by Gary North
Recently by Gary North: Gandhi, Mubarak, and Tough Talkers Who Eventually Slither Away
In this report, I am making a point: the country is headed for a fiscal disaster, and there is no broad-based political movement inside the country to put on the brakes. The train is headed for the collapsed trestle, and it is speeding up. The President as the engineer is talking about slowing the train a little, but he has not yet put on the brakes.
No one will put on the brakes.
This has enormous consequences for your financial future. You cannot easily get off the train. It is speeding up. The faster it goes, the more expensive it is to get off.
The voters are not aware that there is anything really wrong. They are once again running up credit card debt. They figure that happy days will soon be here again. Yet the deficit is $1.5 trillion. “No big problem!” Congress says. “Nothing that a $100 billion spending cut cannot solve.”
Let’s see if they impose that budget cut.
An indication of the self-conscious surrender to the deficit was an article published by Bloomberg on February 14. “Budget Saves $1.1 Trillion, Cuts Deficit, Lew Says.”
Who is Lew? Why should we care?
The Obama administration‘s 2012 budget would save $1.1 trillion over the next 10 years by cutting programs to rein in a deficit that may reach a record $1.5 trillion this year, White House Budget Director Jacob Lew said.
“We have to start living within our means,” Lew said yesterday on CNN’s “State of the Union” program. “The notion that we can do this painlessly – it’s not possible to do it painlessly. We’re going to make tough choices.”
See the game? It has been financial journalism’s game for at least a decade. The game is to run headlines based on a 10-year savings plan. This is done deliberately to confuse the public, on the assumption that readers – even sophisticated readers – will not read the article or think through the numbers. It is done to calm people. It is a now-universal practice.
A President can serve for only eight years. So, he has no authority to achieve such savings.
A $1.1 trillion savings over 10 years is $110 billion a year. The deficit is $1.5 trillion. This, Mr. Lew assures us, is a “hard choice.”
No, this is an admission that there will be no hard choices until a crisis hits. This is one more guarantee that the President and Congress will kick the fiscal can down the road for another 10 years.
We are talking about an increase in the on-budget Federal debt of at least $10 trillion over the next 10 years.
How will the savings be made?
About two-thirds of the savings would come from a five-year spending freeze and cuts in domestic programs. One-third would come from revenue increases, including limiting itemized tax deductions for the wealthy, an administration official said.
Some savings would be diverted to increased spending in education, research and development and technology to compete against global rivals, create jobs and reduce the 9 percent unemployment rate, Lew said.
What’s that? Savings are defined as “increased spending in education, research and development and technology.” I see. Savings are spending.
This is newspeak, just as George Orwell described it in his novel, Nineteen Eighty Four. Examples: “Love is hate.” “Peace is war.” “Saving is spending.”
The public is buying it personally. “Let’s run up our credit card debt. No problem. Spending is thrift.”
For the first time since August 2008, Americans in December increased credit card debt to $800 billion, up by $2.5 billion in November. Credit card debt is down by 18% since August 2008. It was not just credit card debt. Consumer debt was up, too: autos, student loans, etc. It rose to $1.6 trillion, up $3.8 billion above November. These are not major increases – nothing on a par with Federal debt increases. But the public is buying the government’s line: “No big problem.
The Bloomberg article quoted an unknown minor official under Bush. He says this switch by Obama represents a move to the center, in preparation for 2012. It probably does. The center is commitment to a $1.4 trillion deficit rather than $1.5 trillion.
This is the center of a train rushing for the collapsed trestle.
The article says this will not satisfy Republicans. House Speaker John Boehner said on NBC’s “Meet the Press” that “we’re broke.” A spending freeze is “way too much.”
Indeed, it is. What is needed is a $1.5 trillion cut in spending. But Mr. Boehner failed to call for that. Nor did any of the 150 economists he cited. (By the way, there are thousands of economists in the country. Where is a single non-Austrian school economist calling for a balanced budget in fiscal 2012?)
House Republicans disclosed plans on Feb. 11 to kill more than 100 U.S. government programs in an effort to cut spending by $61 billion in the budget for the fiscal year that ends Sept. 30. Lew, on CNN, declined to say whether the White House would support that package.
Wow! A whole $61 billion in cuts! But Mr. Lew failed to join in.
Boehner was asked about prospects of shutting down the government if Republicans can’t reach a compromise with Senate Democrats and Obama on this year’s budget, for which spending authority expires on March 4.
“Our goal is to reduce spending, it is not to shut down the government,” Boehner said.
The article went on and on about billion-dollar cuts. It did not raise the question of the effects of a trillion dollar plus annual deficits. Those deficits are on the table. No one is challenging them, with one exception: Ron Paul.
