Posts Tagged ‘United States’

What I Learned Last Week

US FTAs

US FTAs (Photo credit: Wikipedia)

Tsunamis can occur in lakes.

Within 12 -24 months of retiring, 75% of NFL players will be alcohol or drug addicted; divorced; or bankrupt.

The Federal government takes in about $2 trillion a year, spends $3 trillion and is $16 trillion in debt.

The U.S. has 6 major shipyards. China has over 100.

The Pilgrims originally proposed settling in Manhattan, but were denied permission by the Dutch.

More people die world-wide from chronic hunger than malaria, tuberculosis, and AIDs combined.

The US government mandates that we convert 40% of our corn into ethanol.

Since 9/11, more Americans were crushed by falling furniture or televisions than were killed in terrorist attacks.

In the last 6 years, Canada has negotiated 6 free trade agreements. Canada 6, USA 0.

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Sailing Away

Ship Garthsnaid, ca 1920s

Ship Garthsnaid, ca 1920s (Photo credit: National Library NZ on The Commons)

I am very much enjoying browsing through Cyclopædia of Political Science, Political Economy, and the Political History of the United States, circa 1870. There’s a lot of fascinating history and important lessons in this old work.

At one time, the USA was a leading player in international shipping, rivaling Great Britain. It helped having vast supplies of timber. The lack of an established merchant marine tradition seemed to allow a great deal of innovation which made US shippers tough competitors.

It did not last. The age of steam power and steel ships saw the dimming of the American ocean shipping. British technology was better early in the Industrial Revolution. And, although the British happily sold their technology all over the world, America could just not make a go of it.

What went wrong?

There were a lot of contributing factors, but mostly it was government actions, tariffs, regulations, and taxes. Two motives seemed to be behind most of the terrible policy.

The first was a desire to save American jobs. Sound familiar? Policies did save jobs for a while, but as everyone other than politicians should know, saving today’s jobs usually sacrifices tomorrow’s jobs.

The second was a desire to tax the rich. And boy, did they – not through an income tax, which didn’t exist, but through a complex set of tariffs, fees, excises, duties, etc. The result was that being an American shipper wasn’t as profitable as a lot of other lines of business, which in turn meant a decline in capital investment, which made American shippers less competitive, which meant fewer shippers, which meant fewer jobs. Wash, rinse, repeat.

It’s anyone’s guess as to how much more prosperous we’d be today if we hadn’t abandoned the shipping business through bad policy. This sad story paints a picture (one of many, actually) of where “save American jobs” and “tax the rich” really leads.

Military Might

I don’t know Nico Perrino but he has written a excellent article detailing the dilemma we face regarding the military and our foreign policy. I’ve extracted some bits below:

NATO was the ultimate entangling alliance

[We have]…over 600 military bases in 40 countries across the world.

Without China lending us money, our current foreign policy could not exist.

the United States is currently $15.2 billion in debt. That is about $48,000 of debt for every man, woman, and child living with United States citizenship regardless of age.

All great empires end for two reasons, overexpansion and economic collapse (usually intertwined). Very rarely does an empire end for external reasons, and why should we judge America to be an exception?

All food for thought.

Luxembourgian-registered NATO E-3 AWACS flying...

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Downgraded!

Pointing at another person is aggressive and d...

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Back in July, Standard and Poors issued a courteous warning: if the US did not have a plan for reducing it’s debt by $4 trillion over the next 10 years, the US would no longer merit S&P’s best credit rating. Washington managed (just barely) to produce a plan for reducing the debt by only $2.4 trillion, even assuming the existence of fiscal unicorns and the growth fairy. S&P did as promised and downgraded our national credit rating. The White House was, of course, shocked and appalled – who new some outfits actually did what they said they would do? This was, apparently, an uncustomary paradigm for the White House.

