Higher Taxes Won't Reduce the Deficit

Politicians claim we need to raise taxes to reduce the deficit, but history shows that higher taxes have always lead to even higher spending.

In the late 1980s, one of us, Richard Vedder, and Lowell Gallaway of Ohio University co-authored a often-cited research paper for the congressional Joint Economic Committee (known as the $1.58 study) that found that every new dollar of new taxes led to more than one dollar of new spending by Congress. Subsequent revisions of the study over the next decade found similar results.

We've updated the research. Using standard statistical analyses that introduce variables to control for business-cycle fluctuations, wars and inflation, we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more.

The only option left is to cut spending, but we already knew that, didn't we?

Walking the Walk

Politicians in Washington are great at talking the talk. It gets them elected, it gets them soundbites on TV news, and it convinces their constituents to continue supporting them.

But now it is time to walk the walk. The conservative swing in this year's election has been an indictment of overspending in Washington. The Tea party formed in direct response to corporate giveaways and budget busting entitlements. The mission for Congress this session is clear:

CUT SPENDING.

And now it is time for them to walk the walk. It is easy for a conservative to call for lower taxes and spending, but the process of actually cutting things from government is anything but simple. It will be an uphill battle with deep political consequences. Nobody wants to lose their access to the Federal Gravy Train. But it must be done.

So let's do it.

Government Debt Kills Small Business

The following was written by a small business man in Georgia.

Most of y'all know I own some bars, but my main business is a company I own that leases pool tables, video games, slot machines,etc. to other bars and restaurants all around the state.

I have never really had a beef with the license I have to buy or the fees I have to pay, until today.

Little history:
Every Jan.1st I purchase a license that allows me to lease video games to other businesses. This license costs me $7500 plus $25 for every piece of equipment I have on location. So normally every Jan. I have to pay around $17,500 to the state to acquire a new license.

Well my state is $2.5 billion in the hole this year. So in their wisdom, they decided they could make up the shortfall by raising the license cost and fees associated with coin op arcade games and pool tables AND by CANCELLING ALL CURRENT LICENSES EFFECTIVE JULY 1, and making you re-apply and pay a higher rate, A MUCH HIGHER RATE.(Nevermind that I have already paid for a license to run from Jan.1 2010- Dec 31 2010)

In order to stay in business, I have to come up with almost $60,000 in 3 weeks. The license increased to $10,000 and $125 per piece of equipment. Every license holder in the state has until 8.15.10 to pay it or go out of business.(also, the location now has to apply for a location license and pay $125 per piece of equipment they have in their establishment).So basically, the license fee went from $25 per machine, to $250 per machine. And it takes a LONG TIME to make $250 on a Golden Tee, etc.

And it doesn't just hurt my company, it hurts the consumer...because all locations where my profit is marginal, I will be pulling equipment, leaving that bar or restaurant with no entertainment....and noone else will be coming in to bring them more games, because if it was not profitable for me to keep my equipment there, it is not profitable for anyone else. So those small bars and restaurants will have to close also. Pool tables and arcade games do not make a lot of money, and once you factor in that the first $250 it makes has to go to the state, then you realize this business just got put out of business by the state.

Liberals wonder why deficit hawks like myself are so worried about government debt. It's because when the government runs out of money, I know where they go to look for more: your ass.

So if your ass is barely scraping by, and the government runs out of money, the government will take your ass to the cleaners. This is not theoretical or sensationalized, this is simple fact.

So enjoy your ObamaCare and your unemployment checks while they last, but remember where the government will knock when the bill comes due.

The Economy is Fucked: In Graph Form

We all know the economy is bad, so I'm not shattering any illusions. But the bad news is that its getting worse, especially for those most deeply affected: the unemployed.

This is a graph of the median length of unemployment for those looking for work, and it stands at nearly 5 months. So half of all those looking for jobs have been looking for over 5 months--and they aren't finding anything.

The government likes to release its unemployment statistics, and their current number is 9.3%, which gives a much rosier picture of the situation than truly exists. Like any good statist government, they have to massage the unemployment numbers to make it look like they are doing a good job, even when they aren't.

The real unemployment picture is much darker.

