Tuesday, February 26, 2013

Sequestration: Proof that Congress Is Retarded

Actually, it's proof that just about everyone in DC is monumentally retarded for many reasons.  Before I go into it, I want to make this statement to my readers so there is no confusion over what exactly I believe:

The budget deficit is hurting the economy.  It's trashing our currency, and it's not spurring economic growth.  We need to balance the budget.

Now, let's talk about why sequestration is a horrifyingly stupid idea.  Sure, it sounds great that we're actually going to cut the budget, but the cuts are accross the board and don't take into account the importance of some expenses over others.  What we're hearing from Congress now is that we should allow the cuts to happen, but that we should take the time to allow the cuts to be made in a smart manner.

Let me give everyone a moment to allow that thought to sink in.

What makes this so ridiculous is that Congress can agree to make slash-and-burn cuts, but it can't actually sit down and agree on strategic cuts?  They couldn't use the time it took them to come up with sequestration to actually just figure out smart budget cuts?  No.  Instead, they came up with this ridiculous penalty to impose on themselves rather than sit down, like mature, rational human beings, and figure out a solution to our financial woes.

As Obama keeps saying, the idea was to make it so horrific that Congress would be forced to make cuts before the deadline.  He and others thought this was such a clever idea, but they failed to recognize that most Republicans in congress would simply allow it to happen.  The Democrats really, really bungled this one in terms of political posturing.  Now, slash and burn cuts are almost surely to be made, and the Republicans get to come out relatively unscathed.

How, you might ask?

Well, it's all about the blame game these days.  Republicans get to blame the Democrats for being stubborn on the issue of raising taxes.  You might say "well the Democrats can blame the Republicans for being stubborn on insisting on entitlement cuts."  Yes, but the Republicans have a card up their sleeve that puts them ahead of the Dems: the budget is actually going to be cut.

I don't know if it's spending rate increase cuts or if the cuts are actual baseline cuts (analysts are saying both, so it's hard to tell who is lying/stretching the truth).  But that doesn't matter.  When it's all said and done, the Republicans get to say "we cut the budget, which is what we were elected to do."  And the Republicans will get to say "we wanted to make smart cuts, but the Democrats wouldn't yeild on tax increases."

The Democrats got out-brained this time around.  For some reason, they thought that it would be a punishment to give the Republicans what they want.  It might not be everything they wanted--afterall, the DoD is likely to get the hammer up its rear-end, and we all know how Republicans generally never put the defense budget on the table.  But still, they wanted budget cuts, and now they have it.  47% of voters went for Romney, and the Republicans hold the majority in the house.  That means a good deal of Americans support budget cuts.  Perhaps the Democrats just ignored the numbers?

If the Democrats were as smart as they think they were, then sequestration would've had to include accross the board tax hikes to actually make it a "punishment" to Republicans.  Had accross the board tax hikes been included with the accross the board cuts, then both sides would have had equal amounts of blame to place on each other, and thus both sides would have had equal reason to avoid sequestration.

Politics, my friends, is less about the numbers and more about the games.  That's why I take the time to analyze the posturing of politicians.  In my humble opinion, they don't much care about the numbers.  Will any of them be affected by the budget cuts?  Will they lose income?  Will their services be slowed?

Nope.

The only thing they care about is getting re-elected.  Thus, they will do whatever it takes to get as many people on their side as possible, consequences be damned.  Once you see that it's more about the votes than it is actually guiding this country in a prosperous direction.

And yet somehow, we keep voting for these chuckle heads.  (And by "we" I mean "you."  I didn't vote for a single, solitary establishment soul this election cycle).

14 comments:

Joe Markowitz said...

Do you think that Republicans actually want budget cuts? They like to talk about budget cuts, but notice that they never actually specify anything that they would cut. In fact, the only political position they ran on that was at all popular, was attacking the Democrats for cutting Medicare! The truth is that nobody wants to cut the budget. And that's because all the evil spending that the Republicans are mostly talking about is actually stuff that people want. If they actually cut the budget, they will lose votes. No matter what they cut.

The truth is also that any budget cuts will hurt the economy. Because any cut to the budget means less money in somebody's pocket. Whether that is a food stamp or unemployment recipient who now has less to spend at the neighborhood grocery store, or whether it is a defense contractor who has to lay off employees, no matter what you cut, somebody is going to suffer from that and the economy as a whole is going to suffer.

