The media presents this election as a fight over the economy. Even the contentious abortion debate has been distanced and marginalized by unemployment, housing, mortgages, credit... Heard anything about Oil lately? $85 per barrel was BIG NEWS 3 years ago... now? Barley a sniff.
As always, the media has it completely wrong. The political struggle going on right now is nothing short of a battle for the continuation of the Republic. Look at our circumstances. We have large states that will absolutely need to be placed into receivership (there is no protection in the U.S. Bankruptcy Code for states) because their tax receipts have no shot of covering their liabilities; a vast proportion of the electorate that has been successfully indoctrinated with the idea that something can be had for nothing and that the U.S. Constitution need not be adhered to (while at the same time their political leaders draw their authority from the document); extreme political groups seeking absolute control of the populous dominate the political debate out of all proportion to their number; and nearly 1/3 of the populous has been hopelessly addicted to government assistance, assistance whose sourced resources comes at the "point of the sword" held by the U.S. military whose binary function is to enforce US$ hegemony and petroleum transit protection.
I am simply not poetic enough to describe the level of denial going on within much of the American Body Politic. The U.S. REAL, as opposed to NOMINAL, economic woes stem from 2 disparate sets of phenomenon:
1. The U.S. has experienced the mother of a all credit bubbles. Real Aggregate Credit growth is NO LONGER POSSIBLE, and it is very debatable as to whether or not nominal Credit Growth (inflation) can be induced in this environment.
2. The U.S. has absolutely, positively experienced its peak share of World Oil Exports (a.k.a. "Peak Imports"). I say this without equivocation even if Iraq's production is everything any optimist ever dreamed about. (The perfect scenario in Iraq could put Peak Oil off 5 years, + or - 3, for the world... but this does not do as much for the importers as one might think... though it would flatten the slope of the decline somewhat... but only if Iraq can be brought on to Saudi type production within 6 years... and I got a better shot, given my leanings, at a Nobel Prize in economics.)
This from the most recent EIA short term energy outlook:
Crude Oil and Liquid Fuels Overview. As member states of the Organization of the Petroleum Exporting Countries (OPEC) prepare to meet on October 14 to discuss market conditions, they face an oil market outlook largely unchanged from the previous few months. While commercial oil inventories in the Organization for Economic Cooperation and Development (OECD) countries remain high, floating oil storage has been declining, and EIA believes that a gradual projected reduction in OECD oil inventories over the forecast period should support firming oil prices. The economic outlook has also remained substantially the same, with Asian countries continuing to lead global economic growth. World oil prices are expected to rise gradually as global economic growth leads to higher global oil demand and growth in non-OPEC oil supply slows in 2011. EIA expects OPEC production will rise over the forecast period, keeping oil prices from increasing dramatically. Should OPEC not increase production as global consumption recovers, oil prices could be significantly higher than the central forecast. Conversely, should the global economic recovery be slower than expected, prices could be lower than our forecast.(World economic growth has far more to do with absolute population growth than anything else. Population growth is still with us... and that is the base cause of what we call "economic growth". Total energy consumption from all sources likely peaked in in 2007 for the U.S.... not so the world.)
OK... with that Debt and Oil background, we find ourselves swimming in the disinformation campaigns of those that have their mouths (and both hands and both feet) at the political trough... and their only goal is to remain there. They have the absolute support of the elderly, the near elderly, the unwell, and all others addicted to "Big Government", which believe it or not includes most of the Healthcare industry, the Industrial Food industry, the Defense industry, the Education monopoly, and every single government worker from the President on down to the local dog catcher.
How do we extricate ourselves from this morass? There are no shortage of cleared eyed and clear thinking analysts to make these points... only to then run into what our leaders call "The Political Realities" - a misnomer for weaknesses inherent in our system in the age of cheap oil and fractional reserve banking. Our electorate is populated with "believers", not analysts. Most folks don't know who the Vice-President is, how many senators there are, or who is the Chief Justice of the Supreme Court... but they do know how much their unemployment or social security check is and they "believe" there is plenty of money to keep it coming... and don't try to confuse them with the facts, thank you.
