Posts Tagged ‘Paul Ryan’

A modest proposal: the Red election precincts should secede from the United States

Copyright 2010 by John T. Reed All rights reserved
In 1729, Jonathan Swift published a satirical essay called A Modest Proposal. In that same spirit, I offer my own “modest proposal:”

The red election districts around the U.S. should secede from the United States and form a new country. The basic problem is about half of the American people have a very different idea of what the country should be than the other half. Enough! Let’s end this interminable bickering and political squabbling. Make it two countries.

It will also need a new constitution. The new constitution should be the old one with some problems corrected. More about those problems below (more…)

Democrats refuse to pass budget until after election, want VAT

Copyright 2010 by John T. Reed All rights reserved

Deliberately violating the law

The 1974 Budget and Impoundment Act says Congress has to pass a budget resolution each year by May 15. Democrats have refused to do so this year in violation of the law. They are waiting until after the election.

Obama won’t talk about the budget until he gets a report from the deficit commission to whom he kicked the fiscal can down the road.

What happens to Congressional Democrats when they violate the law? (more…)

Europe and Japan cut government spending, but not U.S.

Copyright 2010 by John T. Reed All rights reserved

Austerity measures everywhere but here

Page A11 of the June 23, 2010 Wall Street Journal has an interesting set of articles. Here are there headlines:

• France’s Lagarde [Finance Minister] Forecasts Austerity

• U.K. Unveils Severe “Unavoidable” Budget

• Japan Lays Groundwork for Cutting Massive Public Debt

Greece, Spain, Iceland, Ireland, and other European countries had previously announced various plans to cut government spending.

Have their U.S. counterparts—Obama, Geithner, Pelosi, Reid—announced any similar plans to cut federal spending?

Are you kidding? (more…)

Winner’s curse in the 2010 elections

Copyright 2010 by John T. Reed All rights reserved

Republicans are thrilled

Republicans are thrilled about the upcoming election. They might want to rethink that.

True, the Democrats have spent the entire time since the 2008 elections pissing off the American people. True, Republicans can probably win just by not being Barack Obama, Nancy Pelosi, or Harry Reid.

But is that really what they want? (more…)

Democrats refuse to pass budget until after election, want VAT

Deliberately violating the law

The 1974 Budget and Impoundment Act says Congress has to pass a budget resolution each year by May 15. Democrats have refused to do so this year in violation of the law. They are waiting until after the election.

Obama won’t talk about the budget until he gets a report from the deficit commission to whom he kicked the fiscal can down the road.

What happens to Congressional Democrats when they violate the law?

Nothing. (more…)

Translation of recent comments of two Fed chairmen into Plain English

Copyright 2010 by John T. Reed All rights reserved
On June 9, 2010, Federal Reserve Chairman Ben Bernanke testified before the Committee on the Budget, U.S. House of Representatives. On June 18, 2010, former Fed Chairman Alan Greenspan published an Op-Ed in the Wall Street Journal.

Bernanke has been warning the president and Congress and the american people that we are spending ourselves into bankruptcy and it must stop yesterday. No one is listening other than a few like Congressmen Paul Ryan and Eric Cantor, the Tea Party guys, and NJ governor Chris Christie. Nevada Tea Party supported Republican senate candidate—Harry Reid’s opponent—Sharron Angle, also is in favor of cutting Social Security and Medicare—which are absolutely necessary for reducing deficits and the national debt.

Bernanke is raising his voice and getting more shrill—for a Fed chairman. They have to speak carefully and in code so only the elite understand, lest the world bond and foreign exchange markets panic and make a run on the dollar (everyone in the world who owns dollars or assets denominated in dollars like bonds, bank accounts, mortgages, and so on, tries to convert them to some other currency or asset simultaneously so they can buy hard assets like gold or real estate or canned goods, etc. instead of dollars.

Accordingly, I will attempt to translate the last five paragraphs of Bernanke’s 6/9/10 statement to Congress into plain English below. And below that, I do the same with Greenspan’s comments, although as you will see, former Fed chairmen are far less inhibited than current Fed chairmen and therefore require far less translation.

