Tag: Deficit

The Right Wing Meltdown: Knock It Off

It’s been downright painful watching conservatives come to grips with the reality that Obama was re-elected. A couple of my favorite sites are about ready to go all Jonestown about it and I haven’t bothered to give them more than a cursory glance for the past week.

Everywhere it’s “Why, why, why?” and “We have to change everything we believe!” and “We just had bad luck, it means nothing, nothing I tell you!” and even “We have to secede, obviously.”

It’s a collective temper tantrum. Liberals think it’s all hilarious, I might add.

At the risk of sounding like a big twat (ha, ha, ha: shut up), I’ve never been more ashamed of us as a movement or group or what-have-you. This is not the End of America, for fuck’s sake. If you’re waiting for the collective breakdown and war (or, worse, hoping for it), settle down.

It’s not Morning in America either, mind you. Let’s not kid ourselves. This country is in for a brutal decade. But that doesn’t mean that America is fatally wounded. Our country has made a shitload of really bad decisions, run up too much debt, and divided itself on some ridiculous issues that never should have become government problems. We have the bad misfortune to be home when the papers are being served.

We’re getting ready for the next act of The Great Devaluation.  Real estate and college got overvalued, made a bunch of people rich, and then it turned out to be unsustainable in the first act.  We’ve been in shit, but only ankle-deep.  The next wave hits EVERYBODY where it hurts: Our money.  We don’t have enough and what we do have is going to be worth less, if not worthless.  Stocks are going to take a major hit, companies are going to tighten their belts, and more.  This is all coming about because we built everything on crap and let our “leaders” get away with mortgaging our future with insane entitlements, limitless wars, and low taxes.    Well, welcome to the future.

Emigration isn’t an option for me and I’m not really jazzed about the idea of joining up with some asshole warlord in Civil War Episode II: Attack of the Self-Entitled Douchebags.  If you’re good with all that, then go ahead and start digging your bunker and just start waiting.  I don’t care.

The Democrats are not up to the task of handling what’s happening and frankly, I don’t think the GOP was either.  It’s too late and I think this is one of those disasters of American history that just has to happen before we can move on, like Pearl Harbor (the actual event, not the film).  I don’t know how else we break our bad habits without imposed austerity.

Now, plenty of pundits and politicians are getting their silly asses on television talking about how we need to change this and that.  Stop apologizing for rape, let the Mexicans run wild, and admit that the wage gap is deliberately caused by evil, stinky men instead of market forces.  If you want to keep going for the two party system of Democrat and Democrat-lite, that’s a personal choice.  I don’t think we need to go that far.

It is time to compromise though.  I still don’t know how to work out a “peace accord”, but I do know that we can call a truce and take the time to retrench without retreating

First, taxes must go up on high earners.  We have to give that away and I see no way we win the Battle of Fiscal Cliff without some casualties.  Coddling the rich isn’t doing us any good if they can’t even buy a Romney presidency.   It’s totally symbolic, it’s not going to help the deficit or jobs, and it’s against our beliefs.  Too bad.  We’re taking a break from worshipping the wealthy while the American people enjoy having their demagogues to spread the wealth pain around.  I still think letting all of the Bush tax cuts expire is fitting, but we should “let” the Democrats talk us out of it if they throw in something worthwhile.

Second, it’s time to end the War in Afghanistan and reduce and reorient the military to stick with what it has done best since the 19th Century: Defend North America.  Yeah, I’m going all Pat Buchanan on this.  Israel: I am really and truly sorry.  But if we’re really heading into a Civil War, it would probably be better to have our guys back here, right?

Next, let’s bite our tongues when the President takes full credit for the deal.  Let him have this last big fuckin’ deal.  I think Boehner sucks, you do too, but lets go easy on him this one time.

The unsustainability of Medicare, Social Security, and ObamaCare is not going to be seriously addressed or resolved by the federal government at this time.  Everything I’m proposing here is with the assumption that it won’t.  We get to watch and let the Democrats totally own the disaster.  When it’s time for them to give some things up and save what’s left of the Obama legacy, they’ll know.

The one issue I don’t think we should compromise on is any immigration reform that requires amnesty for those already living here.  I think America’s natural xenophobia will kick back in as those lettuce-picking jobs start looking better and better as the unemployment starts to dry up.  Be patient on this one.


Finally, screw the Constitution of the United States of America.   I think it’s time we all acknowledged that the Constitution needs a redo.  It is failing us and the American people clearly don’t believe in it or care anymore except when they want to cherry-pick one amendment or another to suit their causes.   It is almost a dead fucking letter and there are no longer any peaceful means of binding our current government back to it.

You want to scare the hell out of the DC establishment?  It’s time to call for a Constitutional Convention, through the states.  They laugh at your pathetic secession petitions but they’ll stop laughing and choke when they realize that we’re about to change the rules to fuck them over.  This isn’t a temper tantrum.  It’s a cold, dead-eyed threat of a long-term solution.  Start demanding this at every turn.  Americans are going to love the idea soon enough, if the doomsayers are right.

Conservatives and progressives simply do not agree on what kind of country we should be and what the Constitution means and independents in the middle are too brain-dead and disengaged to care.  We’re not going anywhere as a people until we firmly establish a new concept of the relationship between the federal government, the states, and the people.   Our government cannot do it at this point.

