Tag Archives: fiscal crisis.

Open letter to President Obama (Part 117)

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

The stimulus was a huge failure and I hope everyone who voted for it will be defeated in their re-election attempts. Dan Mitchell of the Cato Institute predicted it would be a failure back in January of 2009!!!!

President Obama imposed a big-spending faux stimulus program on the economy back in 2009, claiming that the government needed to squander about $800 billion to keep the unemployment rate from rising above 8 percent.

How did that work out? One possible description is that the so-called stimulus became a festering pile of manure. About three years have passed, and the joblessness rate hasn’t dropped below 8 percent. But the White House has been sprinkling perfume on that pile of you-know-what and claiming that the Keynesian spending binge was good policy.

But not every politician is blindly ideological like Obama. Vitor Gaspar, Portugal’s Finance Minister, is willing to admit error. Here are some relevant excerpts from a New York Times report.

Unlike Obama, willing to admit mistakes

Mr. Gaspar, speaking to The New York Times last week, has a message for observers who say Europe needs to substantially relax its austerity approach: We tried stimulus and it backfired. Like some other European countries, Portugal tried what Mr. Gaspar called “a Keynesian style expansion” in 2008, referring to a theory by economist John Maynard Keynes. But it didn’t turn things around, and may have made things worse.

Why does the Portuguese Finance Minister have this view? Well, for the simple reason that the economy got worse and more spending put his country in a deeper fiscal ditch.

The yield on Portuguese government bonds – more than 11 percent on longer-term bonds — is substantially higher than the yields on debt issued by Ireland, Spain or Italy. …The main fear among investors is that Portugal is going to have to ask for a second bailout from the International Monetary Fund and the European Union, which committed $103 billion of financial aid in 2011.

Maybe the big spenders in Portugal should import some of the statist bureaucrats at Congressional Budget Office. The CBO folks could then regurgitate the moving-goalposts argument that they’ve used in the United States and claim that the economy would be even weaker if the government hadn’t wasted more money.

But perhaps the Portuguese left doesn’t think that will pass the laugh test.

Amazingly, the Germans, who have a disturbing affinity for powerful government, decided against Keynesianism and that’s paid dividends for their economy.

In any event, some of us can say we were right from the beginning about this issue.

_________________

Obama’s So-Called Stimulus: Good For Government, Bad For the Economy

Uploaded by on Jan 26, 2009

President Obama wants Congress to dramatically expand the burden of government spending. This CF&P Foundation mini-documentary explains why such a policy, based on the discredited Keynesian theory of economics, will not be successful. Indeed, the video demonstrates that Obama is proposing – for all intents and purposes – to repeat Bush’s mistakes. Government will be bigger, even though global evidence shows that nations with small governments are more prosperous.

_________________

Not that being right required any keen insight. Keynesian policies failed for Hoover and Roosevelt in the 1930s. So-called stimulus policies also failed for Japan in 1990s. And Keynesian proposals failed for Bush in 2001 and 2008.

Just in case any politicians are reading this post, I’ll make a point that normally goes without saying: Borrowing money from one group of people and giving it to another group of people does not increase prosperity.

But since politicians probably aren’t capable of dealing with a substantive argument, let’s keep it simple and offer three very insightful cartoons: here, here, and here.

_________________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

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Obama’s stimulus was a failure like Dan Mitchell of the Cato Institute predicted

The stimulus was a huge failure and I hope everyone who voted for it will be defeated in their re-election attempts. Dan Mitchell of the Cato Institute predicted it would be a failure back in January of 2009!!!!

President Obama imposed a big-spending faux stimulus program on the economy back in 2009, claiming that the government needed to squander about $800 billion to keep the unemployment rate from rising above 8 percent.

How did that work out? One possible description is that the so-called stimulus became a festering pile of manure. About three years have passed, and the joblessness rate hasn’t dropped below 8 percent. But the White House has been sprinkling perfume on that pile of you-know-what and claiming that the Keynesian spending binge was good policy.

But not every politician is blindly ideological like Obama. Vitor Gaspar, Portugal’s Finance Minister, is willing to admit error. Here are some relevant excerpts from a New York Times report.

Unlike Obama, willing to admit mistakes

Mr. Gaspar, speaking to The New York Times last week, has a message for observers who say Europe needs to substantially relax its austerity approach: We tried stimulus and it backfired. Like some other European countries, Portugal tried what Mr. Gaspar called “a Keynesian style expansion” in 2008, referring to a theory by economist John Maynard Keynes. But it didn’t turn things around, and may have made things worse.

