By Thomas Knapp, on January 9th, 2012
This one’s from the New York Times …
And as the Pentagon confronts the prospect of cutting its budget by about 10 percent over the next decade …
… but you can probably find it in just about any newspaper article discussing the upcoming “budget cuts.”
So, just how deep are these horrendous, army-killing cuts?
Well, if “sequestration” goes as forecast, the federal government’s non-war military spending will only increase by 10% instead of by 18% between 2013 and 2021.
No, that is not a typo. The “cuts” are not cuts in actual spending, they’re cuts in the previously projected growth rate of that spending.
Most federal government spending proceeds on rails due to something called “baseline budgeting.” The “baseline” is the previous year’s spending. Under “baseline budgeting,” that previous year’s “baseline,” plus an increase based on a formula, happens automatically unless Congress decides to tinker with it.
This “sequestration” thing — triggered by Congress’s inability to agree on “deficit reduction” targets last year — imposes across-the-board reductions in that rate of automatic growth of spending, not in spending as such.
Neat trick, huh? Your congressman can brag to you that he’s cutting spending at this morning’s town hall, then — this afternoon, over cognac and cigars — brag to your local defense contractor or other corporate welfarist that he’s increasing that same spending.
Hint: He’s lying to one of you. And it’s not the guy pouring the cognac and lighting the cigars.
By Simon Grey, on October 31st, 2011
GOP presidential candidate Rep. Ron Paul will unveil his economic plan Monday afternoon, calling for a lower corporate tax rate, cutting spending by $1 trillion during his first year in office and eliminating five cabinet-level agencies, including the Education Department, according to excerpts released to Washington Wire…
But Mr. Paul does get specific when he calls for a 10% reduction in the federal work force, while pledging to limit his presidential salary to $39,336, which his campaign says is “approximately equal to the median personal income of the American worker.” The current pay rate for commander in chief is $400,000 a year.
The Paul plan would also lower the corporate tax rate to 15% from 35%, though it is silent on personal income tax rates, which Mr. Paul would like to abolish. The congressman would end taxes on personal savings and extend “all Bush tax cuts.”
He would also allow U.S. firms to repatriate capital without additional taxes. Some lawmakers have recently proposed such legislation as a way to spur job growth. Its critics argue that a tax holiday for companies with money abroad has not historically led to domestic investment.
But the plan, at its heart, is libertarian. While promising to cut $1 trillion in spending during his first year, Mr. Paul would eliminate the Departments of Education, Commerce, Energy, Interior and Housing and Urban Development. When former Massachusetts Gov. MItt Romney unveiled his economic plan last month, he said he would submit legislation to reduce nonsecurity, discretionary spending by $20 billion.
Mr. Paul would also push for the repeal of the new health-care law, last year’s Wall Street regulations law and the Sarbanes-Oxley Act, the 2002 corporate governance law passed in response to a number of corporate scandals, including Enron.
I think this is a good start to addressing the problem. I also think this is the most serious proposal from any of the current candidates, Democrat and Republican alike.
Some may call for incremental changes. We’re past that point. We’re going to face an economic collapse. There’s no sense in strengthening federal power when this happens. And there is no point in continuing the policies that led to this problem.
Ultimately, Paul’s plan is the best out there, though it could certainly be improved upon. My proposal would be to cut all unconstitutional spending. I think that would solve a lot of problems in fell swoop.
By Simon Grey, on September 21st, 2011
President Obama today signed into law the Leahy-Smith America Invents Act (H.R. 1249) a bipartisan, bicameral bill that updates our patent system to encourage innovation, job creation and economic growth. Both Houses of Congress overwhelmingly supported the proposal, which was sponsored by House Judiciary Committee Chairman Lamar Smith (R-Texas). The House of Representatives passed H.R. 1249 by a vote of 304-117 earlier this year. The Senate passed the bill by a vote of 89-9. Senator Patrick Leahy (D-Vermont) partnered with Chairman Smith on the legislation. Congressman Smith led the House efforts on patent reform for more than six years.
Much-needed reforms to our patent system are long overdue. The last major patent reform was nearly 60 years ago. The House patent reform bill implements a first-inventor-to-file standard for patent approval, creates a post-grant review system to weed out bad patents, and helps the Patent and Trademark Office (PTO) address the backlog of patent applications. This bill is supported by local companies as well as many national organizations and businesses.
I’m not sure what to think of this.
