Views on the News

January 12, 2013

Views on the News*  

Modern autocrats love the idea of high taxes on those who produce wealth, and income redistribution to those who don't because dependence on a check from the government breeds support for an ever-bigger, ever higher-taxing government.  Robbing Peter to pay Paul makes Paul a loyal supporter.  President Obama understands this very well.  An earlier democratically elected president of another country also understood this very well. Juan Peron, who promised to improve the lot of the poor in Argentina, managed to tax and spend Argentina from one of the richest countries in the world in the early 20th century into borderline third world status, warping its politics for decades, unto the present.  Some have warned about a coming civil war between makers and takers.  It's true that Argentina's politicians have been waging class warfare since Juan and Eva Peron, and they aren't fazed when it turns bloody.  Obama and the Democrats are relative newcomers to the game, but Argentina reveals who really suffers when those who create a nation's wealth get mugged by those who spend it-as just happened this week in Washington.  The path of bleeding the makers to feed the takers leads to a future that looks very much like Argentina, and that may be what most Obama voters want. 

(“The war between makers and takers” by Thomas Lifson dated January 8, 2013 published by American Thinker at http://www.americanthinker.com/blog/2013/01/the_war_between_makers_and_takers.html )

For some reason, Republicans have forgotten their universal core value that government has too much of our money already, and conservatives stress this core belief to justify limiting government and reducing spending.  Apparently conservatives will spent 2013 and beyond waging ideological warfare with Democrats and strategic skirmishes with other Republicans.  I want conservatives to do at least as much, because when we do it, we are actually right.

·    I don’t care that Obama won; I don’t care that Harry Reid still runs the Senate; I want Republicans to carry conservative shields and swords into every battle.

·    If a measure adds to the punishment of success, it is to be opposed.

·    If a measure fails to address obscene spending, it is to be opposed.

·    If a measure compromises on core values, it is to be opposed.

Far better for us to unify and let the chips fall where they may.  Along the way, vote by vote, if we win, we win. If we lose, America gets to see what happens when we lose: The steps we take toward turning into Greece, the mountains of debt we shovel onto our kids and grandkids, the dimming image in the rear view mirror of the nation our founders intended.  Rather than looking for ways to compromise with those who would lead us to ruin, let us fight for what is right, convincing allies with fainter hearts that there is little time to waste.  If we can attract loud enthusiasm from voters we persuade to our cause, that is the kind of thing that can unite the Ryans and Rubios, the Rand Pauls and Pat Toomeys, even the Boehner-backers and grassroots firebrands.  Barack Obama is energized by his success at further soaking the Americans most able to create jobs, he will never tire, and nor should we

(“The Cliff is Behind Us, Time to Brace for the Coming Battles” by Mark Davis dated January 4, 2013 published by Town Hall at http://townhall.com/columnists/markdavis/2013/01/04/the-cliff-is-behind-us-toe-to-brace-for-the-coming-battles-n1478902 )

