First Rule of Holes … when you’re in one, stop digging!

Wow! Good thing Congress is raising the debt limit from $12.374 trillion to $14.3 trillion … wait, uh oh!

WASHINGTON — The US debt is on track to hit a congressionally proposed debt ceiling of 14.3 trillion dollars by the end of February, the Treasury said Wednesday, a day ahead of a key vote to raise it to that level.

“Based on current projections, Treasury expects to reach the debt ceiling as early as the end of February. However, the government’s cash flows are volatile, making it difficult to forecast a precise date,” the Treasury said in a statement.

The current limit on the public debt of the United States is 12.374 trillion dollars.

The US debt exceeded 12.349 trillion dollars on Monday, according to Treasury data.

The US House of Representatives will vote Thursday on whether to raise the US debt limit to a historic 14.3 trillion dollars, allowing the United States to borrow another 1.9 trillion dollars.

House Majority Leader Steny Hoyer said representatives would take up the measure a week after the Senate approved the higher debt ceiling in a 60-39 vote.

In December, both houses agreed to increase the debt limit by an interim amount of 290 billion dollars to ensure the US government would continue to function.

The Senate also last week passed an amendment to legislation raising the debt ceiling that requires new budget items to be paid for, dubbed “pay-as-you-go.”

The measure is intended to prevent the federal government from spending money it does not have and to control the massive US budget deficit.

The House has adopted a similar measure.

Obama’s proposed 2011 Federal Budget includes revenue from “health care savings” of $156 billion and $650 billion from “cap and trade” income. Obama is not going to be able to put either of these programs in place this year … or any other year. Both are DOA.

So if Congress adopts his budget, the deficit will not be the reported $1.6 trillion … it will be more than $2.4 trillion!

I just hope the Republicans in the Senate hold their now 41 votes together and force the Democrats to go back and develop a budget that actually CUTS spending, rather than the unsustainable spending spree Obama has taken up.

Obama’s 2011 Federal Budget

This morning the White House delivered its 2011 Federal Budget, announcing proposed spending of $3.83 TRILLION! That budget projects a deficit of $1.56T. Just last week the White House announced that next year’s deficit would be $1.35T. How did the deficit grow by $210 Billion in one week?

Another point … the President’s proposed “spending freeze,” scheduled to start in a year, projects such a freeze would save $250B over the next 10 years. $250B in savings out of what … an average of $4T per year for 10 years … $40T … is what percent? 0.0625%, less than 1/10 of 1 percent!!! Further, did $210B of that $250B just get wiped out?

The “freeze” is nothing more that political slight-of-hand. I ran across the video below that describes in very simple terms what Obama proposed and what the ‘effect’ will be.

Swami Obama amazes his audiences with his mastery of the art of prestidigitation!

Montana Aluminum Plant Shuts Down … no electricity!

This is something I must have missed reading my copy of the Yew York Times. The Columbia Falls Aluminum Company in Montana shut down its aluminum production October 31, 2009 because it could not purchase the necessary electrical power to continue its operations. Dr. Edwin Berry reports on his web site Climate Physics that Columbia Falls Aluminum negotiated a contract with Bonneville Power Administration in 2006 for Bonneville to supply electrical power until September 30, 2011. But, responding to lawsuits, the 9th US Circuit Court ruled the contract was invalid because it was incompatible with the Northwest Power Act. Follow the link to read the entire article.

Primary aluminum smelting is probably the most energy intensive business in the world. With Club Sierra and the Natural Resource Defense Council in charge of United States energy production, this is just the first of many companies that will be closing their US doors and moving to India or China, where they are able to continue operations without liberal fascist interference. Cement manufacturing will be leaving sometime soon, for both energy and emissions reasons.

The thing that makes all of this so ridiculous is that these businesses will open up shop in other countries that have so little regulation of emissions that are actually harmful to our environment, i.e. not CO2. However, long term the enviro-wackos will get their way. As more business is chased off our shores, the fewer good paying jobs we will have, which will reduce spending in an ever increasing spiral. Then we can return to our pastoral ways of the 17th century and all just get along with everyone and love the world and dream of unicorns and fairies (uh-oh … is that politically incorrect?).

