Scott Spiegel

Poor Greece is on the verge of defaulting on its bills and declaring bankruptcy.  Credit rating agencies S&P, Moody’s, and Fitch long ago downgraded Portugal, Italy, Greece, and Spain (the PIGS) and gave them negative outlooks, with Greece getting Cs across the board.  (Cuba, Pakistan, and Burkina Faso are a few of the nations with better ratings than Greece.)  If Greece runs out of money and fails to pay €14.5 billion to service its debt on March 20, European markets could be badly shaken.

Greece’s financial woes are the result of its unsustainable social welfare entitlement state, whereby working adults are promised generous pensions and early retirements, and younger generations must cough up the money to pay for these, though they won’t receive similar benefits when they retire.  (Sound familiar?)  The government has been borrowing to subsidize these pensions, but it’s not enough—partly because Greece has one of the lowest birthrates in the world, and partly because swaths of young educated Greeks are fleeing the country and emigrating elsewhere to find work.

The European Union—the ill-advised, 27-member collective of largely Western European nations—adopted a common currency among 17 of its members to facilitate trade.  Greater economic stability was supposed to result from the fact that if certain members were in trouble, other members would better be able to bail them out until they got back on their feet.  But the PIGS’ problems are long-term, structural flaws that will lead to greater financial ruin with each passing year.

The wealthier, larger, more financially secure countries—especially Germany—resent perpetually having to rescue these flailing nations.  They’re suspicious that bailing the PIGS out will be temporary fixes, that these nations won’t enact reforms needed to right their economies.  Given that parties to the left of Greek Prime Minister Lucas Papademos’ Socialist Party have been dominating the polls ahead of April’s early national elections, who can blame Germany for mistrusting Greece?

For a while, it seemed German Chancellor Angela Merkel would decline Greece’s request for a bailout—their second since 2010—and let the country declare bankruptcy.  Merkel relented, on the condition that Greece enact widespread austerity measures, subject its spending to greater EU scrutiny, and reduce its public debt to “only” 120% of its GDP by 2020.  Austerity measures would include cutting government agencies, jobs, and wages; pensions; higher education subsidies; and health care benefits.  In return, private holders of Greek bonds would take a 70% cut in the value of their holdings.

Meanwhile Germany is drafting backup plans, whereby Greece would leave the euro if it fails to reduce its debt and implement austerity cuts and privatization of state functions.  German Finance Minister Wolfgang Schäuble and nations such as Austria and Finland openly question Greece’s potential to rebound.

Everyday Greeks, steeped in the European entitlement mentality that promises them a comfortable living their entire lives, are livid.  For weeks, thousands of citizens have protested, rioted, and looted in a display of spoiled petulance that makes Occupy Wall Street look like the Tea Party.  They have fomented violent clashes with police, instigated mayhem and injury, and caused millions of euros of damage to public and private buildings.  Protestors came out en masse on Sunday before decisive talks among the Eurogroup in Brussels over whether to implement the Grecian bailout.

In Greece as in the U.S., everyday folks blame the government for not collecting enough taxes from the rich—which would only stifle job creation and do little to alleviate Greece’s debt crisis.  They scapegoat banks for mismanagement, and lament the government’s failure to prosecute financial executives—as though throwing a few bankers in jail would solve their problems.

The mainstream media have conspired in the protestors’ mission by labeling the austerity cuts “punishing,” as though not getting as much as you want for free is an intolerable deprivation.  Prodigality appeasers insist we rescue Greece and blindly trust their commitment to reform.

One New York Times commentator concluded a lengthy profile of struggling Greek citizens thusly: “Greece’s traditional infrastructure may not be the ultimate answer to its problems… but it may make difficult times less painful.”  Yes, and Greece’s traditional infrastructure is what brought about those difficult times in the first place.

Just as Paul Krugman and other leftists repeatedly, recklessly exhort the U.S. government to spend even more money it doesn’t have on stimulus, lest the country slip further into recession, EU bailout critics warn that austerity cuts will further hobble Greece’s economy.  The Guardian’s Fabian Lindner declares, “Europe is in dire need of lazy spendthrifts” to whom countries like Germany can export goods.  Lindner predictably argues that because Greece has instituted five sets of minor austerity cuts that haven’t yet worked, it should reverse course and ramp up government spending again.

Defenders of statism praise communism, and its relative socialism, by gushing, “It’s a great idea in theory; it’s just never been implemented properly.”  In fact, communism and socialism are terrible ideas, and have been implemented squarely in line with their supporters’ intentions, minus any desperate freedom defenders’ last-ditch efforts to fight off government’s encroachment on citizens’ lives.  What we’re seeing in Greece is exactly what we could have expected after a half-century of full-fledged implementation of the modern welfare state.

If the U.S. continues down its current path—Social Security, Medicare, and Medicaid going broke, new entitlement programs like the prescription drug plan and ObamaCare being piled on, and Democrats and many Republicans unwilling to consider reforms—then we’re going the way of Greece.  The major credit rating agencies have already downgraded the U.S. and threatened to devalue us again if we don’t address our debt.  But when the U.S. defaults, there’ll be no one to bail us out.



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Last summer, during the debt ceiling standoff, Congressional Republicans and Democrats came to a dubious—no, wait: stupid—deal to set up a bipartisan “supercommittee” to negotiate $1.2 trillion in spending cuts over the next decade.

