President Obama says that he wants to cut the $1,300,000,000,000 [$1.3 trillion] deficit that he inherited from President Bush down to a deficit of $533,000,000,000 [$533 billion] by 2013.  While this seems like a tough goal that will cut spending, this will actually result in increased spending.  The reason for this is simple:  the present massive deficit is an aberration from the normal, including hundreds of billions of dollars in spending that was supposed to be one time spending.  For example, included in the $1,300,000,000,000 [$1.3 trillion] deficit is the $700,000,000,000 [$700 billion] spent on the bank bailout, the additional billions spent on the bailouts of Bear Stearns and AIG, and last years stimulus plan that sent most Americans a $600 check.

In fact 2008′s deficit was $438,000,000,000 [$438 billion] a massive number, but a number that is dwarfed by the $1,300,000,000,000 [$1.3 trillion] deficit that is to be expected in 2009.  The vast majority of this money was supposed to be for one time things.  In fact, without adding the increased spending from the “one time items,” the deficit for 2009 looks a lot like the deficit for 2008.

President Obama’s 2013 budget deficit figure still represents an increase of over 21% from 2008′s number.  This “cut” looks more like an increase to me.

And Mr. Obama’s own numbers still admit that he will have a deficit of over $1,000,000,000,000 [$1 trillion in both 2010 and 2011].  No numbers were given by his office for 2012′s predictions, but lets give him the benefit of the doubt and assume that 2012′s deficit equals 2013′s deficit of $533,000,000,000 [$533 billion].  This means an increase in the national debt of at least $3,000,000,000,000 [$3 trillion]–equal to $10,000 per American.  I think the numbers will be much higher.

More on that later.

Americanly Yours,

Phred Barnet

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Of course, even Mr. Obama has admitted that there is no guarantee that these plans will work.  Even more interesting, he has said that these plans will have little effect before 2010.  This is particularly interesting because the non-partisan CBO recently estimated that the recession will supposedly be over in mid 2009 even if these “stimulus” plans werent passed, meaning that Mr. Obama’s plans wouldnt even begin working until after the economy has already started to heal itself.

But, lets pretend that Mr. Obama’s boldest predictions are correct and that this plan will create 4 million new jobs (although he says it will create or save 3-4 million jobs).  Let us also assume that each of these jobs is a high paying job of $100,000 a year and that these jobs are permanent jobs that will never go away in the future, regardless of future circumstances.  According to both H&R Block’s tax calculator and the Heritage Foundation’s much simpler tax calculator, a single person earning $100,000 pays $19,472 in Federal taxes.  So, the 4 million jobs that we are pretending this plan will create will return $77.888 billion in taxes per year to the federal government.  Excluding any interest (which will likely be a hefty sum and will go countries like China), it will take the government about 35.5 years to recoup the money!

If, however, this plan still creates 4 million jobs but these jobs pay $50,000 per year instead of $100,000, the government will collect $6,606 in taxes per person totaling $26.424 billion in taxes per year.   Under these circumstances, it will take the government 113.5 years to recoup the money!

However, I made a little Excel spreadsheet assuming that the government would have to pay 3% interest on these new loans.  This is a generous assumption, considering that the average rate on treasury bills has been much higher.  I used both of the above jobs assumptions in my calculations and found that the government will actually never be able to recoup this money if interest is factored in! Check it out for yourself.

Americanly Yours,

Phred Barnet

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When Nikita Khrushchev was forced out of power in the Soviet Union he left his successor (Leonid Brezhnev) with two letters.  He told his successor to open the first letter when he came to his first major crisis and follow the instructions.   He was told that following the instructions would get him through the crisis.   He was also told that when a second major crisis stuck, he should open the second letter from Khrushchev and follow its instructions.

The inevitable crisis happened and Brezhnev became worried that the crisis could cause him to be removed from power.   He opened Khrushchev’s first letter which said “Blame everything on me.  The only way that you can stay in power is to blame everything on my poor leadership and announce that you have to reverse my policies in order to save the State.”

So, Brezhnev followed the instructions in the letter and things in the Soviet Union got better for a while.   However, after a few more years, the economy began to stagnate and Brezhnev once again became worried that he would lose power.  He realized that the advice from Khrushchev’s first letter had saved him once and that maybe it could do so again.