If we Americans don’t begin to rid ourselves of the current crop of politicians who pander to these green idiots, we will have no one but ourselves to blame. One of the fallacies believed by the run-of-the-mill environmentalist is that the world is perfectible. It never was and it never will be … so get on with your life and leave mine alone!

California gives itself an interest-free loan

Well congratulations fellow Californians.

Bet you didn’t know that beginning last Sunday, you are going to be giving the State a loan and they aren’t going to pay you any interest! And … you don’t have much of a choice!

The Los Angeles Times reported on Saturday:

Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners — holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.

Technically, it’s not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers’ annual tax bills won’t change.

Think of it as a forced, interest-free loan: You’ll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.

But with rising gas costs, depressed home prices and double-digit unemployment, the state’s added reach into residents’ regular paycheck isn’t sitting well with many.

“The state’s suddenly slapping people upside the head,” said Mack Reed, 50, of Silver Lake. “It’s appalling how brash that is.”

Brittney McKaig, 23, of Santa Ana said she expects the additional withholding to affect her holiday spending.

“Coming into the holidays, we’re getting squeezed anyway,” she said. “We’re not getting Christmas bonuses and other perks we used to get. So it all falls back on spending. The $40 gift will become a $20 gift.”

The extra withholding may seem like a small amount siphoned from each paycheck, but it adds up to a $1.7-billion fix for California’s deficit-riddled books.

From a single taxpayer earning $51,000 a year with no dependents, the state will be grabbing an extra $17.59 each month, according to state tax officials. A married person earning $90,000 with two dependents would receive $24.87 less in monthly pay.

California will probably continue to collect the tax at a higher rate for many years — or find an additional $1.7 billion to slice from a future budget, an unlikely occurrence. All workers who have state taxes withheld will see their paychecks shrink.

“Many families are sitting at their kitchen table wondering how they’re going to make ends meet,” said state Sen. Tony Strickland (R-Thousand Oaks). “At the same time, the state of California is taking a no-interest loan.”

The provision is one of numerous maneuvers state lawmakers and Gov. Arnold Schwarzenegger approved in the summer to paper over the state’s deficit. Many of the changes, including the extra withholding, were little noticed outside of Sacramento.

Savvy taxpayers can get around the state’s maneuver by increasing the number of personal withholding allowances they claim on their employer tax forms, said Brenda Voet, a spokeswoman for the state’s Franchise Tax Board.

“People can get out of this,” she said, noting that most people would have to change their allowances through their employers. California’s budget leaders are banking on the hope that most won’t.

The increase is coming at a bad time for store owners, many of whom depend on the holiday shopping season to keep their businesses alive.

“I don’t think there’s any question it’s going to impact consumers’ spending,” said Bill Dombrowski, president of the California Retailers Assn. “Any time you reduce people’s disposable income, there’s going to be a negative effect on the retail sector.”

There’s more, but it isn’t any prettier than what’s above. I think this is referred to as “creative accounting” and if a private firm attemped to do this, it would be charged with fraud.

Thanks Sacramento!

Stop the spending … NOW!!!

This video says it all …

Nothing more need be said!!!!!

US Economy and the President

You’ve all read about how Clinton turned the US economy around after taking office. You’ve also read about how George W. Bush destroyed the strong economy Clinton created, and now all we read about (at least in the drive-by-media) how Obama inherited an economy heading towards a full-blown depression.

This isn’t new. I’ve heard these types of declarations, or accusations, since I began paying attention to the news. One slight difference is that you used to hear both sides (bragging by the administration in power as the economy rose, and castigation by the opposition as the economy tanked). Now if it is a Republican administration, you only hear about the bad or you hear that things are bad when in fact they aren’t.

After I began to actually think about what I was hearing on the news, I came to the conclusion that news about the president being the cause of anything happening to the economy was simply political opportunism writ large. No president had the power to to make the economy do anything! Influence … maybe! Cause and effect … not a chance!