What Bernanke said What he means
Fiscal responsibility federal government living within its tax revenue means and not borrowing and spending far more than we receive, or will ever receive, in tax payments
Ongoing developments in Europe point to the importance of maintaining sound government finances. Most Western European countries are currently in severe financial difficulty and some are having their credit rating downgraded and are in danger of actually defaulting on their national government bonds—behavior usually only seen in Third World countries in Asia and Latin America.
In many ways, the United States enjoys a uniquely favored position. Our economy is large, diversified, and flexible; our financial markets are deep and liquid; and, as I have mentioned, in the midst of financial turmoil, global investors have viewed Treasury securities as a safe haven. We are only still going financially at this point because we are living on our past laurels.
Nevertheless, history makes clear that failure to achieve fiscal sustainability will, over time, sap the nation’s economic vitality, reduce our living standards, and greatly increase the risk of economic and financial instability. The U.S. government is a financial runaway train. If not stopped immediately, it is going to crash and throw us into a horrific financial crisis: either another Great Depression or hyperinflation
Our nation’s fiscal position has deteriorated appreciably since the onset of the financial crisis and the recession. If you think things have gotten better since the 2008 stock market crash and TARP failures, you ain’t been looking at the deficit and national debt, baby. We have gone nowhere but down, way down!
The exceptional increase in the deficit has in large part reflected the effects of the weak economy on tax revenues and spending, along with the necessary policy actions taken to ease the recession and steady financial markets. We can use the recession as a partial excuse for the huge deficits and increase in the national debt, but not all.
As the economy and financial markets continue to recover, and as the actions taken to provide economic stimulus and promote financial stability are phased out, the budget deficit should narrow over the next few years. If there are no more bailouts or stimuluses, at least the deficit will shrink a little, but not enough to make a damned bit of difference from a big picture standpoint.
Even after economic and financial conditions have returned to normal, however, in the absence of further policy actions, the federal budget appears to be on an unsustainable path. But the projected slight shrinking of the deficit—assuming things get a little better in the economy—don’t mean nothing really. We have to end the deficits completely right now and start running surpluses right now to lower the national debt as a percentage of Gross Domestic Product.
A variety of projections that extrapolate current policies and make plausible assumptions about the future evolution of the economy show a structural budget gap that is both large relative to the size of the economy and increasing over time. You guys in Congress and the Oval Office are not only running us off a cliff financially, but you have the pedal to the metal accelerating our arrival at the cliff as much as you can. This is insane! Stop it right now!!
Among the primary forces putting upward pressure on the deficit is the aging of the U.S. population, as the number of persons expected to be working and paying taxes into various programs is rising more slowly than the number of persons projected to receive benefits. Social Security and Medicare alone are going to bankrupt us when the Baby Boomers start collecting in 2011.
Notably, this year about 5 individuals are between the ages of 20 and 64 for each person aged 65 or older. By the time most of the baby boomers have retired in 2030, this ratio is projected to have declined to around 3. You would have to crush the young to financial death with taxes to get enough to pay Social Security and Medicare for the Baby Boomers.
In addition, government expenditures on health care for both retirees and non-retirees have continued to rise rapidly as increases in the costs of care have exceeded increases in incomes. And it’s not just the Baby Boomers retiring, our crazy bureaucratic health care system costs grow far faster than inflation. We would go bankrupt even without the Baby Boomers; faster with them.
To avoid sharp, disruptive shifts in spending programs and tax policies in the future, and to retain the confidence of the public and the markets, we should be planning now how we will meet these looming budgetary challenges. You have to cut federal government spending 40% across the board right now! Plus maybe raise tax revenues a little. That would probably require firing 40% of all government employees, both military and civilian, plus cutting entitlement payments 40% to retirees and persons receiving federal medical care benefits.
Achieving long-term fiscal sustainability will be difficult. But unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy economic growth. You guys have no choice about whether to cut spending 40% right now. If you wait, it’ll have to be cut 50% then 60% and/or we will go bankrupt which will devastate incomes, asset values, and tax revenues down to some new, undreamed of, much lower standard of living and government services.
Thank you Have a nice freaking day you scum bag demagogues. I am now on the damned record for the umpteenth time warning you and the world about this so don’t try to blame me when the hyperinflation or deflation/depression hits the fan.
What Greenspan said What he means
We cannot grow out of these fiscal pressures. Unlike prior post-World War II recessions, mere economic growth will no longer reverse the national debt. Very simply, the ratio of the national debt to the nation’s Gross Domenstic Product has grown so large that the necessary growth rate would be mathematically impossible
The modest-sized post-baby-boom labor force, if history is any guide, will not be able to consistently increase output per hour by more than 3% annually. The product of a slowly growing labor force and limited productivity growth will not provide the necessary real resources necessary to meet existing commitments. The post-Baby Boom Generations X and Y are too small to carry the Baby Boomers financially. Furthermore, their rate of becoming more financially efficient is not likely to compensate for their small numbers. [Efficiency gains stem mainly from high tech new start-ups, organizations that are not encouraged by Obama’s anti-business, anti-growth policies.]
We must avoid persistent borrowing from abroad. We cannot count on foreigners to finance our current account deficits indefinitely. Eventually, the world bond market will say, “No thanks” to the sales of U.S. bonds. Current account is the net of our exports minus our imports. It has long been negative which requires us to sell bonds or other assets to the countries whose imports we are addicted to.
Only politically toxic cuts or rationing of medical care, a marked rise in the eligible age for health and retirement benefits, or significant inflation, can close the deficit. Like I said in my Bernanke translation, 40% cuts. I got some feedback that 40% is wildly exaggerated. Bullshit! This year, the federal government will spend $7 trillion and collect $2.1 trillion in taxes. If the bond market stops buying U.S. bonds, the U.S. government has to reduce is spending for the year to $2.1 trillion. The only way to do that is to default on the $3.25 trillion bonds coming due this year and to cut the $3.6 trillion of entitlement and government operating expenses by 40% (60% x 3.6% = $2.16 trillion). Q.E.D.
I rule out large tax increases that would sap economic growth (and the tax base) and accordingly achieve little added revenues. Tax increases would take money away from the private sector. The private sector is the source of all economic growth. The current U.S. tax base is less than half the population as lower and middle class taxpayers have gradually had their taxes decreased to zero other than Social Security. U.S. tax revunues have been about 18% of GDP regardless of which party is in power and what the maximum tax rates are at any given time. When rates are raised, taxpayers change their behavior so that they avoid the higher rates. The notion that raising tax RATES raises tax REVENUE is a Democrat myth. Tax rate increases more often actually lower tax revenue.
The United States, and most of the rest of the developed world, is in need of a tectonic shift in fiscal policy. Incremental change will not be adequate. In the past decade, the U.S. has been unable to cut any federal spending programs of significance. Like I said, default on the national debt AND a 40% cut in spending, primarily entitlements. The problem is too big for 5% or 10% cuts in spending or minor adjustments in entitlements. The U.S. Congress and president have never made the sorts of cuts that are now required.

