Misleading Deficit Reduction

Once again the media fails to disclose that so-called deficit reduction really hides the fact that the deficit spending will continue to increase our total debt.  All that is being proposed is to spend slightly less than originally proposed, not to cut spending.  Note the misleading headline: In tandem: Reducing the deficit to raise debt ceiling. (emphasis added) Below is a Washington Post graph.





The Economist graph from the Cato Institute



Of particular note, I liked the comment by Mr Edward of the CATO Institute:

Wait a minute, those bars are rising! Spending isn’t being cut at all.  The “cuts” in the deal are only cuts from the CBO “baseline,” which is a Washington construct of ever-rising spending. And even these “cuts” from the baseline include $156 billion of interest savings, which are imaginary because the underlying cuts are imaginary...
The federal government will still run a deficit of $1 trillion next year. This deal will “cut” the 2012 budget of $3.6 trillion by just $22 billion, or less than 1 percent.

When will we ever see a graph from the Obama administration showing the claimed [deficit reduction] to demonstrate that the above graphs are somehow "wrong".  Probably when hell freezes over.

PS: Fixed text in brackets/

Our Economic Malaise

 Economic growth seems to be stagnating. The universal cacophony is a call for stimulus to get the economy growing again.  The Washington Post recently ran a good article by Bill Gross: "America’s debt is not its biggest problem". Well, it was a good article until it put forth, near the end, the tired mantra of: "The president and Congress must recognize that an AA-plus country, to remain AA-plus, must focus on growth, not debt reduction, in the short term."

Up until that point, what made the article good? Well it pointed out that there is a structural change in the economy by pointing out that we have an "Aging demographics, where boomers everywhere spend less,...", that "Globalization, where 2 billion new competitive workers from Asia and elsewhere take jobs and paychecks from complacent and ill-trained 40-somethings in developed markets.", and that "Technological innovation, where machines and robots displace human labor, resulting in corporate profits but declining wages".

Regretfully, the article did not get into (blame) Bush for over-stimulating the economy before the election of Obama.  The supply side economic policies of the Republican starting with Reagan promoted the production and consumption of goods before the wealth necessary to support them was created. Like a credit card, one can enjoy unwarranted spending until some credit limit is reached.  Once reach the spending has to stop, as with a drug addict, withdrawal is tough.  Our political leaders fail to comprehend that we can not spend ourselves into economic growth when the consumer demand does not exist.

This past week, on Fox News, the pundits recognized that home mortgages interest rates were at record lows.  That Obama implemented programs to make it easier for some to buy houses. Yet foreclosures continue and home prices continue to fall. The failure of housing to recover was caused to over-supply, inflated values, and now a lack of demand resulting from the economic downturn.  Our elected official stubbornly remain deaf to the concept that they will be unable to turn the economy around.

A better ending for Mr. Gross's article would have been that we need to recognize that the old growth engine is not there anymore based on the factors he cited, that we have to adjust to lower consumer demand, and the fact that the Republicans overstimulated the economy.  We are now experiencing withdrawal.

Rick Santorum - A Corporate Shill?????

Well, I finally get to combine the fight against so-called "intellectual property" with our current economic malaise and the upcoming presidential election.  Rick Santorum appeared on the Republican straw-poll debate in Ames, Iowa. Basically his presence (and remarks in subsequent post-debate interviews) was exemplified by his whining about the lack of camera time.  I guess that the lack of camera time could be considered good news.

His presence at the debate reminded me that there is some history that would make him a poor selection for a presidential candidate.  Back in 2005, according to the Democratic Underground.com, Santrorum introduced a bill  "that would prohibit federal meteorologists from competing with private companies such as AccuWeather and The Weather Channel. He wants the weather service to surrender much of its data only to private industry, not the public."  The quick counter point is that the Weather Service is not providing "free" weather reports, the public has paid the Weather Service for this service through their tax dollars, therefore we are entitled to it.  Fortunately this bill failed to gain any traction. For some more information see the Electronic Frontier Foundation's Press Mentions: May, 2005.