The truth is that we need to keep running massive deficits until the economy gets better, and then revenues will start to catch up with expenses and people will stop worry about the deficit so much. That is already starting to happen by the way. The budget deficit is already shrinking much faster than most people realize. That's because the economy is getting better. When the economy gets better, tax revenues go up automatically, and spending goes down automatically also as less is needed for things like food stamps and unemployment insurance.

I wouldn't say that all politicians are retarded for not being able to solve this problem, but I would say that none of them will tell you the truth, because they all have to pay lip service to the idea that deficits are bad, even though the deficits have been helping us get out of recession.

Jersey McJones said...

The GOP want's to go after entitlements because half of discretionary spending is for defense. The sequester cuts right across most all discretionary funding. I believe they've made a big political mistake here. It will have an effect, and that will reflect back on the GOP.

Obama should continue to stand firm for SS and Medicare. These are vital institutions. He can take these cuts to make the government more efficient, and as a historically opportune moment to trim defense, something that's long overdue.

JMJ

Anonymous said...

I have to fundamentally disagree with Joe on virtually everything he said other than the politicians just telling people what they want to hear, because that's true.

Fiat currency is the reason you have the booms and the busts. Deficit spending is what got us into the recession in the first place.

I get the idea behind it, sure. You are basically trying to replicate Japan circa 1980. In the early 80's Japan's economy exploded and basically within the span of 5 years grew 10x as large.

The problem in this case is not the amount of money available so people can "spend it at the grocery" it's that the money becomes more and more devalued over time.

You are essentially advocating running up more debt because we have no other choice, we have to keep priming the pump. Some wells are meant to go dry. Some businesses must fail, that's how you get back to something that works.

This idea that we can keep on putting the country's credit card bills on other credit cards is absurd. This will never shake out. You would have to maintain the current GDP while simultaneously putting 100% of the GDP into the governments coffers for a span of 7 years to make this come out right, as well as slashing all spending and never raising it again.

The fiscal irresponsibility of this country made our house out of straw and now that the derecho is here, you are wanting to put more straw up on the wall, like that is the solution. Let this straw house get blown away and build something stronger in it's place.

As for the GOP vs Dems... who cares, they are both fucking wrong. If you even start to say that any of their actions on the whole are correct you are delusional. Either party has their way its going to end up with more spending regardless.

There is no way we can fund a world wide empire, we also cannot take care of everyone from cradle to grave.

Jack Camwell said...

Thank you for your response Joe.

The short answer to your question is yes: I believe the Republicans really, really want budget cuts. they have calculated that the budget cuts they want will not negatively impact who they think is their voter base.

When you think about it, sequestration makes even MORE sense for the Republicans, because there are big DoD cuts about to happen. Now, Republicans will be able to say "we were willing to allow defense cuts." In their minds, and in the minds of their voters, they have already made concessions.

Please tell me, Joe, when this country has prospered while the deficit was huge. That's not meant to be rhetorical. During the 90's, we had a balanced budget (for at least part of the boom). During the 50's, we had a balanced budget (for most of it).

The economy is not improving all that much. In fact, I think the economy shrunk by some percentage last quarter. We've been running massive deficits for the last 12 years, and yet we've found ourselves in this situation.

Jersey McJones said...

Anon,

Booms and busts long predate fiat currency, all the way back to the earliest classical economies. The fiat, in and of itself, has nothing whatsoever to do with boom and bust cycles. Read a little history on the subject.

As for debt, we could always simply pay it, ya' know.

And for Jack and Anon, deficits per GDP have shrunk significantly every year since Obama's been in office. If we rein in defense, and raise taxes, deficits will be a thing of the past in no time. The question is; are Americans too cheap, scared, stupid, short-sighted, and selfish to make that happen.

JMJ

Anonymous said...

Jersey,

In America's case, fiat money is exactly the reason we have booms and busts, bubbles and inflation. I have read "a little history", but what history won't tell you is that our economy is unique and unlike any that has come before us... why?

Because we have the reserve currency of the world, a position only Spain and possibly England in their global prime can even begin to compare to. Rome is close to this, but the world was still fairly "large" when they ruled the roost.

Simply pay the debt. Pray tell where is the fiscally irresponsible morally abhorrent bloodsucking vampires that is the collective going to come up with something north of 90 trillion dollars? It has to be real wealth to our "creditors" not more fake fucking phantom money.

