Monthly Archives: August 2012

Winston Churchill’s Advice to Americans

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OK, actually he was talking to his party about how to talk with the British public at the end of WWII, but the advice is valid here, too.  Republican Presidential Candidate Mitt Romney’s choice for his Vice Presidential running mate indicates that he’s following the first part of Churchill’s advice.  Now the team needs to follow the rest—that seems to be their intent—and we need to support them in that.

This is no time for windy platitudes and glittering advertisements.  The Conservative Party had far better go down telling the truth and acting in accordance with the verities of our position than gain a span of shabbily-bought office by easy and fickle froth and chatter.

All my experience of the British people, which is a long one, convinces me that never at any moment more than this have they wished and meant to face realities, and woe betide those public men who seek to slide into power down the slippery slope of vain and profligate undertakings.

This is no time for humbug and blandishments, but for grim, stark facts and figures, and for action to meet to immediate needs.

What he said.  Americans aren’t as dumb as the Progressives insist on making us out to be.

 

h/t Power Line

Subsidy and Food

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Here are some minor facts concerning a particular subsidy, courtesy of an The Wall Street Journal op-ed.

USDA lowered its 2012 corn forecast by 13% from last year’s, to 10.8 billion bushels, the shortest harvest since 2006, even though the planted acreage is the highest since 1937 and 4% more than last year.

only 24% of the corn crop is in good or excellent condition in the 18 major corn belt states, down from 72% just since June.

USDA’s world agricultural outlook board estimated that global corn consumption will be reduced by 38.9 million tons, with US problems responsible for ¾ of the shortage.

As a result,

Corn futures are up nearly 50% over the last six weeks.  The US accounts for 60% of global exports, and corn feeds cows, pigs, chickens, and humans through its role as a key ingredient in a broad range of foods.

Those corn futures will be realized as actual, sharp price increases that consumers will pay.  The price increase wouldn’t be so bad, but for a certain Federal subsidy.

The food-to-fuel mandate, Renewable Fuels Standard, requires 13.2 billion gallons of ethanol to be blended into the gasoline supply this year, rising to 36 billion gallons by 2022.  Fully 40% of 2011’s corn production went to ethanol, and courtesy of our EPA (though the subsidy originated in an earlier administration), and now more corn is devoted to fuel than to livestock or other foods.

But not to worry.  Despite the drought, the resulting corn crop failures, and the succeeding price increases driven by the crop failure, despite all of these hardships and negative impacts on the food supply, the ethanol makers got theirs.  The Renewable Fuels Association put out a statement, without a trace of irony, that there’s no danger of an ethanol shortage:

obligated parties under the RFS will have every opportunity to demonstrate compliance this year.

Helps to have your priorities straight.

“Ryan Budget” in a Nutshell

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Here’s a summary of the budget that the Progressives have begun demagoguing the moment Congressman Paul Ryan (R, WI) was asked to run for Vice President.

  • The latest full-scale version of the plan, unveiled in March, vows to cut spending by $5 trillion over the next decade, compared against President Obama’s plan.
  • The plan would, a decade from now, give seniors the option of taking a government payment to purchase health insurance. That payment could be used to buy a private insurance plan, or go toward the traditional Medicare plan. The plan calls for extra assistance to help low-income beneficiaries and those with “greater health risks.”
  • The plan would overhaul Medicaid by turning it into a block grant system for states.
  • The plan would cut the corporate tax rate from 35 percent to 25 percent. It would implement two individual income tax brackets — 10 percent and 25 percent.
  • The plan would head off the scheduled automatic defense cuts, first by diverting the planned $55 million defense cut in 2013 by implementing those cuts elsewhere.
  • The plan vows to bring the size of government to 20 percent of GDP by 2015.

Of what are the Progressives so terrified in this budget?  Ryan put his finger on it two years ago in the summary paragraph of his Wall Street Journal op-ed, reprinted by the WSJ over the weekend:

The contrast with our budget couldn’t be clearer: We put our trust in citizens, not government.  Our budget returns power to individuals, families and communities.  It draws inspiration from the Founders’ belief that all people are born with an unalienable right to the pursuit of happiness. Protecting this right means trusting citizens, not nameless government officials, to decide what is in their best interests and make the right choice about our nation’s future.

With the people in charge, Progressives won’t have anything to do.

