Americanly Yours

The War in Afghanistan will soon have been going on for 8 years with absolutely no end in sight.

Are we losing?  Maybe, maybe not.  But, it is clear that we are not winning.

A “surge” like President Bush’s successful strategy for turning around the Iraq War is unlikely to work in Afghanistan.

This War has cost hundreds of billions of dollars in Treasure and, more importantly, hundreds of honorable American lives.

I supported this War for a long time–pretty much everyone did at some point.  In November 2001, shortly after the War started, only 9% of Americans thought the War was a mistake.

But, changing situations create the need for changes in outlook, and often changes in policy.

Whether or not the War was a mistake, a majority of Americans now want our troops to leave Afghanistan.

We have not succeeded in dismantling al-Qaeda.  We have not captured Osama bin-Laden or many of the other high value targets.

The Soviet Empire’s premature end was due in part to its war in Afghanistan.  We should not allow history to repeat itself and bring an end to the mighty American Empire as well.

This Nation is hemmorhaging money, the economy is dismal.  It is time to stop spending so much of our National fortune on this War.  Our cost for this War will be paid back  over the next 3o years to China and others who have loaned us the money to fight.

Afghanistan’s government is crumbling and it now appears that Hamid Karzai, Afghanistan’s American backed Prime Minister may have engaged in ballot-stuffing and other measures of voter fraud to keep himself in power.  These actions are preciously the same that American officials have criticized Iran for taking.  By standing behind a government like this, we are implicitly voicing our approval of these actions.

This war has spilled over into Pakistan and has greatly destabilized a nation with nuclear weapons–threatening the security of the entire world in the process.

The anti-war left has recently been strangely silent over the wars in Afghanistan and Iraq.  My assumption is that they have not wanted to create political problems for a President that they largely supported while he is trying to push through health care and environmental legislation also largely supported by this group.  With the health care and cap and trade bills headed for near-certain failure or at a least a major watering down, I suspect that the anti-war left will begin to be more vocal in its opposition to the War in Afghanistan again soon.

New polls show that the majority of Americans now oppose the War in Afghanistan.  President Obama’s approval ratings have now dropped to the mid-40-low 50’s range.  You can be certain that President Obama does not intend to sacrifice his popularity over a war that was started on President Bush’s watch.

In the coming months, President Obama soon announce his decisions on what to do about the War in Afghanistan.  Many policy analysts believe that the President will announce a large increase in the number of troops for Afghanistan.  This is exactly the wrong strategy.  President Obama should begin a massive withdrawal of American troops from Afghanistan.  Im not saying that we shouldnt continue to hunt bin-Laden–I would favor leaving behind an extremely small and elite force to hunt terrorists and bring them to justice.  However, we should stop engaging in “nation building,” stop propping up Karzai’s corrput government, and stop fighting this War.  If other Nations wish to continue fighting this War without our aid, let them do so, but the United States government should cease spending the lives and the wealth of Americans on this War.

We can still leave Afghanistan honorably; it is time to do the right thing and bring our brave and heroic men and women home from Afghanistan.

Americanly Yours,

Phred Barnet

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Im sure that everyone has heard about the “Cash for Clunkers” program.  This is another one of those government programs that sounds like a good idea until you really think it through.

In an effort to both stimulate the economy and aid the environment, Congress and the Obama Administration enacted a $1,000,000,000 [$1 billion] which allowed people to trade in old cars with low gas mileage and receive a discount of up to $4,500 on new cars with high gas mileage.

Because protecting the environment was one of the goals of this program (and to protect against fraud), dealers were required to pour a solution into the engine of the car that was traded in which permanently disables the car.  The car is permanently taken off the road and is recycled.

Sounds good, right?  Not quite.

Who buys new cars?  People with money, of course.  The rest of the driving population buys their cars used from people who feel the need to buy a new car every few years.  By disabling used cars, the government is permanently removing their supply from the market.  Doing so prevents lower and middle class Americans from buying that vehicle, and has the net effect of raising the prices for used cars.

Someone who is still driving the 1995 Cadillac DeVille that they bought from their neighbor 7 years ago probably isnt very likely to go out and buy a 2010 Honda Accord, even under this program.  But, they would be much more likely to purchase the 2003 model DeVille that their neighbor bought after selling the 1995 DeVille 7 years ago.

But, rather than allowing the market to work in this fashion, the “Cash for Clunkers” program removes the 2003 DeVille–a perfectly good car–from the market and makes it tougher for the person still driving the 1995 DeVille to find a used car that fits his budget.

My personal opinion was that one of the reasons that this bill was passed was to protect the United States’ “investments” in [read:  theft of] General Motors and Chrysler.  It is clear to all that Congress and the Administration intended for this program to stimulate the economy and help the environment.  But I also believe that the government wanted to use this program to inflate the revenues at GM and Chrysler to make the American people less uneasy about the bailouts of those firms.  Think about it.  If you had just made a hugely unpopular move like taking over two iconic American automakers, you would do anything possible to convince the public that it was a good decision.  This includes funneling money to those companies to make their revenues look good.

