After the Civil War Men became less Manly and the Federal Government became more Progressive

Posted by PITHOCRATES - March 25th, 2014

History 101

(Originally published February 12th, 2013)

Prior to 1900 the Role of the Federal Government was primarily to Provide for the Common Defense

In 1800 the new federal government didn’t do a lot.  It spent only about $11 million (in nominal dollars).  With 55% going to defense.  About 31% went to pay interest on the war debt.  About 2% went to the postal service.  And about 12% went to other stuff.  Defense spending and interest on the war debt added up to about 86% of all federal outlays (see Government Spending Details).

In 1860, just before the Civil War, spending increased to $78 million (in nominal dollars).  Defense spending fell to 37%.  Interest spending fell to 4%.  And postal service spending rose to 19%.  While spending on other stuff rose to 40%.  Just over 60 years from the founding the federal government had changed.  It was less limited than the Founding Fathers designed it to be.

In 1900 spending increased to $628.6 million (in nominal dollars).  With defense spending coming in at 53%.  The postal service at 17%.  Interest went up to 6.4%.  And other spending fell to 24%.  Again, defense spending consumed over half of all federal spending.  For the role of the federal government was still primarily providing for the common defense.  Running the postal service.  Treating with other nations.  And trading with them.  As well as collecting duties and tariffs at our ports which paid for the federal government.  There was a lot of graft and patronage.  And long lines for government jobs.  Primarily because government was still somewhat limited.  With a limited number of government jobs to reward campaign contributors.  But that was about to change.

The Progressives expanded the Role of the Federal Government in our Lives and made it more Motherly

The American Civil War killed about 625,000 men.  With an 1860 population of 31,443,321 those deaths amounted to about 2% of the prewar population.  To put that into perspective if 2% of the U.S. population died in a war today that would be approximately 6.2 million people.  And to put that into perspective the total population of the state of Missouri is about 6 million people.  So the American Civil War claimed a very large percentage of the population.  Leaving a lot of children to grow up without a father.  Which had a profound impact on the size of the federal government.

Prior to this generation American men were some of the manliest men in the world.  Tough and rugged.  Who could live off of the land.  Completely self-sufficient.  These are the men that made America.  Men who fought and won our independence.  Who explored and settled the frontier.  Farmers who worked all day in the field.  Men who dug canals by hand.  And built our railroads.  Men who endured hardships and never complained.  Then came the Civil War generation.  Sons who lost their fathers.  And wives who lost their husbands, brothers, fathers and uncles.  Who lost all the men in their lives in that horrible war.  These women hated that war.  And manly displays of aggression.  For it was manly displays of aggression that led to fighting.  And war.  Having lost so much already they didn’t want to lose the only men they had left.  Their sons.  So they protected and nurtured them.  Taught them to shun violence.  To be kinder and softer.  To be not so tough or rugged.  To be less manly.  And when these men grew up they went into politics and started the progressive movement.

The federal government was no longer just to provide for the common defense.  To run the postal service.  To treat with other nations.  To trade with other nations.  Run our custom houses.  No.  Now the federal government grew to be kinder, softer and more motherly.  The progressives expanded the role of the federal government in our lives.  Woodrow Wilson wanted to turn the country into a quasi monarchy.  With a very strong executive branch that could rule against the wishes of Congress.  The Federal Reserve (America’s central bank) came into existence during Wilson’s presidency.  Which was going to end recessions forever.  Then came the Great Depression.  A crisis so good that FDR did not let it go to waste.  FDR expanded the size of the federal government.  Putting it on a path of permanent growth.  And it’s been growing ever since.

They decreased Defense Spending and increased Borrowings to increase Non-Defense Spending

The federal government grew beyond its Constitutional limits.  And the intent of the Founding Fathers.  Just as Thomas Jefferson feared.  It consolidated power just as all monarchies did.  And that was Jefferson’s fear.  Consolidation.  Seeing the states absorbed by a leviathan federal government.  Becoming the very thing the American colonists fought for independence from.  So that’s where the federal government changed.  In the early 20th Century.  Before that it spent money mostly for defense and a postal service.  Now it spends money for every social program under the sun.  There is great debate now in Washington about reducing the deficit.  With the Democrats blaming the deficit problems on too much defense spending.  And too little taxation on the rich.  But if you look at the history of federal spending since 1940 the numbers say otherwise (see Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017 and A History of Debt In The United States).

Federal Spending and Debt

As defense spending (including Veterans Benefits and Services) rose during World War II non-defense spending (Education, Training, Employment, Social Services, Health, Income Security, Social Security, Energy, Natural Resources, Environment, Commerce, Housing Credit, Transportation, Community and Regional Development, International Affairs, General Science, Space, Technology, Agriculture, Administration of Justice and General Government) fell as a percentage of total federal outlays.  And the federal debt rose (federal debt is in constant 2012 dollars).  After the war defense spending fell to 50% while the percentage of non-defense spending rose.  And the federal debt dropped slightly and remained relatively constant for about 30 years.

This tug of war between defense spending and non-defense spending is also called the guns vs. butter debate.  Where those in favor of spending money on guns at the federal level are more constructionists.  They want to follow the Constitution as the Founding Fathers wrote it.  While those who favor spending money on butter at the federal level want to want to buy more votes by giving away free stuff.

Defense spending ramped back up for the Korean War and the Cold War during the Fifties.  After the armistice ended hostilities in Korea defense spending began a long decline back to about 50% of all federal outlays.  Where it flattened out and rose slightly for the Vietnam War.  After America exited the Vietnam War defense spending entered a long decline where it dropped below 30% of all federal outlays.  Reagan’s defense spending raised defense spending back up to 30%.  After Reagan won the Cold War Clinton enjoyed the peace dividend and cut defense spending down to just below 20%.  After 9/11 Bush increased defense spending just above 20% of all federal outlays where it remains today.

During this time non-defense spending was basically the mirror of defense spending.  Showing that they decreased defense spending over time to increase non-defense spending.  But there wasn’t enough defense spending to cut so borrowing took off during the Reagan administration.  It leveled off during the Clinton administration as he enjoyed the peace dividend after the defeat of the Soviet Union in the Cold War.  Non-defense spending soared over 70% of all federal outlays during the Bush administration.  Requiring additional borrowings.  Then President Obama increased non-defense spending so great it resulted in record deficits.  Taking the federal debt to record highs.

So is defense spending the cause of our deficits?  No.  Defense spending as a percentage of all federal outlays is near a historical low.  While non-defense spending has soared to a record high.  As did our federal debt.  Clearly showing that the driving force behind our deficits and debt is non-defense spending.  Not defense spending.  Nor is it because we’re not taxing people enough.  We’re just spending too much.  In about 50 years non-defense spending rose from around 22% of all federal outlays to 74%.  An increase of 223%.  While defense spending fell from 76% to 22%.  A decline of 245%.  While the federal debt rose 619%.  And interest on the debt soared 24,904%.  The cost of favoring butter in the guns vs. butter debate.  The federal government has been gutting the main responsibility of the federal government, defense, to pay for something that didn’t enter the federal government until the 20th Century.  All that non-defense spending.  Which doesn’t even include the postal service today.

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Guns, Butter and Abortion

Posted by PITHOCRATES - February 24th, 2014

Economics 101

Democrats will cut Defense but not Entitlements because fewer People in Defense vote Democrat

A cornerstone of the Obama presidency is social justice.  Primarily through redistribution of wealth.  Raising taxes to fund a growing welfare state.  To help those not lucky enough to have won life’s lottery.  Such as expanding the food stamp program (Supplemental Nutrition Assistance Program).  Which has grown over 70% under President Obama.

