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Archive for the ‘Budget/Economy’ Category

27
Mar

American Dynamism Vs. Chinese Statism

   Posted by: Pat    Print Print

One does not have to look hard to find publications or experts pronouncing or describing an America in decline. They have now become ubiquitous and in many circles pass for the conventional wisdom of the day. In a similar vein, it is not that hard to find arguments that other countries, particularly China, have a more efficient, productive economy and government. Living in California, I’ve heard many unfavorable comparisons to our attempt at building a high speed train to China’s already extensive train network. While, I understand the United States faces deep fiscal issues; and our current political class appears incapable or unwilling (both?) to tackle them, I am still an optimist about my country. After all, the US is not alone in facing headwinds to a prosperous future. We cannot judge ourselves accurately without looking more closely at our peers, with China being the most obvious target. Analyst Ian Bremmer makes a strong attempt at this and finds that China’s very system has plenty of warts:

China has indeed grown by leaps and bounds over the past decade. That’s a huge credit to a country that has modernized and industrialized on a previously unseen scale. And because of its 1.3 billion citizens, China has quite a bit of growth (read: catching up) still to come. China’s style of governance leaves the country light on regulation. However, it’s also light on rule of law, transparency, freedom of speech and several other key features that make the U.S. economy go ’round. Just because the Chinese government can move a village and build a road without holding a single hearing doesn’t mean the free market has taken hold. Indeed, it shows the opposite: China’s economy is largely state-planned, state-owned and state-run. The government uses capitalism only as a tool to reach its ends, not as a true expression of a free market.

Bremmer is right. China can indeed get many things done, but all of these accomplishments come from a centrally planned government, not a dynamic society or economy. The human race has yet to create an omnipotent, all-wise group of men and women that can lead a society to ever growing levels of prosperity. Economic growth cannot just be planned, as the market contains too many forces coming from too many different directions. The Chinese have opened up portions of their economy to the ‘animal spirits’ of capitalism, but as Bremmer points out, this is not really as it seems. There is no such thing a free market in modern China:

where the Chinese government compromises the free market, it does so to fulfill its own desires of effective control over the entire country. It’s capitalism of the state, by the state and for the state, where the state is the principal economic actor. That’s in marked contrast to where the U.S. compromises on “pure” capitalism, adding things like the social safety net, worker safety, product safety, health insurance and retirement planning.

One of the major problems China has had with its economic model is that at nearly any time, the majority owner of most of its economy — the state — can jump into an enterprise and distort it for its own purposes. It can cook the books, it can pull out profits, it can hide losses, it can launder money and it can even shut down a company altogether.

The United States has its challenges. At times, I have strong feelings of doubt that we can get ourselves back on track. Back to being a nation built on rugged individualism that produces dynamic outcomes. It is impossible for me to imagine an Apple being created in Beijing, but I would not be surprised to see a similar story (Pomegranate?) arise in the US. American culture isn’t without flaws and embarrassments, but no other on earth has proven to be so productive and resolute. It just keeps on ticking and with it American power and influence.

21
Jan

Pipe Nightmares

   Posted by: Pat    Print Print

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A President has to make many tough decisions. To send troops in. To get them out. To put his political capital and efforts toward tax reform or health care or energy policy or immigration, etc, etc. But sometimes some decisions should be pretty straightforward. A slam dunk to use a sports metaphor. I believe President Obama shot a serious airball on his Keystone XL Pipeline decision. He was given a 75 mph slowball right down the middle plate and swung and missed. Like fumbling the ball on the one yard li….Ok, that’s enough. The pipeline had by far more positives (jobs, good paying ones!, cheaper oil, aka lower energy and gas bills, less dependence on foreign energy) than negatives (environment degradation, possible spills, eyesore) for the United States and its citizens. The American working class is struggling like we haven’t seen in decades. Working class males have been hit harder than almost all other demographics and Keystone would provide a positive future to thousands of these folks and their families.