On the one hand, this streamlines the patent system, which I begrudgingly support. The first-to-file standard makes resolving multiple claims dead simple: Who got to the patent office first. And weeding out bad patents is also good, especially in light of the standards (distinct, non-obvious, etc.).However, this legislation could very well increase the occurrences of patent-trolling. This would actually discourage invention and innovation in the long run because inventors would more than likely seek to avoid paying royalties to produce their own inventions, so they would have to create modifications to their own product in order to sell them. I imagine this effect would be more prominent among large corporations than among individual inventors because corporations tend to be more susceptible to industrial/commercial espionage.
At the end of the day, though, the simplest and most effective reform is to simply abolish the patent system altogether.There’s little evidence that the costs of the patent system outweigh the benefits thereof.
By Mark Alvarez-Anderson, on August 16th, 2011
The key to an economic recovery does not rest in Washington. The key to an economic recovery is to put Washington through a recession. Any efforts by politicians to con you into believing they’re stimulating some kind of economic progress – again, bribing you with your own money – by promoting one form of energy or another should be detected as a ruse.
Some politicians have gone “green” in the name of curtailing “dependence on fossil fuels” and “foreign oil.” It’s a sham. Why not promote a certain type of underwear in the name of curtailing dependency on a foreign brand?
The fundamental problem is that most politicians and central planners view the economy as a blob to be manipulated, rather than a complex capital structure involving individuals making choices in exchanges, a process of production, and a price mechanism.
The reason why the United States is so dependent upon foreign oil is due to policies that have already been put in place. The solution, then, is to repeal and correct these policies – not creating new legislation.
Artificially low interest rates, brought on by loose monetary policy at the FOMC, drives capital overseas (by deploying unearned income from a printing press, disconnecting consumption from production, capital is also consumed). Capital naturally gravitates to cheaper, more efficient, higher-yielding economies. Rather than generating revenue and income, the nation spends beyond its means.
If a person, firm, or nation is dependent upon inflationary credit expansion (as opposed to credit expansion from savings), then that person, firm, or nation is insolvent and inefficient. We are spending beyond our means, which – yes – engenders dependence upon cheaper markets to supply us with production.
If you want to reduce dependence upon foreign “anything,” then the Fed has to lift interest rates and Washington has to abandon the spending orgy. Dollars that have been accumulating in foreign reserves will then come flowing back into the system.
I know “clean” energy sounds so nice, so attacking it is very “environmentally-incorrect.” I will put everything I possibly can into layman’s terms. Let’s start with the following axiom: we consume energy in everything we do. If you’re that environmentally-conscious, you shouldn’t be online reading this right now because you’re using electricity which is consuming energy.
Solar energy sounds so nice. After all, it comes from the sun. But let’s not forget that there is a process of production here. Take, for example, the solarization of a house. Solar energy requires panels, charge controllers, batteries, inverters, etc. And then let’s not forget capital asset depreciation. Energy is consumed during the process of production.
If “clean” energy has a positive yield, then it will be profitable and private enterprise will pony up the capital. The government need not encourage this. If “clean” energy has a negative yield, then this means that it is unprofitable and dependent on so-called “dirty” energy for its sustenance. It would be akin to consuming 1,000 blueberries for every 500 you’re growing – nobody in their right mind would pursue that course absent government subsidies. Somewhere, you have to make up the difference.
This leads me to the following axiom: the most profitable and economically-efficient form of energy, within the construct of the unhampered market, is also the cleanest form of energy.
The best ecological hygienist is the unhampered market. Suppose a logging company owns a forest. That logging company can clear-cut the forest, say, tripling immediate income. However, this must be weighed against diminishing future income, or the capital value of the forest as a whole. Suppose, however, this is government property. This calculation no longer needs to be made, and the objective is going to be rapid extraction of resources.
No shocker, then, that government is the biggest abuser of the environment and waster of resources. Look at the atomic weapons tests done in the Nevada desert – and right on top of our own military service members.
The government does not sustain itself by satisfying consumer demands, but through compulsory taxation. Government subsidies to, and control over, industry diminishes the need to set prices pursuant to supply vs. demand. Why? Because sustenance is no longer dependent upon having to satisfy consumer demands. Sustenance is disconnected from the satisfaction of consumer demands.
It’s the price mechanism that ensures resources are allocated and managed efficiently. The price mechanism can only function within the construct of the unhampered market, allowing for producers to set prices pursuant to supply vs. demand (i.e. market-clearing prices). The scarcer the supply, the greater the demand, the higher the price. Consumption runs inversely with prices.
Government subsidies distort prices, interfering with the price mechanism, and cause prices to be set above, or below, market-clearing prices. There is a paradox in government policy in that the government encourages consumption without production (in the name of economic stimulus), tells us that we should conserve resources, while simultaneously punishing “price gouging.” Within the construct of the unhampered market, there can’t be price gouging any more than there can be wage gouging, since vendors can’t short inventories at prices beyond what consumers are both willing and able to pay.
