Posts tagged spending
Wow – The Holiday Shopping Season Is Off To A Horrible Start
According to the National Retail Federation, Americans spent an average of 4 percent less over the four day Thanksgiving weekend than they did last year. Overall, that means that approximately $1.7 billion less was spent at U.S. retailers compared to last year. It had already been projected that this holiday shopping season would be the worst for retailers since 2009, but if these numbers are any indication it may be even worse than expected. So why is this happening? Well, basically the American consumer is tapped out. The unemployment crisis in this country is actually getting worse, poverty is absolutely exploding and the middle class is being systematically eviscerated. In other words, you can’t get blood out of a stone. Many retailers are offering extreme discounts in a desperate attempt to lure more shoppers, but the money simply isn’t there.
According to Yahoo News, the decline in shopping over the four day Thanksgiving weekend was the first decline that we have seen since the last recession…
Shoppers, on average, were expected to spend $407.02 during the four days, down 3.9 percent from last year. That would be the first decline since the 2009 holiday shopping season when the economy was just coming out of the recession.
The survey underscores the challenges stores have faced since the recession began in late 2007. Retailers had to offer deeper discounts to get people to shop during the downturn, but Americans still expect those “70 percent off” signs now during the recovery.
And according to the New York Times, Americans spent a total of 1.7 billion dollars less than they did last year…
Over the course of the weekend, consumers spent about $1.7 billion less on holiday shopping than they did the year before, according to the National Retail Federation, a retail trade organization.
“There are some economic challenges that many Americans still face,” said Matthew Shay, the chief executive of the retail federation. “So in general terms, many are intending to be a little bit more conservative with their budgets.”
But this downturn for retailers did not just begin this past weekend. There have been signs of trouble for quite a while now.
For example, posted below is a photo that one of my readers sent to me. This is a photo of the Beverly Center Mall in Beverly Hills, California that was taken in the middle of the day on Tuesday, November 19th. She said that there “wasn’t a soul in that mall and the employees were all standing, staring into space with nothing to do”…
So where are all of the shoppers?
Why aren’t people out buying stuff?
Sadly, this is just the continuation of a trend that has been developing for more than a decade. The truth is that Americans are simply not spending money as rapidly as they used to.
Posted below is a chart that shows that the velocity of M2 in the United States is at an all-time low. In other words, the rate at which money circulates through our economy is frighteningly low and it continues to drop…
As you can see from the chart above, this decline in the velocity of money has been going on since the late 1990s. This is a sign of a very unhealthy economy.
Most Americans know that the U.S. economy is very heavily dependent on consumer spending. But consumers have to make money first in order to spend it. And right now we have a major employment crisis in this country.
Meanwhile, the quality of our jobs continues to decline as well. According to the U.S. Census Bureau, median household income in the United States has fallen for five years in a row, and right now the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.
So should it really be such a surprise that consumers are totally tapped out?
The money simply is not there.
After accounting for inflation, 40 percent of all U.S. workers are currently making less than what a full-time minimum wage worker made back in 1968.
A recent CNN article profiled one of these workers. Carman Iverson is a 28-year-old mother of four that makes minimum wage at McDonald’s. If it was not for government assistance, her and her four children would not be able to survive…
Iverson said she started working in 2012 at $7.25 an hour, and makes $7.35 an hour now after Missouri adjusted the minimum wage. She makes between $400 and $600 a month. Her rent is $650 a month.
When asked how she could pay her rent on those wages, she said she had a landlord who works with her. “I’m kind of on my last little leg, because I’ve been late on rent. I’m actually behind three months in rent.
“Sometimes I can pay it, sometimes I can’t. I get paid twice a month, and both checks go to rent and the rest of it goes to utilities to the point where I don’t have any money left to buy anything for my kids — to buy them clothes, shoes or anything they need.”
She said she manages to feed her four children on $543 worth of food stamps a month.
But instead of fixing things, Barack Obama continues to pursue policies that will kill millions more good jobs. It is absolutely amazing that there are any Americans that still support this guy. For a long list of statistics that show how badly the economy has tanked since Obama entered the White House, please see this article.
You know that things are bad when increasing the number of Americans on food stamps by 15 million is regarded as an “economic accomplishment”. In fact, a message recently posted on the official White House website says that “SNAP is boosting the economy right now” and that high food stamp enrollment is creating lots of jobs…
“SNAP’s effect extends beyond the food on a family’s table–to the grocery stores, truck drivers, warehouses, processing plants and farmers that helped get it there.”
So why don’t we just enroll all Americans in every welfare program?
Wouldn’t that produce an extreme economic boom?
And actually under Obama we are already well on our way. According to the U.S. Census Bureau, 49.2 percent of all Americans are currently receiving benefits from at least one government program, and the federal government has spent an astounding 3.7 trillion dollars on welfare programs over the past five years.
