But the Conquered, or their Children, have no Court, no Arbitrator on Earth to appeal to. Then they may appeal, as Jephtha did, to Heaven, and repeat their Appeal, till they have recovered the native Right of their Ancestors, which was to have such a Legislative over them, as the Majority should approve, and freely acquiesce in.
-John Locke

Thursday, July 21, 2011

US Default Watch, Part 6

As the August deadline for default moves relentlessly closer the question is whether we are actually closer to a deal.  We have moved from Obama expounding Leadership and the House Republicans being ever so close to actually leading before getting distracted by Cut Cap & Balance and Sen. McConnell suggesting another way and Obama trying to scare the folks receiving Social Security and vowing to veto any short-term deal that doesn't kick this giant can down the road past next year's election, to Obama now being agreeable to a short-term deal and now the Gang of 6  has chimed in.  Whew!  that's a lot of stuff going on with no results to show for it.

Let's start with Obama.  First off, it was abundantly clear that he was seeking a political solution to this problem.  Put it off to early 2013 and he gets to hope that people remember his "leadership" and forget the crisis when they go to the polls next November.  Well, that didn't seem to work, as his approval ratings continue to plunge. (interesting aside: in the preceding link Rasmussen finds that 49% of homeowners believe their homes are worth more than their mortgage.  There's confidence for you!).  This probably surprises no one, because it seems that most people disapprove of the job he's doing.  Wait, let me correct that - it probably surprises Obama, who believes that 80% of Americans support his plan...which doesn't actually exist in any discernible form. 

Obama also tried the stale and lame tactic of trying to scare Social Security recipients by saying that he can't guarantee that their checks will go out in august because we will run out of money on Aug 3rd.  You may note that he has not returned to that example.  Why?  Well, one reason might be that he would then have to answer questions about the nature of the Social Security trust fund.  See, the way it's supposed to work is that when we pay FICA taxes, the money goes into a trust fund, where it stays until we are either old enough to access it, or we demonstrate to the Social Security Administration that we are disabled and qualify to access our "retirement" early.  In fact, the Administrative Law Judges who work for the SSA are sworn to protect the trust fund.  Except that the trust doesn't exist as such.  Instead of being a giant pile of money, it a giant pile of IOU's, because the government accesses it routinely to fund other programs, replacing the money with notes.  Think of it as taking money out of your kids' college fund to pay for home repairs, and counting on the odds of your kids actually deciding to attend college - maybe one of them won't go; maybe a lot of the people who pay FICA will die tragically before they can retire or die before they receive what they paid in.  Of course, if all of your kids decide to go to college, you can simply borrow money for student loans.  Our gov't simply borrows money from China.  anyway, the point is that Obama probably doesn't want to add to the already raging fire that is our runaway spending the fact that all the money we've paid into FICA to insure "retirement with dignity" has been treated like some kind of slush fund. 

What can really be said about the Cut Cap and Balance Act?  It all sounds good, but there are two problems: first is timing - do we really want to start the practice of amending the Constitution when there is a ticking time bomb?  While I feel that a Balanced Budget amendment would be great and I can only believe that the reason it wasn't part of the original document is that the Founding Fathers couldn't believe that their form of government could ever grow to be so irresponsible with money.  this is a far different animal than the Obamacare rush-job, but it still sets a poor precedent.  I think we can do without a government that establishes the practice of exploiting every crisis.  The second problem is the Senate.  This would never clear the Senate...the Senate hasn't put together a budget for two years, and now the House wants to force a balanced budget!  So, sound idea but a big waste of time.

The Gang of 6 - Original Formula!  This seems to be the most interesting development.  Cut spending, lower tax rates for personal and corporate income, eliminate tax loopholes...Mason likey.  This is the first real approach we've seen towards real tax reform.  It shows that people are getting serious about the real role of taxes in our society - funding the essential functions of government.  Having a mortgage-interest deduction might be useful in trying to incent home ownership, but what real role of government does that support?  A healthy economy?  Let's look back over the past 4 years of wreckage and see what easy and widespread home ownership did to our economy.  Lowering the corporate tax rates will do more to improve our economy than providing a means that allows people to buy more house than they can actually afford will. 

I do not expect any solution to be perfect, but a solution that does more than just kick this can down the road is essential.  What is becoming painfully clear is that we are getting zero leadership from the President - these matters are clearly beyond his comprehension and do not mesh with his vision of America.  If the Republicans are smart, they will keep this out of Obama's hands until the time that he has to either sign or veto the legislation.

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