Why I am Angry

The Kansas City Star’s front page article recently was about anger of town hall meeting participants. They only partially got right why people are angry in the first place. I agree that many people are acting rather stupidly by comparing Obama to Hitler, but our anger is very real and the actions of a class of morons should not diminish that fact. I am also disturbed that the Speaker of the House Nancy Pelosi has the gall to call the anger an astro-turf movement. There is nothing fake about the anger; let me tell you why I am angry, and I don’t need some schmuck from a right-wing organization to coach me either:

We, the people, feel we no longer have a voice. We call our elected representatives in Washington, D.C. to tell them in overwhelming numbers that we do not support TARP or a stimulus plan and they refuse to listen and pass those measures anyway. We are suffering through a terrible economic downturn and are cutting back our own spending habits while the Washington, D.C. crowd continues to dole out the pork. They give themselves a pay raise while millions of jobs are being lost. They decide that health care reform is needed immediately, which I agree it is, but they try and ram through complex legislation that they have no time to read, no one really understands and it does not even include the basics like tort reform. It appears that over and over again, legislation is being written by special interests for special interests and not for the people. Meanwhile our national debt continues to increase to an unfathomable $12 trillion, the budget deficit for this year alone is nearly $2 trillion, and we pay over $300 billion a year in interest on debt. A recent Kansas City Star article stated that the latest forecast from 2010 to 2019 estimated an additional $9 trillion budget deficit for a potential national debt of more than $21 trillion. How are we supposed to dig ourselves out of that hole? Washington, D.C. is not making tough decisions for fear of the political ramifications; rather they continue to pass legislation that is dubiously funded by increasing the taxes on the “rich” while ignoring the very real long-term fiscal consequences. They are intent on a carbon cap and trade system, which some have argued will not do anything against “global warming” and it gives away most of the initial credits instead of charging for them (again special interests and their influence). They institute a cash-for-clunkers program that is not well administered and is nothing more than a car bubble akin to the housing bubble. At a time when more and more people are getting back to basics they seem to be running in the opposite direction.

I have no ties to the “invisible hand” supposedly behind all the “manufactured” outrage. I am an independent voter that despises the republican and democrat parties. I worry what the future has in store for my children because I see that they will have it very hard if we continue down the road we are currently on. Our elected officials consistently refuse to change course. It is simply unsustainable to continue to run this country the way they are doing. It is not working and the rest of the world is beginning to see that. And I refuse for my children to be sold into debt bondage because of the ambivalence, ignorance, and arrogance of our elected officials. They seem to be more concerned with getting their names on bridges and buildings than doing the right thing.

Gee, I wonder why we are angry.

“Your silence gives consent.” - Plato

Do the opposite of whatever they want to do

Caveat: I know full well that the policies of President Bush and others got us where we are today. I was against all of his fiscal policies. I also know that the democrats sat idly by and said nothing about the explosion in spending. They certainly did nothing about Freddie Mac and Fannie Mae. Sure they protested the Iraq war, but I never heard them complain about the other $4 trillion Bush added to the debt.

There are many within the “intellectual” elite circle and ruling class calling for more stimulus. Paul Krugman, Nobel Laureate, and Robert Reich, former Secretary of Labor under President Clinton, are among those that support such thinking. President Obama appears to be listening to these wunderkids and is making rumblings of more stimulus spending coming our way. They say we need more stimulus than Japan had in their lost decade. Really? Have any of them stopped to think about what that would mean? If you compare the size of the Japanese and American economies and extrapolate we would need a stimulus package worth more than $20 trillion. Now does that pass the sniff test? I don’t think so. Most people in their gut know that this, just like bailing out AIG or GM, is the wrong course. Unfortunately for us, those people are not in charge.

Many of these people wanting more stimulus spending subscribe to Keynesian economics. Keynesian economists believe that government spending is the only way to get an economy in the doldrums going again. Please someone explain to me how the path we are on is sustainable and will not have long-term consequences. Let’s sum up where we are today:

National debt: $11 trillion and growing.
Budget deficit: $1.5 trillion this year and likely $1 trillion for years to come.
Unfunded liabilities for Medicare, Medicaid, and Social Security: $60 trillion and growing.

Looking at those numbers I cannot fathom how spending more money will help. Sure short-term, it may do some good, but then how are we going to pay the tab? It is the height of irresponsibility to push this bill onto our children and grandchildren. President Obama wants more programs and more spending. How is that possible without completing destroying the dollar and creating a Wiemar Republic scenario? Even Keynes pointed out that “governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.” Sound familiar? That’s where we are at now folks. But there are some people out there that have no problem with monetizing our debt. While small, short-term monetization may not pose a problem we are well beyond that. And I think they know it and are trying every stop gap measure hoping that the economy will turn around enough to naturally get us out of trouble. Of course they will claim that it was their massive spending that lifted us out of this recession. BULL SHIT.

Frederick Soddy, a 1921 Nobel laureate in chemistry turned economist, understood how bad debt was. In a recent op-ed piece in the New York Times, Eric Zencey, a professor of historical and political studies at Empire State College, wrote that Soddy

offered a perspective on economics rooted in physics — the laws of thermodynamics, in particular. An economy is often likened to a machine, though few economists follow the parallel to its logical conclusion: like any machine the economy must draw energy from outside itself. The first and second laws of thermodynamics forbid perpetual motion, schemes in which machines create energy out of nothing or recycle it forever. Soddy criticized the prevailing belief of the economy as a perpetual motion machine, capable of generating infinite wealth — a criticism echoed by his intellectual heirs in the now emergent field of ecological economics.

A more apt analogy, said Nicholas Georgescu-Roegen (a Romanian-born economist
whose work in the 1970s began to define this new approach), is to model the economy as a living system. Like all life, it draws from its environment valuable (or “low entropy”) matter and energy — for animate life, food; for an economy, energy, ores, the raw materials provided by plants and animals. And like all life, an economy emits a high-entropy wake — it spews degraded matter and energy: waste heat, waste gases, toxic byproducts, apple cores, the molecules of iron lost to rust and abrasion. Low entropy emissions include trash and pollution in all their forms, including yesterday’s newspaper, last year’s sneakers, last decade’s rusted automobile.

Matter taken up into the economy can be recycled, using energy; but energy, used
once, is forever unavailable to us at that level again. The law of entropy commands a one-way flow downward from more to less useful forms. An animal can’t live perpetually on its own excreta. Neither can you fill the tank of your car by pushing it backwards. Thus, Georgescu-Roegen, paraphrasing the economist Alfred Marshall, said: “Biology, not mechanics, is our Mecca.”

Following Soddy, Nicholas Georgescu-Roegen (a Romanian-born economist whose work in the 1970s began to define this new approach) and other ecological economists argue that wealth is real and physical. It’s the stock of cars and computers and clothing, of furniture and French fries, that we buy with our dollars. The dollars aren’t real wealth, but only symbols that represent the bearer’s claim
on an economy’s ability to generate wealth. Debt, for its part, is a claim on the economy’s ability to generate wealth in the future. “The ruling passion of the age,” Soddy said, “is to convert wealth into debt” — to exchange a thing with present-day real value (a thing that could be stolen, or broken, or rust or rot before you can manage to use it) for something immutable and unchanging, a claim on wealth that has yet to be made. Money facilitates the exchange; it is, he said, “the nothing you get for something before you can get anything.”

Problems arise when wealth and debt are not kept in proper relation. The amount of wealth that an economy can create is limited by the amount of low-entropy energy that it can sustainably suck from its environment — and by the amount of high-entropy effluent from an economy that the environment can sustainably absorb. Debt, being imaginary, has no such natural limit. It can grow infinitely, compounding at any rate we decide.

Whenever an economy allows debt to grow faster than wealth can be created, that economy has a need for debt repudiation. Inflation can do the job, decreasing debt gradually by eroding the purchasing power, the claim on future wealth, that each of your saved dollars represents. But when there is no inflation, an economy with overgrown claims on future wealth will experience regular crises of debt repudiation — stock market crashes, bankruptcies and foreclosures, defaults on bonds or loans or pension promises, the disappearance of paper assets.

