As an update to this post, I ran across another chart which details projections based on the Obama budget: America faces tons of problems right now, some of which are George W. Bush's fault, but most of which result directly from criminal actions of Congressional Democrats like Barney Frank and Chris Dodd. The core of the problems result from too much debt. How on earth can more debt solve problems caused by excessive debt?
Political control of the Census will corrupt the results.
ACORN is already heavily invested in voter fraud and Census fraud makes the job easier.
Fake residents will be created, inflating the population of an area with high concentrations of Democrat voters. This will mean Democrat voters can be spread over more congressional districts making a Republican comeback more difficult.
Opposing ideas will be unable to rise to the surface because of insurmountable (illegitimate) majorities in Congress.
Barack Obama's margin of victory in the general election was large enough that voter fraud didn't play a deciding factor in his victory. But his fundraising irregularities may have given him the advantage over Hillary in the primaries.
I have no problem with elections where the guy I didn't like legitimately gets more votes than my guy. I will just try to support a better candidate next time around and hash out the best solutions possible in the arena of ideas in the interim. But I greatly fear a few years down the road when some sleazy candidate is foisted on the public by fraud. There will be no bounds to the harm they could do to the country.
I was reading another friend's blog and he had a link to this fantastic talk from Mike Rowe, the Dirty Jobs guy.
This got me thinking about my calling at Church. I am the Elders Quorum employment guy. I am supposed to help people find jobs. Which is weird, because I have never looked for one. I have either started my own business or worked with my dad.
In that talk, Mike Rowe mentions that trade schools - for plumbers, electricians, welders, carpenters, etc. - have had dwindling enrollment for years. But I would bet that law schools, MBA programs (like the one I just finished), and other things like that have had more graduates each year for a long time. Mike says we have declared war on work. And he is right.
Last fall, I was at a Steven R. Covey speech for the DFW Chapter of the BYU Management Society. He said something I have never forgotten:
Retirement is an apostate principle invented by Satan.
Said another way, whoever doesn't work is dead. And all kinds of work need to be glorified, not just the glamorous stuff.
There are a lot of smart, educated people in my ward, and I only know of one who is training to be a plumber. The thing is, he may have made a shrewd decision. The infrastructure in this country is in bad shape in a lot of ways. His skills will still be in demand long after those of us with more education have had to switch careers fifteen different times.
In the 1930s, the Church Welfare Program was instituted:
to set up, insofar as possible, a system under which the curse of idleness would be done away with, the evils of the dole abolished, and independence, industry, thrift, and self-respect be once more established amongst our people. The aim of the Church is to help people to help themselves. Work is to be re-enthroned as a ruling principle in the lives of our Church membership.” (Conference Report, October 1936, p. 3; see link here.)
This is partially a self-indictment, but everyone today wants to be a big wig; they want to be CEOs, big lawyers, or have political power so they can be rich and famous and then they won't have to work. CEOs, lawyers, and politicians have a role, but it is secondary. They (we) need to have a broader view of what their self interest is.
Joseph Smith put it (approximately) this way:
Self-aggrandizement is a true principle. But it can only be exercised on one plan or principle: that you seek to lift others first.
If today's cultural vanguard in business, politics, or the media acted on that principle, they would be far more wealthy than they are now.
I was reading a friend's blog and he made the argument that the national debt goes up under Republicans and decreases under Democrats. He also notes that the raw debt numbers are not as informative as a comparison of debt to GDP would be. Well, I ran across that chart today and thought I would post it: This chart tells more of the story. Newt Gingrich's Contract With America brought down the deficit under the Clinton years, making his budgets pretty successful and George W. Bush is not the bogeyman the Left makes him out to be. Bush responded to the 2001 recession with some deficit spending and then by 2006 was bringing it back down as a percentage of GDP. Only the financial meltdown brought the deficit back up.
Now Barack Obama has dwarfed anything Bush ever did. And it only took him two months. Bush's people consulted with Obama's people in the bailouts, so Bush doesn't bear complete blame for that debacle. As the article above points out:
In 2010, Obama envisions a reduction in the deficit to $1.17 trillion. He also assumes a 3.4 percent increase in GDP between 2009 and 2010, which would mean that the deficit as a share of GDP would decline to 8 percent. That's a very optimistic forecast that actually weakens the foundation of the budget document itself.
There is nothing new or responsible about Obama's budget.
there's only two ways out of this: kick start spending (the gov't is the only one with deep enough pockets to do that now) or drastically revalue assets. if we did the latter, almost every bank in america would fail.
I wanted to respond here and elaborate so my thoughts didn't get lost in the comments section.
The government is the only single payer with deep enough pockets, but that is the problem. I don't want one payer. I want 150,000,000 individual wage earners out there spending money. 70% of the economy is private individuals spending money. Isn't it better to give more power to the 70% than the 30%?
