About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Tuesday, January 10, 2023

Prosperity: Seen & Unseen

"Just give it to me.  Send me money.  I don't want to work -  I'm too lazy, I'm too fat, I'm too stupid." - Bernie Marcus, Co-Founder of Home Depot, speaking about socialism in America & his observation that "Nobody works. Nobody gives a damn."

Laura Ingraham Was Right - Shut Down The Republican Party was the title of the post two days before the 2012 presidential election.  Laura's words in September, 2021 to the GOP - "If you can't beat Barack Obama with this record, then shut down the party.  Shut it down.  Start new, with new people."  Laura referred to this election as a "gimmee election" & the fact that the polls predicted a close election infuriated her to make the comment.  She wondered how a failed president by any historical measure could even be competitive for reelection let alone not being shellacked.  Of course BO won 332 electoral votes to 206 for the pitiful Romney.

I couldn't help but think of the above post & Laura's comments as the election results of the 2022 midterms came in on election night.  The party needs to take stock of itself if it couldn't do better than win the House with a miniscule five seat margin (that shakily includes George Santos, Brian Fitzpatrick, & Steve Womack - more later on the latter two) while losing a Senate seat in the process of competing against an even worse presidential record than the one that brought out the fury & distress that Laura felt ten years ago.

Well, things went downhill fast.

Once the GOP projected they had won majority control of the House they voted 52 to 158, in a closed door conference rule meeting, against an amendment by Tom McClintock to ban earmarks for annual spending bills in the new year (i.e., the majority of House Republicans in the new Congress are for earmarks meaning there is no difference between them & all the Democrats).  The vote was confirmed by two people familiar with the vote.

Earmarks are now called "congressionally directed spending" - meaning deal making between congressmen on local projects in their respective districts that have "absolutely no reason to be in the federal purview" according to House Freedom Caucus Chairman Scott Perry.  The McClintock proposed amendment would have scrapped the current rule allowing earmarks that had been narrowly adopted two years ago after Democrats brought earmarks back to life.

Trying to head off the above vote the Club for Growth, Americans for Tax Reform, Freedom Works, National Taxpayers Union, Heritage Action, & Citizens Against Government Waste wrote a letter to House GOP congressmen saying "Supporting Representative McClintock's amendment is your first opportunity to demonstrate to taxpayers that the election of a Republican majority in the House will be accompanied by a serious effort to restore & maintain fiscal responsibility."  Needless to say, the 158 House Republican congressmen who voted against the amendment also let down tens of millions of GOP midterm voters who couldn't be blamed if they felt the same way Laura did in 2012.

The word "betrayed" & the image of "being stabbed in the back" come to mind for those Republican voters who are unfamiliar with the voting records of about 75% (like 158 out of 210) of GOP congressmen.  The very definition of a low Liberty Score is a poor voting record regarding faithfulness to the Constitution & oath of office & a very high percentage of Republican congressmen have Liberty Scores of D or F.  Every Democrat is F.

But from here it got worse.

Although Republicans gaining control of the House means they have the power of the purse starting in 2023 - Article I, Section 9, Clause 7 of the Constitution - several retiring Senate Republicans in the December 2022 lame duck Congress outrageously did not trust the new House Republicans, expecting them to blow their opportunity to control spending & put a check on Biden.  

Well, I don't trust them either, especially after such an inauspicious start regarding earmarks, but trust on controlling spending was not really the case.  Eighteen Republican senators joined all the Democrat senators in December, who stuck together like glue as usual, to vote for the Consolidated Appropriations Act, 2023 - a 4,155 page $1.65 trillion omnibus spending bill that averted a government shutdown by funding the government in fiscal year 2023 & also contained numerous spending opportunities that were masked by such a large bill.

The omnibus was necessitated after the Senate could not finish their work by the deadline for keeping the government funded through regular congressional order which refers to the work of committees & subcommittees being presented for long & careful discussion before holding multiple votes that end up with twelve individual appropriation bills.  Every Member of both chambers, in regular order, votes for each of these twelve bills so there is complete transparency, no concealing of other hidden spending agendas, & a clearly understandable record for every Member of Congress.

