Most economists agree that America has enjoyed unprecedented prosperity, based primarily on excessive debt. Thus, any healthy correction would necessarily involve serious deleveraging and a severe recession. After a lot of pain, the economy would rebuild with healthier fundamentals. Infrastructure improvement would aid, but not cause, the eventual recovery.
Recession is the natural cure for the politically inspired profligacy that America has enjoyed for almost 40 years. Unfortunately, the side effects of this medicine, namely the rapid reallocation of labor resources and deflationary damage to debtors, are still unpalatable to pandering politicians.
The Washington regime, particularly members of the Democrat persuasion, leans towards a socialist solution of avoiding recession at any cost. After all, the bills are paid by others, such as taxpayers and holders of US dollars. This results in an increasing amount of other people’s money being spent on “public” works that would in other times carry the label “pork barrel”.
Washington is choosing to pursue the policy of continued and ever-increasing false prosperity, financed eventually by hyper-taxation, hyper-debt and hyper-inflation accompanied by a gradually eroded standard of living. The jobs created by the bill are by and large non-productive and will divert resources from the private sector and rob consumers of their power to make free choices in the marketplace.
Pain avoidance drove the call for stimulus. Politicians are naturally for that because it ensures their future. But in reality it isn’t pain avoidance at all, but simply a form of pain management. And since that management will be spread over many years, those who will lose under it will be less likely to notice that loss over the years than they would if that loss happened all at once. But there’s a price for that, and it will become apparent eventually. That gradual loss won’t allow the recovery to the previous standard of living because government will have supplanted much of the private sector and many of those options (and resources) for regaining that level are no longer available.
Of course, the good news for the present crop of politicians is that realization of loss won’t happen on their watch. And as far as the political class is concerned, that’s all that matters.
Let the good times roll!
While California’s budget debacle seems to be catching most of the MSM coverage, there’s an interesting drama in Kansas going on as well. Kansas pits a Democratic governor against a Republican legislature.
Income tax refunds and state employee paychecks could be late after Republican leaders and the Democratic governor clashed Monday over how to solve a cash-flow problem.
Payments to Medicaid providers and schools also could be delayed.
“We are out of cash, in essence,” state budget director Duane Goossen said.
The move places state taxpayers, workers and schoolchildren in the middle of a political battle over budget cuts.
Before we move on, note how the situation is framed. Clearly, at least to me, the bias leans toward what? Averting pain. In essence the state should do what is necessary – even if illegal and counterproductive – to avoid any pain.
The fight then, is about pain avoidance or, said another way, facing up to what excessive spending and poor budgeting has brought to the state of Kansas.
Why? Well what happens to politicians when pain is visited on voters? So it’s a very natural thing for politicians who enjoy the perks and power of office and harbor hopes of even higher office to want to avoid pain and the possiblity of losing that power and those perks.
That is essentially what is going on in KS where the governor wants to rob one fund which is healthy to pay out in other areas and the legislature is saying a) that’s illegal and b) we insist instead that we take a hard look at the situation and do things which will actually remedy it while, unfortunately, causing some pain.
Republicans, who hold majorities in both chambers, blocked Gov. Kathleen Sebelius’ proposal to borrow $225 million from healthy state funds to cover shortages in accounts used to meet the state’s payroll and issue tax refunds.
GOP leaders said they won’t approve the IOUs until Sebelius either cuts the current budget herself or signs the bill they passed last week slashing $326 million — including $32 million for education — to balance the budget.
Republican leaders said they had no choice, that by law the state can’t borrow any more money from itself.
Sebelius and Democrats disagree and accuse the GOP of playing politics with people’s paychecks.
“Through their refusal to act today, the Republican legislative leadership is jeopardizing our citizens’ pocketbooks for no other reason than to play political games — games in which the only ones set to lose are Kansas families, workers and schools,” Sebelius said in a written statement.
Replied House Speaker Mike O’Neal: “While we all can agree that these are trying times for Kansas families, seniors and business owners, the Kansas House of Representatives respectfully disagrees with breaking the law in order to gain political capital.”
