Mark Knopfler & Chet Atkins - Instrumental Medley.
I'll See You In My Dreams, Imagine
July 3, 2009
July 2, 2009
Fairy Tale Economics - Part 3
[NOTE: Italicized text is repeated from Part 1 for contextual purposes.]
Politicians would have you believe most anything. They'll say anything to get elected. They themselves might absolutely believe the words they are saying when they say them. But when it comes to governing, they are often confronted with the realities of the situation that cause their promises to become forgotten promises. In that light, the GOP being regarded as the party of 'No.', on the surface appearing to be simply obstructionist, is in reality a good position to be in. It's a lot easier to promise NOT to do something, NOT to spend money and then deliver on that promise, than it is to promise to do something that turns out to be unwise or impossible to deliver upon after being elected. In that case you've got to go back on your word, or plow ahead with a bad idea that will do more harm than good in the long run.
It's one thing to believe that your solutions are smart ones when the aren't, it's entirely another and far more sinister when politicians are deliberately misleading the public into believing in a set of principles that are patently flawed. The United States as a nation finds itself in one of those situations right now. The recessionary meltdown currently being navigated by the economy is the problem, and believe it or not, the solution as it stands is a big part of the problem too. There are three distinct culprits in getting us to this crisis point: (1) President Obama (2) The mainstream news media and (3) the inattentive, gullible and naive American public. The truth is that the culpability is pretty evenly spread between those three.
Previously, looking at the problem itself the focus was on Taxation (See Part 1 here) and additional Government Borrowing (see Part 2). Also in Part 2, the problem was more specifically defined;
The Problem
The economy is in rough shape but it can't be cured by Fairy Tale Economics. Those following the economy will look at things like unemployment rates and the stock market and draw their conclusions about the nation's health based on them (or similar indicators). But that's taking a microscopic look at an economy that has a macroscopic problem. The unemployment rate is the symptom of the problem, not the problem.
You don't solve the economic problems by solving the unemployment rate issue. That's like thinking you'll cure your cold by taking cough syrup. If it was as simple as creating jobs then as someone pointed out (source unknown), then the government could take the stimulus money and hire workers, and handing out shovels to 2 groups of people - one to dig holes and one to fill the holes back in. And why not pay them $200,000 each to do it? Surely that would be more stimulating than $35,000 each, no?
The fairy tale economics yarn that the Democrats are spinning is that the government will create jobs and demand for goods and services by creating projects and spending money on them. The politicians will argue that consumers are not demanding goods and services so the government has to step in to fill the void until consumers appetite for buying returns. The government may indeed need to fix roads, build more Hoover Dams etc., but that's not the issue here. The economy is the issue, and their solution does not work. It's pretty a simple matter to figure out why.
In the simplest context, the government has to get that money from somewhere. They have 3 options available to them (i) they can raise taxes on consumers and/or businesses (ii) they can borrow money from domestic and/or foreign lenders (banks or governments) and then pay it back later or (iii) print more money and use it for the government spending. Of course the politicians could also decide to do a combination of some of all three of those options. The result would then be a mix of the results of each option taken in isolation.
Printing More Money To Spend
Money doesn't grow on trees. It's not a renewable resource in the sense that you simply can't make wealth out of nothing. Wealth has to be created by adding value to something or for someone. There has to be value for money to have meaning. Printing money doesn't add value or wealth to the economy, it dilutes value of existing wealth.
The economy might seem to some to be simple to this example;
Harry and Nancy both have $10. They are the ones responsible for printing their own money. They are in a store where there are goods for sale. Every item in the store costs $1. Thus each of them can buy 10 items. But if they print another $10 each then they could each buy 20 items. They get more and the store gets more money.
Where's the flaw? Let's say one of the goods is a pot and one is kettle. They are worth the same equal value as each other. And they are both worth $1. But there's only one of each in the store. Harry wanted a pot and Nancy wanted the kettle. But now that they've both got twice as much money, they both want a pot and a kettle.
There's only one of each but demand for two of each. What's a smart store keeper to do? Raise the price of the kettle to $2 and the pot to $2. Harry and Nancy are back to the same situation as where they started - Harry gets a pot for $2 instead of one and Nancy gets a kettle for $2 instead of one. In other words, the shopkeeper sells the same two items but gets twice as much money (inflation). But even the shopkeeper is no better off - if he wanted to buy the kettle back, the price has been set at $2 now. No one is any wealthier.