It’s like musical chairs — in the wake of some shock (say, the run-up of the price of gas to $4 a gallon), holders of abstract debt suddenly want to hold money or real wealth instead. But not all of them can. One person’s loss causes another’s, and the whole system cascades into crisis. Each and every one of the crises that has beset
the American economy in recent years has been, at heart, a crisis of debt repudiation. And we are unlikely to avoid more of them until we stop allowing claims on income to grow faster than income.

Soddy would not have been surprised at our current state of affairs. The problem isn’t simply greed, isn’t simply ignorance, isn’t a failure of regulatory diligence, but a systemic flaw in how our economy finances itself. As long as growth in claims on wealth outstrips the economy’s capacity to increase its wealth, market capitalism creates a niche for entrepreneurs who are all too willing to invent instruments of debt that will someday be repudiated. There will always be a Bernard Madoff or a subprime mortgage repackager willing to set us up for catastrophe. To stop them, we must balance claims on future wealth with the economy’s power to produce that wealth.

Now I agree that Soddy and Georgescu-Roegen were on to something: too much debt is bad and our economic model based on consumerism and loose credit hurts us. But Soddy could not leave it at that. He had to develop his own five policy principles that he thought would combat that. His first four were once considered eccentric but are now conventional practices.

1. Abandon the gold standard
2. Let international exchange rates float
3. Use federal surpluses and deficits as macroeconomic policy tools that could counter cyclical trends
4. Establish bureaus of economic statistics (including a consumer price index) in order to facilitate this effort

I would argue that these principles have led to the situation we are in. Abandoning the gold standard has led to the ability to print money and fund government programs that are unsustainable and allows trillion dollar deficits and an $11 trillion debt – the fiat currency.

Letting exchange rates float has hit Greenland and the former Eastern Bloc countries particularly hard as loans made in a foreign currency have created havoc as loan amounts increased as a result of a floating exchange rate – the owners of those loans cannot afford to pay them now. This has also allowed people like George Soros to speculate on currencies and make billions by gaming the system.

Soddy’s third principle is the most nefarious of them all. This principle has produced the mindset that cyclical trends are bad and government intervention is good. This is a very dangerous idea in my opinion. Cyclical trends are natural and we want them; they naturally regulate economies. The idea that a government can manage an economy is ridiculous – that should not be the role of government in the first place. Yes, you can provide some monetary policy, but controlling the economy like he suggests is the same stupid notion that we can control the climate. When people like Paulson or Greenspan meddle they make things worse, not better – like keeping interest rates artificially low. Government debt also takes money away from other private entity capital projects that create real jobs and not the government ones that leech money from our economy (made up work that has little to no value). Government surplus should be used to pay down debt and if it is not needed for that it should go back to the people so that they can use it how they see fit.

The stock market and our lives are now ruled by economic statistics thanks to Soddy’s fourth principle. We hear how the markets react to various economic statistics. Bad stats lead to bad days on Wall Street. Good news and the markets go up. More data manipulates the system and places value on short-term outcomes rather than long-term reality.

“Soddy’s fifth proposal, the only one that remains outside the bounds of conventional wisdom, was to stop banks from creating money (and debt) out of nothing.” Well, this runs counter to his first principle above anyway. The Federal Reserve has long been creating money out of nothing. If you want to stop them from making money out of nothing you need something like the gold standard. This has led our ruling political class to seek our favor by showering us with fake money in the form of inefficient and incompetent government programs we can’t afford. The more they sink their talons into our lives the less likely we are tell them to go to hell.

Lastly, Mr. Zencey, probably as much of an economist as I am, claims that we need a “100-percent reserve requirement on demand deposits”. This is unworkable and would unnecessarily lock up capital in banks and make investment onerous. Please leave the economics to those with common sense. The intellectual elite that include Krugman, Reich, and Zency, should shut themselves up in their offices and leave us alone. Please keep your intellectual workouts to yourself. Have you not done enough damage already? We do not need more of your meddling. You and your ilk landed us in this mess in the first place.

Finally, one last anecdote to dispel the notion that we need more stimulus or onerous regulation (some regulation, yes, not what Reid, Pelosi, Frank, or Schumer want). On a radio program here in Kansas City they were talking with a local bank president. His bank is largely unaffected by the whole subprime mess because he followed two simple rules:-1) they did not make risky loans and 2) they did not allow loans to exceed 70% of their deposits. He claimed that the banks now suffering had loan to deposit ratios greater than 100% and they invested heavily in the subprime market. Damn that Midwestern common sense.

The fix is pretty simple when you get down to basics and let common sense guide your business model. What the brain trust in government does not understand is that we are paying for years of negligence. We cannot simply make a 180 degree turn and suddenly everything is sunshine and lollipops. We need to let the markets correct themselves. Will it be painful? Yes. Will it be better this way and not place a huge burden on our children? Yes. There is no need for complex economic models or scraping our economic system; we just need to do what makes sense, and that does not include what the ruling class is suggesting we do. A better approach may be to do the opposite of whatever they want to do.

Really as Bad as You Think

“One of the most important skills for political success is the ability to make confident assertions of absurdities or lies.” -Thomas Sowell

If you think I am some rethuglican, guess again. I opposed the Bush tax cuts. I opposed the Iraq War. I opposed the Bush stimulus in early 2008. I opposed TARP 1. I also opposed Obama’s stimulus. Why? I see ineffective and dangerous governmental policy behind each one. I look beyond the short-term effects to the long-term consequences. Looking at the result of the first four I can state with some confidence that I was right in opposing each and every one of them.

The stimulus touted by Obama to create 3.5 million jobs (funny how that number keeps increasing) provides a paltry $16 extra per paycheck this year ($400 dollar credit divided by 26 paychecks) which drops to $8 per paycheck next year. NPR was interviewing some so-called expert. The interviewer asked if the “expert” really thought that extra $16 per paycheck would be stimulating. The “expert” actually said that he thought it would. You have got to be kidding; what freaking planet was this idiot from? The only thing an extra $16 per paycheck will stimulate is McDonald’s. Don’t get me wrong, I am all for creating jobs. But this is not the way to do it.

The stimulus is nothing more than a spending stop gap to hide the underlying issues of our economy and delay the inevitable real pain (You can put your finger in the dam to stop the leak…). It does very little to stimulate innovation which creates real jobs. True stimulus would have been a massive $500 billion+ investment in energy of the future and a rehab of our electric grid - I could have supported that because I understand the need for it and I can see how it would benefit our economy. The little dribs and drabs towards an investment in infrastructure in the current stimulus plan fall far short of providing a healthy footing for an economy beyond the next election cycle. As one comment put it: “[The stimulus is] like eating more food to lose weight!”

We had the tech bubble, the housing bubble and next we will have the government spending bubble. When the government money runs out, what then? Will we be told that we need another porktastic spending spree because the first one was not large enough? Can’t we see that this is simply no longer sustainable? And here I thought the progressives were all about sustainability. It is obvious that their idea of what sustainability is does not translate to the pocket book. Of course, if they really adhered to the idea of a sustainable society they would kill themselves because the majority of what humans do is not sustainable. But I digress.

Do not believe for one instant the pundits when they say that the national debt is still only a percentage of the gross domestic product (GDP). They forget to add in the debt held by business and you and me. That total is $52 trillion – three times the GDP of around $14 trillion. Adding more debt is a very bad idea. Some pundits want us to do what Japan did in the 1990s. If only it were that simple. We would have to have a stimulus package worth more than $20 trillion to match what Japan did because we have a much larger economy. And I am not including the unfunded liabilities of social security and Medicare that is an estimated $60 trillion.

Even scarier is what the Federal Reserve (Fed) is doing to straighten out the mess the banks are in. The Fed has committed trillions to the bail out of insolvent financial institutions. Robert Reich in his blog recently wrote:

“To date, the Fed has already committed some $2.5 trillion to rescuing the financial ystem, yet no one outside the Fed knows exactly how or where this money went. The Fed is subject to almost no political oversight. Yet if the trillions of dollars the Fed has already committed and the trillions more it's about to commit can't be recouped, the federal debt explodes and you and I and other taxpayers are left holding the bag.

