The White House and Congressional leaders will soon announce a deal to raise the US government debt ceiling. Surprise! Surprise! This will be a victory for no one, except politicians. The debt will spiral on and should reach $ 20 trillion within seven or eight years. By 2025 we should soar over $ 30 Trillion. By that time, there will be no fix and we will face the Greece scenario without a European Central Bank handy to delay the inevitable.
So, the politicians will cheer that the system has worked. But, actually, the system, once again, failed. It simply continues the US on the path to ultimate bankruptcy. Without seriously reforming social security and medicare, we will come to a time when there is no way to avoid bankruptcy except dishonoring the social security and medicare promises to folks who are, by then, already dependent upon them. This is the endgame that Obama and the politicians are taking us to.
The rest of the Obama agenda will continue to stifle US economic growth and produce a generation of economic stagnation for the US. Europe will join us. Meanwhile the economic center of gravity of the world will shift to countries who don't have entitlement programs of any consequence -- China, Asia, Russia, etc. These countries, not the Western economies, will be the future economic powerhouses of the world. Perhaps, this was the Obama plan after all.
Sabtu, 30 Juli 2011
Jumat, 29 Juli 2011
No Growth Obamanomics
So here we are, puffing along at 1 percent for the first half of 2011 -- the worst economic recovery in modern history. So much for "hope and change."
There are only two real economic issues: 1) freeing up the economy so that it can recover; 2) reforming the entitlements so the country doesn't go bankrupt. Neither of these items are on Obama's agenda.
You wonder why Obama hasn't noticed the utter failure of his economic agenda. By now, you would think he would begin to get a clue. But, it doesn't seem that way. He still seems to think that the economy is someone else's fault. If only we taxed businesses more, they would hire more people, he seems to think. How about more regulation, how about more unionization, how about more lawsuits, how about more demonizing millionaires and billionaires? That ought to bring about a lot of new jobs!
I am still puzzled as to whether Obama is a fool, or simply doesn't care, or does he have a master plan and the results we are seeing are what he intended after all. Obama remains a mystery.
There are only two real economic issues: 1) freeing up the economy so that it can recover; 2) reforming the entitlements so the country doesn't go bankrupt. Neither of these items are on Obama's agenda.
You wonder why Obama hasn't noticed the utter failure of his economic agenda. By now, you would think he would begin to get a clue. But, it doesn't seem that way. He still seems to think that the economy is someone else's fault. If only we taxed businesses more, they would hire more people, he seems to think. How about more regulation, how about more unionization, how about more lawsuits, how about more demonizing millionaires and billionaires? That ought to bring about a lot of new jobs!
I am still puzzled as to whether Obama is a fool, or simply doesn't care, or does he have a master plan and the results we are seeing are what he intended after all. Obama remains a mystery.
Robert Samuelson Has It Right
Robert Samuelson's article in this morning's New York Times is right on target. Samuelson zeroes in on our fiscal problem and lays it at the feet of our subsidies for the elderly. Yes, subsidies. The idea that social security and medicare represent a safety net does not accord with the facts, as Samuelson notes. The elderly are by no means as poor as the White House would have you believe. Transferring money from working Americans to retired Americans is often a "reverse Robin Hood" exercise. Folks with less income and few assets are often subsidizing the upper incomes. As Samuelson notes more than 25 percent of the over 65 population have assets that exceed $ 250,000, which is a lost more than the asset base of the folks subsidizing them.
It is time we disabused ourselves of the notion that social security and medicare are helping poor people. Poor people die earlier than rich people. Folks that live into their 80s and 90s are disproportionately well off compared to the general population. We should stop transferring money from young married couples with children to their parents whose asset base is often far more than the future will provide for that married couple. This is robbing Peter to pay Paul's, often wealthy, grandmother. We should stop doing this.
Helping the truly needy is worthy and we should do that. Transferring money from working folks to folks that often have plenty of assets of their own is unfair and destructive.
It is time we disabused ourselves of the notion that social security and medicare are helping poor people. Poor people die earlier than rich people. Folks that live into their 80s and 90s are disproportionately well off compared to the general population. We should stop transferring money from young married couples with children to their parents whose asset base is often far more than the future will provide for that married couple. This is robbing Peter to pay Paul's, often wealthy, grandmother. We should stop doing this.
Helping the truly needy is worthy and we should do that. Transferring money from working folks to folks that often have plenty of assets of their own is unfair and destructive.
Kamis, 28 Juli 2011
It's Downgrade Time
The US is on course for a ratings agency downgrade from AAA to AA. This has nothing whatever to do with the debt limit extension debate. The only mild relevance to the debt limit debate is the missed opportunity to use the debt ceiling discussion to begin to take steps to reign in the entitlements.
But, alas, no one was interested in reigning in the entitlements. So, the downgrade is now inevitable. Look for the downgrade to take place in a friendlier environment. It won't happen this week or next. But, it will certainly take place before year end.
