Sunday, September 2, 2012

The Pathology of U.S. Democracy

By Anthony Gregory

Electoral politics is a moral and intellectual wasteland. There is no room for anyone of principle, whatever that principle might be.
As a libertarian, I see little difference between Obama and Romney. They both favor a perpetual war on terror, an occupation of Afghanistan, military aid to Israel, indefinite detention of terror suspects, military imprisonment outside the bounds of habeas corpus, warrantless wiretapping, the TSA, the FBI, the CIA, the NSA, the FDA, the war on drugs, gun control, bailouts, Keynesian economics, income taxation, Social Security, Medicare, central banking, subsidies for rich and poor, licensing in industry, public education, employment regulation, agriculture corporatism, tariffs, and a federal budget that amounts to far more than ten thousand dollars for every man, woman, and child in this country.

Obama or Romney: It Matters as much as Choosing Pepsi over Coke

By Gilbert Mercier

Most Americans believe that they live in a democracy which implies options to choose from. They still think that the United States is a two party system with real differences between Democrats and Republicans. But in reality the very same non-elected people have been pulling the strings and making policy decisions for the sake of the same interests for decades. Alan Greenspan is of course a typical example of this, but so are Kissinger and Brzezinski for issues on foreign policy. Larry Summers, a Clinton man who had a big responsibility in creating the real estate bubble and the subsequent 2008 crash, became quickly one of President Obama’s key economic advisers. Ben Bernanke, President Obama’s Chairman of the Fed was George W. Bush’s Chairman of the Feds. The same troubling continuity of powerful policy players took place between the Reagan and Bush Sr. Administration and the Clinton administration.

It is hard to pinpoint when this democracy took a wrong turn towards a plutocracy where oligarchs stay in power from one generation to the next. Where a political aristocracy has the impudence to maintain an incestuous relationship with bankers and corporations at the expense of the people that they are supposed to represent. And where a small group of non-elected powerful “wise men” pull the strings in the background, like puppet masters,one administration after the other. Americans are not, in general, very well informed and most are still under the illusion that the two parties give them real options. That said, US citizens intuitively understand the corruption and failures of their political class. Currently, the public approval rating of the US Congress is 17 percent compared to 75 percent who disapprove. It is at one of the lowest level of confidence in US history.

US Drone Strikes And Bin Laden’s Killing: Turning Pakistan Into A Time-bomb

By Gilbert Mercier

Today, more than 150 Pakistani Taliban attacked a military check point in North-Western Pakistan killing at least ten Pakistani soldiers. The bold attack occurred near the town of Makeen in South Waziristan, near the Afghan border. Lately, South Waziristan has seen a surge in strikes by US drones in the aftermath of the assassination of Bin Laden. The large attack today-which was carried out with rocket propelled grenade and heavy weapons- was the biggest conducted by the Taliban in several months. It has to be seen in the context of a retaliation by the Taliban for the increase of US drone strikes and Bin Laden’s killing conducted on May 2nd by US forces.

South Waziristan is described in US military and intelligence circles as the “most dangerous place on earth”. Washington is currently putting a great deal of pressure on the Pakistani government to take military action in those areas of Pakistan. The Obama administration wrongly believe that Bin Laden’s killing has created a momentum in favor of the United States and against Pakistan’s Taliban. Today’s attack indicates the exact opposite.

The War in Afghanistan: A Monumental Waste

By Ron Steinman

We have all seen the latest headlines about the war in Afghanistan. As of now more than two thousand American troops are dead. Innumerable others suffered wounds. More deaths and injuries will occur over the next weeks and months as America and the NATO forces wind down and mostly get out of the country by 2014. Many of the latest deaths are “green on blue,” meaning, in case you do not know, so-called friendly Afghan troops and trainees turning their weapons on their American counterparts. These seem to happen daily. Sometimes the killings are by the Taliban, by anti-government sympathizers, or simply disgruntled and ignorant men who object to and do not understand the ethos of those who train them and work alongside them. There is also a fair share of “green on green” killings where Afghans kill each other for a myriad of reasons, including tribe against tribe in a society dominated by tribalism and an inability or desire to move into the 21st Century.

The question simply put is what are we doing in that inhospitable country now that Bin Laden is dead? It should be clear that we are not going to build a nation out of one that never existed and does not now exist in any form.

Global War Economy: The Empire of the US Military Industrial Complex

By Gilbert Mercier

Arguably, ever since entering World War II, the United States of America’s economy has been a war economy. Starting or fostering wars became essentially, independently of geopolitical reasons, a “good” business proposition. The early 1940s marked the start of the era of systematic wars for profit. War defined as the ultimate capitalist enterprise. The extraordinary war efforts of World War II turned the United States into a giant global arms factory for the war in Europe and in the Pacific. It was even, cynically, credited as the main factor in ending the Great Depression of 1929.

This trend continued at a slower pace, but without any real interruption, with the Korean war in the early 1950s, the Vietnam war in the 1960s until the early 1970s, and various proxy wars worldwide- including Afghanistan in the 1980s- against the Soviet Union. The event of 9/11/ 2001 gave American politicians the unique opportunity to start the perfect war on behalf of their friends and patrons of the military industrial complex. It is the endless war: the “war on terror” without any geographic boundaries, time frame or even the necessity to have a well defined enemy.

This permanent war business proposition is criminal in nature, but absolutely fool proof in terms of maximum returns on the investment. Money is made when the weapons are manufactured. They are used to kill million and to destroy countries which eventually will get rebuild through programs such as the Marshall Plan used in the aftermath of World War II in Europe.

Like Steve Jobs, Ben Bernanke Should Think Long-Term. by William Poole

Today, Fed Chairman Ben Bernanke kicks off the annual Economic Symposium of the Federal Reserve Bank of Kansas City, which draws central bankers, academics, market participants and policymakers from around the world. I have taken the liberty of drafting his ideal speech:

Again this year, as for the past three years, we seek to understand the prospects for the U.S. and world economies following the most severe recession since the Great Depression.
We thought that by now economic growth would be picking up, but the expected sustained recovery has not occurred. In the U.S., employment is growing but far too slowly.
Why?

Democrats' Hypocrisy with the Rich. by Richard W. Rahn

Did you know that President Obama is responsible for the loss of more U.S. jobs than any other person? Did you know that Sen. John F. Kerry and his wife are three to four times as rich as Mitt and Ann Romney, according to the New York Times, yet paid a lower tax rate than the Romneys in 2003, the year before Mr. Kerry ran for president? Do you know how to lower your tax rate? Read on.

Mr. Romney is being criticized in the mainstream media for having paid just about 14 percent of his income in federal income taxes and having some of his money in places like Switzerland and Cayman (even though he appears to have paid all of the taxes on interest and dividends that were due to the United States). Yet, eight years ago, when the far richer Mr. Kerry and his wife paid a slightly lower tax rate and also had their money dispersed globally, as sensible rich people do, they were lauded by many of the same folks who are now in a tizzy about Mr. Romney's finances. Note: Mr. Kerry's wife inherited her money, while Mr. Romney earned his by building real businesses.

Washington's Perilous Power Play. by Ted Galen Carpenter

Bitter disagreements about how to deal with the growing violence in Syria are damaging Washington's relations with China and Russia. Policy regarding the Syrian civil war has created worrisome tensions in these crucial bilateral relationships, which became evident as early as February 2012.

Following a decision by Moscow and Beijing to veto a United Nations Security Council resolution condemning the violence in Syria and calling for an immediate end to the bloodshed, US Ambassador to the UN Susan Rice stated that her country was "disgusted". The Chinese and Russian actions, she added, were "shameful" and "unforgivable".
Rice's boss, Secretary of State Hillary Clinton, used equally accusatory and inflammatory language later that month. "It is distressing to see two permanent members of the Security Council using their veto while people are being murdered — women, children, brave young men," Clinton fumed. The actions by Beijing and Moscow were "just despicable, and I have to ask whose side are they on? They are clearly not on the side of the Syrian people", she said.

More Fed Bond Buying Won't Let 'Animal Spirits' out of the Cage. by Gerald P. O'Driscoll Jr.

Markets will be hanging on every word in Federal Reserve Chairman Ben Bernanke's speech Friday morning in Jackson Hole, Wyo. That is because the minutes from the July 31-Aug. 1 meeting of the Federal Open Market Committee, released on Aug. 22, were widely interpreted as signaling some kind of further easing of monetary policy.

The minutes stated in part that "many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery." And yet, one day after the minutes were released, St. Louis Fed President James Bullard said they were "a bit stale." This turned market sentiment around, sending equity prices down.
So will he send a signal favorable to "additional monetary accommodation"? Or will he endorse Mr. Bullard's comments?

D’Souza’s Anti-Obama Documentary: If Only It Were True!

Written by Gary North

I went to see 2016: Obama’s America. Dinesh D’Souza wrote, stars in, directed, narrates, and did the original research for it. If we look at this from the point of view of its success as a documentary, I think it is effective. It is making money in theaters. This is amazing for a documentary. It is a campaign year documentary, and it is a good one.
It is also dead wrong. That is because it misses the fundamental political fact of the last dozen years: the Obama Administration is the operational successor of the Bush Administration. In Iraq, in Afghanistan, in Guantanamo, on Wall Street, Barack Obama is George W. Bush in blackface. Obama is the star of a twenty-first century minstrel show.
This fact has been deliberately ignored for almost four years by both the neoconservative Right and the grin-and-bear-it Left. Neither side will admit what I regard as the fundamental fact of this documentary. It is a long whitewash of the policies of George W. Bush.

Official: Iran would take action if US attacked Syria

Revolutionary Guard propaganda official says joint military pact of Syria's allies would be implemented in case of 'stupid American attack'

Reuters

Iran would take action if the United States were to carry out an act of "stupidity" and attack Syria, an Iranian military official was quoted as saying on Saturday, but the comments later disappeared from the state-linked agency website.

Iran has steadfastly supported Syrian President Bashar Assad in his bid to suppress an uprising which both Tehran and Damascus see as a proxy war by Israel and Western states to extend their influence in the Middle East.

Republican Platform Calls for Value-added Tax Scheme

Kurt Nimmo

Ann Romney says you can trust her husband.

Probably the most memorable moment of the Republican dog and pony show in Tampa earlier this week occurred when Ann Romney said “you can trust Mitt.” She didn’t elaborate, but Mitt’s handlers did. They promised Mitt will restore fiscal responsibility, expand the military, and cut taxes.
The last one is betrayed by the Republican platform.
“The 2012 Republican Platform calls for a complete overhaul of the federal tax system. No surprise there. But then it endorses a value-added tax or national sales tax as one possible solution to the nation’s budget problems. This is shocking,” writes Jim McTague for Barron’s.