Of course, this costs money.  A lot of it.  Added on top of an already costly welfare state.  Driven by entitlement spending.  Social Security.  And Medicare.  The biggest portions of federal spending.  And it only keeps growing.  Making the welfare state unsustainable without entitlement reform.  But the politicians won’t touch entitlements.  The third rail of politics.  Because they’re afraid of losing votes in the next election.  So they’d rather the country implode instead of reforming entitlements.  And hope that implosion comes after they’re dead and buried.  For as long as they get to enjoy their lives they could give a rat’s behind about future generations.

But they will touch defense spending.  And often do when they are looking for more money for the welfare state.  Even now.  The Obama administration is proposing spending cuts in defense spending.  That will shrink the size of the military.  And cut pay and benefits for some of the lowest paid people in the country.  The people who go in harm’s way for their country.  They won’t touch entitlement spending because it may hurt people that typically vote Democrat.  But they have no problem doing just that to those who wear a uniform to serve their country.  Who don’t always vote Democrat.  Just so they can have a generous welfare state like the European social democracies they so admire have.  Who can have them because they don’t have large defense budgets.  For the United States has been protecting them since World War II.

People can’t pay Taxes to fund a Welfare State without a Job that Provides an Income to Tax

If you watch television you’ve probably heard New York State’s commercials to attract new businesses to New York.  Where the state is promising that businesses will be “100% tax-free for 10 years.  No income tax, business, corporate, state or local taxes, sales and property taxes, or franchise fees.”  Which is a clear admission from the state with the second highest tax burden in the country that high taxes hurt business.

The tax burden is so great in New York that some businesses have moved their operations out of state.  And people with vacation homes in New York who only visit them a couple of weeks out of the year are selling them.  As the state is taxing their incomes as if they are permanent New York residents.  But despite these high taxes New York has suffered great budget deficits.

New York City is a Democrat city.  Their high taxes pay for a large welfare state.  A large public sector.  And the enormous costs of their public sector benefits.  In particular, health care and pension costs.  But their high tax rates have shrunk the tax base.  Because people can pack up and move out of state.  Just as businesses can.  Which is why they are doing a 180-degree turn on taxes.  In a desperate attempt to get businesses to come to New York.  For even if these businesses aren’t paying taxes their employees will.  Income taxes.  Sales taxes.  Property taxes.  Liquor taxes.  Cigarette taxes.  Etc.  None of which they can pay if there are no jobs to give them an income the state can tax.

The Number of Abortions is having a Direct Impact on the Economy and Tax Revenue

New York City released its SUMMARY OF VITAL STATISTICS 2012 THE CITY OF NEW YORK PREGNANCY OUTCOMES this month.  In it you can find why New York City, New York State and the federal government are having such a difficult time paying for their welfare states.  It’s because of liberal Democrat policies.  Not on the spending side of the equation.  But on the revenue side of the equation.

In 2012 there were 73,815 abortions.  Which are future taxpayers that weren’t allowed to be born.  That’s right, before anyone pays the high tax rates of a welfare state they have to be born first.  And when they are not born that’s future tax revenue the government cannot collect.  If we look at a 20 year period (about a generation) and assume 73,815 abortions each of those 20 years that’s 1,476,300 people that never will pay taxes.  If they earned on average $30,000 each that’s $44,289,000,000 of economic activity they never created.  And at a New York State tax rate of 11.7% that’s $5,181,813,000 in lost tax revenue for the state.

But it gets worse.  If you divide this number by two you get the total number of couples (a man and a woman) that could have started a family.  If each couple had 3 children this lost generation could have brought in another 2,214,450 taxpayers into New York City.  Adding them to their parent’s generation and assuming a median family income of $53,046 (an older generation established in their career earning more and a younger generation just starting their career earning less) brings the total lost economic activity for these two generations of possible New Yorkers to $195,779,524,500.  And lost tax revenue for the state of $22,906,204,367.  So the number of abortions is having a direct impact on the economy.  And tax revenue.  Making it necessary to cut guns to pay for more butter.  Whereas if these taxpayers were born we could have both our guns and butter.  And live in a world made safe by the most powerful military in the world.  Peace through strength.  The Ronald Reagan way.  And not a world where our enemies are constantly testing our resolve.  The Jimmy Carter and President Obama way.

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Debt, Jobs and Criticism—Carter, Reagan, Clinton, Bush and Obama

Posted by PITHOCRATES - November 19th, 2013

History 101

The Democrats used the Power of the Purse to oppose the Reagan Agenda wherever they Could

The left hated President Reagan.  They called him just a “B” movie actor.  With many references to Bedtime for Bonzo.   With the implication that Reagan was a chimpanzee.  He was called stupid.  Senile.  And they said he hated the poor.  The usual stuff when it comes to Democrats calling the opposition names.  But as about as demeaning as it gets.  For the Democrats hated Ronald Reagan with a passion.  They may have hated him even more than George W. Bush.  Another president they called stupid.  Even making similar chimpanzee references.

They fought Reagan tooth and nail.  The Democrats held the House and they used the power of the purse to oppose the Reagan agenda wherever they could.  So Reagan had to compromise on some things.  Especially tax hikes.  But for the most part he kept his word to the American people.  And maintained high approval ratings.  Making it harder for the Democrats to block all of the Reagan agenda.  Which just made the left hate him more.

It’s funny the short memories Democrats have.  For any criticism of President Obama is met with charges of racism.  And because of that few criticize him.  Because no one wants to be called a racist.  Giving President Obama a free pass for most if his presidency.  Something neither George W. Bush nor Ronald Reagan ever enjoyed.  Yet the left says the right says the most vile things about President Obama.  Unprecedented things.  Like calling him a liar when he lied during the State of the Union Address.  Which must be different from saying ‘Bush lied people died’ over and over again.

President Obama is on Pace to add more Debt than Ronald Reagan

Among the terrible things the left said Ronald Reagan was doing was running up the debt to unsustainable levels.  And he did run up the debt.  About 99.4% during his 8 years.  Or about 12.4% a year.  Much of that spending, though, was to reverse the damage Jimmy Carter did to national defense.  He had gutted defense spending so much (cancelling bombers and missile programs) that the Soviet Union thought for the first time that they could win a nuclear war against the United States.  At least with Jimmy Carter as president.  They actually started drafting nuclear first-strike plans to replace the deterrence of mutually assured destruction (MAD).  Anyway, that spending led to the collapse of the Soviet Union.  Allowing the U.S. to win the Cold War.  Giving Bill Clinton a huge peace dividend during his presidency.

Bill Clinton wanted to nationalize health care.  And it didn’t go over well.  His big spending liberal agenda got neutered at the midterm elections.  As he angered the people so much the Republicans won both the House and Senate.  Forcing Clinton to the center.  Dropping any thoughts of national health care.  With Republicans even forcing welfare reform on him.  The Republican Revolution kept spending down.  And the debt only grew 13.6% during Clinton’s 8 years.  Or about 1.7% a year.

After the 9/11 terrorist attacks George W. Bush ramped up military spending.  For national security.  And two wars.  He also ramped up domestic spending.  Giving us Medicare Part D.  A program to subsidize the prescription drugs for Medicare recipients.  In the 8 years of the Bush presidency he added about 41.4% to the national debt.  About 5.2% a year.  Which sounded like a lot until President Obama came along.  A near trillion dollar stimulus bill that stimulated little.  Investments into failed solar power companies and electric car companies.  Automotive (i.e., union pension fund) bailouts.  In his 5 years in office Obama has raised the debt by 53.8%.  Or 10.8% each of his 5 years.  A little more than twice the rate of George W. Bush.  At this pace he will even add more debt than Ronald Reagan.  Adding up to 18.3% per year (over 8 years) if no one stops his spending.