Yes, there will always be poor people that cannot help themselves that will need our assistance.
But most Americans are capable of working if they could just find jobs.
Unfortunately, our jobs are being killed off and wages are going down. The middle class is being systematically destroyed and U.S. consumer spending is drying up.
The horrible start to this holiday shopping season is just the beginning.
Things are going to get much worse than this.
This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.
Image credit: http://theeconomiccollapseblog.com
By Daisy Luther
How to Survive a Personal Economic Collapse
With all that is being written about the national economic collapse, people seem to be waiting for some huge event.
However, for many North Americans, the collapse is here. This isn’t relegated to only lower income neighborhoods. As an article from a Cinncinnati new station stated, “Hunger doesn’t know a zipcode.”
For many people who were formerly financially comfortable, the economic collapse has already happened, in the form of a job loss, hours that have been cut back due to Obamacare requirements for employers, an exorbitant medical bill or other crushing debt, or simply an inflation rate that has outstripped your pay increases. Despite all of the warnings, many people are still going to be absolutely blindsided.
For many families, personal finances have reached a catastrophic level – they are left to make terrible choices:
- Which utility can I live without?
- Should I walk away from my mortgage?
- Should I eat something so I can work harder or should I skip meals so my kids have food?
- Should I use the grocery money to take my child to the doctor or should I wait and hope he/she improves without medical intervention?
- Do I risk the IRS-enforced penalties by forgoing enrollment in Obamacare or should I skip that whole grocery shopping thing so I can pay the monthly premiums and enormous deductibles in order to stay in the government’s good graces?
These are the kind of decisions that people across the nation are grappling with every day.
I’m talking about good people, hardworking men and women who have always been employed and paid their bills. A personal financial crisis does not just strike those stereotypical “welfare queens” with the long manicured nails, Gucci knock-off purse, and a grocery cart full of EBT-funded lobster.
I’m talking about the person next door, who seems to have it all together. I’m talking about that quiet family that sits two rows in front of you at church. I’m talking about that two-income family with two children and a car in the driveway that takes them to work and school 5 days a week. I’m talking about people just like you and me.
What is a personal economic collapse?
A personal economic collapse is a little different than the major crises you see all over Europe right now, where huge segments of the population can’t feed their children or stay employed. It is a crisis that just hits your family due to a given set of circumstances. (In actuality North Americans are on the brink of the kind of collapse that is occurring in Europe, but because of easy access to credit and a buy-now, pay-later society, many of us still have the appearance of prosperity.)
Here are some signs that you may be in the midst of a personal economic collapse:
- You can only afford to pay the minimum payment on most of your bills.
- The same dollar amount you used to spend on groceries doesn’t buy enough food to feed your family for the week.
- You can’t afford to go to the doctor when you’re sick.
- You are taking dangerous steps to “stretch” needed medications because you can’t afford the prescriptions.
- Your utility bills are past due and your power is in danger of being cut off.
- You skip meals in order to save money or to have enough food for your kids.
- You’ve lost your job or had your hours cut.
- You have lost property due to foreclosure or repossession (such as your home or your vehicle).
Surviving the crisis
Times are tough but you can survive this.
1.) First you have to see exactly where you are.
It’s time for a brutally honest assessment of your finances. If you use your debit card or credit card for most expenditures, you’ll easily be able to see what you’re spending and bringing in.
Print off your bank account statements for the past 2 months. On a piece of paper, track where your money is going. List the following
- Car payments
- Vehicle operating expenses (fuel, repairs)
- Credit card and other debt payments
- Telephone/Cell phone
- Extracurricular activities for the kids
- Extracurricular activities for the adults
- Dining out
- School expenses
- Recreational spending
- Miscellaneous (anything that doesn’t fall into the above categories gets it’s own category or goes here)
Don’t say to yourself, “Well, I usually don’t spend $400 on clothing so that isn’t realistic.” If you spent it, then it’s realistic. You are averaging together two months, which should account for those less common expenses. Brutal honesty isn’t fun, but it’s vital for this exercise.
So….what do you see when you look at your piece of paper with your average monthly expenditures for the past two months? Are there any surprises? Did you actually realize how much you’ve been spending? Most of us will immediately see places that we can trim the budget. Those $1-$5 purchases can really add up. Reining them in may just allow you to take care of an important need that you thought you could not meet.
It can’t continue like this. The economy will not withstand it. Step one is to see where you can cut things out right now from the above expenditures. Can you reduce your grocery bill? Slash meals out? Budget more carefully for gift-giving and school clothes?
2.) Rethink necessities.