The twelve pieces of legislation that require annual appropriation;

1.  Agriculture
2.  Commerce, Justice, & Science
3.  Defense
4.  Energy & Water
5.  Financial Services
6.  Homeland Security
7.  Interior & Environment
8.  Labor, Health & Human Services, & Education
9.  Legislative
10.  Military & Veterans
11.  State & Foreign Operations
12.  Transportation & Housing & Urban Development

In an omnibus voters have to dig to find out what a specific Member supported as they hide behind the need to keep the government funded as if the deadline had not been known for a year.

The 18 Republican senators who voted in December against your best interest (with * identifying retiring senators): *Blunt - MO, Boozman - AR, Capito - WV, Collins - ME, Cornyn - TX, Cotton - AR, Graham - SC, *Inhofe - OK, McConnell - KY, Moran - KS, Murkowski - AK, *Portman - OH, Romney - UT, Rounds - SD, *Shelby - AL, Thune - SD, Wicker - MS, & Young - IN.  Barrasso - WY, *Burr - NC, & Cramer - ND, did not vote.  The retiring senators are particularly disturbing in the omnibus vote as is Tom Cotton joining this group of senators with failing Liberty Scores.

The final House vote was 225 to 201 with 9 Republicans voting in December with 216 Democrats & 4 Republicans not voting.  AOC was the lone Democrat to vote against the omnibus because she opposed the expansion of funding for ICE, DHS, & Defense.  Tlaib was the lone Democrat to vote "present" because she thought the omnibus did not provide "meaningful action in providing relief & protection during this public health emergency." 

The 9 Republican congressmen who voted in December against your best interest (with * identifying retiring congressmen):  *Cheney - WY, *Kinzinger - IL, Fitzpatrick - PA, Womack - AR, *Rodney Davis -IL, *Herrera Beutler - WA, *Jacobs - NY, *Katko - NY, & *Upton - MI.  Not voting: Buck - CO, Gallagher - WI, Hollingsworth - IN, & McKinley - WV.  In addition to voting for the omnibus, Fitzpatrick & Womack had controversial positions on Trump's second impeachment - both actions straining the relations of the slim Republican majority in the new House.

In addition to increased defense spending the WSJ reports the omnibus includes $45 billion for Ukraine, $16 billion in earmarks, expansions of Pell grants, heating assistance, Head Start, & the SNAP food stamps program, a 30% increase in the Child Care & Development Block Grant Program, changes to eligibility for Medicaid, the Children's Health Insurance Program, & Medicare provider payments, changes in public-land management, a plan to phase out large-scale driftnet fishing, new oversight of horse racing, a restructure of the U.S. Patent & Trademark Office, changes to help Boeing meet aircraft-certification deadlines, alterations to lobster regulation, a ban of Tik-Tok on government devices, changes to RMD requirements in deferred-tax retirement accounts, a revision of the Electoral Count Act of 1887, & the power grabbing Modernization of Cosmetics Regulations Act of 2022.

It is easy to see why the bill is called omnibus with all of the above jammed in with Members having virtually no time to read it let alone understand it.  You can look all of this up for more detail in the link I provided above for the entire bill.  All told the $1.65 trillion is divided evenly between defense & non-defense discretionary spending.  There were no spending cuts.

The omnibus required a 3/5 majority (60 senators if all present) to pass the Senate so without Republican help the bill would have died.  The government could have been funded by a Continuing Resolution until the new Republican-majority House was sworn in after selection of a Speaker in January.  But the action of the Senate Republicans never gave the new House Republicans a chance as Pelosi whipped the omnibus through the lame duck House like greased lightning.

This feckless representation is appalling to me but not so much to 83 million Millennials or the 74 million people in Generation Z whose only link to academic economics is Modern Monetary Theory - people who have known nothing but prosperity their entire lives.  I know such people & know of them, like the daughter of a charter member of this blog who tells her mother everything always turns out alright regardless of the doom & gloom she hears about regarding fiscal responsibility or lack thereof.

