am Shocked! Shocked!

  • McClarey, I love you! This is the funniest thing I’ve read all year!

  • I can’t take credit for finding this, as I was alerted to it by the Limbaugh show. The article is on “exit taxes” for people who move out of state.

    http://www.realclearmarkets.com/articles/2012/12/17/when_will_death_spiral_states_impose_taxes_on_fleeing_citizens_100047.html

    An honest person, though, might reasonably ask “Hey, why shouldn’t people have to pay exit taxes? They voted for the stuff.” Well, some of them anyway. I remember some years back this girl who came ’round to promote a Big Government Cause during the state elections season. She was refreshingly honest enough to admit she didn’t know much about the issue, didn’t know who was backing it, and didn’t really care. She was being paid to go door to door to destribute campaign info, then she was moving out of state soon to be “with [her] man.”

    It makes me think that maybe the “secret ballot” idea isn’t always so great, because we don’t know who voted to raise whose taxes, increase regulations, promote abotion, etc.

  • It is interesting to me that you blast “Governor Moonbeam” for his bad economics and yet you don’t understand the simple difference between a currency user and a currency issuer.

    Don’t be a hypocrite. Learn the difference. Know that a currency issuer cannot go bankrupt in its own currency.

  • “Don’t be a hypocrite. Learn the difference. Know that a currency issuer cannot go bankrupt in its own currency.”

    Don’t be a fool Alex, and please learn the meaning of the term “hypocrite”. I spend a fair amount of my time dealing with bankruptcy cases. Neither California, unless Congress amends the Bankruptcy Code, nor the nation are going to be filing a bankruptcy petition and going through formal bankrupty. If a State cannot pay its debts however in any realistic fashion over any conceivable timescale, it is bankrupt whether a formal bankruptcy petition can be filed or not. If a nation cannot conceivably pay its debts it really doesn’t matter if it can print endless amounts of what will eventually be worthless currency (think Zimbabwe). The idea that the Federal government can endlessly conjure money out of thin air forever at the rate we are currently doing so is a fable that is coming to a close. Reality always catches up with moonbeamism.

  • There are 11-or-so states including CA, IL, NY, NJ and CT on the fiscal death spiral (unlike Uncle Sam: states can’t print money, monkey with interest rates, or borrow without limit) where tax-takers outnumber taxpayers; and the accrued public pension liabilities are unfunded. Sane people would consider evacuating such economic disaster areas.

    We are going to live to see if the MIT/Princeton PhD’s (better people than the rest of us! or credentialed cretins) are correct in their dreamt-up/death planet-sized economic plots.

    Regarding the US path: think Weimar inflation and schusssss.

  • New York is not on a fiscal death spiral and is one of the few states with a fully funded system of public employee pensions. It has problems with budgeting for several reasons, chief among them that it has a split legislature.

  • Art,

    I love you, man. I live in NYS, too. But, not for long: Machine-gun Kelly and Midget Mike Bulmbung are turning it into a police state.

    Hey, I should be grateful.

    They gave me another opportunity to observe how I react amid sudden death – 23 Aug outside the Empire State Bldg., but that’s another topic.

    According to the November 2012 Forbes magazine, the NY ratio of tax-takers to taxpayers is 1.07. Ergo, NYS in on the death spiral list.

    “Fully funded” public pension fund is in the “eye of the beholder.”

    I don’t want to bore anyone with the details.

  • “The article is on “exit taxes” for people who move out of state.”

    I’d almost suspect the author of the article is trying to “plant” the idea as a way of getting back at blue state residents for reelecting Obama, even though a lot of them (myself included) didn’t vote for him. If the state of Illinois is ever crazy enough to attempt this, I’ll just have to take up do-it-yourself rafting or hot air ballooning (like people used to do to escape communist countries).

Of Trillion Dollar Coins and Fiscal Lunacy

Friday, December 7, AD 2012

8 Responses to Of Trillion Dollar Coins and Fiscal Lunacy

  • Time to buy food for long-term storage.

  • Phillip,

    Amen!

    They can save the platinum. They don’t need to engrave two trillion bills, either. Ya’ know, it would have Saul Alinsky’s face on it!

    It’s all been 24/7 “Contol-P” at the Fed since 2008. In that time span, the Fed added approximately $2 trillion in assets and liabilities to its balance sheet.

    Now, they are in QEternity wherein each month, from now until the Second Coming of Christ, the Fed buys $40 billion in UST securities and $45 billion in MBS.

    It is all done “book entry.” The fed adds $40 billion to the UST’s checking account (liability) and adds $40 billion in UST securities to its assets. Voila!

    Weimar inflation – here we come.

    Liberals are idiots.

  • Minting two one-trillion dollar coins is thinking too small. I say, Fiant lucra!!

  • Inflation is usually the result of currency depreciation. The Federal Reserve steals from us by printing more money causing inflation. Further, they charge the US interest on US currency that it prints. The Federal Reserve Bank is a private corporation. Why is a private corporation allowed to print money or legal tender?

  • Three coins in the fountain…the fountain of youth….unicorns, unicorns!! It’s great to be a liberal.

  • But will the Chinese be happy with that?

  • As long as each coin weighs 18,275 tons, it’ll work just fine.

  • I’m sort-a interested in parallels between Obama’s/Geithner’s/Bernanke’s impending currency catastrophe and Weimar hyper-inflation. We may lower expectations catch up to Zimbabwe.

    In 1918, a German one mark gold coin was worth one mark. Brilliant, Shaw! Take another shot of Jameson’s.

    In 1923, that gold mark coin could be exchanged for 1,000,000,000 paper marks.

Obamanomics: Trillions for Nothing

Saturday, September 15, AD 2012

 

 

Another fine, and timely, econ 101 video from the Center for Freedom and Prosperity.  When future historians write the history of the Obama administration, and what a sad farce that tale will consist of, I think they will stand aghast at all the borrowed money poured out by the Federal government with virtually zero positive impact on the economy.  In regard to Keynsian economics, the Obama administration is proof that one of Karl Marx’s maxims has proven to be a largely accurate observation on human affairs:  Hegel remarks somewhere that all facts and personages of great importance in world history occur, as it were, twice. He forgot to add: the first time as tragedy, the second as farce.

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6 Responses to Obamanomics: Trillions for Nothing

  • Keynes v Hayek – What a brilliant piece of parody.
    Couldn’t help smiling about the Security guard at the door doubling as a proctocologist 🙂

    Listening to what Friedman said, its a pity Keynes didn’t live a little longer. In any event, people take what they want from those who propound theories and become famous, and use those pieces of the theory to suit their own ends, whether or not they fully understand them.
    Greetings, Mr. Obama.

  • Don the Kiwi:

    Greetings from occupied America.

    Re: proctology. I did my post-doctoral field work reading “vox nova” blog. Thank Heaven I don’t need to do it any longer.

    I read that late in his career, Keynes attended a conference of economics egg-heads. He said that he was the only one present that wasn’t a “Keynesian.”

    Keynes would have had Obama and progressives pegged: “How anybody, or any system, so dull and illogical could have exercised such influence over so many . . . ” will be a subject for future historians, or space aliens exploring the ruins of mankind.

  • There is one way federal spending can have stimulative effect on the economy and that is increasing defense spending. Before I go any further. I must issue the big fat disclaimer that I work for the DoD (Navy exactly) as a civlian employee.

    But the defense department is the only federal agency that creates meaningful private sector jobs. I mean the military doesn’t build its own tanks, planes or ships. Or even guns bullets, vests, or even uniforms. And we need a much bigger military, especially a bigger blue water Navy. Our enemies are on the move militarily, China is growing its blue water Navy while we are cutting ours to the bone. Russia is on the move and of course Iran is nuking up. Serving this need would provide a much needed boost to our economy, especially in areas where there is a concentration of military bases and where there are manufactuers of military equipment. There is actually some historical precedent for this: it was the WWII ramp up of military production that brought us out of the Depression, not FDR’s New Deal, which actually prolonged the Depression.

    Now, there would be some side effects to this. One, would be waste. After 28 years in the DoD employ, if you include my eight years of active duty in the Navy, I know a thing or two about waste in the defense department. After all, it is part of the Federal Government. The other is an increase of federal employees in the DoD. But the net benefit will be well worth it.

    Unfortunately. this is something even Paul Ryan doesn’t seem to understand. For him to talk about the need to cut defense spending in the same breath as entitlement reform during last year’s debt ceiling debate demonstrates this. The prospective 500 billion cut viz sequestration (thank you John Boehner and Barack Obama) in addition to the already draconian Obama cuts will not only have a chilling effect on security as well as our economy.

  • My father, who was a veteran of WWII and wisely frugal, often tried to explain ‘that is increasing defense spending’ because the ‘defense department is the only federal agency that creates meaningful private sector jobs.’ Honest work for honest pay. He was adamant that the business of government was to both improve the country’s travel ways for private economic pursuits and protect the country from waste and danger – and not its business to interfere in private lives. Everyone would have a chance to work and live because ‘money can’t grow on trees’.

    It is insane to give and lend bundles of nothing or borrow what can’t be repaid. Someone someday will not get what is coming to him and grow angry. The financial industry has jobs that are based on nothing real because there is no accounting for a government of broken or no budgets, insider personal gain/stealing, dishonesty, and so on. No concrete evidence or no policing. Look at some of the career politicians and their lifestyles – do they also need that paycheck ? If so much of our leaders’ time is spent campaigning for donations, then it proves they know the value of a dollar when it’s for personal gain.

    I agree that defense and interior are a place for job growth with substance.
    A minor example learned while working as auditor (bean counter) for an aerospace contractor:
    a widow wanted to stay home to raise her children so she fed and educated them by sewing plain bags for machined parts as an independent contractor. That enterprise amazed me.

    Old sound buildings are being closed just because the location and cost of rewiring and updating the facilities costs money. Instead, places with no character are built that cannot withstand time. Mall open and then close, while shops disappear.
    Trees planted along highways are being strangled and killed by vines that could easily be managed by workers. Schools – unspeakable waste. On it goes everywhere that has a skyrocketing cost.

    I can almost hear him as to the 2012 wreckage. His generation had kids who rebelled, took a left turn, are making laws and demanding to be tolerated – but can’t manage to do the same.

  • “Eat when you’re hungry.
    Drink when you’re dry.
    If the sky don’t fall in,
    You’ll live ’til you die.”

    From Zerohedge (warning: pervasive bearish sentiment) blog:

    “Marc Faber, . . . , remains very bullish on gold. In another excellent Bloomberg interview, Faber said that ‘the trend for gold prices will be steady but the trend for the dollar and other currencies will be down. So in other words gold in dollar terms will trend higher.’ ‘How high it will go, you will have to call Mr Bernanke and at the Fed there are other people who actually make Mr Bernanke look like a hawk and so they are going to print money.’ Faber is on record as to the importance of owning physical gold and he again warned about the importance of owning gold but not storing it in the U.S. ‘You ought to own some gold but don’t store it in the U.S., the Fed will take it away from you one day,’ Faber astutely noted. He said that Bernanke is a money printer and this could lead to massive inflation and the Dow Jones at 20,000, 50,000 or 10 million. Faber cheerily predicted that the ‘the Federal Reserve’s monetary policy will destroy the world’ and ‘eventually we will have a systemic crisis and everything will collapse.’”

    N.B. the prophesied confiscations. It would not be limited to gold. Your IRA and 401k are in their sights.

    Pray for the best. Prepare for the worst.

    Cheers!

Watch Illinois…And Do The Reverse

Friday, April 27, AD 2012

My beloved State of Illinois is a shining example of what not to do if a state wishes to be prosperous, cursed as it is with probably the worst state government in the Union.  George Will sums up the state of my State in a column this week:

After trying to tax Illinois to governmental solvency and economic dynamism, Pat Quinn, a Democrat who has been governor since 2009, now says “our rendezvous with reality has arrived.”

Actually, Illinois is still reality-averse, so Americans may soon learn the importance of the freedom to fail in a system of competitive federalism.

Illinois was more heavily taxed than its five contiguous states (Indiana, Kentucky, Missouri, Iowa, Wisconsin) even before January 2011, when Quinn got a lame duck Legislature (its successor has fewer Democrats) to raise corporate taxes 30% (from 7.3% to 9.5%), giving Illinois one of the highest state corporate taxes, and the fourth-highest combination of national and local corporate taxation in the industrialized world.

Since 2009, Quinn has spent more than $500 million in corporate welfare to bribe companies not to flee the tax environment he has created.

Quinn raised personal income taxes 67% (from 3% to 5%), adding about $1,040 to the tax burden of a family of four earning $60,000. Illinois’ unemployment rate increased faster than any other state’s in 2011.

Its pension system is the nation’s most underfunded, and the state has floated bond issues to finance pension contributions — borrowing money that someday must be repaid, to replace what should have been pension money it spent on immediate gratifications.

Go here to read the depressing rest.  Illinois is now rated A2 by Moody’s, the lowest credit rating of any state.  When it lowered Illinois’ bond rating Moody’s made the following observation:

Illinois’ general obligation bond rating was lowered to A2 from  A1 on January 6 because of the state’s failure last year to implement  solutions to its largest credit challenges: severe pension under-funding  and chronic bill-payment delays. It remains to be seen whether  the state has the political will to impose new pension reforms and other  measures that restore fiscal strength in the near term.

Not a chance.  No serious reforms will be undertaken until State payroll checks begin to bounce.  Illinois has the worst, most feckless political class in the country.  Louis XV, he of apres moi le deluge, was a dedicated reformer compared to the idiots, crooks and empty suits who misgovern the Land of Lincoln.

 

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46 Responses to Watch Illinois…And Do The Reverse

  • “No serious reforms will be undertaken until State payroll checks begin to bounce.”

    Actually, it’s more like “No serious reforms will be undertaken until the bond markets say “jump” and the State has no choice but to ask “How high?” because the State is so dependent upon short-term borrowing.

    The threat of a bond downgrade was sufficient to get pension plans changes for FUTURE employees (i.e. those hired after 1/1/11) rammed through the General Assembly and signed into law in less than a week last year, before the unions even had a chance to organize a serious protest.

    Now the threat of a further downgrade has Gov. Quinn proposing changes for CURRENT employees and retirees that include raising the retirement age for most state employees from 60 to 67 (That’s actually the age at which one CAN retire though not necessarily with the greatest possible benefits; many wait longer in order to maximize their benefits or get on Social Security or Medicare before retiring). Other possible changes include increasing the share of salary workers contribute to their pensions by 3 percentage points (the employee’s share will go up from 4% to 7% if you are in Social Security, and from 8% to 11% if you are not, like many teachers and university employees) and requiring retirees to pay for all or part of their health insurance.

