Saturday, July 16, 2011

Taking a break from not doing much...

Before I take the rest of the summer off I thought I would leave you with a few thoughts. I realize I have not been faithful in blogging as often as the Tweeting/Facebooking/Texting crowd is used to but I have a good reason - apathy with a little bit of indifference mixed in...

Anyway, we have been told that our government will default on its debt obligations on August 2nd unless the $14.29 trillion debt ceiling is raised. It is pretty basic stuff. For every $1 the government spends it has to borrow about 40 cents. So, on August 2nd the government will have 60 cents in tax dollars but will have "promised" another 40 cents in spending for interest on the debt, welfare, the military and so forth. Someone on August 2nd will have to be told, "No money for you." The Bush-type Republicans are willing to work with Mr. Obama to raise the ceiling, keep spending and allow for some minor revenue adjustments primarily from repealing a few tax deductions here and there. The Tea Party people do not want any compromise that comes with tax hikes or without massive Paul Ryan-type spending cuts. Of course the liberals want to save every program, add new ones and soak small businesses (70% of which are in the $250,000 in income per year crowd) for more money.

I hope our government defaults on August 2nd. If it results in Greek-style riots so be it. I want to see real spending cuts and massive crackdowns on the people who make up the welfare class. Do you realize that in 1983 around 29% of the American people received welfare of some sort? Did you know that over 44% get your money today? 47% of the American people do not pay income taxes anymore. Once we get to 51% receiving the property of other people and 51% not paying anything to the treasury it is all over for our country. Better to see shocking acknowledgment of impending bankruptcy as the clock strikes 12:00 on August 2nd than to see the real pain of gradualism that will come from band-aid solutions that completely destroys our economy and our republic 20 or so years from now. I say that Rome can and should burn to the ground now - and rebuilt with fiscal austerity and limited government. If we let Rome smolder until the Baby-Boomers and growing welfare class have pushed us past the point of no return then we will never turn things around.

Second thought.... I am very interested in the candidacy of Michelle Bachmann. I think she understands the case for real liberty. Even with some missteps in her campaign she could be the candidate to pose a great challenge to President Obama. How is Mitt Romney going to debate Obama? He started forced health care purchasing in Taxachusetts. He has no leg to stand on.

Third thought... President Obama last week said that unemployment benefits are a boost to the economy because it helps people demand the goods and services our businesses produce. Yes, he said it. So, if we gave the people who make up our 9.2% unemployment rate $100,000 per day, wouldn't that, under his logic, boost aggregate demand enough to end the sluggish recovery and help our nation's economy soar?

Speaking of the unemployment rate, get used to it being high for a long, long time. Yes, uncertainty over the cost of Obamacare; his push for tax hikes in 2013; bloated debt and rising regulations have all created a poor environment from which businesses can hire people. But, the bigger issue is this. The last recession has created massive structual changes, along with ongoing uncertainty that has led many businesses to downsize permanently. Many firms are doing more and more with fewer people and will continue to do so for the foreseeable future. I would expect unemployment in excess of 7 - 8% for the rest of this decade. This is what Western Europe has been forced to accept. Our march towards the socialism that destroyed much of Europe, along with rising structural unemployment will mean that the days of 4% unemployment may well be over.

Speaking of Europe, I have been shocked and am quite proud that the government of my country of birth - Germany - has pushed for cuts in government spending, tax and regulatory reform and has refused to engage in Keynesian nonsense for the past two years. This has lead to a falling unemployment and the fastest economic growth in Europe. The Germans are now lecturing us on how to move towards Hayek.

One more thing - and this is the good news. Notice that unemployment is rising at the same time more and more businesses are announcing upcoming price hikes to pay for rising commodity prices and other input costs impacted by regulations, health-care mandates and more. This is called stagflation. The last time we had the worst of both worlds was in 1979-80. Stagflation ended the FDR/Lyndon Johnson/Jimmy Carter era and ushered in Reaganomics. Let's hope that stagflation - as bad as it is - will be with us long enough to end the great Hope and Change experiment or at least forces Mr. Obama to act like Bill Clinton was forced to act in his second term (economically, not morally).

Enjoy the rest of your summer. That is all for now...


  1. Hear, hear!

    Now, let's just see if the planet explodes come August 2nd. Maybe some of those professional rioters from Canada will come down and wreak havoc, all the while holding out a hand to collect an entitlement.

  2. Always a joy to read your thoughts, hope your summer is going well!

  3. Dear Professor Chambless!
    i just listened to the last Obama's speech where he addresses to the wealthiest Americans to "contribute" to the rescue of the country through paying higher taxes. Such a nonsense heard from the president frightens me, and I am very concerned about the future of US. His speech is full of lies and incorrect historic examples about positive effects of raiding of taxes. What should we, young students, do now? Pray?