What's Happened to America's Founding Principles?

 

Has America improved over the years in light of its Founders' intentions and the founding documents? With the founding of a nation unique in the world in its governing philosophy, has the nation been faithful to its ideals? A compelling explanation of what has happened over these years to the American Founders' vision is discussed in Angelo Codevilla's three-part series called “Progression – or Degeneracy?” These essays discuss philosophical and practical topics, and their message commands attention.

The essays appear at American Greatness.

The above link is to the first part, where you will find links to the second and third parts. It is worthwhile reading and valuable food for thought. I had not been aware of this website until today, and I have added it to my list of “Interesting Links.” Enjoy and think. –  E.H.

 

Illustration: Declaration of Independence, by John Trumbull, 1819 (Wikipedia)

Blueprint for Fiscal Failure

Image via Wikipedia

(2008 estimate, Per cent of GDP)

President Obama’s recently released budget proposal defies comparison with the president’s words about reining in the deficit while “investing” in necessary programs. The numbers have become so astronomical that, to me, it seems doubtful that those who crafted this budget really comprehend how huge these figures are.

We’ve already increased the national debt massively in the past two years. As of now, one national debt clock is showing $14.233 trillion plus. And the administration wants to raise the debt limit. Republicans say, “Not without significant spending cuts.”

Conservative House members are striving to reach the $100 billion level in cuts promised in the GOP’s “Pledge to America.” They may accomplish this. Even so, it’s a modest amount compared to the $3.7 trillion called for in the budget for Fiscal 2012. Somehow this budget proposal, if enacted, is supposed to help reduce deficits by $1.1 trillion over a decade. But we would be running a deficit of $1.6 trillion just for FY 2012. Most of Obama’s proposed cuts, of course, are to be made in the out years, well after his current term expires.

The problem with trying to budget over ten years is that we have a new Congress every two years, and all that budgeting, were it to be enacted, is only suggestions to future lawmakers.

As stated by Christopher S. Rugaber at The Daily Caller,

The budget plan President Barack Obama sent Congress on Monday foresees a record deficit of $1.65 trillion this year. That would be just under 11 percent of the $14 trillion economy — the largest proportion since 1945, when wartime spending swelled the deficit to 21.5 percent of U.S. gross domestic product. [1]

Some Proposed Budget Spending Items
Of course, now, our national debt is about the size of our GDP. For all the talk about reducing future deficits, it’s hard to view this budget proposal as a sincere effort. Apparently, things we just can’t do without, according to the Administration, include big spending increases for the following (partial list by departments), according to FederalNewsRadio.com:

Education, $68 billion, increase of 38.5%
Commerce, $10.4 billion, increase of 13.9%
Transportation, $128.6 billion, increase of 68% (includes $53 billion for high-speed trains)
Some agencies received decreases. See the excellent article for a comprehensive listing and comments. [2]


As J.D. Foster points out in a Heritage Foundation article,

The President continues to speak of painful spending cuts even as spending continues to soar. He continues his call for future tax hikes driven by ideology. He continues to express concern over budget deficits while offering only gimmicks in the short term and silence for the long-term problems for which he appointed a now-ignored deficit reduction commission. [3]

Here are some comments by conservative members of Congress on a Heritage video:



Election Results = House Mandate
Republicans won in the 2010 elections largely on the promise of restoring fiscal sanity in Washington. As long as liberals are in charge, there will be excessive spending and increasing national debt until our currency collapses, then liberals will try to start the whole process over. Fiscal irresponsibility is so evident in the president’s proposed budget that it’s difficult to believe anyone can really take it seriously. It increases rather than decreases entitlements, it proposes very costly and unnecessary programs, like high-speed rail, and calls more government intervention in just about every facet of life. And I did mention significant tax increases.

What About the Recovery?
If the GOP’s proposed cuts result in some lost government jobs, they are likely to also result in many new private-sector jobs. When “economic growth” is basically government growth, it falls well short of a healthy recovery. I hope the House GOP leaders and members will stand firm on their “Pledge to America,” and make at least $100 billion in cuts to current spending, and defund Obamacare entirely. Even all that would be relatively small compared to overall spending, but it’s a start that would demonstrate a sincere effort to save our country’s fiscal policy from disastrous results: Chronic high unemployment and possible collapse of our economy and currency. The president’s proposal represents basically just more of the same thing we already have, but made worse.

What’s needed is a substantial reduction in the size and scope of government, not just slower government growth. And the cutting should start now.


[1] Christopher S. Rugaber, “Deficit is biggest share of economy since 1945,” 02/15/2011,
The Daily Caller.


[2] Jolie Lee and the Associated Press, “Breakdown of FY2012 Budget by Agency,” 02/14/2011, FederalNewsRadio.com.