The respected Robert Samuelson agrees and speaks with unusual candor:

President Obama’s rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity. It isn’t often that a president makes a decision that has no redeeming virtues and — beyond the symbolism — won’t even advance the goals of the groups that demanded it. All it tells us is that Obama is so obsessed with his re-election that, through some sort of political calculus, he believes that placating his environmental supporters will improve his chances.

The admittedly more partisan Fred Barnes from The Weekly Standard lays out 12 choices the President made in making this decision:

Here are a dozen of the choices represented by the president’s decision to turn down a permit for the pipeline.

1) The Middle East over Canada.
2) Unfriendly countries over a close ally.
3) Troubled ties with Canada over good relations.
4) A vulnerable oil supply over a secure one.
5) Higher oil prices over lower prices.
6) Spill-prone tankers over a safer pipeline.
7) China (who will likely get the oil) over the U.S.
8)Unavailable green fuel over a plentiful fossil fuel.
9) Ideology over prudence.
10) The political left over the center and right.
11) Partisanship over bipartisanship.
12) Liberal, anti-pipeline public unions over private unions seeking jobs.

The President is wrong and our country is poorer for it.

If these reports keep coming out, the thesaurus will have to add Solyndra to there synonyms for ‘debacle’, ‘embarrassment’, and ‘crony’. The Washington Post reports on the latest outrage; How the Obama administration told Solyndra executives to delay announcing their layoffs and bankruptcy until after the 2010 midterm elections:

The Obama administration urged officers of the struggling solar company Solyndra to postpone announcing planned layoffs until after the November 2010 midterm elections, newly released e-mails show.

Solyndra’s chief executive warned the Energy Department on Oct. 25, 2010, that he intended to announce worker layoffs Oct. 28. He said he was spurred by numerous calls from reporters and potential investors about rumors the firm was in financial trouble and was planning to lay off workers and close one of its two plants.

But in an Oct. 30, 2010, e-mail, advisers to Solyndra’s primary investor, Argonaut Equity, explain that the Energy Department had strongly urged the company to put off the layoff announcement until Nov. 3. The midterm elections were held Nov. 2, and led to Republicans taking control of the U.S. House of Representatives.

“DOE continues to be cooperative and have indicated that they will fund the November draw on our loan (app. $40 million) but have not committed to December yet,” a Solyndra investor adviser wrote Oct. 30. “They did push very hard for us to hold our announcement of the consolidation to employees and vendors to Nov. 3rd – oddly they didn’t give a reason for that date.”

Good, transparent governance this is not.

The WaPo article finishes by detailing yet again how the American tax payer was taken for a ride by the Obama administration’s Department of Energy and Solyndra investors:

On Nov. 3, 2010, Solyndra announced it would lay off 40 workers and 150 contractors and shut down its Fab 1 factory. The department agreed to continue giving Solyndra installments of its federal loan despite the company’s failure to meet key terms of the loan, and in February restructured its loan to give investors a chance to recover $75 million in new money they put into the company before taxpayers would be repaid.

Lame.

Governments are inherently run inefficiently without much regard for cost effectiveness. The US government is no different and this includes the Defense department. It is accurate that America will have to include defense cuts in order for us to get out of this fiscal disaster that is fast approaching as our debt continues to spiral. However, I believe the automatic $600 billion dollars that would be cut from our defense spending if the Super Committee cannot come to another agreement, is going too far. The main duty for any government is to provide for the safety and defense of its citizens and interests and these proposed cuts, which of course go on top of the hundreds of billions already cut by Secretary Gates and the Obama administration, are too drastic and are the wrong target for budget savings. Robert Samuelson brings some much needed perspective on this issue:

People who see military cuts as an easy way to reduce budget deficits forget that this has already occurred. From the late 1980s to 2010, America’s armed forces dropped from 2.1 million men and women to about 1.4 million. The downsizing — the “peace dividend” from the end of the Cold War — was not undone by the wars in Iraq and Afghanistan. In 1990, the Army had 172 combat battalions, the Navy 546 ships and the Air Force 4,355 fighters; today, those numbers are 100 battalions, 288 ships and 1,990 fighters.

