What to make of this trend? I think Oklahoma got the 10th Amendment push-back ball rolling, Montana advanced the ball several yards, Texas got into the game recently (albeit, too glibly), several other states are getting their shots in, and now North Dakota takes it’s turn.
The resolution in the North Dakota legislature asking the federal government to begin recognizing the 10th amendment and to stop overreach into state matters, the one the Fargo Forum wrote off as being part of a “secessionist movement, has passed in the Senate. By a strictly party-line vote, unfortunately, meaning not one Democrat in the legislature had enough respect for the sovereignty of North Dakota to vote for it.
The resolution now goes to the House, where I expect it will also pass. Also, I’m guessing, by a strictly party-line vote. Which, if it happens, would be a small bright spot in an otherwise dim legislative session. It takes a certain level of conviction for politicians to vote for a resolution like this one. Would that the Republicans voting for it now had the courage of those convictions when faced with legislation that grows spending and government in the state.
At Say Anything, Rob Port has a copy of a state Senator Joe Miller‘s speech in support of the resolution from the Senate floor. I recommend you go there and read it.
Combined with some Governors rejecting portions of the stimulus funds, and the Tea Parties breaking out all over the country, I’d say it’s a good sign that people are finally telling Washington to take a hike. Personally, I would say that both Porkbusters and the Sunlight Foundation are owed some credit as well, but either way it’s about time that the federal government was reminded of its place. Granted, it’s a fairly small reminder, but maybe one that can be built upon.
So where does all of this lead anyway. Is there any hope that all of this momentum will lead to less federal government interference? How about some support for repealing the 17th Amendment? I’d like to think that it will end up reducing the size of government (i.e. electing fiscally conservative representatives who will cut taxes and greatly slash spending), but once that horse left the barn, the barn was burned to the ground and a giant spending dance was done on the smoldering ashes. Nevertheless, is there some small ray of hope that the states will rein in our profligate Congress?
I can’t say with any certainty what this forebodes, but this is a staggering amount of debt to pile onto any country, especially within just a few months (my emphasis):
The U.S. government and the Federal Reserve have spent, lent or guaranteed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.
New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.
The really scary thing is, the government is not even close to being done spending money. Yet we’ve already committed about 90% of GDP. Where is all that money going to come from?
As we’ve said before, there’s only a few options: (1) taxes; (2) borrowing; and (3) printing press.
Taxes will only raise so much, even when the government starts raising rates on lower income quintiles, and certainly not enough to keep up with the ballooning debt-service payments.
Borrowing just isn’t going to happen because there isn’t anybody else who either wants to or is capable of lending us more money. To wit, here’s some of Peter Murphy’s analysis on our borrowing problems:
The biggest buyers of US Government (and Agency) debt, for the past several years, have been China, Japan, and the Oil States.
However, the supply of loanable funds among these entities from which the US can borrow is drying up.
China’s current-account surplus, the source of the funds for its Treasury purchases, has dropped precipitously as the global economy has contracted over the past several months.
Japan, another major buyer of Treasuries over recent years, is now posting trade deficits for the first time since the early 1970′s. This current account deficit, combined with a significant fiscal shortfall and planned issuance of $33 Trillion Yen ($340 Billion USD) in government debt this year, means that Japan will be, in effect, competing with the US for funds, rather than lending to us.
And, the oil-exporters are in no shape to be buying anything right now, as oil prices have collapsed since last summers $147/barrel peak. Russia is busy selling foreign exchange to prop up its currency.
Brad Sester of the Council of Foreign Relations reports that foreign demand for long-term treasuries has faded, and notes, ominously, that “global reserves aren’t growing”.
Accordingly, borrowing does not look like an option. Which leaves really just one choice.
Printing money in a down economy, which will have to be done, increases inflation and saps purchasing power (potentially leading to hyper-inflation). We may be able to pay off our debts this way, but we’ll wipe out the wealth of the nation doing so. Think post-Franco-Prussian War where France drove its economy into the ground in order to pay off about 22% of its yearly GDP in war reparations to Germany … over three years. That strife led to the Paris Commune uprisings among other things. Or worse, consider post-WWI Germany, with inflation rising so fast that workers had to be paid twice a day and cart around wheelbarrows full of money just to buy a loaf of bread.
