“Our practical choice is not between a tax-cut deficit and budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve . . . a budget surplus.” John F. Kennedy


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Mar 30 2010

Deficits and the Road Ahead

C.M. Phippen

In the shadow of the recently passed healthcare bill, the news that the administration made a $1.2 trillion “mistake” in deficit projections over the next ten years should do nothing to reassure us regarding our country’s fiscal future. Last Thursday, the CBO, after analyzing the Obama 2011 budget, declared that the $8.53 trillion 10-year deficit projection was off by $1.2 trillion.

Now, for many of us, who’ve heard billion and trillion bantered about in Washington recently as though these are pretty standard monetary denominations, let’s be clear about what $1.2 trillion means in real terms, for real people. The GDP (gross domestic product) of the entire country of the US was $14.2 trillion in 2009; a trillion seconds is the equivalent of about 32,000 years; and if you were to have spent $1 million every day since the day Christ was born, you still wouldn’t have spent $1 trillion (only about $750 billion, or 3/4 of $1 trillion).

That additional $1 trillion means another $10,000 per US household is now owed to investors. When President Obama took office, the public debt was approximately $56,000 per household, a total of $6.3 trillion. Today, based on the most recent budget, that amount has jumped to $72,000 per household, or $8.2 trillion, and will reach over $170,000 per household by 2020 (based on the administrations own numbers), for a whopping $20.3 trillion in federal public debt.

Such an astronomical accumulation of debt is completely unsustainable. In the Bush years, through 2008, $2.5 trillion was added to the public debt. In the six years from 2010-2016 (2009 belongs to both Bush and Obama, so isn’t included but amounts to $2.6 trillion), President Obama’s budget would add $4.9 trillion to that debt.

Currently the US has a AAA bond rating, enabling our federal government to borrow money at extremely favorable rates. By 2020, the cost of major federal entitlements in conjunction with servicing the debt will be equivalent to 100% of federal tax revenue, and this is if our credit rating remains stellar. No one believes it will, without major fiscal discipline never before seen in a politician.

If the rate at which our government is able to borrow money were to increase, we would find ourselves in the non-enviable position of Greece in recent months: Unaffordable and unsustainable rates of government entitlement spending, sluggish economic growth, and increasing interest rates as investors decide the risk of default on government bonds is real.

Just this past month, the rating agency Moody’s issued a stern warning to the US and other major Western nations with regard to the unseemly levels of debt currently being amassed.

Growth alone will not resolve an increasingly complicated debt equation,” Moody’s said. “Preserving debt affordability” — the ratio of interest payments to government revenue — “at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion.”

While Moody’s said the US credit rating is not currently threatened, it relies on the ability of our leaders “to repair the damage caused by the crisis on public finances.”

We have been warned – budgets must be cut, and in a serious and substantive way, which may cause social cohesion to be threatened. Politicians will certainly use this to their advantage as they try to turn us against each other by encouraging disparate groups to push for the preservation of their favorite entitlement. We can’t allow that to happen.

Our elected leaders, who certainly understand the serious fiscal crisis awaiting us, will most likely do what they’ve always done – put aside the good of the country in order to score cheap political points that in the long run will cost us all far more than we ever imagined. We must work together, “cohesively,” to defeat any who choose to put their personal interest ahead of the interests of this country.

Mar 25 2010

Tax dollars and Viagra

In a vote to “reduce the cost of providing federally funded prescription drugs by eliminating fraudulent payments and prohibiting coverage of Viagra for child molesters and rapists and for drugs intended to induce abortion,” 42 senators said no. There were, though, 73 who support such an amendment to the healthcare legislation. This amendment currently has been tabled.

I don’t understand anything less than 100% for such limitations, but if this is the level of morality in the halls of the capital, I am at a total loss for words. Except for maybe to ask this one question: Do you think a victim of rape, committed by a user of taxpayer-provided Viagra, will have the right to sue those members of Congress who chose to table this motion rather than allow the 73 yea votes to rule?

Don’t be silly.