This graph shows the ratio of non-government jobs to the population as a whole, basically how many jobs per capita. This ratio is a true measure of unemployment, as it accounts for those who have given up looking for work or for other reasons aren't counted. You have to go back to before my birth (1985) to see a worse time to find a job in America.

Of course, I don't want to be overly dramatic, there is one sector of our economy that is doing quite well, and appears unfazed by the economic destruction taking place. That sector would be the government.

Despite its crumbling tax base, our government is having no problem steadily adding jobs, and putting an increasing strain on those who can still find work in the private sector. While our economy is taking a hacksaw to jobs, our government is happy to continue piling them on. This would be great, if it wasn't for the fact that the rest of us have to pay for those jobs. These government jobs aren't creating wealth and they aren't helping the recovery. In most cases, government jobs destroy wealth, and that's the last thing we need right now.

But why, you may ask, is the economy struggling so much? What makes today different from yesteryear? That is a question with many answers.

First, too much bureaucracy. Our economy and employment live and die on small businesses. If entrepreneurs have to fill out a thousand documents and apply for a thousand permits before they can open up a new small business, they may not even try. It isn't worth it to start a business, especially in this economic climate. The problem goes much further than this, of course, but fixing this would be a start.

Instead, Obama has added even more complexity and paperwork to the already overburdened businessman with the health care bill. He simply doesn't understand that paperwork can slow economic growth, or even set it backwards.

Second, too much uncertainty. Our government has never taken such direct control of our economy. It would be tolerable if that control was producing results, but it isn't. Instead, our economy must constantly adjust to the trillion dollar whims of Congress or the Fed, and this constant adjustment means no one can possibly plan and invest for the future. Without this investment, our economy stagnates and sheds jobs, waiting out the turbulence so it can start investing again.

With trillions in bailouts saving huge companies from their own mistakes, the laws of economics no longer apply. Companies are waiting for bailouts, or sitting tight and waiting for the economic picture to make sense, but either way they aren't expanding and adding jobs.

Third, too much debt. Our government is running up debt like a psychopathic teenager with a credit card. Our leaders have ignored the consequences of a debt based economy for decades, and now those consequences are upon us. We spend nearly a half a trillion on interest for our national debt every year. We have now taken on the debt of Fannie Mae and Freddie Mac, which totals into the tens of trillions of dollars. That isn't even counting our un-paid-for obligations to Social Security, Medicare, ObamaCare, and, oh yeah, Two Wars.

Business leaders are not blind. They see this massive debt obligation, and they know it means at least one of two things: Much higher taxes, Drastically cut government services, or Both. Either way, this is perhaps the worst time to start a business in the history of this country. Even if you can eke out a living, or if you're lucky a profit, you can be assured that most if not all of your success will be soon taxed away by our spendthrift government.

Congress, seeing the desperate situation and the looming mid-term elections, have passed another round of unemployment benefits. I liken this to attempting to bail out a sinking ship with a coffee mug. You might buy yourself a minute or two, but the ship is still going down.

The Evolution of Thought

The following are four quotes from founding father Thomas Jefferson on the nation's credit and the wisdom of borrowing money.

"Though much an enemy to the system of borrowing, yet I feel strongly the necessity of preserving the power to borrow. Without this, we might be overwhelmed by another nation, merely by the force of its credit." --Thomas Jefferson to the Commissioners of the Treasury, 1788. ME 6:423

"I am anxious about everything which may affect our credit. My wish would be, to possess it in the highest degree, but to use it little. Were we without credit, we might be crushed by a nation of much inferior resources, but possessing higher credit." --Thomas Jefferson to George Washington, 1788. ME 6:453

"Though I am an enemy to the using our credit but under absolute necessity, yet the possessing a good credit I consider as indispensable in the present system of carrying on war. The existence of a nation having no credit is always precarious." --Thomas Jefferson to James Madison, 1788. ME 6:455

"I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government; I mean an additional article taking from the Federal Government the power of borrowing. I now deny their power of making paper money or anything else a legal tender. I know that to pay all proper expenses within the year would, in case of war, be hard on us. But not so hard as ten wars instead of one. For wars could be reduced in that proportion; besides that the State governments would be free to lend their credit in borrowing quotas." --Thomas Jefferson to John Taylor, 1798. ME 10:64

In 1788, Jefferson saw credit as a tool to be used sparingly in times of crisis, especially when other nations use their large credit lines against us to build armies and make war. He felt borrowing money was a necessary evil, and thought that a nation should work hard to preserve a good credit rating.

