AAAAAAAAAAAAAAAHHHH!!!!

Yes, it's official.  Well, maybe I'm a couple of hours early but there is no deal to prevent the fiscal cliff and, as I predicted, the president wanted to go off the cliff anyway.  Rather than extend the BUSH tax cuts, tomorrow he can propose the OBAMA tax cuts.  And amazingly, he is going to cut taxes for people earning less than $250,000, just like he wanted.

These people were elected to resolve problems like this.  The cliff was manufactured in Washington a year and a half ago.  This is a government-created problem.  Capitalism didn't do this.  The private market didn't do this.  The 'rich' didn't bring us to this cliff.  No, it was government.  And people wonder why I have so little faith in government.

 

What else is coming?  I have heard that Obama will now demand tax increases - above and beyond what the cliff gives him - if he is to provide any cuts in spending.  The spending cuts will be illusory but the taxes will be quite real.  On whom do you suppose those taxes will be levied?  I'm guessing the 'rich' still aren't paying their fair share.  He's going to 'ask' them to pay 'a little more.'  Ah, I love when government 'asks' citizens to pay taxes.

Over the Cliff

A month ago, I predicted that we would go off the Fiscal Cliff.  So far, my prediction still holds water.  There is now talk of a mini-deal to somewhat mitigate the cliff but it will only deal with taxes, not spending.  So, in effect, the President is asking the Republicans to raise taxes in exchange for nothing.  Well, not entirely nothing.  Provided the mini-deal passes, the Republicans won't be raising taxes on the middle class.  Yes, the balanced approach that the President spoke about throughout the campaign is all tax and no cut.  Of course, the President says we already have the cuts.  We're not going to spend billions in Iraq or Afghanistan for the next 10 years.  As Charles Krauthammer noted, we could save $800 billion by not building a ski resort on Mars.  The mini-deal, whether it passes or not, is of little consequence.  The movers and shakers of the economy are about to be hit with a tax increase.  Also, the middle class is going to suffer the Obamacare taxes.

 

The next big thing will be the debt ceiling.  If the Republicans are serious (they aren't), they will refuse to raise the debt ceiling.  Shutdown the government.  The debt is bigger than the economy and growing several times as fast as the economy.  Current projections add another $8 trillion to the debt over the next ten years.  This will lead to several possible outcomes:

 

1. Hyperinflation: the government puts the printing presses in high gear and produce trillions of new dollars to debase the currency.  This is never good for an economy and tends to collapse the government.
 

2. Tax hikes: Massive tax hikes would be required.  The government is spending 40% of GDP but only collecting just over half that in taxes.  If the government is going to spend 40% of GDP, it needs to tax that percentage of GDP.  It won't be enough to only tax the 'rich' to make that work.  Everyone gets hit.

3. Default: Not really an option but included for completeness.  The government stops paying its bills.  If we default on Social Security, Medicare, Drug Benefit, and Obamacare, the budget could be instantly balanced but the Congress would be voted out to person and possibly attacked by angry constituents.

 

All of this is obvious.  Everyone in DC knows that the current trajectory is suicidal but they are all children.  The President wants the US to be more like Europe and he's succeeding brilliantly.  Unless there is some massive growth in the economy, the government CANNOT possibly pay the money it has PROMISED to pay to future retirees.

 

If the Republicans shutdown the government (they won't) and hold the line until the fiscal house is put on a sustainable glide path (they won't), then there might be reason for hope.  But that won't happen.  Because, as mentioned in a previous post, Republicans are spineless.  I don't understand this since they will be blamed for whatever disaster befalls so they may as well earn the blame and save the country in the process.

Guns are not the cause of the problem

Once again there has been a shooting and there are immediate demands to ban guns.  By this logic, we should ban cars.  Vastly more people are killed in car accidents than by guns each year.  Ban the car!  Or maybe we should ban alcohol.  I believe a majority of fatal car accidents involve alcohol.  If we just ban alcohol, we could reduce car deaths.  Of course, we tried banning alcohol and decided it was a failure.  Even now the ban on marijuana is toppling in the states.

Interestingly, unlike the car, guns have an amendment in the Constitution denying the Federal Government from banning them.  States and localities have enacted gun control laws that, oddly, seem to have the reverse of the intended effect.  Washington DC and Chicago have some of the strictest gun control laws and also some of the highest murder rates.

 

Guns have been legal in the United States since its founding and yet these mass shootings did not happen until the 1970s and later.  Why?  The availability of guns is not the problem, otherwise we'd be able to point to school shootings in 1914, 1927, 1935, and so on.  This is a modern phenomenon that can be traced to something that had changed in the last 40 or so years.  I don't know what that is but it isn't that guns are legal.

Not Enough Taxes

President Obama wants $1.6 trillion in tax hikes over the next ten years and the Republicans are offering $800 billion over that time period.  Either one sounds like a lot of money.  The President claims that our deficits and expanding debt are not because of excessive spending and massive entitlements; they are from a lack of taxation.  Though I would disagree, let us work on that assumption.  For the last four years, we have run over $1 trillion deficits.  If the problem is insufficient taxation, then the president should be calling for something around a $10 trillion tax increase over the next ten years.  His call for a mere $1.6 trillion will only reduce our yearly deficits by $160 billion a year.  Had such taxes been collected for the last 4 years, the budget deficits would still have exceeded a trillion dollars each.  So, if taxes are really the issue, they need to be raised considerably higher than the president proposes.