[3] J.D. Foster, Ph.D., “President Obama’s 2012 Budget Builds on Failures of the Past,” 02/14/2011, www.Heritage.org.


Illustration: Public domain.

Related articles

• Obama's budget would add $13 trillion to national debt - Kansas City Star (news.google.com)
• Obama Budget Sets Up Fight Over Depth of Cuts (businessweek.com)
• Obama's Unsustainable and Gutless Budget Proposals (pajamasmedia.com)

Would You Take “Investment Advice” from This Man? Or, Is This Our “Sputnik Moment?”

How do you make over-the-top, multi-trillion-dollar government spending sound good? Well, you can try calling it “investment.” That’s been President Barack Obama’s strategy for trying to sell what should be unsellable. In his State of the Union speech, he tried to appear more “centrist,” and some media figures said he was “Reaganesque,” and I think he just read a book about Ronald Reagan.

In the election of 1960, anti-Nixon forces came up with a popular slogan. “Would you buy a used car from this man?” My question is, “Would you take ‘investment’ advice from Barack Obama?”

“Investment” Advice
Mr. Obama wasn’t channeling his inner Reagan. He was giving us more of the same spend, spend, spend “investment” advice while still trying sound as though he was prepared to clamp down on spending. I suppose he thinks he can have it both ways. But after two years of record-smashing deficits with no end in sight, is he really the one to tell us we should be spending less, while at the same time urging us to spend more? Something here doesn’t quite compute.

When Mr. Obama starts advising us about the economy, we would do well to consider the obvious, as explained by Rep. Michele Bachmann (R-MN). The thing that’s been the worst problem for many people, unemployment, is the very thing that the least has been done about in terms of success. Meanwhile, we are quickly becoming a nation in decline as a result of the spending orgy of the Obama era, which makes G.W. Bush look like Mr. Frugal.

I suppose we received a lesson in how to do things like China, a nation much admired by our president. I know there are many fine people and admirable things in China, but the “successes” of their economy depend largely on the fact that there are no human rights in China, thus leaving open the use of child labor, virtual slave labor, and total ignoring of “environmental impact.” Probably to build a nuclear power plant in the U.S. would take decades by the time the required permits and processes were completed, and by then the technology would likely be obsolete. Not so in China. I’m not saying we should be like them. Not at all. But maybe a little less determined to stop this kind of construction before it starts. Similarly for oil refineries, etc.

As Glenn Beck explained on his Fox News Channel show January 26, 2011, The fuels we are now using are going to be the main ones for years to come. Right now, less than one percent of our energy is provided by either wind or solar power. Wood provides two percent. So these new energy sources aren’t going to be our mainstays any time soon.

What’s wrong with letting private industry develop these things when they can be made profitable, rather than throwing good money after bad with government “investment?” Of course it’s questionable whether we have any “good” money to throw at anything – just money hot off the printing press, created out of thin air.

Did I hear him right? Did he actually have some good things to say about America? After bowing to every despotic dictator he meets and apologizing for the U.S. at every opportunity; after wining and dining Mr. “Human Rights” Hu of China? Well, that’s supposed to convince us of his “new tone” and his turn toward the center. Well, not quite.

Our Sputnik Moment?
Here in our “Sputnik Moment,” the president wants us to “invest” (i.e., spend boatloads of government funds) in the following things, among others:

Biomedical research – for what? Cloning?
Information technology – I thought we had Google and Facebook, etc. Oh, I see – so we can give him an effective Internet kill switch….
Clean energy technology – see discussion above.
High-speed rail -- For whom? They can't get enough passengers to ride Amtrak. (As Glenn Beck mentioned, we'd have to lay a whole new track system. I say, not needed and not cost-effective.)
Infrastructure – ah, good old infrastructure, the area where everyone excels us. He may not have noticed, but infrastructure is being worked on all the time. In front of my house, we are getting new curbs and a resurfaced street, All over our city, you can’t go two miles without some major road or bridge construction going on and new buildings going up. Maybe some stimulus funds? And yet our country has 9.4 percent unemployment with the “real” unemployment rate getting worse because people have given up looking for jobs.
Education – he seems to want every American to get a college degree. He’s going to “invest” in education to help people pay for college, but when is he going to ask colleges and universities to make their tuition costs realistic by dipping into some of their multi-billion-dollar endowments? There really is no excuse for these rates being so high.

As others have pointed out, the government did nothing to help Edison or the Wright Brothers. Probably not much to help Facebook. Google, I don’t know. Since Al Gore is a prominent figure in that, maybe they got government welfare. Lots of companies do. But government is not the engine of innovation or invention, or the economy in general. It is almost always the impediment that keeps the economy from improving, due to high taxes and endless regulation.