If your finances are out of control, the best possible reality check is a stark look at what necessities really are. It is not necessary to life to have an iPhone, a vehicle in both stalls of your two-car garage, or for your children to all have separate bedrooms. People in Southern and Eastern Europe right now will tell you, as they scramble for food, basic over the counter medications like aspirin, and shelter, that necessities are those things essential to life:
- Food (and the ability to cook it)
- Medicine and medical supplies
- Basic hygiene supplies
- Shelter (including sanitation, lights, heat)
- Simple tools
- Defense Items
Absolutely everything above those basic necessities is a luxury.
So, by this definition, what luxuries do you have?
3.) Reduce your monthly output
Reduce your monthly payments by cutting frivolous expenses. Look at every single monthly payment that comes out of your bank account and slash relentlessly. Consider cutting the following:
- Cell phones
- Home phones
- Gym memberships
- Restaurant meals
- Unnecessary driving
- Entertainment such as trips to the movies, the skating rink, or the mall
4.) Waste not, want not.
We live in a disposable society. Food comes in throw-away containers. People replace things instead of repairing them. If you throw out more than a couple of bags of garbage each week, that’s a very good sign that you may be wasting resources.
Before throwing anything away, pause and think about how it might be able to be reused.
- Food: Many times small amounts of leftovers can be recycled into a brand new meal. Meat bones can be used to make broth or stock. Small amounts of veggies or grains can be frozen and added to a future soup or casserole. Leftovers can be frozen in meal-sized portions to take to work for a brown-bag lunch. (Learn more about repurposing leftovers HERE.)
- Clothing: Clothing that is torn or damaged can often be repaired with only rudimentary sewing skills. If it has been outgrown or cannot be repaired, often the fabric or yarn can be reused for other purposes, from cleaning rags to fashionable accessories like scarves and headbands, or home items like throw pillows, potholders or rag rugs. When all else fails, the fabric can be used for cleaning rags or patches to repair other items. Keep jars full of buttons, elastic, and other notions that can easily be removed before you throw a clothing item away or relegate it to the rag bag.
- Electronics: Obviously, initially you should attempt to repair (or have repaired) electronic items that are not working. If this is not feasible, are there components of the item that can be reused, either now or in the future? What about hardware such as screws or fasteners?
- Containers: Most food comes in a container of some sort. Before throwing the container away, consider whether or not it might be useful. Glass jars, plastic tubs, and plastic bags can often be reused to store food in your refrigerator or to contain food in brown bag lunches. Clean aluminum cans can hold all manner of items, from hardware and tools in a workshop to sewing and craft supplies. Use your imagination.
5.) Take control of your food budget.
The price of food is skyrocketing. Who hasn’t been to the grocery store recently and been shocked at the high price of that cart full of groceries or at the mysterious shrinking food packages that are the same price as yesterday’s larger ones?
- Stockpile: Create a stockpile of nutritious, healthy staples at today’s prices to enjoy when the cost goes even higher tomorrow. (Learn how to create a frugal food stockpile HERE.)
- Preserve: Learn to preserve food yourself when you come across a windfall. Pressure canning, waterbath canning, freezing, and dehydrating can allow you to take advantage of great sales or end-of-season scores.
- Eat less: This suggestion isn’t for everyone, but many of us could stand to shed a few pounds. Perhaps now would be a good time to cut back a little and shrink both your waistline and your weekly food bill. Lots of people eat for the sheer entertainment of it or out of habit. Next time you’re watching TV, grab some mending or a crossword puzzle instead of a bag of potato chips. Dish out slightly smaller servings at dinnertime to leave enough to stretch the leftovers for a brown bag meal the next day.
- Drink water: Skip the beverages and drink water instead. At less than $1 per gallon for purchased water you simply can’t beat the price. It’s better for you, also, than sugar-y drinks. If you are lucky enough to have well water or access to spring water, your drinks don’t have to cost you a penny.
- Focus on nutrition instead of convenience: Buy the best quality of food you can, and skip the processed, nutritionless convenience foods.
- Grow your own. In the summer, grow the biggest garden you can. In the winter, or if you are an apartment dweller, put some sprouts and greens in a sunny windowsill to add some fresh produce for pennies.
6.) Reduce your dependence on utilities.
Energy rates are skyrocketing. As the prices begin to rise, more and more people will be unable to pay their bills and eventually their power will be shut off. Check your bill each month and as prices increase, use less power. Try some of these ideas to reduce your reliance and drop your bills.
- Hand wash your clothing
- Hang clothes to dry
- Cook on a woodstove or outdoor grill
- Can foods to preserve them instead of relying on a large chest freezer
- Turn the heat down a few degrees and use non-grid methods to keep warm
- Use rain barrels to collect water
- Direct the gray water from your washing machines to reservoirs
- Turn off the lights and open the blinds
- Use solar lighting whenever possible
How do you intend to weather the storm?