The Global Temper Tantrum

Fury is spreading. But the mobs ignore the real culprit behind broken economies.

Yiorgos Karahalis / Reuters-Landov

Riot police at a protest against austerity measures in Athens on June 28, 2011.

This is the age of indignation. Politics in the Western world are becoming more emotional—because our problems are so intractable.

Recently a Chilean friend of mine was at a bullfight in Barcelona, where a spectator threw a bottle at one of the picadors. The police duly arrested the bottle thrower. But as he was led away, the crowd began to boo the policemen and to chant “Libertad! Libertad!”

This captures the illogical mood of the moment. Leave aside your feelings about bullfighting, because this could equally well have happened at a tennis match. Throwing a bottle at a participant in a sporting event is a dangerous criminal act. Someone who behaves that way deserves to be arrested. Yet the crowd’s feelings of hostility to the police trumped that rational view. The arrested man became a symbol of oppressed liberty, despite the fact that everyone had witnessed his crime.

“The Indignant”—los Indignados—are now a distinct group in Spain. They are the young people who take to the streets to protest against high unemployment, government spending cuts, and anything else that ticks them off. But this is no longer a purely Spanish phenomenon. The Indignant are everywhere. They were in the streets of Athens, throwing-Molotov cocktails at police while the Greek Parliament debated its latest austerity budget.

On July 1 the Indignant were marching and yelling outside my London office, too. What was this lot indignant about? Yes, cuts once again—to be precise, the British government’s plan to reduce public-sector employees’ pensions and increase their retirement age.

Indignation takes different forms in different places. In Europe it’s directed against cuts in public spending. In the United States it’s directed against tax hikes, which are anathema to the Tea Party.

What all the Indignant have in common is the refusal to address squarely the problem that nearly all Western countries face. That problem is that the welfare systems that evolved in the mid-20th century are unaffordable under the demographic and economic circumstances of the 21st century. The financial crisis has merely exacerbated what was already a severe structural crisis of public finance, boosting deficits while slowing growth.

The scale of the challenge ranges from the really, really hard to the absolutely impossible. According to the Organization for Economic Cooperation and Development, just to stabilize its debt the U.S. government needs to turn its current primary deficit of 7 percent of gross domestic product into a primary surplus of 1.4 percent. That’s roughly double the fiscal squeeze Greece needs to make.

In a rational world, electorates would recognize the need both to reduce entitlements and to increase revenue. But indignation isn’t rational. The Tea Party position is that the deficit should be reduced without any increase in revenue, even the elimination of tax breaks and loopholes that all serious economists now define as “tax expenditures” (because they essentially give revenue away to lucky special interests). At the same time, many Tea Party supporters appear reluctant to accept that cuts would apply to their own entitlements as well as everyone else’s.

Even more self-contradictory is the readiness of young people in Europe to back the interest groups opposed to spending cuts. The recent demonstrations in London were essentially on behalf of teachers relatively close to retirement. “It’s for the future generations that we’re doing this,” claimed one protester, “not just for ourselves. We’re doing it for everybody.” Baloney. It’s the government that has the future generations in mind, not the protesters. The young people who join in such protests are suckers, demonstrating for the right to pay much higher taxes in the future.

Today’s proponents of austerity are like toreadors, fighting the raging bull of debt. I can understand the vested interests throwing bottles at them. It’s the cheers of the Indignant that are bizarre.

General Marshall on the Aegean

Barry Eichengreen

General Marshall on the Aegean

BERKELEY – It should now be clear to even the most blinkered observer that the Greek economy is in desperate need of help. Unemployment is 16% and rising. Even after a year of excruciating spending cuts, the budget deficit still exceeds 10% of GDP. Residents don’t pay taxes. The system of property registration is a mess. There is little confidence in the banks, and even less in the government and its policies.

Since the economy needs help, here’s a novel idea: provide some. Now is the time for the European Union to come forward with a Marshall Plan for Greece.

Rather than piling more loans onto the country’s already unsustainable debt burden, the EU should offer a multi-year program of foreign aid. The Greek government and donors would decide together the projects that it financed. These could range from building new solar and wind power-generating facilities, in order to turn Greece into a major energy exporter, to updating its ports to help make it a commercial hub for the eastern Mediterranean.

Foreign aid and expertise could be used to modernize the property-registration and tax-collection systems. Funds could be used for recapitalizing the banks and retiring some debt. They could help finance government support for the unemployed, indigent, and elderly, who are among the principal victims of the financial crisis.

The EU should contemplate this option, because, for starters, it bears more than a little responsibility for Greece’s plight. It offered membership to a country with deep structural problems. It then accepted Greece into its monetary union with full knowledge that its fiscal accounts were not worth the paper they were written on. And it looked the other way when French and German banks recklessly enabled the Greek government’s profligacy.

Second, the current strategy, which amounts to trying to extract blood from a stone, is not working. There are limits to how quickly a country can reform. A society can bear only so much pain and suffering before it loses faith in its political system. EU leaders need to acknowledge this reality before it’s too late.

And, finally, history suggests that a Marshall Plan for Greece might actually work.

Recall the plight of the European countries that received aid from the United States after World War II. They had massive debts. Their budgets were deep in deficit. They exported little. Property rights were uncertain. Support for governments grappling with these problems was extremely fragile.

The Marshall Plan, by financing strategic investments, helped the recipients to ramp up their exports. Aid-financed reconstruction turned Rotterdam into a commercial hub for Northern Europe. US aid underwrote the imports of coal and investments in hydroelectric power needed to get industry running again. And, in some cases, like France, US funds were used to extinguish part of the public debt.

Importantly, these projects were neither dictated by the donor nor chosen by the recipient, but decided in collaboration. The recipient, moreover, had to put up matching (“counterpart”) funds for each and every project.

A further condition for receiving aid was that the government had to follow through with macroeconomic stabilization. But this was now politically feasible, because aid topped up the public coffers, reducing the depth of the necessary cuts and the associated pain and suffering. Support for the centrist governments undertaking these reforms was correspondingly stronger.

Indeed, solidifying political support for policies of stabilization and reform was probably the Marshall Plan’s single most important contribution. With that support in place, the recipient countries could do the rest. Europe could get back on its feet.

The cynics among us – that is to say, economists – will worry about the precedent set by a Marshall Plan for Greece. They will warn that other EU countries like Portugal will refuse to undertake more reform, retrenchment, and repayment unless they receive similar largesse.

Economists are trained to worry about this problem, known as moral hazard. But the kind of social chaos and international disrepute that Greece has suffered are a considerable disincentive to go down this path. And while there is moral-hazard risk, there is also meltdown risk. There is the danger of a complete economic, social, and political meltdown in Greece. If that meltdown is not averted, it could take down the rest of Europe.

A Marshall Plan for Greece would require European leaders to do the unprecedented: they would have to lead. That, of course, is what the US did after World War II with the Marshall Plan. Europeans might usefully look back 60 years, to a time when their own countries, perched on the brink of a similar collapse, received the help that they needed to recover – help that has put them in a position to do something similar for Greece today.

Barry Eichengreen is Professor of Economics and Political Science at the University of California, Berkeley.

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From Italy to the US, utopia vs reality

By Martin Wolf

In the eurozone, the fiscal crisis is lapping on Italy’s shores. In the US, the administration declares it will run out of funding early next month if the debt ceiling is not raised. Far fewer Europeans than Americans believe public sector defaults are beneficial. But important Europeans share with Republicans the view that there are still worse outcomes. For reluctant Europeans, the eurozone must not be a “transfer union”. For recalcitrant Republicans, taxes must not be raised. Fiat justitia, et pereat mundus – let right be done even if the world perishes – is the motto.

The fiscal crises we see are a legacy of the west’s private and public sector debt binges of recent decades. As the McKinsey Global Institute tells us in an update of last year’s study of the aftermath of the credit bubble, this is an early stage of a painful process of deleveraging in several economies (see chart). “If history is a guide,” noted the 2010 report, “we would expect many years of debt reduction in specific sectors of some of the world’s largest economies, and this process will exert a significant drag on GDP growth.” So it is proving, with disappointment almost everywhere.

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The link between private and public sector debt is intimate. In some countries, notably Greece, easy credit led to an upsurge in public sector borrowing. In others, notably Italy, it encouraged governments to relax attention to debt reduction: its primary fiscal budget (before interest) moved from a surplus of 6 per cent of gross domestic product in 1997, before joining the currency union, to 0.6 per cent in 2005. Elsewhere, the sudden end of private sector credit booms led directly to collapses in government revenue and surges in public spending: the US, UK, Spain and Ireland are examples.

Exploding fiscal deficits are mainly the result of collapses in activity and revenue rather than of bank bail-outs. But fiscal weakness then undermines the banks, partly because the latter hold large quantities of domestic public debt and partly because they rely on fiscal support. The private and public sectors are intertwined. The view of Republican hawks in the US and of German or Dutch hawks in Europe that the crisis has fiscal roots alone is wrong. Easy credit ends up in fiscal crises.

US evidence is striking. Compare the forecasts for fiscal years 2010, 2011 and 2012 in the 2008 and 2012 presidential budgets, the first under George W. Bush shortly before the crisis and the second under Barack Obama well after it (see chart). The 2011 deficit was forecast in 2008 to be a mere $54bn (0.3 per cent of GDP). But in the 2012 budget, it is forecast to be $1,645bn (10.9 per cent of GDP). 58 per cent of this rise is due to unexpectedly low revenue and only 42 per cent due to a surge in spending, both of these changes mostly due to the financial crisis, not the modest stimulus package (about 6 per cent of GDP).

The astonishing feature of the federal fiscal position is that revenues are forecast to be a mere 14.4 per cent of GDP in 2011, far below their postwar average of close to 18 per cent. Individual income tax is forecast to be a mere 6.3 per cent of GDP in 2011. This non-American cannot understand what the fuss is about: in 1988, at the end of Ronald Reagan’s term, receipts were 18.2 per cent of GDP. Tax revenue has to rise substantially if the deficit is to close.

It is not that tackling the US fiscal position is urgent. At a time of private sector deleveraging, it is helpful. The US is able to borrow on easy terms, with yields on 10-year bonds close to 3 per cent, as the few non-hysterics predicted. The fiscal challenge is long term, not immediate. A decision not to allow the government to borrow to finance the programmes Congress has already mandated would be insane. As the fiscal expert, Bruce Bartlett, has argued, the law requiring Congressional approval of extra debt might even be unconstitutional.

Yet, astonishingly, many of the Republicans opposed to raising the US debt ceiling do not merely wish to curb federal spending: they enthusiastically desire a default. Either they have no idea how profound would be the shock to their country’s economy and society of a repudiation of debt legally contracted by their state, or they fall into the category of utopian revolutionaries, heedless of all consequences. Meanwhile in Europe, happily, nobody believes that defaults are good. But Europe is trapped in its own utopian project: the single currency. Just as members of the Tea Party hate paying taxes for those they deem unworthy, so, too, do solvent Europeans hate transfers to those they deem irresponsible.

