Is America Now A Welfare Nation?

In this photo taken Thursday, Feb. 4, 2010, Tina Tennyson sits with her grandson, Jamari, 3, while waiting to apply for food stamps at the Sacramento County Economic Development Department in Sacramento, Calif. (AP)

U.S. Spending on Food Stamps at All-Time High, Sparking Debate Over Welfare

By Jim Angle

The U.S. is now spending more on food assistance than at any time in its history
, sparking a debate over whether the roughly 40 million people now receiving the latest version of food stamps at a cost of $73 billion a year are a symptom of a weak economy or are part of a long-term expansion in welfare and related programs.

Food stamp supporters say the record-high spending is simply a reflection of the economic downturn over the last two years.

“The program is expanding because we are realizing a significant downturn in the economy,” said Ambassador Eric Bost, who ran the food stamps program in the first years under President George W. Bush. “The food stamp or the SNAP program, as it’s referred to now, responds to the changing economic conditions of the country.”

“Unemployment is the worst it’s been in over 30 years,” added Sheila Zedlewski, an expert on poverty policy at the left-leaning Urban Institute. “The poverty rate is rising. Some people project it will be 15 percent. That would be the highest it has been since the 1960’s.”

But critics say this and other welfare programs were growing long before the recession and that food stamp usage has exploded over the last decade.

“The number of food stamp recipients has more than doubled since 2000, and the cost of the program has more than tripled,” said Chris Edwards, an expert on federal and state tax issues at the libertarian Cato Institute.

Though no one quibbles about the need for more forms of assistance during times of high unemployment, Edwards fears there is more going on here, that there is an effort to just keep expanding such programs.

Some government figures show that only 10 million people have a serious problem with hunger, Edwards said.

“The number of people on food stamps is four times higher than the number of people with a serious hunger problem,” he said.

But Bost defended the food stamp program, saying it helps the most vulnerable.

“Forty nine percent of the people that are participating in this program are children,” he said. “Ten percent are elderly and a vast majority of the other persons that are participating in the program do work. They just don’t earn enough money to meet all of their nutritional needs.”

Melissa Boteach, a poverty policy expert at the liberal Center for American Progress, said that last year, nearly 1 in 4 children were in a household struggling against hunger.

“And nearly 50 million Americans overall lived in households struggling against hunger so this is a serious problem in this recession,” she said.

Bost, the food stamp administrator during the Bush administration, said the numbers should fall as the economy gets better.

“When there’s a significant downturn you see an increase in the number of people participating and enrolled in the program when the economy is strong and doing well you see fewer people,” he said.

But some critics are not so sure.

“You certainly expect the food stamp program to go up during a recession, that’s not a bad thing,” said Robert Rector, a poverty expert at the conservative Heritage Foundation. “What we should be concerned about is even before the recession the food stamp program was increasing dramatically, because the government was reaching out to bring people into the program and then make them dependent.”

If the program were to return to the levels of the early 2000’s, he said, that would be ok, but he fears that is not what’s going to happen.

Looking beyond just food assistance, Rector looks at some 70 programs aimed at assisting the poor and points to President Obama’s spending projections for them in the years to come.

“If you look at Obama’s own projections, he’s projecting to spend over $10 trillion on assistance to the poor over the next decade and that’s without the cost of Obamacare, the new health care program that he’s created,” he said. “This is something that the United States simply cannot afford.”

He argues that Obama has no intention of letting assistance to the poor shrink even when the economy is healthy again and says he intends to expand such spending by more than a third over usual levels.

“He’s creating a permanent spread-the-wealth-state funded through deficits and borrowing from the Chinese,” Rector said.

Obama’s Thuggocracy

By Andrea Tantaros- FOXNews.com

From the G.M. bondholders, to the Black Panthers at polling stations, to ACORN to the mobs showing up at the homes of private citizens, Obama is running a Hugo Chavez-style thuggocracy.

This past Sunday, in one of the most aggressive and offensive intimidation tactics to date, hundreds of members of the largest union – the SEIU – stormed the front yard of Bank of America deputy general counsel Greg Baer’s home. The angry mob had bullhorns, signs and even broke the law by trespassing to bully Baer’s teenage son, the only one home at the time, who locked himself in the bathroom out of fear.

This is what unions do. They pressure politicians into spending too much. They push government into bad policy decisions. They sacrifice the private sector for the public sector. And now, they trespass and break the law only to scare the children of private citizens to get their way.
If you think the unions are working along, think again.

These protests, the ones storming Wall Street bank lobbies and now the private homes of bankers, are likely being carefully coordinated with the White House to increase their profile against the financial fat cats and help pass disgraced Connecticut Senator Chris Dodd’s financial regulatory bill.

Remember, when the White House visitor records were finally made public, it was SEIU boss Andy Stern who was the most frequent guest.

There are also no coincidences in politics. The bill passed the Senate last night.

From the G.M. bondholders, to the Black Panthers at polling stations, to ACORN to these assaults on private citizens, Obama is running a Hugo Chavez-style thuggocracy. Like Chavez, he gets non-official “allies” to act as his henchemen and do the intimidation work. Obama provides the narrative and tells the story of “greed” while the SEIU provides the muscle. This is about power, not prosperity.

This time it’s gone too far.

Unions see the writing on the wall. The goose that laid the golden egg is bleeding on the operating table – and they’re the ones who killed it. They are bankrupting local and state governments, and putting a strain on the federal budget. Unions have also put us at a major trade imbalance. The stimulus has gone to create more public sector union jobs. These jobs cost on average, 30K more than their private sector equivalents.

Take New York State, for example, once upon a time there was manufacturing, a robust Wall Street engine of growth, Fortune 500 companies aplenty. That “Empire State” is no more. The unions lobbied to ensure that these companies were taxed to death and made it extremely challenging to do business — so much that it became easier to do business in communist China.

Let’s be clear, I’m not defending Bank of America. I’m defending the American tax payer from organized labor who has bled them dry and the politicians who have been too weak to stand up to their gangster ways.

