Free Frank Warner

Remember when?

King Juan Carlos once put Hugo Chavez in his place. In 2007, he told him to shut up.

It's too bad a demagogue like Chavez can win power by pandering to the poor and attacking the rich, and then end up making everyone poorer. The rich don't deserve any special sympathy, but those who claim to care for the poor ought to study economic and political history.

Again and again, the world has seen misery when a government that claims to know it all punishes the successful and insists on detaching an economy from the competition, risks and rewards of a free market.

Chavez is dead. He took a rich nation and made it poor. He took a healthy democracy and made it sick. He didn't help anyone but himself. That's the history. Remember it.

Frank Warner

Unemployment rate Jan. 2009: 7.8%. Unemployment rate Jan. 2013: 7.9%

For the record, the unemployment rate at the beginning of President Obama's first term was 7.8 percent.

At the end of that first term, January 2013, the unemployment rate was 7.9 percent.

In other words, $5 trillion in extremely irresponsible new debt aimed at extremely irresponsible spending was a total failure.

Labor participation down every year. About 12.3 million American workers are out of work, according to January 2013 government figures. Another 8 million workers have part-time jobs but want full-time jobs and can’t find them. And another 2.4 million workers have searched for jobs in the last year, but gave up looking and so are not counted as unemployed.

Most troubling, the U.S. labor participation rate – the share of working-age Americans who work or are even looking for work – is just 63.6 percent, near a 30-year low. Our labor participation rate has dropped every year of the Obama administration.

Now that our increasingly idle working-age population has become accustomed to living off of more than $1,000,000,000,000 a year of new federal debt (more than double President Bush's already-huge average annual deficits), it will be almost impossible to cut jobless Americans off from that imaginary wealth without ugly riots and prolonged misery.

Frank Warner

All eyes on one 'deficit cliff' number: With any agreement, does the $1.1 trillion deficit drop 1 penny?

President Obama and the Congress should immediately be cutting at least $200 billion out of the annual deficit (of about $1.1 trillion), if they're to begin saving the economy. I'll bet they don't. And that would mean they've kicked the can over the real fiscal cliff, and the economy is destroyed.

Frank Warner

Why doesn’t Boehner say the House gets a balanced budget ‘free’?

In bargaining over a budget deal, President Obama told House Speaker Boehner that Obama doesn’t have to give up anything to the House Republicans to get an $80 billion a year tax increase.

Obama said that, because he won the presidential election, he deserves the $80 billion tax hike without taking any steps to cut the spending that adds a staggering $1,100 billion ($1.1 trillion) a year to the federal debt.

Why didn’t Boehner respond immediately by saying the Republicans won the House of Representatives, so they deserve a balanced budget within four years?

$1 trillion deficits. And why aren’t the Republicans reminding Americans how dangerously large the last four years’ deficits are? More than $1 trillion a year. More than one million million dollars a year. Except for 2008, when the emergency bank bailout brought the deficit to a record $1.4 trillion, George W. Bush didn't have deficits even close to that.

(Not counting the $700 billion bank bailout ((TARP)) in 2008, most of which has been paid back, the average Bush deficit was about $360 billion a year. By the way, when that TARP bailout was paid back, did Obama count that as income? If so, his spending has been even higher than the statistics show.)

Why aren’t the Republicans alerting Americans that, if we become accustomed to a $1.1 trillion deficit in each $3.7 trillion annual budget, there soon will be nowhere left to borrow more money, and one morning we'll wake up to a catastrophic shock folloed by rioting followed by decades of misery and poverty?

Why aren’t Republicans pointing out more clearly that Obama’s plan for $80 billion taxes more would take care of less than 8 percent of Obama’s annual deficits?

Obama's non-plan. Boehner said that, in negotiations, he offered to accept $80 billion in new taxes (which they always report as $800 billion over 10 years), and Obama offered no concession in return.

As Boehner recalled, Boehner put the $80 billion on the table and asked Obama, “What do I get for that?”

Obama replied, “You get nothing. I get that for free.”