All that has happened is that the value of the dollars have gone down. $1 used to buy a kettle, now it buys half a kettle. The money does not add any value, and therefore no 'wealth'. The only way for there to be more wealth is to get more kettles or pots into the store. They need to be made.
What printing $20 extra has done is caused inflation. What printing an extra trillion dollars does is the same thing but on a much bigger scale. And what it does in the real world is also devalue the American dollar compared to other currencies.
If printing extra money happens on too large of a scale the results can be disastrous. Two relatively recent examples are the Wiemar Republic and even more recently, Zimbabwe. These choices have real world consequences.
Germany:
Zimbabwe:
There are lessons to be learned from the past.
Clearly, the way forward is full of danger.
Next Up: In Part 4 - whose fault is this? How did America get to this point?
Politicians would have you believe most anything. They'll say anything to get elected. They themselves might absolutely believe the words they are saying when they say them. But when it comes to governing, they are often confronted with the realities of the situation that cause their promises to become forgotten promises. In that light, the GOP being regarded as the party of 'No.', on the surface appearing to be simply obstructionist, is in reality a good position to be in. It's a lot easier to promise NOT to do something, NOT to spend money and then deliver on that promise, than it is to promise to do something that turns out to be unwise or impossible to deliver upon after being elected. In that case you've got to go back on your word, or plow ahead with a bad idea that will do more harm than good in the long run.
It's one thing to believe that your solutions are smart ones when the aren't, it's entirely another and far more sinister when politicians are deliberately misleading the public into believing in a set of principles that are patently flawed. The United States as a nation finds itself in one of those situations right now. The recessionary meltdown currently being navigated by the economy is the problem, and believe it or not, the solution as it stands is a big part of the problem too. There are three distinct culprits in getting us to this crisis point: (1) President Obama (2) The mainstream news media and (3) the inattentive, gullible and naive American public. The truth is that the culpability is pretty evenly spread between those three.
Previously, looking at the problem itself the focus was on Taxation (See Part 1 here) and additional Government Borrowing (see Part 2). Also in Part 2, the problem was more specifically defined;
The problem is that the economic crisis the nation currently finds itself in, cannot be solved the way the government is going about doing so. In essence, the initial problem of a recession is being compounded by the solution.
The Problem
The economy is in rough shape but it can't be cured by Fairy Tale Economics. Those following the economy will look at things like unemployment rates and the stock market and draw their conclusions about the nation's health based on them (or similar indicators). But that's taking a microscopic look at an economy that has a macroscopic problem. The unemployment rate is the symptom of the problem, not the problem.
You don't solve the economic problems by solving the unemployment rate issue. That's like thinking you'll cure your cold by taking cough syrup. If it was as simple as creating jobs then as someone pointed out (source unknown), then the government could take the stimulus money and hire workers, and handing out shovels to 2 groups of people - one to dig holes and one to fill the holes back in. And why not pay them $200,000 each to do it? Surely that would be more stimulating than $35,000 each, no?
The fairy tale economics yarn that the Democrats are spinning is that the government will create jobs and demand for goods and services by creating projects and spending money on them. The politicians will argue that consumers are not demanding goods and services so the government has to step in to fill the void until consumers appetite for buying returns. The government may indeed need to fix roads, build more Hoover Dams etc., but that's not the issue here. The economy is the issue, and their solution does not work. It's pretty a simple matter to figure out why.
In the simplest context, the government has to get that money from somewhere. They have 3 options available to them (i) they can raise taxes on consumers and/or businesses (ii) they can borrow money from domestic and/or foreign lenders (banks or governments) and then pay it back later or (iii) print more money and use it for the government spending. Of course the politicians could also decide to do a combination of some of all three of those options. The result would then be a mix of the results of each option taken in isolation.
Printing More Money To Spend
Money doesn't grow on trees. It's not a renewable resource in the sense that you simply can't make wealth out of nothing. Wealth has to be created by adding value to something or for someone. There has to be value for money to have meaning. Printing money doesn't add value or wealth to the economy, it dilutes value of existing wealth.
