Wednesday, May 6, 2009

Capitalism by Lemmings

Allow me to depart, for a short while, from attempting to stay above the ideological fray… (I need a break anyway; I can only do this for so long…)

Fair Warning - This is going to be a L-O-N-G post…

To begin, I must apologize… The President *has* called for cuts in spending – and (surprise!) it was Defense Spending! Back in January, 2009, he asked for an 11% cut in Pentagon spending. Given the challenges we are facing in the world from a military point-of-view, that action seems potentially dangerous. But, for the moment – let’s go with those making those cuts (which would total about 55 Billion, I think) As a matter of fact, about 75% of the budget "cuts" he has requested come from the Defense Budget. So, while we’re busy using that scalpel you suggested (instead of my butter knife) – here’s a few non-military cuts to consider - many are taken directly from the American Recovery & Reinvestment Plan :

- $1 billion for Amtrak, which hasn’t turned a profit in 40 years

- $2 billion for child-care subsidies

- $50 million for that engine of job creation, the National Endowment for the Arts

- $400 million for MORE global-warming research (sorry, Al, but isn’t there already a “consensus”? isn’t it true “the discussion is over”?)

- $2.4 billion for “carbon-capture demonstration projects”

- $650 million (on top of billions already doled out) to pay for digital TV conversion coupons (at about 120 million homes, it would have been cheaper to just by one from Wal-Mart send it to every household in the country)

- $600 million for the federal government to buy new cars

- $7 billion for modernizing federal buildings and facilities

- $150 million for the Smithsonian

- $81 billion for Medicaid

- $36 billion for expanded unemployment benefits

- $20 billion for food stamps

- $83 billion for the earned income credit for people who don’t pay income tax

- $66 billion on education (because it is obviously working so much more effectively than our military)

- $6 billion to weatherize “modest income homes”

- $6 billion to provide internet in “underserved” areas

- $6 billion for “higher education modernization.”
- $20 billion in health information technology to “prevent medial mistakes.”

- $600 million for satellite development and acquisitions, including climate sensors and climate modeling.

- $250 million “to address long-term economic distress in urban industrial cores and rural areas distributed based on need and ability to create jobs and attract private investment.” (thanks for being so specific)

- $300 million for the National Wildlife Refuges and National Fish Hatcheries

- $400 million for “ready-to-go habitat restoration projects”

- $120 million to provide subsidized community service jobs to an additional 24,000 low-income older Americans
- $1.5 billion to help local communities build and rehabilitate low-income housing using green technologies.

- $500 million to rehabilitate and improve energy efficiency at some of the over 42,000 housing units maintained by Native American housing programs
- $10 million for “rural, high-need areas to undertake projects using sustainable and energy-efficient building and rehabilitation practices”

…etc., etc., etc…

WHOA! Steady there! Calm down!... I will admit *some* of the entries on that list are arguably “needed”. But is there no room for eliminating THINGS THAT DON’T WORK? (which, BTW, are his exact words to justify cutting the Defense budget) In the midst of a recession, does ALL of this really qualify as CRITICAL “investing”? NOTHING on that list can wait – not even for One Year? Do these spending proposals really expand and encourage PRIVATE SECTOR jobs (or just create temporary public sector jobs)? Short form: Do we *really* need to increase spending across the board? I DOUBT IT. (I could go on and on, and so could you).

A quote attributed to good ol’ Senator Everett Dirkson states it nicely– "A billion here, a billion there, pretty soon, you're talking real money".

Yes, there *are* legitimate ways and reasons to enact carefully considered cuts in the Pentagon budget. But taking a shotgun approach to the Left’s whipping boy – while ignoring the very serious foolishness in other parts of the budgeting process - is insane at best and could place the country as a whole in significant danger. A 50% cut – without corresponding cuts in domestic spending - is a recipe for disaster. (You can’t wait for the “need” to surface before you start the R&D.) And, like it or not, there ARE people and countries out there who DO NOT LIKE US. They don’t care how much we “want to talk” or “feel a need to understand their issues”. There is no guarantee any kind of dialogue will remove the gun he has pointed at our head. (But pointing a better gun at HIS head will at least get his attention. If he is willing to kill himself to make his point, we lose nothing by being prepared - and still have the option of taking him out first.)

Cuts to the Defense budget is a move than should be taken cautiously and with careful consideration. You don’t do it just because “times are tough” and because “we all have to make sacrifices”. (Really? Unions, too? Government employees? Companies deemed “too big to fail?”)

