Americanly Yours

The news leaked several days ago that in tonight’s State of the Union address, President Obama will speak about the need to curb the government’s out of control spending.  He will announce spending freezes on “non discretionary,” non military spending, as well as pay and bonus freezes on some political appointees.

To put this announcement in context, I want you to imagine a 400 lb man who was eating 3100 calories per day a year ago.  A year ago, the man started eating 3555 calories per day (an increase of 455 calories–14.67%) and gained 64 lbs during the past year and now weighs 464 lbs–an increase of 16%.  Now, the even fatter man realizes that his weight has become an even more serious problem and he hatches a plan to deal with it.  He decides that he will freeze the increases in his caloric intake from most snacks for the next three years.  However, he decides that instead of cutting his meal sizes, he will actually continue to increase their sizes.  He will also increase the sizes of some of his snacks, while freezing the growth in the sizes of other snacks.  He concludes that these meals and snacks are essential to his survival and that therefore he must increase their sizes if he wants to get healthy.

Does this example sound far fetched?  It isnt.  The numbers used above are scaled down numbers from our federal budget.

Our 2009 budget, passed in 2008 under President Bush called for $3.1 trillion in spending.  Of this, $1.89 trillion was “mandatory”–it funded government social welfare programs.  These are the meals described above.  The remaining $1.21 trillion was considered discretionary funding–these are the snacks described above.

But, included in the discretionary funding of that budget was $515.4 billion for the Defense Department, $145.2 billion for the War on Terror, $37.6 billion for the Department of Homeland Security, and $44.8 billion for the Department of Veterans Affairs.  That total is $743 billion.  These are the snacks that the man above will not only continue to eat, but will actually increase the size of.

Now, lets look at the 2010 budget which was proposed by President Obama last February.  This budget had $3.55 trillion in spending.  Of this, $2.184 trillion was “mandatory.”  This is an increase of 15.6% in only one year.  As you can see, the costs of Social Security, Medicare, and other programs are rising rapidly.

The remaining $1.368 trillion was considered discretionary.  The cost of these snacks increased by $13.1% in that single year.

In other words, while discretionary costs are rapidly rising they are not the biggest problem.  Our mandatory costs are not only bigger than our discretionary costs–but mandatory costs are increasing at a much faster rate than are discretionary costs.

But,this budget included $663.7 billion for the Defense Department, $52.5 billions for the Department of Veterans Affairs, and $42.7 billion for the Department of Homeland Security.  The total here was $758.9 billion.  This is an increase of about 2.14%.

If President Obama were proposing to cap the annual growth in the total budget at 2.14%, the majority of Americnas would be pleased.  However, as mentioned above this spending freeze will not include mandatory spending–the biggest and fastest growing part of the budget.  But, just like the fat man described above, our national debt increased by 16% in President Obama’s first year–and just like that fat man, we are going to increase what we eat.

The government is cooking itself bigger meals as well as increasing the size of its snacks.  This is not the way to get in shape.  Using our analogy of the overweight man, we see that at best, this will only slow the rate at which the man gets fatter.

And, we would be fools to think that the President’s freeze on discretionary spending actually means a freeze on discretionary spending.  The news of the spending freeze was leaked the other day, but this morning news leaked that the President was going to request a 6.2% increase in the education budget.

Of course this money will come with strings attached.  Federal money always comes with strings attached and efforts to increase federal control.  Federal funding for education is nothing more than a move by the federal government to expropriate the money from Americans through taxes and then sell that money back to State education departments and local districts in exchange for influence.  The Carter Administration nationalized education in 1979 and the effect has been disastrous: steady declines in education all across the nation and sharp increases in costs of education.  These federal actions have made the American people pay more money for less education.  But, we cant be surprised by the Obama Administration’s efforts to further erode local and family control over yet another aspect of our lives.

On top of this, President Obama will announce an $8 billion high speed rail initiative in Florida tomorrow.  This sounds nice, but the fact of the matter is that the high speed rail systems proposed by the government is a horrible idea that will be extremely costly, bad for the environment, and will not be high speed!  This isnt actually a new plan, but rather a rehashing of a plan that President Obama put forward last year.