Progressives and the Republican VP Choice

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The immediate, and so far sole, response to the Republicans’ selection of Congressman Paul Ryan (R, WI) as their Vice Presidential Candidate has been to attack the man and the man’s budget—which one branch of Congress thought well enough of to pass twice, and from which the Do-Nothing Democrat-controlled Senate has run screaming, not even allowing a debate of it.

Here’s a sampling of the Progressives’ response.

  • A claim that the Ryan budget (summarized nearby) would increase taxes on the middle class so millionaires can continue to get tax cuts.  Their position is, then, that reducing the existing 6 tax brackets to two—10% and 25%—is a tax increase.
  • Obama Campaign Manager, Jim Messina:
    • [the Ryan budget will] end Medicare as we know it and slash the investments we need to keep our economy growing the all while cutting taxes for those at the very top [and]
    • doubled down on his commitment to take our country back to the failed policies of the past
    • Mitt Romney has chosen a leader of the House Republicans who shares his commitment to the flawed theory that new budget-busting tax cuts for the wealthy, while placing greater burdens on the middle class and seniors, will somehow deliver a stronger economy
  • Senate Majority Leader Harry Reid echoed Messina’s claim:
    • doubled down on his commitment to gut Social Security and end Medicare as we know it
  • Maryland Governor Martin O’Malley (D), continuing the Medicare theme:
    • a strong commitment to end Medicare as we know it

What are the Progressives’ alternatives?  Raise taxes on a group of Americans whom they routinely vilify.  Block all efforts to reform, and so save, Medicare, Medicaid, and Social Security (and yes, the reform will change these programs “as we know it;” that’s kind of the nature of reform.  Without reform, though, these programs will be bankrupt in 10-20 years).  Otherwise, the Progressives’ alternatives—since they decry earlier policies—seems to be to continue their current, destructive policies; policies that over the last three years have exploded our deficit, exploded our debt and earned our nation its first credit rating downgrade, suppressed an economic cycle recovery and held us in a post-recession recession with 8.1+% unemployment the entire three years, stalled GDP at 1.5%-1.8% growth that doesn’t even keep up with population growth,….

In the end, by focusing on attacking the Republican ticket and the only budget passed by one house of Congress, without offering any meaningful alternatives, the Progressives are simply confessing that they have no alternatives.  That they have no idea at all about how to fix our country’s ills.  That they have no clue about how to put Americans back to work in a burgeoning, free economy.

What a Central Bank Does vs What the European Central Bank is Doing

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…and to too great an extent, what the Fed is doing….

As Spiegel Online International reports, the ECB intends to attempt to buy up southern Europe’s sovereign debt instruments on an enormous scale.  The idea is to get those, I’ll call them, toxic assets off the market so that lending can resume and the euro zone’s (and EU’s) market economies can restart.

There are a couple of fundamental problems with this scheme (and I use that term in the American sense).  I’ll elide, in this post, the clumsiness of it: it doesn’t satisfy central bank statutes, and the ECB risks becoming a secondary government while simultaneously losing its independence to national politicians.

One problem is the enormous risk this entails—not just for the ECB, but for the EU member nations that fund the ECB and so are on the hook for its failures.  That is to say, the taxpaying citizens of those nations are on the hook.  The risk is whether the bailed out nations will benefit and recover their economies.  If they do not, the losses will become astronomic: the Spanish and Italian debts alone sum to nearly €3 trillion.

Another problem is that this sort of scheme, even if carried out without those…inefficiencies…does not work.  For instance, the euro zone finance ministers, in their latest bailout round, approved a €100 billion to rescue the Spanish banks.  However, the benefits only lasted until those €100 billion ran out; then yields—the prices borrowers must pay in order to get others to lend—on Spanish and Italian government bonds went back up to dangerous levels.

Some understand this: Jürgen Stark, a former member of the ECB Executive Board, has already said

The ECB has a clear mandate to guarantee price stability.  Every additional responsibility compromises this core function.

Notice that: the purpose of the ECB—of any central bank—is to maintain price stability.  The legitimate purpose doesn’t even include maintaining full employment, as the Fed attempts to do.  (In a free market, unfettered by government interferences beyond such niceties as enforcing contract law and laws against things like lying or cheating, price stability combined with freedom in the market tend to maintain full employment through market forces.)

Price stability—monetary policy—for the EU, and for the euro zone in particular, is the über-framework, within which the various nations can structure their individual market economies as they see fit: against a backdrop of price stability.

Interferingintervening in the markets—monetary policy—is the job of elected governments, not that of central banks.

The ECB needs to stay out of the market for sovereign debt.