We've all heard about the joy of giving, but what if the money that we are giving away is someone else's money? Wow! What a thrill. That's the attitude of the Charlottesville City Council as they parcel out taxpayer money with little or no thought. After all, they reason, these are only small amounts of money. There is, of course, no concern by the City Council that the money that they are giving away so blithely is not their money, but taxpayer money. Here is the URL for this amazing story:
http://www2.dailyprogress.com/news/2012/sep/22/last-minute-funding-vexes-council-ar-2226729/
The attitude expressed by City Council members in Charlottesville is typical of liberal attitudes everywhere towards taxpayer money. Dole it out to your friends with reckless abandon. Just multiply all the numbers in the article by 10 million and you have the US government, the government of California, Illinois, Greece, Spain, Italy, etc. It is easy to be charitable and caring when you are spending other people's money. It is far less easy to be charitable when spending your own. That is why Romney's tax return shows that he gives four times as much of his money to charity as do the Obamas. Charity to Obama is spending the hard earned dollars of people who don't agree with him. Romney's idea of charity is to give his own money, not the money of others.
Herein is the great divide in America: Does charity begin at home or is charity the looting of your neighbor's pocket to give money to those that you favor?
Sunday, September 23, 2012
Saturday, September 22, 2012
The Media and the Issues
You would think that the US economy was booming and all was right in the world if you are a regular listener to the major TV and radio outlets in America. Recently, I was in Eastern Europe and was pleasantly surprised to read in foreign newspapers the issues that Americans face in the upcoming election -- the economy, foreign policy, the deficit, etc. Back home, these issues don't seem to be of any interest to the media. Such issues are of interest to voters, but they rarely see them discussed on NBC, ABC, public TV and the like.
The big issues, according to US media, is whether or not a presidential candidate is willing to release their tax returns from decades ago or sidebar comments the candidates may have made before they were candidates that have absolutely nothing to do with any of the important issues. The media is in the "gotcha" business. It isn't just that they favor one party or another, it is more that the media doesn't really seem interested in mundane things like unemployment, the deficit, burning embassies, dying ambassadors, war between Isreal and Iran. Instead it is more important, according to the media stars to worry about cosmetic issues. "Does Romney connect with the average guy?" "Is Obama no longer cool?" These kinds of nonsensical discussions dominate the news coverage of the American presidential election.
No wonder the public knows so little about the issues of our day. Anyone who spends their time watching the major news media or 'public television' or listening to 'public radio' is likely to become an expert on what dress size Michele Obama wears but is likely to have no idea what goes on in the Middle East or how the American economy is faring, since the latter topics are rarely if ever discussed in the major media. There are, fortunately, media outlets that do address the major issues of the day. The "City Journal," for example, published by the Manhattan Institute is a serious publication that addresses issues faced by the American citizenry in a thoughtful, serious way. They are not the only good source of information. One issue of City Journal will provide the thoughtful American with more real news and information than a decade of the NY Times and Washington Post.
An uninformed electorate is likely to make some serious mistakes. That seems to be what the media is counting on.
The big issues, according to US media, is whether or not a presidential candidate is willing to release their tax returns from decades ago or sidebar comments the candidates may have made before they were candidates that have absolutely nothing to do with any of the important issues. The media is in the "gotcha" business. It isn't just that they favor one party or another, it is more that the media doesn't really seem interested in mundane things like unemployment, the deficit, burning embassies, dying ambassadors, war between Isreal and Iran. Instead it is more important, according to the media stars to worry about cosmetic issues. "Does Romney connect with the average guy?" "Is Obama no longer cool?" These kinds of nonsensical discussions dominate the news coverage of the American presidential election.
No wonder the public knows so little about the issues of our day. Anyone who spends their time watching the major news media or 'public television' or listening to 'public radio' is likely to become an expert on what dress size Michele Obama wears but is likely to have no idea what goes on in the Middle East or how the American economy is faring, since the latter topics are rarely if ever discussed in the major media. There are, fortunately, media outlets that do address the major issues of the day. The "City Journal," for example, published by the Manhattan Institute is a serious publication that addresses issues faced by the American citizenry in a thoughtful, serious way. They are not the only good source of information. One issue of City Journal will provide the thoughtful American with more real news and information than a decade of the NY Times and Washington Post.
