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.

Advertisements

As Usual, Campaign Full of Hype, but Short on Details

November 3, 2010

Given all the hype about this year’s midterm elections, you’d think that the results are actually going to make a difference in the lives of Americans.  Oh, we’ve all heard the hyperbole.  Both sides are talking about how this is an election for “the soul of America”.  Democrats are warning Americans that we can’t go back to the failed policies of the Bush Administration by electing Republicans to Congress.  Republicans, bolstered by the Tea Partiers, are screaming bloody murder about the president’s socialist policies and his reckless spending.  It seems like both sides have wasted a huge amount of time and money with these worthless arguments when they should have been talking details about some issues that will really affect Americans.

For starters, let’s talk about the War on Drugs? Since its inception, government at all levels has spent an enormous amount of money on drug eradication, policing, prosecutions, and imprisonment.  Within the last year we passed the milestone of having one in every one-hundred Americans behind bars.  Many are incarcerated for non-violent drug offenses.  But, besides the cost of this failed war it has also caused a huge problem on our southern border – incredible violence.  Actually there is a civil war going on in Mexico that is spilling over into Arizona, New Mexico, and Texas.  It’s all fueled by the enormous profits reaped from illegal drugs.  The “rebels” in Mexico have turned huge profits into murderous rampages of police, judges, and mayors in Mexico and Americans in Arizona and Texas.  With all the carnage caused by the War on Drugs there has been hardly any debate amongst the candidates about what should be done.  I am hard pressed to come up with a candidate who has called for an end to the madness by decriminalizing drugs and treating the situation like the pubic heath problem that it is.  It is a disgrace that an issue so important to the safety of Americans, our border integrity and fiscal sanity has been totally ignored.

As much as Tea Partiers like to denounce federal spending they have not made eliminating wasteful federal departments a part of their platform.  Take the Department of Energy for instance.  Its goal when it was founded in the late 1970s was to reduce American dependence on foreign oil.  It has failed miserably in that endeavor.  In the early 1970s, America imported 24 percent of Her oil.  Today She imports over 65 percent of Her oil.  With a $23 billion annual budget, should we continue to subsidize this failure?  Unfortunately, no candidates addressed this question during the campaign.

Naturally, politicians want to win elections, so any discussion about making hard choices with regard to Social Security and Medicare was off the table during the campaign.  Unfortunately, with millions of baby boomers hitting retirement these two “entitlement” programs more than anything else will break the federal budget. The U.S. Government Accounting Office (GAO) in 2008 announced that unfunded obligations for Medicare and Social Security totaled almost $41 trillion.  Yet, very little discussion was had during the campaign about raising the retirement age or privatizing the system.  How can an issue with such huge implications for the future of the country get so little attention?

Last, but certainly not least, little attention has been given in this campaign to the institution most responsible for the financial crisis, the institution which controls the supply of our currency yet operates in absolute secrecy, and the institution which has and is about to again give billions of dollars in backdoor bailout funds to shyster banks.  I am of course referring to the Federal Reserve Bank.  Ben Bernanke and his Federal Open Market Committee are arguably the most powerful economic policymakers in the world and as recently as a couple of weeks ago Fed policymakers were expressing their belief that inflation was “too low”.  In other words, the prices you pay for goods and services are not high enough to spur economic recovery.  Now, this rhetoric would be tolerable if it was simply professorial theorizing, but these same policymakers actually have the power to print more dollars and make prices go up even further.  What’s so amazing is that Tea Party candidates have made reckless government spending their mantra issue, yet almost none have lambasted the Fed for its role in monetizing the debt.

Chances are good that the midterm elections of 2010 will result in a political shift of power in the Congress.  So, what?  Even in their “Pledge to America” published in September the Republicans committed to cut spending by only $100 billion.  This is loose change compared to the enormous debt we are facing down the road.  Since they love war there is no chance they will end the violence caused by the War on Drugs.  Because they lack courage, Social Security and Medicare will doom us to financial ruin.  And the Federal Reserve will remain safe under Republican rule in Congress since it is the mechanism which makes all the reckless spending possible.  After Republicans screw up the next two years, maybe then Americans will be ready to vote for third parties.  Hopefully, it won’t be too late.


Republican Proposals Reaffirm the Party’s Commitment to the Failed Welfare/Warfare State

September 26, 2010

In an attempt to emulate the electoral success they enjoyed in 1994, House Republicans presented their version of the 1994 Contract with America this past week.  The new document tagged “A Pledge to America” details in its 48 pages the legislative agenda House Republicans will pursue if elected to a majority this fall.  Among the worthwhile proposals put forth in the document are repeal of Obamacare and the immediate cancelation of all unspent stimulus funds.  Beyond that, the Republican’s campaign platform lacks creativity and courage, favors special interests, and reaffirms the Republican Party’s commitment to the failed welfare/warfare state.