Under President Obama the Gap between Black and White Unemployment grew Greater

President Obama said those ‘wise’ investments and higher taxes on those who could afford to pay a little more would generate economic activity.  His income redistribution would balance the playing field.  And raise the poor out of poverty.  While people everywhere celebrated the first black president.  For it would bring the races together.  This is why some on the right joked that President Obama was the messiah.  Because he was going to do all of that.  As well as make the ocean levels fall.  Black America especially loved the nation’s first black president.  As 95% of the black vote went to Obama in 2008.  Though the enthusiasm waned a bit in 2012.  As only 93% of the black vote went to Obama.  And how has black American done under the Obama economic policies.  Well, not as good as they did under the Bush economic policies (see archived data from Table A-2. Employment status of the civilian population by race, sex, and age in the Employment Situation Archived News Releases by the Bureau of Labor Statistics).

Unemplyment Rates by Race Age Sex 2003-2013 R2

The Great Recession officially ran from December 2007 to June 2009.  Which corresponds to the transition from George W. Bush to Barack Obama.  People often call the Great Recession the worst recession since the Great Depression.  Of course they say that primarily because the current economic recovery is the worst since that following the Great Depression.  And the reason for that is President Obama’s economic policies.

Unemployment was lower for everyone under Bush.  On average the unemployment rate for white/black men, women and 16-19 year olds under Bush was 4.2%/9.3%, 4.0%/8.2% and 14.7%/31.1%, respectively.  Under President Obama these numbers jumped to 7.8%/15.7%, 6.7%/12.2% and 21.8%/40.3%.  Which should give black America cause for concern.  For under President Obama the gap between black and white unemployment grew greater.  The gap between black and white men went from 5.1 to 7.9.  An increase of 55.6%.  The gap between black and white women went from 4.2 to 5.5.  An increase of 32.9%.  And the gap between black and white 16 to 19 year olds went from 16.5 to 18.5.  An increase of 12.7%.  So whatever President Obama is doing it isn’t helping America find work.  Especially black America.

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FT167: “When we lived more austerely there was no need for painful austerity to cure a bloated government.” —Old Pithy

Posted by PITHOCRATES - April 26th, 2013

Fundamental Truth

Wise Men in Governments can Do Anything but Pay for their Nanny States

Economics changed in the early Twentieth Century.  America once again had a central bank.  Progressives were expanding the role of government.  And a new economist entered the scene that the progressives just loved.  For he was a macroeconomist who said government should have an active role in the economy.  A role where government tweaked the economy to make it better.  Stronger.  While avoiding the painful corrections on the downside of a business cycle.  Something laissez-faire capitalism caused.  And could not prevent.  But if wise men in government had the power to tweak the private sector economy they could.  At least this is what the progressives and Keynesian economists thought.

That economist was, of course, John Maynard Keynes.  Who rewrote the book on economics.  And what really excited the progressives was the chapter on spending an economy out of a recession.  Now there were two ways to increase spending in an economy.  You can cut tax rates so consumers have bigger paychecks.  Or the government can spend money that they borrow or print.  The former doesn’t need any government intervention into the private sector economy.  While the latter requires those wise men in government to reach deep into that economy.  Guess which way governments choose to increase spending.  Here’s a hint.  It ain’t the one where they just sit on the sidelines.

Governments changed in the Twentieth Century.  Socialism swept through Europe.  And left social democracies in its wake.  Not quite socialism.  But pretty close.  It was the rise of the nanny state.  Cradle to grave government benefits.  A lot of free stuff.  Including pensions.  Health care.  College educations.  And a lot of government jobs in ever expanding government bureaucracies.  Where wise men in government made everything better for the people living in these nanny states.  And armed with their new Keynesian economic policies there was nothing they couldn’t do.  Except pay for their nanny states.

According to John Maynard Keynes raising Tax Rates reduces New Economic Activity

The problem with a nanny state is things change.  People have fewer babies.  Health care and medicines improve.  Increasing lifespans.  You put this together and you get an aging population.  The death knell of a nanny state.  For when those wise men in government set up all of those generous government benefits they assumed things would continue the way they were.  People would continue to have the same amount of babies.  And we would continue to die just about the time we retired.  Giving us an expanding population of new workers entering the workforce.  While fewer people left the workforce and quickly died.  So the tax base would grow.  And always be larger than those consuming those taxes.  In other words, a Ponzi scheme.

But then change came.  With the Sixties came birth control and abortion.  And we all of a sudden started having fewer babies.  While at the same time advances in medicine was increasing our lifespans.  Which flipped the pyramid upside down.  Fewer people were entering the workforce than were leaving it.  And those leaving it were living a lot longer into retirement.  Consuming record amounts of tax money.  More than the tax base could provide.  Leading to deficit spending.  And growing national debt.

Now remember those two ways to increase spending in the economy?  You either cut tax rates.  Or the government borrows and spends.  So if cutting tax rates will generate new economic activity (i.e., new spending in the economy) what will a tax increase do?  It will decrease spending in the economy.  And reduce new economic activity.  Which caused a problem for these nanny states with aging populations.  As the price tag on their nanny state benefits eventually grew greater than their tax revenue’s ability to pay for it.  So they increased tax rates.  Which reduced economic activity.  And with less economic activity to tax their increase in tax rates actually decreased tax revenue.  Forcing them to run greater deficits.  Which added to their national debts.  Increasing the interest they paid on their debt.  Which left less money to pay for those generous benefits.

President Obama’s Non-Defense Spending caused a Huge Spike in the National Debt not seen since World War II

It’s a vicious cycle.  And eventually you reach a tipping point.  As debts grow larger some start to question the ability of a government to ever repay their debt.  Making it risky to loan them any more money.  Which forces these countries with huge debts to pay higher interest rates on their government bonds.  Which leaves less money to pay for those generous benefits.  While their populations continue to age.  Taking you to that tipping point.  Like many countries in the Eurozone who could no longer borrow money to pay for their nanny states.  Who had to turn to the European Union, the European Central Bank and the International Monetary Fund for emergency loans.  Which did provide those emergency loans.  Under the condition that they cut spending.  Money in exchange for austerity.  Something that just galls those Keynesian economists.  For despite all of their financial woes coming from having too much debt they still believe these governments should spend their way out of their recessions.  And never mind about the deficits.  Or their burgeoning debts.

But these Keynesians are missing a very important and obvious point.  The problem these nations have is due to their inability to borrow money.  Which means they would NOT have a problem if they didn’t need to borrow money.  So austerity will work.  Because it will decrease the amount of money they need to borrow.  Allowing their tax revenue to pay for their spending needs.  Without excessive tax rates that reduce economic activity.  Making the nanny state the source of all their problems.  For had these nations never became social democracies in the first place they never would have had crushing debt levels that cause sovereign debt crises.  But they did.  And their populations aged.  Making it a matter of time before their Ponzi schemes failed.  Something no nation with a growing nanny state and an aging population can avoid.  Even the United States.  Who kept true to their limited government roots for about 100 years.   Then came the progressives.  The central bank.  And Keynesian economics.  Putting the Americans on the same path as the Europeans (see US Federal Debt As Percent Of GDP).