I suggest that this is not our “Sputnik moment.” Yes, we need to compete in the global market. This will be not be accomplished by government “investing” in and controlling so many things. It will be accomplished by unfettered free markets in which entrepreneurs and large companies can be free from government intervention and allowed to pursue their self interest. And government could save a lot by cutting off the corporate welfare spending.

Obama still wants our students to spend more hours and longer school years in the classroom, and to focus more on math and science. Or else, saith he, we won’t be able to compete with the smart kids from other countries. Of course, in some of these countries, kids are taken away from their parents and given special training if they excel in some particular area. I say, get the federal government out of education, return it to local control, and see what happens. Probably, more vocational education, less spirit-strangling student debt, and generally a better economy.

G.K. Chesterton said that many people think they are members of the last generation simply because they can’t imagine the world getting on without them. I think that sort of thinking affects our government. It’s so involved in every aspect of life that it thinks life would simply fall apart if it pulled back. It wouldn’t, of course. Someday, we’ll get back to being a society willing to try it. Or so I hope.

Recommended Reading: R.J. Moeller, "State of the Union On My Mind," A Voice in the Wilderness.


Photo: Barack Obama official portrait by Pete Souza. Public domain.

QE2: Bubble, Bubble, Toil and Trouble

Image via WikipediaWhat is QE2 and what is the Federal Reserve trying to accomplish?
The Fed decided to embark on a $600 billion plan to buy Treasury securities in order to balance out economic components to better fulfill their mandate for price stability and full employment.
Ben Bernanke’s statement:

“Measures of underlying inflation are currently at levels somewhat below those the [Federal Open Market] Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate …
“The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.” [1]

What happened with QE1?
Mike Larson at FXStreet.com writes,

[In the housing and mortgage arena], [t]he Fed bought $175 billion in debt sold by Fannie Mae and Freddie Mac. It also bought $300 billion in U.S. Treasuries, and $1.25 TRILLION in mortgage backed securities — bonds made up of bundles of home loans. [2]

Larson notes that key housing indicators such as housing starts, sales of existing homes, etc. demonstrate the failure of the QE1 effort to help the economy. [3]
Another writer sees the effort as likely to fail:

Mr. Bernanke is making the same blunder that we made with the past bubbles busts – if we can create paper profits and convince consumers that they should spend those paper profits then we’ll be on our way to economic prosperity. The problems arise when asset prices readjust lower to meet their true fundamentals. It’s ponzi finance and nothing more.
As I have previously explained, the goal of QE is to increase aggregate demand by creating a fictitious wealth effect and by increasing bank loans. [4]

Fed Independence in Danger? Or Fed Independence Is a Danger?
The Federal Reserve’s massive involvement in the TARP bailouts and QE1 have led to criticism of the Fed for getting involved in fiscal (in addition to monetary) policy. Thus the Fed has been subjected to more than usual political criticism and calls for its abolishment, and a return to the gold standard.
When the Fed is arbitrarily inflating the money supply by trillions, there will eventually be much more inflation than they claim to want. Bernanke says QE2 is supposed to ramp up inflation a bit so as to balance out with increased employment, thus getting both the Fed’s mandates into line.

It is certain that the Fed has not succeeded in its full-employment mandate. There hasn’t been a great amount of inflation because much of the newly-created money has sat in banks’ Federal Reserve accounts drawing minimal interest because banks don’t see much demand for loans due to the Obama Administration’s promotion of threatening conditions, i.e. higher taxes, Obamacare, and general hostility toward business large and small.

Do We Know the Real Reason for This Project?
J. D. Foster at National Review Online thinks Bernanke is not forthcoming about his actual reasons for wanting this “stimulus,” because of possible political consequences, but apparently it is not wanted simply to stave off deflation:

… If the economy is expected to muddle through, let alone accelerate, then there is no reason to embark on a highly risky, highly controversial new round of quantitative easing [to prevent deflation].

Why won’t Bernanke be transparent in this? Because he also worries about the Fed’s independence. Imagine President Obama’s reaction if the chairman of the Federal Reserve were to point out the obvious truth that the economy dare not sustain a massive tax hike at this time. Or if he were to say that the prospect of such a tax hike is what forced the Fed’s hand on QE, despite the risks. Whatever Bernanke’s intentions, this would be interpreted as a blatantly partisan act by the non-partisan Fed. [5]

Turn Off the Bubble Machine!
According to some of the Fed’s critics, especially of the Austrian school, the central bank’s manipulation of the currency is what brings on the bubbles, booms, busts, and accumulating inflation that our economy experiences. They point out that the Fed was slow to recognize (publicly, anyway) the housing bubble, leading to a deep recession which Peter Schiff was ridiculed for correctly predicting.

