GayPatriot

The Internet home for American gay conservatives.

The real coup d’etat?

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We’ve had weeks of exciting news elsewhere, but I’m finally updating an earlier post on President Trump’s budget plans. Where we are:

  • The U.S. national debt is at $20 trillion and counting, with an operating cash deficit around $800+ billion per year. (Thanks, Obama!)
  • Trump hasn’t changed anything – yet; he has allowed Congress to pass continuing resolutions that change nothing.
  • Having said that: his proposals are revolutionary.

From the Associated Press:

JULY 07, 2017 – The Trump administration aims to further tighten its grip on spending, issuing a memo Friday that calls for eliminating some federal agencies and cutting government jobs as part of the upcoming fiscal 2019 budget.

…the 2019 budget would be a “comprehensive plan” to reduce the number of government workers and merge or terminate federal agencies as requested by an executive order signed in March…

…sharply reduce spending for Medicaid, food stamps and student loan subsidies, among other programs. Even Republican lawmakers called the cuts draconian…

The memo for fiscal 2019 is an initial step for a budget the White House would propose early next year.

FY2019 begins a little over a year from now, in October 2018. That’s a ways off. Trump’s proposals don’t touch Social Security or Medicare, the most fiscally-dangerous entitlements. And Congress will mangle any cuts that he does propose. So, all this is slow progress.

Having said that: It is very different from what Obama or Hillary would have proposed. While the President does not set the budget, he runs OMB and gives important input. Trump has suggested that food stamp recipients should have to work. And here are 66 programs that Trump would want to eliminate.

All this surely adds to the intensity of left-wing and Deep State opposition to Trump. As the saying goes, “Follow the money”.

Re: Deep State, consider that Trump has proposed deep cuts to the State Department and foreign aid. And I’ve heard tales (sorry, I can’t find the link right now) of CIA employees adoring Obama because of the way he boosted their budgets and salaries; if true, of course they would perceive the “unknown”, budget-cutting Trump as an enemy.

Again, the President does not dictate the budget – constitutionally, the Congress does – but the tendency/direction of his proposals has an impact. That we have a President who will propose cuts, is a Regime Change. Let’s hope it sticks.

State budget crises

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These seem to be popping up. For decades, State public pensions have been under-funded and overly-generous. The bill is coming due. Bloomberg has a map:

Gray means nothing good. California, for example, has under-funded its pensions by $1 trillion – or $93,000 per household – which is worse than Illinois.

The big crisis of the moment is Illinois. They have not enacted a budget in 3 years, have $15 billion in unpaid bills, and a court just ordered them to make some large Medicaid payments they had been skipping. In consequence, the Democrat legislature has passed tax hikes – that the Republican governor has vowed to veto, at least for now.

Other states in crisis are

  • Connecticut, where the Democrat governor has signed an executive order to take control of State spending (and do service cuts) after the Democrat legislature couldn’t pass a budget.
  • Maine, where the Republican governor is threatening a government shutdown (and state of emergency) rather than accept another Democrat tax hike.

All of these States face downgrades of their bond ratings.

As to California: it already has some of the nation’s highest tax rates (13% top income, 7-10% sales taxes). With typical “progressive” insanity, CA is spinning on whether to do single-payer health care – a $400B idea that it can’t afford even today, and still less after California’s inevitable pension crisis hits.

All this time, we’ve been in a Great Depression

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A few weeks back, Michael Snyder at The Economic Collapse blog looked at U.S. GDP growth rates for the ten years 1930-1939 and the ten years 2007-2016. I didn’t verify his numbers but they seem plausible (referring to “real” or inflation-adjusted GDP). Snyder says:

1930: -8.5%
1931: -6.4%
1932: -12.9%
1933: -1.3%
1934: 10.8%
1935: 8.9%
1936: 12.9%
1937: 5.1%
1938: -3.3%
1939: 8.0%

When you average all of those years together, you get an average rate of economic growth of 1.33 percent.

That is really bad, but it is the kind of number that one would expect from “the Great Depression”.

So then I looked up the numbers for the last ten years…

2007: 1.8%
2008: -0.3%
2009: -2.8%
2010: 2.5%
2011: 1.6%
2012: 2.2%
2013: 1.7%
2014: 2.4%
2015: 2.6%
2016: 1.6%

When you average these years together, you get an average rate of economic growth of 1.33 percent.