However, a few days ago I ran across an article written by Randall Hoven over at American Thinker that opened my eyes. Not to the fact that I was wrong, but that the wrong entity has been taking credit/casting blame for the economy. Randall starts his piece:

President Obama inherited a mess of an economy.  He inherited it from his fellow Democrats in Congress.  As it turns out, which party controls Congress, especially the Senate, probably has a lot more impact on the economy than who resides in the White House.

The last time Republicans controlled Congress, unemployment stood at 4.4%, the S&P 500 closed over 1400, and the economy grew at an average of 3% per year over the four years under a Republican Congress.

After two and a half years of Democrats controlling both houses of Congress, the unemployment rate is at 9.7% and teen unemployment is at 25.5%, the highest since it started being tracked in 1948.  The S&P 500 lost more than 25% of its value.  And real GDP has declined each of the last four quarters and is, in fact, below where it was when Republicans last controlled Congress.

He goes on to present a graph he did showing unemployment levels trending up and down as the control of the Senate changed from Republicans (red) to Democrats (blue).

See the pattern? Unemployment generally goes down under a Republican Senate and up under a Democrat one. Since 1994, it’s almost been like throwing a switch. (I would think the correlation much more evident to the eye than, for example, the correlation between global temperature and man-made CO2 in the last century. I might even call this my hockey-stick graph.)

While the data doesn’t ‘prove’ that the economy is driven by who controls the Senate, the trend is certainly there. This is a well documented article and I highly recommend you click the link and read.

If you like the DMV …

Kimberley Strassel wrote and article in today’s Wall Street Journal about the Republican’s response (or more precisely, lack thereof) to Obama’s push to take over America’s health care industry. Kimberley wrties:

Listen. That sound of silence? That’s what’s known as the united Republican response to President Barack Obama’s drive to socialize health care.

The president has a plan, and he’s laid it on the table. The industry groups that once helped Republicans beat HillaryCare are today sitting at that table. Unions are mobilized. A liberal umbrella group, Health Care for American Now, is spending $40 million to get a “public option,” a new federal entitlement that would kill off private insurance. Democrats passed a budget blueprint that will allow them to cram through that “public option” with just 51 votes.

Republicans? They’re trying to figure out what they think.

Well, not all of them. Earlier this week I ended up in the office of Oklahoma Sen. Tom Coburn, where the doctor was hosting North Carolina Sen. Richard Burr. The duo is, for the second time, crafting a comprehensive reform that would lower costs, cover the uninsured, and put Americans in control of their health care. And while the senators decline to talk GOP politics, their bill raises the multitrillion-dollar question: Will the party have the nerve or sense to coalesce behind some such conservative alternative to the Democratic product?

Kimberley does an excellent job of pillorying the Republicans and I encourage you to read the entire article, but her writings got me to thinking along another line. I am wondering how much people think about the what it is really going to mean when/if the Federal Government becomes the sole provider of health care.

Obama and other liberals say “Americans want health care reform.” On that point I agree. However, I disagree that the solution is to have the government  become the sole provider. Let me first make a disclaimer; I am not nor have I ever been in health care or any related business.

The reason our health care has become so expensive is the same reason the housing market collapsed; government intervention in and regulation of the health care industry and other supporting industries. I’ll start with insurance.

Laws that prohibit me from shopping accross state line for health insurance that best fits my needs is one of the most costly issues for Americans. I don’t know all the reasons for this, but one is so state regulators can force their own agenda on insurers. Here in California insurance companies are required to cover things such as sex change operations and other favorite liberal causes. I cannot opt out of those clauses when I purchase insurance, and therefore all policy holders are contributing to the cost for some very minor increment of the population who may want to give rise to their more feminine/masculine side.Why does the rest of society have to support such narcissism?

Another issue I have with the direction insurance has gone isn’t related to insurers and possibly not the regulators, but to so many insured. With so many policies covering the vast majority of the cost, the insured no longer believe they have a stake in the cost of health care. If the out-of-pocket cost for a visit to the doctor’s office is five dollars, why does the insured really care what the total cost is?

Well … let’s start with supply and demand. I know people that run to the doctor at the first sneeze or a minor ache. After all, it only costs five dollars! No … the insurer pays the health care provider $75 or $100 for that ‘minor’ visit. and when that same person makes 20 or 30 such visits over the course of a year, it starts to rack up the price for everyone. People need price signals and when they are missing, there is little to control demand.