There are bleak days ahead. Have you planned for this? What strategies do you intend to use to weather the financial crisis that is coming for all of us?
Daisy Luther is a freelance writer and editor. Her website, The Organic Prepper, offers information on healthy prepping, including premium nutritional choices, general wellness and non-tech solutions. You can follow Daisy on Facebook and Twitter, and you can email her at firstname.lastname@example.org
Image credit: http://www.theorganicprepper.ca
Vote now in the 2013 Lump of Coal Award poll
Santa’s making his list, and we’re making ours. Over the past year, a number of government and other entities have been very naughty. In response, the Beacon Center is giving you the opportunity to send them a lump of coal for their misdeeds. Below are our staff picks for the four finalists for the not-so-coveted 2013 Lump of Coal Award.
Between now and Monday, December 16th, cast your vote for the finalist who has been the biggest Scrooge to Tennessee taxpayers over the past year. Once voting is complete on the 16th, we will announce the winner and send them a big fat lump of coal for bahumbugging the principles of individual liberty and limited government.
Image credit: http://www.beacontn.org
Today’s Wealth Destruction Is Hidden by Government Debt
Still unnoticed by a large part of the population is that we have been living through a period of relative impoverishment. Money has been squandered in welfare spending, bailing out banks or even — as in Europe — of fellow governments. But many people still do not feel the pain.
However, malinvestments have destroyed an immense amount of real wealth. Government spending for welfare programs and military ventures has caused increasing public debts and deficits in the Western world. These debts will never be paid back in real terms.
The welfare-warfare state is the biggest malinvestment today. It does not satisfy the preferences of freely interacting individuals and would be liquidated immediately if it were not continuously propped up by taxpayer money collected under the threat of violence.
Another source of malinvestment has been the business cycle triggered by the credit expansion of the semi-public fractional reserve banking system. After the financial crisis of 2008, malinvestments were only partially liquidated. The investors that had financed the malinvestments such as overextended car producers and mortgage lenders were bailed out by governments; be it directly through capital infusions or indirectly through subsidies and public works. The bursting of the housing bubble caused losses for the banking system, but the banking system did not assume these losses in full because it was bailed out by governments worldwide. Consequently, bad debts were shifted from the private to the public sector, but they did not disappear. In time, new bad debts were created through an increase in public welfare spending such as unemployment benefits and a myriad of “stimulus” programs. Government debt exploded.
In other words, the losses resulting from the malinvestments of the past cycle have been shifted to an important degree onto the balance sheets of governments and their central banks. Neither the original investors, nor bank shareholders, nor bank creditors, nor holders of public debt have assumed these losses. Shifting bad debts around cannot recreate the lost wealth, however, and the debt remains.
To illustrate, let us consider Robinson Crusoe and the younger Friday on their island. Robinson works hard for decades and saves for retirement. He invests in bonds issued by Friday. Friday invests in a project. He starts constructing a fishing boat that will produce enough fish to feed both of them when Robinson retires and stops working.
At retirement Robinson wants to start consuming his capital. He wants to sell his bonds and buy goods (the fish) that Friday produces. But the plan will not work if the capital has been squandered in malinvestments. Friday may be unable to pay back the bonds in real terms, because he simply has consumed Robinson’s savings without working or because the investment project financed with Robinson’s savings has failed.
For instance, imagine that the boat is constructed badly and sinks; or that Friday never builds the boat because he prefers partying. The wealth that Robinson thought to own is simply not there. Of course, for some time Robinson may maintain the illusion that he is wealthy. In fact, he still owns the bonds.
Let us imagine that there is a government with its central bank on the island. To “fix” the situation, the island’s government buys and nationalizes Friday’s failed company (and the sunken boat). Or the government could bail Friday out by transferring money to him through the issuance of new government debt that is bought by the central bank. Friday may then pay back Robinson with newly printed money. Alternatively the central banks may also just print paper money to buy the bonds directly from Robinson. The bad assets (represented by the bonds) are shifted onto the balance sheet of the central bank or the government.
As a consequence, Robinson Crusoe may have the illusion that he is still rich because he owns government bonds, paper money, or the bonds issued by a nationalized or subsidized company. In a similar way, people feel rich today because they own savings accounts, government bonds, mutual funds, or a life insurance policy (with the banks, the funds, and the life insurance companies being heavily invested in government bonds). However, the wealth destruction (the sinking of the boat) cannot be undone. At the end of the day, Robinson cannot eat the bonds, paper, or other entitlements he owns. There is simply no real wealth backing them. No one is actually catching fish, so there will simply not be enough fishes to feed both Robinson and Friday.
Something similar is true today. Many people believe they own real wealth that does not exist. Their capital has been squandered by government malinvestments directly and indirectly. Governments have spent resources in welfare programs and have issued promises for public pension schemes; they have bailed out companies by creating artificial markets, through subsidies or capital injections. Government debt has exploded.
