Tag Archives: Spending

Is The ‘Mother of all Bubbles’ About to Pop? by Ron Paul

Is the repo market the canary in the coal mine for global financial markets? From Ron Paul at ronpaulinstitute.org:

When the New York Federal Reserve began pumping billions of dollars a day into the repurchasing (repo) markets (the market banks use to make short-term loans to each other) in September, they said this would only be necessary for a few weeks. Yet, last Wednesday, almost two months after the Fed’s initial intervention, the New York Federal Reserve pumped 62.5 billion dollars into the repo market.

The New York Fed continues these emergency interventions to ensure “cash shortages” among banks don’t ever again cause interest rates for overnight loans to rise to over 10 percent, well above the Fed’s target rate.

The Federal Reserve’s bailout operations have increased its balance sheet by over 200 billion dollars since September. Investment advisor Michael Pento describes the Fed’s recent actions as Quantitative Easing (QE) “on steroids.”

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The Dreaded Government Shutdown, by Robert Ringer

Nobody and nothing has yet forced those who rule us to spend less. That day is coming. From Robert Ringer at lewrockwell.com:

The average low-information voter, who depends on getting his news from the FNM, is trembling in his shoes right now because the life-ending government shutdown he has heard so much about has finally arrived.  How in the world can the United States possibly survive such a calamity?

But let’s get serious:  Every reasonably well-informed individual with an IQ above 32 realizes that a government shutdown is not only not a bad thing, it’s actually a positive.  Let’s face it, the only way to stop government spending and borrowing is to close shop.  And, amazingly, when that happens (as it has 18 times in the past), the anti-Armageddon truth is that the average person is totally unaffected!

While the amount varies from month to month, the government brings in, on average, about $200 billion a month from (mostly unwilling) taxpayers and pays out, on average, about $20 billion in monthly interest charges.  That’s a tenfold coverage.

Second, Social Security and Medicare are easily covered by government revenues each month, at least right now.

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The Nation’s Fiscal Doomsday Machine is Now Unstoppable, by David Stockman

The inexorable forces of mathematics and compound interest are creating their own ugly budgetary realities. From David Stockman at economic policy journal.com:

Earlier this year the Donald provoked a bleep-hole moment per the Fox “family channel” or what was otherwise known as the shit-hole moment across the rest of the MSM.

But whatever you called the contretemps spurred by the president’s crude utterance with regard to certain countries domiciled on the African continent, the claim this was evidence that he’s an incorrigible racist was risible. Actually, we already knew that the Donald is a semi-literate bully, who never got (read) the memo on racial comity—to say nothing of political correctness.

Still, there is a not inconsiderable share of Washington’s preening, self-important ruling class that indulges in that very same kind of gutter talk on a regular basis when puffing their chests and marking the objects of their displeasure. That’s why the shaming chorus which sprung up from all corners of the Swamp was enough to give hypocrisy a bad name.

But if we have to have a shaming of politicians, there is a far better reason for it than that unfortunate presidential slur.

To wit, Trump and the GOP deserve everlasting ignominy for literally shit-canning fiscal rectitude. So doing, they have completely abandoned the GOP’s fundamental reason for being— watch-dogging the US Treasury—in favor of immigrant-bashing, border hysteria and what boils down to crude nativism by any other name.

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Denmark as a Model for American Socialists? by Lars Hedegaard

There are unique reasons why Denmark’s political arrangements work. From Lars Hedegaard at gatestoneinstitute.org:

  • Danes actually pay for their brand of socialism through heavy taxation. In Denmark, everyone pays at least the 25% value-added tax (VAT) on all purchases. Income tax rates are high. If you receive public support and are of working age and healthy, the state will require that you look for a job or it will force a job on you.
  • In Denmark, it is uncomplicated for enterprises to fire workers, which gives them great flexibility to adapt to shifting market conditions. In fact, Denmark is more free-market oriented than the US.
  • “Very high taxes and the vast public sector clearly detract in the capitalism index and reduce economic freedom. But Denmark compensates by… relatively little regulation of private enterprise, open foreign trade, healthy public finances and more. This high degree of economic freedom is among the reasons for Denmark’s relatively high affluence.” — Mads Lundby Hansen, chief economist of Denmark’s CEPOS think tank.

Here are some facts to consider before American “democratic socialists” look to Denmark for guidance, as Senator Bernie Sanders did during the 2016 presidential campaign.

First of all, Danes actually pay for their brand of socialism through heavy taxation. In Denmark, everyone pays at least the 25% value-added tax (VAT) on all purchases. Income tax rates are high. If you receive public support and are of working age and healthy enough to work, the state will require that you look for a job or it will force a job on you.

The willingness of all the Danes to pay high taxes is predicated on the country’s high degree of homogeneity and level of citizens’ trust in each other, what sociologists call “social capital.” By and large, Danes do not mind paying into the welfare state because they know that the money will go to other Danes like themselves, who share their values and because they can easily imagine themselves to be in need of help — as most of them, from time to time, will be.

To continue reading: Denmark as a Model for American Socialists?

Tax Cuts Work, by Daniel Lacalle

Tax cuts in our overtaxed world often result in increased government revenues. Expanding deficits are often the result of spending increases greater than the increased revenue. From Daniel Lacalle at theepochtimes.com:

It happened again. Tax receipts soared in the United States after the recent tax cuts.