The problem is that no one in Congress votes on entitlement spending. Entitlement spending is part of the "mandated" budget items. The spending on entitlements has no limit other than population growth I suppose. There are no funds available in the future to fund the entitlements, so selling treasury bonds is the only way to fund the entitlements until no one will buy our bonds anymore. That day is probably coming within the next five years.
Cutting discretionary spending (or cutting nothing, as in the Reid bill) doesn't really matter in the long run. It is not Iraq, Afghanistan, Bush Tax Cuts, the Stimulus, or anything else. It is entitlement spending. That's it, nothing more. Eliminating spending on all other items does not matter in the least. Raising taxes simply takes a sledgehammer to the economy and commits the US to generations of economic stagnation. Only cuts in entitlement spending matter and no such cuts were ever considered in the recent debate. (It is true the Obama folks claim that they were willing to consider entitlement cuts, but they never really mentioned anything specific and simply saying you are for it is the not the same as putting forth specifics).
We are seven are eight years away from the numbers that apply to Greece today. That's where we are. In eight years, any plan to avoid defaulting on our debt will involve cutting payments to social security recipients and medicare recipients who are already retired. If you want to avoid doing this kind of draconian cuts in the future to recipients, you must move the age of eligibility of these programs out right now. Move social security and medicare eligibility to age 70. Anything short of that won't work and will involve cutting payments to oldfolks when they no longer have choices and are no longer working. That's where we are headed.
But, alas, no one was interested in reigning in the entitlements. So, the downgrade is now inevitable. Look for the downgrade to take place in a friendlier environment. It won't happen this week or next. But, it will certainly take place before year end.
The problem is that no one in Congress votes on entitlement spending. Entitlement spending is part of the "mandated" budget items. The spending on entitlements has no limit other than population growth I suppose. There are no funds available in the future to fund the entitlements, so selling treasury bonds is the only way to fund the entitlements until no one will buy our bonds anymore. That day is probably coming within the next five years.
Cutting discretionary spending (or cutting nothing, as in the Reid bill) doesn't really matter in the long run. It is not Iraq, Afghanistan, Bush Tax Cuts, the Stimulus, or anything else. It is entitlement spending. That's it, nothing more. Eliminating spending on all other items does not matter in the least. Raising taxes simply takes a sledgehammer to the economy and commits the US to generations of economic stagnation. Only cuts in entitlement spending matter and no such cuts were ever considered in the recent debate. (It is true the Obama folks claim that they were willing to consider entitlement cuts, but they never really mentioned anything specific and simply saying you are for it is the not the same as putting forth specifics).
We are seven are eight years away from the numbers that apply to Greece today. That's where we are. In eight years, any plan to avoid defaulting on our debt will involve cutting payments to social security recipients and medicare recipients who are already retired. If you want to avoid doing this kind of draconian cuts in the future to recipients, you must move the age of eligibility of these programs out right now. Move social security and medicare eligibility to age 70. Anything short of that won't work and will involve cutting payments to oldfolks when they no longer have choices and are no longer working. That's where we are headed.
Rabu, 27 Juli 2011
Back the Boehner Plan
Nothing good will come of this. The Boehner plan is not a good plan. It is not even close to a good plan. Unless the entitlements are tackled, there can be no real progress on the debt problem.
Nevertheless, it is now going to be either the Boehner plan or the Reid plan (which is basically to do nothing at all). So, it is time to get behind the Boehner plan, which is only slightly better than nothing at all.
At least the adoption of the Boehner plan (as modified by the Senate) will be a stinging defeat for our big spending President, and that alone is worth something.
Nevertheless, it is now going to be either the Boehner plan or the Reid plan (which is basically to do nothing at all). So, it is time to get behind the Boehner plan, which is only slightly better than nothing at all.
At least the adoption of the Boehner plan (as modified by the Senate) will be a stinging defeat for our big spending President, and that alone is worth something.
The Phony Crisis
President Obama and his Democratic allies are shrieking daily that the world is going to come an end if the debt ceiling isn't raised. Why aren't the financial markets singing the same tune? The stock market and, more tellingly, the treasury markets are showing no signs of concern. During the two to three weeks of intense negotiations and the failure of negotiations, the markets have done mostly nothing. The stock market, on balance, is up and the treasury market is pretty much flat. So, where is the panic in financial markets?
Last Saturday, Treasury Secretary Tim Geithner was seen on Fox News hoping against hope that markets would collapse Sunday night if no debt deal was reached. So. No debt deal was reached and the markets yawned. The President, Tim Geithner, Ben Bernanke and the Democratic Congressional leadership are all praying (in the open and before microphones) all day and night that financial markets will show some concern for the phony crisis that they have created. Interestingly, the markets are not accommodating the crisis mongers.
The truth is that none of the plans put forth will have any serious impact on the trajectory of US debt and the markets know that and have known that for some time. Even if no deal is ever reached, there is no reason for financial markets to panic. What's the big deal? There is plenty of tax revenue to pay the interest on the debt, the social security trust fund permits social security payments without raising the debt limit at all, and the government itself has several trillion dollars of treasury holdings in its own hands.