Our Republic is truly at risk here. There simply is not enough blame to go around.
To Be Continued...
28 comments:
And with all those awful possibilities awaiting us, the public is apparently so stupid that we would not FIRST go after the people with taxable income (who have underpaid their taxes for 30 years), and try to get a whole lot of money that way -- perhaps also by legalizing and taxing lots of illegalities. (in 1950s, when the U.S. rich actually felt an obligation to their country, they paid a LOT of tax, and we had great economic times.) I think we will try the latter before we give up and accept the former.
The wholesale denial of reality of Americans, I agree with. We've been pulled out of the fire so many times, and had so many loony-tunes tell us the "end was near," that we don't believe anyone anymore.
Oil inventories are still high, so says the EIA. I can only imagine what kind of orgasm you all will have when the graphs starts to point downward. In the meantime, we have lots of everything, including oil products, and demand in the countries that matter will continue to decrease for many reasons. We can reduce waste and cut our usage. Why do you think the meat producers are killing off their herds and prices for beef are going up? Everywhere I look .. fewer people are eating meat (myself included).
As a person who should be "addicted to government" (I work for and have my pension/401k (called the TSP) in the Federal govt.,) I am NOT voting for pro-government (Democrats) people this time around. Don't assume that all old and disabled people will vote their own pocketbooks every time. :)
Bur,
"We have lots of everything"... except tax revenues.
Oil inventories? You are looking only at on land, USA inventories... the market is looking at worldwide land and at sea inventories.
Seems with oil in the mid 80's for delivery through the next 6 months that the market disagrees with your analysis.
And that's with as competition from Nat Gas as Oil has EVER had here in North America....
Bur,
Let's say we tax the crap out of the rich. How much taxable income do they have? We'll have to pay off our debts. How many years we looking at?
Do the rich have enough money to keep SS, Medi*, etc. afloat?
I'm not saying we shouldn't tax the rich but I'm also not sure that will cure our current problems. What about cutting programs?
BTW... this is the U.S.A., RIght? Not the People's Republic of America.
Do we not have property rights? The right to self-determination? Were we not to be protected from punitive and confiscatory taxation by our founding Constitution?
What's up with the "tax the rich" sh#!, anyway. Don't we WANT people to aspire to financial success? Are we really ready to destroy what's left of the economy in order to "make life fair"? Did those who lost their lives in War do so to protect the ability of the Left to seize assets? Really?
I think you'd be better served in finding a different "solution". The unintended consequences of trying to make us the People's Republic of Berkley won't sit well with some of us.
Thats the ultimate question isn't it Greg?
You nailed it. What right do we have to expect anyone rich, poor, middle class etc to fund all this social spending and high dollar salaries/pensions?
The leftist manifesto is to always find a "target" demon group to blame and loot. Wealth redistribution with a legal mantle and social blessing. It will only end when they finally bite off more than they can chew and enough say NO.
Bill, Preppy and the rich guy :),
I'll list this all again. Feel free to use your fingers to count if needed ...
1) I have no idea how much more income could be taxable. I do know that the big five Federal programs I have listed before are WILDLY popular by everyone except a few crank Libertarians :). They will be funded, they are relatively well-run, and not funding them would result in a media tsunami that every politician would beg to stop. The need for those programs is disputed by almost no one.
2) Addressing the top five Federal programs (SS, Medicare, Medicaid, Interest and Defense) will require both spending cuts and tax increases, but only after the public has been fully informed and is ready. For now, no one wants to cut or tax anything. But it can and will be done. The embarrassing increase of the top 1/10th of 1% in this country is a national scandal. Consider: a couple million 18 year olds risk their lives in the military for peanuts to defend the wealth of the American rich. The rich should be proud to pay LOTS of tax.