    Of course, how much of this actually becomes law remains to be seen, as does how much of what DOES become law survives a court challenge based on the clause of the Illinois Constitution that says pensions are a contracted benefit that “cannot be diminished or impaired.”

    If nothing else, however, the proposal has already had one tangible effect: it’s gotten just about every state employee who is eligible to retire now but had been delaying for whatever reason, to consider getting out NOW while the getting is good. My own agency, which has less than 2 dozen people, has had 2 retire in the past year and there are 3 more getting ready to bail out if the pension plan is changed. If one of Quinn’s goals was to trigger a mass exodus of older and higher-paid state workers, he seems to be succeeding in spades.

  • I’ll bet Lincoln is spinning fast enough in his grave to turn a turbine big enough to provide enough power to make fossil fuels obsolete.

  • Meaningful fiscal reform will remain unlikely if the federal government makes
    bailouts an option for irresponsible states like Illinois. With this administration’s
    ties to Illinois, I’d say the politicians in that state have a reasonable expectation
    of not being made responsible for their poor choices.

    Even if a bailout never happens, the perception that the federal government
    would step in, that Illinois is ‘too big to fail’, acts as a drag on meaningful reform.

  • “the perception that the federal government would step in”

    Sorry, but I’m not seeing ANY such perception here on the ground in the Land of Lincoln. I think it MAY be finally starting to sink in that the bag of fiscal tricks is empty and we are on our own.

    A subtle but potentially significant clue: a bill has been introduced and sponsored by none other than powerful House Speaker Mike Madigan, that would abolish the current statutory obligation the State has to subsidize retiree health insurance. If passed and signed, the state COULD, legally, abandon retiree health insurance completely (currently, retirees get subsidized coverage based on their years of service; those who worked 20 years or more get a 100% subsidy and pay nothing for their health insurance).

    My suspicion is that since a direct attack on pension benefits may be hamstrung by the “no diminishment” clause in the State Constitution, the powers that be will instead use health insurance as the vehicle for pension reform. If all the current pension rules stay the same but retirees have to pay full freight for their health insurance, then no one in their right mind will retire until they are old enough to go on Medicare. This would in effect raise the baseline retirement age to at least 65 and prevent people from retiring in their mid to late 50s or early 60s under the current provisions — which is what’s really killing the pension system.

  • Illinois, like the countries of the Eurozone is in trouble. because it is unable to monetize its debt.

    After all, for a government with its own currency, such as the UK or USA, it is immaterial whether its debt is in the form of government bonds or banknotes, except that bank notes are issued in smaller denominations and pay no interest. It is simply exchanging one liability for another.

    Indeed, there is an advantage in replacing bonds with notes, as this increases inflation and erodes the real value of both domestic and foreign debt (providing it is denominated in the currency in question), as a comparison of the purchasing power of the pound or the dollar over the last hundred years will make abundantly plain.

  • George Will has absolutely no political motives. Nor does the Church hierarchy. Politics is the antithesis of Faith, at it best it is hypocritical; it’s only concern is self interest. To mix Faith with political agendas or parties ends with a corruption of Faith. To me it is becoming more and more evident in Catholic culture. A political ideology with a cover of religiousity. Trust in the Holy Spirit not in political motives.

  • Well, Pesqueira, I suppose you have a political agenda judging from these comments that I assume were left by you at the National Catholic Register:

    “Posted by Pesqueira on Friday, Apr 27, 2012 3:08 PM (EST):

    I found the Bishop’s remarks offensive.

    Posted by Pesqueira on Friday, Apr 27, 2012 3:23 PM (EST):

    In the name of the Holy Spirit, I found the Bishops remarks purposely inciting and offensive.”

    Read more: http://www.ncregister.com/daily-news/bishop-jenkys-assessment-of-religious-liberty-battle-raises-question-about/#ixzz1tMaKMSW2

    How you pulled in the Holy Spirit to support your opposition to Bishop Jenky’s comments attacking the HHS Mandate is beyond me, but I assume that you and the Holy Spirit, in your opinion, see eye to eye on politics.

  • I stand by my statements. Unlike some my Faith dictates not politics. Nor do I not hide an agenda or use my Faith to express a political opinions unlike some.

    My “beloved state” sounds designed to garner sympathy. Perhaps sympathy for a political agenda? Your words.

  • As far as the Bishops words, his defenders state he was alluding to a progression of a policy when comparing the President to Hitler and Stalin. Is the Bishop a prophet that he sees the future? If not he has maligned the President. Maligning someone is tantamount to bearing false witness, a mortal sin. I donot condone his statement. I do not stop anyone else from invoking the Holy Spirit. Perhaps if you were so certain of your rhetoric you not be so fearful about doing so.

  • My use of the phrase “beloved state” Pesqueira was to convey that I love my native state where I have lived all but three years of my life.

    “Unlike some my Faith dictates not politics. Nor do I not hide an agenda or use my Faith to express a political opinions unlike some.”

    Yep, just you and the Holy Spirit handing down the Truth from on high. Got it.

  • correction – Perhaps if you were so certain of your rhetoric you might not be so fearful about doing so.

    Thanks for the interest in my comments. I wish I could say the same.

  • “Perhaps if you were so certain of your rhetoric you not be so fearful about doing so.”

    I tend to think that my political opinions and those of God might not coincide, so I tend not to invoke the Holy Spirit when expressing a political opinion as you did. In regard to Bishop Jenky, he mentioned Hitler and Stalin as granting some churches tolerance as long as the churches limited themselves to performing religious services while the State is controling everything else. That is the type of religious freedom that Obama believes in.

  • I often invoke the name of the Holy Spirit in prayer. Do you have a problem with that?

  • “Thanks for the interest in my comments. I wish I could say the same.”

    You came to my blog Pesqueira and I did not seek you out. I assume you read the post you commented upon, so that indicates some interest on your part. As to your comments, yes I found them fascinating as I rarely see anyone invoking the Holy Spirit to lend support to what they are stating in a combox.

  • “I often invoke the name of the Holy Spirit in prayer. Do you have a problem with that?”

    Not at all Pesqueira. You were not praying however when you attacked the comments of Bishop Jenky and enlisted the Holy Spirit to support your statement.

  • “That is the type of religious freedom that Obama believes in.’

    I have no idea what President Obama believes in these regards. What I know is that the Constitution limits the power of the executive in many ways, one being term limits. Term limits would never allow any President to become a despot as implied by the Bishop.

    Religious freedom is also guaranteed by the Constitution so your argument that the President can supercede the Constitution is fear mongering.

  • “You were not praying however when you attacked the comments of Bishop Jenky and enlisted the Holy Spirit to support your statement.

    “That is the type of religious freedom that Obama believes in.”

    Assumptions on you part. You seem to think that you know what people are thinking.

  • Assumptions on you part. You seem to think that you know what people are thinking.

    It tells me something about a person when they make assumptions about people they do not know.

  • “Term limits would never allow any President to become a despot as implied by the Bishop. ”

    Obama is a symptom Pesqueira and not the disease. The mentality he reflects, that the Church must bend to whatever the State dictates, is very much alive among the elites in our society.

    “Religious freedom is also guaranteed by the Constitution so your argument that the President can supercede the Constitution is fear mongering.”

    Which is not an argument that I nor the Bishop have made Pesqueira. Our argument is that the HHS mandate violates the First Amendment. However, the fact that a law is unconstitutional is no guarantee that it will not be enforced. It was clearly unconstitional for the Supreme Court to overturn all laws against abortion in Roe v. Wade, but the Court did it nonetheless and deemed the laws to be unconstitional rather than the Court’s usurpation of power.

  • “Assumptions on you part. You seem to think that you know what people are thinking.”

    No, I know what Obama has done in this area and that is why I made my statement.

  • “It tells me something about a person when they make assumptions about people they do not know.”

    It tells me rather more when someone clearly has a political agenda, claims not to have a political agenda, and enlists the Holy Spirit to support that political agenda.

  • Just say in the name of the Holy Spirit I believe all that I have stated is not done for a political purpose as I have done. Much like testifying in a court of law, then I will believe you are sincere. If you can not do that I will continue to doubt your veracity.

    Stop with the accusations and assumptions.

  • Politics hiding behind religiousity.

  • “Just say in the name of the Holy Spirit I believe all that I have stated is not done for a political purpose as I have done.”

    No, for two reasons. First, because I believe it is near blasphemy to invoke the Holy Spirit in almost all political discussions, and your doing so I find extremely distasteful. Second, I have a political agenda. I want the State of Illinois to elect new leadership since the current political class has spent the State into near bankrupcy.

  • “Politics hiding behind religiousity.”

    Yes, Pesqueira, you really need to stop doing this.

  • “Obama is a symptom Pesqueira and not the disease. The mentality he reflects, that the Church must bend to whatever the State dictates, is very much alive among the elites in our society.”

    Sympoms of a disease. I am reminded of a glass house and a parable about a twig and a log. Sunlight is the best disinfectant. I make no apologies for expressing a truth and have no problems enlisting the protection of the Holy Spirit when doing so.

  • “Yes, Pesqueira, you really need to stop doing this.”

    You first.

  • “I make no apologies for expressing a truth and have no problems enlisting the protection of the Holy Spirit when doing so.”

    You expressed no truth, but rather an opinion. I doubt if the Holy Spirit has any interest in protecting your political opinions, but you obviously have a direct pipeline to what is on the mind of the Holy Spirit so perhaps I am mistaken.

  • “In the name of the Holy Spirit, I found the Bishops remarks purposely inciting and offensive.”

    Is this statement you consider political? I don’t see it.

  • “You first.”

    Truly a bizarre comment since you intervened in a combox discussion about a purely secular topic.

  • We all have a direct line, some chose not to use it. Tell me that’s not true.

  • “Is this statement you consider political? I don’t see it.”

    More is the pity.

  • “We all have a direct line, some chose not to use it. Tell me that’s not true.”

    On almost all political topics Pesqueira, it isn’t. The Holy Spirit has bigger fish to catch.

  • “Truly a bizarre comment since you intervened in a combox discussion about a purely secular topic.”

    Resorting to attacks again instead of defending your use of religiousity to promote a political agenda.

  • R”esorting to attacks again instead of defending your use of religiousity to promote a political agenda.”

    Nope, making a simple statement of fact. My post was on a purely secular issue and no one breathed a word about religion until your initial comment.

  • On almost all political topics Pesqueira, it isn’t. The Holy Spirit has bigger fish to catch.

    The Holy Spirit doesn’t care about the size of the fish. None too small.

  • “The Holy Spirit doesn’t care about the size of the fish. None too small.”

    I keep forgetting that the Holy Spirit guides your political stances, so I guess I will have to stand corrected.

  • Mac!

    Don’t you have something more pleasurable to do?

    Like cleaning out the gutters, or scouring the toilets?

    I’m watching ND Men’s (#4) Lacrosse play Syracuse on ESPNU.

  • After getting paid all week to argue T.Shaw, one would think that I would have my fill of it, but, alas, that is often not the case!

  • I get it.

    I get paid to annoy people, as necessary.

    Pity my poor wife.

    ND defense is excellent and the goalie has made two spectacular saves. Our Lady is ahead 4 – 0.

  • “I believe it is near blasphemy to invoke the Holy Spirit in almost all political discussions”

    Then Gov. Quinn himself might have skated pretty close when he said, in reference to the pension reform plan, “I know that I was put on earth to get this done.”

    http://articles.chicagotribune.com/2012-04-20/news/chi-quinn-wants-government-workers-to-pay-more-toward-retirement-20120420_1_state-pension-pat-quinn-today-pension-funding-crisis

  • Quinn and blasphemy are old drinking buddies Elaine:

    “Governor Quinn recently announced that, on November 17, he will be presenting an award during a luncheon sponsored by Personal PAC, a pro-abortion, non-partisan political action committee.

    Quinn’s argument in defense of his decision is that it is the “proper, Christian thing to do.” The female recipient, Jennie Goodman, to whom Quinn is presenting the award is a victim of rape who, according to Quinn, is a very strong advocate for helping women who have been sexually assaulted. But regardless of this woman’s heroism and desire to help other victims, the point is that even though Goodman did not have to choose to abort her own child because she did not get pregnant as a result of the rape, she associates herself with a state-wide pro-abortion organization. She appeared in a political ad prior to the last election, speaking out as a victim of rape and against the pro-life Republican running against Quinn. ”

    http://www.all.org/article/index/id/OTQ2OQ

  • Getting back on topic, consider this: the proposal that caused teacher’s unions all over the nation to go nuclear on Wisconsin Gov. Scott Walker was to have teachers START paying their 6.2% (of income) share of their pension instead of making local school districts pay that. In Illinois, teachers ALREADY contribute 8% or more (unless the local school district picks up the cost — some do, some don’t) and Quinn’s proposal would raise that to 11% or more. Also, Illinois teachers are NOT in the Social Security system, while (I think) Wisconsin teachers are. So tell me again, who’s the real bad guy here (from a labor union point of view)? Methinks the union protesters who turned out in Springfield to protest Gov. Walker’s speech to a business group should have focused their wrath a bit closer to home….

  • T Shaw.

    Mac!
    Don’t you have something more pleasureable to do?”

    Oh, I think, after a hard week plying his profession, Don was having some light relief fun, T Shaw. A bit like a cat playing with a mouse 😉

  • Pesqueira,

    If you do come back, I remind you that it is a cardinal sin to take the Lord’s name in vain specifically in support of one’s own idiosyncratic interpretations. It is a violation of the Second Commandment. Since Jesus Christ alluded to the terrible fate awaiting those who go against the Holy Spirit, I am rather afraid of Him and would counsel you not take these matters lightly.

  • Pesqueira

    “We all have a direct line, some chose not to use it. Tell me that’s not true.”

    As Joseph Butler, the celebrated Anglican divine, philosopher and apologist, as Bishop of Bristol said to John Wesley, the noted ranter and enthusiast, “Any pretension to revelations or gifts of the Holy Spirit is a horrid thing, sir, a very horrid thing.”

Financing Government Out of Thin Air

Monday, April 2, AD 2012

38 Responses to Financing Government Out of Thin Air

  • Insane – salaries to do this are cold, hard cash on the other hand. I wonder whether these geniuses use bank accounts.

  • It’s monitizing the debt.

    It is hyper-inflationary. It is actually printing more worthless paper.

    The Fed does not hold this paper and buy debt. It creates the paper from air.

    Buy gold. I sat through an economics PhD talk where he predicted $5 or $10,000 ounce gold, and $250 silver.

    Worse, very little gets to Main Street.

  • I’m going to look like an idiot but what is debt issued by the treasury? I don’t get what that means. Thank you.