The good people at the Georgia Public Policy Foundation put together a report on this plan last year.  You can find that report here.  Here are a few excerpts:

“The FRA is not proposing to build 200-mph bullet trains throughout the U.S. Instead, in most places it is proposing to upgrade existing freight lines to allow passenger trains to run as fast as 110 mph – which means average speeds of only 55-75 mph. This would actually be slower than driving for anyone whose origin and destination are not both right next to a train station.” (Page 6)

“Even with these optimistic assumptions, high-speed rail reduces corridor transportation energy consumption by only 8.3 percent. This means the operational energy and greenhouse gas savings fall to zero if we assume instead that automobiles and airplanes are, by 2025, just 8.3 percent more energy efficient than they are today. If automakers meet Obama’s fuel-efficiency standards, autos will be more than 30 percent more efficient in 2025 than they are today, so high-speed rail will actually be wasting energy.” (Page 21)

“the FRA system will carry each person an average of 58 miles per year.” (Page 25)

But, these are just the two spending increases that have been leaked today.  If we factor in the “mandatory” increases in social welfare programs, the increases in defense and intelligence budgets, and the new jobs/stimulus programs that Congress is almost sure to pass, we are still looking at heafty budget increases.

The man in my analogy would be stupid to not go on a diet.  Our government should do the same.  It needs to stop eating snacks where it can and begin to reduce the size of its meals to a sustainable level.

If President Obama is serious about preventing the looming debt crisis from wiping out decades of economic growth, he needs to change his tone.  Instead of just freezing spending in certain areas while allowing the already bloated budget to expand, Mr. Obama should cut the budget where possible.  He should also look for ways to stop the increases in the costs of mandatory spending before it is too late.

But of course, it may already be too late.

Americanly Yours,

Phred Barnet

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The phrase “you never get a second chance to make a first impression” works for Presidents too.  President Obama’s first year in office has been marked by failure after failure.  His only remarkable legislative success, last year’s “stimulus” bill is itself a failure.  But just how has the  first year of Mr. Obama’s Presidency been a failure?  Lets take a brief look:

Economy:

The economy continues to deteriorate under President Obama’s leadership. When President Obama pitched the “stimulus” bill to the skeptical American public, we were told that if this “crucial” bill was not passed soon (ie, before Congress had ample time to read the bill) then the economy would face devastating consequences.  This was of course a well calculated and bold faced LIE.  The fact of the matter is that the majority of the spending in the “urgent stimulus” bill were not going to be spent for over a year.  We were warned by the Administration that failure to pass the bill would cause unemployment to skyrocket and could cause it to reach as high as 9%, but passing the bill would keep unemployment from raising above 8% (see this chart put out by the Obama Administration to urge support for the “stimulus”).  So, we passed the bill and despite (or because of) this, the official unemployment rate surged past 9% and currently sits at 10%.  Of course, the 10% figure is a lie as well.  Previous administrations changed the way that the unemployment rate was measured in order to disguise how bad things really were.  This U-6 unemployment figure is still reported by the government, however, the government now uses U-3 as the official unemployment number.  While U-3 unemployment is 10%, U-6 unemployment is 17.3%.  This figure was 13.5% one year ago.  Simply put, things are bad.  But, government data collection is shady and should not be trusted as definitive.  Shadow Government Statistics, a private data collection/analysis website places unemployment at over 22%!

Ben Bernanke failed to see the impending collapse even shortly before the economy tanked.  While a candidate for President, Mr. Obama repeatedly criticized the economic policies of the Bush Administration.  By choosing to reappoint Ben Bernanke as Chairman of the Federal Reserve, President Obama was giving his tacit approval to the policies of the Bush Administration.

The administration has also increased the national debt to dangerous levels.  The US is now in serious risk of having its credit rating downgraded.  Any hopes of an economic recovery would be shattered if this were to happen.

Foreign Policy:

Candidate Obama repeatedly attacked the Bush Administration on three fronts: the economy, the wars, and foreign relations.  President Obama has failed to correct the errors of the Bush Administration on any of these areas.  As mentioned above, President Obama has continued the “stimulus” and bailout policies initiated by President Bush.  His reappointment of President Bush’s Federal Reserve Chairman Ben Bernanke confirms the fact that President Obama’s economic policies are not notably different than those of President Bush.

The second area where candidate Obama frequently attacked the Bush Administration was his handling of the wars in Iraq and Afghanistan.  Mr. Obama criticized President Bush’s Iraqi surge, falsely claiming that it was not a success.  If I were a candidate who ran on a platform of change and who repeatedly criticized the previous administration’s military policies, I surely would not have allowed the previous President’s Defense Secretary to continue serving.  Furthermore, if I had attacked the former President’s Iraqi surge strategy, I would not have employed a similar strategy in Afghanistan.  However, President Obama has done both of these things.  He kept Defense Secretary Robert Gates in his position, and he has sent an additional 68,000 troops to Afghanistan since taking office (many of those troops were sent in the weeks following the President’s claiming of the Nobel Peace Prize).

Candidate Obama promised to have all of the combat troops out of Iraq within 18 months after taking office.  That leaves him less than six months to remove over 100 thousand troops from Iraq.  Id put the chances of this happening right at zero.  More likely, President Obama will declare that the troops in Iraq are no longer combat troops (despite the fact that they will almost surely be engaging in combat).

