Young Voters Betrayed by Obama Policies

December 21, 2013

Barack Obama, in large part, owes his presidency to young voters.  In two presidential elections he has garnered 66 percent and 67 percent of their vote respectively.  Many of those votes proved pivotal for him in winning key states like Florida, Virginia, Pennsylvania, and Ohio.  And yet the President apparently feels no loyalty toward this group of voters that has given him so much.  In fact, it has become second nature for him to run roughshod over their interests.

To begin with, the economy Obama has produced for young people in close to five years of his leadership is horrendous.  His policies of regulate and spend have not permitted the economy to recover from the Great Recession that began in 2008.  Unemployment for 15 to 24 year olds is more than double the national average.  Many college graduates, unable to find a job, have returned to their parents’ nests to wait for better days and brighter employment prospects.  African-American teenagers face a jobless rate of more than 40 percent!

And while the President was attempting to “stimulate” the economy back to good health with profligate spending, what he did instead was run up a tab that young folks will have to pay back for many years into the future.  What’s more, when interest rates rise to their historic average and interest payments on the national debt more than double, paying back that debt will have to include much higher taxes or enormous cuts in government services.

Lastly, there is Obamacare.  The President is relying on young folks to make his health care scheme work.  He is counting on millions of them to purchase high cost plans to offset costs for the sick and elderly.  Of course, many will not accommodate the President’s wishes, thereby causing health care premiums to skyrocket for all consumers.  By the time the current crop of 18-30 year olds is interested in purchasing health care coverage the costs will be astronomical.  Thus he has put them in an unenviable position.  They are damned if they do, damned if they don’t.

Young people made a serious mistake giving Barack Obama their overwhelming support in the last two presidential elections.  But, what choice did they have?  John McCain and Mitt Romney weren’t much better alternatives.  What young people need are free market policies – sound money, a balanced federal budget, and deregulation.  It doesn’t appear this is going to happen anytime soon.


If Republicans Love America They Must Keep the Government Closed Down

October 5, 2013

The current government shutdown has statists all in a tizzy.  Democratic congressmen and mainstream media pundits have been blabbering all week about how we are doomed because Republicans in the House of Representatives refuse to approve more wasteful federal spending thereby allowing the government to continue to function.  For these folks, it is the end of the world if Washington is not the center of decision making and the purveyor of all of life’s provisions for the American people.  The incessant chatter of how a small group of “extremists” in the House is holding the whole country hostage got old pretty darn quick and I found myself reaching for the remote to quell the noise on more than one occasion.

I mean what is so extreme about attempting to change the disastrous course the country is currently on?  Can the federal government continue to rack up enormous deficits each month with no end in sight?  Are we able to take on another massive entitlement program?  Finally, after five years of managing the economy and producing no economic recovery, is it not time to admit failure and try something new?  If Republicans love America, they must stick to their guns and demand changes before any budget deal is agreed to.

For one thing, it is no secret that Washington wastes billions of dollars each year and a lot of the spending has nothing to do with the welfare of the American people.  It includes everything from $10 million  to create a version of “Sesame Street” for Pakistani television to $2.6 million to train Chinese prostitutes to drink responsibly.  None of it is constitutional and none of it enriches the lives of ordinary Americans.

But, that spending is just the tip of the iceberg.  The national debt is quickly approaching $17 trillion and unfunded future liabilities for Social Security and Medicare equals another $84 trillion.

Then there is Obamacare – the president’s signature legislative accomplishment.  The increased costs that come with that scheme will be enormous.  Much of the costs will be covered by federal subsidies which will further exacerbate the national debt.  Because it is another entitlement program, future lobbying for protection of the system and increased benefits will rival that of Social Security and Medicare thereby causing huge unfunded liabilities of its own.  Yet, Democrats refuse to even consider delaying the law for one year.

