Tuesday, February 24, 2009

Being Fiscally Conservative

There's a lot of talk about liberal vs. conservative ideals and attitudes these days, but it seems that nearly all of our representatives in the US House and Senate have forgotten the meaning of being fiscally conservative. There's plenty of blame to go around.

President Obama stated in his address to Congress tonight (2/23/09) that one of his goals is to cut the budget deficit in half. That's a wonderful goal, but it's like saying he wants to sink half as fast as we are currently sinking. Bill Clinton and George W Bush and their associated congressional delegations both saw a budget surplus, so it's been possible in the past irrespective of political party. World circumstances are partly to blame for that surplus window being very small, so I'll grant that it's not just greed and corruption driving the deficit. Still, Old Hickory managed to pay off the entire national debt once so it's been possible in the past.

Given that we want to move toward a balanced budget, I like to compare small scale and large scale to identify principles. For instance, what happens if I as a consumer try to spend my way out of my financial problems? Assuming I can get infinite loans, it doesn't look so bad at first. I get my necessities taken care of, along with whatever I can convince myself looks like a necessity, along with a few things that are just too cool to pass up.

But what happens if my source of money shuts off and begins to come due? Not only do I have to suddenly balance my budget, but part of that budget n0w has to go to pay off both principle and interest to cover my spending spree. The national equivalent of this thought experiment is that in 2008 8% of our taxes went to interest payments. The deficit goes toward increasing the principle each year. I think it would be a bit high if 8% of my income went to interest payments, but some people are well above that percentage on their personal budgets.

Every time we run a deficit, that percentage goes up. Guess what happens if we keep running deficits every year? Pretty soon, we end up with so much of the budget going to debt that we can't pay for anything else. Could you survive with 25% of your budget going to interest? How about 75%? What's the drop dead value where you can't meet requirements for survival? What's our national drop dead point where we can't defend and support ourselves as a country?

If it helps, think of this Saturday Night Live skit, and apply it to governmental spending.

We have lots of options to choose from.
  1. Balance budgets now voluntarily. It hurts for a while, but it's like being vaccinated against stupidity.
  2. Gradually cut back on expenses as the percentage of debt service goes up, and put off the choice.
  3. Pay off debt later when we are forced to do so by an overwhelming burden of debt.
  4. Ignore it until we have uncontrolled inflation, and can use $100 bills as kindling.
  5. Call it quits and see what form of government comes out from the far side of the chaos.

Well, it turns out to not be much of a choice after all.

Monday, February 16, 2009

Wind of Change

It has been nearly 20 years since the fall of Communism/socialism in the United Soviet Socialist Republics and the other Eastern bloc countries, yet socialism in our own country is sung as the way of the future.

In doing a search on socialism in Google I found the following written just over a week ago.

I was standing on the Washington Mall on Inauguration Day, alongside nearly two million other people, and proudly watched the first African American take the oath of office in our nation’s history. That alone made the day deeply memorable, joyful, and historic. But I couldn’t help but think – and I’m sure that millions of others had the same thought – that the transfer of power from Bush to President Obama not only tore down a barrier that once was thought near impenetrable, but also signified the fading away of one era and the beginning of another.” A New Era Begins, Sam Webb, National Chair of the Communist Party of the United States of America 02/06/2009 http://cpusa.org/article/view/1015/

My question to you is why would the chair of the Communist Party here in America be so proud about our current President of the United States?

Remember Joe the plumber’s chat with then candidate Barack Obama? Obama responded to the questions from “Joe” that he intended to “spread the wealth around”—in other words…a redistribution of wealth or socialism.

