Some Basic Facts About The Debt Ceiling

Issues & Insights is a blog that was started by the team that for decades had produced IBD Editorials at Investor’s Business Daily. They are one of the most reliable sites on the web for financial and political information.

On Monday, Issues & Insights posted an article about the debt ceiling ‘crisis.’ The article pointed out a lot of basic facts that are being overlooked in the debate.

The article notes:

At the heart of all fearmongering over the debt ceiling “crisis” is the claim that if the federal government can’t borrow more money it won’t be able to pay interest on its existing debt, leading to a default.

But that’s poppycock. The government will collect more than a trillion dollars over the next three months. (It collected $638 billion in taxes in April alone.) That will be more than enough to pay interest on the debt. And it will be enough to pay all Social Security benefits, Medicare and Medicaid bills, welfare checks, food stamps. There will even be enough money to pay for Joe Biden’s new electric car subsidies.

There just won’t be any money left for anything else. Nothing for the military, infrastructure, education, the environment, law enforcement, or any other program the federal government currently operates.

That’s because, as it stands today, every penny collected in taxes goes to pay interest on the debt and a category described as “payments for individuals.” Everything else is paid for with borrowed money.

…This year, the federal government will collect $4.8 trillion in taxes, according to the Office of Management and Budget.

It will spend $4.2 trillion on “payments for individuals,” and $661 billion in interest on the national debt.

Everyone knows about interest payments. But what are these “payments for individuals”?

As the budget document explains, payments for individuals:

Are federal government spending programs designed to transfer income (in cash or in-kind) to individuals or families. To the extent feasible, this category does not include reimbursements for current services rendered to the Government (e.g., salaries and interest).

In 1946, “payments for individuals” accounted for less than 11% of federal spending. By 1991, they reached 50%. In 2014, they topped 70% for the first time and have been bouncing around that level ever since.

The article also notes:

The vast bulk of these “payments for individuals” involve middle-class entitlements such as Social Security and Medicare, which are paid for in volume by … the middle class. Only a fraction of the money (26%) targets the poor and needy for programs such as Medicaid, welfare payments, food stamps, earned income tax credits.

Worse, some programs, Medicare, for instance, are regressive. A paper published by the National Bureau of Economic Research concluded that “Medicare has led to net transfers from the poor to the wealthy, as a result of relatively regressive financing mechanisms and the higher expenditures and longer survival times of wealthier beneficiaries.”

This is all by design. The left desperately wants to increase dependency on government, and there’s no better way to do that than through income redistribution. Take as much money away from people as possible, then give it back to them in the form of a “benefit.”

Please follow the link to read the entire article. We don’t just need to cut spending–we need to overhaul the entire federal budget and follow the lawful budget process.

How Gun Laws Affect Crime

On Sunday, The Blue State Conservative posted an article about a recent study by the National Bureau of Economic Research. According to the study, there is a direct correlation between gun ownership and crime.

The article reports:

According to a recent study by the National Bureau of Economic Research, there is a direct correlation between gun ownership and crime, but that correlation doesn’t align with the storyline from the “guns are bad” crowd. In fact, shocker… it shows just the opposite.

The NBER analysis used Tennessee’s database for handgun carry permit holders, and then cross-referenced that data with crime statistics in those zip codes. It was determined that once information from the database was publicized, in areas where gun ownership was highest, burglaries were correspondingly lower. Conversely, in areas with relatively low gun ownership, burglaries were considerably higher:

…If a criminal is considering what areas and homes they want to target, there are a few factors they will weigh. Certainly, a burglar is going to want to focus on a residence that will have valuable belongings which they can take, but the first thing they’re going to assess is their own well-being. It’s human nature.

A house or apartment with a big Rottweiler or Dobermann Pincer? That could certainly deter a burglar. The same can be said regarding a residence with a sophisticated security system. Burglars certainly want to avoid getting bitten by a big dog or having police arrive at the scene of a burglary while it’s in progress. But as much as criminals dislike dog bites and jail time, what deters them most is the prospect of getting their heads blown off in an attempted burglary.