Although it will take a while for the full effect of the 2017 tax reform to kick in, U.S. state and local government tax revenue climbed to $350.2 billion in the first quarter of 2018, a rise of 5.8 percent compared with the same time period in 2017. Individual income tax collections had big gains for a second-straight quarter with a 12.8 percent increase to $107.4 billion in 2018’s first quarter.

But the evidence of the positive impact on growth, jobs, and wages of lower corporate taxes has been published in many studies over time. The example of more than 200 cases in 21 countries shows that tax cuts and expenditure reductions are much more effective in boosting growth and prosperity than increasing government spending.

Multiple studies conclude that in more than 170 cases, the impact of tax cuts has been much more positive for growth.

In Denial

However, some commentators continue to deny the positive impact of tax cuts using the argument that deficits rise.

The fallacy that “deficits rise” has nothing to do with tax cuts, but with increases in government spending on top of the tax cuts.

The deficit excuse is very simple. It says taxes should not be cut because governments will spend all revenues, even if these increase, and more. But this excuse is wrong.

The mistake of pointing at deficits as proof that tax cuts don’t work is debunked by looking at the proposals of the same economists that argue against tax cuts. Economist Paul Krugman is one example. He argued against tax cuts in his New York Times article “Time to Borrow” after the Obama administration increased debt by $10 trillion. These demand-side economists defend deficit spending, yet consider tax cuts as negative … because deficits may increase. Only Keynesian economists manage to pull off such mindbending logic.

Deficits need not rise or exist at all if governments spend in line with revenue growth. And the evidence points to rising revenues from lower taxes and higher growth.

To continue reading: Tax Cuts Work

President Trump should have made even deeper cuts in Washington’s bloated budget, by Diana Furchtgott-Roth

Cutting the federal budget is like lyposuctioning 10 pounds out of a 1500-pound pig. This year’s exercise will prove no different. From Diana Furchtgott-Roth on a guest post at theburningplatform.com:

President Trump wants to cut the budgets of individual agencies by as much as 31%.

On Thursday President Trump released his proposed budget for fiscal 2018. It would increase defense spending by $54 billion and cut the budgets of other government agencies by the same amount.

He wants to trim executive-branch agencies with a chain saw rather than with pruners. The State Department would get a 28% cut, the Environmental Protection Agency would get a 31% reduction and the Labor Department would get a 20% decrease. Gone are a wide swath of programs that could be funded by the private sector or individual states, such as the National Endowments for the Humanities and the Arts, the Corporation for Public Broadcasting and the Overseas Private Investment Corporation.

Washingtonians are complaining [about the proposed budget], but those who do not live on the coasts are undoubtedly cheering.

Although many in Washington are saying the sky is falling, Trump has not moved to cut Social Security and Medicare, the main sources of the budget deficit. That would have the most effect in reducing government spending in the future. When he issues a fuller 10-year budget, it is to be hoped that he will include even more cuts.

Cutting entitlements would be a welcome change. Although the U.S. economy is doing better than most of its competitors, our government for the past 15 years has been spending with abandon, increasing debt to dizzying levels. Concern about deficits was abandoned in 2002 after the attacks of Sept. 11, 2001. Debt today is a staggering $20 trillion.

Wasteful and duplicative government programs cost taxpayers billions annually, according to the Government Accountability Office. America has over 90 anti-poverty programs, 17 food-aid programs and 22 housing-assistance programs. The federal government even pays over $150 million for “official time” for union officials who happen to be federal civil-service employees in practically all its agencies. These officials work for their unions rather than for the taxpayer.

To make Trump’s budget a reality, Congress must pass it as a budget resolution. One would expect that a Republican Congress would pass a Republican president’s budget, but senators and representatives often have their own priorities — such as getting reelected. That means retaining expenditures within their states’ borders.

To continue reading: President Trump should have made even deeper cuts in Washington’s bloated budget

Will Trump Continue the Bush-Obama Legacy? by Ron Paul

Trump does not appear set to cut spending. From Ron Paul at ronpaulinstitute.org:
This week, Congress passed a budget calling for increasing federal spending and adding $1.7 trillion to the national debt over the next ten years. Most so-called “fiscal conservatives” voted for this big-spending budget because it allows Congress to repeal some parts of Obamacare via “reconciliation.” As important as it is to repeal Obamacare, it does not justify increasing spending and debt.

It is disappointing, but not surprising, that the Obamacare repeal would be used to justify increasing spending. Despite sequestration’s minor (and largely phony) spending cuts, federal spending has increased every year since Republicans took control of the House of Representatives. Some will attribute this to the fact that the Republican House had to negotiate with a big-spending Democratic president — even though federal spending actually increased by a greater percentage the last time Republicans controlled the White House and Congress than it did under President Obama.

The history of massive spending increases under unified Republican control of government is likely to repeat itself. During the presidential campaign, President-elect Donald Trump came out against reducing spending on “entitlements.” He also called for a variety of spending increases, including spending one trillion dollars on infrastructure.

One positive part of the infrastructure proposals is their use of tax credits to encourage private sector investments. Hopefully this will be the first step toward returning responsibility for building and maintaining our nation’s infrastructure to the private sector.

Unfortunately, the administration appears likely to support increased federal spending on “shovel-ready” jobs. Claims that federal spending helps grow the economy rely on the fallacy of that which is not seen. While everyone sees the jobs and economic growth created by government infrastructure projects, no one sees the greater number of jobs that could have been created had the government not taken the resources out of the hands of private businesses, investors, and entrepreneurs. Despite what some conservatives seem to think, this fallacy applies equally to Republican and Democrat spending.

To continue reading: Will Trump Continue the Bush-Obama Legacy?