In other words, Geithner and Fed Chair Ben Bernanke continue to do pretty much what Hank Paulson and Bernanke did: They hide much of the true costs and risks to taxpayers of repairing the banking system.”

And we should trust Turbo Tax Tim? Why am I and others like me marginalized for speaking out? We are raising the alarm and the sheeple simply would rather watch American Idle. Congress voted on nearly a $1 trillion spending plan that contained more than 1,000 pages of text and had less than 24 hours to look it over before voting on it. We are simply to take on faith that politicians are looking out for our best interests?

The dumb are leading the dumber towards the cliff. The sheeple look idly by without a clue as to what is going on. We the Idiots deserve every bit of what we have sown.

Question everything and everyone. Trust no one.

Photo by KCThinker, Butterfly at Ohama Henry Doorly Zoo

Repeating Mistakes of the Past

Probably one of the most frustrating things about the financial crisis we are in is that the response is eerily familiar to past crises. Yes, I am talking mainly about the Great Depression. The history we learned in school that FDR’s New Deal brought us out of the Great Depression is patently false.

World War II did end the Great Depression, as revisionists are apt to claim, in a manner of speaking, but not in the way you may think. The U. S. did benefit from the massive war building effort, but after the war was over all that manufacturing had to be turned somewhere else, it simply could not keep churning out guns and ammo for a war that did not exist. When WWII finally came to a close the majority of countries with industries similar to ours before the war were in shambles. The U. S. was intact, had the manufacturing infrastructure and was able to quickly start producing. Another key was that the war effort led to considerable innovations which spurred more job growth. In conclusion, FDR’s New Deal did nothing. In fact, Henry Morgenthau, FDR’s Treasury Secretary, testified before the House Ways and Means Committee in May 1939:

“We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot.”

Of course the economists today (and even presidents) don’t let the truth stop them from making idle claims. It is interesting to note that, like psychologists, economists adhere to different schools of thought (or ideology if you will). There are the Keynesians, the Austrian School, and others. Frederic Bastiat, a French politician in the 19th century wrote:

“Essentially, economics is the science of determining whether the interests of human beings are harmonious or antagonistic.”

In a way, economics is like psychology because much of it is based on human emotion and interaction, so it should not come as a surprise that economists rally around different schools of thought than reality.

The idea that the government is like Superman coming to save the day is absolutely ludicrous. Time and time again, history has shown us that the government is inept. Yes, they are necessary, but only to a point. The role of government is not to be some big brother making sure you don’t fall and if you happen to fall not only picking you up, but dusting you off and carrying you to bed to rest. Government may provide some programs for people to better themselves by, but for the most part it is not government’s responsibility to make sure you have a roof over head and food on your table – that is called personal responsibility, something that seems to be a foreign concept nowadays. The role of government is to provide a safe environment for life, liberty and the pursuit of happiness; to ensure there are sufficient, but not burdensome, laws to protect society. Government is at its best when it gets out of the way of commerce. Government also wastes a lot of our tax-payer funded time on moral issues like homosexuality, abortion, and gay marriage, and non-political issues like steroids in baseball and the NCAA football championship.

What is now going on is the perversion of the idea of government. President Bush presided over a doubling of our national debt and was at the helm of largest expansion of federal government in decades. Republicans insisted that regulations on financial institutions be relaxed. Democrats forced banks to make bad loans. The Federal Reserve cut interest rates to rock bottom levels. You and I spent more money than we had. Everyone wanted everything now. People borrowed against a home with an inflated value. They ran up their credit cards. People bought houses with no credit, no job, and no money down. Financial instruments like Credit Default Swaps were created. Banks bundled the loans and sold them off only to be sold again by others. The result: a combined $56 trillion debt - $12 trillion for the government and $44 trillion for businesses and individuals. That is approximately four times our annual gross domestic product. How is something like that sustainable? It simply is not.

The government’s response? Pump billions (soon to be trillions, mark my words) into insolvent banks. Spend nearly $1 trillion to get the economy going. It did not work in the 1930’s and it won’t work today. Why? Even though the circumstances are somewhat different, the fundamentals are the same. The banks also don’t trust anyone, especially government, after they got burned for making stupid decisions. They are rightfully (and finally) tightening up credit again. There is no credit crunch. Banks are just getting back to fundamentals. If you don’t have a job you should not be given a loan for a car, let alone a house. The government refuses to understand that the last couple of decades have been built on personal and public debt. The government tries to prop up businesses that should be allowed to fail because they are poorly run (banks and American car companies). The government also refuses to understand that government spending projects do not grow an economy. There needs to be real demand and not more artificial demand based on borrowed money no one has. Once the money is spent to build a road, there is no incentive for that employer to employ that person any more. Once the food stamps are spent, more are needed. Yet, the government, in its infinite wisdom (more like denial), is galloping to the rescue of an empty burning building.

As usual, the government is blind to the consequences of its actions. It cannot think beyond Stage One. “In the Economic Sphere,” Frederic Bastiat wrote:

“An act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.”

To prove his point, Bastiat described what happens when a vandal breaks a shopkeeper’s window. The seen effect is that repairing the glass creates economic value in the payment to the glazier, who then has money to buy a new suit or hire a part-time employee. What is unseen is that the shopkeeper has to pay the glazier with money that he would otherwise have used to buy a suit or add an employee. “The broken-window fallacy, under a hundred disguises, is the most persistent in the history of economics,” wrote the economic journalist Henry Hazlitt in 1946. Another similar parable is Uncle Sam, Cousin Maynard, and the miracle seeds.

There is a hidden cost to everything. It is in the stimulus package and it will be in other legislation that the Obama administration will try to ram through Congress. This so-called stimulus will cost each and every household approximately $6,700 in additional debt, paid for by our children and grandchildren. That does not include the $12 trillion of debt we already have - add each citizen's share of that debt is more than $35,000!

The longer government keeps its blinders on, the more likely the real problems will never get solved and the more likely the future integrity of the U. S. is in doubt. Of course, historians will probably take creative license with Obama’s story and undoubtedly shape it in positive nature, much like they have with Lincoln and FDR.

Photo by KCThinker. My daughter walking along the beach.

Why the Stimulus is a Bad Idea

I may just be a simpleton from "fly over country" who sees this stimulus as an utter waste of money. Only about $100 billion is for true infrastructure. You might as well as throw the rest in the fire along with the TARP money. That’s trillions of dollars we will never see any benefit from and that my children will have to pay for now. Why is no one asking how this largesse will be paid for? They simply take it on face value that we need to rush headlong into unwisely spending nearly a trillion dollars. The same crap was pulled with TARP and the Patriot Act and look at where it got us. I am tired of the fear mongering. I thought that would be over when President Bush left office. However, President Obama obviously took a page out of Bush’s playbook and is using fear to get this travesty of a spending bill passed.

What will creating a massive spending government spending bubble actually do? The way I see it, once the money is spent the jobs go away. Government spending as a means to create jobs is not sustainable from my perspective, especially when you have to borrow that money in the first place. How does the stimulus provide long-term sustainable job growth, if at all? That is not change I can believe in.

A good number of jobs were created under during the Clinton Administration because there was innovation in the form of the internet boom. Innovation leads to positive job growth. Under the Bush Administration there were far fewer jobs created because there was no innovation behind the government’s deficit spending. The majority of the stimulus is deficit spending. Little in the stimulus package is geared towards innovation. Sure there is a portion directed to renewable energy and increasing broadband accessibility, but the vast majority of the $800+ billion package is directed to short-term jobs with absolutely no innovation.

The whole idea of getting back to where we were is ridiculous. It was all artificial in the first place. Just when we are finally coming to our senses after decades of spending like sailors in a whore house and now everyone wants to once again spend money no one has. Have we learned nothing? How can that possibly be a good idea when we have so much debt in the first place and we are nowhere close to addressing the long-term fiscal problems associated with social programs such as Medicare?

