Showing posts with label Reid. Show all posts
Showing posts with label Reid. Show all posts

Sunday, November 22, 2009

Hu Jintao Wants a Kiss from Barack Obama


Last night's opening skit on SNL pilloried President Obama's trip to China and his attempts to lecture its leaders. President Hu Jintao responded by coarsely reminding Obama which country owes the other $800 billion. Obama replied with a firm promise that the money is certain be repaid.

INTERPRETER: Are we? Are we going to get our money? Because from what I read your country is in the middle of a serious recession.

OBAMA: Uh, while this is true, there are signs that our bailout has steadied the financial markets and our stimulus package has been effective in fixing the job crisis.

(Hu Jintao "speaks.")

INTERPRETER: I'm curious. How many jobs has it created?

OBAMA: Uh, so far, none.

(Hu Jintao "speaks.")

INTERPRETER: I see.

OBAMA: But our health care reform plan, we're confident, is going to lead to enormous savings.

(Hu Jintao "speaks.")

INTERPRETER: How exactly is extending health care coverage to 30 million people going to save you money?

OBAMA: I... don't know.

(Hu Jintao "speaks.")
...
INTERPRETER: You know, as I listen to you, I am noticing that each of your plans to save money involves spending even more money. This does not inspire confidence.

OBAMA: I assure you, you're going to get your money.
...
(Hu Jintao "speaks.")

INTERPRETER: Will you kiss me?

OBAMA: --- --- --- I'm sorry?

(Hu Jintao "speaks.")

INTERPRETER: Will you kiss me?

OBAMA: --- I don't understand...

(Hu Jintao begins screaming)

INTERPRETER: I like to be kissed while SOMEONE IS DOING SEX TO ME!

Funny, in a bittersweet way. After all, Doug Hornig of Casey Research poses the serious question alluded to by SNL: what if they stop buying our debt?

As recently as 1970, foreign holders of U.S. debt were essentially non-existent. But their slice of our obligation pie has steadily increased, especially over the past two decades, until now foreign governments and international investors hold about 35% of Treasuries, as the following chart reveals.

Of about $11 trillion in U.S. debt, foreigners have about $3.8 trillion, with China in the lead at nearly $1 trillion and Japan not far behind at around $750 billion.

Most likely, though, this trend has already leveled off. The Chinese, Japanese, Russians, and Indians have openly announced their decision to cut back on further purchases and existing holdings of U.S. government debt. Beyond that, the source of funds previously allocated to their purchases -- trade surpluses -- has declined sharply with the recession. As a consequence, going forward, foreign buying is more apt to shrink than increase... As the chart below illustrates, sales of long-term bonds to foreigners are way down.

So what does all this mean? ...It means that a big chunk of our prosperity during the past twenty years was due to a trade deficit that put billions of dollars into the hands of foreigners, who then turned around and bought Treasuries with them, helping the U.S. government finance its massive deficit spending. That’s over -- and the unwinding process has just begun.

Yet federal deficit spending, far from reflecting this reality, has grown by leaps and bounds. But who will finance it? Let’s extend our first chart out a few years.

As you can see, we project that foreign participation has plateaued. U.S. private domestic investors can probably increase their holdings moderately, now that households are consuming less and saving more, and financial institutions have money to invest in Treasury paper. The agencies and trusts (like Social Security) are really not a part of the equation, but rather reflect programs on 'auto-pilot' and quickly headed to the point where they will negatively impact, not help, the deficits.

Adding it all together, even under the most conservative of assumptions, there are simply not enough buyers to cover the accelerating federal deficits. That leaves the lender of last resort, the Federal Reserve, as the only remaining candidate to satisfy the government’s grotesque appetite for funding. There is no viable alternative.

The Fed will take up the slack in the only way open to it, by printing money out of thin air and exchanging it for promises from the Treasury. That means an escalation of monetary inflation and, somewhere down the road, serious price inflation as well. We don’t know exactly when that will happen, only that it must.

Those who don't learn from history are indeed doomed to repeat it. For this reason, an ironclad case can be made that today's Democrat Party is psychologically unfit to serve.