Having a FICA holiday for a year is the fastest and cheapest way to kick start the economy. I would get more than $700 a month to spend, save, or invest.
And the other thing is that there is tons of cash out there in the economy. No one is willing to spend it until the government has one plan and sticks to it.
As long as there is massive uncertainty about what Geithner and Obama will do (it's not like they even know what they are doing - every time either one opens their mouth about the economy the Dow Jones loses 300 points) everyone with cash is going to sit on it.
Just imagine if people making more money than me are behind on their mortgage and they get to keep more of their wages. They will catch up on their mortgage. Those who have no debt will be free to save or invest as they see fit.
That is the only fair and just way to do this. Otherwise, the wise stewards are bailing out the unwise steward and we just dig a deeper hole. Nobody wants to pay someone else's mortgage.
The more I read about Obama and his spending, the more hopeless I am about the future of economic growth in this country. I had a real estate class last semester and one guest speaker said he would work through the first part of the year until he reached the 70% tax bracket. Once he got there, he would sit around all day and play cards.
He said, "I am not going to work for a 30 cent dollar." If Obama keeps up his spending, we will be back there soon. I will go fishing before I work for a 50 cent dollar. Economic growth will only come when the most productive have a reason to work their tails off all year. And I don't want to be lectured by Joe Biden that it's my patriotic duty to pay more taxes.
The biggest problem with Obama's spending is that it will never go away. Bureaucracy is the only thing humans have ever created that borders in immortality.
The government's appetite for our money is insatiable. The worst parts of Obama's spending is that most will be spent after the recession is over and that none of it will stimulate job growth.
It has become clear that the cheapest and most temporary way to stimulate the economy would have been to collect no FICA taxes this year.
If there were no FICA withholdings from any American worker this year, they would automatically stimulate the economy. They would save, pay off debt, pay for their mortgages, and go out and buy new stuff.
I have already had over $1500 of my money withheld. Which means my employer has paid another $1500 to the federal government. That $3000 is most of a month of my salary. If construction slows down too much in Texas, that is the difference between keeping my job and getting fired.
Jonah Goldberg has this analogy for the "savings" in Obama's dishonest budget:
Try this with your boss sometime. First, go buy a Mercedes on the company credit card. Then tell him that you saved money because you were planning on buying a Lear Jet — two years after your mandatory retirement age. Then ask him for an attaboy, or even a raise. See what he says. I dare you.
Just as a matter of practicality, not raising taxes for someone making under $250,000 isn't really fair. In the places I am willing to live, that kind of money makes for an amazing lifestyle. In parts of California, New York, and Massachusetts, $250,000 is as bad as living below the poverty line. Cost of living determines everything.
Those who are rich as Obama defines it will flee states with high taxes. California, the state we are all supposed to emulate because of its progressive environmental standards and high government regulations, leads the nation in tax paying households leaving for other states. Same thing for Europe. I look at their economy for the past decade and can't understand why we want to copy them.
I have lost half of my IRA. Luckily I was in school and haven't put much in yet, but that is staggering. I have met people who have had to un-retire because they don't have enough savings anymore. And yet, with all this need out there, Obama only cares to advance his agenda - the same things he would have done if the economy were rip-roaring.
The thing about this recession is that it has people clamoring for something to be done. And something should be done, but this bailout stuff is the opposite of help.
In supply chain, there is a phenomenon called the bullwhip effect. Basically, when a company is short on inventory, they order a whole bunch to make up for the shortage irrespective of the amount in route. When the previous order arrives and the new order also arrives, they will have more inventory than they have space for.
Now the company has mountains of inventory and they don't make any orders for a long time. Which means their suppliers have nothing to do for a while. Suddenly, the main company runs out of inventory and they have to place a huge order to their supplier who can't meet the order immediately.
That is the problem with having economic decisions made by political figures who only have a 2, 4, or 6 year time horizon. They make decisions that will help them get reelected, but that are not ideal for encouraging long-term prosperity.
In economics, there is an ideal rate of economic growth. For the US and other mature economies, that rate is about 2.5% to 3.5%. They call that range "Goldilocks" because it is not too hot and not too cold.
There may be some short term gains from all this massive government spending, but once the bullwhip effect reaches the money supply, there will be inflation, people's savings will be harmed, and massive tax hikes will be placed on the rich (who are the only ones who pay taxes anyways).
I make no distinction between the way Bush and Obama have handled the economic uncertainty since last fall. They have had the same problem. They have no freaking clue what to do other than throw spaghetti at the wall and hope something sticks. The bank bailout at the end of Bush's term was just a random number plucked out of the air that sounded big enough to do something to help. Obama's pork-laden stimulus bill is no different. They are just copying the "bold experimentation" of the FDR years.