My guess is that this program will actually hurt GM and Chrysler as compared to their competitors, namely Ford.  Why?  Well for one, a new Rasmussen poll found that 66% of Americans have at least “a somewhat favorable opinion of Ford.”  The same poll found that “General Motors is viewed favorably by 38%… and unfavorably by 56%”  It also found that 34% have at least somewhat favorable opinion of Chrysler “while 55% see the company unfavorably.”  The American people are angry at the other two companies for taking taxpayer funds, and Ford is now perceived as the only American automaker that isnt owned by the government.

They also make much better cars now than they used to.  I love my 2007 Ford Fusion.

In another poll that was published on the same day, Rasmussen also found that 46%of Americans are more likely to buy a Ford because they did not take a government bailout (13% said they were less likely and 37% said it didnt make a difference).  41% OF Americans also believe that quality of GM’s cars will get worse now that the government owns the company, while only 19% think it will get better.

[Investors like me know this.  For the sake of disclosure now that the FTC has announced that it is going after bloggers, I am a proud stockholder of Ford Motor Company and have seen the stock rise by about 18% in the last week.  Still, I am 100% opposed to this program.]

Additionally, the government’s intention was to get people to purchase cars with much better fuel efficiency and the new Ford Fusion Hybrid gets 41 MPG and was rated higher than the Toyota Camry Hybrid, making it an attractive choice for anyone who decides to trade in their clunker.

If the intention was to increase the revenues at GM and Chrysler, this program will backfire, as do most government programs.  My prediction is that the market shares of Ford, Toyota, Honda, Hyundai, and Kia will rise at the expense of GM and Chrysler.

This program also raises further questions about the competency of the government.  Love or hate this program, it was administered poorly.  No, this doesnt “prove that government cant run our health care system.”  It should, however raise at least some concern about the capability of government to administer programs.  It should also serve as a warning that when the government offers people a massive discount to use a service, people will take advantage of it (people respond to incentives).  The government and taxpayers should at least use the example of this program to think about what the effects of what will be perceived by many to be free health care will have on an already strained system.

This program should remind us to be weary of government estimates.  The $1,000,000,000 [$1 billion] allotted for this program was expected to last at least until the program’s anticipated end date of November 1st.  Instead of lasting for 4 months as estimated, it lasted less than one month before it exhausted its funding.  If the government was this wrong–way wrong–on estimates for its costs of giving out coupons for discounts on cars, can you imagine how far off could its estimates of the costs of administering a $1,000,000,000,000 [$1 trillion] “free” health care program be?

Its worth thinking about.

Americanly Yours,

Phred Barnet

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The non-partisan Congressional Budget Office recently released a report saying that the President’s healthcare plan would be very costly–the CBO estimated that the plan would cost around $1,000,000,000,000 [$1 trillion] in new debt and would only decrease the percentage of people without health insurance by around 1/3.  From the CBO director’s blog:  “According to our preliminary assessment, enacting the proposal would result in a net increase in federal budget deficits of about $1.0 trillion over the 2010-2019 period. When fully implemented, about 39 million individuals would obtain coverage through the new insurance exchanges. At the same time, the number of people who had coverage through an employer would decline by about 15 million (or roughly 10 percent), and coverage from other sources would fall by about 8 million, so the net decrease in the number of people uninsured would be about 16 million or 17 million.“

In other words, this plan is extremely expensive and will only accomplish around 1/3 of its goal.

$1,000,000,000,000 [$1 trillion] over 10 years comes out to $100,000,000,000 [$100 billion] in new debt per year from this program.  If you divide that up amongst the $304 million people living in this country, the cost of this program in new debt per person per year is $328.95… BUT…

Not everyone pays (ie, the poor) or even files for taxes (ie, children) .  According to the IRS, 132,276,000 individual tax returns were filed in 2006.  Of these returns, 43,400,000 had no tax liability (and many actually had a negative tax liability).  This means that taxes were paid on 88,876,000 tax returns. [Note:  i used the 2006 IRS numbers because I was unable to find a percentage of returns that didnt pay taxes in 2007]

Now, if we take the $100,000,000,000 [$100 billion] and divide it up among the 88,876,000 income tax returns that paid taxes, we find that those Americans who do pay taxes will be forced to pay an average of $1125.16 per person per year to finance President Obama’s healthcare plan. Remember, this is an average–many Americans will be forced to pay much more than this.

And remember, this $1125.16 per taxpayer will only cover about 1/3 of those Americans who do not currently have health insurance.  Covering the other 2/3 will undoubtedly be much more expensive.

As a taxpayer, are you OK with the government telling you that you HAVE TO pay $1125.16 per year to pay for someone else’s healthcare?  If not, you need to call or email your representative and tell them that you oppose this plan–before it is too late.

Americanly Yours,

Phred Barnet

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The nonpartisan CBO made a disturbing announcement in regards to our future budget deficits yesterday.

