Tag: Obama

Capitalism is the Answer – Socialism is the Problem!

G’Day!

Yes, Free Market Capitalism IS the answer to our economic malaise. America is the country of equal opportunity (not equal income) and self-improvement through economic and social mobility, not stagnation, stratification, and redistribution of other people’s money. Capitalism is founded on growth, innovation, unlimited production, and decentralized decision-making through free market pricing. Capitalism properly allocates our economic resources as citizens’ wish (not the government), rewards creativity, and expands the wealth “Pie” for all to share based on effort and contribution. Socialism is founded on personal immobility, government control of production through central planning, and price controls. Socialism predetermines and distorts proper allocation of goods and services as the government wishes (not the citizens), restricts innovation, and redistributes the existing wealth “Pie” based on arbitrary administrative decisions of the government “elite”.

While no system is perfect in all respects, history has proven that Free Market Capitalism works best for maximizing economic growth and prosperity and improving living standards. History has also shown that Socialism does not work and over time retards economic growth and prosperity, and produces a lower standard of living. The demise of communist Russia, China under Mao, and the current European Union fiscal and debt crises are recent examples of the failures of Socialism and central planning. Our government should realize that it cannot tax and spend America into prosperity. Only growth in the private sector can create long-term prosperity and new jobs for our nation. The government should get out of the way, reduce regulations, shrink spending and entitlements, reform personal and business taxes, and let the innovative forces of Free Market Capitalism work.

Our current socialist-oriented, anti-business government has assaulted and discouraged innovative opportunities by enacting legislation and imposing regulations that restrict our ability to engage domestically in creative and profitable endeavors. These policies, including taxation, have stifled domestic investment, encouraged companies to create new jobs offshore, and suppressed the economic growth for which our nation is famous. If Obama’s policies continue and he is reelected, the “Middle Class” will suffer most from the continuing consequences of our economic stagnation. The current “Middle Class” will increasingly join America’s “Dependent Class” who rely on government handouts that sustain and maintain lower living standards. Is this the future you want for our nation and your children?

The factors that have made our country great and the envy of the world are the equal opportunities to improve ourselves through personal hard work, innovation, risk-taking, and thrift. To grow and prosper as our nation has historically done, we need to return to our foundations and encourage entrepreneurial opportunities for wealth creation based on individual freedoms, free markets, private property ownership, and limited government. We don’t need a handout; we want a hand up. Without government support and encouragement for vibrant and profitable financial and business sectors, our economy will continue to underperform. This will result in less, if any, economic growth; less, if any, wealth to redistribute; and fewer, if any, new jobs. Wealth is not created by attacking the institutions and individuals who create it. The choice for the future of our country will be ours at the 2012 election. Vote wisely.

The Old Guy PhD

Let’s Send Congress & The President on Unpaid Leave!

G’Day!

Let’s face the truth. Our government is doing nothing to solve our country’s economic problems and has actually made the situation worse in the last two and a half years. While not practical, perhaps the best way to create jobs and improve our economy would be to send Congress and President Obama on an unpaid leave of absence for 2012. Certainly neither is accomplishing anything of benefit and paying Congress to do nothing and President Obama to campaign for his reelection is a waste of their time and our money. Also, my real concern that they will continue to do even more harm through Executive Orders or will create new regulations that further restrict our businesses and prolong the political uncertainty that is at the heart of our economic stagnation. Since they are not doing anything meaningful, preventing all new government action in 2012 would give business the certainty of “status quo” and no further damage would be done prior to our national vote on economic policy. Withholding pay is a logical penalty for our current do-nothing government representatives and would have the benefit of reducing the deficit. Since their priority is reelection, this would give them the freedom to try to convince the electorate that they support policies that will protect our freedoms, promote jobs and economic growth, and deserve to be retained in office.

To be fair, let’s review a few of the major government results since the 2008 election. Our total deficit has increased by $4 trillion and the annual deficit more than doubled from $500 billion to $1.3 trillion/year. Government spending has increased from approximately 20% of GDP to 25% of GDP. National Debt has now increased by nearly 50% to an estimated $15 trillion, nearly 100% of GDP. New entitlement commitments through “Obamacare” was passed against the desires of the majority of American voters and will further increase deficits and debt in the future. The Dodd-Frank Financial Regulations Bill was passed, which significantly increases regulations over the financial services industry and has currently added to the turmoil, confusion, and stagnation in our banking system. The Energy Department and the Environmental Protection Agency (EPA) have virtually shut down domestic development and exploration of fossil fuel resources, have wasted billions of taxpayer dollars in support of noneconomic renewable energy companies (Solyndra et al), and have again delayed the proposed pipeline from Canada (Note: Canada is now threatening to sell the oil to China). The Department of Justice (DOJ) tried to bring the terrorist prisoners back into the US to be tried under US laws, supported the sales of guns to criminals and is delaying business mergers, which will improve the competitiveness of American companies. The Federal Communications Commission (FCC) has joined with DOJ in attacking the proposed merger of AT&T and T-Mobile. The pro-union activist National Labor Relations Board (NLRB) is attempting to stop Boeing from finalizing its new “Dreamliner” plant in the Right-to-Work State of South Carolina and is attempting to change voting rules to eliminate the requirement for secret ballot for unionization in a company. The do-nothing Democrat-controlled Senate has passed no government budget for approximately three years and has blocked attempts by the Republican-controlled House to pass fiscally responsible legislation. Not an appealing set of accomplishments.

President Obama is and has been in re-election campaign mode for months and has virtually abdicated leadership to resolve our unsustainable deficit and debt crises. In fact, Obama has significantly added to the magnitude of these problems by his uncontrolled increases in government spending, Obamacare, and the overall anti-business attitude of his administration. Obama ignored the excellent recommendations of his own Bowles-Simpson Debt Reduction Commission, which addressed all areas of the deficit and debt crises including increased revenues through tax reform, entitlement reform, and decreased government spending. Obama has also provided no apparent advice or leadership for the failed “Super Committee” and it now appears to have been designed to fail in order to create a political issue for the next election. As Governor Christie of New Jersey said this week regarding Obama’s lack of leadership, “What the hell are we paying you for?”

