Friday, April 29, 2011
First things first, our thoughts and prayers go out to everyone affected by the tornadoes, (I have family in Alabama). I'm confident that Americans will band together to help those communities recover, (we usually do).
Here we go again. One day everyone's talking about tackling the debt and deficits, the next day we talk about increasing the amount of debt we're allowed to borrow ourselves into. Isn't politics fun? Believe it or not this isn't as simple of an issue for me as you may think that it should be, let me explain.
It's no secret that I think Art Laffer is one of the best economists out there. When asked about raising the debt ceiling, he recently supported raising it but stated that congress should have strings attached to it. Read his article here.
"After World War II, the U.S. cut federal government spending dramatically. In 1945, federal government spending as a share of GDP peaked at 31.6%, and by 1948 it was down to 14.4%. Private real GDP (e.g., GDP less government purchases) for the three years 1946, 1947 and 1948 grew at a 7.5% annual rate. So much for the idea that cutting government spending hurts the economy."
You have to ask yourself what Austan Goolsbee, (Obama's current top economic advisor), is thinking. Art Laffer points out exactly where Mr. Goolsbee is wrong by using facts rather than simply ridiculing Goolsbee's ignorance on economics. It appears that Art Laffer sees Goolsbee as more of an accountant, (and not much of one), than an economist.
"The mistake Mr. Goolsbee makes when he says that a massive reduction in government spending will reduce output is to confuse accounting with economics. In the simplest accounting terms, GDP is equal to consumption plus investment plus government spending—that's true. But reducing government spending doesn't reduce GDP dollar-for-dollar, as this accounting equation would seem to be saying."
It's Obama's faith in people like Austan Goolsbee that have made this so called recovery anything but. The only reason the stock market hasn't crashed is because we keep bailing it out with printed money. It is for this reason that the inflation rate, (counting gas and food), stands around 9.6% even though Obama and Goolsbee won't admit it. For the record, the recalculating of inflation rates and the decision to exclude gas and food began in 1980, (under Carter not Reagan as Reagan didn't take office until 1981), it seems as though it was a trick by Carter to make inflation look better than it was as we faced massive inflation under Carter. Luckily, the people understood that inflation faces us every day from the supermarket's to the gas stations and everywhere in between so Reagan went on to win 44 out of 50 states in the election of 1980.
Now back to the debt ceiling. It's true that Ronald Reagan also fought to raise the debt ceiling. However, Reagan also fought hard for spending cuts against a Democrat controlled congress. While President Reagan didn't get as much in spending cuts as he would have liked he did get a good amount of Democrats to agree with his budgets and at least enough spending cuts to prove he was serious about the issue.
The position Laffer takes on the next debate over the debt ceiling is the same position Senator Rand Paul has taken with this issue. Raising the debt ceiling has to be met with proof that we are in fact taking the debt seriously and therefore needs to be tied with significant spending cuts.
Pay attention to the rhetoric used as May begins and we approach the debt ceiling. This fight will be very similar to the recent one where Boo-hoo Boehner caved and the congress pretended to cut $38 billion from the massive budget. Also, when you see Obama accusing the Republicans of playing politics with the debt ceiling, (you'll see it as we get closer to reaching that limit by mid-May), remember this. There are Democrats who are also ready to vote against raising the debt ceiling but President Obama will most likely not mention them.
One other point to make so this can relate to you personally. It's the reason I was conflicted about this for awhile. What's the point of having a debt ceiling if you're just able to raise it every time you approach the limit? Think of it this way. Let's say you have a credit card with a $2,000 limit. So you go out and spend the $2,000 but then you call the credit card company and tell them you have to keep spending or your household will crumble.
The credit card company then says okay fine and increases your limit to $4,000. You, of course don't learn anything and keep on spending as usual. Next thing you know you've hit the $4,000 so you just call again and ask for a $6,000 limit. Does that make any sense? That's essentially what we've been doing with the debt ceiling for some time now. We have to cut our expenses and that means we have to cut spending end of story.
In conclusion I leave you with this point. This one goes out to all of the left-wingers out there. Ask them this, (I issued this challenge on facebook but received no replies so I'll try here).
If conservatives are in the tank for big business and wall street then why is it that the liberals and progressives support bailing them all out?
Most true conservatives, (myself included), were against the bailouts from the beginning even under George Bush. The liberals like Obama are all for bailing out the very industries they claim to hate. Meanwhile, the conservatives were against the government rushing to the rescue of the industries that we supposedly are all in collusion with to keep the little guy down. As usual, the rhetoric doesn't seem to match the reality. I'll leave it to you to figure out. Feel free to comment an attempt to explain that one but so far my challenge for the left has gone unanswered.