True, Iraq and Afghanistan raised defense budgets. As these wars conclude, lower spending will shrink overall deficits. But the savings will be smaller than many expect because the costs — though considerable — were smaller than they thought. From fiscal 2001 to 2011, these wars cost $1.3 trillion, says the Congressional Budget Office. That’s 4.4 percent of the $29.7 trillion of federal spending over those years. In 2011, the cost was about $159 billion, 12 percent of the deficit ($1.3 trillion) and 4 percent of total spending ($3.6 trillion).

Then Samuelson takes on a few myths about defense spending, including:

We can’t afford today’s military. Not so. How much we spend is a political decision. In the 1950s and 1960s, when the country was much poorer, 40 percent to 50 percent of the federal budget routinely went to defense, representing 8 percent to 10 percent of our national income. By 2010, a wealthier America devoted only 20 percent of federal spending and 4.8 percent of national income to the military. Social spending replaced military spending; but that shift has gone too far….

The Washington Post came out against the Super Committee defense cuts as well and highlighted some of the testimony of America’s military leaders:

Since the congressional supercommittee is reportedly at an impasse, let’s hope its members have used some of their idle time to catch up with the testimony of the nation’s military chiefs at a House Armed Services Committee hearing on Thursday. The chiefs were asked to assess what would be the consequences if $600 billion in across-the-board cuts were imposed on the defense budget — a sequestration currently required by law in the event the supercommittee fails to agree on a debt reduction plan or Congress fails to pass it.

Their answers were blunt: “Cuts of this magnitude would be catastrophic to the military,” testified Army Chief of Staff Gen. Raymond T. Odierno, a former Iraq commander. “My assessment is that the nation would incur an unacceptable level of strategic and operational risk.”

“A severe and irreversible impact on the Navy’s future,” said Adm. Jonathan W. Greenert, chief of naval operations.

“A Marine Corps below the end strength that’s necessary to support even one major contingency,” said Marine Commandant James Amos.

“Even the most thoroughly deliberated strategy may not be able to overcome dire consequences,” said Air Force Chief of Staff Norton Schwartz.

There is much waste and superfluous defense programs that should be found and uprooted. I have personally seen defense sector waste and am very sympathetic to the American tax payer who may feel that he is being taken for a ride far too often by its profligacy, but the current proposed cuts on the table would start digging into real and necessary defense programs, personnel, and technology. America’s budget deficits and debt are major threats to our future, but believing we can solve them by mostly cutting our defense spending is numerically and philosophically wrong. Numerically speaking, our financial position is in dire straits because of runaway entitlement spending, not a bloated defense sector. Philosophically speaking, well, I’ll let Robert Samuelson have the last word:

Defense spending is unlike other spending, because protecting the nation is government’s first job. It’s in the Constitution, as highways, school lunches and Social Security are not.

The below is a back in forth between FMFP and I that took place over the past couple weeks:

GPP: What do you make of the Occupy Wall Street, (Boston, Washington DC, etc) movement? Basically, what are your first impressions?

FMFP: On first glance, I think they are a disorganized group of young college kids looking for a reason to protest. On second glance, I don’t see much more. After milling around the crowd at Liberty Square (about a block from the NYSE) a few days ago, I came away with a few observations. First, it was not a pleasant smell. Showering and changing clothes are part of most people’s daily hygiene habits for good reason. If they want to appeal to your average American (not to mention the supposed “99%”), this is not helping.

Second, the politics of the protesters was anywhere from anarchist to socialist. Signs everywhere promoted the destruction of the capitalist system, a rewriting of the American Constitution and the violent end to America. Oh yeah, mixed in were some signs and literature promoting the President’s jobs bill. If they can’t bring down the whole system, I suppose they’ll settle for Congress passing President Obama’s jobs bill. Very logical leap, I know.

