The View from Right Field

Cliff Negotiations

What does it say that Mitch McConnell is negotiating with Joe Biden instead of Harry Reid or Barack Obama?  Just asking.

What Christmas Is All About

Charlie Brown:  "Isn’t there anyone who knows what Christmas is all about?"

Linus: "Sure, Charlie Brown, I can tell you what Christmas is all about. Lights, please?

  "And there were in the same country shepherds abiding in the field, keeping watch over their flock by night. And, lo, the angel of the Lord came upon them, and the glory of the Lord shone round about them. And they were sore afraid. And the angel said unto them, ‘Fear not, for behold, I bring you good tidings of great joy, which shall be to all people. For unto you is born this day in the city of David a savior, which is Christ the Lord. And this shall be a sign unto you. Ye shall find the babe wrapped in swaddling clothes, lying in a manger.’ And suddenly there was with the angel a multitude of the heavenly host, praising God, and saying, ‘Glory to God in the highest, and on Earth peace, good will toward men.’

  "That’s what Christmas is all about, Charlie Brown."

 

President Obama Goes On Vacation

And so, President Obama has left for Hawaii, where the fiscal cliff will hit five hours later than in Washington, DC.  I understand that Speaker Boehner could not get 218 Republican votes for his plan and, therefore, the House of Representatives has adjourned until after Christmas.  But I am not sure why the President should give up, too.

I understand that the President feels he should get his plan passed.  He was re-elected, and the Democrats gained seats in both the Senate and House.  Clearly, he won.  The only problem is that Republicans still control the House, and all of them were re-elected, too.  And while the President thinks that his plan is best, they think theirs is.  He has his beliefs – and they have theirs.  President Obama may think that going over the fiscal cliff will be good for Democrats politically, but will it be okay for the country economically? Going over the cliff may help Democrats in November of 2014, but what happens to the country until then?

I understand that President Obama can’t reach an agreement with Speaker Boehner and a majority of the Republicans in the House.  But he doesn’t need a majority of Republicans in the House.  If he can keep all the Democrats, all he needs is five Republicans in the Senate (assuming Harry Reid can’t figure out a way around the filibuster rules) and 17 in the House.  Why isn’t he trying to pick off a few Republicans here and there?  It’s only 17 out of 234.  That’s less than ten percent.  That’s what other presidents have done.  Why can’t he?  Why can’t he try?

Trying to Take “Christmas” Out of Christmas Market

A couple of years ago, the four of us went to Germany in December to see the Christmas markets there – and other things.  They were great.

Chicago has what I have read is the largest German-style Christmas market in the United States.  In keeping with the German influence, they call it “Christkindlmarket Chicago”.  But in keeping with American political correctness, they don’t call it a Christmas market.  Rather, they say it is a “traditional German holiday market”.  The one thing I wonder, though.  Do those who call it a “holiday market”, instead of a Christmas market, know what “Christkindl” means?

Progressives and Progress: Energy and ABMs

Liberals now like to be called “progressives”.  I guess they think progressive sounds better and doesn’t have some of the negative connotations of “liberal”.*  Also, “progressives” are for “progress” and what could be bad about progress?  Well, progressives better be careful on this last point because lately progress has been going against them on a couple of important issues.

First, anti-ballistic missile systems.  Progressives (and previously liberals) don’t like them.  Back in the Cold War, they said that ABMs would not work and that they were a waste of money.  They also claimed ABMs were dangerous because they unsettled the strategy of Mutual Assured Destruction.  They supported Richard Nixon’s ABM treaty in 1972 (which limited ABM systems) and hated Reagan’s SDI in the 80s, which promoted them.  They cut back on ABM research during Clinton’s presidency and cut spending on ABMs in the George W. Bush administration once they recaptured Congress in 2006.

The problem that progressives now have, however, is that in the recent fighting in the Middle East, Israel’s “Iron Dome” anti-missile system worked.  Its success was a huge surprise.  It stopped lots of the missiles aimed at Israeli cities and civilians.  One thought is that increased computer power was a key in finally making an ABM system that work.**  But regardless of why it worked, the important thing was that it did work.  And not only did the Iron Dome save Israeli lives (which seems to me to be a good thing), it also made it easier to ultimately achieve a ceasefire and stop the fighting. 