Why does the Portuguese Finance Minister have this view? Well, for the simple reason that the economy got worse and more spending put his country in a deeper fiscal ditch.

The yield on Portuguese government bonds – more than 11 percent on longer-term bonds — is substantially higher than the yields on debt issued by Ireland, Spain or Italy. …The main fear among investors is that Portugal is going to have to ask for a second bailout from the International Monetary Fund and the European Union, which committed $103 billion of financial aid in 2011.

Maybe the big spenders in Portugal should import some of the statist bureaucrats at Congressional Budget Office. The CBO folks could then regurgitate the moving-goalposts argument that they’ve used in the United States and claim that the economy would be even weaker if the government hadn’t wasted more money.

But perhaps the Portuguese left doesn’t think that will pass the laugh test.

Amazingly, the Germans, who have a disturbing affinity for powerful government, decided against Keynesianism and that’s paid dividends for their economy.

In any event, some of us can say we were right from the beginning about this issue.

_________________

Obama’s So-Called Stimulus: Good For Government, Bad For the Economy

Uploaded by on Jan 26, 2009

President Obama wants Congress to dramatically expand the burden of government spending. This CF&P Foundation mini-documentary explains why such a policy, based on the discredited Keynesian theory of economics, will not be successful. Indeed, the video demonstrates that Obama is proposing – for all intents and purposes – to repeat Bush’s mistakes. Government will be bigger, even though global evidence shows that nations with small governments are more prosperous.

_________________

Not that being right required any keen insight. Keynesian policies failed for Hoover and Roosevelt in the 1930s. So-called stimulus policies also failed for Japan in 1990s. And Keynesian proposals failed for Bush in 2001 and 2008.

Just in case any politicians are reading this post, I’ll make a point that normally goes without saying: Borrowing money from one group of people and giving it to another group of people does not increase prosperity.

But since politicians probably aren’t capable of dealing with a substantive argument, let’s keep it simple and offer three very insightful cartoons: here, here, and here.

2 cartoons illustrate the fate of socialism from the Cato Institute

Cato Institute scholar Dan Mitchell is right about Greece and the fate of socialism:

In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often warn that the welfare state reaches a point-of-no-return when the number of people riding in the wagon begins to outnumber the number of people pulling the wagon.

To be more specific, if more than 50 percent of the population is dependent on government (employed in the bureaucracy, living off welfare, receiving pensions, etc), it becomes rather difficult to form a coalition to fix the mess. This may explain why Greek politicians have resisted significant reforms, even though the nation faces a fiscal death spiral.

But you don’t need me to explain this relationship. One of our Cato interns, Silvia Morandotti, used her artistic skills to create two images (click pictures for better resolution) that show what a welfare state looks like when it first begins and what it eventually becomes.

These images are remarkably accurate. The welfare state starts with small programs targeted at a handful of genuinely needy people. But as  politicians figure out the electoral benefits of expanding programs and people figure out the that they can let others work on their behalf, the ratio of producers to consumers begins to worsen.

Eventually, even though the moochers and looters should realize that it is not in their interest to over-burden the people pulling the wagon, the entire system breaks down.

Then things get really interesting. Small nations such as Greece can rely on permanent bailouts from bigger countries and the IMF, but sooner or later, as larger nations begin to go bankrupt, that approach won’t be feasible.

I often conclude my speeches by joking with the audience that it’s time to stock up on canned goods, bottled water, and ammo. Many people, I’m finding, don’t think that line very funny.

___________________

The Department of Health and Human Services administers the huge and fast-growing Medicare and Medicaid programs. These programs fuel rising health costs, distort health markets, and are plagued by waste and fraud. The department also runs an array of other expensive subsidy programs, including Head Start, TANF, and LIHEAP. Growth in HHS spending is creating a federal financial crisis, and the 2010 health care law sadly makes the situation worse.

The department will spend $910 billion in 2011, or $7,710 for every U.S. household. It employs 68,000 workers and runs more than 420 subsidy programs.

Milton Friedman – Roots Of The Welfare State


Timeline of Government Growth

  • See this timeline for key events in the department’s growth.

Reading Room

Cato Experts

Spending Cuts Summary

  • Here are proposed reforms to save $81 billion annually in the short-run and prevent federal health costs from consuming a growing share of the economy in the long-run.

Downsize This!

