Tag Archives: economics

Debt Limit Extensions

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James Freeman quoted Capital Alpha Partners‘ James Lucier’s prediction concerning reaching the current debt limit and Congress’ response to it:

We think that Congress will pass a temporary extension of the debt limit deadline for 30, 60, or 90 days.

The House already has passed a temporary debt limit extension—of ~365 days.

The sad fact is that all debt limit extensions, of however many years, are merely temporary, and that will continue to be the case until Congress quits spending more money than the Federal government takes in. The most efficient way of achieving that end is to cut spending—not merely reduce its rate of growth.

That efficiency will take We the People getting off our duffs and electing Representatives and Senators—and Presidents—who have the courage to do the cutting.

Yet More Reasons

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American and other businesses foreign to the People’s Republic of China really need to stop doing business in the PRC or with businesses domiciled in the PRC. That nation is making it increasingly dangerous—physically and legally—for foreign business’ employees even to be present there.

Hiroshi Nishiyama, a veteran Japanese executive at Astellas Pharma Inc and a prominent member of his country’s business circle in China, spent late March wrapping up his assignment there and preparing to head home.
He never made it. Mr Nishiyama disappeared on what was supposed to be his last day in China. A few days later, China’s Foreign Ministry said he had been accused of espionage and detained.

No warning. No heads up to Astellas. Not even a prompt notice to Astellas as soon as Nishiyama had been “detained.”

Nishiyama’s fate is all too typical of what might befall foreign businessmen.

In recent weeks Chinese authorities have questioned staff at US consulting firm Bain & Co and raided the office of American due diligence firm Mintz Group and detained all five of its employees in mainland China.

The PRC also is moving to expand—and attempt justification for—its reach regarding these employees of foreign businesses.

China also passed an expansive update of an anti-espionage law that will tighten state control over a wider swath of data and digital activities, raising the risks that ordinary business behavior could be misconstrued or misrepresented as spycraft.

Rule by law rather than rule of law: the PRC government passed this law explicitly so it could coerce foreign businesses—and the governments of the nations where those businesses are domiciled—into expensive, and dangerous, concessions, particularly concerning technology transfers.

These moves provide yet further reasons for all foreign businesses to simply walk away from the People’s Republic of China; do no further business there at all.

Anheuser-Busch’s Messaging

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A letter writer to Tuesday’s Wall Street Journal Letters section offered a solution to Anheuser-Busch’s marketing fiasco of recent weeks.

A-B should produce a series of cans and bottles featuring labels highlighting soldiers, athletes, teachers, construction workers, etc. I’d start buying again, and I am sure many others would do the same.

I’m not sure I would. A-B’s managers spoke from their heart the first time and said what their values are. This time around, they would only be putting out those subsequent cans in response to the hue and cry over the former. There’s no possibility of taking the change as sincerely done with the current managers in place.

And no, putting a couple of lead marketers on temporary leave doesn’t cut it. The CEO approved the marketing switch, too, if only by being the one in charge. And his subsequent statement, which was in the main a non sequitur, only demonstrated that he agreed with the prior marketing move.

Debt and Spending

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Here’s a fun fact, one that every child from three years old and up who gets an allowance clearly learns, one that’s made explicit in any high school basic economics class, and one that’s driven home in junior college and college Econ 101 classes: when you spend more than take in, you owe the difference, either explicitly by borrowing separately to make up the arrears or implicitly by the existence of the deficit resulting from spending more than is taken in.

There are two outcomes that are absolutely critical to successfully resolving such a situation: pay the debt that has been incurred, and reduce spending to fit within income in the subsequent years so as to not incur that debt again.

So it is with our nation’s Federal budget.

We have, for decades, but especially with the Obama administration’s overwrought response to the Panic of 2008, again during the Trump administration’s overwrought response to the Wuhan Virus situation, but especially with the Biden administration’s deliberate explosion of spending in response to no particular “emergency,” and without any regard for actual Federal intake under its Grove of Money Trees Modern Monetary Theory foolishness. This is coupled with a statutorily set debt limit, a limit that stops the Federal government from borrowing at all when the amount of debt already incurred reaches that limit. The bar on further borrowing forces a complete stop in spending above current Federal income—which represents a significant spending cut.

Those spending cuts include not paying on existing Federal contracts, reductions in or complete halts of welfare program payments, reductions in Social Security and Medicare payments, and reductions in payments on Federal debt, the latter which would be reductions in principal payments. Payments at least of the interest owed are Constitutionally required, which especially drives reductions in or complete withholding of any or all of those other payments in order to be able to make the debt interest payments.

Which brings us to the Federal government’s only solutions to the current debt ceiling crisis: pay the debt and reduce spending to fit within Federal intake in the subsequent years. These must be done together, or we’ll just keep needing to raise the statutory limit on Federal debt accrued.

That, in turn, brings us to the current situation vis-à-vis debt and spending. For months Republicans and Conservatives in the House have sought negotiations with President Joe Biden (D). (Republicans and Conservatives in the Senate have been remarkably silent. Some of that is driven by the Constitutional requirement that revenue and spending bills must originate in the House, but some of it, also, is driven by the timidity of those Senators.) For months, Biden has refused to negotiate, refused to talk with House Republicans and Conservatives at all.

Lately, Speaker Kevin McCarthy put forward a bill that would raise the debt ceiling by enough to support excess spending for a year while clawing back various appropriated but unspent monies, cutting spending in other areas, and capping non-defense discretionary spending at 1% growth for each of the next 10 years. Associated with that is a proposal to use that year to negotiate serious spending reductions for the next budget year and subsequent years.

Biden has ignored the proposal. Biden’s stubbornness—a stubbornness that is born of the man’s ego-driven pride—is threatening our nation with default on our debt. Such a default will be Joe Biden’s doing, and no one else’s.

McCarthy wants a different outcome:

…Biden [to] return to the negotiating table for debt ceiling negotiations….
I think as president and the leader of the free world, this is one of the problems. We have challenges around this country, around the world. He needs to show leadership and come to the negotiating table instead of putting us in default. This is risky, what he’s doing.

Biden needs to get past his ego and stoop to negotiating.

Full stop.

Another Reason to Not Take Federal Dollars

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Aside from the fact that those dollars aren’t actually Federal government dollars; they’re OPM, the tax remittances of us ordinary Americans from all over our nation that then get transferred to other jurisdictions than the ones we live in.

Here’s the latest reason.

The Department of Housing and Urban Development is proposing a rule that would require towns that receive federal money to create “equity plans” for fair housing and take action to end racially unbalanced neighborhoods.

In other words, as the Wall Street Journal‘s editors put it,

the Biden bureaucracy wants to socially engineer suburban neighborhoods to its racial and ethnic liking.

Not to the liking of us citizens.

Never mind that such plans are intrinsically racist, handing out funds as they do based on race, no matter the high-minded pretenses of the politician pushers. And never mind that “racially unbalanced neighborhoods” would balance out on their own—to some extent—in an unfettered free market. “Some” because in that free market, buyers and sellers would make their own decisions on where to live and among whom, and many free Americans would choose freely to live in the company of others like themselves.

In the end, the way to be free of Government strings attached to Government funds transfers is to stop taking Government funds. Breaking the addiction to OPM, as with any other addiction, will be deucedly hard. But hard means possible.