  • I think these criticisms are off base. As Milton Friedman famously showed, it was the failure of the Federal Reserve to engage in similar activities that caused the Great Depression.

  • that creates the funds to purchase this debt by conjuring funds out of thin air. I have seen men go to prison for fraud schemes more fiscally sound than this. This will not end well.

    Regulating the dimensions of the monetary base (by purchasing securities with paper money) is one of the activities of a central bank. You will recall there was three years ago and abrupt increase in the demand for liquidity. Supplying it is what the central bank is supposed to do. The alternative was catastrophic deflation (been there, done that, 1929-33).

  • Your criticism is off base BA. What Friedman talked about was for the Fed to act to stop a run on the banks in 1929, not the Fed propping up the government through purchase of huge amounts of Federal debt that can’t find a buyer in the marketplace at a low interest rate:

  • “I’m going to look like an idiot but what is debt issued by the treasury?”

    The difference between receipts and expenditures by the government.

  • Your criticism is off base BA. What Friedman talked about was for the Fed to act to stop a run on the banks in 1929, not the Fed propping up the government through purchase of huge amounts of Federal debt that can’t find a buyer in the marketplace at a low interest rate:

    No he was not, because banks did not begin to fail at rates exceeding a certain background value until November of 1930. There were three waves of bank failures: one at the end of 1930 and the beginning of 1931, one extending from May 1931 to March 1932, and one running from November 1932 through March 1933.

    His confederate Sir Alan Walters offered that the most salient discrete failure of public policy in the United States during that era was electing not to follow Britain off the gold standard in September 1931. Britain began to recover within a few months while the American economy went through the most rapid contraction ever enumerated. Sir Alan put it this way: when you have a liquidity crisis, you need a manual over-ride in your monetary policy to maintain M1.

  • Here is what happens: The Fed adds, say, $700 billion to the US Treasury’s Federal Reserve Bank checking account and takes ownership of $700B US T debt securities that can’t be sold at negative real interest rates to citizens, to Social Security and Medicare Trust Funds, to China, etc.

    Here are the accounting journal entries:

    Debit/Increase “UST securities” $700B and credit/increase “Due to the US Treasury” $700B

    Voila – out of the Ether the Bernank created $700B.

    And, you thought that the creation of something from nothing was Divine.

    The monetary base is the sum of all Federal Reserve notes and coins in circulation, i.e., outside the Federal Reserve Banks. M1 and M2 add to that private, liquid bank deposits and etc.

    Later the money supply is increased as the US Treasury sends out the created-from-air $700B in checks to every body and his brother.

    Buy gold.

  • Don,

    Art is right. In fact, when Japan was facing similar problems a decade ago, Friedman explicitly advised them to engage in quantitative easing as a solution.

  • How much money was sucked out of the economy by the Great Recession? While I would fight QE3 with tooth and nail, I think TARP and QE1 are reasonably defensible on the grounds of stopping a crushing deflationary cycle in its tracks.

  • BTW, Friedman would agree with Taylor that rules-based monetary policy is superior to discretion-based monetary policy. The thing is, though, that Taylor’s own proposed rule (called unsurprisingly the Taylor Rule) has called for negative interest rates over the past three years. So following the Taylor Rule would mean doing precisely the sort of quantitative easing that Friedman recommended for Japan.

  • Inflation is the cruelest tax of all.

    If he wins in the SCOTUS, Obama doesn’t need the Fed. When Obama can force you to buy health insurance, he can force you to buy US debt instruments.

    BTW, financing the government is fiscal policy, not monetary.

    No one could possibly want the US economy’s next ten years to be anything like Japan’s economy of the last 20 years.

    The Bernank most fears high interest rates.

    I was at a conference in DC last week. There is no recession in DC or northern VA. Washington and its agile operators on Wall Street have sucked all the “air” out of Main Street.

  • Inflation is the cruelest tax of all.

    It is not a tax.

    The aforementioned Prof. Taylor has identified the period from 1985 to 2003 as one of appropriately conducted monetary policy. The mean annual increase in the consumer price index was 3.0% during those years. The increase over the last twelve months has been 2.9%

  • Thomas Sowell is great. But monetary policy is not his area. It was Milton Friedman’s area, and in a dispute between the two the smart money should be on Friedman.

  • When the government devalues the currency in order to repay unsustainable debt with cheap money, inflation is a tax.

    America has been able to sustain this sham because the dollar is the reserve currency. That may soon change.

    Consider the following from Tyler Durden at zerohedge.

    “If you think the last four years have been bad, you ain’t seen nothing yet. Hope is not an option. There is too much debt, too little cash-flow, too many promises, too many lies, too little common sense, too much mass delusion, too much corruption, too little trust, too much hate, too many weapons in the hands of too many crazies, and too few visionary leaders to not create an epic worldwide implosion. Too bad. We stand here in the year 2012 with no good options, only less worse options. Decades of foolishness, debt accumulation, and a materialistic feeding frenzy of delusion have left the world broke and out of options. And still our leaders accelerate the debt accumulation, while encouraging the masses to carry-on as if nothing has changed . . . “

  • I am not too sophisticated when it comes to high finance. However, I do think it’s
    significant that while the price of an ounce of gold in 2000 was roughly that of 12
    or 13 barrels of brent crude oil– and today it’s still roughly the same ratio– the
    price of both commodities in dollars has increased over 5X. In other words, if we
    were using gold to buy oil (or vice versa), we’d have seen relatively little
    change in those prices. It’s just that the dollar is worth about 1/5 what it was just
    twelve years ago.

    In March 2000, gold and oil sold for about $300/oz. and $27/barrel, respectively.
    Today, they’re going for about $1680/oz. and $125/barrel.

    Again, I’m not a banker or a treasury official, but it seems to me that the implosion
    of the dollar is well underway.

  • Aye.

    Dr. Sowell’s most scholarly writings are in the history of economic thought. He writes texts on economic history (sytheses, I think), but in the history of the 1930s he has been known to make serious errors.

  • Consider the following from Tyler Durden at zerohedge.

    Ummm. Wasn’t that a character in Fight Club?

  • Clinton,

    The ratio of the price of gold to oil tends to vary quite a bit. In 2005, for example, an ounce bought less than nine barrels of oil ($444.74 vs. $50.04), while in 2009 it would have bought more than eighteen barrels ($972.35 vs. $53.48) . And neither gold nor oil are typical of what happened to prices in general over the last twelve years. For all the talk about the coming hyperinflation, inflation over the last three years has been lower than normal, and from mid-2008 to mid-2009 we actually experienced deflation, with predictable consequences.

  • Buy low. Sell high. Supply and demand. That is all you need to know.

    The Dow/Gold ratio is an indicator of when one is comparatively cheap.

    Oil/gold is probably not so good for correlation. Gold is a commodity with aspects of a financial asset. Oil is strictly a commodity. Commonality: both are quoted in USD.

    I’ve been long gold since the early 1990’s. It’s for diversification and insurance.

    I was buying gold bullion at around $250 back in the day. I would buy over the phone from a dealer. He would call periodically for orders. As he did one day when gold had inched up to say, $275. Dummest thing I ever said, “I’ll pass. I think it’s too high.”

    No wait! That is the second dummest thing I ever said. The dummest was, “I do.”

  • Does your wife read this blog, T. Shaw?? 🙂

  • Short of conducting a seance I doubt if it is possible to get a definitive answer to how Milton Friedman would have reacted to the Fed buying huge amounts of debt. However both Allan Metzler and John B. Taylor believe that he would not have:

    http://www.zerohedge.com/article/allan-meltzer-explains-why-friedman-would-never-endorse-increasing-inflation-stimulate-econo

    http://johnbtaylorsblog.blogspot.com/2010/11/certainly-milton-friedman-would-not.html

    I agree with them, but even if he had endorsed the current debt purchase policy of the Fed, Friedman had no charism of infallibility on economic matters, and if he endorsed the idea of the government producing massive debt and then having the Fed purchase it, it would remain a disastrous policy.

  • “Does your wife read this blog, T. Shaw?? ”

    She is no doubt locking and loading even as we type Don!

  • Blackadder, of course there are fluctuations in the ratio between the price of gold vs.
    the price of oil. Commodities traders and speculators wouldn’t have anything to do
    if such fluctuations didn’t exist. However, my point is that over time the average
    ratio has been relatively stable while the purchasing power of the dollar has declined.

    I suppose we should ask ourselves if we can imagine ever seeing gold at $300/oz. or
    oil at $27/barrel again. If not, why not?

  • My wife does not read this blog.

    I may be crazy. I’m not suicidal.

    That was a joke. I actually made the other statement.

  • and if he endorsed the idea of the government producing massive debt and then having the Fed purchase it, it would remain a disastrous policy.

    If I am not mistaken, the Federal Reserve makes its purchases in the secondary market.

    We have been waiting for the disaster for three years now.

  • And we are living midst the first stages of the disaster now Art. I would find this funny if the ultimate outcome of this lunacy on stilts were not going to be so devastating to this country.

  • T. Shaw, “I do” I have to say that the dumbest thing you have ever done is to post this insult to your wife, without first asking her about how your wife feels about her dumbest “I do”. It has occurred to me that you may find yourself married to your wife in heaven and on earth. God works in mysterious ways.
    @Donald McClarey: She is no doubt locking and loading even as we type Don! Funniest thing I have heard all day. This post Is being saved for future laughter.

  • Lighten up Mary.
    It may be sexist from your POV, but it was a joke.
    If you wish, blame me for highlighting it – but it is fairly common world wide humour.
    My wife has some pretty good ones too. 🙂

  • And we are living midst the first stages of the disaster now Art.

    The latent disaster is derived from excessive public sector borrowing, for which Dr. Bernanke and the other governors bear no responsibility. Take it up with the President and Congress.

    Dr. Bernanke’s responsibility has been to maintain price stability and contain contagions in the financial sector by acting as a lender of last resort. That he has accomplished thus far.

  • The Federal Reserve is NOT an arm of the federal government. It is a private bank with monopoly privileges. It is a parasite and we are the host. We are very close to having the parasite killing the host. To think this is a good thing is insane. To think it is an evil thing that we somehow need and can control is naive. To support this monster is just evil. Time to role it back, audit it, expose it and then end it. T. Shaw is right, buy gold. In order for gold to reach parity w/1980 peak in $FRN-2011, gold would be over $7,000/oz.

  • No Ak, the Federal Reserve System is an arm of the federal government, internet insanity to the contrary. That says nothing about whether it should exist or not, but is simply a statement of fact. The system is completely a creation of Congress and Congress can alter or abolish it at will, along with the Federal Reserve Banks.

  • OK. Don, because you said so. Wow, I’ve been wrong for two decades about the fact that this was concocted by men controlling 25% of the world’s wealth as a banking cartel. What a fool, our money is totally safe in the hands of this government arm. I feel better now. end of sarcasm.

    Seriously, Don, you don’t really believe that the Fed is a government agency? do you? It is clearly a private bank with government-granted monopoly power and it is very, very dangerous. Seriously, you do know this right? I know it is uncomfortable, but you are an intelligent and bold man, I can’t believe that you actually buy this smokescreen.

    There are many things I disagree with that libertarians think, but this is not one of them – the Austrians are right about monopoly banking. Time to turn the tables and whip the usurious money-changers.

  • Conspiracy mongering aside AK, the Federal Reserve System is an arm of the Federal government. When I state a fact on this blog, you can take it to the bank, whether it is state or federal. As to my opinion of current actions of the Fed, I think you can clean that from this post and from my comments in the combox.

  • Don, since you and I agree so often, I rarely need to comment. We tend to disagree about the Fed and the War for Southern Independence, but I still like you and respect your intellect, your fidelity and your knowledge despite your Yankee-WASP-Moneyed-interest tendencies – I hope you take that latter part in jest as it was meant.

    BTW – it is not conspiracy mongering to note that this monstrosity was concocted by transnational bankers, in secret, at Jekyll Island, GA in Nov. 1910 – that is a fact and it is a conspiracy, by the most rigid definition of the word. We also know that it was stated, long after it was fait accompli, that if the people and the Congress knew that the conspirators at Jekyll Island were drafting a banking (cartel) bill, it would have never passed.

Why Illinois Is Bankrupt

Tuesday, March 27, AD 2012

 

,

 

My beloved state of Illinois has a terrible economy, and a shrinking tax base but that is apparently no problem for the bi-partisan pirates who have been plundering the Land of Lincoln for decades:

When Republican state Rep. Roger Eddy announced his retirement from the House Thursday, you could hear the “ding, ding, ding” of a slot machine all the way from Springfield.
Eddy hit the pension jackpot.
He is retiring early from the House to run the Illinois Association of School Boards, which, among other activities, lobbies the Illinois Legislature. His start date is July 1 — although now that he’s leaving the Statehouse before the end of the spring session, he said it’s likely he’ll work for the association before July.
Why the sudden defection? One likely reason: He’ll be much richer in retirement, thanks in part to taxpayers.
In his new job, Eddy will not only stay in the Teachers’ Retirement System, he can collect more in benefits from it. He has been working both as a state representative and superintendent for Hutsonville Community Unit School District 1. He has been part of TRS through his Hutsonville job, where he earned a salary of $107,400. His new salary is expected to be at least $200,000, and his pension will be based on that.
Illinois Statehouse News reported that Eddy’s pension as school superintendent would have been about $70,500 a year. It will climb to at least $141,000 in his new job. His predecessor at the IASB, Mike Johnson, is earning an annual pension — get ready to swallow hard — of $193,273, according to TRS.
But that’s not the end of Eddy’s pension largesse. He’ll be eligible in two years to begin collecting a pension of about $24,000 a year from his nine years of part-time work in the Legislature. Illinois Statehouse News projected his lawmaker pension carries a lifetime value of $584,273. Eddy is 53 years old.

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6 Responses to Why Illinois Is Bankrupt

  • Not only do incidents like this hurt taxpayers, they also hurt the vast majority of state employees who cannot and will not ever receive pensions that large — if indeed they receive a pension at all, at the rate things are going.

  • “…if indeed they receive a pension at all, at the rate things are going.”

    The only pension I have is what I save myself. My saving rate is hurt by taxes.

  • …and Illinois had to add insult to injury by giving the nation Obama to everlasting shame.

  • Born and raised in the Land of Lincoln, going to school in Georgia, and never looking back (well, maybe for a Bulls game or two).

  • They should start showing this commercial in Wisconsin. Too many people up here still think Scott Walker is being very mean to the poor teachers. I’m not a huge Ann Coulter fan, but she summed up the situation very nicely by noting that the public union employees want the people in the private sector – people who are already suffering – to suffer more so public union employees do not have to suffer at all. What floors me is how many private sector people have fallen for the union propaganda.

