The American national debt hangs over the nation’s head like the sword of Damocles, ready to drop and severely damage the American economy. The present debt has now reached the astronomical sum of $15 trillion, and continues to grow. The federal budget submitted to Congress by President Obama on February 14, 2011 was $3.729 trillion. But revenues come to only $2.627 trillion, meaning that there would be a deficit of $1.101 trillion. In other words, the federal government would have to borrow over a trillion dollars just to meet its present expenditures.
Each year since 1969, Congress has spent more money than it takes in, and each year the Treasury Department has had to borrow money to meet Congress’ appropriations, which always increase. Indeed, the Treasury Department has the third largest expenditure in the federal budget. Only Defense and the income redistribution programs of the Departments of Health and Human Services, HUD, and Agriculture (food stamps) are higher.
As the finance ministers from each of the 17 members of the eurozone meet in Brussels today, the main topic is “integration.” It’s a race against the clock.
One of the first items being discussed is putting in place the leveraging of the stability fund — otherwise known as the EFSF, or European Financial Stability Fund. At present, this fund holds some $600 billion in assets, much of which has already been invested in government bonds issued by the eurozone's weak sisters: Ireland, Greece, and Spain. The leveraging, through some opaque maneuvering, will then allow the fund to do some serious purchasing of enough of Italy’s debt to solve two problems at the same time. One is to bring down interest rates to some level that Italy may be able, in the short run, to afford to pay. And the other is to give the new Italian technocrat, Mario Monti (who was appointed on November 12 to replace Prime Minister Silvio Berlusconi after he was forced out), enough time to implement even more severe austerity programs in order to meet eurozone guidelines.
That is the next item on the Brussels agenda: Just what are those guidelines, and who is going to enforce them, if necessary? According to Reuters, this would involve “deeper financial integration” among its members. The term “integration” is being increasingly used to disguise the erasing of national sovereignty and the installation of the final step toward a United Europe run by international bankers (such as Monti) and other unelected elites.
Benefiting from a hint from an article titled "Is Harry Potter Making You Poorer?", written by my colleague Dr. John Goodman, president of the Dallas-based National Center for Policy Analysis, I've come up with an explanation and a way to end income inequality in America, possibly around the world. Joanne Rowling was a welfare mother in Edinburgh, Scotland. All that has changed. As the writer of the "Harry Potter" novels, having a net worth of $1 billion, she is the world's wealthiest author. More importantly, she's one of those dastardly 1-percenters condemned by the Occupy Wall Streeters and other leftists.
How did Rowling become so wealthy and unequal to the rest of us? The entire blame for this social injustice lies at the feet of the world's children and their enabling parents. Rowling's wealth is a direct result of more than 500 million "Harry Potter" book sales and movie receipts grossing more than $5 billion. In other words, the millions of "99-percenters" who individually plunk down $8 or $9 to attend a "Harry Potter" movie, $15 to buy a "Harry Potter" novel or $30 to buy a "Harry Potter" Blu-ray Disc are directly responsible for contributing to income inequality and wealth concentration that economist and Nobel laureate Paul Krugman says "is incompatible with real democracy." In other words, Rowling is not responsible for income inequality; it's the people who purchase her works.
Republicans are amazing. It's possible they could lose the 2012 presidential election before 2011 is over. Really, they ought to rename that big river in Egypt (You know, “Duh Nile”) the Republican River. If you want to see an entire party in denial, with a few honorable and intelligent exceptions, look at virtually every Republican presidential hopeful but Ron Paul, the premier honorable and intelligent exception.
The others will talk about balancing the budget — though they believe the SuperCommittee should get that job done for them before any of them gets to the White House — but none, with the exception of Ron Paul, is in favor of cutting the military spending, euphemistically called the “defense budget.” Former U.S. Senator Rick Santorum of Pennsylvania made that emphatically clear when I spoke with him in New Hampshire on Sunday. The same Rick Santorum has on op ed piece in today's New Hampshire Union Leader calling for a balanced budget amendment to the U.S. Constitution.
No cuts for our worldwide military empire and no tax increases, praise God, but do pass an amendment that will tell us we must balance the budget.
What a wonderful opportunity for the Democrats to tell the country that these allegedly pro-life Republicans really love bombs more than babies — more than old folks, too, whose votes will be up for grabs in 2012.
The British government is looking for a way to jumpstart its stagnant economy. The plan is to use pension funds to invest in big construction projects to the tune of $46.5 billion.
The announcement of this plan came before growth figures were announced by the Finance Minister. The news so far has been very bad. Retail sales fell at the fastest pace in two and a half years. The unemployment rate is at a 15-year high. The national deficit, which has hovered around 11 percent of GDP is not getting better. The OECD forecast on Monday that Britain would slide into a modest recession next year.