By 1798, his thoughts had evolved to the point where he no longer thought government could be trusted with the power to borrow. He realized that credit allowed government to run wild, and place its population in untenable situations, most importantly war. He felt so strongly that he wished for a constitutional amendment to strip the power to borrow from our federal government.

Jefferson foresaw what could happen to a nation who's government had access to credit. Our wars in Iraq and Afghanistan have been conducted totally on the national credit card. Thousands of American soldiers have lost their lives in these wars, and many more permanently injured. The cost of these wars has significantly expanded our national debt, placing our nation at the mercy of the financial system, which as we have all learned is a complete disaster.

If can learn anything from the current Greek debt crisis, as well as America's own experience, its that governments can and will borrow a nation past the breaking point. Whether it is done for social programs or to conduct senseless wars, government's national tendency is towards debt, which is passed on generation to generation, weakening our nation and our economy, and enslaving us all through our system of credit.

Obama's Debt "Reduction" Panel

I already called BS on this debt commission, and the more I learn about it the more certain I am that I was right.

The commission is scheduled to make its report by Dec. 1, about a month after the midterm elections. It is charged with recommending ways to reduce the deficit in the fiscal year 2015 to the equivalent of 3 percent of the gross domestic product or less — nearly a percentage point smaller than it is now projected to be in that year. The panel is also to recommend long-term changes in taxes and spending for the major entitlement programs — Medicare, Medicaid and Social Security — whose expected growth is the biggest factor in the deficit forecasts.

This horseshit commission isn't worth the expensive chairs I'm sure they're sitting in. They aren't even trying to balance the budget or decrease our debt, they just want to grow the debt more slowly. Thanks for nothing assholes.

I'm sure their solution will be to raise taxes. After all, comrade Obama has just saddled the American people with the Health Care bill, which we will be paying for long after we're dead. Fantastic.

Are we cutting Medicare? No, we're expanding it. Are we cutting Social Security? Yeah right, old people vote. Are we cutting the Military? Fat chance, we have to build new bombs to replace our old bombs, oh and we put more people in Afghanistan, oh and that Iraq thing is still going on.

Also, notice the scheduling of the commission's report--AFTER the elections. They know the report will be ugly, because once the rest of America wakes up to the giant pit we've dug for ourselves, they will be just as mad as I am right now.

Fuck it. I'm beginning to believe that the only way out is to spend all our money, then max out all our credit cards, until no one else will lend us money and all our checks start bouncing. Because until then, nothing will change.

Financial Reform is a Cruel Joke

Obama is gearing up for another congressional battle, this time over financial reform.

Instituting a system to ensure that “American taxpayers are protected in the event that a large firm begins to fail.”

Imposing the so-called Volcker Rule, named after Paul A. Volcker, the former Federal Reserve chairman who proposed limits on the freewheeling trading and risks taken by banks.

Setting new transparency rules for derivatives “and other complicated financial instruments.”

Assuring “strong consumer financial protections.”

Instituting “pay reforms” to give investors and pension holders “a stronger role in determining who manages the companies in which they’ve placed their savings.”

In many ways, he is trying to protect people from their own bad decisions, which in my opinion makes it more likely that they will make those bad decisions.

Obama is also trying to reign in the derivatives markets that allowed the mortgage backed securites to grow and spread so quickly and so far.

All of this seems logical and fair, however it is not real reform. Financial giants still hold all the cards, because they still have access to the Federal Reserve.

It may interest you to know that banks are currently borrowing from the Federal Reserve at 0.5% interest, then using that money to buy Treasury bills, which pay 3%. You read that correctly. Our government has set up a system whereby banks can make money without lifting a finger using the Fed's money machine.

Why would our government allow this practice? The answer is simple. The Fed prints the money, lends the money to banks, then the banks lend the money to the government via T-bills. The government is borrowing against the dollar, against the wealth of the American people, and they are laundering their dirty deed through banks, while paying a 2.5% premium for the laundering service.

Congress is not interested in real reform, and neither is Obama. The government needs the financial system to work the way it does, because without it, we wouldn't be able to run trillion dollar annual budget deficits. We have given tremendous amounts of power to the financial system, and we are surprised when they misuse that power.