The committee comprised three Republicans and three Democrats from the House, and three each from the Senate.  The committee would make spending cut recommendations by November 23, and Congress would vote on them by December 24.  If the committee failed to agree to cuts that can pass in Congress, automatic cuts of $450 billion from defense spending, $450 billion from domestic programs, and $300 billion from reduced interest payments would kick in on January 1, 2013.

What could possibly go wrong?

For starters, there are six Democrats on the panel and only six Republicans.  Since spending bills originate in the House, which Republicans control, why is this a 50-50 proposition?  Would gloating Democrats have been so sporting if this process had unfolded in 2007 or 2009?

The Republicans on the committee aren’t nearly as conservative as the Democrats are liberal.  Only one Republican could be called a consistent, genuine fiscal conservative: newly elected Senator, Club for Growth President, and godsend Pat Toomey.  Republican committee chair Rep. Jeb Hensarling, Sen. Jon Kyl, and Reps. Rob Portman, Dave Camp, and Fred Upton, whatever their virtues, all voted to increase the debt ceiling in August, and thus cannot be trusted.

In contrast, three Democrats on the committee—Reps. James Clyburn, Chris Van Hollen, and Xavier Becerra—bucked the majority of House Democrats and voted not to extend the Bush-era tax cuts last December.

In other words, the GOP appointed moderate-right members, while Democrats appointed members of the Socialist Workers Party.

Then there’s the matter of negotiating strength.  Sen. Max Baucus, a Democratic committee member and chairman of the Senate Finance Committee, infamously rammed ObamaCare through the Senate without a single GOP vote.  Whatever you think of his policies, the firmness of Baucus’s past negotiating stances has been solidly demonstrated.

In contrast, Republicans consistently fail to stand up for their side in negotiations with Democrats, always caving in when the accusation of being meanies gets to them.  Already Hensarling is making the rounds telling reporters that tax increases are “a reality” when you’re dealing with Democrats.

There’s also the fact that any agreed upon spending cuts are not binding, and can be weakened or eliminated by future Congresses—which means that any cuts that don’t take effect in the next ten minutes are basically meaningless.  Even the “automatic” cuts slated for 2013 can be “unautomatized” by Congress next year.  As Toomey notes, in the event of failure to reach a deal, “[I]t’s very likely that Congress would reconsider the configuration” of automatic cuts.

Also, the Defense Department says it cannot sustain $450 billion in cuts.  As for the $450 billion to be cut from domestic programs, Congress still has to wrangle over which agencies to target, which means that the supercommittee isn’t really deciding anything, just kicking the can down the road.

Also, other committees are trying to use the supercommittee to slip by Congress unpalatable bills on things like agricultural subsidies for farmers who don’t farm, by capitalizing on its behind-closed-doors nature and refusal to disclose its discussions to the public.

The secretive supercommittee, whose final product will be sent straight to Congress for a vote, with no opportunity for revision or amendment, finds itself just eight days away from the deadline with no resolution in sight.  (This, despite President Obama’s helpfully calling the committee every five minutes to nag them from his courtside seat in Hawaii last week.)

Even within their party, Democrats can’t agree on which job-killing tax increases and illusory spending cuts to propose.  For example, Democrats haven’t decided whether to try to claim that the $700 billion we might not be spending on the wars in Iraq and Afghanistan may count as 58% of their spending cut target.

Recently Republicans on the committee agreed to a tax increase that would reform the overall tax code, lower the top marginal rate, and broaden the tax base to incorporate the 47% of the population that pays no federal income taxes (and sponges off the rest of us).  Naturally, Democrats resoundingly defeated that proposal.  At least Republicans were savvy enough to start with a negotiating point that involved cutting taxes for high income earners, so that the final compromise would likely be closer to no tax increases for this group.

Although it’s been said many times, many ways, it bears repeating: All of this chaos is entirely the fault of Congressional Democrats, who have refused to pass or even propose a budget for over two years, thus necessitating all of these recent, panicky, last-minute showdowns.  (Quick: Google “Democrats haven’t…” and see what autocomplete suggests for you.)

The most important lesson conservatives should learn from this farce is one that cannot be stated too often: Never negotiate with Democrats.



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Presidential candidate Herman Cain has been touting his 9-9-9 tax plan, which would replace the three-million-word tax code with a flat 9% federal income tax, 9% corporate tax, and 9% national sales tax.

Fellow candidate Rick Perry recently proposed a flat tax of 20% on earned income and 20% on corporate income, and a simplification of the tax code, including elimination of loopholes and eradication of the death tax.  Newt Gingrich has similarly suggested a 15% flat tax.

These plans recall the flat tax Steve Forbes campaigned for president on in 1996 and 2000.  All of these plans would massively reduce the U.S.’s collective tax compliance cost to the tune of hundreds of billions of dollars.  (Though liberals don’t realize it, it would be a fantastic thing for our economy if every employee of the Internal Revenue Service and H&R Block, and every tax lawyer, accountant, and tax preparation service employee lost his job and had to go out and find useful productive employment.)

In response to these thoughtful Republican proposals, liberals are screaming that conservatives’ plan for getting us out of our present fiscal crisis is to “tax the poor.”

If only we could get out of our current budget predicament by taxing the poor.  In fact, we can’t even get out of it by taxing the rich.