On this story

Martin Wolf Eurozone’s moment of truth
Martin Wolf Freeing our universities to compete
Martin Wolf Austerity alone risks disaster
Martin Wolf A curiously continental job market
Martin Wolf How China could yet fail like Japan

Alas, as many have long predicted, what would, in the absence of the currency union, have been a straightforward currency crisis has now morphed, within these constraints, into an agonising fiscal cum financial crisis. Worse, spreads on Spanish and Italian 10-year bonds over German bunds have reached 328 and 296 basis points, respectively.

In slow-growing economies with overvalued real exchange rates, these spreads begin to be dangerous. If they became and remained, say, 400 basis points, the real interest rate on long-term debt would be 5 per cent. These countries would then be slowly shifted from a good equilibrium, with manageable debt, to a bad equilibrium, with close to unmanageable debt. Italy, with the fourth-largest public debt in the world, is probably too big to save: Italians themselves must make the decisive moves needed to restore fiscal credibility. That, in turn, requires both a sharp tightening and measures to raise the growth rate. Can this combination be managed? Only with difficulty, is the answer.

These are dangerous times. The US may be on the verge of making among the biggest and least-necessary financial mistakes in world history. The eurozone might be on the verge of a fiscal cum financial crisis that destroys not just the solvency of important countries but even the currency union and, at worst, much of the European project. These times require wisdom and courage among those in charge of our affairs. In the US, utopians of the right are seeking to smash the state that emerged from the 1930s and the second world war. In Europe, politicians are dealing with the legacy of a utopian project which requires a degree of solidarity that their peoples do not feel. How will these clashes between utopia and reality end? In late August, when I return from my break, we may know at least some of the answers.

EN RIESGO DE SUSPENSIÓN DE PAGOS

Standard&Poor's cierra el cerco sobre la deuda de EEUU

La agencia afirma que hay bastantes posibilidades de que degrade la deuda del país en los próximos meses.

Standard & Poor's situó hoy la deuda estadounidense "bajo vigilancia con perspectiva negativa", e indicó que hay un 50 por ciento de posibilidades de que la degrade en los próximos tres meses.

El anuncio de Standard & Poor's se suma al emitido el miércoles por otra de las grandes agencias mundiales de calificación, Moody's, que colocó bajo revisión la calificación "Aaa" de la deuda de Estados Unidos, ante la posibilidad de que no se logre un acuerdo que eleve el límite de endeudamiento del país antes del 2 de agosto. "El debate político sobre la posición fiscal de Estados Unidos y el asunto relacionado del techo de la deuda del Gobierno estadounidense, en nuestra opinión, no ha hecho más que complicarse", indicó Standard & Poor's en un comunicado.

De no lograr un acuerdo bipartidista en los próximos días, la agencia considera que el país no podría alcanzarlo "en varios años", lo que resulta "inconsistente con una calificación 'Aaa', dada la trayectoria esperada de la deuda en los próximos años.

John Chambers, director gerente de Standard & Poor's, comunicó la decisión de la agencia en una reunión privada con el líder de la mayoría demócrata en el Senado, Harry Reid, y a funcionarios de la Cámara de Comercio de EEUU y del Foro de Servicios Financieros.

Toque de atención

El subsecretario del Tesoro para finanzas domésticas, Jeffrey Goldstein, consideró la medida un nuevo toque de atención sobre la urgencia de que republicanos y demócratas encuentren cuanto antes un acuerdo que evite que el país entre en suspensión de pagos por primera vez en su historia. "La acción de hoy de S&P demuestra lo que el Gobierno de (Barack) Obama lleva diciendo un tiempo: que el Congreso debe actuar expeditamente para evitar un incumplimiento de las obligaciones nacionales, y para trazar un plan de reducción del déficit creíble y que tenga un apoyo bipartidista", dijo Goldstein en un comunicado.

Si el Congreso y el Gobierno finalmente llegan a un acuerdo antes del 2 de agosto, S&P "revisará los detalles" de ese plan en los 90 días siguientes para determinar si, en su opinión, "es suficiente para estabilizar la dinámica de la deuda de Estados Unidos a medio plazo", según el comunicado de la agencia.

Obama alentó a los líderes republicanos y demócratas del Congreso a esforzarse para llegar a un acuerdo en las próximas 24 a 36 horas, para evitar exponerse a la fecha límite en la que caduca el anterior tope de la deuda, de 14,29 billones de dólares.

El presidente, cuya propuesta inicial estaba ligada a una ambiciosa reducción del déficit valorada en unos 4 billones de dólares en los próximos diez años, sigue abogando por el "acuerdo más amplio posible", pero está ahora más dispuesto a aceptar un plan más modesto, con un recorte de unos 2 billones de dólares.

Sin embargo, la propuesta de Obama, que incluye concesiones demócratas como los recortes a la Seguridad Social, sigue contemplando subidas de impuestos, algo que los republicanos aseguran que no aceptarán.

David Ogilvy's Lesson for Libertarians

by Michael Cloud

"A good advertisement is one which sells the product without drawing attention to itself," wrote advertising legend David Ogilvy.

Good advertisements persuade people to buy and use the product. Bad advertisements convince people that the ad was clever or funny or interesting.

Good advertisements create an ever-growing number of customers. Bad advertisements leave sales stagnant, but they win advertising industry awards.

David Ogilvy's insight is equally true of libertarian speakers and talk show guests.

Good libertarian speakers win people to liberty. Slick libertarian speakers convince the audience that they are clever or interesting.

Good libertarian TV and radio talk show guests sell the audience on libertarianism. Slick libertarian guests sell the audience on them.

Good libertarian spokespeople leave the audience excited about liberty. Slick libertarian spokespeople leave the audience excited about them.

Do you want the audience jazzed about the product: liberty? Or the advertisement: the speaker?

Do you want new supporters of freedom? Or fans of the speaker?

Do you want the audience embracing and advancing liberty? Or embracing and promoting the speaker?

Why is this important to you? Why is this important to libertarianism?

Because your choice will determine whether we grow the libertarian movement, whether we advance the libertarian cause -- or whether we promote the careers of slick libertarian personalities who do NOT increase our numbers or advance our cause.

Because your choice will determine whether we make America more free -- or an ambitious libertarian personality more famous.

Because your choice will either push liberty forward or hold it back in America.

When you support and promote spokespeople who put liberty first, we will get more libertarians and more liberty.

Michael Cloud is author of the acclaimed book Secrets of Libertarian Persuasion, available exclusively from the Advocates.

Should You Oppose the "Redistribution of Wealth?"

by Michael Cloud ShareThis

"These government programs and policies take us closer to -- or are -- the redistribution of wealth," say pundits, bloggers, and talk radio hosts. Then they expose and explain and attack the "redistribution of wealth."

Some bring light to the subject. Others just heat.

Will you empty your mind of all you know and believe about "the redistribution of wealth?" Will you look at the matter with fresh eyes and an open mind?

Will you "examine your premises," as Ayn Rand wisely counseled?

Ask: What is the redistribution of wealth?

First, the meaning of the key words: "wealth" and "redistribution."

"Wealth" means all goods, services, or information that have economic value. Usually money or goods.

To understand "redistribution," we need to first grasp the meaning of "distribution."

"Distribute" means to deliver, disperse, spread, give out, or hand out. "Distribution" means the act of distributing or condition of being distributed.

"Redistribute" means to distribute again. "Redistribution" is the act of distributing again or the condition of being distributing again.

Wealth is first distributed when each of us earns or produces it.

Every transfer afterwards is redistribution.

When you barter, you redistribute wealth.

When you buy or sell, you redistribute wealth.

When you give or receive gifts or charity, you redistribute wealth.

When you borrow or loan money, you redistribute wealth.

Every voluntary transfer of wealth is redistribution. A free market is a mechanism for voluntary redistribution of wealth.

But there is also the involuntary, coerced, forced redistribution of wealth.

Armed robbery is a coerced transfer of wealth.

Burglary is, too.

Embezzlement and fraud are coerced transfers of wealth.

So is extortion.

I support each person's right to freely choose, to voluntarily redistribute his own wealth.

I oppose the criminal, coercive, involuntary redistribution of a person's wealth.

Don't you? Isn't this the litmus test for being a libertarian?

I'd wager that most of the critics of the redistribution of wealth would agree with you and me -- up to this point.

But then they'd add, "I'm talking about the GOVERNMENT'S redistribution of wealth."

Okay.

Every tax transfers money from the man or women who earned it to the government.

Every tax redistributes wealth. Then the government again redistributes the wealth to government contractors, government employees, politically-privileged special interests, and other beneficiaries.

Every government mandate on private citizens and private businesses redistributes wealth.

Many government laws and regulations redistribute wealth.

So, do these critics oppose ALL "government redistribution of wealth?" All taxes? All government spending?

Or, are they just against certain KINDS of "government redistribution of wealth?" Or for certain purposes? Or for certain individuals or groups?

Or, are they only against these KINDS or these PURPOSES when "the other political party" controls the White House, Senate, or House of Representatives?

Some critics are engaging in self-serving, misleading propaganda.

But many largely agree with the libertarian principle. Not totally. But mostly.

If they examine their premises, many will reject the phrasing and framing of the two-edged slogan. They will find better concepts and language to oppose Big Government -- to endorse and advocate individual liberty, personal responsibility, and small government.

Michael Cloud is author of the acclaimed book Secrets of Libertarian Persuasion, available exclusively from the Advocates.

Put a Ceiling on Overregulation

Make regulatory reform part of the big deal.

By John Berlau, Clyde Wayne Crews

After months of saying it wanted a “clean” hike in borrowing authority, the Obama administration now proclaims it wants to do something “big” in a debt-ceiling package just as its self-imposed deadline is approaching. On NBC’s Meet the Press this Sunday, Treasury Secretary Tim Geithner said the president wanted to do the “biggest, most substantial deal possible, the deal that’s going to be best for the economy.”

GOP leaders should take up this challenge and put on the bargaining table something big that would also be a boost the economy: curbing overregulation that’s crushing economic growth.

With the economy teetering, leaders of both parties realize that long-term issues must be addressed in a debt-ceiling package. The American people agree and so, seemingly, do the markets. While the bond market has registered barely a hiccup to news about the debt-ceiling talks, stocks and other financial instruments continue to drop after the release of dismal growth and employment statistics.

Yet when it comes to the foundations of the U.S. economy, neither party is using the debt-ceiling talks to address the proverbial elephant in the room. In this case, it’s a trillion-dollar elephant that is stomping all over new business formation and job growth.