My gut tells me that this is a bad idea and we will regret it. I look at it and I shake my head because it seems common sense has left the building. You can quote all the economists you want, cite all the job creation numbers from one president to another, and compare it to Sweden or Japan, but ask yourself if you can truly make those apple to apple comparisons. Something tells me that the situation we are in is far worse, much deeper, and far more complex than any of those other situations. Throwing money at it is not necessarily the answer to every problem. Taking a step back and coming up with the right response is always better than merely responding quickly.

We need to feel some true pain. And an unemployment rate of 7.6% is not true pain (yes, those without a job would disagree, but let’s be realistic and look at historic jobless rates and we must also consider ourselves fortunate when looking at the state of the rest of world). All we are doing is providing temporary pain relief but not looking at the symptoms. We want to give aspirin when we may have to amputate a leg.

Please keep in mind I am no economist, I am just a simple civil/environmental engineer who has not knowingly cheated on his taxes so obviously I am not qualified to have made any of the comments above.

Photo by my daughter. Winter weather in Iowa.

Living Beyond Our Means - A Short Story

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship." - Unattributed

The curator sighed. After 36 years working for the Smithsonian he was filled with sadness. This is not how he wanted to end his career. This would be the last piece of artwork that would be boxed up from this gallery. It was one of his favorites from the early 1900s – a beautiful painting from the Arts and Crafts era of the Snake River with the Grand Teton mountain range in the background.

Under the Debt Reconciliation and Repayment Act all valuable artwork was categorized and sold off in large lots to countries holding the United States’ massive $43 trillion national debt – even after making payments it was now still 127 times the current estimated gross domestic product. Most of the extremely valuable pieces had already been packed up and sent away. Even priceless artifacts were given an estimated value. The majority of the Library of Congress had been divided up and sold to collections in Europe, Asia, Africa, and South America. The most horrifying acquisition was the sale of the Declaration of Independence to China. He supposed that everything had its price in the end. He wondered why America was still suffering when the rest of the world had returned to ecomonic normalcy more than 6 years ago.

The less valuable pieces and displays were merely discarded or burned rather than being placed in long-term storage. During a recent trip to a Smithsonian Warehouse to catalog a number of items destined to Venezuela, he had even caught a glimpse of a minor modern piece of art being used as a roof in one of the many shanty towns outside of Washington, D.C. The Emergency Homeland Austerity Measures Act called for strict budget expenditures. They had no choice; the International Monetary Fund and World Bank had stepped in to mediate the settling of the America’s debt in the aftermath of the collapse of the dollar. Under the terms of the agreement, the United States had to enact the EHAMA. Such trivial things like preserving history were ignored in favor of feeding Americans.

His thoughts drifted to the many times he discussed the economy with friends. They all assured him that everything would be fine. He was convinced that America could no longer afford to live beyond its means. His friends told him that he was overreacting, that the trillions spent in financially securing the banks and the many stimulus packages would finally set America on the right course. Of course, no one in the government considered how all that spending would be paid for. They were all surprised when foreign investors stopped buying U.S. Treasury Bills. With no funding, the bottom finally fell out from under the unsustainable initiatives. He grimaced with a pang of guilt at being right. He felt the heat in his head rising as his anger of what had been done to his country surfaced.

Five years ago a ragtag contingent of Iraq and Afghanistan war veterans disabled security and managed to storm the Capital. They demanded real change and ended up killing 15 senators and 53 congressmen before being killed themselves in the standoff. The government fearing another act like that quickly instituted martial law, disbanded the armed forces, formed the National Police, and passed The Firearm Prohibition Act. It took over three years but the majority of firearms had been confiscated. Rumor had it that there were some serious firefights between the National Police and the last holdouts who loudly proclaimed “…From My Cold, Dead Hands.” Well that is exactly what ended up happening. The metal from the guns was melted down and sold to countries to pay down the debt. The remaining gun stocks were initially destroyed in huge public bonfires vaguely reminiscent of the infamous Nazi book burning pyres. Later they were quietly destroyed after some environmentalists complained about the pollution. Now and then there was a report of someone who had slipped through the system and was caught with a firearm – mainly hunters trying to feed their families – and were sent to prison work camps without a trial. It was hard labor. Many in the camps died.

The official government press was tightlipped during the firearm prohibition campaign. The main news providers quickly towed the government line. Those that did not where conveniently shut down by the Federal Communications Commission under an emergency law. What real news was available from the internet was quickly silenced when Congress passed The Fairness in Media Act in an attempt to control what was being said in the media. The act essentially shut down the internet. They felt that too much negative news would incite more violence and demoralize Americans.

He stared at the blank walls around him. After so many years of providing the public with a venue to see, hear, and touch the history of the United States and the world one more Smithsonian Museum would be closed. Not that the public had been allowed access to the National Mall in several years; the entire area around the Capital and White House was cordoned off and only accessible to government employees on official business. The public was not allowed to enter the area because of security concerns.

The painting he was packing up was part of a collection destined for Brazil and their new museum of North American Art History. Not much he could do about it now. He called his wife and told her that he was leaving soon. It would be the last call made from the building. The workers were coming tomorrow to salvage the wiring and gut the building of anything of worth. The windows and doors would be bricked over and the yet another government building would be mothballed. He doubted the interiors would ever see any daylight except when the roof finally caved in. There was no money in the budget for even simple maintenance. The only living things to step in these halls again would likely be rats, spiders, and other insects.

Over the phone his wife told him that the elderly man next door had died that day. One of the more heinous parts of The Emergency Homeland Austerity Measures Act was the refusal of medical care for anyone over 65 years of age. The man next door had a history of cancer. Ten years ago at the age of 63, he had survived colon cancer. He was supposedly in remission, but he had not been feeling well of late and many of the same pains he had when he had first been diagnosed with cancer were returning. The hospital turned him away saying there was nothing they could do for him. They told him that he had no right using up valuable medical resources. His wife could not afford any outside treatment. They were left to suffer. To add insult to injury, dead bodies were discarded on the streets because no one could afford burial or cremation. The government came around and collected the bodies and dumped them in large pits. He was thinking of setting fire to his house just before he died to save them the trouble. At least he would go out on his terms.

He hoped that he would not have to wait long to get his rations today; one piece of hard bread, a bit of meat with questionable origin, rice or potatoes and if he was lucky a piece of fruit or vegetable. A tear rolled down his cheek as he turned from the building and walked down the overgrown and unkempt National Mall to his government-issued home.

An original short story by KCThinker. The story pretty much sums up how I feel right now – hopeless.

After the Hangover Wears Off

On Wednesday morning, after the long night of drinking to celebrate or lament, we will wake up and guess what – nothing has changed. We are still the same country with $11 trillion in debt and $54 trillion unfunded liabilities. We are still the same country with unpopular wars in the Middle East. We are still the same country with a crumbling infrastructure. We are still a country that sends more than $700 billion a year offshore for its energy. Most importantly, we are still the same country with an egotistical political establishment; one that would prefer to pander than lead.

This was an election about the last 8 years of Bush more than anything else. Let’s be honest, the electorate is not smart enough to actually look at the issues and make an informed decision, they would rather base their selection on emotion. The contradictory political ads make it even more difficult for the shallow to make sense about where the candidates really stand. In the end, America is all about making themselves feel better – whether that be at the shopping mall or in the voting booth.

After the congratulatory back slaps, lip smacking at the new found political power and the statements of an imagined mandate are over, there still looms the 800 pound gorilla in the room. I stand by my belief that no matter who gets elected (I am about 95% certain that Obama will be elected) nothing will really change where it really matters. The only change will be who is called president. Sure there will be some other changes –Obama will change from Bush’s tax-cut-and-spend administration to a tax-increase-and-spend administration. Oh yeah, Obama will enact cap and trade of plant food (carbon dioxide) which will significantly increase all of our energy bills (although, to be honest, McCain is also talking about that).

What really needs to happen? We need a real leader that would present America with a plan that will include touch choices. A real leader will work with Congress to enact those tough choices. What would those tough choices be?