The Culture Wars were driven by the Supreme Court making these decisions for us and they’ve done an awful job.  They’re completely unpredictable and they barely even use the Constitution as the basis for rulings anymore.  Congress has ignored its fiscal duties and its members serve to benefit themselves.  The Presidency is imperial in everything but name.  Whole industries are crippled with executive orders and psychotic bureaucrats.  This has to stop.  We need to accept that the old Constitution has done nothing to restrain all three out-of-control branches of government and quit acting like the Founding Fathers were flawless gods.   What they created was beautiful, but it isn’t working anymore.

We stop the Right Wing Meltdown.   The game is still on and what is happening in Congress is everything right now (even though the Petraeus thing is the most awesome scandal of my lifetime).  My advice is to comment on the Jonestown Blogs that the histrionics are done and it’s time for a Constitutional Convention.  Start getting that into the public consciousness now.

I’ve been preaching the importance of staying on task ever since last Tuesday’s electoral calamity.  This isn’t because of my sunny disposition or optimistic outlook.  I have neither.  It’s because the United States needs a vibrant pro-Liberty movement and we’re it.

No more embarrassing theatrics.  Do it FOR THE CHIIIIIIILDREN, you bastards.

I invite all denunciations and mental health referrals.   Sometimes, you just gotta rant.

The President Punks Us … Again

Here’s the thing: the President’s budget proposal is effectively DOA. Even if the Republicans didn’t control the House, his Senate has refused to propose a budget in three years. So there is no chance today’s proposal will come anywhere close to passing.

Given that, why doesn’t he propose something bold? Why does’t he put out Simpson-Bowles? Why doesn’t he say, “Hey, you want the budget balanced? Here’s what it’s going to take.” and put out a proposal with big tax hikes and even bigger spending cuts. He’s had two plans — Simpson-Bowles and the Ryan Plan — but out in front of him. And he responds with this?

President Obama on Monday unveiled a $3.8 trillion spending plan that seeks to pump billions of dollars into the economy while raising taxes on the rich to tame a soaring national debt now projected to grow significantly faster than previously forecast.

The president’s outlook for debt reduction has slid markedly since September, when Obama told Congress that his proposals would hold annual deficits well under $600 billion after next year and permit the debt held by outside investors to rise to $17.7 trillion by 2021, or 73 percent of the overall economy.

The new 10-year blueprint shows annual deficits exceeding $600 billion every year except 2018. And the portion of the debt held by outside investors would grow to $18.7 trillion by 2021, or 76.5 percent of the economy — a full $1 trillion higher.

Administration officials said about half the increase is due to policy changes, with the other half driven by gloomier economic projections that tend to depress tax collections, increase government spending and drive deficits up. Job growth has proved stronger than expected since the budget was prepared, they said, adding that the picture would look brighter today.

To see how accurate their past budget projections have been, Veronique de Rugy looked at the 2010 budget proposal. It projected a $500 billion deficit in FY 2013, about half of what we will actually have.

Now to be fair, the budget proposal keeps overall spending nearly frozen at $3.8 trillion. However, this is part of the problem. The Stimulus bumped up the baseline and we are still well ahead of it. I said at the time that the true cost of the stimulus would be more like $4.5 trillion over the next decade (a $300 billion one-year increase times ten years with the usual spending growth). And rather than cut stimulus bullshit, Obama’s spending cuts, such as they are, are coming from things like NASA, which did not get stimulus spending but is losing any Mars exploration to pay for things like Solyndra.

The President proposes to tax dividends as ordinary income. While I think this should be paired with an overall rate cut, I’m not opposed to this in principle. Since we lowered the capital gains and dividend rates in the 1990’s, we’ve had two investment bubble and little economic growth. I recently talked to an engineering professor who confided that his best students were going into finance instead of … engineering. I think it’s a fair argument that the low tax rates on investments had the side effect of keeping tax rates low for high-stakes financial gambling (that we subsequently bailed out) while leaving them high on people actually working and making. When Wall Street bankers pay a third of the tax rate of business owners, something is wrong.

BUT. But … you don’t start tax reform with the objective of taxing Mitt Romney or Warren Buffet more. The appropriate thing to do here is scrap the entire system and rebuild it from scratch in a way that minimizes the deadweight loss of the revenue our government needs to operate. It is possible, as Reagan showed, to increase overall tax revenues while decreasing the impact on the economy.

But that would require courage. And Obama’s budget basically punts on all the big issues. Stimulus spending? Maintained. Green energy? Increased. Medicare? Untouched. Social Security? Ha!

This is a joke. We should treat it as such. The first serious budget proposal will come out of the House. That’s when we should pay attention.

Consensus! The debate is over…

Well, not really but that’s how they operate on the left, so I wonder how they will react to this revelation:

The majority of economists surveyed by the National Association for Business Economics believe that the federal deficit should be reduced only or primarily through spending cuts.

The survey out Monday found that 56 percent of the NABE members surveyed felt that way, while 37 percent said they favor equal parts spending cuts and tax increases. The remaining 7 percent believe it should be done only or mostly through tax increases.