With that free pass, Obama would have a deficit next year of “only” $1.02 trillion. With another $40 billion in annual cuts that Obama has occasionally considered, his deficit next year would be about $980 billion. Still mighty close to a $1 trillion deficit. In other words, the unsustainable borrowing would continue unchecked.

'Kick the can' again? This would be “kicking the can down the road,” which Obama promised in 2008 and 2009 he would not do. This would be putting off any serious attempt get rein in the federal deficit spending, which is destroying the U.S. economy.

Obama also has asked for the permanent lifting of the federal debt ceiling. The Congress must never agree to that. Over the last three years, the cowards in the Democratic Senate have failed to even pass a budget, and that illegal inaction has killed each House budget.

With no budget, federal spending has gone wild with almost nothing to check it and no one accountable for overspending. The debt limit is the only thing the House has left to hold spending close to the spending approved by the House.

Economy's last chance. Today, the impending “fiscal cliff” isn’t our biggest economic threat. The biggest problem is that this week -- or possibly the next month -- probably is the last chance the federal government has to reform entitlements and control spending before the ticking debt-time-bomb goes off. We have bipartisan plans for those reforms, and they can be adopted immediately to defuse the bomb. But no one is touching those plans.

The Republicans -– and the Democrats –- should be making it clear that this is he moment to act. Start by implementing Obama's 2009 promise to cut the annual deficit to $700 billion by 2012. If they can’t set a serious path toward a balanced budget when an election campaign is over, they can’t expect to do anything more when the next campaign begins. Then it will be too late.

At this point, “kicking the can” on deficit spending is an irresponsible and immoral choice. Why isn’t Boehner making that case? Does economic reality evaporate when he gets in a room with Obama?

Frank Warner

Communist China censors New York Times story on Wen Jiaboa’s filthy riches

The New York Times is reporting this weekend that top Chinese Communist dictator Wen Jiabao’s family has amassed $2.7 billion in the last few years.

For more than two decades, the dictatorship has freed large segments of the Chinese economy, working wonders for the material well-being of millions of Chinese. The partial economic freedom has created a middle class and certainly a new upper class in that nation. But the totalitarian rulers have been sure to take a large cut of the free-market profits.

China remains a slave state with ruthless masters at the helm. The population knows their unelected rulers have stolen their political freedoms. But thanks to tyranny's darkness, the Chinese people can’t find out how much of their hard-earned wealth has been siphoned to the despots.

Frank Warner

 

Mounting debt sends civilization toward a 'death spiral'

Economist Richard Duncan has told CNBC that the debt of America and its closest allies is so big, and its growth accelerating so fast, that Western civilization is on the verge of a "death spiral."

He and his team of analysts have studied a variety of social and economic trends, and they have concluded Western governments have constructed pyramid schemes so large they are guaranteed to bring ruin.

Among Duncan's colleagues are energy expert Kent Moors and pathologist Chris Martenson.

"It's a pattern that's hard to see unless you understand the way a catastrophe like this gains traction," Dr. Moors says. "At first, it's almost impossible to perceive. Everything looks fine, just like in every pyramid scheme. Yet the insidious growth of the virus keeps doubling in size, over and over again - in shorter and shorter periods of time - until it hits unsustainable levels. And it collapses the system."

Martenson points to the U.S. total credit market debt as an example of this unnerving pattern.

"For 30 years - from the 1940s through the 1970s - our total credit market debt was moderate and entirely reasonable," he says. "But then in seven years, from 1970 to 1977, it quickly doubled. And then it doubled again in seven more years. Then five years to double a third time. And then it doubled two more times after that. ...

Dr. Moors warns this type of unsustainable road to collapse can be seen today in our energy, food and water production. All are tightly connected and contributing to the economic disaster that lies directly ahead.

Political divide. Duncan's team doesn't say exactly when the disaster will arrive, and that's the question that divides political philosophies in the early 21st century. How much reckless borrowing is too much? And how long can our corrupt leaders pay for their irresponsible promises with empty funds and fraudulent accounting?

Most of us in the West are accustomed to heat and air conditioning, electricity for our TVs, fuel in our cars, food in our refrigerators and water from our faucets. We've also had the wealth to pay for decent schools and, yes, good health care.

