Shutdown Now; Shutdown Later

Today, all it takes to end the government shutdown in the US is a vote by Congress.  Within 15 years, it won't be so easy.

In 15 years, a vote by Congress will be largely irrelevant.  There won't be enough money to pay our bills, no matter what Congress does.

It will be at that point, that the government will inform the oldest Americans that the safety net that was promised is no longer there.  Having convinced these folks when they were younger they did not need to save and provide for their old age, the government will announce (surprise, surprise) that old folks should fend for themselves.

The politicians, who are creating this coming nightmare, will be comfortably relaxing in their wealth and old age and will blame all of this on "rich people" and "greedy Wall Streeters."

But the reality is that no level of government is setting aside the requisite resources to fund the future obligations embedded in social security, medicare, medicaid and public pension plans all over the US.  It is easy to promise things to folks in the future and to hope that unborn children will be happy to pay for all of this.  But, at the end of the day, the numbers don't add up.

One virtue of the current shutdown is that it focuses attention on the real problem -- a shutdown in 15 years that no amount of negotiating can avoid.  This doesn't worry the President and his allies because disaster is not going to occur on their watch and they are good at shifting blame.  But, for the country, the current shutdown is nothing compared to what is on the unavoidable horizon.

John Harwood Fesses Up

John Harwood, supposedly a reporter by trade, held an exclusive interview with President Obama yesterday.  Harwood works for CNBC.  Today on CNBC he provided his listeners with a typical example of his (and NBC's objectivity) in reporting the news.  He argued that Republicans were 'psychopaths' and that President Obama was perfectly reasonable and was 'asking for nothing.'

It's good to see that Harwood is willing to openly admit that he has no objectivity in reporting the news from the White House.  It is something we have always suspected.

Even Becky and Joe recoiled from Harwood's summary of the issues and pointed out to Harwood that he was lacking in objectivity. 

No one should rely on this kind of news reporting, if the truth is what they are seeking.  John Harwood is little more than a spokesman for the extreme left wing of the Democratic Party.

This Aint Nothing

"This Aint Nothing" goes the great country and western song of a few years back.  I was thinking about that song as the deadline passed for Congress to reach a budget deal.  What happens 15 years from now?  No vote can save us then.  Medicare will be out of money and social security will be bleeding as well.  Then what?  That's the real budget crisis.

In a country choking on unaffordable entitlements, the Obama Adminstration has crammed down one more unfunded entitlement on a wary public.  This simply makes the clock tick faster toward America's impending insolvency.

The US is on track to go broke.  Whatever happens now is irrelevant unless it tackles the entitlements.  Putting this off, even for a year or two, makes it almost impossible to fix and guarantees the country's eventual insolvency.

So, why not fight now?  Shut down the government.  That's better than business as usual, which simply guarantees an eventual shutdown that no Congressional vote can then alter.

If the Republicans cave, then they deserve to be defeated in 2014.

"You Can Keep Your Existing Health Insurance"

I wondered about this statement at the time Obama made it.  Clearly, by changing all the rules of health care insurance and mandating conformity, it was unlikely that the vast majority of Americans would not find themselves forced by 'The Affordable Care Act' to have to deal with a completely different health insurance plan and completely different set of health care providers.

I now understand what Obama meant.   He was speaking to his immediate family and (politician) friends.  They are exempt from the "Affordable Care Act."  Clearly what he meant to say was: "if you are exempt from Obamacare, like me and my family, you can keep your existing health insurance."  He never meant to mislead.

Things We Now Know

The poor are losing ground in the new Obama world.  The facts are showing up even in the halls of collectivist extremes like the New York Times.  The rich are getting richer and poor are being locked in place.  Big government is throttling the economy and the hopes and dreams of lower and middle class Americans.

Today's Wall Street Journal's article by Simon Constable lays out some of the simple and obvious facts of the Obama era: "The richest 20% of households account for 38% of spending, according to government data for 2011, the latest available.  Compare that with 2003 when the top earners spent 26% of the total."  The article goes on to say..."it could get even worse."  It will.

Who really benefits when the regulators strangle the banks?  Do banks really need to get much more conservative in their lending practices?  Why does the government know best?  How far can you stretch the FDIC guarantees before American banking is simply a subsidiary of the US government?  We are now getting clear answers to these questions.

The big losers are minorities, the poor, the struggling middle class.  These are the folks that are being devastated by Obama's big government agenda.

The next hammer to fall on the middle class is the 'Affordable Care Act,' which, in theory, is due to begin implementation next week.  This 'Act' will destroy the American health care industry, impoverish the average American, and create a bonanza for bureaucrats and politicians.  The wealthy are totally unaffected, as are the politicians.  We don't know this yet, but soon we will know.  This will be the straw that breaks the camel's back.