A comment I published on the December 12 post from a Baby Boomer describes this same point of view:  "For my entire life the Republicans have been predicting doom and gloom if we don’t cut spending.  Year after year the budget gets passed, usually larger than the request.   Spending cuts are never part of the discussion in Washington.  Today we talk in terms of trillions of dollars.  How many zeros are in a trillion or for that matter a billion?  It doesn’t matter the size of the debt the government will write a check.  A printing press is a wonderful tool to own.  We can continue to predict the coming economic crisis but history, the previous 100 years, tells a story of prosperity."

Of course Americans have known only a story of prosperity because the country was founded on the libertarian principles of limited government, personal responsibility, & free enterprise - all principles that bring out incentives for improving human conditions like ingenuity, inventiveness, creativity, imagination, originality, skill, talent, & genius.  Steve Jobs' brilliance created the most ubiquitous product the world has ever known when there was no demand for it.

Even in 1929 America's GDP was more than three times the size of Germany's or Great Britain's & more than seven times larger than Japan's.  Source - Professor Paul Kennedy, Yale University.

Ever since 1789 when the new government started under the ratified Constitution & Alexander Hamilton put in place the nation's financial, tax, & monetary system that pegged the dollar's value to gold, prosperity only grew in the new country.  Except for times of war the price of gold stayed in the $20 per troy ounce range from 1792 to 1933 when FDR devalued it.   The U.S. price level remained constant from 1800 until 1946 when the government declared both a federal policy & responsibility to promote purchasing power.  See graph below.

Click on graph to enlarge.

For much of the first 140 years of our new country the U.S. was on the gold standard meaning the government stood ready to buy & sell gold in unlimited amounts @ a fixed dollar price thereby making inflation impossible.

With this foundation the wealth of We the People of the United States increased "the previous 100 years", even with the government spending trillions of dollars on welfare programs the commenter described above, so that today prosperity is overflowing especially compared to countries in the rest of the world.

For perspective it is important to understand that the average poor American in the bottom income quintile has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe.  These comparisons are to the average citizens in foreign countries, not to those classified as poor - a middle class person in Europe lives below the standard of living of someone in America living @ the so-called poverty level.  Many architects & engineers in Europe can only afford to rent apartments - not own their homes like we do in America.  Source – Robert Rector of the Heritage Foundation. 

Think of your first TV & then first color TV & even the first time you had cable TV in your house, & then the first time you air conditioned a room or maybe two – did you consider yourself living below the poverty level before or during these times?  For everyone who has travelled to Europe but not to the poverty-stricken neighborhoods of America it is hard to believe that the typical American living below the poverty level has a home fully equipped with appliances that is larger than the home of the average non poor French, German, or Englishman.

Now the above describes the prosperity that is seen - what is immediately in front of us.  It is important to use experience & foresight to help determine the prosperity that is not seen as Frederic Bastiat taught.

Governments have three ways to fund its spending.  It can 1) tax, 2) borrow, & 3) print new money.  Its source for the first two is the private sector - call it 100

Rose Wilder Lane summed up the main consideration for government spending when she wrote on page 52 of The Discovery Of Freedom "Men in Government must take the wealth they consume from the wealth that productive men produce.  The important question is ``What amount can they take safely?"'  In brief, how much of that 100 - earned income - can the government take before it kills the incentive to produce & create wealth.

Henry Hazlitt presents a further factor on page 37 of his book Economics In One Lesson (based on Bastiat's work) when he wrote "it (is) improbable that the wealth created by government spending will fully compensate for the wealth destroyed by the taxes imposed to pay for that spending."

If the budget is balanced the tax receipts equal the spending.  The problem with a balanced budget is if the spending & the taxes are both very high, thereby taking too much of the private sector's earned income, a less robust economy will be produced than otherwise would have been realized.