Third, there were the beginnings of organization setting in. By this I mean, I saw union organizers walking around with their clipboards and walkie talkies trying to coordinate the madness in to an effort fighting to protect exorbitant pensions and lifelong tenure. Again, good middle ground if they end up failing to rewrite the US Constitution.
I’m fascinated to see where this movement goes, if anywhere. Right now, it’s pretty difficult to take them seriously. Although I do enjoy watching supporting Democrats try to defend these protesters sh*%ting on police cars and stinking up the center of some very liberal cities.

FMFP: While the protesters deny they are associated with any political party, the Democrats and some major public unions have demonstrated public (and perhaps financial) support for the protests. Do you think this is a wise move? And what would you advise if you were a Democrat Party or public union official?

GPP: Great question. Though the Occupy movement has a myriad of differences with the Tea Party phenomenon, one thing they surely have in common is the difficult position they put the political establishment in. The Tea Party movement helped bring to office many very fiscally conservative Republicans (Rand Paul, Ron Johnson, Marco Rubio), but it also cost the GOP in several winnable races in 2010 (Nevada, Delaware). In my opinion, the Occupy demonstrators pose a much greater risk for the Democrat Party. It is well-known that though most of the American populace has major grievance for Wall Street, most of those actually protesting are what I would call ‘permanent protesters’. It doesn’t take much to get many of these people to join a sit-in, march, etc for a liberal cause, be it the environment, ‘social justice’, or war. My feeling is these ‘permanent protesters’ are much closer to representing the 1% than the 99%. I believe most Americans view their demonstrations with skepticism and wariness. Very few Americans have much sympathy for those on Wall Street who got tax payer bailouts, but I don’t think they have anymore sympathy for those who spend their days chanting slogans instead of going to work a 9-5 shift. If your a Democratic politician do you really want to tie yourself to this Occupy group that you cannot control and who many Americans view as fringe? If some of these protests make a turn for the worse (i.e. Seattle WTO meeting), no one will want to be associated with this group. Another negative aspect for the incumbent Democratic administration is that these Occupy protests are just one more sign of the disappointment that many Americans are feeling toward our current national state. As FMFP poignantly referenced above, aren’t these protesters asking for change, and wouldn’t that have to mean a change of who’s in charge of Washington?

Now, I’ll let you tackle the Union side of this question:

FMFP: SEIU has fully thrown its support behind the movement and seeing as how it’s one of the President’s best friends, one could easily assume a connection. Also, behind the effort is our friend George Soros, liberal funder extraordinaire. His main group used to spread money to progressive groups, the Tides Foundation, has funded the group Adbusters, which is a social agenda driven magazine that practices in “culture jamming.” Adbusters first ran teasers of the OWS event back in mid-July. Hashtags were created and an ad was placed in their magazine for the September 13 event. The Working Families Party of NY was also involved day one with the protests. Just a little digging finds that WFP shares the same mailing address as ACORN and SEIU. Interesting to say the least. But don’t hold your breath on the media cracking this case. Reuters ran a story yesterday drawing attention to the Soros-Adbusters connection to OWS only to be quickly smacked down by fellow media pundits for even attempting to imply that OWS is not an organic, sincere movement.

Where do you think these protests are going? Will they have legs?

GPP: I think they have already shown some legs. Unfortunately for the movement as a whole, these legs are kicking in Oakland, Calilfornia and polls are starting to show the public souring on the movement. Nevertheless, I think that a decent portion of the protesters will survive the winter and keep up their fight. I can imagine ‘Occupy’ protesters at both the Democratic and Republican Presidential Conventions and I would say this is more of a threat to the former. As long as the economy is in the tank, these protests will keep up, but I feel they are unlikely to have a major impact on American politics either now or in the future. There will always be those ready to drop everything (sometimes this is just a Chomsky book) and hit the streets with signs, but a majority just want to have a good job and once one arrives….