In the final analysis, the way to get America back on the path to economic prosperity is not through big government programs supported with huge budget deficits.  That has been proven over the last five years.  The road to a bright economic future is through small government and balanced federal budgets.  The greatest period of economic growth in our nation’s history came when deficits were low and the largest federal program was the U.S. Postal Service.  Between 1869 and 1879 America’s economy grew 6.8 percent (NNP equals GDP minus capital depreciation) per year.  When the 20th Century began, America was the world’s leader in per capita income and industrial production.  Real wages increased greatly and prices of goods and services remained steady.

We have spent over $7 trillion in the last 5 years and what has it gotten us?  Lagging wages, continued high unemployment, and higher prices are the result.

An immense fiscal and monetary crisis is eventually going to engulf America. It is already too late to prevent it.  Over 40 years of profligate federal spending and monetary recklessness is quickly coming to a head.  If Republicans back down to the big spenders and pass a budget which increases the debt ceiling and funds Obamacare the collapse will be that much worse.  If they really love America, they must keep the government closed down.  Maybe we can salvage some of our doomed economy?

The Fiscal Cliff is in our Rearview Mirror

November 28, 2012

Washington is full of drama.  Americans are constantly being treated to high political suspense.  Whether it’s the scandal ridden death of an ambassador, an outrageous gun dealing policy gone wrong on our southern border, or the spectacle of politicians scurrying frantically at the eleventh hour to raise the federal debt ceiling to keep Uncle Sam running, there is usually no shortage of political theater emanating from the nation’s capital.

At present, the drama centers around the so-called “fiscal cliff” negotiations taking place between the President and congressional leaders.  According to the main stream media, the big question is, can Congress and the President thwart economic catastrophe by agreeing on tax increases on the rich and some spending cuts before a January deadline would automatically terminate Bush era tax cuts and cut military spending deeply thereby causing an economic crisis.

It’s no secret that the fiscal condition of the United States is apocalyptic.  With $16 trillion of current debt and 10s of trillions of dollars more in future unfunded liabilities for Social Security and Medicare, there is no possible way for the United States to ever meet these obligations short of its current strategy of printing money out of thin air.  And, of course, that is a financially suicidal option.

The big problem is that the federal budget is inflexible.  In Fiscal Year 2011, $2.303 trillion in tax revenue was collected by the federal government.  In that same year, the government spent $454.4 billion on interest payments and $2.025 trillion on mandatory spending like Social Security, Medicare, and Medicaid.  Thus, money that Uncle Sam was forced to pay out exceeded all revenue collected by $176.4 billion.  This doesn’t include discretionary spending like defense appropriations.  Mandatory spending and interest payments will only grow as more baby boomers retire and the Treasury goes deeper into debt.

Of course, many progressives believe that all we have to do is raise taxes on the rich to fix our fiscal mess.  They argue that tax cuts since the 1980s which lowered marginal tax rates on the rich from 91 percent to the current 35 percent are responsible for the national debt.  But this is simply not true.  A Congressional Research Study  found that the 91% marginal tax rate on high earners in the 1950s and 1960s produced an effective income tax rate on the top 0.01 percent of only about 45%.  Consequently, high rates on the rich did not produce the windfall for the U.S. Treasury that progressives claim.  In fact, whether the top rate was 91 percent or 35 percent, federal tax receipts for the last 67 years have changed little, averaging about 17 percent of GDP for the time period.

What proponents of soaking the rich like to ignore about the 1950s and 1960s is the real check on government spending which was the gold exchange standard. They ignore it because they know that if a gold standard were reinstituted in the U.S. it would put a real crimp in their plans to maintain the welfare/warfare state they have built since LBJ.

At the end of the day, the current drama over the approaching fiscal cliff in January is utter nonsense.  The fact is we have already gone over the fiscal cliff.  Washington is either in denial, won’t admit it, or doesn’t realize it because we haven’t had the hard landing at the bottom of the canyon yet.  That will come when interest rates begin to rise and the Fed prints even more money to meet obligations.  Then the real drama will begin.