Enough is enough. Given the stalemate in Congress and an absentee President focusing on his own reelection, we should, if we could, send them all home on unpaid leave until the next election. Unfortunately, we need to have this election ASAP and not a year from now. The will of the American people needs to be determined regarding whether free market capitalism and individual freedoms or redistributive socialism and big government central planning is preferred. Personally, I vote for individual freedom, free markets, sound fiscal and monetary policy, economic growth, and limited government.

The Old Guy PhD

Debt Crisis – Whatever happened to Bowles-Simpson?

G’Day!

The bipartisan Debt Reduction Commission co-chaired by Democrat Erskine Bowles and Republican Alan Simpson completed and submitted to President Obama in February a rational and comprehensive approach to our country’s fiscal and debt crises. I posted articles praising the work of the co-chairs and the commission members on April 1, April 16, and July 22. (See “Bowles & Simpson Have it Right!”, “Obama Ignores Bowles-Simpson Debt Reduction Commission – Again!”, and “Debt Reduction: Bowles & Simpson Have it Right – Redux!”) To date, President Obama, the Democrats and the Republicans in the House and Senate have fundamentally ignored their proposal. Why their recommendations have been ignored by our government, and especially by the President, who established the commission, is a “puzzlement”?

The final Co-Chair’s proposal, “The Moment of Truth”, included both long and short-term government actions to resolve our fiscal and debt crises, contains nearly $4 trillion in debt reduction over 10 years, and was approved by eleven (61%) of the eighteen bipartisan members of the commission. As stated in Guiding Principle #2 of the draft report, “The Problem is REAL – the Solution is Painful – There’s no Easy Way Out – Everything Must Be On the Table – and Washington Must Lead”. Their proposal is comprehensive. It includes cuts and caps on discretionary spending and revenue enhancements through major tax reform to broaden the tax base, simplify the code, reduce tax rates, and cap revenue at 21% of GDP. It reduces spending for entitlements including healthcare and social security and eventually caps total spending at 21% of GDP. The proposed plan stabilizes the debt by 2014, reduces debt to 60% of GDP by 2024 and 40% by 2037. What’s not to like??

As noted above, it is a mystery to me why this proposal, developed and approved with bipartisan support, was shelved by Obama and ignored by Congress since it was formally delivered to the President nine months ago. While these are difficult and trying times, we should expect and demand that our President and Congress put partisan bickering and reelection concerns aside and act for the benefit of the American People. Time spent on campaign fundraising does not reduce our debt or improve job creation and economic growth. We deserve rational behavior from our elected representatives and should demand the compromise and cooperation necessary to correct our economic problems and return our great nation to a path of growth and prosperity. Admittedly, the Co-Chair’s proposal is controversial. It is also realistic, responsible, comprehensive, and should be receiving the immediate and serious attention of our President, Congress, and currently the “Super-Committee” (who are looking for a mere $1.2 trillion over ten years).

Every sensible citizen knows America has an unsustainable debt crisis that, if not corrected quickly, will lead to financial and economic disaster for our country. Socialism does not work. Greece is not a role model for government in America. Our current government is too large, too oppressive and is out of control. Economic growth is based on opportunities not restrictions and lower tax rates not higher regulations. Escalating government spending must be halted and its intrusion in our lives and businesses reversed. Tax reform to broaden the tax base, simplify the code, lower rates (especially corporate), and increase revenues is essential. Our government MUST be business friendly and promote the entrepreneurial spirit necessary for economic growth and global competitiveness. We need to bring back the constitutional freedoms and personal liberties that led us to be the greatest nation on earth. The Bowles-Simpson proposal is a good start.

The Old Guy PhD

Is “The American Dream” Dying?

G’Day!

Yes, the traditional “American Dream” is probably dying if the divisive socialist and antibusiness policies of President Obama, the Democrats, and the Unions continue to be supported by our government. Already much damage is being done by the passage of Obamacare, the Dodd-Frank Financial Regulations Act (including the new Bureau of Consumer Financial Protection and the Durbin Amendment), the EPA, the NLRB, and now full force “Class Warfare” by the President to divide the country in an apparent attempt to be reelected. Martin Luther King Jr’s memorial opens this week and his famous “I have a Dream!” speech was about national unity and equality of opportunity not class divisions and wealth redistribution. If we want to preserve our freedoms, our opportunities, and our exceptionalism as a nation, these destructive attacks on our economy, attempts to divide the American people, and collectivist “nanny-state” policies must be stopped and reversed. We must protect and preserve “The American Dream” for future generations and ourselves.

Our traditional view of “The American Dream” is based on the principles our Founding Fathers and Patriots risked and gave their lives to secure for our country and our future. These values were documented in The Declaration of Independence, The Constitution, and The Bill of Rights. Primarily these values are: guaranteed individual freedoms (especially from government), equal opportunities for all Americans, decentralized governance BY THE PEOPLE, free market capitalism based on private property ownership, and a specifically limited-power federal government. These fundamental principles have provided all Americans the opportunity to choose our careers, succeed (or fail) based on our own decisions, and retain the fruits of our labor reasonably free from oppressive regulations, unnecessary controls, and excessive taxation. These freedoms and privileges essentially stood for over a century from our nation’s founding until the passage of the 16th Amendment in 1913 authorizing direct federal taxation. Since the authorization of direct federal taxation these basic rights have been inexorably eroded as the size, scope, controls, and restrictions by government over our lives and our economic opportunities has expanded. It is time to get government off our backs and return to our traditional vision of success embodied in “The American Dream”.

The socialist and antibusiness agenda supported by President Obama and his allies is accelerating the destruction of this dream. Obama’s alternative is a collectivist society of mandated wealth sharing, unsustainable federal spending, high taxation, limited individual and business freedoms, and highly centralized governance. Obama appears to want a federal government with virtually unlimited power to regulate, control and dictate our lives, our property, and our businesses, including the transfer of wealth from those who have created jobs and earned it to those who have not. Just look at the current “Occupy Wall Street” mobs that have picked up Obama’s message and essentially want to destroy the capitalism that made our country great. Socialism doesn’t work as the former Soviet Union and most European countries, especially Greece, have learned. As Margaret Thatcher said, “The problem with socialism is that you eventually run out of other people’s money”. Is this the vision of America’s future that you support?

