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| occrider |
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Leaders Who Won't Choose
In Washington, it's business as usual in the face of a national catastrophe.
By Fareed Zakaria
Newsweek
Sept. 26, 2005 issue - Adversity builds character," goes the old adage. Except that in America today we seem to be following the opposite principle. The worse things get, the more frivolous our response. President Bush explains that he will spend hundreds of billions of dollars rebuilding the Gulf Coast without raising any new revenues. Republican leader Tom DeLay declines any spending cuts because "there is no fat left to cut in the federal budget."
This would be funny if it weren't so depressing. What is happening in Washington today is business as usual in the face of a national catastrophe. The scariest part is that we've been here before. After 9/11 we have created a new government agency, massively increased domestic spending and fought two wars. And the president did all this without rolling back any of his tax cuts—in fact, he expanded them—and refused to veto a single congressional spending bill. This was possible because Bush inherited a huge budget surplus in 2000. But that's all gone. The cupboard is now bare.
Whatever his other accomplishments, Bush will go down in history as the most fiscally irresponsible chief executive in American history. Since 2001, government spending has gone up from $1.86 trillion to $2.48 trillion, a 33 percent rise in four years! Defense and Homeland Security are not the only culprits. Domestic spending is actually up 36 percent in the same period. These figures come from the libertarian Cato Institute's excellent report "The Grand Old Spending Party," which explains that "throughout the past 40 years, most presidents have cut or restrained lower-priority spending to make room for higher-priority spending. What is driving George W. Bush's budget bloat is a reversal of that trend." To govern is to choose. And Bush has decided not to choose. He wants guns and butter and tax cuts.
People wonder whether we can afford Iraq and Katrina. The answer is, easily. What we can't afford simultaneously is $1.4 trillion in tax cuts and more than $1 trillion in new entitlement spending over the next 10 years. To take one example, if Congress did not make permanent just one of its tax cuts, the repeal of estate taxes, it would generate $290 billion over the next decade. That itself pays for most of Katrina and Iraq.
Robert Hormats of Goldman Sachs has pointed out that previous presidents acted differently. During World War II, Franklin Roosevelt cut nonwar spending by more than 20 percent, in addition to raising taxes to finance the war effort. During the Korean War, President Truman cut non-defense spending 28 percent and raised taxes to pay the bills. In both cases these presidents were often slashing cherished New Deal programs that they had created. The only period—other than the current one—when the United States avoided hard choices was Vietnam: spending increased on all fronts. The results eventually were deficits, high interest rates and low growth—stagflation.
Bush is not the only one to blame. Congressional spending is now completely out of control. The federal coffers are being looted for congressional patronage, and it is being done openly and without any guilt. The highway bill of 1982 had 10 "earmarked" projects—the code word for pork. The 2005 one has 6,371. The bill, written by the House transportation committee, is called the Transportation Equity Act: A Legacy for Users, or TEA-LU (in honor of chairman Don Young's wife, Lu). This use of public office for private whims would seem more appropriate in Saudi Arabia than America. Perhaps next year's bill will include a necklace for Mrs. Young.
The U.S. Congress is a national embarrasment, except that no one is embarrassed. There are a few men of conscience left, like John McCain, but McCain's pleas against pork seem to have absolutely no effect. They are beginning to have the feel of a quaint hobby, like collecting exotic stamps.
Today's Republicans believe in pork, but they don't believe in government. So we have the largest government in history but one that is weak and dysfunctional. Public spending is a cynical game of buying votes or campaign contributions, an utterly corrupt process run by lobbyists and special interests with no concern for the national interest. So we shovel out billions on "Homeland Security" to stave off nonexistent threats to Wisconsin, Wyoming and Montana while New York and Los Angeles remain unprotected. We mismanage crises with a crazy-quilt patchwork of federal, local and state authorities—and sing paeans to federalism to explain our incompetence. We denounce sensible leadership and pragmatism because they mean compromise and loss of ideological purity. Better to be right than to get Iraq right.
Hurricane Katrina is a wake-up call. It is time to get serious. We need to secure the homeland, fight terrorism and have an effective foreign policy to advance our interests and our ideals. We also need a world-class education system, a great infrastructure and advancement in science and technology.
