Obama Cuts 0.47% from Budget

Today, word came out that President Obama has cut $17 billion from the 2010 budget.  While that is a lot of money to you and me, it is a measly 0.47% of the $3.55 trillion budget that has been proposed for this year.  Surely, with the way things are going, the 2010 budget figures to be even bigger, so the $17 billion will become an even smaller percentage.

During his campaign, Obama promised to go through the budget, line by line and cut programs that weren’t working or were not necessary.  Looks like he thinks 99.53% of all the government spending is necessary.  And he’ll probably tout this as the “change” he promised and the media and all of his supporters will eat it up.  They’ll just blame the Republicans and Bush for making all the spending “absolutely necessary.”

Just when I think Obama can’t be more of a hypocrite, he does something like this.  Why even announce you’re “cutting” less than one-half of one percent of the budget?  This country is going off a cliff, and Obama isn’t putting on the brakes, he’s flooring the gas.

Obama’s Double Talk on Economy

When President Obama reassured China and the world that their investments in US bonds and the dollar were safe, he made the following quote:

“And that is not just in U.S.-issued treasury notes, but also in the private sector and the commerce and the industry that has made this the most dynamic economy in the world.”

If our economy is so great and dynamic, why did he just go about ripping it when he was pressing for his stimulus package?  Didn’t he say it was unsustainable and that we needed new clean energy jobs to take us into the 21st Century?  The double-talk from Obama is starting to get ridiculous.  With Bush, at least we knew where he stood.  Obama is a much smarter man, but he seems to be trying to please too many people.

Also, just to clarify things, our economy is not in great shape.  When almost 60% of our GDP has been fueled by spending, I don’t see how we’re in great shape.  This year, in order to make up for the lack of consumer spending, almost half of our GDP is predicted to come from government spending.  Also, we’ve had almost zero savings for the last decade, we have no manufacturing base, and we are up to our eyeballs in debt.  To me, that is anything but a dynamic economy.

We can fix the economy, but no one wants to re-route the ship.  Instead, we’re burning through trillions of dollars trying to keep it down the same path to oblivion.  We need savings and investment from the private sector to provide capital, and we need to start producing goods and services in the US.  We have the best and most skilled workers in the world.  We also have some of the best creative minds.  What we need is more competition to lead to better innovation and new products and skills to turn us around.  We need to strip away layers of government interference that burden businesses and hinder their ability to compete in the global market.

Obama really pushed hard for his stimulus package, telling us how bad of shape our economy was in.  Now that his stimulus isn’t really working, he’s pushing hard to tell everyone how great our economy is.  He needs to decide where he stands on all of this and provide a consistent message to the world.  We need a strong dollar, and we need to start producing and stop spending.  It can be done, but our leader has to come to this realization as well, and not believe the words coming out of his own mouth.

China’s Concern IS a Big Deal!

Today, the Chinese Prime Minister expressed concern over the value of the treasury bills and US dollar reserves they are holding:

“We have lent a huge amount of money to the US. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” In rare comments on another country’s financial health, he added: “I’d like to take this opportunity here to implore the United States … to honour its words, stay a credible nation and ensure the safety of Chinese assets.”

This makes a lot of sense and should be a real concern of the United States.  This is potentially a HUGE HUGE issue.  We cannot downplay this!

China buys Treasury bills, and those funds are then used to fund our government spending and the stimulus packages.  If China stops buying them, we will have to either find a new lender, start printing more money, or stop spending.

We have printed over $2 trillion over the last 6 months.  Since the Federal Reserve does not report the total money supply, we do not know what effect that has had on the amount of dollars in circulation, but common sense would tell you that we have increased it by 5-10% at least.

The US dollar is strong right now because everyone is selling their assets that are paid for in US dollars.  Oil, stocks, bonds, and many other commodities are traded in US dollars.  So when people sell those, they need dollars in return.  Once they either spend, save, or reinvest that money, the demand and value of the US dollar will deteriorate.

China’s concern about their massive reserve holdings is very legitimate.   If we keep printing money, and the amount of dollars increases, their holdings automatically lose value.

China has already funded their first $600 billion stimulus package with their savings, which means they used part of their dollar reserves.  If they decide that US investments are no longer worth it, then they will start to sell their holdings and stop buying them from the US.

Once China stops borrowing from us and stops exporting all their goods and start keeping them at home, their economy will decouple from ours.  That would be great for them, and horrible for us.  A lot of people say that our economies are too linked together for this to happen.  I would argue that once the Chinese start buying the products they make, they will stop shipping them to us.  Peter Schiff has been talking about this for the last few years.  His prediction looks like it is going to come true.

If there is one national security issue that needs to be addressed, this is it.  Our government should not be reliant on another country’s government to fund it’s operations.  They could use their holdings as leverage, telling us that if we don’t do one thing or another, they will dump all of their holdings.  We need to live within our means and not spend more than we make.  It is not just an economic issue, but one that is important in us being the leader in the world.