That tells me 56 percent of economists understand the problem with our politicians and spending, 37 percent are still hoping the politicians this time will actually institute real cuts if they get revenues, and only 7 percent are insane or stupid enough to think the answer is to fleece the productive even more. Looks like the grand majority is however for cuts, an aggregate 93% of economists that believe government is way too big and spending too much, and that’s an awesome thing to see, despite the fearful belief of some 37% that more taxes will not simply make these morons forgo any real cuts. The 7% that want tax increases only are to be made fun of. I bet most are part of the Obama Admin though. That was a joke CM, so don’t ask for proof please.

It gets better too.

As for how to reduce the deficit, nearly 40 percent said the best way would be to contain Medicare and Medicaid costs. Nearly a quarter recommended overhauling the tax system and simplifying tax rates and exemptions. About 15 percent said the government should enact tough spending caps and cut discretionary spending.

How about a balanced budget amendment – with no loopholes please! And also make everyone pay taxes. It is very clear now that the compassionate conservative move to spare the lowest earners from paying taxes just served to divorce them completely from the reality that the others paying taxes are already paying far too much. But there was also some bad.

According to the survey of 250 economists who are members of NABE, nearly 49 percent of those responding said the country’s fiscal policy should be more restrictive, while nearly 37 percent said they believe the government should do more to stimulate the economy. The remainder said fiscal policy should remain the same.

A striking 37% of these idiots either still think Keynesian economics work and that the problem was they didn’t spend enough or that government spurs economic growth. The reality is that it can certainly stump or kill economic growth, but as far as I am concerned whatever “stimulus” they do is at best mediocre, and more likely fictitious, because they do not account for the impact that taking all that wealth from others that do far better growing it has in any of this nonsense. And printing new money or borrowing it might short term look like it helps, but now that we are there economically and doing this stupid crap, we can clearly see that the jump in inflation and the weight of the huge debt load that comes with this, has a far greater overall impact on the economy.

Finally there is this:

At the same time, more than 70 percent of the people that responded said they expect U.S. fiscal policy to be more restrictive over the next two years.

One can only wish.

UPDATE: And many others are pointing this discrepancy in government spending vs. revenue collection out, like Byron York does in this awesome article at the Washington Examiner:

There’s no doubt federal spending has exploded in recent years. In fiscal 2007, the last year before things went haywire, the government took in $2.568 trillion in revenues and spent $2.728 trillion, for a deficit of $160 billion. In 2011, according to Congressional Budget Office estimates, the government will take in $2.230 trillion and spend $3.629 trillion, for a deficit of $1.399 trillion.

That’s an increase of $901 billion in spending and a decrease of $338 billion in revenue in a very short time. Put them together, and that’s how you go from a $160 billion deficit to a $1.399 trillion deficit.

But how, precisely, did that happen? Was there a steep rise in entitlement spending? Did everyone suddenly turn 65 and begin collecting Social Security and using Medicare? No: The deficits are largely the result not of entitlements but of an explosion in spending related to the economic downturn and the rise of Democrats to power in Washington. While entitlements must be controlled in the long run, Washington’s current spending problem lies elsewhere.

The truth is a bitch.

The Canadian Model

To circle back to the most pressing topic of the day: S&P may be nitwits but their downgrade of our debt was utterly correct. We have not made any real inroads on our staggering debt load, the hysterics over the debt ceiling not withstanding. Until we address entitlements, we’re not serious. The S&P downgrade is not some esoteric financialspeak that has no relevance to us. It’s the canary in the coal mine: the warning that we’re heading toward very serious problems.

But the WaPo makes a good point this morning. If we want to get out of this, we should be more like Canada. Seriously:

A quick Canadian history lesson: in the early 1990s, things were looking pretty grim. The country had regularly run fiscal deficits since the 1960s. In 1993, stood out among the G-7 as having the most foreign indebtedness. As one analyst noted, “From the beginning of 1990 to the end of 1993, Canada experienced a long slide in economy activity and employment.” The country lost its AAA rating in 1993. Feel familiar?

Facing an unprecedented fiscal crisis, Canada got down to work. The country passed a landmark budget in 1995. The plan tilted heavily towards cutting expenditures but also included some new revenue (the ratio was about $7 in cuts for every $1 of revenue). Canada cut the civil service by about 25 percent and overhauled its pension program. The plan worked. Canada is now on much more financially-sound footing; S&P restored its AAA rating in 2002. The turnaround is now referred to, in some economic literature, as “The Maple Leaf Miracle.”

The heavy ratio of spending cuts to tax increases was because Canada had high taxes to begin with. But they are not alone in restoring their debt rating this way. Australia, Denmark, Finland and Sweden also restored their ratings. They got there in different ways but they all had something in common: they didn’t stick their thumbs up their asses and wait for the problem to solve itself. Restoring the debt rating wasn’t the goal, per se. But it was a useful harbinger of their overall finances. When S&P upgraded them, it was a sign that things were finally under control.

We’re not serious yet. Despite Obama’s supposed overtures on the subject, his party remains diametrically opposed to entitlement reforms (Pelosi has made it clear she will oppose any “grand bargain”). Last night’s GOP debate saw all the candidates oppose a theoretical 10-to-1 cuts to tax hikes deal. The so-called “Super-Committee” is being rigged for failure.

