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July 28, 2011

The Coming End of the Therapeutic Society

I don't know what's going to happen in the House tonight or tomorrow with Speaker Boehner's bill, but I do know that Mona Charen is right when she tells the tea party types not to blow it by insisting on perfection. Because events are moving so quickly, and I'm not a "story of the hour" blogger, I'll take a look at the bigger picture in this post. I also don't have time anymore to post my own analysis, which is why most of my recent posts are other people's articles. My apologies, but that's what it's going to have to be for the foreseeable future.

Our current economic and budgetary models are unsustainable. The programs that we currently think we depend on will be gone with the wind in not too many decades, because they are on a collision course with reality.

If you are over, say 60, you can rest easy, because you will be able to enjoy the benefits of our current system. If you're between, say 40 and 60, you will enjoy some of it, but will likely see big cuts. And if you're under 40, forget it, because the world of your old age will be nothing like what it is today.

The Tragic View Returns
The therapeutic society's world view has become unsustainable
National Review
Victor Davis Hanson
July 27, 2011 4:00 A.M.

In hard times, as in war, questions arise that were once considered taboo. As we approach $15 trillion run up in aggregate national debt, and confront the reality of a welfare state that is predicated on flawed assumptions about everything from demography to human nature, a rendezvous with brutal reality is now upon us.

Indeed, an entire array of tragic questions arises in a bankrupt but suddenly open-minded society in a way unimaginable in a reactionary, affluent one with endless credit: Should those on welfare who have more than three children still qualify for increased assistance for each additional offspring? Should state-subsidized elective operations automatically be provided for the chronically obese or lifelong smokers? Does the affluent class deserve mortgage-interest deductions on second and third homes? Should U.S. troops subsidize the defense of an allied and rich Germany or Japan 66 years after World War II?

Social Security reform used to be the third rail that politicians dared not touch. But is that prohibition really still operative as big government approaches insolvency? Expect soon not just the retirement age to jump, reflecting modern longevity, or automatic cost-of-living increases to cease, mirroring the reality found in the private sector, but also the entire notion of disability to change as well.

Quite simply, the dogma that a teenager with dyslexia or a mature man with a bum knee will receive years of Social Security disability benefits will be assessed as an historical aberration of the last twenty years. A decision by an insurance company or government agency that a 62-year old must settle for arthroscopic surgery on a chronically torn meniscus rather than a complete knee replacement will not be interpreted as social cruelty.

Almost everything that can be said has been said about illegal immigration -- and about the sustainability and morality of millions of Mexican and Latin American nationals crossing the U.S. border unlawfully and plugging into the American entitlement system. But an insolvent state like California, despite the liberal protestations, cannot continue to house 50,000 Mexican nationals in its penal system at a per capita cost of nearly $35,000 a year, or to extend free tuition in its broke university system to those without legal residence, or to provide social services to illegal aliens that may well cost the state nearly $10 billion a year. Even to suggest such limits was once considered illiberal. Now, not to state the obvious -- that those without education, English, and legality have been expecting far more than what they could contribute in return -- will be considered derelict.

An eight-decade tradition of direct agricultural subsidies was once considered sacrosanct. In laughable fashion, farm-state senators invoked everything from the "Save the family farm" mantra to national security to green energy, all to ensure ongoing direct cash grants to affluent and influential corporate agribusiness. But even in flush times the system had long ago become intellectually and morally indefensible: Why subsidize one crop and not another? Why give public money to those who already make good profits in the private sector? As the government crosses its financial Rubicon, such largess will quietly disappear as well. The only mystery that will remain a decade from now will be how such an absurdity lasted as long as it did.

Nearly 50 million people are now on "food stamps." Of course, the nomenclature is an anachronism, because modern therapeutic society long ago rejected the stigma of shuffling clumsy stamps at the check-out counter, and reduced the process of getting free food into flashing a government-issued plastic card no different in appearance from a bank ATM card. The calcified liberal technocracy talks as if each new person added to the program was faced with Dickensian starvation, even as the other five-sixths of Americans trade anecdotes about waiting in line behind a subsidized cart of food far superior to their own.