As has been amply demonstrated, massively increasing taxes on high earners wouldn’t come close to relieving our budget woes.  These can be alleviated only via radical entitlement reform.  Eating the rich now will not ensure an enriching long-term diet for the nation later.

The reason conservatives have been advocating flatter taxes is not that they want to “balance the budget on the backs of the poor,” or some other such nonsense.  It’s so that the 47% of the population who, due to the expansion of the Earned Income Tax Credit over the past several decades, pays no federal income tax will be forced to contribute something, however measly, to the country’s tax revenue.

Free market types don’t want to raise taxes on the poor to be meanies.  They just want liberals to stop demanding that high earners pay more, and Democrats to stop spending so much, and are willing to call the left out by shining a blinding spotlight on how little almost half the population pays to fund our government.

Conservatives hope that if the income of the lower-earning half of the electorate were considered fair game, then maybe the voters who receive it wouldn’t be so quick to rally around politicians who want to increase spending via public boondoggles like Obama’s Jobs Act, which will have to be paid for via tax revenue.

If Democratic politicians weren’t constantly dreaming up new ways to steal and waste the hard-earned income of the nation’s most productive citizens, perhaps so many Republican candidates wouldn’t be gaining traction by proposing that a greater proportion of society have some “skin in the game.”

And contrary to Democrats’ claims, a flat tax doesn’t “help” or “benefit” the rich—it merely punishes them a little less.  If Occupy Wall Street types weren’t going around hollering that the rich should be even more exorbitantly taxed than they are now—the highest-earning 1% already shoulder 40% of the federal tax burden, a fact of which most protestors seem blissfully unaware—then the glaring lunacy of their demand that the rich pay their fair share wouldn’t be so ripe for ridicule.

It’s possible that neither Cain nor Perry is the best Republican candidate to deliver the flat tax message, since each seems to have some difficulty explaining the intricacies of his policies to audiences (though see Perry’s fine Wall Street Journal editorial outlining his plan).  But having three of the most prominent candidates pushing for a flat tax may pressure other candidates to endorse similar plans, should they secure the nomination (ahem, Mitt Romney).

Liberals must be scared that these flat tax proposals will resonate with voters, as witnessed by the flurry of recent editorials declaring, not that the plans won’t work, but that smart voters would never, ever go for them.

Conservatives often play the game of asking liberals how much those earners in the highest tax bracket should pay—that is, how much would satisfy the left’s desire to bash the rich.  50% of their income?  60%?  70%?

How about a different game: What percentage of their income would it be fair to ask those in the lower 47% to pay?  Would 10% a year be too much too ask?  How about 5%?  1%?

Something greater than 0.00%?



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Recently Republican presidential candidate Mitt Romney criticized fellow contender Rick Perry for labeling Social Security a Ponzi scheme.  Romney extolled the virtues of the soon-to-be-bankrupt program and vowed to support its continuance unconditionally if elected.

A Ponzi scheme, so named after white-collar criminal Charles Ponzi, involves a huckster collecting money from numerous investors who are promised a high or reliable return on their investment, with payments being made by future investors lured in by similar promises of financial gain.  The scheme is unsustainable, because dividends received are not actually invested, and are not equaled by the dividends promised to investors.  Earlier investors fare better than later investors, who lose their money once the scheme collapses.

Sound familiar?

Social Security, signed into law by white-collar criminal Franklin Delano Roosevelt, involves the federal government collecting money from all working citizens, who are promised a reliable pension when they retire, with payments being made by subsequent generations who are dragged into the program.  The system is unsustainable because, due to slowing population increases and politicians raiding the Social Security Trust Fund, most payroll taxes received are not actually invested, and are not equaled by the payments promised to retirees.  Earlier generations fare better than later generations, who will not receive benefits once the system collapses.

The history of Social Security’s establishment and implementation reveal that Governor Perry is wrong about the program’s being a Ponzi scheme.  It is much worse.

Social Security is bigger, by many orders of magnitude, than any Ponzi scheme ever enacted in human history.  It is the largest government program in the world, and the biggest component of U.S. federal expenditures.  Social Security is to the average Ponzi scheme what the Great Pyramid of Giza is to a traffic cone.

Social Security is involuntary, whereas Ponzi schemes are at least voluntary.  Though applying for a Social Security number is not technically mandatory to live and work in the U.S., the Internal Revenue Service and other agencies require it, which forces everyone to participate in the program, or makes their lives very difficult if they don’t.

Social Security is better disguised than a Ponzi scheme, and thus more insidious.  Unlike a Ponzi scheme, the true nature of Social Security is hidden in broad daylight, which lulls ordinary citizens into thinking it couldn’t possibly be as fraudulent or unsustainable as it is.

Social Security is longer-lasting than any real-life Ponzi scheme.  Whereas most Ponzi schemes are lucky to survive a few months, Social Security has continued for over 75 years.

Social Security’s insolvency won’t affect young, naïve, retrainable investors, but rather elderly people at the potentially neediest and most vulnerable stage of their lives.

All of the above negative consequences of Social Security are a direct result of its being administered by the federal government.

Government has access to billions of participants, trillions of dollars in capital, and decades of time to continue the ruse.

Government forces all citizens to participate, even if they’d rather keep their money, invest as they choose, and take their chances later in life.