The economy might seem to some to be simple to this example;
Harry and Nancy both have $10. They are the ones responsible for printing their own money. They are in a store where there are goods for sale. Every item in the store costs $1. Thus each of them can buy 10 items. But if they print another $10 each then they could each buy 20 items. They get more and the store gets more money.
Where's the flaw? Let's say one of the goods is a pot and one is kettle. They are worth the same equal value as each other. And they are both worth $1. But there's only one of each in the store. Harry wanted a pot and Nancy wanted the kettle. But now that they've both got twice as much money, they both want a pot and a kettle.
There's only one of each but demand for two of each. What's a smart store keeper to do? Raise the price of the kettle to $2 and the pot to $2. Harry and Nancy are back to the same situation as where they started - Harry gets a pot for $2 instead of one and Nancy gets a kettle for $2 instead of one. In other words, the shopkeeper sells the same two items but gets twice as much money (inflation). But even the shopkeeper is no better off - if he wanted to buy the kettle back, the price has been set at $2 now. No one is any wealthier.
All that has happened is that the value of the dollars have gone down. $1 used to buy a kettle, now it buys half a kettle. The money does not add any value, and therefore no 'wealth'. The only way for there to be more wealth is to get more kettles or pots into the store. They need to be made.
What printing $20 extra has done is caused inflation. What printing an extra trillion dollars does is the same thing but on a much bigger scale. And what it does in the real world is also devalue the American dollar compared to other currencies.
If printing extra money happens on too large of a scale the results can be disastrous. Two relatively recent examples are the Wiemar Republic and even more recently, Zimbabwe. These choices have real world consequences.
Germany:
Zimbabwe:
There are lessons to be learned from the past.
Clearly, the way forward is full of danger.
Next Up: In Part 4 - whose fault is this? How did America get to this point?
Arlen Specter, Cautionary Tale
When Arlen Specter switch from the Republican party to the Democratic party in exchange for a few shiny trinkets and a chance to avoid facing Pat Toomey in the next primary for his Senate seat, he had hoped that in exchange for the changed allegiance he could extend his own political career.
Now it looks like he will likely be defeated in the next Democrat primary for the same seat. Ironic. Some would say short-sighted and moronic.
But he sold out his party. The one that threw a lot of financial support behind him in the last election for his Senate seat. Now, with the confirmation of Al Franken as the Senator from Minnesota, the Democrats have a 60 seat majority in the Senate. And the Republicans have no option for a filibuster. Meanwhile Specter looks to have no additional life in his career. Maybe it's too soon to be sure, but if things hold up the way they are now, it looks like that would be the case.
Arlen Specter serves as a cautionary tale. Two in fact.
The first and most obvious for Specter - don't sell out your allies for personal gain. It will harm you in the end.
The second cautionary tale is for the GOP - don't back weak allies so fiercely without strings attached. Better yet, you can't trust RINOs, so if they make it into the GOP past the primaries, then leave them to fend for themselves and use your war chest to back close races with quality candidates instead.
Now it looks like he will likely be defeated in the next Democrat primary for the same seat. Ironic. Some would say short-sighted and moronic.
But he sold out his party. The one that threw a lot of financial support behind him in the last election for his Senate seat. Now, with the confirmation of Al Franken as the Senator from Minnesota, the Democrats have a 60 seat majority in the Senate. And the Republicans have no option for a filibuster. Meanwhile Specter looks to have no additional life in his career. Maybe it's too soon to be sure, but if things hold up the way they are now, it looks like that would be the case.
Arlen Specter serves as a cautionary tale. Two in fact.
The first and most obvious for Specter - don't sell out your allies for personal gain. It will harm you in the end.
The second cautionary tale is for the GOP - don't back weak allies so fiercely without strings attached. Better yet, you can't trust RINOs, so if they make it into the GOP past the primaries, then leave them to fend for themselves and use your war chest to back close races with quality candidates instead.
July 1, 2009
Why Obama's popularity diverges with his policies popularity
Earlier today I posted the latest Rasmussen Reports Presidential approval ratings. But if you take a look at Gallup, the results tell a slightly different story. While I'm not sold on Gallup being right about Obama, but they do have a solid reputation. What does Gallup say about the President? Gallup Daily: Obama Job Approval has his job approval at 60% and disapproval at 32%.