Notice the Governor and Democrats come back – the GOP is “playing politics with people’s paychecks”. But what is the Governor trying to “play” with:
The Governor is asking the Legislature to be complicit in breaking the law by approving certificates of indebtedness outside of the parameters set in statute. Kansas law requires the Director of the Budget to certify that money will be present at the end of the year to pay off certificates of indebtedness, and there is no evidence that will be the case. There is no reason to believe that under the current budget such money will be available. It is irresponsible and illegal to act as if the money will be available when all economic indicators show that we may see even less.
So, in fact, it appears that the GOP isn’t “playing” with anything to include the law, while the Governor wants to waive it so she doesn’t have to face the music and make the cuts necessary to bring the budget of Kansas back into balance.
Given that, which then is the “reality based” group in Kansas? And, after adapting to the new reality, to include the pain it will bring, do you think Kansas will be on the road to recovery faster than some state where pain avoidance is being practiced? Last, but not least – want to bet Governor Sebelius delays signing the bill which would require such cuts hoping the “stimulus” bill to be signed today by Obama will rescue her and help keep her from having to make that difficult decision (and avoid the pain)?
Pain avoidance for political purposes or rule of law? Screw the law, opt for pain avoidance, even if illegal.
That’s exactly the type person I want as my governor. [/sarc]
You’ve got to hand it to former IL Governor Rod Blagojevich. He’s the anti-Midas. Everything he touches turns to…not gold, anyway. His magical touch has once again appeared, and this time the touchee is the senator he appointed to replace Barack Obama, Roland Burris. Apparently, Blagos Magic Touch™ caused Sen. Burris to, uh, misremember things.
The governor’s brother, Rob Blagojevich, asked Burris three times to help with fundraising, according to a Feb. 4 affidavit the senator filed with state Representative Barbara Flynn Currie, who chaired the Illinois House panel that impeached Blagojevich.
Burris told the House panel on Jan. 8 that the governor hadn’t asked for money or favors in exchange for the Senate seat. In a letter accompanying the affidavit, Burris’s lawyer said the senator hadn’t been able to “fully respond” to questions.
He didn’t mean to give contradictory testimony. But it was all so confusing and difficult.
“While Senator Burris testified truthfully and to the best of his recollection before the Impeachment Committee, given the fluid nature of the questions and answers between the Senator and the committee, and based upon our subsequent review of the hearing transcripts, the Senator was unable to fully respond to several matters that were included in questions during his testimony,” lawyer Timothy Wright wrote in the Feb. 5 letter.
You see, he meant to tell the committee that Robert Blagojevich, the governor’s brother had asked him to do some, uh, fund-raising to the tune of $10,000, on three separate occasions, but he just wasn’t given a chance to testify to all these things fully. So, it’s really the committee’s fault, with their slipshod procedures and what not. That’s why he told the committee that he had not been asked for any fund-raising at all.
You’d think that a former state Attorney General would be able to negotiate the shoals of testimony, but I guess not.
Still, he told the committee that he had no contact with anyone connected to the governor in association with the appointment. And he specifically denied having been asked to raise any money. That’s a difference that would seem difficult to explain, but Sen. Burris is having a press conference today in which he will, presumably, clarify these matters to everyone’s satisfaction.
The press conference has started. “I was never inconsistent in my statements”.
He says he answered affirmative when asked if he’d had contact with Gov Blagojevich’s cronies, and provided Lon Monk’s name as an example, after which, the questioning moved on to another subject.
He says his testimonies are fully consistent.
The Chicago press corps is asking him some pretty tough questions. They don’t seem to be buying his schtick.
This should be interesting to follow.
You’ve just witness the unimaginable – Congress passes a 789 billion dollar pork-laden spending bill disguised as a “stimulus” bill and they may be contemplating “Unimaginable II”:
Despite the enormous size of the $787 billion stimulus plan, some economists worry that it won’t make a big enough dent in unemployment and that lawmakers will have to work on another stimulus in short order — something members of Congress are loathe to discuss.
