Unstimulating…

In his mistitled book, “End This Depression Now! “, liberal economist Paul Krugman writes that our economic situation today is no different to that of the Great Depression of the 1920s and 1930s.  According to Krugman, it follows that we should be following the same Keynesian spending policies that, he contends, worked in the past. Of course, this is music to those on the left who want to spend, spend, spend. 

But it’s not true.  A depression involves a large sustained fall in output and high unemployment and a recession is two consecutive quarters of negative growth in Gross Domestic Product.  The U.S. economy has grown in each of the last twelve quarters, albeit at rates trending well below the post-war average of 3.3 per cent.  By contrast, between 1929 and 1933, GDP fell for four consecutive years. 

Unemployment in the United States is higher than the post-war average of 5.8 per cent but it is much lower than the levels of 20-25 per cent that were sustained between 1932 and 1934. 

So we simply cannot say that America is in a depression, or recently has been in one.  The recession ended in 2009.  Liberals like to label our poor economy a “depression” because they think it helps them to sell their radical spending policies to the public.    And for Krugman, the dishonest title sells more books than, “End This Slow Economy Now!” 

While some parallels exist between now and then – such as low levels of private sector investment – they do not amount to a replication of the Great Depression and the stock market crash of 1929.  The  basic economic problem today is vastly different than that of the 1930s. 

When the stock market crashed in 1929, federal debt was running at around 20-25 per cent of GDP, compared to around 100 per cent today.  It was the same in the UK, which had paid for World War One largely by selling assets rather than by borrowing. 

Today, the U.S. government already has a $16 trillion debt and is adding to it with a deficit of over $1 trillion a year.  Federal indebtedness is getting worse because of entitlement programs growing at a much faster rate than the economy.  It is the same situation in Europe, where Greece, Italy and Spain, among others, have more debt than they can restructure and service. 

Moreover, structural problems remain in the United States housing sector as a result of so-called “affordable housing” policies, Congress has discouraged private investment (Sarbanes-Oxley, Dodd-Frank), and the Obama Administration has been overtly hostile to business.  

The idea that governments should expand unemployment and welfare entitlements to boost economic activity has been discredited.  While most of this money will indeed be spent, in economic terms it merely transfers money from productive to less productive uses, increases the tax burden and debt and discourages some recipients to seek work.   When Washington bails out Democrat-run debt-laden states and funds more entitlements it doesn’t stimulate the economy – and we all can see that it hasn’t created jobs. 

Not surprisingly, the so-called stimulus programs – that Democrats mislabel as “job creation plans” – have failed to do much more than expand federal indebtedness.   Democrats wanted to use the power of the federal purse to expand government and use Keynes’ writings as their excuse.  But Keynes would be alarmed that his writings justify today’s lax and uncontrolled federal spending.  In the 1930s a crisis of economic confidence had caused private investment to dry up and public spending was introduced to jolt the economy into greater activity.  Today public spending is suppressing – or crowding out – the private investment that really creates jobs. 

Krugman is equating today with completely different events that took place eighty years ago.  He wants more and bigger spending.  But the problem with the United States economy is structural and has a $16 trillion government price tag attached to it.  We are not in Depression.  We are in a sovereign debt squeeze.   Federal spending is the problem, not the solution. 

Chief Executive Officer and Chief Operating Officer?

Since entering Congress in 1999 Ryan has immersed himself in the U.S. economy.  He wants growth and prosperity with an effective safety net for those most in need.  He prepared a welfare reform plan that would save Medicare from its unsustainable trajectory.  And, unlike Senate Leader Harry Reid and President Obama, the House Budget Committee Chairman has produced and passed a budget that would include these reforms, tackle the deficit, control spending and encourage growth. 

Ryan knows the federal budget inside out.  He has debated the need for meaningful reform and the welfare policies of his opponents so many times that he is regarded by both sides as the Congressional expert on the issue.  No bluster is detectable.  He can quote the figures, explain the shortcomings of the current system and detail what is needed without resorting to political talking points.  This makes him hard for the Democrat-supporting media to unravel. 

Ryan also has the political grounding to get things done.  His approach is to build alliances, most recently with Oregonian Democrat Senator Ron Wyden.  If anyone can craft a reform that can get through the House and Senate, it is Ryan. 