• Balance the budget with the current revenue stream and that includes excluding social security revenue from the revenue stream. That means across the board cuts, including the military.


• A tax increase levied only to pay down the debt and pay back the trillions in IOUs to the social security fund. I propose a modest national sales tax in lieu of increasing income taxes.


• Consolidate government, reduce duplicity, and increase governments’ effectiveness and efficiency.


• Reform Medicare and Social Security. That means cutting benefits and eliminating the maximum earnings amount above which you stop paying the social security payroll tax.


• Reform our education system and invest in math and science education.


• Drill more and invest in renewable energy. We need to be leaders in the renewable energy field.


• Close military bases around the world and pull our military back. We need to defend OUR borders first and foremost.


• Squash the climate change nonsense which would waste trillions trying to reduce global temperatures by a tenth of degree. Taking that money and investing it in math and science education, renewable energy research, and infrastructure would have a far greater impact.

If the $11 trillion in debt and $54 trillion in unfunded liabilities does not say it all, you, quite frankly, are a moron of massive proportions. These two numbers alone provide enough justification for the measures I propose above. These two numbers provide a measure of the precariousness of our situation. Americans need to realize that the run is over. America needs to rethink its priorities. America needs to realize that money does not grow on trees and cannot be printed wantonly without dire consequences. America can no longer enslave on our children and grandchildren with debt. It is time we take responsibility for our actions, at a personal level and at a national level.

Wake up America. Take some aspirin and drink some water. Shake the hang-over off and demand real change, not the change promised in pretty speeches.

Photo by fellow Engineers Without Borders member, Sugar cane fields, road, railroad, and mountains, Dominican Republic

A Simple Request

I only have a few simple requests of our politicians:

1. Please explain to me how you are going to pay for your policies and spending proposals and have a balanced budget without counting the social security surplus.

2. Please justify deficit spending with more than $10 trillion in debt and $54 trillion in unfunded liabilities.

3. Please justify the burden you are putting on my children and their children with reckless policies and spending habits.

4. Please look into my children's eyes and tell them what you just told me.

Welcome President, er, Chairman Obama

Senator and future President of the United States of America Barack Obama promises a change from the last 8 years of Bush. I believe he will deliver that change. It is just not the type of change that you and I are really expecting. It is not the type of leadership this country needs in the face of an unprecedented economic turmoil. Not that that old guy would be any better. We basically have a leadership and intellectual vacuum in D.C.; unfortunately I am ninety percent certain that Obama will be elected because cultural change is more important than substantive issues like debt, deficits, and fiscal responsibility.

The last 8 years of Bush were all about tax cut and spend. How will Obama change that? Will he cut spending? No. He will increase spending by billions taking the nearly $500 billion budget deficit for fiscal year 2008 and increase it at a time we need to be cutting spending across the board including the military. Neither candidate does not take into account the trillions spent trying to “save” the system (oh wait, that was “printed” money – my mistake that doesn't count).

Will he increase taxes? Yes and No and Yes. Those making more than $250,000 a year or the top 5% of income earners (those making more than $150,000) will pay more, (not sure which number he means) but those making next to nothing will get money. However, Obama will make plant food (CO2) a major pollutant and likely enact cap-and-trade of plant food (CO2). The dirty, little secret on that is that all our energy prices will sky rocket hitting every income class. Obama giveth with one hand and taketh with the other.

Another change under an Obama administration will be reverting to Woodrow Wilson era politics where those critical of the administration will be silenced. We already have seen the beginnings of that with the handling of Joe the Plumber. An innocent question about Obama's tax policies by "one of us" leads the press to investigate Joe's taxes and licensing. It turns out that all of a sudden Joe needs to be silenced and discredited. Wouldn't you know it, Joe owes back taxes. Never mind that a member of the United States senate, Senator Rangel (D), owed back taxes recently too, but then again he did not have the audacity to question Obama’s policies. Obama had the arrogance to say that he never heard of any plumbers making $250,000. I suppose only elitists with degrees from Harvard and Presidents of the United States are allowed to make that much. How out of touch can he possibly get? He obviously has never run a business or knows anything about running a business based on a comment like that.

Now Obama by himself with a republican controlled house and senate may be held in check and things like the Fairness Doctrine would never see the light of day. Unfortunately, we have the dumb leading the dumber. The combination of Pelosi and Reid will make a nasty three-headed monster that should keep any child from getting a good nights rest. The Obalosied tax monster is coming for your pocket book. Oh, it is a nice monster to poor people, but you rich people better watch out. The Obalosied monster will have the audacity to steal from your pocketbook in the middle of the day. Wow, I really am looking forward to the next 2 to 4 years. If you thought things were rough now, just wait, worse is around the corner.

We are so screwed. Thanks for nothing democrats and republicans. You both have put us in an untenable position. Instead of being so self-absorbed in your party’s power you should have been looking out for America. You should have been leading and not pandering. I hope you can look in your children and grandchildren in the eyes and know that you had a chance to turn the tide, but you chose to be selfish. Thanks for nothing, now go to hell.

The Bail Out to End All Bail Outs?

Soon our elected representatives will vote for an extremely large plan to help the struggling financial markets in the United States. The urgency has been made clear by Treasury Secretary Paulson and President Bush. It is obvious that such a plan is needed in order to make sure that businesses can continue operating as intended. However, there should be sufficient concern with the haste that this plan is being put together. Through this urgency and typical partisan politics a great opportunity to make sure we do this the right way the first time will surely be missed.

The bail out must contain, at a minimum, the following four key items:

1. There should be crystal clear transparency into how this money is used and to what companies this money goes to. This is a gamble with an extraordinary sum of money that our children and grandchildren will be beholden to pay off. We cannot afford to let it be used without knowing how and why and where.

2. There should be no compensation (i.e., golden parachutes) for the executives that have been at the helm of any companies receiving government-funded help. They were the leaders and they should be held accountable for their actions. Through their actions they will also likely cause thousands of Americans to lose their jobs. There should be no reward for landing their companies in the positions they are in.

3. If any profits (highly unlikely) are realized from this venture they should, first and foremost, be used to pay down the national debt, which is almost $10 trillion. No profit should be used to justify more spending or tax cuts or more risky government programs. The only place that profits shall go is to reduce the debt burden on future generations of Americans.

4. The government should enforce the existing rules and regulations or create new ones to prevent this from happening again. The idea that everyone should own on a home is a good one, but we need to make sure that people buying homes can afford them, can prove that they can afford them and understand what they are getting into. This crisis has been largely created as a result of congress men and women letting politics cloud judgment. The full extent of the law should be used to prevent discrimination of race, religion, etc. being used to prevent someone from securing a home loan. However, this notion has been abused to the extent loans are given to people who simply could not afford them.

The bail out will likely happened whether the majority of the American people are pissed off by it or not (it’s torches and pitchforks time people!). In my opinion we are propping up a bubble built with made up money with more made up money. The end result may be far worse than if we had just let the bubble burst to begin with. Something about this whole situation just plain stinks and makes me feel dirty.

I am not sure most Americans understand the gravity of the situation. We are at a key turning point in this country; we may not recover from the fine mess Congress and the President has created. More than the executives of these failing firms, we should blame our elected officials for allowing this to occur in the first place. While playing politics like kids play house they failed to realize what is more important than being a democrat or republican and that is being an American.

Photo by KCThinker, Passage in San Juan, Puerto Rico

This November 4 Check “None of the Above”

Now more than ever this country needs a leader that understands the complex and vexing issues that face this country. We have a financial crisis created by our lawmakers and greedy bankers that has bankrupted numerous banks and financial companies. We have a seemingly never ending war against terror. We have an energy crisis. We have a vacuum of leadership. The so-called leaders refuse to address the looming fiscal crisis of Medicare, Medicaid, Social Security and the massive debt piled up as a result of failed government policies. In a campaign where all the talk is about “change” the real thing we need is massive reform.