This is not reform, this is shuffling paperwork. Real reform would require reforming or ending the Federal Reserve, but our leaders have no interest in killing the golden goose.

Bernanke Prods Reform in Medicare, Social Security

Fed chief Ben Bernanke finally says what I've been saying for years: Medicare and Social Security are going to bankrupt this country if we don't do something soon.

Mr. Bernanke noted that the economy was still fragile, and he made it clear that he did not expect the federal government to raise taxes or cut spending anytime soon. But he spoke about the budget pressures posed by Social Security and Medicare with greater urgency than he has in the past.

“The arithmetic is, unfortunately, quite clear,” Mr. Bernanke said. “To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above. These choices are difficult, and it always seems easier to put them off — until the day they cannot be put off any more.”

Democrats don't want to cut benefits, and Republicans don't want to raise taxes, but something must be done before it is too late.

Bernanke also commented on the Fed's response to the financial crisis, and added his two cents on financial reform.

“To end ‘too big to fail,’ the new regime should permit regulators to close a failing firm and impose losses on shareholders and creditors,” he said. “Indeed, I would argue that no financial instrument counted as regulatory capital should be allowed to receive any protection from losses.”

He's talking a good talk, but thus far it's only talk. We'll see if he practices what he preaches.

Not Enough Money

Federal tax receipts for 2010 are estimated $2.381 trillion. Obama's budget for 2010 wants to spend $3.55 trillion (plus another $137 billion for the wars). That leaves us $1.3 trillion dollars in the hole.

You read that correctly. One third of our federal government's expenditures this year will be paid for by...

If that wasn't bad enough, we are running a hefty trade deficit. In 2009, we exported $1.553 trillion worth of goods and services. In the same year, we imported $1.934 trillion. That means last year a whopping $380.7 billion left our country.

Taken together, that puts us $1.687 trillion in the hole FOR A SINGLE YEAR. People, that is BAD.

And it's only going to get worse unless we change course NOW.

The Constitution is Dead

Every person elected as President of the United States must recite the following oath.

"I do solemnly swear (or affirm) that I will faithfully execute the office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States."

Every president since FDR has utterly failed to uphold this oath.

Upholding the Constitution's sharp limits on government was once a sacred duty for the men who worked in the oval office, even if that meant making unpopular decisions.

They knew that limiting the scope of the federal government was crucial to the continuation of the American experiment. They knew that turning the federal government into a giant money pool would ultimately destroy the freedoms our forefathers had fought so hard for. They knew that, sometimes, they would have to make the hard choices, even if it meant they would be ostracized.

That is why they took that oath.

President Franklin Pierce’s 1854 veto of a measure to help the mentally ill read, “I cannot find any authority in the Constitution for public charity. [To approve the measure] would be contrary to the letter and spirit of the Constitution and subversive to the whole theory upon which the Union of these States is founded.”

One cannot even imagine a president today vetoing a reading program for the mentally ill. But that is exactly what presidents of the past did, on a regular basis. Our government, by design, was never meant to be a public charity. But that is exactly what it has become.

On the issue of using federal funds to build up infrastructure, something similar to Obama's recent Stimulus Program, President James Madison had this to say:

“Having considered the bill this day presented to me . . . which sets apart and pledges funds ‘for constructing roads and canals, and improving the navigation of water courses, in order to facilitate, promote, and give security to internal commerce among the several States, and to render more easy and less expensive the means and provisions for the common defense,’ I am constrained by the insuperable difficulty I feel in reconciling the bill with the Constitution. . . .”

Madison could find no provision in the Constitution allowing federal infrastructure projects precisely because no provision ever existed. The federal government, as the founders envisioned, was never intended to take on the responsibility of building roadways or transport. In their minds, these were best left to the states.

The definition for what is allowable under our constitution has shifted so much in the last 100 years that today's federal government would be unrecognizable to presidents of the past.

Today, every congressman goes to Washington with his or her hand out, trying desperately to funnel as much money as possible into their districts. This comes in the form of road projects, bridges, government office buildings, financial assistance, tax breaks, etc.