“President Barack Obama’s budget would produce $9.3 trillion in deficits over the next decade, more than four times the deficits of Republican George W. Bush’s presidency.” Remember that Mr. Obama criticized President Bush for sharply increasing the deficit which Mr. Obama inherited.  Well, Mr. Obama’s ambitious plans will leave his successor with a much much larger debt to inherit.

President Obama inherited a deficit of about $1,000,000,000,000 [$1 trillion] from President Bush’s administration–and the Democratic Congress.  He then added another $800,000,000,000 [$800 billion] to the budget by passing his gargantuan “stimulus” plan.

Mr. Obama did inherit a large annual deficit from the Bush administration, however, trillion dollar deficits were by no means emblematic of the Bush administration’s record.  President Bush’s deficits peaked at $412,700,000,000 [$417 billion] in 2004, but dropped down to $162,000,000,000 [$162 billion] by 2007– a drop of over 60% from its peak.  In 2008, the deficit did soar to record heights, however this was mainly due to the massive stimulus bill that sent every working American a check and was championed by President Bush and the Democratic Congress.  However 2008’s record deficit is still 1/4 of the size of this year’s deficit and less than half of the projected average annual deficit for the next decade!

And, the $9,300,000,000,000 [$9.3 trillion] in deficits projected by the CBO is $2,300,000,000,000 [$2.3 trillion] higher than the total deficits projected by President Obama back in February.  As you may recall, I previously wrote about Mr. Obama’s plans to “cut the deficit in half” by 2013 and criticized that statement as a distortion of the facts.  However, the CBO is now projecting that Mr. Obama’s deficit for that year will be $139,000,000,000 [$139 billion] higher than the numbers that he announced in February!  “Obama’s budget promises to cut the deficit to $533 billion in five years. The CBO says the red ink for that year will total $672 billion.” And, following that year, the deficits will begin to climb again, ageraging just under $1,000,000,000,000 [$1 trillion] each year for the next ten years!!!

The avergae deficit for the next ten years will be as large or larger than the one that President Obama criticized President Bush for leaving behind.

The large increases in spending in 2008 and 2009 have been justified by Presidents Bush and Obama and Congress as temporary measures that are “necessary to end the recession and stabilize the economy.”  But economists, the Foderal Reserve, and the CBO are all saying that the recession will end in late 2009 or early 2010.  Why then is the President proposing budgets that continue to promote reckless deficit spending after the crisis has ended?

Americanly Yours,

Phred Barnet

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A few weeks back, several of my friends and I exchanged arguments over email.  I wanted to pull a quote from a response of one of my friends and use it to talk about interest rates.

“. . . TBILLS at the lowest rates ever!  We can print money for nearly no intrest [sic]. . .”

I think that this is a common misconception among people.  Yes, the FED has a target rate of 0-1/4% for the Federal Funds Rate, but this rate is only the rate that banks charge each other for overnight loans.  This is not the rate for US Government bonds which are issued to fund government debt.  In fact, US government bonds have a much higher interest rate than the overnight fed funds rate.  Government bonds are largely traded on the open market which means that they are priced through supply and demand.  The current rate on a 10 year bond (about 3%) can be found here.

We have a large national debt that is growing every day.  Of the money that we owe, our debt to China is over $1,000,000,000,000 [$1 trillion].  To continue to fund ambitious “stimulus” bills, government bailouts, and large social welfare programs like medicare and the coming socialized health care scheme, we will have to continue to borrow funds from American citizens and foreign nations.

As we increase our money supply, our money becomes worth less.  As we increase our borrowing, we have to pay higher interest rates in order to entice countries and private citizens to loan money to us.  Both of these things are happening at the same time, and happening during a global recession.  This leads me to believe that interest rates on government bonds will be rising (if no one wants to loan us money and we want to keep running a deficit, we have to raise interest rates).

We have more than doubled our money supply in the last year!  If you dont believe me, see the chart below, or click here.

But, things dont end there.  China’s Premier, Wen Jiabao recently expressed worry about the value of the dollar.  He said “Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried.”  Apparently, there is even debate within China about whether or not to continue to invest so heavily in American bonds. And of course, this is coming at a time when China is dealing with their own economic problems.  China needs to have high levels of annual economic growth in order to pacify their increasingly restless (and violent) rural populations.

China just announced a stimulus of their own totaling over $500 billion.  The money being spent on that stimulus is money that cannot be loaned to the American government.

One thing that very few people are aware of is that President Obama’s anticipated budgets for his 8 years as president (assuming that he wins a second term) have the national debt doubling to over $20,000,000,000,000 [$20 trillion]!  In order to finance these massive budget deficits, we have to borrow this money from someone.  If China turns off the loans, it is going to be very hard to find the money to continue to fund massive national programs, while fighting two wars and bailing out American industries.  China has us right where they want us… and they know it.

Americanly Yours,

Phred Barnet

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