But again, $14 trillion-plus in debt cuts into a lot of liberal screeds. At some not too distant date, we will begin to see only poor people buying food on taxpayers' money, and buying only essentials -- we will not see those in the middle class counting on such subsidies to free up cash for elective purchases.

In that regard, the entire modern therapeutic sensibility will wane when the ability to borrow endlessly ceases, and the old tragic view of human experience will reassert itself. A classical Greek would suggest that the more one supplies generous pensions, unemployment insurance, food stamps, and direct government subsidies, the more entirely human responses assert themselves: the incentive to be self-reliant disappearing in direct proportion to the spread of self-righteousness about deserving such entitlements as a birthright. A year ago, to hint that many were not looking so eagerly for work because they enjoyed long-term unemployment benefits and an array of state subsidies would have been deemed heartless; soon the pieties of a credit-obsessed society will vanish with the tragic nod, and the remark "But of course -- human nature being what it is."

Finally, the entire debate about wealth and poverty, confined solely to the ossified realm of reported income and federal and state entitlements, will also change. Is one poor who has access to an iPhone or iPod, a big-screen television, or a hand-held GPS -- appurtenances that even a decade ago were mostly confined to the affluent? Is one poor who can walk into a Wal-Mart and buy a Chinese- or Indian-made sweat suit for less than $20, one that appears not much different from the $500 designer sports outfit worn by the Wall Street grandee in Central Park?

Is the hot water any less hot, the stovetop any cooler, in the HUD-subsidized tract houses two miles from my home than in the mansions of a John Edwards, John Kerry, or Barack Obama?

Is the cash economy always to remain just an abstraction, or at some point does one tabulate officially what we know privately is commonplace? Do millions perennially count as impoverished who mow lawns, clean houses, and serve food for tax-free cash wages while qualifying for state subsidies?

Reactionary politicians in a time warp harangue about 19th-century-style poverty as if only their efforts to borrow more money to extend more entitlements to more people each day save humanity, even as high technology has reinvented modern consumer life, a huge cash economy has arisen hand-in-glove with half the nation not paying income tax, and some 500 million Indian and Chinese workers flood U.S. stores with low-cost items unimaginable just twenty years ago.

There is a certain brutal honesty about this debt crisis. It is slowly beginning to force us to see the world in the tragic way it is, rather than in the therapeutic way we dream it must be.

-- NRO contributor Victor Davis Hanson is a senior fellow at the Hoover Institution, the editor of Makers of Ancient Strategy: From the Persian Wars to the Fall of Rome, and the author of The Father of Us All: War and History, Ancient and Modern.

Posted by Tom at 8:40 PM | Comments (1) | TrackBack

July 26, 2011

John Boehner Is Doing An Outstanding Job... So Far

Via Mike's America, Speaker of the House John Boehner responds to President Obama's ridiculous speech on the debt limit:


Transcript at Mike's America.

Of all the plans to reduce the deficit, John Boehner's House plan is by far the best:

Grading the Plans
National Review The Corner
July 26, 2011
By Douglas Holtz-Eakin

Speaker Boehner has been quoted as saying that his proposed plan to raise the debt ceiling is "not perfect." Okay. How, then, does it stack up as a matter of policy? And what about the Reid alternative?

Timing. A timely increase in the debt limit is imperative. (A video is worth 10,000 words.) The Boehner plan is a way to meet the need to raise the debt limit. Moreover, the Boehner plan forces Congress to address entitlements sooner (six months) rather than later. Good on both fronts.

Size. I have never been a member of the "size matters" club. Instead, I think that markets are more interested in the quality of the policy addressing the debt problem. The projected debt explosion is fundamentally a spending explosion, so policies that address growth will be more convincing to markets than a "large" deal that is dominated by a futile attempt to tax away the problem.

Composition. By the standards of historic budget agreements, the Boehner plan is off the charts. See the chart below from the Congressional Research Service.

First, there is not a single dime in taxes. David Addington at the Heritage Foundation has argued that the Boehner plan "greases the way for tax hikes." This is truly unhinged. The Boehner plan envisions a "select committee" of six Republicans and six Democrats that would require a majority vote -- that is, seven votes -- to propose entitlement reforms for an up-or-down vote in Congress. The six Republicans (and any Democrats who are not renting their brain from an amoeba) can easily stop any notion of tax increases. And there is simply zero chance that the House would pass such an increase if it did emerge over the next six months.

