Living Within Our Means

The following 30 minute video depicts Milton Friedman at his best.  This interview allows Milton to discuss several of his most important topics.  One of his famous quotations is near the beginning of this video “One of the great mistakes is to judge policies and programs by their intentions rather than their results”.  His ability to present uncomplicated answers to complex questions is superb.  This video is now listed in the permanent links on this blog to the right of this text under “View these videos”.

This video is from the PBS show "The Open Mind", Moderator/Host Richard D. Heffner, Guest: Milton Friedman, economist, Sunday, December 7, 1975:

PBS Open Minds

You should invest 30 minutes of your time to watch this video in its entirety, if for no other reason to see how fluidly Milton is able to think through these questions and give such easily understood answers.

If you do not have the time now here are some of the highlights:

One of the great mistakes is to judge policies and programs by their intentions rather than their results. We all know a famous road that is paved with good intentions. The people who go around talking about their soft heart, I admire them for the softness of their heart, but unfortunately, it very often extends to their head as well, because the fact is that the programs that are labeled as being for the poor, for the needy, almost always have effects exactly the opposite of those which their well-intentioned sponsors intend them to have.

Let me give you a very simple example. Take the minimum wage law. Its well-meaning sponsors — there are always in these cases two groups of sponsors. There are the well-meaning sponsors and there are the special interests who are using the well-meaning sponsors as front men. You almost always when you have bad programs have an unholy coalition of the do-gooders on the one hand and the special interests on the other. The minimum wage law is as clear a case as you could want. The special interests are, of course, the trade unions, the monopolistic craft trade unions in particular.

You see, I think there’s been one underlying basic fallacy in this whole set of Social Security and Welfare measures. And that is the fallacy — this is at the bottom of it — the fallacy that it is feasible and possible to do good with other people’s money. Now, you see that fallacy — that view — has two flaws. If I want to do good with other people’s money I’d first have to take it away from them. That means that the welfare state philosophy of doing good with other people’s money, at its very bottom, is a philosophy of violence and coercion. It’s against freedom, because I have to use force to get the money. In the second place, very few people spend other people’s money as carefully as they spend their own.

But if you take the road that we have been on, we are heading towards a destruction of our free society and towards a totalitarian society.... we still have time to avoid it. But we will not avoid it unless the people of this country recognize the danger and take very difficult and important steps to set a limit on the extent to which they are going to permit government to interfere with their lives.

Well, I say thank God for government waste. If government is doing bad things, it’s only the waste that prevents the harm from being greater. And the waste of government has two very important elements. Number one, if government were now spending.…efficiently, we’d be slaves now. And in the second place, the waste is so obvious that it arouses a counter­movement on the population at large, people are disillusioned with government and it increases the chance that they will recognize where this road is taking them and get off that train before it goes all the way.

Other People's Money

These 2 short videos explain the fundamental inefficiency of government spending:

The first video is an excerpt from a TV interview on PBS "The Open Mind" (December 7, 1975).  In this interview Nobel Laureate economist Milton Friedman examines the dynamics of "doing good" with other people's money:

http://youtu.be/2IECY6LgqE0

The second video is from the organization ProLiberty:

http://youtu.be/leYMlFWWrmw

Funding Government by the Minute

Please take 4 minutes to watch this very well made video from LearnLiberty.org.  You have seen and heard other discussions of our current Federal budget crisis but this video is extremely compelling.

http://www.youtube.com/watch?v=p0RkWqyn1y4&feature=youtu.be

Death spiral states

Forbes magazine published the following article on 11/25/12:

http://www.forbes.com/sites/baldwin/2012/11/25/do-you-live-in-a-death-spiral-state/

The highlights of this article are as follows:

Don’t buy a house in a state where private sector workers are outnumbered by folks dependent on government.  Thinking about buying a house? Or a municipal bond? Be careful where you put your capital. Don’t put it in a state at high risk of a fiscal tailspin.

