Entries Tagged as 'Government Spending'

MORE GREEK TRAGEDIES TO COME?

From To The Point News and Richard W. Rahn comes this article that says what I believe very well:

Greece and too many other countries have been trying to defy gravity by living the good life on borrowed money. In 2001, the Greeks entered the eurozone, which gave them access to low-rate loans under the pretense that Greece was richer than it was.

The seeds of the destruction that resulted in the closure of the banks this week were planted the day the Greeks adopted the euro. None of this should have been a surprise to anyone. The only thing for certain is that the Greeks will now suffer another major drop in their real incomes.

The open question is will the Europeans, the Americans, the Japanese and others who also have been living on borrowed money, growing at unsustainable rates, learn the lessons from the latest Greek tragedy, or will they too march off the cliff?

The United States, Japan, the United Kingdom, France, Spain, Italy, Russia, Brazil and a majority of smaller countries again this year will have lower rates of economic growth than the size of their current deficits as a percentage of gross domestic product (GDP) — causing a continued growth in the real debt burden.

At some point these countries will have no choice but to cut expenditures or increase their real rates of economic growth to avoid becoming a future Greece. It is sad and striking how few countries, including the United States and most of the European countries, have real plans to reignite growth. Japan is in its third decade of little growth. Europe has stagnated for almost a decade, and the United States is only doing marginally better.

Many on the left and so-called establishment economists, including many who work for the International Monetary Fund, World Bank and Organization for Economic Cooperation and Development, and politicians (plus, of course, the media) argue that the way to avoid a Greek-style debt crisis is to increase tax rates — while ignoring the basic fact that most tax rates on labor and capital in the major countries are well above the growth-maximizing rate.

They argue, because of demographics and politics, that it is not possible to cut government spending despite it also being above the growth-maximizing level in most countries. Or in National Public Radio parlance, spending cannot be cut because there are “too many unmet needs” — which, by definition, are infinite.

Switzerland, Hong Kong, Singapore and other places demonstrate how fallacious the argument that more government spending is needed because they have shown that it is possible to have a higher per capita income than the United States while having lower taxes and less government. And they manage to accomplish this without oil and other natural resources that the United States has in abundance.

It is widely and correctly acknowledged that growth in regulations, particularly financial and environmental regulations, is serving as a major impediment to increasing economic growth. Yet, the Obama administration and its administrative agencies continue to crank out costly regulations at a record rate, without bothering in most cases to do serious cost-benefit analysis. The Republicans tend to decry the number and cost of the torrent of regulations, while doing little to stop them.

Note that the folks who turn out and enforce all of the regulations are salaried government employees. If the Republicans, who now control Congress, would cut or even eliminate many of the regulatory agencies in government, they could bring a meaningful slowdown or even a halt to these destructive regulations. No employees = no bad regulations.

Question: How many new regulations do we need? Almost all new regulations impose a cost on individuals, the economy and individual liberty. The Greeks and their fellow Europeans do not lack for regulations — so why are the folks in Hong Kong who have the greatest amount of economic freedom in the world so much better off?

There are plenty of examples from around the world of what policies promote economic growth and opportunity. Unfortunately, the ignorance of the voters in most of the major democracies makes them too receptive to politicians who promise a free lunch. More goodies for you to be paid for by someone else — or as Margaret Thatcher put it, “The problem with socialism is that you eventually run out of other people’s money to spend.”

She could have substituted the “welfare state” for socialism to better describe today’s Greece, Europe and the United States. Total government spending as a percentage of GDP is 52 percent in Greece, 35 percent in the U.S., 33 percent in Switzerland, and only 18 percent in Hong Kong.

Electing politicians who deliver (not just promise) less but more careful government spending, lower tax rates on labor and capital, fewer regulations whose benefits are unambiguously greater than the costs, and freer trade — along with a strong adherence to the rule of law and protection of private property — is the only way to guarantee not becoming a future Greek-like tragedy.

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.

Interest Rate Hike

Fed holds off on interest rate hike, downgrades economic forecast, Says the LA Times

“The economy still isn’t strong enough to handle it.