Debt as Percent of GDP and Wars R2

With the end of the Revolutionary War they diligently paid down their war debt.  Which was pretty much the entire federal debt then.  As the federal government was as limited as it could get.  Then came the War of 1812 and the debt grew.  After the war it fell to virtually nothing.  Then it soared to pay for the Civil War.  Which changed the country.  The country was bigger.  Connected by a transcontinental railroad.  And other internal improvements.  Which prevented the debt from falling back down to pre-war levels.  Then it shot up to pay for World War I.  After WWI the Roaring Twenties replaced progressivism and quickly brought the debt down again.  Then Herbert Hoover brought back progressivism and killed the Roaring Twenties.  FDR turned a bad recession into the Great Depression.  By following all of that Keynesian advice to spend the nation out of recession.  From the man himself.  Keynes.  The massive deficit spending of the New Deal raised the debt higher than it was during World War I.  Changing the country again.  Introducing a state pension.  Social Security.  A Ponzi scheme that would struggle once the population started aging.

Then came World War II and the federal debt soared to its highest levels.  After the war a long decline in the debt followed.  At the end of that decline was the Vietnam War.  And LBJ’s Great Society.  Which arrested the fall in the debt.  Its lowest point since the Great Depression.  Which was about as large as the debt during the Civil War and World War I.  Showing the growth in non-defense spending.  Then came Reagan’s surge in defense spending to win the Cold War.  Once the Americans won the Cold War the debt began to fall again.  Until the Islamist terrorist attacks on 9/11.  Halting the fall in the debt as the War on Terror replaced the Cold War.  Then came the Great Recession.  And President Obama.  Whose non-defense spending caused a huge spike in the national debt.  Taking it to a level not seen since World War II.  When an entire world was at war.  But this debt is not from defense spending.  It’s from an expanded nanny state.  As President Obama takes America into the direction of European socialism.  And unsustainable spending.  Which can end in only but one way.  Austerity.  Painful austerity.  Not like the discomfort of the sequester cuts that only were cuts in the rate of future growth.  But real cuts.  Like in Greece.

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State of the Union, Benghazi, Sequestration and the Politics of Spending

Posted by PITHOCRATES - February 14th, 2013

Politics 101

President Obama’s Idea of Compromise and Bipartisanship is Unconditional Surrender

President Obama’s State of the Union Address was a little light on details.  But the general gist is no spending cuts.  And more taxes.  Which makes the sequestration about to hit a crisis in the making for the president.  For it was sort of his idea.  And he did sign it into law.  But to him it was more like playing a game of chicken.  Confident that the Republicans would cave and roll over.  Giving him whatever additional tax increases he wanted to prevent cuts in defense spending.  But the Republicans aren’t blinking.  Because this is the only way they’re going to get any spending cuts.  Even if it means gutting defense spending.  Something the president didn’t consider.

Despite being an architect of the sequestration he called it a stupid idea during the State of the Union.  He doesn’t care about the cuts in defense spending.  He is, after all, a leftist liberal.  And they hate defense spending.  He even denied Ambassador Stevens’ request to beef up security in Benghazi.  Which led to Ambassador Stevens’ death.  Along with three other Americans.  But it’s the equal cuts in things he does care about that has him worried.  That social spending.  The kinds of things that buy votes.  And makes people dependent on government.  Helping to endear the Democrat Party to the American people.  While making them hate the Republican Party.  Who want to take away the great things the Democrats so generously give them.  Even if the government can’t afford to give these things to the American people.

President Obama may talk about compromise and bipartisanship but he doesn’t mean it.  His idea of bipartisanship is unconditional surrender.  He has no interest in meeting Republicans halfway.  He wants to destroy the Republican Party.  And undo the Reagan Revolution.  And bring back the Big Government of the Sixties and Seventies.  When the Democrats ruled supreme.  And you do that with spending money.  Not cutting spending.  Which is why the sequestration bothers him so much.

Running Deficits is OK if it provides for Senior Citizens, Our Children and Clean Stuff

Leading Democrats are saying we don’t have a spending problem.  We’re just not paying enough for the stuff we want.  Which also happens to be the stuff that buys votes.  So the excess spending to buy votes is not the problem.  The problem is that we’re not raising taxes enough to pay for this orgy of spending that is the problem.  We’re not taxing rich people enough.  Or corporations.  And once we do then we won’t be taxing the middle class enough.  And once we do that it probably won’t matter what we do as the country will be so deep in debt that no amount of new taxes will help.  Unless they figure out a way to tax away more than 100% of a person’s earnings.

So low tax revenue is the problem.  Well, that, and spending money on the wrong things.  On things that don’t buy votes.  Things that weren’t on the laundry list President Obama rattled off during the State of the Union that we need to spend more on.  Defense spending.  And…, well, defense spending.  Which is the only thing the Obama administration is willing to consider cutting.  Because we can get a lot of free things by gutting defense.  New programs that won’t add a single dime to the deficit.  Something he said more than once during the state of the union.  Obamacare, for example, will be deficit neutral.  Because the money we were going to spend on the wars in Iraq and Afghanistan will pay for it.  So even though the spending will still add to the deficit it’s now Obamacare spending.  Not defense spending.  Which is OK.

You see, running deficits is OK if it provides for senior citizens.  Our children.  If it gives us clean water.  And air.  Invests in clean energy.  And in those jobs of the future.  If it builds roads and bridges.  For less face it, we would be nothing without our government-provided roads and bridges.  Which we simply could not have it if it weren’t for government.  (Then again railroads build and maintain their own roads and bridges.  With funds they earn operating their railroads.  But I digress.)   In fact, any deficit reduction that comes from cutting this spending is just about the worst thing in the world we could do.  According to those on the left.  So we should tax rich people and corporations more.  And cut defense spending more.  Because we spend way too much on defense spending anyway.  And for what?  It’s not like we’re going to use it for anything.  Such as protecting our ambassadors in hostile lands.

Defense Spending is the only Spending growing at a Rate less than Total Federal Outlays

If you listened to the State of the Union (and didn’t fall asleep during it) you’ve learned that we don’t spend enough on our social spending.  And too much on defense spending.  That’s what the president said.  But what do the numbers say?  To find out let’s look at federal outlays (see Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017).  The following chart graphs the historical data from 1958 to 2011 and the projection for 2012.  We look at 4 areas of spending: defense; education, training, employment and social services; Medicare; and Social Security.  We calculate the spending as a percentage of total spending and graph the results.

Percent of Total Federal Outlays

The one area we spend too much on that the Obama administration is willing to cut is the one area that has seen the greatest decline in spending.  Defense spending.  Which as a percentage of total outlays has fallen while non-defense has trended up or held steady.  This tells us the government has pulled money from defense to pay for these other things.  But this chart doesn’t tell the whole story.  For although Medicare and Social Security have trended up they haven’t taken as big a piece of total spending as defense gave up.  And education spending has been pretty flat.  Perhaps giving credence to President Obama’s claim that we’re not spending enough on education.  But if you look at the year-to-year growth in spending you see a different picture.

Federal Outlays as a Percentage of 1958 Outlays

Here we divide each year’s spending by the spending in 1958 (or 1966 for Medicare).  Showing the increase in spending over time.  This chart also includes total federal outlays.  Which tells a startling story.  Not only is defense spending being gutted to pay for other spending it is the only spending growing less than the growth rate of total federal spending.  While the other three areas are growing at greater rates.  In 2011 Social Security spending was 8,892% of the spending in 1958.  Medicare, which came into existence in 1965, grew at an even greater rate.  In 2011 it was 17,673% of the spending in 1966.  More than twice the growth in less time.  And education spending tracked pretty close to Medicare spending.  In 2011 it was 15,744% of the spending in 1958.  While defense spending in 2011 was only 1,509% of the spending in 1958.

