Monthly Archives: December 2011

Debt and Taxes

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The price of our burgeoning national debt is this.  As our debt grows, more of our national income must be taken out of our economy and spent: at minimum, on the interest payments due; if we’re to actually pay off the loans, even more on principle payments.  But as we make the payments, if we borrow still more, still more money must be taken out of our economy for the additional payments.

In essence (to beat this horse a bit), money taken out of our economy to pay our increasing debt is money not available to our economy for use in productive things: capital investment, R&D, consumption, hiring, and so on.  Our nation’s debt, in the best of times, is a drag on our economy, but when it gets out of hand, it’s worse—it generates a negative feedback loop that actually contributes to shrinking our economy.  The more money taken out to make the payments, the less money for growth; the less growth, the less capacity for absorbing the removal of money, and the more that same removal amount hurts.

It’s true enough that the Federal Reserve Bank can manipulate interest rates, so as to keep those interest payments small and less of a drag, but only to a point.  In the end, Mr. Market overrules all of us, including our government.  As our debt grows (Greece, Italy, and Spain are graciously serving as object lessons here), our ability to repay it becomes more doubtful.  It’s certainly true that the Fed also can print all the dollars it wishes to print with which make those payments.

But there’s a rub here, too.  Our dollars are only worth what they can buy, and as we print more and more of them, they can buy less and less (that’s inflation)—including the “purchases” represented by debt payments.  There will come a time, sooner rather than later, when the interest the Fed is setting on our debt no longer accurately reflects the risks inherent in our debt, both in terms of our ability finally to repay and in terms of the value received from lending to us.  Worse, it will have become impossible to determine an accurate price either of our debt or of the risk in lending to us.  At that point, who will wish to lend to us?  Ask the Greeks, Italians, and Spanish how this is working out for them.

The price of rising taxes, another leg to our government’s efforts to right our economy, is this.  Taxing, at bottom, withdraws money from our economy.  Take everything written above about debt payments subtracting from our economy’s capacity and substitute “tax collections,” and we have the same negative feedback loop.  Increasing those taxes—a need seemingly justified by our stagnating, if not fading, economy—simply exacerbates the problem, with even more money taken out, an even more constricted economy as a result, and even less revenue going to government.  And more importantly, an even less effective economy, with lower production, less investment, fewer jobs, and reduced quality of life.

There is this one additional factor.  Some of the tax revenues do find their way back into our economy, but not all.  Roughly 75-80 cents of every dollar collected in taxes is all that makes it back.  Leaving aside the fraud, waste, and abuse that is a favorite target of our politicians’ perennial “spending cut” moves, the government acts as a middle man in the transactions, and so it keeps a fraction of every tax dollar for itself for the purpose.  Additional fractions of the tax dollar are lost simply to friction.

Further, government spending is money that is significantly misallocated, if only because it’s allocated to purposes we would not have chosen had the money been left in our hands.  It’s also misallocated, though, because so much government spending is allocated to things that inherently wasteful and destructive—overregulation from EPA regulations threaten electricity-generating power plants with closure, at the costs of jobs and of increased instability of our national power grid, for instance—and misguided—subsidies for “green” energy enterprises and for oil and gas production, for instance.  These misallocations reduce the efficiency of our markets so that our economy cannot even use the reduced production effectively.

More Regulations, or Thank you, Sir; May I Have Another?

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There has been plenty of commentary about the EPA’s regulatory excesses in various areas; I’ll not go into those.  Here are a couple of other examples of Big Government in action, though.  For our own good, of course.  And one that we desperately need that government hasn’t yet supplied.

Power Line tells about a 9th Circuit Court of Appeals ruling that rain falling onto forest roads wants tight regulation.  It turns out that when this water passes through a culvert or some such that a forester has added to the road he built for logging access, the rain becomes polluted with…something, and the culverts, says the 9th Circuit, are point sources of pollution that might contaminate that rainwater.  With 378,000 miles of roads in our national forests alone, some 400,000 permits will be required to handle that nasty rainwater (some roads have more than one culvert), and it’ll take roughly 10 years before the requisite permits can be issued (assuming that process goes smoothly) and the logging can resume.

What’s the logic for this?  Oh, wait, here it is: the housing industry’s bubble bursting caused our present economic malaise.  Bad housing.  Bad.  We’ll cut off your supply of wood.