Bernanke is trying to call the alarm without causing a panic. I and Greenspan are more directly telling the American people and the Congress and President, as New Jersey Governor Christie recently told his constituents, “The day of reckoning is here.”

Since the Congress and president are going to do absolutely nothing to stop the “runaway train,” I highly recommend that you read my new book How to Protect Your Life Savings from Hyperinflation & Depression and follow its advice—fast —before it’s too late!

The human national treasures we do not value enough

When Tim Russert died unexpectedly, I was moved to name others who I feel are living human national treasures whom we do not appreciate enough.

These are talented, diligent men and women who are successful enough that we have heard of them. But they stand above other prominent people for their character. They seek position and ratings and raises, but not at the cost of doing what’s right. Their highest priority is doing what’s right, not what gives them status or money or fame. They comply with the ideal set forth in the Frank Sinatra song My Way.

They are also like John F. Kennedy’s Profiles in Courage heroes only without the one big, famous, dramatic conflict. But we have to know that these people on my list below have fought a million little, behind-the-scenes battles to maintain their integrity as they have lived their lives. They tell people what they need to know, not what they want to hear. They also remind us of Henry Clay’s statement, “I’d rather be right than be president.” That is, they have a vision of how they want to live their lives and they will not compromise it for any of the enticements that tempt others to live their lives so as to win the approval of others. People who do this are extremely rare.