As for the rating agencies, they are already way behind the curve. US debt should have been downgraded long ago. It deserves a downgrade and it will get it no matter what happens in the political arena. The markets have already factored that in. Markets aren't stupid, even if politicians are.
The truth is that August 2nd is largely irrelevant. That's why the markets are yawning.
It is true if Democratic politicians continue to cry wolf, the markets may eventually sag just out of boredom. But, panic? It's not in the cards regardless of the outcome of the current phony crisis.
Last Saturday, Treasury Secretary Tim Geithner was seen on Fox News hoping against hope that markets would collapse Sunday night if no debt deal was reached. So. No debt deal was reached and the markets yawned. The President, Tim Geithner, Ben Bernanke and the Democratic Congressional leadership are all praying (in the open and before microphones) all day and night that financial markets will show some concern for the phony crisis that they have created. Interestingly, the markets are not accommodating the crisis mongers.
The truth is that none of the plans put forth will have any serious impact on the trajectory of US debt and the markets know that and have known that for some time. Even if no deal is ever reached, there is no reason for financial markets to panic. What's the big deal? There is plenty of tax revenue to pay the interest on the debt, the social security trust fund permits social security payments without raising the debt limit at all, and the government itself has several trillion dollars of treasury holdings in its own hands.
As for the rating agencies, they are already way behind the curve. US debt should have been downgraded long ago. It deserves a downgrade and it will get it no matter what happens in the political arena. The markets have already factored that in. Markets aren't stupid, even if politicians are.
The truth is that August 2nd is largely irrelevant. That's why the markets are yawning.
It is true if Democratic politicians continue to cry wolf, the markets may eventually sag just out of boredom. But, panic? It's not in the cards regardless of the outcome of the current phony crisis.
Selasa, 26 Juli 2011
The Poorest Among Us
Obama is forever excoriating "the rich" and claiming that he represents the average American and the "poorest among us." Really? Is that why Warren Buffett and Bill Gates and George Soros are so supportive of Obama?
The brunt of the current recession is being borne, not by Buffett, Gates and Soros, but by the "poorest among us." If you look at the data on unemployment, the unemployed are concentrated among those with the lowest education levels and concentrated among minorities. The rich and comfortable are doing fine under the Obama regime. That's why so many of the "comfortable left" support Obama and his administration.
Obama and Pelosi will never have to look for a job. Neither has spent a day in the private sector hoofing it. They fly in charter aircraft and government financed airplanes far above the common folk. It is easy to pontificate from that elevated position.
"Let them eat cake" is an expression that never grows old. Obama and his compatriots think that the slogan "tax the rich" has meaning. It doesn't. That's why Buffett, Gates and Soros are all for taxing the rich. They know that they won't pay the increased tax rates. They can hide their income, as all three have always done by their own (arrogant) admission.
The real victims of Obama are average Americans stuck reporting their income on w-2's. They are the real target of the Obama crowd. If you work for a living you are in trouble. If you don't work for a living you are in even more trouble.
The rich have nothing to fear from this president. He can't reach them. What Obama can do is use class warfare rhetoric to try to confuse and divide the American public. The real issue is that this is a failed presidency with a disastrous set of economic policies. The US is drowning in lost jobs and debt. No amount of presidential obfuscation can hide the real facts.
The great tragedy is that the "poorest among us" are the real victims of this administration. That's why Buffett, Gates and Soros are happy campers cheerleading this buffoonery on.
The brunt of the current recession is being borne, not by Buffett, Gates and Soros, but by the "poorest among us." If you look at the data on unemployment, the unemployed are concentrated among those with the lowest education levels and concentrated among minorities. The rich and comfortable are doing fine under the Obama regime. That's why so many of the "comfortable left" support Obama and his administration.
Obama and Pelosi will never have to look for a job. Neither has spent a day in the private sector hoofing it. They fly in charter aircraft and government financed airplanes far above the common folk. It is easy to pontificate from that elevated position.
"Let them eat cake" is an expression that never grows old. Obama and his compatriots think that the slogan "tax the rich" has meaning. It doesn't. That's why Buffett, Gates and Soros are all for taxing the rich. They know that they won't pay the increased tax rates. They can hide their income, as all three have always done by their own (arrogant) admission.
The real victims of Obama are average Americans stuck reporting their income on w-2's. They are the real target of the Obama crowd. If you work for a living you are in trouble. If you don't work for a living you are in even more trouble.
The rich have nothing to fear from this president. He can't reach them. What Obama can do is use class warfare rhetoric to try to confuse and divide the American public. The real issue is that this is a failed presidency with a disastrous set of economic policies. The US is drowning in lost jobs and debt. No amount of presidential obfuscation can hide the real facts.
The great tragedy is that the "poorest among us" are the real victims of this administration. That's why Buffett, Gates and Soros are happy campers cheerleading this buffoonery on.
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