Next, Steven Nelson of The Daily Caller reports this.  The Clean Up Government Act is going to really clear out corrupt gift giving and conflicts of interest.  For instance, a part-time state legislator who also owns a car dealership could find himself, as a result of the Act, in Federal criminal violation of the Act by voting on a highway bill.  A potential (but not certain) ethical violation—certainly that should be a Federal felony.

On the matter of gift giving, it’s currently illegal to give or accept gifts for or because of any official act.  Gifts that are given or received by public officials because of their position also are already handled by existing regulations: when the gift-giving occurs, and refusing the gift would be offensive (for instance to a foreign dignitary who made the gift), it’s received and turned over to the proper government authority.  This Act, though, would ban all such gifts.  Can’t have those exceptions.

Finally, Daily Markets offers this.  According to this table golf is three times more dangerous than hunting with firearms.  Hmm….  We have regulations that govern the conditions of ownership and transportation of firearms.  We have regulations that govern the interstate sale of long guns, or rifles.  The government even reserves to itself the definition of “sporting,” the only legal purpose for importing a firearm.  Where are the regulations governing the possession and transport of golf clubs?  How do we know that golf bag is safe, much less legal?  Where are the regulations governing the interstate sale of long clubs, those dangerous drivers and low irons?  Under what conditions might we import a golf club from Canada, or Scotland?

And tennis?  What are we to do?

Is There any Clearer Demonstration

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…of Attorney General of the United States Eric Holder’s incompetence than his own words?

As reported in The New York Post by Michael Walsh and in Politico:

  • About who ordered Fast and Furious: “We don’t know yet.”
  • Even though he is “ultimately responsible for everything that happens in the Department of Justice….”  Yet “There are all kinds of operations going on right now in the Justice Department about which I know nothing because of the way the Department of Justice is structured.”
  • After Holder told Rep. Jason Chaffetz (R, UT) that he had never discussed Fast and Furious with President Barack Obama, Secretary of Homeland Security Janet Napolitano, Secretary of State Hillary Clinton or the president or attorney general of Mexico, “You have to understand something about the way Washington works, here, OK?  The meaningful conversations that happen between DHS and DOJ that happen at lower levels, between investigators.… [Obama, et al.] can find out about my state of involvement in matters connected to the Justice Department without speaking directly to me.”
  • The recently withdrawn letter from DoJ to Congress denying federal responsibility for Fast and Furious did not contain lies, “…because it all has to do with your state of mind and whether or not you had the requisite intent to come up with something that would be considered perjury or a lie.”
  • “I have no intention of resigning.  I’m the attorney general who put an end to these misguided tactics that were used in Fast and Furious.”

and

  • “I’m a big guy. I’ve been in Washington for a long time.”

Deterrence

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Deterrence is one means of influencing another nation’s behavior.  It is, by its nature a passive activity, relying as it does on persuading another nation not to do something by threatening a response so powerful that any gain from the undesired behavior is overwhelmed by the loss from the threatened response.  One nation might deter another from initiating a nuclear attack, for instance, by threatening a nuclear response of devastating effect.

But deterrence, to be successful, relies on a number of factors, only some of which are under the control of the deterring nation.  One of those factors is actually having the ability to deliver the threatened response and the ability to defeat the other nation’s initiating action.  This is generally within the control of the deterring nation.  Either the United States, for instance, has the ability to deliver a devastating response and to defeat sufficiently the initial action, or we do not, and within limits, only we make the determination acquire/maintain those abilities.  Another factor in deterrence is the will to use that strength, should the nation we’re trying to deter act anyway.  This is a shared factor, though, depending not just on our actual will, but on the other nation’s perception of our will.  We can manage that perception only by acting meaningfully and decisively with lesser consequences in response to lesser actions.  If we do not deliver those lesser consequences, the nation we wish to deter will have no reason to believe we’ll respond with our described deterrence actions.  A third factor on which deterrence depends is the clarity of our position.  The consequences of the other nation’s action must be well understood by that nation.  This also is a shared factor: communication is a two-way street, and we must ensure that the other nation does get the message.  A fourth factor in deterrence is the other nation’s tolerance for the damage we’ll inflict should they strike and we respond as our deterrence position says we will.  The moment the other nation decides the cost is worth the gain, our deterrence ceases to exist, and we must adjust our deterrence—and defensive—posture.  And we must recognize the other nation’s tolerance for pain in order to make the adjustments.  This factor, other than our understanding, is entirely under the control of that other nation.

