Sunday, August 28, 2011

Left Ready to Bash Rich Perry on Immigration

In 2001, Rick Perry spoke at the Border Summit. In the speech he advocated closer ties with our neighbor to the south.

While the left is busily trying to provide amnesty to Mexicans who have entered America illegally, they are also preparing to discredit Perry with his Tea Party supporters over his 10 year old views on our relationship with Mexico.

Quite frankly, I've changed my position on relations with Mexico quite dramatically since 2001, based upon real world evidence.

The basic argument of letting Mexican workers into the country is simple. Without an economic relief valve, the corrupt Mexican system would deteriorate into chaos. We don't need chaos on our border. But the reality is that we already have chaos on the border, thanks to the drug war. And the chaos is escalating.

When Vicente Fox become the first conservative Mexican President in several decades, I thought that we should give the guy a chance to reform things. But nothing changed. The corrupt system continued, but with different people in charge of the corruption.

My opinion today is that we should close the relief valve and let Mexico explode. A big explosion like we are seeing all over the Middle East is probably the only chance that Mexicans have of reforming their corrupt system.

Unlike the Middle East, there are enough people in Mexico with ties to and experience in the U.S. to help ensure that any explosion results in something better than they have today.

Close the border and let them stew. That's the real answer. It's a completely different answer than I would have given in 2001.

Circumstances change and it's okay to change a position based on new evidence. In fact, when circumstances change a reasonable and rational person will change their beliefs based on the new evidence. Those who don't change in the face of new evidence (like unreconstructed leftists) are not worth listening to.

Wednesday, August 24, 2011

Obama's Jobs Program

As the President suns himself at his $50,000 a week estate in Martha's Vineyard, the nation's economy continues to struggle, with new housing starts falling and delinquent mortgage payments on the rise.

As he was leaving for his vacation, Obama promised to unveil a new "jobs program" when he gets back. Undoubtedly, it will be another Keynesian pump priming disaster, just like Obama's "stimulus", which will do nothing to help the economy.

Keynesian economics should have been completely discredited in the 1970s. According to Keynesians and their Phillips Curve, you cannot have high inflation and high unemployment at the same time. Yet, this is exactly what he had under Carter and this is exactly where we are heading again. Yet the left clings to Keynesianism like a religion.

Keynesian economics is predicated on the notion that wages are sticky downwards, i.e., people will not willingly take a pay cut in a recession to clear the market and start economic growth again.

The Keynesian solution was to have government fool people into taking pay cuts during recessions by creating inflation.

That may have worked for a very short while, but people got wise to this and started demanding things like automatic cost of living adjustments in their contracts.

So, a fundamental policy prescription of Keynesian economics just doesn't work any more.

Another Keynesian policy prescription that doesn't work anymore is demand stimulation to start economic growth. Sure, pumping money into the system may help stimulate demand, but demand for what? Cheap goods made in China and Mexico, which does nothing to support economic growth at home.

In a global economy, borrowing money to stimulate demand is a foolish proposition.

What we really need to do to get the economy moving again is stimulate investments in innovation and productive capacity. There are things that government could do to help.

First, we need to dramatically simplify our convoluted 80,000 page tax code which punishes most American businesses with the highest corporate tax rates in the world, while letting politically favored companies get away with paying little to no taxes at all.

Second, our byzantine regulatory system needs to be completely rethought. We need to start by being more outcome focused than process focused. Regulations should have to go through a cost benefit analysis before they are enacted and on a periodic basis after enactment to ensure that they are effective at achieving the desired outcomes with as few side-effects as possible.

Third, we need to fix our broken government monopoly schools to produce students with sufficient skills in math and science to succeed in a high tech economy.

Forth, yes we need to invest in repairing and expanding our crumbling infrastructure. The focus has to be on results, not political expediency. If an infrastructure investment cost effectively helps the flow of commerce through the country it should be undertaken. Otherwise, there is no point in spending the money.

Fifth, we also have to get rid of incentives for not working. Allowing people to lay around growing their bellies on unemployment insurance for two years is counterproductive to economic growth.

Obama had his chance to simplify the tax code and make some needed infrastructure investments by embracing the proposal from his own debt commission. Unfortunately, he ran away from it as if it were the plague. Obama is not about to go to battle with his biggest supporters -- government bureaucrat unions -- to fix the schools. Obama's EPA is increasing the regulatory burden on American businesses. On economic policy, he is doing everything wrong.

The sad fact is that the economy is going to continue to struggle until Mr. Obama is ejected from the White House, because he just doesn't get it.