Let me explain:  If the system had failed and Palestinian/Hamas (whatever you want to call them) missiles had been raining down on Israeli cities and civilians, Israel would have had no choice but to escalate the fighting.  They would have had to invade Gaza, Lebanon, wherever the missiles were coming from.  And they would have had to bomb the missiles launching sites, wherever they were.  But because the Iron Dome worked, Israel did not have to do that.  They could wait, and they could negotiate.  And a ceasefire could be achieved.

The success of the Iron Dome was real progress.  So what are progressives going to do now about supporting an anti-missile system that would protect the US against rogue missiles?  ABM systems can protect people and they can postpone escalation.  Will progressives now support a US ABM system that protects against missiles from countries like Iran and North Korea?

Second, energy independence.  I am totally shocked, but it seems as if at least some limited energy independence (or at least greatly reduced dependence on foreign oil) is within our grasp.***  Part of that is because of increased vehicle efficiency rules passed in the last couple of year.  But it’s also because of progress in energy technology.  Fracking, horizontal drilling.  These are new technologies that are allowing us to tap energy resources that were not available ten or fifteen years ago.  Because of technological progress, the United States has actually increased the amount of available energy reserves it has.  And there is promise of even more in the future.  We may find that what we thought was an inevitably declining resource, is not.

And what has this meant?  It is cheaper for people to heat their homes in the winter.  Jobs in energy-intensive industries can come back to the United States.  Less money needs to be sent overseas to buy oil from some really bad governments.  But are progressives happy with this progress?  It’s unclear (at best).  Fracking is said to be bad for the environment (even though it frees up natural gas, which is much cleaner than the oil or coal in replaces.  I’m not sure what is wrong with horizontal drilling, but I am sure there is something.  At times, it almost seems that some people don’t want cheaper energy.  Or at least they don’t want us to use energy.  Low-energy usage is a lifestyle choice for them, instead of an economic necessity.  And they want to force it on the rest of us, too.

It will be interesting to see how “progressives” react to this “progress”.

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* For somebody who grew up in the ‘60s, the idea that “liberal” has negative connotations is amazing.  Back in the day, it was “conservative” that nobody wanted to be called.  Which shows how things can change.

** Here, here, and “Israel’s Iron Dome,” The Wall Street Journal, November 20, 2012.

*** Here and Benoit Faucon and Keith Johnson, "U.S. Redraw World Oil Map," The Wall Street Journal, November 13, 2012.

Missing Milton Friedman

Long-time readers of this blog will not be surprised that I do not like the Federal Reserve Board’s new policy of keeping interest near zero, and effectively printing money (though its program of buying $85 million a month of mortgage-backed securities and long-term Treasury securities) until unemployment falls to 6.5% or less, as long as inflation stays below 2.5%.  (The Fed said it would continue its program as long as inflation stayed within ½% of its 2% target.  2% + ½% = 2½%.) 

One of the problems with the Fed’s policy is that, by the time inflation gets to the top of the range, it’s too late to stop it from going higher.  To stop inflation from going up nine months from now, you have to act now.  If you wait until inflation hits the limit, it’s too late to stop it from going over the limit.

When I see the Fed doing things like this, and justifying them like this, I realize how much we miss Milton Friedman.  He would have been able to explain clearly and simply why what the Fed is doing is wrong.  And we need that.

North Korean Missiles – And Our Defenses

Earlier this year, President Obama told then-President Medvedev of Russia that he, President Obama, would have “more flexibility” on things, “particularly missile defense,” once he was re-elected and that then-Prime Minister, now-President Putin should give him “space” during the campaign.

Well, North Korea has just launched a satellite into space.  If President Obama still uses his new, second-term “flexibility” to give in to Russia’s demands, “particularly [on] missile defense,” we could be in a very difficult position once North Korea develops a nuclear weapon small enough to fit on the top of one of its missiles – or says it has.