With these thoughts in mind, let’s look at our ability to deter today.

We say we do not want Iran to obtain nuclear weapons, going so far as insisting that such a thing is unacceptable.  How have we gone about pursuing that goal?  This administration began by extending an open hand to Iran, if only they would unclench their fist: we would negotiate with them, offer them incentives, including help with enriching uranium to the level that an Iranian nuclear power plant needs in order to function effectively.  In truth, the negotiation attempts did not originate with the Obama administration; prior administrations had been pursuing this path all along.  When it became clear that the open hand, the negotiations, were failing, then this administration began a parallel course of threatening ever stronger sanctions, and repeated attempts to apply them.

Indeed, President Obama insists that “this administration has systemically imposed the toughest sanctions on…Iran ever.  When we came into office, the world was divided.  Iran was unified and moving aggressively on its own agenda. Today, Iran is isolated and the world is unified in applying the toughest sanctions that Iran has ever experienced and it’s having an impact inside Iran.”

The Iranian response, though, has been continued effort, and progress, toward nuclear weapons acquisition.  The “toughest sanctions” were ineffective, and part of their ineffectiveness was the active interference with global sanctions by Russia and the People’s Republic of China.  Indeed, Iran has taken to openly attacking diplomatic missions in Teheran, and they’re dispersing their medium range missile systems, making them harder to target should Iran take overt military action.

Our deterrence effort vis-à-vis Iran has failed on a number of fronts.  We did not demonstrate any particular will to apply serious consequences at any stage of our interactions with Iran.  We have not demonstrated even the capability to apply serious consequences.  Even our message is muddled: we’ve never really spelled out the consequences of their continued efforts or of their actually getting nuclear weapons: we’ve only made fatuous remarks about sanctions and vague threats of “no option is off the table.”  Finally, Iran has determined that it’s willing to bear the costs we might inflict.

With Russia, it’s a slightly different story.  The question here is who is actually deterring whom.  The Russians object to our having a missile shield to protect against Iranian missiles (against northern Korea’s missiles, too, but Russia’s public objections have centered on a defensive deployment in Europe).  Shortly after President Obama took office, Russian objections became quite vociferous as we concluded agreements with Poland and the Czech Republic to install components of the shield in each nation.  The Russians said that if we persisted, they would move nuclear weapons into western Russia from where they could strike Europe.  They also made direct threats to destroy Poland with nuclear strikes.  We canceled those agreements and agreed not to deploy a missile shield there.  (As an aside, keep in mind that this missile shield would have been part of that larger deterrence against Iranian use of their nuclear weapons—an ability to defeat a strike by them.

Now The Weekly Standard reports that

The Obama administration is…undertak[ing] what amounts to an off-schedule Nuclear Posture Review—one that ices out Defense and State Department experts usually consulted on nuclear issues.  It is also beginning a new round of talks with Moscow here in Washington next week that many observers believe will result in the United States offering to trade U.S. strategic weapons in exchange for reductions in Russian tactical weapons.

Further,

[T]he Obama administration is looking to make unilateral cuts….  Defense Secretary Leon Panetta has suggested that to save money the administration might have to eliminate America’s land-based 450 single-warhead Minuteman III ICBMs (though ICBM sustainment is but a rounding error in the DoD budget)….”

It may be that Panetta’s threats are mere polemics in an attempt to protect the Defense budget from the cuts mandated by the Super Committee’s failure.  However, against the backdrop of Russia’s just concluded success at deterring us from deploying a defensive system—the flip side of which is our appeasement of them (which itself comes against the backdrop of our acquiescence in the Russian partition of an American ally, Georgia), it’s reasonable to ask whether we’re being further deterred, this time from having sufficient offensive weapons with which to respond to an attack against which we no longer can defend ourselves.  Understand: whether we’re conning the Russians (or conning ourselves) into accepting the decommissioning of supposedly obsolete ICBMs in return for their decommissioning of (obsolete) tactical missile systems or we’re being deterred from maintaining an offensive leg of our triad makes no difference.  We’ll lose a major fraction of our offensive capability.  Further, the tactical systems will be faster and cheaper to replace in the event of a breakout and arms race than will be the strategic systems.  And they will be more immediately decisive in a fight, especially one in which we have no defenses.