Unsurprisingly, the SEIU has made no apology for their behavior toward Baer’s family. Their spokespeople argue that the protest was over home foreclosures under Bank of America’s watch, but that still doesn’t give them the right to break the law. It also doesn’t allow them a carve out like they demanded in the health care bill for their costly Cadillac insurance plans. It’s absurd that in a recession, the unions feel they deserve special treatment because they are connected to the party in power. If that’s what they’re arguing they need to stand up and say it.

In this economy, you can’t punch someone without feeling it yourself. Punch the bank, they stop making loans, thus hurting the private sector. Punch the private sector, you hurt the markets. Hurt the Street and you hurt the pensions funds, in fact, the very same ones unions are going gangster to protect.

We now know, there is nothing they won’t do, nobody the unions won’t intimidate. And the president, who promised to preside over an administration free from special interest influence, should be held accountable. As long as we continue to feed the unions, the country will continue to decline. It’s time to stand up to this behavior with the same muscle they’ve used to bully our country all these years and send a message loud and clear: we will not be intimidated.

Andrea Tantaros is a conservative columnist and FoxNews.com contributor.

Starve the Beast?

What would happen if U.S. businesses stopped paying federal payroll taxes? What wou;d happen if we went along with the idea thrown about by Neal Boortz and allow people to understand how much money the federal government takes from them each paycheck? Would they get the idea of how great of an idea the fairtax is if they got 100% of their paycheck for a month or two? Would the federal government get the idea of how angry the American people are if they were starved from their monthly allowance from all American businesses?

Right now, we are looking at becoming Greece, or worse, Bangkok. What is the solution, civil disobedience? What are your thoughts, your ideas?

There is a facebook page: what if Businesses stopped paying federal payroll taxes?

What say you?

The Democrats’ Civil War

By Kim Strassel

The Democratic primaries are generating nominees who are embracing, or even going beyond, the president’s unpopular agenda.

What do Joe Sestak, Bill Halter and Colleen Hanabusa have in common? The left loves them. This is yet another reason Democrats are in trouble this fall.

Given the obsessive coverage of the Republican “civil war,” you may not realize Democrats are also feuding. Angry and disappointed that their president and Congress has not done more, the party’s liberal base is throwing itself into the primaries, pushing the party to the left even as the country moves right.

Ask Arkansas Sen. Blanche Lincoln, who on Tuesday will fight to keep her party’s nomination against progressive Bill Halter, the state’s lieutenant governor. Also up for judgment that day is Sen. Arlen Specter. He has his new party’s full financial backing. Recent polls nonetheless show the liberal Mr. Sestak within striking distance.

Later next week Hawaii holds a special election to replace Rep. Neil Abercrombie, who resigned to run for governor. His district is Democratic, but the liberal Ms. Hanabusa is siphoning support from the party’s preferred candidate, former Rep. Ed Case. Republican Charles Dijou might win.

These races follow primaries in Ohio and North Carolina where the anointed Democrat fought damaging battles against insurgent liberals. Ohio Lt. Gov. Lee Fisher prevailed over Netroots favorite Jennifer Brunner, but not before she had drained Mr. Fisher’s campaign coffers. In North Carolina, the base’s preferred pick, Secretary of State Elaine Marshall, has dragged the more conservative state Sen. Cal Cunningham into a June runoff.

True, candidates like Mrs. Lincoln and Mr. Specter are struggling against today’s anti-incumbent, anti-Washington fever. But the primary challenges are also the result of mismanaged expectations. Barack Obama allowed the left to believe he was one of them. Some of his campaign promises certainly fed its hopes: He’d close Guantanamo, pass union “card check,” renegotiate Nafta, leave Iraq. Adding to the left’s exuberance was the party’s filibuster-proof Senate majority.

But Guantanamo is still open, card check is still dead, Nafta is still functioning, and troops remain in Iraq. Meanwhile, the president dangled the public option in front of his liberal supporters, only to further enrage them when he lost that fight. All this has forced Democratic congressmen to take the blame for failures like card check.

The base has interpreted the policy failures as proof that the decision to sit back while the Democratic Party elected more moderates was a mistake. The response has been for unions and grass-roots groups to throw their money and support behind more liberal candidates. Democrats are currently battling as many, if not more, ugly primary challenges than Republicans.

No one exemplifies the dynamic better than Mrs. Lincoln. Over her 12 years in the Senate, she’s been careful to project herself as a Democrat in tune with Arkansas voters and business. The party leadership’s decision to push card check and the public option (both highly unpopular with the general public and the Arkansas public) forced Mrs. Lincoln to push back, which cast her as the spoiler of liberal dreams.

Mr. Halter was the result, propelled from the start by groups such as MoveOn.org. The lieutenant governor has run far to Mrs. Lincoln’s left, and in March, his first month of campaigning, he raised more than $2 million. And the left is unleashing money against his opponent; the Service Employees International Union recently unveiled a $1 million ad campaign against Mrs. Lincoln.

Win or lose, the base’s candidates are pulling the Democratic field left. Colorado’s appointed Sen. Michael Bennet was intending to win re-election by keeping his head down, splitting the difference on tough issues. Then, last September, the grass roots fueled former Colorado House speaker Andrew Romanoff’s entrance into the race, who announced his support for an ObamaCare public option. Not to be outdone in a closed Democratic primary, Mr. Bennet became the Senate’s most vocal public-option supporter.

Unfortunately for both men, the winner will now be on record supporting a position few in Colorado’s general electorate share. In Pennsylvania, Mr. Specter was against the unpopular card check; thanks to Mr. Sestak he’s now for it. Mr. Fisher was ambiguous about the Democratic health bill, until, prodded by Ms. Brunner, he declared “100%” support. These are positions that can’t easily be dialed back.