An uninformed electorate is likely to make some serious mistakes. That seems to be what the media is counting on.
Friday, September 21, 2012
Oops
Jerry Brown's $ 28 billionbudget gap in California turns out to be a mirage. Brown considered the $ 28 billion number a crisis for California, when he strode into the Governor's mansion. A blue ribbon committee founded by Democrat and Obama advisor Paul Volcker has studied the budget gap in California and come up with a different number, or should I say, a range. The outcome of that study is discussed in today's New York Times in an article by Mary Williams Walsh. The actual California budget gap, according to the Volcker committee is somewhere between $ 167 billion and $ 335 billion. Ooops!
Even this is a dramatic understatement of California's plight since the combined unfunded liability of CALPERS, CALSTERS, and the nine largest county pension funds in California is well in excess of $ 1 Trillion, which is a multiple of the assumption being used by California's state government in assessing the budget gap. So, the committee is trying to be California-friendly. But, heck. A trillion here, a trillion there. After a while, you're talking about real money.
Meanwhile, Brown and the California legislature have tacked on many new job-killing legislative initiatives that keep California in the economic doldrums. California is currently in a race with New York to see who can lose the most wealthy citizens, fleeing exhorbitant tax rates.
So, what is the future for California? How's Greece doing these days?
Even this is a dramatic understatement of California's plight since the combined unfunded liability of CALPERS, CALSTERS, and the nine largest county pension funds in California is well in excess of $ 1 Trillion, which is a multiple of the assumption being used by California's state government in assessing the budget gap. So, the committee is trying to be California-friendly. But, heck. A trillion here, a trillion there. After a while, you're talking about real money.
Meanwhile, Brown and the California legislature have tacked on many new job-killing legislative initiatives that keep California in the economic doldrums. California is currently in a race with New York to see who can lose the most wealthy citizens, fleeing exhorbitant tax rates.
So, what is the future for California? How's Greece doing these days?
Thursday, September 20, 2012
BofA Shrinks; Goldman Sheds New Hires
Wherever you look, the American financial service sector is retreating. The decline of US pre-eminence in world finance began with the regulatory overkill of Sarbanes-Oxley legislation in 2002, but the real death blow was the Dodd-Frank Act of 2009. The future will be in Hong Kong, Shanghai, Singapore. London may survive this, but that remains to be seen, but New York is definitely fading. Basically, American financial strength is being legislated into weakness.
You wonder why? Have stocks done poorly. On April 24th,1995, a scant 17 years ago, the Dow Jones Industrial Average closed at 4,303. Yesterday, the DJIA closed at 13,577, about 3 1/2 times as high as the 1995 level. (This result includes the 2008 financial crash). Is that bad? Has the average investor been screwed? Is this why pension funds are in trouble? The market hasn't delivered enough? How much is enough?
Why this rush to destroy American financial pre-eminence? You wonder how folks will like the slow growth and tepid stock returns of the future thanks to the regulatory overkill that is strangling our financial sector.
You wonder why? Have stocks done poorly. On April 24th,1995, a scant 17 years ago, the Dow Jones Industrial Average closed at 4,303. Yesterday, the DJIA closed at 13,577, about 3 1/2 times as high as the 1995 level. (This result includes the 2008 financial crash). Is that bad? Has the average investor been screwed? Is this why pension funds are in trouble? The market hasn't delivered enough? How much is enough?
Why this rush to destroy American financial pre-eminence? You wonder how folks will like the slow growth and tepid stock returns of the future thanks to the regulatory overkill that is strangling our financial sector.
Chicago Teachers Pension Plan is Broke
Like almost every public pension plan in America, the Chicago teachers' public pension plan is not going to survive. Mary Williams Walsh's article in today's New York Times lays out the numbers. With just over $ 10 billion in assets the fund is paying out more than $ 1 billion more than they take in every year. The end is clear.
