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.

Voters to Obama: Take Your Spending and Shove It

The voters sent a clear message last night: We don't like what Obama and the Democrats have done to us over the last two years. We're not going to take it any longer. So, take your big government spending and shove it.

The breadth and depth of the Democrat's defeat was unimaginable just a couple of months ago.

The GOP will pick up 63 to 65 House seats -- the largest turnover since WWII. Not only were the Democrat classes of 2006 and 2008 largely purged from the House, several long time Democrat Congressmen (like Ike Skelton) were defeated.

The GOP won almost 700 state legislative seats. (I thought I was being optimistic when I predicted at least 300). 20 or 21 state legislatures will change party control, just in time for redistricting. North Carolina and Alabama have GOP state legislatures for the first time since the 1870s.

Several governors races are still too close to call, including Oregon and Minnesota, which the Democrats were supposed to win handily.

The GOP won at least 6 Senate seats. Rand Paul won by double digits. Marco Rubio had a larger than expected margin. One of the most liberal members of the Senate (Russ Feigngold) was handily defeated. We'll see what happens in Colorado and Washington.

The GOP elected the first female Latino governor (Susana Martinez), the first female Indian governor (Nikki Haley), and two other women governors (Mary Fallin and Jan Brewer). The GOP also elected three Latino Congressmen, including a woman (Jaime Herrera) from my state. They also elected and two black Congressmen. We'll see if they are allowed into the Congressional Black Caucus.

The only bad news for the GOP is that three successful business women (Meg Whitman, Carly Fiorini, and Linda McMahon) went down in flames as did Christine O'Donnell, and Sharron Angle. What a surprise given that they were viciously attacked as extremists, whores, bitches, psychos, and worse by the Democrats and their cronies in the media. Feminists everywhere must be so proud of their great triumph in defeating these women with their vulgar slurs.

The big question is what will Obama do now? Will he try to work with the GOP House like Clinton did after the GOP picked up 54 seats in 1994? My guess is that he won't. Obama is too much of a leftist ideologue. He also doesn't have any experience working with an opposition. Obama will likely try to use executive orders to push through his radical agenda on things like carbon emissions, while continuing to demonize the GOP as obstructionists.

Democrats who predict that the GOP will just sit back and do nothing are kidding themselves. That may be what Mitch McConnell wants, but he isn't calling the shots. The House is in charge of the GOP agenda. There are enough Tea Party candidates elected last night to push through pretty much whatever they want and send it to the Senate.

There are 21 Democrat Senators up for reelection in 2012. Many of them are in solidly red states while others are in states that swung heavily to the GOP yesterday. That includes Joe Manchin of West Virginia who just won a special election by running television ads in which he used a rifle to shoot holes in Obama's cap-and-trade bill. It's doubtful that they will continue to follow Obama off of a cliff.

On the GOP side, people like Rand Paul, Marco Rubio, Jim DeMint and others will not be content to simply block and filibuster legislation. These people have an agenda and they are they are going to try to push it.

It would not surprise me at all to see a coalition of scared Democrats and GOP Tea Partiers in the Senate pass a fair amount of legislation on taxes, spending cuts, and fixes to Obamacare.

We should also expect to see the new GOP Governors and State Legislators push through their own reform agenda to fix their economies, failing schools, and tort systems.

Last night was an election of historic proportions. Now, the real work begins.

Tea Party: All Noise and No Muscle?

The AP is running a story today that paints the Tea Party movement as being largely ineffective. One Republican consultant characterized them as making a lot of noise, but having no no muscle.

The smarmy little Republican operative who said that may very well wind up eating his words. There is still plenty of time between now and 2012 for a new Ross Perot type candidate to emerge and get in front of this thing.

Perot was largely a creation of the media, starting with Larry King. Half way through the campaign he went nuts and quit, and then re-entered the race. However, people were so angry at H.W Bush that Perot won 19% of the vote anyway.

People are every bit as angry today, starting with W. Bush, Wall Street, the Congress, and now Obama. The Tea Party is a ready made movement for a right-of-center populist candidate to leverage. I think Sarah Palin knows this and is paving the groundwork to make it happen.