So if Romney wins in November, we can be sure that he will place his Chief Operating Officer in charge of passing vital welfare reform legislation.  And unlike the Gitmo showmanship that characterized President Obama’s first hours in office, the selection of Ryan at this stage indicates that Romney really means business. 

Compare all this to Obama’s selection of Joe Biden in 2008.  Obama needed cover on foreign policy, where he had no experience, and he needed someone who had been in Democratic politics for a long time to reassure the party faithful after he usurped Hillary. 

Biden’s selection was a political calculation, not that there is any disgrace in that.  Kennedy chose Johnson, who he was known to dislike intensely, so that he could win Texas.  But it is nonetheless refreshing that Romney looked beyond the election and made a choice that prepares for governance.  He could have gone with Senator Rob Portman of Ohio or Senator Marco Rubio of Florida to tie up a battleground state.  But he didn’t. 

While Democrats feel they can portray Ryan as a heartless extremist pushing grandma over the cliff (as they have already done in one moronic video), the truth is that Ryan is a thoughtful political reformer more in the mold of a Roosevelt or Reagan.  He is in Washington to get things done and, win or lose in November, he will have the staying power to continue to push his agenda on lawmakers. 

For this, Republicans have reason to coo.

Climate language is in a troubling spin

One reason liberals utilize the word so frequently is that implies some greater knowledge or sensitivity on the part of the speaker.  The GOP presidential hopeful isn’t aware that sending jobs overseas is bad, just as those unrepentant conservative Justices on the Supreme Court don’t realize their own biases. 

For some reason, conservatives rarely trot out the word “troubling” to characterize Democrat failings.  Troubling unemployment figures or troubling tax increases have seldom, if ever, seen the light of day.  Conservatives, it seems, have an aversion to “troubling” that is as marked as the liberals love for it.  These columns use it now and again just for fun. 

And so to leading climate fear-monger, James Hansen, whose Washington Post opinion editorial column on Sunday took just four paragraphs to introduce the beloved word.  The NASA Goddard Institute for Space Studies activist is a scientist who uses political language to great effect to advance his reputation, at least in the liberal bleachers. 

“I have revealed a stunning increase in the frequency of extremely hot summers, with deeply troubling ramifications for not only our future but also for our present.” 

Aah, thank goodness for this man!  He has “revealed” something – which must, therefore, be true.  And, of course, the ramifications must be troubling – otherwise they have no political or discursive value.  The days are long gone when Winston Churchill declared that scientists should be on tap, not on top. 

Hanson is particularly skillful in his use of non-scientific language to make political points.  The reader relates to the political message while still considering the thrust of the article to be scientific and objective. 

Indeed, his linguistic ingredients are so fine that it is almost disappointing that he bothered to use “troubling” at all. 

One technique Hanson deploys is the use of authority statements to get the reader to trust him.  They are naturally narcissistic and would make a more humble person blush:  “I testified before the Senate”, “In a new analysis, my colleagues and I…”; “I introduced the concept…”; “Our new peer-reviewed study, published by the National Academy of Sciences…”; “We plotted the world’s changing temperatures…”

The true advocacy purpose of the article is disguised by intertwining the main political messages with a seeming scientific objectivity.   In addition to the “troubling” quote above there are other dramatic, unscientific but appealing political phrases such as: “This is the world we have changed, and now we have to live in it.”

And of course, we finish with the liberal political solution of tax increases.  Like President Obama, Hanson calls them a “fee”.  “We can solve the challenge of climate change with a gradually rising fee on carbon collected from fossil-fuel companies with 100 percent of the money rebated to all legal residents on a per capita basis.”

Note the use of “rebates” and “legal residents” in the same sentence as “fee” to try to appeal to those troubling conservatives.  Hanson’s column boils down to liberal politics dressed up as science. 

Scientists who are this adept at political advocacy should be treated with great suspicion.  This is particularly the case when they are peddling dubious environmental claims.   

My advice: whenever you see or hear the word “troubling”, take a deep breath.

Back as Gavin Carter Blog

As you can see, AskGavino has been rebranded as the Gavin Carter Blog.  In part this was prompted by some hacking which first messed up some links and then completely affected access to the old site.