I don’t know what it will take for us to follow Canada into serious reform. Maybe another downgrade or stock market crash. But we can’t put with this shit any longer. We can’t afford to.

Today’s Awful No-Good Job Numbers


The job market hit a major roadblock last month, as hiring slowed to a crawl and the unemployment rate unexpectedly rose.

The economy gained just 18,000 jobs in the month, the government reported Friday, sharply missing most expectations and coming in even weaker than the paltry 25,000 jobs added in May.
It marked the weakest month since September, when the economy was still losing jobs.

Unemployment is up to 9.2%.

Everyone is trying to blame everyone on this. I think they’re all half-right. It’s clear that the stimulus — now $4 trillion and growing — hasn’t had anywhere near the promised effects. However, the extension of the Bush tax cuts and unemployment benefits, as well as the demand-side cut in payroll taxes has not had a positive effect either. We have the lowest level of taxation in over half a century and the economy continues to stall.

I’ve noted before how I think we need to go about creating jobs. More stimulus spending is simply going to send us down the road Japan followed and mindless tax cuts are only going to worsen our biggest problem — the deficit. We have to stop playing games. As I said in the previous post:

Close the deficit, even if it means broadening the tax base.
Overhaul the tax code.
Repeal Sarbanes-Oxley.
Sign the pending free trade agreements.
Create a process to identify and remove the most damaging regulatory provisions.
Suspend Obamacare or allow HSA’s to qualify.
Suspend Davis-Bacon provisions.
Reduce the employer contribution on payroll taxes.

There are signs of progress on the first one. But it critical that the Republicans and Democrats agree to a grand bargain. Given the job numbers, it would be insanity to crash the debt ceiling and hope that nothing bad happens.

Update: Looking deeper, the problem is that while the public sector is shedding jobs, the private sector, while growing is not growing fast enough to pick up the slack. In some ways, this is not a bad thing. The public sector was bloated and, like the housing sector, needs to shed its fat before things get moving. But in other ways it demonstrates precisely the problem: we’ve made it more difficult for the private sector to hire people. Think of the regulations and obstacles we’ve put in place as an anchor on hiring and imagine the linked graph without that anchor.

Social Security system is in deep trouble

As our political class is locked in a fight about government, with one group begging for cuts while the other refuses to let go of the idea that the problem is government isn’t taking enough money already from people, to tackle our out of control spending, one of the items I am afraid isn’t being discussed is the need for serious and massive SS reform. Social Security is in real bad shape. How bad? Well according to this Fiscal Times column, its in horrible shape right now. Here are some facts:

*Since last year, the present value of Social Security’s long-term funding gap widened by $1.1 trillion. In one year.

* Last year, the trustees reported that Social Security would be unable to pay all of its promised benefits beginning in 2037; now the expected default year is 2036.

* The year in which Social Security is projected to start running in the red—that is, the year in which it will start adding permanently to the budget deficit—advanced from four years in the future to one year in the past.

Let’s look at each of these in turn, starting with the first one: SS is running in the red because of a $1.1 trillion funding gap. Not my words. Here is the meat of that argument straight form the article.

First, Social Security stalwarts can’t say any more that the program doesn’t increase the deficit. Until last year, Social Security actually reduced Washington’s need to borrow, since the program took in more FICA tax revenue than it had to pay out in benefits. That was supposed to continue (with the exception of last year and this) until 2015. But in one of the more alarming changes from last year’s trustees report, the year of permanent red ink (revenues falling below costs and staying there) jumped ahead to 2010. In other words, we’ve been operating in the red for a year now, and it’s not going to change.

SS is running in the red and impacting the deficit. That’s started in 2010, instead of as had been projected in last year’s report to not be an issue until 2015, because of this widening funding gap. Currently that Ponzi scheme is taking in $1.1 trillion less than it needs to pay out, and the Baby Boomer retirement bonanza hasn’t even gone full swing. So that brings us right back to the second argument that the defenders of the status quo use to pretend SS isn’t in big trouble: that SS has a large stash of money put away that can be tapped for quite a while. But there is a huge problem with that thinking, because that fund they can tap is simply a bunch of government IOUs, not real money. Let’s look at the article again.

At least until 2037—er, make that 2036 —Social Security can make up the shortfall by tapping its trust fund. Tapping the fund means, essentially, that Social Security presents a bill to the U.S. Treasury and Treasury has to pay. Of course, Treasury has to get the money from somewhere. And that means higher taxes, reduced spending elsewhere, or more borrowing. More borrowing means a wider deficit. Got it? To use the highly technical language of accountants, Social Security has gone from being a deficit good guy to a deficit bad guy five years ahead of schedule.

First off, it looks like every year that we look at a new report, it looks that the numbers have changed in such a way that the projected date that they run out of that IOU money happens earlier and earlier. But the real problem is the IOUs means that basically we have a situation where the Treasury will have to scrounge for money that it doesn’t have to pay off the IOUs. Worse yet is the fact that at the current pace things are going the bill that the financial arm of the SS will present the US Treasury each year to make up its own shortfall will be going up.