With no missile defense capability and with such reductions in our offensive capability, where is our ability to satisfy either the first factor in deterrence: the capability to respond?  And with the reduced capability to respond at all, the pain threshold is much harder to cross, also, giving Russia much less pause as they consider an offensive move.  Russia seems to be moving our behavior in directions satisfactory to it, however.

It’s different yet with the PRC, but not optimistically so.  We have a legal obligation to keep the Republic of China well enough armed with modern weapons that they can defeat an attack by the PRC.  Yet when we began the latest round of talks with Taiwan, the PRC objected so vociferously that we walked away from an initial sale of 66 modern F-16s, and agreed only to sell our ally a couple dozen of outmoded F-16s.

Further, the PRC is increasingly aggressive in the South China Sea, threatening American allies (vis., the Philippines) and potential allies (vis., Vietnam) and seizing key islands—including those that belong to the Philippines and Vietnam—and claiming them for itself.  The American response to this has been…silence.

Finally, DoD is on record as saying that the PRC is developing their own road-mobile ICBM (a capability which the Soviet Union had developed in the early days of mobile ICBMs), and they’ve dug a 3,000 mile tunnel system in which to hide their ICBM force.  They’ve also dismissed out of hand an offer of a joint weapons verification facility proposed by then-Defense Secretary Robert Gates.

Here, it’s clear that the PRC does not consider that we have the will to act, and so any ability to act does not concern them.  Nor have we said anything at all about consequences for their continued aggressiveness.  Finally, as they demonstrated with their human wave attacks in the Korean War, they’re perfectly willing, literally, simply to throw bodies into a fight until we run out of ammunition.  The degree of damage they’re willing to absorb is quite high.

So here we are with our deterrent capability.  Iran is about to acquire nuclear bombs, and it already has the missile systems with which to deliver them.

Russia has convinced us not to deploy a missile defense shield in Poland and the Czech Republic.  Russia threatens our allies and any new, potential defensive systems we might deploy with nuclear attack, and it does so with impunity.  Indeed, the imbalance has reached the point where we can’t even determine for ourselves whether we will acquire/maintain the strength necessary for us to deter Russia.  We’re negotiating our arms levels with them.

The PRC threatens our allies and potential allies over sea resources and key islands in South China Sea and over our erstwhile willingness to provide the Republic of China the resources with which to resist a PRC invasion.

Given all of this, what happens when Iran gets its nuclear weapons?  Which of us will be deterred then?  From what else will we be deterred by Russia and the PRC?  What will we deter these three from doing?

Finally, a closely related aside on the question of appeasement: President Obama insists “Ask Osama bin Laden and the 22 out of 30 top al-Qaida leaders who have been taken off the field whether I engage in appeasement.  Or whoever is left out there, ask them about that.”

Let’s also ask Mahmoud Ahmadinejad, Vladimir Putin, Hu Jintao, and Kim Jong-il, how American strength and steadfastness is working out.  Oh, and congratulations to President Obama on his success in carrying out President Bush the Younger’s drone and bin Laden policies.

Apologies

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The US ambassador to Belgium, Howard Gutman, made some truly appalling remarks the other day, but what followed is even more so.  Gutman’s remarks were these:

There is and has long been some amount of anti-Semitism, of hatred and violence against Jews, from a small sector of the population who hate others who may be different or perceived to be different, largely for the sake of hating. Those anti-Semites are people who hate not only Jews, but Muslims, gays, gypsies, and likely any who can be described as minorities or different.

It is the area where every new settlement announced in Israel, every rocket shot over a border or suicide bomber on a bus, and every retaliatory military strike exacerbates the problem and provides a setback here in Europe for those fighting hatred and bigotry here in Europe.

Peace in the Middle East would indeed equate with a huge reduction of this form of labeled “anti-Semitism” here in Europe.

It seems, then, that at least some anti-Semitism results from tensions between Israel and the Palestinians.  Israel is condemned as a participant in the bigotry for the crime of insisting on defending itself.  Anti-Semitism, more generally, is trivialized by the attitude that “there always are haters.”  Gutman’s remarks, though, reverse the situation: the bigotry, which predates the existence of modern Israel and Palestine by some centuries, is the cause of the conflict, not the result.  The remarks demand a clear, unequivocal apology.