The same! But wait, averaging them isn’t quite right. For math-y reasons, it’s better to take a starting index value like 100, then apply the growth rates year by year. I did that, and

  • Real GDP grew 10% from 1930-1939.
  • Real GDP grew 14% from 2007-2016.

Still not much difference! The point remains that the last 10 years have been super lame. President Obama was perhaps the first in U.S. history to never have a single year of real GDP growth over 3%.

And it’s possible that Obama’s record was yet worse. Remember, in recent years they’ve been padding the GDP numbers. They directly added nonsense to GDP. They also under-estimate inflation, which artificially boosts the growth estimates.

But for now, let’s stick with official numbers (where Obama’s overall record is nearly as bad as a Great Depression), and pivot to look at unemployment.

You may wonder: if we’ve been in a depression, how could the unemployment rate be down at 5%? The difference from the 1930s is that, in our time, the Establishment (or Political-Financial Complex) has been determined to fool people – to boil the frog (us) slowly, so to speak – and to cover for President Lightworker. Thus,

  • They let him jack the national debt from $10 trillion to $20 trillion. Even a monkey could make GDP seem halfway-OK for 8 years, if you gave him a $10 trillion credit card.
  • They had the central bank (Federal Reserve) conjure trillions of new money from thin air and inject it into the financial markets. It’s chicanery, but people say “At least my home and 401k are up.”
  • And they baked the unemployment statistics. Remember, the official 5% number hides a huge decline in Labor Force Participation, plus full-time jobs being replaced with crappy part-time jobs.
    • If you add back the people who left the labor force in despair these last ten years, real unemployment is 11-12%.
    • And if you add the extra part-timers (assuming they would rather be full-time), it’s even worse.

Depression 2.0 has been with us, all this time. It’s part of why people were so unhappy with Queen Cersei in 2016 (who ran as the Establishment’s poster child).

What does all this bode for President Trump? Probably not well.

  • He’s trimmed back some of Obama’s growth-killing regulations. That will help.
  • And his infrastructure spending may go to productive works (unlike Obama’s 2009 “Porkulus” package), if he can get it passed. He wants to revive American manufacturing, which would be good.
  • BUT, with so much debt on the books and so many Americans expecting handouts, our underlying economic problems are worse than ever.

Trump has inherited a sinking ship. The next recession should be a roller-coaster. If the American Left is krazy and violent now, just you wait.

Then again, maybe our leadership will hit on the solution quickly (a Free Enterprise system with smaller government, Rule of Law, sound money, cutting the Welfare-Warfare State, letting Washington and Wall Street fail, letting Main Street pick up the pieces). And maybe our leadership will use the media skillfully (plus a few well-placed arrests) to transition people’s minds to all that. Don’t tell me I’m dreaming.

OK, I’m dreaming. Time to buy more ammo.

He will propose spending cuts?

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A few weeks ago, I took a dim view of President Trump’s tax proposal:

The true level of taxation is the government’s spending level. All spending must be paid for, one way or another. There are 3 possibilities.

1. Overt taxes.
2. Borrowing. This is a covert tax, a tax on the future (when either the debt must be repudiated, or more and more government revenues must be diverted to servicing it).
3. Money-printing. Another hidden tax, this time on the real value (the purchasing power) of everyone’s wages and savings. Also known as “inflation”.

So really, it isn’t a tax cut unless it’s a spending cut also. Trump wants to cut the overt taxes. So, what? Without spending cuts, it’s only a corresponding increase in the hidden taxes: borrowing and/or money-printing.

I gotta give credit where it’s due. It looks like Trump is going to propose spending cuts?

More details from President Donald Trump’s first budget proposal are trickling out via a flurry of overnight reports from The Washington Post, Associated Press and Bloomberg News…

The budget will slash $1.7 trillion in spending on entitlement programs, according to Bloomberg.
Trump’s budget will include a massive nearly $200 billion cut to the Supplemental Nutrition Assistance Program, the modern version of food stamps, over the next 10 years – what amounts to a 25% reduction, according to The Washington Post.
The food stamp cuts are part of a broader $274 billion welfare-reform effort, according to a report by The Associated Press.
The budget calls for about $800 billion in cuts to Medicaid for fiscal year 2018, WaPo reported.
The budget is also expected to propose major domestic discretionary spending cuts – an earlier version of the budget called for $54 billion in such cuts next year alone.