Prices send signals to entrepreneurs, telling them where to deploy capital. Prices tell consumers what to buy and what not to buy. The price mechanism can only function within the construct of an unhampered market. There’s no need for the government to encourage or discourage the use of any kind of energy. And let’s not forget that tax credits are subsidies camouflaged as tax cuts. A tax credit merely allows a person to use a portion of income for a specific purpose (i.e. indirect subsidy). (See: http://www.businesstaxrecovery.com/articleupdates/definition-tax-credit)
I write as a native-Minnesotan. Minnesota is one of the first states that employed the use of ethanol-blend fuels. Let me say that if I see anything with ethanol in it, I avoid it like the plague. It’s “cheap” for a reason; it’s inefficient.
Only can politicians get away with turning efficient food into inefficient fuel. If politicians keep at it, we will soon be filling our automobiles up with corn and drinking motor oil. Maybe after installing those solar panels, the government can begin shooting those pollution particles (See: http://www.telegraph.co.uk/earth/environment/climatechange/5128109/Shoot-pollution-particles-into-atmosphere-to-cool-Earth-says-Obama-adviser.html) – which supposedly ”clean energy” is designed to prevent – into the atmosphere in order to block the sun and “save” us from “global warming.” Sounds like the perfect plan. It’s a plan only a politician in D.C. could dream up.
Soon, we will not only be dependent upon foreign sources of “fossil fuels,” but also so-called “clean energy.” Unless you get out and support Ron Paul for president.
By Mark Alvarez-Anderson, on August 15th, 2011
I’m with Senator Reid over Goodman on the issue of brothels. Unless somebody can show me how the use of prostitutes engenders a net economic benefit, I don’t see why such an activity should be legal. In my estimation, it’s immoral. It degrades women, turning them into objects to be bought and sold. Prostitution undermines society and the economy.
Here’s the only problem that we run into. Criminalizing prostitution will never make the activity go away. So do we treat the prostitute as a criminal, while simultaneously a sitting senator is capable of having sex with a staffer and then paying $90,000 to her spouse? If we reject the notion of treating prostitutes as criminals, then we run into an enforcement issue. Personally, I don’t like the idea of treating prostitutes as criminals myself. However, I do have a solution.
Let’s treat prostitution as mental illness. After all, we treat people who believe in sound money and economic liberty and even Biblical Christianity as mentally ill. Now, let me ask the reader something. Suppose you had a neighbor in, say, his sixties and you knew he was having sexual relations with women in their twenties. How would you feel about that? Would you let your kids go anywhere near his house? Ah. But if it’s done on camera, with money exchanging hands in the name of commerce, and participants accrue wealth and garner celebrity status, then it’s considered to be respectable.
Behavior that would otherwise be condemned is defended, protected and consumed so long as it turns people into celebrities and millionaires. Now that’s mental illness. I say place all participants into the looney bin and give them massive doses of Haldol. If they disagree, well then they suffer from paranoia and need to be drugged for that reason.
By Thomas Knapp, on August 8th, 2011
… that if you don’t check in with the government before wiping your bum, some idiot may blow $9,000 on extra toilet paper and blame you for it.
I’ve looked and looked and looked, and I can’t find anything in the Constitution about the airspace around POTUS being “restricted.” Nor are bullshit security theater antics covered in Article I, Section 8.
By Bron Suchecki, on August 8th, 2011
Some blogs that caught my eye last week. First is The Burning Platform with Edward Gibbon’s five marks of Rome’s decaying culture from his book The Decline and Fall of the Roman Empire:
1. Concern with displaying affluence instead of building wealth.
2. Obsession with sex and perversions of sex.
3. Art becomes freakish and sensationalistic instead of creative and original.
4. Widening disparity between very rich and very poor.
5. Increased demand to live off the state
I think it would be fair to say we are close to ticking all of them. Second is Steve Keen on the RBA’s setting of the cash rate:
The graph shows an almost 100% correlation between the cash rate and the 90-day bank bill rates. However the data also shows that in almost every instance the RBA cash rate FOLLOWS the 90-day bank bill rate, rather than leads it. … This analysis raises a number of interesting questions:
1. Why do we have the RBA as an interest-rate setting body at all when all they do is follow the market?
2. Why does the RBA shroud itself in such mysticism when their actions are so transparent to all?
3. What is the quality of our economists, politicians and financial commentators that we have to go through the “Will They or Won’t They” pantomime each month?