Brezhnev opened the second letter and it read “Sit down and write two letters.”

As I said above, this is not a true story.  It is however, a useful lesson on political survival.

I would argue that President Obama began reading his first letter during the campaign when he blamed everything wrong in the world on President Bush.  He has continued to beat up on President Bush’s record in a constant attempt to convince the public that the current crisis is not his fault.

He will likely continue to read from this letter for several years.

For example, if the situation in Iraq continues to improve and we can pull our troops out, Mr. Obama will undoubtedly take all of the credit, despite the fact that President Bush’s controversial Surge plan was a complete success and has effectively won us the war.  If on the other hand, the situation in Iraq deteriorates and we either do not leave within Mr. Obama’s promised 16 months or we end up leaving in disgrace, there can be no doubt that President Obama will blame Mr. Bush.

Similarly, if the economy turns around in the next year or two, Mr. Obama will take all of the credit.  If however, the situation worsens, the economy continues to contract, and unemployment approaches or reaches double digits, President Obama will claim that he inherited this mess.  In his speech last night President Obama said “I can’t tell you for sure that everything in this plan will work exactly as we hope, but I can tell you with complete confidence that a failure to act will only deepen this crisis as well as the pain felt by millions of Americans.  My administration inherited a deficit of over $1 trillion, but because we also inherited the most profound economic emergency since the Great Depression, doing a little or nothing at all will result in even greater deficits, even greater job loss, even greater loss of income, and even greater loss of confidence.” This was effectively Mr. Obama hedging his bet:  if the economy turns around, he can take credit, but if it doesnt work, he will say that things are still better than they would have been if the bill wasnt passed and besides, it is still President Bush’s fault.

This is why President Obama still sounds like his is running for President, rather than holding the office.  It is safe to say that President Obama was not elected to office based any past accomplishments that he had.   He was also not elected based on any future plans that he had.  Rather, he was elected because the American public was (and still is) fed up with President Bush.  The fact that Mr. Obama was elected President is really only an externality of the perceived failure of the Bush Administration.  Mr. Obama really didnt run against John McCain; he really ran against President Bush. How many times did you hear Mr. Obama refer to “8 years of failed policies?”   Because Mr. Obama was elected as an opposition candidate–a reactive candidate rather than a proactive candidate– he is likely to continue this course of acton.  Expect him to continue to beat up on President Bush’s record.  Furthermore, you can expect him to denounce Republicans who vote against his programs (in a manner that will probably become much more hostile in the near future).

The problem is that Mr. Obama cannot continue on this course for too long.  The American people are fickle and grow tired of things quickly.  Remember that when the War in Iraq started Bush (who was cheered on to war by the American public as well as the media) had an approval rating of near 70%.  At some point, the American public will grow tired of hearing Mr. Obama blame all of the country’s problems on the previous administration–especially if things get worse.  The people want solutions and when President Obama realizes that he cannot deliver them, he may have to reach for that second letter.

Americanly Yours,

Phred Barnet

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Here is a really cool chart that lists how much each bank has received from the TARP program.  It is updated daily.

I absolutely refuse to put my money in a government owned bank.  I will not allow the government to take the profits it earns off of my deposits to fund any further bailouts.  By banking at a government run bank, you are encouraging these bailouts.  If you are against further (or existing) government bailouts, then it is your duty to remove your money from this bank and place it in an independent bank.  I used to bank at Washington Mutual which is now owned by JPMorgan Chase (which has received $25 billion from the government in exchange for ownership rights).  I removed my money from this bank as soon as I was able to identify a local bank that had not sold part of itself to our government.

I now bank at United America’s Bank in Chamblee.  This is a small bank with only a few locations in Atlanta, Chamblee, and Roswell, but it is a bank that is independent from government ownership.  Plus, it has the added convenience of being the closest bank to my house.  Whether you live in my area or somewhere else, if you oppose government bailouts and government ownership of businesses, you should consider putting your money in a small bank that is not owned by the government.  I would be glad to help you find a non-government owned bank in your area.

Americanly Yours,

Phred Barnet

Let me first start with the bad so that I can end with the good.