“Fed officials sharply downgraded their economic forecast for this year. They projected the economy would grow between 1.8% and 2% this year, well below the range of 2.3% to 2.7% in its last forecast in March.

“If they’re correct, annual growth would be the worst since 2011 and would be far from the breakout performance some economists had hoped for this year.”

The economy is stagnating, the middle class hasn’t seen any wage increases adjusted for inflation for at least 10 years. He is priced out of the housing market, over loaded with debt, lives paycheck to paycheck, and doesn’t have the extra money to get the economy moving. I think the people in charge ought to be fired for incompetence; 92 million people out of work or looking for work; almost 50 million people on EBT.

Erin Burnett Schooled


THE AFFORDABLE CARE ACT ISN’T

THE AFFORDABLE CARE ACT ISN'T

THE AFFORDABLE CARE ACT ISN’T From To The Point News Written by Jack Kelly

Major health insurers seek eye popping rate increases for 2016 – 25 percent in Oregon, 30.4 percent in Maryland, 36.3 percent in Tennessee, 51.6 percent in New Mexico.

Insurance commissioners won’t approve all companies ask for. Rates will rise modestly in some states. But the odds are your premium will cost a lot more next year.

Premiums for non-group policies rose 24.4 percent more last year than they would have without Obamacare, says the National Bureau of Economic Research.

Premiums in this market rose more after two years of Obamacare than in the 8 years preceding, sayseHealth Insurance, a private health exchange.

Despite subsidies for the industry of at least $16 billion, many insurers lose money. Far fewer signed up for Obamacare than they expected (and the administration claimed). Those who did sign up are older and sicker.

“Only about 40 percent of those eligible eventually signed up after two full open-enrollments,” insurance expert Robert Laszewski told the Washington Examiner. “Carriers need more like 75 percent.”

Subsidies for insurance companies mask the true cost, says Stephen Parente, director of the Medical Industry Leadership Institute. When they expire in 2017, premiums for the cheapest plan could rise nearly 100 percent for individuals, 50 percent for families, he says.

That’s on top of sky high deductibles. The average deductible for the cheapest Obamacare plan is about $5,180 for individuals, $10,500 for families – four times the IRS threshhold for a “high deductible” plan.

Patricia Wanderlich, who suffered a brain hemorrhage in 2011, skipped the brain scan she should have every year because her Obamacare policy has a $6,000 deductible.

“To spend thousands of dollars just making sure (my aneurysim) hasn’t grown?” Ms. Wanderlich told the New York Times.  “I don’t have that money.”

About 25 percent of Americans with private insurance can’t afford to pay a mid-range deductible ($1,200 for individuals, $2,400 for families), the Wall Street Journal said in March.

People with a policy they can’t afford to use are no better off than the uninsured. Which may be why – despite the threat of fines – so few without insurance signed up for Obamacare.

About 75 percent of those who did are subsidized. Subsidies could end for people in 36 states if later this month the Supreme Court rules for plaintiffs in King v. Burwell.

As written, the ACA permits subsidies only for insurance purchased on exchanges “established by the state,” plaintiffs note.

That was a drafting error, politicians he quoted told New York Times reporter Robert Pear. They’re lying. The words “established by the state” appear 9 times in the ACA. No “drafting error” is repeated that often.

The words were inserted deliberately to induce states to set up exchanges, says MIT Prof. Jonathan Gruber, foremost architect of Obamacare, and Sen. Max Baucus, D-MT, who chaired the committee that drafted the ACA version that became law.

Mr. Pear mentioned neither – par for the biased course at the New York Times.  Let’s see if the Supreme Court can avoid such blatant bias.

Obamacare is a cancer inside the body of health care in America — and it is metastasizing.

Nearly every promise Democrats made has been broken. The average family pays more (some much more) for insurance, not $2,500 less. About 9 million Americans (so far) have learned they can’t keep their health plan if they want to. Or their doctors.

Federal spending for health didn’t go down. It’s zoomed upward. So have emergency room visits. Overhead costs are exploding.