Government gives Social Security its imprimatur—whatever that’s worth these days.  Most members of both major political parties approve of continuing Social Security more or less as is.  The program is referred to as the “third rail” of politics, meaning that if you touch it, you die politically.  It is as though Bernard Madoff were a major donor to both parties, and Congress refused to question his investment strategies because Madoff were considered the “third rail” of politics.

Government designed Social Security to increase its ability to control the populace, by forcing them to pay in when they’re young and healthy and then meting out or scaling back benefits when they’re old and infirm.  (By “government,” of course, I mean Democrats.)  The Supreme Court actually ruled, in Flemming v. Nestor (1960), that the Social Security Administration is not legally required to pay benefits to retirees who have contributed to the system their whole lives, if it finds itself in a pinch: “To engraft upon the Social Security System a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands…”  Would that everyday businesses were afforded the same “flexibility” and “boldness” to decide not to honor their contracts in order to better adjust to “ever-changing conditions.”

Supporters of Social Security only wish it had the air of respectability of a garden-variety Ponzi scheme.  Then we could send the fraudulent originators to jail, cut our losses, and start over.

Instead, we’re saddled for eternity with the mother of all entitlement programs, the granddaddy of confidence games, the oldest relic of the Seven Entitlement Wonders of the Modern World.  Even supposedly conservative presidential candidates—including, sadly, Rick Perry—are now duking it out to show how badly they want to preserve this fraud.



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The new meme on the left, helpfully demarcated on social media sites like Twitter via such catchphrases as #TeaPartyDowngrade, #HeckuvaJobTeaParty, and the trending #TeabaggersArePoopyheads, is that Standard & Poors’ downgrade of the U.S. long-term credit rating is due to the Tea Party’s push for spending cuts in the debt ceiling battle.

Never mind that S&P, Moody’s, and Fitch are the same agencies that thought Democrats’ Community Reinvestment Act and government-mandated subprime housing loans were a peachy idea; maintained top ratings for most securities backed by subprime mortgages; and thus contributed to the meltdown.

Never mind that S&P, headed by English lit major John Chambers, made a $2 trillion error calculating the U.S.’s debt-to-GDP ratio over time, then rewrote its justification for the downgrade to fit its already formulated decision.

Never mind that in the past five years, betting against S&P’s recommendations would have given you a better return on your investment than betting for them.

To the extent that one trusts S&P, its report gives a decidedly different impression of their reasons for the downgrade than those claimed by the left.

The report cites “difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about… a broader fiscal consolidation plan that stabilizes the government’s debt dynamics…”  S&P is obviously trying to be nonpartisan and spread the blame around.  It would help if they displayed less vagueness about where responsibility lies for the U.S.’s financial problems.  But I read that last bit as clearly highlighting Congress’s refusal to cut spending on items that make a real dent in our budget, which is largely the fault of Democrats, at least this time around.

S&P notes: “We could lower the long-term rating to ‘AA’ within the next two years if we see less reduction in spending than agreed to, higher interest rates, or new fiscal pressures…”  There is nothing in there about future debt ceiling inflexibility, extremist conservative posturing, or the intransigence of jihadist Tea Partiers.

The report continues: “[W]e believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed.”

Any liberals looking at this stopped reading that last paragraph after they got to “prolonged controversy over raising the statutory debt ceiling.”  The Tea Party held America hostage—S&P said so!

In fact, the agency stated that the prolonged debt ceiling debate was of concern, because the gap between the parties foretells difficulty in reining in entitlement spending.

Let’s see: which party favors reducing entitlement spending, and which is reflexively, dogmatically opposed to it?  If the two parties face gridlock on the entitlement cuts S&P is eager to see, which party is therefore more at fault for Congress’s failure to cut entitlement spending?  Why, I believe that would be the Democrats!

As for the claim that S&P was upset because Congress didn’t raise taxes, the agency explicitly took no position on what combination of spending cuts and/or tax increases, if any, should be adopted.

One very specific request S&P did indicate, however, is that an ideal deficit reduction deal should cut about $4 trillion over the next decade.  The plan Congress agreed to cuts $2.4 trillion.

So Tea Partiers were pushing for bigger cuts than Democrats and even House Republican leaders were willing to consider, and S&P wanted cuts twice as big as those Congress agreed on.  How is it again that pushing for cuts was the Tea Party’s mortal sin?

The only other crime for which the Tea Party might be to blame in S&P’s eyes is “brinkmanship” in using the debt ceiling as a negotiating tool to bring down spending.  But if a good chunk of the reason for S&P’s downgrade was the U.S.’s refusal to rein in entitlement spending, and Democrats are congenitally opposed to all entitlement cuts, then what other bargaining chip did Republicans have to work with besides the debt ceiling?

Anyway, it is logically impossible for S&P to have downgraded the U.S. out of fear that the debt ceiling standoff would result in our creditors not being paid.  The U.S. spends less than 10% of its revenue servicing our debt.  We failed to raise our debt ceiling in time on nine occasions in the past, and our debtors always got their interest payments.  How could there have been even a remote chance we would have defaulted?

If S&P really thought the U.S. was at risk of default, then they owe the American people an explanation of how exactly this might have happened.  An S&P downgrade, if any, should have taken place entirely because of our enormous debt, not our debt ceiling.  The fact that S&P refuses to make it clear which one is the cause for their downgrade shreds any credibility they have.