Is that what we’re headed for? I sure hope not, but the signs aren’t very encouraging if history is any guide. It is true that a much more dynamic and nimble economy exists today as compared to the late 19th and early 20th centuries. But the world tendency right now seems to be to shackle that economy, making it much less dynamic and nimble. The end result must be less wealth produced, and less money to pay these debts. In short, our government is currently cashing checks that our economy can’t pay.
China expresses some … um … “concern” about whether or not it will ever see its money back:
The Chinese prime minister, Wen Jiabao, expressed unusually blunt concern on Friday about the safety of China’s $1 trillion investment in American government debt, the world’s largest such holding, and urged the Obama administration to provide assurances that the securities would maintain their value in the face of a global financial crisis.
Speaking ahead of a meeting of finance ministers and bankers this weekend in London to lay the groundwork for next month’s G20 summit, Mr. Wen said he was “worried” about China’s holdings of United States Treasury bonds and other debt, and that China was watching economic developments in the United States closely.
“President Obama and his new government have adopted a series of measures to deal with the financial crisis. We have expectations as to the effects of these measures,” Mr. Wen said. “We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.”
Just a little? There’s an old saying to the effect of “if you owe the bank $1 Million, then the bank owns you; if you owe the bank $1 Trillion, then you own the bank.” China’s feeling pretty nervous because it knows it can’t sell its holdings except at a tremendous loss — both from the normal discount expected, and from the fact that it is by far the largest mover in the market (e.g. what do you think would happen to Microsoft stock if Bill Gates started selling off?) — and it doesn’t see a whole lot coming out of Washington to instill confidence.
But there’s no need to fret PM Jiabao! Unnamed economists are here to save the day:
While economists dismissed the possibility of the United States defaulting on its obligations, they said China could face steep losses in the event of a sharp rise in United States interest rates or a plunge in the value of the dollar.
Whew! That was close. Nothing but a little market risk to worry about there, Jiabao. Default? Pffft … never gonna happen.
Back in the land called “reality” however, default is plays a bigger part since, aside from reneging on the debt, there are only three other ways for the government to pay for its spending binge: higher taxes, printing more money, or borrowing. Higher taxes impedes growth and leads to less revenue. Printing money leads to hyper-inflation. So, even though those two choices will be used to a certain extent, further borrowing is the only viable alternative to default. But who’s going to lend to us?
The bulk of China’s investment in the United States consists of bonds issued by the Treasury and government-sponsored enterprises and purchased by the State Administration of Foreign Exchange, which is part of the People’s Bank of China … much of the Treasury debt China purchased in recent years carries a low interest rate, and would plunge in value if interest rates were to rise sharply in the United States. Some financial experts have warned that measures taken to combat the financial crisis — running large budget deficits and expanding the money supply — may eventually create price inflation, which would lead to higher interest rates.
This puts the Chinese government in a difficult position. The smaller the United States stimulus, the less its borrowing, which could help prevent interest rates from rising. But less government spending in the United States could also mean a slower recovery for the American economy and reduced American demand for Chinese goods.
It may just be the case that China’s best option is to support its investment by propping up its best customer with yet more loans. Unfortunately, that means that Washington will have little incentive to slow down spending (since it owns the bank). The nasty little cycle of borrowing > spending > inflation > rising interest rates > falling dollar, will continue necessitating even more borrowing. China, in turn, will have serious questions about the value of its investment, and the US will start having serious discussions about declaring a default.
In short, China’s not just “worried” about the current fiscal mess. It’s crapping its collectivist shorts.
Pretty sad when you have the Secretary of State soliciting funds for debt instruments:
US Secretary of State Hillary Clinton has urged China to keep buying US debt as she wrapped up her first overseas trip, during which she agreed to work closely with Beijing on the financial crisis.