    Ah, well, as Mark Steyn has been saying lately, civilisations can die of stupidity. We sure seem to be headed that way.

  • “Too many people up here still think Scott Walker is being very mean to the poor teachers.”

    The Illinois Chamber of Commerce has invited Walker to address a meeting in Springfield on April 17 regarding solutions to the pension/budget crisis. Of course, union types are vowing to protest the appearance.

    In some ways, however, our Democratic governor, Pat Quinn, is not exactly a friend of unions either. At the end of the last fiscal year, he announced out of the blue that pay increases previously negotiated as part of a union contract would be frozen, on the grounds that not enough money had been appropriated to cover them. In other words, Quinn abruptly reneged on an existing contract, whereas Walker used the legislative process to change the law first and gave everyone plenty of notice of what he intended to do. After the pay freeze was imposed some AFSCME officials complained that Quinn was “worse than Walker” for that very reason!

The Obama Record: The Debt

Friday, March 23, AD 2012

 

The second in my ongoing series on the Obama record as President, the first part of which may be read here,  leading up to the election in November.  Few things show more graphically the disaster of the Obama presidency than the debt he has piled on this nation.  This week the Obama Debt reached a grim milestone, as he surpassed the debt run up by his predecessor George W. Bush in eight years.  That right-wing news organization CBS News, gives us the forbidding numbers:

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7 Responses to The Obama Record: The Debt

  • They can refund the public debt. The debt needs to be paid in cash (from taxes) is the trillions in the Social Security and Medicare Trust Funds. And, add loan guaranties at FNM/FRE and student loans.

  • Obama took all of our money in the first one hundred days. Obama took our private property with Rural Councils. Obama is taking out FREEDOM with Obamacare. Obama’s game plan is the guilt trip. The problem is always the citizenry’s fault. Citizens with unresolved deep seated guilt are being played like a violin or maybe a harp. (Citizens are being used and abused) Let us set aside our personal and communal guilt, take back our money, our property and our freedom.

  • Of all the harm that Obama has done to the American Republic, I believe his acceleration of the process that will end ultimately in some form of national debt repudiation will be the one that future historians will point to as the most significant.

    You could refer to “the harm Obama has done”, but what has been notable about the current incumbent is his concession of the initiative to the Democratic congressional caucus. What you get with B.O. is the resultant of all the various vectors operating withing the Democratic Party, or, put another way, the default Democratic position. The President’s disregard of the work of Erskine Bowles, Alice Rivlin et al one might wager is the most consequential (non)-decision he has made. Then you remember, the U.S. Senate, under the direction of the chairman of its majority caucus, has not passed a budget in three years. The criminal negligence doesn’t go all the way down (state governments balance their budgets), but it the central government is so steeped in it that a minimum condition of addressing any problems is an electoral shellacking for the Democratic Party of a sort that has not been delivered in 60 years or more.

  • I agree with every word you typed Art.

  • As an “average” joe with a non-finance degree all of this is quite frightening.

    I read somewhere that much of this debt is owed to people like myself who own large amounts of government bonds (US citizens).

    does anyone know if this is true?

    And if so, am I screwed or am I going to get a larger return on my investment?

    I am somewhat afraid of the anwers I might get….

  • Once upon a time, President Andrew Jackson actually paid of ALL of the national debt.

  • Chris,

    If you have been paying “payroll taxes” (one of the big lies: this is Federal Insurance Contributions), you “own” a small piece of a huge chunk of the national debt.

    I’m kind’a in the finance business.

    US government debt obligations basically have zero credit, or default, risk. That means you don’t need to be concerned whether the US can pay you back.

    There are many other risks. Interest rate (usually a problems in banks) and market risks: The market value of fixed-rate bonds/debt instruments falls as market interest rates rise and vice versa. Say, you purchased for $1,000 a 30-year T Bond paying 3.5% (We are now in a historically low rate environment). If market rates risk to normal levels, say 6%, for 30-year T’s, and you must sell, you will incur a loss of say 20%. If you hold on you could be earning 6%. Then that would be an opportunity cost/loss.

    A concomitant risk is you would be losing purchasing power with your 3.5% yield.

    The regime’s regulatory and tax policies, including Obamacare, make it more difficult for the evil, unjust private economy to grow (and so tax revenue growth will be retarded) enough to repay the debt. Then, the debt may need to be repaid with the cruelest tax of all: inflation. Again, inflation, market interest rates rise and fixed rate debt instrument prices fall (see above) like rocks.

    Finance 101: diversify.

Demography, Contraception and Fiscal Melt Down

Sunday, February 19, AD 2012

 

 It should be the highest ambition of every American to extend his views beyond himself, and to bear in mind that his conduct will not only affect himself, his country, and his immediate posterity; but that its influence may be co-extensive with the world, and stamp political happiness or misery on ages yet unborn.

George Washington

 

Mark Steyn at National Review Online, notes that the fiscal lunacy of the Obama administration and the HHS Mandate are linked:

 

As for us doom-mongers, at the House Budget Committee on Thursday, Chairman Paul Ryan produced another chart, this time from the Congressional Budget Office, with an even steeper straight line showing debt rising to 900 percent of GDP and rocketing off the graph circa 2075. America’s treasury secretary, Timmy Geithner the TurboTax Kid, thought the chart would have been even more hilarious if they’d run the numbers into the next millennium: “You could have taken it out to 3000 or to 4000” he chortled, to supportive titters from his aides. Has total societal collapse ever been such a non-stop laugh riot?

Yeah, right.” replied Ryan. “We cut it off at the end of the century because the economy, according to the CBO, shuts down in 2027 on this path.”

The U.S. economy shuts down in 2027? Had you heard about that? It’s like the ultimate Presidents’ Day sale: Everything must go — literally! At such a moment, it may seem odd to find the political class embroiled in a bitter argument about the Obama administration’s determination to force Catholic institutions (and, indeed, my company and your company, if you’re foolish enough still to be in business in the United States) to provide free prophylactics to their employees. The received wisdom among media cynics is that Obama has engaged in an ingenious bit of misdirection by seizing on a pop-culture caricature of Republicans and inviting them to live up to it: Those uptight squares with the hang-ups about fornication have decided to force you to lead the same cheerless sex lives as them. I notice that in their coverage NPR and the evening news shows generally refer to the controversy as being about “contraception,” discreetly avoiding mention of sterilization and pharmacological abortion, as if the GOP have finally jumped the shark in order to prevent you jumping anything at all.

It may well be that the Democrats succeed in establishing this narrative. But anyone who falls for it is a sap. In fact, these two issues — the Obama condoms-for-clunkers giveaway and a debt-to-GDP ratio of 900 percent by 2075 — are not unconnected. In Greece, 100 grandparents have 42 grandchildren — i.e., an upside-down family tree. As I wrote in this space a few weeks ago, “If 100 geezers run up a bazillion dollars’ worth of debt, is it likely that 42 youngsters will ever be able to pay it off?” Most analysts know the answer to that question: Greece is demographically insolvent. So it’s looking to Germany to continue bankrolling its First World lifestyle.

But the Germans are also demographically exhausted: They have the highest proportion of childless women in Europe. One in three fräulein have checked out of the motherhood business entirely. A nation that did without having kids of its own is in no mood to maintain Greece as the ingrate slacker who never moves out of the house. As the European debt crisis staggers on, these two countries loathe each other ever more nakedly: The Greek president brings up his war record against the German bullies, and Athenian commentators warn of the new Fourth Reich. The Germans, for their part, would rather cut the Greeks loose. In a post-prosperity West, social solidarity — i.e., socioeconomic fictions such as “Europe” — are the first to disappear.

The United States faces a mildly less daunting arithmetic. Nevertheless, the Baby Boomers did not have enough children to maintain mid-20th-century social programs. As a result, the children they did have will end their lives in a poorer, uglier, sicker, more divided, and more violent society. How to avert this fate? In 2009 Nancy Pelosi called for free contraceptives as a form of economic stimulus. Ten thousand Americans retire every day, and leave insufficient progeny to pick up the slack. In effect, Nancy has rolled a giant condom over the entire American economy.

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23 Responses to Demography, Contraception and Fiscal Melt Down

  • Obama — our Director of Hatcheries and Conditioning

  • You do know that our total debt as a percent of GDP fell from the end of WW2 until 1980 when our tax policy (not our spending) took a dramatic change. The percentage has since risen except for the 90’s when our tax policy briefly took a minor reversal from their current direction. The direction of the deficit and then the debt changed abruptly again as the tax policy changed in 2001. I know there are going to be many comments claiming it was all about spending, but that is not what the data shows. The relationships between tax policy and the point when the graphs of the current balance and the total debt change direction are clearly related to tax policy. The recent massive debt does have a spending component in that the severe recession we entered in 2008 did cause an increase in spending, but the larger effect was a decrease in tax collections due to the recession.

    I do disagree with the HSS ruling, but if we are going to show charts of rising debt, then we should lay the blame where if belongs. It belongs on our unwillingness to pay for the things we want. We were promised (both nationally and at the state level) that if we cut taxes we would see prosperity and increased . The lowest federal tax rate since WW2 at the federal level has brought massive deficits and the worst 10 years of employment since WW2. A 15 year recorded of increasing tax cuts in Michigan (coupled with the fall of the American auto industry) have devastated our state. At the very least we should stop seeing the claims that tax cuts will improve our economy and increase government revenues as a result since the evidence is to the contrary.

  • Justice and peace!

    Obama’s policies are destroying the evil, unjust private sector.

    It’s working.

    Pharaoh’s economic reports hide the huge decline in number of Americans with jobs.

    Mark Steyn: Obama, Romney and Santorum are talking about sex while the nation goes broke. Each day, 10,000 Americans retire but “leave insufficient progeny to pick up the slack. In effect, Obama has rolled a giant condom over the entire American economy.”

    America can’t employ more people.

    In 30 years, there will not be enough taxpayers to pay for the entitlement masses, $100,000,000,000,000.00 present value of cash flow due. Taxes won’t cover interest on the national debt.

    Then, grandpa will be left out in the cold.

    Justice and peace!

  • “The lowest federal tax rate since WW2 at the federal level has brought massive deficits and the worst 10 years of employment since WW2.”

    Complete hogwash Paul. No possible jacking up of the tax rates can possibly pay for our completely out of control entitlement spending, which is apparently insatiable. Your argument would have a tinge of merit if the European welfare states, paying higher taxe rates than we do, were not also on the same quick path to national bankruptcy.

  • And for those who might still labor under the illusion that congress and this admin-
    istration are in any way serious about this situation, please reflect on the fact that it
    has been almost three years since the federal government has had a budget.

  • No possible jacking up of the tax rates can possibly pay for our completely out of control entitlement spending, which is apparently insatiable.

    Federal spending is currently about 24% of domestic product. There is a mess of junk in the federal budget that ought to be excised, but that is a policy choice. We could certainly levy the taxes necessary to pay for it.

  • ‘The Obama administration is the perfect avatar for the all consumed in self mentality produced by a contraceptive culture that can see no further than the brief span of time this globe is occupied by those who currently inhabit it.’ Yup.

    George Washington’s quote ends with their choice – to stamp misery on ages yet unborn.

    Laughing at religion and conscience like silly jokers, talking about sex enough to train the needy national psyche away from their sleight of hand, and accommodating no one but their handlers with money.

    ‘ and leave insufficient progeny to pick up the slack. In effect, Nancy has rolled a giant condom over the entire American economy.’ As she said on the video, something like uh – more bang for the buck – er – that’s what the economists say.

  • The United States faces a mildly less daunting arithmetic. Nevertheless, the Baby Boomers did not have enough children to maintain mid-20th-century social programs.

    For the record, postwar birth cohorts have varied between 2.9 million and 4.3 million, with no secular trend in size. Our total fertility rate has been at replacement level or above for that entire time bar a brief run of years in the late 1970s. Escalating burdens of caring for the elderly have been a function of improved life expectancy, a problem which can be finessed by having the retirement age on an appropriate escalator.

  • To pay for entitlements Art would require doubling tax rates. Not only is that politically inconceivable, the impact on our economy can be imagined.

    http://www.heritage.org/budgetchartbook/entitlements-double-tax-rates

  • Since the late Fifties Art, the rate of fertility has declined from 3.8 children per woman to 2.06 today. 2.10 is considered to be the replacement rate, and since 2000 we have been at that for only one year: 2008.

  • Given the Pelosi pic, I think a better title for the post should have been– “Demography, Comtaception, and Facial Meltdown.”. After all, the Pelosi facelifts are taxpayer supported.

  • Don, please tell me what I said that is hogwash. The federal tax revenues are the lowest as a percentage of GDP since WW2. The 10 years of employment since 2001 (when the income tax rates were cut followed by tax cuts on capital gains and dividends) are the worst since WW2. I could give you numerous links including the federal government’s budget page. Also, do you deny that our budget was in surplus before the tax cuts of 2001 and 2003?

    As for entitlements, the problem continues to be Medicare, yet every proposal to fix the problem by doing what has been successful in every other country is rejected in this one.
    As compared to the European welfare states please the chart below. The data is sorted by the larges Debt as a percentage of GDP by country. Of the welfare states in Europe that have economies comparable to the US, you could only rank Italy as having a higher debt burden than the US. And only the UK has come anywhere close to the US in the increase of debt from 2000 to 2010 (I included the 2009 numbers to demonstrate that this did not all occur under President Obama). The problem in Europe is that they decide to include countries like Greece in the Euro zone and Germany absorbed East Germany. These actions are close to the US agreeing to a common currency with Mexico, this might help Mexico but would be a significant burden.

    National debt as a percentage of GDP
    2009 2009-2000 2010 2010-2000
    Japan 197 66 220 89
    Italy 109 2 119 12
    United States 67 22 94.36 49.36
    Germany 73 14 83.96 24.96
    Canada 65 -6 83.95 12.95
    France 80 21 82.33 23.33
    United Kingdom 59 17 75.5 33.5
    India* 66 -4 71.84 1.84
    Brazil* 66 -2 66.84 -1.16
    Spain 56 -7 60.12 -2.88
    China* 32 9 3 3.83 10.83
    South Korea 31 18 33.44 20.44
    Russia* 5 -14 11.75 -7.25

    Sorry to be so long winded in a com box, but I felt the need to respond.

  • Sorry, I spent 20 minutes trying to format the chart and then the columns still did not line up.

  • The pig’s not getting any cleaner Paul. A more pertinent list is that of the total national debt as a percentage of the country’s annual gross domestic product. Go to the link below to view the list.

    http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

    The numbers for most of the European nations are especially shocking when consideration is given that they spend next to nothing on defense as compared to the US.

