Wednesday, April 28, 2010

The Arizona Immigration Bill Debate

For all of the overwrought reaction to Arizona's new bill requiring anyone who the police have reason to suspect is here illegally to produce documentation, you would think that the Arizona police were going to start going door to door checking papers. People worry that anyone with dark hair and a suntan will be an automatic suspect. More likely, the law will only be used on people who cannot produce a valid driver's license during routine traffic stops.

President Obama and the Democrats are insisting that this bill is nothing more than legalized racial profiling and that it is an example of undisguised racism. There are calls for a nation-wide boycott against Arizona's racism. This is untrue and unfair to the people of Arizona.

While the rest of the country is still debating illegal immigration, the reality has changed dramatically in Arizona and in Mexico. Drug lords have taken over many border towns. For years the state department has been issuing warnings against going near these towns. Now there are signs that the violence is crossing the border.

I'm not convinced that the law will accomplish anything but the legislature felt that they had to address their constituents' fears. Controlling the boarder is the job of the federal government but it has abdicated its responsibility. Worse, in an effort to court Hispanic voters, the Democrats have painted anyone who advocates a closed border as a racist.

The Mexican government is unable to control the drug wars on its border and at the same time, it is against tighter border controls. The Mexican government itself depends on money being sent home by Mexicans living in the US and has suggested having a special voting district for these people.

It should be noted that, as the head of the boarder patrol, President Obama could have prevented this bill by promising tighter border controls. The fact that he didn't indicates that he wanted the bill to pass. Why? Possibly because tightening the boarder would cost him Hispanic votes. The other possibility is that he wanted an unpopular state law on the books so that he and the Congressional Democrats could exploit it. There is no downside to this for the Democrats. Arizona is a strong red state that they would be likely to lose regardless. In the meantime, they have a wedge issue to drive Republicans apart and another charge of racism to add to the ones they have been making about the Tea Party protesters.

Friday, April 23, 2010

Obama and the Space Program

A few days ago several famous astronauts including Neil Armstrong issued a letter to President Obama protesting his cancellation of the Constellation program and abandonment of the American manned space capability. Obama replied with a speech in which he expressed his support for the manned space program. He made several predictions of future accomplishments.

Aspects of Obama's speech bothered me but it took a few days to put my finger on why.

Obama's reason for dropping a return to the moon from the program is that "We've already been there."

Obama is too young to remember the space race that culminated in a moon landing. I am older and had watched documentaries on it and read books written by people involved. Most of the race to the moon took place in earth orbit. Technologies had to be tested, one at a time. Going to Mars is much more difficult. It is hard to imagine solving the logistics of this undertaking without trying them out on the moon.

Obama is also rejecting the Constellation booster in favor of a new booster to be designed later. He gives a similar reason for this - that the Constellation is built on "old technology" and we need new designs. Reading between the lines here, Obama seems to be captivated by SpaceX. He has visited their site several times and their founder is an enthusiastic supporter of Obama's plans. My suspicion is that Obama wants to cut the existing contracts and start from scratch with SpaceX as the new prime contractor. That is what he was driving at when he talked about new technologies.

The big question is how committed is Obama to the space program? The big clue here is his suggestion that future missions to the International Space Station be contracted out, first to the Russians and later to private industry. Several Libertarians have applauded this since they see commercialization of space to be a good thing. This may be true but I doubt that President Obama would agree. He has a history of being hostile to profit-making enterprises, especially one in competition with the government. He felt so strongly about bank-issued student loans that legislation to discontinue that program was inserted in the amendments to the health care bill.

If the manned space program was really important to Obama then we would see more government involvement. The fact that he is outsourcing it means that he has little or no interest in it. This has nothing to do with the merits of outsourcing. It is how Obama thinks.

The space program has been good to America. During the Cold War, it became a peaceful proxy for armed conflict - a way of showing which philosophy could produce the greatest scientific advances. As the Cold War cooled, space became a source of new advances. Our advances in communications and weather prediction are direct benefits of the space race. The technology that powers our computers and allows me to write this blog is an indirect benefit.

Being a space-capable country with a manned flight capability is a status symbol. It is a far more exclusive club than having nuclear weapons. By giving up our manned flight capability for decades to come, we are voluntarily giving ourselves second-class status. This will hurt us in international relations in the long-run.