This lurch toward liberal priorities coincides with polls showing that the electorate— particularly independents—has shifted significantly to the right since Mr. Obama took office. While some Republican primaries are proving bloody, most are turning out candidates largely in tune with today’s public frustration with Washington.

The Democratic primaries, by contrast, are generating nominees who are embracing, or even going beyond, the president’s unpopular agenda. This is the feud that may have the bigger consequences for this fall’s midterms.

Big Banks, Big Government and Big Labor, Oh My….

by Liberty Chick

The financial reform bill is finally in its home stretch in the Senate, but Americans have yet to fully engage on the issue. In fact, in recent weeks as I’ve worked with various grassroots leaders across the country to discuss the bill, its impacts on our economy and on us as American citizens, I must admit, it’s probably the first time I’ve ever found myself frustrated at the progress of activism.

It’s a complex issue, and let’s face it, not exactly an exciting one either. But that’s precisely what the left is counting on. So, whenever I find myself feeling frustrated that others might not share my same level of fervor on the issue, I remind myself of its complexity and lackluster appeal. And then, I proceed directly to the source – the bill itself.

I hone in on a few key points in three categories that resonate with most activists I know: Big Labor, Big Government, and Big Brother. Put those together in the context of Big Banks, and they spell out big disaster.

As the left goes on demonizing Wall Street and big bankers on one hand, Democratic lawmakers on the other hand are busy making sweetheart backroom deals with them up on Capitol Hill, promoting their legislation to the public as “consumer protection.” But really, such measures are nothing more than payback to the likes of three-way mortgage entitlement partnership stronghold of the Bank of America, Center for Responsible Lending and Fannie Mae.

Meanwhile Democrats and Obama allies like Organizing for America are also using the issue as a shameless fund-raising opportunity.

The banks actually SUPPORT this bill – so don’t let that “Main Street Not Wall Street” message fool you, no matter which side of this issue you’re on.

Once many people learn about some of what’s in the bill, their reaction of immediate remorse followed by outrage is completely understandable. Remorse – for some – for not having engaged their grassroots groups earlier. Outrage over just how much this bill would push the country head first toward socialism. That’s right, I said the “s” word. Let’s stop pretending and just call it for what it is, shall we? Even old school Democrats I talk to feel the same outrage and see the “s” word coming as the result of this bill. Facing down the inevitable is the only way we’re going to be able to tackle what the radical left has snuck into this thing. All the while, they have been counting on the apathy of average citizens on BOTH sides, and on the burnout of Tea Party and other patriot group activists.

The reality is this: If we sit back and allow this bill to pass the Senate in its current form, then we deserve the destruction of our privacy, our liberties and of our free market system that will follow. WE will be the only ones to blame. Because as bad as we all thought the Health Care bill was for our freedoms, the Financial Reform bill makes Health Care pale in comparison. No level of remorse could suffice if we failed to engage every last patriot, every last Paul Revere and Sam Adams , during these final days of the legislation.

I’ve found that one way to help other activists digest this bill has been to put all of the actual financial details aside and focus solely on some of the parts of the bill that demonstrate the erosion of our personal liberties and the free market system as we know it.
Big Labor: Dismantling the Free Market System

Under the American Financial Stability Act of 2010 (S 3217), several provisions tucked away in the bill will give labor bosses unprecedented powers that, especially if abused, could threaten the very structure of our free market system.

* Financial institutions and other covered businesses could be required by law to give labor unions “Proxy Access”, enabling union bosses to potentially abuse the system to force unrelated agenda items, like unionizing the firm’s employees, before the shareholders
* New regulations will control how board of director elections are conducted – at private corporations!
o The SEC would be granted the power to force the names of outside nominees onto the corporate ballot (as reported by Politico)
o Directors running in an uncontested election would now be required to win a majority of votes cast, rather than only by the current plurality(as reported by Politico)
* Similar rules will also determine whether an individual may serve as both the CEO and Chairman of the Board – at a private corporation!
* Government and labor unions will have “say on pay” for the annual salaries and bonus compensation of executives and other employees. Essentially, like Obama himself, they can determine at what point “someone has made enough money”

I don’t think anyone’s against shareholders having their proper say and representation in the corporate management process. But that’s not really what’s behind these pieces of the legislation. We’ve seen how today’s labor bosses are abusing their powers and using the shareholder resolution as a hostage weapon to bully corporations into unionization and special union concessions. Just read my prior post, “SEIU’s Secret Weapon: If Obama’s Plan Fails, Brandish the Shareholder Resolution” for a taste of that tactic.

It’s been known for some time that labor bosses are now organizing on a global scale, and as such, have taken to the Participative Management style common in European workplaces. In the U.S., private corporations might typically achieve a similar democratic process of employee participatory management when the company enters into a direct employee ownership plan. The difference here however is that we’re talking about companies that do not belong to the labor unions – these are companies in which the union might have a pension fund investment, or perhaps some of its workers unionized on premise. These are private companies that the unions attempt to overtake through such smaller connections to earn a place on the board, and then change it from the inside out until a Participative Management environment is achieved. If that achievement were to occur, US corporations would quickly fold and restructure under a more socialist model. Eventually, the free market system would erode away as labor unions take over the boards of once privately owned corporations.

For weeks now, Ive been searching for the resources to help me describe this threat in simple terms, and just as fate would have it, my friend Peter List over at LaborUnionReport and RedState pens the perfect post describing this with clarity and precision, in his post titled “Changing America Forever: Behind the AFL-CIO’s Push for Financial Reform.”
Big Government: Power, Control and Everlasting Entitlements

* A new agency, the Consumer Financial Protection Agency, or CFPA, would serve as massive bureaucracy that would control everything from defining the types of loans consumers may be permitted to purchase, to expanding redlining provisions and subsequent mortgage entitlement programs. (And let’s not forget that the head of this agency would be Eric Stein, who ran the Center for Responsible Lending, and before that worked at Fannie Mae)

* The CFPA’s authority goes far beyond banks or financial institutions. This new bureaucracy would have the power to regulate hundreds of thousands of businesses. Examples of small businesses that would be subject to CFPA oversight (as outlined by the US Chamber of Commerce):
o A nonprofit organization that provides financial literacy education
o A software company that creates products to help consumers manage their money
o An advertising company that provides services relating to financial products
o Utilities companies, retailers and even doctors that extend credit to their customers.