Many people believe the paper wealth they own in the form of government bonds, investment funds, insurance policies, bank deposits, and entitlements will provide them with nice sunset years. However, at retirement they will only be able to consume what is produced by the real economy. But the economy’s real production capacity has been severely distorted and reduced by government intervention. The paper wealth is backed to a great extent by hot air. The ongoing transfer of bad debts onto the balance sheets of governments and central banks cannot undo the destruction of wealth. Savers and pensioners will at some point find out that the real value of their wealth is much less than they expected. In which way, exactly, the illusion will be destroyed remains to be seen.
Philipp Bagus is an associate professor at Universidad Rey Juan Carlos. He is an associate scholar of the Ludwig von Mises Institute and was awarded the 2011 O.P. Alford III Prize in Libertarian Scholarship. He is the author of The Tragedy of the Euro and coauthor of Deep Freeze: Iceland’s Economic Collapse. The Tragedy of the Euro has so far been translated and published in German, French, Slovak, Polish, Italian, Romanian, Finnish, Spanish, Portuguese, British English, Dutch, Brazilian Portuguese, Bulgarian, and Chinese. See his website.
Image credit: https://www.mises.org
A List Of 23 Famous Obama Quotes That Turned Out To Be Broken Promises Or Cold-Hearted Lies
How many lies can one president tell and still retain any credibility? What you are about to see is absolutely astounding. It is a long list of important promises that Barack Obama has broken since he has been president. If he had only told a few lies, perhaps the American people would be willing to overlook that. After all, pretty much all of our politicians our liars. Unfortunately, many of the lies that Obama has told appear to have been quite cold-hearted in nature. For example, Barack Obama repeatedly made the promise that “you will be able to keep your health care plan” under Obamacare. But now we are learning that he knew that this was a lie all along. Not only that, the Democrats in Congress knew that this was a lie all along too. In fact, U.S. Senator Kirsten Gillibrand, a Democrat, said the following when she was asked about Obama’s promise to the American people recently: “He should’ve just been specific. No, we all knew.” You can see video of her making this statement right here. The truth is that they all knew that millions upon millions of Americans would lose their current health care policies under Obamacare. They deliberately lied just so that they could get the law passed.
And of course this is far from the only major lie that Obama has told in recent years. The following is a list of 23 famous Obama quotes that turned out to be broken promises or cold-hearted lies…
#1 “If you like your doctor, you will be able to keep your doctor. Period. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.”
#2 “My administration is committed to creating an unprecedented level of openness in government.”
#3 “We agree on reforms that will finally reduce the costs of health care. Families will save on their premiums…”
#4 “I don’t want to pit Red America against Blue America. I want to be the president of the United States of America.”
#5 “We’ve got shovel-ready projects all across the country that governors and mayors are pleading to fund. And the minute we can get those investments to the state level, jobs are going to be created.”
#6 “And we will pursue the housing plan I’m outlining today. And through this plan, we will help between 7 and 9 million families restructure or refinance their mortgages so they can afford—avoid foreclosure.”
#7 “I will sign a universal health-care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family’s premium by up to $2,500 a year.”
#8 “We reject the use of national security letters to spy on citizens who are not suspected of a crime.”
#9 “For people with insurance, the only impact of the health-care law is that their insurance is stronger, better, and more secure than it was before. Full stop. That’s it. They don’t have to worry about anything else.”
#10 “We will close the detention camp in Guantanamo Bay, the location of so many of the worst constitutional abuses in recent years.”
#11 “Allow Americans to buy their medicines from other developed countries if the drugs are safe and prices are lower outside the U.S.”
#12 “We will revisit the Patriot Act and overturn unconstitutional executive decisions issued during the past eight years.”
#13 “Will ensure that federal contracts over $25,000 are competitively bid.”
#14 “We reject sweeping claims of ‘inherent’ presidential power.”
#15 “Will eliminate all income taxation of seniors making less than $50,000 per year. This will eliminate taxes for 7 million seniors — saving them an average of $1,400 a year– and will also mean that 27 million seniors will not need to file an income tax return at all.”
#16 “We support constitutional protections and judicial oversight on any surveillance program involving Americans.”
#17 “If we have not gotten our troops out by the time I am president, it is the first thing I will do. I will get our troops home, we will end this war. You can take that to the bank.”
#18 “Will not sign any non-emergency bill without giving the American public an opportunity to review and comment on the White House website for five days.”
#19 “The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation.”
#20 “We have a choice in this country. We can accept a politics that breeds division and conflict and cynicism…. That is one option. Or, at this moment, in this election, we can come together and say, ‘Not this time….’”