The space program has always been about more than circling the earth. Obama needs to realize this.

Do We Really want These Guys in Charge?

The goal of the Progressives is to expand government's reach as far as possible. Since President Obama's inauguration, the government has expanded its influence on health care and finance with further expansions being pushed. The President took upon himself the power to reorganize General Motors and Chrysler and to set salary limits for top bank employees.

The justification for this is that the government is somehow better at running things than private industry. Let's look at the people we are putting in charge of an increasing portion of the economy.

There is the late John Murtha, known as the king of pork. Among other things, he personally arranged for a major expansion of his district's airport, spending millions on an airport that only has a few commercial flights per week.

There is William Jefferson who tried to hide thousands of dollars in his freezer and was sentenced to 13 years for political corruption.

There is Rod Blagojevich who tried to sell the Senate seat that Barack Obama vacated and Roland Burris who he appointed during impeachment proceedings.

There is Eric Massa, who began harassing his male interns almost as soon as he was elected and who was often so drunk by the end of the day that he could not tell his staff where to pick him up.

Then there are all of the Obama appointees who were underpaying their taxes.

I could go on like this for some time. Everyone I named is a Democrat but the Republicans had major ethics problems when they were in charge.

Now, ask yourself, how much control over your life do want to give to these people?

Thursday, April 22, 2010

Bush and the Tea Parties

There is a push to vilify the Tea Parties, to show that they are not really about stopping the increase in government and the deficit; that they are really nothing but racism. This is understandable for a couple of reasons. Racism is a hot-button issue. Any group that is labeled as racist is automatically discredited. There are other reasons that the Left is sure that the Tea Parties should not be taken at face value which I will get to later.

In the meantime, a question asked of the Tea Partiers is "where were you during the Bush administration?" This is a valid question since we had a budget surplus at the beginning of the Bush administration which quickly turned into a deficit.

So, where were the protesters?

Some of them were there the whole time. Bush rejected financial conservatism from the start and the financial conservatives hated him for it. Prominent conservatives like George Will frequently complained about Bush. Reason Magazine, the leading Libertarian voice, hated Bush.

Granted, people were not marching in the street against Bush's spending but who would have noticed if they had been? The anti-war left was so vocal in denouncing Bush that they drowned out any other criticism.

Allowances must also be made for the type of spending that Bush did. His biggest-ticket item was the War on Terror. While this was expensive, wars are not the same as new entitlements. Wars end and their spending winds down. Entitlements grow, requiring more and more money. Fiscal conservatives may have rolled their eyes at the amounts Bush was spending but they could see an eventual end to it.

Besides, when the rubble of the World Trade Center was still smoking, it did not seem proper for conservatives to start questioning costs. The left took care of that.

Bush's biggest spending did not take place until his last six months. That is when his administration bailed out major financial institutions and passed the TARP (with the help of the Democrats including Barack Obama). There was a lot of anger then. A case can be made that the Tea Parties would have started under Bush if he had been in office any longer. The first Tea Party protests did not distinguish between the TARP funds and bailouts under Bush and the ones under Obama. No one held up sign saying "Bush TARP=good, Obama TARP=bad."

When the left asks why the Tea Partiers were not protesting during the Bush years, a good rejoinder is, "Why aren't you protesting alongside the Tea Parties?" MoveOn ran an ad during the 2004 Superbowl showing children with huge sums floating over their heads symbolizing the debt that the Bush administration was leaving them. Not they run ads telling us how great the health care bill was.
Democrats promised a balanced budget in 2006 and 2008.

For four years the left campaigned against the Bush deficit. Now that Obama is in office, the deficit is forgotten as an issue and anyone who is against it must be a secret racist.

It is obvious that the left never really cared about the deficit. Clinton did and counted the surplus as one of his major accomplishments but he went against his party in this. According to Bob Woodward's The Agenda, actual tears were shed in the White House when Clinton made deficit reduction an early goal of his administration.

The Democrats never really cared about deficit reduction. They talked about it during the Bush administration because they knew that it would help them with swing voters but their real goal was expansion of the government first. If deficit reduction is eventually needed then they are willing to raise taxes but not make any cuts.