Taxes and spending are of course very important. House Speaker John Boehner is right to insist that debt reduction come from spending cuts rather than net tax hikes. It is more than reasonable for congressional leaders to shape most of the package to their liking, because the Constitution explicitly makes approval of new borrowing a prerogative of Congress, not the presidency.

But the problem here is that GOP leaders aren’t exercising this prerogative to deal with the vital issue of overregulation. Even if the GOP got all the spending cuts it is asking for, with no increase in taxes, Americans would still face the hidden tax of overregulation.

Even the Obama administration itself has pledged — in its rhetoric — to rein in regulation. “If they are not providing the kind of benefits in terms of the public health, and clean air and clean water, and worker safety that have been promised, then we should get rid of some of those regulations,” Obama said in his press conference on Monday following up on his calls earlier this year for repealing “outdated regulations that stifle job creation.”

This language sounds strikingly similar to language in the House GOP’s “Plan for America’s Job Creators” unveiled in May, which states: “We must remove onerous federal regulations that are redundant, harmful to small businesses, and impede private sector investment and job creation.”

Yet, amazingly, even though both parties now want the debt-ceiling package to address issues of economic growth — all the more so, in the wake of Friday’s dismal employment numbers — no one has put measures to rein in regulation on the table. Since both Obama and GOP leaders are saying that overregulation is a barrier to job creation, it’s time to make regulatory curbs part of the debt-ceiling negotiations. As Sen. Olympia Snowe (R., Maine), not generally known as an anti-government Tea Party stalwart, wrote recently in Politico, “One of the most effective ways government can spur job creation is to pass substantial regulatory reforms — immediately.”

A debt-ceiling deal to spur growth without adding to our fiscal woes must contain measures to halt and reverse the mounting regulatory burden. The Competitive Enterprise Institute’s annual study “Ten Thousand Commandments” found that the Federal Register, which spells out all the new regulation the government has issued, stands — as of the end of 2010 — at an all-time-record high of 81,405 pages. Meanwhile, the sheer number of regulations in the pipeline at the end of 2010 stood at 2,439, a 19 percent increase from 2009.

In 2010, the Obama administration issued more than 90 rules that regulatory agencies figure will cost the economy at least $100 million apiece. A single provision of the 2010 Dodd-Frank financial overhaul — the pending rule on new collateral requirements for derivatives — could cost U.S. manufacturers and other firms as much as $1 trillion in lost capital and liquidity, according to an estimate by the International Swaps and Derivatives Association. The Atlantic magazine finance columnist Daniel Indiviglio largely agrees with ISDA’s calculation, arguing that the cost “would certainly be in the hundreds of billions.”

This and other pending regulations have attracted bipartisan criticism. Democrats have joined Republicans in expressing objections to the Federal Communications Commission’s “net neutrality” mandates on Internet providers, the Department of Education’s “gainful employment” regulations on for-profit colleges, and the Environmental Protection Agency’s plans to regulate carbon dioxide as a pollutant under the Clean Air Act — a backdoor cap-and-trade scheme that Time has called “the most far-reaching environmental regulatory scheme in American history.”

The ideological gulf between Obama and the GOP on many of these regulations is indeed wide, and it may be unrealistic to address all these edicts in a debt-ceiling deal. Still, since both Obama and the GOP recognize that regulation can be a barrier to growth, the debt-ceiling package can set a framework to put constraints on regulatory agencies and hold them more accountable to Congress and the courts. At the very least, any hike in borrowing authority should be conditioned on passage of major elements of bills pending in Congress to reform the regulatory process. The GOP should give the Obama administration the chance to back up at least some of its rhetoric on overregulation.

First, a debt-ceiling deal should include passage of the Freedom Act sponsored by Senator Snowe. This bill received the support of 53 senators — including six Democrats — when voted on in June. The act would, among other things, give small business more access to the courts to challenge rules.

Current rules requiring agencies to minimize costs for smaller firms lack teeth, because firms are required to “exhaust” time- and money-consuming challenges before agencies before they can get judicial review. This can be next to impossible for firms that have trouble securing money for day-to-day operations, let alone a costly lawsuit. The Freedom Act would make this process easier for smaller entrepreneurs by allowing suits to be filed as soon as a rule is proposed.

And where Snowe’s bill would give the courts more oversight over regulations, the REINS Act would do the same for Congress. It would require that major rules scored as costing the economy $100 million or more be affirmatively approved by both houses of Congress.

The bill, a part of the House GOP’s job-creation plan, has been praised by such respected scholars as New York Law School professor David Schoenbrod and Case Western Reserve University professor Jonathan Adler. Adler writes in the current issue of the policy journal Regulation that “requiring congressional approval before economically significant rules may take effect ensures that Congress takes responsibility for major regulatory policy decisions.” Noting that the REINS Act designs a streamlined procedure for approval of regulations that is not subject to filibuster, Adler compares the bill to legislation creating “fast-track trade authority or base closing” procedures and argues that it will likely not delay “needed regulatory initiatives.”

Meanwhile, Sen. Mark Warner’s (D., Va.) “one-in, one-out” proposal for balancing new regulations by getting rid of old ones at least helps put a “ceiling” on today’s regulatory enterprise. It belongs on the table too.

Sober reflection indicates that ours is an age in which we need, not politicians who come to Washington merely to “get things done,” but leaders who recognize when it’s time to get things “undone.” Balancing the budget may address our fiscal woes. But to resolve the current “ceiling” we suffer on job creation, we must reduce the “regulatory budget” of costly mandates faced by entrepreneurs.

The Shadow Science of Economics

by John Derbyshire

Bodrum, Turkey

I spent the Memorial Day weekend as a guest of Professor Hans-Hermann Hoppe’s Property and Freedom Society at their annual conference in Bodrum, Turkey. It was a wonderfully relaxing break, for which I am very much obliged to the good professor, his charming wife, and their co-organizers. I gave a talk about China and got to see some of Turkey (a country that was new to me), and I listened to some interesting and instructive lectures.

The PFS exists to help promote the economic and political libertarianism of Ludwig von Mises and Murray Rothbard. I was in Bodrum because Prof. Hoppe was kind enough to invite me, not because I am a particularly dogmatic disciple of those gents. I approve of them and their doctrines in a vague, general sort of way, as I approve of anything much to the right of the statist elephantiasis dominant in the modern West and which looks to be sailing into some great crisis in the near future.

On the other hand I have issues with libertarianism—with free trade, for instance, and with the open-borders dogma that too many libertarians (though not all the ones at Bodrum, perhaps not even a majority) cling to with religious zeal.

If I had to be marooned on a desert island with an economist, I’d much prefer it to be someone from the Austrian School, merely for their devotion to liberty; but like other economists, the Austrians seem to be uninterested in the crooked-timber aspect of human nature. (I might exempt some behavioral economists from that observation, but as Nikolay Gertchev demonstrated in his talk at Bodrum, the Austrians look askance at behavioral economics. The title of Nikolay’s forceful address was “Psychology Ain’t Economics.”)

“Human nature, and a true understanding thereof, precedes everything in the human world.”

I have never read anything by an economist—though I confess I have read far too little in the field—or heard any lecture by an economist that did not leave me thinking, “If this guy’s fundamental assumptions about human nature were true, human history would have been utterly different.”

Still, I suppose someone has to do economics, and the Austrians do it closer to my own political tastes than any others. There was even something calming about listening to their airy abstractions there at Bodrum. I came away feeling about the Austrian school somewhat the same way I feel about the Anglican Church: unable to assent wholeheartedly to the doctrines, but sympathetic at some deep level and wishing them well.

Back home in New York, I checked through the mail that had arrived in my absence. It included my subscription copy of The Economist. Page 87, “The Future of Mobility”:

Immigration is unpopular in rich countries because people overestimate its costs and underestimate its benefits. An influx of unskilled migrants may drag down the wages of unskilled natives, but this effect is “very small at most, and may be irrelevant”, according to a number of different studies.

Really? According to a number of different different studies, that is not true. So what is the non-economist to think? Perhaps the same thing he finds himself thinking when surveying the list of recent Nobel Prize winners in economics and noticing that for every large opinion that has won a Nobel, the contrary opinion has also won one. Real sciences don’t work like that.

And then (going back to The Economist):

The next big wave of migration will come from Africa.

Oh. The Economist article (it is actually a book review) is illustrated with a photograph of some young black African men, presumably the leading edge of that “next big wave.”

I suppose the Economist reviewer would be shocked speechless to know that some large majority of Europeans and Americans, presented with that picture, imagine not fresh, keen young workers coming to help ease their labor shortage. Instead, in their wicked human hearts, they see sowers of discord, destroyers of civil peace, inmates of penitentiaries, carriers of disease, agents of social and economic entropy, and consumers of welfare.

That’s economics for you—and economists, and The Economist. The world of their imagination is a cool, well-lit world in which thoughtful human beings, responding to rational incentives, move along paths defined by elegant mathematical formulas. It is a shadow world, a dream of perfection. It resembles, but only as shadows resemble objects, the grimy, gamy, half-mad world of actual humanity—the substance of human affairs.

The human beings who populate the economist’s—certainly The Economist’s—imagination are mere tokens. They have no allegiance to nation, faith, family, or the huge old inbred extended families we call races. Still less do they exhibit features so evident to those of us who live outside great universities: pride, stubbornness, folly, misplaced loyalty, and the occasional irresistible urge to cut off one’s nose to spite one’s face. They are not biological entities at all.

Economics can have a future, if the human race does. It will not be a container of large truths, though, unless it somehow incorporates facts about human nature that the earthier human sciences—genetics, paleoanthropology, evolutionary biology, neurophysiology, and psychometrics—are only beginning to wrestle into submission.

Until it is willing to do this, and actually can do it, economics will be a discipline of shadows, not substances. Worse yet, it will continue to be a plaything of ideologues, as it has so disastrously been in the past. Human nature, and a true understanding thereof, precedes everything in the human world.

What is anarcho-capitalism?

1. What is anarcho-capitalism?

Anarcho-capitalism is the political philosophy and theory that

the State is an unnecessary evil and should be abolished, and
a free-market private property economic system is morally permissible.

Part one is simply the definition of "anarchism," and part two is soft propertarianism, known more generally as "a free market" or "laissez-faire." Let's look more closely at each of the two parts of our definition. Moral permissibility is a "minimum" position. Almost all anarcho-capitalists believe also that a laissez-faire economic system is generally better than alternatives. Some strong propertarians, such as objectivists, go further and claim that laissez-faire is the only moral economic system.

A typical dictionary definition^Pf of anarchism is: "The theory or doctrine that all forms of government are oppressive and undesirable and should be abolished."^Pf This definition follows the etymology of the word: "Anarchism" is derived from the Greek αναρχία meaning "without archon" (ruler, chief, or king.) This is the core meaning of the term - against the State. This means against it in principle, as an institution, not merely against certain policies or personnel.