Politico reports on the connection between Solyndra and recent Obama fundraising:

Two Obama fundraisers involved in the controversy surrounding embattled energy company Solyndra ramped up their efforts on behalf of the president’s campaign in late summer, according to the campaign’s voluntary disclosure of its bundler list, released late Friday…

Steve Spinner, a longtime Obama fundraiser of Menlo Park, Calif., raised $500,000 or more during the third quarter, up from $200,000 to $500,000 during the second quarter.

Spinner got a spot in the administration to help monitor the clean energy program that eventually gave $535 million in loan guarantees to faltering Solyndra, which was once touted as a model for business-government partnerships by the Obama White House.

Spinner repeatedly pushed the Energy Department and the White House to commit to a loan before Vice President Joe Biden’s trip to the company’s headquarters in September 2009, according to emails released by the administration last week.

And for those who argue that the Solyndra debacle was just another case of the government making a poor investment…

Two senior Treasury officials said Friday that they had never seen a loan restructuring similar to an Energy Department loan to a failed solar panel maker.

The half-billion dollar loan to Solyndra Inc. was restructured earlier this year so that private investors moved ahead of taxpayers for repayment on part of the loan in case of a default.

Treasury officials Gary Grippo and Gary Burner told a House committee they had never seen that occur in a federal loan. Grippo is a deputy assistant treasury secretary and Burner is chief financial officer at the Federal Financing Bank, which made a $528 million loan to Solyndra in 2009.

The two Treasury officials stopped short of declaring the loan restructuring illegal, as some Republicans allege.

The Solyndra beat goes on…

Just was reading this Washington Post story on the Solyndra debacle and found this gold in the beginning of the piece:

Administration officials defended the loan restructuring, saying that without an infusion of cash earlier this year, solar panel maker Solyndra Inc. would likely have faced immediate bankruptcy, putting more than 1,000 people out of work.

Even with the federal help, Solyndra filed for Chapter 11 bankruptcy protection earlier this month and laid off its 1,100 employees.

Sooooo the US government had to hurry up and give money to a failing business. Sounds like good public policy to me! Here’s my guess of one of the possible internal Department of Energy discussions about whether the government should lend Solyndra millions of dollars:

Obama official #1: ‘We have to get this 500+ million dollar loan to Solyndra ASAP!’

Obama official #2: ‘Why?’

Obama official #1: ‘Because if we don’t it will go out of business very, very soon.’

Obama official #2: ‘If that is true than maybe we should take even more time to investigate the company. This might be a bad investment.’

Obama official #1: ‘Shut up! Loan approved.’

Ridiculous, I know, but probably not far from the truth. Maybe I’m also being too harsh calling these fake DOE characters ‘Obama officials’, after all it’s not like the President himself was an integral part in pushing and promoting this colossal boondoggle of tax payer dollars. Oh wait, he was:

President Obama visiting the Solyndra solar plant. The worker smiling beside him no longer has a job.

I’ll have more on this gross waste of American tax dollars soon.

16
Sep

Paul Ryan on Tax Reform

   Posted by: Pat Tags: , , ,    Print Print

Rep. Paul Ryan, who should do the country and a favor and run for President already, stars in this short and sweet video about how our current federal tax system is flawed and more importantly, how it can be fixed. Enjoy:

When it comes to explaining the American conservative viewpoint, few are as articulate, convincing, and engaging as Florida Senator Marco Rubio. Rubio has only been a Senator for about a year, but he is definitely making a name for himself. I have watched him in action (aka Youtube) several times, including his campaign victory speech, on the Senate floor, and on the sides of Florida’s streets and come away impressed every time. This week he spoke at the Ronald Reagan Presidential Library and once again failed to disappoint. The twenty-three minute speech is full of heartfelt conviction clearly laying out the conservative political and social message and includes some great lines, including my favorite; ‘Conservatism is not about leaving people behind. Conservatism is about empowering people to catch up.’ Check out the whole speech:

Here are this week’s Top 5:

1. American’s Desire for Earned Success – Pollster and pundit Michael Barone pontificates on why Democrats’ plans for winning over the majority of Americans – by buying them off with entitlements and benefits – isn’t working:

Why aren’t voters moving to the left, toward parties favoring bigger government, during what increasingly looks like an economic depression?…

I think the larger mistake the Obama Democrats have made is that they suppose ordinary voters want government to channel more money in their direction.