Mar 24 2010

Healthcare and Charity

C.M. Phippen

Healthcare – so much to say and no idea where to even start with a bill so full of manipulations, cost-shifting, and purchased votes.

I think I’ll begin with a few of the responses of liberal friends since the bill’s passage. They tend to go something like this:

“I just don’t understand why people who claim to know of God’s love would deny help to their fellowman.”

“My family has plenty of money and we don’t mind helping those in need. We can afford it.”

Those who “claim to know of God’s love” were already helping others before this bill ever came along, and to a greater degree than those without God. Arthur Brooks, a former professor at Syracuse University, spent twenty years studying the issue of philanthropy. His book, Who Really Cares, is based upon hundreds of studies and the underlying theme is that those who truly care have always helped their fellowman. No government program of forced redistribution necessary. I mentioned a very small portion of this in a previous ultra-simplified post entitled Ideology, Religion, and Charity.

We are a country of givers.

This, from an article by Arthur Brooks, citing some of the data from his book:

“In 1995 (the most recent year for which data are available), Americans gave, per capita, three and a half times as much to causes and charities as the French, seven times as much as the Germans, and 14 times as much as the Italians. Similarly, in 1998, Americans were 15 percent more likely to volunteer their time than the Dutch, 21 percent more likely than the Swiss, and 32 percent more likely than the Germans.”

“One nationwide survey from 2002 tells us that monetary donors are nearly three times as likely as non-donors to give money informally to friends and strangers. People who give to charity at least once per year are twice as likely to donate blood as people who don’t give money. They are also significantly more likely to give food or money to a homeless person, or to give up their seat to someone on a bus.”

To the issue of those who “know of God’s love” – not only are the people in the US the most charitable on the face of the earth (in any way that can be measured), but religious people in the US are even more charitable than the average citizen. They are 25% more likely to give to charity than the non-religious, and 23% more likely to volunteer. When looking at the average dollar amounts and average time volunteered, religious people give nearly four times as much money and volunteer twice as often. This is the difference between giving $2,210 versus $642 and volunteering 12 times/year versus 5.8 times.

Certainly we would see a much different world if all gave to same degree as the religious. Unfortunately, what tends to happen in any society is that the more government does for the people, the less they do for themselves and for each other. Thus, increasing government programs that limit the freedom of individuals and decrease their available resources doesn’t bode well for our future.

The answer to the second response is based on the first, “Well, if you have plenty of money, then why do you need government to take it from you in order to help those in need?” Incidentally, the income of this family is generated by an ER doctor. Apparently he never thought to donate his time and efforts to those who can’t afford medical care or to establish a charity that would treat indigent patients. Maybe that would take just a little more than he’s willing to give, while still speaking the language of charity (with a little bit of his money and a whole lot of ours).

What he also fails to understand is that pretty soon he won’t have “plenty of money.” As more and more individuals are forced onto the government plan, his income will decrease. The reimbursements rates of government plans must be driven down over time in order to not only cover an additional 30 million new Americans, but all those whose employers can no longer afford to pay their rising premiums (premiums that will have to rise as a result of what will surely be a slew of new mandates placed on insurance companies by the federal government when the plan finally goes into effect). Incidentally, most of this plan doesn’t begin until after the next presidential election.

Government policies have consequences. If we truly believe that this new entitlement program that robs from the future prosperity of this country in order to establish rights never envisioned by the founders will make us a better country, then we have certainly come a long way from their “land of the free.”

Incidentally, while we’re changing the meaning and intent of the Constitution, it might be nice to note that the right to healthcare was part of a constitution, but it was the constitution of the USSR. Heaven help us.

Mar 17 2010

Freedom and War

C.M. Phippen

Quite a few Americans, on the left and on the right, oppose US entanglements in other countries unless we have been attacked. For the most part I would agree, but I have to ask if it’s ever permissible to enter another country and enforce our moral code when the opposing country’s conduct is so egregious and their citizens are so victimized that we feel it is the only right thing to do?