Hat tip: Casey Research. Linked by: Legal Insurrection. Thanks!

Saturday, November 21, 2009

Don't Cry For Me, America


In the early 20th century, Argentina was one of the richest countries in the world. While Great Britain's maritime power and its far-flung empire had propelled it to a dominant position among the world's industrialized nations, only the United States challenged Argentina for the position of the world's second-most powerful economy.

It was blessed with abundant agriculture, vast swaths of rich farmland laced with navigable rivers and an accessible port system. Its level of industrialization was higher than many European countries: railroads, automobiles and telephones were commonplace.

In 1916, a new president was elected. Hipólito Irigoyen had formed a party called The Radicals under the banner of "fundamental change" with an appeal to the middle class.

Among Irigoyen's changes: mandatory pension insurance, mandatory health insurance, and support for low-income housing construction to stimulate the economy. Put simply, the state assumed economic control of a vast swath of the country's operations and began assessing new payroll taxes to fund its efforts.

With an increasing flow of funds into these entitlement programs, the government's payouts soon became overly generous. Before long its outlays surpassed the value of the taxpayers' contributions. Put simply, it quickly became under-funded, much like the United States' Social Security and Medicare programs.

The death knell for the Argentine economy, however, came with the election of Juan Perón. Perón had a fascist and corporatist upbringing; he and his charismatic wife aimed their populist rhetoric at the nation's rich.

This targeted group "swiftly expanded to cover most of the propertied middle classes, who became an enemy to be defeated and humiliated."

Under Perón, the size of government bureaucracies exploded through massive programs of social spending and by encouraging the growth of labor unions.

High taxes and economic mismanagement took their inevitable toll even after Perón had been driven from office. But his populist rhetoric and "contempt for economic realities" lived on. Argentina's federal government continued to spend far beyond its means.

Hyperinflation exploded in 1989, the final stage of a process characterized by "industrial protectionism, redistribution of income based on increased wages, and growing state intervention in the economy..."

The Argentinian government's practice of printing money to pay off its public debts had crushed the economy. Inflation hit 3000%, reminiscent of the Weimar Republic. Food riots were rampant; stores were looted; the country descended into chaos.

And by 1994, Argentina's public pensions -- the equivalent of Social Security -- had imploded. The payroll tax had increased from 5% to 26%, but it wasn't enough. In addition, Argentina had implemented a value-added tax (VAT), new income taxes, a personal tax on wealth, and additional revenues based upon the sale of public enterprises. These crushed the private sector, further damaging the economy.

A government-controlled "privatization" effort to rescue seniors' pensions was attempted. But, by 2001, those funds had also been raided by the government, the monies replaced by Argentina's defaulted government bonds.

By 2002, "...government fiscal irresponsibility... induced a national economic crisis as severe as America's Great Depression."

* * *

In 1902 Argentina was one of the world's richest countries. Little more than a hundred years later, it is poverty-stricken, struggling to meet its debt obligations amidst a drought.

We've seen this movie before. The Democrats' populist plans can't possibly work, because government bankrupts everything it touches. History teaches us that ObamaCare and unfunded entitlement programs will be utter, complete disasters.

Today's Democrats are guilty of more than stupidity; they are enslaving future generations to poverty and misery. And they will be long gone when it all implodes. They will be as cold and dead as Juan Perón when the piper must ultimately be paid.


References: A tear for Argentina's pension funds; Inflation in Argentina; The United States of Argentina. Linked by: Dan Riehl. Thanks!

Friday, November 20, 2009

Ten Things I Hate About You (If You Support ObamaCare)


1.      $493 Billion In Tax Increases On Health Insurance, Medical Innovation, Payroll And Small Businesses Would Pay For The Bill. (Douglas W. Elmendorf, Letter To Senator Harry Reid, 11/18/09)


2.      Americans Won’t See Benefits Of This Health Care Experiment Until 2014, But They Start Paying For It In 2010. (Page 13, Douglas W. Elmendorf, Letter To Senator Harry Reid, 11/18/09)