We Communists believe that socialism is the very best replacement for a capitalist system that has served its purpose, but no longer meets the needs and requirements of the great majority of our people.Gus Hall (1910-2000), former National Chair of the Communist Party of the United States of America 01/01/1996 http://cpusa.org/article/static/13/

The New Testament even talks of sharing with the poor. Acts 2: 44, 45:

And all that believed were together, and had all things common;

And sold their possessions and goods, and parted them to all men, as every man had

Americans have always been committed to taking care of the poor, aged, and unemployed. We have done this on the basis of Judaic-Christian beliefs and humanitarian principles. It has been fundamental to our way of life that charity must be voluntary if it is to be charity. Compulsory benevolence is not charity. Today's socialists--who call themselves egalitarians--are using the federal government to redistribute wealth in our society, not as a matter of voluntary charity, but as a so-called matter of right. One HEW official said recently, ‘In this country, welfare is no longer charity, it is a right. More and more Americans feel that their government owes them something."(U.S. News and World Report, April 21, 1975, p. 49). Ezra Taft Benson A Vision and a Hope for the Youth of Zion, 12 April 1977 http://speeches.byu.edu/reader/reader.php?id=6162

The idea of helping the poor is a noble endeavor. Indeed, we ought to help the poor where we can. However, mandatory redistribution of wealth or socialism will never bring this about.

Edmund Burke, the great British political philosopher, warned of the threat of economic equality. He said,

A perfect equality will indeed be produced--that is to say, equal wretchedness, equal beggary, and on the part of the petitioners, a woeful, helpless, and desperate disappointment. Such is the event of all compulsory equalizations. They pull down what is above; they never raise what is below; and they depress high and low together beneath the level of what was originally the lowest.” http://speeches.byu.edu/reader/reader.php?id=6162

In my early 20s I noticed the results of socialism and communism in Eastern Europe. The stories come out of the east were less than stellar. History has shown those results.

Instead of growing, the capital stock of socialist countries has been declining. They've been consuming it. Most of the textile mills in eastern Czechoslovakia were built before the First World War. They still operate with the original machinery. In East Germany, many of the buildings seem not to have been painted since 1945. In some cases, no one even painted over the old and faded Nazi slogans on the walls. In the Soviet Union, there are chemical factories built 110 years ago that are still producing the same chemicals in the same way. It is a general principle that under socialism no factory is ever closed.

The capital stock inherited from previous generations has been largely worn out, and there are real declines in the standards of living of many East European countries. Those declines would have taken place sooner had it not been for the enormous amount of Western capital that was pumped in by the International Monetary Fund, the World Bank, and other international lending institutions and used largely to finance current consumption
.” Why Socialism Collapsed in Eastern Europe by Tom Palmer director of Cato University, Fall 1990. http://www.cato.org/special/berlinwall/palmer1990.html

It has only been 20 years since that time. Many have not forgotten. The following is comment on a post at humanevents.com from someone named Chris in Romania:

For everybody that praise socialism,

I am from my experience: I lived under communism and I know what socialism is. I would rather die than go back in that time (before 1989 when we drop the communism in Romania). Socialism looks fine on the paper, but it was applied to people and it didn't work. And to make it work, hundred of millions of people were killed in the name of this ideology and it's still not working. If you want to correct the future, learn from the mistakes that were done in the past. And socialism is one of those mistakes.

It is sad to see people from WestEurope or US preaching how good the socialism is, when they haven't lived A DAYin a socialist society. They didn't stay in line to buy milk (the ratio was 1liter per day for 2 people), to buy bread (1/2 of bread per person), 2 liters ofoil per month, 2 kilograms of sugar per month, 20 liters of gas per month. Also,Sunday we had driving restrictions "to save gas".

I am glad that Romaniajoined NATO but I am not that happy that Romania joined UE in 2007. Millions ofRomanians had to leave the country and work in Western Europe because the wholeindustry and agriculture in Romania was ruined by the socialist ideology. Andthey work there like slaves, underpaid, with no benefits, while the westernpoliticians preach to their people, who are staying home on unemployment, how
good the socialism is
.” Chris, from Romania Sep 28, 2008 http://www.humanevents.com/article.php?id=28723&page=6

"The lyrics [below] celebrate the political changes in Eastern Europe at that time – such as the Polish Round Table Agreement and fall of the Berlin Wall, the increasing freedom in the communist bloc (which would soon lead to the fall of the USSR), and the clearly imminent end of the Cold War.