So how has the growth of “progressive” or socialist policies influenced “The American Dream” over the last century? Federal income taxes have “progressed” from a maximum rate of 7% in 1913 to a current rate of 35%. Obama and the Democrats are proposing to raise this rate to 40%. (Note: this rate does NOT include the approximate 15% in federal “payroll taxes” additionally paid by employees and employers or State and Local taxes.) Federal government spending has “progressed” from 3% of our national economy in 1913, to a current level of 25% under President Obama (an increase in the size of government by 5% in just two and one-half years by Obama). The number of federal government agencies, bureaus, departments, and employees has exploded since 1913 under both Republicans and Democrats. This was especially true under President Roosevelt’s “New Deal”, President Johnson’s “Great Society”, President Bush’s “Prescription Drug” legislation, and now President Obama’s “Healthcare” and “Financial Regulations”.

The Obama Administration alone has more than doubled the ANNUAL Federal Deficit, increased the National Debt by approximately 40%, increased the cost, uncertainty, and complexity of healthcare, and passed sweeping and largely unnecessary regulation over our essential financial industry. Obama’s healthcare plan alone creates an estimated 159 new agencies and the Dodd-Frank Act requires an estimated 387 new regulations across 20 agencies. The EPA under Lisa Jackson wants to implement and administer new business and job killing environmental regulations that are projected to cost tens of thousands of jobs and increase our energy costs. Essential domestic fossil fuel exploration and development in America has been virtually shut down. (Note: Opening our domestic energy resources could create hundreds of thousands of good American jobs and improve national energy security.) Among other pro-union activities, the National Labor Relations Board (NLRB) is attempting to stop final implementation of Boeing’s new “Dreamliner” factory in South Carolina. The Department of Justice (DOJ) under Eric Holder is disrupting our legal system, suing States for trying to enforce immigration laws, and interfering with mergers that would improve the competitiveness of American Business. Obama’s failed economic policies have stifled business and job creation, stagnated our economy, and significantly expanded the size and spending of our government. These policies are radically advancing an unsustainable European-style centrally planned socialist welfare state for our country and eroding our individual and economic freedoms. Are these “progressive” social policies enhancing our lives or your vision of “The American Dream”?

If we don’t stop this madness and get the government off our backs and our businesses, “The American Dream” of opportunity and success will continue to die and may be destroyed. A nation cannot be successful by confiscating wealth from those who create it and redistributing it to those who do not. Leftwing collectivist policies do not work. These are not the foundation of freedoms and opportunities upon which our country was created and which made America great. It’s time to take back our country and restore “The American Dream”. Let’s get to work!

The Old Guy PhD

Yes, We CAN Grow the Economy and Create Jobs – Redux

G’Day!

On June 10 I posted the below article on the above subject. To date the Obama Administration and Congress have failed to act on any of the issues and suggested solutions presented. The article is still essentially accurate after three (3) months of non-action and is repeated below for those who missed it. We must get our government working for the people and not for themselves. I hope you join with me in advocating responsible government that supports individual freedom, free markets, sound fiscal and monetary policy, economic growth, and limited government! Let’s get to work!

Obama and the Democrats have tried and failed with virtually every centrally controlled socialist alternative to stimulate the economy and create jobs. The only jobs they have really created are in government. The so-called recovery is the weakest in decades and may be about to “double dip”. Big collectivist government solutions have failed miserably (see “Big Government IS Our Problem!”). Obama and the Democrats only answer to this failure has been to blame it all on Bush. They claim that without their $4 trillion dollar taxpayer & debt funded stimulus, nationalization of businesses, increased healthcare regulations and spending, increased financial regulations, and extreme monetary easing by the Federal Reserve, it could be worse. The only thing that worked has been TARP and that was enacted under President Bush! It is time for government to stop regulating, remove the uncertainties facing business, get out of the way, and let the free market and capitalism work. You do not create jobs by taking wealth from those that generate it, siphon off government administration and oversight, and redistribute less of it back into the economy.

Economic growth and job creation is about free markets, minimum regulations, incentives, and opportunities in the private sector. Government doesn’t create jobs; the private sector creates jobs. Government also doesn’t create opportunities but it can discourage or prevent them (think energy policy) and it can and does distort the market through politically motivated subsidies or tax deductions for selected industries. If taxation and regulations are minimized to the level necessary to support the essential role of government as defined in our Constitution, business will take advantage of whatever opportunities are available in the marketplace and the economy will grow. Unfortunately, the Obama administration and the Democrats in Congress do not understand this. They apparently believe that a few “elites” (themselves) in government are smarter than the millions of consumers and business managers throughout the global economy. They have imposed on American business a climate of increasing regulatory restrictions, increasing healthcare costs, high business taxes, and increasing uncertainty as to what they will do next. In this centrally controlled environment, it is no surprise that American businesses are not currently hiring or investing in our country. The regulations and costs just in Obamacare and the Dodd-Frank Financial Regulations Act are particularly harmful and businesses are wisely waiting to see what the government will force on them next.

So what needs to be done to create jobs and get our economy back on track? At least six actions could and should to be taken: 1) Stop/Minimize non-essential regulations, 2) Have a business-friendly government, 3) Reduce tax rates, especially on business, through tax reform, 4) Enact an energy policy that encourages rather than discourages development of domestic sources of traditional energy, 5) Fix the fiscal and debt crises by cutting government spending, revising entitlements, and increasing tax revenues through tax reform, 6) Pass the three pending Free Trade bills and expand them to include other trading partners.

First, a moratorium on new regulations should be declared and all regulations associated with Obamacare and Dodd-Frank (especially the Consumer Protection Agency) halted until after the next election in 2012. The uncertainty overhang from these two bills alone is stifling hiring and investment by business. Ultimately, all regulations, both existing and new, should have a “sunset clause” that requires our government to formally reaffirm their need at pre-set intervals, perhaps every ten years. This would insure that outdated or unnecessary laws do not become permanent.

Second, President Obama needs to realize that his collectivist socialist policies don’t work and become truly business-friendly. It is no secret that the current administration is pro-union, pro-environmentalist, and anti-business as evidenced by numerous actions by himself and the Administration’s Departments and Agencies. The pro-union/anti-Constitution actions by the NLRB against Boeing in South Carolina (see “Attack on American Business by Obama “packed” NLRB!”) and the many actions of environmentalists against any form of energy development (drilling in the Gulf of Mexico, Shell Oil off the coast of Alaska (see “Obama Administration Attacks American Business Again!”) are not conducive to economic growth and job creation. This week the issue of an energy pipeline from Canada to Texas has also come under attack by environmentalists. These and other obviously pro-union and environmentally biased activities against businesses (and some States) should be halted and free markets given an opportunity to function.

