Tag: Federal Spending

What To Do Is Do Nothing?

I recently listened to Peter Schiff on MSNBC on the direct that the government was taking and that it was the wrong thing to do.  I was interested in what he had to say and did a little research (yes, I Googled).

He wrote a piece in the WSJ in January of 2009 in which he said:

Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere. If the government doesn’t have a surplus, then it must come from taxes. If taxes don’t go up, then it must come from increased borrowing. If lenders won’t lend, then it must come from the printing press, which is where all these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing.

By borrowing more than it can ever pay back, the government will guarantee higher inflation for years to come, thereby diminishing the value of all that Americans have saved and acquired. For now the inflationary tide is being held back by the countervailing pressures of bursting asset bubbles in real estate and stocks, forced liquidations in commodities, and troubled retailers slashing prices to unload excess inventory. But when the dust settles, trillions of new dollars will remain, chasing a diminished supply of goods. We will be left with 1970s-style stagflation, only with a much sharper contraction and significantly higher inflation.

The good news is that economics is not all that complicated. The bad news is that our economy is broken and there is nothing the government can do to fix it. However, the free market does have a cure: it’s called a recession, and it’s not fun, easy or quick. But if we put our faith in the power of government to make the pain go away, we will live with the consequences for generations.

If this were a free market economy that is exactly what would be happening in Washington.  I cannot remember who said this, and I apologize, but if a company is too big to fail then it is too big to exist.  I have said in the past, somewhere, sometime we have got to stop all this bailout stuff and just let somebody actually fail and then we can begin to see a recovery.

I found his approach very Libertarian and in some way very true……I also found that he was running for US Senate for the state of Connecticut.  I then wondered if his tone would change considerably if he was elected to the office.  There is a wealth of people with opinions on the economic crisis but they seem to give up those principles and fall in line with the party that they embrace.  Will a smart guy like Schiff be any different?

Where Have All The Poppies Gone?

No damn where!  Opium production in Afghanistan is going full tilt, just another indication that the “War on Drugs” is about as worthless as tits on a bull.

US efforts to eradicate opium poppy crops in Afghanistan have been “wasteful and ineffective”, the US envoy to Afghanistan and Pakistan says.

Richard Holbrooke said the $800m  a year the US was spending on counter-narcotics would be better used in supporting Afghan farmers.

Efforts to eradicate poppy cultivation, Mr Holbrooke told a conference in Belgium – the Brussels Forum – had failed to make an impact on the Taleban insurgents’ ability to raise money from the drugs trade.

“It hasn’t hurt the Taleban one iota,” he said, “because whatever money they’re getting from the drugs trade, they get whatever they need whether we reduce the acreage or not.”

The US said last month that poppy cultivation had been reduced by 19% last year. Despite the drop, the UN estimates that Afghanistan accounts for 90% of the world’s illicit heroin supply.

“The United States alone is spending over $800m a year on counter-narcotics. We have gotten nothing out of it, nothing,” he said.

“It is the most wasteful and ineffective program I have seen in 40 years.”

Ya think?  Pretty much sums up the ENTIRE program of the War on Drugs….time to look for a REAL alternative and save the money for whgere it is needed…in the good old US of A.

Is The Economic Anger Populist?

I keep hearing the word “populist” being used more and more in the media to explain the anger of the American people.  Why is this word being used so much?

Populism can be defined simply as :  Academic and scholarly definitions of populism vary widely and, among both journalists and scholars, the term is often employed in loose, inconsistent and undefined ways to denote appeals to ‘the people’.

Administration officials and the corporate media characterizes the growing popular anger against AIG and the bailout of Wall Street as “populist” in an attempt to de-legitimize it, portraying it as backward or ignorant, implying that it could disrupt supposedly necessary measures to revive the economy.

But what are these measures? One measure initiated by the Obama administration will divert at least a trillion dollars more to the Wall Street banks through a program to entice hedge funds and private equity firms into purchasing toxic assets from the banks. The hedge funds will be given cheap loans from the government and will be guaranteed against major losses. The scheme, like all of the previous measures, is designed to privatize profits and socialize losses, guaranteeing that the interests of the financial parasites will not be impinged upon in the slightest.

The fear that popular outrage over the AIG bonuses could interfere with this program is well-founded because they are of a piece, both involving the bailout of a wealthy oligarchy at the expense of the rest of the population.