But ordinary Americans don’t want money as much as they want honor. They want what the chance to achieve what American Enterprise Institute President Arthur Brooks calls “earned success.

2. Wisconsin Recall Elections Bring Disappointment to Unions – As expected by political insiders, last Tuesday’s recall elections involving six Republican state senators yielded only two new Democrats, falling one shy of what was needed to turn the State Senate. This affirms the voters’ general support for how things are going in the state. It also comports with the good news coming out of Wisconsin in the last few months showing the positive effects of Governor Walker’s collective bargaining law – cities able to re-negotiate with unions and save their budgets from a lot of red ink:

Someone has to be pretty deep in the Land of Denial to spin the Wisconsin recall elections as good news for Democrats. But the Daily Kos’ Markos Moulitsas rose to the occasion yesterday.

Republicans managed to keep four of the six seats that Democrats and their public union allies had targeted for recall, thwarting Democratic plans to wrest control of the state legislature from GOP hands. Of the two seats that Republicans lost, one was in a solidly Democratic district that a Republican happened to hold only due to a fluke of nature, David Freddoso of the Washington Examiner notes. And the second was held by an alleged adulterer whose wife revealed that he had moved outside his district to live with his young lover.

3. Getting Serious with the Super Committee – The Super Committee was chosen this week by the respective Congressional leaders and the positioning has already begun over spending cuts, defense cuts, new tax revenues and entitlement changes. But like we saw with the previous budget deals, there seems to be little willingness to make structural or permanent changes. Yet a cursory review of current programs with the question in mind – do they serve a valuable purpose – could go a long way toward debt reduction:

But what many of these media accounts will inevitably fail to do is ask fundamental questions about these programs: What were they designed to do? And is there any evidence they accomplish their purpose? Those questions are significant because much of discretionary spending that our government introduces is speculative in nature. That is, there is little or no evidence when we begin this spending that the money will actually accomplish what we want it to. That’s why we wind up funding anti-poverty programs that don’t reduce poverty, and job training initiatives that don’t get people jobs. We justify tax expenditures to make homes more affordable or to reduce our energy dependence, when there’s little evidence they accomplish either. And yet, once begun, we often can’t get rid of this spending, even when the evidence against its effectiveness is substantial.

4. Britain is in Disarray – Despite the hullabaloo caused by S&P’s downgrade of the U.S., this last week saw even more turmoil in the European economies and even violence in Britain:

The British state is morbidly obese. For a third consecutive year, government will spend more than half the gross domestic product — partly because half of all jobs created during the 13 years of Labor Party governance that ended in May 2010 were in the public sector.

Britain’s debt, now 62 percent of GDP, is scheduled to rise to 71 percent in 2013-14 before declining. Government devours 47 percent of national income.

The five-year goal of reducing it to 40 percent will be difficult because Cameron has a tepid mandate. In 2010, Conservatives almost suffered a fourth consecutive defeat, and they failed to win a majority against an exhausted and unpopular Labor government.

5. Are US-Sino Relations Destined to Fall Apart - As the U.S. economy continues to stumble, questions and fears continue over the Chinese and their long-term desires. The relationship is made even more tense by the Chinese military buildup as evidenced by their first naval battleship completed this week. What some are arguing is a serious focus on improving and maintaining better relations with the Chinese:

In a recent piece in the New York Times, Mike Mullen, Chairman of the US Joint Chiefs of Staff, stressed the importance of improving Sino-US military relations.

Mullen acknowledged that PLA-Pentagon ties have frequently been characterized by ‘misunderstanding and suspicion,’ and complained that Beijing continues to employ bilateral defence ties as ‘a sort of thermostat to communicate displeasure. When they don’t like something we do, they cut off ties. That can’t be the model anymore.’

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