Responsible gun ownership is a good thing. Gun owners give criminals a serious reason to reconsider burglarizing someone’s home. Government officials thinking of becoming overly tyrannical must remember that they have an armed populace; and in some cases, that populace is heavily armed. Even foreign adversaries can be deterred by America’s gun-toting public, as was the case with both the Japanese in World War II and the Soviet Union years later.

Would the Holocaust have happened if the German citizens had not surrendered their guns?

Analyzing The Data

Issues & Insights recently posted an article comparing how the blue and red states and cities have handled the COVID pandemic. We need to learn from the mistakes made.

The article reports:

…Those that hewed to the Red State model of lower taxes, less regulation, and respect for the rule of law thrived – while those that followed the “woke” blue-state model, built on socialist top-down control, forced equality, and divisive racial identity politics, suffered.

One of the new studies, by Phil Kerpen of The Committee to Unleash Prosperity, Casey Mulligan of the University of Chicago, and Stephen Moore of the Heritage Foundation, and published as a working paper by the National Bureau of Economic Research, ranked states by how they performed in three major areas during the pandemic: economics, education, and mortality.

That study, for good reason, has garnered much attention. It shows that red states, in general, beat blue states hands down during the pandemic, largely due to the latter’s dedication to damaging COVID lockdowns.

“Shutting down their economies and schools was by far the biggest mistake governors and state officials made during COVID, particularly in blue states,” said Moore, a co-founder of the Committee To Unleash Prosperity.

New Jersey was the worst-performing state, while neighboring blue-state giant New York was next, ranked 49th. Also flunking out were California, Illinois, and Washington, D.C.

“They had high age-adjusted death rates, they had high unemployment and significant GDP losses, and they kept their schools shut down much longer than almost all other states,” according to the study.

So who did best? Utah, Nebraska, Vermont, Montana, South Dakota – and Florida.

Meanwhile, a second study from the U.S. Census Bureau showed that there has been massive population movement away from large blue-state cities toward red-state cities.

The article concludes:

As for New York, its leaders seem to think crime-ridden streets and more government spending will do the trick. Sorry, but New York’s losing its wealthiest citizens after years of misrule.

Far-left Democrats have an iron lock on government in Albany, so tax cuts and a crackdown on crime seems highly unlikely. In the meantime, one key group is leaving the state and city of New York in droves: Millionaires.

“New York’s share of the nation’s total millionaire earner population dropped to 9.9%, down from 12.7% as of 2010, the year after the state enacted a supposedly temporary and ultimately permanent higher rate on millionaire earners,” noted E.J. McMahon of the Empire Center for Public Policy think tank.

Good riddance you say? Millionaires pay 40% of taxes in New York. So losing so many to Florida, Texas and other red states is a disaster. All New York will suffer.

Truth is, America is being re-made, moving van by moving van, family by family, as the states’ demographic profiles and political leanings undergo dramatic shifts. It all points to a possible shift in political power toward conservative-leaning red states and away from once-dominant blue states. But how big that shift is remains to be seen.

As we’ve said before, the red-state model works. It has proved itself in good times and bad. Americans, you do have a choice: Red pill, or blue pill. Which is it going to be?

Our government was designed to give individual states the power to experiment with ideas to see what worked and what did not. The idea was that less successful states would copy what the successful states did. Unfortunately in our highly politically-charged atmosphere of today, blue states are not interested in learning from red states. Hopefully they will change their ways as their populations relocate.

The Path To National Prosperity

 

Investor’s Business Daily posted an article today citing the results of a recent National Bureau of Economic Research study by MIT economist Daron Acemoglu and University of Chicago economist James A. Robinson.

The study reports:

It’s long been a truism that democracy brings benefits and flexibility to an economy that help boost growth. But some theoretical work “suggests that not all the mechanisms unleashed by moving political institutions from autocratic to democratic are positive for economic growth.” The economists built a model that controlled for possible unexpected influences — such as recessions and negative economic shocks, which often take place before a nation turns democratic. It’s tricky.

After doing the necessary number fiddling, what they found was pretty remarkable: “Our central estimates suggest that a country that switches from autocracy to democracy achieves about 20% higher GDP per capita over roughly 30 years.” That’s a huge difference.