3.      Reid’s Bill Allegedly Reduces The Deficit By $130 Billion In Ten Years, But The Obama-Reid-Pelosi Spending Agenda Produced Deficit Of $176 Billion Last Month Alone. (Table 3, Douglas W. Elmendorf, Letter To Senator Harry Reid, 11/18/09)


4.      $465 Billion In Medicare And Medicaid Cuts Would Pay For Two New Unsustainable Entitlements. (Douglas W. Elmendorf, Letter To Senator Harry Reid, 11/18/09)


5.      Health Care Costs For The Federal Government – And Your Family – Would Increase, Not Decrease.  (Page 16, Douglas W. Elmendorf, Letter To Senator Harry Reid, 11/18/09)


6.      A New Medicare Commission Of Unelected Bureaucrats Would Ration Care. (Sec. 3403, H.R. 3590, Amendment In The Nature Of A Substitute, “Patient Protection And Affordable Care Act,” Introduced 11/18/09)


7.      The “Doc Fix” Provision That Would Add $250 Billion To The Deficit Is Not Included In The Democrats’ List Price For Their Health Care Experiment. (Page 17, Douglas W. Elmendorf, Letter To Senator Harry Reid, 11/18/09)


8.      Taxpayer Dollars Would Fund Abortions. (Sec. 1303(a), H.R. 3590, Amendment In The Nature Of A Substitute, “Patient Protection And Affordable Care Act,” Introduced 11/18/09)


9.      A New Entitlement Program For Long-Term Care That One Democrat Senator Called “A Ponzi Scheme” Would Be Created. (Douglas W. Elmendorf, Letter To Senator Harry Reid, 11/18/09; Shailagh Murray & Lori Montgomery, “Centrists Unsure About Reid's Public Option,” The Washington Post, 10/28/09)


10.    States Burdened With $25 Billion In Unfunded Mandates From Medicaid That Would Force Them To Increase Taxes. (Page 7, Douglas W. Elmendorf, Letter To Senator Harry Reid, 11/18/09)


Hat tip: RNC Research Briefings.

Wednesday, November 18, 2009

Blackmont Capital: Unemployment Could Reach 15%


Nearly two weeks ago, the Wall Street Journal reported that unemployment had reached 10.2% and under-employment (the so-called "U-6" figure) had reached a shocking 17.5%.

Investment firm Blackmont Capital believes that the worst is yet to come.

...The graph of unemployment with the default rates is meant to show that the rate of unemployment will continue upward for some time once default rates have peaked. You will see this in the 1980-1984 period, the 1990-1994 period and lastly the period of 2000-2004...

The basic assumption generated with this study results in a rate of ascent in the rate of unemployment once high yield default rates peaks. I will have applied an average of these three periods discussed going forward in our three base cases.

This rate of ascent is shown in the graph with the subsequent higher unemployment rate. It does carry upward for some time and will lag the turning point of the high yield default rate peak.

...Lastly we provide an overview of my unemployment projections based on three scenarios. The base case number one takes the view that high yield default rates are peaking and will start to drop from this level now. The rate of unemployment ranges from 10% to 11.5% with this given scenario. In the base case number two, I am using a composite of both peaks in 1991 and 2002 to suggest that default rates may carry upward one percent more. The resulting effect on unemployment targets will range from 11% to 13.5%. In our final analysis base case number three will use the peak at 13% in default rates established in 1991. Unemployment rates in this scenario show a range of 12.5% and 15% before possibly peaking.

A simple back o' the napkin calculation for the total under-employment rate if the latter model holds: A U-6 figure of 26% to complement the 15% unemployment rate.

We got the change, but hope just left town.


