Does your wallet feel a little lighter? It should. Uncle Sam just bumped the debt ceiling to $1.9 trillion. That means you have even more that you have to pay back in the form of taxes in coming years.
Politico reports that Congress approved the record $1.9 trillion debt ceiling increase Thursday together with legislation to reinstate “pay-as-you-go” rules credited with helping to rein in deficits during the 1990s. CNN reports that the total U.S. Federal debt now stands at a staggering $12.3 trillion.
Earlier Alabama’s Senators Sessions and Shelby voted against the debt resolution in the upper chamber. Joe Bonner of Alabama’s 1st voted against it in the House.In fact, every single Republican in the House voted against the debt increase – every one. 37 Democrats voted against it.
This isn’t the end either. Remember the Obama budget? It is full of even more red ink and continues to ignore the economic reality that government cannot spend us out of debt. The roost is ready and the chickens are on their way in.
Oh and by the way, only one Alabama Congressman voted to raise the debt ceiling: Artur Davis (D-Birmingham). Davis is a leftist who has introduced a bill to provide federal loans to small businesses. Davis should remember that such loans are the province of banks. If left alone the banks will lend to any credit worthy organization or business. Fortunately Davis is the only Democrat among Alabama’s entire delegation.
Full vote results from the House are here:
Moody’s is warning that the United States could lose it’s top ranked credit ranking because of rising deficits. This is an important warning which politicians should be listening to.
If the government’s credit rating drops it will have effects that will echo throughout the global economy. First of all, the government will have to pay more on its debt. That’s bad news because it will raise the deficit more or require deeper budget cuts.
Second, if the government’s rates go up it may create pressure on other debt rates or interest rates. The government occupies such a large part of the credit markets that anything that happens to it has an impact on everyone else.
Remember, the only way for the government to raise is money is to print it, causing inflation for everyone, or raise taxes which everyone pays in some way.
It’s time to cut the deficit by taking bold, courageous steps to reign in the growth of government.
President Obama wants to expand loan guarantees to the nuclear power industry as a way to promote green energy options. That’s an acceptable goal and does move us off of a dependence on foreign oil.
However loan subsides are not the right way to go to achieve that goal. The Heritage Foundation in a post called Conditions and Policy Reforms Must Accompany Nuclear Loan Guarantee Boost says this:
“they create taxpayer liabilities, give recipients preferential treatment, and distort capital markets. Further, depending on how they are structured, they can remove incentives to decrease costs, stifle innovation, suppress private-sector financing solutions, perpetuate regulatory inefficiency, and encourage government dependence.”
The critical factor is the shift in the markets that government subsides create. The better idea is remove the massive hurdles and provide a raid path to certification of new systems. In fact, the government could promote a “type-acceptance” which would allow rapid deployment of new reactor systems. Bringing new plants online quickly is the best way to help the economy, green the energy sector and provide greater economic security.
It’s basic economics Mr. President. Do some reading.
The 5.7% jump in the 4th quarter 2009 has excited many who claim that this is evidence that government intervention in the markets has worked. Some think we are saved because of the government’s intervention via the stimulus prorgrams of the past year. But let’s look at three important points.
GDP Is Still Low
The actual GDP in the 4th quarter stood at 14,463.4 billion dollars. The high was in the 3rd quarter of 2008 and we aren’t back there yet. The number may be an improvement but we are still below where we were. This is not surprising because we know unemployment is still high.
GDP Report is Incomplete
The 5.7% report is “incomplete” according to the Bureau of Economic Analysis. Most economist expect that the number will drop when all factors are finally factored in. Don’t count your chickens just yet.
GDP is Built on Government Deficit Spending
The present economy is growing, in part, because of deficit government spending. Every penny of the stimulus comes from taxpayers. But much is deficit. That means we have a massive federal debt hanging over our heads which must be repaid.
The number is good and is a slow improvement but keep it in perspective.
There is a surprising but welcomed story in the papers this morning. Some people in Haiti are beginning to rebuild their homes without waiting on government help. The government is opposing their efforts.
The Associated Press says the Haitian government opposes the self-starting re-builders. The Culture and Communications Minister said the rebuilding “wouldn’t be tolerated.” She said, “the governemnt wants to develop and implement a comprehensive reconstruction plan that might feature building codes…”
The people of Haiti are not waiting. They are collecting pieces of wood and tin and rebuilding their own homes instead of waiting.
That is just like government. Oppose people who are hard working and force them to accept layers of government bureaucracy. These hard working people who desire to be self-sufficient should be encouraged. That is a nugget of freedom that shouldn’t be ignored.
The island nation has been suffering under ineffective and corrupt governments for generations. The recent earthquake with the staggering loss of life has brought the Haitian troubles squarely into the view of the entire world. There has been a massive outpouring of support, led by the United States, which so far has proven woefully inadequate to relieve the suffering there. The aid is necessary and ought to continue but it shows that the government is simply unable to respond fast enough to such disasters. That is a lesson we learned after Katrina.
Economics 101 teaches the concept of the Supply and Demand Curve. It is a powerful illustration which shows the relationship between prices and demand. As demand rises prices follow. The point at which price and demand balance one another is the point of equilibrium. All markets will stabilize at equilibrium if artificial forces are excluded. It’s a frustrating law that governments often try to bypass. But the curve always wins. Attempts to artificially shift the curve result in fouled economic conditions producing shortages or surpluses of goods. An inefficient economy is the result.
An article from the AP shows the curve in action. The makers of Tide detergent has been forced to cut prices. Why? Because of decreased consumer demand. IT’s and example of the Supply and Demand Curve in action and moving toward equilibrium. It’s a normal process.
Political leader should take note. Leave the market alone and they will work.
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