Article first published as The Fiscal Cliff is in Our Rearview Mirror on Blogcritics.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

The End is Nigh

September 4, 2012

According to data from the Federal Reserve Bank of Philadelphia we are about to enter another recession.  Of course, one would be hard-pressed to convince the over 20 million Americans who remain unemployed or underemployed that the last recession ever ended.  But, I suppose, according to economists it technically did.

Given the circumstance we are in, what can be concluded firmly is what this commentator has maintained all along, namely that Keynesianism is a complete and utter failure.  Yes, it made many Americans feel like the political class cared about them because it spent so much money on their behalf in an attempt to “stimulate” the economy back to good health.  And all the money infused into the economy either by government appropriations, monetized debt, or artificially low interest rates did indeed forestall an economic collapse.  But, like the old Chiffon margarine commercial which warned its viewers that impending doom would befall those that fooled Mother Nature, doom is now ours because Bush, Bernanke, Geithner, Obama, and many members of Congress dared to fool the Free Market.

Naturally, Keynesian diehards will claim that the problem is that not enough money was spent to revive the declining economy.  Well, that is an easy out given that more money could always be spent.  In any event, more money spent would have probably forestalled the next recession even farther into the future, but it wouldn’t have solved the systemic problems in the economy – namely price fixing by the Fed, government spending crowding out private investment, and overregulation.  In fact, with the spending we have had an even worse recession than the last is on the horizon; if more money had been spent the next downturn would be that much larger.

The fact of the matter is that since 2008 we have racked up close to six trillion dollars more in debt with nothing to show for it.  The big spenders responsible will blame the greedy rich who they say do not pay their “fair share” of the tax burden.  But, according to the IRS, in 2007 the richest one percent earned 22 percent of national income while paying 40 percent of all personal income taxes; the top five percent earned 37 percent and paid 61 percent of all income taxes; and the top 10 percent earned 48 percent and paid 71 percent of all income taxes.  Meanwhile, the bottom 50 percent earned 12 percent of the nation’s income but only paid three percent of the nation’s income tax.  So, I am not sure what the President and his coterie are talking about when they claim the rich need to be taxed more in order for them to pay their “fair share”?

I know one thing and that is that the disastrous policies of the U.S. government are responsible for not only the loss of our industrial base, but the current trend of America’s young enterprisers leaving for greener pastures overseas.  High taxation, overregulation, inflation, and the prospects of even higher healthcare costs through Obamacare are the reason for the exodus.

With all of these productive entities fleeing our borders and given that the federal government is close to $16 trillion in debt and unfunded future liabilities, specifically for Social Security and Medicare, adds 10s of trillions more to that total, how is America ever going to meet her future obligations?  To make matters even worse, should interest rates rise to their historic long-term average the annual interest payment on the national debt would more than double.  Using current numbers, the total would eat up 41 percent of revenues collected.  The massive increase in that line-item would require even larger annual budget deficits at a time when America can least afford it.

The problem is that Americans want their Social Security, Medicare, and all the other goodies politicians promise them.  And they don’t seem to mind the endless wars and corporate favoritism coming out of Washington either.  This can be concluded because they continue to reelect the same policymakers that have produced the mess we are in.

On the eve of another recession, leading policymakers in Washington are not discussing what needs to be done to turn the economy around.  Very few are talking seriously about addressing the debt crisis.  Lastly, most Americans who will vote this November are poised to send these same politicians back to Washington.

And that is why the end is nigh.  The end of what you ask?  The end of everything we have come to expect as Americans since the 1970s.  It will be the end of militarism and endless wars.  This time it will truly be the end of welfare as we know it.  It will be the end of political favors to every special interest group under the sun.  Finally it will be the end of living off accrued wealth by producing less and less while at the same time spending like drunken sailors to acquire cheap Chinese goods.  All these things will end because we simply can no longer afford them.  The real question is can we afford what will come after the end?