Murray Rothbard coined the term "anarcho-capitalist" in the winter of 1949 or 1950. "My whole position was inconsistent [...], there were only two logical possibilities: socialism, or anarchism. Since it was out of the question for me to become a socialist, I found myself pushed by the irresistible logic of the case, a private property anarchist, or, as I would later dub it, an anarcho-capitalist."^Pf

Some prefer the term "market anarchism" to avoid the negative connotations some people have with "capitalism."

2. Why should one consider anarcho-capitalism?

First, there is the issue of self-ownership, as the abolitionists called it, or moral autonomy as the philosophers call it. Is your life your own moral purpose? Do you owe anyone obedience regardless of consent? In natural rights language: Do you have rights - moral claims to freedom of action? If you answer yes to any of these questions, then logic leads you to the position of philosophical anarchism.

The defining mark of the state is authority, the right to rule. The primary obligation of man is autonomy, the refusal to be ruled. It would seem, then, that there can be no resolution of the conflict between the autonomy of the individual and the putative authority of the state. Insofar as a man fulfills his obligation to make himself the author of his decisions, he will resist the state's claim to have authority over him. That is to say, he will deny that he has a duty to obey the laws of this state simply because they are the laws. In that sense, it would seem that anarchism is the only political doctrine consistent with the virtue of autonomy." - Robert Paul Wolff, In Defense of Anarchism.

A second more utilitarian reason is the dismal record of States. Considering all the war, genocide, slavery, and repression perpetrated by States through history, might humanity do better without this barbaric institution? As the young Edmund Burke wrote in the world's first anarchist essay (before he went conservative):

These Evils are not accidental. Whoever will take the pains to consider the Nature of Society, will find they result directly from its Constitution. For as Subordination, or in other Words, the Reciprocation of Tyranny, and Slavery, is requisite to support these Societies, the Interest, the Ambition, the Malice, or the Revenge, nay even the Whim and Caprice of one ruling Man among them, is enough to arm all the rest, without any private Views of their own, to the worst and blackest Purposes; and what is at once lamentable and ridiculous, these Wretches engage under those Banners with a Fury greater than if they were animated by Revenge for their own proper Wrongs - Edmund Burke, A Vindication of Natural Society.

That was written in 1756, long before modern weapons of mass destruction and long before 170 million civilian people were murdered by their own governments in the 20th century. That's just civilian deaths perpetrated by their own governments; it doesn't count the deaths due to enemy States, deaths of soldiers, dislocated refugees, and so on. To quote Rothbard, "If we look at the black record of mass murder, exploitation, and tyranny levied on society by governments over the ages, we need not be loath to abandon the Leviathan State and ... try freedom."

3. Do anarcho-capitalists favor chaos?

No. Anarcho-capitalists believe that a stateless society would be much more peaceful, harmonious, and prosperous than society under statism. We see life under States as chaotic - the insanity of war and the arbitrariness of government regulation and plunder. Anarcho-capitalists agree with the "father of anarchism" Pierre Proudhon: "Liberty is not the daughter but the mother of order," and his contemporary Frederic Bastiat, who wrote of the "natural harmony" of the market, that "natural and wise order that operates without our knowledge." ("Economic Harmonies")

4. Isn't anarcho-capitalism utopian?

No. Anarcho-capitalists tend to be pragmatic, and argue that, no matter how good or bad man is, he is better off in liberty. If men are good, then they need no rulers. If men are bad, then governments of men, composed of men, will also be bad - and probably worse, due to the State's amplification of coercive power. Most anarcho-capitalists think that some men are okay and some aren't; and there will always be some crime. We are not expecting any major change in human nature in that regard. Since utopianism by definition requires a change in human nature, anarcho-capitalism is not utopian.

Tea Party Confusion

By Tibor Machan

The idea that politicians should sign a pledge to promote personal morality is contrary to the avowed Tea Party commitment to small government. If you want the government to have a restricted scope, you should stick to the US Declaration as your guide: Government is instituted so as to secure our rights! It is not instituted, at least in the American political tradition, so as to be our moral police!

This is the kind of inconsistency that will bode very ill for the Tea Party and the Republicans. It is just like the liberals’ inconsistency of preaching choice in the abortion debate but loving to take it from us in nearly everything else. Obama care comes to mind which commands people to buy health insurance and is, thus, anything but pro choice. And what about coercing us all to buy green light bulbs?

Who are these people, imposing their standards of right conduct on the rest? Both sides of the political spectrum are still wedded to their tyrannical ways. No wonder so few people vote.

Here is the pledge Tea Party Republican Rep. Michell Bockmann wants candidates to sign:
“Therefore, in any elected or appointed capacity by which I may have the honor of serving our fellow citizens in these United States, I the undersigned do hereby solemnly vow* to honor and to cherish, to defend and to uphold, the Institution of Marriage as only between one man and one woman. I vow* to do so through my:
Personal fidelity to my spouse.
Respect for the marital bonds of others.
Official fidelity to the U.S. Constitution, supporting the elevation of none but faithful constitutionalists as judges or justices.
Vigorous opposition to any redefinition of the Institution of Marriage – faithful monogamy between one man and one woman – through statutory-, bureaucratic-, or court-imposed recognition of intimate unions which are bigamous, polygamous, polyandrous, same-sex, etc.
Recognition of the overwhelming statistical evidence that married people enjoy better health, better sex, longer lives, greater financial stability, and that children raised by a mother and a father together experience better learning, less addiction, less legal trouble, and less extramarital pregnancy.
Support for prompt reform of uneconomic, anti-marriage aspects of welfare policy, tax policy, and marital/divorce law, and extended “second chance” or “cooling-off” periods for those seeking a “quickie divorce.”
Earnest, bona fide legal advocacy for the Defense of Marriage Act (DOMA) at the federal and state levels.
Steadfast embrace of a federal Marriage Amendment to the U.S. Constitution which protects the definition of marriage as between one man and one woman in all of the United States.
Humane protection of women and the innocent fruit of conjugal intimacy – our next generation of American children – from human trafficking, sexual slavery, seduction into promiscuity, and all forms of pornography and prostitution, infanticide, abortion and other types of coercion or stolen innocence.
Support for the enactment of safeguards for all married and unmarried U.S. Military and National Guard personnel, especially our combat troops, from inappropriate same-gender or opposite-gender sexual harassment, adultery or intrusively intimate commingling among attracteds (restrooms, showers, barracks, tents, etc.); plus prompt termination of military policymakers who would expose American wives and daughters to rape or sexual harassment, torture, enslavement or sexual leveraging by the enemy in forward combat roles.
Rejection of Sharia Islam and all other anti-woman, anti-human rights forms of totalitarian control.
Recognition that robust childbearing and reproduction is beneficial to U.S. demographic, economic, strategic and actuarial health and security.
Commitment to downsizing government and the enormous burden upon American families of the USA?s $14.3 trillion public debt, its $77 trillion in unfunded liabilities, its $1.5 trillion federal deficit, and its $3.5 trillion federal budget.
Fierce defense of the First Amendment?s rights of Religious Liberty and Freedom of Speech, especially against the intolerance of any who would undermine law-abiding American citizens and institutions of faith and conscience for their adherence to, and defense of, faithful heterosexual monogamy.”

Some of this is of course redundant–anyone who takes the oath to defend the US Constitution has made many of these pledges, namely, those that involve protection of individual rights. But many of them are meddling pieces of political posturing as the citizenry’s moral guide, as our nannies, just as Al Gore wants to be our moral guide vis-a-vis global warming or other environmental issues.

One thing is for sure: anyone who signs this would not be a supporter of limited government, the sort Tea Party folks are proud to claim to be.

Why U.S. Leaders Deceive Their Own People

by Ted Galen Carpenter

Professor John Mearsheimer's latest book, Why Leaders Lie, provides a number of intriguing insights and surprising conclusions. Perhaps his most unexpected conclusion is that leaders lie to foreign leaders far less frequently than is generally assumed. Indeed, he contends that leaders lie to their own people more than they do to foreign counterparts. He does, however, concede that less blatant forms of deception, such as "spinning" and "concealment" are pervasive in international politics.

Two other conclusions ought to be deeply troubling to populations in democratic countries, and especially so to Americans. One is that officials in democratic political systems are more likely to deceive their own people — even engaging in outright lies — than officials in autocratic systems. His reasoning on that point is solid, and he provides compelling evidence to support his case. Mearsheimer's thesis is that democratic leaders are much more dependent than autocrats on public support for foreign policy initiatives, especially when an initiative includes going to war. If the available evidence is weak that a major security threat exists, but political leaders believe that taking military action is in the national interest, a powerful incentive exists to inflate the threat to gain badly needed public support.

A second, related part of his thesis is that political leaders are much more inclined to lie involving wars of choice rather than wars of necessity. Again, there are ample historical examples supporting his argument.

Ted Galen Carpenter, senior fellow of foreign policy studies at The Cato Institute, is the author of Smart Power: Toward a Prudent Foreign Policy for America, as well as other books on international affairs.

More by Ted Galen Carpenter

If Mearsheimer is correct, Americans must face the troubling realization that U.S. leaders will be unusually prone to engage in lying as well as milder forms of deception to gull their own populations. Not only is the United States a long-standing democracy, but it is the nation since World War II that is most inclined to embark on wars of choice — often involving issues that have little or no connection to genuine American security interests. The list of U.S. military interventions just in the post-Cold War era — Panama, Somalia, Haiti, Bosnia, Kosovo, Iraq (twice), and the extended mission in Afghanistan — is definitive testimony to that tendency.

America's status as a democracy and a country inclined to wage wars of choice is a deadly combination that creates an overwhelming incentive for political leaders to use whatever techniques of threat inflation are necessary to stampede an otherwise skeptical public into supporting the latest dubious military crusade. The potential corrosive effect on America's political institutions and values are all too apparent. At a minimum, Americans ought to be on guard and doubly skeptical when an administration's spin machine goes into action making the case that Lower Slobovia's mistreatment of Upper Slobovians really, truly poses a dire security threat that only U.S. military action can prevent. The American people have heard such a refrain — and believed it — far too often for the health of the Republic.

Federal Spending Doesn't Work

by Chris Edwards

Despite ongoing federal deficits of more than $1 trillion a year, many liberals are calling for more government spending to "create jobs." At the same time, liberals are opposing budget cuts because that would supposedly hurt the economic recovery. And then there is the perennial problem of Democrats and Republicans defending spending on their particular favored programs.

With all these forces arrayed against budget sanity, it's time to take a back-to-basics look at the role of government spending in the economy.

