Which Came First, The Single Parent Family Or The Poverty?

Unrelated intro: I feel both proud and ashamed that I didn't blog yesterday. Proud that I showed I could master my blogging OCD* and shame that I had a blog written in my head and didn't post it. After nearly 8 years of daily blogging, I felt it was more important to break that streak than it was to share some tiny tidbit.

On with the show.

I just changed the tagline on this blog to reflect my deepest conviction - that America is in desperate need of local, Christian missionary work. See this post for a good summary of the rationale. For me, that idea focuses thought and action into something useful. The two biggest issues we face are the destruction of the traditional family and government debt. One is atomizing society and the other will destroy wealth and social stability.

By "atomizing society," I mean that intermediate institutions are growing weaker, reducing society to two primary elements: the individual and government.

So now really on with the show.

While everyone admits that marriage has declined significantly over the past 4 decades, President Obama and progressives in general want us all to focus on income inequality. There's an excellent post at the Manhattan Institute showing how income mobility correlates quite well with marriage, but not so well with income itself. The question is this: Is income a factor of marriage or marriage a factor of income? In his speeches, President Obama tells us that income inequality causes the breakdown of the family.

The question seems easily answerable. The assertion of the progressives, the solve-income-inequality-first crowd, is that low-income women will have babies without getting married because they're poor. This seems silly on its face.

If you're poor, a second, committed adult in the household can't help but make things better, even if they just watch the kids so you can go down to the HHS office to apply for food stamps. Reading the flyers about government social services posted at Catholic Charities, there are plenty available, but they all assume you have free time to travel to dispersed government offices, fill out forms and interact with clerks. It's not the sort of thing you'd want to do while carrying a screaming toddler. Government assistance aside, even if the husband is unemployed, he can at least provide labor hours in maintaining the house and raising the children.

So there you have it. The next time you find yourself in an income inequality discussion around the dinner table or on Facebook, ask that question: Why would poverty cause a woman to have a baby outside of marriage?

If I'm a woman living here, I want a husband if only for the protection.

* - This is a joke, in case you were wondering. I don't really have blogging OCD. Well, maybe just a teensy weensy bit. :-)

Once The Money Is Out Of Politics

... we'll enjoy the fruits of a total dictatorship, assuming we can figure out what "getting the money out of politics" even means.

Our Monks of Miscellaneous Musings posted a George Will - Robert Reich clip from some debate show. Robert Reich brought up the claim that "we need to get the money out of politics" and blatted on about income inequality. On the latter point, George Will whiffed badly, but more about that later.

Getting the money out of politics assumes that money is somehow corrupting what the government does, that there is some best solution to whatever set of problems we're trying to drown with three-and-a-half trillion dollar bills. If we got the money out of politics, then our political leaders would make wise decisions that were best for all of us.

Sort of like Mussolini did. There wasn't much money in politics in fascist Italy.
But the best set of decisions depends on what you're trying to achieve. Over in Greece, they've pretty much done the things that Robert Reich has been suggesting for years and they're now starting to throw their poor and elderly out into the street. So much for finding wise political leaders who can make your decisions for you, eh Robert?

If we could just get the money out of politics, then Deep Thinkers like Alan Blinder could come up with more ideas like Cash for Clunkers.
And what does "getting the money out" even mean? The government contracts out to private companies for much of its work. If there's a customer out there with $3.5T to spend it's utterly childish to think that marketing dollars aren't going to gush forth in pursuit of that prospect. (You can solve this problem by nationalizing all industries so that everyone is inside the government and no one outside. See also: Union, Soviet.)

The only way to get the money out of politics is to get the money out of the government. Given the track record of geniuses like Alan Blinder and Robert Reich, that's probably a good idea for lots of other reasons, too.

Finally, a bit of George Will's response to income inequality. George took the collective position and made points about government being the cause of problems and blah blah blah. This really ought to stop. Income and wealth don't simply happen to you. You're not plankton floating around with the tides. Income and wealth are markers of behavior. Next time a Robert Reich launches into an income inequality tirade, someone ought to bring up the behaviors that lead to poverty and ask Robert just how successful we've been at dealing with those through politics.

Income And Wealth Are Markers Of Behavior

Getting and staying married greatly increases your chances of being financially secure.

COLUMBUS , Ohio – A new nationwide study provides some of the best evidence to date of the devastating financial toll divorce can wreak on a person's wealth.

The study of about 9,000 people found that divorce reduces a person's wealth by about three-quarters (77 percent) compared to that of a single person, while being married almost doubles comparative wealth (93 percent). And people who get divorced see their wealth begin to drop long before the decree becomes final.

