by Steven Waechter | Jun 13, 2011
Imagine a plot of land in the desert, consisting only of mesquite scrub and dust. If you assembled a system of sprinklers on this desert land, and ran them heavily enough, you could make the desert green with grass, corn, or even water loving willow trees. But then the water supply you are stealing from runs dry, and the sprinklers sit there, idle. The greenery of your efforts wilts, dies and turns to dust.
This is the story of government stimulus. First, the federal government stole – yes, I said stole – hundreds of billions of dollars to bail out first the banks, and then General Motors, and then spend hundreds of billions more on the President’s stimulus package, which promised to reignite the economy, fight of the recession, and reduce unemployment. The federal government crowded out private borrowers from the capital markets with their enormous deficits, damaging other sectors of the economy – but no matter. The stimulus program would create or “save†jobs elsewhere, making the whole thing worth while, somehow.
It didn’t work. It was never going to work. All we were left with was another economic bubble; this one not in stocks or in housing, but in government spending. Now, the cash supporting this situation – the air inflating the bubble – is being printed, at the cost of inflation and rising prices on everything; essentially theft through increased costs of living. Consumer spending is shifting to cover the increased costs of food and fuel, to the detriment of other goods and services.
As it became an obvious failure, the first impulse was to double down with another stimulus program – digging a deeper well. But not this time; the wealth of the country was depleted, the water was gone.
Now, we stand at the beginning of the double-dip recession – a recession within the depression that was born from the last recession. This time there is no way out and no way to delay. The economy as a whole can no longer afford to supply the cash to keep the government spending bubble inflated, a bubble that never should have existed in the first place.
It is time for the economy to be purged of all the mal-investments of both government and business and finally rebalance itself, something which it has not had a chance to do. Government stimulus was doomed from the beginning because it only stimulated a portion of the economy that depended entirely upon government money; the rest of the economy was damaged by this, not improved by it, and governments can, in fact, run out of money.
The next phase of the recession will be more painful than the first; with an economy that has been further weakened and a government lacking the resources to do much of anything, the next big dip is going to be one for the history books – which is terrifying.
![Supply and Da Man]()
by DJ Durant | May 24, 2011
U.S. markets closed off today, while foreign markets ended generally positive. A bright spot in the US economy was the release of new home sales, which were estimated to be up 7.3% in April, to 323,000 new homes sold. This represents the fourth month in a row of increasing new home sales, but we’re coming off a dismal low. In 2005, 1.4 million new homes were sold.
The housing market reflects a classic supply/demand equation. The supply of housing far outstrips demand, and with a glut of foreclosed homes still in the market, the housing market is unlikely to return to 2005 levels for several years.
The markets seemed to be more concerned with the nation of Greece’s ability to service it’s debt. Keep in mind that about the only difference between Greece and the United States is 270 million people. Investors have yet to figure that out.
Chrysler today repaid $7.6 billion in government loans to the United States and Canada. Perhaps this will tide Treasury Secretary Tim Geithner for another 20 minutes or so.
Having said that, Secretary Geither hinted today that it would be “irresponsible ” for Congress to allow the nation to default on its debts by not raising the debt ceiling. Is he kidding? It would seem to me that allowing the nation to run $1.2 trillion deficits, and the general handling of the economy by this Administration would be the very definition of irresponsible. Perhaps he should be examining how we got to this point. A little circumspection could go a long way and would be a pleasant change of pace.
![Supply and Da Man]()
by | Feb 11, 2011
A study of the National debt over the last thirty years proves that our Representatives are not responsible enough to continuing governing without the rules of the game being changed. Though much belabored, it bears repeating that the National Debt did not break the one trillion dollar threshold until the year 1982 and not until the fiscal year 2002 did it break six trillion. From 2002 to 2010 it more than doubled from $6.25 trillion to over $13 trillion dollars.
Changing the rules of the game in this case means the passing of some form of a balanced budget amendment to the Constitution. This is far from a new idea and most people, especially newcomers to the world of politics, would be shocked at how close we have come, even recently, to achieving it. In the 90s alone constitutional amendments involving balancing the budget came to serious Congressional votes at least once in six different years—1990, 1992, 1994, 1995, 1996, and 1997. In ‘92, ‘94, and ‘97 the Balanced Budget Amendment came up only a handful of votes short of achieving the two-thirds majority needed in both Houses.
Without getting too much into the weeds it is significant to note that the amendment in 1992 was sponsored by a Democrat—Charles Stenholm of Texas. In the House it garnered 116 of its 280 yes votes from Democrats with only 3 of its 153 no votes coming from Republicans (2) and Independents (1). One of the two attempts at passage in 1997 (S.J Res.12), though excluding Social Security, was not only sponsored by North Dakota Democrat Byron Dorgan but was shockingly co-sponsored by both Diane Feinstein and Harry Reid. In light of their recent attitudes and votes on spending one can only guess at the numbers of skins each has had to shed to evolve their position from then to now.
As frustrating to the bill’s advocates as these votes were they were dwarfed by the events of 1995. The fate of the 1995 Balanced Budget Amendment, knowing what has transpired since, has to stand as the mother of all “the one that got away†stories. With the addition of just one more Senator’s vote the amendment would have passed, gone to the States for ratification, and the Federal Budget would have, by Constitutional mandate, been forced to be balanced as soon as 1997 and no later than 2002. From 1997 to 2010 our Federal Debt grew from $5.4 to $13.6 trillion dollars. This is an addition of $8.2 trillion that could have been avoided by changing this increase from being merely unconscionable to being unconstitutional. Adding to the agony is that, under intense pressure from President Clinton, six Senators that had voted for a nearly identical amendment in ‘94 switched to a no vote in ‘95. Among the six were Byron Dorgan, Diane Feinstein, and Harry Reid, who all, as noted before, would go on to sponsor and co-sponsor a similarly spirited Constitutional Amendment in 1997.
While the details of this history are ugly there also lies within it a glimmer of hope and perhaps a blueprint for future success. As sad as it is that constitutionally confining our Legislators is needed, it is equally as promising that achieving such a feat was that closely at hand. Resetting the same debate in 2011 includes facing the identical sticking points and opponents that killed the effort in the 90s, namely the inclusion of Social Security and the unions.
Though counter-productive I would favor excluding Social Security if this compromise was the difference between non-passage and passage. This makes strategic sense both because Social Security reform is better achieved as a separate issue and even with it excluded the amendment would make a massive difference. In terms of the union position of opposing due to potential cuts in wages and safety net services, I would not give an inch of concession. Here the truth is that, barring a sustained economic boom, these things will have to be reduced. The fact that the National debt has more than doubled since the last time this issue was hotly debated not only adds to the causes urgency but makes a public showdown with the unions increasingly winnable.
Also different this time around is a new proposal offered up by Representatives Jeb Hensarling of Texas and Mike Pence of Indiana. Like the Balanced Budget Amendments of the 90s, and most common sense solutions, it is very simple and consists of only a few paragraphs. The Spending Limit Amendment states that the total annual outlays of the Federal government shall not exceed 20% of the United States yearly economic output. The two exceptions to this being that Congress could provide for a specific increase with a two-thirds vote in each House and could waive the provision while a declaration of war was in effect.
Every serious thinking Conservative should begin their own investigation and analysis of this and other likeminded proposals. Legally binding pieces of legislation dealing with how Congress spends money will not only be at the forefront of political debate in the coming years, but is the one area that provides the Tea Party movement an opportunity to leave a lasting legacy. Though failing in this effort in the 90s can be called “the one that got away,†coming up short this time around likely will rename the story “the one that broke the camel’s back.â€