In his writing, John Stuart Mill pointed out that the British, for at least a half-century, “have spent annual sums equal to the revenue of a small kingdom in blockading the Africa coast, for a cause in which we not only had no interest, but which was contrary to our pecuniary interest.” He was here, of course, talking about Great Britain’s efforts to abolish the slave trade around the world. Interestingly enough, Mill pointed out that the moral crusade was economically harmful to the British. Most of us would agree that despite that, it was worthwhile.

In 1849, the British entered Brazilian waters and destroyed Brazilian ships that had been used in the slave trade. The Ottoman Empire resisted attempts to pressure it to ban the African slave trade, and when it finally was banned, the British had to threaten that they would start boarding Ottoman ships in the Mediterranean if the Empire didn’t better police the ban. America was responsible for the destruction of the slave trade in the Philippines and the Netherlands was responsible for its end in Indonesia. In Central Asia, the Russians were the cause of its demise, as were the French in their West African colonies and in the Caribbean, and Germans in their East African colonies.

Outside of the Western world, the fight to abolish the slave trade endured for over a century, often at great cost to the countries that insisted upon its end. Reports from government officials as they tried to convince leaders of slave nations that the concept of slavery itself was immoral, always seemed to include a defense from the offending country regarding their customs and an explanation that their customs, as well as their people, differed from those in the Western world.

In 1841, the British representative consul to Zanzibar, Atkins Hamerton, attempted to convince the ruler of that country to end the slave trade. The response he received was that if he were to do so, his subjects would not remain loyal and would appoint another ruler who would allow the trade to continue. He reminded Hamerton that “Arabs were not ‘like the English and other European people who were always reading and writing’ and were unable to understand the anti-slavery viewpoint.” He also pointed out that one of his most important responsibilities was to protect and guarantee for his people their “dearest interest” – the slave trade.

Throughout this century-long struggle, the British patrolled the waters off of Africa in an attempt to halt the trade there. They would would seize and destroy slave ships, pay to resettle rescued slaves, and risk international relationships with countries that didn’t agree with them. The cost was high, but the moral mission was seen as a greater good.

I ask again, is it ever permissible to use military resources and personnel in order to “enforce” freedom, and a better way of life for others?

Much of the history is taken from Thomas Sowell’s book, Black Rednecks and White Liberals, pp. 111-132.

Mar 16 2010

Obama and Math

C.M. Phippen

Yesterday, at a rally in Ohio, our President told the crowd that ObamaCare will reduce health insurance premiums by “3,000%.”

Of course, that would mean the federal government would be paying us to have health insurance. did a little math to illustrate just how much money those of us responsible enough to currently have health insurance could make from this new scheme.

“If your current health insurance policy costs $5,000 a year, insurance companies will pay you $145,000 a year (2,900 percent multiplied by $5,000). If you’re fortunate enough to be paying $25,000 a year for health insurance, insurance companies will pay you $725,000 a year. There’s no word whether you can purchase a more expensive health insurance policy to increase the amount of money that insurers pay you each year.

“Just think, America: These are the people telling us that they know best how to run 1/6 of our economy.”

Just one more question: Do you think the CBO was given that information to use when scoring the costs of healthcare reform?

Mar 15 2010

Accounting Fraud and Short Sellers

C.M. Phippen

Fascinating discussion Friday on CNBC about the falsification of Lehman Bros. balance sheets prior to their collapse. The fraud was completely missed by regulatory agencies despite extensive government oversight by the SEC and the NY Federal Reserve, who had regulators inside Lehman after the Bear Stearns meltdown. Sarbanes-Oxley, put into place after the Enron scandal to ensure that such a thing never happened again, failed to keep Lehman honest, and numerous other rules and regulations had no effect either. Even Ernst and Young, Lehman’s accounting firm, still stands by Lehman’s practices which apparently amount to outright fraud.

Who investigated and discovered the problems? Short sellers. Could it be that those with an economic interest are in many ways more effective regulators than the government? (Not to say we don’t need some government regulation, to be sure, so don’t even go there.)

Watch the video, and tell me what you think.