For all its virtues, the private sector cannot accomplish all this. Wal-Mart and Federal Express cannot devise a national energy policy for the United States. For that and for much else, we need government. We already pay for it. Can somebody help us get our money's worth?
http://www.msnbc.msn.com/id/9379241/page/1/
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Ahhh it's a good thing I hate kids and probably will never have them. Sorry to all of you that have those kinds of aspirations. |
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| trancaholic |
| I have been hearing about the ridiculous spendings of Bush for quite some time, and this just seem to be another editorial in the line. Therefore, my question is this: When will we see the effects that the doomsayers are promising? When will the US have to disband the first platoon of soldiers stationed in Iraq, due to troubles paying their salaries? When will the first retired person suffering from starvation be committed to a hospital? If the "cupboard" is really "bare", why don't we see any effects? |
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| Trancer-X |
:rolleyes: :rolleyes: :rolleyes: |
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| St_Andrew |
| quote: | Originally posted by Trancer-X
:rolleyes: :rolleyes: :rolleyes: |
Wow.
But yeah, as trancaholic said, when will we (you) see the real effects? |
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| josh4 |
| Is it any surprise that some rich kid whose idea of hardship is a bad hang-over after a night of too much booze and coke paid for by his daddy's no limit credit card would have a problem with spending money? |
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| occrider |
| quote: | Originally posted by trancaholic
I have been hearing about the ridiculous spendings of Bush for quite some time, and this just seem to be another editorial in the line. Therefore, my question is this: When will we see the effects that the doomsayers are promising? When will the US have to disband the first platoon of soldiers stationed in Iraq, due to troubles paying their salaries? When will the first retired person suffering from starvation be committed to a hospital? If the "cupboard" is really "bare", why don't we see any effects? |
Economic forecasting is probably akin to predicting the weather with 19th century technology. One can infer some things with barometric pressure, humidity, wind, clouds, etc., however, the where, when, and intensity are always going to be subjected to a great deal of uncertainty. What complicates things is that you’re trying to model human behavior which is, at times (all the time imo), irrational. Thus the spending won’t have any grand detrimental effect on the US economy until the markets decide that they’ve had enough, when it forsees a better investment opportunity. While the US has been an excellent investment opportunity in the past, I think that the markets are reaching their limits in absorbing billions more of our debt given the shocks to the US economy from the hurricanes, the continuing war in Iraq, increased domestic spending, etc. (although some economists say that the markets could absorb up to a trillion dollars of debt ... I’m somewhat skeptical). If you’re expecting some grand economic crash Argentina or South Korea style, I don’t think it’s going to happen. What you will see happening is a slow and steady process much like the improvement in the US economy after the first set of tax cuts. It didn’t happen over night, but it was a gradual process. I think we’ll start to see some inflationary spikes or a demand for the increased interest rates in order to increase the rate of return for US securities. Then we’ll start seeing a slow ripple effect to other sectors of the economy as it begins to slow. Of course, if that happens all our deficit spending has ruled that out as an effective combative tool to give a boost to the economy, so I’m not sure what we would do ... |
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| occrider |
Well , when I said we'd start seeing slow ripples in the economy, I didn't think the next day ...
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U.S. Economy: Consumer Confidence, Home Sales Plunge (Update6) Listen
Sept. 27 (Bloomberg) -- U.S. consumer confidence fell by the most in 15 years after Hurricane Katrina devastated the Gulf Coast and pushed gasoline prices to a record this month.
The consumer confidence index dropped to 86.6, the lowest in two years, from 105.5 in August, the New York-based Conference Board research group said today. New home sales sold in August at the slowest pace since November, falling 9.9 percent to a 1.237 million annual rate, the Commerce Department said in Washington.
``We may now see a pullback in spending,'' said Quincy Krosby, who helps oversee $293 billion in assets as chief investment strategist for The Hartford in Hartford, Connecticut. ``This winter and this Christmas shopping season are going to be the test case, and we're going to see if this is the tipping point for the consumer.''