  • Medicare Reforms. Medicare should be transformed into a system based on vouchers, individual savings, and competitive insurance markets.
  • Medicaid Reforms. Federal spending on low-income health care should be converted to block grants for the states.
  • TANF and Welfare Spending. Welfare reforms in 1996 created Temporary Assistance for Needy Families, but this sort of aid should be provided by private charities.
  • Head Start and Other Subsidies. HHS funds a vast array of other subsidy programs, many of which are wasteful and ineffective.
  • 2010 Health Care Legislation. The law expanded Medicaid, added new taxes and subsidies, created new bureaucracies, and did little to reduce cost growth in health care.

The government of the United States is a definite government, confined to specified objects. It is not like the state governments, whose powers are more general. Charity is no part of the legislative duty of the government.

– James Madison. A paraphrase from Elliot’s Debates regarding a proposed subsidy bill, House of Representatives, January 10, 1794.

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Levin on Milton Friedman: ‘One Thing to Have Free Immigration to Jobs, Another for Welfare’ By Michael Morris | January 16, 2015

_____________________ Levin on Milton Friedman: ‘One Thing to Have Free Immigration to Jobs, Another for Welfare’ By Michael Morris | January 16, 2015 | 5:12 PM EST During his show on January 15, 2015, Nationally syndicated radio host Mark Levin recalled the famed economist Milton Friedman and explored an important reason why open immigration, despite […]

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Hong Kong and the Miracle of Compounding Long-Run Growth March 11, 2016 by Dan Mitchell (with video from Milton Friedman)

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2 cartons illustrate the fate of socialism from the Cato Institute

Cato Institute scholar Dan Mitchell is right about Greece and the fate of socialism:

In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often warn that the welfare state reaches a point-of-no-return when the number of people riding in the wagon begins to outnumber the number of people pulling the wagon.

To be more specific, if more than 50 percent of the population is dependent on government (employed in the bureaucracy, living off welfare, receiving pensions, etc), it becomes rather difficult to form a coalition to fix the mess. This may explain why Greek politicians have resisted significant reforms, even though the nation faces a fiscal death spiral.

But you don’t need me to explain this relationship. One of our Cato interns, Silvia Morandotti, used her artistic skills to create two images (click pictures for better resolution) that show what a welfare state looks like when it first begins and what it eventually becomes.

These images are remarkably accurate. The welfare state starts with small programs targeted at a handful of genuinely needy people. But as  politicians figure out the electoral benefits of expanding programs and people figure out the that they can let others work on their behalf, the ratio of producers to consumers begins to worsen.

Eventually, even though the moochers and looters should realize that it is not in their interest to over-burden the people pulling the wagon, the entire system breaks down.

Then things get really interesting. Small nations such as Greece can rely on permanent bailouts from bigger countries and the IMF, but sooner or later, as larger nations begin to go bankrupt, that approach won’t be feasible.

I often conclude my speeches by joking with the audience that it’s time to stock up on canned goods, bottled water, and ammo. Many people, I’m finding, don’t think that line very funny.

___________________

The Department of Health and Human Services administers the huge and fast-growing Medicare and Medicaid programs. These programs fuel rising health costs, distort health markets, and are plagued by waste and fraud. The department also runs an array of other expensive subsidy programs, including Head Start, TANF, and LIHEAP. Growth in HHS spending is creating a federal financial crisis, and the 2010 health care law sadly makes the situation worse.

The department will spend $910 billion in 2011, or $7,710 for every U.S. household. It employs 68,000 workers and runs more than 420 subsidy programs.


Timeline of Government Growth

  • See this timeline for key events in the department’s growth.

Reading Room

Cato Experts

Spending Cuts Summary

  • Here are proposed reforms to save $81 billion annually in the short-run and prevent federal health costs from consuming a growing share of the economy in the long-run.

Downsize This!

  • Medicare Reforms. Medicare should be transformed into a system based on vouchers, individual savings, and competitive insurance markets.
  • Medicaid Reforms. Federal spending on low-income health care should be converted to block grants for the states.
  • TANF and Welfare Spending. Welfare reforms in 1996 created Temporary Assistance for Needy Families, but this sort of aid should be provided by private charities.
  • Head Start and Other Subsidies. HHS funds a vast array of other subsidy programs, many of which are wasteful and ineffective.
  • 2010 Health Care Legislation. The law expanded Medicaid, added new taxes and subsidies, created new bureaucracies, and did little to reduce cost growth in health care.

The government of the United States is a definite government, confined to specified objects. It is not like the state governments, whose powers are more general. Charity is no part of the legislative duty of the government.

– James Madison. A paraphrase from Elliot’s Debates regarding a proposed subsidy bill, House of Representatives, January 10, 1794.