If that's true, then despite other polls like the ones that indicate more of the American public are conservative than liberal, that people are not comfortable with the deficit spending, that more Americans see the Democrats as being too liberal all diverge with the President's personal popularity. What gives?
The superficial answer is that Obama comes across as likable, a man you could relate to - perhaps in a somewhat similar way to Ronald Reagan. But that's too superficial. After all, the numbers just don't work. If I disagree with the President on a number of big issues, how can I possibly approve of the job he's doing? And that's the case on some issues to the tune of a 20% difference.
It would seem to boil down to three factors.
1) The disconnect in perception between policy decisions and personal impact
2) The current issues in focus
3) The delaying effects of personal likability
and also possibly
4) Gremlins.
(but we'll ignore that one for now, since there's no evidence of a concerted Gremlin effort).
When the government passes a bill like Cap and Trade, the average person does not see an immediate impact on their personal financial situation, or their personal freedom of choice. There is no direct line between the two details. Nevertheless, it happens. But because the impact is not immediately obvious, politicians can make ridiculous assertions and get away with it.
The President can talk about spending additional trillions and yet lowering the deficit because the concepts are so far removed from daily life, so esoteric, that a flimsy argument about the ability to do both can, with the right spin, appear to be reasonable.
The second disconnect is between the issues in focus and the issues of most importance to voters. Aside from the economy, people have diverse views on what is important. And since there is obfuscation and confusion on the efficacy of the Democrat solutions as noted above, the Democrats, particularly the President are afforded time and leeway. The economy is the number one concern, but it's simply too soon to see proof on whether the President's stimulus will work or fail. That it is failing to make a difference so far, is of little consequence. He still has time. When and if those policies lead to economic disaster, the Presidential approval ratings will plummet. In this climate, secondary issues take on more importance to the Presidential approval.
But the secondary issues are so diverse - abortion, immigration and amnesty, the Fairness Doctrine, global warming, 2nd Amendment rights, national defence, discrimination, and Card Check are but a few examples. There's been sporadic attention on any given one of these issues. In fact even on Fox News, there's been more coverage of Michael Jackson's death than of what has gone on in Iran this week. As the various issues bubble to the surface and then are neglected their impacts are soon forgotten.
What it means for the President is that again, he has time. If gay marriage is something an Obama supporter has pinned his hopes on, it will take time and inaction for the supporter to become embittered. Similarly if Obama decided to forge ahead on the issue he would alienate some as well. The best option for him therefore, is to do nothing. He can coast along on his goodwill. For now. But as time wears on inaction becomes an enemy to someone who has come to power based on hope and change.
Lastly, Obama's campaign inspired many. He positioned himself as a candidate of hope, change and vision. He also tried very hard to come across as likable. Remember the visit to the Tonight Show with Jay Leno? Remember the bowling? Remember the town halls and the talking about his childhood and listening to Stevie Wonder while the music teacher tried to get him to sing 'Oklahoma'? Likability. He established a cache of personal endearment with many Americans. That serves to extend the grace period for the President as well. But it does not extend it indefinitely. It buys him time.
In each of the three factors, the commonality is time. It is an asset for Obama for now, but it is a finite asset. Over time, things will change. Those of us hoping for Obama's ratings to falter lack patience. It's understandable - he's doing things at breakneck speed, and time is a luxury conservatives cannot afford. It's a conundrum, because Obama's ratings will inevitably slide. The economy ahead is replete with risk - higher unemployment, inflationary pressures, and exorbitant government debt and higher taxes to compensate. Secondary issues will be resolved to the annoyance of some in every case, or ignored for too long until hope on those issues is lost. And the President's personal popularity will become a symptom of job approval rather than the reverse.
In the meantime, conservatives need to fight every uphill battle that matters to prevent the President from redirecting the country leftward. He is using the breakneck speed approach to governance because he knows he cannot expect the same successes in two years that he is getting now. Tactically, his approach is brilliant. For the country his approach is dangerous. Unproven policies at such speed are a long odds gamble.
The President's ratings will fall. The factors that affect his job approval are going to turn. And then again it could be gremlins..
If that's true, then despite other polls like the ones that indicate more of the American public are conservative than liberal, that people are not comfortable with the deficit spending, that more Americans see the Democrats as being too liberal all diverge with the President's personal popularity. What gives?