The next issue is the interjection of “cost control measures” so many insurance companies have implemented. In my opinion, the primary reason for interjecting a layer of bureaucracy between the insurer and paitent is driven by law suits. Sure, there was some degree of over-medicating or doctors preforming unneeded procedures to increase their income. However, Most doctors began to call for tests and procedures that generally would not have been necessary to protect themselves from malpractice law suits. All of these “unnecessary” procedures put additional pressures on costs.

This is the segue to the costs caused by the law suit industry. Yes … it is an industry and very profitable, I might add. I’ll continue this in a future post, but I’ll leave on this note:

If you think the DMV is efficiently run, how will you like your doctor’s office run by the same folks?

Time Bomb to go off soon!

Why is it that the story at this link cannot be found on the front page of the Los Angeles Times? The post describes the crisis facing the City of Los Angeles regarding unfunded pension funds of $2 BILLION a year by 2015 … that’s just six years away.

This is tiny in compairson to what the State of California faces and miniscuial to what the US Federal government will have to cover. Just remember … governments have no money.

We taxpayers will be on the hook for TRILLIONS of dollars over the next couple of decades to pay for these Cadillac Lexus pension plans, created by our elected officials as payoff to those that funded their election.

The Future of our Country ….

Peggy Noonan wrote an opinion piece in the Wall Street Journal on Friday that I didn’t get to until Sunday evening, but once I did … it smacked me harder than any article I’ve read in a long time! She begins on the current hot topic of the Madoff ‘swindle:’

That’s the big thing at the heart of the great collapse, a strong sense of absence. Who was in charge? Who was in authority? The biggest swindle in all financial history if the figure of $50 billion is to be believed, and nobody knew about it, supposedly, but the swindler himself. The government didn’t notice, just as it didn’t notice the prevalence of bad debts that would bring down America’s great investment banks.

The part that started to grab me was in the next paragraph, as she started talking about the American public’s loss of faith in the institutions we’ve come to believe it:

All this has hastened and added to the real decline in faith—the collapse in faith—the past few years in our institutions. Not only in Wall Street but in our entire economy, and in government. And of course there’s Blago. But the disturbing thing there is that it seems to have inspired more mirth than anger. Did any of your friends say they were truly shocked? Mine either.

I’ve not had all that much faith in most of the institutions she cites above, but I do believe very deeply in some of the systems we’ve embraced; capitalism … republicanism … and most important, Judeo-Christian morality. I don’t believe our government has been trustworthy in my lifetime … and my great-grandfather would most likely have said the same thing during his lifetime as well. Governments have a habit of becoming more onerous and more burdensome to their constituents the longer they are on place.

Peggy goes on to relate a story of a friend in government bemoaning the absence of any ‘wise men’ within government to lead. Over the past one hundred years, our political system has made it less and less desirable for ‘wise’ men (and more recently women) to pursue public office. Teddy Roosevelt, in my opinion one of our five greatest Presidents, would not likely be elected in today’s hyper-politicized, 24/7 media environment.

The bureaucracy of our government civil service system has become a stronghold for union activism, i.e. reducing all job performance to its lowest common denominator. When one thinks of a government worker, one doesn’t picture a dynamic self-starter, putting in 12 to 14 hour days because they are committed to the organization. The first thing that comes to most minds is a postal worker pitching mail into slots, or a road repair crew leaning on their shovels along the roadside watching the junior man on the crew fill the pothole. Wise men don’t generally spring to mind in this context.

The process that candidates for appointed positions within an administration have to endure has become such a circus that the most qualified wouldn’t dare put themselves before such a kangaroo court. So what do we get? The Obama appointments provide a perfect case study … retreads and cronies from past administrations that have not accomplished anything beyond their ability to rise within a bureaucracy. Further, they have already had their pasts vetted, so face little scrutiny as they are considered part of the ‘good old boy’ network (regardless of gender).