Many employers say Obamacare is chiefly why 2.3 million fewer Americans have full time jobs than in 2007.

The ACA has hurt millions more than it’s helped. The worst is yet to come. President Obama delayed or altered  (mostly illegally) unpopular provisions at least 50 times. If they’re implemented fully, up to 100 million who get insurance from their employers could have their policies cancelled, the American Enterprise Institute estimated.

As premiums and deductibles rise, and the job-killing employer mandate goes into effect, a “death spiral” – begun because so few healthy people have signed up – will accelerate. If the Supreme Court rules the ACA must be enforced as written, it would be a mercy killing.

Jack Kelly is a former Marine and Green Beret, and was the Deputy Assistant Secretary of the Air Force during the Reagan Administration.  He is the national security writer for the Pittsburgh Post-Gazette.

The Next Currency Crisis Has Begun

According to Graham Summers of Phoenix Capital Research The Next Currency Crisis Has Begun. 

Stocks have been boring for months now. They’ve gone almost nowhere since the start of the year.
The REAL action is in the currency markets.
The biggest news is the breakdown of the Japanese Yen. Normally it’s a big deal if a currency breaks a trendline that is over five years long.
The Yen just broke a 30 year trendline.

Image

The significance of this cannot be overstated… one of the major world currencies has broken support dating back to the mid-80s. This sets the stage for a collapse to 60 if not 40 in the coming months.
The Yen collapse represents a 33%-50% currency collapse. It is nothing short of a hyperinflationary event.
The impact will be felt around the globe, most notably in Asia where other currencies will be in absolute chaos.
However, the Yen also is a major currency partner with the US Dollar and the Euro… and a Japanese currency collapse will be felt in those regions as well. Stocks will be the last asset class to “get it.”

The Next Recession Has Already Begun

The Next Recession Has Already Begun

The following is an excerpt from a recent issue of Private Wealth Advisory.

The official data is out and it shows that GDP collapsed 0.7% in the first quarter of 2015.

The financial world is shocked by this because:

1)   The drop occurred despite the Government massaging the heck out of the data to make it look better.

2)   The world has bought into the idea that the Fed can remove any and all recessions by printing money.

Regarding #1, the Government recently added a bunch of bogus measures to GDP such as intellectual property. How exactly you can accurately measure the value of intellectual property is beyond me. But then again, much of what the Government does in the name of “the better good” is beyond me as well.

Despite adding this and a slew of other accounting gimmicks, the economy collapsed 0.7% in the first quarter. This is shocking only to those who believe that official GDP is an accurate measure of economic growth.

Our readers have been well aware for some time that the GDP number is largely an accounting fiction meant to overstate growth. Indeed, if you strip out the various gimmicks employed by the BLS, you find that the year over year growth for GDP has been at levels usually associated with recessions for years.

Recessionary levels are circled in the chart below.

NOM GPD.png

Small wonder the “recovery” has felt so weak… the economy has been moving at pace usually associated with a contraction!

It Is Mathematically Impossible To Pay Off All Of Our Debt

From Michael Snyder at The Economic Collapse:

“Did you know that if you took every single penny away from everyone in the United States that it still would not be enough to pay off the national debt?  Today, the debt of the federal government exceeds $145,000 per household, and it is getting worse with each passing year.  Many believe that if we paid it off a little bit at a time that we could eventually pay it all off, but as you will see below that isn’t going to work either.  It has been projected that “mandatory” federal spending on programs such as Social Security, Medicaid and Medicare plus interest on the national debt will exceed total federal revenue by the year 2025.  That is before a single dollar is spent on the U.S. military, homeland security, paying federal workers or building any roads and bridges.  So no, we aren’t going to be “paying down” our debt any time in the foreseeable future.  And of course it isn’t just our 18 trillion dollar national debt that we need to be concerned about.  Overall, Americans are a total of 58 trillion dollars in debt.  35 years ago, that number was sitting at just 4.3 trillion dollars.  There is no way in the world that all of that debt can ever be repaid.  The only thing that we can hope for now is for this debt bubble to last for as long as possible before it finally explodes.