Third, tax reform is essential to both economic growth and reduction in the deficit (see “Fiscal & Debt Crises – Tax Reform essential!”). As the referenced article indicates, there are several excellent proposals available and Republican presidential candidate, Tim Pawlenty, just added another this week. All are pro-growth and pro-job creation and all will work by providing incentives for private sector investment IN THIS COUNTRY, not abroad. Naturally, the Democrats, who believe in centralist government solutions and not in free markets, are generally opposed to all of them. Perhaps the easiest, most immediate, and most beneficial tax reform is to reduce (or eliminate) corporate tax rates to a level equal to or less than the major nations with whom we compete and simultaneously eliminate the politically motivated subsidies and deductions that distort the market. Currently US corporate taxes at 35% are highest in the developed world and actually represent double taxation on income, first at corporate level and again at personal level, when distributed as dividends. Additionally, the high US corporate tax rates discourage US based international companies from repatriating foreign profits back into the US because, if returned, they are taxed at the higher US tax rate. Our current tax policy encourages investment abroad and discourages repatriation of profits back into America. This is a job killer, not a job creator. Is our government crazy?

Fourth, enact a domestic energy policy that encourages rather than attacks development of domestic sources for traditional energy. This will create thousands of good jobs in our economy and reduce our dependence on foreign energy supply. For far too long we have allowed the environmentalists to dictate policy and stagnate domestic energy growth. Every rational person knows America will be dependent on fossil fuels for decades. Yes, development of alternative energy forms and technology is important but there is no chance “green energy” is going to be a replacement for traditional energy sources, including nuclear power, any time soon. It is madness to exclude active development of domestic fossil fuel sources and nuclear power from our alternatives just to satisfy a few environmentalists with unproven science and questionable computer projections. If “green energy” was a viable economic solution, we would not need a policy or subsidies to support it. Also, independent of the longer-term cost benefits from domestic production, the extremely high and increasing risk of supply from the foreign sources is a very dangerous national security concern. The Middle East is in turmoil and no one knows how it will turn out. Without domestic alternatives, American could find itself with an energy disaster, which could seriously endanger our economy. We must actively develop domestic energy to create jobs in America, sustain our economy, and reduce our global supply risk.

Fifth, resolve our short and long term deficit and debt crises. We must get government spending and the dual debt and deficit crises under control (see “Bowles & Simpson Have it Right!”, “Obama Ignores Bowles-Simpson Debt Reduction Commission – Again!”, “Is Obama Really Serious about Debt Reduction?”). Our Government is too big, too oppressive, and exercises too much control over the American people and business. The current policies are sucking money from business and taxpayers, adding more public sector union layers of government control, stifling business growth, and reducing America’s ability to grow and prosper. As stated above, in a free market economy with protection for the freedom of individuals and businesses, the private sector creates jobs. Since his election, Obama has expanded the size and scope of government control far beyond the level any freedom-minded citizen would have imagined possible. Simultaneously, Obama has also increased our federal deficit by $4 trillion and increased our national Debt by approximately 40% to $14.3 trillion. Relative to GDP the size of government has increased from approximately 20% of GDP to over 25.5% of GDP, a 5% increase in the size of government relative to our economy in less than three years. Without correction, our deficit next year is expected to be another $1.6 trillion and in ten years our national debt will grow to a staggering $22 trillion! Does anyone think this makes sense? My article last week, “Is Our Government Broken? – Redux!”, provides more information on this critical issue.

Sixth, pass the Free Trade Agreements for South Korea, Columbia, and Panama. These proposals go back to the Bush Administration and should be easy to pass. I believe nearly everyone including the President and many Democrats support them. As usual, politics is holding them up. Free trade works and provides value through additional products and services at lower costs to all American consumers. Only unions are opposed to free trade because, in the short term, it may reduce union jobs in non-competitive industries. Over 200 years ago, Adam Smith established the unchallenged principle that the wealth of a nation was based on the goods and services available to its citizens. Free trade allows this to work for the benefit of all consumers. It’s time for the unions to realize this and support what’s good for the nation over what’s good for the union.

Yes, we CAN solve our problems, if we have the political will to do so. This country was founded and prospered on the principles of individual freedom, free markets, sound fiscal and monetary policy, and limited government. Let’s get back to our foundations and demand that our elected representatives in government get to work.

The Old Guy PhD

Personal Responsibility – What Happened to Our Pioneer Spirit?

G’Day!

It is obvious that the current members of The Democratic Party did not create our great country. They would never have taken the risks and hardships of crossing the Atlantic and relying on their own abilities for survival without an established government “socialized safety net”. So what has happened to the original American “Pioneer Spirit” of personal responsibility and risk-taking, free of government interference and control? Why have so many of us allowed ourselves to be deluded by lawyers and politicians into believing that the government or “someone else” is responsible for our personal security, retirement, healthcare, employment, injury, or any problem that we face? Why is America becoming a European-style socialist “nanny” state at the same time Europe is finally realizing that unconstrained collective socialism not only does not work but also restricts economic growth AND is ultimately unaffordable? Greece and Portugal are current examples and others may follow. IT IS NOT POSSIBLE FOR THE GOVERNMENT TO SOLVE EVERY PROBLEM OR TAXPAYERS TO PAY FOR EVERY DESIRABLE SOCIAL GOAL OR ADDITIONAL REGULATION OR BUREAUCRACY OUR POLITICIANS WANT! Solving every social issue through additional taxation and government spending is neither affordable nor achievable and only retards economic growth and wealth creation for all. Wealth is not created by taking from those who earned it and giving it to those who did not.

Our pioneer ancestors came to this country searching for freedom from many different oppressions and the opportunity to build independent productive lives free from excessive government control and interference. Our ancestors accepted total personal responsibility for any risks they took. They understood that, whatever the outcome, their future and the future of their families were based on their own decisions and how well they made and executed them. Millions of immigrants have come to our country for the “opportunity” and not the “guarantee” of a better life. We need to rekindle this spirit in our country, get government off our backs, and retake personal responsibility for our lives.