Subsequently, the markets went into wild fits. I suppose it’s OK for everyone to know that Uncle Sam resembles a sub-prime borrower as long as everyone pretends otherwise. But now it’s out in the open and no one’s sure what to do with Uncle Deadbeat, especially there are some real deadbeats across the pond. Uncle doesn’t look too awful by comparison, but it’s kind of like being the prettiest girl at the Wallflower Dance.

With more downgrades on the way (I’m talking to you, France), things could get interesting.

Political Boundaries

Uncle Sam with empty treasury, 1920, by James ...

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Don Boudreaux hits the nail on the head:

Most modern “liberals” believe that domestic economic problems are caused chiefly by unsavory characters – “business people” – who impose their destructive rule on masses of innocent workers and consumers yearning for more prosperity, and that the best solution to these problems is government force deployed using armies of regulators to subdue these bad guys and to keep close watch over them and their successors.  Failure to intervene is immoral.  These same “liberals,” though, believe that foreign problems are typically the result of complex forces that can be understood only poorly by American-government officials; it is naïve to suppose that even well-intentioned foreign intervention by Uncle Sam will not have regrettable unintended consequences.

Most modern conservatives believe that domestic economic problems are typically the result of complex forces that can be understood only poorly by government officials; it is naïve to suppose that even well-intentioned economic intervention by Uncle Sam will not have regrettable unintended consequences.  These same conservatives, though, believe that problems in foreign countries are caused chiefly by unsavory characters – “dictators” or “tyrants” – who impose their destructive rule on masses of innocent people yearning for more democracy, and that the best solution to these problems is government force deployed with armies of soldiers to subdue these bad guys and to keep close watch over them and their successors.  Failure to intervene is immoral.

Yep! Either way, we’re going broke!

The Debt Bomb

Medicare & Social Security Deficits Chart

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Steve Randy Waldman has a great insight: Americans tend to view Social Security and Medicare benefit as property, similar to Treasury bonds. Once you’be put your money in, you have a right to the benefits. This bodes ill for entitlement reform.

Several things have happened in the last few years: banks made housing loans that could not realistically be repaid; governments (particularly Greece and Ireland, but also Japan and the US) have borrowed money that they can’t repay; Chinese banks are lending money for development where the prospects for repayment are very dubious. The world is awash in bad debt. How will it end?

Here’s a clue: what can’t be repaid won’t be repaid.

Oh, there can be the pretense of repayment. In the end, governments can print money. This, of course, debases the currency which, in turn, makes everything more expensive. Standards of living will drop, as we’re seeing already in Greece.

Barring some technological miracle, the next generation, and probably the one after that, will have a lower standard of living – perhaps much lower.

The alternative is entitlement reform – reducing the old age benefits that we hold so dear. Should we sacrifice the well-being of our children for the well-being of our parents? Or the other way around? Tough call.

Too Much Good

Centers for Medicare and Medicaid Services - M...

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When I read a blog entry that contains a nice quote, I usually capture it on my tumblr site. But sometimes I find a lot of great quotes in a single entry. Today it happened with a great piece by John Mauldin. Mauldin is always a thoughtful and erudite writer, but today he’s in perfect form. Here are a few of my favorite quotes:

Government checks of one form or another are about 20% of total personal income in the US.

And let’s be clear, this year’s “profits” becomes next year’s working capital when you are a small business owner.

But everyone knows that the only way to get the budget into some reasonable semblance of balance will be to either cut Medicare benefits or increase taxes.

The simple reality is that if We the People of the US want Medicare, in even a reformed and more efficient manner, we must find a way to pay for it. It will not be cheap. Raising income taxes on the “rich” is not enough. You have to go back and raise income taxes on the middle class, too. Oh, wait, that will be a drag on the economy and consumer spending. And in any event it will not be enough.

The defining political question of this decade will not be Iraq or Afghanistan, or the environment or any of a host of other problems. The single most important question will be what do you do with Medicare?

You may be able to fool the voters, but you will not be able to fool the bond market.

This election next week will change very little in real terms, the things that matter, like whether the US economy can grow or will face a very real crisis and a true depression.