Tag Archives: political economy

Yet Another Reason for Smaller Government

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German factory orders fell 5.7% in August, real GDP is stagnant or falling in many European countries, Standard & Poor’s has downgraded France to AA from AA+….

There’s more.

[T]he 18 euro area countries had zero real growth in the volume of production during the second quarter of 2014. Euro area real GDP grew only 0.5% in 2013 after falling 1% in 2012. In other words, output was lower in mid-2014 than it was at the end of 2011.

And yet—or because:

Euro area government spending was 49.8% of GDP in 2013 versus 46.7% in 2006. In other words, euro area governments have co-opted an additional 3.1% of GDP (roughly €300 billion, or $383.6 billion) compared with before the crisis—about the size of the Austrian economy.

France spent 57.1% of GDP in 2013 versus 56.7% in 2009, at the peak of the crisis. This is the opposite of austerity—but the French economy hasn’t grown in more than six months. It is no wonder S&P downgraded its debt rating.

Italy, at 50.6% of GDP, is spending more than the euro area average but is contracting faster.

And so on.

There seems to be a pattern developing. An old, old pattern.

You can’t take money out of the private sector of an economy and give it to government without both growing government and shrinking the private sector. Government is simply incapable of spending the money as efficiently as the private sector (if only from a confluence of greater internal friction due to bureaucracy and an in-built lack of concern for the cost of money, with which the private sector must always contend, while leaving aside a system of graft that grows faster in a bureaucracy than in a private sector entity that will surely be punished by the market).

Redistribution of money from the private sector to government holds back growth, at best. As we’re seeing in Europe. Smaller governments have a harder time doing that than Big Governments.

Who Pays for Political Campaign Travel?

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In the case of some Democrats, like President Barack Obama, it looks like us taxpayers pay a significant fraction of the costs. As Mark Knoller of CBS News noted the other day,

Under Federal Election Commission (FEC) rules, the government must be reimbursed for parts of presidential political travel.

“When a trip is for political or unofficial purposes, those involved must pay for their own food and lodging and other related expenses, and they must also reimburse the government with the equivalent of the airfare that they would have paid had they used a commercial airline,” states the Congressional Research Service in a 2012 analysis of “Presidential Travel: Policy and Costs.”

Further, when a presidential trip includes both political and official appearances, the White House is permitted to prorate the reimbursable costs.

However,

As President Obama embarks Thursday on a three-day Democratic fundraising trip to California, the White House again refuses an umpteenth request from CBS News for the political travel information.

[R]epeated requests are turned down for a breakdown of the costs and an explanation and specific examples of how the White House calculates how much is paid by taxpayers and how much must be reimbursed to the government by the Democratic National Committee or others.

The Obama White House justification? They insist that prior administrations also have refused such disclosures.

There’s that Democrat morality with which we’re all so familiar: the rightness or wrongness of a thing isn’t inherent in the thing; it’s entirely in whether someone else did first, or is doing it also.

Crony Capitalism and Big Government

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California’s health insurance exchange has awarded $184 million in contracts without the competitive bidding and oversight that is standard practice across state government, including deals that sent millions of dollars to a firm whose employees have long-standing ties to the agency’s executive director.

Several of those contracts worth a total of $4.2 million went to a consulting firm, The Tori Group, whose founder has strong professional ties to agency Executive Director Peter Lee, while others were awarded to a subsidiary of a health care company he once headed.

It isn’t just state government, though, nor is this problem limited to government-run medical “care.” Think, also, Solyndra and A123, Tesla in Nevada, “green” energy subsidies, Dodd-Frank and too big to fail, farm subsidies, loan guarantees for big corporations like Boeing and GE (roughly $6 billion between them, via the Ex-Im Bank), even the Senate barbershop (!).

If our government weren’t so big, so taxing, so spending; if we turned the rascals out more often in our biennial elections, our government wouldn’t have the wherewithal with which to engage in crony capitalism, and we citizens could get back to capitalist capitalism and general prosperity.

Our Navy’s—and our Country’s—Future

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Mark Helprin had some thoughts a couple years ago about this administration’s Naval policy; they’re worth revisiting these days in light of the People’s Republic of China’s ongoing grab for and occupation of the South and East China Seas, and especially against the backdrop of the PRC’s decision to deny the people of Hong Kong their right to choose their own government members, in particular their Chief Executive, in violation of the Sino-British Joint Declaration. In the latter’s case, the PRC will tell the Hong Kong citizens who will be on the ballot and so for whom they’ll be permitted to “vote.”

Helprin quoted President Barack Obama in a 2012 campaign debate with Presidential Candidate Mitt Romney:

You mentioned the Navy, for example, and that we have fewer ships than we did in 1916. Well, Governor, we also have fewer horses and bayonets, because the nature of our military’s changed. We have these things called aircraft carriers, where planes land on them. We have these ships that go underwater, nuclear submarines.

Helprin responded

To which one could say, like Neil Kinnock, “I know that, Prime Minister,” and go on to add that we must configure the Navy to face not the dreadnoughts of 1916 but “things called aircraft carriers, where planes land on them,” and “ships that go underwater,” and also ballistic missiles, land-based aviation, and electronic warfare.

Then Helprin added a few kickers.

[I]n fact, except for advances in situational awareness, missile defense, and the effect of precision-guided munitions in greatly multiplying the target coverage of carrier-launched aircraft, the Navy is significantly less capable than it was a relatively short time ago in antisubmarine warfare, mine warfare, the ability to return ships to battle, and the numbers required to accomplish the tasks of deterrence or war.

And

China’s claims [to the South and East China Seas], equivalent to American expropriation of Caribbean waters all the way to the coast of Venezuela, are much like Hitler’s annexations. But we no longer have bases in the area, our supply lines are attenuated across the vastness of the Pacific, we have much more than decimated our long-range aircraft, and even with a maximum carrier surge we would have to battle at least twice as many Chinese fighters.

Not until recently would China have been so aggressive in the South China Sea, but it has a plan, which is to grow; we have a plan, which is to shrink; and you get what you pay for. To wit, China is purposefully, efficiently, and successfully modernizing its forces…. And yet, to touch upon just a few examples, whereas 20 years ago it possessed one ballistic-missile submarine and the US 34, now it has three (with two more coming) and the US 14. Over the same span, China has gone from 94 to 71 submarines in total, while the US has gone from 121 to 71. As our numbers decrease at a faster pace, China is also closing the gap in quality.

The effect in principal surface warships is yet more pronounced. While China has risen from 56 to 78, the US has descended from 207 to 114. In addition to parities, China is successfully focusing on exactly what it needs—terminal ballistic missile guidance, superfast torpedoes and wave-skimming missiles, swarms of oceangoing missile craft, battle-picture blinding—to address American vulnerabilities, while our counters are insufficient or nonexistent.

And what could become the coup de grâce if we let it continue:

The trend lines are obvious and alarming, but in addition we face a potentially explosive accelerant…. That is that whereas the American Shipbuilding Association (now dissolved) counted six major yards, China has more than 100. …it can surge production and leave us as far behind as once we left the Axis and Japan. Its navy will be able to dominate the oceans and cruise in strength off our coasts, reversing roles to its pleasure and our peril—unless we attend to the Navy, in quality, numbers, and without delay.

There’s one other requirement, more critical even than correcting the deficiencies Helprin identified: that’s the need for the will to use these—and that will must be evident, not merely claimed. Nor is it enough to say, “I don’t bluff.” It’s necessary to not bluff.