This system has shifted the focus of our lawmakers from good governance to begging. They beg for campaign contributions so that they can go to Washington, D.C. to beg for money to pay back their campaign contributors. Then they must beg for more to keep their constituents happy, so that they can win another election and beg for more. This cycle is destroying our nation. It is obvious from our ballooning federal debt. And We always want more. But we never want to pay for it.

This is where principled men and women are supposed to stand up and shout "No!" No to stimulus spending! No to health care spending! No to education spending! No to welfare spending!

We want all these things, of course. We think these things will end our reliance on our crappy jobs, or on our crappy economy, we think these things will set us free, free to do the things we really want to do.

But what many do not realize is that these things end up controlling us. Huge swathes of our economy, including millions of jobs, live or die depending on how much our government wants to spend on a particular project.

Our spending through Medicare and on health insurance tax cuts is driving health care prices through the roof, making health care unaffordable to anyone who is not receiving federal benefits.

Our spending on education has centralized control of tens of thousands of schools, millions of teachers, and tens of millions of students into the hands of a few people in Washington, D.C.

Our welfare spending, which we say helps people without jobs, takes money out of the economy, money that could have been used to create jobs for the very people we claim to be helping.

Just Say No

It is time to say "No." If you want special interests out of Washington, remove what is bringing them there: the money. If you want to cut spending and reduce the deficit, you have to remove money. If you want to bring politics back to the state and local level, where you actually have a voice, then you need to take back the money. But it begins by saying "No."

The transition will not be an easy one, but when have Americans ever shied away from a challenge? Living under a paternalistic government is easy, but it quickly builds dependence. And once you are dependent, you are no longer free. We claim we want freedom, but we need the government constantly. We need the benefits it gives us. We have stopped providing for ourselves. Instead we look up to the government, with our hands out. We have given our freedom away, in exchange for convenience.

America was not meant to have a government that cares for you, that picks you up when you skin your knee, that makes you sandwich when you get hungry. Americans are supposed to be brave. We are supposed to take what life gives us, good or bad, and thrive.

America was meant to be the land of opportunity, the land of freedom, the land where you did what you want, and took responsibility for yourself. That is what the founders had in mind when they penned the Constitution 224 years ago. The government was there to protect your freedom to follow your dreams, and little more.

America was not supposed to be easy. It was supposed to be free. We have strayed so far from that ideal that I do not know if we can ever find our way back. But I will try, because I know what must be done. I know what must be done to revive the American spirit, to get back to the ideals upon which this country was founded, to get back the ideals that made this country great.

It starts by saying "No."

This Sounds Awfully Familiar

Obama signs the federal debt commission into existence today with an executive order. I'm not sure why, because Ronald Reagan did the same thing 28 years ago with the Grace Commission, and Congress has yet to take any of the commission's debt reducing suggestions.

I am confident that the latest debt commission will be just as successful as the last one.

Fareed Zakaria: Budget fixes are simple -- and unthinkable

Fareed makes some reasonable points:

If he were to cut spending at this point, the economy would quite likely go into a second recession, a double-dip, and then frankly everything collapses. If you don't have growth, you have no prospect of getting out of this budgetary situation. ... But he must in a year begin really to address the serious issues that make up the budget crisis that we have.

The most significant one is health care costs. ... Obama's health care plan, while it has some cost control measures, is mostly about expansion and adding to the costs. ... There has to be a much, much more serious focus on costs.

The second is a number of sacred cows in the federal budget which are very large but which frankly make no sense. We have a $250 billion a year hole in the federal budget because employers are given a tax deduction for health care plans. This is actually bad for health care, because it is one of the factors that contributes to these out of control costs, because it's an invitation to have inflation in the system.

Fareed has a solid plan for bringing down the deficit, but he is disingenuous about the macro economic effects of doing so. He understands and says that cutting spending would hurt the economy in the short term, but in the next breath he proposes tax increases, which would have almost the same net effect.

Not that I disagree with his proposal, because a little short term pain is going to be necessary. But he should be honest about it, or the pundits and partisans will tear it apart for raising taxes.

[via Raven]

America Jumps the Shark

The Federal government is pulling out all the stops to save our suffering economy, and it's going to send us all to the poor house.

[via Glas]

Senate Health Care Bill Will Bankrupt the US

This bill is a disaster of epic proportions, and will quickly bankrupt the United States.