“That’s possible,” said Alice Rivlin, a former Clinton administration budget director. “I think the economy is getting worse quite rapidly and this may not prove to be enough.”
And why is that, Ms. Rivlin? Why might it not be “enough”?
The stimulus got “less stimulative,” Rivlin said, as it passed through the Senate and some of the things that offered “the biggest bang for the buck” were scaled back, such as more money for food stamps.
You mean it was exactly what those mean old Republicans said it was – more relief than stimulus. More social spending than jobs? That, in fact, any stimulative part of the bill was watered down or eliminated in favor of special interest spending on programs which are either years in the future or will provide no immediate jobs with which to help get the economy moving?
You mean, despite all the rhetoric and nonsense to the contrary by Obama and the Dems, we are on the road to repeating the mistakes Japan made that brought them their “lost decade”?
And I doubt many would call Ms. Rivlin a right-wing reactionary economist spouting Republican talking points, would they?
So now that the Dems have fulfilled their 40 year social program spending spree, it appears they may now try to actually stimulate the economy with a few more hundred billions of your great, great, great grandchildren’s money.
More future theft.
“Son of Stimulus”, coming to a wallet near you soon?
I suppose this too will somehow come as a surprise the left:
General Motors Corp., nearing a federally imposed deadline to present a restructuring plan, will offer the government two costly alternatives: commit billions more in bailout money to fund the company’s operations, or provide financial backing as part of a bankruptcy filing, said people familiar with GM’s thinking.
The competing choices, which highlight GM’s rapidly deteriorating operations, present a dilemma for Congress and the Obama administration. If they refuse to provide additional aid to GM on top of the $13.4 billion already committed they risk seeing an industrial icon fall into bankruptcy.
Tired of throwing money at a company which has a failing business model? Not interested in throwing good money after bad?
Well, then let them seek protection under the bankruptcy laws, reorganize (which means getting out from the labor contract the UAW refuses to renegotiate) and let them stand a company back up that’s able to compete. Heck, this is as good a time as any – they’re not selling any cars anyway.
Oh, and as an afterthought, if bank execs have to have salary caps, how about auto execs and labor leaders? No I’m not for any of that, but it does provide a vivid example of how arbitrary the rules Congress imposes are, doesn’t it?
I‘m sure this will come as a complete surprise to some on the left but the people didn’t go for Gov. Paterson’s idea at all:
New York Gov. David Paterson admitted Thursday one of his most talked-about tax proposals, an obesity tax on sugary drinks, is fizzling.
But he said it popped the right question.
In meeting with college students over his budget, Paterson told the young New Yorkers not worry about his soda tax because the Legislature won’t go for it. But he said it has served its purpose of raising awareness of childhood obesity.
It served another more important purpose – it showed the extent to which politicians are willing go to control your life and that they are only limited by their imagination. Without a public outcry, this might have found its way through the legislative process. Eternal vigilance is the price of freedom.
And another point to ponder – if government was the sole purveyor of health care, how outlandish of an idea do you really think this would be? A legislature looking for ways to raise revenue while cutting costs in health care? A fat-tax would be a no-brainer and its justification would be found in government’s assumed responsibility for your health.
[HT: Matthew H.]
Well yeah – now:
President Barack Obama on Friday warned that economic recovery in the United States “will be measured in years, not months” as he scored a major victory in his young presidency with the approval in Congress of a $787 billion (£542) bill to revive the economy.
How unfocused is this mess? Well here’s a nice example:
Sec.1421 of the American Recovery and Reinvestment Act gives employers a tax incentive for hiring people (I hesitate to call them “workers,” given it’s not likely they’ve ever held a job for more than a couple days) who fit the following description. Betcha can’t wait to hire this person!
DISCONNECTED YOUTH . –The term ‘disconnected youth’ means any individual who is certified by the designated local agency as having attained age 16 but not age 25 on the hiring date, as not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date, as not regularly employed during such 6-month period, and as not readily employable by reason of lacking a sufficient number of basic skills.