The superficial answer is that Obama comes across as likable, a man you could relate to - perhaps in a somewhat similar way to Ronald Reagan. But that's too superficial. After all, the numbers just don't work. If I disagree with the President on a number of big issues, how can I possibly approve of the job he's doing? And that's the case on some issues to the tune of a 20% difference.
It would seem to boil down to three factors.
1) The disconnect in perception between policy decisions and personal impact
2) The current issues in focus
3) The delaying effects of personal likability
and also possibly
4) Gremlins.
(but we'll ignore that one for now, since there's no evidence of a concerted Gremlin effort).
When the government passes a bill like Cap and Trade, the average person does not see an immediate impact on their personal financial situation, or their personal freedom of choice. There is no direct line between the two details. Nevertheless, it happens. But because the impact is not immediately obvious, politicians can make ridiculous assertions and get away with it.
The President can talk about spending additional trillions and yet lowering the deficit because the concepts are so far removed from daily life, so esoteric, that a flimsy argument about the ability to do both can, with the right spin, appear to be reasonable.
The second disconnect is between the issues in focus and the issues of most importance to voters. Aside from the economy, people have diverse views on what is important. And since there is obfuscation and confusion on the efficacy of the Democrat solutions as noted above, the Democrats, particularly the President are afforded time and leeway. The economy is the number one concern, but it's simply too soon to see proof on whether the President's stimulus will work or fail. That it is failing to make a difference so far, is of little consequence. He still has time. When and if those policies lead to economic disaster, the Presidential approval ratings will plummet. In this climate, secondary issues take on more importance to the Presidential approval.
But the secondary issues are so diverse - abortion, immigration and amnesty, the Fairness Doctrine, global warming, 2nd Amendment rights, national defence, discrimination, and Card Check are but a few examples. There's been sporadic attention on any given one of these issues. In fact even on Fox News, there's been more coverage of Michael Jackson's death than of what has gone on in Iran this week. As the various issues bubble to the surface and then are neglected their impacts are soon forgotten.
What it means for the President is that again, he has time. If gay marriage is something an Obama supporter has pinned his hopes on, it will take time and inaction for the supporter to become embittered. Similarly if Obama decided to forge ahead on the issue he would alienate some as well. The best option for him therefore, is to do nothing. He can coast along on his goodwill. For now. But as time wears on inaction becomes an enemy to someone who has come to power based on hope and change.
Lastly, Obama's campaign inspired many. He positioned himself as a candidate of hope, change and vision. He also tried very hard to come across as likable. Remember the visit to the Tonight Show with Jay Leno? Remember the bowling? Remember the town halls and the talking about his childhood and listening to Stevie Wonder while the music teacher tried to get him to sing 'Oklahoma'? Likability. He established a cache of personal endearment with many Americans. That serves to extend the grace period for the President as well. But it does not extend it indefinitely. It buys him time.
In each of the three factors, the commonality is time. It is an asset for Obama for now, but it is a finite asset. Over time, things will change. Those of us hoping for Obama's ratings to falter lack patience. It's understandable - he's doing things at breakneck speed, and time is a luxury conservatives cannot afford. It's a conundrum, because Obama's ratings will inevitably slide. The economy ahead is replete with risk - higher unemployment, inflationary pressures, and exorbitant government debt and higher taxes to compensate. Secondary issues will be resolved to the annoyance of some in every case, or ignored for too long until hope on those issues is lost. And the President's personal popularity will become a symptom of job approval rather than the reverse.
In the meantime, conservatives need to fight every uphill battle that matters to prevent the President from redirecting the country leftward. He is using the breakneck speed approach to governance because he knows he cannot expect the same successes in two years that he is getting now. Tactically, his approach is brilliant. For the country his approach is dangerous. Unproven policies at such speed are a long odds gamble.
The President's ratings will fall. The factors that affect his job approval are going to turn. And then again it could be gremlins..
