We Must Cut the Deficit and Somehow Still Spend a Lot

Yesterday the president held forth on the ‘state of the union’. It is impossible for us the review the entire tedious and quite longish speech (admittedly, no-one can hold a candle to recent Venezuelan presidents regarding the length of political speeches; which is in a way a comment on quantity and quality). So we are only going to pick out a few morsels that caught our eye and either respond to questions the CiC asked or comment on a few statements, or where necessary, translate them. Readers looking for a cheap cure for insomnia can read the entire thing here. Lettuce begin:

 

“Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion – mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans. As a result, we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances.”

 

Which economists say so? Opinions between economists on this topic vary rather widely (from Krugman to Kotlikoff). We also think the president is a bit confused about the cause-effect chain here. The main reason for the slightly lower deficit was the most recent bubble blown by the Fed. It printed more than $1 trillion last year, remember? A secondary reason was the ‘sequester’, the only flaw of which was that is was way too small. Right after the above statement he asked:

 

“Now we need to finish the job. And the question is, how?”

 

The lot of you could resign for starters …

 

“That’s why Democrats, Republicans, business leaders, and economists have already said that these cuts, known here in Washington as “the sequester,” are a really bad idea.”

 

Au contraire, it was the best idea ever. The above (and the paragraph preceding it, in which he listed all his favorite programs that must under no circumstances suffer spending cuts) can be translated as : “we urgently need to find a way to be able to continue to spend like drunken sailors.”

 

“Already, the Affordable Care Act is helping to slow the growth of health care costs.”

 

Stand-up comedians can use this quote without alterations. Comedians had it very easy with Bush, but his successor is making an effort too.

 

“To hit the rest of our deficit reduction target, we should do what leaders in both parties have already suggested, and save hundreds of billions of dollars by getting rid of tax loopholes and deductions for the well-off and well-connected. After all, why would we choose to make deeper cuts to education and Medicare just to protect special interest tax breaks? How is that fair? How does that promote growth?”

 

You’d be surprised. As Mises once said, ‘loopholes are what allows capitalism to breathe‘ (see our previous article on loopholes for more on this). It follows logically that closing them will suffocate it, unless tax rates are reduced considerably (we would propose the levels of taxation and spending of 1904 as a good starting point. Government represented less than 4% of the economy at the time and hence was a mere footnote in most peoples’ lives. Which is as it should be).

 

“Every day, we should ask ourselves three questions as a nation: How do we attract more jobs to our shores? How do we equip our people with the skills needed to do those jobs? And how do we make sure that hard work leads to a decent living?”

 

Answers: 1.: cut taxes and regulations to a fraction of what they are today. 2. & 3.: Get the hell out of the way.

 

A Plea for Numberless Boondoggles and Subsidy Schemes

Instead he wants to do this:

 

“So tonight, I’m announcing the launch of three more of these manufacturing hubs, where businesses will partner with the Departments of Defense and Energy to turn regions left behind by globalization into global centers of high-tech jobs. And I ask this Congress to help create a network of fifteen of these hubs and guarantee that the next revolution in manufacturing is Made in America.”

 

Right, not three but 15 government boondoggles are needed to get all those manufacturing jobs back! Has anyone notified the president of the fact that manufacturing employment has fallen by nearly three quarters while output almost tripled? It’s called progress.

 

“But for the sake of our children and our future, we must do more to combat climate change. Yes, it’s true that no single event makes a trend. But the fact is, the 12 hottest years on record have all come in the last 15. Heat waves, droughts, wildfires, and floods – all are now more frequent and intense. We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence. Or we can choose to believe in the overwhelming judgment of science – and act before it’s too late.”

 

Good grief, the warming non-threat again. There has been no ‘warming’ in more than 17 years. Neither are heatwaves, floods or storms more frequent or intense than they used to be – the exact opposite is actually the case. And even if they were more intense, it would be nothing we could do anything about. As to the ‘overwhelming judgment of science’ – even most of the AGW supporters among scientists admit that the weather has absolutely nothing to do with the renamed ‘climate change’. Even the freaking IPCC admits it! If anyone really thinks it is important for us to freeze our behinds off, just send Al Gore in a continuous loop around the planet – wherever he goes, snowstorms and blizzards follow.