Article first published as The End is Nigh on Blogcritics.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

Obama has been on a Spending Binge

May 31, 2012

Rex Nutting of the financial website MarketWatch recently published a column titled, “Obama Spending Binge Never Happened.”  In it, Nutting analyzed the spending practices of presidential administrations going back to Dwight Eisenhower in the 1950s.  His findings indicate that Obama, who everyone believes is a reckless appropriator of federal funds, has actually presided over the smallest increase in federal spending since President Eisenhower ended the Korean War in the early 1950s.  Using George W. Bush’s last federal budget of $3.52 trillion as a baseline and projecting Obama’s fourth and final budget of his first term to be $3.58 trillion, Nutting figures that the annualized growth of federal spending under Obama will increase by 1.4 percent in his first term.  Compare that to Reagan ‘82-85 – 8.7 percent, Bush II ’02-05 – 7.3 percent, and Bush II ’06-09 – 8.1 percent and Obama looks like a frugal fellow.

And don’t think that Obama isn’t going to use the analysis to clear his name and further his reelection chances.  In fact, at a campaign stop last week the president boasted, “Since I’ve been president, federal spending has risen at the lowest pace in nearly 60 years. Think about that.”  Now that is an interesting comment.  Obama has never wanted to be known as a spendthrift, but he sure doesn’t want to be known as the Herbert Hoover of this financial crisis either.  The same Herbert Hoover who is much maligned by Paul Krugman and other Keynesians for not spending enough to prevent the Great Depression from happening.  Funny thing is that under Hoover real government spending rose by 12.3 percent per year and we still had the Great Depression.  According to Keynesian logic, with Obama’s paltry spending increase we should already be in another Great Depression.

The bottom line is that Obama can’t have it both ways.  He can’t claim his spending has kept us out of depression while at the same time claim that his spending has been meager by comparison to other administrations.

Obama is a big spender because, Nutting’s irrelevant analysis aside, he is still outspending his big spending predecessor.  Just because the rate of spending increase under Obama is small does not make him a responsible custodian of the federal purse strings.  Not only has he maintained Bush’s spending spree but he has slightly enlarged it.  So Keynesians can rest easy that Obama is one of them.

And of course they will claim that his fiscal policies have kept us from another depression.  I don’t disagree, but Obama has borrowed more than five trillion dollars from future generations of Americans in order to do it.  He essentially has traded a much needed economic correction for temporary serenity.  The economy is not improving.  Analysts have been warning about a double dip recession for years now.  In order to maintain the charade Obama must continue to spend lavishly or the economy will collapse.  At some point our current rate of spending will become unsustainable.  Given that we will be many more trillions in debt and have a lot more mal-investment in our economy, the next crisis will make the last look like a walk in the park.

Article first published as Obama Has Been on a Spending Binge. on Blogcritics.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

Gingrich Plan Has Been Tried Before

December 21, 2011

In the debates for the Republican nomination for president, it is no accident that Newt Gingrich constantly invokes the name of conservative icon Ronald Reagan.  Gingrich continually reminds us that he was in Congress fighting for Reagan’s tax cuts and his military budgets in the early 1980s.  Naturally this is a calculated political strategy   on the part of Gingrich since the most faithful Republican primary voters are Reaganites.  But, the strategy is more than political; it is an indication of how he would govern if elected president.

According to Gingrich’s official campaign website, the former Speaker of the House of Representatives is essentially proposing the same program that Reagan foisted on America in the 1980s.  The key elements of which are huge tax cuts and military spending.

In terms of taxes, Gingrich’s plan would lower individual tax rates, lower the corporate tax rate from 35 percent to 12.5 percent and eliminate the capital gains tax.  Any lover of small government should love these proposals, however Gingrich never addresses how he would pay for the tax cuts.  On his site, he proposes no specific spending cuts and claims he will balance the budget by “growing the economy” through tax cuts.

