Month: August 2011

The Tea Party – Patriots or Terrorists?

G’Day!

Members of The Tea Party ARE true American “Patriots” and definitely NOT “Terrorists” or “Racists” or “Crazies” or “Fanatics” as accused by liberal politicians! I am not a Tea Party member but am appalled by the inaccurate, unfounded, and demonstratively biased political attacks on them by the Obama Administration, Congressional Democrats, and segments of the Liberal Media. The ONLY reason for these attacks is that the Congressional members of the Tea Party movement are willing to stand up for our nation’s long-term constitutional principals of individual freedoms, free markets, sound fiscal and monetary policy, economic growth, and limited government. Congressional Tea Party members have NOT been willing to make the short-term compromises of these principles typically characteristic of our political representatives. GOOD FOR THEM! We need more elected members of Congress who are willing to take a stand for what is right for our country not for what is convenient for reelection or supportive of bigger and bigger federal bureaucracy and spending. Political compromise is not necessarily progress and, given our current fiscal and debt crises, is not in the long-term interests of the American people. OUR GOVERNMENT GROWTH IS OUT OF CONTROL, UNSUSTAINABLE, AND MUST BE STOPPED AND REVERSED! The Tea Party is trying to accomplish this.

So what is “The Tea Party” and why are Obama and the Democrats so terrified of them that they are aggressively engaging in political demagoguery in an attempt to discredit their positions and influence? First of all “The Tea Party” is not a political party (yet). The Tea Party is a “movement” by ordinary Americans of all parties who are fed up with the encroachment by federal government into our personal lives, our business commerce, and the inexorable increase in the magnitude of our government spending and debt. The Tea Party is trying to correct this, which is the primary reason the Obama Administration and Democrats with their tax and spend big government socialist policies are attacking them.

Perhaps the most accurate and concise summary of what The Tea Party stands for is on TheTeaParty.net website, which describes supporters as follows:

“The Tea Party movement is a grassroots movement of millions of like-minded Americans from all backgrounds and political parties. Tea Party members share similar core principles supporting the United States Constitution as the Founders intended, such as:
•  Limited federal government•  Individual freedoms•  Personal responsibility•  Free markets

•  Returning political power to the states and the people
As a movement, The Tea Party is not a political party nor is looking to form a third political party any time soon. The Tea Party movement, is instead, about reforming all political parties and government so that the core principles of our Founding Fathers become, once again, the foundation upon which America stands.” 

So what’s not to like? Who among true hard-working Americans willing to challenge forced dependency on government could object to these core principles? It is no wonder that Obama and the Democrats object to and attack them because The Tea Party’s core principles are diametrically opposed to those of Liberal Democrats. The Liberals are leading us down a path of less support for our Constitution, bigger federal government, greater government control over our lives, more regulation of what’s left of our free markets, more central power for the federal government and less freedoms for the states and the people. Contrary to the “Blame Game” against The Tea Party, the real “obstructionists” in government are Obama and the Congressional Democrats, who refuse to address the fundamental causes of our fiscal and debt crises, such as government growth and entitlement spending.

Let’s review a few of the activities Obama and Democrats have initiated in just the last two and one-half years. Since Obama was elected, Federal Government ANNUAL spending has increased “relatively” from 20% to 25% of GDP and “absolutely” from $2.9 trillion to $3.8 trillion, the ANNUAL deficit increased from $500 billion to 1.7 trillion, and our total National Debt has increased by 40% from $10 trillion to over $14 trillion (and an additional $2 trillion increase has just been authorized)! The Democrats in Congress have not passed a Federal Budget for over 800 days and have so far this year rejected all attempts by the Republicans to pass one for next year! The budget proposed by President Obama earlier this year continued his excessive government spending and added another $10 trillion in deficits and debt over ten years, (fortunately, both parties in Congress overwhelmingly rejected the President’s budget). Over the objections of a majority of the American people, they passed Obamacare and the Dodd-Frank Financial Regulations legislation, both of which add additional costs, additional regulations, and additional central control to our federal government. During a Congressional Recess without Senate approval, Obama appointed union activists to the National Labor Relations Board who have attacked Boeing’s implementation of a new non-union factory in Charleston, SC, (see “Attack on American Business by Obama “packed” NLRB!” and “Obama “packed” NLRB Continues Attack on Boeing & Free Markets!”) and the EPA under Lisa Jackson has stopped a Department of the Interior’s previously approved Shell Oil request to development a large oil reserve off the Alaskan coast, (see “Obama Administration Attacks American Business Again!”). They have allotted $27 billion for “Green Jobs”, which have not worked out well and have virtually shutdown oil and natural gas development (at a loss of thousands if not hundreds of thousands of good jobs). In summary, the obstructionist policies of Obama and the Democrats have produced a Congressional stalemate, hurt our economy, are stifling job growth, are hostile to business operations, and have increased our deficit and debt crises. What part of reckless and unsustainable spending, destructive regulations, and excessive government control of free markets and personal liberties don’t Liberal Democrats understand? It is no surprise that they feel threatened by The Tea Party.