S&P’s downgrade is either entirely the fault of Democrats who refuse to cut entitlement spending or pass a budget, or S&P’s willful obfuscation of the difference between raising our debt ceiling and servicing our debt.  Either way, the Tea Party is utterly blameless.

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Last week Moody’s Investors Service threatened to downgrade the U.S.’s Aaa credit rating if the nation fails to raise its $14.3 trillion debt ceiling before August 2.  On Monday the agency counseled the U.S. to scrap its debt ceiling altogether.

Standard & Poors (S&P) and Fitch, the other two major credit rating agencies, recently echoed Moody’s warning.

Democrats pounced on Moody’s pronouncement as ammunition in Congressional budget talks, citing Moody’s as an unimpeachable source on what to do with our debt ceiling.

Why is anyone listening to what Moody’s has to say about the economy?

Moody’s, S&P, and Fitch are the same credit rating agencies that helped precipitate the subprime lending crisis of 2008.  These bureaus continued to give large financial institutions their highest ratings until the last minute, despite the flimsy cores of these firms’ collateralized debt obligations and mortgage-backed securities.  Moody’s and company thought the Democrats’ Community Reinvestment Act was a splendid idea, with the result that millions of investors lost billions of dollars and the international market collapsed.

Credit rating agencies work to offer valid, objective, neutral assessments of companies and sovereign states’ creditworthiness by systematically reducing outside influence and making their ratings as independently as possible.  However, if they hold invalid ideas about how governmental policy and economic principles interact, their predictions will be as shoddy as Paul Krugman’s.

Ratings agencies are subject to the same biases that businessmen, Wall Street investors, banks, and homeowners are.  Moody’s eight-member Board of Directors, for example, includes the following advisors: one director of the Federal Reserve Bank of Dallas, one member of The Federal Reserve Bank of New York Financial Advisory Roundtable, one director of Freddie Mac, and one director of the Dutch National Bank.  So 50% of Moody’s Board of Directors includes members who are heavily involved in central banking.

As one disillusioned former Moody’s VP lamented at Congressional hearings on the subprime lending crisis, “I had this somewhat naive idea when I joined Moody’s that it was a particular quality Moody’s was offering, and that was something that the company was going to seek to defend over time.”  Not quite.

In contrast to Moody’s and spend-happy Democrats, Republicans have been insisting that the nation has more than enough revenue to cover interest on our debt, military pay, Social Security, and other high-priority items for months without raising our debt ceiling.  There is literally no risk of the U.S. Treasury defaulting on our debt, unless petulant Democrats sabotage the process.

Because Moody’s admits it will downgrade the U.S. only if a default happens, not if we fail to raise our debt ceiling, there should be no need for a downgrade.  The U.S. failed to raise its debt ceiling on nine occasions in the past, from 1973 to 2007, with no concomitant default or credit rating downgrade.

There hasn’t been a looming catastrophe this overblown since Y2K.

The debt ceiling scenario is analogous to a hypothetical credit card holder who gets to arbitrarily raise his credit limit as often as he wants.  On August 2, the cardholder runs out of money to borrow.  He has more than enough income to pay the interest on his card and meet his basic living expenses.  Republicans are arguing that because he’s raised his limit so many times and is spiraling into a sinkhole of debt, he should cut up his card, rework his budget, and pay the card off.  Democrats are arguing that he should raise his credit limit again and charge the interest payments to his card, in case the credit card company is worried that he’ll fail to make them—as he always has before—and blow the money on a trip to Bermuda.

Can someone explain to me how the Democrats’ plan is more financially responsible and reassuring to bondholders?

Moody’s also argues that because the U.S. is one of the few nations that self-imposes a debt ceiling, yet has continually voted to raise it, this creates periodic uncertainty regarding whether the U.S. can service its debt; hence, the ceiling should be eliminated.

A debt ceiling is certainly not an essential aspect of governing a sovereign state.  But in this era of trillion-dollar deficits, doesn’t it serve the purpose of holding our politicians in check and sending the populace periodic wake-up alarms?  Shouldn’t a debt ceiling, however imperfectly administered, be recognized as a good-faith attempt to control a nation’s debt?

True, the debt limit has been raised many times in the past.  But in a limited government whose constitution is suffused with checks and balances and limits on rule, is it so foolish to have one at all?

If debt limits are such a poor idea, why do credit card companies impose them on cardholders?

The problem isn’t that debt limits are bad, as Moody’s implies, but that the U.S. government has been borrowing so much for so long that it thinks it has none.

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Obama doesn’t want to increase taxes on oil companies because it will bring down the price of gas.  He wants to increase them because it will raise the price of gas.

This week the House will vote on whether to expand offshore drilling and eliminate red tape needed to get drilling permits approved.  Democrats also hope to vote on whether to end billions of dollars in tax breaks to oil companies.

The media have been happy to do Obama’s bidding by referring to the tax breaks as “subsidies”—as though U.S. Treasury officials were riding around the country in an armored van handing out satchels of gold to Exxon Mobil, Chevron, and ConocoPhilips executives.

In fact, we’re talking about reducing the gargantuan taxes these companies pay for the sin of drilling for oil and making it widely available to a country that uses it in every daily setting and is dangerously dependent on Middle Eastern imports.

Since oil companies are likely to pass the cost of increased taxation on to consumers in the form of higher gas prices, the Democrats’ plan will, as usual, do nothing to solve the underlying problem, make things worse, and give greater influence to the federal government.  Mission accomplished!