Barack Obama's Device to Implement Government-Run Health Care


Dale Brumfield sends along this apt description and illustration:


Computer (A) tells faceless bureaucrat (B) that patient needs hip replacement surgery, who thumbs through 2,000-page health care index (C) to see if it is covered procedure. Wind from fanning pages (D) powers eco-correct wind-powered vacuum (E) which sucks wallet (F) from American taxpayer’s pocket (G). Wallet travels through tube (H) and drops into “Big Pharmacy” slush fund bucket (I). Weight of wallet tilts TV (J) playing endless loop of President Obama saying, “If you like your current health coverage you can keep it.” Angered by president’s message, taxpayer’s blood pressure (K) raises meter, tripping lever (L) and rolling ball (M) into basket (N). Basket compresses bellows (O), injecting taxpayer with mandatory H1N1 vaccine (P) and ejecting thousands of pink slips (Q) for health insurance industry employees. Basket also trips switch on eco-correct twisty fluorescent bulb (R), which slowly melts ice block (S). Water collects in funnel (T), tipping lever and raising calendar (U), postponing surgery by six months and revising cost matrix (V), showing physician (W) that a double-foot amputation costs less than a hip replacement. Patient (X) has both feet amputated instead of hip replacement, saving government program $72.

If only it really were that straightforward.


Thursday, November 12, 2009

American Companies Abandon Ship


Bloomberg reports that Emerson Electric, the massive $21 billion manufacturing conglomerate, is raising the white flag and moving offshore.

Emerson Electric Co. Chief Executive Officer David Farr said the U.S. government is hurting manufacturers with regulation and taxes and his company will continue to focus on growth overseas.

“Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing,” Farr said today in Chicago at a Baird Industrial Outlook conference. “Cap and trade, medical reform, labor rules.”

Emerson, the maker of electrical equipment and InSinkErator garbage disposals with $20.9 billion in sales for the year ended September, will keep expanding in emerging markets, which represented 32 percent of revenue in 2009. About 36 percent of manufacturing is now in “best-cost countries” up from 21 percent in 2003, according to slides accompanying his speech.

Companies will create jobs in India and China, “places where people want the products and where the governments welcome you to actually do something,” Farr said... “We as a company today are putting our best people, our best technology and our best investment in these marketplaces to grow,” he said. “My job is to grow that top line, grow my earnings, grow my cash flow and grow my returns to the shareholders. My job is not to shrink and roll over for the U.S. government."

Farr's complaints echo a private missive I received in July from a veteran M&A specialist.

My clients are all entrepreneurs having built successful businesses with sales of $5 million to $50 million. My prospective buyers are typically companies with sales of $50 million to $200 million. Every one of these companies (buyers and sellers) today shares these common denominators:

1. Their businesses are down 10, 20% or more.

2. They have either laid off staff or have reduced hours to 4-day weeks trying to keep key staff.

3. They have reduced their own salaries and in many cases have implemented “cross the board” salary reductions.

4. They (for the first time in their lives) have no ability to forecast beyond 4 weeks.

5. They see nothing good on the horizon that would benefit them re: sales, cost reduction, efficiency, etc.

...My hope is to at the very least to try to sell these 5 businesses [information redacted]... Prospects are slim. M & A deals are down (depending on the source) anywhere from 60% – 80%. I used to receive 20 – 40 inquiries from buyers every week. I now receive a handful a week.

...Any private business owner would be insane to sell his business now. He will be hit with excess taxes and so many unknown consequences. Do you know that part of the “Cap and Trade” bill includes a provision that if you sell your house, it must conform to new “green standards” which reportedly could cost a seller many thousands of dollars? How many unknown consequences are built into a 1,300 page bill that no one has read?

Any future seller prospects that I encounter, I will urge them to continue operating their business and take from the business everything that they can legally do for as long as they can. They are far better off. It is quite likely that I will have to revisit some of my existing clients and tell them the same thing... something that I dread.

I am so outraged as to what is happening to our country. This is no longer a political issue [because] we will all lose. We are all casualties of the new paradigm. There will be many more as we continue into a morass that will take generations to recover, if we can. Be it “Cap and Trade”; government-run health care; TARP; bailouts; “stimulus”; business takeovers, etc.; our future is being controlled by bureaucrats and politicians who never, ever, ever ran a business and knew the “gut-check” of filling out and paying their “941’s”.

How could they know how to create a job? Throwing billions at states and municipalities with payoffs to unions, lobbyists and partisan sectors? Sadly, the worst is yet to come with job losses, cost increases, inflation, etc. Just look at the job numbers released today.