The US Treasury will have to then raise taxes, borrow, and/or cut spending on other things to pay back the IOUs. My bet is that the whole scheme implodes long before 2036, by a couple of decades at least, unless SS is reformed. The next time some liberal moron tells you that this SS crisis is made up and a ruse by evil people that want to throw Grandma off the cliff or under the bus, point out this horrible reality. SS is already broke, and the US Treasury simply doesn’t have the ability to pay them back for the IOUs you claim make the whole point moot short of destroying the economy.

And those that say that the problem isn’t that the Ponzi scheme was not just abused terribly but a scheme that was doomed to failure the moment that the left made it the mandatory retirement system it was never intended to be – because it ignored the fact that the whole scheme was set up as a lottery that rewarded the one out of over 90 people that actually lived long enough to collect – but that the Baby Boom generation was simply to big, and their mass retirement is responsible for the strain SS is now under, are also in for a rude surprise. Once all the Baby Boomers are gone, Gen X is going to face the same problem because Gen Y is yet again smaller than it. For a Ponzi scheme to stand a chance, the number paying in has to continue to increase and be larger than those taking out. If that’s not maintained, it implodes. Ask Madoff. Unlike the government though, he is now in the slammer for doing this stuff.

Here is what it all comes down to: to keep SS alive in its current incarnation we will need to put more money into the system, pay out less, and then a lot later, or do all three. If we raise the age to where it should be – in the 70s – it will shock too many people and cause a lot of hardship. If we cut the pay too drastically, people that then do collect aren’t going to get much value anyway from a system that basically robbed them. And as we all clearly see, with a ton of other liberal fantasy land obligations already competing for our cash, even if we basically took all the money from the rich people and the corporations like the crazy people tell us we should so we can avoid dealing with the fact we are running out of other people’s money, we ARE running out of other people’s money.

As I realized more than 2 decades ago, it now seems almost a given that SS will collapse under its own weight as the political class that benefits the most from this scheme continues to refuse to address the issues and fix it. Just remember that when Ronald Reagan proposed SS privatization back over 30 years ago and was shot down by the left over it, that it would have cost us less than $800 million to fix it. Now SS has a $1.1 trillion annual gap. A decade from now when it runs multi trillion dollar gaps, what’s the solution going to cost us, huh?

The lesson here is that there are no free lunches paid by others. Sooner than later it all ends up badly.

A Deal In the Making?

Ugh. What a day today. Not much time to blog. I’m cooking up a post for the weekend, but I’ll pre-season it with Ezra Klein’s wonkbook from this morning:

The Biden group is readying itself for the final sprint towards a debt deal. “Now we’re getting down to the real hard stuff,” Biden told reporters. “I’ll trade you my bicycle for your golf clubs.” The hope is to get to $4 trillion in deficit reduction eventually, and at least $2 trillion in the deal to raise the debt ceiling. But perhaps the strongest sign that they’re likely to succeed isn’t coming from inside the room, but from outside of it.

Earlier this week, Senate Republicans voted to close out some ethanol subsidies in the tax code and use the savings to reduce the deficit. That was an explicit signal that they’re willing to increase revenues so long as the mechanism is closing loopholes, ending tax breaks and shaving expenditures. Now, it’s a lot easier to close $6 billion of reviled energy subsidies than raise hundreds of billions in new revenues by attacking popular tax breaks like the mortgage-interest deduction. But it’s at least clear we can now move onto that discussion.

Meanwhile, AARP has quietly dropped their blanket opposition to Social Security cuts. The reason? They figure they’re inevitable. “The ship was sailing,” John Rother, AARP’s policy chief, told the Wall Street Journal. “I wanted to be at the wheel when that happens.” That makes it much likelier that Social Security will see reform later this year. But perhaps more importantly, it shows that the major players in Washington are entering dealmaking mode. And that’s usually a pretty good predictor that some deals are about to be made.

This is good news. The goal of $2 trillion in budget closing has apparently been met and they’re eyeing off $4 trillion. I’m also glad the GOP is showing some flexibility in taxation, which is a tribute to Tom Coburn. I love having taxes low but I love low deficits more. And closing loopholes and credits is the best way to increase revenue. It doesn’t raise marginal rates and it broadens the tax base, making us less susceptible to huge swings in revenue. And if the economy picks up, it could set the table for a broader overhaul of the tax system that could dramatically reduce the deadweight loss.

If ethanol and Social Security are on the table, we’re looking good. Both of these have powerful interests behind them. The only way to stand up to them is to get both parties in on it, so that neither can demagogue. Let’s hope we see yet more sanity emerge.

Here comes a recession, UNEXPECTEDLY!

Reading this CNBC article about the current plunge in economic data, you get the impression, yet again, that these “experts” in the MSM are constantly baffled by the continued negative economic news that keeps coming because they, after all the evidence to the contrary, still think that the destructive borrow-or-print & spend policies of the last 2 or 3 years from the anti-business Keynesian jackasses in charge, somehow should be working.

The last month has been a horror show for the U.S. economy, with economic data falling off a cliff, according to Mike Riddell, a fund manager at M&G Investments in London. “It seems that almost every bit of data about the health of the US economy has disappointed expectations recently,” said Riddell, in a note sent to CNBC on Wednesday.

“US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn’t revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing.”