Why is this the case? Because it is very easy for politicians to make promises of things that they will do in the future, while providing benefits right now. Social Security operates on this premise. Give the benefits now, pay for them later. But, of course, they never pay later. That part is simply kicked down the road.
We have already witnessed pension funds cutting the benefit payments for folks that have already retired. We are about to see a wave of such actions. The Chicago teachers fund is in much better shape than the Illinois state employee fund. So, guess where that one is headed.
The crime is that politicians pretend that nothing is wrong. They castigate those, like Paul Ryan, who propose ways of providing funding for programs that everyone already knows will go broke if nothing is done. So, the programs go broke.
This means the future for the elderly of the future is bleak. Medicare and social security will not be there for people who, today, are in their middle working years. They will have almost nothing when they reach retirement age. The situation is worse than that for public employees in many states where even folks in their fifties will have no retirement income in another decade.
Those who are currently retired are at risk as well, but their situation is not nearly so dire as those in the generation to follow.
Instead of pretending that these systems will be available in the future, the public should be made aware now that their retirement dreams are dreams that will not be fulfilled. Then these folks can begin saving for their old age. Pretending that what is clearly not going to be there is going to be there is a cruel policy that will produce untold misery for the future elderly when they realize, too late, that what was promised is not going to be delivered.
Why is this the case? Because it is very easy for politicians to make promises of things that they will do in the future, while providing benefits right now. Social Security operates on this premise. Give the benefits now, pay for them later. But, of course, they never pay later. That part is simply kicked down the road.
We have already witnessed pension funds cutting the benefit payments for folks that have already retired. We are about to see a wave of such actions. The Chicago teachers fund is in much better shape than the Illinois state employee fund. So, guess where that one is headed.
The crime is that politicians pretend that nothing is wrong. They castigate those, like Paul Ryan, who propose ways of providing funding for programs that everyone already knows will go broke if nothing is done. So, the programs go broke.
This means the future for the elderly of the future is bleak. Medicare and social security will not be there for people who, today, are in their middle working years. They will have almost nothing when they reach retirement age. The situation is worse than that for public employees in many states where even folks in their fifties will have no retirement income in another decade.
Those who are currently retired are at risk as well, but their situation is not nearly so dire as those in the generation to follow.
Instead of pretending that these systems will be available in the future, the public should be made aware now that their retirement dreams are dreams that will not be fulfilled. Then these folks can begin saving for their old age. Pretending that what is clearly not going to be there is going to be there is a cruel policy that will produce untold misery for the future elderly when they realize, too late, that what was promised is not going to be delivered.
Wednesday, September 19, 2012
A Glimpse into the Future
Liz Alderman's article in the New York Times today, "Euro or No, Economics of Everyday Greek Life is Eroding" provides a glimpse into the future of the western economies. Economic and civil order has broken down in Greece. The rising popularity of the neo-nazi party (now at 18 percent of the electorate) is gathering in the fruits of the collapse of the Greek welfare state. In time, democratic government will collapse in Greece to be replaced by one of the extremes. The so-called centrist governments cannot deliver and will not survive.
Greeks expect the promises of past governments to be honored. That is an expectation that has no hope of reality. Their frustrations are spilling over into everyday economic and political life. The beginnings of a similar breakdown are evident in Spain, Portugal and Italy. No government can survive by imposing a program of austerity. Their citizenry still believes the lies that they have been told for generations. It is too late to convince them that all of these benefits they have come to expect cannot be afforded.
Gradually, this collapse will extend across the plains of Europe and eventually engulf even France and Germany. The UK, not a member of the Eurozone, is not immune. Their fiscal path is a road to disaster as well. As for the US, the opening bell of the slide to disaster will be heard soon from California and Illinois.
The truth is that no society can survive as an entitlement society except at virtual poverty levels -- the old Soviet Union, modern day Cuba. The prosperity in the US and Europe that was built on free markets, self reliance, and limited government is being sabatogued by a growing state control of all aspects of economic life and a sense of entitlement by the bulk of their populations. This is the path to Greece.