For me this election is about the economy, the short-term and long-term fiscal stability of the United State, and a diverse and secure energy policy. If we do not get a handle on those things, you can forget about all the rest because there won’t be a United States of America anymore. We will soon likely have a country in Chapter 11 with foreign governments helping us “reform” or the World Bank treating us like Haiti. Our AAA bond rating will be downgraded meaning that we will have to pay a higher interest rate on our debt which will overnight increase the trillions in unfunded liabilities that are not being addressed.

More than ever we need a leader that will care more for this country than for his party. After more than a year of pure political torture (and hundreds of millions of wasted dollars – the economy seems good enough for Obama to raise more than $390 million off the backs of the “working people”), this 4 November 2008 we will finally get to vote for president of the United States of America. Our choices: Barack Obama (D) and John McCain (R). Given these choices I wonder why I should even vote for president. I would be better off with a box “None of the Above” or “Can I please have a real choice?”

Why should I vote for Barack Obama?

The main reason to vote for Obama is that after the last 40 years we need something new. Obama is young, energetic, healthy, dashing, and a decent orator with a teleprompter. He would bring life back into the stale politics of old, white men. Obama had it right when he opposed the start of the war in Iraq.

Why I should not vote for Barack Obama?

His main mantra is bringing change to Washington, D.C. Yet his policies are largely the policies of the democratic party. The only change he will bring is who sits in the White House, and thankfully that was going to occur regardless. I do not agree with the majority of his policies. From biofuels to taxes, he comes across as a naïve upstart. After the last 8 years I want a president that I think is smarter than me. Obama is definitely not smarter than I am. He is first and foremost a politician that can give a good prepared speech.

Here are a few reasons I will not be voting for Barack Obama:

• He thinks people that make $250,000 are rich. Really? He would increase taxes on the “rich” and cut taxes on the lower middle class at the same time he is proposing billions in new spending. That does not equate to a balanced budget. We simply cannot afford more deficit spending.
• Like his main rival, his energy policy is too one sided and not diversified. Obama likes biofuels. Any civilization that burns food should be severely punished in my opinion. His policy relies too much on alternatives with no realistic fossil fuel bridge. By the way, we still need oil to make the stuff we use everyday – you know, stuff like plastics, drugs, chemicals, and hundreds of thousands of other everyday items we take for granted.
• He wanted to sell oil out of the strategic reserve to lower gas prices. I suppose he does not understand what strategic means unless he thinks it means pandering.
• He believes climate change should and can be fought. The war on climate change brought to by Al Gore. We have seen how effective the war on poverty, the war on drugs, and the war on terror have been (ergo wasted trillions of dollars for very little to show for it).
• Obama preaches change yet he picks an entrenched career politician, fellow senator Joe Biden, for his vice president. Biden has been in the senate for 36 years. Obama complains that McCain has not made any meaningful changes during his 22 years in congress, yet Obama picks a stale old white man to be his running mate. For all his supposed foreign policy expertise, Biden suggested dividing Iraq up into three countries; that would have had disastrous consequences.
• Obama thinks that a strong economy will strengthen the dollar and lower gas prices except he wants cap-and-trade for carbon dioxide (higher energy prices) and he is silent on debt, a balanced budget, and unfunded liabilities (strength of the dollar). A strong economy needs a secure financial structure and cheap energy…endless do loop begins.
• He thinks it is the government’s responsibility to grow the economy. Here he is wrong again - the government is there is provide a stable and responsible platform from which the economy can grow.
• Obama thinks we should to take to people like Mahmoud Ahmadinejad, President of Iran, who has called for wiping Israel off the map. He naively holds the belief that if only we talked to Iran and engaged them they would not be so belligerent. Looking back at history I see now how effective Chamberlain was in preventing WWII by talking to Hitler.
• For all his talk about reaching across the aisle, there is very little evidence of it. We need someone that will get past the Karl Rove divisive political game. I do not see Obama rising above typical Washington, D.C. politics despite all his "talk".
• Then there are all of his personal entanglements with unrepentant domestic terrorists and racist preachers. Given his quick and convenient disassociation with these people that have supposedly formed him as a man one wonders what he really believes in.

I look at the Obama platform and I see BIG GOVERNMENT. I see us moving closer to socialism where we tax the crap out of everyone and “fairly redistribute” wealth; I see this country digging itself deeper and deeper into debt with yet more failed government and more debt that our children and grandchildren should not be on the hook for. The net result of his platform is that the government will take care of us from cradle to grave. That is fine for hazardous waste management but not for the future of this country.

Why should I vote for John McCain?

He is the maverick. He is a straight talker and calls it as he sees it. He is a fighter and a survivor. Instead of giving up in Iraq he supported the surge (it appears to have been the right move, but the jury is still out on that one). He is saying the right things when it comes to both the democrats and republicans being at fault for the financial crisis. He does not want to bail out any more banks and financial companies. Unlike Obama, he has reached across the aisle, working with Kennedy and Lieberman (of course, we can debate the wisdom of the legislation that came from those pairings). On the face of it, his vice-presidential pick of a reform-minded Sarah Pahlin is refreshing (although her negatives are outweighing her positives). Overall, I believe him more than Obama when it comes to bringing reform (change) to government.

Why should I not vote for John McCain?

Here again, after the last 8 years of Bush I want someone smarter than I am. I want someone with good judgment. There is the stigma that he will be beholden to his party and his party is stuck in the backwoods when it comes to social issues. The republicans also have not shown that they can govern for the people and not for big business.

Here are a few reasons I will not be voting for John McCain:

• McCain is yet another old, white man from the entrenched political establishment. Instead of running a country the guy should be in Florida enjoying retirement. We need a leader that understands the role technology plays in today’s society. I am not sure McCain understands that role. There is also the likelihood that he will die in office during his first term.
• He has stated that we may need 5 more years of budget deficits. We can no longer afford to NOT have a balanced budget. I am not sure he understands the gravity of the situation we are in.
• How can we afford his proposed tax cuts? We are already running a deficit and McCain’s proposals would just increase the deficits. The suggestion of tax cuts increasing revenue just does fly especially when our economy is being hit with this mortgage crisis that is sending it into a tailspin. The bailouts only make the situation more tenuous.
• His vice-presidential pick, Sarah Pahlin, has made statements that worry me. How can I vote for a ticket on which there is a person that would not even allow abortion in the case of rape or incest?
• Although McCain had an interesting pick for vice president, her inexperience and religious right baggage will ultimately be the downfall of the ticket. I have no interest in having another born-again like Bush in the White House.
• McCain’s energy policy is lopsided to the policy of drill here, drill now. We need a balanced approach which only Paris Hilton seems to understand.
• He appears to be a war monger. Just like Obama, he has a naïve approach when it comes to Iran and Islamic fundamentalism. McCain’s policy is at the opposite end of spectrum from Obama’s.

I look at the McCain platform and I see more of the same failed policies of the Bush administration. Our international standing is at all time low and I doubt McCain can help that.

There you have it; all the reasons to simply skip over the presidential part of the ballot on 4 November 2008. Concentrate on the local elections, although to be honest, until we get a true centrist third party what’s the point. The whacked out fringes of the two party system will continue to dictate the worthlessness of the majority of the candidates that we can elect.

Are you disgusted? I am.

The recent bail outs of financial giants are unconscionable. The government should not be bailing these institutions out of the mess they created. By providing this support the government delays the necessary and painful correction that must occur. All that is being done is propping up a house of cards with used toothpicks. Reckless, short-term policies and the interference with the natural evolution of such things are creating the conditions for a major collapse that will have dire consequences. There is no such thing as an institution that is “too big” to let fail.

Instead of investigating steroids in baseball, maybe our elected officials should be investigating how we got into this mess and measures to prevent it from happening again. Where are the emergency sessions that spotlight the financial mess? Of course such an investigation would also point the finger at them for allowing lax lending practices in the first place for the misnomer of home ownership for everyone regardless if they could really afford it. Such inquiries would also inevitably shed light on the thousands of dollars of political contributions received by politicians from Fannie Mae and Freddie Mac (The Clinton administration's White House Budget Director Franklin Raines ran Fannie Mae and collected $50 million. Jamie Gorelick — Clinton Justice Department official — worked for Fannie Mae and took home $26 million. Big Democrat Jim Johnson, briefly on Obama's VP search committee, has hauled in millions from his Fannie Mae CEO job). They probably know that these skeletons will have disastrous consequences shortly before an election which is why I fear that nothing is being done but putting the proverbial finger in the failing dike. Unfortunately, I, like many other Americans, are tired of the divisive politics that permeates Washington, D.C. We want solutions, not half-measures and more political pandering.