Yesterday, President Obama’s first public act was to limit the power of lobbyists in his administration.  He did this by creating a rule that prevents members of his administration from working as lobbyists and trying to influence the administration if they do leave his administration.  He also created a rule that prevents former lobbyists hired by the administration from working in their areas of expertise.

Lobbyists have been getting a very bad rap for the last decade, and while some of the criticism is needed, the truth is that lobbyists are essential to the proper functioning of American Democracy.  Lobbyists are experts in their fields who know pretty everything about their issue that can possibly be known.  They spend their careers specializing in studying one area of policy and make it their business to know everything about that subject that is possible. Now, because policy advisors in the administration cannot be experts on all fields, they often need to consult with lobbyists from all sides of an issue in order to get vital information.  An environmental lobbyists will know all of the effects of allowing a certain chemical into the water supply, and would be able to supply administration officials with needed data.  Administration officials meet with lobbyists on both sides of the issue in order to get a full perspective on the issue before crafting their policy–in the case of a new environmental regulation, administration officials will meet with a lobbyist who is lobbying on behalf of an environmental group, as well as a lobbyist who is lobbying on behalf of corporations.  As I said above, this is done because it is impossible for an administration to become an expert in all fields, so he outsources this part of his job.  Bringing in lobbyists with different opinions allows the official and the administration to be exposed to an array of differing opinions.

Mr. Obama is banning former lobbysts that he has hired from working on the same policy areas.  This does not make sense.  These people are experts in their fields and probably know more about the issues they previously represented than almost anyone else in the world.  Rather than excluding them from working in their fields, Mr. Obama should welcome these experts to put their knowledge of their areas of study into good use.  I think that this is a well intentioned rule that cause problems for the administration down the road.

Now, the good.  So far, Mr. Obama seems to be keeping his pledge for a more open and transparent government.  Yesterday, he announced that he was going to support a more loose interpretation of the Freedom of Information Act which would allow citizens to more easily obtain access to government files.  An open and transparent government is important in any highly functioning democracy, and I am glad that Mr. Obama has taken this step towards opening secret documents and records to the public.  Maybe soon we can find out about Area 51.

Americanly Yours,

Phred Barnet

I thought the speech was pretty good—say what you want about President Obama, but he is a great speaker. I thought that he had some nice, positive things to say about our Nation, and I especially liked the point he made about how great it is that a man whose father would not have been allowed to eat at a local restaurant 60 years ago has now become President. The American Dream is not dead!

I did, however, have problems with some of the things that Mr. Obama said. I have copied parts of the text of his speech and placed the in italics with my criticism of them below.

“On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord. On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn out dogmas, that for far too long have strangled our politics.”

I thought these sentences were completely inappropriate. For one, the way Mr. Obama described putting “hope over fear” makes his sound like a sore winner. I voted for Senator McCain, but I did not vote for “fear.” That was a ridiculous statement by President Obama which serves no purpose other then to reopen old wounds. I didnt vote for fear, I voted for free trade, free markets, economic freedom, experience, strength, and leadership. Obama did not need to say that.

On a side note, I have a friend (who will remain nameless here) who has an awful habit of changing his views to agree with whatever the candidate he supports says, even going so far as to copy the rhetoric of those who he supports. I have seen him do so for years and he did this quite a bit during the election. Well, he has already reminded me (in all seriousness on his part) that I “voted for candidates who preach fear.”

The final sentence of the above paragraph is troubling to me. Does Mr. Obama really believe that his election has put an end to politics? Does he think that there will be no political resistance to his lofty, overly expensive, and intrusive plans? He had better think again.

As far as false promises go, you can track these for yourself throughout Mr. Obama’s presidency. Here is a link to an Excel spreadsheet of the nearly 900 promises that Mr. Obama made during his campaign. Here is a webpage that tracks statements made by elected officials—kind of like Snopes.com for politics. They have created a user friendly table of nearly 500 of Obama’s campaign promises and his progress towards achieving them.  He is off to a great start so far.

“Our journey has never been one of short-cuts or settling for less. It has not been the path for the faint-hearted — for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things — some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom.”