“It shocks many people to learn that our debt is far larger than the total amount of money in existence.  So let’s take a few moments and go through some of the numbers.

“When most people think of “money”, they think of coins, paper money and checking accounts.  All of those are contained in one of the most basic measures of money known as M1.  The following definition of M1 comes from Investopedia

A measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts. M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency.

“As you can see from the chart below, M1 has really grown in recent years thanks to rampant quantitative easing by the Federal Reserve.  At the moment it is sitting just shy of 3 trillion dollars…

M1 Money Supply 2015

“So if you gathered up all coins, all paper currency and all money in everyone’s checking accounts, would that even make much of a dent in our debt?

“Nope.

“We’ll have to find more “money” to grab.

“M2 is a broader definition of money than M1 is, because it includes more things.  The following definition of M2 comes from Investopedia

A measure of money supply that includes cash and checking deposits (M1) as well as near money. “Near money” in M2 includes savings deposits, money market mutual funds and other time deposits, which are less liquid and not as suitable as exchange mediums but can be quickly converted into cash or checking deposits.

“As you can see from the chart below, M2 is sitting just short of 12 trillion dollars right now…

M2 Money Supply 2015

“That is a lot more “money”, but it still wouldn’t pay off our national debt, much less our total debt of 58 trillion dollars.

“So is there anything else that we could grab?

“Well, the broadest definition of “money” that is commonly used is M3.  The following definition of M3 comes from Investopedia

A measure of money supply that includes M2 as well as large time deposits, institutional money market funds, short-term repurchase agreements and other larger liquid assets. The M3 measurement includes assets that are less liquid than other components of the money supply, and are more closely related to the finances of larger financial institutions and corporations than to those of businesses and individuals. These types of assets are referred to as “near, near money.”

“The Federal Reserve no longer provides charts for M3, but according to John Williams of shadowstats.com, M3 is currently sitting somewhere in the neighborhood of 17 trillion dollars.

“So even with the broadest possible definition of “money”, we simply cannot come up with enough to pay off the debt of the federal government, much less the rest of our debts.

“That is not good news at all.

“Alternatively, could we just start spending less than we bring in and start paying down the national debt a little bit at a time?

“Perhaps that may have been true at one time, but now we are really up against a wall.  Our rapidly aging population is going to put an enormous amount of stress on our national finances in the years ahead.

“According to U.S. Representative Frank Wolf, interest on the national debt plus “mandatory” spending on programs such as Social Security, Medicare and Medicaid will surpass the total amount of federal revenue by the year 2025.  That is before a single penny is spent on homeland security, national defense, paying federal workers, etc.

“But even now things are a giant mess.  We are told that “deficits are under control”, but that is a massive hoax that is based on accounting gimmicks.  During fiscal year 2014, the U.S. national debt increased by more than a trillion dollars.  That is not “under control” – that is a raging national crisis.

“Many believe that that we could improve the situation by raising taxes.  And yes, a little bit more could probably be squeezed out of us, but the impact on government finances would be negligible.  Since the end of World War II, the amount of tax revenue taken in by the federal government has fluctuated in a range between 15 and 20 percent of GDP no matter what tax rates have been.  I believe that it is possible to get up into the low twenties, but that would also be very damaging to our economy and the American public would probably throw a huge temper tantrum.

“The real problem, of course, is our out of control spending.

“During the past two decades, spending by the federal government has grown 63 percent more rapidly than inflation, and “mandatory” spending on programs such as Social Security, Medicare and Medicaid has actually doubled after you adjust for inflation.

“We simply cannot afford to keep spending money like this.

“And then there is the matter of interest on the national debt.  For the moment, the rest of the world is lending us gigantic mountains of money at ridiculously low interest rates.  However, if the average rate of interest on U.S. government debt was just to return to the long-term average, we would be spending more than a trillion dollars a year just in interest on the national debt.

“So the best possible environment for “paying down our debt” that we are ever going to see is happening right now.  The only place that interest rates on U.S. government debt have to go is up, and our population is going to just keep getting older and more dependent on government programs.