"Obama, With Blue-Collar Backdrop, Presses Case for Higher Taxes on the Richest"

This was the headline on an article in today's New York Times.  The article itself started like this:

"Using a German-owned truck factory as a grease-stained backdrop, President Obama on Monday pressed his case for higher tax rates for the richest Americans, declaring that his economic program would cut the deficit without crimping the job market."

Should somebody maybe tell President Obama that the election is over and that he won?  It seems like he is lost in a "Groundhog Day" loop and can't get out.  Maybe if somebody changed the wake-up call on his clock radio, he would realize it's December and time for governing, instead of campaigning.

Talking Past Each Other As We Near the Fiscal Cliff

It looks like we may be going over the fiscal cliff.  Right now both sides are playing chicken, though to be honest President Obama seems to be playing it a little more than the Republicans, or at least some of them.  Some Republicans have suggested increasing tax rates.  And the House Republican leadership has supported higher tax collections (though by reducing deductions for the rich, instead of raising rates). 

President Obama, however, seems to be holding out for higher tax rates or nothing.  He not only wants higher tax rates, it’s almost as if he wants to rub the Republicans’ nose in it.  Sometimes, though, it’s easier to win if you help the other side find a graceful way to give in.  Clearly, President Obama is not doing that.

Social Security and the Fiscal Cliff

As negotiations to avoid the fiscal cliff continue (or not – who really knows), Democrats are saying Social Security is not relevant to getting the deficit under control.  Senator Dick Durbin (D-Ill) said this about Social Security:

“Social Security does not add one penny to our debt -- not a penny. It's a separate funded operation …”

White House Press Secretary Jay Carney agreed:

“We should address the drivers of the deficit, and Social Security is not currently a driver of the deficit.”

In a literal and superficial sense, these statements may be defensible.  But let’s look at the reality behind the technicalities.  While Mr. Carney claims that Social Security is not “currently a driver” of budget deficit, it is certainly increasing the amount of money that the federal government has to borrow each year in order to fund its operations.

Similarly, as Senator Durbin says, Social Security is separately funded – sort of.  There is a separate Social Security tax.  The question is, what happens when the amount of Social Security taxes coming in does not cover the amount of Social Security benefits going out.  My guess is that Senator Durbin would say this is not a problem because that extra money is just coming out of the balance that has been built up in the Social Security Trust Fund over the years.  I, on the other hand, say the federal government has to borrow the money to pay those benefits.  Let’s see who is right – and the answer will explain why Mr. Carney’s and Senator Durbin’s statements are wrong.

I previously talked about how Social Security is financed in my post “How Social Security Fits Into Our Deficit/National Debt/Entitlement Spending Problem”.  Let’s review the situation today.  But first, let’s look at some history, especially as it relates to what happens when Social Security taxes and Social Security payments do not match.  As I said in my earlier post, when Social Security is in surplus, i.e., when we are collecting more in Social Security taxes than we are paying out in Social Security benefits (which is the way it used to be), the Social Security Administration takes the extra money that comes in and “invests” it in U.S. government bonds.  In other words, it gives it to the U.S. Treasury and gets back an IOU.*

Today, however, Social Security is no longer in a surplus situation.  Today the Social Security Administration is collecting less money in taxes than it is paying out in benefits.  So where does the Social Security Administration get the extra money to pay these benefits?  It goes to the U.S. Treasury and asks for some of its money back.  And where does the Treasury get the money to pay to the Social Security Administration?  Simple, it borrows it – along with all of the other money it has to borrow each year.

In other words, politicians can claim that Social Security does not add “to our debt” and that it is not a “driver of the deficit,” but it does add to the amount of money the Treasury has to borrow each year, which seems like debt and deficit to me.  And with more and more the baby boomers retiring each year, it is only going to be worse unless our politicians face up to what is really happening, as opposed to technicalities that sound good and let them put off tough decisions. 

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* In other words, in spite of what some politicians may have told us in the past, there is not and there never has been a “lockbox” where people’s Social Security money was put and protected.  The excess money in Social Security was always given to the U.S. Treasury and used to fund government operations.  When the Social Security Administration needs the money back, the Treasury has to go out and borrow it, unless it has some extra money laying around, which it clearly doesn’t at this point.