Fairy Tale Economics - Part 2
[NOTE: Italicized text is repeated from Part 1 for contextual purposes.]Politicians would have you believe most anything. They'll say anything to get elected. They themselves might absolutely believe the words they are saying when they say them. But when it comes to governing, they are often confronted with the realities of the situation that cause their promises to become forgotten promises. In that light, the GOP being regarded as the party of 'No.', on the surface appearing to be simply obstructionist, is in reality a good position to be in. It's a lot easier to promise NOT to do something, NOT to spend money and then deliver on that promise, than it is to promise to do something that turns out to be unwise or impossible to deliver upon after being elected. In that case you've got to go back on your word, or plow ahead with a bad idea that will do more harm than good in the long run.
It's one thing to believe that your solutions are smart ones when the aren't, it's entirely another and far more sinister when politicians are deliberately misleading the public into believing in a set of principles that are patently flawed. The United States as a nation finds itself in one of those situations right now. The recessionary meltdown currently being navigated by the economy is the problem, and believe it or not, the solution as it stands is a big part of the problem too. There are three distinct culprits in getting us to this crisis point: (1) President Obama (2) The mainstream news media and (3) the inattentive, gullible and naive American public. The truth is that the culpability is pretty evenly spread between those three.
Previously, looking at the problem itself the focus was on Taxation (See Part 1 here). The problem however was not immediately defined in Part 1, so before looking at more let's define the problem specifically.
The problem is that the economic crisis the nation currently finds itself in, cannot be solved the way the government is going about doing so. In essence, the initial problem of a recession is being compounded by the solution.
The Problem
The economy is in rough shape but it can't be cured by Fairy Tale Economics. Those following the economy will look at things like unemployment rates and the stock market and draw their conclusions about the nation's health based on them (or similar indicators). But that's taking a microscopic look at an economy that has a macroscopic problem. The unemployment rate is the symptom of the problem, not the problem.
You don't solve the economic problems by solving the unemployment rate issue. That's like thinking you'll cure your cold by taking cough syrup. If it was as simple as creating jobs then as someone pointed out (source unknown), then the government could take the stimulus money and hire workers, and handing out shovels to 2 groups of people - one to dig holes and one to fill the holes back in. And why not pay them $200,000 each to do it? Surely that would be more stimulating than $35,000 each, no?
The fairy tale economics yarn that the Democrats are spinning is that the government will create jobs and demand for goods and services by creating projects and spending money on them. The politicians will argue that consumers are not demanding goods and services so the government has to step in to fill the void until consumers appetite for buying returns. The government may indeed need to fix roads, build more Hoover Dams etc., but that's not the issue here. The economy is the issue, and their solution does not work. It's pretty a simple matter to figure out why.
In the simplest context, the government has to get that money from somewhere. They have 3 options available to them (i) they can raise taxes on consumers and/or businesses (ii) they can borrow money from domestic and/or foreign lenders (banks or governments) and then pay it back later or (iii) print more money and use it for the government spending. Of course the politicians could also decide to do a combination of some of all three of those options. The result would then be a mix of the results of each option taken in isolation.
More Government Borrowing
One of the ways politicians try to get elected or re-elected is to give people things. Sometimes this is manifested via pork-barrel spending projects, sometimes it's done on a more subtle level. If a politician running for offices promises to give you a new benefit (say free health care) but tells you that under his or her plan, it won't cost you one extra dime, that politician is promising to give you something for nothing.
Everybody has heard the expression "there's no such thing as a free lunch". You've heard it because it's true. Nothing is ever free. If something is free for you personally, which is pretty rare, it means there's a cost for someone else. If you went into your local Wal-Mart and they told you here's a free XBox 360 and 10 free games, there's a cost to Wal-Mart. They've given up the cost of those items they gave to you because they bought them. And they've also given up the possible profit they could have made from you.
Why does that matter? Because any politician who tries to borrow money to give you something for 'free', is only telling you half of the story - the good half.
Firstly, the government has it's own problems. It's not living up to a lot of what it's supposed to be doing in so many areas (think of service levels at the DMV), that it's wrongly focused on trying to do more for you. It can't even get right what it's already doing. Furthermore, if it can't get those things right, what makes you think that they can get health care or carbon tax credits right? But the bigger point is that the government shouldn't be responsible for those items for you - you should be.
Secondly and more importantly government borrowing isn't free. Whether the government borrows from an American bank, a foreign bank, or a foreign government, they are going to have to pay interest on what they borrowed. Do you think China is lending America money out of the goodness of it's blessed communist heart? No - they want to make a percentage off the loan. On top of which they want the borrowed money to work it's way into the American economy and eventually back to China in the way of purchases on manufactured goods now made there instead of the United States. It's a win-win for China, provided the U.S. doesn't default on the loans.
