Destroying the Nation in Just Four Years

The graph to the left is from the National Taxpayers' Union.

Thomas Sowell has written another noteworthy article.  He exposed some of the rhetorical chicanery practiced by President O-buma and his ideological soul mates.  In particular, he cites their use of straw man argumentation, or as he describes it, arguing against a caricature instead of confronting the argument actually made.  One such example is mainstream media's bobble-headed reference to the so-called trickle-down theory.

No such theory has been found in even the most voluminous and learned histories of economic theories [nonetheless] this nonexistent theory has become the object of denunciations from the pages of the New York Times and the Washington Post to the political arena, and has been repeated as far away as India.  Sowell’s credentials concerning economics are extensive and impressive; still, they refer to this nonexistent theory as though it were scripture.

Franklin Roosevelt was the father of modern US socialism.  His speechwriter Samuel Rosenman made an early straw man reference to the trickle downism that he alleged existed at that time.  He was referring to tax-rate reductions that Congress enacted during the 1920s.  Tax rates were so high that they had driven taxpayers into shelters.

Vast sums of money had been put into tax shelters such as tax-exempt municipal bonds instead of being invested in the private economy, where this money would create more output, incomes and jobs — thereby producing higher tax revenues for the federal government.  Almost invariably, the more we tax productivity, the less we get of it; conversely, the more we subsidize waste, the more we have of it.

The author points out that similar effects resulted from decreasing tax rates during the Kennedy, Reagan, and George W. Bush administrations.  Increased economic activity drove up employment; growing demand for labor increased incomes; higher incomes translated into increased tax revenues, despite lowered tax rates.

There were other consequences as well…people in higher-income brackets paid not only a larger total amount of taxes, but a higher percentage of all taxes, after what were called 'tax cuts for the rich.' It was not simply that their incomes rose, but that this was not taxable income, since the lower tax rates made it profitable to get higher returns outside of tax shelters.

Raising tax rates during the current recession is a recipe for disaster.  Regardless, the O-bumites are engaging in straw man rhetoric to drum up support for further dampening economic expansion by increasing tax rates.  They know full well what they are doing, and it is time that voters caught on to them.  They are simply pursuing the O-buma-George Soros-Steven Chu-Lisa Jackson, et al playbook for bankrupting the nation.

May your gods be with you. 

O-buma Wants $8 a Gallon Gas Prices

O-buma and company are simultaneously committing so many grievous economic errors that it cannot be mere coincidence.  Percipient thinkers recognize that unlikely coincidences are so rare that they seem to require careful planning.  Based upon these understandings, it is easy to conclude that the mess left after more than two years of The One’s mismanagement is no accident.

In this article, Jim Johnston points out that we should have used our Strategic Oil Reserve, as was done after Katrina, to increase the supply of oil and moderate its price after recent price shocks.  However, the O-bumites would rather we twist in the wind because we are an arrogant nation.  Government likes discretion in energy policy in order to obtain political advantage. 

The chart below of the last year's OVX (oil price volatility index) shows there were two occasions when the index exceeded 40.  One was a result of the BP oil spill in April 2010.  The other episode coincided with the 2011 revolutions in Middle Eastern oil-producing states.  In this pair of cases the volatilities rose because of unexpected increases in oil prices.  The jump in volatilities would have been a signal to release from the SPR.  That is what a private owner of stored oil would have done.

There is a frequently ignored connection between the Fed's increasing the money supply and increases in oil prices.  When inflation is anticipated, as it is now, one of the defenses is to switch out of dollars and into commodities.  This pushes nominal oil prices higher.  Thus the Fed is contributing to the high oil prices about which President Obama is complaining.  As with oil, Washington is ignoring several market indicators of future inflation.  Commodities such as gold, silver, and copper are all near historic high levels.  Foreign exchange futures are also higher, as are interest rate futures.

In another article, Chuck Roger exposes Federal Reserve Chairman Ben Bernanke’s Quantitative Easing as folly.  QE derives from the Keynesian economic hypothesis that government spending helps end recessions.  But reality refuses to comply with theory...the $800 billion stimulus passed by Democrats and signed by Obama in 2009 will generate a paltry 5 percent boost in Gross Domestic Product.  Furthermore, each government dollar injected between 1947 and 2007, via deficit spending, stimulated only forty-six cents of additional GDP.  Negative returns and higher debt make for crummy investment karma.

The Fed Chief is inclined to give in to the insanity reflex: expecting repeatedly-failed tactics to succeed.  Bernanke's strategy will ram into reality.  His tactics will create conditions like those which caused the Great Recession in the first place.  Worse still, to compound the conditions that existed when the subprime mortgage gravy train derailed, today we have $2.35 trillion from QE1 and QE2 ready to flood the economy.

In “Four More Dollars?” author Pete du Pont asserts that America's energy policy is as bad as our fiscal policy.  The federal government is focused on producing not more energy but less of it, on making costs higher rather than lower, and on expanding regulation.