The above was naturally followed by assertions that subsidizing ‘green energy creates jobs’. Balderdash. It is simply malinvestment of scarce resources (that’s why subsidies are needed to ‘make it work’). In fact, it isn’t even working with subsidies. The empirical record on specifically the Obama administration’s ‘green stimulus’ efforts is an utterly appalling account of waste. Europe is just trying to bail on its various green energy schemes, mainly because they are such a costly economic failure (a collection of links to articles discussing this can be found here). Even the US energy department – i.e., the US government itself – has published data that show what a huge waste these schemes are:

 

energy subsidiesEnergy subsidies – the ‘dollars per megawatt hour’ are the decisive figure.

 

However, these subsidy schemes are a great way of shifting tax payer funds into the pockets of various cronies.

Next he mentioned “infrastructure investment”, always a safe topic for a tax-and-spender, so it is held. This is why we have frequently discussed here why it shouldn’t be regarded as such. There is no way for bureaucrats to judge opportunity costs. They have no yardstick by which to determine which projects are economically sensible. The erection and running of infrastructure should be fully privatized.

 

“Part of our rebuilding effort must also involve our housing sector. Today, our housing market is finally healing from the collapse of 2007. Home prices are rising at the fastest pace in six years, home purchases are up nearly 50 percent, and construction is expanding again.

But even with mortgage rates near a 50-year low, too many families with solid credit who want to buy a home are being rejected.”

 

(emphasis added)

Translation: we gotta blow a new housing bubble somehow! We’re already half-way there apparently. And we need more, not less, housing socialism. It hasn’t occurred to the president that the first sentence highlighted above is the main cause of what he bemoans in the second highlighted sentence.

 

“These initiatives in manufacturing, energy, infrastructure, and housing will help entrepreneurs and small business owners expand and create new jobs.”

 

Comedians can use this one ‘as is’ too. What these initiatives will do is move tax payer funds to politically well connected firms, while impoverishing everyone else.

Next he announced another governmental malinvestment effort, this time in human capital, by further directing education from the top down. The crowning sentence was however this one:

 

“Through tax credits, grants, and better loans, we have made college more affordable for millions of students and families over the last few years.”

 

We actually spilled some of what we were drinking when coming across this one (comedians … you know the drill by now). It seems hardly necessary to comment on this, let us just present a chart instead:

 

totalgovTotal consumer loans (more than 95% of this are student loans) owned by the federal government. With not a hint of irony, it was decided to abbreviate this data series as ‘TOTALGOV’ – click to enlarge.

 

“But taxpayers cannot continue to subsidize the soaring cost of higher education. Colleges must do their part to keep costs down, and it’s our job to make sure they do.”

 

They will be coerced? What other way is there ‘to make sure’ they obey? Frankly, a far more promising approach would be to abolish the Fed and return to honest money. That is however not on the presidential agenda as far as we could tell.

 

Economic Laws Be Damned …

 

“Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour.”

 

Yes, let’s pretend that economic laws don’t exist and we can order nature around. Just look at France, it works splendidly there! While we’re at it, let’s price millions of low-skilled or unskilled workers out of the labor market, by criminalizing all attempts to offer one’s labor at a price the market will bear. Why didn’t we think of this before? Wait, we actually did …

 

“So here’s an idea that Governor Romney and I actually agreed on last year: let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.”

 

He and Romney actually agreed on lots of things, including the principles of Obamacare. It mainly demonstrates the futility of voting. The above idea would even kill the remote chance that the effects of the Fed’s money printing might one day price unskilled laborers back into the market.

 

Mission Accomplished

 

“Tonight, we stand united in saluting the troops and civilians who sacrifice every day to protect us. Because of them, we can say with confidence that America will complete its mission in Afghanistan, and achieve our objective of defeating the core of al Qaeda.”

 

The mission in Afghanistan was so extremely successful, that it will soon be possible to once again visit public stonings of adulterers there. Not only that, since the invasion, Afghanistan’s opium production has increased from 185 tons a year to almost 6,000 tons. There can be no doubt: the enterprise was a smashing success. ‘Defeating the core of Al Qaeda’ should pose no great difficulties, since it was recently reduced from three completely isolated aging reactionaries to two. However, the CiC’s beloved ‘drone war’ has created thousands of potential successors to them, and defeating those might be a slightly bigger challenge. A good start would however be to stop producing new ones.