Federal spending has soared over the past decade. As a share of gross domestic product, spending grew from 18 percent in 2001 to 24 percent in 2011. The causes of this expansion include the costs of wars, growing entitlement programs, the 2009 stimulus bill and rising spending on discretionary programs such as education.

The reality is that Washington is very bad at trying to micromanage short-term economic performance.

New projections from the Congressional Budget Office show that without reforms spending will keep rising for decades to come. The CBO's "alternative fiscal scenario" shows spending growing to 34 percent of GDP by 2035. Thus, the federal government is on course to gobble up almost twice as much of the U.S. economy 24 years from now as it did just a decade ago.

America is becoming a big-government nation

Sadly, America is rapidly becoming a big-government nation. Data from the Organization for Economic Cooperation and Development compares spending by all levels of government among its 31 high-income member countries. This year, government spending in the United States hit 41 percent of GDP, meaning that more than 4 out of every 10 dollars that we produce is consumed by our federal, state and local governments.

We used to have a substantial government size advantage compared to other countries. But Figure 1 shows that while government spending in the United States was about 10 percentage points of GDP smaller than the average OECD country in the past, that gap has now shrunk to just 4 points. A number of high-income nations — such as Australia — now have smaller governments than does the United States.

This is very troubling because America's strong growth and high living standards were historically built on our relatively small government. The ongoing surge in federal spending is undoing this competitive advantage that we have enjoyed in the world economy.

CBO projections show that federal spending will rise by about 10 percentage points of GDP between now and 2035. If that happens, governments in the United States will be grabbing more than half of everything produced in the nation by that year. That would doom future generations of Americans to unbearable levels of taxation and a stagnant economy with fewer opportunities.

Government spending doesn't stimulate

There is renewed talk in Washington about further spending measures to try and stimulate the weak economy. That idea is remarkably naïve and misguided. It is now more than two years after passage of the $821 billion stimulus package in 2009, and it is obvious that that effort was a hugely expensive Keynesian policy failure.

The Obama administration's attempt to pump up "aggregate demand" in the economy simply hasn't worked. In Keynesian theory, the total amount of deficit spending is the amount of "stimulus" delivered to the economy. Well, we've had deficit spending of $459 billion in 2008, $1.4 trillion in 2009, $1.3 trillion in 2010 and $1.4 trillion in 2011.

Yet despite that enormous deficit-spending stimulus, U.S. unemployment remains stuck at more than 9 percent and the recovery is very sluggish compared to prior recoveries. Indeed, the current recovery appears to be slower than any since World War II, according to a recent Joint Economic Committee study.

Obama administration economists had claimed that the Keynesian "multipliers" from government spending are large, meaning that spending would give a big boost to GDP. But other economists have found that Keynesian multipliers are actually quite small, meaning that added government spending mainly just displaces private-sector activities. Stanford University economist John Taylor took a detailed look at GDP data over recent years, and he found little evidence of any benefits from the 2009 stimulus bill. Any "sugar high" to the economy from recent increases in government spending was at best very small and short-lived.

The reality is that Washington is very bad at trying to micromanage short-term economic performance. Its failed stimulus actions have just put the nation further into debt, which will harm our long-term prosperity. Harvard University's Robert Barro calculated that any short-term benefit that the 2009 stimulus bill may have provided is greatly outweighed by the future damage caused by higher taxes and debt.

The government's leaky bucket

Let's take a look at how government spending damages the economy over the long run. Spending is financed by the extraction of resources from current and future taxpayers. The resources consumed by the government cannot be used to produce goods in the private marketplace. For example, the engineers needed to build a $10 billion government high-speed rail line are taken away from building other products in the economy. The $10 billion rail line creates government-connected jobs, but it also kills at least $10 billion worth of private jobs.

Indeed, the private sector would actually lose more than $10 billion in this example. That is because government spending and taxing creates "deadweight losses," which result from distortions to working, investment and other activities. The CBO says that deadweight loss estimates "range from 20 cents to 60 cents over and above the revenue raised." Harvard University's Martin Feldstein thinks that deadweight losses "may exceed one dollar per dollar of revenue raised, making the cost of incremental governmental spending more than two dollars for each dollar of government spending." Thus, a $10 billion high-speed rail line would cost the private economy $20 billion or more.

The government uses a "leaky bucket" when it tries to help the economy. Former chairman of the Council of Economics Advisors, Michael Boskin, explains: "The cost to the economy of each additional tax dollar is about $1.40 to $1.50. Now that tax dollar … is put into a bucket. Some of it leaks out in overhead, waste and so on. In a well-managed program, the government may spend 80 or 90 cents of that dollar on achieving its goals. Inefficient programs would be much lower, $0.30 or $0.40 on the dollar." Texas A&M economist Edgar Browning comes to similar conclusions about the magnitude of the government's leaky bucket: "It costs taxpayers $3 to provide a benefit worth $1 to recipients."

The larger the government grows, the leakier the bucket becomes. On the revenue side, tax distortions rise rapidly as tax rates rise. On the spending side, funding is allocated to activities with ever lower returns as the government expands. Figure 2 illustrates the consequences of the leaky bucket. On the left-hand side, tax rates are low and the government initially delivers useful public goods such as crime reduction. Those activities create high returns, so per-capita incomes initially rise as the government grows.

As the government expands further, it engages in less productive activities. The marginal return from government spending falls and then turns negative. On the right-hand side of the figure, average incomes fall as the government expands. Government in the United States — at more than 40 percent of GDP — is almost certainly on the right-hand side of this figure.

In his 2008 book, Stealing from Ourselves, Professor Browning concludes that today's welfare state reduces GDP — or average U.S. incomes — by about 25 percent. That would place us quite far to the right in Figure 2, and it suggests that federal spending cuts would substantially increase U.S. incomes over time.

All the official projections show rivers of red ink for years to come unless federal policymakers enact major budget reforms. Unless spending is cut, the United States is headed for economic ruin. We need to cut entitlements, domestic discretionary programs and defense spending, as Cato has detailed at www.DownsizingGovernment.org.

Chris Edwards is editor of Cato Institute's Downsizing Government.org.

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Cutting spending would boost the economy because many federal programs have very low or negative returns. Many programs cause severe economic distortions. Other programs damage the environment and restrict individual freedom. And the federal government has expanded into hundreds of areas that would be better left to state and local governments, businesses, charities and individuals.

With the upcoming debt-limit vote, fiscal conservatives in Congress have a real chance to start turning the tide. If they don't stick to their guns, the "life, liberty and pursuit of happiness" we celebrate this July 4 will become meaningless as Washington usurps an ever larger share of our incomes and our economy.

Tim Pawlenty: The Latest Dangerous Neoconservative

by Doug Bandow

Republicans have spent a decade as the party of war. In fact, since President George W. Bush abandoned his call for a "humble foreign policy" the country has not been at peace. Now former Minnesota Gov. Tim Pawlenty has unabashedly raised the neoconservative banner.

President Bill Clinton famously wished to be a wartime leader, but ordering 78 days of high-altitude bombing of Serbia doesn't count. When he left office Americans were not in combat, other than undertaking episodic air and missile strikes to enforce the "no fly" zone over Iraq. Looking back, those were the good ole days.

Unfortunately, this relative peace ended with 9/11. Rather than limit his response to targeting al-Qaeda, President Bush launched two nation-building crusades.

Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to Ronald Reagan, he is the author of Foreign Follies: America's New Global Empire (Xulon)

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The first, in Afghanistan, is nearing its tenth year with little success to show. As the attack on the Intercontinental Hotel demonstrates, even the capital of Kabul is not safe.

The second, in Iraq, generated a new terrorist franchise and turned an entire nation into a charnel house. Over time, U.S. military operations spread into Pakistan and Yemen, and today qualify as "hostilities" by any definition except that used by the Obama administration.

President Barack Obama has initiated his own war, in Libya, for largely discredited humanitarian claims. Nevertheless, the GOP's most avid cheerleaders for war, Senators John McCain and Lindsey Graham, have pressed for escalation in North Africa. Sen. Graham also has proposed military action against Syria.

Four years ago advocates of permanent war dominated the Republican presidential race. Rudy Giuliani was perhaps the most hawkish but least informed candidate. The other GOP presidential candidates, other than Rep. Ron Paul, also advocated pursuing the American imperium, irrespective of cost. Even Mitt Romney, who presented himself as a responsible businessman, sounded like a neocon bot.

Sen. McCain ended up as the Republican presidential nominee and his hawkish mien defined the GOP fall campaign. He even urged confrontation with nuclear-armed Russia in its conflict with the country of Georgia — which started the conflict. Had McCain won the election, no one knows how many additional wars Washington now would be fighting.

But reality has made a reemergence in Republican ranks. Rep. Paul has been joined by another ideological libertarian, former New Mexico Gov. Gary Johnson. Former Utah Gov. Jon Huntsman has expressed skepticism of the Afghan war. And the newly refurbished Mitt Romney has taken several carefully choreographed steps away from the neocon cry of "Afghanistan forever."

The result has been much wailing and gnashing of teeth in the neoconservative camp, and especially by Senators McCain and Graham. In their view, anyone who fails to endorse killing foreigners in at least five different countries or believes that Americans cannot afford to forever police the globe is an "isolationist."

Now candidate Pawlenty has taken up the cry of "war now, war forever" with his speech to the Council on Foreign Relations. Naturally, it took him little time to toss the "I" word at his primary opponents: "parts of the Republican Party now seem to be trying to out-bid the Democrats in appealing to isolationist sentiments."

The talk was long on rhetoric but short on reality. Candidate Pawlenty obviously is a true believer in Washington's ability to run the world. The U.S. president need only speak with sufficient firmness — unlike Barack Obama, naturally — and the world will come to heel.

Pawlenty focused on the struggle of Arab peoples against authoritarian governments, many long supported by the United States: "We can help steer events in the right direction." He complained that the Obama administration stood by as an election was stolen in Iran only "to see the Green Movement crushed." He decried the reduction in foreign aid as "a lack of support" for democracy in Egypt. Declared Pawlenty: "I called for Assad's departure on March 29; I call for it again today."

As for policy, Pawlenty called for more American micro-management in more countries:

"We must do more than monitor polling places."
We must use foreign aid "to build good allies."
"We must insist that our international partners get off the sidelines and do the same."
We must tell new government "the truth," that "economic growth and prosperity are the result of free markets and free trade."
We must "commit America's strength to removing Qaddafi."
"We should press new friends to end discrimination against women, to establish independent courts, and freedom of speech and the press."
"We must insist on religious freedoms for all."
"We need to tell the Saudis what we think."
"We need to be frank about what the Saudis must do to insure stability in their own country. Above all, they need to reform and open their own society."
"We need to encourage opponents of the [Syrian] regime by making our own position very clear, right now. Bashar al-Assad must go."
We must "hasten the fall of the mullahs" in Iran.
We should keep the military option against Tehran on the table.
"Peace will only come if everyone in the region perceives clearly that America stands strongly with Israel."
"I would ensure our assistance to the Palestinians immediately ends if the teaching of hatred in Palestinian classrooms and airwaves continues."
"I would recommend cultivating and empowering moderate forces in Palestinian society."
We must seek "victory" like "in the 1980s."