I think that this is one reason that many on the left think that the Tea Parties must have an ulterior motive. The Democrats used it hypocritically so they expect that the Republicans are doing the same. The Democrats real motive for bringing up the deficit was to pressure Bush to abandon Iraq. They assume that the Republicans are doing the same thing and are looking for hidden motives. After exploiting the deficit for so many years, they cannot believe that anyone actually cares about it.

When the Tea Parties first began, the most common thread among them was that they had never done anything like that before. Unlike many on the left who plan their vacations around protests, the people in the Tea Parties wee the sort who normally complain quietly to each other but never act. Getting them to take to the streets took more than a few weeks of Obama. They were already upset with government under Bush and the Republicans and many of them are still angry at Bush and distrustful of the Republicans.

Wednesday, April 21, 2010

Is Obama a Socialist?

Is President Obama a socialist with a secret agenda to remake America into a European socialist state?

I'll cut to the chase - no, he is not a socialist. If he was then he would have nationalized the large banks and other financial corporations a year ago. His base was urging him to do it. Instead, he left them as separate but dependent organizations. He informed both the banks that, since they took the TARP, he owned them. He used the TARP in similar ways to force restructurings in GM and Chrysler.

So, if Obama is not a socialist, then what is he? Ron Paul recently called Obama a Corporatist. This may be a good description of him, but 99.9% of the country never heard of corporatism.

I think that the best label for President Obama is the one he gave himself - a transformative progressive in the mold of FDR. Of course, this means that we need to start a national converstion about what progressives actually are, especially under FDR.

FDR is given a lot of credit for his first 100 days. His best-remembered accomplishment was to stabilize the banks. Other accomplishments were later declared unconstitutional. Chief among these was the NRA (National Recovery Administration). It's goal was to produce a planned economy where the government and businesses worked together to set prices and wages. Roosevelt wanted to prevent future depressions and hoped that government planning could prevent future crashes. Compare this with Obama's desire to move beyond "boom and bust cycles."

One point that really needs to be understood is that many of today's problems can be traced directly to FDR's administration. California is insolvent and several other states are following its lead. One strong factor is state unions and union pensions. Unions and union pensions were also the downfall of GM. FDR was a great believer in unions and strengthened them early in his administration.

Union pensions is a problem right now but Social Security will be a much bigger problem within a decade. This is one of FDR's biggest legacies. The system worked as long as there were multiple workers paying into the system for every person drawing from it. Demographics and longevity have undercut this. Already the system is paying out more than it takes in. The amounts are still trivial but that will soon change.

What about the Great Depression? Some historians claim that everything was fine by 1937 and would have continued to improve if FDR had just continued to spend. Others say that FDR's policies prolonged the Depressions. By keeping companies from dropping wages to match deflation, he kept the unemployment rate high.

Obama seems determined to follow in FDR's footprints. He wants to increase government control and scope. He as already expended government in ways not seen since LBJ.

People need to look back at the Roosevelt administration and understand what worked, what did not, and what seemed to work for a while but was not sustainable in the long-run. Obama needs to explain how he will keep Social Security from bankrupting the country before he expands the government further. Democrats have gotten a free ride for the last few years by calling themselves progressives instead of liberals.

The thing here is that calling Obama a socialist confuses the issue. Being a progressive should be bad enough but it will take a concerted effort. We need to educate people on what progressives actually are.

UPDATE: Jonah Goldburg thinks that Obama does qualify as a socialist under a broad definition of socialism. He also puts Progressives into context:
With a few exceptions, the progressive political agenda has always been to argue for piecemeal reforms, not instant transformative change—but reforms that always expand the size, scope, and authority of the state. This approach has numerous benefits. For starters, it’s more realistic tactically. By concentrating on the notion of reform rather than revolution, progressives can work to attract both ideologues of the Left and moderates at the same time. This allows moderates to be seduced by their own rhetoric about the virtues of a specific reform as an end in itself. Meanwhile, more sophisticated ideologues understand that they are supporting a camel’s-nose strategy.

Friday, April 16, 2010

What About Those Obama Tax Cuts?

Obama, speaking Thursday night at a Democratic fundraiser in Miami, told supporters he is amused by the protesters' complaints about taxes because, contrary to their claims, he's cut taxes. "You would think they'd be saying thank you," the president said.