Ms Clinton made the plea shortly before leaving China, the final stop on a four-nation Asian tour that also took her to Japan, Indonesia and South Korea, where she worked the crowds to try to restore America’s standing abroad.
In Beijing, she called on authorities in Beijing to continue buying US Treasury bonds, saying it would help jumpstart the flagging US economy and stimulate imports of Chinese goods.
“By continuing to support American Treasury instruments the Chinese are recognising our interconnection. We are truly going to rise or fall together,” Ms Clinton said at the US embassy here.
Of course, its absolutely necessary that China (and the rest of the world) continue to buy these bonds and fund this spending debacle or taxes will have to be raised dramatically (and not just on the ‘rich’) and/or more money will have to be printed. That’s not to say that both of those won’t be done anyway whether China continues to buy or not. My guess is it’s only a matter of time. Don’t forget, health care reform legislation and environmental legislation are yet to come. Both may end up taking even more out of the private side of the economy than the so-called “stimulus” did.
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!
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‘ve spoken before about the political brilliance that running on nebulous catch phrases can accrue for the politician. Lay them out there, let the voting public decide what they mean to each of them and then ride the wave to elected office.
Obama did precisely that. And many who are marginally on the right, were fooled by that. Those who voted for him projected their “hope” for “change” on the blank screen he provided. But, as you’ll see in this example, the reality of who Barack Obama really is may be clearing up, and it appears it is a huge disappointment to many of his more conservative/libertarian supporters.
Silicon Valley, where I live, is home to both political liberals and conservatives–more liberals of late, but not by a huge margin. The lopsidedness occurs on the freedom-statist divide. An overwhelming majority of Valley residents would place themselves on the freedom side and against the state. This should not surprise anyone. Silicon Valley is a land of immigrants, both foreign and from other American states. What draws people to Silicon Valley is the freedom to go out and commit industrial revolution and make the future.
Thus it was always odd that Silicon Valley voted for the most statist-inclined presidential candidate since FDR. Silicon Valley fell in love with Barack Obama. His youth and multicultural cool, along with the Web superiority of his presidential campaign, had Silicon Valley going googly for Obama.
In the eyes of Silicon Valley, Obama was like the Apple Macintosh. John McCain was like Windows.
Now comes the reckoning. Obama may be the coolest guy ever to hold the office of U.S. president. He may be the personification of an Apple Mac, iPod and iPhone. But this week Obama proved he is a big-state liberal, through and through.
My Silicon Valley friends who supported Obama are weirdly silent about this. I suspect they are in denial, still hoping for the closet libertarian Obama to emerge. Throughout the 2008 campaign, Silicon Valley Obama voters would tell me that Obama was really an economic centrist. Forget his liberal Senate record and Saul Alinsky-conditioned career as a community organizer. Forget the Chicago-style thug politics. That was in the past. Obama did what he had to do to rise. Once in the Oval Office, Obama will really govern more like John F. Kennedy, Bill Clinton or Tony Blair.
Say it enough times, and you can almost believe it. Well, sorry about that, you Obamacons. You just got thrown under the bus.
The $790 billion stimulus headed for Obama’s desk is statist. It is also backward looking. Sure, there are some forward-looking initiatives, such as a few billion for broadband. But the bill is overwhelmed by “shovel-ready” projects aimed at school building improvement, road repair and so forth, and by bailouts to profligate state governments.
Very disturbingly, the bill has the stench of protectionism in it. This is antithetical to the interests of trade-happy Silicon Valley.
What is becoming clear is the Obama we can expect to govern is the big government statist liberal and not a “closet libertarian” as they hoped. Note the word. They fooled themselves into thinking that was actually a possibility. Yet as I pointed out below, this huge and unfocused spending plan being touted as a “stimulus” is nothing more than a massive expansion of government. It is also just the prelude for further intrusion, essentially a down-payment which paves the way for massive intrusion in health care and the energy sector.