    The idea that the solution to this problem is to raise taxes is simply wrong. The only solution is to radically slash government spending and such a solution will come, probably after the financial crash the West is inevitably headed for.

  • Integrity I wish Obama had some.

  • Don, Still you said my original post was hogwash and make the claim that the answer is not raising taxes. Although I agree the answer is not just raising taxes. Anyone who would claim that the federal government (or any other institution) could not improve it’s efficiency would be silly. However, you have yet to answer what part of The current take of the federal government being the lowest since WW2 or the decade of job performance since the taxes were dropped were “hogwash.” Plus you avoid commenting of the fact that we had a surplus before taxes were cut in the early 2000’s.

  • We did not have a surplus under Clinton Paul. We had the dot.com bubble, a Republican Congress and blue smoke and mirrors with social security funds.

    http://www.craigsteiner.us/articles/16

    If the Bush tax cuts were completely repealed, we could expect to have around 200 billion a year in additional taxes. The deficit for this year is estimated to be 1.327 trillion dollars. Increasing taxes isn’t even a bandage on the underlying problem of run away entitlement spending.

  • Yes Don, unfortunately when the social security taxes were doubled in the 1980’s President Reagan insisted that SS funds were counted in the deficit calculations. And that did allow the issue that the article points out. It is also true that President Clinton had the advantage of the computer industry expansion and dot com bubble to the income side. But Pres. Clinton does deserve credit for stopping his party from spending the money and he stopped the Republican party from issuing tax cuts instead of responsibly reducing our deficit during good times. If you don’t believe this draw a graph of the current balance of the federal government from 1980 through 2010. It has a point of inflection at two points. In 1993 it changes from constantly going more negative to going less negative. In 2001 it changes from constantly going less negative to going more negative. The curvature did not change when congress changed from Democratic to Republican in 1995, nor did it change when the congress went back again in 2008. It changed when President Clinton gained control of the budget process and it changed again President Bush gained control of the process. There is a lot President Clinton did I do not agree with, and some things I find abhorrent, but if the data does not show you that he was responsible for the improving current balance of the federal budget during the 1990’s than you are choosing not to look.

    By the way, you still have not pointed which of my original comments are “hogwash.” Since this is a nice way of saying I am lying, I wish you would at least attempt to support the claim in some way.

  • To pay for entitlements Art would require doubling tax rates. Not only is that politically inconceivable, the impact on our economy can be imagined.

    Heritage is an advocacy group. They are not necessarily going to be terribly explicit about it that when they speak of the federal income tax they are not discussing the whole menu of federal or state taxes. The federal income tax comprehends about half of all federal tax collections and about a quarter of all tax collections.

    As we speak, the ratio of federal tax collections to domestic product is 0.149. I believe that is lower than it has been at any time in the last 50-odd years. However, there was a revolution in state and local expenditures during the years running from about 1965 to 1975, so total tax collections are not so low, but not abnormal in context.

    Currently, federal expenditures amount to about 24% of domestic product, just a wee bit higher than they were in 1984. (Federal tax collections as a share of domestic product are lower than they were, so public sector borrowing is at this time 9% of domestic product rather than 6% of domestic product). All things being equal, the relative size of the public sector (beyond a certain baseline) is inversely related to measures of economic dynamism. There is a cost to be paid in static utility and in economic vibrancy each time you expand the public sector’s take and that cost has to be taken into account in assessing any proposed program.

    Now, how are we financing this expenditure? We are financing it through a mix of taxation and public sector borrowing. One might expect that it does diminish utility to finance an activity from coerced contributions (taxation) rather than voluntary contributions (borrowing). Keep in mind that the diminution of utility would be some fraction of 9% of domestic product, perhaps expressed in anemic growth rates experienced as the tax increase is imposed (recall that the money is not being invested, but parked in Treasury issues). That is not what you want, but it is not economically devastating either).

    If you wish to make an argument against a particular manifestation of public expenditure, make that argument; there’s plenty to choose from. If you wish to argue that there are perverse incentives encoded into entitlement programs, make that argument. If you wish to make an argument that optimal public expenditure is of a particular dimension, make that argument. What you really ought not to do is contend that it would be economically devastating to maintain a public sector of a given relative size when we have in fact done so for 35 years or more (and other countries have maintained larger such sectors for longer periods).

  • The idea that the solution to this problem is to raise taxes is simply wrong. The only solution is to radically slash government spending and such a solution will come, probably after the financial crash the West is inevitably headed for.

    I think it might benefit you if you have the time to review the Appendix to the Budget of the U.S. Government and the analytical tables (not the executive summaries, which can be misleading). There are clunky pdfs available online. Review it with two notions in mind.

    1. You cannot welsh on debt service;

    2. The elderly and disabled have very limited capacity to adjust to reduced economic circumstances; diminution of benefits to these sectors (that would be Social Security, Medicare, and that portion of Medicaid which finances nursing homes) has to be undertaken quite gradually and is not going to net you much over the course of the next several years.

  • And I would suggest Art that you contemplate the deficits for the last five years and consider this truism: “Something that can’t go on forever will not go on forever.” National public debt is currently at 99% of GDP. Our capacity to finance the government by conjuring money out of thin air is coming to an end and probably sooner rather than later due to an increasing realization that we can never pay off this amount of debt, at least not with a currency that has anything close to its present value. Slow motion debt repudiation, hyper inflation, currency devaluation, whatever it is called, it is eventually going to occur with severe damage to our economy.

  • I am perfectly aware of the problem. However, cessation of public sector borrowing requires:

    1. More revenue; and

    2. Less spending.

    My complaint about your posts on this matter is a deficit of specificity as regards the latter and your insistence that the former cannot occur. There’s quite a mass of bilge in the federal budget. There are roughly 55 independent agencies you could shut down with little damage to the public interest; two cabinet departments that could be shut down with like consequences; a third department which could have its budget cut by >90% with like consequences; and another that could use a 22% cut. The thing is, you pump out the bilge and you still have problems.

    A. Reducing the bloat derived from the structural defects in entitlement programs takes time;

    B. Removing excess spending in legitimate programs requires intensive attention to granular details or requires you make an arbitrary cut and tell the agency chiefs to figure out the details.

    C. Some sorts of cuts will induce or exacerbate fiscal crises in state and local government. Liquidated programs are properly partially replaced with formulaic revenue sharing.

  • Medusa, the Gorgon, is Nancy Pelosi. Medusa had snakes for hair. Nancy Pelosi has snakes (lies) for hair. The sight of Medusa turned men to stone. Nancy Pelosi turns men to stone. Nancy Pelosi gives her son a stone when he asks for a loaf of bread and a snake when he asks for an egg. As a public servant, all citizens are constituents of Nancy Pelosi. We, the people, are her public, her national community. Yet, Nancy Pelosi consistently gives us, her constituents, a stone, when we ask for a loaf of bread, and a snake when we ask for an egg. If untruth, or perjury in the public court of law is permissible, then, Nancy Pelosi has handed us, her constituents, a stone when we ask for a loaf of bread and a snake when we ask for an egg.
    In Greek mythology, Perseus slew the vile Medusa by viewing her in the mirror of his shield for if he had looked at Medusa straight away, he would have been turned to stone. Medusa had snakes for hair, the sight of which turned men to stone. Perseus, son of the Greek king of gods, Zeus, separated Medusa’s ugly snake-generating head from her body with his sword. Separating Nancy Pelosi from her snake-generating lies with our vote in November will free us, her constituents, from turning into stone.
    St. Patrick drove the snakes out of Ireland. It is time to drive the snakes out of the United States Congress.

One Response to The Debts of the Parents Will Be Visited Upon the Children

  • Nations are ruined when governments grow faster than private sectors. (See Greece, Italy, Ireland, Portugal, Spain.) That has been the US model since mid-2008.

    If the US doesn’t reverse course there likely will be economic collapse.

    Congress and the president are unwilling to address the debt problem and, in fact, are exacerbating it.

    The point of no return will be when the federal government no longer can collect sufficient tax revenues to service the national debt.

    The fed will monetize the debt: buy the debt, efectively print money, and that will induce hyper-inflation (must have central bank action to generate hyper-inflation).

    The paper dollar will be worthless.

    The various trust funds: Soc. Sec., Medicare will not be able to pay anyone – they are invested in worthless (more taxes need to be collected from you to pay you) federal gov paper.

    If Obama gets re-elected, and maybe Romney, within your children’s lifetimes:

    No money can be paid from bankrupt Social Security, Medicare, etc.
    Life savings and financial assets will be wiped out.
    Famine, pestilence, exposure.
    Mass violence, rapine, etc.

Shooting the Messenger

Sunday, October 23, AD 2011

 

 

As intensely frustrated as I get at the idiocy frequently shown by government here in the US, for truly high handed over the top governmental lunacy we can rarely compete with the Europeans:

This week alone has seen a ratings downgrade for Spain as well as a threat by agencies to review France’s AAA status — and the markets have taken notice. Once again, it would seem, ratings agencies are making things difficult for European countries.


Now, the European Union is considering doing something about it.

European Internal Market Commissioner Michel Barnier is considering a move to ban the agencies from publishing outlook reports on EU countries entangled in a crisis, according to a report in Thursday’s issue of the Financial Times Deutschland newspaper.

In an internal draft of a reform to an EU law applying to ratings agencies obtained by the paper, Barnier proposes providing the new EU securities authority, the European Securities and Markets Authority (ESMA), with the right to “temporarily prohibit” the publication of forecasts of a country’s liquidity.

The European Commission is particularly concerned about countries that are negotiating financial aid — for example from the euro rescue backstop fund, the European Financial Stability Facility (EFSF), or the International Monetary Fund (IMF). A ban could prevent a rating from coming at an “inopportune moment” and having “negative consequences for the financial stability of a country and a possible destabilizing effect on the global economy,” the draft states.

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2 Responses to Shooting the Messenger

Rand Paul Gets It

Thursday, March 10, AD 2011

I have never been a fan of Ron Paul, to say the least, but I am rapidly becoming a fan of his son.

Yesterday the Senate in a 44-56 vote rejected the House proposal to cut 57 billion from the budget.  Then the Senate rejected a Democrat proposal to cut the budget by 5 billion dollars, 42 to 58. 

This year the federal budget deficit will be an estimated one and a half trillion dollars and that is probably on the low side.

Senator Rand Paul of Kentucky voted against both proposals because he believes that neither are serious attempts to come to grips with the sea of red ink which is threatening to destroy this nation’s future prosperity.  He is absolutely correct.

He has proposed 500 billion dollar cuts.  This would be a serious start, but would still leave a deficit this year of a trillion dollars.  Here, hattip to David Fredosso at the Washington Examiner,  are the details of his plan:

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16 Responses to Rand Paul Gets It

  • Even if adopted, that would leave a $1 trillion deficit. Even eliminating DoD will not balance the budget. You either have to acknowledge that the deficit will disappear on its own once economic growth is back in full swing or taxes have to rise.

    I’m all for cutting discretionary spending, though I’d do it more gradually when it involves middle-class jobs. And I’ve been a fan of Ron and Rand, though not a disciple. But Rand’s proposal is junk. Read the end where it sounds like he’s running out of steam. He literally makes up numbers. What the CBO traditionally does, he does and includes in the bill! Did this get vetted at all? It’s not legislation. It’s a blog post. And, he makes all these cuts to regulatory agencies without reducing their regulatory mandates. Cutting FDA funding doesn’t reduce regulation, it just creates delays increases the regulatory burden by increasing delays. He would eliminate the State Department’s International Commissions which would effectively withdraw the US from binding international treaties. He would also eliminate the Bureau of Indian Affairs which literally means anarchy on Indian territories. I don’t mean belt tightening. I mean there would be no cops or courts. Rand may argue that the Indians should be allowed to fail as nations. I think the least the government can do is ensure they have law and order.

  • He does not go far enough. Of course, principle and practical reality must be reconciled. The problem is that reality is uncomfortable and inconvenient.

    If these ‘programs’ are not cut now – they will self-destruct soon.

    Comparing where we are to some Utopian ideal is foolish. We have to take measures now in relation to reality. Within a short while, without course correction (drastic), we will experience hyper-inflation, the implosion of the dollar, world wide depression, civil unrest, supply shortages, massive unemployment and war, possibly civil war too. This is an extreme outcome, but it is inevitable – unless, we cut all spending that is not actually essential. This requires a true assessment of reality, as it is objectively, irrespective of the lack of desire by anyone to actually see it.

    Will there be some unpleasant consequences? Surely. Will some people become very uncomfortable in the short run? Without a doubt. Would we prefer to avoid this and ease into some kind of fiscally prudent reform? Of course, but that time has long past, at least 30 or 40 years ago. As bad as these short-term consequences will be, the consequences of soft measures, political ploys and other irresponsible measures will be far, far worse – probably the end of the United States as we know them.

    It is past time to act and the longer we actually wait, the more drastic the measures will have to be. If we wait too long, then nothing will stop the inevitable destruction.

    As for tax increases, those will only serve to hamper our economic growth – no matter whose taxes are increased. What we should do is reduce taxes slightly, cut spending dramatically and reduce or eliminate most ‘regulation’ – that is political interference in the economy, not authentic regulation that makes the market more free. We need to unleash the massive creative energy of the entrepreneurial American economy in order to grow our way out of this mess. Spending cuts alone won’t do it and tax increases and more debt will never do it.

    We also must have realistic expectations. Things will get much, much worse before they get better and it will take a long time, over a decade. If we think that these changes will yield immediate results, we will be disappointed, then we’ll become agitated and some will resort to plunder, group violence, lawlessness, anarchy. What else can you expect when we now have legalized political plunder as the order of the day. One group against the others, even those alive today against those near death and those not yet born (not only through euthanasia and abortion), but by putting future generations in so much debt that they will be born slaves. Slaves with no incentive to build civilization, merely work off the burden we have laid upon them. Of course, the massive size of the burden will lead to their deaths before it is ever retired.

    We must have a federal government that protects the national borders (all of them, land, air, water, virtual) and a strong military so that no one will take advantage of our internal weakness to attack us. Everyone, will have to let go of their favorite national issues and plunder of the treasury. Everything, save national defense, must become local. This will have many problems and will eventually need to be corrected – but we have no choice.

    The false prosperity of fiat debt renders this argument as cookoo and way out there, but it is not. Correct it now, or possibly never have a chance to correct it again.

    We need more Rand Pauls. Don, despite not being a fan of Ron Paul, we need him and more like him. He will never be president, and I don’t think he’s suited for it, but we need him to bring these issue to the table, issues politicians DO NOT want to discuss – but, they must be addressed. Within the form now, or through violence later. I prefer we keep the form, but time is short.