What they fear is that all of the rhetoric about “change” and “hope” notwithstanding, Obama will be seen more and more for what he is: a front man for finance capital who is implicated in its criminality and fraud and is carrying out a naked class policy to defend its interests.

The Battle Of The Collars is beginning.

Do Not Screw With Our Money!

Basically, that is what China is telling the US.

In a public statement raising questions about the solvency of the US government, Chinese Premier Wen Jiabao said Friday that China, the largest holder of US treasury debt, was “concerned about the security of our assets.”

Wen’s remarks came at a news conference following the annual session of China’s parliament, where he commented on the economic policies of the new US administration. “President Obama and his new government have adopted a series of measures to deal with the financial crisis,” Wen said. “We have expectations as to the effects of these measures. We have lent a huge amount of money to the US. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.”

He called on the United States to “maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

Chinese officials fear that the huge borrowing in world credit markets required to finance the US government’s budget deficits—a projected $5 trillion over the next four years according to an estimate released by the Obama administration last month—will lead to a decline in the value of the dollar.

Since Beijing now holds about $1 trillion in dollar-denominated assets, including nearly $700 billion in US Treasury debt, a decline in the value of the US currency would hit China hard.

Not only are we a country of credit addicts…our country is a credit addict…….we have been told by Washington and the conservs that the country should live within its means…all the while they assisted in turning the people of the country into the world’s biggest credit junkies.

Would they foreclose on the country?  Doubtful, they would lose too much money, but it is an interesting developement and watch the news…….to calm China nerves they will get all sorts of special deals from Washington.

Democrats Growing More Nervous

It seems the party of “no” is having its effect on the party in power.

Some Democrats are increasingly concerned about President Obama’s $787 billion financial fix for the ailing economy, and are demanding greater transparency on further spending.

With the White House seemingly comparing the nation’s economy to a house on fire, some congressional Democrats are asking, where’s the fire truck?

As a nod to moderate concerns, Obama took steps to make his budget more transparent. He included items former President George W. Bush passed separately in recent years to obscure the true operating cost of the government, such as the money for the wars in Iraq and Afghanistan, an annual multibillion-dollar fix of the fees Medicare pays physicians and Alternative Minimum Tax relief for the middle class.

Sen. Evan Bayh, D-Indiana, who along with Nebraska Democrat Ben Nelson and Connecticut Independent Joe Lieberman is one of the so-called Gang of 15 — a coalition of moderate Democratic senators — says it’s all about the messaging.

“Like getting health care costs under control is important to the economy and getting the deficit down,” he said. “Sustainable sources of energy at reasonable prices is also important to the economy. Dealing with the financial crisis is obviously important to the economy.”

House Democrats, CNN has learned, heard that message in a meeting with top economists, who predicted the president’s stimulus plan will fall short of saving or creating three to four million jobs, as he promised.

“Over the first two years about 2 1/2 million jobs saved and created,” said economist Allen Sinai. “A little less than the administration and perhaps Speaker Pelosi has said … the jobs created may be a little disappointing.”

But budget hawks in the party don’t like the sound of that.

“I mean, if we were to take a vote this afternoon, the stimulus package would probably fail,” said Rep. Earl Pomeroy, D-North Dakota. “If they want substantial, more public funds committed, they’re going to have to go out there and explain precisely how this is going to work.”

Earmarks UpDate

Earmarks are unrelated pet projects that members of Congress insert in spending bills.

The president maintained that earmarks can serve a useful purpose, but he said it is time for Congress and the White House to embrace a new set of guiding principles.

His remarks came the day after the Senate passed a $410 billion spending bill that included nearly 9,000 earmarks, which are projects designed to benefit individual legislators’ districts.

The earmarks in the spending bill are worth nearly $8 billion. Many critics have deemed them as wasteful, and some observers have questioned Obama’s pledge to end such spending.

The president also said that any earmark benefiting a for-profit private company “should be subject to the same competitive bidding requirements as other federal contracts.”

“The awarding of earmarks to private companies is the single most corrupting element of this practice,” he said.

“Private companies differ from the public entities that Americans rely on every day — schools, police stations, fire departments — and if they are seeking taxpayer dollars, then they should be evaluated with a higher level of scrutiny.”

Obama added that earmarks should “never, ever be traded for political favors.”

The president pledged to seek to eliminate any future earmark that has “no legitimate public purpose.”

Obama has broken with many of his more conservative critics in opposing an elimination of the earmarking process.

If done right, he argued Wednesday, earmarks “give legislators the opportunity to direct federal money to worthy projects that benefit people in their district, and that’s why I have opposed their outright elimination.”