The above statement is mostly true, but to me it provides another example of President Obama talking out of both sides of his mouth. He derides those who prefer leisure over work, yet he is calling for an extension of unemployment benefits so that unemployed workers can receive taxpayer money for doing nothing—probably the worst way to encourage hard work and employment. Bush already made a mistake by signing a bill extending unemployment benefits from 26 weeks to 39 weeks, but Mr. Obama wants even this to be extended. If you disagree with my assertion that this is bad policy, think about Europe’s extended unemployment benefits and their constant double digit unemployment rates. President Obama celebrates “the risk-takers, the doers, the makers of things,” yet he has plans to raise taxes on those very people. Raising taxes on risk takers (entrapreneurs) will not help our society create new innovations, and will surely not lead to the creation of the 4 plus million jobs that Mr. Obama has promised to create.

“What the cynics fail to understand is that the ground has shifted beneath them — that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works.”

Again, how can Mr. Obama believe that the day of political arguments and disagreements have ended. This is just not how things work in a Democracy. Sure, President Obama will enjoy a large majority for at least 2 years, this does not mean that we have reached the end of political arguments.

Our government is too big. This is clear, as is the fact that it is not working correctly. The proper role of the government is to protect its citizens from foreign invaders, to protect its citizens from violence brought on by other citizens, and to protect the citizens from fraud and abuse through the creation of an objective and fair legal system. These are the only duties and responsibilities of government. The government should not be providing, owning banks, making cars, placing priority on any one type of scientific innovation over another, “creating jobs,” or deciding what children should learn.

“Those of us who manage the public’s dollars will be held to account — to spend wisely, reform bad habits, and do our business in the light of day — because only then can we restore the vital trust between a people and their government.”

Did those words really come from the mouth of a man whose inauguration cost 4 times more than what was previously the most expensive inauguration in the history of this Nation and who has promised trillions of dollars in new spending and programs when the Nation is broke?  My trust will be restored when the budget is balanced.

Americanly Yours,

Phred Barnet

Lets put things in perspective:

George Bush’s inaugurations each cost around $40 million.

Bill Clinton’s 1st inauguration cost $33 million and his 2nd cost $23.6 million.

George H.W. Bush’s inauguration cost $30 million.

Obama’s inauguration is set to cost as much as all 5 of these previous inaugurations combined.

Economically speaking, these are not exactly the best of times.  Unemployment is rising and people are having trouble paying their bills.  In a time like this, should the American people really be forced to pay for this event?  After committing trillions of dollars that we do not have to bailouts and “economic stimulus,” our government should be trying to save money wherever possible, not paying for lavish parties.

The District of Columbia has anticipated their costs for the inauguration to be $47 million.  Virginia and Maryland will spend another $16 and $12 million, respectively.  The states are already broke–Virginia just cut $429 million from its public education budget and $418 million from its health care budget.  This is just not the right time for states to have to shell out money for a party when they cant even afford to educate their own children.

In 2005, Bush was criticized for spending $40 million on his 2^nd inauguration (even though only $17 million of this money came from the government). Yet, the media is not criticizing Obama even though his inauguration is costing about 4 times what Bush’s cost. If you are interested, this BBC article from 2005 details some of the complaints of Bush’s inauguration, including a request by Democratic Representative Anthony Weiner to cancel the inauguration because he says that the government shouldnt be throwing parties while people are dying in a war. We are still at war, but ill bet that Representative Weiner is not calling for Obama’s inauguration to be cancelled.  Also, I have yet to see an article online criticizing the costs of Obama’s extravagant inauguration (although, I am not surprised).

Mr. Obama fundraising during the previous election was nothing short of amazing.  Why couldn’t he use his network of donors to help fund the costs of his lavish inauguration.  Or, he could take the example of Jimmy Carter who intentionally scaled back his inauguration during a recession, spending only $3.5 million on his inauguration in 1977 to avoid drawing too much attention to himself while so many Americans were hurting.

Is it just me or does the story of an extravagant party for a Nation’s leader while its people suffer sound familiar?  Well at least maybe Obama will let us eat cake.