Federal Reserve Chairman Alan Greenspan said yesterday a marked slowdown in the housing market, if one develops, may result in an ``adjustment'' in spending by consumers. Higher energy costs are also leaving Americans less to spend on other goods, hurting sales at companies such as Avon Products Inc.
Greenspan, in a speech today, said asset prices often fall after long periods of stability and ``euphoria,'' echoing warnings he's issued over the past year that investors may be too complacent about risk.
``History cautions that extended periods of low concern about credit risk have invariably been followed by reversal with an attendant fall in the prices of risky assets,'' he said in a speech to the National Association for Business Economics.
Expectations
U.S. two-year Treasury yields rose to a six-week high after the speech by Greenspan did little to alter the view that the central bank will continue raising interest rates. The two-year note's yield rose almost 3 basis points, or 0.03 percentage point, to 4.08 percent at 4:20 p.m. in New York.
Fed Bank of San Francisco Janet Yellen said earlier today the economy will see a ``significant dip'' in growth through the rest of the year and central bankers won't allow inflation to reach ``unacceptable'' levels as oil prices surge.
While a report yesterday showed near-record sales of existing homes in August, new homes may be more of a leading indicator because they count purchases when contracts are signed, not when transactions close. The average price of a new home rose last month to $220,300 from $215,000, today's data showed.
The confidence index was forecast to fall to 95 from 105.6 previously reported for August, based on a Bloomberg News survey of 62 economists. New homes were predicted to sell at a 1.35 million annual rate from the 1.41 million previously reported for July. July's rate was revised today to 1.373 million.
Confidence Drops
``It's important to stay focused on the interplay between the consumer and the overextended housing market and sharp increases in energy prices,'' said Stephen Roach, chief global economist at Morgan Stanley in New York, in an interview. ``That will be key as to whether or not the U.S. economy will sustain itself in 2006.''
The decline in confidence was the biggest since October 1990, when oil prices were rising after Iraq invaded Kuwait and the U.S. was preparing for war. The Conference Board's mail-in survey of 5,000 households was completed Sept. 20, after Katrina damaged drilling rigs and curtailed fuel shipments and pushed up energy prices. The survey was ending as Hurricane Rita crossed the Florida Straits and headed for the Gulf Coast.
Regular-grade gasoline, averaged nationwide, touched a record $3.057 a gallon on Sept. 2, according to the AAA, the nation's largest motoring organization. While the average pump price fell to $2.755 by Sept. 22, it was still 48 percent higher than a year ago.
Jobs and Inflation
``The increase in gasoline prices and the prospect of a long, expensive winter is depressing sentiment,'' said Joseph Abate, a senior economist at Lehman Brothers Inc. in New York, before the report.
New York-based Avon Products, the world's largest direct seller of cosmetics, last week cut its annual profit forecast for the second time in three months, in part because the hurricane and higher fuel costs will hurt demand in the U.S.
The percentage of consumers that saw jobs as hard to get rose to 25.4 percent from 23.1 percent. The percentage who saw jobs as plentiful fell to 20.1 percent, compared with 23.6 percent in August.
The component of the index that tracks consumers' expectations for the next six months dropped to 71.7 from 93.3, also the biggest decline since 1990. A gauge of optimism about the present situation also fell, to 108.9 from 123.8.
Home Purchases
``The destruction wrought by Katrina and Rita may reduce growth somewhat in the short run, but the longer-term growth trajectory remains in place,'' Ben Bernanke, chairman of the White House Council of Economic Advisers, said in a speech in Chicago to the National Association for Business Economics.
The storm likely will trim growth by 0.4 percent percentage point in the third quarter, to a 3.5 percent annual pace, according to 43 economists surveyed by the National Association for Business Economics.
``It will be a few more weeks before we get a clear idea of the costs of these disasters,'' said James Heckman, professor of economics at the University of Chicago and a Nobel Prize winner in 2000, in an interview.
The proportion of consumers planning to buy a home in the next six months held at 3.5 percent, according to today's survey. The proportion of people expecting to buy a car in the next six months fell to 5.8 percent from 6.2 percent.
Sales of new homes may have plateaued and will slow in 2006 after setting a record this year, economists said.