Ending tax breaks for oil companies is the closest Democrats can get to imposing an outright gasoline tax, which they know is politically impossible during a recession.

To be fair, oil companies might not pass the entire added cost on to consumers—they might cut back on hiring, reduce wages, or otherwise trim their workforces.  Such actions will no doubt be wondrously helpful for the high unemployment rate.

Obama also recently announced the formation of a Justice Department task force to scrutinize whether oil companies are “manipulating” prices in collusion with oil speculators.

As high as gas prices are, there are many factors that have conspired to increase them, none having anything to do with the sudden greed of oil companies or the rampant fraud of speculators.

There’s the little matter of a dozen or so uprisings in oil-rich Middle Eastern nations over the past four months, which have elevated uncertainty regarding oil production and regime change in the region.

There’s the declining value of the U.S. dollar, due to Democrats’ hyperactive spending orgies, which has increased the price of imported oil.

There are seasonal differences in gas prices, many induced by onerous federal regulations.  For example, many states force gas companies to sell purer, more expensive blends during the summer, when a disproportionate amount of driving is done.  Not only does this directly raise gas prices all summer, it indirectly raises them in the spring by temporarily making gasoline scarce, since refineries must halt production while they shift their operations to the summer plan.

Then there’s the administration’s relentless, premature, taxpayer-subsidized push for unprofitable “green” energy, which makes prices higher for everyone, with no concomitant increase in fuel quality or reliability.

Both political parties insanely continue to support the production of biofuels such as ethanol, a program that does nothing but increase food prices, raise the cost of automobiles and fuel, and (if you care about such things) boost carbon dioxide emissions.

In addition to arbitrarily increasing automobile fuel efficiency standards to levels that are not cost-effective given current technological developments—which forces car companies to cut corners on performance to comply with the law—the Obama administration has twice defied a federal judge’s orders to lift the moratorium on drilling in the Gulf after the BP oil spill.  He continues to oppose drilling in the Alaska National Wildlife Refuge, off the coast of Virginia, and just about every place else where there’s oil.

Obama’s Environmental Protection Agency is doing its best to initiate creative new methods of preventing oil and natural gas drilling.  For example, the EPA recently proposed adding the sand dune lizard to its list of endangered species, thus greatly hindering oil exploration in the Texan/New Mexican Permian Basin, the second-most bountiful gas and oil field in the country.

But all of this should be good news to Obama, he of the “Electricity rates would necessarily skyrocket” and “If somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them” statements on the consequences of cap-and-trade restrictions.  Though he would never publicly admit it, $10-a-gallon, European-level gas prices are the apotheosis of Obama’s environmental plan for this country.

Don’t believe it?  Check out the statement his energy secretary, Steven Chu, made to the Wall Street Journal shortly before Obama’s election: “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.”  His Secretary of the Interior, Ken Salazar, once famously said that he would refuse to allow expanded offshore drilling even if the price of gas rose to $10 a gallon.

But Democrats need not fear that high gas prices will reduce Obama’s reelection prospects.  If Obama takes action that a gullible public perceives as tough on oil companies, yet gas prices rise anyway, he’ll just claim that he tried his level best to rein in Big Oil, but the behemoth was simply too big to wrestle to the ground.



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In honor of Tax Day 2011 and Democrats’ impeccably timed renewed push to raise taxes on high income earners, behold the following lessons we’ve learned about economics from liberals in recent times:

•    The most innovative and wealth-generating company in the history of the world, Apple Inc., destroys jobs.  So sayeth Representative Jesse Jackson, Jr., an admitted iPad owner, who blamed Steve Jobs’ latest invention for taking away employment from textbook manufacturers and paper mills.  In other news, a Democratic Representative from West Virginia excoriated the “automobile” for killing off the horse-and-buggy industry.

•    Cutting $352 million from a proposed $3.7 trillion budget is “the functional equivalent of bombing innocent civilians.”  This according to D.C. Delegate Eleanor Holmes Norton, who was fuming over the possibility of a government shutdown two weeks ago.  Given liberals’ complaints about the size of the military industrial complex and the expense of war, this is quite a bargain.  How can we harness this technology of “Miniscule Republican Budget Cuts” to defeat Moammar Kaddafi’s forces in Libya?

•    Not constraining teachers’ unions’ ability to award themselves extravagant pensions and health care packages no one in the private sector has, thereby continuing to bankrupt states by keeping entitlement spending astronomically high, is good for union members.  In contrast, making slight cuts to bloated benefits programs in order to prevent massive layoffs hurts the little guy.  This bit of wisdom comes courtesy of the delusional, demonic mobs who swarmed outside the Wisconsin State Capitol trying to undermine Governor Scott Walker’s implementation of his nefarious campaign promise to balance the state budget.

•    Raising tax rates on job creators and wealth investors leads them to selflessly continue to create jobs and invest wealth at the same rate as before.  This directly contradicts liberals’ caricature of the rich as selfish bastards who hoard profits and refuse to help the economy recover, but try pointing that out to a liberal.  This also contradicts the evidence that every time marginal tax rates have been lowered—under Reagan, Clinton, Bush—tax revenues have increased, and every time they’ve been raised, tax revenues have decreased.