RON PAUL VS. THE ESTABLISHMENT
I would like to see Ron Paul elected President, but not because I see him as a political messiah. I would like to see him elected because, in order to get elected, he would have to represent a majority of Americans. He does not represent a majority of Americans. He will not be elected. The voters want more of the same. They will get it.
The Conservative Political Action Conference, also known as CPAC, is an annual convention. Conservative politicians who are thinking of running for the Republican party’s presidential candidate show up to rally the conservative troops. Some of them don’t show up, knowing they have no chance at winning the straw poll. Sara Palin is one of these annual no-shows. They can then blame their poor showing on the fact that they did not show up.
In 2010, Congressman Ron Paul won the straw poll. In 2011, he did it again. He did it with this speech – a frontal assault against the agenda of the conservative mainstream.
The mainstream media recognizes Paul for what he is: the nation’s major voice for libertarianism. This understanding is shared by the conservative mainstream media. Fox News recognizes this, and therefore steadfastly opposes Paul. It was Fox News in 2008 that kept Ron Paul off the podium during its broadcasting of the Republican Party’s debates. He was not invited.
The mainstream conservative media want someone who is in favor of the expansion of American Empire. They want someone who will not rock the boat, which would mean sinking the Establishment’s ship of state. They are big government conservatives.
The fact that Ron Paul, for the second year in a row, is the favored candidate of the people at CPAC is an insult to the conservative Establishment. It indicates that large numbers of conservatives are not willing to go along with the basic agenda of the conservative movement, namely, the expansion of Federal power in the realm of foreign policy, and an unwillingness to roll back the New Deal, Fair Deal, New Frontier, Great Society, and all the rest of the bipartisan expansion of the Federal welfare state.
Ron Paul represents an ideological threat to the entire conservative movement. Because of this, it opposes him and does whatever it can to make certain that whatever publicity he receives, and whatever public support he receives, will not be given favorable treatment. The fact is this: there is a large group of people in the conservative movement who are in favor of Ron Paul’s agenda. This is regarded, correctly, as a vote of no-confidence against the conservative Establishment.
It goes without saying that the Republican Establishment, which is to the left of the conservative Establishment, is even less happy with any publicity Ron Paul gets. These people do not want to think about the fact that there are millions of voters out there who are sick and tired of the expansion of the Federal government. These Paulites not only want to stop the expansion of the Federal government, they want to roll back the Federal government.
This is an intolerable thought to the Republican Party Establishment. The Republican Party Establishment is completely in favor of the expansion of the American Empire and the expansion of Federal welfare spending. The Republican Establishment understands that money buys votes, and they want to buy votes.
So, when any reporter approaches a major Republican figure in Congress, and asks what major spending programs must be cut back, or even limited, the Congressman begins to waffle. He refuses to be specific about what, exactly, ought to be cut from the Federal budget. He refuses to give any examples of how the Federal budget deficit can be rolled back from a $1.5 trillion deficit to, say, a $200 billion surplus. We need a surplus in order to repurchase all American debt. There is simply no thought given to the idea that the Federal debt ought to be zero. That has not happened since 1836, and it is not going to happen again.
So, when Ron Paul receives 30% of the straw poll, Mitt Romney receives 23%, and all the rest of the would-be Republican party hopefuls receive single digits, this indicates that the conservatives who attend CPAC are sick and tired of the waffling. They are unwilling to go along to get along. When the rest of the conservatives receive single-digits, including 3% for Sarah Palin and 2% for Huckabee, this indicates that the conservative Establishment is out of touch with the conservative party activists at CPAC. This is an affront to big-government conservatives.
SETTING THE AGENDA
Setting the agenda is the most important single power exercised by any establishment. We are told the President of the United States is the most powerful person on earth. But someone sets the agenda every day for the President. Somebody is in charge of the daily schedule of meetings. That person, not the President of the United States, will determine what issues get considered.
While it is possible for the President to set his own daily schedule, this is never done. Always it is some lower-level figure who schedules who will meet with the President, meaning which topics will be discussed by the President. The person who controls the daily agenda really does set the agenda for probably 80% of what the President decides to think about.
I have never seen a discussion and political science textbook of the procedure by which the daily schedule is set. A man I knew in high school, Dwight Chapin, used to set the schedule for Richard Nixon. He later got caught in the Watergate scandal and went to jail. I wish he would sit down and write a memoir, not on his activities regarding Watergate, but with respect to how, exactly, he set that daily schedule of meetings. I am sure he had to satisfy all kinds of political pressure groups represented within the cabinet. No one ever writes this memoir.