Peggy continues:

And this as much as anything has contributed to the sense you pick up that people feel all trends lead downward from here, that the great days of America Rising are over, that the best is not yet to come but has already been. It is so non-American, so unlike us, to think this, and yet one picks it up everywhere, between the lines and in asides. The other night a man told me of his four children, and I congratulated him on bringing up so many. From nowhere he said, “I worry about their future.” At another time he would have said, “Billy wants to be a doctor.”

This is the point that concerns me more and more. As long as we continue to elect people such as Barak Obama as our ‘leaders,’ we will continue our downward path from the greatness we’ve achieved. As more of our citizens stop investing in our country and become vassals to its largess, the more these same citizens will vote for those who promise them more … the old story of ‘those who rob from Peter to pay Paul can always count on Paul’s full support.’

I tend to be an optimist. I have always believed in America’s greatness and the driver for that greatness; the can-do attitude of the American people. This has been reinforced millions of times … every time someone leaves their home country and comes to America because of the opportunity we afford those willing to work hard and contribute to the American experience … every time someone starts a new business with the vision of becoming the next Bill Gates. Yet even though I view the world optimistically, I don’t view it through rose-colored glasses.

Some recent headlines could just as well have been published in 1850 as today … “Illinois Governor arrested for trying to sell bla bla bla” … “Banking executives accused of being greedy in the bla bla bla” … this is human nature. We’ve lived with evil since the Garden of Eden. There are those who rise above their base nature and others that don’t.

However, more and more I’ve seen the changes in our society as I’ve aged that don’t give me warm fuzzies …

• teachers in public schools willing to let their students fail before accepting responsibility for the continuing failure of those same students to master the most basic levels of education.
• public officials whose only focus is to move on to the next, more prestigious office.
• parents who would rather have their children cheat in school than smoke,
• young people more interested in just becoming famous than in accomplishing anything significant.
• voters who elect the candidate that promises them the most freebies

Peggy goes on in her article to assuage any concern for America’s future after having a conversation with former Secretary of State George Shultz, noting;

Mr. Shultz laid out some particulars of his own optimism. There is “the ingenuity, the flexibility, the strengths of the national economy.” The labor force: “We are so blessed with human talent and resources.” And the American people themselves. “They have intelligence, integrity and honor.”

Twenty years ago I would have seconded Peggy’s conclusion. Today … not so much!

I’ve arrived … now close the door!

My family moved to North Orange County, California in early 1954. California had a population of about 12.5 million and Orange County had around 240,000 people (the 2008 population is 3.1 million!). In grade school I recall hearing people saying that to preserve our way of life, we need to control the growth in population. I remember wondering about all the new kids in my school, and how they would feel if they were told ‘sorry, you have to go back where you came from … your family wasn’t quick enough to make it here in time.’

I heard this story line repeated numerous times over the next several decades as California’s population surpassed 20 million (in 1970), 25 million (in 1983), 30 million (in 1991) and beyond … “I’m here now, so let’s not let anyone else in and ruin it for us.” … those of us who are now here!!!

I’m hearing the same thing anew, but this time it’s related to wealth. Politicians, supported by Hollywood elitists, Silicon Valley elitists and some of the nouveau riche, call those who start earning more than “middle-class” income “selfish.” At the same time, Warren Buffet calls for increased taxes on those with nowhere near as much wealth as he has, while his accountants dig up loopholes to shelter his inheritance from the IRS. Al Gore doesn’t dare accept a position in Obama’s administration and risk any hint of the value of his estate being exposed to public scrutiny …  notwithstanding how much more energy his home uses relative to the average American’s home.

Joe ‘the Plumber’ Wurzelbacher is called selfish for his unwillingness to share his “wealth.” Those with far more significant resources find ways to avoid having their wealth diminished by sharing it with anyone … except their lawyers and accountants.”I’ve arrived, so now let’s close the door!”

Round and Round We Go

Oil prices closed at $57.04 per barrel today, down from a high of over $147 last July. Earlier in the summer “experts” were predicting $200 per barrel oil by the end of the year. In 1979, financial and energy gurus published chart after chart showing oil heading to $100 a barrel from its then price of $40 by 1982. When 1982 rolled around, the world price for oil was hovering around $13.