``It's the early signs of some cooling in this super-heated market,'' David Resler, chief economist at Nomura Securities International Inc. in New York said. ``Fewer people qualify for loans and sales at these prices.''
The Federal Reserve raised its benchmark U.S. interest rate a quarter-point to 3.75 percent last week, saying the U.S. faces only a near-term setback from Katrina instead of a ``persistent threat.'' The increase suggested the Fed is more concerned about inflation than slowing growth.
To contact the reporter on this story:
Joe Richter in Washington Jrichter1@bloomberg.net[/email];
Courtney Schlisserman in Washington [email]cschlisserma@bloomberg.net
http://quote.bloomberg.com/apps/new...efer=news_index
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So we have a situation where the housing boom, which helped to limit the recession may be coming to an end. We have consumer confidence falling and thus consumer spending will likely follow. We have a Federal Reserve that is becoming more and more concerned about inflation than growth and thus will continue to raise interest rates. We have a corresponding increase in the yield of Treasuries, and we have Greenspan acknowledging that investors may be reaching a tipping point in their attitudes toward credit risk. So, if consumer spending begins to fall and the economy experiences a slowdown with recession looming in the distance … we don’t have monetary policy to combat it since inflation is the Fed’s principle worry, and how the are we going to use fiscal policy to stimulate the economy when we’re already engaged in negligent deficit spending and any more deficit spending would simply cause more inflation??? If the economy is indeed at a tipping point, we are going to be so ed. Rising inflation and a slowing economy are the principle ingredients for stagflation. FFS deficit spending should ONLY be used as a tool to smooth downward trends in the business cycle … not a ing way of life that we see this administration and this congress doing.
Furthermore, there are some disturbing statements purportedly coming from Greenspan that are NOT GOOD at all:
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UPDATE 1-Greenspan to French finmin:US lost deficit control
Sunday 25 September 2005, 8:59pm EST
Printer Friendly | Email Article | Reprints | RSS
By Paul Carrel
WASHINGTON, Sept 24 (Reuters) - U.S. Federal Reserve Chairman Alan Greenspan told France's Finance Minister Thierry Breton the United States has "lost control" of its budget deficit, the French minister said on Saturday.
"'We have lost control,' that was his expression," Breton told reporters after a bilateral meeting with Greenspan.
"The United States has lost control of their budget at a time when racking up deficits has been authorized without any control (from Congress)," Breton said.
"We were both disappointed that the management of debt is not a political priority today," he added.
Ministers from the Group of Seven rich nations on Friday called for vigorous action around the world to curb rising imbalances in international trade and investment accounts.
A decrease in the U.S. budget deficit were cited by the G7 as one way to ease those imbalances. U.S. Treasury Secretary John Snow said the U.S. administration was still committed to halving its budget deficit by 2009.
Breton spoke as International Monetary Fund Managing Director Rodrigo Rato said U.S. plans to cut its government expenditures now looked ambitious in the light of huge reconstruction costs to be borne in the wake of Hurricane Katrina.
Breton said: "The situation that is creating tension today on the currency market ... is clearly the American deficit."
The United States needed to address its budget deficit, he said, adding: "It seems to me that my counterpart John Snow is completely aware of this, he wants to harness the problem, but it seems to me he doesn't have the room for maneuver."
Breton added that after hearing Greenspan talk about inflation: "One has the feeling -- though he didn't say so -- that interest rates will probably continue to rise slightly until his departure."
Greenspan is due to step down as Fed chairman in January after 18 years in the post.
Asked if G7 finance chiefs would meet as usual in February next year as well as gathering for an extraordinary meeting in December this year -- partly to pay tribute to Greenspan before his departure -- the French finance chief said: "Yes, yes. Next February as well."
He said France was "not against" the idea of enlarging the Group of Seven, a notion that has gained impetus at these meetings.
http://today.reuters.com/business/n...4&imageid=&cap=
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I hope I’m wrong on this.
But hey, guess what, it's business as usual in Washington ... cronyism at taxpayer expense.
GAO To Investigate $1.5 billion in Contracts Awarded After Katrina, 80% of Which Were No Bid Contracts |
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| HardTranceProd |
| So much for proponents of "small government" :eek: :rolleyes: |
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