Whether the Republicans in Congress will tolerate any cuts, is another matter.

Note that these cuts are hardly draconian. OK, the numbers sound large. But only because:

  1. some of the numbers are totals across many fiscal years, and
  2. the government IS large. Spending and promises (entitlements) skyrocketed under Bush 43 and Obama.

But the Controlled Media is sure to make them sound like the Entropic Heat Death of the Universe.

Trump’s tax plan

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Yesterday, President Trump outlined his tax plan. Key features:

  • Slightly lower personal income tax rates. (Top rate from near-40% to 35%.)
  • Eliminating almost all income tax deductions, except mortgage interest and charitable contributions. (No more deduction for your State or property taxes, among other things.) Increase in the “standard deduction”.
  • Much lower corporate income tax rates. (Top rate from 35%, one of the world’s highest, to 15%.)
  • A one-time tax on overseas business profits. (That haven’t been repatriated to the U.S. Apple has a lot.)
  • A “territorial system” where future profits that corporations earn abroad, are not taxed.
  • Repealing a bunch of taxes and complications, most notably the Alternative Minimum Tax (AMT) and the estate tax.

Of course, Congress still has to chew on it.

Taking Trump’s proposals by themselves, I have little objection. Rates should be lower. High income taxes are a form of slavery. Corporate income taxes are stupid because they are an indirect, distorted sales tax (that is, a tax paid ultimately by consumers). Estate taxes destroy many small businesses (forcing families to liquidate the business in order to pay the 50% tax or whatever).

Nonetheless, I can’t praise this plan. Because it will reduce revenues at first, without being matched by spending cuts. Our budget will come no closer to balance.

President Obama already doubled the U.S. national debt in his 8 years, from roughly $10 trillion to roughly $20 trillion, for an average real annual deficit around $1.25 trillion. Is Trump going to beat Obama’s record? I sure hope not.

This is an important point. The true level of taxation is the government’s spending level. All spending must be paid for, one way or another. There are 3 possibilities.

  1. Overt taxes.
  2. Borrowing. This is a covert tax, a tax on the future (when either the debt must be repudiated, or more and more government revenues must be diverted to servicing it).
  3. Money-printing. Another hidden tax, this time on the real value (the purchasing power) of everyone’s wages and savings. Also known as “inflation”.

So really, it isn’t a tax cut unless it’s a spending cut also. Trump wants to cut the overt taxes. So, what? Without spending cuts, it’s only a corresponding increase in the hidden taxes: borrowing and/or money-printing.

And what happens when we add (say) a Trump infrastructure spending package and a Syria or North Korea war on top of that? More of the hidden taxes: borrowing and/or money-printing.

Obama Debt Roundup

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I meant to do this awhile back, updating previous posts in the series.

When President Obama left office on January 20, 2017, the U.S. national debt was $19.9 trillion. ($14.4 trillion held by the public; $5.5 trillion “intragovernmental”, for example, Treasury bonds held by Social Security.)

When Obama took office on January 20, 2009, the U.S. national debt was $10.6 trillion. ($6.3 trillion held by the public; $4.3 intragovernmental)

Obama more-than-doubled the part of the U.S. national debt that everyone agrees is important (what’s “held by the public”). And he nearly doubled the total.

And for what? Eight years of the weakest economy “recovery” on record.

Midnight in America

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That dark title comes from Peter Schiff, the investment analyst and libertarian ninja. His article’s conclusion:

Ronald Reagan was the last Republican president who was swept into office promising great change. He made good on his “Morning in America” promises to cut taxes and regulations. But he failed in his promises to reduce spending. …[and now after others did even worse,] the economy of 2016 has far deeper problems than the economy of 1980. Reagan’s morning now looks more like Trump’s midnight.

Trump did not make this mess, but he will likely be in office to clean it up.

