$500 Million of Additional Foreign Aid to Pakistan?!?

The Obama Administration has announced that Pakistan has been granted $500m of additional foreign aid which will be used to pay for various non-military causes and to combat "rampant anti-Americanism".

"Secretary of State Hillary Clinton on Monday unveiled $500 million worth of civilian aid projects for key ally Pakistan, in an attempt to counter rampant anti-Americanism in the country by reaching out to the population with tangible help.

The aim of the projects was to show that the U.S. relationship "goes far beyond security," and they ranged from restoring a historical fort to boosting mango exports. The money is part of the $1.5 billion a year pledged to Pakistan under the Kerry-Lugar bill, named for Sens. John Kerry, D- Mass, and Richard Lugar, R- Ind, the chairman and ranking member, respectively, of the Senate Foreign Relations Committee. It represents a tripling of U.S. civilian aid to the country.

Since 2001, Pakistanis have complained that the United States was using their country for U.S. security aims alone, with all benefits going to Pakistan's dominant military apparatus. The Obama administration says it's determined to change that perception."

The US should not be bribing the Pakistani people in order to sway their negative opinion about our current military policies. Instead, the U.S. should shut down the Afghanistan war and get out of Pakistan altogether.

It's preposterous, naive and foolish to think that simply by paying for a few public works projects (assuming this foreign "aid" doesn't immediately get siphoned off by the entrenched government and get sent to a private bank account in Switzerland) the Pakistani people will warmly embrace the active role we demand of them in the Afghanistan War.

Let's just end the war, declare victory, bring the troops home and separate them from armed service and dedicate the tax dollars no longer used in that needless and useless military endeavor towards reducing our public debt.

On the other hand, with skyrocketing budget deficits now measured in the trillions of dollars, it perhaps might be easy to think of any spending item that numbers in the millions as being "inconsequential".

However, these items all add up and if Congress were serious about corralling its out-of-control spending, they must focus on reigning in all areas of government spending.

Top Republicans Struggle to Articulate Spending Cut Ideas

Republicans have long tried to play it both ways fiscally speaking. They are publicly and loudly in favor of tax cuts, and are also publicly and loudly in favor of reducing federal spending.

However, ask them to name exactly which federal programs or spending that they'd like to see cut, and they suddenly clam up.

An appearance by a multitude of Senate Republican leaders on Meet the Press this Sunday confirmed that Republicans' inability to propose specific spending cuts unfortunately continues.

"Democrats are gleefully passing around a video clip of Rep. Pete Sessions' (R-Tex.) appearance on "Meet The Press" this Sunday, and for good reason. Pressed repeatedly by host David Gregory to explain exactly what the GOP would do to cut the deficit -- should it regain congressional power -- the National Republican Congressional Committee chair stammered and offered platitudes:

"We need to live within our means."

"We need to make sure we read the bills."

"We are going to balance the budget, we should live within our means and we should read the bills and work with the American people."

"We need to make sure that as we look at all that we are spending in Washington D.C."

"We have to empower the free enterprise system."

Really, how hard is it to propose cutting something, anything?

I can rattle off at least 10 programs that could be cut or outright eliminated, without thinking too hard about it (Homeland Security, TSA, Departments of Agriculture and Education can all be eliminated, while spending on Social Security, the Department of Defense, Medicare, foreign aid, etc. can all be scaled back, dramatically in some cases).

The issue for Republicans of course is that they perceive that American voters in general are similarly in favor of cutting federal spending, but not at the expense of "their" programs. Hence, the solution of being in favor of cutting spending in general, but without going into specifics.

Given the fiscal state of America, I think now is the right time for the Republican Party to be honest with ordinary Americans, and either state that they are not in favor of cutting any federal spending (and deal with the political fallout that follows) or that they are in favor of cutting spending and spell out exactly what program they are in favor of cutting or eliminating (and deal with the political fallout that follows).

It's time for politicians (both Republicans and Democrats) to grow up, fully appreciate the fiscal predicament we find ourselves in as a country, and fully and clearly state what they intend to do about it.

Should Congress Let the Bush Tax Cuts Expire?

There is a growing debate about whether Congress should allow the so-called Bush tax cuts, which were originally enacted in 2001 with a 10 year sunset provision, to expire at the end of 2010 or extend them.

"Though the tax cuts passed by Congress with the encouragement of former President George W. Bush are often described as a boon for the wealthy, the changes passed in 2001 and 2003 lowered taxes for every income bracket.

Democrats have pledged to shield middle-class taxpayers from the Dec. 31 expiration though no action has been taken yet. Democratic leaders reportedly have suggested holding off taking up extending the cuts until after the November election and a report released by President Obama's debt commission."