“And that’s just in the last week and a bit,” said Riddell. Pointing to the dramatic turnaround in the Citigroup “Economic Surprise Index” for the United States, Riddell said the tumble in a matter of months to negative from positive is almost as bad as the situation before the collapse of Lehman Brothers in 2008.

Heh! WTF are they talking about? Did they miss all the people pointing out that the tack the democrats took – to make the deficit spending of the Bush years suddenly look like the good years, while targeting all the bloat towards their operatives, lobbyists, union & corporate buddies, and in general, any front they could use that would then funnel the money into their campaign coffers, cushioning the impact of the Dodd & Franks lending/financial industry collapse for state and federal government employees at the expense of the private sector – was a recipe for disaster? At least they aren’t claiming the problem was that they didn’t do double the stupid anymore.

Housing prices continue to fall because the fundamental underlying policy that caused the implosion remains untouched, Freddie & Fannie are still at it, while the new regulation that was passed to supposedly “protect” the American people from the “greed” of Wall Street, makes it virtually stupid for any lending institution to loan money to job creators. Job creators that even when doing fine BTW are not creating any jobs, because they simply can not predict the actions of this business-hostile government and the insane regulations it puts out. Regulation that instead of dealing with the problems are instead intended to make government responsible for picking the winners & losers, heavily favoring the idiotic industries and giant corporations the left feels will help it grow it’s political & financial power, at the tax payer’s expense. In the mean time the private sector hunkers down and hopes to whether the storm.

And let’s not forget that we have not had a budget for over 2 years now. The democrats call any attempt to roll back the most massive expansion of the welfare state since the days of FDR “draconian”, and infer the people that are calling for fiscal sanity want to kill granny, kids, pets, and the planet. All so they can avoid actually having to admit their fiscal policies are insane and unsustainable. They refuse to propose any changes to address the looming and massive entitlement spending problem and the out of control deficit spending that is tacking trillions to our debt each year, and demagogue those that dare propose any changes that don’t involve fleecing the productive sector even harder than they already do. They rammed through a government takeover of healthcare bill that will drastically impact not just healthcare, but puts us on a quicker path to financial implosion. They have virtually had no energy policy, other than to drive up the prices of the types of cheap energy sources that stand in the way of them gauging people, to the tune of hundreds of billions of dollars, while pushing both inefficient and marginal “green” technologies nobody would go for otherwise. Their job policy has consisted of funneling billions of tax payer dollars to temporarily prop up government/public jobs over tax payer/private sector jobs, and it shows. The list of other such economic transgressions is long and replete of idiocy. It’s why we are seeing soaring inflation and a dramatic deflation in the value of the dollar. Heck, despite falsely blaming military spending for our predicament, they up and started another war in the Middle East, this time to steal oil for real, which I remind you should be ironic considering how that’s what they falsely accused their predecessor of, and completely ignoring all the politically motivated grandstanding they did back when, proving yet again that the only thing important to them is power at all costs. Think all of that isn’t going to come back home to roost?

“The correlation between the economic surprise index and Treasury yields is very close, so the lesson is that whatever your long term macro views are regarding hyper inflation vs. deflation or the risk of the US defaulting, the reality is that if you want to have a view about government bond prices, the best thing you can do is look at the economic data to see what’s actually going on,” said Riddell.

“And right now, the economic data is suggesting that however measly you may think a 3 percent yield is on a 10-year Treasury, the yield should probably be a fair bit lower given what’s going on in the US economy,” said Riddell. “You’ve also got to wonder at what point the markets for risky assets start noticing, too.”

The markets noticed. And while they may claim to be baffled, they are now seeing the obvious end game. The economic path the left has us on right now is unsustainable. The deficit spending to grow government was wrong during the Bush years, it affected the 2008 elections, and it is magnitudes of orders more wrong now that the left is doing orders of magnitude more insane spending. Gird your loins people. The ride is about to get even more bumpy, and the morons refuse to accept the fact that the gravy train is about to run off the proverbial blown up bridge.

Disheartening study

RealClearPolitics has a very interesting, albeit disappointing to me, article about politicians, the public, the debt crisis, and how the participants of this study feel it needs to be solved. As usual, what we have here is a debate between what the left thinks the public wants and what the right does, as the article starts off discussing. What’s obvious to me from the study that the article is based on is the fact that most people are not able to grasp the fact that we are where we are today because of ourselves. We are the enablers that have caused government to grow out of control. But more importantly, the fact that polls taken in a vacuum will skew reality.

Americans are reportedly childish about the debt crisis. The public says the budget deficit is a serious issue. So serious that Americans will let other people sacrifice. Rich people. We know the enemy of U.S. debt, and it’s us. You, dear reader, are framed as a hypocrite. But is that true?

Last week’s Washington Post carried a familiar headline: “Poll Shows Americans oppose entitlement cuts to deal with debt problem.” Bloomberg News led a December article: “Americans want Congress to bring down a federal budget deficit that many believe is ‘dangerously out of control,’ only under two conditions: minimize the pain and make the rich pay.” Politico recently reached for Shakespeare with its conclusion: “the fault lies not in our stars but in ourselves.”

But the fault may actually lie in misreading the stars (data) and how our political stars (lawmakers and pundits) misread us. Americans appear willing to make hard choices, according to a largely unnoticed but landmark study. Given the chance, the public cuts much of the deficit and saves Social Security.