For well over our first century as a country, we experienced essentially free markets and constitutionally protected individual liberties, which were largely free of federal government controls. We experienced problems but grew and prospered into a great nation. Major federal government intrusion in our commercial and personal lives really began with the passing of Constitutional Amendment XVI in 1913 authorizing direct federal income taxes. In 1913, federal government spending was less than 3% of GDP. From that year forward the size of our government and its control over our lives and commerce has inexorably increased over time, especially under F. D. Roosevelt’s “New Deal” in the ‘30s, Johnson’s “Great Society” in the ‘60s, and in this century Bush II’s “Prescription Drug Program” and Obama’s “Healthcare and Financial Regulation”. Except for WWII, the current size and scope of government spending has never been as high as it is now under the Obama Presidency at approximately 25% of our GDP! Just since Obama was elected, Federal Government ANNUAL spending has increased 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 $14.3 trillion! The Democrats in Congress have not passed a Federal Budget for over 800 days and have so far rejected all attempts this year by the Republicans to pass one for next year! To paraphrase Bill Clinton during the 1992 Presidential campaign, “It’s the Spending, Stupid!”

In July, my post highlighted the fact that our Founding Fathers risked their very lives, not just reelection, with “The Declaration of Independence”. Eventually, a new nation and a new government, unlike any other in history, were born based on their courage, vision, and desire to preserve this spirit of independence and freedom and to protect it for future generations. Our Founding Fathers were incredibly wise and shortly after gaining our independence from England, realized the potential flaws inherent in pure democracy, and created a written “Constitution” and subsequent “Bill of Rights” establishing the role of federal vs. state government, protecting the rights and freedoms of individual citizens from the government, and establishing appropriate mechanisms to amend the Constitution as necessary without destroying it from within.

Where are we today? We have an emerging “nanny-state” in which many believe that anything bad that happens is NOT personally their fault and it must be the fault of “someone else” or the responsibility of the government to correct. In other words, we are giving up personal freedoms and responsibilities and becoming a nation of dependency on government. Our ancestors would be appalled! The government cannot and should not try to protect us from all misfortunes or bad decisions we make ourselves. Historically, Americans don’t want or need a “handout”; they want an opportunity and the freedom to get a “leg up”. Today, only the Republicans, especially the “Tea Party”, are even attempting to risk reelection by taking a long-term view of our country’s needs. They are actually proposing fiscal solutions to correct the spending disaster that our governments have imposed on us. So what has been the “Tea Party’s” reward for standing up for what is right? They have been the subject of malicious vilification by the Obama Administration, Democrats, and segments of the media and have even been called “Terrorists”! Unbelievable! The Tea Party members are currently our true “Patriots” and should be praised for refusing to accept the short-term and totally inadequate fiscal “Band-Aids” proposed by the Democrats. Instead of addressing our long-term problems of unfunded and unsustainable entitlement programs, the Obama Administration and Congressional Democrats are ignoring the problem and are attempting to blame the Tea Party for our economic and political problems. The Administration and Democrats are not only continuing their failed policies down this path of national destruction but also seem to be intent on accelerating its speed of decline. More Liberal Madness!!

So what should be done to halt the increasing culture of dependency on the government and return prosperity and growth to the people and to our country? Our government must set priorities within “Capped” budget constraints (see “Is a Balanced Budget Amendment Necessary?”) and make rational cost-benefit trade-offs before commitments to any new or continuing government socially/politically motivated programs and bureaucracy are approved. For starters, every new law or program should have a built-in “Sunset Clause” specifying that it must be reapproved by a set date or it is terminated. As detailed in “Yes, We CAN Grow the Economy and Create Jobs!” at least six specific actions could and should to be taken: 1) Stop/Minimize non-essential regulations, 2) Have a business-friendly government, 3) Reduce tax rates, especially on business, through tax reform, 4) Enact an energy policy that encourages rather than discourages development of domestic sources of traditional energy, 5) Fix the fiscal and debt crises by cutting government spending, revising entitlements, and increasing tax revenues through tax reform, and 6) Pass the three pending Free Trade bills and expand them to include other trading partners. More is possible but this would be a good beginning.

In short, we need to return to the principles of a constitutionally limited government and individual freedoms created by our Founding Fathers. Returning to our fundamental principles of individual freedoms, free markets, sound fiscal and monetary policy, economic growth, and limited government is the proper course of action. The government should get out of the road and let entrepreneurs and businesses generate the economic growth, job creation, and increasing wealth of which they are capable. Let’s get to work!

The Old Guy PhD

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

Debt Reduction: Bowles & Simpson Have it Right – Redux!

G’Day!

On April 1, I posted the article, “Bowles & Simpson Have it Right!”, suggesting that the Bowles-Simpson Debt Reduction Commission’s proposal was a good solution to our country’s deficit and debt crises. Subsequent articles have repeatedly referred to this proposal as a reasonable bipartisan way to address our federal fiscal problems, especially long-term debt, (see “Obama Ignores Bowles-Simpson Debt Reduction Commission – AGAIN!”, “Is Obama Really Serious about Debt Reduction?”, “Fiscal and Debt Crises – Tax Reform Essential!”). Approximately eight months after publishing the Commission’s preliminary report and 5 months after formal submission to President Obama, the “Gang of Six” in the Senate finally appears to be considering it. Perhaps there is some intelligent life in Washington after all. I hope so.

To resolve our unsustainable deficit and debt crises, we need significant comprehensive changes to improve revenues through comprehensive tax reform, to reduce discretionary spending including defense, and reduction/reform in entitlement programs for Medicare, Medicaid, and Social Security. All of these reforms: taxation, government spending, and entitlements, are essential to a comprehensive solution for our country’s problems and ALL must be addressed if we are to succeed.

Bowles-Simpson, which is still an appropriate bipartisan starting point, addresses all of these issues and was approved by 61% of the commission members. I hope it now gets the attention it deserves. The “Gang of Six” and Bowles-Simpson have identified nearly $4 Trillion in deficit reductions over ten years with an immediate reduction of $500 Billion. Both plans rely on government spending cuts and tax reform to lower tax rates, broaden the tax base, and increase tax revenues. These are all good initial actions and I would also suggest the addition of the House “Cut, Cap, and Balance Act, which specifically “Caps” government spending relative to GDP and includes a “Balanced Budget Amendment” provision to insure that our government performs its future fiscal requirements in a responsible way. Currently, polls indicate that over two-thirds of the American people want a “Balanced Budget Amendment” and do not want a further increase in our National Debt. Now is an appropriate time to deal with these issues to insure not only our own future but also more importantly, the future of our children.