The next day the British government announced that growth would be slower than previously believed and that it would need to borrow more money and would not be able to cut the budget as much as projected. George Osborne, Chancellor of the Exchequer, told Parliament that “debt will not fall as fast as we’d hoped.” The response of Britain’s public unions was to call for a general strike on November 30, which will cause slowdowns at airports, hospitals, and schools. Osborne also added, “If the rest of Europe heads into a recession, it may be hard to avoid one here in the U.K.”
That is another major economic concern that Britain faces: the connection of the nation with the fate of European nations makes the prognosis for British recovery more dim.
The European crisis continues to mushroom, even as Eurocrats meet in Brussels to try to stave off implosion of the eurozone. Tuesday’s sale of Italian debt forced the government of Italy again to accept interest rates or “yields” in excess of seven percent, a level proven by experience to be unsustainable. Thursday will be another bellwether day, as Spain and Belgium — both of whose bonds are commanding steep yields — auction off debt of their own. But at the rate interests on government debt are rising across the eurozone, a few more weeks could write the epitaph for the once-touted international currency.
While European politicians continue to insist, as politicians will, that Europe’s problems will be resolved and that the eurozone will be kept intact at any cost, the world’s financial and banking elites are apparently coming to a different conclusion. Banks and banking regulators in Asia, the United Kingdom, and North America are busily drawing up contingency plans for a eurozone breakup while trying to reduce their exposure to European debt. “We cannot be, and are not, complacent on this front,” declared Andrew Bailey, a regulator at Britain’s Financial Services Authority, last week. “We must not ignore the prospect of a disorderly departure of some countries from the euro zone.”
According to the New York Times’ Liz Alderman, writing on November 25:
On the lookout for perceived injustices in the marketplace, Cornell University professor Robert Frank decided that Black Friday needed his attention and wrote in the New York Times about just what was needed: more taxes to discourage unreasonable behavior.
His first complaint was about the unreasonable hours that stores were opening in an effort to respond to consumer demand: “For many years, stores opened at reasonable hours. Then, some started opening at 5 a.m., prompting complaints from employees about having to go to sleep early on Thanksgiving and miss out on time with their families. But retailers ignored those complaints, because their earlier start time proved so successful in luring customers away from rival outlets.”
He then iterated the now-familiar theme of major retailers opening earlier and earlier, also in response to consumer demand. He said it was thoughtless of those greedy merchants to make such demands on their employees: “The costs to store owners and their employees are enormous: millions must now spend time away from home on the one occasion that all Americans, regardless of religion or cultural background, share as a family holiday.”
The Federal Reserve Bank committed some $7.77 trillion in funds to major Wall Street banks during the height of the 2008 financial crisis, according to a report published by Bloomberg News November 28 through a Freedom of Information Act request.
It's unclear from the methodology explained by Bloomberg's analysis of some 29,000 Federal Reserve documents released how much overlap there is with the Government Accountability Office audit published last July that counted some $16 trillion in Federal Reserve loans to major Wall Street banks. Bloomberg's explanation of its methodology does indicate at least some overlap.
Throughout the financial crisis, Congress remained blissfully unaware that trillions of dollars were being committed by the Fed with the implicit guarantee of the U.S. taxpayer. “We were aware emergency efforts were going on,” Massachusetts Democrat Barney Frank told Bloomberg, but “we didn’t know the specifics.” Frank, who announced his retirement November 28 after the Massachusetts state legislature gerrymandered him out of his district, served as Chairman of the House Financial Services Committee at the time the bailouts began. That committee is charged with oversight of the Federal Reserve and the banking industry.
Even if Congress' supercommittee had agreed on how to cut the national debt by $1.2 trillion over the next decade, it would still have been a total failure, an inconsequential bit of political grandstanding. With the federal debt officially projected to grow by $11 trillion over the next 10 years (and that’s probably an optimistic undercount), a cut of $1.2 trillion over the same period would simply result in the current $15 trillion federal debt ballooning to $25 trillion.
Jacob G. Hornberger is founder and president of the Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for 12 years in Texas. In 1987, Hornberger left the practice of law to become director of programs at the Foundation for Economic Education in Irvington-on-Hudson, New York, publisher of The Freeman.
In 1989, Hornberger founded the Future of Freedom Foundation. He is a regular writer for the foundation’s publication, Freedom Daily. Fluent in Spanish and conversant in Italian, he has delivered speeches and engaged in debates and discussions about free-market principles with groups all over the United States, as well as Canada, England, Europe, and Latin America, including Brazil, Cuba, Bolivia, Mexico, Costa Rica, and Argentina.