#21 “We’ve got to spend some money now to pull us out of this recession. But as soon as we’re out of this recession, we’ve got to get serious about starting to live within our means, instead of leaving debt for our children and our grandchildren and our great-grandchildren.”
#22 “[T]oday I’m pledging to cut the deficit we inherited in half by the end of my first term in office. This will not be easy. It will require us to make difficult decisions and face challenges we’ve long neglected. But I refuse to leave our children with a debt that they cannot repay – and that means taking responsibility right now, in this administration, for getting our spending under control.”
#23 “I, Barack Hussein Obama, do solemnly swear that I will execute the office of president of the United States faithfully, and will to the best of my ability, preserve, protect, and defend the constitution of the United States.”
Image credit: http://thetruthwins.com
By Tyler Durden
Picturing The Biggest Scam In The History of Mankind
Last week Mike Maloney exposed the “biggest scam in the history of mankind” in 7 easy steps in his latest presentation. As Mike explains, most people can feel deep down that something isn’t quite right with the world economy, but few know what it is. Gone are the days where a family can survive on just one paycheck…every day it seems that things are more and more out of control, yet only one in a million understand why. Here is the simple infographic to explain the grift…
(click image for massive legible version)
Image credit: http://www.zerohedge.com
By Ron Paul
Debt Ceiling Deal: DC Wins, Americans Lose
Washington, DC, Wall Street, and central bankers around the world rejoiced this week as Congress came to an agreement to end the government shutdown and lift the debt ceiling. The latest spending-and-debt deal was negotiated by Congressional leaders behind closed doors, and was rushed through Congress before most members had time to read it. Now that the bill is passed, we can see that it is a victory for the political class and special interests, but a defeat for the American people.
The debt ceiling deal increases spending above the levels set by the “sequester.” The sequester cuts were minuscule, and in many cases used the old DC trick of calling reductions in planned spending increases a cut. But even minuscule and phony cuts are unacceptable to the bipartisan welfare-warfare spending collation. The bill also does nothing to protect the American people from the Obamacare disaster.
As is common in bills drafted in secret and rushed into law, this bill contains special deals for certain powerful politicians. The bill even has a provision authorizing continued military aid to opponents of the Ugandan “Lord’s Resistance Army,” which was the subject of the widely-viewed “Kony 2012” YouTube videos. Most of these unrelated provisions did not come to public attention until after the bill was passed and signed into law.
Members of Congress and the public were told the debt ceiling increase was necessary to prevent a government default and an economic crisis. This manufactured fear supposedly justified voting on legislation without allowing members time to even read it, much less to remove the special deals or even debate the wisdom of intervening in overseas military conflicts because of a YouTube video.
Congress should have ignored the hysterics. A failure to increase government’s borrowing authority would not lead to a default any more that an individual’s failure to get a credit card limit increase in would mean they would have to declare bankruptcy. Instead, the failure of either an individual or a government to obtain new borrowing authority would force the individual or the government to live within their means, and may even force them to finally reduce their spending. Most people would say it is irresponsible to give a spendthrift, debit-ridden individual a credit increase. Why then is it responsible to give an irresponsible spendthrift government an increase in borrowing authority?
Congress surrendered more power to the president in this bill. Instead of setting a new debt ceiling, it simply “suspended” the debt ceiling until February. This gives the administration a blank check to run up as much debt as it pleases from now until February 7th. Congress can “disapprove” the debt ceiling suspension, but only if it passes a resolution of disapproval by a two-thirds majority. How long before Congress totally abdicates its constitutional authority over spending by allowing the Treasury permanent and unlimited authority to borrow money without seeking Congressional approval?
Instead of seriously addressing the spending crisis, most in Congress would rather engage in last-minute brinksmanship and backroom deals instead of taking the necessary action to reign in spending. Congress will only take serious steps to reduce spending when either a critical mass of Americans pressures it to cut spending, or when investors and foreign countries stop buying US government debt. Hopefully, those of us who understand sound economics can convince enough of our fellow citizens to pressure Congress to make serious spending cuts before Congress’s reckless actions cause a total economic collapse.
Blount County Clerk and Dedicated Employees Save Taxpayers a Bundle
As we read from time to time about how friendly some in government may be to interests other than the taxpayers they are elected to represent it is a joy to find and share some positive news.
At tonight’s Commission meeting citizen Richard Hutchens gave County Clerk Roy Crawford his first Statesman Award for his recent effort to provide enhanced service to the citizens of Blount County without raising their taxes. Mr. Hutchens requested the Chairman’s indulgence to give Mr. Crawford a round of applause and Chairman Moon obliged. Mr. Crawford received a standing ovation by the citizens in the audience.