Stuck under this morass of regulation, that tells you where you can send your kids to schools, what they should eat, what you should eat, where you should go to get your health care, what kind of car you can drive, and even what size soda bottles you are permitted to purchase, is the average American.  The land of opportunity is now the land of regulation and oppression.

Given how bad the public schools are, you might think that learning on the job might be able to give you just the lift you need to begin climbing the ladder of the American dream.  The big government boys have an answer for that too.  The minimum wage.  By escalating the minimum wage, the ladder's bottom rungs are effectively sawed off.  Too bad if you are poor, uneducated and striving to improve your circumstances.  Every opportunity to break out of the low income world has now been criminalized.

Meanwhile, JP Morgan may be facing an $ 11 billion fine from the big government boys.  Like everything else, this is a tax on the American worker, since he/she  are the owners of JP Morgan and will pay this $ 11 billion.  Who won't pay the $ 11 billion are any of the perpetrators of the so-called crimes for which this $ 11 billion is a settlement.  The janitor sweeping out the building will pay this fine and retire on a lower income thanks to the big government boys.  Meanwhile, the directors and senior executives at JP Morgan will see their compensation continue to sail higher and higher.  The rich get richer, the poor get poorer, courtesy of the US government and its cronies.

In every way, government is waging war on its own people.  These things we now know.

Poor Policies; Poor Predictions

The Obama Administration and the Federal Reserve have consistently over-estimated the strength of the US economy.  The Fed has, on no occasion since 2009, had a remotely accurate prediction, constantly and consistently over-estimating economic growth by well over 40 percent on average.  With that record, one wonders why anyone cares what the Fed thinks about the future.  (The Wall Street Journal on Thursday reported, in a graphic, the predictions that the Fed had made over recent years).

Now, economists like Laura d'Andrea Tyson, a Clinton economic advisor, wonders why the poor are getting poorer in the Obama non-recovery since 2009.  After five years of government expansiveness and a Federal Reserve out-of-control, the rich are getting richer and the poor and middle class are losing ground.

Strangely, these results were perfectly predictable.  They follow from the Obama policies.  We have implemented in detail what David Stockman, in his recent book "The Great Deformation," has excoriated as 'crony capitalism' that benefits mainly rich folks.  It is no wonder that Warren Buffett supports all of this.  He does well in an Obama economy.  I doubt that his secretary's income is growing as fast as his personal wealth, regardless of who pays what in taxes.

Buffett, like other rich folks, is a hypocrite.  He knows that Obama's policies mainly benefit folks like him and destroy opportunity for the middle class and reduces them to scrambling for part-time work or applying for food stamps and other subsidies.  For Buffett, that works.  For Obama, that works.  For the poor and middle class, this is disaster.

Obama's only economic initiative this year is to encourage expansion of a law that makes it a criminal offense to hire an employee below a certain wage level.  This means that low-skilled workers that wish to learn a skill on the job are told.....no!  Forget about taking a job, without pay if necessary, to learn a useful skill that will enable you to get a real job.  That kind of apprenticeship, long a staple of growing economies, has been criminalized.  Obama would like to criminalize it further.

You wonder why Obama doesn't just propose a law saying that no one can hire a worker unless they are willing to pay them $ 150,000 and provide them with free health care.  That would pretty much eliminate any opportunity for folks below the top 25 percent in income and wealth.  I feel certain that Buffett could endorse such a proposal.  Then he could fire his secretary and no longer have to worry about what taxes she pays.

The hypocrisy of folks like Obama, Bernanke and Buffett knows no bounds.  They have spent the last five years in a successful effort to shut down the great American economic engine.  They have succeeded.  Expect the rich to get richer and the poor to get poorer.   That's where these folks are taking us.

A Rose By Any Other Name

The Fed announced today that it would continue it's bond buying binge to the tune of $ 85 billion monthly, a policy that has been in place since the 2008 financial collapse.  This has expanded the once miniscule Fed balance sheet to over $ 4 trillion. 

The Fed, of course, can create money digitally.  That's what it uses to buy the bonds.  It just says:  "let there be money" and there is money.   This massive expansion in the monetary base has created huge excess reserves in the nation's commercial banking system.  Why doesn't anyone loan this money out?

The pitiful loan activity is a result of two factors.  Dodd-Frank and activism in the Justice Department and others has made it a criminal activity to loan money to anyone who doesn't have the very, very best credit.  And people with that kind of credit have lost interest in borrowing to build businesses in the new Obama world of massive regulation and impending soaring health care costs.  So, not too many loans are getting on bank books.  The reserves are simply piling up.

But what happens if, heaven forbid, the economy recovers?  Ah, an outcome not contemplated by the Obama-Bernanke clique.  So far, they have successfully prevented any serious chance of a strong economic recovery that would quickly expand loans and the money supply, bringing on the inevitable out-of-control inflation.  But, that won't happen if you keep the economy from recovering.  I think that I am beginning to understand the Obama-Bernanke plan.  It's working.