Printing dollars and printing Euros -- the current policy of the Fed and ECB -- will only provide a brief breathing space as the western economies weaken. Fortunately, Asia is not marching down this path and the future is bright for Asia. But the lights are dimming in the West. Alderman's article today in the NY Times is one of many recent articles chronicling the slow slide of Greece into anarchy.
Greeks expect the promises of past governments to be honored. That is an expectation that has no hope of reality. Their frustrations are spilling over into everyday economic and political life. The beginnings of a similar breakdown are evident in Spain, Portugal and Italy. No government can survive by imposing a program of austerity. Their citizenry still believes the lies that they have been told for generations. It is too late to convince them that all of these benefits they have come to expect cannot be afforded.
Gradually, this collapse will extend across the plains of Europe and eventually engulf even France and Germany. The UK, not a member of the Eurozone, is not immune. Their fiscal path is a road to disaster as well. As for the US, the opening bell of the slide to disaster will be heard soon from California and Illinois.
The truth is that no society can survive as an entitlement society except at virtual poverty levels -- the old Soviet Union, modern day Cuba. The prosperity in the US and Europe that was built on free markets, self reliance, and limited government is being sabatogued by a growing state control of all aspects of economic life and a sense of entitlement by the bulk of their populations. This is the path to Greece.
Printing dollars and printing Euros -- the current policy of the Fed and ECB -- will only provide a brief breathing space as the western economies weaken. Fortunately, Asia is not marching down this path and the future is bright for Asia. But the lights are dimming in the West. Alderman's article today in the NY Times is one of many recent articles chronicling the slow slide of Greece into anarchy.
Tuesday, September 18, 2012
Why you borrow matters
Borrowing for investment may be a good idea. Debt is not a bad thing. It can be a good thing. It depends upon what you are borrowing for.
Borrowing to finance a new business or to expand an old one is a good idea. Borrowing for investment purposes is generally a good idea.
Borrowing is generally a bad idea if you simply borrow to finance consumption that you cannot otherwise afford. Eventually 'consumption borrowing' will lead to disaster since nothing is taking place that can pay off the debt that is being created. This is the type of borrowing that is taking place in western economies today.
As much as politicians talk about 'investing in our future,' what they invariably mean in practice is financing consumption for a favored part of the electorate. Rarely if ever is modern government spending intended to finance investment of any kind. Paying more money to your favorite public employee, including teachers, is not a form of investment -- it is a form of consumption for your favorite public employee unless they choose to save some part of it. Transferring wealth from rich to poor and supplementing that with more debt is simply an expansion of debt and consumption.
Borrowing to consume at the expense of private and public investment activity is a ticket to disaster. We see that disaster unfolding in the western economies today. In short order, the current euphoria in the US and in Europe over the virtues of printing money as a substitute for capitalism will turn to despair as their economies are crushed with the weight of too much debt. and too little economic activity.
You can only live off false promises for a limited period of time. Sooner or later, crushing the private economy, expanding the government sector, letting sovereign debt increase without limit only results in disaster.
Borrowing to finance a new business or to expand an old one is a good idea. Borrowing for investment purposes is generally a good idea.
Borrowing is generally a bad idea if you simply borrow to finance consumption that you cannot otherwise afford. Eventually 'consumption borrowing' will lead to disaster since nothing is taking place that can pay off the debt that is being created. This is the type of borrowing that is taking place in western economies today.
As much as politicians talk about 'investing in our future,' what they invariably mean in practice is financing consumption for a favored part of the electorate. Rarely if ever is modern government spending intended to finance investment of any kind. Paying more money to your favorite public employee, including teachers, is not a form of investment -- it is a form of consumption for your favorite public employee unless they choose to save some part of it. Transferring wealth from rich to poor and supplementing that with more debt is simply an expansion of debt and consumption.
Borrowing to consume at the expense of private and public investment activity is a ticket to disaster. We see that disaster unfolding in the western economies today. In short order, the current euphoria in the US and in Europe over the virtues of printing money as a substitute for capitalism will turn to despair as their economies are crushed with the weight of too much debt. and too little economic activity.
You can only live off false promises for a limited period of time. Sooner or later, crushing the private economy, expanding the government sector, letting sovereign debt increase without limit only results in disaster.
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