Forgive my blathering. I went through the 50’s, the 60’s, the price restrictions and gas shortages of the 70’s, the 22% interest rates into the 80’s, the many frustrations of the 90’s, etc. They all pale in comparison to what we face now. Whether it’s “tea parties”, a realization by the silent majority of what is happening, or some miracle that stops this ongoing disaster, I hope and pray for an awakening. I think we can make it and I only hope that my children and grandchildren are as fortunate as we were to continue to have opportunities.

The Democrats' plans are succeeding. They want to reduce our 'carbon footprint', presumably to stop the current spate of warmal colding. They want to eradicate private industry and private employment. As for proof, consider their serial attacks on doctors, the health care industry, the coal companies, the pharmaceutical companies, the oil companies, the refiners, you name it.

Who could possibly hire in this environment? The economy is flat on its back because Obama and the Democrats put it there; and their policies continue to suck the life out of the most productive members of society. And those members will continue to abandon ship.

If you're looking for relief in the unemployment numbers, don't hold your breath.


Hat tips: InstaPundit and Mark Levin.

Tuesday, November 10, 2009

When Plunder Becomes a Way of Life


When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it. --Frederic Bastiat

Last week the Bureau of Labor Statistics released its national "under-employment" (or U-6) rate for October: it was 17.5%, a big jump from 17% in September and a major leap from the 10.6% figure of September 2008.

Unemployment keeps climbing, even though President and Congress spent more than $787 billion dollars in taxpayer funds for a stimulus package.

Since that time, neither the President nor Congress have spent an iota of effort analyzing the impact of the stimulus program.

And they've not taken a moment to consider alternatives that might help alleviate the economic pain felt by so many Americans.

The President and Congress continue to ignore the economy while they pursue their ideological agenda of truly massive government.

Anyone who has lost a job, can't find a job, is nervous about losing their job, or simply lives in an area decimated by job loss should be livid over a President and Congress that spend all of their time plotting a takeover of health care.

Even though the economy is the top concern for almost every American, the oligarchy in Washington is fixated on nationalizing health care and exacting carbon taxes on every sector of the economy.

Sen. Barbara Boxer (D-CA) broke committee rules and slammed an energy-rationing bill through the Senate Environment and Public Works Committee last week without a single Republican present.

The bill would curtail America's ability to exploit its own natural resources to harvest energy and boost economic activity. Thus, despite the economic crisis, the government is turning its back on $1.7 trillion in tax revenue and tens of thousands of real jobs (i.e., non-government payroll).

Democrats are only concerned with their big-government agenda -- nationalizing the health care industry, carbon taxes and amnesty for illegal aliens -- and not worried a bit about American jobs. Each of their programs raises taxes and fees on job creators, which further harms the economy.

Both the health care and cap-and-trade bills translate to huge tax hikes for most Americans.

Frighteningly, even the 17.5% under-employment figure understates things. During the Clinton administration, the BLS began removing those 'too discouraged' to look for a job for more than a year. John Williams of Shadow Government Stats thinks the true unemployment rate would be 22.1 percent if everyone were included.

Meanwhile, Congress fiddles while the economy burns. As I said more than six months ago, this willful abandonment of Americans in economic distress is intentional.

As Rahm Emanuel told the New York Times after the 2008 election, "Rule 1 -- never allow a crisis to go to waste."

The President and Congress simply ignore high unemployment while plotting their next moves to bankrupt the country. They are violating the Constitution. They meet and maneuver and vote -- not in the tradition of this nation -- but of totalitarian regimes.

They vote late Saturday night, when the public isn't watching. Meeting behind closed doors -- one party and one party only. Changing the locks on the committee room doors to exclude the opposition party and prevent debate. Everything is done in secret until they drop a massive, 2,000-page bill on an unsuspecting public.

And that doesn't even include the regulations to implement the bill, which will be ten times longer! And it affects your life, your livelihood, your family. And you -- don't -- have -- access to it, or them.

Only the oligarchs, who laugh off high unemployment, get a say in how you will live. And they don't give a damn about anything but accruing more power and growing the size of government.


Inspired by: Nolan Finley (Detroit News), Mark Levin, John Crudele (New York Post).