One of my major ongoing criticisms of our elected officials is that they seem to have lost sight of working on behalf of the American people. The Weather Service receives its funding from our tax dollars and we are entitled to that data.  For Santorum's to claim that the Weather Service should be prohibited from competing with a private company smacks of corporate protectionism.  If a business cannot compete, then it has no business being in business. This incident may now be "old" and be relatively isolated but it does raise questions concerning who Santorum would represent should he be elected President.

Creating Jobs - Republican Cognitive Dissonance.

A time out on the Obama bashing.  Time to analyze the mindless Republican talking points relating to job creation since we have a so-called "fragile economy". The Republicans demand that the government must provide incentives (tax credits and regulatory relief) to private industry so that they will  have the financial resources to unleash America's entrepreneurial spirit that will result in job creation.  Makes for excellent sound bytes.

Regretfully, this logic is highly simplistic and illogical too boot.  The Republicans do not seem to equate the use of tax credits and regulatory relief as a form of welfare.  Yes welfare.  When you subsidize a business through tax credits that is a form of welfare. So if the Republicans seek to eliminate welfare for the poor, why is it acceptable to give businesses welfare?

In a sense this is a zero sum game.  Reducing entitlements and welfare means that the recipients won't have the money to buy products/services.  If these people do not have the money to buy,  businesses will not have an incentive to hire people to produce products. So how will giving "welfare" to private enterprise promote job growth?

The basic problem with the economy today is lack of demand. This has been discussed on both CNBC and Fox News.  Regretfully, this is one of those issues that has not yet reached the "critical mass" necessary to achieve national recognition. Too bad.

To continue, the Republicans assert that they want government to stay out of the private sector.  Furthermore, that government programs should not be used to determine which private sector companies will be successful or not, and that government programs (overall) are wasteful.  If the Republicans truly believed their own rhetoric and had an ethical foundation, they would be insisting that the private sector take the leadership role in resolving the employment situation. The Republicans have been silent.  I guess this is one of those cases where it is easier to perpetually castigate the government for every conceivable ill then it is to accept accountability for implementing what you profess.

The problem of course is that the private sector is busy laying people off.  If not laying people off, not hiring. A fact that the Republicans conveniently ignore. Clearly the private sector does not believe that they have a responsibility or an obligation to fix the national economy.  So when will the Republicans look in the mirror and recognize their cognitive dissonance and then resolve their ethical lapses?

When Will We Stop Raising The Debt Ceiling?

 In response to the Washington Post article "Break the spend-and-borrow cycle" olddesert_rat responded with the following:

"We must raise the debt ceiling, and also craft a sound plan to cut spending over a measured period of time so that essential programs are left to operate and meet the needs of our citizens. Greater measures need to be put into this plan, in order to curb the waste, fraud, and abuses which contribute so much to the excessive costs."

My apologies to olddesert_rat, but this is the repetition of the same old empty rhetoric that we have been endlessly hearing from the politicians for many years. At what point do you finally say enough with empty rhetoric? Take a look at the graph below.  What do you see?

The graphic above is from the Washington Post.

But there is also a deeper question concerning the seemingly perpetual increases in the debt limit. That is where is the increased spending going?  Is it going towards legitimate programs that require increased funding or is it going to "Bread and Circus" largess to "buy" votes?

I don't know.

What I can say is;  in the year 2000 total Federal government spending amounted to $1,789 Billion. For 2011 the projected spending is estimated to total $3,818 billion. An increase of 213%. Conceptually, as a casual observation, the scope and functions of government are obviously being enlarged. The money has to be going somewhere. Much like the hypothetical decision to buy a  $38,189 instead of a $17,890 car.  Clearly you do NOT have to buy the more expensive car, you could settle for a $20,000 for example. Those who perpetually bellyache for an increase in the debt limit do not seem to consider that proposed increased spending may not even be justified.   

Concerning my response to "Break the spend-and-borrow cycle":
"The obvious question, where was the pledge for fiscal responsibility under (Blame) Bush? 

Why no mention of a rational tax structure by Perry and Haley? We do have to pay (fund) government services.

Regretfully, this letter is simply another example, of an endless number of examples of, empty rhetoric. At some later date (when politically expedient) both Perry and Haley, will repeat Obama's infamous assertion concerning fiscal responsibility: "I now regret that decision."