THE ENTERPRISE--IDEALISM VS. REALISM & LIVING BEYOND OUR MEANS
IN CASE YOU MISSED IT: THE IDEALIST VS. THE REALIST
In case you were working and not watching TV Thursday, I have posted the text of both President Obama's and former Vice President Cheney's speeches today. Cheney's was scheduled much earlier (and pushed back in time by Obama's) and was not intended to be a prompt rebuttal to Obama--until circumstances made it seem that way. Certainly Cheney's remarks were prepared far enough in advance that he couldn't have simply compiled them in response to Obama's. Thus I suggest you read each of them in that context. It is ironic that as poorly as Cheney's popularity ratings show, he gained in stature by Obama's scheduling mistake.
Obama's: http://www.ibdeditorials.com/IBDArticles.aspx?id=327798169288054
Cheney's: http://www.ibdeditorials.com/IBDArticles.aspx?id=327798331208109
AN WELL-INTENTIONED APOLOGIST AT HEART
Since I fear that too few readers will devote the 30-45 minutes it will take to read them all the way these speeches. Here are the "Cliff notes."
The contrast is staggering. Obama's remarks spanned a much broader range of topics than Cheney's so I will comment only on those parts dealing with national security and terrorists. Obama--a lawyer by trade, and a "smoother" by nature--is clearly preoccupied with that about which he knows the most--the legal aspects of his problems. Like the lawyer and idealist he is, he waxes eloquent about the real or imagined "laws" that apply to terrorists. In fact, nearly none really do. These people live, act and belong "outside the laws" of civilized society. President Obama speaks theoretically and philosophically about protecting America. I don't doubt his motives. I do doubt his ability to even imagine the magnitude of the danger he faces--and in which he places America--and he is just beginning to learn about how hard it is to protect a nation the size of the USA with it's borders, coastlines and individual freedoms.
A VETERAN OF BEING UNDER FIRE--AND KNOWING WHAT TO DO--AND SAYING SO
The other man, is a veteran of multiple administrations, and of several serious conflicts--none more prominent than 9/11--where he was in the center of the attacks. He speaks like a Chief Executive (which he has been) and a political pragmatist who knows what it feels like to make decisions amidst disaster and death. He is unencumbered by the need to run for reelection, and thus he speaks him mind openly, freely and honestly--and bluntly. This is a person who still speaks proudly of having kept America safe, even though 4 out of 5 Americans disapprove of him. In Cheney's speech he comments that if he and George W. Bush had promised Americans that they would assure no other attacks on American soil for the remaining 7 years of their terms, they would have been vilified for their hubris. But that is what they did. Whether you like Dick Cheney or not, and in fact whether you agree with him (or President Obama) or not, this was an impressive, no-nonsense speech, filled with profound truths and memorable lines, "...recklessness cloaked in righteousness..." being one of the best.
THE CHOICE IS YOURS
Do you want to theoretically, hopefully be safe; or actually be safe. Two thoughts crowd all else out of my mind right now. The first: "Don't bring a knife to a gunfight." and the second, a quote from one of my earlier business books seems all too appropriate here: "In theory there is very little difference between theory and practice; in practice, there's a hell of a lot of difference."
PELOSI MUST GO! PASS IT ON -- AND SPREAD THE WORD
I can't believe I actually agree with her on one point: a "truth commission" would be useful to confirm whether she is telling the truth. Anybody want to bet on that one? She is only one major event and two heartbeats from the Presidency. Either she's lying (more likely) or she wasn't paying attention and blocking out what she was being told. Eithe is sufficient to disqualify her to be the Speaker of the House. Her criticism of the CIA (later diverted in a Bush smear statement) shows she has neither the integrity nor the good sense to protect the security of the USA. If the Democrats don't get rid of her, every American will know that they too, don't care what kind of leadership they leave in place. The same goes for President Obama. He can certainly bring pressure her replacement. She was not a popular choice when she was reelected as Speaker last time. GET HER OUT OF THAT POWERFUL POSITION--NOW. (She did learn to "quit digging the hole deeper" in this week's press conference when she refused to make a single comment--but stood by her previously stated "first lie."