3) If these Federal programs are demanding by the population, they have to be paid for. There is diminishing returns after a certain point trying to get more money from the poor. So, we will have to tax the wealthy (the upper 20% of earners -- everyone over $100,000). We need money. We don't want to borrow anymore. We tax those who have the dough. Simple. And don't tell me they don't have it.
4) For everything the middle class and well-off get from this country, they should be the LAST to crab about being denied their "self determination." Having to deal with a few regulatory hurdles and a few taxes here and there is small price to pay for life in the USA.
Bur,
How much taxes in nominal dollars are collected is irrelevant, the wealth isn’t there. Also, they are expanding the money supply as a matter of policy, in order to do that the treasury must issue debt.
All,
Bureaucrat is right on one thing, either the Ross Perot’s out in the stratosphere have their taxes raised from the 18% he was paying when he ran for office, and before several rounds of tax cuts, to over 50% as I currently pay, or the ability of the former middle class to feed themselves goes out the window, along with any semblance of public order. Some things are best put off as long as possible.
On the other hand, funding social security is not nearly the problem as funding medicare. When they cut back on medicare, inevitable at some point, it will also perversely help with social security.
Did anyone see Pat Buchanan’s take on the elections? I think he is right that the GOP is not going to be elected so much as the DNC rejected. It’s only a matter of time before we see a credible third party.
Dan
The real issue here is as per the lefty, government dependent playbook Bur tries to shift the focus in hopes the gravy train will continue. His latest is harping on the rich.
If you go back he has went through defense being our greatest expenditure. Claiming rural areas get more government welfare. Attacking everything as having been set up by "dead white guys" and a few others I am sure I am forgetting at 4:30 AM.
His other claim about the big 5 as he calls them being wildly popular also has no backing but rests on the fact that these programs have been paid for by a number of people for years, so something is due. Somehow he turns that into "wildly popular" when around here most would be happy if they simply got back what they have paid in and call it over. He also suffers from urban rot mentality which refuses to see that in the real productive parts of the country government handouts are not needed nor wanted.
Once it was annoying now I kinda look on it as the mascot you keep around or the memento you keep to remind yourself of some silliness of bygone days.
The wealthy, as he calls them, are unique in that they have the resources to defend themselves so the returns will be minimal on that road anyway.
I do agree we will and in fact already are seeing a third party movement. I am not so sure that the third party will actually carry into elections before things explode however.
Bur,
You are saying that these programs will be funded "because people want them". That's about the dumbest thing I've ever heard. You can't fund something without money. You can borrow for a while but after a while that stops too.
You can rant and rave all you want about what people want. When the money is gone it won't matter what people want.
Bur,
The necessary wealth (productive capacity) does not exist in this country any more. That is the cause of the chronic deficit. It has been an increasing trend for the last 40 years. The government loosens credit to "stimulate" the economy, increasing the price of housing (and .coms for a while). The money goes off shore, and finances overseas industrialization. Industry leaves the US. Foreigners repatriate dollars by buying US bonds. The government spends the money on social programs, stimulating demand. People buy foreign junk. Rinse. Repeat.
When interest rates approached zero, it became impossible to increase credit further, and the credit bubble burst. Now, the Fed has stepped in to replace the dollars that were created with expanding credit with nice freshly printed ones. The government is now expanding public credit (national debt) to make up for the lack of growth of private credit. It is just the next bubble. The wealth is just NOT there to tax. Our economy is much smaller than it looks when the funny finance is taken away. For get it.
I hope your parents live to be 110.
Regards,
Coal Guy
As far as the states' shortage of cash to pay their pensions and other liabilities, this is an issue which will probably go to the Supreme Court within the next few years. It could play out as follows:
California declares that it cannot pay all its state pensioneers their 100k pensions for life starting at age 50 and there will be across the board 20 to 50% cuts in pensions. Someone files suit in federal court claiming that the Constitution has a clause which prohibits states from interfering in contracts. This goes to the Supreme Court which rules in favor of the states and changes the bankruptcy codes such that states can declare bankruptcy. Amid much brouhaha California declares bankruptcy. Problem solved. It won't be pleasant for the pensioneers but this is the most likely scenario.