Marvin Hutchinson of Money Morning sees the Fed’s move as creating a commodities bubble that must burst:

By encouraging higher inflation - a stance that was clear in the recent statement of the policymaking Federal Open Market Committee (FOMC) - Bernanke is creating a commodities bubble that is already showing signs of distorting the global market. By keeping interest rates below inflation for years at a time, he is discouraging U.S. saving and encouraging leverage.

That leads to the creation of massive bubbles - such as are currently appearing in the junk bond market, and occurred in dot-com bubble of 1997-2000 and the housing bubble of 2003-06.

In the long run, the losses from those bubbles bursting - combined with the low savings rates - will destroy the U.S. capital base. Once the United States no longer has more available capital than its competitors, it will have less and less ability to create good-paying jobs and preserve U.S. living standards. Thus, unemployment will increase and real wages will decline. [6]

A satirical article at The Onion was headlined, “Recession-Plagued Nation Demands New Bubble To Invest In.”
But we’ve had enough of the bubble-and-burst cycles.
World financial leaders oppose it.
Reuters reports:

Resentment abroad stems from worry that Fed pump-priming will hasten the U.S. dollar's slide and cause their currencies to shoot up in value, setting the stage for asset bubbles and making a future burst of inflation more likely.

“With all due respect, U.S. policy is clueless,” German Finance Minister Wolfgang Schaeuble told a conference.

“(The problem) is not a shortage of liquidity. It's not that the Americans haven't pumped enough liquidity into the market, and now to say let's pump more into the market is not going to solve their problems.” [7]

 Ambrose Evans-Pritchard at The Telegraph reports that the world views the Fed action as a move to devalue the dollar:

China's commerce ministry fired an irate broadside against Washington on Monday. "The continued and drastic US dollar depreciation recently has led countries including Japan, South Korea, and Thailand to intervene in the currency market, intensifying a 'currency war'. In the mid-term, the US dollar will continue to weaken and gaming between major currencies will escalate," it said. [8]

Further, Evans-Pritchard writes,

As this anti-dollar revolt gathers momentum worldwide, the US risks losing its "exorbitant privilege" of currency hegemony – to use the term of Charles de Gaulle. [9]

Evans-Pritchard expects the Fed’s policy to bring more food inflation to countries that can least afford it:

The innocent bystanders caught in the crossfire of Fed policy are poor countries such as India, where primary goods make up 60pc of the price index and food inflation is now running at 14pc. It is hard to gauge the impact of a falling dollar on commodities, but the pattern in mid-2008 was that it led to oil, metal, and grain price rises with multiple leverage. The core victims were the poorest food-importing countries in Africa and South Asia. Tell them that QE2 brings good news. [10]

Conclusion
The Fed’s decision to implement QE2 will lead to inflation, reducing the value of the dollar, and aggravate currency relationships with other countries. This will contribute to weakened purchasing power for Americans, who already are cheated of the ability to gain from saving, and will contribute little to nothing to economic recovery. It will do nothing to increase demand in America or elsewhere.

Loosening money and credit even more won’t help when interest rates are near zero already, and banks are lacking customers who want to borrow. QE2 exacerbates the problem by introducing more risk and uncertainly into the markets. It’s been correctly characterized as a back-door tax increase.

Also, the Fed subjects itself to even more scrutiny and criticism, and risks the independence it so wants to protect. Both the dollar and the economy would benefit greatly from less manipulation and “help” from the government and the Fed.

[1] Mike Larson, “Fed confirms: QE2 on tap … despite dismal failure of QE1! Have these guys gone nuts??” 09/24/2010, FXStreet.com.

[2] and [3] Ibid.

[4] Pragmatic Capitalism, “Northern Trust: QE1 Failed, Why Will QE2 Work?” 10/10/2010.

[5] J.D. Foster, “Why Bernanke’s QE Justifications Don’t Wash,” 11/15/2010, The Corner, National Review Online.

[6] Marvin Hutchinson, “As QE2 Looms, Is the Fed Focusing on the Wrong Things?” 10/08/2010, Money Morning. (Emphasis added)

[7] Glenn Somerville and Zhou Xin, “Global anger swells at Fed Actions.” 11/05/2010, Reuters, via Yahoo! News.

[8] Ambrose Evans-Pritchard, “QE2 risks currency wars and the end of dollar hegemony,” 11/18/2010, The Telegraph (U.K.).

[9] and [10] Ibid.

Photo: Portrait of Federal Reserve Chairman Ben Bernanke. Public domain.

Related articles

• "QE2: Last Rites for the World's "Reserve Currency"" and related posts (zerohedge.com)
• Republicans to Bernanke: QE2 is a Bad Idea (dailyfinance.com)
• House And Senate Republicans Attack Fed Over QE2 In Letter (businessinsider.com)