* The Consumer Financial Protection Agency, or CFPA, created in the bill would be housed within the Federal Reserve, an already secretive and unchecked force of power in our financial system that insists on going unaudited
* A government agency will have unlimited executive bailout authority, including the power to pick and choose which companies are saved and which are left to fail. This creates serious potential for abuse, as private corporations could literally live or die based upon political decisions
* This bill contains the same language used by groups like the Center for Responsible Lending in the redlining laws and changes to the Community Reinvestment Act in 1995 for special research centers and programs “that promote awareness and understanding of the access of individuals and communities to financial services, and to identify business and community development needs and opportunities”

And we all know what happened as the result of those redlining laws and subsequent CRA changes in 1995.
Big Banks: Empowered by Big Government, Become Big Brother

Finally, in order to justify all these entitlement programs, all this forced unionization, all this takeover of private companies’ boards of directors, the government needs research. Not to worry, the bill creates vehicles for that, like the “Office of Financial Research” and a national database for the collection of your personal bank account and loan information, and various deposit account data.

Fannie Mae and Bank of America will be so thrilled when this passes the Senate (as will ACORN and SEIU). Thanks, of course, to years of lobbying by organizations like the Center for Responsible Lending. After all, they pioneered the use of banking research to mandate mortgage entitlements. Just imagine all the new entitlements that will be created once they can analyze all of that *new* banking information and data on what we’re purchasing. Someone will find some injustice somewhere in there. You can count on that.

If you haven’t been as interested in all the complex language about things like financial derivatives and credit default swaps in this bill, then all of this above should be plenty for you to be concerned about.

Depression 2010?

By Robert Samuelson

WASHINGTON — It is now conventional wisdom that the world has avoided a second Great Depression. Governments and the economists who advise them learned the lessons of the 1930s. When the gravity of the financial crisis became apparent in late 2008, the response was swift and aggressive. Central banks like the Federal Reserve and the European Central Bank dropped interest rates and lent liberally to threatened financial institutions and rattled investors. The United States and many countries approved “stimulus” programs of tax cuts and additional spending. Panic was halted. A downward spiral of falling private spending and rising unemployment was reversed. The resulting economic slump was awful. But it was not another Great Depression. The worst has passed.

Or has it? Greece’s plight challenges this optimistic interpretation. It implies that celebration is premature and that the economic crisis has moved into a new phase: one dominated by the huge debt burdens of governments in advanced societies. Comparisons with the Great Depression remain relevant — and unsettling. Now, as then, we may be prisoners of deep and poorly understood changes to the world economic system.

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Historians increasingly attribute the Depression to broad geopolitical upheavals. World War I shattered the existing global economic order. Dominated by Great Britain, it fostered vibrant trade and rested on the gold standard. (Under the gold standard, paper currencies could be converted into gold coins or bullion.) The war also spawned huge international debts, reflecting German war reparations and large U.S. loans to Britain and France. It was impossible to reconstruct the prewar order. Britain was too weak, the gold standard was too constricting, and the debts were too heavy. But countries tried, because the prewar order had delivered prosperity. This futile effort brought on Depression. Only when economic hardship became unbearable were unrealistic goals (keeping the gold standard, repaying debts) abandoned.

There are eerie, if crude, parallels now. The welfare state is today’s equivalent of the gold standard. With aging societies, advanced countries have promised more benefits than their tax bases can support. Hence, high government debt. Greece is merely the canary in the coal mine. But politicians resist cutting popular benefits except under extreme pressure. It takes a crisis. Greece, again. Another unsettling parallel is the global economy. The United States’ leadership since World War II is eroding before China’s ascent. There’s a danger now, as then, of a power vacuum. Witness the long delay in coming to Greece’s aid. No one country acted decisively, even as markets grew nervous.

Of course, these parallels do not preordain a second Depression. But they at least clarify today’s confusing economic outlook. There’s a tug-of-war. The normal mechanics of the business cycle signal recovery, while deeper economic weaknesses threaten it. In late 2008 and early 2009, fear and hysteria were almost palpable, especially in the United States. Consumers and companies cut spending anywhere they could. From September 2008 to June 2009, the U.S. economy lost 6 million payroll jobs. In 2009, American car sales were almost 40 percent lower than in 2007. Governments’ frenetic interventions stabilized confidence. People and firms are opening their wallets again, here and abroad. The world economy will grow almost 4.3 percent in 2010 and 2011, with the United States expanding at an average of nearly 3 percent, reckons the International Monetary Fund.

But the deep-seated problems remain. Three stand out: first, the weight of the welfare state and aging populations; second, the burden of huge private debts (mortgages and consumer loans in America and elsewhere); and finally, huge imbalances in global trade, with some countries — notably China — running massive surpluses and others — notably the United States — having large deficits. Each threatens a vigorous recovery that could conceivably plunge the world back into a protracted slump.

To cope with big budget deficits, developed countries would cut spending or raise taxes. These steps would weaken recovery. The problem is that failing to do so might have the same effect by creating a financial crisis. Lenders, scared by mounting debt, would insist on higher interest rates. The value of older government bonds, issued at lower interest rates, would drop. Banks around the world, which are big holders of various countries’ bonds, would suffer huge losses. So would other investors and financial institutions. The financial system might again seize up.

The dilemma posed by Greece isn’t unique. It’s different only in degree. In 2009, Greece’s budget deficit was almost 14 percent of gross domestic product (GDP) — its economy. Its accumulated debt was 115 percent of GDP. Meanwhile, Italy’s deficit was 5 percent of GDP and its debt 116 percent of GDP. Spain’s deficit was 11 percent of GDP and its debt 53 percent. Germany’s deficit was 3 percent and its debt 73 percent. The U.S. deficit — calculated slightly differently — was 9.9 percent of GDP; the debt, 53 percent of GDP. Most developed countries, representing about half the world economy, are caught in the same trap.