President Obama's record on taxes is mixed. On the stump he promised that "no family making less than $250,000 will see any form of tax increase.". The Obameter, run by the non-partisan PolitiFact, rates this as a broken promise. Taxes have already been raised on cigarettes and new taxes on medical devices, high-quality insurance coverage, and tanning beds are part of the recently passed health care reform package. Still, he did cut payroll taxes through the "Making Work Pay Act" which was part of the general stimulus. So why doesn't Obama get credit as a tax cutter?

First, there is the obvious - you can't raise taxes enough to cover a trillion dollar new program and claim that you are a tax cutter.

Then there is the tax cut itself and the way it was implemented. The Obama administration is a big fan of Nudge which holds that government can make major changes in behavior through small changes. Part of this says that spreading tax cuts across every paycheck is more effective in getting people to spend more than giving them a lump sum. Obama's tax cut was a credit of $250. This amounts to $5 in a weekly paycheck and $10 in a bi-weekly check. These amounts are small enough to be missed, especially if your hours or benefits have been cut.

In addition to wanting to "nudge" people, Obama also has an aversion to wealth so the tax credit starts cutting off for individuals making more than $75,000. A lot of the Tea Party protesters are older and more affluent so they may have never seen the Obama tax cut. To them, Obama was engaging in income redistribution rather than cutting taxes, especially when he has raised taxes elsewhere. That's what happens when you selectively cut taxes. The people who didn't qualify feel slighted.

It is only fair that Obama has gotten so little credit for his tax cuts. President (W) Bush's tax cuts benefited everyone and raised the number of people who did not owe any income tax but Obama consistently refers to this as "Bush's tax cuts for the rich".

Wednesday, April 14, 2010

The "What is Obama" Debate

Just how radical is Barrack Obama and how much were his values shaped by his mother and grandparents? The debate continues here.

I would like to comment on a few points. First, there is Obama's mother. His defenders call her a Kansas girl, conjuring conforting, conservative values. That does not match with her biography. Remember, this is a woman who married two foreign Muslim men of color while in college. It is difficult for someone today to understand how radical that was in the early 1960s and on three different levels.

First, mixed-race couples were frowned on, even by people who championed civil rights. A friend who was in a mixed-race marriage in the 1960s was shot at when visiting her husband's family in the South. Please note, I am not condemning her, I am just pointing out how unusual it was.

If mixed-race couples were frowned on, mixed religion couples were outright discouraged. Even Catholics and Protestants or Christians and Jews marrying was a big deal. The country as a whole was far more religious in the 1960s than now and people were expected to marry within their own faith. Islam was so exotic that most Americans never even met one but she married two of them.

Finally, she married foreign nationals who had no intention of immigrating. Think about that. Both of her husbands were foreign exchange students who intended to, and did, move home after college.

So, Obama's mother was seeking and marrying intellectual men who were as far from American mainstream as possible. That she did it twice is important as is the fact that she spent most of her adult life living outside the US. This was a woman who did not like her native country. Some of this has to have rubbed off on the future president.

Obama spent his teens being raised by his grandparents. Again, their Kansas roots are often stressed but, remember, these people raised his mother. They would not be my first choice for imparting love of country to a future president.

What does that tell us about Obama himself? Not a lot, but what it does say argues that he did come from a radical past. Add in his own accounts of seeking out Marxists in college and it is hard to argue that Obama comes from moderate roots.

Tuesday, April 13, 2010

Conservative Justices

Writing in the Atlantic (and picked up by MSNBC), Michael Knisley asks what makes a conservative justice? Knisley is no conservative so what he really lists is a series of conundrums meant to support his conclusion:

Conservatives believe that they have a coherent judicial philosophy and liberals either don't have one or ignore the one they have in favor of simply using judges to impose their political philosophy on an unwilling nation. They are giving themselves too much credit. They don't have one either. Words like "restraint" and "originalism" don't add up to a coherent judicial philosophy, let alone one that conservatives are willing to live by themselves.

This is neither fair not true and there are problems in his analysis.

It can mean a strong belief in the principle of stare decisis, or respect for precedent. Problem: Does that mean that a conservative judge must rule in favor of upholding all of the liberal rulings of the 1960s and 1970s? Even though many of them overturned earlier precedents?

Conservative can mean a narrow view of the Constitution, especially the Bill of Rights: Justices appointed for life should be modest in their ambitions. They should stick to the "original meaning" of the document, avoid "activism," and be slow to overturn the workings of the democratic branches.