Mar 11 2010

Congress, Perceptions, and Reality

C.M. Phippen

Last week, the issue of Sen. Bunning singlehandedly holding up a bill that would extend jobless benefits and “hurt millions of Americans” was all over the news. The Senator was refusing to budge because Congress had just passed a paygo rule, which would require that any new spending be offset by cuts elsewhere. The very individuals taking credit for passing the rule weren’t supporting Bunning’s stance, and apparently aren’t willing to apply it to any spending programs they happen to like.

According to Senator Bunning, “When 100 senators are for a bill, and we can’t find $10 billion to pay for it, there’s something the matter, seriously the matter, with this body.” Could it be that they aren’t at all interested in actually finding a way to pay for their “gifts” to the American people (taken directly from other Americans, by the way)? Could it be that this paygo rule was just an opportunity for photo ops, creating the illusion of fiscal responsibility while spitting in its face?

In fact, in the midst of the opposition to Senator Bunning’s position, President Obama held a reception at the White House to celebrate paygo. Huh?

Today, the news is out that Louise Slaughter, House Rules Chairwoman, is considering a move to usher the Senate healthcare bill through the House without requiring an actual vote on the bill itself. She knows that the current Senate bill is so unpopular with the American people that there’s a good possibility that even using reconciliation, it may be dead.

The move under consideration would require only a vote on changes to the Senate bill and would presume the Senate version passed if this rule change bill passes, without actually voting on it. This is an absolute end-run around reconciliation, (as well as the Constitution) which requires that any bill using reconciliation be passed in its original form. Once that is done, changes can be made and voted on by both houses of Congress.

Just as with the paygo rule, too many in Congress want to have it both ways. They know the American people are overwhelming against the Senate healthcare proposal. No one in the House wants to be maligned for voting yes on a piece of legislation so poorly pieced together and so widely known to contain outright payoffs to Senators in exchange for their votes.

The supposed solution: Vote for the bill without voting for the bill. This way, as with paygo and jobless benefits, you can pose for the cameras saying one thing while actually doing another. Brilliant way to manipulate, obfuscate, and possibly save your job. Horrendous way to “serve” the American people and our republic.

Mar 2 2010

Republicans and Obstructionism

C.M. Phippen

We keep hearing that the Republicans are the party of “no,” that they are simply obstructionists keeping us from achieving a blissful state of progressive utopia.

The latest example of this is Sen. Jim Bunning, standing in the way of a $10 billion unemployment benefits extension. He says he supports the extension, he just wants to see it paid for by cutting elsewhere rather than adding to an already out-of-control deficit. According to Sen. Bunning, “If we can’t find $10 billion to pay for something we all support, we will never pay for anything on the floor of this U.S. Senate.” The man does have a point.

I seem to remember a similar standoff not so many years ago. Back in 1995/1996, Republicans were blamed for being obstructionists, for punishing those needing federal services over what amounted to a political fight, rather than a matter of principle. Pres. Clinton, at the time, even went so far as to say that, “It was morally indefensible to hold needed government services and hard-working government employees hostages in a political battle.”

After Clinton finally ended the standoff by bowing to Republican demands that he submit a seven year balanced budget scored by the Congressional Budget Office, the LA Times wrote that Democrats denounced the plan as “draconian.”

Is this the same plan that Democrats have been taking credit for ever since? I don’t really care who takes the credit as long as the voting public understands which policies bring prosperity and which will make us look even more like Greece or Italy or one big California.

Mar 2 2010

Ideology, Religion, and Charity

C.M. Phippen

If liberals are the charitable people and conservatives are greedy and selfish, why is it that though liberals make, on average, 6% more than conservatives (using numbers from 2000), conservatives give, on average, 30% more to charity?

Why is it that religious people are twice as likely as nonreligious people to volunteer (12 times/year v. 5.8 times) and they give nearly four times as much money ($2,210 v. $642)?

Why, even after adjustments for differences in income, does the average religious household give 14% more to nonreligious charities than the average secular household?

Why do conservatives, who make up less than 20% of the population, give over one-quarter of the blood? If liberals and moderates were to give at the rate that conservatives do, the amount of blood collected in the US would increase by 50%!

Just wondering what your thoughts are . . .