Our current annual deficit is $1.4 trillion. The latest Health Bill is estimated to cost $871 billion over ten years. However, this hides the true cost as many of the bill's measures do not go into effect until 2014. If one calculates the ten year costs from 2014-2023, the bill's price tag jumps dramatically to $2.5 trillion.

Liberals would like you to believe that the bill will actually reduce the deficit. This relies on nearly half a trillion in Medicare cuts, which even honest liberals will tell you will never happen. Medicare is already underfunded, paying about 80% of what a private insurer will pay, and any further cuts to Medicare will certainly put thousands of doctors out of business.

And what about the ever spiraling cost of health care and insurance premiums? The CBO estimates that individual insurance plans will increase 10-13% over what they would be if we simply did nothing. The bill attempts to cover up these costs with subsidies for around half of those subscribers, which avoids the root problem altogether, and the other half of the individual market will just be stuck with massive, unsubsidized increases.

Prices for health care itself will also skyrocket. Massachusetts has already implemented similar reforms and has seen its health care costs increase much faster than the national average. I don't know if the CBO is even accounting for this form of accelerated inflation, but we will all be paying for it soon.

If you need more proof that costs will rise faster, you need look no further than Econ 101: Supply and Demand. With 31 million new people gaining or being forced to buy insurance, the demand for health care will drastically increase. The supply, however, will not. Any freshman economics major can tell you that when demand increases faster than supply, price goes up.

The brilliant lawmakers in Washington have decided to pay for some of this reform with new taxes in the middle of the worst recession in decades. I do not need to explain how billions in new taxes will hurt our economy, especially those at the bottom. Luckily, we won't have to pay for all of it as much of it will be paid for by borrowing.

China is already asking questions about the solvency of our reform plans, as they will be the ones paying for it. Not only will this bill bankrupt us, it will put us further under China's thumb.

Some of those dollars will not even go to reform. Billions in spending were written in for no other reason than political bribery. Ben Nelson's home state, Nebraska, will get $45 million. For Louisiana, another $100-300 million. For Florida, $5 billion. These votes have been bought and paid for, by which I mean bought by Democratic power players and paid for by you and me, bi-partisanship be damned.

Not only will this health bill bankrupt our nation, it will also trample our rights. Many states are challenging the constitutionality of an insurance mandate, and they are making a strong case.

It's probably why a majority of Americans do not want this reform.

Merry Christmas, America, you're about to get the worst health care reform in history.

Obama Bucks

Found this, thought it was funny.

China: Bow Down To Your Lender

China is now using its role as our lender to influence the terms of our health care reform:

In a July meeting, Chinese officials asked their American counterparts detailed questions about the health care legislation making its way through Congress. The president’s budget director, Peter R. Orszag, answered most of their questions. But the Chinese were not particularly interested in the public option or universal care for all Americans.

“They wanted to know, in painstaking detail, how the health care plan would affect the deficit,” one participant in the conversation recalled. Chinese officials expect that they will help finance whatever Congress and the White House settle on, mostly through buying Treasury debt, and like any banker, they wanted evidence that the United States had a plan to pay them back.

Who would have thought health care reform could become a national security issue?

The Chinese are getting skeptical about our ability to pay them back. Perhaps they will need to teach us a lesson in capitalism, which would be ironic to the max.

Shovel Ready My Ass

The $787 billion dollar Stimulus Bill is doing nothing and I couldn't be less surprised. Take California for example:

Figures from the California Department of Transportation show that, as of late October, over $2 billion in federal highway funds had been allocated to the state when the American Recovery and Reinvestment Act passed in February. Of that sum, only $837 million had been awarded in construction contracts. Even more surprising, only $51 million, or about 2.5 percent of the total, had actually been disbursed. Given all the talk when the ARRA was passed about the many projects that were “shovel ready” and primed for construction, this is perhaps a bit disheartening. After all, this spending was pitched as a way to pump immediate life into a collapsing economy.

The Stimulus is a complete failure. Actually, it's worse than a failure, since it's pushing capital to be invested inefficiently.

We would be better off and in less debt if we had just done nothing.