Friday, August 19, 2011

Thoughts from Taiwan

I spent the last week in Taipei, Taiwan visiting a customer.

I've been all over Asia, but this was my first trip to Taiwan, other than catching a connecting flight at the airport.

I'm sitting here at Taoyuan International Airport waiting for my 12 hour flight to Seattle, reflecting on my week.

I love Taiwan and its people. The city is on the move. People are hustling and working hard. Yet, they are extraordinarily friendly and caring.

Last night we went to Tower 101, which is one of the tallest buildings in the world. Until very recently, it also had the fastest elevator in the world. We climbed from the 5th floor to the observation deck on the 89th floor in a matter of seconds. The view was spectacular.

Taipei 101 is designed to withstand typhoon winds and earthquake tremors. Inside the building there is a 660 metric ton steel pendulum (my pic is on the left) which acts as a mass damper that sways to offset movements in the building caused by strong gusts of wind. It's the largest mass damper in the world and the building is an engineering marvel.

Afterwards, we had diner at a great restaurant that specializes in dumplings.

We were sitting at diner, looking at all of the energy in the city, the wonderful people, and everything that they've accomplished over the last 50 years. I couldn't help but think that if Chiang Kai Shek hadn't lead 2 million people off of the mainland, all of these people and what they've accomplished wouldn't be here because the communists would have murdered their parents and grandparents for rebelling just as the communists murdered so many others.

Our thoughts quickly drifted to the problems we face in America. Although the American left haven't turned into mass murders (yet), they are killing the country nevertheless.

In Taiwan and the rest of Asia, you are expected to work and take care of yourself. If you can't, you rely on your family. In America (and Europe) the government's welfare system has destroyed the family by replacing it with a faceless, uncaring bureaucracy. They've also replaced our core values of hard work and responsibility with sloth and dependency. So, you've been on unemployment insurance for 2 years???!!! No problem, Obama and his minions will let you ride out the rest of your miserable life at the taxpayer's expense.

At one point last night I told my colleague that we should take every big mouth leftist in the U.S., and dump them off in Taiwan, the Philippines or elsewhere in Asia without a penny in their pocket. If they can manage to survive a year, both they and America would be better off when they come back. I seriously doubt that many of them could survive.

It's getting close to boarding time. I am so glad to be coming back to America with another shining example of how the American values of hardwork, thrift, and personal responsibility translate into success in every society. It is so sad that many Americans are losing those very values.

Saturday, August 13, 2011

An Economic Lesson from Harry Truman

The appointment of yet another deficit commission, to make recommendations for reducing the programmed increases in our national debt over the next 10 years, demonstrates just how dysfunctional the political system has really become.

President Obama appointed a bi-partisan deficit commission last year. In December, they came back with a modest proposal to reduce the planned increase in the debt by $4 trillion over the next 10 years.

Obama should of went on TV, held the plan up, and told the American people that we need to do this to fix the economy. Then he should have dumped it in John Boehner's and Harry Reid's laps and focused like a laser beam on building support for it around the country. That's what Reagan and Clinton would have done.

Instead, Obama ran away from it. It was his own debt commission. Democrats and Republicans on the commission voted for it. But Obama ran away from it like it was the plague.

Over the last few months a bi-partisan group in the Senate, known as the Gang of Six, also came up with a modest proposal to reduce the increase in the debt by $4 trillion over the next 10 years. Both Democrat Majority leader Harry Reid and President Obama ran away from it.

Now, as part of the deal to raise the debt ceiling by a whopping $2.4 trillion over the next 18 months, the House and Senate have appointed yet another deficit commission tasked with finding future savings in the budget, amounting to a lousy $1.6 trillion over the next 10 years. This won't do a thing to solve our economic woes.

The big problem here is that Democrats just don't want to cut spending.

They are sustained by various Keynesian economists, like Paul Krugman who warn of dire economic consequences if we cut government spending.

Keynesian economists also warned Harry Truman not to cut government spending at the end of WWII. They actually tried to get Truman to keep the wartime economy in tact. They argued that we should continue to build military equipment and just bury it in the desert in the name of "full employment".

Fortunately, President Truman told the Keynesian's to take a hike.

Truman oversaw a massive transformation from a government directed economy to a private one. Yes, there were some minor dislocations as there are in all transformations, but the economy did not collapse, millions of people were not thrown out of work, and we did not enter a second Great Depression as the Keynesian's claimed would happen.