Palin was the first GOP leader to endorse the third party congressional candidate in NY23. She has endorsed Rand Paul for Senate in Kentucky over the establishment, neo-con candidate. Her husband used to be a member of the Alaska Independence Party. A couple of weeks ago, she stunned GOP sycophant Sean Hannity by saying that third party conservative candidates are a good thing because: A.) they provide us with more choice and B.) they help keep the GOP candidates in-line. After their disastrous performance under Bush, we all know that the GOP needs to be kept on a short leash. Sure Palin made a campaign appearance with McCain, but this was a political payback for McCain putting her on the ticket in 2008.

The GOP has a nasty habit of letting people have their turn at the Presidential nomination. Reagan lost the 1976 primary but wound up as the candidate in 1980. Bush lost in 1980 but was the candidate in 1988. Dole lost in 1988 but was the candidate in 1996. No serious 1996 contender ran in 2000, but McCain lost in 2000 and he was the candidate in 2008. Everyone knows that it's Romney's turn next. Palin knows this too, which is why I think she is laying the groundwork for an independent campaign in 2012.

Palin may or may not be the best choice. It's still not clear that she has what it takes to go the distance. Who else is there? Former New Mexico Governor Gary Johnson looks set to run, but he has little national exposure. I like the idea of having a successful business person like Perot in the race. Unfortunately, most high profile technology executives are liberals. We certainly don't want anyone from Wall Street in front of this movement. Donald Trump? He made some noises about running a few years ago, but then bailed out.

So unless someone emerges from the ether over the next year, it's probably Palin or no one. If it's no one, we're going to get stuck with RINO Romney and nothing much will change.

Hatch worried that the Tea Party will tear GOP apart

Orin Hatch has been bellyaching that the Tea Party threatens the GOP establishment. He joins a growing chorus of GOP regulars who are becoming very worried about the consequences of Tea Party activism. GREAT!!! They should be worried. While there are a small handful of good people in the GOP, most of the SOBs in the party need to get booted from office along with the Democrats.

I cast my first vote in 1980. I voted for Reagan. For 20 years, I listened to GOP excuses. Reagan couldn't cut spending in the 1980s because he had a Democrat congress. Gingrich and the GOP Congress couldn't cut spending in the 1990s because they were laboring under a Democrat President. For 20 years I said: I want to see the GOP run it all so that they can make the changes they talk about.

Well, now we've seen the GOP run it all under Bush and it wasn't a pretty site.

They created the first new entitlement program since LBJ. They initiated the largest federal intrusion into the classroom in history. They created the largest pork barrel programs the world has ever seen. According to the Heritage Foundation, Bush oversaw Hurricane Katrina "victims" spending OUR TAX MONEY on things like Caribbean vacations, Dom Perignon champagne, Girls Gone Wild videos, and at least one SEX CHANGE OPERATION. They embarked on a costly, demented, and belligerent foreign policy that has left America weaker in the world.

As a result, they turned a balanced budget into a massive annual deficit. They doubled the national debt and had to borrow a TRILLION dollars from the Chinese to do so. They collapsed the economy. Then they gave Wall Street Banksters $700 BILLION dollars of OUR TAX MONEY, which was promptly used to lavish bonuses on FAILED executives.

Of course, one could point out that Obama is even worse, but to do so would be missing the entire point, which is: Both parties are sprinting towards hell. I don't want to go to hell. I want someone to turn around and go the other way. The GOP has shown that they won't. That's the problem.

Tea Party a Major Success

By all accounts the 9/12 Tea Party was a major success. The D.C. police were surprised by how many people attended. At one point, they had to close Pennsylvania Avenue. Of course, the so-called “mainstream” media tried to downplay the significance of the protest, declaring that only “tens of thousands” of people were in attendance. The London Daily Mail was the first news source to set the record straight, estimating that up to 2 million people were in attendance.

When was the last time that the left was able to stage a protest rally that drew upwards of 2 million people?

The D.C. march was only part of the story. Tea Parties were held across the country. My wife and I were startled yesterday to see 50 or 60 protestors in our normally quiet suburb of Redmond, WA.

It's very obvious that something big is happening here. It's not just the Tea Parties. 20 states have now passed 10th Amendment Resolutions declaring their sovereignty over the federal government, demanding that the federal government stop usurping their power. Who would have thought even a couple of years ago that this would have been possible? It has now become inevitable due to the massive power grab of the Bush administration and the even greater foundation of tyranny being laid by Barack Obama.

Hopefully the Republican establishment will finally get the message and respond to voter discontent in the same way they did in 1994 – with a real program for true reform.