Of course, we could inject some intrigue here by alleging that the White House took exception to our hard-hitting columns.  Having laid bare President Obama’s hopeless economic policies, who else would have such a strong motive, and capability, to knock us out?  But the fact is that unless the White House is now dealing in Russian, the hacking of AskGavino came from a different source altogether.

This interference is now behind us and the new site ensures that a similar interruption is unlikely to occur again.  Gavin Carter Blog is built on a new platform with enhanced security.

We have also created a simpler look, making it easier to navigate the new Gavin Carter Blog.  And it is easier to read on those ubiquitous handheld devices.

Building a new site gave us an opportunity to take the next logical step in developing the blog.  Some of you wanted to know why the “Ask” was there, or commented that the name wasn’t consistent with the insightfulness of the articles.  Another concern was that AskGavino unnecessarily concealed the identity of the writer, perhaps creating sinister suspicions and negative perceptions.  These observations have been carefully considered – you could say that you asked Gavino and we listened.  The result is the newly designed Gavin Carter Blog.

The aim remains to publish thoughtful and thought-provoking articles on the political issues of the day – with angles that you don’t normally see in the editorial columns of traditional newspapers or on populist current affairs television shows.

We have kept the popular “Best Listened to…” feature and hope that this continues to give you as much pleasure, as it does us – whether or not you agree with the thrust of the particular article.

So the Gavin Carter Blog has been born. For now, the AskGavino.com domain will still take you to Gavin Carter Blog but please save the new domain in your favorites and take a moment to re-subscribe because it will eventually disappear…

And please continue to read Gavin Carter Blog and comment at your leisure!  Tell your friends about us.  Like us.  After all, this is the most thoughtful conservative opinion site out there!

Are we nearing the end of the entitlement road?

First, thanks to Britain’s Gordon Brown and America’s Barack Obama, entitlement spending became an “investment”.   By taxing and borrowing to pay for welfare programs, the government was apparently investing in the future.  Not surprisingly, these “investments” have yielded no tangible returns.

New French President, Francoise Hollande, has taken this sophistry one step further.  He has defined the current economic malaise in Europe as a choice between austerity and growth, by which he really means spending cuts or more borrowing and spending.

But it gets worse.  Austrian socialist Hannes Swoboda, writing in the Wall Street Journal (21 May), goes so far as to argue that, “investment in growth and employment … should not be integrated in calculations of structural deficits” because it generates income and taxes.  So if we don’t count the money that the government borrows, we can pretend we are not borrowing it at all.

Of course, the laws of economics cannot be manipulated like the terms.  Whether or not we wish to measure key economic indicators, the consequences of our actions will still occur.  It is just like driving a car.  Mr. Swodoba is advocating doing so with eyes closed because he doesn’t like what he sees.

Pretending that economic terms can be relabeled to avert a crisis is akin to rearranging the deck chairs on the Titanic.  The futility of the exercise reveals a level of political desperation that runs well beyond naivety.

Ballooning entitlement spending is creating a government-driven financial meltdown in Europe and the United States.  Hollande’s call for growth is little more than the trick of an illusionist.  The rhetorical appeal of “growth” is that it requires no sacrifice and no hard choices.  It means we spend because we can and while we can.

So governments have a spending problem and their solution is to borrow and spend more, only to call it “growth” and not to account for the cost.  Then what?

It is perhaps apt that the inevitable social fragmentation caused by ‘spending gone wild’ is on display in Greece, the most indebted European nation and the birthplace of sophism.  Since Greece will be first to arrive at the tipping point, it will show the way.

And while economic growth (in its traditional definition) could indeed provide countries with much needed relief from the impact of high levels of sovereign debt, the rising tide of revenue would not fix the underlying spending problem.   Economic growth, even if it returns to 1980s levels, cannot be counted on always to outpace entitlement spending.

‘Debt-mageddon’ could yet reveal the limits of prosperity in a democracy – a stark symbol of our inability to suppress the urge of entitlements over collective thrift.

The real news is that the GOP primary contest is finally on the verge of becoming a two-horse race after so many false dawns. 