 

“As we do [fight Al Qaeda, ed.], we must enlist our values in the fight. That is why my Administration has worked tirelessly to forge a durable legal and policy framework to guide our counter-terrorism operations. Throughout, we have kept Congress fully informed of our efforts.”

 

We should really not drink anything while reading this stuff. This is almost on a par with the ‘I welcome this discussion’ clunker in connection with the NSA scandal. We are aware that the psychopathic class takes us all for idiots, but there should be limits.

 

“I will continue to engage with Congress to ensure not only that our targeting, detention, and prosecution of terrorists remains consistent with our laws and system of checks and balances, but that our efforts are even more transparent to the American people and to the world.”

 

What exactly does ‘more transparent’ mean? That the constitution will be trampled more openly than is already the case? As to checks and balances, a great many of those have been done away with with the PATRIOT Act and several other pieces of legislation that followed. Not one of these abominable laws has been repealed. And there remain quite a few guys who would dearly like to know more about these checks and balances.

 

“America must also face the rapidly growing threat from cyber-attacks. We know hackers steal people’s identities and infiltrate private e-mail. We know foreign countries and companies swipe our corporate secrets.”

 

Err … the biggest collection of hackers ‘infiltrating private email and swiping corporate secrets’ is actually employed by the federal US government and goes by the shorthand ‘NSA’. We’re mentioning this in case he’s wondering where to start swinging his eager broom. And no, we don’t want him to get a ‘Kill Switch‘.

 

“We will invest in new [military, ed.] capabilities, even as we reduce waste and wartime spending.”

 

Good luck with that one. The Pentagon is the biggest black hole for tax payer funds ever devised by man. Its accounting has a hole several trillion dollars large. Whether or not a war is underway, this remains hands-down the biggest racket ever.

 

Improving the Experience

 

“[…], tonight, I’m announcing a non-partisan commission to improve the voting experience in America.”

 

Allow us to point out that even with an ‘improved experience’ there is little hope that the choices presented will be getting any better. As Butler Shaffer reminds us, voting is largely an empty ritual. He inter alia quotes Emma Goldstein, who brought it to the point by saying: “if voting changed anything, they’d make it illegal.”

 

“Of course, what I’ve said tonight matters little if we don’t come together to protect our most precious resource – our children.”

 

No longish political speech would be complete without dragging the children in to push some agenda. In this case, you probably guessed it, it’s gun control. Of course the president is only proposing small and sensible sounding reforms (otherwise people would be, well, up in arms). But that’s how these things always start. As a reminder, when they introduced the income tax a little over a century ago, the highest rate was at 7% for annual incomes amounting to $10m. in today’s money.

The speech concluded with a few sappy anecdotes of people demonstrating altruism, which has however little to do with government or the State, as these individuals engaged in voluntary acts, whereas the State employs coercion.

 

Table by: Energy department / WSJ, chart by: St. Louis Federal Reserve Research

 

 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

4 Responses to “‘State of the Union’ or TOTALGOV”

  • Too bad we couldn’t watch him eat what he spit out last night? The lies told about the weather should have caused him to bite his tongue. Maybe the updates he has read have stated this. I heard one the other day out of a government agency about how last year was the 4th hottest year on record, dating back to 2003. Double speak of 1984 going on all the time out of government agencies. Think of it, 4th hottest out of 11. 4th hottest and 4th coldest puts only 3 years in between, meaning last year was roughly in the middle.

    The older I get the more I realize that the primary purpose of the state is to steal for the benefit of a few. Senator Coburn of Oklahoma found $200 billion of duplication in government programs. Seems there is no interest in saving $200 billion, which probably employs close to 1 million overpaid government workers, likely cronies of others in government. I would imagine the subsidies for energy will reach such political cronies as Terry McAuliffe and some of the Clinton and Gore family.

  • easypilot:

    As my friend Doug Casey like to say: “politicians are famous not only for doing the wrong thing, but the exact opposite of the right thing”

  • No6:

    Economically illiterate, scientifically illiterate, arrogant, bullying drivel.
    The downward trajectory of the USA is assured.

  • jimmyjames:

    We should really not drink anything while reading this stuff.