“Meanwhile, our overall debt continues to spiral out of control as well.  According to CNBC, the total amount of debt that Americans owe has reached a staggering 58.7 trillion dollars…

As the nation entered the 1980s, there was comparatively little debt—just about $4.3 trillion. That was only about 1.5 times the size of gross GDP. Then a funny thing happened.

The gap began to widen during the decade, and then became basically parabolic through the ’90s and into the early part of the 21st century.

Though debt took a brief decline in 2009 as the country limped its way out of the financial crisis, it has climbed again and is now, at $58.7 trillion, 3.3 times the size of GDP and about 13 times what it was in 1980, according to data from the Federal Reserve’s St. Louis branch. (The total debt measure is not to be confused with the $18.2 trillion national debt, which is 102 percent of GDP and is a subset of the total figure.)

“As I discussed above, there isn’t enough money in our entire system to even pay off a significant chunk of that debt.

“So what happens when the total amount of debt in a society vastly exceeds the total amount of money?

“Is there any way out other than collapse?”

My note: Snyder doesn’t mention that Americans have over $19 Billion in pension plans. I believe that will be the next target. Just require all Pension plans to be invested in US Treasuries.

 

NO WAY TO RUN A RAILROAD

NO WAY TO RUN A RAILROAD

Written by Richard Rahn at To The Point News

If taxpayers suddenly stopped subsidizing Amtrak, what do you think would happen?

Before trying to answer that question, it is useful to review U.S. railroad history. The first railroads were built in the United States in the late 1820s, and by 1900, only 70 years later, almost every town in the country had rail access.

Railroads were high tech, the Internet of their time. The system was built and profitably operated by private companies.

Amtrak and the modern freight railroad companies use the infrastructure that was built long ago. The 180-year-old privately built Canton Viaduct (an incredible stone bridge – see link) in Canton, Massachusetts and the 100-year-old Hell Gate Bridge (the model for the Sydney Harbor Bridge in Australia) over the East River in New York are still used by Amtrak.

The investor-owned Pennsylvania Railroad built the hugely expensive North River Tunnels under the Hudson River in 1904-1908, which were technological wonders of the time. They are still used by all of those who ride Amtrak from New Jersey to New York.

(As an aside, I found it rather ironic when President Obama claimed that private business only succeeded by using government infrastructure —  “You did not build that” — when, in fact, government mostly uses privately built infrastructure.)

Once the railroads were built, state and local governments began heavily taxing every mile of track and other railroad facilities, and the federal government imposed endless regulations, including regulating fares.

The predictable result was that expenses grew faster than revenues — causing deferred capital spending and maintenance. Eighty years ago, trucks, automobiles and airplanes began to lure away rail’s customers. As a result, the rail industry began a death march after World War II.

Railroad companies ripped up thousands of miles of track to save on expenses and tax levies. Today, the United States has a fraction of the number of miles of railroad tracks compared to what it had 100 years ago. Route mileage peaked at 254,251 miles in 1916 and fell to 139,679 miles in 2011.

By the late 1960s, most of the nation’s railroads were in deep trouble as a result of new forms of competition, disastrous tax and regulatory policies, and inflexible unions. In 1971, the federal government created Amtrak as a government corporation to operate intercity passenger rail service.

By contrast, freight rail was finally deregulated in 1980, now resulting in the most efficient and profitable freight railways in the world.

Amtrak has eaten through more than $45 billion in taxpayer subsidies in its 44-year history. The only line it has that it claims to be profitable is the Northeast corridor from Washington to Boston, which was shut down for six days following last week’s fatal train crash near Philadelphia.

It is widely acknowledged that Amtrak is poorly managed — as are most government enterprises — but nothing is done about it by either the administration or Congress. Amtrak even manages to lose money on its food service, which is hard to do when one has a captive market and serves only mediocre food at high prices.

Studies show the government could save money by giving away airline tickets to everyone who rides some of the long-distance Amtrak routes, because the subsidy per passenger exceeds the cost of an airline ticket over the same route.

