CAN WE POSSIBLY CONTROL THE SPENDING SIDE NOW?
As we kickoff 2019, I believe we will be force to buckle our chin straps and pull up our socks. We are likely in for a Battle of the Bulge in defense of responsible economics, and against a surge of nonsensical socialism. As Nancy and Chuck take the reins this month and begin to deal with the man who prides himself in "The Art of the Deal," I believe deals are likely to get done. Unfortunately, a betting man would wager that these deals increase budget deficits, increase the national debt, empower government instead of the individual, and work to more than offset the nearly-miraculous growth, productivity, and employment success achieved the last two years.
Mitt Romney took some cheap shots at the current Administration in the Washington Post this week as he feels out his 2002 Presidential campaign possibilities, but even he could not help but compliment the tax reform, the deregulation, and the China trade battle. Daniel Henniger wrote that even the Brookings Institution recently claimed there are 150 Administration deregulation initiatives (smaller government) completed or under way affecting telecom, finance, housing, environment, health, agriculture, labor and education.
JAM Views is diligent to remain apolitical, because the human brain will instantly construct a wall against values it construe are against its own core beliefs. I remind our members that our mission is truth and understanding, without labels and preconceived constructs, so that we may remain open to facts, math, and true determinants of behavior.
The socialists now feel empowered to make another surge against our freedom and our economic miracle. Rep. Alexandria Ocasio-Cortez's "Green New Deal" moves federal tax rates back to 70% on top-income earners (business owners who just moved unemployment to its lowest level since 1969 because of the tax cuts). Can anyone say "Jimmy Carter?" Paul Krugman, the only Nobel Prize economist who will never be invited as a guest blogger on JAM Views, came to Cortez's defense this week citing studies which calculate the optimal tax rate at 73%, and even 84% (for every $100 you earn the government lets you keep $16). The problem is that listening to these people is like watching "Jerry Springer" and "Love & Hip Hop" after work every day. It melts your brain slowly, and soon you believe that jumping over chairs to fight your pregnant cousin and throwing plates across crowded restaurants is acceptable behavior.
Holman Jenkins wrote that the goal of these new, wild tax and spending plans is to make them sound plausible enough to lure millennial voters off the couch (put down the Xbox) and into the voting booth. "Like the young everywhere, they are excited by radical proposals as long as somebody else is paying." (JAM Views flashback to Margaret Thatcher's famous line that the problem with socialism is you "always run out of other people's money.")
Speaking of sounding plausible, Prof. Steve Hanke of John Hopkins and Prof. Stephen Walters of Loyola Univ. Maryland propose that we push for a limited constitutional convention to propose a balanced-budget amendment to the Constitution. They need 34 states to convene and 38 to ratify, but they claim 28 states are already on board. Many believe this is our only hope, since the politicians employ "lying prices" to lull us into going along with each budget increase. For example, over the last decade we went along with paying $27.2 trillion for federal services, but the actual cost was $35.6 trillion.
The politicians simply printed $9 trillion extra out of thin air to make up the difference and added it to our children's debt. Hanke and Walters claim this is the ultimate crime on our children for "taxation without representation." If we understood the big picture better, we could see this is the same as you and I buying a private plane and telling Learjet to "send the bill to our sons and daughters, and make sure the grandkids kick in a good amount also."
The infrastructure deal by itself has the potential to blow all of our hard-fought progress. The President will enjoy being America's "Builder-In-Chief," and Nancy and Chuck will throw in so much pork and income-redistribution that the government will eat the last remaining sectors of the free market. Nancy's $1 trillion infrastructure proposal last year included $2.5 billion for research on the effects of oil spills and sea level rises (who gets that $25 billion? Friends of Nancy.), $25 billion for commuter rail projects which is to bail out California's massively-over-budget bullet train, and $3 billion for charging and refueling stations for their Teslas. A billion here and a billion there, and we might start talking about some real money!
And the numbers are just pulled out of the sky, because they are spending your money - why not $35 billion for studies on sea levels rising? There is also a line item for unspecified funds for "locally driven initiatives to preserve and expand affordable housing." (Can you say "Barney Frank and mandatory loans to consumers we knew could never make the first payment?" Didn't end well).
The WSJ Editorial Board has attempted to provide some sane advice on the infrastructure issue by writing, "A real compromise on public works would leverage some taxpayer money to raise more private funds to build the most urgent projects while easing permitting rules and political red tape." JAM Views says the private market should handle the whole project and, if allowed to be truly competitive, it will be ahead of schedule and under budget (See Trump Times Square Ice Rink).
We must remain diligent this year. There are two sides to our personal P&L's and two sides to our Government P&L. Even if we make great progress on the revenue side, it is all for not if we allow it and more to be spent by adding more crushing debt. Outsized debt always, eventually, destroys, and don't forget that when they tell you the "lying price" of a $20 trillion current national debt, it is truly, at least, $70 trillion with all of our bills coming due. Boston University economist Laurence Kotlikoff claims the current number is actually $200 trillion!
With interest rates rising, and us trying to swallow the huge increase in money supply and debt from the last decade, I say we double check those chinstraps and pull up those socks!
"When I say 'capitalism,' I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism with a separation of state and economics, in the same way and for the same reasons as separation of state and church." - Ayn Rand
* Many thanks to the WSJ, Forbes, and Fortune for the above statistics and quotes.
* Many thanks to my Academy basketball teammate, Scott, for when times were tough yelling at us to "Pull up your socks!" and he still does...
* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.
** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com
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