Second, there are real cuts in FY2012 discretionary spending, caps on future spending, and an enforcement process for those caps. One might argue for more aggressive cuts up front and there will be concerns over the ability of future Congresses to slip the discretionary caps. But on the whole, this is as good a package of discretionary spending controls as can be written.

Third, the "select committee" process ties future debt-limit increases to entitlement reform. Since the heart of the debt problem is broken entitlements, this linkage is entirely appropriate. While less ideal than actual reforms themselves, the committee forces future action on the most pressing policy issue facing the United States.

Comparison to Reid Plan. The plans are quite similar. Indeed, the best way to think about the Reid plan is that it is simply the Boehner plan with fake cuts (largely war spending) added on. Put differently, executing the Reid plan is the same as executing the Boehner plan and then adding an unrestricted debt limit increase on at the end. Since so-called "clean" increases are a signal to markets that the U.S. cannot address its fundamental problems, this is extremely dangerous and undesirable.

The bottom line. The ideal debt-limit package would combine up-front discretionary cuts with medium-term discretionary controls and real policy changes to entitlement programs that address the spending explosion and display to international capital markets the ability of the United States to address the debt threat. The Boehner plan is not ideal, but certainly is a strong B+. The Reid plan, in contrast, is a gentleman's C at best. And, of course (see here), those who fail to turn in their homework get an F.

Posted by Tom at 8:51 PM | Comments (0) | TrackBack

July 25, 2011

Big Surprise, The President is Not Serious about Spending Cuts

Big surprise, the president is not serious about spending cuts, and wants to use the current debt crisis as an excuse to expand government and raise taxes.

You can balance the budget by increasing revenue to match spending, reduce spending to match revenue, or both so that they meet in the middle. The first is totally unacceptable, the second ideal, and the third misses the point.

The problem is twofold; One is the deficit and amount of debt we have built up. Second is the overall size and scope of government. Stated another way, balancing the budget at current levels of spending would only solve half of the problem.

But on with proving the thesis of the post:

Toying With Default
The President isn't serious about real spending cuts
The Wall Street Journal

Barack Obama was in full-scold mode Friday night, summoning Congressional leaders to the White House to "explain to me how it is that we are going to avoid default." It's a terrific question, albeit one the President refuses to answer. He remains far more interested in maneuvering to blame a default or credit downgrade on Republicans than in making himself part of any plausible solution to a crisis he insists is imminent.

Senate Minority Leader Mitch McConnell, who figured out earlier than most that the President wasn't serious, long ago turned to crafting a deal within Congress. He's now been joined by John Boehner, who was prepared to take political risks to reach for the "big deal" only to tire of White House antics. Now House Republicans and Senate Democrats are each working to craft their own plans, and it says something that the country has a better shot of getting something out of a divided Congress than it does out of the Oval Office.

Then again, it has long been clear that Mr. Obama isn't interested in spending reform. In February he proposed a budget that spent more than any in U.S. history. In April he demanded that Congress pass a "clean" debt ceiling hike that included no spending cuts whatsoever. Only after House Republicans unveiled their own sweeping budgetary reforms did the White House rush to also claim it wanted deficit reduction as part of the debt-ceiling debate.

In June, the President dispatched Joe Biden to negotiate spending cuts, only to have the White House insist at the last minute that modest trims be accompanied by significant new taxes. Mr. Boehner and the Senate's bipartisan Gang of Six produced plans that would have acceded to that White House demand in exchange for substantive tax reform that would have lowered individual and corporate rates. Yet last week the White House backtracked on its agreement for the lower tax rates and demanded another $400 billion in tax revenues above the $800 billion the Speaker had already conceded.

The President insists his party is offering serious spending cuts and entitlement reform. He also likes to talk about "balance," which to him means real tax increases immediately and speculative spending cuts some time in the distant future. Behind the scenes the White House has only ever agreed to token reform and cuts. Here's a number for the debt history books: Mr. Obama's final offer in the Biden talks was a $2 billion cut in 2012 nondefense discretionary spending. The federal government spends more than $10 billion a day.