As for oil production, our government is limiting it, and over the years domestic drilling has been declining. In 1970 the U.S. produced 3.5 billion barrels; by 2010 that figure was down to two billion. The federal government has prohibited oil and natural gas drilling on 83% of federally owned land and increased the importation of foreign oil. In 1970 only 500 million barrels were imported; last year it was 3.3 billion barrels. That means that in 1970 U.S. oil production was 88% of consumption, and today it is only 37%.

[C]onsider the statement of Energy Secretary Steven Chu in The Wall Street Journal: "Somehow we have to figure out how to boost the prices of gasoline to the levels in Europe."  The current gasoline price is about $8.50 a gallon in England and $8.80 in France and Germany.  Increasing the price of gasoline increases the costs of all essential commodities, driving more and more people to turn to the Corruptocrats’ theft-welfare state.  Who could possibly benefit from that?

May your gods be with you.

The Downward Gyre Revisited

As a nation, we are in what is known as a debt death spiral.  We simply cannot repay the debt that we have amassed.  "Hence the unpaid balance is added back to the amount owed, making the problem worse next year.  The debt spiral is growing exponentially.  There is no way to avoid a certain mathematical end--BANKRUPTCY." 

According to the Washington Post, interest on the national debt, the accumulated deficits from previous years, is projected by the current administration to be $251 billion for fiscal year 2011.  At a quarter of a trillion dollars a year in interest alone, the Chinese government is becoming Uncle Sam's Tony Soprano.  O-buma and company want Congress to allow the federal government to spend $3.83 trillion while taking in only $2.57 trillion in revenue, leaving a $1.27 trillion shortfall.

We cannot make good on the financial commitments that we have already made.  To put it into perspective, if "the Government confiscated everything, [an Obamatron utopian dream] the social programs would still be $50 trillion short and the Government would still be bankrupt.  Furthermore, no company or individual would be left with anything."  If O-buma and the other Saul Alinsky type Theftocrats had their way and private ownership were to be ended, we would all be landless as well as penniless.  Still, Corruptocrats want to spend one-and-one-quarter trillion dollars more than we will take in this year.

What sort of spending schemes have gotten us into such deep kimchee?  Federal workers' compensation is an area where the burden on taxpayers pockets could be lightened.  This article points out that in "the private sector, productivity determines workers' pay.  Firms that overpay their employees are driven out of business by firms that more accurately price their employees' economic contribution.  [think Government Motors]  If the federal government paid market rates for their employees' skill, education, and experience, it would save taxpayers $47 billion in 2011 alone."

If former Senator Everett Dirksen were alive today, he might observe that saving $50 billion here and $50 billion there could eventually add up to some real money.

"The gravy train doesn't end there.  How much would near-absolute job security be worth to you?  While their private sector counterparts have seen unemployment rise from 4.2% to a high of 10.6%, the percentage of federal employees who lost jobs barely budged, going from 2.0% to 2.9%."  Abolishing the current seniority-based system "and implementing performance-based pay would go a long way toward getting taxpayers a fair deal."

Unemployment decreases federal revenue and increases its expenditures.  However, productivity also improves the government's balance sheet, and it is influenced by the national debt.  The Congressional Budget Office advises that "economic output per person will tend to rise under normal conditions (about 1.5 percent year), but could stagnate or even fall if rising government debt 'crowds out' the ability of the private sector to make productivity enhancing investments...CBO economists are warning that debt poses a direct threat to economic growth."  However, growth can be created artificially.

In "The Fed Trashes the Dollar," author Pat Buchanan observes that the US Federal Reserve's prime responsibility is to "protect the dollars that Americans earn and save."  Unfortunately, its chairman Ben Bernanke is going to have the Fed "buy $600 billion in bonds from banks and pay for them by printing money that will be deposited in those banks.  The more dollars that flood into the economy, the less every one of them is worth."

"This is Weimar economics."  The prices for oil and gold indicate that we are on the way to hyperinflation.  During the time of the Weimar Republic money was plentiful; unfortunately, it took a wheelbarrow load of money to buy a week's worth of groceries.  When the Fed was created in 1913, "a $20 bill could be exchanged for a $20 gold piece.  Today, it takes seventy $20 bills to buy a $20 gold piece, which means that the dollar can buy in 2010 what you could get in 1910 for two pennies.  Quite a record for a central bank set up to protect the dollar."

Inflation is a kind of theft that is perpetrated by the federal government's fiscal and economic policies.  It increases the dollars that the nation's coffers receive as they tax artificially bloated incomes and prices for property and commodities.  Politicians use this backdoor tax to finance the largesse that Corruptocrats use to buy votes and finance the theft-welfare state.     

National problems have their origins at the highest levels of government.  Our present leaders have left the ship of state rudderless in foreign affairs and aggressively anti-American in domestic matters.  This article describes how the The One's imperial presidency is leading us down the path to third world status.  "It is almost as if a collective schizophrenia dominates policymakers.  Impotence abroad, omnipotence at home; shrinkage of the reach of government abroad; expansion at home; frugality in foreign and military affairs; profligacy at home; appeals for public approval of foreign citizens; deafness to the desires of voters at home."

May your gods be with you.