The last four years eloquently indict the efficacy of government economic intervention, since government intervention cost an incredible amount, while returning very little, beyond debt.  While long-term intervention has long been dismissed as ineffective, many still cling to a Keynesian hope that government intervention of limited duration could succeed.  Now the effectiveness of both short-term and long-term economic intervention seems questionable.  Federal spending has exploded, deficits have skyrocketed, the government's debt has doubled, but the economy remains stagnant.  In 2008, the federal government spent $2.983 trillion, a record to that point.  A year later spending jumped 18% (to $3.518 trillion) and equaled 25.2% of GDP.  The CBO reported 2012's spending at $3.538 trillion, almost 23% of GDP.  The last four years' federal spending has averaged $3.5 trillion, roughly a quarter of everything America produces.  Only WWII rivals that level, with no peacetime equal. Not until 2002 did the entire federal debt (held by the public) match the last four years' spending average.  Federal deficits have soared. In 2008, the deficit was $459 billion, the then-record. It has been more than double that ever since.  In 2009, it grew by almost $1 trillion, equaling 10.1% of GDP.  From 2009 to 2012, the deficit has averaged $1.3 trillion and almost 9% of GDP.  Not only is that a peacetime overspending record, but total federal spending did not hit that level until 1991.  This deficit spending doubled federal debt in just four years.  At 2008's end, federal publicly held debt stood at $5.8 trillion. CBO projects that at 2012's end, it will be $11.3 trillion.  Those favoring government intervention call it "investment."  This last four years' investment may have performed worse than any other in this current bear market.  In 2009, our economy fell 3.1%.  In 2010, it grew just 2.4% and in 2011, 1.8%.  CBO does not foresee improvement: This year CBO projects growth at 2.1% and 2013's at 1.7%, even without a fiscal cliff effect.  This translates into a four-year annual recovery rate average of 2%.  That is the lowest four-year recovery rate (averaging real GDP growth rates following a negative growth year) since the Depression.  Unemployment has been just as dismal.  According to the Bureau of Labor Statistics, 2008 annual unemployment rate was 5.8%.  In 2009, it reached 9.3% and 9.6% in 2010.  While 2011's unemployment level was 8.9% and last month's 7.8%, both are more due to people leaving the workforce than recovery.  The growing evidence of ineffectiveness of current concerted and unprecedented fiscal and monetary stimulus becomes harder to ignore.  Combined with the evident failure of long-term government economic intervention, the last four years poses serious questions as to when and how government intervention can be effective

(“Obama Experience Highlights Failure of Keynesian Gov’t Intervention in Economy” by J.T. Young dated January 7, 2013 published by Investor’s Business Daily at http://news.investors.com/ibd-editorials-viewpoint/010713-639593-keynesian-intervention-in-the-economy-has-failed.htm )


In July of 2011, Standard & Poor's announced that it would cut the U.S. credit rating from its vaunted AAA status within three months "if we conclude that Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden," but members of Congress apparently didn't notice (or care), so they dickered over raising the U.S. borrowing limit until the last second, and delayed meaningful action on cutting spending, and so as promised, on August 5, 2011, S&P cut the U.S. credit rating by one notch for the first time ever.  The stock market fell by nearly 7%.  The agencies that rate sovereign debt are once again spelling out what will lead to another U.S. downgrade, and Congress seems not to be listening this time, either.  Moody's and Fitch still give America's debt their top rating, but like S&P, they've put the United States on a negative outlook, which means a downgrade could be coming.  The recent deal to avert the fiscal cliff helped a little by preventing widespread tax hikes that probably would have caused a recession and made the national debt even worse.  That deal also resolved some long standing questions by locking in tax rates permanently instead of leaving them subject to further political action, which reduces uncertainty.  But the deal did virtually nothing to cut spending or improve the nation's shaky finances, which is why further downgrades seem likely. Here's why:

·    Another standoff over the debt ceiling.  Failure to reach agreement on raising the debt ceiling in a timely manner, weeks in advance rather than just a single day before the funding capacity of the federal government is exhausted, as happened in August 2011, would raise questions about US governance on fiscal matters.

·    A failure to cut spending in 2013. Moody's wants to see spending cuts, and perhaps even more tax hikes, as part of a big budget deal in the first few months of 2013 that would convincingly improve the government's long-term finances.

·    A rise in interest rates.  Standard & Poor's says that higher interest rates are one scenario that could cause it to downgrade U.S. debt a second time.

·    A recession. Another economic downturn would put more people out of work, lower government revenue from income taxes, and more federal stimulus spending would make the U.S. debt burden more intractable, leading to another downgrade.

Policymakers are in such a tricky spot now. They must simultaneously raise taxes and cut spending, but not so abruptly that it torpedoes the economy. The best plan would be one that phases in adequate austerity measures over time, so everybody knows what's coming, with minimal disruption today, but that sort of deftness may be beyond the capabilities of a bare-knuckle Congress

(“What Will Cause the Next U.S. Credit Downgrade?” by Rick Newman dated January 3, 2013 published by US News & World Report at http://www.usnews.com/news/blogs/rick-newman/2013/01/03/what-will-cause-the-next-us-credit-downgrade )