LIVING WITHIN YOUR MEANS
This was an American credo for many years, and a good one. I learned it as a young man. If you can't afford it, don't buy it. Bouncing checks was popular years ago, as was Payday lending (which has grown since then). Then came the flood of credit cards, the best means of buying things you can't afford. College kids and the young were primary targets, but every age group caught on fast. Credit card debt averages (latest info I saw) over $8000 per household in the USA. Next came the "trick" of leasing cars you can't afford to drive, which also allowed car companies to "sell" more new cars. Never mind that used car lots were glutted with 2-3 year old, low mileage cars when leases expired. More recently and as we now know, and widely used, was sub-prime mortgages based on little or no evidence of creditworthiness (Thank you Barney Frank & Chris Dodd). The government had been living beyond its means for a long time too--no matter which party controlled Congress or the White House. Federal deficits have risen continuously. (Now it also wants to tax corporate earnings earned and held outside the US to "feed the beast.")
NOTE: My friend Will Kaydos does a great job of illustrating these points and many others in his new book THIN ICE--AND MELTING: Why Our Economy is Failing and How We Can Stop the Meltdown.
If you really want the facts about our government's and our economy's issues, problems and how they got that way, get a copy of it.
Here's a link to amazon.com for those who want to buy it now.
http://www.amazon.com/Thin-Ice-Melting-Economy-Meltdown/dp/0615252826/ref=sr_1_1?ie=UTF8&s=books&qid=1242661009&sr=1-1
APOLOGY--SURVEY WAS FLAWED SOMEHOW
I apologize to those who tried to take the survey a few weeks ago and couldn't complete it. Somehow it did work for some people (46) and not for others (??). I will try this tool again, and hope to figure out what went wrong and fix it as I use it more. The results are not too surprising, but confirm what many of us suspect to be the case. The most popular answers were:
1) recession ends 4Q '09;
2) unemployment peaks at 11%;
3) stock market has bottomed;
4) new hires in sales, R&D/NPD, and IT;
5) lack of revenue growth is biggest problem followed by financing issues; and
6) replace members of the House, and the Senate, and the Speaker of the House.
Click on the link or paste it in your browser for more detailed response info. (If that works?)
http://www.surveymonkey.com/MySurvey_Responses.aspx?sm=yzeDwo45Y5pyDA42sL21l%2f9P%2b12X07gZ9e8VT88n09A%3d
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This week, the federal government published two important reports on long-term budgetary trends. They both show that we are on an unsustainable path that will almost certainly result in massively higher taxes. By 2016 we will have to fund Social Security out of general revenues, as the surplus we now have will be gone. And there are no trust funds. They are a myth. It as if I wrote myself a check for $2 trillion and then declared I was worth $2 trillion. The money is just not there. Social Security makes Bernie Madoff look like a small-time crook.
And Medicare is in far worse shape. For those with the stomach, you can read Bruce Bartlett's analysis at http://www.forbes.com/2009/05/14/taxes-social-security-opinions-columnists-medicare.html. He estimates that taxes will have to go up by 81% if we are to pay the obligations as they now stand. Now that is unsustainable. It won't happen. And as the saying goes, if something is unsustainable, at some point it will stop. No getting around it. Long before we get there, change you will not like will be forced on the US.
The following headline caught my eye: "Obama Says US Long-Term Debt Load is 'Unsustainable.'" Yet they announced a $1.8 trillion deficit, which is really going to be at least $2 trillion, and are getting ready to pass health-care programs that will mean at least a trillion in deficits for as long as one can project. How will they pay for it? Even getting rid of the Bush tax cuts will only produce a few hundred billion a year, which is nowhere near enough. They project much lower medical costs in the future, because they assume they are going to figure out ways to cut costs and make medical care more efficient. As if no one has ever tried that.
Yes, there are some savings on the margin; but the only way you really cut costs is to ration health care, especially health care in the last year of life, which is about 30% of health-care expenses. That is going to be very tough in the US. But when faced with a real budget crisis, the choices are going to be stark. And that crisis is coming if we do not control spending.
You cannot propose massive increases in spending without either creating crushing debt that the markets will simply not allow, pushing interest rates much higher and really slowing growth and hurting the economy. It is a simple fact that you cannot increase the debt-to-GDP ratio without limit.
We found the limit on personal and corporate debt this past year. We pushed the limits until the system crashed. And now the US government wants to basically do the same thing. They are planning to see where the limits on government debt-to-GDP will be. Unless cooler and more rational heads in the Democratic Party prevail, this is not going to be pretty. Sometime in the middle of the next decade we will hit the wall, and it will make the current crisis pale in comparison.