For those who cast a jaundiced eye on the candidate and his blank slate campaign, none of this comes as a surprise. A creature of the most liberal political machines in America, a student of Saul Alinski’s method and someone who consistently saw government as the answer and not the problem during his political rise, the Barack Obama the folks are suddenly discovering in Silicon Valley and other parts of America is precisely the guy we expected.
His “youth and multicultural cool” may have been part of sales job, but now it comes down to performance. Thus far his performance has been directed at expanding government. Two of the first three bills passed in his administration have massively increased government. And as I’ve noted, he promises even more.
In less than a month, Obama has signaled that there isn’t a libertarian leaning bone in his body. The question remains as to how people, like those in Silicon Valley, managed to fool themselves enough to vote for a candidate who so obviously didn’t fit their “hope”. And are they, as this particular piece seems to indicate, feeling a little buyer’s remorse?
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.
If you haven’t gotten you pork pie, you’d better hurry – mine is written into law plus a couple of bonuses:
DEPARTMENT OF COMMERCE
Economic Development Administration
Economic Development Assistance Programs
(including transfer of funds)
For an additional amount for `Economic Development Assistance Programs’, $250,000,000: Provided, That the amount set aside from this appropriation pursuant to section 1106 of this Act shall not exceed 2 percent instead of the percentage specified in such section: Provided further, That the amount set aside pursuant to the previous proviso shall be transferred to and merged with the appropriation for `Salaries and Expenses’ for purposes of program administration and oversight: Provided further, That up to $50,000,000 may be transferred to federally authorized regional economic development commissions.
Bureau of the Census
periodic censuses and programs
For an additional amount for `Periodic Censuses and Programs’, $1,000,000,000: Provided, That section 1106 of this Act shall not apply to funds provided under this heading.
National Telecommunications and Information Administration
salaries and expenses
For an additional amount for `Salaries and Expenses’, $350,000,000, to remain available until September 30, 2011: Provided, That funds shall be available to establish the State Broadband Data and Development Grant Program, as authorized by Public Law 110-385, for the development and implementation of statewide initiatives to identify and track the availability and adoption of broadband services within each State, and to develop and maintain a nationwide broadband inventory map, as authorized by section 6001 of division B of this Act.
wireless and broadband deployment grant programs
(including transfer of funds to McQ for the McQ Personal Economic Stimulus Program)
For necessary and unnecessary expenses related to the Wireless and Broadband Deployment Grant Programs established by section 6002 of division B of this Act, $2,825,000,000, of which $1,000,000,000 shall be for Wireless Deployment Grants and $1,825,000,000 shall be for Broadband Deployment Grants: Provided, That an additional $350,000,000 shall be paid directly to McQ in the form of subsidized loans that do not require repayment. Provided Further, That the funds be used by McQ to build aqua park for cats or for whatever. Provided Even Further, That McQ will receive free Braves tickets for life. Provided Even Further Still, That McQ shall be treated as a cabinet-level appointment for the purpose of income tax reporting, and therefore no taxes shall be paid on any of the aformentioned benefits. And one more thing: Pelosi is hereby expelled from Congress, effective immediately upon enactment.
digital-to-analog converter box program
Notwithstanding any other provision of law, and in addition to amounts otherwise provided in any other Act, for costs associated with the Digital-to-Analog Converter Box Program, $650,000,000, to be available until September 30, 2009: Provided, That these funds shall be available for coupons and related activities, including but not limited to education, consumer support and outreach, as deemed appropriate and necessary to ensure a timely conversion of analog to digital television.
National Institute of Standards and Technology
scientific and technical research and services
For an additional amount for `Scientific and Technical Research and Services’, $100,000,000.
industrial technology services
For an additional amount for `Industrial Technology Services’, $100,000,000, of which $70,000,000 shall be available for the necessary expenses of the Technology Innovation Program and $30,000,000 shall be available for the necessary expenses of the Hollings Manufacturing Extension Partnership.
Head over to Reason and fill out your stimulus request form today! It isn’t real until it is written into law. Get it in before they vote! They’ll never even notice it.