The same is true, though to a lesser extent, of heavily indebted households in the developed world. As they pare back, or lenders tighten lending standards, consumer spending will remain subdued, depriving the recovery of another powerful propellant. It wasn’t just Americans who enjoyed years of easy credit. In the United States, household debt reached 138 percent of disposable income in 2007, reports the Organization for Economic Cooperation and Development. Elsewhere, comparable figures were also high: 138 percent in Canada; 128 percent in Japan, 186 percent in Britain; 102 percent in Germany. There is no precise threshold as to what constitutes too much debt; but these levels suggest restraint and retrenchment, not exuberant spending.

On paper, the escape from these problems seems plain. China, India, Brazil and other “emerging market” countries would become the world’s engine of growth. Their appetite for advanced goods from the developed world — airplanes, power plants, earth-moving equipment, medical instruments — would raise their living standards and sustain production and employment in advanced countries. This could be happening. The latest IMF forecasts have poorer countries (“emerging and developing economies”) growing at about 6.5 percent in 2010 and 2011 compared with 2.4 percent for all developed countries. The trouble is that this shift requires that China and other Asian countries permanently renounce export-led growth. It’s not clear that they can or will.

Everywhere countries face changes of policies, practices and habits that are deeply woven into their social, political and economic fabrics. Can developed countries gradually rein in their welfare states? Will Asia’s relentless export economies shift to domestic-led growth? Will Americans save more and spend less — and the Chinese do the opposite? As after World War I, reverting to what’s familiar, comfortable and understood may be hazardous. It was the inability to see and adapt to change in the 1920s — a process complicated by the war’s animosities — that fundamentally caused the Great Depression, economic historians Barry Eichengreen of the University of California, Berkeley, and Peter Temin of the Massachusetts Institute of Technology have argued.

The case that we have dodged a second Great Depression rests on a narrower notion: that the Depression was preventable; and that advances in economic knowledge allowed us to do so. If we knew then what we know now, governments could have averted the tragedy. Despite some disagreements, economic scholars subscribe to a broad consensus about what went wrong in the 1930s. Government central banks, like the Fed, were too passive. They didn’t halt bank panics. Intervention at decisive moments (perhaps the failure of the Bank of the United States in late 1930 or Austria’s Credit Anstalt in spring 1931) could have changed history. Instead, mounting unemployment and falling prices fed on each other. Debtors couldn’t repay loans, leading to more bank failures, a contraction of credit and deposit losses. But this time the mistakes were not repeated. Despite criticism, banks were “bailed out.” Money was pumped into credit markets to pre-empt a downward spiral.

By this reading, the world has bought itself time to deal with underlying problems. As the economic recovery strengthens and lengthens, the politics of confronting unstable export-led growth (for Asia) or unsustainable welfare spending (for developed countries) will grow easier. People will be more optimistic about the future; they will be more open to necessary, if not popular, adjustments. This could happen. The world may muddle through, making gradual and messy changes that ultimately defuse another large crisis.

But there is another more sobering reading of the Great Depression. It is that painful and once unthinkable changes are made only under the pressure of acute crisis. One reason that central banks were so passive is that they clung to the gold standard: Relaxing credit policies too dramatically to rescue banks might lead to a loss of gold; people would demand metal to replace paper money. Gold was abandoned in various countries only after it seemed untenable. Similarly, the post-World War I debt problem wasn’t “solved” until repayment was impossible. As for Britain’s place as global leader, the United States assumed that role only in World War II.

Against that backdrop, today’s unresolved problems — over the welfare state, leadership in the global economy — become more ominous. They suggest that major adjustments won’t be made until they’re compelled by some sort of crisis. This possibility defines the present economic drama. Will the recovery encourage conscious changes? Or is recovery providing a false sense of security? The stakes are, of course, enormous, because — as everyone knows — the economic suffering of the Great Depression transformed many countries’ politics for the worse and led to World War II.

Free markets help the poor more

By: Walter Williams
Examiner Columnist

Listening to America’s liberals, who now prefer to call themselves progressives, one would think that free markets benefit the rich and harm the poor, but little can be further from the truth.

First, let’s first say what free markets are. Free markets, or laissez-faire capitalism, refer to an economic system where there is no government interference except to outlaw and prosecute fraud and coercion. It ought to be apparent that our economy cannot be described as free market because there is extensive government interference.

We have what might be called a mixed economy, one with both free market and socialistic attributes. If one is poor or of modest means, where does he fare better: in the freer and more open sector of our economy or in the controlled and highly regulated sector? Let’s look at it.

Did Carnegie, Mellon, Rockefeller and Guggenheim start out rich? Andrew Carnegie worked as a bobbin boy, changing spools of thread in a cotton mill 12 hours a day, six days a week, earning $1.20 a week. A young John D. Rockefeller worked as a clerk. Meyer Guggenheim started out as a peddler. Andrew Mellon did have a leg up; his father was a lawyer and banker.

Sam Walton milked the family’s cows, bottled the milk and delivered it and newspapers to customers. Richard Sears was a railroad station agent. Alvah Roebuck began work as a watchmaker. Together, they founded Sears, Roebuck and Company in 1893. John Cash Penney (founder of JCPenny department stores) worked for a local dry goods merchant.

It wasn’t just whites who went from rags to riches through open markets; there were a few blacks.

Madam C.J. Walker, born Sarah Breedlove, just two years after the end of slavery, managed to build an empire from developing and selling hair products. John H. Johnson founded Johnson Publishing Company, which became an international media and cosmetics empire.

There are many modern-day black millionaires who, like other millionaires, black and white, found the route to their fortunes mostly through the open, highly competitive and more free market end of our economy.