Problem: Many specific items on the conservative agenda violate this principle. Conservatives have been saying that judges or justices ought to overturn health care reform. They cheered when the court decimated the campaign spending laws. They want courts to outlaw affirmative action. They want to use the Fifth Amendment's ban on government taking "property" without due process of law, in order to forbid a wide variety of government activities.

Conservative can mean simply judges who use their power to impose a conservative political agenda. Problem: This would be a gross violation of the other two alleged principles

First, I will agree with Knisley on his last point (except for his use of the word "alleged"). Justices should not base their decisions on their own political leanings - something that liberal justices often do.

So, there is the first point of what makes a conservative justice - one who rules according to the law, not his own personal beliefs.

Knisley throws out his first two points in reverse order and completely ignores the concept of prioritization. The Constitution and the Bill of Rights should take priority in any decision. The system was designed to work this way. The Constitution is difficult to amend. This makes sure that a super-majority agrees with any changes. It also limits Congress's role in amendments. This prevents sweeping changes from being forced on an unwilling population. When a justice stretches the Constitution or discovers a new meaning that the framers must have intended but neglected to actually write down then the whole amendment process is broken. Liberals loved doing this, especially during the 1960s, but it has caused long-term damages. Abortion was on its way to being accepted nation-wide. If the political process had been allowed to continue, it would probably be legal and accepted in most if not all states. The Supreme Court inserted itself into this process, "discovering" a new right. Not only did this energize the opposition, but it also meant that every nominee since has been judged more for his stance on abortion than anything else.

So, the Constitution and the Bill of Rights must take priority over any other considerations. If a justice doesn't like the way that the Constitution reads then he should urge an amendment.

Precedent is important, but only if it was constitutional in the first place. If a ruling was wrong then it should not be upheld. The Second Amendment is quite clear about guns. If there is any question, the Founders left other writings that clarify their position.

Original intent is also important in considering new, novel applications of existing law. Clearly, Congress did not intend for the EPA to mandate fuel economy. If they had then they would not have passed the CAFE standards separately. If they do want the EPA to control fuel standards then, being Congress, they can amend the law to say so. The same is true for the EPA and CO2 in general. A conservative justice would tell the EPA to go to Congress if they want to expand their authority. A liberal justice ignores this, sees the good that a broader interpretation can cause, and allows the EPA to expand its authority.

The complexities that confound Knisley just are not there, but he wants us to think that they are. Why? Because a liberal activist and a liberal court can effect societal change much faster than the legislature. In the 1970s, I heard a high-ranking member of the NOW (National Organization of Women) explain why the ERA (Equal Rights Amendment) was so important to their cause. She explained that it was much easier to use the courts than the legislatures to advance their agenda.

The courts should not exist as an alternative to the legislature. That is the real difference between liberal and conservative justices.

Monday, April 12, 2010

Markets vs Congress

Spirit Airlines announced that it will start charging for carry-on luggage that has to be stored in over-head bins. At the same time they cut the price for tickets. This is the last, and possibly most insulting, of a series of airline add-on charges.

According to an AP story, U.S. Sen. Charles Schumer said Sunday he's trying to get the federal government to prohibit airlines from charging a fee for carry-on baggage, calling it a "slap in the face to travelers."

This ignores why airlines are implementing add-on prices and the proper solution.

Airlines have a problem - cost are going up and fewer people are flying so profits are going down. If they raise prices then people will flock to their competitors. This is especially true now that people book their own flights through on-line services. The airlines figured out that they get more business if they hide some of the total cost of flying. They lower their base prices so that they will come up as low-cost on the travel sites. Then they hit you with extra charges. A traveler trying to find the actual lowest-cost carrier will have to look up all of the extra charges then order them by hand.

People are understandably upset and Congress, especially Democrats, feel the need to insert themselves into every situation. History shows that Congress seldom solves problems. They just rearrange them. Remember when Congress got involved in cable TV pricing? Prices rose faster after Congress got involved than before.

So what should happen? The on-line services need to include the add-ons in their ranking. They could either have you fill in a few check-boxes about how many bags you will have, etc. or they could rank the tickets based on average final-ticket price. They should be able to come up with a basic measure of the final ticket price just from data they already have on file.

If the airlines lose their financial incentive to hide prices through add-ons then they will fold them back into their base price.