I know it's hard, but think outside liberal agenda and trying to pump up the indefensible obama's balls for a moment. Actually think for this one.

What happens if the dollar crashes and becomes worthless.

Rein in defense, yes I agree.

Rein in all your bullshit entitlement programs that do nothing but hemorrhage taxpayer dollars too.

The domestic debt incurred by programs like social security and welfare is more than 10x what we spend in defense. You do know that the true liability is 90 trillion dollars correct?

Future liability and predicted liability as of FY 2012 was over 150 trillion.

You want us to bow prostrate to Obama because he tossed an indian penny into an empty scrooge mcduck vault that should be full up to the brim with solid gold bars with diamond latticed shelving.

You want a way back, its called personal responsibility and accountability. Remember the good ole days when people could actually save money, or invest in our bond market and actually... I know it sounds unreal... keep their wealth? You simply cannot do this anymore. Which is why I get so frustrated with liberals who don't see that our entitlement system is a snake eating it's own tail.

"But Beale, if we cut SS and Medicaid these people will be screwed!"

They are screwed either way. If they saved up money since their 30's its all long since lost its value unless they bought Microsoft at 33. How in the blue blazes would people from the 60's who bought 4bdrm houses for 7 grand feel today when the cheapest 2bd underground shed peeled walled roach infested boarded up god damn tinderbox sells for 50k.

More inflation and more spending is not the answer in any way shape or form. Let obama and his crack group of professional con artists try to extinguish the sun with a thimbleful of his kenyan piss, I don't care. Same goes for people who defend the GOP, they are just as bad.






Jersey McJones said...

Again, Anon, the fiat, in and of itself, has nothing to do with booms and busts and no economist of note would say otherwise. The HANDLING of the fiat is a another story.

We're not going back to gold, sunshine, and we had just as many booms and busts when we had it. History proves my point and proves you wrong. You could say the Milton Freidman school of economics we've had non-stop since the 70's has easerbated the cycles and consequences, but you can't in any educated way say the fiat in and of itself is the cause of the booms and busts, and hence you can only say the government only has so much to do with them.

The FACT of the matter is that booms and busts are usually and mainly caused by risky and sometimes highly unethical or illegal private sector initiatives, and that usually, when you look at these booms and busts, you see it was government inaction, sometimes brought about by corruption, that allows the cycle in the first place. In other words, often the cycles are avoidable but the government failed to stop them. Such would be the case of the derivatives markets in the 2000's, and there are plenty more examples.

As for what you call "bullshit," it's heartening to know a sizable majority of Americans would find your sentiment abhorrent, stupid, and short-sighted.

As for your good ol' days - they never existed. You're insane.

JMJ
JMJ

Joe Markowitz said...

Jack, if Republicans really want to cut the budget, why can't they ever specify what to cut? And why did they attack Democrats for finding hundreds of billions of savings in Medicare? I don't believe anybody who says they want to cut spending unless they tell me specifically what they want to cut. And I never hear the Republicans say they want to cut anything specifically, except maybe Big Bird.

As far as when deficit spending helped the economy, the great example is World War II, when we ran up much larger deficits as a proportion of GDP than we have now. The reason it took us so long to work our way out of the Great Depression was that even Roosevelt still believed in balanced budgets. We only finally got everybody back to work when the war came and the government started running up massive deficits. And the infrastructure that we built up to build the tanks and planes and everything else we needed for the war, set the stage for the prosperity of the 1950's when all that productive capacity could be used to build cars and washing machines and housing and all kinds of other stuff.

If you accept Keynesian theory, and not everybody does, you have to be a little counter-intuitive in your approach. When the economy is going strong, as in the 2000's, that is when you are supposed to raise taxes and run a surplus to slow the economy down. But George W. Bush did the opposite and the economy over-heated and crashed. And when demand collapses and the economy is shrinking, then you have to increase spending and/or lower taxes and run a big deficit to heat the economy back up again. I'm not sure how many more times we have to see Keynesian theory play out in the real world before people finally understand and accept its power.

Jack Camwell said...

Joe,

As far as I can see, the Republicans have been very vocal in specifying that they want cuts to entitlement programs. Perhaps they would do well to be more specific about how they want to go about that, but they've been wanting to cut entitlements ever since this debate started.

Your WWII example is a good one, but there's a key difference between the deficit spending in WWII and the deficit spending now.