It is no surprise that many of those who call for more taxpayer spending on Amtrak are the affluent media and political folks who frequently travel between New York and Washington. To pay for their subsidies, they seem to have no trouble taxing lower-income folks in much of America who have no access to Amtrak.

The rail tunnels under the Hudson River are now more than a hundred years old and will need to be rebuilt or replaced. Many members of Congress are calling for billions of taxpayer dollars to be spent to rebuild these tunnels.

Yet we have many examples of private companies that are willing to invest in transportation infrastructure, such as bridges, tunnels and roads, when they are allowed to charge market prices for use of the infrastructure. No taxpayer dollars need be spent.

Again, if the subsidies were eliminated, what would happen?

All of the trains now operated by Amtrak, other than the Northeast corridor, would cease operation. But then many private entrepreneurs would buy up some of the rail cars or buy new ones, and make contracts with the railroads to run trains over their tracks (Amtrak uses the private railroad companies’ tracks).

Private passenger rail companies might well successfully compete with airplanes, buses and cars on some routes by providing luxury services with great dining cars as an alternative transportation experience, as they do in other parts of the world.

We now know that a socialistic, government-regulated, -taxed and -operated passenger rail does not work. So let’s get rid of Amtrak and its taxpayer subsidies, and see what magic free-market rail entrepreneurs might create.

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.

Apocalypse And Enormous Disorder Coming – Hugo Salinas Price

TND Videocast Spotlight:  Greg Hunter’s USAWatchdog.com

Mexican retail mogul Hugo Salinas-Price is worried about the common man and the upcoming currency calamity that is approaching the globe.  Salinas-Price says, “It certainly isn’t getting better when you have some intellectuals going so crazy as to say they want to ban cash.  We can’t go too much further along this road.  This is utter madness.  We’re not supposed to use cash anymore?  Salinas Price goes on to say, “If we have these lunatics running things, it can’t get any better.  We have people running things that have forgotten about what motivates the common man. . . . I want people to have silver because it is going to protect them.”

Why does the common man need the protection of precious metals?  Salinas-Price says, “I just read today the global debt is $200 trillion, and it’s grown from the last crisis in 2008.  Something has to happen to take care of that debt.  Either it’s going to be repudiated or it’s going to be inflated away, or it’s going to be paid with taxation. . . . We are headed over Niagara Falls.”

The Truth Rarely Gets Spoken

Orioles Executive Vice President John Angelos, son of majority owner Peter Angelos had this to say about the riots in Baltimore: The Truth Rarely Gets Spoken

“Brett, speaking only for myself, I agree with your point that the principle of peaceful, non-violent protest and the observance of the rule of law is of utmost importance in any society. MLK, Gandhi, Mandela, and all great opposition leaders throughout history have always preached this precept. Further, it is critical that in any democracy investigation must be completed and due process must be honored before any government or police members are judged responsible.

That said, my greater source of personal concern, outrage and sympathy beyond this particular case is focused neither upon one night’s property damage nor upon the acts, but is focused rather upon the past four-decade period during which an American political elite have shipped middle class and working class jobs away from Baltimore and cities and towns around the U.S. to third-world dictatorships like China and others, plunged tens of millions of good hard-working Americans into economic devastation, and then followed that action around the nation by diminishing every American’s civil rights protections in order to control an unfairly impoverished population living under an ever-declining standard of living and suffering at the butt end of an ever-more militarized and aggressive surveillance state.

The innocent working families of all backgrounds whose lives and dreams have been cut short by excessive violence, surveillance, and other abuses of the Bill of Rights by government pay the true price, an ultimate price, and one that far exceeds the importance of any kids’ game played tonight, or ever, at Camden Yards. We need to keep in mind people are suffering and dying around the U.S., and while we are thankful no one was injured at Camden Yards, there is a far bigger picture for poor Americans in Baltimore and everywhere who don’t have jobs and are losing economic civil and legal rights, and this makes inconvenience at a ball game irrelevant in light of the needless suffering government is inflicting upon ordinary Americans.”

Copyright © 2007 Mover Mike. Design by Anthony Baggett.