It's an impressive litany, and most of the sentiments are reasonable or at least defensible. But most are sentiments, not policies. And certainly not realistic policies. Nor are any of the points new. Unfortunately, none so far has worked. Because most people, irrespective of how friendly, will not allow Washington to run their lives. They want to govern themselves.

Of course, foreign aid should be used to build "good allies." Like giving billions of dollars to Hosni Mubarak year in and year out. He was a "good ally." Moreover, with his overthrow has come rising hostility to Israel and religious minorities. Does Pawlenty believe that all we have to do is "insist" that the newly democratic Egyptians adopt our liberal values and all will be well?

Of course, the Saudi ruling family should be encouraged to reform. Does Pawlenty believe that the Saudi royals run a quasi-totalitarian state because they have never considered the benefits of reform? That all we have to do is tell the Riyadh autocrats that empowering women and freeing religious minorities would be good for the country, and the regime will act?

Why didn't Presidents Roosevelt, Truman, Eisenhower, Kennedy, Johnson, Nixon, Carter, Reagan, Bush, Clinton, Bush, and Obama realize how easy it was?

Naturally, Pawlenty closed with the usual rhetorical boilerplate used to justify an American imperium. It is wrong "for the Republican Party to shrink from the challenges of American leadership." "Weakness in foreign policy costs us and our children much more than we'll save in a budget line item." "America already has one political party devoted to decline, retrenchment, and withdrawal." "Our enemies in the War on Terror, just like our opponents in the Cold War, respect and respond to strength." Of course. All the U.S. government has to do is stand strong for "the ideals of economic and political freedom of equality and opportunity for all citizens" and all will be well.

Patriotism is the last refuge of the scoundrel said Samuel Johnson, and so it is today. What current politician does not believe in the traditional values which have animated the American republic? What presidential candidate does not want to ensure U.S. security in a dangerous world? What national leader wants America and Americans to be isolated from and uninvolved in the world?

The challenge is how to best promote those values and best ensure that security. America as empire — constantly bombing, hectoring, invading, lecturing, occupying, and instructing other states — is not.

Today the U.S. is involved in the equivalent of five wars: Iraq, Afghanistan, Yemen, Pakistan, and Libya. Americans have not enjoyed peace for more than a decade, and if Tim Pawlenty has his way, would not enjoy peace for years if not decades to come.

The costs are high. Some 6000 Americans have died and tens of thousands of Americans have been wounded in Afghanistan and Iraq alone, and the human toll continues to climb. In Iraq perhaps 200,000 civilians died in the violent aftermath to the U.S. invasion; millions of people were pushed into internal or external exile; the historic Christian community was ravaged. The financial cost continues to rise. Washington is effectively bankrupt, with a $14 trillion national debt, trillions more in unfunded federal retirement liabilities, and more than $100 trillion in unfunded Social Security and Medicate obligations. Yet America has doubled military spending, adjusted for inflation, over the last decade. The U.S. now spends more, in real terms, than at any point in the Cold, Korean, and Vietnam wars, and accounts for roughly half of the globe's military outlays.

Finally, every new bombing run, invasion, and occupation creates more enemies, and thus encourages more terrorism. Better calibrated responses relying on Special Forces, drones, intelligence, and international cooperation are less costly, more effective, and less likely to trigger blowback.

Far from being an early neocon, Ronald Reagan was a master of restraint. He used force only three times — in Grenada, Libya, and Lebanon. All were limited actions, and in the latter case Reagan responded to the bombing of the Marine Corps barracks by pulling out U.S. forces rather than launching a nation-building campaign. He recognized that the stakes in Lebanon were no where near the cost of expanding the conflict.

Ultimately, advocates of limited government and individual liberty must choose between empire and freedom. Perpetual intervention and conflict have been among the most important political fertilizers for the growth of the Leviathan state.

Tim Pawlenty has endorsed war and Big Government. Let us hope his competitors decide differently.

Why U.S. Leaders Deceive Their Own People

Why U.S. Leaders Deceive Their Own People

by Ted Galen Carpenter

Professor John Mearsheimer's latest book, Why Leaders Lie, provides a number of intriguing insights and surprising conclusions. Perhaps his most unexpected conclusion is that leaders lie to foreign leaders far less frequently than is generally assumed. Indeed, he contends that leaders lie to their own people more than they do to foreign counterparts. He does, however, concede that less blatant forms of deception, such as "spinning" and "concealment" are pervasive in international politics.

Two other conclusions ought to be deeply troubling to populations in democratic countries, and especially so to Americans. One is that officials in democratic political systems are more likely to deceive their own people — even engaging in outright lies — than officials in autocratic systems. His reasoning on that point is solid, and he provides compelling evidence to support his case. Mearsheimer's thesis is that democratic leaders are much more dependent than autocrats on public support for foreign policy initiatives, especially when an initiative includes going to war. If the available evidence is weak that a major security threat exists, but political leaders believe that taking military action is in the national interest, a powerful incentive exists to inflate the threat to gain badly needed public support.

A second, related part of his thesis is that political leaders are much more inclined to lie involving wars of choice rather than wars of necessity. Again, there are ample historical examples supporting his argument.

Ted Galen Carpenter, senior fellow of foreign policy studies at The Cato Institute, is the author of Smart Power: Toward a Prudent Foreign Policy for America, as well as other books on international affairs.
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If Mearsheimer is correct, Americans must face the troubling realization that U.S. leaders will be unusually prone to engage in lying as well as milder forms of deception to gull their own populations. Not only is the United States a long-standing democracy, but it is the nation since World War II that is most inclined to embark on wars of choice — often involving issues that have little or no connection to genuine American security interests. The list of U.S. military interventions just in the post-Cold War era — Panama, Somalia, Haiti, Bosnia, Kosovo, Iraq (twice), and the extended mission in Afghanistan — is definitive testimony to that tendency.

America's status as a democracy and a country inclined to wage wars of choice is a deadly combination that creates an overwhelming incentive for political leaders to use whatever techniques of threat inflation are necessary to stampede an otherwise skeptical public into supporting the latest dubious military crusade. The potential corrosive effect on America's political institutions and values are all too apparent. At a minimum, Americans ought to be on guard and doubly skeptical when an administration's spin machine goes into action making the case that Lower Slobovia's mistreatment of Upper Slobovians really, truly poses a dire security threat that only U.S. military action can prevent. The American people have heard such a refrain — and believed it — far too often for the health of the Republic.

How to Get Real Spending Cuts

How to Get Real Spending Cuts

by Michael D. Tanner

It is getting close to "crunch time" in the debate over raising the debt ceiling. Much of the debate continues to focus on whether Republicans will accept tax hikes as part of the package, and how big the debt-reduction package will be. All sorts of numbers are being tossed out: $4 trillion over twelve years? $6 trillion over ten years? $3 trillion over two years?

But focusing on dollars — even trillions of dollars — may be setting Republicans up for a fall.

After all, we've heard promises of spending cuts before. Remember the deal over the continuing resolution that kept the government open back in April? That deal was supposed to include $61 billion in spending cuts, but, in reality, it was crammed full of gimmicks such as counting savings from spending that hadn't occurred in the previous year or not funding programs that actually didn't exist. In the end, the actual reduction in spending was less than $8 billion.

Budget history is flush with promises of cuts some day in the future — but some day never actually comes.

And President Obama, in his most recent budget proposal, counted interest savings and the elimination of tax breaks ("spending in the tax code") as reductions in spending. They might show up that way on a balance sheet, but that sort of budget cutting does very little to reduce the size and burden of government — which is what this debate should really be about.

Republicans must also ask when those spending cuts will occur and how will they be enforced. Budget history is flush with promises of cuts some day in the future — but some day never actually comes. This is especially true when budget savings are anticipated not from actually eliminating programs, but from making government "more efficient." For example, the Obama administration claims that the health-care-reform law will ultimately save some $500 billion in Medicare spending. But even Medicare's own actuaries don't believe those savings will ever occur.

Now, the administration is reportedly offering another $340 billion in Medicare and Medicaid cuts as part of a budget deal. But because the administration continues to resist any changes in the structure of the program, those savings are likely to be as ephemeral as the Obamacare cuts.

And speaking of those Obamacare cuts, the health-care law "double counted" those Medicare savings by routing them through the so-called Medicare Trust Fund. This type of "trust-fund accounting" allowed the administration to "extend the life of Medicare" and reduce the program's unfunded liabilities, even as the savings were actually spent elsewhere. Will the debt-ceiling deal include similar smoke and mirrors?

Michael Tanner is a senior fellow at the Cato Institute and coauthor of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
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That is why Republicans should not get hung up on seeking any particular amount of spending cuts. The dollar amount matters far less than getting the structural and institutional changes that will actually bring down the size, cost, and intrusiveness of government in the future.

Republicans should push hard for a balanced-budget amendment to the Constitution — and not one that simply requires a balanced budget, but one that includes meaningful spending limitations. If they can't get the two-thirds vote that such an amendment would require, they should at least insist on a statutory spending cap. Republicans should also insist on fundamental structural changes to Medicare, Medicaid, and Social Security.

In the end, this is not really a debate about budgeting or the size of the national debt. It is a debate about whether we will have a limited constitutional government or a European-style social democracy. Winning that debate will not be a question of whether there is an agreement to cut $2 trillion over ten years rather than $1.5 trillion. If Republicans get an extra $500 billion in cuts on paper, but leave the structures of big government in place, they will find out down the road that nothing has really changed.

Stocks Advance Behind Energy, Tech Shares

By Nikolaj Gammeltoft -

U.S. House Speaker John Boehner (R-OH), right, listens as U.S. House Majority Leader Eric Cantor (R-VA), center, answers questions during a press conference on a balanced budget amendment at the U.S. Capitol July 14, 2011 in Washington, DC. Photographer: Win McNamee/Getty Images

U.S. stocks rose, trimming the Standard & Poor’s 500 Index’s weekly loss, as gains in energy and technology shares were enough to overcome concern that an impasse over raising the federal debt limit is putting the nation’s top credit rating in jeopardy.

Google Inc. (GOOG) jumped 13 percent after reporting sales that beat predictions, a sign that it’s making progress expanding beyond search advertising. Petrohawk Energy Corp. (HK) rallied 62 percent as BHP Billiton Ltd. agreed to buy the oil and gas company for $12.1 billion in cash. Gauges of energy stocks and technology companies advanced at least 1.5 percent. Clorox Co. (CLX) rose 8.9 percent after Carl Icahn offered to buy the company.