Alan Greenspan, the alleged "Maestro" whose loose monetary policies while head of the Federal Reserve created one asset bubble after another, weighed in to say that the tax cuts should be allowed to expire in order to fix the deficit. Considering his track record on economic decisions, his "wisdom" can be safely ignored.

There is no question that the tax cuts at all levels should be extended. An extension for all Americans can be defended on at least two grounds.

1. With the country in the midst of economic recession, why would taking more money out of the pockets of Americans (by in effect raising taxes) be helpful to our economy? The federal government is certainly not suffering from a lack of money to spend.

2. The federal government already takes out a healthy-sized piece of the economic pie in the form of taxes. There's no reason this should increase, and any attention now being given to the budget deficit should be directed at creating a fix borne out of spending cuts, not tax hikes.

Obama Fiscal Commission Already Treading Water

The Fiscal Commission (headed up by former Senator (R-WY) Alan Simpson and former Clinton White House staffer Erskine Bowles) is reporting a deep divide among their members and is calling into question their ability to unanimously agree to the measures needed to overcome the giant budget deficit we face as a country.

"The co-chairmen of President Obama's debt and deficit commission offered an ominous assessment of the nation's fiscal future here Sunday, calling current budgetary trends a cancer "that will destroy the country from within" unless checked by tough action in Washington.

"There are many who hope we fail," Simpson said at the closing session of the National Governors Association annual meeting. He called the 18-member commission "good people with deep, deep differences" who know the odds of success "are rather harrowing."

The commission leaders said that, at present, federal revenue is fully consumed by three programs: Social Security, Medicare and Medicaid. "The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans -- the whole rest of the discretionary budget is being financed by China and other countries," Simpson said.

"We can't grow our way out of this," Bowles said. "We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can't tax our way out. . . . The reality is we've got to do exactly what you all do every day as governors. We've got to cut spending or increase revenues or do some combination of that."

Bowles is dancing around what should be the primary mission of the Commission, which should be recommending spending cuts and not tax increases.

The federal government budget has expanded massively since 2000. Bringing federal spending back in line with the amount of spending undertaken in the year 2000 would go a long way towards reigning in the current budget deficit.

The Commission appointees and members of Congress know that tax increases will stifle investment and savings, and would not improve the outlook for jobs.

The choice for the Fiscal Commission is simple. Once they stop thinking of ways to provide cover for Congressional Democrats by proposing tax increases, they can get down to the real business of ending the budget deficit through spending cuts.

Germany Fiscal Policy Provides A Great Example For The US

Germany recently announced that their government would be implementing a plan to cut spending but not raise taxes, in an initiative aimed at balancing their books.

"Germany’s cabinet is poised this week to approve a 2011 budget as part of a four-year programme of public spending cuts meant to serve as an example to other European governments without jeopardising the country’s increasingly robust economic recovery.

Briefing papers for Wednesday’s cabinet meeting, released by Berlin on Sunday, argue that by curbing spending – rather than increasing taxes – the €80bn ($100.3bn, £66bn) savings programme would differ “fundamentally” from previous fiscal squeezes and offer “noticeable, better growth possibilities”.

The comments appeared aimed at heading off international criticism that German fiscal austerity would hit Europe’s growth prospects."

This is in stark contrast to the US, where President Obama spent last week in Toronto urging fellow members of the G20 to continue running up budget deficits in order to create "growth".

It should be obvious to the reader that all spending by the government simply displaces either current or future private spending, because government spending involves taking money from private individuals (in the form of taxes) that would otherwise be spent or saved (and later spent, by those taking loans from banks).

Higher taxes and more spending are simply a means for the government to gain more control over the economy and, indirectly, our own personal lives without creating an appreciable difference in the overall economy or our own collective well-being.

Germany's approach here is the correct one, which demonstrates why it's been the stalwart of the EU since the latter's formation. Cutting spending and keeping taxes in check are a much better recipe for economic success than increasing spending and taxes, and will likely allow Germany to emerge from the economic recession in much better shape than its competitors.

On the other hand, it's ironic and yet sad and pathetic that just days before the 4th of July, which of course a couple hundred years ago saw the overthrow of a tyrannical government by the people of America, President Obama is out lecturing other countries that the path forward is for governments of the world to exercise even more state-control over their "subjects".

New York Senate Fiddles...

New York City residents in recent years have made a burgeoning business out of offering their apartments for rent on a short-term basis to out-of-towners for the latter to use for a mini-vacation.