I agree that based on my own experience it looks like most sane people actually want balanced budgets, an end to the deficit spending, a reduction of the debt, and are willing to accept cuts to get there. But way too many also want freebees, paid by others. And the real greedy and envious ones have no problem saying they want everyone that makes more than they do to give as much as they can get away with stealing, in the name of social justice or some such nonsense, of course. And while we can blame the politicians for our disastrous state, we need to keep in mind that they only did what too many people wanted, and that was obviously a free ride.

But the problem with those making the case that cuts are not what most people want based on these disconnected surveys, is obviously that they disconnect the needs to get things balanced with the need to give up some of our sacred cows. Check it out.

The conventional wisdom is wrong not because the evidence is wrong. Polls capture a gap between how seriously Americans view the debt problem and how seriously they take it. The right questions were asked. But they were asked in the wrong way. A budget requires choosing between the most tolerable of unwanted sacrifices. Think Otto Von Bismarck’s maxim that “politics is the art of the possible.” Conventional polls pose budget questions in isolation. Budget politics is reduced to what’s preferable rather than what’s possible among imperfect alternatives.

“It’s like you are saying, would you like to have some cake? Yes. Would you like to eat your cake? Yes. Ah, they want to have their cake and eat it too!” said political psychologist Steven Kull, director of the Program for Public Consultation at the University of Maryland, which conducted the study. “The public is capable of dealing with the budget in a rational fashion,” Kull continued. “When you ask one-off questions they can only react in a visceral way. No, it’s not attractive to cut spending. No, it’s not attractive to raise taxes. Yes, you want to balance the budget. You haven’t asked them to make tradeoffs.”

Exactly! In a vacuum practically everyone will opt to keep the free ride for themselves. Why not? Let others make the sacrifices! Don’t take my shit! But that’s a big problem in getting a real feel for what’s acceptable, and most of us understand this. When you can not make these choices of what to cut and who to fleece in a vacuum, the game changes. Well, it changes for most of us sane enough to understand that just confiscating even more of the wealth of others, in order to keep the gravy train rolling, isn’t going to solve the problems, just postpone them, and then for a very short while. In the end, the spending has to be rolled back, or we run off the tracks into the ravine. So lets move on here.

Kull’s study asked a random sample of Americans to do precisely that. They presented adults with the discretionary budget shortfall of $625 billion by 2015, as well as shortfalls in Social Security and Medicare. Participants chose from a range of realistic options using a computer application.

Now we have something more realistic to work with, although that $625 billion shortfall isn’t close to what we see now, unless the shortfalls in SS and Medicare they mention above added another $1 trillion to the total numbers, which I doubt was the case. Take a test ride of that application yourself and play along. It’s interesting when you are being told there are consequences to the decisions you make and you are not going to meet your objective if you aren’t serious.

Anyway, let’s look at what they have gotten so far from the people that took this test ride and discuss.

The majority made Social Security solvent. They acomplished that by raising the income limit subject to the payroll tax and increasing the retirement age to at least age 68; majorities agreed to similar tweaks of Medicare eligibility and benefits.

Absolutely not surprised by these actions/results. Most Americans now understand SS enough to see it for the Ponzi scheme it is, and they know that our government has been robbing and mismanaging it to the point that it is on the verge of imploding. I wish more of them understood that these fixes that left SS in the hands of government bureaucrats are still going to expose SS to future abuse and had simply privatized the thing for anyone under the age of 50, but at least it shows most Americans understand SS as it exists right now, is an disaster waiting to happen.

The average respondent reduced the discretionary budget deficit by 70 percent. One third of deficit reductions came from cuts to government programs. Two-thirds came from increased taxes and adjustments to the tax code.

This information really bothered me. The cuts are way too little to be serious, and it proves that way too many have become totally dependant on the nanny state. That so many opted to feed the politicians by allowing them to jack up taxes again, tells me they have not been paying close attention. As soon as the politicians get more income they will jack up spending. That’s the way it has always been, and I see no reason that these hyenas will change their spots now.

I wonder what the taxes people were Ok with were. Are we talking about just fleecing the rich again? I am disgusted that so many feel they have the right to confiscate other people’s money to pay for their spending. I wish I could do the same to pay credit cards. Then I could really go on a decent spending spree.

“People’s reaction to that package may be different than their reaction to each element individually,” said Michael Dimock, associate director for research at the Pew Research Center. “One element of opposition to specific proposals is the sense of unfairness. The package of solutions may give a sense of shared sacrifices that they don’t see when asked about cutting Social Security and Medicare.”

Indeed, when respondents were forced to consider the budget’s give-and-take, even partisans confronted sacred cows. Most Republicans, including tea party sympathizers, raised some taxes. Most Democrats cut government programs and increased the retirement age.

While this is all good, the amount of people that went for more taxes bothers me, unless said tax obligations are going to be spread to everyone. We already have way too few people paying taxes: more than half of the population doesn’t pay. Maybe when everyone has to pay, they will suddenly decide cuts are better. Taxes as a means of wealth redistribution are a disgusting concept, and the result, the fact that so many believe the money of others should be shared so they can keep getting a free ride, shows it.

The average respondent made three quarters of the cuts in defense, followed by trims to intelligence and the military operations in Afghanistan and Iraq.