The S&P 500 rose 0.6 percent to 1,316.14 at 4 p.m. in New York. The gauge fell 2.1 percent this week. The Dow Jones Industrial Average added 42.61 points, or 0.3 percent, to 12,479.73 today.

“There’s a lot more company-specific issues driving stocks now, even though there’s still macro uncertainty about the debt negotiations in Washington and the European crisis,” Jeffrey Coons, president of Manning & Napier Advisors Inc. in Fairport, New York, said in a telephone interview. His firm manages $44 billion.

Stocks lost their gains this morning amid concern negotiations toward raising the U.S. debt ceiling are failing to progress. House Speaker John Boehner, a Republican from Ohio, told reporters that his party wouldn’t accept any tax increases as they work with President Barack Obama on a deal to lower deficits and possibly raise the U.S. debt limit. Moody’s Investors Service and S&P said this week that they may cut the federal government’s credit rating if the issue isn’t resolved.

Higher Rates

Obama said a failure to raise the U.S. debt limit would trigger a default on the nation’s obligations that could drive up interest rates for everyone in the country.

“We could end up with a situation where interest rates rise for everyone,” he told a Washington press conference. In effect, it would be “a tax increase for everybody.”

The S&P 500 rallied 93 percent from its low in March 2009 through yesterday as the Federal Reserve used large-scale asset purchases to buoy the economy and companies posted earnings that beat analysts’ estimates. Of the 13 S&P 500 companies that have posted results so far this earnings season, 11 have beaten forecasts for per-share profit.

Stocks fell from their highs of the day after the Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 63.8 in July from 71.5 the prior month. The gauge was projected to rise to 72.2, according to the median forecast of 62 economists surveyed by Bloomberg News. Estimates for the confidence measure ranged from 75 to 68. The index averaged 89 in the five years leading up to the recession that began in December 2007.

Stress Tests

Stocks briefly extended their advance after the European Banking Authority said eight banks failed the European Union stress tests with a combined capital shortfall of 2.5 billion euros ($3.5 billion).

Agricultural Bank of Greece SA, Austria’s Oesterreichische Volksbanken AG and Spain’s Banco Pastor SA were among the failures. The companies were found to have insufficient reserves to maintain a core tier 1 capital ratio of 5 percent in the event of an economic slowdown, the European Banking Authority said. All banks tested in Italy, Germany and the U.K. passed.

“The stress test results are coming in pretty much as expected, at least at the headline level,” E. William Stone, who helps oversee about $110 billion as chief investment strategist at PNC Wealth Management in Philadelphia, said in a telephone interview. “Everybody is waiting for more news on the U.S. debt ceiling and more about the EU sovereign debt situation, and nobody wants to get too far on one side or the other ahead of the weekend.”

Google, Clorox

Google soared 13 percent to $597.62, its biggest gain since October 2008. Sales, excluding revenue passed on to partner sites, rose to $6.92 billion. That topped the $6.57 billion average estimate of analysts surveyed by Bloomberg.

Clorox advanced 8.9 percent to $74.55, its highest price since at least 1980. Icahn, a billionaire, offered to buy the maker of the namesake bleach for about $10.2 billion in a move designed to draw out other potential bidders.

Petrohawk Energy rallied 62 percent to $38.17. BHP Billiton, the world’s largest mining company, agreed to buy the company for about $12.1 billion in cash in its biggest acquisition, betting natural gas demand will gain in the U.S.

Chesapeake Energy Corp. (CHK) climbed 9.1 percent to $32.96. The natural-gas driller would be worth $58 a share should it be taken over based on the valuation of the Petrohawk acquisition, Ticonderoga Securities LLC said in a note.

Energy Stocks

Energy companies rose 2.3 percent, the most among 10 industries in the S&P 500. Technology stocks added 1.6 percent as a group.

Ralcorp Holdings Inc. (RAH) fell 0.7 percent to $86, dropping for a sixth straight day. The maker of Raisin Bran cereals and private-label food brands plans to spin off Post Foods after failing to sell the unit to rival foodmakers or private-equity firms.

Flir Systems Inc. (FLIR) fell the most in the S&P 500, slumping 9.9 percent to $28.92. The maker of night-vision cameras used by U.S. combat forces reported second-quarter profit excluding some items of 35 cents a share, trailing the average analyst estimate by 4 cents, according to Bloomberg data.

Is Obama a One-Termer?

Republicans have a golden opportunity to break Barack Obama's presidency, ensuring he will be a one-termer. Mr. Obama has backed himself into a corner on the debt-limit talks; the GOP can smash his re-election prospects if they have the will—and intelligence—to do it.

Mr. Obama has asked that the nation's $14.3 trillion debt-ceiling be raised, and he knows that cannot be done without support from House Republicans. Moreover, along with Treasury Secretary Timothy F. Geithner, Mr. Obama warns that fiscal Armageddon is coming unless the ceiling is lifted before Aug. 2—the date Mr. Geithner claims the United States begins defaulting to its debtors.

Mr. Obama seeks a "grand bargain": a debt reduction package that includes $1 trillion in tax increases to accompany entitlement spending cuts, including Social Security and Medicare. He wants to go big. His target is to slash $4 trillion over 10 years. He has repeatedly vowed to veto any "small" debt-limit increase—one that keeps America paying its bills until a more comprehensive agreement is ratified. In other words, Mr. Obama has issued an ultimatum to congressional Republicans: either break your 2010 campaign pledge not to raise taxes or else be blamed for the debt-limit debacle. As he put it, it's time to "eat our peas." The president is playing Russian roulette with the economy and our nation's future.

Yet, he has badly played his weak hand. Mr. Obama has committed a fatal mistake: overreach. The president has issued a public ultimatum that either must be upheld or he must back down from. Either way, it is Mr. Obama's political credibility that threatens to be shattered.

House Speaker John Boehner is holding all the cards. Mr. Boehner should insist on a small deal—lifting the debt ceiling accompanied with corresponding spending reductions. Every debt dollar raised should be coupled with a dollar cut. Hence, the package pays for itself. More importantly, it places Mr. Obama in a no-win situation. House Republicans will pass legislation that raises the debt-limit. Therefore, they cannot be blamed for any economic fallout should America default. Mr. Obama can veto it, which means he will be solely responsible for the fiscal calamity. Or he can sign it—publicly standing down from his earlier threats. Thus, he will be denuded among his liberal supporters and the larger electorate, and shown to be a weak leader whose words mean nothing.

Either way, it will be his Waterloo: the effective end of his presidency.

AOL Touts Masturbation Huffington-Style

America Online is now endorsing masturbation. Recently, AOL posted an item on its general page discussing how men often fake orgasms, and that they should engage in masturbation to help "discover what stimulates you." Apparently, women aren't the only ones faking it in the bedroom.

The fact that AOL would even run a lewd story like this—never mind give it top billing—reveals the change in editorial content since its merger with the far left Huffington Post. The liberal website, founded by Arianna Huffington, was acquired by AOL in February for a stunning $315 million. Moreover, the deal made Ms. Huffington the editor-in-chief of AOL's 1,200-member newsroom. AOL's stories are starting to reflect her radical views—undermining its credibility as a respectable Internet news source.

This is what now passes for informative news at AOL? Under Ms. Huffington's leadership, the popular website has become a pimp for the sexual revolution. It is peddling the Playboy philosophy, hoping to make it mainstream. Perversion and moral indecency are packaged as part of a "healthy lifestyle." What's next: the benefits of bestiality, polygamy or oral sex?

Ms. Huffington is frittering away the hard-won reputation of AOL and dragging it into the journalistic gutter.

Beck's Swan Song

Glenn Beck, the radio host and former FOX News talking head, apparently needs to capitalize one last time on his dwindling fame. His solution: publish a redundant book on the Federalist Papers.

In "The Original Argument" (Threshold Editions, 430 pages), Mr. Beck seeks to translate and adapt the Federalist Papers for contemporary readers. Therefore, many of its passages—written in 18th-century English prose—are updated to be more understandable and, hopefully, relevant. The book contains footnotes explaining the historical events or references of the time. There are short summaries of key arguments, as well as one-paragraph nuggets on the essays seeking to apply their wisdom to today's problems. "The Original Argument" is really a version of the "Federalist Papers for Dummies."

But do we really need another work on the Constitution, or the Federalist Papers for that matter? The subject has become a cottage industry. There have been countless volumes written on the topic. Mr. Beck argues that the Federalist Papers are "boring" to read and arcane, thereby there is a need for his book. This is false—and puerile. I (along with millions of students) had no trouble reading the essays in college years ago. The same held true for the Bible, Shakespeare, Plato and all the other canons of Western civilization. Hence, will Mr. Beck be coming out with his adaptation of the Bible anytime soon—maybe one for those of his Mormon faith.

Mr. Beck has cynically positioned himself as a so-called leader of the Tea Party. His rise to fame and fortune has been based on one giant gimmick: the wannabe constitutionalist professor, eye glasses and chalk-board in hand, preaching about the evils of progressivism. Yet, Mr. Beck is really a phony: He has placed Vaseline near his eyes so he could cry on cue about the suffering caused by President Obama's socialist policies. Mr. Beck is the court jester of the conservative movement.

He is a modern-day P.T. Barnum, whose act has finally worn thin. His ratings at FOX dropped dramatically. He had become overexposed—the speaking tours, the countless books and novels, the metamorphosis into a self-help guru preaching personal empowerment and bogus uplift. He is now leaving the stage, launching his own Internet-based television network (GBTV). My prediction: it will flop. Just like "The Original Argument," Mr. Beck has nothing new or meaningful to say. This is a non-book by a non-author.

LATICONOMICS

Sunday, September 2, 2012

By Anthony Gregory

Obama or Romney: It Matters as much as Choosing Pepsi over Coke

US Drone Strikes And Bin Laden’s Killing: Turning Pakistan Into A Time-bomb

The War in Afghanistan: A Monumental Waste

Global War Economy: The Empire of the US Military Industrial Complex

Written by Gary North

Official: Iran would take action if US attacked Syria

Friday, July 15, 2011

General Marshall on the Aegean

From Italy to the US, utopia vs reality

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On this story

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La agencia afirma que hay bastantes posibilidades de que degrade la deuda del país en los próximos meses.

David Ogilvy's Lesson for Libertarians

Should You Oppose the "Redistribution of Wealth?"

Put a Ceiling on Overregulation

Why U.S. Leaders Deceive Their Own People

Federal Spending Doesn't Work

Tim Pawlenty: The Latest Dangerous Neoconservative

Stocks Advance Behind Energy, Tech Shares

Higher Rates

Stress Tests

Google, Clorox

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