Note that the general trend of increased spending holds regardless of who is in power.  That’s because of baseline budgeting.  Which provides for automatic increases in spending.  When government talks about spending cuts it not really spending cuts.  It a cut in the rate spending increases.  You can see some dips in the graphs and where they may have cut the rate of growth.  But nowhere is there really a cut that results in reducing net spending.  Except for defense.

Increases in spending on education (and training, employment and social services) has grown at a rate greater than most other spending.  And what can we learn by throwing money at education?  Well, based on the president’s remarks, it doesn’t work.  It doesn’t increase the quality of education.  At least based on the great increases year after year that only give us the need to spend more money.  And this spending doesn’t even include the bulk of education spending.  That generated from property taxes.  Which can mean only one thing.  If we’re paying more and need to spend even more the quality of education is not as good as it should be.  Or all that money is going to teachers’ salaries, pensions and health care benefits.

Of all this spending the only sustainable spending is defense spending. For it is the only one growing at a rate less than total federal outlays.  While increases in the other spending is going off the chart.  With the slopes of these graphs getting ever steeper.  And the closer they get to vertical the more impossible it will be able to pay for these programs.  That’s why Medicare is near crisis mode.  With the cost of our aging population pushing that graph closer and closer to vertical.  Where our spending obligations will approach infinity.  Which is, of course, impossible to sustain.

Of all this spending the only sustainable spending is defense spending. For it is the only one growing at a rate less than total federal outlays.  While increases in the other spending is going off the chart.  Contrary to what the president said we are increasing spending in these areas so much that we won’t be able to sustain it.  For there just won’t be enough money to tax away from the people.  Unless we figure out a way to tax away more than 100% of their earnings.

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After the Civil War Men became less Manly and the Federal Government became more Progressive

Posted by PITHOCRATES - February 12th, 2013

History 101

Prior to 1900 the Role of the Federal Government was primarily to Provide for the Common Defense

In 1800 the new federal government didn’t do a lot.  It spent only about $11 million (in nominal dollars).  With 55% going to defense.  About 31% went to pay interest on the war debt.  About 2% went to the postal service.  And about 12% went to other stuff.  Defense spending and interest on the war debt added up to about 86% of all federal outlays (see Government Spending Details).

In 1860, just before the Civil War, spending increased to $78 million (in nominal dollars).  Defense spending fell to 37%.  Interest spending fell to 4%.  And postal service spending rose to 19%.  While spending on other stuff rose to 40%.  Just over 60 years from the founding the federal government had changed.  It was less limited than the Founding Fathers designed it to be.

In 1900 spending increased to $628.6 million (in nominal dollars).  With defense spending coming in at 53%.  The postal service at 17%.  Interest went up to 6.4%.  And other spending fell to 24%.  Again, defense spending consumed over half of all federal spending.  For the role of the federal government was still primarily providing for the common defense.  Running the postal service.  Treating with other nations.  And trading with them.  As well as collecting duties and tariffs at our ports which paid for the federal government.  There was a lot of graft and patronage.  And long lines for government jobs.  Primarily because government was still somewhat limited.  With a limited number of government jobs to reward campaign contributors.  But that was about to change.

The Progressives expanded the Role of the Federal Government in our Lives and made it more Motherly

The American Civil War killed about 625,000 men.  With an 1860 population of 31,443,321 those deaths amounted to about 2% of the prewar population.  To put that into perspective if 2% of the U.S. population died in a war today that would be approximately 6.2 million people.  And to put that into perspective the total population of the state of Missouri is about 6 million people.  So the American Civil War claimed a very large percentage of the population.  Leaving a lot of children to grow up without a father.  Which had a profound impact on the size of the federal government.

Prior to this generation American men were some of the manliest men in the world.  Tough and rugged.  Who could live off of the land.  Completely self-sufficient.  These are the men that made America.  Men who fought and won our independence.  Who explored and settled the frontier.  Farmers who worked all day in the field.  Men who dug canals by hand.  And built our railroads.  Men who endured hardships and never complained.  Then came the Civil War generation.  Sons who lost their fathers.  And wives who lost their husbands, brothers, fathers and uncles.  Who lost all the men in their lives in that horrible war.  These women hated that war.  And manly displays of aggression.  For it was manly displays of aggression that led to fighting.  And war.  Having lost so much already they didn’t want to lose the only men they had left.  Their sons.  So they protected and nurtured them.  Taught them to shun violence.  To be kinder and softer.  To be not so tough or rugged.  To be less manly.  And when these men grew up they went into politics and started the progressive movement.

The federal government was no longer just to provide for the common defense.  To run the postal service.  To treat with other nations.  To trade with other nations.  Run our custom houses.  No.  Now the federal government grew to be kinder, softer and more motherly.  The progressives expanded the role of the federal government in our lives.  Woodrow Wilson wanted to turn the country into a quasi monarchy.  With a very strong executive branch that could rule against the wishes of Congress.  The Federal Reserve (America’s central bank) came into existence during Wilson’s presidency.  Which was going to end recessions forever.  Then came the Great Depression.  A crisis so good that FDR did not let it go to waste.  FDR expanded the size of the federal government.  Putting it on a path of permanent growth.  And it’s been growing ever since.

They decreased Defense Spending and increased Borrowings to increase Non-Defense Spending

The federal government grew beyond its Constitutional limits.  And the intent of the Founding Fathers.  Just as Thomas Jefferson feared.  It consolidated power just as all monarchies did.  And that was Jefferson’s fear.  Consolidation.  Seeing the states absorbed by a leviathan federal government.  Becoming the very thing the American colonists fought for independence from.  So that’s when the federal government changed.  In the early 20th Century.  Before that it spent money mostly for defense and a postal service.  Now it spends money for every social program under the sun.  There is great debate now in Washington about reducing the deficit.  With the Democrats blaming the deficit problems on too much defense spending.  And too little taxation on the rich.  But if you look at the history of federal spending since 1940 the numbers say otherwise (see Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017 and A History of Debt In The United States).

Federal Spending and Debt

As defense spending (including Veterans Benefits and Services) rose during World War II non-defense spending (Education, Training, Employment, Social Services, Health, Income Security, Social Security, Energy, Natural Resources, Environment, Commerce, Housing Credit, Transportation, Community and Regional Development, International Affairs, General Science, Space, Technology, Agriculture, Administration of Justice and General Government) fell as a percentage of total federal outlays.  And the federal debt rose (federal debt is in constant 2012 dollars).  After the war defense spending fell to 50% while the percentage of non-defense spending rose.  And the federal debt dropped slightly and remained relatively constant for about 30 years.

This tug of war between defense spending and non-defense spending is also called the guns vs. butter debate.  Where those in favor of spending money on guns at the federal level are more constructionists.  They want to follow the Constitution as the Founding Fathers wrote it.  While those who favor spending money on butter at the federal level want to buy more votes by giving away free stuff.

Defense spending ramped back up for the Korean War and the Cold War during the Fifties.  After the armistice ended hostilities in Korea defense spending began a long decline back to about 50% of all federal outlays.  Where it flattened out and rose slightly for the Vietnam War.  After America exited the Vietnam War defense spending entered a long decline where it dropped below 30% of all federal outlays.  Reagan’s defense spending raised defense spending back up to 30%.  After Reagan won the Cold War Clinton enjoyed the peace dividend and cut defense spending down to just below 20%.  After 9/11 Bush increased defense spending just above 20% of all federal outlays where it remains today.

During this time non-defense spending was basically the mirror of defense spending.  Showing that they decreased defense spending over time to increase non-defense spending.  But there wasn’t enough defense spending to cut so borrowing took off during the Reagan administration.  It leveled off during the Clinton administration as he enjoyed the peace dividend after the defeat of the Soviet Union in the Cold War.  Non-defense spending soared over 70% of all federal outlays during the Bush administration.  Requiring additional borrowings.  Then President Obama increased non-defense spending so great it resulted in record deficits.  Taking the federal debt to record highs.

