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!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add 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:

  • India: The World’s Fastest Growing Large Economy?
    Popular Narrative India has been the world’s favorite country for the last three years. It is believed to have superseded China as the world’s fastest growing large economy. India is expected to grow at 7.5%. Compare that to the mere 6.3% growth that China has “fallen” to.   India's quarterly annualized GDP growth rate since 2008, according to MOSPI (statistics ministry) - click to enlarge.   The IMF, the World Bank, and the international media have celebrated...
  • Don’t Blame Trump When the World Ends
    Alien Economics There was, indeed, a time when clear thinking and lucid communication via the written word were held in high regard. As far as we can tell, this wonderful epoch concluded in 1936. Everything since has been tortured with varying degrees of gobbledygook.   One should probably not be overly surprised that the abominable statist rag Time Magazine is fulsomely praising Keynes' nigh unreadable tome. We too suspect that this book has actually lowered the planet-wide IQ –...
  • Silver Speculators Gone Wild – Precious Metals Supply and Demand
    Silver Gets Frisky Last week, the prices of the metals had been up Sunday night but were slowly sliding all week — until Friday at 7:00am Arizona time (14:00 in London). Then the price of silver took off like a silver-speculator-fueled-rocket. It went from $16.68 to $17.25, or 3.4% in two hours.   March Silver, 30 min. candles. Someone certainly piled in last Friday... - click to enlarge.   What does it mean? We don’t know. We would bet an ounce of fine gold against a...
  • What is the Best Time to Buy Stocks?
      Chasing Entry Points Something similar to the following has probably happened to you at some point: you want to buy a stock on a certain day and in order to time your entry, you start watching how it trades. Alas, the price rises and rises, and your patience begins to wear thin. Shouldn't a correction set in soon and provide you with a more favorable buying opportunity?   Apple-Spotting – a five minute intraday chart showing the action in AAPL on February 1, 2017 - an...
  • Incrementum Advisory Board Meeting, Q1 2017 and Some Additional Reflections
      Looming Currency and Liquidity Problems The quarterly meeting of the Incrementum Advisory Board was held on January 11, approximately one month ago. A download link to a PDF document containing the full transcript including charts an be found at the end of this post. As always, a broad range of topics was discussed; although some time has passed since the meeting, all these issues remain relevant. Our comments below are taking developments that have taken place since then into...
  • Gold and Silver Divergence – Precious Metals Supply and Demand
      Gold and Silver Divergence – Precious Metals Supply and Demand Last week, the prices of the metals went up, with the gold price rising every day and the silver price stalling out after rising 42 cents on Tuesday. The gold-silver ratio went up a bit this week, an unusual occurrence when prices are rising. Everyone knows that the price of silver is supposed to outperform — the way Pavlov’s Dogs know that food comes after the bell. Speculators usually make it...
  • Trump and the Draining of the Swamp
      Swamp Critters BALTIMORE – The Dow is back above the 20,000-point mark. Federal debt, as officially tallied, is up to nearly $20 trillion. The two go together, egging each other on. The Dow is up 20 times since 1980. So is the U.S. national debt. Debt feeds the stock market and the swamp. What’s not up so much is real output, as measured by GDP. It’s up only 6.4 times over the same period. Debt and asset prices have been rising three times as fast as GDP for 36 years! Best...
  • Making America Great Again – How to Judge Policy
      A Simple Formula MIAMI – How do we know if new programs will make the economy better... or worse? Here’s a simple formula:   W = rv (w-w – w-l)   That is, wealth is equal to the real value of win-win exchanges minus the loss from win-lose exchanges. Yes, dear reader, it’s as simple as that. Like a whittler working on a piece of wood, we’ve shaved so much off, there is nothing left of it... except the essential heartwood.   When devising a win-win,...
  • When Trumponomics Meets Abenomics
      Thirty Year Retread What will President Trump and Japanese Prime Minister Shinzo Abe talk about when they meet later today? Will they gab about what fishing holes the big belly bass are biting at? Will they share insider secrets on what watering holes are serving up the stiffest drinks? [ed. note: when we edited this article for Acting Man, the meeting was already underway]   Japan's prime minister Shinzo Abe, a dyed-in-the-wool Keynesian and militarist, meets America's...
  • The Great Wailing
      Regret and Suffering BALTIMORE – Victoribus spolia... So far, the most satisfying thing about the Trump win has been the howls and whines coming from the establishment. Each appointment – some good, some bad from our perspective – has brought forth such heavy lamentations.   Oh no! Alaric the Visigoth is here! Hide the women and children! And don't forget the vestal virgins, if you can find any...   You’d think Washington had been invaded by Goths, now...
  • Gold Sector Update – What Stance is Appropriate?
      The Technical Picture - a Comparison of Antecedents We wanted to post an update to our late December post on the gold sector for some time now (see “Gold – Ready to Spring Another Surprise?” for the details). Perhaps it was a good thing that some time has passed, as the current juncture seems particularly interesting. We received quite a few mails from friends and readers recently, expressing concern about the inability of gold stocks to lead, or even confirm strength in gold of...
  • Receive a One Percent Gift When Buying or Selling a Home
      How to Save Money When Buying or Make More When Selling a Home In your professional capacity and perhaps also in your private life, you may be closely involved with financial and commodity markets. Trading in stocks, bonds or futures is part of your daily routine.  Occasionally you probably have to deal with real estate as well though – if you e.g. want to purchase an apartment or a house, or if own a home you wish to sell.   The people who took this photograph probably want to...

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