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Opinion

Opinion

Economic goals clash with political goals

November 17, 2011

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Born during what is mistakenly called the debt-ceiling “debacle” last summer, the supercommittee may die without sending Congress a 10-year $1.2 trillion (at least) deficit-reduction plan. This is not properly labeled a failure. Committee Democrats demanded more revenues; Republicans offered $500 billion; Democrats responded with the one-syllable distillation of liberalism: “More!” So the committee has been a clarifying event that presages a larger one — next November’s elections.  

The messiness surrounding the debt-ceiling increase was what democracy looks like when belatedly confronting big problems. Remember, Barack Obama demanded, until doing so became politically untenable, a “clean” ceiling increase — no supercommittee or other threat to his spending torrent.

The supercommittee should by now have sent its plan to the Congressional Budget Office for “scoring” — calculation of the fiscal consequences of its proposals. The law establishing the committee requires any proposal to be published in legislative language 48 hours before the 23rd. Not that law has much to do with fiscal matters: The Democratic-controlled Senate has not produced a budget in more than 930 days. This is just one way existing budget law is ignored.

Regarding the supercommittee, the interests of Harry Reid and Obama diverge. Imitation is the sincerest form of politics, and Obama needs congressional failure as he seeks re-election by emulating Harry Truman in 1948, running against a “do-nothing” Congress. Reid, however, wants to remain Senate majority leader. In 2012, Democrats will be defending 23 seats, Republicans only 10. Republicans need to gain just four seats to control the Senate. Reid’s members cannot relish running while Obama is denouncing the “Republican Congress.” As if the Democratic-controlled Senate has been temporarily disassociated from Congress.

Sensible people who remember the last grand budget bargain will be dry-eyed about not having another now. Although only 21 of the 242 Republicans currently in the House and eight of 47 Republicans in the Senate were on Capitol Hill in 1990, everyone there should remember the results of that year’s budget agreement, wherein President George H.W. Bush jettisoned his “no new taxes” pledge: Taxes increased. So did spending. And the deficit. Economic growth decreased.

Congressional failure to approve a supercommittee proposal supposedly will trigger a $1.2 trillion sequester, half from national security budgets. But the trigger will not be pulled until 2013. No Congress can bind another, and any trigger Congress creates Congress can disable. Obama, who may not be president then, hints that he might veto legislation that alters the sequester. But suppose the sequester occurs. Ignore loose talk about “draconian” spending cuts. Veronique de Rugy of George Mason University’s Mercatus Center has a graph (http://bit.ly/uKZAUd) you should see.

It shows two lines. The top one charts spending, 2013-2021, without the sequester, the other shows spending with the sequester. Both lines are ascending. Both show annual spending rising from below $4 trillion to more than $5 trillion. The space between them is so narrow it is difficult to see that there are two lines. Without the sequester, spending will increase $1.7 trillion; with the sequester, spending will increase $1.6 trillion. Here are categories of spending:

10-Year Spending Increases, Without and With:    

Defense: 20 percent/18 percent

Nondefense Discretionary: 14 percent/12 percent

Medicare: 62 percent/62 percent

Other Mandatory: 51 percent/51 percent

Net Interest: 152 percent/136 percent

The supercommittee’s difficulties are not shocking. This is shocking: Amid a darkening fiscal crisis, Secretary of Energy Steven Chu, whose department has become a huge and incompetent venture capital fund, has not resigned as penance for complicity in the administration’s “green graft” and crony capitalism.

Equally incomprehensible: As the supercommittee seems about to leave government’s spending curve unbent, Secretary of Transportation Ray LaHood, who should take a high-speed train into retirement, continues his multibillion-dollar mania for California’s San Francisco-to-Anaheim high-speed rail project. In just three years the projected price of it has tripled (so far) to $98.5 billion and only ludicrous assumptions about passenger traffic present the project as profitable enough to attract private investors, who are supposed to pay most of the costs.

“The first lesson of economics is scarcity,” writes economist Thomas Sowell. “There is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” Next November we will learn whether the second lesson of politics is that adhering to the first lesson is eventually dangerous to incumbents.

— George Will is a columnist for Washington Post Writers Group. His email is georgewill@washpost.com.

Comments

Waddetreestudio 3 years, 1 month ago

The Schemematics dont make sense- the points of economic dependence- is caped instead of developing or replacing a golden root..

 (Scarcity) leads to envious roads of recession with a downside of 25 years. This scarcity 
  caused the recession in 2000, 1989, 1993,

   ( Its just a turn-key) band-aid untill something comes along.

Waddetreestudio 3 years, 1 month ago

  The example of Scarcity is Our Mr.Greenspan who made our interest rise when the dollar 
  gain its strong-hold in 2000-thus caused a spun-off seeds for a recession..

             http://www.fff.org/comment/ed0500d.asp

Waddetreestudio 3 years, 1 month ago

Our Economic Remedy is: America going back to its gold standard with the all seeing eye of the dollar bill- The four points of early american economic development-americans investing in the savings bond that will hold for 25 years.

Ron Holzwarth 3 years, 1 month ago

There has not been nearly enough gold mined since antiquity to back up all of the dollars that are in circulation today at the current price of $1,738.30 per troy ounce. The US dollars in circulation today could not possibly buy all of it, since there hasn't been that much mined since antiquity.

If all of the gold that has been mined since antiquity were to be molded into a cube, that cube would only be about 70 feet on an edge. It sure would be a heavy cube, though!

When the United States went off the gold standard, the price of the dollar had been fixed at $20.00 per troy ounce.

I have just now put in some effort into determining exactly how many US dollars are in circulation, but I cannot figure it out, not with any reasonable time frame. If I were to be paid to do it, I would put in more effort. The only conclusion I can come up with in this time frame is this: A LOT!

So, I think it might be possible to go back to the gold standard today, if the value of the dollar was pegged at maybe, $100,000 per troy ounce.

From $1,738.30 per troy ounce as of today, November 17, 2011. That's a big change from $20.00, huh?

A friend of mine has a much more reasonable idea. He thinks that the US dollar be pegged to either a basket of other currencies, or a basket of commodities, of which gold, silver, palladium, wheat, and corn would be some examples.

But, as for going back to the gold standard, that simply is no longer possible without inflating the value of the dollar to almost nothing overnight.

From Wikipedia, which is not a credible source, but on these points I think it's not too far off:

"By acts of Congress in 1933, the domestic economy was taken off the gold standard and placed on the silver standard."

"President Richard Nixon announced that the United States would no longer redeem currency for gold or any other precious metal, forming the final step in abandoning the gold and silver standards."

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