The question is: Will President-Elect Trump be able or willing to clean it up? As Schiff puts it:

…as bleak as the picture Trump painted of the current state of the U.S. economy, it was not bleak enough. Before things can actually get better, they must first be allowed to get much worse. Decades of government promises to supply voters with benefits taxpayers can’t afford must be broken, starting with many of the promises Trump made himself to get elected.

(Emphasis added) That has been my chief criticism of Romney (in 2012) and of Trump all along: Although they were “truthier” with the voters than their Democratic opponents, they still didn’t tell voters nearly enough of the truth.

After eight years of President Obama, we now have a national debt of $19.8 trillion by official figures; and something far north of $100 trillion when you include the “unfunded liabilities” (the future benefits promises that the government should report, under proper accounting standards – and does not). States, and especially their pension funds, also face a great crisis where they won’t come close to meeting their future promises. This is all very different from when Reagan took office.

Based on his speeches about “infrastructure” spending and his past track record, Trump’s first instinct might be to run up the U.S. debt up to even greater heights than Obama has. But at some point, Trump’s deficit spending will hit a wall: a full-on recession (it’s overdue) and a new financial crisis, wherein world markets simply won’t allow the United States to carry on as before.

What happens then? Will Trump give Americans the bad news about serious cuts to their benefits and hopes? Or will Trump flounder, protect special interests – maybe hyperinflate the dollar – and allow events to destroy him and us?

Anyway, it’s been fun to watch the left-wing butthurt over President-Elect Trump these last few days; but realism compels me to start being a wet blanket again. America’s problems, especially its debt problems, are beyond anything that even Trump had acknowledged.

He won’t be able to fix them by magic. And in a way, left-liberals are right: the next four years will be awful, for many.

Deficit update

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First, let’s do a National Debt update. You’ll see why, in a minute.

As of this day, the U.S. national debt is $19.3 trillion. ($13.9 trillion held by the public; $5.4 trillion “intragovernmental”, for example, Treasury bonds held by Social Security.)

When President Obama took over from President Bush, it was $10.6 trillion. ($6.3 trillion held by the public; $4.3 intragovernmental)

So, Obama has already more-than-doubled the part of the U.S. national debt that everyone agrees is important (what’s “held by the public”). And he’s on track to double the total, by the time he leaves office.

But there’s more. On this day 3 years ago, the total was $16.7 trillion. So, over the past 3 years, the U.S. operating deficit – the money that the U.S. Treasury actually had to borrow to pay for stuff – has been $2.6 trillion, or roughly $865 billion per year.

That’s funny because the three most recent U.S. budget deficits are supposed to be much smaller. 2014 – $483 billion, 2015 – $438 billion, 2016 – $616 billion; for a total of $1.5 trillion. (September-ending fiscal year means a 2-3 month shift from the dates I used above; but that does not alter the story drastically.)

What does it mean? It means they’re lying to us about the size of the U.S. budget deficit. And they’ve been lying for years, as I’ve blogged previously.

Oh, you could say “Come now, the accounting numbers are accurate, they’re just using some budget/accounting tricks to hide a big chunk of their spending-and-borrowing.” But I consider tricks to be lies. Don’t you?

According to left-wingers like MSNBC and Rachel Maddow, or even the Dear Leader Himself, His Dear Leadership has reduced the U.S. annual budget deficit by 2/3. No, pumpkins. It hasn’t. You lie.

Why gold is (real) money

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In 1912, testifying before Congress, the banking giant J.P. Morgan famously said “Money is gold, nothing else.” The quote is often repeated in a fake-but-accurate form as “Gold is money, everything else is credit.”

On and off for 15 years, I’ve read/thought about why that is so; especially in view of the people (both Left and Right) who deny it. I thought I would lay out the answer for anyone with eyes to see.

According to the IMF, money is a medium of exchange, a unit of account and a store of value. It arose as an improvement on barter.

Instead of having to directly barter my apples for your oranges, I would trade my perishable apples to some third party for a particular, third good. Wait…Why would I do that? I would do it if the third good is generic, non-perishable, popular (widely admired and valued), limited in supply, and easily handled and stored. Then I can KNOW that you’ll take it trade for your oranges, and the doctor will take it from you in trade for his services, and the baker from the doctor, and so on, forever.