Restricted, regulated and monopolized markets are especially handicapping to people who are seen as less preferred, latecomers and people with little political clout.

For example, owning and operating a taxi is one way out of poverty. It takes little skills and capital. But in most cities, one has to purchase a license costing tens of thousands of dollars.

New York City’s taxicab licensing law is particularly egregious, requiring a person, as of May 2007, to pay $600,000 for a license to own and operate one taxicab. Business licensing laws are not racially discriminatory as such, but they have a racially discriminatory effect.

The Davis-Bacon Act of 1931, still on the books today, had a racially discriminatory intent and has a racially discriminatory effect. The Davis-Bacon Act is a federal law that mandates “prevailing wages” be paid on all federally financed or assisted construction projects and as such discriminates against non-unionized black construction contractors and black workers.

During the 1931 legislative debate, quite a few congressmen expressed racist motives in their testimony in support of the law, such as Rep. Clayton Allgood, D-Ala., who said, “Reference has been made to a contractor from Alabama who went to New York with bootleg labor. This is a fact. That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.”

Today’s supporters of the Davis-Bacon Act use different rhetoric, but its racially discriminatory effects are the same.

The market is a friend in another unappreciated way. In poor black neighborhoods, one might see some nice clothing, some nice food, some nice cars but no nice schools. Why not at least some nice schools?

Clothing, food and cars are distributed by the market mechanism while schools are distributed by the political mechanism.

Examiner Columnist Walter Williams is nationally syndicated by Creators Syndicate.

Read more at the Washington Examiner: http://www.washingtonexaminer.com/opinion/columns/Free-markets-help-the-poor-more-93587999.html#ixzz0nlRCgJkZ

U.S. posts 19th straight monthly budget deficit/More Debt by the Day

(Reuters) – The United States posted an $82.69 billion deficit in April, nearly four times the $20.91 billion shortfall registered in April 2009 and the largest on record for that month, the Treasury Department said on Wednesday.

It was more than twice the $40-billion deficit that Wall Street economists surveyed by Reuters had forecast and was striking since April marks the filing deadline for individual income taxes that are the main source of government revenue.

Department officials said that in prior years, there was a surplus during April in 43 out of the past 56 years.

The government has now posted 19 consecutive monthly budget deficits, the longest string of shortfalls on record.

For the first seven months of fiscal 2010, which ends September 30, the cumulative budget deficit totals $799.68 billion, down slightly from $802.3 billion in the comparable period of fiscal 2009.

Outlays during April rose to $327.96 billion from $218.75 billion in March and were up from $287.11 billion in April 2009. It was a record level of outlays for an April.

Department officials noted there were five Fridays in April this year, which helped account for higher outlays since most tax refunds are issued on that day.

But for the first seven months of the fiscal year, outlays fell to $1.99 trillion from $2.06 trillion in the comparable period of fiscal 2009, partly because of repayments by banks of bailout funds they received during the financial crisis.

Receipts in April — mostly from income taxes — were $245.27 billion, up from $153.36 billion in March but lower than the $266.21 billion taken in during April 2009.

Receipts from individuals, who faced an April 15 filing deadline for paying 2009 taxes, fell to $107.31 billion from $137.67 billion in April 2009.

The U.S. full-year deficit this year is projected at $1.5 trillion on top of a $1.4 trillion shortfall last year.

White House budget director Peter Orszag told Reuters Insider in an interview on Wednesday that the United States must tackle its deficits quickly to avoid the kind of debt crisis that hit Greece.

(Reporting by Glenn Somerville, Editing by Diane Craft)

Who Will Bail Out America?

By Peter Ferrara

Social Security, Medicare and the retirement of the baby boom generation wasn’t enough of a burden for the American taxpayer. We will now be paying as well for the generous pensions of Greek bureaucrats retiring in the warm Mediterranean sun at age 55, thanks to the foresighted leadership of our very own international statesman, Barack Obama.

Just last year President Obama proposed, and his overwhelmingly Democrat Congress approved, an additional $100 billion line of credit from the USA to the International Monetary Fund (IMF). On Sunday, the IMF approved a contribution of $40 billion to the Greek bailout, with America voting yes for yet another raid on its own taxpayers.

But this is only the beginning. What the trillion dollar Euro bailout fund has done is to create the perverse incentives of Too Big to Fail for fiscally irresponsible Eurostates. Do those literally murderous Greek rioters look ready to accede to austerity budgets with massive tax increases and massive benefit cuts? Political leaders in the Mediterranean states in particular, faced with short-term financial and political pressures, will be too tempted to put off the pain a little longer, hoping that EU bailouts will save them in the end. Indeed, voters in Spain, Italy, Portugal, and elsewhere may well think they should get their share of those bailout funds too, voting out leaders who try to be responsible, and voting in the worst demagogues trying to take advantage of the situation to gain political power.

Imagine if each of the American states could run deficits with a federal bailout fund to back them up. Could we count on the voters of California, New York, New Jersey, Michigan, and Illinois to support candidates promising crippling austerity budgets, with draconian benefit cuts and skyrocketing taxes, so they can do the responsible thing? This is the system the EU has just adopted. What that means is get ready for still more IMF bailouts financed by American taxpayers.

Unemployment Still Rising

Yet, America is still plagued with its own problems, poised soon enough for yet another ride down the roller coaster. The unemployment report just last Friday showed unemployment rising again in April, from 9.7% to 9.9%, almost two and a half years now after the recession began in December, 2007. Since World War II, the average recession has lasted 10 months, and the longest has been 16 months. Yet, 28 months after the last recession began, unemployment is still 10% and rising.

And that is only scratching the surface. Besides the 15.3 million officially unemployed, the army of the underemployed included 9.2 million described by the Bureau of Labor Statistics as “working part time because their hours had been cut back or because they were unable to find a full time job.” Another 2.4 million were marginally attached to the labor force, meaning they were not in the labor force, but “wanted and were available for work, and had looked for a job sometime in the prior 12 months.”