President Obama missed a historic opportunity to improve relations with Cuba.  Since taking over, Raul Castro has introduced many positive reforms, introducing notions of private property, increasing wages for productive workers, and allowing Cubans to take advantage of certain technologies.  Raul Castro’s Cuba still has a very long way to go, but any movement in the right direction should be seen as positive.  Candidate Obama pledged to improve relations with Cuba.  Instead, President Obama has continued to support the same policies towards Cuba which have failed for the past 48 years.  Of course, this si just one example of this administration’s failed foreign policy.

Candidate Obama pledged to repair our strained relations with foreign nations.  President Obama has failed at this as well.  He has been publicly scolded by Russia’s Putin, Israel’s Netanyahu, France’s Sarkozy, and other allies.  In fact, I would argue that our foreign relations have not noticably improved with a single foreign nation since President Obama’s inauguration.

Agenda:

President Obama has almost completely failed in his efforts to push his agenda during his first year.

Remember, this President was the candidate who vigorously campaigned on a platform of “change.”  There have been few noticeable changes in the previous year.

With sizable majorities in Congress and a public eager for change, President Obama should have had a relatively easy time pushing through at least some major parts of his agenda.  The only major bill that President Obama was able to push through Congress during his first year in office was the “stimulus bill.”  This was a bill which was passed by using intimidation, threats, fuzzy math, erroneous estimates, and down right lies.  The “stimulus” bill was a costly mistake that did little if anything to stimulate the economy but will cost taxpayers around $1 trillion when the time comes to repay the costs of financing this bill.

Congressional Democrats pushed various health care reform bills for well over 6 months.  During this time, President Obama showed almost zero leadership on this issue, basically promising to sign any bill that came out of Congress.

Had President Obama taken a leadership role and urged Congress to pass a series of smaller health care reforms instead of trying to push a sweeping bill down the throats of an adamantly opposed American public, he could have signed several of these reforms months ago and moved onto other pressing issues.  Instead, Democrats wasted the better part of a year, alienated a large portion of American voters, and came up empty handed.  Democrats might now adopt the strategy of pushing through smaller, incremental reforms, although it could even be too late for that approach.

Opponents of government controlled health care can thank President Obama’s complete lack of management abilities for preventing the nationalization of health care that seemed to be a foregone conclusion several months ago.

The President’s inability to lead has also prevented the passing of cap and trade and several other government intrusions into the lives of individuals.  He has placed his coalition in danger time after time, and now seriously risks losing the House of Representatives in November.  Things also look increasingly likely that the Senate may be in play in November as well.  More ont his in a future article, but it is beginning to look very likely that Democrats will lose President Obama’s former Senate seat, Vice President Biden’s former Senate seat, Harry Reid’s Seat, and possibly Hillary Clinton’s seat.  This would have been unthinkable only one year ago, but then again so would a Republican winning Ted Kennedy’s former Senate seat.  President Obama has alienated Democratic voters to a degree that even the most optimistic Republican would have thought to be impossible a year ago.

President Obama should follow the lead of Domino’s Pizza: soak in and address the valid criticisms, revamp his “product,” and use his rhetorical skills to sell his new image to the public.  Failure to do so can only lead to a changing of the guard in the 2012 Presidential election.

Americanly Yours,

Phred Barnet

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How exactly did we get to the point where government owned banks started charging credit card holders fees for paying off their balances every month?

The government passed laws like the Community Reinvestment Act which essentially mandated banks to loan to people who would not have been able to obtain loans otherwise.  Then, the government and the Federal Reserve created money out of thin air and lent it to banks at absurdly low rates.  Flush with new and cheap money, these banks massively increased their lending to “sub-prime” borrowers (begin bubble).  With the money supply growing at unprecedented rates in the 1990’s and this decade, there was always enough money for banks to make loans.  Borrowers were able to take out second mortgages at very low rates.  Home builders rapidly built houses to meet soaring (bubble-induced) demand.

As with all bubbles, this one burst, leaving home builders unable to sell newly built houses and borrowers unable to meet their obligations.  Banks had sold off the rights to their lender’s payments so they would have more money to make new loans.  This left the banks in the same boat as homeowners who could not make their payments.  But, while homeowners and home builders had to file for bankruptcy and sell off their assets to pay their debts, the banks used their lobbyists, fear, and their ownership of the Federal Reserve to convince our government to bal them out.

The government and the Federal Reserve then printed up a bunch of money–they simply created it out of thin air–and gave it to the banks in exchange for ownership.

This happened on October 3rd, 2008.  I can understand the government’s perverse rationale that led it to bail out these banks.  What I can not understand is why, over a year later, the government continues to own large stakes in these banks.