I wonder if the Democrats who voted for the stimulus bill realize they just voted to give a tax break to McDonald’s and WalMart.
Of course, they have no idea of who or what they’ve given breaks too (although I doubt McD’s and Wal-Mart are eager to take on workers with no skills).
And the bill is rife with examples like the above. What is doesn’t have at all are the things economists know work and work immediately – like marginal tax cuts.
Fact Check takes a look at the bill and finds problems with many of the basic promises made (and certainly takes issue with the claim there are “no earmarks” in the bill).
A couple of things Fact Check notes include the claim that digitizing health records and modernizing the electrical grid will be quickly done and provide great savings:
The president also says electronic health records will save billions of dollars. But the Congressional Budget Office says that even a decade of expected savings are unlikely to pay back the government what the government will spend on health IT.
The president said the bill will modernize the nation’s electricity grid, reducing consumption by 2 percent to 4 percent. That’s optimistic. Industry reports say that a new grid could reduce energy consumption by up to 4 percent, but not until 2030 and at a cost much greater than the stimulus bill would cover.
But what this does is get the proverbial government nose under the tent and set up more spending with future bills:
Mr Obama will also propose a budget to lay the groundwork for sweeping health care reform and present a major green energy bill. Mr Obama will also propose a budget to lay the groundwork for sweeping health care reform and present a major green energy bill.
The mistake of the paragraph above is the “groundwork” is being laid with this “stimulus” bill.
So, we’ve added 789 billion to the 750 billion TARP and the possible 1.2 trillion Geithner plan and are contemplating spending hundreds of billions more for “sweeping health care refomr and … a major green energy bill”. And we haven’t even mentioned the coming “AGW” spending debacle.
What generation are we up to now? Have we dragged my great, great, great grandchildren’s generation into to this yet?
I was sitting here with my two older grandsons and when word came that the bill had been approved by the Senate I said, “congrats boys, you just went about $30,000 into debt tonight”. Of course that spurred an instant response – “What!?”. And then we had a nice little talk.
A bill full of wasteful, unfocused spending with money we don’t have and we’ll be lectured soon about “fiscal responsibility” and “sacrifice” by the profligate yahoos that put this mess together. Can’t wait.
he Democrats in Congress keep talking about it, and talking about it: The Fairness Doctrine. The newest musings about it come from Rep. Maurice Hinchey (D-NY).
More and more Democrats in Congress are calling for action that Republicans warn could muzzle right-wing talk radio.
Representative Maurice Hinchey, a Democrat from New York is the latest to say he wants to bring back the “Fairness Doctrine,” a federal regulation scrapped in 1987 that would require broadcasters to present opposing views on public issues.
“I think the Fairness Doctrine should be reinstated,” Hinchey told CNNRadio. Hinchey says he could make it part of a bill he plans to introduce later this year overhauling radio and t-v ownership laws.
When Bruce addressed this recently, commenter PogueMahone responded:
Well then you are kooks. This is no fairness doctrine. Despite the wishes of some, there will be no “fairness doctrine” bill passed.
Huh. maybe. But for people who aren’t going to pass it back into law, they sure talk about it a lot.
The other entity who got us into this financial mess has no problem whatsoever about using the equivalent when necessary or convenient while lecturing others about their insensitivity to the times:
A government plane will ferry Sen. Sherrod Brown (D-Ohio) back to Washington from his mother’s wake in Ohio in time to vote tonight, courtesy of the White House.
Brown won’t even be leaving until viewing hours end at 8 p.m. He then travels back to Washington for his mother’s interment, vote and fly home for his mother’s funeral tomorrow morning.
Nope, when government decides it must “maximize the time” of it’s members, it pulls out all the stops and, as usual, you pay for it.
What was the line – “as long as you’re taking our money”?
Well, that’s all government does.
Do as I say, not as I do.
Hope and change.