Regarding taking responsibility and showing leadership, Obama has been demonstratively invisible. During his recent “Black Bus Tour” (in a bus made in Canada), Obama has blamed Bush, The Tea Party, Republicans, Congress in general, the earthquake in Japan, the Arab Spring, and the European Debt Crisis for our current economic problems. Never once did he admit or even suggest that his policies of irresponsible spending, uncontrolled borrowing, and increased federal regulation were part of the problem (see “Government Imposed Uncertainties Hurt Economic Growth!”). Other than the President’s outrageous budget proposal noted above and his endless generic campaign speeches, Obama has offered NO SPECIFIC PLAN to solve our economic problems and create jobs. Like Democrats in Congress he has been content to “kick-the-can-down-the-road”. Astounding behavior for the so-called leader of the free world! Again, it is no surprise that the President is afraid of the patriots in The Tea Party, who actually have a plan to get America back on track and are willing to take responsibility for it.

So, can we resolve our problems? In a previous article I outlined, six (6) specific suggestions, which I believe would improve our situation (see “Yes, We CAN Grow the Economy and Create Jobs!”). If our President and Congress are serious about solving our problems and restoring our economy, all of these suggestions could be accomplished quickly and all are consistent with the goals of The Tea Party. Overall, the message is to reverse the socialist movement toward a “nanny state”, get government off our backs, and return our country to the American people. Because most of my suggestions require reversal of Obama’s policies, it is unlikely that they can be pursued before the next election in 2012. Therefore, the 2012 election will be critical to our future as a great nation. Think about it and act accordingly!!

The Old Guy PhD

Is a Balanced Budget Amendment Necessary?

G’Day!

Yes, the Constitutional Amendment is necessary given the dysfunctional behavior of our government, and No, it is not necessary (even undesirable) in economic theory because it limits the flexibility of our government. So what should we do??

Given the past and current inability of our Congresses and Presidents, both Democrats and Republicans, to act responsibly regarding fiscal budgets and debt policy for our nation, a “Balanced Budget Amendment” to the Constitution appears to be necessary. This amendment should mandate a federally balanced budget including a federal spending “Cap” of no more than 20% of GDP (preferably less), and with “Safety Valve” exceptions granted only for “War” or “National Emergency”. These exceptions should require a “Supermajority Vote” in Congress to authorize and the signature of the President to enact. Unfortunately, short-term personal political motivations appear to be stronger than the long-term fiscal responsibilities to our national economic needs. Therefore, we do need a “Balanced Budget Amendment” to protect the American People from continued irresponsible and dysfunctional fiscal and debt behavior by our federal legislators and Presidents. If we needed any additional indication of the necessity to curb government spending, the recent federal debt downgrade from AAA to AA+ by Standard & Poor’s should suffice.

Forty-nine States have some version of a balanced budget requirement (only Vermont does not). Interestingly, Germany and Switzerland, both strong financial nations, also have a balanced budget requirement. This forces their legislators to behave in a responsible manner that protects the national fiscal and long-term debt interests of the people they were elected to serve. Without such a constitutionally protected provision, including the “Cap” on federal spending above, lawmakers are prone to ignore the long-term fiscal consequences of the laws they pass and focus on their own short-term reelections. The relentless historical increase in our national debt and especially the current deficit and debt crises are clear evidence of irresponsible short-term decisions by our Federal Government.