Two factors determine whether a state makes this elite list of fiscal hellholes. The first is whether it has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector.

The taker count is the number of state and local government workers plus the number of people on Medicaid plus 1 for each $100,000 of unfunded pension liabilities.

The second element in the death spiral list is a scorecard of state credit-worthiness done by Conning & Co., a money manager known for its measures of risk in insurance company portfolios.

A state qualifies for the Forbes death spiral list if its taker/maker ratio exceeds 1.0 and it resides in the bottom half of Conning’s ranking.

The list of states in a death spiral:

New Mexico

Mississippi

California

Alabama

Maine

New York

South Carolina

Kentucky

Illinois

Hawaii

Ohio

Cut Federal Spending Act of 2011

Thanks to Senator Rand Paul we now have a bill before the US Senate that will reduce Federal spending by 500 billion dollars in 2011.  The title of this bill is the “Cut Federal Spending Act of 2011”.  The bill can be viewed at this link:

http://www.randpaul2010.com/wp-content/uploads/2011/01/500Bcutsbill.pdf

This is a relatively short bill considering the amount of spending cuts that it entails.  You can easily read all 12 pages in a few minutes.  If you do not read the entire bill the highlights are as follows:

The following departments or agencies will be defunded:

The Government printing office

The Agriculture Research Service.


The National Institute of Food and Agriculture.


The Resources Conservation Service.


The Foreign Agricultural Service.


All Department of Education programs are defunded effective on the date of enactment of this Act, except for the Pell grant program which shall be capped at $16,256,000,000.


All accounts and programs of the Department of Housing and Urban Development.


The Bureau of Reclamation.


All accounts and programs of the Bureau of Indian Affairs.


All accounts and programs of the Office of Justice Programs.


International Organizations and Conferences.


International Commissions.


All Amtrak Federal subsidies are terminated.


Affordable Housing Program.


Commission on Fine Arts.


Consumer Product Safety Commission.


Corporation for Public Broadcasting.


National Endowment for the Arts.


National Endowment for the Humanities.


State Justice Institute.



All other Federal Agencies and departments will have their budgets cut by various amounts except for the following:


The Occupational Safety and Health Administration.


The Mine Safety and Health Administration.


The Employment and Training Administration (including all unemployment compensation).


Department of Veterans’ Affairs


Social Security Administration


MISCELLANEOUS BUDGET SAVINGS.


The following programs shall be implemented or repealed in fiscal year 2011 with the savings provided:


Collect delinquent taxes from Federal Employees, $3,000,000,000.


Freeze Federal Government employee pay, $2,000,000,000.


Reduce Federal Government travel, $7,500,000,000.


Davis- Bacon is repealed, $6,000,000,000.


Prohibit union labor project agreements, $2,000,000,000.


The Troubled Assets Relief Program is repealed, $4,481,000,000.


Unused Federal assets shall be sold, $19,000,000,000.


Reduce Federal vehicle budget, $600,000,000.

I sent the lettter listed below to  both of my Seantrors:
 

Dear Senator _______________________


I enthusiastically support the “Cut Federal Spending Act of 2011” which was sponsored by Senator Rand Paul. I encourage you to consider the detrimental effects that our current Federal spending will have on the future financial stability of our nation. I know that you have the best interests of your continuants in mind and that you realize that our current federal spending is unsustainable. Your vote to pass the “Cut Federal Spending Act of 2011” will make America stronger and more self sufficient. I know that you will put your constituents future above politics.  I strongly encourage you to vote in favor of the Senate bill “Cut Federal Spending Act of 2011”.

Sincerely yours,

Tax exemptions for any cause

New York City will soon consider tax-free financing for the Ground Zero Muslim center:

http://www.reuters.com/article/idUSTRE67Q5BW20100827?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FtopNews+%28News+%2F+US+%2F+Top+News%29&utm_content=Google+Feedfetcher

The Muslim center planned near the site of the World Trade Center attack could qualify for tax-free financing, a spokesman for City Comptroller John Liu said on Friday, and Liu is willing to consider approving the public subsidy.