Thursday, April 08, 2010

Job Creation Problems

An editorial in the New York Times shows the problems caused by depending on the government for job creation. It starts out with an inaccurate figure:

The economy added 162,000 jobs in March, a welcome gain after more than two years of nearly uninterrupted losses.

In fact, the economy added less than 110,000 jobs. The rest are temporary census jobs created by the government.

The editorial included the standard caution against fiscal sanity:

Make no mistake, the deficit is a serious problem that must be addressed in the medium term. The economy needs to be bolstered now.

The problem is how to use the government to bolster the economy without having long-term consequences. Predictably, the Times suggested several fixes that involve large sums of government money. The long-term problem is that this money has to come from somewhere. There are only three possibilities and none of these are desirable:

1) Raise taxes. The economy needs more people spending and investing money. The more money the government taxes, the less is available for the rest of the economy. The Times acknowledges this on the state level if not the federal level:

As states try to close their deficits with tax increases, consumers cut back on their spending, which harms businesses and hiring.

2) Borrow more money. This is the most likely answer, at least in the short term. This means raising the deficit and adding to the national debt. The higher the debt the more money is needed every year just to pay off interest. Since the principle is not being reduced, the amount of money needed to make interest payments keeps rising forever. The Times tries to minimize the effects of the deficit by accusing the Republicans of "grandstanding" on it but this is a real problem with long-term consequences. Under current projections, the national debt will grow so large that the deficit will have to be eliminated. This will be horribly painful.

3) Print new money. At some point in the near future this will begin to look attractive. If the government puts enough extra money into circulation it can pay off the debt. This will lead to runaway inflation. This may not sound so bad to anyone under 45. For those of us who remember the 1970s, this is a disaster. It has the same overall effect as raising taxes but it affects savings the most.

The bottom line is that any money the government spends on stimulating the economy, eventually has to come from somewhere. The hope is that a short-term stimulus will lead to long-term growth which will cushion the eventual drag of paying for the stimulus. While this might work sometimes, it will not work now. We have spent too freely, already.

So what can the government do to stimulate job creation? There are several options available that do not require new spending. These involve reducing the cost of hiring. The government could roll back the minimum wage increases or some parts of the ADA. It could repeal the recently-passed health care mandates. It could postpone new environmental standards. All of these cost jobs. There is also the issue of illegal immigration. For years this has been excused since the illegal immigrants were "taking jobs that Americans would not do." I suspect that many Americans have reordered their priorities and would be glad to clean hotel rooms or do gardening rather than being unemployed.

Sadly, none of these actions will even occur to the Democrats or the New York Times. They are inordinately proud of these measures and the idea of rolling back any of their "progress" in order to create new jobs would not occur to them.

Wednesday, April 07, 2010

Tax Fairness

Today is Tax Freedom Day. The Tax Foundation calculates that all of the money you made since January 1 went to pay your taxes. From now on, you get to keep what you make.

But, for nearly half the country, January 1 is Tax Freedom Day. 47% of the country does not pay any income tax. That includes a family of four making $50,000 per year. 10% of the taxpayers pay nearly 75% of the taxes. While the Democrats painted President Bush's tax cuts as benefiting the rich, they also benefited the poor. President Obama added to that as part of his stimulus package. The result is that while government spending keeps going up, fewer and fewer people are paying for it. This is one reason that it is easy for Democrats to sell new programs - someone else will pay for them.

The Democrats claim to be for fairness but it is hardly fair for the government to be spreading the wealth so lavishly. That is a hallmark of the Progressives, though, and it will increase in the near future under health care.

Taxes should be a shared burden so that everyone feels the cost of government spending. Between borrowing and unequal taxation, this relationship has been broken for a long time and is leading to the financial crash that I wrote about last time.

Tuesday, April 06, 2010

The Obama Crash

President Obama loves to say that he saved the economy. On multiple occasions he has pointed out that when he took office, unemployment was still rising and that the economy has turned around and is now creating (a few) jobs. He claims that he kept a recession from becoming a depression.

Since he is taking sole credit for it, he must be crediting the stimulus package passed during the first few weeks of his administration for this feat. Someone taking a longer view might give more credit to the Bush administration for passing the TARP. Bush also bailed out some of the "too big to fail" institutions. Obama can take credit for turning around GM and Chrysler although he used some of the money from Bush's TARP for that.