•    Spreading the wealth around is preferable to increasing the wealth for everybody, if the latter means that the gap between high- and low-income earners widens.  See, for example, Senator Barack Obama’s response to Charlie Gibson during a primary debate with Hillary Clinton, in which he responded to irrefutable evidence that cutting capital gains taxes boosts federal revenue with the argument that companies should nonetheless be forced to pay more “for purposes of fairness.”

•    The U.S. doesn’t have a spending problem—it has a revenue problem.  Hat tip to Michael Moore, who recently bellowed that “America is not broke…  The country is awash in wealth and cash…  It has been transferred, in the greatest heist in history, from the workers and consumers to the banks and the portfolios of the über-rich.”  Double hat tip to conservative site Iowa Hawk, which deftly and devastatingly refuted Moore’s ludicrous claim.

•    Paying taxes is the highest form of patriotism.  See Clinton-era hack Paul Begala’s editorial explaining why April 15 should be considered “Patriot’s Day.”  Note that the first credential liberals always cite as evidence of their patriotism is not “I vote” or “I support the military” but: “I pay taxes!”  For liberals, there is no greater moral obligation than federally funding cowboy poetry festivals.

•    The amount of federal income taxes Americans pay is “about right.”  This according to a recent Gallup survey in which 43% of Americans approved of current tax rates and 50% thought they were too high—i.e., 43% were left-leaning and 50% were right-leaning.  Much of that 43% no doubt overlapped with the 47% of Americans who pay no federal income tax.

•    The work required to earn a high GPA is completely, utterly different from the work required to earn a high salary.  One… doesn’t involve money, and the other does, or something.  In the above video, the next generation of potential industry titans informs us that forcibly redistributing grade points among university students by taking from those with “excessive GPAs” and giving to the disadvantaged who have to work harder and hold down extra jobs is a terrible idea, but forcibly redistributing dollars among citizens and giving to the disadvantaged who have to work harder and hold down extra jobs is… a wonderful idea!

•    When Democrats cut spending and refuse to raise taxes, as New York Governor Andrew Cuomo has—i.e., when they abandon their party’s core philosophy and govern like conservatives—they enjoy skyrocketing popularity ratings and set their constituents on a path to financial solvency.

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The deal Congressional Republicans made with Democrats last week to cut the federal budget and avoid a government shutdown is the scam of the decade.

Mainstream media, conservative commentators, and Republican politicians call it a grand victory for the GOP, showing as it does Speaker of the House John Boehner’s suave negotiating skills, the GOP’s ability to nudge Democrats from their opening position, and Republicans’ luck in getting $6 billion more in cuts than Boehner had asked for.

FOX News’ Carl Cameron crowed, “Who Won the Shutdown Showdown?  It Wasn’t Even Close…  Democrats claimed they met Republicans halfway after the $10 billion in cuts that already passed this year were approved.  They settled late Friday night at three and a half times more.  Boehner came in $8.5 billion higher than the halfway point between his high offer of $61 billion in cuts and the Democrats opening bid of zero cuts.”

All of these numbers are meaningless, constituting as they do microscopic slivers of the federal deficit.

To put the cuts in perspective, CNS News reported that the federal debt jumped $54 billion in the eight days before Congress approved the $38.5 billion in cuts.  The cuts leave the 2011 budget $773 billion greater than the 2008 budget, higher by about the same amount as the Democrats’ 2009 stimulus bill.

Congress is negotiating over grains of sand while a dune is about to collapse on us.

Also riding the self-congratulatory bandwagon was the CATO Institute’s Chris Edwards, who declared, “It is a victory for freshman conservative Republicans.  The real question is whether this is the beginning of a sustained movement, or a one-shot deal?  I’m an optimist, so I think it is the first of many spending-cut actions…”  I’ve seen wily Democrats and spineless Republicans in action, and I’m a pessimist.

Edwards: “Also, if the baseline is down $38 billion this year and that is sustained or built upon, it’s down $380 billion or more over 10 years.”  The operative word here is ‘and.’

The other operative word is ‘if.’  Not only do the alleged $38.5 billion in cuts constitute just 1% of Obama’s proposed budget, they consist of: things that had no chance of being funded, unused funds from prior years, funds that hadn’t been specified for projects, non-renewals of things meant to be one-off expenses, one-time cuts that will be reversed next year, and salaries for czars who have already resigned.

Half the cuts involve, as The Associated Press put it, “simply mopping up pools of unused money spread across the budget” and using them “to shore up day-to-day agency budgets and other programs like health research.”  In other words, half the cuts don’t involve actual cuts.

But the Heritage Foundation’s Ron Utt gushed, “Without examining the numbers in any detail I consider it an important win for our side, and a momentum boost for the bigger issue to come: the FY 2012 budget battle.”  Without examining Lindsay Lohan’s parole record in any detail, I declare her fully rehabilitated and fit for polite society.

There’s also the nature of the cuts to consider.  Here are a few things Republicans cut: $2 billion from Defense, $1 billion from Homeland Security, $600 million from the Army Corps of Engineers, and $5 billion from a crime victim compensation fund.

Here are a few things Republicans didn’t cut: ObamaCare, the Agriculture Department, NPR, PBS.  Republicans also left out resolutions blocking the Environmental Protection Agency from enforcing global warming restrictions and preventing implementation of new Wall Street regulations.

Republicans’ defense—they had to compromise on the 2011 budget so Democrats would work with them on the debt ceiling and the 2012 budget—is as fallacious as they come.  If Republicans can’t stand up to Democrats on pennies, what chance is there they’ll stand up on dollars?