Right there, we can see that real money is some physical good that society’s marketplace finds to be sufficiently generic, non-perishable, popular, supply-limited and easily moved/stored – so that the marketplace will use it as a medium of exchange, and then logically also as a unit of account and a store of value. It could be shells, cattle, salt, cigarettes. But most societies in human history found that silver and gold made the best money, and then mainly gold.

In technical terms, gold is money because it is the good that has the slowest-declining marginal utility.

In layman’s terms (saying much the same thing), gold is the most marketable and hoardable good; the one good that any sane trader would always want a little more of. Oil, apples, wheat, cattle, U.S. Treasury bonds, Bitcoin, Whitney Houston CDs, etc. are not like that.

“But gold is useless!” anti-gold people will say. “It’s a pet rock!” Sorry, but that is a feature not a bug (as they say in software engineering). The fact that gold isn’t needed for some other crucial use is ONE of the reasons why it is so hoardable, and became the most important money.

(Other reasons, shared partly but NOT entirely by silver, are that it’s beautiful and artistic, straight women love it, it’s enduring / corrosion-proof, it’s divisible, it’s ultra-generic as a mere element on the periodic table, it’s compact, it’s user-friendly because almost anyone can hold it and understand what it is, it’s somewhat rare but not too rare – and again, you’re always OK with owning a little more of it. But I digress.)

In the West today, gold is no longer currency. Currency is a representation of money that gets used in a modern country’s daily life. Originally, currency was claim checks (called banknotes) on actual gold or silver at a bank. But today, we use dollars, euro, yen, etc. And what are those things? They’re inventions of certain government-sponsored banks.

They come into existence by decree, or by the mere click of a keyboard; thus the term, “fiat currency”. In effect, a fiat currency is non-redeemable shares in a particular central bank’s assets. (Yes. On each central bank’s balance sheet, the currency + bank reserves that it has created are the major part of the Liabilities + Equity column.)

And what do central banks hold as assets? Lots of financial-system crap – including government bonds, sub-prime mortgage bonds (what caused the 2008 financial crisis), other currencies, and even company stocks (the Swiss central bank is big on Apple). Plus, some gold. The top central banks hold thousands of tons.

And of those central-bank assets, which is the best and most important? Hint: Gold is the only asset in the financial system that can ever be free of “counterparty risk”; that is, the only asset which isn’t also somebody else’s liability.

A bond is somebody else’s liability. It is good only if they stay solvent. A government bond is just the government promising to pay some fiat currency, subject to risks like default or hyperinflation. Central-bank gold does not have those risks. Which is why they value it, and why the “safer” or more-prestigious central banks tend to have larger gold reserves, which adds to their strength.

Thus, although the Western world no longer uses gold as currency, it is still the “pet rock” (or Rock of Gibraltar) upon which rest the key central banks, and so the entire financial system. As such, gold is real money. And everything else – from government bonds, all the way down to your bank account and the cash (the fiat currency) in your pocket – is, in the end, mere credit.

[Read more…]

Greek drama update

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Greece’s Syriza-led government has basically folded, for now, in its debt negotiations with the rest of Europe.

A “complete political surrender to the world of reality” was how [one European bank analyst] put it. [Other analysts] labeled it a “u-turn” by Tsipras, who won election Jan. 25 promising an end to budget cutting.
[…]
At last week’s meeting, Greece signed up to all the conditions of its current package and to continued international oversight, ditching plans to win back control of its purse strings so it could raise wages and pensions.

You can find GayPatriot’s backgrounder here. And some details on the new agreement, here.

Needless to say, many Syriza supporters are outraged. For example, one Syriza veteran of WW2 said, “…[Syriza’s] promises have not turned into practice…On my part, I APOLOGIZE to the Greek people because I have contributed to this illusion.”

My feelings are mixed. Pleasure at seeing a gang of socialists having to learn math, combined with dismay/sympathy for the Greek people – who probably shouldn’t cave in; they probably would be better off, in the long run, if they defaulted on their debt and left the Eurozone.

I don’t think this drama is over. I think it ends with either Greece or Germany leaving the Euro currency (later this year or perhaps in 2016), as the Eurozone simply isn’t big enough for both of them. But, as the saying goes, “we’ll see.”