So is defense spending the cause of our deficits?  No.  Defense spending as a percentage of all federal outlays is near a historical low.  While non-defense spending has soared to a record high.  As has our federal debt.  Clearly showing that the driving force behind our deficits and debt is non-defense spending.  Not defense spending.  Nor is it because we’re not taxing people enough.  We’re just spending too much.  In about 50 years non-defense spending rose from around 22% of all federal outlays to 74%.  An increase of 223%.  While defense spending fell from 76% to 22%.  A decline of 245%.  While the federal debt rose 619%.  And interest on the debt soared 24,904%.  The cost of favoring butter in the guns vs. butter debate.  The federal government has been gutting the main responsibility of the federal government, defense, to pay for something that didn’t enter the federal government until the 20th Century.  All that non-defense spending.  Which doesn’t even include the postal service today.

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Guns vs. Butter

Posted by PITHOCRATES - February 11th, 2013

Economics 101

When Children get their Allowance their Faces light up as they Think of all that Spending they’ll Do

Parents try to teach their kids to be responsible.  And to understand that they are not rock stars.  They can’t have “everything all the time.”  Because if you can you get bored.  And look for new ways to kill that boredom.  Like developing a coke habit.  (“There were lines on the mirror, lines on her face.”  Life in the Fast Lane.  The Eagles.)  Which is bad.  Very, very bad.  So this is where a weekly allowance comes in.  It teaches kids to be responsible.  And to budget their wants.  To make choices.  If they want more of one thing they learn they have to have less of another.  This is economic reality.  And the sooner they learn it the better off they will be.

So what does a kid want?  Food, candy, games, toys, comic books, going to the movies and consuming a lot of concession food and drinks.  And other stuff.  What does a parent want?  Their kids not to want so much of these things.  And not to whine.  Especially that.  They also want them to learn the importance of saving money.  To spend less and save more.  So later in life should they lose their job they will have savings to live on while they look for another job.  Without having to move back home.  So they may give a child an allowance of $100 a week.  Telling that child it’s for those things they want.  And for putting a little in the bank every week.  So they can have some money for later.  During a time they really need it.  And when the child gets that $100 his face lights up.  Thinking of all that spending he’s going to do.  While thinking nothing about saving.

Kids Allowance and Budget

The parent watches with proud satisfaction as their child budgets his wants.  For 5 weeks he pays for his school lunch.  Spends a fixed weekly amount on candy.  When he wanted to spend more on games, toys and comic books he cut back spending on movie night.  Even not going to the movies at all in Week 4 because he chose instead to buy an expensive game.  The parents are happy to see their child live within his budget.  But are disappointed that he spent all of his allowance without putting any of it in the bank.

With this Easy Credit he soon realizes that he can have Everything all the Time

Then the parents divorce.  The mother remarries.  The new stepdad really wants his stepson to like him.  While he is bitter about his parents’ divorce.  The stepdad keeps the same allowance structure in place.  But in a desperate attempt to get him to like him he is more than willing to make advances on his allowance.  Loaning money easily.  But charging interest.  To continue the lesson of responsibility.

Kids Allowance and Budget with Deficits

With easy credit and wanting more toys the stepson borrows money in Week 2.  $10.  And buys more games and toys.  Paying $1.10 for the allowance advance.  Liking the ability to buy more at the toy store he goes back for another loan in Week 3.  This time $20.  Paying $3.42 in total interest charges at the end of the week.  Losing the lesson of living on an allowance he goes back to borrow more.  This time $30.  Paying $7.10 in total interest.  With this easy credit he soon realizes that he can have everything all of the time.  And in Week 5 he borrows $40.  With his interest on the outstanding balance adding up to $12.28.  Which is almost enough to buy his school lunches for a week.

At the end of Week 5 he owes $100 in allowance advances.  Which he will have to eventually pay back.  Seeing how irresponsible the child got the stepdad refuses future allowance advances.  Upset the kid starts whining.  A lot.  Annoyed the stepdad calls in the loan.  He gives the child his $100 weekly allowance.  And then takes it back.  The child whines more.  For he can’t buy anything that week.  Not even school lunch.  Having to brown-bag it.  A peanut butter sandwich and an apple.  Making pizza day a living hell.  For he has no savings to live on during this difficult time.  As he was a spendthrift with his money.  Ignoring the sage advice of his parents to save for a rainy day.  So he suffers the most painful time of his life.  Extreme austerity for a week.

When they can’t reduce Defense Spending anymore they simply Borrow Money to keep Spending

This example is similar to how the federal government works.  The taxpayers are the kids.  And the stepdad are the politicians in the federal government trying to make taxpayers like them.  So they keep voting for them.  Only the politicians don’t want the people to learn to be responsible.  To budget their wants.  To understand that if they want more of one thing that they have to have less of another.  No.  They want them to believe they can have everything all of the time.  If only they vote for them.  How can they do this?  Unlike a parent the federal government can print money.  Making it the best stepdad in the world.

One of the reasons the Founding Fathers created the federal government was to provide for a common defense.  After winning their Independence they couldn’t get the British to leave our soil.  Or prevent the Barbary pirates from capturing our merchant ships and selling our sailors into slavery.  The new federal government was to provide a military force to protect Americans.  The Founding Fathers wrote this into the Constitution.  What they didn’t write into it was all the social spending we see today.  Often at the expense of defense spending.  The great political debate of how to divvy up spending between defense and the social stuff we see today is the guns vs. butter debate.  Where strict constructionists wanting to keep spending per the intent of the Founding Fathers.  All guns and no butter.  The ‘butter’ being an issue for state governments.  While progressives and liberals want all butter and no guns.  Because they hate the military.  And think they can talk to our enemies and make them like us.  Most other people want something in between.  As shown by  this graph.

Gunds vs Butter

If you spend 80% on guns that only leaves 20% for butter.  If you spend 50% on guns that leaves 50% for butter.  If you only spend 20% on guns that leaves 80% for butter.  And so on.  Progressives and liberals want to move as far to the left on this graph as possible.  Because the farther left they go the more they please their stepchildren.  Who become accustomed to all that spending.  And show their appreciation by continuing to vote for their stepdad.  Of course they can’t reduce defense spending to 0% because there are people out there who hate us and want to hurt us.  So when they can’t reduce defense spending anymore they simply borrow money to keep spending.  So they can keep spoiling their stepchildren.  Whose faces light up when they think about all the spending they are going to do.  With the added benefit that they will never have to repay that spending.  Or learn economic reality.  Until, that is, the government gets so overextended they have to implement a little austerity of their own.  Only it won’t last a week like it did for that spoiled child.  Instead it will be more like it was in Greece.  It will last years.  And include some rioting.

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2012 Endorsements: JFK and Ronald Reagan

Posted by PITHOCRATES - October 31st, 2012

2012 Election

JFK did all the Democrat things to Stimulate the Economy out of Recession but none of it Worked

John Fitzgerald Kennedy (JFK) was a Cold War warrior.  Not to mention a World War II combat veteran.  He warned Nikita Khrushchev that any Soviet interference with U.S. access to West Berlin (located behind the Iron Curtain in East Germany) would be an act of war.  Which meant a nuclear war with the USSR.  The Soviets responded by building the Berlin Wall between East and West Berlin.  Blocking free passage between East and West.  JFK authorized the Bay of Pigs Invasion to topple the Soviet-backed Castro government in Cuba.  The invasion failed for the lack of air support.  Castro feared another US invasion.  Shortly thereafter the Soviets installed intermediate-range ballistic missiles in Cuba.  To counter US missiles placed in Turkey.  Once discovered JFK ordered a quarantine of Cuba.  A US naval blockade.  Leading to the Cuban Missile Crisis.  And the closest the US and the USSR ever came to all out nuclear war.  Khrushchev and JFK finally resolved the crisis.  Khrushchev agreed to remove their missiles with a public US guarantee that they would never invade Cuba.  And a private promise to remove those US missiles from Turkey.