Despite winning his home state comfortably, Newt Gingrich labored in all the other contests.   Worn down by the attacks from the Romney campaign that began in Florida, the gutsy former House Speaker finally looks like he is running out of steam. 

Newt’s gutsy nomination bid looks set to fall short

Gingrich trailed Santorum by 13 per cent in Tennessee and 7 per cent in Oklahoma, coming third in both.  If these states are bellwethers for the coming primaries in Kansas, Alabama and Mississipi, it surely will be game over for Newt. 

It’s been game over for Ron Paul since the start of campaign.  He has been capping out at around 8-12 per cent in each state.  Sooner or later his support surely will start to wane as reality sets in. 

So the big question is, with Gingrich and Paul looking like “also rans”, how many of their supporters in the ensuing primaries will switch to Romney or Santorum?

What? Did I say Romney?  The expectation must be that those who do will move to Santorum in far greater numbers. 

Just look at Virginia where around 80,000 Republicans were motivated to go to the polls simply to register a vote AGAINST Romney – boosting Ron Paul’s proportion of the state vote to 40 per cent.  If this is a measure of Romney’s unpopularity among the GOP base, he shouldn’t count on winning too many converts. 

Romney’s greatest asset is, well, his assets.  He has more cash to spend than any other candidate.  But the perception lingers that he doesn’t have conservatism in his gut.  He appears to lack conviction.  Witness his call to tie future minimum wage increases to inflation at a time of high unemployment. 

As he tries to portray himself as conservative, Romney also is burdened by the highly publicized endorsement of John McCain – hardly a political hero to many GOP voters. 

So while Romney prevailed in the tight Ohio contest, as he had in Michigan, he may now find victories more difficult to come by even while Gingrich and Paul stay in the race. 

If Gingrich suspends his campaign, as Santorum’s backers are urging, this will free a sizeable group of voters to decide the outcome.    

Romney’s supporters said that the contest would be over if he beat Santorum in Ohio.  This is patently not the case.  But Santorum will have to show some “real steel” if he is to actually overcome the well-oiled political machine out of Massachusetts.

It’s only money….

Part of the problem with how these questions are viewed is that crises have largely degenerated into party political tugs-of-war.  On the left, a crisis is used to justify more prohibitions and rules.  On the right, a crisis is used to justify de-regulation and reduce government interference in the economy. It is now uncertain whether we can really recognize a true crisis anymore – or whether we even care.

So, as with beauty, a political crisis is often in the eye of the beholder.  Our acceptance of whether one truly exists can depend more on our general political outlook than on any agreed facts.  Climate change springs to mind as one example.

We also know that crises are used as a lever – or excuse – for bringing about radical and urgent change.  Shortly after he was appointed Chief of Staff to President Obama, Rahm Emanuel famously stated that, “A good crisis should never be wasted”.  The biggest government spending bill in United States history became law on the back of the 2008 financial crisis.  Restrictive and onerous financial regulations followed in the form of Dodd-Frank.  Meanwhile, the root cause of the problem – the lending practices of government-sponsored mortgage giants Fannie Mae and Freddie Mac – were exempted from the legislation.

Yet the world has moved on regardless.  Isn’t this what always happens when a crisis supposedly happens?  Sea levels never did rise dramatically despite Al Gore’s Nobel Prize-winning movie.  Economic depression didn’t occur in 2008 despite the collapse in the value of mortgage-backed securities and the under-capitalization of banks.  U.S. states like Illinois and California continue to operate despite their near bankruptcy.  The global economy trundles along.

And even if the debt crisis is a real crisis, what can we actually do about it?  In Athens, Greeks continue to go about their daily business as if nothing much will change, while their leaders’ making solemn agreements on public spending cuts.  Is it any surprise, then, that most people simply expect that this crisis will blow over like all those that went before?

To put it another way, after years of supposed crises, experience tells us to be skeptical when a new one arrives.  We are crisis-weary.  We simply don’t trust a crisis anymore like we used to.

Perhaps this helps to explain why many Americans remain unconcerned about the indebtedness of the United States government.   A $15 trillion debt is surreal, not only in terms of comprehending its size but also in terms of what it means.  Why not $20 trillion?  Why not $50 trillion?

