America, We have a Problem!

G’Day!

Yes, if we can still call it our country, America has a problem and it is Obama’s continuing push for “Big Government.” The results of his socialist policies are increasing dependency on government, more central control over our lives, slow economic growth, higher taxes, and unsupportable debt financing for the increased spending and expansion of government. Obama, Congressional Democrats, and the liberal media are promoting this unnecessary federal enlargement primarily for political purposes. Simultaneously, they are trashing the Republican Party for trying to do the right thing for our country by offering intelligent fiscal policies to correct the liberals’ addiction to spending and debt. All of these left-wing groups are ignoring the results of their policies and believe they know more about what is best for us than we know for ourselves. These liberals are very wrong and are hurting our country. Obama and his supporters are transforming America from a nation of “makers” into a nation of “takers.”

Our great country was created by people who came here desiring religious and individual freedom, economic opportunities, limited government, a fair legal system to protect their rights, and a democratic process that prevents development of the autocracies from which they fled. They left everything behind in the hope of a better life for their families and themselves. Our Founding Fathers and the American patriots risked their wealth and their lives to establish our independence from tyranny and create the freedoms our ancestors wanted and which we have enjoyed for over 200 years. Liberal and especially Obama’s socialist policies are undermining the country our Founding Fathers created. America’s historic virtues are being replaced with left-wing policies that are slowing job & economic growth, are rapidly expanding a dependency class that relies on wealth-transfer from the success of others, and exploding and unsupportable debt. Currently, there is no end in sight to this potential result. Is this the future you want for yourself and your children?

For the last century starting with Woodrow Wilson, these so-called “progressive” policies have been systematically undermining our individual freedoms, our Constitution, our capitalist economy, and the very fundamentals upon which our country was founded. FDR, Lyndon Johnson, and now Barack Obama have expanded these economically destructive policies in major ways. Perhaps more importantly, these policies have accelerated with Obama and are increasing the probability of our financial failure as a country. America cannot continue to support our current entitlement programs and government, let alone their enlargement. Throughout history socialism has not succeeded and, over time, nearly always results in oppressive central government, a debt crisis, and economic collapse. Under Obama in only five years our National Debt has increased by 70% from $10.0 trillion to $17.2 trillion. Make no mistake; these liberal groups really do want to control every aspect of our lives from cradle to grave and are apparently willing to risk bankrupting our country to accomplish this. If we do not stop them, the America in which you and I grew up and loved will likely be lost for our children and ourselves.

It is totally beyond my comprehension how we twice elected an inexperienced, unqualified, aloof, and imperial-minded President with few, if any, managerial skills to lead the greatest nation on earth. Obama’s singular skill is to be an impressive “talking head” by reading from a teleprompter. He has shown little interest or ability in effective leadership. The list of Obama’s economic failures and his foreign & domestic policy disasters is extensive; of which Obamacare is just the most recent. History will be the ultimate judge of Obama’s two terms in office and it is not likely to be favorable.

One of the few things Obama got right was when he said in a recent speech, “Republicans need to win an Election!” Absolutely true! The only way America can change Obama’s failing liberal policies that are continuing to damage our country, is to vote out the “tax, spend, and borrow” Congressional Democrats in the 2014 election and in 2016 elect an unbiased and qualified President who understands economics, foreign policy, supports our Constitution & individual freedoms, and truly believes in American exceptionalism. Obama has not been that leader.

Yes, America, we have a big problem and the problem is Obama and his left-wing supporters of “Big Government.” As noted above, on one thing Obama is right, if we want to correct the problem, “Republicans need to win an election.” Are you ready to do your part?

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