    It seems to me the only solution is to elect moral men of principle, or at least a suicide squad that has no future political aspirations. The crony culture we have now is nothing but protection of the status quo, which is essentially a socialist revolution that has occurred within the form. Unlike 1789, 1917, 1933 and 1934 in France, Russia, Germany and Spain our revolution occurred gradually and virtually unnoticed. The destructive effects are the same, the difference is we have allowed a back-build to be created and when these forces are unleashed rapidly the destruction will be far worse than anything the Jacobins, Marxian Leninists, Nazis and socialist/anarchists ever unleashed upon the world.

  • “You either have to acknowledge that the deficit will disappear on its own once economic growth is back in full swing or taxes have to rise.”

    Raising taxes to solve this problem is complete non-starter rr. You couldn’t raise them enough to accomplish the goal without killing the economy, not to mention the fact that since the Sixties increasing taxes have never been tied to reducing government spending. We have to radically change the nature of government in this country and our reliance upon it, and Paul Rand understands this. As I noted in my post however, those who pooh pooh this and prefer the status quo are those not dealing with reality. We are near the end of the era of government through endless borrowing. In the future we are going to have a much smaller and more affordable government, by force of our lack of resources if for no other reason.

  • Rand Paul destroys Energy bureaucrat Kathleen Hogan
    hes been on a roll

  • How did the US exist before the federal government spent $1.5 trillion more each year than it spent in 2008?

  • PS: What did we the people get for the $3 trillion in additional national debt?

    Was it $5 a gallon gasoline/home heating oil? Or, an 8.9% unemployment rate?

  • T. Shaw,

    1. As a Confederated Republic

    2. War, socialism, devalued dollar

    3. All lies – everything costs much more than that and when the paper bubble blows we’ll see the real prices, which none of us can afford. Unemployment is closer to 20%.

  • And, he makes all these cuts to regulatory agencies without reducing their regulatory mandates.

    RR is right. If you want to get serious about making these kinds of cuts, then attack the legislation that drives the spending. Instead of throwing out numbers, Paul should tell us which things he would have the Federal gov’t not do. The funny thing is, Americans say they want to control spending, but when asked if they want to do without the major drivers of the spending, they back off. Suddenly, the prospect of the FDA not inspecting food and the FAA not inspecting planes or licensing pilots doesn’t sound so appealing.

    In one section of his proposal, in the very same sentence, Paul claims he wants to cut the civilian defense workforce AND cut waste, fraud, and abuse. What exactly does he think those civilian workers are tasked to do? Then he proceeds to show a histogram showing the growth in the civilian defense workforce… all the while failing to show how military end strength has concurrently declined. The jobs that servicemembers used to do are being taken over by civilian workers.

    I have no problem with getting serious about cutting Federal spending, but I keep waiting for conservatives to understand what needs to change before that spending can decrease. (With due apologies to all that claim civilization as we know it is going to melt down, anyway, and force our hand. I’m leaving that off the table here.)

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  • Do the math.

    Think “aggregate demand” (AG), people. There are (rounded) 100,000,000 million households in the USA. In an alternative reality, the NEW, SPENT debt of $3,000,000,000,000 could have been paid pro-rata to each American family. COMMON GOOD/SOCIAL JUSTICE: The American family would have $30,000 to spend or invest – AG. Instead, each household NEWLY owes $30,000 more than it did before American became blessed with hope and change. Extra credit question: how does excessive debt affect AG?

    WHERE’S THE MONEY?

    Your children and grandchildren will suffer for this.

    Corporate Financial Management 301: When revenue decreases (either from lower sales/lower taxes or higher expenses) the corporation needs to act to rectify the situation. If revenues (sales for businesses, taxes for government) can’t be increased, expenses (cost of goods sold, salaries, benefits, etc.) must (business MUST there is no money/state governments MUST: cannot print money) be cut.

    Anyhow, I wish I had time. Too busy making money for my family. Pull out the “budget. Get out one of them two-foot accounting (or excel) worksheet with at least 12 columns. List the revenues and expenditures from largest down. Start columns with 2007, leave two columns between each year: one for the $ change and one for the % change. Fill it in. Then look at each line item’s level change and trend. VOILA!

    Spending has to decline. This is like gravity. This is hard fact. This is unalterable by appeals to “common good” or “social justice” or “charity.” It is what it is.

    AGAIN: On what did Obama spend $3 trillion in additional national debt?

    Everyone write a letter to your congressman and two sentators asking . . .

    I’m think instead of giving your family $30,000, the zero paid his base $3,000,000,000,000.

    In any event, we are ruined.

  • “RR is right. If you want to get serious about making these kinds of cuts, then attack the legislation that drives the spending.”

    A true recipe for getting nothing done is getting lost in a legislative thicket. Take an axe to the funding first.

    “Suddenly, the prospect of the FDA not inspecting food and the FAA not inspecting planes or licensing pilots doesn’t sound so appealing.”

    This of course is the routine strategy trotted out by people who do not want any government expenditures. (I do not accuse you of being in this camp J. Christian.) I have no doubt that the essential functions of government could be performed quite nicely without the nation going bankrupt.

    “What exactly does he think those civilian workers are tasked to do?”

    Some of my active duty friends are often puzzled by that same question.

    http://www.federaltimes.com/article/20100723/DEPARTMENTS01/7230302/-1/

  • If I am not mistaken, the operating budgets of federal regulatory agencies in the fiscal year concluding in September amounted to about $65 bn, or less than 2% of all federal expenditures. (A similar sum was expended on the civil police and courts). That may be excessive, but you would have to have fairly granular knowledge of the operations of these agencies to know that. Regulatory agencies are just not a rich vein to mine for cuts.

  • I have no doubt that the essential functions of government could be performed quite nicely without the nation going bankrupt.

    But what are the essential functions? No one addresses the root cause of all this “overhead.” People don’t realize how many statutory requirements are out there that drive the workload of all of these contractors and staff. Simple example: Nunn-McCurdy. It’s there to catch cost overruns. Is the marginal benefit of the law greater than its marginal cost of enforcement? I don’t know. Repeal it and find out. What *doesn’t* work is to cut funding and leave things like Nunn-McCurdy in place. I don’t know about you, but passing lots of laws and not enforcing them seems like a waste of time. Delving into the legislative thicket would stop these round-and-round budget debates, because we could once and for all decide what it is we want the Federal government to do.

    Some of my active duty friends are often puzzled by that same question.

    Actually, it’s often the other way around. The military isn’t doing quality assurance on the products it buys, it’s the civilian workforce. Same with a bunch of other functions. I recently heard a contractor say, “We do all of the work for the military guys, they just take the credit.” I say, let the military do its core job and get out of the business of business. We could eliminate half of the uniformed “Chair Force” that way.

  • Regulatory agencies are just not a rich vein to mine for cuts.

    I would like to know what’s included in the definition of a “regulatory” agency. Is DoD? What those 700,000+ civilian workers are doing might not be strictly called regulatory/compliance work, but a lot of it is program analysis and management — which is an essential function of every agency but probably gets called “overhead” for the purposes of rhetoric.

    but you would have to have fairly granular knowledge of the operations of these agencies to know that

    Exactly. I think that’s what we need. I’m afraid that too many in the civil service are vested in the system, and too many outside it are too detached to care or try. Who is going to take that granular look at what every dept. and agency does, and decide what is truly “essential”? I wouldn’t make broad cuts and just hope that things will turn out okay… I would prefer a more directed approach.

  • I would like to know what’s included in the definition of a “regulatory” agency.

    An agency whose task is in whole or in part to enforce legislated constraints on the conduct of private parties or to collect taxes from them. Excluded from the definition would be agencies (uniformed or no) responsible for enforcing the federal penal code.

    Generally, the Appendix to the Budget of the United States Government indicates in its tables or in annotations and discussions thereto which funds are intended for the regulatory component of an agency’s function, so the spending of agencies which are service providers as well as regulators (e.g. the Federal Aviation Administration) can be parsed.

    It was a back of the envelope exercise on a rapid reading of the Appendix and my memory is not what it used to be, so I may have missed and forgotten some expenditure. The Environmental Protection Agency has a ten-figure budget the bulk of which is devoted to enforcement, but as a rule the budgets of individual agencies are quite modest. IIRC, the regulatory functions of FAA cost about about $1.7 bn. The Securities and Exchange Commission spent (in 2009/10) about $1.1 bn. These two are among the more richly endowed agencies.

    By way of contrast, the National Institutes of Health puked about $30 bn into the patronage of bio-medical research.

  • Rand Paul is proof that sometimes the apples fall far enough from the tree to not get contaminated.

Government and Economic Health

Tuesday, February 15, AD 2011

Another fine econ 101 video from the Center for Freedom and Prosperity.  The day after we learned that the Federal debt now equals the annual size of the US economy seems like an appropriate time to watch the above video.  We have attained a size and cost of government in this country which threatens to severely damage the economy which pays our bills, public and private.  This cannot go on and will not go on, either by our elected representatives finally taking steps necessary to curb the size and cost of government or through de facto national bankruptcy.

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30 Responses to Government and Economic Health

  • The US general government has been broke since 1933. The government is broke because of fiat money, but the country, these United States are very, very wealthy. We needn’t worry, we just need to jettison the central bank, the debt owed to that bank and all the government ‘regulations’ that hamper our wealth.

    We have a few choices:

    1) Constitutional restoration
    2) Revolution
    3) Civil War
    4) become obsolete

  • 1) We can only go bankrupt if we voluntarily declare it.
    2) Big government doesn’t necessarily require big taxes nor excessive debt. The ill effects of spending without financing or raising revenue are inflation and exchange rate depreciation. Inflation is very low right now and is following a similar trend as the Japanese experienced in their ‘lost decade.’
    3) Politicians may decide that there is too much government and that is all fine and good, but if they cut spending, then they must cut taxes too. Drops in the deficit will only reinforce the recession.
    4) You must not have taken economics, or you would understand that GDP=C+I+G+Net EX. G only crowds out I and C if it raises interest rates. That doesn’t seem to be a problem at the moment does it?
    5) What does this post have to do with being Catholic? If you are promoting Catholicism in politics, then show me where in Catholic Social Teaching encyclicals it says all of this. What does the teaching of Christ, the Apostles, and their successors say on the proper role of government?

  • 1. You can be in de facto bankruptcy without declaring it, and we are headed in that direction. Bankrupts are individuals who can’t pay their debts and cannot be legally compelled to do so. That is a pretty good summary of the situation facing the federal government in the very near future.

    2. Not necessarily, but usually, and that is our situation currently.

    3. Not necessarily depending upon what is cut.

    4. I have read a fair amount of the dismal science, enough to know that most economists are very good at predicting the past.

    5. Every post on this blog does not pretend to be Catholic Holy Writ. Catholicism over the past 20 centuries has said almost everything under the sun regarding government and its role, as one would expect from an institution that dates from the reign of Tiberius Caesar. In answer to your last sentence, Christ says very little, the Apostle Paul preached a fairly submissive attitude to the Roman Empire, except in matters of religion, and the Popes have been imperialists, feudalists, theocrats, monarchists, republicans, and every shade in between. Currently Catholicism is fairly comfortable with social democracy of a European sort. Lord knows, literally, what the views of the incumbent of the seat of Saint Peter will be regarding government a century hence. An example of just how shifting this can be in relatively short time periods in the life of the Church, imagine a debate on the subject between Pius IX and John Paul II.

  • Alex:

    I note Donald used the term “de facto” bankruptcy. One needn’t make a formal declaration that one isn’t going to pay one’s debts, to be in a situation where one cannot in fact do so without incurring intolerable difficulties.

    When you ask where in Catholic teaching it “says all of this”: All of what, specifically? Are there particular elements in either the video clip, or Donald’s note, which you hold either to be in opposition to Catholic teaching, or simply not mentioned in Catholic teaching?

    For of course a thing need not be mentioned to be true! “All truth is God’s truth.” I don’t know that the formula for GDP is found anywhere in an encyclical, for example; but it needn’t be.

    And of course it is a moral obligation that we not damage the economy through foolish policies, especially since poor folk are most harmed by such mistakes. (Foundational preferential option for the poor: Don’t destroy the jobs market! Corollary: Don’t make rich people too poor to hire. I myself have never been given a job by a poor man, and I don’t suppose many other folk have, either.)

    On the statement that government spending only crowds out private spending if the government raises interest rates: I don’t see how that addresses the argument.

    There is necessary spending; there is wise but not necessary spending, and there is unwise and not necessary spending. If (to use round easy numbers purely as an example) half of my tax bill were going towards spending of the unwise and unnecessary variety, and if half of every government dollar spent was borrowed but the other half was derived from taxation, then a quarter of my tax bill would represent unwise and unnecessary spending, and a comparable amount of our national debt would represent unwise and unnecessary borrowing.

    Had my taxes instead been reduced by the same amount, then 10% of that amount would have gone to the church (and thus indirectly to the poor), another segment (the percentage would change in proportion to my income that year) would have gone directly to the needy; some additional portion would have gone towards savings. The remainder would have been spent that year, becoming part of either “C” (Consumer spending) or “I” (business Investment in expansion or maintenance of operations). Let’s say — again for easy numbers — that this “C or I” spending ended up being half of the amount in question (which was itself a quarter of my tax bill, using the easy numbers from before). In that case unwise and unnecessary government spending would have replaced “C or I” in 12.5% of my tax bill.

    The real numbers are very different of course; it might boil down to only 1% of some people’s bills, 5% of other people’s bills. But multiply that by the hundred million or so people who actually pay income taxes, and as they say in D.C., “a billion here and a billion there, and pretty soon you’re talking about real money.”

    One could of course argue that the unwise and unnecessary spending was wholly funded by borrowing, and that taxes paid for all the prudent or necessary spending…assuming the numbers matched up in each category. In that case one could say that no “C or I” spending was unnecessarily crowded out. But that’s not a realistic way to look at money: It’s fungible; whether debt-based or tax-based, dollars are dollars. Seeing the debt vs. taxation balance as a percentage of each dollar is more realistic.

    Or, one could say, “Hey, all we care about is keeping GDP going; who cares whether it’s through government spending or private spending?” But that’s shoddy thinking: Our goal is not to win a game where the score is based on GDP, but to have a decent society with a functioning economy where folk can find jobs. Government spending is therefore not equivalent to private spending: The latter creates wealth through voluntary exchange and transmits helpful price-signals (required for economic health), whereas the former only transfers wealth through involuntary mechanisms and often obscures price signals (which detracts from economic health). This is why, even when all government spending is tax-based, if a given spending item is not necessary or its wisdom is “iffy,” it’s better, as a general rule, to leave it in the hands of consumers and businesses.