The Republicans claim that our deficits are a result of overspending.  The government takes in $2.4 trillion in taxes... er... revenue and spends... er... invests $3.5 trillion a year.  Of that $3.5 trillion, $727 billion is going to Medicare & Medicaid, $759 billion is going to Social Security, $652 billion is going to the military, $360 billion is going to income security (e.g. food stamps, earned income tax credits, unemployment, etc.), $258 billion is debt service (just paying the interest on that borrowed $16 trillion), $212 billion to federal pensions, and the remaining $600 billion to all those other functions of government.  Contrary to popular belief, spending on wars and the military is not the problem.  You could abolish the military and still have $500 billion deficits.  Let's even cancel the pensions and health care for veterans and that would bring us down to $300 billion deficits.  If we were to dust off the 2008 budget and just use that, our deficits would be instantly cut in half.  Really, now that the economy is 'poised' for recovery, we should be able to cut back government spending to pre-crisis levels, right?

 

One does not go into debt by a lack of income.  I have a friend who has darned near no income and yet he has considerable savings.  He understands spending within his means, meager as they are.  One goes into debt by spending too much, not earning too little.  A wise person budgets according to their income but the federal government seems to think that it can demand a raise (i.e. taxes) from the boss (i.e. taxpayers).  It might sound something like this:

 

"Gee, taxpayer, I've been spending 40% above my salary for a while now so I'm gonna need a substantial raise, okay?"

 

"No, I can't afford that right now.  Times are tough."

 

"Oh, sure you can.  Just cut the pay of the top earners and give it to me instead.  I insist."

 

Doesn't work in most cases but the government really can insist, on penalty of imprisonment.  Insist they shall and it will make hardly any difference.  The debt will continue to rise and the economy will continue to struggle.

Spinelessness

It is a little known fact, sad to say, that Congress - specifically the House of Representatives - initiates all spending bills.  The President and the Senate can suggest to their hearts' content but it is the House that gets first crack on all spending priorities.  As such, the House has as much, if not more power, than the President to choke off or expand spending.  The Republicans have controlled the House since January of 2011 and yet the spending is still wildly out of control.  How can that be?  Spinelessness.  The Republicans have passed budgets (as required by the Constitution) only to have the Senate refuse to pass a budget.  Thus, the continuing resolution is passed to maintain current spending in all things.  This means that the Republican House has been extending the Democrat budget of 2009 for the past two years and the foreseeable future.  Why?  Spinelessness.  Sure, in the wake of the 2010 shellacking, the Republicans may have thought it wise to bide their time for a Republican President in 2013 to address the looming debt crisis.  Well, that didn't pan out.  It is time to force a new budget with new priorities to be passed.  The Republicans have the House for the next two years and it is always best to do anything unpopular in the odd years (i.e. those where there isn't an election).  So, as I suggested in 2010, the Republicans need to choke off the spending, shutting down the government for as long as it takes to prevent the painfully obvious fiscal collapse that is even now visible on the horizon.  But they won't!  Why?  Spinelessness!  No, they will raise taxes just like George HW Bush did.  They will do this in exchange for 'promised' cuts that will NEVER materialize.  It happens again and again and yet they NEVER learn.  If we don't go off the fiscal cliff with the New Year, it will almost certainly be because the Republicans caved so tremendously that the President couldn't refuse and a clear sign of spinelessness.

Costas on Gun Control

The other night, Bob Costas addressed the nation on the issue of gun control in the wake of Jovan Belcher's murder of his girlfriend and subsequent suicide.  Bob points out that it was obvious that if the gun had not been present, both Jovan and his girlfriend would be alive today because it would be impossible for Jovan - a linebacker from a professional football team - to kill his girlfriend.  For example, OJ Simpson didn't have a gun so Nicole Brown Simpson is perfectly healthy today.  Oh, wait, she isn't?  Hmm.

 

The interesting thing about gun control is that it tends to increase gun violence.  How can that be?  Well, the criminals - who brazenly break the laws against guns - still have guns and need have little fear from law-abiding citizens.  Why do the massacres happen on school campuses?  Because they are gun-free zones, the ultimate goal of the gun control activist.  By contrast, criminals tend not to rob gun stores and gun ranges where it is a certainty that there will be armed resistance.  Given the option of robbing the bar where all the police hang out or the bar where all the gun control activists go, which is the shotgun-wielding thug more likely to choose?

 

New York has long been on the gun control bandwagon and has been so successful that knife murders are on the rise.  Yes, NYC has so choked of the supply of guns that knife killings rose by 50% in 2008.  See, you get rid of the guns and, like Bob says, nobody dies.  In contrast to NYC, places that loosen gun regulations see a drop in violent crime.  Florida and Texas both had murder rates above the national average but shortly after passing right-to-carry laws, the rate dropped.  It's easy to be a criminal when you know the other guy is unarmed.

 

Here is an interesting website on the subject:

http://www.justfacts.com/guncontrol.asp#[144]