Regardless of who did what, this is only a temporary respite. There are problems on the horizon that will be much more difficult to fix than the 2008 crash. Our country's national debt is exploding and Obama seems oblivious to the implications.

Keep in mind that the debt is different from the deficit. The debt is the total amount that our government owes to its creditors. The deficit the the amount that the government spends minus its income (if the income is greater then it is a surplus). Since our government almost always runs a deficit, we never pay off any of the debt. We simply pay the interest. This is already one of the biggest items in the budget.

For decades this was a minor problem. It became a hot topic during the 1992 campaign when independent Ross Perot bought TV time and used a pointer and some simple charts to attract attention to the deficit. Under long-term pressure to control the deficit, President Clinton and a Republican Congress made tax increases and budget cuts and actually balanced the budget for a time.

With the attacks on 9/11/2001, a recession, and the start of long-term foreign wars, the deficit came back. At the same time, President Bush and Congress increased the rate of government growth. This caused record, but manageable deficits.

Several things have changed in the last couple of years. The recession cut income. The TARP, the bailouts, and the stimulus all increased spending. The Obama administration and a Democratic Congress made several other moves to increase spending. The 2010 budget grew by several times the rate of inflation. The Health Care bill was presented as deficit reduction but that relies on future Medicare cuts that are unlikely to happen. Even with the cuts, it only reduces the deficit for a short period. Long-term, it will add to the deficit.

Social Security hit a milestone this year. Since the 1980s, it has produced a surplus which went into the general fund and offset the deficit. This year it ran a deficit which means that money has to come out of the general fund to pay off Social Security benefits (technically Social Security is being paid by redeeming special bonds but the money for this comes from the general fund). This adds to the deficit and the new debt being incurred.

Within the next few years Medicare and Medicaid will also start to run deficits and drain the general fund. There is also pressure for the federal government to bail out states that are in trouble. The federal government does not have any more money than the states but it has powers to borrow or print cash that the states do not have.

All of this will result in exploding debt. Our deficit is already high enough (63% of GDP) to cause a crisis in some countries. A deficit of 90% nearly always causes a crisis.

So what is the Obama White House doing to head off this crisis? Virtually nothing. Yes, Obama appointed a commission to look into the deficit but it has no authority.

What will this mean in the long run? It will be painful. It will mean cuts in services and increased taxes. Greece is already facing this. So is California. It will be more painful for the federal government than either of these examples. Greece is getting help from Germany and the European Union. California is getting help from the federal government. There is no one large enough to bail out the US (with the possible exception of China).

We need to start acting now but President Obama is a prisoner of his preconceptions. He sees the government as a creator of jobs so the growth of government (and the deficit) is a good thing during a recession. He also listens to economists like Paul Krugman who insist that deficits do not matter. They point out that the deficit during World War II reached 100% GDP but was paid off a few years later. What they do not admit is that the economic conditions of post-WWII are completely different from the present. Among other things, the government was financially stretched to the breaking point by the end of the war. The government immediately started decommissioning troops and cut spending as soon as the war ended. A significant portion of the workforce (women) voluntarily stopped working so that there would be more jobs for veterans. Finally, the war left Europe and Asia's manufacturing capacity shattered which the US was fully intact.

Nothing that I have written here is new or unknown. This is what motivates the Tea Party protesters.

We have two choices. We can start implementing austerity budgets on both the state and federal level and trying to control the deficit or we can ignore the problem and continue to spent until we have a crisis. The second approach appeals to a president who is bent on being "transformative". Eventually the crisis will come. If Obama manages to be elected to a second term then there is a good chance that he will be in office to deal with the fruits of his labors.

Friday, April 02, 2010

Everybody Wins?

President Obama announced new mileage requirements for auto manufacturers. The New York Time proclaimed that "everybody wins."

The new automobile fuel economy standards formally adopted by the Obama administration on Thursday will yield a trifecta of benefits: reduced dependence on foreign oil, fewer greenhouse gas emissions, and consumer savings at the pump.

Wow, no downsides at all! Except...