  • I was in college when today’s U profs were running through the streets screaming, “Ho, Ho, Ho Chi Minh: NLF is sure to win!”

    My question re the gross domestic product formula: Doesn’t G squander do-re-me that could have been better used in C and I: the wealth creation arena?

    The money could be invested in plant and equipment instead of buying dem votes and Bud Light.

  • As always, I think the real trick is to maintain a proper balance between government and private spending. Obviously we cannot have a 100 percent socialist/communist nanny state in which the government becomes responsible for meeting every single need and everyone is taxed to death to support it. Government cannot solve every problem.

    However, a society in which absolutely everything other than law enforcement, the courts and the military were privatized — no public schools, libraries, parks, roads, or other types of infrastructure, no public universities, no public regulatory bodies of any kind, etc. — wouldn’t necessarily be an economic paradise either. (What if, for example, ALL roads were toll roads and people who lived in small towns or rural areas had to pay for their daily drive to work?) To some extent, private business depends on the existence of an infrastructure that it cannot or would not be able to create on its own; and this is where a responsible government would get involved. It also makes a difference what level of government you are talking about — some things are more appropriately done at the local or state level than at the federal level, and vice versa.

  • 1) I agree, but what makes you think we can’t pay our debts?
    2) I agree, but it still isn’t necessary.
    3) What do you propose we cut? I think there is a lot of wasteful spending and it annoys me to no end, but the free market hasn’t indicated it will provide for those born in less favorable situations and neither have our people as whole.
    4) You are right most economists are very good at predicting the past and terrible at predicting the future, but that sidesteps the accounting identity known by everyone who has taken basic macroeconomics. Are you arguing that because economists are terrible at predicting the future then we should disregard all of what they say?
    5) I agree, but shouldn’t we as Catholics defend and promote the teachings of the Church rather than promote our own opinions about politics and life?

    R.C. –

    Im not sure what you mean by intolerable difficulties. Other debt ratings agencies may make it more difficult for us to pay our debts by lowering their ratings on our debt. Inflation and exchange rate depreciation may get out of control, but where in our current situation has that happened? You can’t compare us to the EU because we are sovereign in our own currency. I agree that the pace we are on currently is unsustainable, but I do not believe this is an immediate concern because these intolerable difficulties don’t appear to be anywhere near our current situation. A much more immediate concern is joblessness. If government spending declines and nothing takes its place then joblessness surely will not get better and none of the data I have seen has convinced me that the private sector has, is, or will take up the slack. Decreasing taxes doesn’t help the deficit situation either.

    I agree with the rest of your comment whole-heartedly; you make very excellent points with well though out arguments and thought-experiments. I don’t believe that the size of government must be big in order to sustain spending. I too believe that there is much waste in government spending that would be better spent by the private sector through tax cuts. The one big problem is that the private market isn’t efficient at distribution. It distributes to those who command the most economic power. I believe the saying goes “the rich get richer while the poor get poorer.” This isn’t always the case and I do believe in rewarding hard work and risk taking, but many people start with a huge disadvantage and get more piled on top of them as life goes by simply because they were born in that state. Justice owes that we do something to give them a boost from their situation. This, in my opinion, is best met through private charity and job creation, but it seems that this just doesn’t happen. There isn’t enough charity and stability of jobs isnt there when left up to private individuals. In this way I think the government must step in because individuals are either unwilling or unable to do it themselves. “How much government?” is a tough question.

    All should be ordered towards getting to heaven. I see both the government and individuals as obstacles to this and any emphasis toward materiality leads us away from this goal. The poor need to be shown charity in more than just material goods. They need their dignity upheld and opportunities to be educated, provide for themselves and their families, and support the common good. Free markets ignore the human person. We need individuals to transcend the market with charity and justice. I wish this was done without government transfers, but it isn’t. People seem to want handouts from whoever they can get it from, but you know and I know that what they really want is to be loved, to find happiness and fulfillment. The government really CANT do this. So if we as individuals would take up our responsibility and our calling the government wouldn’t have to and wouldn’t feel a need to.

  • If anyone thins our government is not bankrupt then I suspect they have no idea what bankruptcy means. The debt and unfunded liabilities our government is carrying CANNOT be retired by all of the wealth in the entire world, let alone what America can generate. It is not just that our government shouldn’t have this much debt, or that we don’t have the desire to settle it, it simply CANNOT be paid off. The borrower is the slave of the lender. Our government is the slave of the money power and that makes us defacto slaves. We need to jettison the debt, the central bank and the wealth hampering regulations that favor the politically connected business and group interests at the expense of everyone else.

    Elaine,

    You stated, “However, a society in which absolutely everything other than law enforcement, the courts and the military were privatized — no public schools, libraries, parks, roads, or other types of infrastructure, no public universities, no public regulatory bodies of any kind, etc. — wouldn’t necessarily be an economic paradise either.”

    Some of us would rather not have public (which means government run) schools, etc. Of course, if your local government was pressured by the citizens to have such a monstrosity, they could provide it and those of us who don’t want it would move to the place that doesn’t have it – of course, we’d also take our wealth and our money with us. When people have choices, the market decides. Compare the cost and benefit of most Catholic schools as compared to government schools, there is no question which works better.

    Most of the things you think would not exist without the force and threat of government would probably exist and in a better way. Enoch Pratt and Andrew Carnegie have provided more and better libraries than just about any municipality. Businesses would pay for infrastructure because their customers would demand it. Ford can’t be in business without roads and gas stations, yet we NEED government roads and we HAVE private gas stations – which seems to always provide better service?

    As for so-called regulation, which merely means control and should mean to make regular, usually fails. Enron and Madhoff were protected by the regulators, it was the independent forces of the free market that brought them down. Regulations are usually used to favor one company or group over all others. Over-regulation is unjust and leads to economic disruption, which always does the most damage to the poorest people. Government ‘regulation’ caused the moral hazards that led to the most recent financial crisis and then Wall Street banks were bailed-out, regulations were increased and the banks are doing great – how’s everyone else doing?

    As for an economic paradise, that would be one in which the principle law of economics does not apply – the law of scarcity. We will never achieve that this side of heaven, but we have to try and come as close as we can.

  • American Knight-

    I suggest you read Quadragesimo Anno pp. 103-109. The free market isn’t all it’s cracked up to be.

  • 1) “I agree, but what makes you think we can’t pay our debts?”

    Basic math. Unless we are willing to implement economy killing tax increases there is simply no way to pay off the accumulated debt while also meeting entitlement expenditures. The only reason we have stumbled along thus far is through the greatest borrowing spree in the history of the planet, and I think our ability to do this is nearing its end.

    2) “I agree, but it still isn’t necessary.”

    It may not be necessary, but it is what is happening.

    3. “What would you cut?”

    I would start with Rand Paul’s 500 billion cut proposal and move on from there. In regard to the less fortunate, it is only the free market that provides the wherewithal to do anything for the less fortunate. All the social programs in the world are worthless without an economy to pay the bills.

    4. “Are you arguing that because economists are terrible at predicting the future then we should disregard all of what they say?”

    Take anything any economist says with a boulder of salt, and look closely at their track record in regard to predictions and economic advice.

    5) “I agree, but shouldn’t we as Catholics defend and promote the teachings of the Church rather than promote our own opinions about politics and life?”

    Depends. The teaching against abortion has been changeless since the Apostles. Catholic teaching on economics has been all over the lot as has Catholic teaching regarding government. In those areas I suspect that because of the variety of teaching we see through history we are not dealing with the eternal truths of Christ, but rather fairly ad hoc stances arising often from secular developments. That explains why the Church could embrace feudalism in one era, and the welfare state in another. Some portions of the teaching on economics of course are always true. The admonition to remember the poor for example. However when someone tells me that because of this admonition I must agree that the government should do x, y or z, or the economy must be structured in a particular manner, I get skeptical.

  • Alex,

    I suggest you read the seventh commandment.

    A free market is not an anarchic market, it is the natural market that is created by numerous and unrelated individuals being useful to each other, primarily for the sake of sanctity and also for the material benefit of others. Government has a very important function in a free market; however, that function is to protect the market and not necessarily to provide so-called ‘services’.

    As for the Church’s position vis. economics and politics, I like what our resident barrister stated above. The Church has no charism in political economy other than to state principles of charity and justice, how those are applied is our work. Using the intellect God gave me I can see no other economic system that provides the material benefits of a free market and allows people to exercise charity and justice toward their brothers and sisters. I know some subscriber to Distributism is going to attack me; however, a truly free market, and not the corporate capitalism we call a free market, is more-or-less Distributist.

    Once again, I’ll point to the quality (being what it is) of Catholic education against government schooling. Much better quality, abysmal as it is, for considerably less cost, offering much more choice, flexibility and opportunities for the poor. I currently have no children in school, yet through my parish I support our school. Of course, I also have large sums confiscated from me so I cannot direct them toward a Catholic school so that I can subsidize the indoctrination of some poor soul at the government school. As a Catholic and an American I find that abhorrent.

  • Knight: I realize that Catholic education is better, but special needs students like my own autistic daughter are NOT accepted into most Catholic schools and often have no choice but to attend public schools. Where are they going to go if public schools are abolished? Homeschooling, maybe, but not everyone can do that full time (particularly single parents, or couples that both have to work). And if public universities are abolished, most of the middle class will lose ANY hope of being able to advance beyond high school.

  • Alex,

    Some additions from Centessimus Annus regarding Marxism and Socialism:

    24. The second factor in the crisis was certainly the inefficiency of the economic system, which is not to be considered simply as a technical problem, but rather a consequence of the violation of the human rights to private initiative, to ownership of property and to freedom in the economic sector. To this must be added the cultural and national dimension: it is not possible to understand man on the basis of economics alone, nor to define him simply on the basis of class membership. Man is understood in a more complete way when he is situated within the sphere of culture through his language, history, and the position he takes towards the fundamental events of life, such as birth, love, work and death. At the heart of every culture lies the attitude man takes to the greatest mystery: the mystery of God.

    On “State Capitalism and needs for the market with proper controls:

    “In this sense, it is right to speak of a struggle against an economic system, if the latter is understood as a method of upholding the absolute predominance of capital, the possession of the means of production and of the land, in contrast to the free and personal nature of human work.73 In the struggle against such a system, what is being proposed as an alternative is not the socialist system, which in fact turns out to be State capitalism, but rather a society of free work, of enterprise and of participation. Such a society is not directed against the market, but demands that the market be appropriately controlled by the forces of society and by the State, so as to guarantee that the basic needs of the whole of society are satisfied.”

    Given proper constraints, the market is seen by the Church as a positive:

    “42. Returning now to the initial question: can it perhaps be said that, after the failure of Communism, capitalism is the victorious social system, and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this the model which ought to be proposed to the countries of the Third World which are searching for the path to true economic and civil progress?

    The answer is obviously complex. If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy”. But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.”

    This all goes with the Church teaching that the Church herself offers no specific solutions to the problems of the world, but merely the principles to guide laymen in making those solutions. The Church also teaches that people, using historical, economic, sociological etc. knowledge, may come to distinctly different solutions. This is what people are doing here on the blog.

  • This in addition to the authoritative teaching of the Church (contrary to some of our co-religionists misinterpretation of CST) the Catholic Social teaching is not utopian. That we cannot perfect this world through our efforts. In fact, the current President of the Pontifical Council for Peace and Justice notes that CST is about seeking the “best possible world.” Not the ideal world, but what is possible given numerous constraints. This includes avoiding excessive govt. debt etc.

  • Elaine, I think here in Upstate New York there are about 840,000 people (give or take) between the ages of 18 and 25. Enrollment in private institutions of higher education stands somewhere around 110,000. That would be 13% of those demographic cohorts. The patriciate is not that large. I work in an office of about 70 people. It is not hard to find multiple examples of people from wage earning families or the common-and-garden bourgeoisie who garnered degrees from private colleges or sent their children there.

    As for primary and secondary education, if we re-chartered all public schools as philanthropies to be financed by vouchers, donations, and endowment income (not tuition and fees) and then allowed extant private institutions and new foundations to participate in the voucher program, I would wager institutions serving niche clientele such as yourself would be able to find a school that worked for you.

  • (Guest comment by Don’s wife Cathy:) Art Deco, one of our sons is part of that “niche clientele” of autistic kids like Elaine’s child. Don tells me that Livingston County is the geographically the fourth largest county in Illinois — but it’s overwhelmingly rural/small town (county seat pop. 12,000; next largest town (ours) pop. 4,200); countywide pop. under 50,000). Finding enough special-ed students to make a privately-funded special-ed program viable in a low-population area like ours would mean transporting students long distances — longer than would be desirable for many of the students. Don & I are very thankful that there is a special-ed program which can accomodate our son through the local public school system. We were offered the opportunity to enroll our son in special ed a year early, but chose to wait a year so we wouldn’t have to send him out of town to special ed.

  • Phillip –

    I know well what CST says about capitalism and socialism. I am planning on doing my dissertation on it. I am not arguing for socialism, but if you are going to argue for a free market then you should know what you are arguing for. Unfortunately, a free market is characterized by monopolistic competition, corporations, and large businesses with much incentives and resources to persuade government policy in their favor. If there were ample competition (the check on the self interest of the free market) then this wouldn’t be such a problem. Free markets tend to lend power toward the greedy and ruthless, not the hardworking.

    I wish the free market were more virtuous. The popes are clear that this takes virtuous actors within the market. So my desire is to increase the virtue of myself and others so that whatever economic system we live in will perform better. I don’t think government is the answer in many ways, but they also have the power to set rules and maintain competition and give the less fortunate a better chance to compete, whereas individuals do not. Fortunately, as the author points out, we can be Catholic in any form of government. In our current form of government, the Popes make clear in their teaching how this must be done. They do not suggest policies but remind us of our priorities. If we order all our actions and policies toward these priorities, then we will achieve the ‘best possible world’ in this life.

    So if you argue for the free market, then understand that it tends toward big business/corporations/monopolistic competition (as well as inequality of living and less opportunity of advancement) and then be willing to make economic decisions for others and not solely out of self-interest. If we all did this, there would be no need for any intervention, let alone government intervention, but we find that many cry out for it because they find themselves in need because of the free market.

  • Alex,

    Free markets are morally neutral, it is the actors in the market that set the morality of the market and I know you understand this; however, your assertion that free markets tend to monopoly and rewarding the ruthless is not accurate. It may happen, it sure has here in the USA, which is why we don’t have what can reasonably be called a free market. We have a managed market that is relatively free as compared to others.

    Monopoly and what is called state capitalism or corporatism occurs because of the government. Not necessarily the intent of the structure of government but the use of the threat and force, of which government has sanctioned use, by those who are in the market and don’t want it to be free. They just want to be free to extract as much from the market as possible.