The only way to solve the problem is to grow GDP more rapidly than debt, and for that to happen you have to have policies which are shaped for the growth of the economy or massive savings by consumers. And right now we have neither. Cap and trade is hugely anti-growth. So are high corporate taxes, and Obama is proposing to effectively raise corporate taxes by closing loopholes for income earned outside the US. Much better would be to lower the overall corporate level to a competitive world rate and then require the offshore income to be taxed. A lower rate would actually increase tax revenues.
Looming protectionism worldwide is a problem. (See the article at http://www.msnbc.msn.com/id/30758018.) Towns in Ontario, Canada with a population totaling 500,000 have effectively barred US contractors from doing business with them, in retaliation for job losses stemming from US protectionism in the stimulus plan. That movement is spreading. A US steel mill with 600 union jobs will have to close down because its owners are not US-based, and thus it is not technically a US supplier. They are losing jobs to US-owned mills -- but those are US jobs. The insanity goes on and on. As I have written for many years, the one thing that really gets me worried is protectionism. That can make this very significant recession into a depression quicker than you can imagine. Bad ideas have bad consequences.
All in all, we face some very difficult decisions, not just in the US but all over the developed world. Ironically, the less developed nations will have fewer problems and on a relative basis will likely grow much faster than the developed world. But, multi-trillion-dollar deficits and massive new programs are not the right answer.
Obama is right: the debt load is unsustainable. Let's hope he will do more than talk, and show some budget restraint.
Excerpted from a recent John Mauldin newsletter: © [email protected]
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THERE YOU HAVE IT--THE GOVERNMENT IS SPENDING US INTO DISASTER--AND TAKING OVER MORE AND MORE OF OUR LIVES
AIG, GM, most of the big banks, and God only knows what comes next for government "bailout" and "takeover." Government controlled health care is certainly coming on fast--in spite of its many pitfalls and shortcomings. Cap & Trade (coming soon) will add huge costs to energy, while China and others continue to pollute freely. The Middle East laughs behind President Obama's back at his naivete' -- about which you were warned here, last fall. North Korea thumbs its nose at Obama and fires test rockets over Japan's head. Pakistan is melting down and its nukes are "nearly in play." Only a concerted effort by a weak Pakistani government can contain this threat.
CONGRESS FIDDLES WHILE OUR COUNTRY BURNS
Meanwhile one of the leaders of our Congress demeans our government's own CIA and lies about what she knew (from multiple sources). She claims that everyone else is lying but her--current & former CIA heads, fellow Representative who were in the meetings with her, etc. Many have felt that she is delusional for a long time. The first step to returning sanity to our government is getting rid of these inept, misguided leaders in Congress. Harry Reid is almost as bad, as he joins the Joe Biden "misstatement club" regularly. Will President Obama privately pressure the Democratic Congressional leaders to remove these two in favor some qualified leaders. Even if their politics are "wrong" in my perspective, these two are the laughing stock of the country by now.
WE WILL HAVE THE SAME ISSUES IN OHIO IF SOMETHING ISN'T DONE
Ohio (along with many other states) are in dire financial straits. Some of this was done in prior times (the GOP in OH was a joke when I moved here 5 years ago). No matter. The current elected officials are preparing to make it worse--and if they don't, unfunded mandates out of Washington will. When there is a recession, tax revenues drop. In case no one has checked lately, this is the only meaningful source of revenue for governments. Taxes and fees levied on individuals and businesses who live and operate in their state (or country). This is the path to disaster--and meanwhile, the majority of the mainstream media is "enchanted" with President Obama, and only now starting to see the flaws in so many of the other leaders of Congress.
OBAMA WAS RIGHT ABOUT ONE THING IN HIS LAST CAMPAIGN
IT IS TIME FOR A CHANGE--IN CONGRESS--AND IT CAN'T HAPPEN SOON ENOUGH.
Tell everyone you talk to. Share your views. Encourage them to find new and better candidates to replace the wrong-headed ones. Then get out there and help get them elected. That will include supporting them financially too. I made my first contribution to a 2010 campaign today--and I am happy I did. THIS IS YOUR COUNTRY. IF YOU DON'T TAKE CHARGE, THIS MADNESS WILL JUST GET WORSE.
"Not the Best" these days...but hoping for Better Days, John
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