For his part, Ronald Reagan based his entire economic platform to get the economy moving again on tax cuts.  He also claimed that lowering taxes would grow the economy and balance the federal budget.  After eight years in office he managed to triple the federal debt.  The problem with Reagan wasn’t that he cut taxes (he also was the biggest tax raiser in history to that point) it was that he didn’t cut spending.  He proposed cuts when he ran for president, but didn’t follow through on his rhetoric.

At least Gingrich is not being dishonest about his intentions not to cut federal spending, but his overall policy will have the same effects as Reagan’s – an enormous increase in the national debt.  Given that our debt has already reached a critical point, we can ill afford a return to 80s style economics; thus we can ill afford a President Newt Gingrich.

Gingrich is also proposing Reaganesque militarism if he is elected president.  Of course that is the path we have been on since the 1980s anyway.  He has no intention of making any military cuts a part of debt reduction.  In fact, according to his campaign website, under President Gingrich the U.S. would continue to be the world’s military policeman:

“America’s foreign policy must begin by understanding who we are as a country.  We are, as Ronald Reagan said, the world’s “abiding alternative to tyranny.” Therefore, America’s foreign policy must be to ensure our own survival and protect those who share our values.”

So while he proposes to cut taxes drastically and offers no spending cuts, he also would seek to at the very least keep spending enormous amounts of money on military adventures that don’t contribute to our safety and security.  In fact, by defending Israel unconditionally his policy would make us much less safe.

There is no doubt that Ronald Reagan’s legacy is still very much with us today.  Indeed, Newt Gingrich has co-opted the Reagan governing plan as his own.  It is a simplistic plan that set us on the road to an astronomical national debt.  We are currently at a breaking point with that debt and all Newt Gingrich can do is propose more of the same?

It Should be Easy to Balance the Federal Budget

November 20, 2010

In spite of the recommendations for tackling the federal budget deficit and national debt of Obama’s Debt Commission, which included a combination of tax hikes and spending cuts, a new poll released by  Rasmussen Reports finds that 51 percent of likely voters polled believe it is possible to balance the federal budget without raising taxes.  This is not surprising since approaching where to cut federal spending is like a glutton deciding where to start eating at an all you can eat buffet.  In other words, there are so many things that should be cut from the federal budget the hardest decision is where to begin.

There are so many things the federal government finances that are unconstitutional it would take a treatise to list them all.  So, instead I will just “nibble” at the edges, which in itself will save a bunch of dough.

First of all, how about abolishing a few bastions of corporate welfare?  I speak of the departments of agriculture and commerce.  In 1910, over 30 percent of Americans farmed.  Today, less than 3 percent of us till the soil, yet the Department of Agriculture’s budget has ballooned to be one of the largest in the Executive Branch at $95 billion per annum.  According to the Heritage Foundation, farm subsidies distributed by the department are meant to lessen the poverty of family farmers, but in reality the majority of payments go to big commercial farms with average yearly incomes of $200,000 and net worths of close to $2 million.   Keep in mind that these subsidies not only are a waste because they go to big agribusiness, but they are responsible for high food prices. Clearly, farm policy in America does not promote the general welfare.  Abolish the Department of Agriculture and save almost $100 billion annually.

Another corporate welfare enclave is the Department of Commerce.  At $6.5 billion a year this wouldn’t save that much but should be an easy target to unite the constitutionalist right with the socialist left.  The goal of the department is to essentially promote American business abroad.  Not just those on the right or left but all Americans should know that that is the job of corporate marketing departments.  The department is just another gross example of corporate welfare run amok.

And while we are talking gross examples of corporate welfare, there is no better example than the federal agency known as the Overseas Private Investment Corporation (OPIC).  The agency’s mission is to provide political risk insurance, loans, and loan guarantees for U.S. private capital in less developed countries.  In other words, the agency helps facilitate the transplanting of American jobs to foreign countries by giving financial aid to American business and by insuring those businesses against potential losses due to political upheavals and the like in their country of operation.    Granted the abolition of OPIC would only save tens of millions, but why should American workers pay for the exportation of their jobs overseas?  Doesn’t this also cut into valuable tax revenues? End the injustice, take the risk of doing business in a distant land off the taxpayer and place it back where it belongs on the business, abolish OPIC.