Now we're days from the August 2 default deadline set by the Treasury Department, and the President's only response has been to blame everybody else for deficient seriousness.

Mr. Boehner reached out to Senate Majority Leader Harry Reid this weekend, only to have Democrats continue to insist any deal include a sweeping debt ceiling increase that provides the White House with political cover through the 2012 election. The Speaker's goal now should be to get his House members to design a package of cuts--no matter how small--that can pass both chambers, and pair this with a debt ceiling increase that avoids default. Even many Democrats agree with Republicans on a base of about $1 trillion in cuts over 10 years. Mr. Boehner would also be wise to make sure his bill doesn't include a mandatory balanced budget provision, or any other clause that the White House can label a poison pill.

Mr. Boehner can then toss this fix to the Senate and let Democrats decide if they want to trigger a default. If the bill falls short of President Obama's and Mr. Reid's demand for a big enough debt increase to push any further fights until after the election, then let the White House or Senate Democrats take responsibility for killing it on those political grounds.

This fall-back position is far less than many House Republican freshmen, particularly those in the tea party, were hoping to leverage out of this debt fight. It may not even be enough to avoid one or more of the ratings agencies from stripping the U.S. of its AAA rating.

But it is growing abundantly clear that this may be the best Republicans can do with a President who is using these negotiations to finance the blowout spending of his first two years with a tax increase. Voters can decide for themselves who was toying with default come the real moment of truth in November 2012.

Posted by Tom at 8:20 PM | Comments (1) | TrackBack

July 13, 2011

NATO Can't Even Beat Libya

NATO has been fighting Libya for almost four months and victory is nowhere in sight. Of course, it's hard to know what exactly victory is, since no coherent, consistent, objective has been given. One day it was to protect civilians, then to get rid of Khadaffy. We're not helping the rebels then we are; they're doctors and lawyers one day but then the next we're not sure. What we are trying to achieve is still unclear.

But whatever we're doing, it's not working: "NATO" is running out of ammunition. This, mind you, is the alliance that was founded to fight the Soviet-led Warsaw Pact in World War III. It is now so feeble it can't even beat a 5th rate power.

Well, not quite. Italy and France could whomp Libya, if they wanted to. And Italy alone could build a military that would make short work of the Libyan armed forces, it it wanted to. But that's just it.

Rope-A-Dope
Belmont Club
July 11, 2011
by Richard Fernandez

Reuters reports that some NATO countries participating in the Libya operation have punched themselves out, although Khadaffy is still standing. "New U.S. Defense Secretary Leon Panetta said on Monday that some NATO allies operating in Libya could see their forces 'exhausted' within 90 days." European forces are wearing out from the beating they are delivering to the Libyan dictator.

"The problem right now, frankly, in Libya is that ... within the next 90 days a lot of these other countries could be exhausted in terms of their capabilities, and so the United States, you know, is going to be looked at to help fill the gap," Panetta said, speaking to troops in Baghdad.

AFP added that the Italians are pulling out their carrier and Norway is pulling out its planes. The Italians have called for a "political solution" in Libya. France is reported to be secretly negotiating with Khadaffy for a settlement, according to Saif Khadaffy, who says talks have been ongoing between a Libyan envoy and the French President. The reality is that Europe's combat power will soon have to be cut back in Libya unless the US takes up the slack.

Among the European countries involved in Libya, Norway has announced it will withdraw its six F-16 fighters on August 1, and Italy is pulling out its Garibaldi aircraft carrier, for a saving of 80 million euros.

Panetta said that Nato's European members must "make efforts to develop their defence capability; they're gonna have to invest in that kind of partnership as well.

"We can't be the ones that carry the financial burden in all of these situations," Panetta said.

Washington bears 75 per cent of Nato's defence budget. Of the 28 Nato countries, only the United States, France, Britain, Greece and Albania meet the Nato threshold of two percent of GDP spent on defence.

The problem facing President Obama is that, by his own account, there isn't even a war on in Libya, or nothing that amounts to one. It will be hard to make the case that he needs to come to the assistance of allies in military need, if that need has by defined into nonexistence by none other than himself.