It is important to understand that government spending, by itself, does not cause inflation.  President Reagan taught Jimmy Carter & the nation this lesson during one of their debates, by pointing out that tax cuts do not cause inflation, when he asked why is it inflationary for people to keep what they earn, & spend it as they see fit, but not inflationary for the government to take what people earn to spend it.  The money is spent either way.

If the budget is not balanced by tax receipts a deficit is created.  In this case, if the citizen taxpayers are willing to buy the debt, we once again are producing a less robust economy, but not inflation, by the same reasoning as above.  Economist John Tamny recently pointed out that deficits have nothing to do with inflation, by themselves, because if deficits caused inflation then there would be no deficits.  Think about it - when a citizen taxpayer buys a U.S. Treasury security he is buying future income streams denominated in dollars.  Who, either foreign or domestic, would buy these securities if the dollars paid out in interest, let alone the return of the original investment decades from now, were losing value through inflation.

If the budget is not balanced by tax receipts & Treasury securities are not purchased by the public in sufficient supply to fund the spending the Federal Reserve steps in & makes up the difference by creating money out of thin air.  This produces inflation - the distortion of prices that occurs when money loses value.  The fundamental cause of inflation is a decline in the value of currency - i.e., too much money chasing too few goods.

The point of the above explanations of government spending, tax, deficits, & the inflation caused by the Fed printing money is to highlight the prosperity that is not seen because of the less robust economies & inflation that is triggered by the way government  spending is funded.

Stanford economics professor John Taylor teaches that economic growth equals employment growth + productivity growth.  Clearly, government spending that encourages people not to work does not help employment growth & taking money from the private sector to fund the government spending can only stymy the  creation of innovations that produce productivity growth.  Worse yet, the people who are not working are not just consuming resources, they are not contributing @ all.

Former Fed Vice Chairman Stanley Fischer explained that "If labor productivity grows an average of 2% per year, average living standards for our children's generation will be twice what we experienced.  If labor productivity grows an average of 1% per year, the difference is dramatic:  Living standards will take two generations to double."  It is this difference in the growth of living standards, prosperity in our context, that is not readily seen.  

The following graphic shows the difference in economic growth rates between two diametrically opposed ideologies - Reagan for free enterprise (environment of lowering both taxes & regulations) & BO for socialism (environment of raising both taxes & regulations).  The graphic below shows the quarter to quarter annualized real GDP change for Reagan's & BO's presidencies starting in the 3rd year of each presidency.

 Click on graphic to enlarge.

In summary, the recent omnibus spending bill, & all the other ones like it, robs the country of prosperity that is not immediately seen.  It is the reduction of the size of government & its claims on earned income that fuels economic growth, & its accompanying prosperity, when coupled with sound-money policies & lower marginal tax rates for the highest income earners.

One class of people who are not robbed of prosperity, seen or unseen, is the political class & this was made clear last week during the election of Kevin McCarthy as Speaker of the House.

I watched live on C-SPAN the entire 15 rounds of votes & one question kept coming to mind after a few votes:  Why was Hakeem Jeffries the only person suitable to 212 Democrats & why was McCarthy the only person suitable to 202 Republicans.  And the answer is that, like Nancy Pelosi before them, they are prodigious fund raisers.  In McCarthy's case he even provided funds for @ least some of his six detractors who could only bring themselves, not to vote for him, but to vote present that cleared the way after midnight Saturday for him to be elected Speaker.

Jeffries has a Liberty Score of F @ 6% & McCarthy's is F @ 54% so it is no wonder that the total twenty Republican detractors from the House Freedom Caucus, many of whom have Liberty Scores of A @ 100% (Chip Roy, Andy Biggs, Byron Donalds, Bob Good, Matt Rosendale, Lauren Boebert, & Paul Gosar) did not trust McCarthy & could not support McCarthy without reassurances that nothing like the omnibus would ever happen again.