There is a problem with that approach. There is no certainty or consistency in the market. Obama complained last night that banks are not lending money to get businesses going again. There is a reason for that. If I run a bank, and know that the government is heaving loads of cash out the treasury doors, I am not going to lend a penny. Why?
I don't want to lose my money. If I make a loan to a company that gets bailed out, I probably will never see the money again. And Obama will say it is my patriotic duty not to seek redress. I know people who are stepping in where banks won't and making business loans at confiscatory interest rates and earning good money. Provide a service; collect a fee.
Since September the stock market has been in free fall. The major reason for this is uncertainty. No one, not even Obama, knows what Obama will do. As a business leader, my responsibility is to make the best decisions I can with all the information I can gather. There is no telling what load of manure this Congress will drop next, and until these issues are resolved, I can't invest in anything.
This uncertainty keeps private investors out of the stock market and keeps businesses from investing in new equipment which will improve their operations. Millions (of people and dollars) will stay on the sidelines until there is a resolution. I personally will not invest if the government will be taking over my business. Until I know my investment won't be confiscated, I will keep my money where it will be 100% safe, even if inflation costs me some value.
I would love to see a little more about this, but land speculation has brought down banks forever. Church history makes that clear. The Kirtland Bank fell along with hundreds of other banks in the 1830s.
The most important thing is that most debt never stimulates anything. Debt only limits future growth. That is why the Church talks about only borrowing for an education and a home. All other purposes of debt are dangerous. If I borrow money for a TV, I temporarily stimulate the economy, but later resources that could have bought other stuff is instead eaten up by interest payments.
I have been pondering the comments from a friend about the economy. He basically argues that there is a massive downward momentum and the government is the only institution which can change the momentum. I have been uncomfortable about the analysis but couldn't quite decide why (other than the obvious that I don't trust government spending).
The real issue is that there was a bubble and it needed to burst. In recent history, there was a tech stock bubble, a crude oil bubble, a food price bubble (corn, wheat, rice, etc.), a farm land price bubble (this is related to the food bubble), and a housing bubble. I may have missed some, but those are the big ones.
A bubble specifically means that an item is inaccurately valued by the market and it increases in value. Those investors trying to ride the next wave buy, buy, buy. The increase in buyers drives up the price. Prices are determined by the expectations of future gains. Everyone bought houses because they could get cheap money and the value was appreciating.
Whenever there is a bubble, there must be a correction. That is because the market learned that it had made wrong assumptions about the value of the future earnings from an asset. Any attempt to prevent the correction will prolong the downturn.
Looking specifically at the housing bubble, there were several contributing factors.
Cheap money from abnormally low interest rates (the Fed was fighting inflation without watching other things),
An increase in the supply of buyers (they were attracted to the quick profits),
Separating loan origination from the risk of loan default (liar loans came from mortgage agents being paid ONLY for signing up a person for a loan, not their ability to pay it back - people didn't have their income verified),
Congress accepting massive political contributions from the institutions they "regulated" (Chris Dodd, Barney Frank, and others - yeah, no conflict of interest there),
Financial institutions packaging mortgage-backed-securities as high quality investment vehicles for hedge funds (banks had no way to value the liar loans and the securities only work in a perpetually appreciating housing market - oh, and by the way, there are credit card backed securities too. If the recession is long enough and income decreases enough, people will default on credit card payments just like their mortgages. Then all those financial instruments will have to be written off the balance sheets, too.)
All of that to say that the decrease in asset values is necessary at this point. Government bailouts are just propping up the inaccurate values and prolonging the bubble. The real issue in my view is a debt bubble. And debt makes us slaves to our creditors. This bubble has to burst. Consumers need to live within their means, and government needs to stop borrowing from future generations to buy votes now.
The money to pay for corporate bailouts is either borrowed or printed out of thin air. The obvious problem of this new money is that inflation is next. The last time we had high taxes and inflation was not a time of economic growth in this country.
Every time one of these asset pricing bubbles has burst, economic prosperity was on the other side. The time to bail out this economy would have been about 5 years ago. Now it is too late. This needs to run its course so the world can get back to work.
UPDATE: I added a link above to a New York Times article predicting the bailout of Fannie Mae from back in 1999.
And those of us who manage the public's dollars will be held to account — to spend wisely, reform bad habits, and do our business in the light of day — because only then can we restore the vital trust between a people and their government.
I only have one conclusion watching this stimulus debate. Barack Obama lied. There is no wise spending in this stimulus. There is no reformation of bad habits. There is no business done in the light of day. Not one statement from that part of Obama's inauguration is true.
A few things from Obama's rhetoric gave me hope that he would do good things as president. Instead, he says one thing, and does the exact opposite. Whatever the failings of George W. Bush, at least he was honest. He did all he could to fulfill his campaign promises.