    Our government was set up as a protector of the North American free trade zone between sovereign states and commonwealths and it worked. It worked so well that some men became so wealthy, elevating many others with them, that they began to think they were gods of the market and wanted to secure their god-like status. How’d they do that? They took over the government and twisted it from a Federal government, protecting a free market and restrained by law and checks and balances and fashioned it into a National government that is directly involved in every aspect of our lives so we can be better consumers and borrowers for the market gods.

    The solution is to restore the Constitution in practice and not in words only, elect moral men of honor to office and work to sanctify the world as moral actors in the market. It won’t be perfect, but it will be much better than Airstrip One.

  • Elaine,

    Subsidiarty dictates that some level of government or community effort should try to satisfy genuine needs when private institutions or individuals or families CANNOT. We don’t know if that is the case because the private schools have to compete with the government schools, which have an unfair advantage. I know at least one Catholic High School in my county offers and excellent special needs program. Would there be more if Catholics who owned real estate weren’t forced to pay for government indoctrination. Perhaps, probably, I don’t know because it hasn’t been tried. We should try it and see if it works, I suspect we’ll be very surprised by the results. If the market doesn’t respond, then the community, the county, or the state would have to. But, when the state insinuates itself first, it crushes the market and then becomes self-funding with an unending appetite to the detriment of all, except those being compensated by the state.

  • Mrs. McClarey,

    You are making an implicit reference to several questions – the size and distribution of the autistic population, curriculum for the autistic population, per-pupil cost of teaching the autistic population, and the feasibility of cross-training the general set of special education teachers to teach autistic students – the answers to which I do not know.

    Implicit also in your remarks is that instruction of the autistic requires a cross-subsidy drawn from the general school budget (either inherently or because economies of scale are not to be had) and that the costs of such would not be borne by a school absent compulsion. That may be the case, but there are ways around the problem that do not involve erecting and permanently maintaining public agencies to produce services which can be readily contracted for by private parties. One would be cross-subsidies financed by philanthropic donations (If I understand correctly, the core of the autistic student population in rural and small town Illinois would be about 450, with a periphery of about 2,500). If worst comes to worse, the State of Illinois could incorporate a private foundation whose interest and divident income could finance the cross subsidy through grants to schools, and provide the initial endowment.

  • “Unfortunately, a free market is characterized by monopolistic competition, corporations, and large businesses with much incentives and resources to persuade government policy in their favor. If there were ample competition (the check on the self interest of the free market) then this wouldn’t be such a problem. Free markets tend to lend power toward the greedy and ruthless, not the hardworking.”

    Actually I believe American Knights comment about markets being neutral is more corect though that dovetails with your comments about individuals being morally upright converting society. That is consistent with Catholic teaching. Your comment above seems more of an ideological position and not one that has been pronounced upon by the Church’s social teaching.

    ” I don’t think government is the answer in many ways, but they also have the power to set rules and maintain competition and give the less fortunate a better chance to compete, whereas individuals do not. ”

    As noted, I do not deny that the state has the power to establish limits to the Free Market. Though, from a Catholic perspective, that government is also composed of fallen individuals who can, as within the Free Market, predispose the state towards self-interest, preservation of special interest groups including corporations and unions (see Wisconsin teachers) and not necessarily the common good.

  • (Don’s wife Cathy again:) Art, I’ll take your word for it on how special ed programs could be privately financed. My concern is more over keeping such programs as locally-based as possible, so that as little of the students’ potential instructional time is wasted on transportation to and from a central-but-distant location in thinly-populated areas. If locally-based special ed programs could still be done via private funding, I wouldn’t have a problem with that.

    American Knight, it’s great that your county has a Catholic high school with a great special-needs program. My county, however, has no Catholic high schools at all, and just 2 Catholic grade schools (the nearest one being 9 miles away, with some students from our parish). There are some special ed services available to the parochial school students (f.ex. speech therapy); however, the Catholic grade school our parish has access to does not have the resources for a self-contained special ed classroom, which is the level of support our autistic son would have needed in grade school and still needs in high school. (As far as I know, I don’t believe the other parochial school in our county (in the county seat, hence a larger school) has a self-contained special ed classroom, either.)

  • “5) I agree, but shouldn’t we as Catholics defend and promote the teachings of the Church rather than promote our own opinions about politics and life?”

    “They do not suggest policies but remind us of our priorities. If we order all our actions and policies toward these priorities, then we will achieve the ‘best possible world’ in this life.”

    Alex,

    In general people here are applying their Catholic principles towards a just society. They just don’t happen to coincide with your positions. For example your own position on the natural trend of markets which is not a position the Church has defined.

  • Cathy,

    According to the principle of subsidiarity your community, county, or state should step in and fill the need that has not been met, but only until a lower order body can step up and meet the need.

    Of course, the principle problem you are facing is the problem of the whole world, Catholics are poor evangelists. If we were keeping our commandment from Our Lord to baptize all nations in the Name of the Father, and the Son, and the Holy Spirit, then you’d have a vibrant Catholic community and probably one that is wealthy enough to meet the needs of the minority of special-needs children and the minority of the individual person in need, you can’t get more minor that that.

    My chief concern, probably articulate poorly, is that we have allowed government, at all levels, to enter space it is not meant to serve and even create needs and codify them as rights that only it has the monopoly to fill. By doing this government distorts the natural market of matching people’s needs with those who can satisfy them. When government schools command education and offer it ‘free’ (actually by debt, taxes and confiscatory redistribution of wealth) then they enjoy a virtual monopoly over the need of education and how to define and satisfy that need. This crowds out the true innovators in the realm of education and the sole arbiters of what that education should be – the children’s parents.

    I use Catholic schools as an example; however, other private secular institutions may be able to fill the need just as well. For example a company that specializes in educating special-needs children could contract with schools, parents and acquire philanthropic or charitable funding combined with direct billing. This is unlikely when the government schools provide this service ‘free’ – this may or may not be a benefit to the child, but it certainly is a benefit to the budget for the school because no politician is going to cut the budget for children with special-needs (well, except may be Crusading Christie of NJ). That does not mean the child is getting the best service, nor that anyone is getting the most cost-efficient benefit; usually the services provided by monopoly government with hidden costs are more expensive and of lower quality.

    All that being said, it is still incumbent on government to step in when the market is NOT satisfying these genuine needs, but, we have to have measures to get the government out as soon as possible so a lower order can do it instead.

  • In regard to our autistic son, Cathy and I had to fight like the dickens to get him included in CCD. Our local director of religious education, supported by our parish priest, had zero interest in having our son participate due to his autism. Cathy was willing to instruct our son separately from his class while CCD was in session, with Larry joining for group activities under Cathy’s close supervision. That is what we were fighting for and it was a fight to get that. To be quite blunt, few people other than their parents are really interested in the education of mentally handicapped kids, and that includes some of the special ed teachers we have encountered over the years. I would prefer a voucher system for all kids so that reliance would not have to made on the state, since education, especially education for special ed kids, is something the state does poorly. The main concern for Cathy and me of course is that our son receive an education, however it is accomplished. Most of his education however, we have done ourselves. My heart goes out to parents confronted by this challenge who are less prepared for it than we were.

  • Don,

    That is a sad reception. It is not lost on me that teaching about the virtue of Charity is part of CCD and what an opportunity was missed. We are called to love and what could state that more to children than teaching the faith. Furthermore, if we really believe that we are a catholic (universal) covenant family of God, then all the children and their education is our responsibility. It is sad when convenience trumps obedience and I know I have been guilty of that far too often.

    I am confident that your example provides hope to many parents.

  • Phillip and American Knight –

    I really agree with what you say. The government is made up of fallen individuals just as markets are full of them.

    “Our government was set up as a protector of the North American free trade zone between sovereign states and commonwealths and it worked. It worked so well that some men became so wealthy, elevating many others with them, that they began to think they were gods of the market and wanted to secure their god-like status. How’d they do that? They took over the government and twisted it from a Federal government, protecting a free market and restrained by law and checks and balances and fashioned it into a National government that is directly involved in every aspect of our lives so we can be better consumers and borrowers for the market gods.”

    I agree with this statement as well. If we had morally sound politicians and wealthy individuals then they would not use government to their own advantage…big if right? That’s why John Paul II said this in response to the question “Is capitalism the best system?”:

    The answer is obviously complex. If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy”. But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.

    We need both moral politicians and players in the market. (We need moral people!). Government policy doesn’t make people more moral, but outlining rules and guidelines can help them stay the course. Transferring wealth that wealthy people won’t through personal charity is also beneficial to the society and the common good if done for the right reasons. It is ideal of me to think this is possible. I hope for such a world and hope I am doing my part to evangelize and make disciples of all nations. I think part of that is educating others that free markets make some rich who don’t always use it for the common good, and by its nature encourages selfishness. I think part of that is educating others that government distorts the beneficial processes of the free market and is often controlled by “economic dictators” (as we read from CST) who use it to maintain their wealth and status. I don’t think that free markets are the answer and I don’t think that the answer lies in more government control or spending. I think the Popes have taught the same thing. I think it’s clear that at the bottom of it all is that all of us need to act in solidarity for each other and the common good. I think you realize this, too, and I thank you for contributing toward this mission!

  • “To be quite blunt, few people other than their parents are really interested in the education of mentally handicapped kids, and that includes some of the special ed teachers we have encountered over the years. I would prefer a voucher system for all kids so that reliance would not have to be made on the state, since education, especially education for special ed kids, is something the state does poorly.”

    I agree there, Don. Public school special ed is far from ideal, but most of the time it’s the only game in town if you have a special needs child. (And in many areas, it took the force of the federal Individuals with Disabilities in Education Act, or IDEA, to make that possible.) It’s possible, I suppose, that if public schooling were abolished the amount of money families save on taxes could then be sunk into private education; but I wouldn’t bet on it ever happening.

    In the end I have to agree also with Alex, that both business and government are made up of fallen human beings and neither side has all the solutions.

  • Alex,

    I think in general we are in agreement. Glad you recognize we too are applying CST. One addition I would add is that we need moral poor. There is nothing inheritly moral about the poor. They too are fallen and can be corrupted by Govt. programs. Thus the need to be careful about social programs that can promote dependency and deter the poor from seeking to improve their life.

    “Transferring wealth that wealthy people won’t through personal charity is also beneficial to the society and the common good if done for the right reasons. It is ideal of me to think this is possible. I hope for such a world and hope I am doing my part to evangelize and make disciples of all nations.”

    One has to be careful here also. CST does not deny that there be classes. To seek to absolutely level the playing field is not in accord with CST. And while it does note the universal destination of goods, it does also teach that people are entitled to their property and to provide for their families. This includes, in the long-term. retirement. Wealth, which given current life-spans and costs, may be quite a bit for a couple seeking not, in accord with CST, to be dependent on the Govt. Also CST teaches that taxes should not discourage productivity. These are legitimate concerns for placing limits on the taking of wealth.

    Thanks for helping me evangelize about CST.

  • Alex,

    You, Philip and myself are in general agreement because we are all trying to apply the Truth practically and being Catholic we have the benefit of the teaching of the Church. We differ, as we should, in detailed application and on this the Church is silent. This is good because if the Church did all the work, what would be left for us to do?

    One thing to note is that the ‘wealthy’ and the ‘poor’ are not static classes in our country. I know people who were very wealthy one year, after years of being poor due to losses and some of the wealthy weren’t all that wealthy in following years. What we consider poor in this country would be considered very wealthy in most other places in the world and don’t fall for Marxist garbage about relative wealth within a society. Additionally, when we refer to the poor it is not always, exclusive or necessarily to the materially poor. One can be ‘poor’ and still carry envy and covetousness in one’s heart, which renders one no longer poor in spirit. When Christ stated that the wealthy will have a tough time getting into heaven, he wasn’t referring to the materially wealthy. After all some of his closest friends and disciples were wealthy. Levi (Matthew), who left his wealth to follow Christ and also Joseph of Arimathea, who remained wealthy – he even gave Christ his lavish garden tomb to rest in for three days – of course, Joseph didn’t know that Christ’s body was only going to reside in the tomb for a short while.

    While those who have wealth ought to give to the less fortunate, we have no right to demand that they do it through confiscation. The wealthy man is deprived of freely offering his material wealth in Charity and Truth if we force him to give it away. The recipient of the wealth is also deprived of accepting and offering his current poverty to God if we tempt him with ‘free’ stuff. Also, how is the poor man supposed to be grateful to God and the benefactor if he thinks that it is the government that provided him the benefits? As Phillip stated, making the poor dependent on government programs robs them of their dignity, which sadly, is the overarching purpose of government programs, to increase clients, and acquire a voting block and keep feeding the machine.

    Notice the good Samaritan. He helped the man on the road, he did not demand that Roman Centurions do it and he didn’t use threat of force to make someone else help the man. He did it himself, from his own Charity.

    A free market, that is kept free by government, is the environment that allows the most free choice and therefore the most good. Of course, it also allows for ill, but that is a result of our Fallen state and not the free market. Coercion, force, fraud, deceit and all other ills employed by fallen man in a free market should be checked by government without interfering or adding a burdensome compliance cost to all other actors. Of course, the government needs to be checked also. it is a balance and the pendulum will not stop swinging from one end to the other until the Judge returns to balance the scales. Nevertheless, we can keep a modest balance and when we err, we should always err on the side of freedom. Compulsion breeds resistance and resistance agitates and aggravates. Freedom allows for the Peace of the Holy Spirit.

    Another important point to note is that the Church, even in temporal matters, is chiefly concerned with the salvation of souls and not their material economic benefit. It is far better to be a poor Holy nation than a wealthy nation of perdition. Wealth is good, all material is good, when God created the world He said it was good, when He created our first parents He said they were very good. The garden was good, the tree in the middle of the garden was good in and of itself, it was not good for man to eat of it, but the tree was good. Since that disobedience we tend to use wealth, a good, poorly. It is us who taint it. Redistributing wealth through force is not good, even if a material benefit is facilitated. We cannot use evil means to do good, we are only permitted to use good means to do good.

    Violating private property, in order to bring about a good result, still results in breaking the seventh commandment. One could argue that killing an abortionist prevents him from killing others, yet since we have the power, at this time, to make his actions illegal, we have no right to employ murder, an evil, to bring about a good. We cannot rob one man to benefit another, just because we feel one man has too much and the other hasn’t enough. We create an occasion of sin for both men while we are sinning ourselves. Wealth maybe evenly distributed, but three souls may be lost to hell.

    Thanks for this discussion, it is very enjoyable and moves my mind to want to do my part in bringing about Catholic Social Justice by helping people understand what we ought to do, voluntarily; rather than through political force.