If Congress and the President had seriously considered Bowles-Simpson earlier in the year, the debt crisis could already be resolved. We must bring responsibility to the country back into our government and significantly reduce its size.

The Old Guy PhD

Note: The original Bowles-Simpson article with “links” is repeated below for those who missed it.

Bowles & Simpson Have it Right!

In my previous posts, “Big Government IS Our Problem” and “Is Our Government Broken”, I laid out the current and projected fiscal and debt problems facing our nation and argued that significant contraction in government spending is immediately essential. Also essential is tax reform. Our taxes MUST be simplified, the tax base broadened, and tax rates reduced (especially business taxes), if we are to be able to compete in a global economy.

The Debt Reduction Commission’s “Co-Chair’s Proposal” released in December 2010 by the Co-Chairs, Democrat Erskine Bowles and Republican Alan Simpson and submitted to the President in February 2011, is an excellent and understandable overview of the recommendations, which, with minor modification, were approved by 11 of the 18 bipartisan members (61% approval) in December 2010. Unfortunately, the final vote fell short of the 14 votes necessary for the “Supermajority” needed to directly submit the recommendations to Congress. While the Co-Chair’s Draft Proposal differs slightly from the final report submitted to the President, it is worth reviewing for its importance, focus, clarity, and brevity. They have done an excellent job and their proposal deserves the immediate attention of the President and Congress. While no one will be fully happy with all of the commission’s proposals, rational behavior combined with cooperation and compromise by our elected government is necessary if we are to remain a solvent and great nation. The time for government to act is NOW!

The bipartisan Debt Reduction Commission worked from April – December 2010 to develop and present overall comprehensive recommendations to solve our country’s short and long term fiscal and debt crises. They have done their work well. The report addresses all the necessary areas required to resolve the issues including setting out ten (10) objectives, “Guiding Principles and Values”, beginning with “#1-We have a patriotic duty to come together on a plan that will make America better off tomorrow than it is today”; and “#2-The Problem is REAL – the Solution is Painful – There’s no Easy Way Out – Everything Must Be On the Table – and Washington Must Lead”. The other 8 can be read by clicking the link in paragraph above. After establishing the Guiding Principles, the following comprehensive “Five Part Plan” is recommended:

1.Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015.

  1. Pass tax reform that dramatically reduces rates, simplifies the code, broadens the base, and reduces the deficit.
  2. Address the “Doc Fix” not through deficit spending but through savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care cost growth.
  3. Achieve mandatory savings from farm subsidies, military and civil service retirement.
  4. Ensure Social Security solvency for the next 75 years while reducing poverty among seniors.

Implementation of the comprehensive Five Part Plan is projected to achieve nearly $4 trillion in deficit reduction through 2020, in addition to other specific improvements in debt and budget reductions summarized below:

  • Achieves nearly $4 trillion in deficit reduction through 2020: 50+ specific ways to cut outdated programs and strengthen competitiveness by making Washington cut and invest, not borrow and spend.
  • Reduces the deficit to 2.2% of GDP by 2015, exceeding President’s goal of primary balance (about 3% of GDP).
  • Reduces tax rates, abolishes the AMT, and cuts backdoor spending in the tax code.
  • Caps revenue at or below 21% of GDP and gets spending down to 22% and eventually to 21%.
  • Stabilizes debt by 2014 and reduces debt to 60% of GDP by 2024 and 40% by 2037.
  • Ensures lasting Social Security solvency, prevents projected 22% cuts in 2037, reduces elderly poverty, and distributes burden fairly.

 

The proposal outlines how to achieve the above results through specific recommended actions to improve revenues through “Comprehensive Tax Reform” alternatives, to reduce spending through “Discretionary Budget Options” including Defense cuts, reductions for entitlement programs through “Mandatory Budget Options” for healthcare and “Reforming Social Security”. All of these reforms: taxation, government spending, entitlements for healthcare and social security, are essential to a comprehensive solution for our country’s problems and all must be addressed if we are to succeed.

The Co-Chair’s Proposal is controversial but responsible, realistic, and deserves the serious consideration of the President and Congress, who are currently engaged in irrelevant political bickering over trivial spending cuts instead of the substantive fiscal and debt problems we face. Congress and the President should get together, agree on or revise as appropriate the “Guiding Principles and Values” above, and start to work for the American people and our country. Political posturing for re-election is NOT a valid course of action.

Currently, neither the Congress nor the President is addressing our fiscal and debt crises with any sense of urgency. The President and the Democrats are not only totally ignoring the problem but are fighting to avoid even minimal reductions from the inflated budget spending of the last 2-3 years. Federal Budget inflation nearly tripled our federal deficit from $0.459 trillion in 2008 to $1.3 trillion in 2010 and is expected to increase again to $1.7 trillion this fiscal year. Obama’s recent budget proposal for 2012 continues spending at $3.7 trillion and the deficit at $1.6 trillion. Additionally, Obama’s new budget projects a further cumulative deficit of $7.2 trillion for the next ten years – bringing our debt to approximately $22 trillion! This is not leadership; it is madness! Only the Republicans are even attempting to address the issue and, to date, their proposals are woefully inadequate. To be fair, the House Republicans through Representative Paul Ryan are promising to present a comprehensive budget in April that does address the looming long-term catastrophe we face. I hope they deliver.

Given the magnitude of our fiscal and debt problems, the current congressional squabbling is an inappropriate distraction from solving the overall crises facing our nation! Without an agreement on debt limits and/or spending cuts by April 8, our government may shut down. As noted in “Is Our Government Broken”, except for national security and some essential services, shutting down might actually be a good thing. Our government is too big, too irresponsible, and too self-centered. Can’t our Congress or Administration do math?

Where is President Obama’s leadership in all of this? Actually, at the time of this writing he’s currently travelling again and making speeches at a Democratic Party Fundraiser – big surprise. As usual, when leadership and responsibility for our country are required, Obama is absent. Last week with a national debt deadline imminent, Congress took a week off rather than stay in session to attempt to resolve the current national debt limit issue. Brilliant! Our elected representatives need to make financial solvency and economic growth a priority and get to work NOW!