Then again, you don’t have to be an economist to rationalize that somewhere out there is a limit to how much governments can borrow.  Otherwise, they all would have been spending at Obama rates and higher for decades.  The very idea of austerity measures would be something to giggle at.  The key question is whether developed nations are now reaching that limit.  Greece is Exhibit A.

After years of expanding welfare programs, Europe is finally bumping into the outer wall of the sovereign debt frontier.  The U.S. is firmly in the fast lane, trying to catch up.  It has expanded its debt by $5 trillion over the past three years alone – and that is before adding in the ObamaCare entitlement program.

Beyond public spending cuts in countries like Ireland, Portugal and the UK, the economic consequences of overspending have yet to be realized.  Free market economists predict a combination of inflation, economic stagnation, high unemployment, the loss of pension guarantees and a general contraction in social and welfare programs.  There will be calls for tax increases but it is well documented that there are limits to the amount of revenue that can be raised from taxation.

The end result, of course, is that people will be made poorer.  Whether or not you call this a crisis is up to you.

And today's winners are...

On Monday, Barack Obama announced that government-run Fannie Mae and Freddie Mac can rewrite mortgage loans for all up to date borrowers who are suffering from negative equity. 

Forget what the White House says about this new initiative stimulating the housing market.  It won’t.  But lower interest rates for a key tranche of borrowers is more likely to provide a jolt to consumer spending than any phony “jobs plan”.  As the President said: “It gets those families spending again.”

The macroeconomic impact will be that of a narrowed down middle class tax cut.  Relabeled and repackaged for sure, but this boils down to a sampling of Reagan supply-side economics. If John Boehner had presented such a proposal, he would have been slammed by the left for wanting to give handouts to the wealthy. 

Of course, the left will be attracted by the greater dysfunctionality this move brings to the much maligned banking sector.  Consideration of job security and repayment history had already been removed from lending decisions in the name of fairness.  Now the President has brushed aside requirements on equity.  Any semblance of logic to consumer lending  has been removed.  A cornerstone of capitalism has been further weakened. 

The tragedy, of course, is that Democrats created the equity trap in the first place.  They introduced and passed the disastrous easy lending legislation that created the housing bubble, leaving many borrowers owing more than the value of their homes. 

To make matters worse, last year Democrats established new restrictions on private lenders that have produced erratic and inconsistent home property valuations.  These have made loans much more difficult to rewrite, tying borrowers to their homes and mortgages even as interest rates have remained at record low levels. 

But while they have tightened regulations in the private sector, Democrats have removed them in the state sector.  Fannie and Freddie are exempt from these rules and the president has now given them an even more unfair edge over private lenders.   Consumers will inevitably turn to the cheaper government deals, leaving Wall Street ever more dependent on political decisions made in Washington, DC.    

Someone might ask where in the Constitution the government is given the power to provide mortgages and the President to determine the terms of lending. 

By picking winners the President can appeal to different blocks of voters and there can be little doubt that with this particular selection Barack Obama has improved his re-election chances.  But the big question is whether enough of these newly-favored consumers will spend their bonanza after years of retrenchment.  The economic and political payoff for Barack Obama could be small if the extra cash is used instead to pay down mortgage balances or reduce other household debt.   

Appropriately, all this was announced in Las Vegas.  Would anyone like to wager against the President expanding the handout to all government-backed borrowers before Election Day?  After all, what could sound more fair?

Yes - by liberals...

In developed nations, governments take wealth from those who have it and redistribute it via health care providers, unemployment checks, low income credits, government bureaucracies, corporate bailouts, industrial subsidies, supposedly green investments and a welter of other social and welfare programs. 

In the United States, the top five per cent of earners pay more income tax than the bottom 95 per cent combined, by a ratio of approximately 60 to 40.  They take in only a third of adjusted gross income.   

Apparently this is not enough. 

You want to really reduce wealth?  You’ve got it.  High tax payments are one thing but something  much more pernicious is looming around the corner.  The impact of massive government borrowing to finance these programs is poised to be exposed to the middle classes as theft on a much grander scale.  

This will be demonstrated when Greece finally defaults on the back of its welfare debt.  When the drachma is reintroduced, it will be worth so much less than the Euro that Greek assets values – pensions, savings, property, businesses, etc. – will free-fall. 