As far as the rest of the country is concerned the best solution would be to have a true ideological/geographical schism such that the "blue states" said to the "red states" "you know what? We don't like you either. You don't like the federal government in your face and you don't want to pay taxes? Fine. Get lost. Beat it. Secede from the Union and this time we won't fight you. And don't come running back to us when it doesn't work out"
But in order for that to happen we would have to have a true geographical split such that 95% or more of the voters in the blue states, which is now basically the Atlantic and Pacific Coasts and the upper Midwest voted one way and 95% of the rest of the country voted the other way. We're not there yet.
As far as the libertarians are concerned their best bet would be to have some type of their own geographical split like the so-called Native Americans. The Native Americans have their own territories and are exempt from federal taxes and most regulations. They mind their own business and want to be left alone.Get all the libs in the country in one state and that might happen.
Y'all forget about another group of Americans that have a lot of money and pay little tax- the self employed cash businesses. I spend time with Korean, Chinese, and Vietnamese small business owners, and they do better than the average American chump paying taxes. For instance, a worker in those little nail salons can gross $1500 a week,a sushi chef $3000 a month + free room and free food. How many Americans have $3000 cash in their pocket every month?
I think the government will go after them first, because they don't pay off DC. I can see a ban on cash transactions, and a VAT coming.
When the most expensive restaurants in Chicago start closing, and when the BMWs and the occasional Ferrari here disappear, I'll believe that the wealth has evaporated. For now, for every schmo blowing credit to finance their opulent lifestyle (all hat, no cattle), there are a hundred more like my parents who got modestly rich in America, and could pay lots more taxes, and they, and we, should. I myself could probably afford to pay twice as much Federal tax (I pay about 10,000 in a given year) to keep America running and deny Jeffers his "I'm not really a doomer" doomer scenario. :)
Bur,
Ok, so it's back to real numbers. Just because there are expensive eateries open doesn't mean squat. Show us the numbers...
If everyone 'like you' started paying double what would the effect be on tax revenues, debt, and unfunded liabilities?
If you don't know then quit saying it. Anybody can say things. Your problem is that you can't back it up with actual numbers.
Bur,
Wealth is not the same as income. Wealth is accumulated useful assets, such as real estate, a business, or equity and bonds in productive enterprises. Government bonds are once removed from that, retaining value based on the government's ability to tax productive endeavors.
Income is not wealth. The federal government taxes income, not wealth. It is possible to have high income and still be broke. 50% of the players in the NFL can attest to that.
Regards,
Coal Guy
Bill, old buddy,
You can't back up anything with real numbers either, cause in ten years, your numbers will be useless. I've made enough predictions in my life to know "real numbers" in economics and policy mean almost nothing. How many times have we seen a quote along the lines of "in 1965, the government expected Medicare to cost $60 billion by 2000, and the actual number was quadruple that." Using real numbers to predict anything is a waste of breath.
I look for themes and anecdotes (sorry, Jeffers) that I think I can match to the government & economy at large. I can't tell you how much oil the world will produce in 2020, but I'm gonna bet it is less than we're producing now. :)
Carbon: yes, we tax income now. Would be nice to tax wealth, but it is too easy to hide wealth .. for now. So, we have to talk about income. Property taxes tax wealth, and that system is as unfair and screwed up as can be.
Greg; stimulus is temporary and will run out, then fundamentals will reassert themselves (whoevers in the hot seat in Washington). A falling confidence in the dollar will increase interest rates and this will be the constraint on future spending, and if states go bankrupt, so be it. In the long term the gov't, states, population, everybody will be forced to kowtow to reality.