Of course, Obama’s henchman have “assured” the Chinese that their investments are safe with more lip-service.  Here’s what Robert Gibbs said:  “There’s no safe investment in the world than the United States.”

Whew!  I mean, if that doesn’t assure the Chinese, I don’t know what will!  I mean, who cares if we are printing trillions of dollars and running a $1.3 trillion yearly deficit?  Who do you think is funding that deficit Mr. Gibbs?  If you are going to say something like that, you better back it up with actions.  Talk is cheap, especially when what you’re saying has no basis in reality.

Instead of going on about Madoff, Jon Stewart, or some other news item, this needs to be on the front page of every newspaper.  Our largest creditor is basically giving us a “past due” notice and is telling us to get our act together.  We need to stop using our credit card!  Instead, the White House is just blowing them off, which could lead to our creditor cutting us off.  If the Chinese lose faith in the US dollar, it will lose all of it’s value and become worthless.

We have been warned.  Now we have to act.

Real Debate Over Spending is Needed

Today, President Obama signed the $410 billion “Omnibus Spending Bill” which will fund our government for the rest of 2009.  In case you didn’t know (I didn’t until I looked it up) omnibus means that it is multiple budgets and programs all rolled into one big bill.  So, rather than medicare going in as its own item, it is tied with social security, education, and all other government programs.

The big debate today was about the 8,000 or so earmarks that totaled around $8 billion.  Earmarks get a bad rap because they go directly to wasteful pet projects of our representatives.  This money though, had already been allocated and was going to be spent anyway.  The only difference is who was going to spend it – Congressmen or government bureaucrats.

These earmarks are a symptom of the wasteful government spending, not the beginning and end of it.  We need to look at the real problem, which is massive government spending in first place.  We need to be debating the other $402 billion, and the record $1.45 trillion budget deficit for 2009 alone!  Everyone wants to reform earmarks.  Why not get rid of them altogether?

We need to realize that government (not just ours but any) has no source of income.  They need to create it, which comes in the forms of taxes, fees, and tariffs.  These massive budget deficits will either be paid for by raising taxes on us, or on our children and grandchildren.

We need to open up the debate and stop bickering about 2% of the spending of the entire government.  What happened to Obama’s “line by line” speech about the budget?  Do you think he read the 1,100 page spending bill line for line?  In a time when we need to start to save and practice sound economic principles, our leaders are throwing around billions of dollars like it’s nothing.  We’ve become so desensitized to huge, hundred billion dollar figures that we don’t even look at it twice.

We need to start over.   Just scrap the every government program and eliminate all taxes and start from scratch.  Only fund what is truly necessary and efficient, and then tax to only make up that amount.  We would all have more money and better run programs.  We can’t keep reforming and patching up broken government departments.  It’s beyond repair.

We need real debate and new ideas.  We need to open up the arguments that are off-limits in the media.  The debate right now is too narrow and they have us all focused on $8 billion, instead of on the other $402 billion.

When Will It Stop?

Today, President-elect Barack Obama announced that he has upped his goal to add at least 3 million jobs in his economic programs.

Also, we announced that we are going to double the number of our troops in Afghanistan.

Both of these announcements comes on the news that we just bailed out GM and Chrysler for $17 billion, and the Treasury is requesting to use the other $350 billion of the TARP that’s not a TARP plan.

Seriously, how are we going to pay for all this?  Even though creating jobs is a good thing, is it really the role for the government to create and pay these jobs?  How much will it cost to continue our military prescence in the Middle East and around the world?

At what point are we going to stand up and say enough?  It’s like we are all waiting for someone in the government to say it for us.  Well, I really doubt that is going to happen.

We need government to lead by example, not do exactly what we did to get into this mess.  Many people were living beyond their means, going deeper and deeper into debt, and now they can’t afford their mortgage payments and don’t want to spend money.  Now, our Federal Government is doing the same thing!  They are printing trillions of dollars, running up more debt, trying to inflate our way out of this crisis.

It’s not going to work!  Who’s going to bailout the dollar when the money finally makes it’s way down through the system?  Our Federal Government cannot print money forever.  It’s going to need a bailout, and when that happens, all of our standard of living will dramatically decline.

We need our government to try reign in their spending and pay attention to the huge deficit they are running.  Everything is at a standstill, waiting for the next bailout.  If they would just say, “we’re done, you figure it out” we would be out of this mess already.  The prospect of more and more money is making everyone sit on their hands.  We won’t find a bottom until the government stops trying to be a hero and gets out of the way.

Everyone is expecting Obama to come in and pull a couple of levers and make everything good again.  His already announced spending plans have the chance to run us into an even deeper hole.  We need a sound fiscal policy to start with the government and we need them to stop printing money and bailing everyone out.  Only after that will we really turn the corner and return to prosperity in the US.