The official responses to this were worse.

To digress, for a moment, an apology consists of three things, as any child knows: first, a prompt acknowledgment by the one owing the apology of the wrong done; second, an expression of regret for that wrong and for the harm caused by that wrong; and third, the first two must be sincere.  Measures of sincerity include whether the apology occurs without prompting of any sort, the promptness of the apology, and the clarity of the expressions.

In response to the hue and cry over his remarks, Gutman had this to say:

I strongly condemn anti-Semitism in all its forms and deeply regret that my words were misinterpreted.

My personal history and the history of my family testify to the importance I attach to this subject and my unwavering commitment to fight anti-Semitism.

He regrets his audience misunderstood him, but he’s not the least sorry for what he said.  And we’re supposed to give extra credit because of his family history.

Then President Obama spoke up through his spokesman, Jay Carney:

Q    I’m wondering if you could explain what the U.S. ambassador to Belgium meant in his comments about anti-Semitism, tying them to Israel’s policy.

MR. CARNEY:  The fact is, as you know, we condemn—this administration and the United States condemns anti-Semitism in all its forms, and believe that there is never any justification for prejudice against the Jewish people or against Israel.  Ambassador Gutman has expressed his regret, noting that he, quote, “strongly condemns anti-Semitism in all its forms.”

And I would just point out, Jake, that this administration has consistently stood up against anti-Semitism and efforts to de-legitimize Israel, and we will continue to do so.  Our record on this speaks for itself.  Whether it was opposing one-sided efforts to single out Israel at the Human Rights Council, speaking out against incitement in the Arab world, or opposing efforts to shortcut negotiations at the United Nations.

Specifically to your question, I think the ambassador himself has addressed this, so I would direct you to his statements, in terms of interpreting what he meant.  But our position is quite clear.  And our record is even clearer.

Not a word of condemnation of, or even remonstration against, Gutman’s remarks, nor an apology from Obama for his ambassador’s words.  Just an injunction to go see what he said.

The State Department couldn’t even figure out what the problem was, as this confused exchange demonstrates:

Q: I’ll start with Ambassador Gutman’s speech from last week.  Does the—did the administration sign off on this, or was it vetted by anyone in EUR or NEA? And does the administration agree with the sentiments that he expressed in his speech?

MR. TONER: I think you saw—actually, let me start again. I’m not aware that his remarks were cleared back here in Washington. He made very clear in a subsequent statement that they were his thoughts or his remarks. He did condemn—he—and was very vocal about condemning anti-Semitism in all its forms, and I believe he expressed regret that his words might have been taken out of context….

Q: I don’t know—it’s a pretty easy question. Yes or no?

MR. TONER: It is a—it is—it is—it was his remarks. It was his opinion—

Q: So he wasn’t speaking on—the ambassador to Belgium, he was not speaking—

MR. TONER: He was not speaking on behalf—I think he’s said as much. He said it was his remarks and he was speaking on his own—

Q: No, he didn’t. He did not say that. He—but he was not speaking on behalf of the U.S. government?

MR. TONER: I don’t believe so.

Q: So the—OK, the ambassador to Belgium shows up at a conference in Europe, in Belgium, and he is not speaking on behalf of the U.S. government. Is that correct?

MR. TONER: The ambassador was expressing his views on an issue.

Q: They’re not the view—so these—

MR. TONER: He subsequently—he subsequently issued a statement clarifying that he was—and expressing regret if his remarks were taken out of context. He then said that he does condemn anti-Semitism in all its forms and in fact pointed to his own family history as a—as a testament to that.

Q: So are you—well, I understand that. But you’re saying that he was speaking as a private citizen, not as the U.S. ambassador?

MR. TONER: Well, of course, when—any time an ambassador speaks, he is representing the United States….

Q: Can I just follow up briefly on that? Some Republicans have called for the administration to fire Ambassador Gutman. Is there—does the administration have a response to that, have a position on—

MR. TONER: We have full confidence in him.

“Could you repeat the question?”

No hint of an apology in any of the statements or exchanges.  There were only “clarifications” and deflections from Gutman, avoidance and deflection from Obama, and an inability even to understand the problem from State.  And it was all done in response to the uproar, and not at all out of any recognition of, and acceptance of responsibility for, wrong-doing.

Even worse, this failure is not unique to any particular party; it seems to be the modern vogue.