Yet this power of setting the agenda is rarely discussed in specialized studies of the Presidency. The simplest kind of question, namely, who gets in to see the President, is never mentioned. Here is one of the most important single powers anywhere on the face of the earth, and nobody knows exactly how it is done who was not part of the actual procedure. We do not hear discussions on this, and therefore we do not have any real conception of how policy is made in the executive branch of government.
The reason why Ron Paul is such a threat to the conservative Establishment is the fact that he has such a clear-cut agenda. This is obvious to the people who want access to controlling his daily schedule. That person would not be anybody connected with the Republican Party Establishment or anybody connected with the conservative movement’s Establishment. He would have a completely different set of people in charge of his office. It is imperative, therefore, Ron Paul’s candidacy be undermined as much as possible well in advance.
This is why, in the reports on the results of the straw poll, the writers spent almost no time on Ron Paul’s agenda. There was no discussion of why Ron Paul got votes, except to say that somehow he was able to get more of his people to manipulate the straw poll. The question then is this: Why did the also-rans not get their people in to manipulate the straw poll? If Ron Paul was able to get out all those people, it indicates that the others failed to get support. This, I guarantee you, is never discussed by the journalistic hacks who spin the results of the straw poll. They spend time on the other candidates, as if the winner of the straw poll were somehow a secondary figure.
The conservative Establishment has always been able to keep libertarians at arm’s distance from the troops. The mainstream has praised Austrian School economists as theoreticians, but never before has anyone in politics come before the voters to call for the implementation of the Austrian School economists’ agenda. There has only been one other figure in my lifetime who was anywhere near as libertarian Ron Paul. That was Howard Buffett, who served in Congress in the late 1940s and early 1950s. He had no national audience. Nobody outside his district in Omaha, Nebraska had ever heard of him. He was not considered “Presidential timber,” or even Senatorial timber.
So, Ron Paul was the first libertarian politician ever to penetrate the consciousness of the conservative movement. The fact that he has so completely penetrated the consciousness of the conservative movement has mainstream conservatives terrified. It was never supposed to be that anybody who favors the roll-back of the welfare state would ever be able to get the ear of conservative voters. This is what Ron Paul has been able to do.
If you look at the other people who are powerful enough to get the Presidential nomination, other than Mitt Romney, you find that they are pretty much silent on the issue of foreign aid, American military bases abroad, the expansion of the war in Afghanistan, and when exactly the troops ought to be called home. In other words, they are basically behind Obama.
This raises the question: When will anybody in Congress vote to cut American military spending? This raises another question: When will the foreign aid programs be completely eliminated?
END THE FED!
Ron Paul is also known for his position on ending the Federal Reserve System. Nobody in the also-rans has a platform hostile to the Federal Reserve System. It is considered intolerable for any major American political figure to run for President on the platform of ending the Federal Reserve System. This would be a direct assault on the American Establishment. There is no more treasured institution anywhere in the Establishment than the Federal Reserve System. Yet here is a candidate who is basing his agenda on ending the FED.
In short, Ron Paul’s agenda is far too specific for the conservative mainstream to tolerate. He wants to do what the conservative mainstream says it wants to do: cut the Federal budget, stop the expansion of the money supply, stop price inflation, and return to a free-market economy. The conservative mainstream does not really want to do any of these things, and never has. It has always been in favor of expanding the military budget, expanding Federal power outside the borders of the United States, running the world as the world’s policeman, and increasing the money supply on a reasonable basis in order to keep American prosperity rolling. All of this is big government conservatism. All of this has been basic to the conservative movement since 1950.
Who will set the agenda? Will it be people who want to roll back the Federal government? Will it be people who want to constrict the Federal budget? Will it be people who want to end the Federal Reserve System’s ability to bail out the Federal government every time it runs massive deficits? Is it somebody who wants to balance the budget, and not merely balance it, but run a budget surplus, so the government can begin to buy back the Federal debt? No conservative candidate runs on this platform other than Ron Paul.
This is why we can be certain that nothing is going to change in American political life. Ron Paul is not going to get the nomination. The American Establishment will see to this. We will see more deficits, a larger Federal budget, and more inflation. That is all the conservative movement has ever offered to the voters, and it is not going to change now.
In order to set the agenda, the conservative movement in the mainstream financial press must join together in order to confuse the voters. They must persuade the voters that things are not too bad, that there is hope for the future, the Federal deficit is really not so bad after all, and the good news is on the way.
There is no way off the train. The train is going to go over the trestle. The Establishment is committed to kicking the fiscal can. There will be no budget cuts. There will be no balanced budgets.
There will be a crisis when the budgets cannot be financed at anything under 20% per annum except by mass inflation by the FED.
Prepare for the crisis. It’s coming.
February 16, 2011
Copyright © 2011 Gary North
- On the Budget – Lew outlines a ‘very difficult budget’ (politico.com)