The new cars will cost more - around $1000 by 2016. That's because nothing is free. If more efficient cars could be built for the same price they would already be on the market. The extra up-front cost is expected to be more than recovered over the life of the car but there are other trade-offs. Hybrid cars are likely to be more expensive to maintain in the long-run. There are persistent rumors that the Prius's batteries die after 80,000 miles. Toyota will not comment either way but with worn-out batteries, you lose all of the advantages of a hybrid and replacing a set of batteries will cost far more than the car saves in gas. Since cars these days regularly last upwards of 100,000 miles, anything that reduces car life will eventually offset the mileage gains.

There are two ways of increasing mileage with current technology. Hybrid drive trains is the first and most expensive but the easy way is to reduce the car's size, weight, and horsepower. This is elementary physics - less weight means less energy expended to accelerate. Small economical cars have been available for decades. The problem is that people don't want them. Profit margins are small and the cars are not suitable for families with older children. That's why SUVs were so popular in the last couple of decades and mini-vans before that. People need more room than small, economical cars provide but that adds weight.

The car companies are the big losers here. SUVs and pickups are what kept the big three going. At best they broke even selling small cars and they only carried those in order to meet the previous fleet mileage. In order to meet these requirements, the car makers are going to have to convince buyers that they want to pay more for cars that they didn't want in the first place. This may be enough to push one or more manufacturer past the brink.

There may be benefits to the new mileage standards but don't fool yourself into thinking that there are no downsides.

Thursday, April 01, 2010

Fearing the Right

Washington Post columnist Eugene Robinson wants us to fear the right. While he admits that there was violence from the left in the 1960s and 1970s, he insists that this is a thing of the past.

But for the most part, far-left violence in this country has gone the way of the leisure suit and the AMC Gremlin. An anti-globalization movement, including a few window-smashing anarchists, was gaining traction at one point, but it quickly diminished after the Sept. 11, 2001, attacks. An environmental group and an animal-rights group have been linked with incidents of arson. Beyond those particulars, it is hard to identify any kind of leftist threat.

By contrast, there has been explosive growth among far-right, militia-type groups that identify themselves as white supremacists, "constitutionalists," tax protesters and religious soldiers determined to kill people to uphold "Christian" values. Most of the groups that posed a real danger, as the Hutaree allegedly did, have been infiltrated and dismantled by authorities before they could do any damage. But we should never forget that the worst act of domestic terrorism ever committed in this country was authored by a member of the government-hating right wing: Timothy McVeigh's bombing of the federal building in Oklahoma City.

Robinson has selective memory. The Unabomber was still mailing bombs for environmental causes until he was caught in 1995. More recently there was the university professor and Obama supporter who shot up a faculty meeting.

Robinson mentions the anarchists who vowed to trash any city that dared to host a World Bank or G8 meeting. He minimizes then as being just a few people breaking windows but they actually caused millions in damages. True, they faded away after September 11 but they made a comeback in the last year.

Violence from the left is so common and the press so complacent, it is under-reported. Much has been made over a Congressman's brother's gas grill line being cut but it was hardly reported that anti-Republican protesters were dropping things on the delegates' shuttle buses or throwing bricks at the buses' windows.

Deep Ecology groups like Earth First were bigger and more fashionable 20 years ago but they never went away and the continue to commit acts such as arson. For that matter, petty eco-terrorism is widespread. Hummers and other large SUVs are often vandalized. Who on the right does anything like this?

Maybe we should only look at plots by religious extremists to kill multiple people. I will admit that this standard lets the left off the hook (at least during the last 25 years or so). There is still a problem with Robinson's assertion that we should fear the right. In the last decade, several similar plots have been broken up. Prior to this one, they all involved Muslims planning on killing Americans in general or American soldiers specifically. There have been multiple arrests for similar plots just since President Obama was inaugurated. How many columns has Robinson written telling us to fear Muslims? Or from any other left-leaning columnist? None. Their silence was deafening. More likely they wrote a column excusing the terrorists as big-talkers who would never have acted on their plans. Sometimes they blamed the Bush administration for planting an informer who was the first one to suggest violence. Which is more likely - a pizza delivery man who often delivers to a military base smuggling some co-conspirators in with guns and shooting unarmed soldiers or somehow planting bombs to kill a spread-out column of mourners? The answer appears to be "Whichever group is Christian."

I just checked Robinson's columns for the last three years. This is the only column he wrote about domestic terrorism. Ironically, he wrote more than one column on prejudice.