Good News – County Clerk and Dedicated Employees Save Taxpayers a Bundle
The County Clerk’s office is where you go to renew vehicle registrations, get titles to vehicles, get a marriage license, get a business license or submit a passport application. County Clerk Roy Crawford, and his fine employees, set high goals for customer service and efficiency. And, they deliver. When I ask people about the service they experience when visiting the County Clerk’s office, the comments are resoundingly positive. Yet, the Blount County Clerk’s office spends less money than the other similar Tennessee counties. The recent opening of the new, expanded County Clerk’s office in the Foothills Mall show the planning and hard work that go into maintaining these high standards.
Several months ago, Crawford was notified the lease for the small space he used for his Foothills Mall branch office was being terminated. Crawford faced a choice between moving the branch back to the Courthouse or leasing expensive new space. The first alternative was not attractive because it would force citizens to make a special trip to the Courthouse, where they would have to deal with very limited parking. The second alternative would cost the taxpayers thousands in additional rent.
Crawford and his employees got creative. They analyzed the data and found that the office attracted more than 40,000 people each year. They put together a presentation that asked merchants what they would have to spend on advertising to attract 40,000 people. They pointed out how much cheaper it would be for the merchant to donate space for the new office and get those 40,000 visits. Several merchants quickly expressed interest. In the end, the good people who manage Foothills Mall, provided a new, larger space at no cost to the taxpayers. But this is not the end of the story.
The space needed to be fitted out for the new office. The employees of the County Clerk’s office volunteered their time and their spouses’ time to construct the fine new office you see at the Mall. This saved you, the citizens, thousands of your hard earned tax money. Next time you visit the County Clerk’s office at the Mall, be sure to tell the fine people there, that you appreciate their efforts.
Richard Hutchen’s Speech Presenting Statesmen Award to Roy Crawford
For over three years, I have been coming to these Commissioner meetings in the hopes that I could appeal to your higher natures to encourage and inspire you to want to become more than just another self-serving, small-minded, big ego, politician; but instead rise to the level of Statesman and Stateswomen.
Being a politician is easy. However, earning the Title of a true Statesman is hard. An occasional act of Statesmanship here and there does not make a politician a Statesman. It takes years of consistent, dedicated Public Service to earn the Title of Statesman.
One of the distinguishing qualities of a True Statesman is whether he regards and treats the Taxpayers’ hard-earned dollars, as the Sacred Trust that it is. If tax revenues go down, he doesn’t run to politicians asking them to raise taxes; instead he first looks for ways to improve efficiency and effectiveness within his stewardship.
Fortunately, we do have in our County a Public Servant who truly is a Public Servant. This particular individual has consistently run his office and guarded the tax payer’s money as if he was spending his own money.
I have never heard a single taxpayer complain about the way the Blount County Clerk’s office budget is run, but instead is one department whose budget is a shining example of what good government could be, should be, and is meant to be.
Several months ago, when Mr. Crawford was notified that the lease for the Foothills Mall branch office was being terminated. Mr. Crawford faced with a choice of either closing the branch office or pay thousands more tax dollars for an expensive new retail space.
Mr. Crawford and his employees got creative and successfully persuaded Mall management to drive 40,000 customers a year into the mall by donating a new empty retail space to the county at no cost to the taxpayers. In addition, the employees of the County Clerk’s office even volunteered their time to help construct the new office saving Blount County taxpayers thousands of their hard earned tax dollars.
It is with great pleasure that I wish to, at this time, publicly recognize Blount County Clerk Roy Crawford as having officially earned the prestigious title of Statesman.
This certificate reads as follows ….
With the Chairman’s indulgence, I would respectfully ask permission to be able to enter the Board’s area, to personally award Mr. Crawford with this highly covenanted Award, shake his hand, and ask the audience to join with me in giving Mr. Crawford a standing ovation.
*The two italicized paragraphs were omitted for time.
Lew Rockwell discusses the upside of government default
This RT interview with Lew Rockwell was published yesterday before the great compromise of today when we read Boehner Admits Defeat. Well worth a view, as Lew’s remarks are spot on as always.
Published by misesmedia
About: In his recent appearance on RT, Lew Rockwell discusses the upside of government default. Rockwell is founder and CEO of the Mises Institute. For more information, visit the Mises Institute online at mises.org.
Debt Ceiling Delusions
The popular take on the current debt ceiling stand-off is that the Tea Party wing of the Republican Party has a delusional belief that it can hit the brakes on new debt creation without bringing on an economic catastrophe. While Republicans are indeed kidding themselves if they believe that their actions will not unleash deep economic turmoil, there are much deeper and more significant delusions on the other side of the aisle. Democrats, and the President in particular, believe that continually taking on more debt to pay existing debt is a more responsible course of action. Even worse, they appear to believe that debt accumulation is the equivalent of economic growth.