Yeah, sure. Cut deep in what government is actually tasked with doing in the constitution and can levy taxes for. And pretend that if we just can walk away from these wars. It’s not like this will have consequences or something. Not surprised many people chose to do this. Isolationism and the fact that the western world’s freedom rides on us being able to fight for it isn’t important until said freedom comes to a screeching halt.

Wait until congress gets to fighting over whose pet project gets hammered too. Not to mention the drastic decline in those high paying – and tax paying of course – military industry jobs that will evaporate, and all the other peripheral jobs that will disappear as a consequence of those cuts. I have always known most people aren’t bright enough to see that unlike the fortunes wasted on the welfare state that this was actually giving Americans a value add. Oh, well.

Smaller cuts were made to programs such as veterans’ benefits, the highway system, space exploration, and subsidies for large farms. Those cuts were slightly offset by some increases that even tea party sympathizers favored: investing more in job training, pollution control, energy conservation, humanitarian assistance, education and small farms.

Yuck. That’s all I have to say.

The majority firmly opposed instituting a national sales tax or valued added tax.

I could go with a sales tax, if we did away with income tax. But I am glad that the VAT is a none starter.

But majorities favored increasing the tax rate for capital gains and restoring the tax on stock dividends to 20 percent, where it stood prior to the Bush-era tax cuts. Americans backed closing the loophole that allows private investment fund managers to have a significant part of their income taxed at only 15 percent, which enables an ultra-rich sector to avoid the tax burden borne by most Americans. The majority also favored a tax on large banks and increased corporate taxes. Most would also repeal tax deductions for the oil and gas industry.

What? No taxes on the demcorats favorite companies? What about GE? And when the economy dips a second time because people move their money elsewhere to avoid these new taxes? Heh, pretend there are no consequences and move along. Is everyone is pissed at the oil & gas industries making profit but me? I happen to have stock in my 401K that’s rocking because they are making profits. WTF? Don’t be surprised when we see a whole bunch of special regulations exempting this or that friend of some demcorat from these taxes either.

Americans have long favored abolishing the Bush tax cuts for the highest earners.

Which Americans? The ones that don’t pay taxes? Like the 51% that are tax exempt and the liberal elite that just “forget” to pay their taxes? Maybe they are talking about John Kerry and his yacht?

But the public would actually make the tax code even more progressive to bring the budget more in balance. The plurality raised taxes 5 percent on those with annual incomes of between $75,000 and $100,000. The majority raised them for earnings between $100,000 and a half million dollars. They raised it 10 percent for earnings that exceed $500,000.

What about the bottom earners? Make them pay taxes too. Bet you they suddenly will grow a sever aversion to government confiscation of their wealth, and all this pro tax increase talk will evaporate in a flash.

Most instructive was the altruism exhibited by all income brackets. Wealthier and middle class Americans did not raise taxes on lower classes. A plurality of upper middle class Americans was willing to accept increasing taxes on themselves. Higher earners most opposed increasing taxes on lower incomes and chose to bear higher taxes to balance the budget.

Sorry, but this is obviously one of our biggest problems. Too many people do not have to pay into the pot, and hence have no stake in the excessive spending or taxation schemes that feed this monster. This isn’t altruism, this is suicidal stupidity. If taxes have to go up, make it do so on everyone. In fact get with the flat tax already.

“People are not simply acting in their self-interest,” Kull said. “You don’t see tyranny of the majority here.”

Nah, just a lot of stupid people that don’t realize that as soon as they give government more money, it will simply decide to spend it and more anyway, as it has done in the past. Brilliant!

There were also signs of shared sacrifice. The majority supported increasing the alcohol tax and taxing sugary drinks like soda. They would limit the child tax credit to children younger than age 14 beginning in 2015. They found it acceptable to reduce the amount of interest 10 percent that can be deducted on all mortgages (a concession that would hit the middle class) and cap the amount that can be deducted to $25,000 (a concession even high earners found “tolerable”).

This is why we are in the mess we are today. All these silly taxes on special interest, and the political industries that sprout up around creating loopholes for some at the expense of others.

Anyway, there is one other thing I want to address:

Independents and Democrats slashed the deficit most. Why? The average Republican and tea party sympathizer were less willing to raise taxes and cut defense. The least fiscally conservative group was, paradoxically, conservatives.

I was not surprised by this result. If the tea partiers and republicans think like me, they are smart enough to have realized that the moment we allow government to raise taxes to cover the problems – and this is based on historical evidence, not just opinion – that they will not just lose all interest in meaningful cutting, but ramp up spending.

We shouldn’t ever commit to any kind of tax increases until we have gotten real and deep cuts. In my state of Connecticut for example, our new demcorat governor pushed a bill with huge tax increases and what seemed like harsh demands for union concessions, he claimed to want $1 billion, under the guise of shared sacrifice. The tax increases are happening, but we are finding out that the union concessions, short of a few token ones, are not, and the threats of layoffs if they don’t are nr just empty words.

Buyer beware. If we let them get tax increases, we can kiss any fiscal sanity, and certainly any chance for meaningful government cuts, goodbye. And most Americans seem unable to grasp that. I wonder what it takes to emmigrate to New Zealand.

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