The average taxpayer often regards welfare spending with skepticism, viewing those programs as wasteful and counterproductive, and those suspicions are not unfounded.  A recent report by Republicans on the U.S. Senate Budget Committee noted that cumulative spending on means-tested federal welfare programs, if converted into cash, would equal nearly $168 per day per household in poverty, which is a lot since national median income per day is just $137.  Of course, welfare recipients don't get that full amount.  Transactional costs, such as salaries for those administering programs, eat up much of the money, but the budget report graphically illustrates the inefficiency of the system.  Most people support a safety net for the truly needy, but boosters of recent benefit expansions also argue that the programs are ultimately good for the economy, but that last point is debatable.  Expansion of government benefits enacted in recent years for the poor and unemployed have reduced incentives for work.  It is estimated that half of the labor-market depression can be linked to recent government benefit expansions including expansions of unemployment benefits from 26 weeks to 99 weeks, increasing the number of people who qualify for unemployment benefits, expansion of food stamp eligibility and benefits, relief for low-income individuals who are underwater on mortgages, and paying up to 65% of the health insurance of certain people who have become unemployed.  Since welfare benefits aren't taxed but paycheck earnings are, welfare recipients must often find jobs paying substantially more than they get in government benefits to make the transition financially worthwhile. Mulligan found the cost of returning to work for some recipients equated to an effective tax rate of more than 100% due to lost benefits that exceeded the income available through employment.  The problem isn't necessarily that people on government assistance are lazy; it's that they are rational.  Most Americans would prefer that federal policy promote work over government dependence, but Obama wants to fund policies that discourage work by passing tax policies that discourage hiring. 

(“Federal policies should promote work, not dependence” dated January 4, 2013 published by The Oklahoman at http://newsok.com/federal-policies-should-promote-work-not-dependence/article/3742808 )


The accelerated transformation of the American economy and polity into a mandatory racially-based spoils system was a defining trait of President Barack Obama’s first term in office, and it is set to become an even more defining trait of his second.  Obama wants to be more aggressive about suing banks, employers, schools and other institutions whose practices, however unintentionally, adversely affect “disadvantaged” (read: nonwhite) populations.  This is the doctrine of “disparate impact.”  Attorney General Eric Holder already has used it to extract hundreds of millions of dollars in coerced settlements from Wells Fargo and other major banks.  Its widespread application is further evidence, as if any more were needed, that “civil rights” has become a well-organized shakedown racket.  This government coercion is rebranded as “affirmative action” and “diversity.”  The language may be benign, but the desired end is enforceable goals, quotas and timetables, accompanied by close monitoring to ensure “progress.”  Equality of outcome, not equality of opportunity, is the overriding goal.  Ground zero for this egalitarian enthusiasm is the ostensibly race-neutral Title VII of the 1964 Civil Rights Act.  Affirmative action took root during the Johnson administration and then took off during the Nixon administration.  Disparate impact” is at once bad law and a near-guarantee of full employment within the legal profession.  It’s noteworthy that not a single Presidential administration has ventured to challenge it.  As a report released in April 2011 by the Congressional Research Service indicated, affirmative-action federal regulatory mandates are more numerous than ever.  President Obama remains unsatisfied.  He has little reason to fear further “progress,” since his administration is home to many diversity zealots, most of all, Attorney General Eric Holder and his chief civil rights enforcer, Thomas Perez.  President Obama says he wants to close “persistent gaps” in economic and social outcomes across race. At the same time, he knows enforced affirmative action isn’t popular among the nation’s white majority (with good reason!).  Thus, the administration has made heavy use of the lawsuit, knowing even the threat of one can strike fear across a wide swath of organizations and not just one organization under a federal microscope.  Institutional lending isn’t the only realm where the Obama administration plans to turn up the temperature. Also likely to be closely monitored are: college admissions guidelines; voter ID requirements (all the better to fight minority “disenfranchisement”); school disciplinary codes; professional licensing examinations; employee background checks; and prison sentencing guidelines.  The executive branch isn’t the only arena in which the Obama affirmative action crusade will be felt over the next four years.  The legislative branch, too, offers manifold opportunities for mischief. The Patient Protection and Affordable Care Act of 2010 (ObamaCare), offers a generous supply of tripwire.  The Obama-backed Wall Street Reform and Consumer Protection Act (Dodd-Frank) also contains a cornucopia of racial favoritism.  One only can envision the opportunities for shakedowns of mortgage lenders not getting aboard the diversity express, and the fearful compliance by lenders.  Disturbing as this expanded role for the legislative branch is, it may have an equally potent rival in the judicial branch.  Any number of Obama-friendly (if not Obama-appointed) federal judges are working overtime to force racial-ethnic diversity upon for-profit and educational institutions.  The current administration believes that because whites as a whole are better off than nonwhites, their advantageous position necessarily must be due to illegal and immoral “discrimination.” Obama, Holder, Perez and other affirmative action soldiers decry any social arrangements that allow whites, even under an assumption of color-blindness, to come out ahead.  The intent is to minimize or eliminate “disparities,” because equality of outcome is the goal, equality of process (i.e., rule of law) necessarily becomes an obstruction.   