The money was being spent on a massive production effort for a nation that suddenly found itself in need of a high quantity of consumables. The government spending was actually going towards PRODUCTION of tangible goods.

It's common knowledge that government spending, today, is going towards entitlements, salaries, and defense research. 50% of our budget goes to entitlements. Our defense budget isn't going towards making 10 billion bullets, or 5 brand spankin new battleships. It's going towards researching new technology. And can you even IMAGINE how much money is going to pay the salaries of the hundreds of thousands of federal government employees?

Our budget is not being spent on infrastructure or production. In the 50's, the government invested on things that actually had promise of producing returns. Right now, the government is investing on things that have ZERO promise of returns.

Like I said before, we've been running high deficits for the last 12 years, and yet the economy is still doing poorly. All we have to show for it is higher inflation and back-and-forth marginal growth increases and decreases.

Anonymous said...

Jersey,

Cool story bro. I am not talking about the "stock market", I am talking about the currency supply and the so called "Inflation Tax" Where is the 90 Trillion gonna come from that isn't fake phantom money if it is so simple to just pay the debt?

The good old days of keep what you earn? Never happened? I think my grandparents and my great aunt who worked a family farm for 35 years and retired multimillionaires in the 70's would disagree with you. You can catch my great aunt down at Grand Cayman the next time you are depositing your phantom cents.

Oh I forgot anecdotal evidence isn't evidence. Disregard that. No tropical visits for you.

Joe,

I get the sentiment, I really do. Why isn't Keynesian economics pulling us straight out of this recession like a rocketship? Buffet for 350,000,000 in 15 minutes, just add handshakes and winks? If more reckless spending is the answer, why don't we just add 6 zeroes to everyone's checking account? surely funds based on nothing is a good thing? If a little bit is good, more must be better after all.

When people (the federal government) are given carte blanche, bad things usually happen. How many stories of people winning the lottery and then being bankrupt within 2 years have you heard?

Do you either of you work for free 100% of the time? I certainly don't. However in a sense we are back to serfdom. Wherein I owe 3 days a week to the lords of the land.







Joe Markowitz said...

Why on earth, when we currently have the most unequal distribution of wealth that we have had since the 1920's, AND when the burden of federal taxes is the lowest that it has been in more than 50 years, why at this moment would people be insisting that in order to balance the budget, we need to make poor people even poorer and let rich people keep more of their wealth? Why do people insist that to balance the federal budget, we have to take somebody's unemployment check away, but we should let people who have been making a fortune in capital gains through no effort of their own, continue to enjoy paying half the tax rates of working people? And when you talk about entitlements, understand that Social Security contributes nothing to the budget deficit. It is still self-sufficient. Medicare does present a budget problem, but remember again that the one coherent attack the Republicans made that actually won them some votes was to attack Democrats for doing something to bend the cost curve in Medicare. Republicans are suggesting nothing to fix the Medicare problem, other than suggesting that we take people's benefits away at an earlier age, which will only force them to get more expensive private insurance or depend on the emergency room, which again drives up the cost of health care for everyone. Other big entitlement problems are food stamps and unemployment insurance. Those are precisely the kinds of entitlements that are designed to increase in a Keynesian way during the recession, and they were instrumental in preventing the bread lines and enormous homeless encampments that we saw happen during the 1930's. That kind of spending automatically goes down when the economy improves. The problem we need to be working on is unemployment. The deficit will take care of itself if we fix that. Whereas massive cuts in federal spending are only going to increase unemployment and delay the recovery even further.

Anonymous said...

I got one better Joe.

Why should anyone but the top 1-10% pay taxes at all for the foreseeable future.

I acknowledge your wealth distribution issue. However this is not capitalism, it's corporatism. It has been for a long time. Let the tax curve match the distribution curve for all I care.

I think the the correct question isn't "why do we take unemployment away" it's really "Why is their unemployment everyone's problem"

I agree in theory, it makes perfect sense. In practice it doesn't work.

In theory you could become a millionaire overnight by collecting littered pop cans.

You would have to be the flash and have to have and be able to carry a bag the size of santa claus' "Paramus, New Jersey" sack, but it's possible.

So in the old days a bank actually had to have money to give people. A bank could only afford to loan so much money and acquire so much assets because their "clients" would only deposit a certain amount of money.

Enter the federal reserve.

Now you deposit "money" in JP morgan chase and it goes to the hive mind as a computer transaction. They don't loan you "money" that other people have given them, they loan you "money" the federal reserve has given them.