If France and Italy have negotiate a settlement that leaves Khadaffy in power they will have provided a textbook example of international rope-a-dope, one convincingly demonstrates the limitations of feeble muscles allied to soft-power. It will be the perfect companion to the emerging debacle to financially save Greece. Europe has punched itself out fighting a non-war against a 5th rate country in North Africa. Far from covering themselves in glory enhancing the prestige of the old continent they will have succeeded in making themselves nothing but a laughing stock. The only problem is that there will probably be serious consequences.

Exactly. The Ron Paul types who think that we can pull up the drawbridge and largely ignore the rest of the world are wrong. Europeans who think they can keep their drawbridge down and rely on United Nations resolutions are also wrong. What happens around the world affects our economies and what immigrants come knocking at our door (or more likely sneaking in around it).

But as Fernandez says in a comment to his own post, "the problem isn't power or even money." Any one mid-sized European country could beat Libya, if it wanted to. The problem is that they are paralyzed into inaction. Europeans, and perhaps increasingly Americans, don't care to rouse themselves to face up to the big issues of our day.

Instead it is obsessed with ludicrously small issues. The political system worries endlessly about soap opera problems, sexual politics, racial quotas, "climate change" etc. This littleness promotes people like Herman Von Rompuy or Julia Gillard or Barack Obama -- complete ciphers -- to positions of power for no other reason than that they check all the boxes. A terrible diminuation of mind, an unbelievable poverty of thinking, has descended on the Western world.

Posted by Tom at 8:15 PM | Comments (4) | TrackBack

July 9, 2011

Say No to the Dem's October Surprise

Say No to the Dem's October Surprise
Powerline
by John Hinderacker

Many times in the past, Congress has voted to raise the nation's debt ceiling with little or no controversy. Not so this year. The Republicans turned the vote on the debt ceiling into a major political issue by threatening to vote No, at least unless the Democrats made significant spending concessions. Initially, the Democrats squealed. Over time, however, they realized that the situation presents, for them, a once in a lifetime opportunity.

Thus, they developed the strategy that we now see at work: First, publicize a purported deadline for an agreement to raise the ceiling, and promote the claim-false, in my view-that a fiscal disaster will ensue if a deal is not reached by that supposed deadline. Second, engage in secret negotiations with the Republican leadership that are expanded to include future tax increases and limited entitlement reform. That is the stage we are in now. Third, announce a deal-a cosmic, bipartisan budget agreement that ostensibly saves the Republic from a sea of debt-48 hours or so before the bogus debt ceiling deadline. Fourth, commit the deal to writing and rush it through Congress before anyone has a chance to read it or understand what is in it. Sound familiar?

...

The Democrats stand to gain enormously from this strategy. As things are now, they are stuck with a fiscal record that is utterly indefensible. In a mere two and a half years, the Obama administration has rung up deficits that dwarf any in our history. Trillions of dollars have been added to the national debt. We have gone for more than two years without having a federal budget in place-which is not only scandalous, but illegal. And President Obama proposed a budget for FY 2012 that was so absurd that it couldn't garner a single vote in the Senate. The Democrats, based on their dismal record, deserve to go down to a resounding defeat in 2012.
...

Over time, of course, the truth about the deal will leak out. Voters will learn that the ballyhooed trillions of dollars in spending cuts are more or less nonexistent: First, the "cuts" will consist entirely of smaller increases, not actual reductions. Second, they will occur mostly or exclusively in the "out years," and therefore will probably never take place at all, since whoever is in Congress eight or ten years from now will not be bound to the slightest degree by any purported deal the Republicans may agree to later this month. Third, many of the supposed cuts will prove to be nothing but accounting legerdemain.

Likewise, voters will slowly realize that the cosmic bipartisan budget agreement does little or nothing to control our burgeoning federal debt. But that understanding will come later; hopefully, from the Democrats' standpoint, after the November 2012 elections return President Obama for a second term and sustain their majority in the Senate, while-who knows?-perhaps returning the House to Democratic control.

Posted by Tom at 9:45 PM | Comments (0) | TrackBack

The June Jobs Report: Big "Surprise," Obamanomics Doesn't Work!

Right now on the U.S. Department of Labor website:

9.2% unemployment for June

How's that stimulus plan working for ya?