Permanent currency devaluation is the perfect solution for those liberal intellectuals who find compassion in picking other people’s pockets.  It is theft by stealth.  Greeks will wake up to discover that their holdings were not so secure after all.  Their wealth already has been “redistributed”.  Spent.  Gone. 

With three record post-war budget deficits and $15 trillion in accumulated debt, Barack Obama’s America is on the same trajectory.  Today’s welfare is tomorrow’s robbed pension fund and empty cashbox. 

Dependency has taken away the very thing that its proponents claim to offer – hope.  Hope comes not from endless welfare but from responsibility and self-reliance.  Welfare recipients see little hope for advancement.  They have been permanently enslaved. 

As the Occupy Wall Street and copycat protesters have demonstrated, nobody is satisfied.  There never can be enough redistribution and government welfare to satisfy the aspirations of recipients and egalitarians.  An ever expanding sub-culture of dependency has been created that demands ever greater handouts to mitigate the inherent misery from relying on government welfare.   The circle is complete. 

Occupy Everywhere is a cry for help.  It boils down to protests not against wealth or bankers, but against the failings of liberal policies. 

Young people in particular are being squeezed by a system that offers little or no prospect for them to prosper as individuals.  This is the system that has been created. 

How will teenagers respond when they work out that their legacy already has been spent by the political classes?  Will they want to grab their share of what is left?  Will they comprehend that the more wealth that can be commandeered from others, the less hope they will have of ever escaping dependency themselves?   Will there be a backlash against government and in favor of capitalism? 

The lesson of Occupy Everywhere is that welfare should be a hand up, not a hand out.  The government trough is no nirvana.

Sarah Palin’s character was famously butchered and mauled.  Jeb Bush’s surname was a liability.  Mitch Daniels chose not to allow the media adjudicate on personal family issues. 

By any historical record, a slate of Palin, Daniels, Bush, Perry and Christie would have oozed talent – five articulate Governors comparing their successful economic records against Obama’s.  But Perry is the only one running and, given his falling polling numbers, he would have registered as the least articulate of the group.   

Not the media's choice - but can Perry win?

This is not to forget Mitt Romney.  But the former Massachusetts Governor, who is unashamedly on the liberal extreme of his party, has so far been given a clean pass by the liberal media.  Judging by what happened to John McCain in 2008, the criticism, intrigue and innuendo will only be activated once he has secured his party’s nomination.  

Lest this sounds like a case of sour grapes, let’s be clear that the media does have a legitimate role to play in vetting candidates for the most important job in America.  But whereas liberals purport to strive for what is “fair” when it comes to dividing wealth, the same standard doesn’t apply to political reporting.  The basic theme for the liberal media is that the state must safeguard citizens against all possible ills, and candidates are coddled or undermined accordingly.    

For example, if a similar standard of media intrusion applied to Democrats, the 2008 election would have probably looked very different.  Barack Obama likely would have been disqualified by his close relationship to domestic terrorist Bill Ayers.  Hillary Clinton might have been ruled out over her dodgy financial gains in futures trading and role in the Whitewater scandal.  John Edwards surely would have been exposed for his sleazy personal affairs that finally became public after the election.  Perhaps Joe Lieberman and Dennis Kucinich would have fought out the Democrat nomination in a thin field. 

Still, the liberal media’s willingness to shield the shortcomings of its candidates has negative electoral repercussions for the left as well.  With so little external scrutiny, the last three Democrat presidential candidates have been a global warming hoaxer, a military embellisher and an economic illiterate.  With good reason, some liberals are openly doubting Barack Obama’s chances of winning a second term.  Greater scrutiny of liberal candidates might lead to more competent nominees. 

Who knows, perhaps the Tea Party would not have emerged as such a powerful political influence if the choice in 2008 had come down to voting for Lieberman or McCain. 

As a political philosophy, liberalism boils down to picking winners and losers, whether it is in the form of political candidates or political policies.  This reveals a fundamental flaw of liberalism.  By definition, it isn’t fair. 

True, the Republican field might have been stronger.  But whoever emerges from the pack can hardly do a worse job of generating economic prosperity than Barack Obama – however the media chooses to spin the contest.