It is time our "leaders" stopped thinking about themselves and their political careers and started thinking about the country and its citizens. They need to stop thinking about themselves as democrats and republicans and instead see themselves as Americans first. Continuing down this road of billion dollar deficits and billion dollar bail outs will be the end of this country. You are probably aware of the testimony of David Walker, former Comptroller General and his forecasts of tens of trillions of dollars of unfunded liabilities. Maybe they should turn Sarbanes-Oxley on the financial books of the United States government. Where is the accountability? Stop pointing fingers at one another and start with constructive governance.

I sure hope they can sleep at night knowing that our children and grandchildren will suffer in debt bondage due to the actions and inactions of selfish politicians and greedy bankers.

Photo by KCThinker. Street side in Les Cayes, Haiti.

Senate Rejects Earmark Moratorium for 1 Year

The senate rejected a 1 year moratorium on earmarks by a vote of 71 to 29. According to Senator Harry Reid (D - NV) earmarks are only a drop in the bucket of the federal budget – only $17.2 billion in fiscal year 2008.

Citizens Against Government Waste (CAGW) has this to say about the rejection of Senate Amendment 4347. CAGW rightfully named all 71 senators voting against this amendment as Porkers of the Month.

In light of more than $9 trillion in national debt how can they say that $17.2 billion does not matter? Unbelievable.

The Stupidity of It All

It is Friday evening. My wife and I both did not feel like cooking so we did the slovenly thing and went to CiCi’s Pizza. I knew from the moment I stepped out of the car that I was going to be depressed. I saw the overweight people going to the feeding trough and caught the reflection of myself in the glass and was reminded that I am one of them. We sat down and I looked around at the people there. What were their lives like? Do they worry about the same things I do? Do they know how bad it really is and how bad it will become? Are they ready for it?

I wish I could be optimistic about the future of this country. I want to have hope for my children. I just cannot. I see what is happening and I think about a car accident one witnesses in seemingly slow motion. You know it is going to happen but there is nothing you can do to stop it except watch and marvel at the ensuing carnage.

Now you may be wondering what the heck I am talking about. I am talking about the economy, the devaluing dollar, the credit crunch, the overwhelming national, state, and local debt, and the understated incompetence of our leaders at every level of government.

I will preface this by saying that I am no economist. But I am a thinker. Here are a few of the issues that I see as bringing us to brink of collapse:

• The government making money cheap for banks to loan out to artificially prop up the housing market.
• The banks making risky loans to people who in all reality should never have been given a loan.
• The government borrowing massive amounts of money to pay for huge spending increases in the wake of a tax cut and an epic military campaign in the Middle East.
• The homeowner who thinks they need it all and subsequently borrow more than their house is worth.
• The pending retirement of the baby-boomers.
• The thousands of bureaucrats whose action or inaction has far reaching consequences that they are either to dim to understand or could care less about the repercussions of as long as they get reelected.
• The falling dollar as a result of foreign investors who see an unsustainable economy and no leadership at the helm of a rudderless ship.
• An education system that fails to produce students capable of competing in a global market.

People are defaulting on their loans. House prices are falling. Banks are losing billions. There is panic in the halls of Congress. “We need to do something” they cry. What do they want to do? They want to dust off a 1930’s program called the Home Owners’ Loan Corporation (HOLC). The HOLC was established in June 1933 to help distressed families avert foreclosures by replacing mortgages that were in or near default with new ones that homeowners could afford. It did so by buying old mortgages from banks ... and then issuing new loans to homeowners. The HOLC financed itself by borrowing from capital markets and the Treasury. On the whole this sounds benign enough. But if you were to actually strip the emotion from it and step back and think about it you would come to several realizations: 1) the banks and people should not be bailed out by the government; 2) we have more than $9 trillion in debt and cannot really afford to borrow any more money to bail them out in the first place; and 3) Fannie Mae reported that rising defaults and falling home prices contributed to a $3.56 billion loss in the last three months of 2007 and now we want to put more liability on the taxpayer. None of it adds up. But then again, the politicians are accustomed to fuzzy math; how else could you justify using the Social Security surplus to balance the budget.

The reality is that the housing market was artificially inflated and now we are witnessing the impact of bad monetary policy and piss poor decisions by greedy assholes in the banking sector. Why are housing prices falling? Well in some markets they were hyper-inflated to begin with and in other areas there is too much supply and not enough demand. Hear that? SUPPLY AND DEMAND. Of course falling housing values have other consequences, namely the municipalities that have bet on increasing property taxes to finance public projects will soon find less money in the coiffeurs.

The response from Washington, D.C. is long in thoughtlessness and vote pandering and short in common sense. The sky is falling, the sky is falling. So they pass a $150 billion fiscal stimulus. They talk about things like the HOLC. Not once do they consider the long-term impacts of their policies. Not once do they consider the billions we will have to pay on the $150 billion we had to borrow for the fiscal stimulus. Not once do they consider the long-term impacts of inappropriate measures like the HOLC. They give me the impression that they could care less what shape they leave this country in.

The housing crisis alone would probably not be a deal killer for our country. But the real problem is only a few years away – the retirement of the baby boomers. On the horizon is another fiscal crisis we are not prepared to deal with and that is funding Medicare and Social Security. Add to that the reports that state and local government pensions may be underfunded by $1 trillion or more (Illinois alone has a $40 billion unfunded pension liability). Ouch.

If you want to know why I am so depressed you need to read a book called the “The Forgotten Man: A New History of the Great Depression” by Amity Shlaes. You can literally watch the car wreck that became the Great Depression unfold in front of your eyes. History does not repeat itself but it does rhyme. What we are seeing today is reminiscent of the actions of lawmakers before the Great Depression. I even think the conditions are much worse today than they were back then.

From The Angry Economist:

"I saw a bumper sticker today saying "If you're not OUTRAGED, you're not paying attention". This was on a Toyota Prius, the official automobile of the "Let's Ignore Economics and Do The Right Thing" crowd. I remarked to my wife "I'm outraged, too, but probably not about the same thing. I just want more control over my life." She quipped "Oh, no, they want the same thing as you: more control over your
life."

Photo by KCThinker, alley in Village of Simiane la Rotonde, Provence, France, October 2007

One Nation Under A Mountain of Debt

Some say that Iraq is the most important topic for the upcoming election. Some say immigration and others say the economy. Some say healthcare while others say education. The most important topic for this election is really all of these and none of these. The most important topic should be fiscal policy because it encompasses all of these topics and should be at the forefront of all the debates. Fiscal policy will dictate whether we can afford to have a military presence in the world. Fiscal policy will dictate if we can afford Medicare and Medicaid. Fiscal policy will determine where our economy goes.

If you are at all following fiscal policy you know that the national debt is around $9.1 trillion (Bush has increased the national debt by an on the books amount of $3.4 trillion). If you had no idea what the national debt is you should now be outraged at the utter irresponsibility of our federal government. Now the other shoe drops – the real debt is much, much more. What the morons running this country do not want you to know is that there are no trust funds for Medicare and Social Security – only a bunch of worthless IOUs in a “lock box”. The accountants for the federal government make the accountants at Enron and Worldcom blush. The sheer scope of the fraud that is occurring in Washington, D.C. when it comes to the keeping of our nation’s books is absolutely mind boggling. The real debt is more than $50 trillion according to David Walker, Comptroller General of the United States of America.