The government has now taken to regulating the salaries of banking officials, as well as the actions and practices of these banks.

So, it comes as no surprise to the observant that the government would use its power and control to create perverse incentives.

Bank of America and Citigroup–two firms now under the ownership of the federal government have begun implementing new fees.  These fees are not on late payments, gong over one’s credit limit, or cash advances.  Instead, these government owned banks have announced fees for customers who regularly pay off their balances.  Customers who leave monthly balances on their cards will not be charged the fees.

A fee is similar to a tax (especially if t is levied by a government owned entity).  Both taxes and fees use pricing to create incentives to change behavior.

Because Bank of America and Citigroup are owned by the government, a fee on those who pay off their balances regularly can be viewed as a tax on them.  Because those who leave monthly balances on their cards are exempt from these fees, this can be viewed as a subsidy for those who leave balances.

Our government is creating perverse and dangerous incentives: they are incentivizing debt and discouraging good and proper financial habits.

But, you cant hardly be surprised by this.  After all:  our perverse government’s perverse actions do tend to lead to perverse incentives.

Americanly Yours,

Phred Barnet

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For the first time in almost 35 years, there will be no cost of living increase in Social Security payments.  In the predictable “something must be done about this [so called] problem” mentality of this administration, President Obama has proposed sending $250 checks to over 50 million seniors to help them cope with their financial woes.

The problem here is that there is a very good and simple reason why there is not going to be an increase in Social Security payments: prices have dropped by 2.1% since the fall of 2008, meaning that the money that seniors already get from Social Security actually buys more goods and services than it did last year.  On top of this, the Social Security Administration has already given seniors a large increase in their payments this year: in January, seniors received a 5.8% boost in their payments, the largest increase since 1982.

Once again, President Obama is using misguided “logic” to support his own political goals.  Social Security payments are indexed to price inflation, however, they are not allowed to be decreased, meaning that a decrease in prices actually makes seniors much better off.

I understand that many seniors are suffering in this recession.  Many have lost a great deal of their savings due to the collapse in stock prices.  However, Congress decided over three decades ago that Social Security payments would be linked to the cost of living.  Besides the obvious reason of guaranteeing seniors a livable income, Congress likely had another reason for guaranteeing the benefits: they wanted to take the decision out of the hands of the political process.  Right or wrong, it will be very difficult for members of Congress to vote against the $250 payment for seniors.  For one, seniors are a vulnerable group, many of whom are living only on their fixed Social Security payments.  Seniors also vote–a lot.  As a group, they historically have the highest rates of voter turnout.

I firmly believe that this bill should be voted down.  For one, President Obama’s proposal to send checks to seniors  is addressing a problem that doesnt actually exist: seniors can buy more for their money than they could a year ago.  Additionally, these payments will cost roughly $13,000,000,000 [$13 billion] in money that the government does not have.  The money being spent on this non-existent problem will have to be expropriated from hard working citizens or printed out of thin air (devaluing the savings and earnings of anyone who does not receive a payment).

This “something must be done” mentality is flat out wrong.  Many supporters of the bailouts, stimulus, and other interventionist policies defend them not on moral or economic grounds, but rather defend them by saying that “at least they are trying something.”  This mentality has brought this once great Nation to the brink of bankruptcy and has brought government regulation into nearly every single aspect of daily life.  We can only hope that enough members of Congress will do the right thing and oppose these payments.

Americanly Yours,

Phred Barnet

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We are making good progress towards getting this bill more support.  We have to keep up the effort!  The Senate is still preoccupied with the health care debate, but a vote is expected on that issue soon, meaning that there will be more time for Senators to focus on passing S 604.

In case you didnt notice, I put up an entire section devoted to this bill.  You can find it right under the Americanly Yours logo, or by clicking here.

If you use Facebook or GMail, please consider adopting the following messages as your “status” daily.  Even if you are not willing to make these messages your status, please consider calling the Senators.  This is very important!

Status for Monday, October 12:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Mary Landrieu (LA) (202) 224-5824. Republican: Michael Enzi (WY) (202) 224-3424. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Tuesday, October 13:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Kristen Gillibrand (NY) (202) 224-4451. Republican: George LeMieux (FL) (202) 224-3041. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Wednesday, October 14:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Tim Johnson (SD) (202) 224-5842. Republican: Richard Lugar (IN) (202) 224-4814. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Thursday, October 15:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Tom Udall (NM) (202) 224-6621. Republican: Olympia Snowe (ME) (202) 224-5344 . It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Friday, October 16:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Jay Rockefeller (WV) (202) 224-6472 . Republican: Susan Collins (ME) (202) 224-2523. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Americanly Yours,

Phred Barnet

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