I want to be hopeful, but our governments have been so obsessed with serving themselves that they've bet our future on a mountain of lies. This will be hard to correct.

Frank Warner

 

$4.5 trillion of new debt over these 4 years

Remember when we worried that President Obama's health care law would add $1 trillion to the national debt over 10 years? Now here we are, we will have borrowed $4.5 trillion in Obama's four years, and the expensive part of the health care law hasn't even taken effect yet.

So what have we spent that $4.5 trillion in borrowed money for? The Iraq war? Well, the Iraq war cost a total of about $1 trillion, and this year there are no U.S. troops in Iraq. The war is over. Yet in this year alone, we will add almost $1 trillion to the national debt.

So back to the question: What have we spent that $4.5 trillion in borrowed money for?

Frank Warner

Jeffrey Sachs says runaway Medicare costs are a ‘myth’

Jeffrey Sachs, the environmental economist of Columbia University, writes in Huffington Post that new figures show health care costs are coming under control. He says the calls for restructuring Medicare and Medicare are “hysteria” based on a “myth.” Sachs says:

According to the President's budget, Medicare and Medicaid would rise slightly from 5.1 percent of GDP in 2011 to 5.5 percent of GDP in 2020. Not exactly the stuff of deficit cataclysm.

So what is the source of the hysteria? Some of it is simply propaganda, by those with the political agenda to gut the country's social safety net.

He quotes a free market defender:

As J. D. Keinke of the American Enterprise Institute writes [Feb. 17] in the Wall Street Journal, the idea of runaway health spending is a "myth" because "new data show that health spending over the past several years has been normalizing toward the rate of general inflation, rather than growing higher and higher, as had been the case almost continuously since the 1970s."

Growing costs. Keinke, a former health-care executive, and Sachs are referring to a mildly hopeful trend, during which free market forces have tamped down on health care costs, slowing their growth relative to inflation. But those costs already are busting the budget, and they haven’t stopped rising. We'd have something to cheer about if the percent of GDP represented by Medicare and Medicaid were decreasing a little each year, or for maybe even one year.

Table S-6 of President Obama’s fiscal year 2012 budget shows Medicare and Medicaid will increase 25 percent as a share of the economy over the next 10 years.

If you want to see how this affects the federal budget, take a closer look at Medicare, for example: Average federal spending on Medicare is projected to be 3.2 percent of the economy over the next 10 years, but under the Obama plan, the Medicare payroll tax will average only 1.4 percent of GDP over the same decade. We’ll pay less than half the Medicare bill and borrow the rest. No wonder the deficit balloons.

(Meanwhile, Congress and the president again just approved waiving a third of the Social Security payroll tax, without spending cuts to replace that money. This guarantees that Social Security can’t even sustain itself this year, much less in 25 years. It also guarantees more debt of epic proportions, or a dollar collapse.)

Here we are in 2012: All our troops are out of Iraq and, according to Sachs, we’re seeing a break on health care costs, and yet the president proposes a budget that requires borrowing another $900 billion, more than the cost of the entire Iraq war. That’s no myth. The myth, the blind faith, is in pretending we’re out of the fiscal woods.

Frank Warner

After 3 years, Obama notices we need our own oil

It was encouraging that President Obama’s State of the Union address this week opened the door to drilling for more U.S. oil to replace some of the oil imports that drain the nation’s wealth and prop up oil-rich tyrants.

He said:

This country needs an all-out, all-of-the-above strategy that develops every available source of American energy.  A strategy that’s cleaner, cheaper, and full of new jobs.

Like Palin. His “all-of-the-above” policy, straight from the mind of Sarah Palin, was a complete reversal from last year’s State of the Union speech, which kept up the pseudo-liberal pretense that we somehow we’ll be able to do without oil within a generation.

Last year Obama mentioned the word "oil" twice, the first time to call for the United States to end its dependence on it, and the second time to call for funding clean energy development by decreasing tax breaks for oil companies.