OK… maybe I was being too obtuse about making specific cuts. So, let’s make it real simple and jump back out of the funnel and look at the Big Picture…

Immediately FREEZE *all* federal spending at the 2009 budget level. Do it for one year, no… make that TWO YEARS. That means 2010 and 2011 will have *NO* increases, whether previously planned or not. No COLA adjustments in benefit payments to individuals. No raises for staffers. No new jobs ‘created’ at the public teat. No pay raises for ANYONE; not even the military… THAT is “controlling runaway spending” in a very real way we can all understand.

If you want to get technical, how about formally locking federal spending to a defined percentage of collected tax revenues in the previous year (and that percentage can’t be more than 100%). And then mandate that any – repeat *any* - department that exceeds it’s budget will have its NEXT annual budget reduced by the amount of the overage… THAT will drive people to seek “efficiency” in government like nothing else.

As a knuckle-dragging, greedy, fiscal conservative - am I being too tough? Or too aggressively tight-fisted? Tough times require tough measures, don’t they? And let’s not forget… It’s not THEIR money – that’s MY MONEY they are spending! (and YOURS, too).

The easiest and most effective way for government to “benefit private industry” is to Get The Hell Out Of The Way. And that specifically means - Stop trying to invent new and creative ways to TAX anything that currently moves, moved at one time, or is no longer capable of moving. The transfer of Real Wealth from Private Entities to the Government DOESN’T WORK.

“I think you will find that the foreign competitors who have been cleaning our clock for so many years are the ones who have managed to make government an effective partner rather than a nagging wife (or husband - sorry ladies)…” Really? The governments of the most “successful” foreign competitors we have are run by despots and tyrants (whether by individuals or committees). The ‘successful economic’ example of exactly which country are you suggesting we follow? China?

“I'm not going to dive into the specifics of where and how Obama's budget proposals aim at backing up and augmenting private enterprise rather than leading it around by the nose.” Please try and find the time – I see a lot of nose leading and demands being made. The only ‘backing up’ I see is jerking back on the reins. The only visible “augmenting” is the addition of onerous regulation and back-seat-driving.

Let’s be serious – there are a new set of rules being set up by the current administration. The game is changing. I admit it’s not a Soviet Union / China hybrid of socialism / communism. It certainly isn’t a version of capitalism that Adam Smith or Ronald Reagan would recognize. At best, will look like the Japanese style of economic governance. Are they the international ‘clock-cleaner’ you want us to follow?

In Japan, the Ministry of Trade and Industry (MITI), informally “guides” companies and basically tells them what to do. Fortunately, in the Japanese culture, a soft hand is all that is needed since a nod is a good as a command. In the rough-and-tumble US, you gotta use a hammer just to get their attention. Accordingly, the PRO’s are pulling out some Big Hammers. Either way, you could label this new goal as “Capitalism by Lemmings”.

Companies are not supposed to look out for their shareholders or their employees or even their customers. Their single focus is to watch Washington – because they will tell us what to do. Washington will control the decisions, not the marketplace.

Am I exaggerating? Look at how the mortgage ‘rescue’ plan is operating under government control and private (barely) ownership. Look at the cap-and-trade proposal and the emphasis on government mandated controls in accordance with “green” lending practices and “green” job creation, and “green” this and “green” that. (“One Fish, Two Fish, Green Fish, Green Fish”). Look at the brutal strong-arm actions leading up to the Chrysler deal…

And have you noticed how foreign nationals, especially terrorists, will have no fear of reprisal or any reason to suspect a violation of their constitutional rights – but that CEOs of US companies do *not* have the same ‘rights’? And these actions and tactics by the administration are supposed to ENCOURAGE business and private industry? Please.

Their Goal is very simple: Washington knows best.

And before you go dancing down this road, I’d like to point out: No, It Doesn’t.

Look at how wonderfully effective the Japanese economy has been for the past 20 years. They provide modern validation to the fact that government usually gets it wrong. Sometimes it fails to anticipate the market (Japan downplayed laptop computers and stressed mainframes). More often, government is so beholden to the demands of special interests that it ends up worried about dividing up the economic pie for the benefit of “the consensus” (which just happens to correspond to their political supporters).

You probably dislike this comment, but I think it has at least a grain of Truth that is often ignored - "Every government interference in the economy consists of giving an unearned benefit, extorted by force, to some men at the expense of others." – Ayn Rand.

As long as I am standing on my “extremist soapbox”, and before I get down from these lofty heights – what we are experiencing, what we are facing, what we are being asked to swallow and be grateful to have received - is called TYRANNY.

If you want to “cut” something - start there.

- Steve

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