    *************

    I have to read it with a bottle in front of me- or i go with a frontal lobotomy-

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Gold Price Skyrockets in India after Currency Ban – Part III
      When Money Dies In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days.   Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this...
  • Gold Price Skyrockets in India after Currency Ban – Part IV
      A Market Gripped by Fear The Indian Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes would no longer be legal tender. Linked are Part-I, Part-II and Part-III updates on the rapidly encroaching police state. The economic and social mess that Modi has created is unprecedented. It will go down in history as an epitome of naivety and arrogance due to Modi’s self-centered desire to increase tax-collection at any cost.   Indian jewelry...
  • A Note on Gold and India – What is Driving the Gold Price?
      Hidden Motives It is well-known that India's government wants to coerce its population into “modernizing” its financial behavior and abandoning its traditions. The recent ban on large-denomination banknotes was not only meant to fight corruption.   Obviously, this very bad Indian has way too much cash. Just look at him, he looks suspicious! Photo via thenewsminute.com   In fact, as our friend Jayant Bhandari has pointed out, fresh avenues for corruption ...
  • Gold Price Skyrockets in India after Currency Ban – Part V
      A Brief Recap India's Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes will no longer be legal tender. Linked are Part-I, Part-II, Part-III, and Part-IV, which provide updates on the rapidly encroaching police state Expect a continuation of new social engineering notifications, each sabotaging wealth-creation, confiscating people’s wealth, and tyrannizing those who refuse to be a part of the herd, in the process destroying the very backbone of the...
  • Attaining Self-Destruct Velocity
      Bad Monday Some Monday mornings are better than others.  Others are worse than some.  For one Amazon employee, this past Monday morning was particularly bad. No doubt, the poor fellow would have been better off he’d called in sick to work.  Such a simple decision would have saved him from extreme agony.  But, unfortunately, he showed up at Amazon’s Seattle headquarters and put on a public and painful display of madness.   Good-bye cruel world! On this our planet,...
  • All Aboard! Trump’s Express Train to the Future
      Free Money! BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.   Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won...
  • India's Currency Debacle – An Interview with Jayant Bhandari
      A Major Crisis Last week Jayant Bhandari related the story of the overnight ban of certain banknotes in India under cover of “stamping out corruption” (see Gold Price Skyrockets In India after Currency Ban Part 1 and Part 2 for the details).   Banned 500 rupee banknotes   The problem is inter alia that the sudden ban of these banknotes has hit the Indian economy quite hard, given that 97% of all transactions in the country are cash-based. Not only that, it has...
  • Will the Swamp Swallow Trump?
      Permanently Skewed TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor. There, on the banks of the Potomac, it will fight its next big battle.   Lieutenants in Trump's army: Bannon, Flynn & Sessions Photo credit: Drew Angerer / AFP   Here at the Diary, we do not like to get involved in politics. But this is a special time in the history of our planet – a...
  • There Are Two Types of Credit — One of Them Leads to Booms and Busts
      Stumped by the Bust In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs.   What has caused the bust? The modern-day economic orthodoxy continues to be unable to provide...
  • Gold Bull Market Remains Intact – Long Term Fundamentals Outweigh Short Term Market Gyrations
      A Strong First Half of the Year, Followed by Another Retreat In early 2016 gold had a big bull run. The precious metal rose close to 25% this year, pushed higher in a summer rally that peaked on July 10th. Gold experienced a bumpy ride over the remainder of the summer though, as investors became increasingly concerned about a potential rate hike by the Federal Reserve. Uncertainty returned to gold market and has intensified further since then.   Initially, gold rallied sharply...
  • Too Early for “Inflation Bets”?
      The Trump Trade After 35 years of waiting... so many false signals... so often deceived... so often disappointed... bond bears gathered on rooftops as though awaiting the Second Coming. Many times, investors have said to themselves, “This is it! This is the end of the Great Bull Market in Bonds!”   The long bond's long cycle – red rectangles indicate when the post 1980 bull market was held to be “over” or “over for sure” or “100% over”, etc.  We have...
  • US True Money Supply Growth Jumps, Part 1: A Shift in Liabilities
      A Very Odd Growth Spurt in the True Money Supply The growth rates of various “Austrian” measures of the US money supply (such as TMS-2 and money AMS) have accelerated significantly in recent months.  That is quite surprising, as the Fed hasn't been engaged in QE for quite some time and year-on-year growth in commercial bank credit has actually slowed down rather than accelerating of late. The only exception to this is mortgage lending growth - at least until recently. Growth in...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com