The Man Who Predicted The Depression

The Great Depression and our current Great Recession were both predictable and preventable, at least if you're Ludwig von Mises:

The 1920s were marked by the brave new era of the Federal Reserve system promoting inflationary credit expansion and with it permanent prosperity. The nerve of this Doubting-Thomas, perma-bear, crazy Kraut! Sadly, poor Ludwig was very nearly alone in warning of the collapse to come from this credit expansion. In mid-1929, he stubbornly turned down a lucrative job offer from the Viennese bank Kreditanstalt, much to the annoyance of his fiancée, proclaiming "A great crash is coming, and I don't want my name in any way connected with it."

We all know what happened next. Pretty much right out of Mises's script, overleveraged banks (including Kreditanstalt) collapsed, businesses collapsed, employment collapsed. The brittle tree snapped. Following Mises's logic, was this a failure of capitalism, or a failure of hubris?

Mises's solution follows logically from his warnings. You can't fix what's broken by breaking it yet again. Stop the credit gavage. Stop inflating. Don't encourage consumption, but rather encourage saving and the repayment of debt. Let all the lame businesses fail—no bailouts. (You see where I'm going with this.) The distortions must be removed or else the precipice from which the system will inevitably fall will simply grow higher and higher.

The system we have today is destined for failure. Our government thinks it can just do more of the same and achieve a different result.

With interest rates at zero, monetary engines humming as never before, and a self-proclaimed Keynesian government, we are back again embracing the brave new era of government-sponsored prosperity and debt. And, more than ever, the system is piling uncertainties on top of uncertainties, turning an otherwise resilient economy into a brittle one.

The take away from all this? Stay out of the stock market.

Millionaires in Congress

A new report finds that of the 535 members of Congress, 237 of them are millionaires.

That’s 44 percent of the body – compared to about 1 percent of Americans overall.

CRP says California Republican Rep. Darrell Issa is the richest lawmaker on Capitol Hill, with a net worth estimated at about $251 million. Next in line: Rep. Jane Harman (D-Calif.), worth about $244.7 million; Sen. Herb Kohl (D-Wis.), worth about $214.5 million; Sen. Mark Warner (D-Va.), worth about $209.7 million; and Sen. John Kerry (D-Mass.), worth about $208.8 million.

I find it hopelessly ironic that the 5 4 of the 5 richest people in Congress are Democrats. I guess I shouldn't be surprised.

It's funny how the people most able to directly help the poor refuse to do so, and instead wish to pass the check to taxpayers. Hey Kerry, instead of supporting this draconian health reform, why not use a few thousand dollars and buy insurance for a poor family?

But that's not even the best part:

Some lawmakers have profited from investments in companies that have received federal bailouts; dozens of lawmakers are invested in Wells Fargo, Citigroup, Goldman Sachs and Bank of America.

I'm sorry, but HOW THE FUCK IS THIS LEGAL? This country is being bankrupted so our "representatives" can profit on their investments? This is torch and pitchfork stuff here.

This only reaffirms my belief that government debt is bad, and government involvement in the marketplace is worse.

[Politico via rastian77]

Facts About Health Spending

America spends more than any other country on health care, and this spending rises every year. So here's a breakdown of our National Health Expenditure (NHE).

• NHE grew 6.1% to $2.2 trillion in 2007, or $7,421 per person, and accounted for 16.2% of Gross Domestic Product.
• Medicare spending grew 7.2% to $431 billion in 2007, or 19 percent of total NHE.
• Medicaid spending grew 6.4% to $329 billion in 2007, or 15 percent of total NHE.
• Private spending grew 5.8% to $1.2 trillion in 2007, or 54 percent of total NHE.
• Hospital expenditures grew 7.3% in 2007, up from 6.9% in 2006.
• Physician and clinical services expenditures increased 6.5% in 2007, the same rate of growth as in 2006.
• Prescription drug spending increased 4.9% in 2007, a deceleration from the 8.6% growth in 2006.
• At the aggregate level in 2007, businesses (25 percent), households (31 percent), other private sponsors (4 percent), and governments (40 percent) paid for about the same share of health services and supplies as they did in 2006.

Many people claim we need a larger government presence in health care to control costs, but the government programs of Medicare and Medicaid already account for 34% of all health spending, and costs continue to spiral out of control. In fact, spending by the government increases significantly faster than private spending.

We already have a third of our health care industry supported by the government, how much more do we need before we accept that more government is not the answer?