Your Vote Didn’t Count last Tuesday

November 8, 2010

Did you really think it was worth your time to vote last Tuesday?  Oh, Republican partisans will of course say an unequivocal “yes” as their party “shellacked” the Democrats and in the process picked up several Senate seats, governors’ mansions, and control of the House of Representatives.  But in actuality within 24 hours of the Republicans coup d’état all those Tea Party voters and others who crave small government had their votes negated and their victory smashed. 

How?  To begin with, South Carolina Senator and Tea Party Kingmaker Jim DeMint admitted on John King’s State of the Nation on CNN that Republicans will support raising the debt ceiling currently at $14.3 trillion, but only if massive cuts are included with the vote.  Ah, Senator, there is plenty to cut in the budget that will make raising the debt ceiling unnecessary.  How about ending our quest for World Empire by ending foreign occupations, closing down bases, and bringing our troops home?  How about abolishing the Energy, Commerce, and Education Departments for starters?  How about rescinding the balance of Obama’s “stimulus” program and ending corporate welfare as we know it?  Just these moves alone would save over a trillion dollars.  If there was ever a time for Republicans to be gutsy it is now.  They are riding a wave of voter anger unprecedented in our history.  They have a mandate from those same voters to cut, eliminate, and abolish anything and everything in the way of a balanced budget.  But within 24 hours of their mandate DeMint is already cutting deals on federal spending.

Jim DeMint aside, the biggest negation of the voters’ wishes on Tuesday came on Wednesday.  The Federal Open Market Committee (FOMC) of the Federal Reserve Bank announced that it would begin a new buying spree of between $600 and $900 billion of U.S. Treasury bonds over the next 10 months. This so-called quantitative easing is necessary according to the FOMC because, “…the pace of recovery in output and employment continues to be slow”.  Thus the Fed must step in, purchase Treasury Bonds from banks so the banks in turn can loan that liquidity to businesses to get the economy moving again.

You see Congress and the president are not the only big spenders in Washington.  The Federal Reserve also exercises the power to essentially spend our money through monetizing government debt.  Thus, on the very day voters across the country were saying no more reckless spending and voting spendthrifts out of Congress the unelected Fed decided to usurp the People’s power by deciding to spend hundreds of billions of dollars to purchase Treasury bills from member banks.

Based on past experience, here is how the Fed’s spending spree will work.  The Fed will create between $600 and $900 billion of liquidity (dollars) out of thin air.  It will then use that liquidity to buy up massive amounts of Treasury bonds from the big banks.  The banks are supposed to use the proceeds from the sales to make new loans and to get the economy moving again.  Keep in mind that what the Fed is about to do, it has already done in the not so distant past. Beginning in March of 2009 the Fed injected about $2 trillion into banks to buy up toxic assets.  Precisely at that time, the S&P 500 stock index bottomed out after falling by 57 percent from its historic high.  Since the Fed began that round of “quantitative easing” in March of 2009 the S&P has rebounded a remarkable 80 percent.  With the economy still stuck in a deep sewer there is no reasonable explanation for the sudden, renewed health of the stock market except that Wall Street invested their Fed funds in themselves instead of in Main Street.

And that is what banks are going to do this time as well.  It is bad enough that an unelected central bank has the power to print our money like crazy with no Congressional restrictions placed on it, but to give it to the big banks without any stipulations like they have to make loans or face penalties is just plain criminal.

Look, our political and financial systems are corrupt and rigged.  They make a Mafia bookmaker look honest.  Think of it like a happy love triangle between Congress, the Fed, and Wall Street.  To protect itself politically Congress has contracted out management of our money supply to the Federal Reserve.  In return, the Fed prints money out of thin air to support Congress’ deficit spending which ensures its high reelection rate.  The Fed supports big banks by loaning them our money at very low rates.  It bails them out when they don’t have enough reserves to meet obligations.  It allows fractional reserve banking whereby banks are guaranteed solvency by the Fed even though they loan out up to 90 percent of deposits on their books.  The final link in the cycle is the contributions given by Wall Street banks to members of Congress.  We’ve heard DeMint, McConnell, Cantor, Boehner and other Republicans decry the deficit spending of Democrats but when have we ever heard them decry the Federal Reserve?  Never.  There is a good reason for this:  the Fed is their meal ticket to reelection through the financing of deficit spending and campaign kickbacks from Wall Street.