Why should we believe Boehner will side with us tomorrow?  Boehner concluded a recent op-ed in USA Today saying, “[W]e are committed to using our limited power to maximum effect in the effort to end the uncertainty facing job creators and put our economy back on a path to job creation and prosperity.”  That’s not a strategy for fighting Marxist Democrats, it’s a campaign slogan.

Even Paul Ryan, bless his Path to Prosperity proposal to cut $5.8 trillion from spending over the next decade, fell for the trap.

If Republicans do anything to prevent the $14 trillion debt ceiling from being raised and make meaningful cuts to entitlement spending, it will be in spite of the first step they gutlessly refused to take on the 2011 budget.



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Image by tj.blackwell via Flickr

On Saturday President Obama magnanimously announced that he was willing to support cutting $33 billion from 2010 federal spending levels for 2011—which, for the mathematically challenged, is about 1% of infinity.

Congressional Democrats screamed that these cuts were way too large.  Republicans countered that the cuts didn’t go far enough and should be extended to $61 billion, which amounts to about 2% of infinity.

With current spending set to run out this week, the federal government faces a shutdown on Friday night unless Congress can agree on which of these piddly sums to cut from the budget.

Tea party supporters have been rightly insulted by these farcical negotiating positions, arguing that hundreds of billions could be saved just by, for example, eliminating redundant programs.

As Rasmussen reports, a majority of Americans haven’t been snookered into thinking these microscopic doses of fiscal austerity will do a thing to address our long-term budget crisis.

Meanwhile, the only Congressman clear-eyed enough to appreciate the extent of the crisis, knowledgeable enough to propose a plan to resolve it, and brave enough to stand up for his proposal in the face of Republican wishy-washiness—namely, House Budget Chairman Paul Ryan—and also not crazily isolationist on foreign policy (Ron and Rand Paul) has offered a blueprint called “A Path to Prosperity,” modeled after his 2008 “Roadmap for America’s Future.”

Ryan’s plan proposes phasing out Medicare by replacing it with vouchers and turning it over to the states, making major changes to Medicaid, and taking similar action with Social Security after these two behemoths have been wrestled to the ground.

The central irony of Ryan’s stance is that, as he claims, his is the only proposal that will help “save” these programs, whereas current entitlement obligations will, if continued at their present levels, lead to eventual insolvency.

While Medicare/Medicaid and Social Security are unsustainable, unconstitutional Ponzi schemes, and while our country somehow managed to survive 189 and 159 years respectively without them, I suppose we need to start somewhere.  I guess a Budget Chairman who wants to drastically reform these albatrosses in order to save them is as good a start as we’re going to get nowadays from a political standpoint.

Ryan’s plan proposes cutting $5 trillion from the national debt over the next decade, and eventually eliminating the national debt, all without raising taxes.

On Tuesday, Obama rejected a third stopgap offer from House Majority Leader John Boehner to keep the government open another week while budget negotiations continue.

Obama’s right—we shouldn’t settle for on-the-fly, seat-of-our-pants, week-by-week spending plans.  Republicans should hold their ground and not be afraid to shut the government down on Friday.

Some who claim to favor entitlement reform have counseled House Republicans to compromise with Democrats on this week’s negotiations, so that Democrats will work with them later on more substantial cuts like Ryan’s.  The Chicago Tribune counsels, “Better to declare victory at $33 billion, or whatever more Republicans can wrest from Democrats, and move on to the bigger picture.  Because sanity in federal spending isn’t going to be restored by dealing in billions.  It’s going to be restored by dealing in trillions…  A deal today on discretionary spending could lay the foundation for bipartisan agreement on the far more impactful issue of entitlements.”

So giving in to Democrats will create goodwill and set the stage for larger-scale cuts, whereas shutting down the government will cause Democrats to dig in further and resist compromise later on.

One question: Since when did Democrats respond to Republican compromise with magnanimous, reciprocal behavior?

Sensing that they’re about to win on the shutdown, dyed-in-the-wool leftists like E. J. Dionne are already crying, “The Ryan budget’s central purpose will not be deficit reduction but the gradual dismantling of key parts of government…  Americans are about to learn… how radical the new conservatives in Washington are, and the extent to which some politicians would transfer even more resources from the have-nots and have-a-littles to the have-a-lots.”  Ezra Klein whines that Ryan’s plan will mean “leaving the old and the poor without health care.”  These are the people who are going to be placated by giving in on minute cuts now into accepting huge cuts several months from now?

Republicans’ negotiation strategy, from Bush I to Bush II to Boehner, has always been: The other side asks for an inch; Republicans give a mile.  Democrats’ strategy is: The other side asks for an inch; Democrats take a mile.  See how fair and evenhanded things are!

To take just one recent example, Congressional Republicans begged Democrats to consider including medical malpractice tort reform, legalizing health insurance sales across state lines, and offering greater tax deductions for health care costs in their ObamaCare bill.  Democrats responded by ignoring all these ideas and muscling through their bill inappropriately using the budget reconciliation procedure after the enraged residents of Massachusetts denied them their 60th Senate vote.

Battling Democrats legislatively is like fighting terrorists militarily—you don’t show them how weak and spineless you are; you show them how ruthless and merciless you can be.  They don’t respond to anything else.



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