Americanly Yours,

Phred Barent

We should, however, worry about our economy now.  The national debt is rapidly marching towards ten trillion dollars ($10,000,000,000,000).  Our unfunded liabilities in Social Security and Medicare now total an additional sixty-seven trillion dollars ($67,000,000,000,000).  By 2012 the Medicare fund will be going into a deficit and we will be forced to spend tax dollars to keep up with Medicare payments.  By 2017, the same thing happens with Social Security.  American families now owe over $15 trillion in household debt.  We have nothing left.  We are witnessing the slow, painful fall of the American Empire.  It hurts me to watch because I love this Nation so much.

For years we threw money at problems without ever trying to really solve them (poverty, drugs, education, health care).  Now we have no money and things are getting worse in all of these areas.

Iconic American companies are being swallowed up by foreign firms at an unprecedented rate.  Budweiser is being bought out by a Dutch firm, Miller is now owned by South Africans, and Coors is owned by Canadians.  Ford, Chrysler, and General Motors are now on the brink of extinction and are closing down American plants to move to other nations.

Sovereign wealth funds (companies owned by foreign governments) have been buying up large stakes in American companies—these sovereign wealth funds now own about 10% of Citigroup, 20% of the NASDAQ stock exchange, 9% of UBS, 10% of Morgan Stanley.  They own 7.5% of the Carlyle Group (which owns major defense contractors, telecommunications and technology companies, CSX railroads’’ domestic container lines, and consumer companies like Baskin-Robbins and Dunkin’ Donuts).  China owns 10% of the Blackstone Group (which owns Hilton Hotels, American textbook publisher Houghton-Mifflin, Universal Studios Parks, and is in the process of purchasing a large stake in The Weather Channel).  These wealth funds also own well over 10% of Merril Lynch (RIP), 2% of Barclays (which controls large portions of the stock of many large companies—go here and put in any symbol and you will see that Barclay’s owns a large stake), 7.5% in Diamler, AG, and several hundred million dollars worth of Visa.

The German government owns 35.5% of DHL, 20.3% of Volkswagen, and 32% of T-Mobile.  Through its stake in Renault, the French government owns 6.9% of Nissan.  Any time that you buy a product or a service from one of those companies, you are essentially paying a tax to a foreign government.  For example, if you stay at a Hilton hotel, 10% of the profit made from your visit goes to the Chinese government.  If you buy a new Mercedes, 7.5% of the profits made subsidize the Dubai government.  Do you think that American text books will continue to criticize the policies of Mao, now that China owns 10% of the company that makes our history books?

This is socialism, but at least in traditional socialism, Americans would see some benefit from their dollars going to state-owned enterprises.  In this case however, American dollars are going directly into the hands of foreign governments.  Would foreign nations tolerate the American government coming in and buying up stakes in their countries?  think not.

Do you remember mercantilism from history class?  That is what is happening in this country.  We export food, chemicals, plastic, cigarettes, cotton, and many other raw materials, only to import these goods back into the country later as finished goods: the cotton comes back as clothing, the plastic comes back in the form of goods made in China, and so on.   We produce nothing here.   We consume foreign goods like the world is ending tomorrow.  We now have the import/export profile of a 3rd world nation.

Rome is burning while Congress is playing the fiddle.  Be scared.  You should be.  Your children will know a different America.

Americanly Yours,

Phred Barnet

Apparently this guy gets really drunk on a United Airlines flight from Japan to America a few years ago.  Then, he goes home and beats his wife.  The beating was so severe that it landed him an 18 month jail sentence.  The couple is now suing United Airlines for over $100,000 because they claim that it is somehow their fault that he beat his wife after drinking on United’s plane.

Are you kiding me?  Why should United Airlines be responsible for the actions of a drunk customer of theirs.  The man, an adult, got drunk on his own and then choose to go home and abuse his wife.  I have been drunk hundreds of times and have never beat up a woman.  United Airlines had no reason to believe that serving this man alcohol would result in him physically abusing his wife, and they should not be forced to pay any damages to this man.  It is his personal responsibility–not the responsibility of United Airlines–to ensure that when he becomes inebriated that he does not abuse his wife.

No rational person could ever abuse his wife and then claim that it is the fault of the airline because the airline served him.  The judge should dismiss this case and the couple should be forced to reimburse the court and the attorneys for United Arilines for the costs of this frivolous case.

We live in a society where our first instinct has become to place blame on others for our own faults and that is a shame.

Americanly Yours,

Phred Barnet