This whole rigged system has been destroying our standard of living for decades.  By adding more dollars to a low producing economy the value of our currency will continue to deteriorate and prices will spike.  Previous “stimulus” spending of Congress and quantitative easing by the Fed has already caused commodity prices to rise hugely in the last year:  Agricultural Raw Materials up 24%, Industrial Inputs Index up 25%, Metals Price Index up 26%, Coffee up 45%, Barley up 32%, Oranges up 35%, Beef up 23%, Pork up 68%, Salmon up 30%, Sugar up 24%, Wool up 20%, Cotton up 40%, and Rubber: 62%.  You get the idea.  Imagine price increases after this next round of easing.  But don’t worry, because the Fed’s member banks will know when to pull out of the stock market before it busts.

At the end of the day, if you voted for smaller, less expensive government last Tuesday your vote was negated by the unelected economic central planners at the Federal Reserve.  It took the FOMC just 48 hours in closed door meetings to undo what candidates across the country spent billions of dollars on in the last year to achieve on Election Day.  What a pity since you thought your vote was really worth your time.

Article first published as Your Vote Didn’t Count Last Tuesday on Blogcritics.

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House Republicans Must Be Joking

June 8, 2009

Thomas Jefferson said, “I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”  Certainly, our current unhappiness as a nation can be partially attributed to the fact that for at least the last 38 years we have allowed government at all levels in the United States to rack up enormous debt in the name of providing for the needs of the American people.  The $400 billion national debt in 1971 has ballooned to well over $11 trillion today.  Our national debt as a nation has gotten so bad that the ratio between debt and GDP will soon be one to one.  Most sane Americans agree that the lunacy must end.

The President, however, doesn’t see things quite the same way.  He has proposed a $3.5 trillion budget for fiscal year 2010.  Besides being the largest budget proposal in the history of the republic, it is filled with items the President claims the American people need.  You know the same kinds of expenditures which have traditionally produced huge deficits and sent our total debt into the stratosphere – more for college loans, worker retraining, nutrition, health and housing programs.

But, this article is not about the President’s insane budget proposal.  It is about the response to it by the opposition party, the so called conservative party of the two major parties in the U.S. – the Republican Party.  This week, responding to a challenge by the President to propose cuts in his budget, the House GOP acquiesced and submitted their recommendations for lowering federal spending.  They proposed spending cuts totaling $23 billion over the next five years.  You heard right, spending cuts averaging $4.6 billion a year for the next five years. That amounts to one-ten thousandth of a percent of the total Obama budget!   House Republicans must be joking. 

Now, the Republicans led by House GOP Whip Eric Cantor of Virginia, are right to propose elimination of federal spending on building sidewalks and bike paths and hiring crossing guards.  But, in a $3.5 trillion budget this is the best they can do?  What about slashing the budgets of various federal departments by half?  Take the Education Department for instance.  It’s unconstitutional and doesn’t educate one kid.  If we cut its budget by half, we could save another $23 billion a year.  Then there are the extortionists over at the Transportation Department.  $73 billion a year is given to this bureaucracy so they can take state funds, attach strings to it, and send it back to the states as a gift to them to improve our highway structure.  Why not let the states keep their own revenue and decide how best to spend it locally?  We would save billions a year just in salaries.  How about the Energy Department?  Aren’t we still dependent on foreign oil?  A slashing of fifty percent here would save $13 billion.  Lastly, there is plenty to be cut at the Commerce Department.  Do we really need a federal agency to promote American products abroad?  Isn’t that what the weak dollar and advertising budgets are for?  In Obama’s budget he has allocated $7.4 billion dollars to Commerce for the 2010 Decennial Census.  If we could reduce the census to its original format, simply counting heads for congressional apportionment and not bathrooms and outhouses on properties for God knows what we could save billions.  The total savings just by cutting these few departments’ budgets in half comes to $80 billion per year.  Now we have a start toward fiscal solvency.

In any event, like the mantra that Obama represents real change the idea that the current Republican Party would have the courage to do the rights things as the opposition party was a pipe dream.  Eric Cantor, one of its leaders in the House is emblematic of this.  Cantor served in the House through the Bush years and voted for almost all big spending schemes.  He consistently voted for Bush budgets which nearly doubled the national debt in eight years.  He voted for Bush’s defense authorization bills, lavish federal department appropriations, the $150 billion “stimulus” bill of February 2008, and the $700 billion TARP (twice).  It’s no wonder the best he could do was come up with an amount of spending cuts that don’t even deserve the title “infinitesimal.” 

Sadly, as our day of financial reckoning approaches there are still no real leaders in charge in Washington to put an end to the lunacy that is federal spending.  Both the Democratic and Republican parties are more interested in helping their own cause than in doing what is right for the country.  Ultimately, doing what is right for the country is what Americans really need.