This year he mentioned oil nine times (10 if you include a reference to a regulation that categorized cow milk as an oil). Gone was any sense that oil was an addiction, as his predecessor George Bush had called it, or something the United States had to reduce its dependence on. He praised the fact that the U.S. produced more oil last year than it had for eight years, and he said that he is opening more areas for offshore drilling. When he called for the development of alternatives to oil, his reason was that we just don't have enough of it in the United States. 

Although Obama sounded supportive of oil, he did call for an end to subsidies for oil companies and for Congress to "double down" incentives for clean energy. He also said he would continue efforts to make sure oil companies can contain oil spills like the one in the Gulf of Mexico. 

Last year, Obama said that U.S. oil dependency could be broken by turning to biofuels and electric vehicles. He didn't mention either this year.

Wealth or poverty. There have been recent breakthroughs in electric cars, which still are run indirectly by burning coal, and in other energy alternatives, and we can expect more advances in the next 20 or 30 years.

In the meantime, if we expect to compete globally and to build the wealth we need for better health care and the other necessities of democratic civilization, we’d better find all the domestic oil and natural gas we can.

Frank Warner

* * *

Note: In the speech, President Obama also mentioned freedom once and liberty once. That's low.

Newt Gingrich, paid off, in 2007 said Freddie and Fannie helped ‘stable finance’

We already know that Newt Gingrich took $1.6 million in consulting fees over a decade from Freddie Mac, the mortgage giant that, with its twin Fannie Mae, bought or backed $1 trillion in bad home loans and brought down the economy.

Many have wondered what Gingrich did for all that dough. Most of us figured the money was to keep a top Republican’s mouth shut as Freddie and Fannie promoted all those risky loans and cooked the books to enrich Freddie and Fannie’s executives.

Well, according to Verum Serum, the former Speaker of the House actually did some talking for the two toxic lenders (also called government-sponsored enterprises, or GSEs). On Freddie Mac’s webpage, in April 2007, Gingrich is quoted at length making the case for Freddie and Fannie:

Q: A key element of the entrepreneurial model is using the private sector where possible to save taxpayer dollars and improve efficiency. And you believe the GSE model provides one way to use the private sector.

Gingrich: Certainly there is a lot of debate today about the housing GSEs [Freddie Mac and Fannie Mae], but I think it is telling that there is strong bipartisan support for maintaining the GSE model in housing. There is not much support for the idea of removing the GSE charters from Freddie Mac and Fannie Mae. And I think it’s clear why.

The housing GSEs have made an important contribution to homeownership and the housing finance system. We have a much more liquid and stable housing finance system than we would have without the GSEs. And making homeownership more accessible and affordable is a policy goal I believe conservatives should embrace. Millions of people have entered the middle class through building wealth in their homes, and there is a lot of evidence that homeownership contributes to stable families and communities. These are results I think conservatives should embrace and want to extend as widely as possible. So while we need to improve the regulation of the GSEs, I would be very cautious about fundamentally changing their role or the model itself.

Q: This is not a point of view one normally associates with conservatives.

Gingrich: Well, it’s not a point of view libertarians would embrace. But I am more in the Alexander Hamilton-Teddy Roosevelt tradition of conservatism. I recognize that there are times when you need government to help spur private enterprise and economic development. Look at our own history. The government provided railroad land grants to encourage widespread adoption of what was then the most modern form of transportation to help develop our country. The Homestead Act essentially gave land away to those willing to live on it and develop it. We used what were in effect public-private partnerships to bring telephone service and electricity to every community in our nation.

All of these are examples of government bringing about desired public purposes without creating massive, taxpayer-funded bureaucracies. To me that is a pragmatic and effective conservative approach.

Bipartisan treason. “It’s telling that there is strong bipartisan support for maintaining the GSE model,” Gingrich said. Yes, it’s telling. It tells us that, as Barney Frank and other Democrats took over Freddie Mac and Fannie Mae in the 1990s and early 2000s, they paid off every Republican in a position to stop them from tossing aside sound lending practices and saddling millions of Americans with loans they could never pay back.

Gingrich shouldn’t be running for president. He should be joining Barney Frank in a retirement of silence and shame.

Frank Warner