Next on the chopping block should be the boondoggles better known as the Departments of Education and Energy.  Brought into existence under Jimmy Carter in the late 70s, the Department of Education was nothing more than a gift from the president to the teacher’s union for supporting his presidential run in 1976.  Education has not improved in America since its founding, thus at a price tag of $70 billion a year abolition of the department is a no-brainer.

Likewise, the other Carter era department – Energy, should also be axed.  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.  By pulling the plug on Energy another $23 billion annually would be saved.

Again, because of my desire to keep this article at a reasonable length, I cannot get into all of the cuts I would propose of the unconstitutional and wasteful things the federal government spends money on.  But, I would be remiss if I didn’t include a discussion of the largest portions of the federal budget – namely Social Security/Medicare and defense.

The U.S. Government Accounting Office (GAO) in 2008 announced that because of the retiring Baby Boomer Generation unfunded future obligations for Medicare and Social Security total almost $41 trillion.  Many experts agree that to fund the programs into the future will require raising FICA tax rates enormously.  More than likely, those rates will bankrupt American companies and force many to relocate overseas.  The resulting unemployment will lower the standard of living for all Americans.  Something radical needs to be done.

In 1935, when Social Security started if you reached age 21 you could expect to live to age 65.  The retirement age for Social Security was initially set at 65.  In the last 75 years life expectancy has risen by 12 years to 77 years of age, yet the retirement age for Social Security remains at 65 years of age!  How insane is that?  In the short term to sustain those currently on the system and to save trillions the retirement age for both Social Security and Medicare should be raised to 75 years of age.  In the meantime, we should work toward transitioning to a time when socialized retirement does not exist.  Social Security has been continuously broken and reformed because it is a flawed concept.  Medicare has probably done more to raise the cost of healthcare for all Americans than any other “entitlement” program.  More than the well-being of seniors is at stake here.  The very financial solvency of the country is at stake and this affects all of us.

Lastly, the defense portion of the budget must undergo huge cuts.  Washington spends over $1 trillion annually on defense related expenditures.  We have our troops in over 150 countries.  Why is it that we have invested so much money and personnel in our security and yet still not feel safe?  It seems like the government’s national threat level is perpetually stuck at Yellow or Elevated.

Besides that, who are we competing against militarily?  We spend about six times more on defense than the next highest spending country – China.  Do we really need to spend a trillion dollars a year to defeat Al Qaeda?

The United States is in a similar position to what faced the Soviet Union in the late 1980s.  With a bankrupt economy, Soviet leaders continued to spend lavishly on its military industrial complex.  The result was the breakup of the empire.  The lesson was and is that bloated defense budgets can break the bank.  We can no longer afford to finance a worldwide empire that doesn’t even make us safe.  It is beyond the time to bring the troops home and cut the war budget by at least half.  To not do so puts our national security in greater risk than if we continue to spend trillions.

There is so much in the federal budget that can be cut that it should be relatively easy to balance the books.  At the end of the day the U.S. government must cut back drastically or face financial insolvency.   A majority of Americans realize that the solution is in cuts and not tax increases.  The problem is Americans have gotten use to feeding at the federal trough.  Big business will oppose abolishing federal departments that give them subsidies and eliminate competition.  The teachers’ unions will fight tooth and nail to preserve a department that perpetuates their failed monopoly over our education system.  The AARP will scream bloody murder about any changes to Social Security and Medicare.  And of course, defense contractors and military brass will mount a campaign of fear and hatred to protect their gravy train.  In the end, what it will come down to is the courage of our elected leaders.  Given their historic track record, it won’t be easy.