However, the New York State Senate is now considering a bill that would outright ban people living in New York City from using Craigslist and similar sites from doing just that.

"This week, writes Budget Travel, "New York state senators vote on a bill that would make it illegal for any homeowner or renter to sublet for less than a month. The new law would be a blanket ban on short-term rentals no matter how ethical the renter is. (It's always been illegal to violate co-op leases and condominium bylaws.)"

Maybe the Senators are looking for a reason to not focus on the state's gigantic, exploding $9 billion plus budget deficit.

The state is quickly sinking into a fiscal hellhole, and instead of coming up with growth-oriented policies (for example - cut the state sales tax, slash the individual tax rate, waive certain rules and regulations for newly-formed businesses, etc.) the best that state lawmakers can do is to make it even more unlikely that a budget-conscious traveler will actually want to visit New York City.

Given the complete reluctance on the part of New York state lawmakers to make difficult choices on how much the government attempts to raise in the form of taxes and how much of that amount it should spend, its challenging fiscal times will continue and only get worse from here.

The Flip Side of the Offshore Drilling Ban

The US government has instituted a six month ban on deepwater offshore water drilling in response to the BP oil spill, which will have its own ramifications.

"President Barack Obama's six-month moratorium on deepwater drilling in the Gulf has sent shudders across the coast's offshore oil industry — where no one knows just how extensive or long-lasting the damage to jobs may be.

Louisiana has long been indebted to the oil industry. Its thousands of good-paying jobs — offshore workers frequently earn $50,000 a year or more — counterbalance the low-wage tourism industry in the state's southern tier of parishes.

But that changed — at least temporarily — after the oil rig exploded in the Gulf of Mexico, spewing the black gold into the waters. Now, many of those who counted on making it in the oil patch are out stumping for jobs."

Given the excessively high unemployment rate in the US and the fact that a lot of other drillers have been insisting that BP has been using rogue practices in their drilling (i.e., the risk of another giant oil spill is not as great as the government suggests), the drilling ban will only further depress the economy, increase the unemployment rate and increase our budget deficits as claims for unemployment payments increase.

The Trouble With Democracy...

After years of over-spending and over-taxing by New York State politicians and with new reports indicating that Governor Paterson may shutdown state government in a dispute with other state-level Democratic lawmakers, surely residents there are looking for a change to the failed policies of the past, and are embracing a fresh start with polices focused on reasonable tax rates and balanced budgets?

Uhhh, no.

A recent survey poll indicates that residents in parts of New York are unsurprisingly in favor of increasing taxes on "millionaires" in order to retain the current unsustainable funding of education.

"The [New York State United Teachers] union surveyed voters in three swing districts and asked them whether they would be more or less likely to vote for their representatives if they supported a millionaire's tax as a way to avert deep education cuts.

In all three districts, voters by a 37-18 point margin said they'd be more apt to support their lawmakers if they moved to raise taxes for the wealthy if it meant saving their schools from budget cuts.

Two temporary income tax hikes were included in the survey: An additional 1 percent for those earning more than $1 million and 2 percent for incomes over $5 million.

The state's top income tax bracket is 8.97 percent so the rate cited in the survey would go up to 9.97 and 10.97 percent respectively."

So once again, voters indicate their willingness to address massive and systemic overspending by government by raising taxes. Their willingness would be a bit more noble if they were actually agreeing and willing to raise taxes on themselves. But what is actually occurring here is that survey responders are indicating agreement with raising taxes on the "other guy", not themselves.

Hence, the problem with popular democracy. A well-worn summary of the issue is as follows:

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the Public Treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the Public Treasury with the result that a democracy always collapses over loose fiscal policy always followed by dictatorship." (Author unknown, at least to this scribe)

The solution to this issue, which rears itself not just in New York state but in other states and at the federal level, are Constitutional amendments limiting the amount of income that can be taken in the form of an income tax and requiring an annual balanced budget.

Until such time, productive members of society will increasingly see themselves as a target by the less-productive and non-productive members of society, who seek the property of the former to live beyond their own means.

Connecticut Circles the Toilet

Connecticut has joined many other states that have attempted to fund their budget deficits with debt issuances, and that consequently have had their ratings downgraded.

"Connecticut, the state with the highest tax-supported debt, had its bond rating lowered one level to AA by Fitch Ratings as it prepares to borrow money to cover a budget deficit for a second straight year.

Connecticut is preparing to borrow $956 million to close a budget gap in the fiscal year beginning July 1, after borrowing money last year to cover a deficit of $947.6 million, the analysts said. Lawmakers also chose to draw down the state’s rainy-day fund and raise the top income tax for residents after tax collections fell almost 15 percent in the year ending June 30, 2009, according to Fitch."