While the presidential candidates are busy debating who the real candidate for change is, Mr. Walker is coming out and talking about the important issues. While Senator Hillary Clinton and Senator Barack Obama were stumping in some diner in New Hampshire Mr. Walker was talking to CBS and raising the alarm. While former Governor Romney was schmoozing at an Iowa farm Mr. Walker was talking to USA Today. While Mike Huckabee was trying not to evolve Mr. Walker was. While Senator John McCain was developing yet another miserable failure of a bill, David Walker submitted testimony to the U.S. Senate Committee on the Budget. While former Senator John Edwards was getting a hair cut for $400 and giving a speech about two America’s the Washington Post said the following:

"The largest employer in the world announced on Dec. 15 that it lost about $450 billion in fiscal 2006. Its auditor found that its financial statements were unreliable and that its controls were inadequate for the 10th straight year. On top of that, the entity's total liabilities and unfunded commitments rose to about $50 trillion, up from $20 trillion in just six years.

If this announcement related to a private company, the news would have been on the front page of major newspapers. Unfortunately, such was not the case -- even though the entity is the U.S. government."

If you think what I am talking about is unimportant take a look at the federal budget and where our money goes. It shows a troubling trend. Medicare/Medicaid, interest on Debt, defense, and Social Security make up the majority of the money the United States spends every year.

Instead of talking about the one issue that dictates all the others, we are stuck with speeches filled with senseless rhetoric only meant to appeal those with a low IQ. The budget determines what we can do and what we can’t do. Simplistic statements like taxing the rich by bigger simpletons are not enough to solve this problem. Wake up America. It is time to demand real change where our fiscal policy is concerned. If we don’t address fiscal policy you won’t get healthcare and you won’t get defense. You won’t get anything at all but a bill saying Due in 30 days.

Photo by KCThinker, Roman ruins, Vaison la Romaine, France.

While America Slept

Most Americans are clueless. There really is no arguing about it. If I asked someone on the street what the national debt is they would probably not be able to tell me. If I asked that same person what the Law of the Sea Treaty was they would have no idea. If I asked that person who Ben Bernanke was I would probably not get a correct answer. If I asked them what the SPP was they would probably give me blank look. Now, I ask that same person what Britney or Paris or some other celebrity was up to that person could probably provide me with an up-to-date description of the celebrity’s latest escapades.

We work hard all day long. We spend time with our family and friends. At the end of the day we do not have the energy to pick up a book about economic policy or foreign relations or read the newspaper or a news magazine like the Economist. We tend to get our news in little 30-second bites and we have no time to think critically on some of the most important issues of the day. Most Americans could care less. We have our circus maximus in ESPN and FOX Sports. Most Americans are content. They have a decent job; life is not too bad. America is working too hard and doing too many things to have time to wake up, shake off the haze, and really understand what is happening with their country.

“A person is smart. People are dumb, panicky dangerous animals and you know it. Everything they've ever "known" has been proven to be wrong.” - Men in Black,
1997

Most Americans are so disenfranchised that they prefer to get their news from Jon Stewart and Stephen Colbert. They would rather read People Magazine. They prefer to hear about the sexual exploits of so-and-so. They want to see the celebrities fall flat on their face. Meanwhile their country is being sold or given away one piece at a time.

I look at America and I see Rome before the fall. We are fat and happy and have no idea that the Visigoths are about to cut our throats. There are so many issues that need to be dealt with now, not later. China has us by the economic ball sack. Our debt is sending investors to Europe, China and India. Our education system is not keeping up with the demands of our knowledge-based, global economy. We have no border security and that leaves us open to crime, terrorism, and illegal immigration. All I see in Washington is a bunch of talking heads that either have no clue what is happening, are complacent and allowing it happen, or helping it along for reasons that are a mystery to me.

Debt

We have amassed a national debt of more than $9 trillion (that is trillion with a T, not billion). Our national debt has nearly doubled in 10 years. Hard to believe that under President Bush’s watch we have borrowed nearly $3.4 trillion. That alone is a staggering number. Sure he cut taxes and we have record revenue coming in, BUT the federal government is still running a deficit in the billions of dollars. Unconscionable. This is under the watch of a “conservative” president. This is from a guy who wants to abolish abortion but could care less about the mess he is living our children.

Do not believe the economists that are being trotted out saying that it is not a big deal. They say that the United States can handle this level of debt. The harsh reality is that the national debt does affect the economy. The world is seeing how unsustainable the United States lives. They are pulling out of the dollar because they see that we are not a good investment anymore. They see the current leadership and the lack of any mention of national debt and economic policy in the debates and have lost confidence in the United States. They see we have no intention of implementing a sound energy policy. The implosion of the sub-prime mortgage market is only the beginning.

Hugo Chavez is selling all his country's oil and gas infrastructure in the United States. Meanwhile we stand in line at Best Buy or Kohl’s at 4 AM in the morning on the Friday after Thanksgiving to get a “deal”. What a sorry statement on the United States people. How far we have fallen.

Here is an interesing post about what the future may hold for our economy.

Education

An Associated Press story in 2005 about education rankings in the world found that the United States was already slipping. Not good signs for a country whose economy base has shifted from manufacturing to knowledge. President Bush’s No Child Left Behind Act may have increased test scores but those improvements have only resulted in an increase in the ability to take a test and not an increase in the ability to think critically. Education should be our number one priority. The smart kids are not motivated, the dumb kids are given all the resources, and the kids in the middle get by. That is not education.

We have a 19th century education system when we need a 21st century system. Why do we have such a long summer break? We have one of the shortest school years because it is based on an agricultural economy. The vast majority of kids no longer have to help their parents on the farm. Let's lengthen the school year by reducing the summer break to 4 to 6 weeks maximum.

Why are teachers paid so little? They are responsible for educating future Americans, yet we pay them very little in comparison to engineers and scientists. If you want to attract better teachers you need to pay better. You also need to address the teacher’s union which is holding our education system back from changing.

We need to change the way we teach. Teaching for the test will not provide children with an ability to effectively compete in the global economy. We need to change our programs. The Cloud Institute is at the forefront in changing our education system. We need to embrace these kinds of initiatives and put an end to worthless buearcratic intervention like the No Child Left Behind Act.

Borders and Immigration

We need border security. This is not just about illegal immigration; this is about drugs, arms trafficking, gang activity, and terrorism. For some reason border security has been equated with racism. What? Are you that naïve or stupid to think that having a secure border is a racist act? I am not against immigration. My parents came over from Germany in the late 1960’s. I am the son of immigrants. This country has been built by immigrants. What I am against is the notion that we need to tolerate people breaking the law and the circumventing the system to come here illegally. I asked a friend of ours from Peru what he thought was one of the biggest threats to America. He answered illegal immigration. He is here in the United States legally. He has had to jump through the legal hoops. His family is building a dream here.

And please do not buy the line by President Bush that these people are the doing the work Americans won’t. The truth is that Americans are not willing to do the work for the wages employers are paying the illegals. Americans are so used to having everything so cheap that they have fostered this system. Our tax system has fostered this problem (America has the highest corporate tax rate in the world). Our government’s lack of law enforcement has only encouraged it. What really gets me is that if I used a fake social security number or fake documents and was caught my ass would be in jail.

What should we do?

I am so cynical that I think we should march on Washington, D.C. and demand our government back from the special interest groups. I often joke that I am sharpening the pitchforks and preparing the torches (which I am anyway by the way).

The reality is that we need real leadership. Not false leadership like President Bush. Not the false promises of Hillary or the hope-will-do-everything speeches by Barrack. Not the isolationism of Ron Paul or the 9/11 mentality of Rudy. We need to demand that our leaders start thinking about America and put themselves way down on the list.

We need campaign finance reform that forces all candidates to only use public money. This does not limit free speech. No one is stopping you from standing on the street corner and stating your opinion or views. We need to get money out of politics period. The fact is that billions of dollars will be spent by the 2008 presidential candidates alone. We need to rethink our election process and stop this stupidity of starting the campaign two years before the election.

We need new ideas in Congress and the only way to do that is through term limits. We have term limits for the President, why not for Congress? I recommend two terms for Senators and six terms for Representatives.

We need to look at ourselves and decide if we really want the vision that the founding fathers had for this country. If we do, then we need to change our attitudes and demand leadership. Otherwise, just sit back and watch the downward spiral.

Photo by KCThinker. Gordes, France, October 2007.