Of course, no Republican agenda would be complete without the standard proposals for tax cuts.  If the Republicans take the House they promise to renew the Bush tax cuts and give small business owners “a tax deduction equal to 20 percent of their business income.”  Now, tax breaks are always a good thing because the private sector can allocate money way more effectively than government, but the Republicans really need to branch out from their uncreative, politically popular tax cut proposals if they are really serious about turning the country around.  What good is more money in your pocket if the cost of things continues to rise?  How about proposing a new monetary system to replace the Federal Reserve’s?  How about proposing one that serves all the people not just the banks?  Maybe we could get one that puts real restraints on the spendthrift tendencies of politicians?  You know, one that provides a sound currency, backed up by a scarce commodity, which would ensure real price stability not the type the Fed provides now where prices increase over time to benefit corporate America.  But, House Republicans dare not propose that because their benefactors on Wall Street would get upset and they themselves would be negatively affected because they wouldn’t have the Federal Reserve around to monetize all their deficit spending.

Next up, House Republicans are pledging to alleviate the burdens of federal regulations on business.  The idea is if regulations are light businesses will prosper, hire, and our economy will return to full health.  You can’t beat that logic.  But, Republicans draw a line in the sand.  Under their “Pledge”, they will only require “congressional approval of any new federal regulation that has an annual cost to our economy of $100 million or more”.  What is so special about $100 million?  Is that the monetary threshold where regulations are most effective in protecting special interests by hindering new players from entering a market while at the same time minimizing the effect on the profits of the same special interests?  It is bad enough that most federal regulations on business are unconstitutional.  At the very least, Congress should approve all regulations.  But if Republicans were really serious about producing a prosperous economy they would talk about repealing onerous regulations which stifle competition and only serve narrow special interests.

Their proposals to “stop out of control spending and reduce the size of government” in “A Pledge to America” are so ridiculous it is embarrassing.  House Republicans want to cut government spending to “pre-stimulus, pre-bailout levels”.  This, they claim, will save us $100 billion in the first year and put “us on a path to begin paying down the debt, balancing the budget, and ending the spending spree in Washington that threatens our children’s future”.  Question, weren’t we on a spending spree pre-stimulus – pre-bailout?  In the seven years preceding the stimulus and bailouts didn’t a Republican president and Congress increase the national debt by $5 trillion – almost doubling it?  I don’t understand how a mere $100 billion is going to help us eliminate a deficit that could be $2 trillion this year?  This proposal is a joke.

And in a real sign that they dig the welfare state, House Republicans are pledging to “reform” Fannie Mae and Freddie Mac.  They will end the government takeover, shrink their portfolios, and establish minimum capital requirements.  Again, Republicans claim their proposal will save the taxpayer money – as much as $30 billion.

However, according to the Congressional Budget Office, the government bailout of Fannie and Freddie could swell to $400 billion and if housing prices continue their downward trajectory costs could hit as much as $1 trillion.  In light of these massive losses for taxpayers, Republicans must be joking when they boast their reform proposals will save a mere $30 billion.  They sound like Democrats.  If Republicans want to renew American prosperity they should privatizing both Fannie and Freddie, end the implicit guarantee of federal bailouts, and let the free market handled mortgages.

Lastly, under their leadership the House Republicans promise that the warfare state will be safe and secure.  Well, they don’t say that exactly.  They cloak their speech with emotional words in an effort to make opposing them an unpatriotic act.  Instead they say, “When asked to provide our troops with the resources they need, we will do so without delay”.  So, does that mean Republicans are willing to give blank checks to the military industrial complex?  If it does, the Republicans will be spending all of their proposals savings and then some.  More importantly, as the party of war, how many more conflicts will they get our troops into?

A Pledge to America is a wonderful reminder of why the American voters rejected the Republican Party in 2006 and 2008.  Economically, all they really offer are tax breaks.  In foreign affairs, they offer more war.  If they are so concerned about restoring American greatness, they should be proposing: reform of the monetary system, huge cutbacks in every federal department and agency, and closing down bases and bringing the troops home to defend America.  But, it seems the Republicans lack the creativity and courage to do that.  They prefer instead to favor special interests and recommit to the failed welfare/warfare state.

Article first published as Republican Proposals Reaffirm the Party’s Commitment to the Failed Welfare/Warfare State on Blogcritics.