I can't wait to see how many other statements from the Inauguration become void. (That is tongue in cheek. There were good things in the speech, but I am starting to expect that NONE of them will be fulfilled.)
I just signed this petition to stop the stimulus bill. I left this comment in the comment section:
At the price tag of $230,000 spent for every job created or saved, It would be cheaper to pay people to stay home! I would stay home for years for that kind of money! But since I do work, I won't see one penny of benefit. Where is the economic justice in that? Robin Hood took from the government and gave to the poor. It is not the government's job to take from those who produce something and spread the wealth to those who do nothing.
A buddy sent me a message that the Republicans were 8 years too late to the party of fiscal responsibility. That got me thinking that I like the Republicans better as the opposition party. Over the last several years, I have been pretty disgusted with the Republicans and their spending. There is no excuse for the things they have foisted upon the American people. Prescription drugs, farm bills, campaign finance, and others.
You expect the Democrats to do those things (it is what they run on), but that is not why I vote Republican. Bush had Congress for half of his Presidency. Now that Democrats have Congress and the Presidency, the Republicans finally remember their principles and fight wasteful spending. The problem is that they are 6 months too late. The first bailout should not have been passed, at least not with Republican assistance. Let the Democrats own that monstrosity all by themselves.
With Republicans in charge there was no one to stand athwart history yelling "STOP" to the increase in the size of government. Now that the Republican House leadership has rediscovered fiscal responsibility, I may start to be a little more willing to call myself a Republican, instead of just a conservative.
I saw a headline online that said Obama was going to have more financial oversight. That is all well and good, and is probably needed, but the issue no one (in Congress) seems to want to address is who is going to have financial oversight over Congress?
I don't care which party is in power, there is no such thing as self-control. All these irresponsible bailouts Bush did and Obama will expand look like a recipe for disaster. Everyone that looks at them lately has said they won't create a single job and the money won't be spent until 2010, which is after the recession is projected to end anyway. (Conveniently, that is the year Congress will be looking to buy their reelection.)
The simple answer is to NOT spend the bailout money. Other than the Jeb Hersarlings and Jeff Flakes (and a short list of others), no one is fighting this power grab by Congress. (If Obama would fight it, that would be change I could believe in.) There is no way this will not cause massive inflation once this new money spreads around the economy.
This is a note I sent to my congressman, Chet Edwards:
I have been hearing lately about the FOCA legislation. I have not heard your position on it, but wanted to express in the strongest terms I can that it must be opposed. I understand that abortion is not likely to be outlawed, and don't think that it should be banned in every situation. However, FOCA is a direct attack on the most innocent in our society. There must be common sense limitations on abortion and FOCA outlaws all of them.
To make a point, I compare it to the closing of the Guantanamo Bay terrorist prison. We disregard the lives of the innocent, but let human debris go free to rejoin al-Qaeda and endanger our troops and our citizens. The world really has turned upside down.
I have seen people say they are proud to be Americans for the first time in 8 years. That statement makes me a little queasy. Who the president is has nothing to do with my gratitude for this country. The freedom of speech, religion, and press are the most vital aspects of this country.
Obama said we must start today to "remake America." What will be his template? I will agree that government does not work. If he really ends programs that don't work I will rejoice. If the government really starts doing business in the light of day, it will be a miracle. Obama's greatest obstacle to that will the the Reids, Pelosis, Franks, and the rest of Congress. Like he will stand up to them.
Obama says good things about standing up to terrorists: "We will defeat you." Good. I hope he takes that seriously. "People will judge you for what you can build, not what you can destroy." I like that line.
Obama issues a call to service akin to the sacrifice of those who lie in Arlington Cemetery. I appreciate his words about the Founding.
Overall, I thought it was an ok speech. But for all those people who think all our problems are supposed to be over now, there will be massive disillusionment. Things aren't going to change quickly.
It is interesting to look at the things people think Obama's election means for the future of the country. My biggest worry is that something like universal healthcare will pass. People don't like the results of a relatively free market determining who gets medical treatment, but I don't trust the government to do anything better.
The bigger problem is the cultural implications of the nation wanting universal healthcare. What has happened to the American independent spirit which drives people to pick themselves up by their own bootstraps? If healthcare pases this time, it will be because most Americans want it. That is more troubling than the results to the healthcare system.
Looking to government to solve every little problem is a slippery slope to mediocrity. Just look at all the financial bailouts. There is no way passing out money like this will make any of these businesses successful in the long run. Now any business in trouble will come, hat in hand, to Washington asking for money. They will say they are "too big to fail" or "too many jobs are at risk". That is no way to create innovation and economic growth.
I have created this blog as a place to store events, thoughts, and ideas I have as I observe the world around me. I see much of the world falling apart, but also see great causes for optimism. Business, politics, and religion are some of my interests.