But the question is when? There's a short term situation that confuses me: the US uses about 25% of the worlds oil and substantial chunks of other resources. A rapid collapse in the US market (and subsequent decline is all Western economies) would collapse commodity and oil prices for a while until Chinese and Indian demand took up the slack. So I think we could easily see a short period of $25 a barrel again for a year or two, then a rapid increase to stratospheric levels over the following few years as Peak/ELM takes hold.
Any comments?
Bur,
I'm backing up with real numbers. We are in debt $13T and have unfunded liabilities of $100T. We can't keep spending money we don't have.
What's complicated about that?
You are saying people are buying steaks so there must be enough money out there to fund all these things.
That's not just lacking in numbers it's also lacking in logic.
Relatively high US crude oil inventories, based on five year norms (which reflects a move to a Just In Time inventory system), basically are indicative of weak US demand, which is not a new story. US demand continues to be well below our 2005 level.
However, that is definitely not the case in most developing countries.
And as I have pointed out several times, the US is well on its way to becoming "free" of our dependence on foreign sources of oil, just not in the way that most people expected.
We simply cannot afford our current level of government spending, and we are only experiencing the outlying squalls from the real energy storm. Anyone who believes we can afford our current level of spending is smoking some pretty good stuff.
Bur,
Why don't you send all of your money in to Uncle Sam? Better than that, pay my taxes! Then, you can feel good for both of us, and I'll feel good too!
Regards,
Coal Guy
I think it is no coincidence that the net external debt and the national debt are about the same.
Regards,
Coal Guy
Carbon,
As soon as you return all the Social Security and Medicare benefits that you have costed or are about to cost, which is a FAR bigger number than any American is paying in, I will consider it. :)
Also keep in mind that not having to kiss Vlad Putin or Hugo Chavez's tail as your dictator is a benefit to you and us as well, thanks to the expensive American military. :)))
WesternTexas,
You seem like a sharp individual. :) (I missed you in Washington DC by the way.)
Which government spending would you suggest we cut first?
The real money (80-90%) is in the following programs:
-- Social Security (never)
-- Medicare (never times two)
-- Medicaid (want poor people dying on your front lawn?)
-- Interest on the Debt (screw the bondholders? Screw the Chinese? Screw Jeffers????)
-- Defense (see Social Security and Medicare)
-- Education (screw the children)
-- Human Services (screw the disabled)
-- (state) Medicaid (see above)
-- Pensions for teachers and government workers (over my dead body)
So you see, it isn't a question of cutting government spending, which ain't gonna happen (much). It's a question of convincing multi-millionaire farmers like Jeffers (and my parents) to realize that everything he and his family has and is is due to the bounty that is America, and that bounty costs.
Get off the soak the rich BS, bureaucrat. If you confiscated the total wealth of all the billionaires, all that money would cancel out the porkulus - sorry, stimulus - bill, no more. Rip off the millionaires, and you've paid off Obama's deficit reign. That still leaves over ten trillion dollars, and this assumes that you'll get market value for their assets (ha!). Step away from the bong and over to the government-supplied calculator.
What else would you get? No more rich, no more capital investment, no more private sector, no jobs, no taxes! Oops.
Ya know what is amazingly funny to me when leftist whine and complain about defense spending? Out of everything the fed spends money on defense is one of the few things they are suppose to spend money on. All the other crap is just areas the fed has taken over or created to gain more power.
If things keep going the way they are it will again be the only thing the fed spends on in the not so distant future. I am afraid it won't be by choice either.
Bur,
The problem with your solution is that there isn't enough money to fund these liabilities into the future. Our unfunded liabilities are 4x the average assets per citizen. So, it would take 4x all of our current assets to pay for these things into the future. That ain't gonna happen.
Europe is figuring that out and is cutting. We'll figure it out soon enough.
Unfunded liabilities is a crap concept and you know it. :) Who knows how much anything is gonna cost in 20 years? Do we really think this sclerotic government is going to do NOTHING and not raise fees/taxes on someone, and cut benefits, likely for people like me who can afford it? I throw out current numbers if I see them, but numbers masquerading as future projections are worthless. :)
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