Where did the Federal Reserve system get the "money" to finance the banks? They entered a cheat code. They just made it up. It's counterfeit. It's fake. Doesn't exist. Not present in this dimension. The only place it exists is on a computer screen because they told it to.

So imagine if you could log-in to your bank statement on-line and change the numbers. Congrats, you are now an American bank.

If that doesn't occur to anyone other than myself that eventually there will be reckoning and it will be catastrophic, then you have been snowed.

The answer to mal-investment is not more mal-investment. As far as the social security system being solvent, I would love some proof of that. Inflation alone probably destroyed it.

The government cannot fix the entire economy, they can only rig the game so a few people win.

Again, you want to fix this, you have to go back to something that actually works equally and that is actually real. You think handing out 100 bucks a week to people is somehow stimulating the economy? They are spending it on luxury items like Food and Rent, they aren't buying houses, cars, or investing in Apple Computer.

We need to localize as many of these issues as possible and take the federal government out of the picture. Because our tax dollars are going toward government pet projects like that abortion of nature down in puerto rico... of which I am sure some congressman is getting a kickback.







Jersey McJones said...

Anonymous, Obama did not invent taxes. They've been around a long, long time, and the current taxation per GDP revenue is relatively low compared to most modern history and among our competitors.

Your forbears probably paid a lot of taxes, and probably paid less and less as the years went by. That's what America's been doing for two generations now.

It's reckless and irresponsible.

JMJ

Anonymous said...

Wow Jersey.

Ok, if our taxes are so low, why is the spending so high? Does the mighty and noble democratic party not have a hand in this situation? Surely the democratic party, who are the champions of greatness and good for everyone ever are in no way to blame in the slightest for this erosion of our economy. NO! I know! It's those evil evil republicans! God damn those republicans, I swear. HOW EVIL!

Is that not reckless and irresponsible? Do you as well feel that we should make a habit of living on credit without end?

Please.

Do you honestly think any group of people in Washington is legitimately trying to help? They try to make it all seem like sunshine and rainbows, while Obama streaks into the frame on a Unicorn with a saddle made from daffodils, wielding a sword which he uses to decapitate Boehner and win back the day for the people... So he and his ilk can continue to fuck em real slow.

Also, if you look at the so called "Inflation tax"... we are paying a lot more than we have since around the heralded 50's everyone cites.

Bitch about taxes all you want. That's not my point at all.

My point is when you try to stimulate the economy with counterfeit phantom cents, in the case of the federal government it was a considerable amount of phantom cents, then something is going to have to give. There is no such thing as free money, and if there is, then you need to eradicate the entire concept of money and value for this to remotely work for real.

If you don't see the insanity behind this line of thought, just go back to rooting for obama and go back to sleep please.

I have read a lot of different explanations why Keynesian Theory is the best we can do for the time being. However, none of those explanations speak to what the end game is, when does the ultimate reconciliation of the dollar occur? All it seems to preach about is regulating money supply and trying to stabilize prices. To what end? They would have us spin an ever increasing amount of plates on sticks for all-time? Let's throw some bowling pins in there to juggle as well.

When you have one group of people with a stranglehold on the money, you have to take a step back and realize how it got that way, in reality.

The wool has been pulled over everyone's eyes. Our culture is becoming increasingly hedonistic to an almost slovenly degree. The sirens of excess have whispered in everyone's ear: "You really can have it all you know, you deserve it all, for no effort whatsoever... here you go, here is some credit, go buy everything you want." Then they giggle and fart themselves silly on the spoils of everyone's ignorance.

Banks make money with phantom cents. There is no danger of a large well connected American bank dieing off and going bust, because they risk NOTHING. This is the crux of the problem. Something for absolutely nothing. Either you pay your loans like a good bitch, and they make money off you that way, or you cease to pay your loans, and they take back whatever property they swindled you on, all the while even if they make bad loans, or screwed up business decisions, its ok, it's straight, the Fed has your back, as long as you promise to kick up some prime real estate to the higher ups in the private central bank in exchange for a CEO bonus and bailout money.

Meanwhile, some 14 year old girl in Liberia is having a warlord's demon child, that will grow up to eat shit and howl at the moon.

I don't know where this road ends sir, however I do know that it's nowhere we want to be. Either we do a massive detox and get this country back to something that works, or we let the system shit itself right out of existence and then we are all screwed.