Now, we all know that just because a ratings agency such as Fitch decides to take action doesn't mean much. All three of the big ratings agencies (S&P, Moody's and Fitch) were woefully late in making any meaningful downgrades on the ill-fated investment banks and basically mis-rated much of the mortgage-backed securities market.

Nonetheless, it's telling that Connecticut is now viewed as crossing some sort of abyss. Why legislators there can't simply find some spending programs to cut in order to maintain a balanced budget is beyond me.

It's simply outrageous that there are no (save Ron Paul, and perhaps Chris Christie, governor of New Jersey) politicians at the federal or state that are willing to stand up and do the right thing - which is, to not issue more debt that has to be repaid by future generations from higher-than-necessary taxation.

We can only hope that the November elections are the chance for right-thinking Americans to correct the direction of this country on many levels.

CA Budget Mess a Harbinger of Future Federal Issues

The massive budget deficit that the state of California currently faces should seemingly be an opportunity for lawmakers in the Golden State to finally face up to the fact that, at some point, chronic overspending needs to be reigned in.

Unfortunately, that's not the way things work in the world that politicians live in.

Consider Democratic lawmakers proposal to "solve" the state's $19 billion budget deficit, which counters the budget cuts that Governor Schwarzenegger had proposed.

"Assembly Democrats weighed in Tuesday with their own state budget plan that relies on borrowing nearly $9 billion from Wall Street and installing a new tax on oil production to pay back that loan over 20 years."

The $9 billion loan from "Wall Street" is basically securitized by the nickels and dimes that roll in over the next 20 years from the state's bottle recycling tax.

And I wonder how much additional tax revenue that new tax on oil production will actually bring in, once producers factor in the new cost into their estimates and decide that, "hey, maybe we should tap those oil rights we have in Texas or Oklahoma instead of bringing anything new on-line in California."

This sort of fiscal recklessness is foreboding for what Democrats in national office will do when it ultimately becomes clear that printing money is not the panacea for exploding budget deficits.

One can only imagine that instead of ultimately trimming costs as they by all rights should do, perhaps Congress will ultimately decide to securitize future gate receipts at the Smithsonian or sell burial plots at the Arlington National Cemetery.

We're a long ways away from lawmakers and their supporters in this country actually facing up to the destructive fiscal policies that they embrace.

BCS Head Stands Up to the US Senate

In a time when members of Congress think they should weigh in on any contemporary issue that interests them (instead of, you know, focusing on their Constitutionally-mandated responsibilities), it's refreshing to hear of a person in a position of national renown in effect publicly and plainly telling them to spend their time on other issues, rather than pliantly responding to their missives like most would.

Sens. Orrin Hatch (R-UT), and Max Baucus (D-MT) started the exchange recently when they sent a letter to the BCS.

"Their letter, which was posted on Hatch’s official Web site, asks for details about how the BCS calculates which conferences get automatic bowl bids, how money will be divvied up under a new TV deal and what sort of legal status the organization has."

BCS executive director Bill Hancock responded as follows:

“I’m looking forward to taking a longer look at the letter. I sure do think that Congress has more important things to do, with all the issues facing our country,” Hancock said in a telephone interview with The Associated Press. “The BCS is fair. Access is fair. Revenue is distributed fairly. And frankly, we welcome the opportunity to tell our story every chance we get.”

I couldn't agree more with Hancock.

Perhaps if Messrs' Hatch and Baucus would spend more time thinking about ways to reduce our budget deficit and less time worrying about whether certain colleges can compete for the college football championship game, we wouldn't be in quite the financial pickle we find ourselves as a country today.

US Government Gives $656m to Pakistan?

At a time when US budget deficits are out of control, why is the American government taxing Americans in order to transfer over a half a billion dollars to Pakistan?

"The United States has released $656 million to Pakistan for some of the costs incurred last year in military operations against Taliban militants, a U.S. embassy spokesman said on Tuesday.

The funds are part of a program called the coalition support fund (CSF), a U.S. program used to reimburse countries that have incurred costs in supporting counter-terrorist and counter-insurgency operations.

Pakistan, a vital ally for the United States as it struggles to stabilize Afghanistan and end the global threat posed by al Qaeda and its allies, has been heavily burdened by the cost of battling Taliban insurgents along its Afghan border."

Given the resurgence of the Taliban in Afghanistan, it would be hard to argue that the Pakistani military has provided much help.

This money would have been better kept in the US to repay our public debt, in order to lessen the massive federal debts our future generations are already expected to repay.