He conceded, however, that some earmarks “have been used as a vehicle for waste, fraud and abuse. Projects have been inserted at the eleventh hour, without review, and sometimes without merit, in order to satisfy the political or personal agendas of a given legislator, rather than the public interest.”

Okay, all the lip flapping is done……..but will this be something the president can win?  Earmarks are the way that projects in the districts of the congressmen gets funded.  Will this hurt projects back home?

This is a piece of work to watch……who will be the loudest opponent and where will the saga end.

2009 Omnibus Bill

Opposition to the left and opposition to the right…..for now a cork has been put in Cantor and the new mouthpiece of the GOP is Rep. Mike Pence of Indiana.  Obama is catching all the flack with Dems coming in second, but the truth is that little of this spending bill is that of Obama.

In November, House Democratic leaders hope to tee up in the next six weeks an omnibus package consisting of the nine remaining fiscal 2009 appropriations bills so President-elect Obama can sign the legislation into law shortly after he is inaugurated, senior Democratic aides said Tuesday. The plan, also heard in lobbying circles, would require the new Congress to come into session before the Jan. 20 inauguration to approve the package.

During debate on the CR Sept. 25, House Appropriations Chairman David Obey, D-Wis., said Bush sought to cut $14 billion from domestic programs, including research funding at the National Institutes of Health and low-income aid for home heating. Rather than capitulate, said Obey, “we would kick the can down the road … so that if we have a president that will negotiate” some of that funding could be preserved.

The CR, which included three fiscal 2009 spending bills — Defense, Military Construction-VA and Homeland Security — funds most programs at fiscal 2008 levels. Along with three spending measures, the CR includes up to $22.9 billion in disaster relief funding; $2.5 billion for the Pell Grant program; and $5.1 billion in low-income heating assistance. The $25 billion loan program for the auto industry is part of the CR, costing $7.5 billion for the fiscal year.

Congress on Tuesday sent President Barack Obama a once-bipartisan bill to fund the domestic Cabinet agencies that evolved instead into a symbol of lawmakers’ free-spending ways and penchant for back-home pet projects. The Senate approved the measure by voice after it cleared a key procedural hurdle by a 62-35 vote. Sixty votes were required to shut down debate.

Obama is expected to sign the measure Wednesday to avoid a partial shutdown of the government. But the White House has kept the bill at arm’s length, calling it last year’s business. Obama is also set to announce steps aimed at curbing lawmakers’ so-called earmarks.

The $410 billion bill is chock-full of those pet projects and significant increases in food aid for the poor, energy research and other programs. It was supposed to have been completed last fall, but Democrats opted against election-year battles with Republicans and former President George W. Bush.

Blame all the Dems you would like, but I would say that to blame Obama is a bit of a stretch even for a party that has NOTHING constructive to say, other than revenge for losing an election.

AIG Plays The Country Well

American International Group Inc. appealed for its fourth U.S. rescue by telling regulators the company’s collapse could cripple money-market funds, force European banks to raise capital, cause competing life insurers to fail and wipe out the taxpayers’ stake in the firm.

AIG needed immediate help from the Federal Reserve and Treasury to prevent a “catastrophic” collapse that would be worse for markets than the demise last year of Lehman Brothers Holdings Inc., according to a 21-page draft AIG presentation dated Feb. 26, labeled as “strictly confidential” and circulated among federal and state regulators.

“What happens to AIG has the potential to trigger a cascading set of further failures which cannot be stopped except by extraordinary means,’’ said the presentation by New York- based AIG. “Insurance is the oxygen of the free enterprise system. Without the promise of protection against life’s adversities, the fundamentals of capitalism are undermined.’’

Regulators revised AIG’s bailout last week to ease loan terms and extend $30 billion in fresh capital after the firm posted a $61.7 billion fourth-quarter loss, the worst in U.S. corporate history. Lawmakers are reluctant to give more support beyond the package already in place, worth about $160 billion, because they say regulators haven’t given enough detail about how the funds are being used or when the bailouts will end.

The insurer’s first bailout package, crafted last September, later grew to $150 billion. After failing to sell enough subsidiaries to repay the government, AIG had to turn to U.S. taxpayers again. The company may need more support if financial markets don’t improve, the Treasury and Federal Reserve said last week in a joint statement.

Now ask…when will this stop?  How long must we, the taxpayer, subsidize AIG and the like?  When is enough, enough?