If Republicans were to inexplicably prevail, and the federal government were to cut spending so that its expenditures matched its tax revenues (a truly radical idea) the country’s financial mess would be laid bare. The government would have to weigh the relative costs and benefits of making interest payments on Treasury debt (primarily to foreign creditors) or to trim entitlements promised to U.S. citizens. But those are choices we will have to make sooner or later anyway. In fact we should have dealt with these issues years ago. But generations of mechanistic debt ceiling increases have allowed us to perpetually kick the can down the road. What could possibly be gained by doing it again, particularly if it is done with no commitment to change course?
The Democrats’ argument that America needs to pay its bills is just hollow rhetoric. Paying off one’s Visa bill with a new and bigger MasterCard bill can’t be considered a legitimate payment of debt. At best it is a transfer. But in the government’s case, it doesn’t even qualify as that. Treasury debt is primarily bought by the Fed, foreign central banks, and major financial institutions. None of that will change with a debt ceiling increase. We will just go to the same people for greater quantities. So it’s like paying off your Visa card with a bigger Visa card.
According to modern economists, an elimination of deficit spending will immediately cause a dollar for dollar decrease in GDP. For example, if the government stopped sending food stamp payments to poor people, then grocery stores would lose business, employees would be laid off, and the economy would contract. But this one dimensional view fails to appreciate that the purchasing power of the food stamps had to come from somewhere. The government can’t create something from nothing. Taxation transfers purchasing power from people living in the present to other people living in the present. In contrast, borrowing transfers purchasing power from people living in the future to people living in the present. The good news for politicians is that future people don’t vote in current elections (and current voters don’t seem to appreciate the cost to their future selves of current policy).
The Obama Administration has congratulated itself for turning around the contracting economy that it inherited from President Bush. But even if you take the obscenely low official inflation statistics at face value, we only grew at an anemic 1.075% annual pace from 2009 to 2012 (far below the between 3% and 4% that the U.S. averaged post World War II). Sadly, this growth pales in comparison to the accumulation of new debt that we are borrowing from the future.
U.S. GDP is measured at roughly $15 trillion per year. 2% growth means that each year the GDP is approximately $300 billion larger than the prior year. But in the less than five years since Obama took office, the federal government has added, on average, about $1.3 trillion per year in new debt, a pace that is four times higher than the growth. If the deficit were subtracted from GDP, America would be shown to be stuck in a severe recession that Washington can’t acknowledge. But such a reality is more consistent with the dismal job prospects and stagnant incomes experienced by most Americans.
The belief that deficits add to the economy, and that debt can be dealt with in an imaginary future (that never seems to arrive) is the foundation upon which the President can chastise the Republicans as irresponsible suicide bombers. Using this logic, he can argue (with a straight face) that borrowing is the equivalent of paying. That the President can make this delusional argument is not so surprising (no lie too great for the typical politician to attempt). What is alarming is that the media and the public have swallowed it so willingly. As they call for limitless increases in borrowing, Democrats have offered no plan to reduce the current debt and they are unwilling to negotiate with Republicans on that topic. Yet somehow they have been perceived as the party of fiscal responsibility.
While the Republicans have a dismal track record of their own when it comes to budgetary management, it can’t be disputed that the minor dip in that rate of increase in spending that resulted from the recent Sequester, happened only because they dug in on the issue. Without the 2011 debt ceiling drama, there is no chance that any spending would have been touched.
Democrats had warned that the $85 billion in sequestration cuts slated for fiscal year 2013 (about 2% of the Federal budget) would be sufficient to bring on economic Armageddon. But guess what? We survived. Recently, Senate Majority Leader Harry Reid continued with such rhetoric by declaring that there are no more cuts to be found anywhere in the $3.8 Trillion dollar federal budget. (Apparently he missed last week’s 60 Minutes piece on the spreading epidemic of federal disability fraud.)
We have to acknowledge what even the Republicans haven’t fully grasped. We are in such a deep debt hole that there is no solution that does not involve serious economic pain. Tea Party Republicans rightly believe that government spending is a drag on economic growth. As a result, they conclude that immediate spending cuts will help with the “recovery”. But they are confusing real economic growth with the delusional expansion created by deficit spending (which is actually damaging the real economy). If they cut the deficit, this phony economy may likely implode and cause widespread distress.
So even though a reduction in government borrowing and spending does help the economy, it won’t feel very helpful tomorrow. The more we borrow and spend today, the more we will suffer tomorrow when the bills come due. Ironically, cutting government spending now helps the economy by allowing the economic adjustment to happen sooner rather than later. But this type of long-term thinking is very difficult for politicians to consider.
Unfortunately our debts don’t leave us much in the way of choices. We can choose to pay now or try to pay later. But the longer we wait the steeper the bill.
Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital, best-selling author and host of syndicated Peter Schiff Show.