We are on unsustainable fiscal and debt crises that, if not corrected quickly, will lead to potential financial and economic disaster for our country. Our government is oppressive and out of control, its growth must be stopped, and its intrusion in our lives and businesses reversed. We MUST maintain the entrepreneurial spirit necessary for economic growth and global competitiveness. We need to bring back the constitutional freedoms and personal liberties that led us to become the greatest nation on earth. Our government should immediately take up the Bowles-Simpson Co-Chairs’ Proposal.

The Old Guy PhD

Government Imposed Uncertainties Hurt Economic Growth!

G’Day!

In nearly every analysis or survey of why business and financial institutions are not currently hiring or investing in America, the primary reason given is “uncertainties”. While dealing with economic uncertainties is a normal part of business decisions, the Obama Administration and Democrats in Congress have created additional administrative and legislative uncertainties that are unnecessary and detrimental to growth. Removal, or at minimum temporary suspension, of these government obstacles to investment, growth, and job creation would allow business and financial institutions to get America moving again.

Summarized below are the current government-sponsored complications that are discouraging job creation, capital investment, and the economic growth that we would expect from business during a normal expansion. I apologize in advance for its length but the issues are important and merit nominal analysis. Please review the information below and ask yourself, “If I were a business manager or a banker, would I risk my own money to expand, startup a new business, or make loans in this restrictive and uncertain regulatory environment?”

Fiscal Deficit & Debt Crisis: These two related issues are by far our greatest overall national risk! Fortunately we have a very comprehensive, rational, and bipartisan solution available, which was initially sponsored by President Obama. It is the Bowles-Simpson Debt Reduction Commission Report, “The Moment of Truth”. Unfortunately, President Obama and Congress have ignored this proposal since its completion. I have extensively discussed and still support this positive and bipartisan solution, (see “Bowles & Simpson Have it Right!” “Obama Ignores Bowles-Simpson Debt Reduction Commission – Again?” and “Is Obama Really Serious about Debt Reduction?”). The commission’s report, which was approved by a majority of 61% of the bipartisan members, has languished in obscurity since it was completed and presented to President Obama early this year. The recommendations from the commission cover all the necessary aspects of an implementable comprehensive solution to the our fiscal and debt crises including significant tax reform, reductions in discretionary and defense spending, and entitlement reforms including Social Security. For reasons that are a mystery to me, neither Congress nor the President appears to be considering this report in their current discussions. The President and the Democrats are not only totally ignoring a rational solution but have been fighting for months to avoid even minimal reductions from the inflated federal budget spending of the last 2-3 years. How can anyone expect financial institutions or business firms to act positively with these uncertainties hanging over them?

Taxes: As repeatedly discussed in previous articles, both corporate and individual income tax reform is essential for economic growth and investment in our country (see “Fiscal & Debt Crises – Tax Reform Essential!”). We need to raise additional federal revenues by lowering tax rates (especially corporate tax rates), eliminating loopholes, subsidies, and unnecessary “tax expenditures”, broadening the tax base to include more taxpayers, and simplifying the tax code. Currently at 35%, corporate tax rates in America are among the highest in the developed world (corporate taxes in China are 25%, Russia 20%, Germany 15%, and Ireland 12.5%) and foreign profits are penalized if returned to the US. This is ridiculous and encourages job creation and investment overseas, not in the US!

Regarding broadening the tax base, over 51% of US families currently pay no income taxes but receive the benefits paid by taxes from the rest of us, especially the much maligned “wealthy” (who already pay 76% of total income tax revenues). The current Obama proposal is to add more taxes on the “Rich” by rescinding the “Bush Tax Cuts” sooner than they are scheduled to expire. Simple math demonstrates that the “Rich” don’t have enough income to pay for the current and projected Obama deficits. This is nothing but political demagoguery and class warfare in preparation for the next election and is neither rational nor a serious solution to our long-term government overspending problems. If we are to solve our deficit and debt crises, broadening the tax base can and must be accomplished.

In “Fiscal & Debt Crises – Tax Reform Essential!” noted above, I have outlined three overall reform alternatives: 1) Retain but simplify our current “Progressive tax system, 2) Adopt a “Flat Tax” (one tax rate for all), and/or 3) Adopt a “Fair Tax” (a consumption or “VAT” tax). I personally prefer implementation of the “Fair Tax” either alone or in conjunction with one of the other two alternatives.  However, any one or a rational combination of these alternatives will accomplish the necessary tax reform goals and stimulate economic growth. All have detailed proposals available to our government, which are currently being ignored. The current extension of the “Bush Tax Cuts” expires at the end of 2012. Would you hire new employees or invest in your business, if you didn’t know what your taxes would be in eighteen months?

Obamacare: Virtually all independent analysis indicates that implementation of the 2000+ pages of Obamacare will ADD not reduce healthcare costs and will probably result in a single payer government-controlled healthcare system with restricted options and limited services. Small businesses, the job growth engine of our economy, are particularly at risk. At last count, approximately 1450 organizations, including many unions, have been given Obama Administration waivers against required implementation of Obamacare because of the higher costs it demands. Equally importantly, no one really knows all the implications, costs, or unintended consequences of the legislation because the Obama Administration is still writing the rules. In two separate articles, I suggested market-based solutions to our healthcare issues, “How to Solve Healthcare Part I” and “How to Solve Healthcare Part II”. I lived and worked in England for the better part of ten years and can assure you government-run healthcare is costly (through taxation), inefficient, slow, and limited in providing medical services. Think long and hard before you support such a system in the US. Again, if you were a business manager and were faced with the higher costs, more administration, and uncertainties associated about healthcare rules that are still being written by the administration, would you add to your payroll costs by hiring new employees?