Natural gas followed the same pattern these past months. The local gas utility went so far as to advise its customers to prepare for an 80% increase in prices through the coming winter. Gas prices peaked at almost $14 per MMBtu, likewise in July. Prices on NYMEX closed today at $6.318 per MMBtu, almost $2 lower that this time last year.

Why is it that people don’t get cycles? In 1999 pundits proclaimed business 2.0 …  no more fear of recession … markets are no longer saddled with the burden of supply and demand! Markets only go up from this point forward!

I read a book in the mid 1990′s by Robert Prechter called the Elliot Wave Principle. During the early 1930′s, Ralph N. Elliot discovered that social behavior trended and reversed in recognizable patterns, or “waves.” His initial work focused on the US stock market

Elliot saw waves in the ups and downs of the stock market and later discovered the same patterns in other aspects of business, society and eventually, in nature.

The current economic downturn was as predictable as a wave rolling onto the beach at Huntington. I told on of my sons three plus years ago that the home loans being proffered … and snapped up by people that would never be able to purchase a $500,000 home in the real world, would soon come to a screeching halt. It went on longer than I predicted at the time, and the fallout is far more devastating than I ever imagined.

Folks … whatever goes up, must come down! It’s the LAW!

First Law of Holes … Stop Digging!

Megan McArdle writes a great piece on the bail-out and the Dem’s push to support their financiers backers in Detroit.

Why bail out Wall Street a nd not GM, demand many people.  Why do we care about bankers and not ordinary folks?

I think this misses the point of the financial bailout.  Whether or not it works–and I sure hope it will–I don’t think very many people wanted to bail out the financial industry because we were so moved by the plight of those plucky traders on the mortgage desk.  We bailed them out not because they deserved it–they didn’t–but because if we didn’t, there was a very big risk that they would take us down with them.

This is not generalizeable to other industries.  Money is weird.  Finance is weird.  There is no other industry that is, first, so tightly coupled, and second, severely affects every other industry in the country.  Moreover, there are few other industries that are so vulnerable to panic.  Strategic injections of capital can actually salvage operations that are otherwise sound.

GM’s operations are not otherwise sound.  They have been headed for this moment since 1973.  Conservatives blame legacy costs, and liberals blame management.  They’re both …

Read the entire article.

Explaining the Orgins of the Problem

Here is a great, simple explanation of the financial crisis we’ve been in for some time now. Show all your friends, co-workers, family … everyone!

Financial Flimflam

Congress is ‘working to solve the financial crisis’ as I write. Why is it I fear the ‘solution’ may end up being more painful than the crisis?

Congress is the primary cause of the crisis in the first place. Their ongoing interference in the market, including regulatory hijinks and politically motivated tax policies, helped put in motion a climate that others used for their own benefit at the expense of the taxpaying citizens of this country. Some on Wall Street as well as others on Main Street saw a way to gain with little risk to themselves … or so many thought.

Is the bailout now under consideration being designed to avert further blows to our economy, or is it being crafted to reward irresponsibility? Unfortunately I suspect only time will tell.

Are You Better off … ?

George F. Will is one of the best columnist in America today … one that I read religiously. His most recent article asks the question, ‘are you better off?’ The McCain/Palin campaign is asking this question in a new twist on a question first asked 38 years ago by Ronald Reagan during his successful campaign against Jimmy Carter. While it’s interesting that McCain is asking the questing following 7+ years of a Republican administration (I suppose to politically separate himself from the Bush administration), Will comes to the question from a completely different perspective.

Will writes:

The nation considered the answer obvious. Reeling from oil shocks worse than today’s, with 52 U.S. hostages in Tehran and with the Soviet Union rampant in Afghanistan, voters resoundingly said no.

But he then he proposes that because the Soviets’ incursion into Afghanistan contributed the the ultimate downfall of the ‘evil empire,’ was it in fact a bad thing?

Today we know that the Soviet invasion of Afghanistan hastened the collapse of the Evil Empire, so some things that seem to make us worse off are not unmixed curses.

In his usual, thoughful wisdom, Will draws some interesting parallels and conclusions. Be sure and read the whole thing.