The following table, from the White House Office of Management and budget, illustrates spending during the Truman era versus today:

Year 1944 1945 1946 1947 1949 1949 1950 1951 1952 2011
National Defense 37.8 37.5 19.2 5.5 3.5 4.8 5.0 7.4 13.2 5.1
Human Resources 0.9 0.8 2.5 4.2 3.8 4.0 5.2 3.4 3.4 16.6
Physical Resources 2.6 0.8 0.4 0.5 0.9 1.1 1.3 1.2 1.2 1.4
Net Interest 1.1 1.4 1.8 1.8 1.7 1.7 1.8 1.5 1.3 1.4
Other 1.8 2.0 1.6 3.4 2.3 3.3 2.9 1.5 1.2 1.4
Undistributed offsetting receipts -0.6 -0.6 -0.7 -0.7 -0.6 -0.7 -0.7 -0.7 -1.0 -0.6
Total 43.6 41.9 24.8 14.8 11.6 14.3 15.6 14.2 19.4 25.3

Look how fast Truman wound down the war time economy: Government spending went from a peek of 43.6% of GDP to 11.6% of GDP in 4 years. Truman kept government spending at about 15% of GDP between 1947 and 1951. Yes federal spending jumped to 19.4% of GDP in 1952, but this was entirely due to increases in national defense to fight the Korean war.

Unless you were a black in the south, life during the late 40s and early 50s was pretty good, because the government mostly kept it's nose out of our business.

Look at the chart carefully. The problem we have today is very clear -- a bloated and unsustainable welfare / entitlement system, which now comprises nearly 17% of GDP. It will continue to grow and squeeze out the private economy as baby boomers head into retirement.

We need to take a lesson from Truman and unwind as much government spending as possible in as short a time as possible.

We don't need to go from 43.6% of GDP to 11.6% of GDP as Truman did. We only need to go from 25.3% to 18% or so. That, plus simplification of the 80,000 page tax code is all we need to do to restart the economy and balance the budget.

Harry Truman does not get enough credit from history for saving the country.

Had Truman listened to the Keynesian's, who wanted to build tanks and bury them in the desert, America would be a poor country today.

Wednesday, August 10, 2011

The Biggest Loser to Ever Occupy the White House

Obama's dismal handling of the downgrade to America's credit rating is the most pitiful lack of leadership in recent memory.

In my 52 years on this earth, I have learned that there is one thing which is 100% certain in life: winners take responsibility and losers blame others.

Bush, Europe, the weather, the Arab Spring, Wall Street, Owners of private jets, the Tea Party, Oil Companies, Glen Beck, Gold "speculators", the GOP, and even ATM Machines... all at fault for the dismal economy, which led to the downgrade. But not the government and certainly not Obama. No, they are as pure and faultless as a virgin's honey pot.

Even liberals are starting to get this. People from Maureen Dowd to several Clinton confidants have concluded that Obama is the biggest loser to occupy the White House since Jimmy Carter.

In my view, Obama may yet become the biggest loser to ever occupy the White House.

Nothing is going to change until this incompetent SOB is booted from office, one way or another.

Wisconsin Recall Election

I was watching MSNBC last night covering the Wisconsin recall election. They were in Wisconsin among a crowd of recall supporters.

Every single "working person" they interviewed was a government employee -- mostly employees of the failed government monopoly school system. There wasn't a single Teamster, UAW member, etc. in the crowd. It was all government employees.

This should have crystallized the real problem in America for everyone. The two sides in America politics are not "rich" versus "poor". The two sides in America are people who work for a living versus people who vote for their living. There are "rich", "middle class", and "poor" people on both sides.

We no longer have government of the people, by the people, and for the people. It's now a government of the government, by the government, and for the government.

Until this dramatically changes, America is going to continue its slide into the trash heap of history.

Thursday, August 4, 2011

What is Really Driving the Deficit?

We spend $700 billion on the military each year.

If we leave Iraq and Afghanistan we save $100 billion.

If we leave Europe, Japan, and South Korea we might save $100 billion more.

I support downsizing those commitments right now.

That leaves us with $500 billion in military spending, which is less than 3.5% of GDP. That would be lowest military spending since before WWII. It's a reasonable price to protect the country.

The deficit this year is over $1,500 billion. Take $200 billion out of the military and we still have a $1,300 billion deficit.

Yes, military spending needs to be reformed, but it is not the primary driver of the deficit.

The primary driver of the deficit is that over half the people in the country receive a government check.

Until that fact really sinks in, we are going to continue to hemorrhage money.