June Jobs Report: the Ugly, the Ugly and the Ugly
Yahoo News!
By Daniel Gross
Fri, Jul 8, 2011

Typically, the monthly jobs report contains some good news, some bad news and some ugly news. And optimism had been building over the June figure, in part because alternate methods of measurement had indicated higher jobs growth. TrimTabs earlier this week said its data indicated the economy added 171,000 new jobs in June, while ADP on Thursday suggested 157,000 private-sector jobs had been added in the month. Add in the slight decline in unemployment claims, falling gas taxes and good preliminary news on retail sales, and there was some hope that the soft patch of April and May was over. This morning's ugly, ugly, ugly jobs figure throws a large bucket of ice-cold water on that thesis.


The Ugly #1. The headline number showed that a mere 18,000 payroll jobs were added in June. As Barry Ritholtz of the Big Picture frequently points out, when you're working off a base of 130 million or so, a gain of 18,000 (or a loss of 18,000) is statistically meaningless. The numbers show that the conservative recovery continues, with the private sector adding jobs and the public sector cutting them. The services, mining, and leisure and hospitality sectors all added jobs. In all, the private sector added 54,000 jobs. But government has been shedding jobs consistently for the past year. It did so again in June, slashing 39,000 jobs. Government spending may be higher, but employment at the federal, state and local level is falling.

The Ugly #2. The unemployment rate ticked up to 9.2 percent. Payroll jobs figures are calculated from the establishment survey (calling up companies and asking them how many they employ). The unemployment rate is derived from the BLS's household survey (calling up people and asking them if they've been working). Sometimes the two surveys tell divergent stories. Not this month. The unemployment rose to 9.2 percent. The number would have been worse had the labor force not declined in June by about 250,000 people. Virtually every component of the household survey -- the labor force participation rate, the number of people reporting themselves to be employed, the number of people *not* in the labor force -- moved in the wrong direction last month.

Ugly #3. The trend is not our friend. The monthly jobs are revised in each of the two months following the original report. And the trend over much of the past year has been for the figures to be revised upward. In hindsight, during this recovery, BLS has tended to discover more jobs. But in June that trend seems to have reversed. Looking back, BLS is now concluding that there were fewer jobs added in previous months than originally thought. April's figure was revised from a gain of 232,000 to a gain of 217,000, and the May gain of 54,000 was revised to a gain of 25,000. Add it up, and BLS is telling us there are about 44,000 fewer payroll jobs out there than it thought.

This is just one month, and we should be careful not to read too much into a single data point. But this report really stinks. It is a significant problem for President Obama, for any incumbent, for the U.S. stock market and for consumer-based business. The outstanding feature of the past two years has been the big disconnect between the rapid recovery in the capital markets and the much slower recovery in the labor markets. Put another away, companies have shown that they can massively increase profitability without having to add significantly to their payrolls. Part of this is because U.S. companies have proven to be remarkably adept at boosting productivity -- doing more with less labor or the same amount of labor. And part of it has to do with the fact that, with each passing month, U.S. companies -- especially large ones -- are getting a larger share of their sales from overseas. Some of that comes in the form of exports, which helps support employment. But a lot of it comes in the form of sales of goods and services that are produced outside our borders.

Despite the ugly, ugly, ugly jobs figure, the U.S. expansion is still intact. Macroeconomic Advisers is standing by its call that the pace of growth will pick up in the second half of the year. From industrial production to retail sales, there are signs that demand is continuing to grow. At some point, companies will have to break down and hire people in significant numbers. This report suggests we haven't yet reached that point.

Yeah I know, the liberals will say "it's all Bush's fault!" and "The economy was so much worse than we thought," and "Obama has only been in office less than three years, you have to give his time plan" yada yada yada.

No. The fact is that Obama told us that without his stimulus and spending things would get worse, and with them they would get better, and instead the Pelosi-Reid Congress passed his plan and things have still gotten worse. ObamaCare was supposed to increase business confidence, and instead they're scared to death of it and anyone who can is obtaining a federal waiver.

It's time for a change, a change to the right, to electing true conservatives who will set our country right.

Posted by Tom at 9:30 PM | Comments (2) | TrackBack