That leaves a total of nearly 27 million Americans still unemployed or underemployed. With a labor force of 154.7 million, that translates into a total underemployment rate of 17.4%. Moreover, of the officially unemployed, close to 50%, or 6.7 million, were long-term unemployed, meaning they had been unemployed for 27 weeks or more, the highest total since the recession began over 2 years ago, and still rising.

While President Obama and his party-controlled media ballyhooed the 290,000 new jobs created in April, 66,000 were temporary census workers. Moreover, that is still not enough new jobs created to reduce unemployment. Given the natural rate of new entrants to the work force, close to twice that many must be created each month to reduce the unemployed.

The Recovery: Hopelessly Too Little, Shamelessly Too Late

Yes, with the U.S. economy growing again, economic recovery is technically underway. But that is an inevitable, natural, cyclical recovery, as I predicted in this column over a year ago. The notion that the economy was going to tumble ever downward without some magic from Obama the Magnificent was always a fairy tale bedtime story for small children and their mental equivalents. As mentioned above, the average recession since World War II has been 10 months, and those recoveries were not due to magical Big Government rescues.

The way to evaluate the current recovery is by comparison to other recoveries after downturns of similar magnitude. Historically, the deeper the recession the stronger the snapback recovery. The Bureau of Economic Analysis reports that economic growth in the first 3 quarters after the 1981-1982 recession was 5.1%, 9.3% and 8.5%. Yet, economic growth in the first 3 quarters after this last recession was 2.2%, 5.6% and 3.2%, not even half as much.

Moreover, in 1984, real economic growth boomed by nearly 7%, the highest in 50 years. That recovery then lasted 92 months without a recession until July, 1990, when the tax increases of the 1990 budget deal killed it. This set a new record for the longest peacetime expansion ever, the previous high being 58 months. During that recovery, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, the third largest in the world at the time, to the U.S. economy.

Real per capita disposable income grew by nearly 20% during that boom, meaning the American standard of living increased by that magnitude. Real median family income had declined by almost 10% from 1978 to 1982, with income falling by 14% for the bottom 20%. But in a stunning reversal, real median family income grew by 11% during the recovery, with incomes increasing by 12% for the bottom 20%. The poverty rate, which had started rising despite trillions spent on the war on poverty, reversed and declined every year during the recovery as well.

Note also that the 1981-1982 recession resulted because Reagan had to slay a historic inflation. Inflation roared over 1979 and 1980 by 25% (11.6% in 1979 and 13.5% in 1980), after accelerating throughout the 1970s. But Reagan backed strict monetary policies at the Fed reining in the money supply, and inflation was slashed in half by 1983 as a result to 6.2%, and by half again in 1984 to 3.2%. Every school of economic thought, from Keynesian textbooks to the most free market “Austrian” economics of Friedrich Hayek and Ludwig von Mises, preaches that ending inflation inevitably produces a period of unemployment and recession.

In diametrically opposing contrast, instead of ending a historic, raging inflation, like Reagan, President Obama is creating one.

Indeed, everything critical to the American economy of today is the reverse of what it was during the economic boom starting in 1983-1984, reflecting that President Obama’s policies are the opposite of Reagan’s. Interest rates were heading sharply lower back then from historic highs, with the prime rate peaking at 21% in 1980. Today, as the Wall Street Journal commented on May 1, “[T]he Fed has held short-term interest rates at close to zero for 16 months. The only question is how soon and how high rates will rise.”

Moreover, the 1983-1984 recovery was launched just as the Reagan marginal tax rate cuts became fully effective. But today we are set for historic tax rate increases to kick in next year. While the Tax Foundation reports that the top 1% of income earners already pay more in federal income taxes than the bottom 95%, President Obama says their taxes should be raised even more so they can pay their “fair share.” So next year, capital gains tax rates will soar by close to 60%, tax rates on dividends by roughly 200%, and the top income tax rate by close to 30%.

In addition, as the 1983-1984 recovery launched, “an era of deregulation was lowering costs across most industries,” as the Journal also commented, whereas today, “Washington is raising costs for business by expanding its regulatory reach via tougher antitrust enforcement, mandates on health care and energy, more political limits on telecom investment, restrictions on bank lending, and much more.”

What this means is that instead of sustained recovery, what we are heading for is Art Laffer’s Coming Crash of 2011. President Obama’s economy is at its peak performance right now, however stunted that is.

President Obama’s Grecian Formula

For 2009, Greece’s budget deficit came in at 13.6% of GDP, and its national debt grew to 115% of GDP. President Obama has America on this exact same track. Our budget deficit for this year is nearly 11% of GDP. By 2020, according to the CBO, America’s net national debt held by the public would be 90% of GDP. Total gross federal debt, which includes such items as the debt held in the Social Security trust funds (real debt that will have to be paid in the future), would be 122% of GDP.

But it’s even worse than that. For the top 1% will get their revenge for President Obama’s tax piracy. Instead of raising revenues through his top income tax rate increases, he will be lucky if revenues do not decline. For capital gains alone, every tax rate increase over the last 40 years has produced less revenue rather than more. President Obama’s class warriors also do not understand that dividend payments will collapse next year as a result of their tax increases, and so will revenues from taxes on those dividends.

Lower than expected revenues, even if they do not absolutely decline, will mean still higher deficits and debt. Even more so as net interest spending increases as a result. If interest rates rise more than the modest increases President Obama’s budget projects, even more likely with the growing world debt burden, then the vicious death spiral takes another tumble downward.

If the economy turns downward in 2011 rather than upward, then all of this will explode out of control right there. America will also be effectively defenseless at that point, for we will not be able to borrow the still greater funds that would be necessary for any protracted conflict. (Is that what the ultraliberal President Obama and George Soros planned all along to get America “under control,” so to speak?). That condition of vulnerability, of course, again just the opposite of President Reagan’s peace through strength, invites war.