JFK sent the Special Forces to South Vietnam to stem the spread of communism in Southeast Asia.  He also initiated the coup that toppled the government of Ngo Dinh Diem (though he did not call for his assassination).  Leading to America’s long involvement in the Vietnam War.  And Kennedy’s Secretary of Defense helped make all of this military action possible.  Robert McNamara.  One of the ‘Whiz Kids’ who helped to rebuild the Ford Motor Company.  And he ran the Department of Defense like he ran Ford.  By the numbers.  He made it more efficient.  Saving a lot of money from the existing budget.  While JFK added an additional $8 billion (about $58 billion in 2011 dollars) of defense spending.  Paying for a lot of the weapons a Cold War warrior needed.  However, he was still concerned about the size of the deficit.  So JFK also included some domestic spending cuts to help offset the increases in defense spending.  But it wasn’t enough.  He had a deficit.  Worse, he had a recession.

JFK did all the Democrat things to stimulate the economy out of recession.  Typical Keynesian economics stuff.  Government spending.  And keeping interest rates artificially low.  But it wasn’t working.  One of the problems was that Keynesian stimulus just doesn’t work.  But another problem was the baby boom following the war.  Who grew up and were looking for jobs in the Sixties.  That just weren’t there.  He needed some really solid economic growth to create those jobs.  And for that he turned to supply-side economics.  What we would later call Reaganomics.  He created a more business-friendly environment.  He offered businesses tax credits for investments in new machinery and equipment.  He accelerated depreciation schedules, allowing businesses to expense their assets more quickly.  Which encouraged investment into new assets.  And he proposed tax cuts on both business AND personal income.  It worked.  Unleashing an economic boom that lasted until 1966.

When Reagan entered Office he did what JFK did and created a Business-Friendly Environment

Ronald Reagan was a Cold War warrior.  While President Carter pursued a policy of detente with the Soviet Union Reagan’s policy was more in keeping with JFK’s policy.  He called the Soviet Union the Evil Empire and pursued a goal of destroying it.  And like Kennedy he built up a strong military.  Reagan invaded Grenada when hard-line communists overthrew a moderate socialist government.  While there were Cuban construction workers and military personnel building a 10,000 foot reinforced runway.  Which would be handy for the Soviets to use in their Central American activities.  Which Reagan also opposed in Nicaragua.  As he helped the Mujahideen resist the Soviets in Afghanistan.  Reagan revived the Carter-canceled B-1 Lancer bomber program.  He introduced the MX intercontinental ballistic missile program.  And when the Soviets deployed SS-20 intermediate-range ballistic missiles Reagan deployed Pershing medium-range ballistic missiles in West Germany.  Then he took it up a notch and introduced a strategic ballistic missiles defense system.  The Strategic Defense Initiative (SDI).  When Reagan gave a speech at the Berlin Wall’s Brandenburg Gate with Mikhail Gorbachev in attendance he said, “General Secretary Gorbachev, if you seek peace, if you seek prosperity for the Soviet Union and Eastern Europe, if you seek liberalization, come here to this gate! Mr. Gorbachev, open this gate! Mr. Gorbachev, tear down this wall!”

The Soviets couldn’t keep up with the spending as their command economy was a mess.  It was a different story in America.  In fact, it was Morning in America.  Not only did the Americans spend the Soviets to the brink of collapse they did that in what those on the Left call the Decade of Greed.  Because economic times were so good there was excessive materialistic consumption.  So while the Soviets stood in line for soap and toilet paper the Americans enjoyed Sony Walkmans, CD players, VCRs, new cars, big houses and all the delicious food you could eat.  Americans had a weight problem.  While the Soviets had a malnutrition problem.  The Soviet Union would collapse about 3 years after Reagan left office.  George H. W. Bush, Reagan’s vice president, having the honor to be in office at the end of the Soviet Union.

Like JFK Reagan also had a recession.  As he entered office following the disaster of the Carter presidency.  Carter did all of the Keynesian stuff like JFK.  Using inflation to try to end unemployment.  Which only gave the nation high inflation and high unemployment.  Stagflation.  And malaise.  But unlike JFK Carter refused to try something different when it didn’t work.  When Reagan entered office, though, he did what JFK did.  He created a business-friendly environment.  That included tax cuts.  Tax cuts that stimulated economic activity.  So much economic activity that federal tax receipts went up even though tax rates went down.  So Reagan’s deficits weren’t a revenue problem.  They were a spending problem.  Much like they are today.  Much like they always are.

If JFK and Ronald Reagan were Alive Today they would likely Endorse the Republican Candidates Mitt Romney and Paul Ryan

The attacks on 9/11 didn’t just happen.  It was the last in a chain of events.  There was the 1993 World Trade Center Bombing.  The New York City Landmark Bomb Plot (1993).  The Khobar Towers Bombing (1996).  The United States Embassy Bombings (1998).  The Millennium Attack Plots (2000).  The USS Cole Bombing (2000).  Then 9/11.  Until 9/11 we treated all of these events as criminal offences.  Not acts of war.  While Osama bin Laden and his al Qaeda acted from the start as if they were fighting a war.  Not breaking the law.  President Obama is also reluctant to call these radical Islamist attacks war.  When a radical Muslim in the US Army killed fellow soldiers on an Army base because of America’s ‘crimes against Islam’ the president called that workplace violence.  And when an American ambassador asked for additional security in Benghazi someone in the Obama administration denied the request because President Obama had killed Osama bin Laden.  And defeated al Qaeda.  Having to beef up security to defend against a growing al Qaeda presence, though, would have gone against that narrative of defeating al Qaeda.

The current so-called economic recovery is about the weakest on record.  Despite doing the normal Keynesian things to revive the economy.  Including an almost trillion dollar stimulus package.  Leading to record deficits.  Money the government had to borrow.  Borrowing which required an increase in the official debt ceiling.  This excessive debt and government spending cause the first downgrade of US sovereign debt.  All of this to fix the economy.  Only the economy is not fixed.  And the people who can’t find a full time job holds steady at 14.7% (U-6 unemployment rate).

So if JFK and Ronald Reagan were alive today who would they support in the 2012 election?  Who would a couple of Cold War warriors who risked nuclear war to protect the United States support?  These practitioners of supply-side economics who brought their economies out of recession to record economic growth?  Probably not the candidates foolishly hanging on to failed Keynesian policies despite a real unemployment rate of 14.7%.  Or the ones refusing to accept that we are still being targeted and killed by al Qaeda and other radical Islamist elements in the ongoing War on Terror.  No.  If JFK and Ronald Reagan were alive today they would likely endorse the Republican candidates Mitt Romney and Paul Ryan.

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President Obama is “the Best Food-Stamp President in American History”

Posted by PITHOCRATES - October 21st, 2012

Week in Review

Newt Gingrich called President Obama “the best food-stamp president in American history.”  Because, Gingrich said, President Obama has spent more on food stamps than any other president.  Supporters of the president have attacked Gingrich’s comments.  Calling them untrue.  And racist.  So is Newt Gingrich a lying racist?  Or is President Obama the “the best food-stamp president in American history?”  All we can do is look at the numbers (see Report: Welfare government’s single largest budget item in FY 2011 at approx. $1.03 trillion by Caroline May posted 10/18/2012 on The Daily Caller).