The article mentions that after the fall of the Berlin wall, there was a movement around the world toward democracy. Unfortunately, some of the countries that attempted to become democracies have slipped back to their totalitarian ways. Russia, Venezuela, China and Argentina have all encountered major financial crisis since moving away from democracy. The statistics indicate that one of the most basic solutions to those financial problems would be a move toward democracy. The other kingpin of national prosperity is private property rights (rightwinggranny). That is an area where Americans need to be paying attention to what their government is doing. Less private property rights means less prosperity for the citizens of a country. Freedom breeds prosperity. We need to make sure we guard our freedoms.

 

 

Regular Readers Of This Blog Know This, But Here It Is Again

I  have periodically posted the YouTube video “Burning Down the House” on this website to remind people what actually caused the housing bubble as opposed to what they were being told caused the housing bubble. There is a reason I am posting it again.

In December 2012, a website called examiner.com posted a story with the headline, “New study confirms economy was destroyed by Democrat policies.” Sounds like the video at YouTube. The study was done by the National Bureau of Economic Research and released the week of December 21, 2012.

The article reports:

-No one was making bad loans to unqualified people until Democrats came along and threatened to drag banks into court and have them fined and branded as racists if they didn’t go along with the left’s Affirmative Action lending policies…all while federally insuring their losses. Even the New York Times warned in the late 1990s that Democrats continuing to force banks into lowering their standards would lead to this exact catastrophe.

Obama himself is even on the record personally helping sue one lender (Citibank) into lowering its lending standards to include people from extremely poor and unstable areas, which even one of the left’s favorite blatantly partisan “fact-checkers,” Snopes, admits (while pretending to ‘set the record straight’).

If we are to remain a free people, we need to understand facts–not spin. The lies that have been told about the financial collapse of 2007 are astounding. Even worse is the fact that the Dodd-Frank legislation passed as a result of the collapse does not come anywhere near addressing the core issue.

The graph below from the National Bureau of Economic Research study shows the impact of the Community Reinvestment Act on mortgage lending:

It is time to change both the Washington culture and the media culture. Unless we do that fairly quickly, we will cease to exist as a free, prosperous nation.

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Something To Think About As The Temperature Drops

I am not a cold weather person. I think New England is a beautiful place, but I really am not a cold weather person. I’m not real fond of intense heat either–I enjoy my creature comforts. Thus, I love the following story.

Yesterday’s Washington Post posted a story about a study by Tulane University, Carnegie Mellon University, the National Bureau of Economic Research and the Massachusetts Institute of Technology showing that air conditioning has played a major role in reducing deaths of Americans on extremely hot days by keeping them cool. That makes perfect sense.

The article reports:

The likelihood of a premature death on an extremely hot day between 1929 and 1959 was 2.5 percent, the academics found, dropping to less than 0.5 percent after 1960. The paper, which is under review at an academic journal, compared days on which temperatures exceeded 90 degrees Fahrenheit with days when they ranged between 60 and 69 degrees Fahrenheit.

Because the article is in the Washington Post, the article goes on to explain how air conditioning will help all of us survive global warming. Putting that aside, isn’t it ironic that the thing the global warming camp criticizes as being one of the causes of global warming also saves lives.

The article reports:

The study’s results could be particularly important for nations such as India, where only a small portion of the population has residential air conditioning. The typical person in India experiences 33 days per year where the temperature rises above 90 degrees Fahrenheit; that could increase by as much as 100 days by the end of the century, according to some climate projections.

Anand Patwardhan, a visiting professor at the School of Public Policy at the University of Maryland in College Park, said he expects home air conditioning to become more common in India, but not as a conscious response to global warming.

“While it is certainly the case that residential air-conditioning helps in reducing mortality due to temperature extremes, the rapid growth of air-conditioning in the past is perhaps more due to rising incomes and increasing affordability of air-conditioning,” he wrote in an e-mail.

First of all, global warming is a political hoax designed to take money from economically successful countries and give it to third world dictators who will spend it on themselves while their people starve (remember food for oil–it worked the same way). The best scientific source of information on global warming is a website called wattsupwiththat. I strongly recommend it.

Anyway, the fact is that as countries become more wealthy, they consume more energy. The only real way to lower energy consumption is to lower standards of living. Americans who buy into unproven global warming theories might want to consider whether it is worth lowering their standard of living based on an unproven theory.

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