Ignorance Is Not Bliss

Hat tip to Terry Headley for passing this gem along from the director of the AFL-CIO's  West Virginia Center for Budget and Policy:

Ted Boettner @WVpolicywonk
It's amazing how many people say America is "broke" and have little clue that since we issue our own currency that we can't go broke.

Ted needs to go back to the drawing board on his economic thinking.  History is chock full of examples of states that have deluded themselves in this way.  Thinking that one can simply print money to pay bills assumes way too much.

Paper currency based upon "full faith and credit" of the government relies on the understanding that the state will work to maintain its artificial value.  It assumes that people will use it in place of commodities that have tangible value.

Some states have abused the trust and faith of the people in their money and government by printing money to pay its bills.  This produces the classical definition of inflation, which is "too many dollars chasing too few goods."

Liberals like a moderate amount of inflation because it redistributes wealth from creditors to debtors.  If debt is repaied at fixed amounts with a fixed interest rate, its real value will fall during periods of inflation.  The debtor has to pay back less value than he or she originally borrowed.  This will harm an economy in the long run because lenders will adjust their policies to protect themselves against this kind of loss.

Taking Boettner's idea to its logical end produces disaster.  The Confederate States, Weimar Germany, and countless Latin American countries fell to this temptation.  Weimar Germany obtained loans from the United States to shore up its system after the world saw the spectacle of people wheelbarrowing in bills to pay for bread.  Those in the Confederacy relied on barter toward the end of the Civil War because the central government simply printed to pay.

There is no easy way out of paying debt, even for nations.  To think otherwise is either delusion or ignorance.

That being said, America does not need to be broke.  If federal and state regulators pare down burdens to those which are necessary.  If the federal government gets out of the way of energy production.  If Obamacare is reformed and put on a free market basis.  If, if, if the competitive free market can be restored, then the United States can prosper and pay its bills.  We have wealth locked not in our power to print money, but in our resources and potential production.

Unleash it, pay off the debt, secure the future.

Debt

Again, the media is blasting Republicans. Why won't they compromise on the debt ceiling? Why won't they raise taxes? Don't they know the end is nigh? After all, Obama told us this (of course he told us this several times and it did not come to pass.)

Liberals often fail to remember that there is a better way to raise tax revenue than upping the tax rates. That is by increasing prosperity. You can never tax your way to economic growth, or spend to get there either, as the (non) stimulus proved.

What we need is national leadership to unleash the economy. We need a president who believes in the free market and reduced government interference. We need politicians who know that plundering the economy won't help it to grow. We need to reduce the burdens on business at not only the national, but also the state and local levels. The EPA is one of the worst offenders, but local zoning laws choke business vitality as well. We also have the highest corporate tax rate in the entire world, which drives business overseas.

Raising the debt ceiling will not help because it perpetuates the problem of too much spending. All we have to do to stay within our current limits is to completely scrap Obamacare and that will solve the crisis in the short term. Pretty simple and it will accomplish something that the people want.

The Difference Between Debt and Deficit Is Well Understood

Earlier today, Obama proposed that federal salaries be frozen in place for two years to try and address the federal deficit. While that is a good idea in itself, it ought not be seen as a major part of the solution.

For a long time, politicians have counted on the notion that the public does not differentiate between the deficit (how much more we spend every year versus how much we take in) and the debt (how much we owe in total.)

The difference between the deficit and debt is like a quadruple layer cake with only a thin layer of icing on the top. Lowering the deficit is nice, but it does not solve the problem of spending more than our country makes in revenue. We cannot simply lower the deficit and then pat ourselves on the back and say good job. The deficit needs to disappear completely and we need to put money into paying down the debt.

To accomplish real debt reduction, we need to change our expectations of government and limit what we expect from it. We cannot build every road that anyone proposes. We cannot afford every single expensive program that comes down the pike. We should always be asking, like families, "Do we need this? Is there a less expensive alternative? How can we fit this into a rational budget?" Most importantly, we can ask "can the private sector do this better?"

The National Debt

"Hand to hand combat" Promised By Obama After Election

Obama and his spokesmen had two interesting statements this week connected to the midterm elections.

First came the news that he will leave on November 5 instead of the 7th on a trip to India. Interesting idea, drive your party to defeat and then leave the country. I wonder if he will get any golf in over there?

Next came something more ominous. Obama promised "hand to hand combat" with Republicans after they make gains this November. Look for Congress to defund and box off his health care initiative and work to limit the reach of the EPA. Obama's reaction is interesting since his ideas and policies resulted in the congressional defeats. This year is a referendum on his left wing ideology and Americans are clearly not buying it. What is interesting is that Joe Biden said he would "strangle" Republicans who opposed their debt ridden budget proposals.

So the president and vice president are figuratively using the language of murder to describe their frustration with the GOP, the Tea Party, and the electorate for rejecting leftism. Of course they won't be literally killing Republicans, but their language reflects their frustration.

In 1995 when the GOP took over Congress, they skirmished with Clinton, but also hammered out welfare reform. In 2007, you saw Bush retrench and try to find ways to work with Congress (although this led to some negative outcomes). I seriously do not see Obama working with congressional Republicans in the remaining two years of his term. Like Andrew Johnson, he will more likely go off the deep end and become a bizarre spectacle, shunned by both parties.

Look for Hillary to get the Democratic nomination in 2012. Just my gut feeling.

Rep. Jim Jordan on America's unsustainable debt

Part 1


Part 2

This Note Is Legal Tender For All Debts, Public and Private

If you look at a piece of US paper money, there is a disclaimer on it somewhere claiming "this note is legal tender for all debts, public and private." As any Ron Paul supporter will correctly explain, that means that those pieces of paper are money and have worth because the government says so and for no other reason.

For a long time, that backing meant something. One could put full faith and credit into the money because the government was always able to support the currency. The obligation of the United States government to pay its debts, much like the money itself at one time, was as good as gold. As any individual knows, when one takes out too many loans, or fails to pay their bills on time, their credit is undermined. Spending money frivolously causes most of the problems that result in this state of affairs.

That is where the United States is at right now. China questions our credit. Automobile dealerships and medical facilities question our credit. The "cash for clunkers" deal is approaching fiasco status because the government is not paying the credits due to the dealers. Medicare is habitually behind on its payments. These problems undermine faith and credit in our government's handling of the economy.

That goes back to those little pieces of paper we carry around with us. What happens when the faith and credit extended to our government are replaced with suspicion and fear? Our currency then loses value, causing inflation. Lenin did say that high taxes and inflation were the perfect combination with which to destroy the political influence of the middle class.

Regardless of why this is happening, the danger is real. Credit, once lost, is hard to regain even for the United States of America. Admittedly this process has taken many years and presidents to hit this stage. However, Obama is severely exasperating the problem by proposing new costly initiatives instead of trying to scale back the burdens on taxpayers and the system itself.

Blast from the Past: Tyrannosaurus Debt