In order to secure the votes needed to be elected Speaker, McCarthy agreed to a list of demands by the Freedom Caucus that make you wonder why they weren't being followed all along in every House of Representatives, until you think of Nancy Pelosi who Jeffries referred to as Speaker of the House Emirata in a long winded divisive speech delivered @ 1:00 AM Saturday that dismissed any idea that there would be any cooperation from Democrats @ all.  Jeffries presented, in a hateful tone, 26 Democrat principles (one for each letter of the alphabet) that implied Republicans were against such principles..

The Freedom Caucus Members brought up their demands last summer never thinking they had a Joe Manchin-type hold on such a slim majority.  McCarthy had projected a red wave all through 2022 so he largely ignored the Freedom Caucus whose Members he has nothing in common with.

This led McCarthy to agree, in order to secure votes to become Speaker, that any one Republican congressman could call for a motion to vacate the chair which would force a return to the election process of last week - effectively a no confidence vote.  Other highlights of the agreement known so far: 1) a return to fiscal year 2022 levels for discretionary spending when preparing the FY 2024 budget this year, 2) a coupling of spending cuts with any debt-ceiling increase, 3) a promise that only single-subject bills would be considered with a 72-hour requirement that gives Members time to read the bill, 4) a 3/5 supermajority vote would be required for tax increases, 5) a "cut-go" rule requiring any mandatory spending increases be offset with equal or greater spending cuts, & 6) a return to the Holman rule of 1876 that will allow appropriation bills to defund the salaries of specific executive branch officials or specific programs.

Now the agreement is all well & good.  The problem is that McCarthy is trusted so little that he needs such an agreement in the first place.  Just like McCain voting for ObamaCare after years of campaigning to overturn it or Romney's terrible voting record as a Utah senator, this arrangement between McCarthy & the Freedom Caucus has all the potential to not turn out well, blowing up when the country least needs it.

In any event, you can be assured that the prosperity of the 414 congressmen who could only vote for Jeffries or McCarthy for Speaker will not be affected, seen or unseen, in any way - while they continue to support policies & vote for legislation that gives you mediocrity, welfare programs, & prosperity @ a level below theirs that ensures their power & elite lives.


  1. "She wondered how a failed president by any historical measure could even be competitive for reelection let alone not being shellacked."

    When half the country is on a government program and / or not paying taxes I am not sure how anyone can wonder how Obama won reelection.

    I am not a Romney fan but the problem goes much deeper than him.

    Tocqueville and Franklin both explained what was going to happen ("politicians buying votes") and I don't understand how anyone is surprised by the outcome, especially when many Republicans want their mommy's in Washington to take care of them.

    Best thing may well be a national divorce.

  2. Doug - I applaud the members of the Freedom Caucus and the concessions they achieved. The so-called chaos reminded me of our Tea Party meetings. Hope McCarthy comes through on the debt ceiling negotiations. The FairTAX will be brought to the floor of the House.

  3. Doug – Your analysis is much appreciated and spot on. Left unchecked, our economy will tank and soon.

    In positive note, I heard there were some politicians (but likely weak minority) that raised following:

    Automatic spending cuts (equally across all programs would be fine) whenever US Federal Debt to GDP ratio reaches (CHOOSE a ratio). As I write this, the US Debt Clock web site lists the ratio at 1.215 to 1.000. In 2000 it was .595 to 1.000. Let’s start right now with 10% across the board funding cuts. Then let’s choose 1.1 as the ratio whereby the ‘trigger’ for cuts is invoked to get under 1.1.

    Why not?

    Many successful private companies operate like this and stay in business. Does not the US Government want to stay in business?
    Also, many successful private companies regularly conduct Zero-Based budgeting, and ALWAYS conduct Return On Investment (ROI) analyses. These measures improve odds of staying in business.

    Banks are required by the Federal Government to conduct careful and well documented ‘stress’ tests. Stress scenarios are presented for banks and the banks must run these tests and accurately detail their results.

    Banks are required to maintain strict capital ratios set by the Government. The argument is that this will ensure bank solvency and thus not be a risk to the US Economy.

    Congress MUST ensure that the US Government is strictly run like described above.