The mosque's backers hope to raise a total of $70 million in tax-exempt debt to build the center, according to the New York Times. Tax laws allow such funding for religiously affiliated non-profits if they can prove the facility will benefit the general public and their religious activities are funded separately.

Whether you support or oppose the building of this project the fact that it may be financed by tax exempt bonds is outrageous. This is what happens when someone else is allowed to spend your money. Just say no to government spending! (Please note that handing out tax exemptions has the same effect as increasing government spending).

A deadly virus

The following editorial is from the 8/19/10 edition of the Washington Times:

http://www.washingtontimes.com/news/2010/aug/19/we-cant-afford-this-government/

The title “We can't afford this government” and subtitle “Costs of bureaucracy spread like a deadly virus” are strongly worded but are directly to the point.

Consider these 2 facts referenced in the editorial:

…Congressional Budget Office estimate that this year's federal deficit will be well above $1.3 trillion for a second straight year and remain above $1 trillion next year as well - causing as much debt in three years as government built up in the previous 219.

…the announcement by Americans for Tax Reform (ATR) that yesterday (8/19/10) was the 2010 "Cost of Government Day," which is "the day on which the average American has earned enough gross income to pay off his or her share of the spending and regulatory burdens imposed by government at the federal, state and local levels." Just two years ago, Cost of Government Day fell an astonishing 34 days earlier. This year, the average American worked 231 days just to support government, which consumes 63.41 percent of national income.

You Can't Spend Your Way Out of the Crisis

Not every government in the world is expanding. This article is about the current administration in New Zealand:

http://online.wsj.com/article/SB123638162497057661.html

Some highlights of this article:

• "We don't tell New Zealanders we can stop the global recession, because we can't," says Prime Minister John Key.



• "We have been on a slippery slope," Mr. Key says, pointing to the country's slide to the bottom half of the Organization for Economic Cooperation and Development's per-capita GDP rankings. "So we need to lift those per-capita wages, and the only way to really do that is through productivity growth driving efficiency in the country." He talks at length about how to attract and retain talented workers. What does he think about populist arguments about the end of capitalism? "Nonsense!"



• Mr. Key's program focuses first on personal income tax cuts, which -- given that the new top rate, as of April 1, will be 38% -- are still high, especially when compared to Hong Kong and Singapore. "We just think it's good tax policy to lower and flatten your tax curve," he says. "People will move in labor markets and they look at their after-tax incomes."



• Cutting the corporate tax rate -- which is now 30% -- isn't as crucial just now as keeping liquidity flowing, Mr. Key argues. "A lot of [companies] won't pay tax if they don't make money," he reasons. "So they might be slightly less focused on corporate tax in the immediate future. Longer-term, they will be." Why? Corporate money is "mobile." "If you really are out of whack with the prevailing corporate tax rates, and there's been a global shift toward countries lowering their corporate tax rate, then you're not likely to attract capital, or you're likely to lose capital." Mr. Key and his coalition partner, the ACT Party -- Mr. Douglas's party -- want to eventually align personal, trust and company tax rates at 30%..

I now have New Zealand on my list of potential future residences

Tea parties make an impact

Here it is, the Obama administration’s response to the call for reduced government spending:

http://www.google.com/hostednews/ap/article/ALeqM5isOFwdbq0tsqatW6vJpkDRTI1gMgD97MADV81

In 2009 federal spending is budgeted to total three trillion nine hundred thirty eight billion dollars ($3,938,000,000,000). This spending is equal to 27.7% of GDP. See page 114 of the following report: http://www.gpoaccess.gov/usbudget/fy10/pdf/fy10-newera.pdf

Please note that the $3.938 trillion spending does not include the “stimulus package” or any losses that the US Treasury or FDIC will accrue for any of the “bailout programs”.

The ability of the Obama administration to find a savings of $100 million dollars in this vast tsunami of spending is a testament to their commitment to reduce government waste.