Thirdly, because the borrowing isn't free it creates another problem. Any money the government borrows now, gets added to the national debt which already stands at over $11 trillion and is expected under Obama's budgets to nearly double in the next 10 years. That's on top of the currently calculated costs of Social Security and Medicare that are currently calculated to be at $107 trillion dollars. That amount is staggering, and in the favored lexicon of the President ' unsustainable'.
People know from their personal credit situations that the more you borrow the higher the interest payments become. If you owe $100 at 5% APR interest, that means after a year without making any payments you'd owe $105. But imagine owing $11 trillion, let alone $127 trillion all told. 5% APR for the government on $11 trillion is $550 billion dollars. By comparison the U.S. Defence Budget for 2009 is $515.4 billion. That's an astounding amount.
Every year that the government does not pay that down the billions the government has to pay goes up. In the course of two years at that level, the government will pay a combined $1.1 trillion in interest payments to banks foreign and domestic, and to other governments, some of which are not friendly to American interests. Furthermore that money is money the government could have spent on roads, dams or fixing the DMV as much as possible. Your tax money is going to China, who have bought government bonds to support American spending habits. The interest on the debt flowing outside of America is as much a problem as the balance of trade deficit because both cannot go on indefinitely and the interest on the debt is something that's going to hit the fan sooner of the two problems.
The Fairy Tale here is that the government can somehow magically borrow money from anywhere and there is no impact on your wallet. There may be no visible impact for the short term, but the truth is it will cost America, it will cost your children and grandchildren, and given the rate of growth of the problem, it may hit your wallet sooner than you think.
Just like you can't spend yourself rich, the government cannot spend it's way out of the economic hole it has dug for itself since the time of Roosevelt. The surpluses of the 90's didn't couldn't have overcome the Social Security, Medicare, Medicaid trifecta of doom, and would have hardly dented the spend President Obama has planned for you either. While the short term boost of a government spending spree might have made sense under ideal circumstances - those vary considerably from current conditions.
If the government regularly ran at a surplus budget, if there were no massive national debt, if the stimulus truly generated more spending than it raised the interest on the debt, if the spending were economically efficient, immediate and clearly controlled, monitored and costed then maybe it might make sense. And even then, only if the costs were repaid as immediately afterwards as possible would it make sense. That reality is more of a Fairy Tale's distance away from the current situation.
But Democrats will tell you each and every time this money has to be spent or else...don't bite. Every dollar out is another government spent dollar for nails for the coffin of America.
NEXT UP: The third option for government to come up with ways to spend money is to just print more. Scary? You bet, and there's lots of evidence as to why.
Latest Rasmussen - Obama's flat
The latest from Rasmussen Reports is showing a continuation of a flattening trend. In the past when public opinion started turning a bit against the President, he would hold a press conference and with a combination of saying the right things (whether he believed them or not), getting softball questions and just being visible (i.e. being the anti-Bush) he would revive his ratings. You can see in the Rasmussen graph below, where he's done that.
But despite the blips, the numbers have stayed relatively converged for a little while now. Perhaps the tipping point has been reached. Not in time to halt Cap & Trade in Congress but perhaps in the Senate. And hopefully in time to halt the health care 'reform'.
The other interesting thing about the graph, that may or may not be relevant anymore, is that each spike the President produced was a temporary spike. If he believes that is ow he has to combat any deterioration in his job approval/popularity ratings then it means he's going to have to spend a lot of his efforts on public relations. It's not the most productive use of his time. Perhaps as conservatives we should be thankful for that.
But despite the blips, the numbers have stayed relatively converged for a little while now. Perhaps the tipping point has been reached. Not in time to halt Cap & Trade in Congress but perhaps in the Senate. And hopefully in time to halt the health care 'reform'.
The other interesting thing about the graph, that may or may not be relevant anymore, is that each spike the President produced was a temporary spike. If he believes that is ow he has to combat any deterioration in his job approval/popularity ratings then it means he's going to have to spend a lot of his efforts on public relations. It's not the most productive use of his time. Perhaps as conservatives we should be thankful for that.
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