(“Obama, Race and Affirmative Action: Why the Second Term Will Be Worse” by Carl Horowitz dated January 5, 2013 published by Town Hall at http://townhall.com/columnists/carlhorowitz/2013/01/05/obama-race-and-affirmative-action-why-the-second-term-will-be-worse-part-i-n1479259 and http://townhall.com/columnists/carlhorowitz/2013/01/06/obama-race-and-affirmative-action-why-the-second-term-will-be-worse-part-ii-n1479273 )


The Vietnam War still looms very large in the United States military’s collective understanding of history and Obama’s choice of John Kerry to head America’s foreign policy and Chuck Hagel to head our defense is a reflection of his internationalist view that America is the problem and to the far left, Vietnam was a defeat for America.  Both Kerry and Hagel are decorated Vietnam veterans, which is to their credit.  Both men have seen war and hate it, as any sane person who has seen war does.  Both bear internal scars from their experiences, and Hagel still bears shrapnel in his body.  The scars of Vietnam, peculiar to their generation, should not have undue influence on American foreign policy now.  Vietnam is not the fulcrum of American history.  It did not equal Grenada, for instance, or Panama, or the Gulf Wars, or Afghanistan.  Each war has had its own set of challenges.  No two wars are the same, but lessons can be learned from them all and applied to future conflicts.  The U.S. military is the best trained and funded in the world, and is quite a few notches above the Vietnam-era military that was composed mostly of draftees and had not yet come to terms with modern styles of warfare based much less on large command structures than on small cells that engage in infowar and hit-and-run attacks against America’s superior forces. Today’s wars are fought as much in the media and online as they are on battlefields. We go into conflicts with much clearer purpose now, even if that purpose morphs as conditions change on the ground, as they have in Afghanistan.  My point is, the American military has learned the lessons of Vietnam and applied them as much as possible to the conflicts that have followed, but John Kerry and Chuck Hagel are stuck there in that war that they fought in, and lost.  They’re human and their experience profoundly shaped them, but it’s not fair to subject this and future generations to Vietnam Syndrome and its obsessive defeatism.  Kerry and Hagel are, in their core, defeatists.  It is fair to blame Barack Obama for elevating them.  He knows exactly what message he is sending by appointing them.  By appointing them to such positions of responsibility, Barack Obama is turning back the clock.  The U.S. military and the American people had mostly defeated Vietnam Syndrome and moved on.  Kerry and Hagel are stuck in a worldview that views the U.S., our allies, and our adversaries with more or less equal skepticism, and will give the likes of Iran a benefit of the doubt that they have not earned and do not merit.

(“The Problem with John Kerry and Chuck Hagel: They Are Products of the Vietnam Generation” by Bryan Preston dated January 8, 2013 published by PJ Media at http://pjmedia.com/tatler/2013/01/08/products-of-the-vietnam-generation/ )

* There is so much published each week that unless you search for it, you will miss important breaking news.  I try to package the best of this information into my “Views on the News” each Saturday morning.  Updates have been made this week to the following issue sections:

·  Budget at http://www.returntocommonsensesite.com/dp/budget.php


David Coughlin

Hawthorne, NY