The Scorpions were inspired to write this song on a visit to Moscow in 1989, and therefore included references to the aforementioned landmarks.

In 2005 the viewers of the German television network ZDF chose this song as the song of the century. It is the highest ever selling song in Germany, reputedly selling over 6 million copies in that country alone, and is frequently played on television shows presenting video footage of the fall of the Berlin Wall. It is widely known in Germany as the song of German reunification (and fall of communism in Eastern Europe generally), even though it only rose to popularity two years later.
" http://en.wikipedia.org/wiki/Wind_of_Change_(song)

The euphoria felt as these people were finally able to leave the oppression that had held their countries down was pronounced.


Wind of Change by The Scorpions

I follow the Moskva
Down to Gorky Park
Listening to the wind of change
An August summer night
Soldiers passing by
Listening to the wind of change

The world closing in
Did you ever think
That we could be so close, like brothers
The future's in the air
I can feel it everywhere
Blowing with the wind of change

Take me to the magic of the moment
On a glory night
Where the children of tomorrow dream away
In the wind of change

Walking down the street
Distant memories
Are buried in the past forever

I follow the Moskva
Down to Gorky Park
Listening to the wind of change

Take me to the magic of the moment
On a glory night
Where the children of tomorrow share their dreams
With you and me

Take me to the magic of the moment
On a glory night
Where the children of tomorrow dream away
In the wind of change

The wind of change blows straight
Into the face of time
Like a storm wind that will ring
The freedom bell for peace of mind
Let your balalaika sing
What my guitar wants to say

Take me to the magic of the moment
On a glory night
Where the children of tomorrow share their dreams
With you and me

Take me to the magic of the moment
On a glory night
Where the children of tomorrow dream away
In the wind of change

Even now there are countries in Europe who are experimenting with socialism.

Barack Obama talks about change and hope. But these people looked to a different kind of change—a change in the opposite direction from that which our nation’s leaders want to take us.

What I ask you now, is who will finance our socialist experiment? There will be no other nation on earth that will be able to pick us up when we fall.

Thursday, February 12, 2009

Our Best and Brightest Hope

We have the obvious problem that the economy has hit a bump in the road. For some, it's a really big bump. We have foreclosures, layoffs, businesses and people going bankrupt. So we have weeping and wailing all around, right?

No, not even close. We have a shining beacon out there, able to turn the economy around, give finance a kick in the pants, and get society out of this "woe is me" attitude. Who is this paragon of goodness? The nearly trillion dollar government-built taxpayer money shotgun? Once again, no, not even close. The refunds, bailouts and handouts are likely to have an emotional impact which could possibly shorten the downturn, and some borderline-viable businesses will be saved, but that's not what recoveries are made of.

Let's make the reasonable assumption that some of those who have been in a layoff recently have been fiscally responsible and have spent the time and effort to build a nest egg. Yes, there are those who didn't get into loans beyond their means and who are able to hold a $20 bill for more than 10 minutes without spending it. The exact percentage doesn't make any difference. Now let's trim it down some more and assume that some percentage of those responsible types also have some entrepreneurial spirit. This results in new small businesses popping up all over the place.

If you assumed 5% savers and 5% of those as entrepreneurs, you have 2500 businesses formed per million layoffs. Of course my numbers are guaranteed to be incorrect, but the principle remains despite the numbers you would prefer to choose.

Those new small businesses will hire people, so the old-school companies don't need to hire everyone back to reduce unemployment. Some of the fledgling companies will fail as they always do, but some will thrive and move on to become the movers and shakers of the economic recovery, and will become household words in their states, countries, and even in the world.

To widen the scope, many of those small businesses will thrive because they meet the needs of you and me, the common citizen. Our part in the recovery if we're not forming these engines of industry, is to patronize them because they help us with what we need and want.

So whose vest is big enough to hold the shiny pin given for saving the world from economic disaster? Yours and mine, if we're up to the challenge.