The government spent approximately $1.03 trillion on 83 means-tested federal welfare programs in fiscal year 2011 alone — a price tag that makes welfare that year the government’s largest expenditure, according to new data released by the Republican side of the Senate Budget Committee…

The data excludes spending on Social Security, Medicare, means-tested health care for veterans without service-connected disabilities, and the means-tested veterans pension program…

CRS reports that food assistance programs — the third largest welfare category behind health and cash assistance — experienced the greatest increase in spending, with 71 percent more spending in 2011 than in 2008. The agency explained that this spending increase was largely due to the growth in the Supplemental Nutrition Assistance Program, or food stamps.

Well, apparently President Obama is “the best food-stamp president in American history.”  At least, based on his 71% increase in food assistance programs spending.  Where most of the increase in spending came from food stamps.  So it would appear that Newt Gingrich is not a lying racist.

Total 2011 defense spending (military defense, veterans, foreign military aid and foreign economic aid) was $964.8 billion according to us government spending.  Or $0.9648 trillion.  Which is less than $1.03 trillion in spending on means-tested federal welfare programs.  Now here’s an interesting side note.  The Constitution calls for defense spending.  While it doesn’t call for any welfare spending.  So this is quite the deviation from our Founding.  And one the Founding Fathers would probably not approve of.  As you can enrich some defense contractors with that defense spending.  But you can’t buy a lot of votes with it.  Not like the votes you can buy by giving people lots and lots of free stuff.   And $1.03 trillion can buy a lot of stuff.

When you have an economic record that is an abject failure you can’t run on your record.  Because most people are not better off after 4 years of President Obama.  Unless, of course, they got some of that $1.03 trillion in additional federal spending.  Which is about all a failed presidency can hope for.  Grateful benefits recipients.  As long as there are enough of them.  And when you increase some federal spending by $1.03 trillion there just may be enough of them.

One final note.  We’ve had trillion dollar deficits in each of President Obama’s 4 years in office.  Deficits that we had to finance by borrowing from China.  Excessive spending and borrowing that caused the first credit downgrade in US history.  All, it would appear, to create more grateful benefits recipients to help with the president’s reelection.  Because his 4 years in office have been an abject failure.  With his only success being the expansion of the welfare state.  Leading to the aforementioned credit downgrade.  And a bleak future of a new normal.  High unemployment.  Low GDP growth.  High taxes.  Stagflation.  And Malaise.

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Fiscal Policy

Posted by PITHOCRATES - February 6th, 2012

Economics 101

The Constitutional Convention in Philadelphia (1787) was about Money and Unity at the National Level 

Once upon a time in America federal taxes were small.  As was federal spending.  The Constitution called for little.  The only big ticket items being an army and a navy.  To protect the new nation.  But Americans didn’t like paying taxes then any more than they do now.  There wasn’t even a federal income tax until the 16th Amendment (1913).  So even maintaining an army and a navy was difficult.  Which led to a lot of problems.  For a nation that couldn’t protect herself got pushed around in the rough and tumble world.  And the U.S. took its share of swirlies and wedgies in her infancy.  Figuratively, of course.

Just as kings needed money to maintain their kingdoms, the Americans needed money to maintain their new nation.  Which was the point of the Constitutional Convention in Philadelphia (1787).  It was about the money.  And unity.  Which the new nation (that just gained its independence from Britain) had little of.  So we got a new constitution.  And a new nation.  And the federal taxing and spending began.  Which was small at first.  Too small for Alexander Hamilton.  But far too much for Thomas Jefferson.  In fact, Jefferson thought any federal spending above zero was too much.  And when he was president he slashed government spending.  To the point that it hurt the safety of the United States.  But he also bought the Louisiana Territory.  And used the Navy and the Marine Corps to protect American interests abroad.  These two items alone required enormous amounts of federal spending.  And borrowing.  Another thing Jefferson was dead set against.  And we’re talking sums of money that not even Alexander Hamilton had proposed.  Yet here was Jefferson, the limited-government president, spending and borrowing unlimited funds. Being more Hamilton than Hamilton himself.

Of course, things change.  Even for Jefferson.  The Louisiana Purchase was a deal that no president should have passed up.  Thankfully, Jefferson took that opportunity to more than double the size of the United States.  Without a war.  Unlike Napoleon who was conquering Europe.   But he was burning through money.  And he needed money more than he needed the Louisiana Territory.  Hence the Louisiana Purchase.  Which turned out to be quite the bargain in the long run for the U.S.  And the antimilitary Jefferson flexed America’s might by teaching the Barbary pirates a lesson.  By deploying the U.S. Navy and Marines to the Shores of Tripoli.  The first U.S. victory on foreign soil.  Giving the U.S. respect.  And a cessation of those swirlies and wedgies.

Keynesian Stimulus Spending may lessen the Severity of Economic Recessions

These things cost money.  And the lion’s share of the federal budget was defense spending.  Per the Constitution.  For that was one of the main things the several states could not do well.  Maintain an army and a navy.  Because they needed unity.  One army.  And one navy.  To protect one nation.  So the states and their people could pursue happiness without foreign aggressors molesting them.  So this is how federal spending began.  But you wouldn’t know it by looking at fiscal policy today.

Fiscal policy is the collection of policies that government uses to tax and spend.  But it’s more than just defense spending these days.  Federal spending had grown to include things from business subsidies to Social Security to Medicare to food stamps to welfare to income redistribution to farm subsidies.  And everything else you can possibly imagine under the sun.  None of which was included in the Constitution.  Because neither Jefferson nor Hamilton would have agreed to these expenditures.  But it doesn’t end with this spending.

Fiscal policy also ‘manages’ the economy.  Or tries to.  By trying to maintain ‘full employment’.  Which means they adjust tax and spend policies so that anyone who wants a full time job can have one.  Based on Keynesian economics.  And the business cycle.  The business cycle is the cyclic economic transitions between economic expansions and contractions.  The inflationary and recessionary boom-bust cycles.  No one likes recessions.  Because people lose their jobs.  And have to get by on less money.  So Keynesian economists say to lessen the severity of recessions the government can take action to stimulate economic activity.  They can cut taxes.  Because when people pay less in taxes they have more disposable income to spend on economic activity.  Which they say will keep people from losing their jobs.  And create new jobs.  Or the government can spend money.  Picking up the slack from consumers who aren’t spending money.  Thus saving and/or creating jobs.  Which stimulus depends on the political party in office.  In general, Republicans favor tax cuts.  And Democrats favor spending.

All Keynesian Stimulus Spending is Deficit Spending

But it’s not as simple as that.  Because during recessions tax revenues fall.  When people earn less they pay less in taxes.  Far less.  Especially if an interruption in their income puts them into a lower tax bracket.  And if you run through all of your unemployment benefits, it will.  So there’s more to economic stimulus than meets the eye.  For to stimulate a government must borrow money.  Or print money.  Because all stimulus spending is deficit spending.

Keynesians say this deficit spending is not a problem.  Because once the stimulus turns the economy around there will be plenty of new tax revenues to pay back the money they borrowed.  But that rarely happens with a tax and spend government.  Because they like to spend.  As is evident by the ever increasing federal debt.  And when they get more tax revenue they spend that tax revenue.  On anything and everything you can possibly imagine under the sun.  Often times cutting defense spending to help pay for all that other spending.  Despite defense spending being one of the few things enumerated in the Constitution.

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