Prior to the passage of 16th Amendment in 1913, which permits federal income taxes directly on the people, we had governments that were forced to limit their size and spending to a level reasonably consistent with federal revenues. The funds available required adherence to the provisions for limited federal government defined in our Constitution and required the establishment of appropriate priorities for federal programs and services. In other words, our government was reasonably forced to live within its means. What a revolutionary concept!! After the 16th Amendment, our government could (and did) simply increase income taxes or borrow to meet whatever programs or bureaucracy they deemed desirable, not necessarily important or essential. In 1913 federal spending was less than 3% of GDP. In 2008, President Bush’s last year, federal spending was approximately 20% of GDP and this year under Obama, the federal spending is estimated to be 25% of GDP. This is madness and does not serve the American people.

As mentioned above, since 1913 our elected officials have relied on increasing income taxes on the American people or debt to pay the increased costs of the programs and bureaucracy they desired, regardless of the cost, need, or even importance of these programs to the American people. It is easier for politicians to identify a socially “desirable” program than to identify and justify its costs and priority to the taxpaying public and its overall benefits to society. Our government has merely increased taxes to pay for these new or expanded social entitlement programs or added to our National Debt by borrowing the missing funds (increasingly from foreign sources, like China). In 2008 our National Debt was $10.0 trillion, a $4 trillion increase in eight years under President Bush. Currently, under President Obama in only two and one-half years, our National Debt has increased another $4 trillion (a 40% increase) to $14.3 trillion and, even after this week’s debt agreement, is projected to grow another $8 trillion to approximately $22 trillion over the next 10 years. This is more than 100% of projected GDP, is not sustainable, and must be corrected.

In economic theory (especially Keynesian), a balanced budget amendment would limit our government’s flexibility. It would restrict government fiscal actions to correct imbalances in our economy, such as running “deficits” to stimulate the economy during recessions and the use of “surpluses” to retard excessive and unsustainable growth. In theory, this should smooth economic growth by limiting the magnitude of peaks and valleys in the business cycle. This in turn would restrain “booms”, minimize “busts”, stabilize economic growth to reasonably sustainable levels, and avoid excessive fluctuations in job markets. Nearly all economists believe that prudent use of this power is good but excessive use is bad. All good stuff in theory! Unfortunately, the behavior of our governments and the actual results have not followed the theory. “Excessive use” has repeatedly hurt our economy and job growth starting with FDR in the “Great Depression” and currently with the Obama Administration’s “Stimulus”, expansion of government size, and spending to support his big government agenda. Also, when federal surpluses were possible, as with the Kennedy, Reagan, and Bush tax rate reductions (all of which increased economic growth and tax revenues), Congress quickly initiated new spending programs to use the money (Johnson’s “Great Society”, Bush’s wars, and the Democrat Congress’ Prescription Drug Program in Bush’s second term). As I have repeatedly said, socialism and long-term economic growth are not compatible. Most other nations, including many in Europe, and especially Russia, India, and China, have learned this and are increasingly relying on free market economies and prudent fiscal and monetary policies.

Since the founding of our nation, balanced budget legislation has been discussed. Thomas Jefferson was the first President to think seriously about requiring balanced budget legislation to maintain fiscal discipline and he actually wanted to ban federal borrowing power to limit the potential size of federal government. Ultimately, he concluded this would be too restrictive in times of emergencies, especially wars. For over 200 years our nation has relied on the wisdom and responsibility of our elected officials to act appropriately on behalf of the American people. The introduction of the federal income tax amendment above combined with the evolution of our short-term political reelection process has unfortunately undermined the ability of our legislators to perform their fiscal duties to serve the long-term interests of the American people. It is time to renew the effort to force our federal government to behave responsibly. Clearly, history, since 1913 has shown that they cannot be trusted to do it on their own.

So “Yes”, we do need a Constitutional “Balanced Budget Amendment” with federal spending “Caps” and a “Safety valve” for national emergencies to rein in the reckless fiscal behavior of our elected officials. Our governments are increasingly turning our nation into a centrally controlled socialist debtor nation. These policies are not the foundation of freedoms upon which our country was created and which made America great. It’s time to return our country to the individual liberties, free markets, sound fiscal and monetary policy, economic growth, and limited government upon which it was founded.

The Old Guy PhD