4. How could any economist get their forecasts wrong, particularly on the up-side?
Very much Wizard of Oz man behind the curtain. Third is Mark Tier at economics.org.au with two takeways on small/no government, which speak for themselves:
“… when the income tax was introduced in 1913 no one in his right mind would have suggested a top rate of 90 percent. In fact, there was considerable support for capping the income tax at 4 percent. This was shot down by those who argued that specifying such a maximum rate would mean the income tax would rapidly rise to that (then) horrific level. Can you imagine living in a world where an income tax of 4 percent is unthinkable!?”
“On January 24, 1848, the California gold rush began. But it took eighteen years for the U.S. Congress to enact a mining law to regulate such discoveries. Meanwhile, gold production in California boomed. How could that have happened without a governmental framework to recognize mining claims, register titles, and regulate disputes?
The miners created their own. They established districts, registries, procedures for establishing and registering a claim and buying and selling claim titles, and a system for resolving disputes. Officers were usually elected, including the recorder of claims.”
Finally, we have a report by Mineweb that I think few PM commentators will pick up, but which I think is a good signal that gold is on the move into the mainstream. Mineweb reported on Thomson Reuters buying GFMS which “will enable Thomson Reuters to offer clients analysis of metals markets alongside its news and prices”. This is a sign to me that smart money is moving into gold, as they are the only ones who can afford a Reuters feed. The mass market (dumb?) money follows much later, which is when we’ll see a real bubble. 
By Thomas Knapp, on August 1st, 2011
“We agree to allow ourselves to borrow more money now. In exchange we pinky-promise ourselves to cut spending later.”
By Simon Grey, on July 29th, 2011
With the doomsday clock showing that America is five days away from the Economic Apocalypse™, I can’t help but wish that Boehner finally grows a pair and stands up against any proposed increases in the federal debt ceiling. I’ve noted multiple times before how an increase in federal debt is a horrible, horrible idea, and generally unsustainable, so at this point it seems that maintaining the current debt ceiling is a good idea. And, there are several possible positive outcomes.
First, we could default on our debt. This has the valuable outcome of making it harder for the federal government to borrow money, which should help to keep the budget in check. Of course, the government may find that it would just as well use inflation to bring more into the system in the even that it can’t find lenders, but that’s a risk worth taking.
Second, we could actually balance our budget. The beauty of the hitting the debt ceiling is that it makes a balanced budget amendment largely unnecessary. (Although, it should be noted, if one is using GAAP accounting techniques, one’s budget is, by definition, balanced. Of course, the general sentiment of the balanced budget amendment is, hopefully, that revenues equal expenses, and that the government does not take on more debt.) Anyway, the point in all this is that if Boehner really wants a balanced budget, all he has to do is make sure house Republicans vote against increasing the debt ceiling. This way, he no longer has to concern himself with passing an additional piece of legislation then having it ratified by the states.
Third, Obama could ignore the law and tell the Treasury to issue more debt. This would be a violation of the law, naturally enough, and should be grounds for impeachment. I almost want to see this happen, just to see what it would look like. Of course, given our luck, the Senate would laud Obama for his bold, decisive action, so all that would happen would be an increase in executive powers, leading America closer to being ruled by a dictator.
Finally, it’s possible that the government shuts down at the behest of President Obama in the attempt to play chicken with the Republicans. I sincerely hope this is what eventually happens, but mostly because I have nothing but contempt for the federal government. In fact, I hope that the federal government not only shuts down on August second, but that it stays shut down for all eternity. There is not a single federal function that is either a) necessary or b) can’t be replicated by the state governments. As such, it is time for this behemoth to die, and to that end I say let the debt ceiling stay the same. Let’s starve the beast!
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By Thomas Knapp, on July 6th, 2011
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. — 14th Amendment
Not only do I question its validity, I deny its validity, at least insofar as it implies any claim that the word “public” obligates me in any way.
At no point have I authorized the Congress of the United States to borrow money in my name or on my behalf; nor have I at any time co-signed said loans, guaranteed said loans, or agreed to repay any portion of said loans.
If the (occasionally rotating/shifting) group of 537 persons composing the US House of Representatives, the US Senate, the Vice President of the United States and the President of the United States want to repay the debts they’ve incurred, hey, that’s just peachy (as long as they do so from their personal wealth, rather than through some kind of program of organized theft).
If they want to default on it instead, that’s between them and their creditors.
Maybe they can negotiate some kind of settlement.
That, however, is up to them. If Harry Reid, John Boehner et. al borrowed more than they can repay, poor them. If their creditors were naive or too optimistically avaricious in their speculations, tough shit. Not my problem.
This is my nth notice to both groups that I’m neither party to, nor do I consent to become party to, the matter (note to those who believe that I have no choice in the matter: Check your premises).
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