Dodd-Frank Financial Regulation: Like Obamacare, this legislation is lengthy, complicated and potentially expensive for the financial services industry and ultimately consumers. No one really knows all the implications or additional regulations of the legislation because they are still being written by the administration and will create many unintended consequences for consumers and the industry. The Act is perhaps the most significant change in financial regulation since FDR. It represents major changes to all financial regulatory agencies and affects most of the nation’s financial industry. Major new agencies have been created: Financial Stability Oversight Council, the Office of Financial Research, and the Bureau of Consumer Financial Protection. Perhaps the most controversial provision is the creation of the potentially big and expensive “Bureau of Consumer Financial Protection” within the Federal Reserve System (FRS). Very importantly, even though the new Bureau is placed within the FRS, it operates INDEPENDENTLY. The FRS is PROHIBITED from interfering with matters before the Director, directing any employee of the Bureau, modifying the functions and responsibilities of the Bureau or impeding an order of the Bureau. With virtually unlimited power and authority to act independently, without oversight, the agency can do whatever it deems appropriate supposedly to protect consumers! WOW! Have we become a potential police state regarding “consumer protection”! What ever happened to “Caveat Emptor” (let the buyer beware) and personal responsibility? Is the government going to protect us from everything and if so, how? How many new public-sector union employees will this take? What will it cost? Ultimately, businesses and consumers will end up paying for this new unlimited-power bureau with sweeping authority to do “whatever it deems appropriate to protect consumers”. This is a scary development and creates endless uncertainties as the bureau writes its new regulations. More government madness and not good for job creation (except in the government)!

Additionally, the “Durbin Amendment” gives the power to regulate debit card interchange fees (prices) to the FRS. Effectively this eliminates free markets for debit cards and allows price fixing by the FRS, which was acted on by the FRS this week!

This is not a good trend for freedoms or free markets and bodes poorly for the other uncertain regulations to follow. If you were a banker faced with these uncertainties and risks, what would you do?

Energy & Environmental Policy: An intelligent national energy policy is vital to support economic growth and minimize the very real and present dangers of disruptions in our essential imports of foreign supplies. This policy must include and recognize America’s economic necessities, national security concerns, and the time required and costs necessary for conversion from any current source to any new technologies without creating growth constrains. It must include ALL possible sources of domestic energy generation including fossil fuels (oil, natural gas, coal), nuclear, as well as green energy sources (wind, solar, biotech).

Obama has no apparent energy policy other than promoting the green energy sources to ostensibly support his “global warming” environmental agenda. This action is happening at a time when more and more evidence is challenging and refuting not only “global warming” theory but also CO2 as a causative agent, and at a time when energy demands and prices for fossil fuels are increasing with NO serious alternatives in sight for decades! Further, the dependency and risks from imports of fossil fuels to the US are staggering and the economic and national security consequences of a stoppage of these imports would be catastrophic for our nation. Obama’s administration is actively working against virtually every effort to explore and develop domestic sources of fossil fuels. Offshore drilling in the continental shelf and interior of the US is being severely restricted even though thousands (perhaps hundreds of thousands) of good jobs could be created by actively pursuing known domestic reserves. Specifically, exploration and development of fossil fuel sources are being stifled by a lack of permits from the Administration and delays forced on development by environmentalists such as the EPA’s recent stoppage of Shell Oil’s permit to drill and develop a 27 billion barrel reserve in the Arctic Ocean off the coast of Alaska. (see “Obama Administration Attacks American Business Again!”)

The EPA is also trying to circumvent Congress’ refusal to pass “Cap and Trade” legislation by “backdooring” the regulations as new rules issued directly from the agency. Also, the EPA has proposed two new “clean coal” regulations regarding the use of coal in power plants that may result in “hundreds of thousands of coal industry jobs lost” and an estimated increase in the cost of coal produced electrical power by 11-23%. It is further estimated by a trade group that, in addition to the above jobs lost, the new regulations will cost the coal industry approximately $180 billion. For information, coal-fired power plants account for approximately half America’s energy supply.

I am not opposed to environmental protection or pursuit of green energy sources but, like many, am not convinced that global warming is actually occurring, and if so, is caused by humans or CO2. A rational and balanced national energy policy is needed. Restricting our domestic economy growth at a time of increasing global competition and increasing our dependency on foreign imports from a very volatile area of the world for the sake of a still unproven theory does not seem to me to be wise. It only creates more costs and uncertainties for our country and harms job growth, especially in the energy sector.

Pro-Union, Anti-Business Activism: The pro-union anti-business biases of the current administration are well documented and are detrimental to job creation, capital investment, and economic growth in America. Obama’s endless campaign speeches to unions, the stream of union activists to the White House, and repeated class warfare attacks on the “wealthy” are sufficient evidence of these biases.

Perhaps the most flagrant current example is the National Labor Relations Board’s (NLRB) anti-business, anti-free market, and pro-union (not pro-labor) socialist attack on the Boeing Corporation and “Right-to-Work” States (see “Attack on American Business by Obama “packed” NLRB!” and “Obama “packed” NLRB Continues Attack on Boeing & Free Markets!”). Under Obama, the NLRB has become a pro-union activist body and is now deliberately attacking job creation and investment in America by attempting to stop Boeing, America’s #1 exporter, from final implementation of the firm’s new “Dreamliner” factory in Charleston, South Carolina. South Carolina is one of 22 “Right-to-Work” States, which don’t require (or prevent) hiring union workers. To date, Boeing has already invested approximately $1 billion and hired approximately 1000 workers in South Carolina. Boeing directly employs over 160,000 workers, and is indirectly responsible for approximately another 1.2 million jobs. Apparently to the NLRB, the only “good” American jobs are union jobs.

For years during and subsequent to the Bush Presidency, union activists and Democrats in Congress have prevented the passage of Free Trade Agreements with South Korea, Columbia, and Panama, which are favorable to American business, American exports, American consumers, and will create American jobs. The unions have delayed passage because imported goods coming into the country at lower prices will displace some workers. Really! This is the global free market at work, expands economic growth, creates wealth and jobs, and benefits all consumers who are provided with more product choices at cheaper prices. Finally, this week the Senate is holding hearings on these bills and hopefully, after years of delays and economic losses, will be passed and signed by the President. Just another uncertainty caused by government interference in the marketplace that has hurt job growth and consumers.

With these pro-union anti-business biases at the very top of our political leadership and government, is it any wonder that business is hesitant to hire and banks to loan?

Conclusion: Government needs to get out of the way! (see “Big Government IS Our Problem”) The above issues and the uncertainties they have imposed on our economy are indications of where Obama’s and the Democrat’s policies are leading us. Socialism and central planning don’t work – just ask the former Soviet Union or India. Free markets and individual freedoms do work! Obama is increasingly turning our nation into a centrally-controlled socialist welfare state with significant pro-union, anti-business biases and uncertainties that hurt us all. These policies are not the foundation of freedoms upon which our country was created and which made America great. It’s time to return to individual liberties, free markets, sound fiscal and monetary policy, and limited government. It is time to take back our country!

The Old Guy PhD