If the totally irresponsible new Obamacare entitlements end up costing more than planned when they start in 2014, as is likely, the phrase “adding fuel to the fire” seems inadequate. How about firebombing the fire?

And we haven’t even factored in renewed inflation yet. The EU bailout only encourages weak monetary policies from the European Central Bank, and further extended lax policies by the Fed. If this finally leads to inflation, as it did in the 1970s, the Fed would be faced with either raising interest rates, contributing to extended economic weakness and downturn, or letting inflation roar, until it returns to 1970s levels, or worse.

Maybe that is why the price of gold is already higher than the S&P 500. The truth is we are on the path to a worldwide flight from increasingly irresponsible fiat currencies. This is well beyond the issue of a declining or even collapsing dollar.

Even the shortsighted stock market, which usually looks only about 6 months ahead, is signaling trouble. For all the talk of a booming stock market recovery over the last year, it has never returned near to its peak over 14,000. It is stuck hovering about 25% below that peak. With the above economic prospects, there is no longer enough upside in trying to game the stock market to milk any remaining short-term gains.

Rest assured that when the credit markets tell America “No Mas” to record-shattering borrowing, there will be no one to bail out the USA. No one is big enough to even try it. Rather, the vultures will circle.

The only possible bailout will come on Election Day, 2010. Unless the American people send a message that rocks Washington like never before, 2012 may well be too late.

Tired of Big Government Spending?

by Rep. Eric Cantor (R-VA)

Two weeks ago, I wrote on BigGovernment that the GOP Today is much different than the party was a few years back. I was glad that my post generated attention, and very pleased to read through the different responses – both positive and skeptical. Today I write again for two reasons. First, to announce an exciting new project devised by the House Republican Economic Working Group. Second, to take another step in earning your trust by showing you that we understand that actions speak louder than words.

We all know that Washington has a spending problem – and both Democrats AND Republicans bear some responsibility. But as I wrote last week, America is at a crossroads and the choices we make at this critical time will determine what kind of country we want to be. To get back on the right path, Congress MUST start to make some choices that simply can’t be delayed any longer.

While we won’t be able to solve our deficit problems overnight or with one silver bullet, we CAN and we MUST begin to replace the culture of spending that now dominates Washington with a culture of savings. Just imagine if your government was as focused on saving money as it is on spending money. Imagine if Congress spent less time naming post offices – 62 and counting – and more time reducing wasteful spending. Sounds nice, doesn’t it?

Today, we are launching YouCut – a first-of-its-kind project designed to defeat the permissive culture of runaway spending in Congress. It allows YOU to vote, both online and on your cell phone, on spending cuts that you want to see the House – YOUR HOUSE – enact. That’s right, instead of Washington telling YOU how THEY will spend YOUR money, YOU can tell THEM how to save it. After several days of voting, on Monday, May 17th, we will announce the first winner and later that week House Republicans will call for an up-or-down vote on the spending cut. We will repeat this cycle every week for the rest of the year.

For the first week of voting, here are your choices:

1. Eliminate the Presidential Election Fund, a federal program that provides matching funds to political candidates during Presidential primaries, certain third-party candidates, and funds for political conventions. In the 2008 Presidential election the candidates raised over $1.3 billion from individuals and PACs; do they really need to supplement that with taxpayer money?
2. Prohibiting taxpayer-subsidized union activities by prohibiting federal employees from being paid by the government for performing union functions. Currently some federal employees spend up to 100% of their workweek, paid by taxpayers, doing work for their union. Federal employees unions collect millions in revenue each year and spend significant amounts on political activities and lobbying; should they also be subsidized by the taxpayer for their official functions?
3. Terminate the Department of Housing and Urban Development program that provides individuals with $25,000 stipends for completing their doctoral dissertations. Recently taxpayers have financed research on media strategies for housing policy and the use of eminent domain for urban redevelopment. Why should families who are struggling to pay for their children’s college also be asked to fund stipends from the government for those who want to write their dissertation on certain government-preferred policies?
4. Terminate the new alternative welfare program, recently created to incentivize states to increase their welfare caseloads without requiring able-bodied adults to work, get job training, or otherwise prepare to move off of taxpayer assistance. Reforming the welfare program was one of the great achievements of the Republican Congress in the mid 1990s, saving taxpayers billions of dollars and ending the cycle of dependency on welfare. This new program ushered in by Democrats is merely a backdoor way to undo those reforms.
5. Focus federal economic development assistance on areas of need. The Community Development Block Grant program currently funds a wide range of local economic development activities. While it is advertised as a way to help low-income communities, funds are also dispersed to communities with income well-above the national average. A recent study found that the community of Newton, Massachusetts, with a per capita income over twice the national average, was receiving $28 per person in CDBG funds. At the same time, other communities with income 25% below the national average were receiving $10 per person.

There they are: five simple ways to begin to talk about saving money.

You have a right to a federal government that doesn’t spend money that it does not have. Anyone who believes that President Obama, Senator Reid, Speaker Pelosi or the Democratic majorities are “concerned” about the deficit should take a look at how grossly they’ve increased spending. Make no mistake, they look at America’s massive debt and see a reason to raise taxes. But they are wrong. Our debt was born out of an addiction to spending. And if those same Democrats aren’t going to do anything to stop this addiction, we are. If those Democrats aren’t going to listen to you, we are.

As I wrote a few weeks back, a 178-seat minority isn’t going to win many legislative battles in the House. And we don’t have a lot of tools at our disposal. But I commit to you that we ARE going to use every means we have to hold them accountable. And this project is a start.

The time has come for Congress to finally show political courage. American families have been forced to face tough financial realities and make difficult but necessary decisions. Why should their government act any differently? This is not the same GOP as it was a few years ago, and with YouCut, we hope to force the Democrat-controlled Congress to begin to confront the difficult but unavoidable realities of our fiscal situation.

Please drop by http://www.republicanwhip.house.gov/YouCut and vote to help us put Uncle Sam on a diet.