Scott Adams, Dilbert cartoonist, lives a couple of towns away from me; we each were recruited to our first post-civilian-university jobs by Crocker National Bank in San Francisco; I left Crocker the year before he arrived; his cartoons are based on his experiences at Crocker and at PacBell where he subsequently worked, as well as on ideas from readers
Glenn Beck, radio and Fox news TV host, libertarian who is more than any of his competitors a teacher of facts and logic pertinent to the major policy issues of the day. As with Limbaugh, he is dismissed by the polite-company crowd because of his clowning around. When asked about that, he made some answer along the lines that he regretted the loss of the serious people but that he would rather that than to have Charlie Rose’s audience size. The best teachers and professors also use dramatization and clowning effectively. If Beck and Rose viewers were quizzed on the issues of the day, Beck’s viewers would outscore Rose’s by a large margin because of his persistent teaching. PBS was originally called “educational TV.” The Glenn Beck show is educational TV. PBS, on the other hand, has been running Rich Dad Poor Dad get-rich-quick infomercials.
John C. Bogle, author, founder and former CEO of Vanguard Mutual Fund Group
Dr. Michael Burry, erstwhile medical doctor who switched to stock market investing, tells people what they need to know, not what they want to hear, incentivizes himself to serve his investors first, limits their number and prohibits withdrawal for at least one year, very contrarian approach (I am the author of The Contrarian Edge for Football Offense), has no filter
Ward Connerly, effective opponent of affirmative action, former University of California regent, leader of several state ballot initiatives to ban affirmative action in CA, MI, and NE
Jamie Dimon, top banking executive at American Express, Commercial Credit, Citigroup, Bank One, and JPMorgan Chase—a guy who frequently did the right thing when most of his peers were doing the wrong thing (he graduated five years after me at Harvard Business School)
Steve Eisman, honest stock market analyst (all but a contradiction in terms other than Eisman), the hero of Michael Lewis’ book The Big Short, called the subprime crisis before it broke, has no filter
John Gagliardi, head football coach, St. Johns University; most all-divisions victories of any college football coach; unique approach to coaching
Bill James, author, baseball statistician, historian, Senior Advisor on Baseball Operations for the Boston Red Sox.
Steve Jobs, Apple cofounder and CEO, Apple Computer, Macintosh, Pixar, iPod, iPhone, iPad
Charles Krauthammer Psychiatrist, conservative newspaper columnist, Fox News contributor
Michael Lewis, author of Liar’s Poker, The New New Thing, Moneyball, Blindside, The Big Short, started at Salomon Brothers as a liberally-educated Princeton, London School of Economics kid who got paid hundreds of thousands for nothing and thought that was so stupid he quit
Rush Limbaugh, Conservative radio talk show host, pioneer of the genre, savior of AM radio, leading conservative in the U.S., appreciated fully by his fans, but not by non-listeners who underestimate him because of his mixing clowning and satire in with well-researched reporting and analysis
Joe Paterno, head football coach Penn State University; most Division I victories, bowl games, and undefeated seasons of any coach in football history; longest single-college tenure of any football coach in history; turned down numerous offers to “move up,” probably the biggest bargain of all coaches receiving just $500,000 a year in salary as a coach
Jane Bryant Quinn, fearless personal finance author and formerly at CBS TV news and Newsweek, now Bloomberg News personal finance columnist (in the interest of full disclosure, Jane is also my friend)
James (“Amazing Randi”) Randi, magician, escape artist and debunker of fakes, winner of a MacArthur Foundation “genius” award
Congressman Paul Ryan (R-WI), His Roadmap for America’s Future is the only legitimate proposal for fixing America’s runaway fiscal train, chairman of the House Budget Committee; America’s best chance to avoid federal government “bankruptcy” or hyperinflation
Thomas Sowell, economist, columnist, author, Hoover Institute Senior Fellow, has no filter
John Stossel, fearless Libertarian investigative reporter on ABC 20/20, switched to Fox News 9/10/09, goes out of his way to do provocative stories like one with the theme “greed really is good”
Walter E. Williams, relentlessly logical, powerful advocate of liberty and free-market economics. Economics professor at George Mason University, syndicated columnist, libertarian; takes great delight in using logic to prove all sorts of politically-incorrect conclusions, occasionally guest hosts for Rush Limbaugh having Limbaugh’s announcer introduce him as “black by popular demand”

I’m sure I will think of more later. I urge readers to suggest people to me. One reader suggested Milt Rosenberg a WGN Chicago radio talk show host. He may be deserving, but I know nothing about him so I cannot put him on my list.

Why Charlie Rose is not on the list

Another suggested Charlie Rose. I generally like his show, but my impression is that he is too afraid to displease guests for fear of getting a reputation that would discourage that guest or others from accepting his invitation to appear on his show. If I did such a show, I would not have liars on and if one slipped through, I would either call him on the spot or after investigating his false statement. That would cause the liars in question to refuse to ever appear again on my show and would cause other liars to refuse to come on to begin with.

Who are the liars? Elected or appointed officials, mass market corporate executives, corporations that rely on government contracts, political activists, etc. Who tells the truth as they see it? Generally, authors, tenured professors, retired people, true experts.

The John D. and Catherine T. MacArthur Foundation awards grants to fellows every year. They are commonly called the “genius awards.”

They say of the fellowships:

The MacArthur Fellows Program awards unrestricted fellowships to talented individuals who have shown extraordinary originality and dedication in their creative pursuits and a marked capacity for self-direction. There are three criteria for selection of Fellows: exceptional creativity, promise for important future advances based on a track record of significant accomplishment, and potential for the fellowship to facilitate subsequent creative work.

I wish there were a similar award for the combination of accomplishment and moral focus exhibited by the sort of people I have named above—and that it were not restricted to obscure persons as the MacArthur grants seem to be. It is easier to be moral when you are obscure than when you are involved in large organizations or mass markets.

I have no money to give to the folks I named above. Most of them probably already have more money than I do. But I tip my hat to them.