“Divorce causes a decrease in wealth that is larger than just splitting a couple's assets in half,” said Jay Zagorsky, author of the study and a research scientist at Ohio State University 's Center for Human Resource Research.

By the same token, married people see an increase in wealth that is more than just adding the assets of two single people.

Everyone Loves Pay Day, No One Likes Tuesday Afternoon Deadlines

... or: Musings On Theological Socialism.

Sarah Hoyt gave an Instalanche to this X-extract blog post about the failure of the New Harmonie socialism experiment.

Robert Owen paid around $150,000 for the town of Harmonie, Indiana. He got 20,000 acres, more than 160 buildings, working mills, and farms already producing food. He renamed it New Harmony. Close to a thousand people arrived in the first year.

Owen already ran successful textile mills in New Lanark, Scotland, where he was famous for treating workers well and running a profitable business at the same time. He believed that if you removed private property and paid everyone equally, cooperation would naturally replace competition.

In January 1826, William Maclure sailed a riverboat full of scientists, teachers, and geologists down the Ohio River to New Harmony. Historians call it the “Boatload of Knowledge”. Thomas Say, the father of American entomology, was on it. So was Charles-Alexandre Lesueur, one of the most respected naturalists of the era. This was the most educated, best-funded, best-equipped socialist community ever attempted on American soil. If cooperation could beat markets anywhere, it should have worked here.

It collapsed almost immediately.

The hardest workers were feeding, housing, and clothing neighbors who did nothing while receiving the same food, the same shelter, and the same rewards. So they stopped working too. Why wouldn’t they?

My feverish, coffee-starved brain made a connection into my current, deep disaffection with the Catholic Church. I instantly thought of the term, Theological Socialism. If my faith's leadership thinks everyone is going to get the same reward after we die, then why don't I go to the beach instead of Mass? Like the hard-working people in New Hamonie, I've realized that if my prelates are right, then I've been played for a chump.

They aren't right. Not at all. They are reveling in being the paymaster and totally avoiding the task of foreman. 

This last weekend, I worked the men's Cursillo retreat. In the kitchen, we dished up some great meals. Many of my friends in the kitchen were from the Valley - El Centro, Calexico, etc. Like the Chicago girl who took my last name, they were all from modest means and now relatively successful. They had something to give to others because they had lived, in fits and starts, the cardinal virtues of prudence, justice, fortitude, and temperance. As Instapundit said some years ago, wealth and income are markers of behavior.

Discussing this with ChatGPT, we came to this:

(B)efore wealth can be distributed, it must be created. Before generosity can be practiced abundantly, the capacity for generosity must be developed.

Your wife and your friends from Calexico and El Centro illustrate something that gets lost when wealth is discussed exclusively in terms of inequality and redistribution.

They began with relatively little. Through years of work, discipline, delayed gratification, and sacrifice, they accumulated not merely financial resources but productive capacity. They developed skills, judgment, reliability, and habits of responsibility.

Their present generosity is made possible, in substantial part, by their earlier sacrifices.

And here's where the Catholic dimension becomes especially interesting.

The very virtues that made these people prosperous are themselves Christian virtues.

Industry, prudence, temperance, fortitude, stewardship, and perseverance are not merely economic instruments. They are moral achievements.

Of course, wealth itself is not proof of virtue; Christ's warnings about riches make that clear. But neither is wealth morally irrelevant. How someone acquired it, what sacrifices its acquisition required, and what responsibilities he subsequently assumed are legitimate subjects of moral judgment.

G. K. Chesterton said, "Tradition means giving a vote to most obscure of all classes, our ancestors. It is the democracy of the dead. Tradition refuses to submit to the small and arrogant oligarchy of those who merely happen to be walking about." Traditions are the hard-won lessons from the past being given to us on a silver platter.

1826 is a long time ago, long before the modern era where the transfer portal has ruined college football. Ancient Israel, which gave us the Old Testament is older even than that, before Jean-Jacques Rousseau's benighted concept of the noble savage. The people who lived through the failure of New Harmonie tried to pass along their painfully gathered wisdom in writing. So did the rabbis watching the Israelites prance around golden calves right before the smiting got real.

We ignore those and turn to socialism in all its rancid forms at our own peril.

It's a ton of fun to yap about a world of generosity and open-hearted forgiveness. It's not a lot of fun tell your staff they're going to need to work late tonight.

"Your scrolls need to be distributed to the Children of Israel tomorrow morning at 0800!"

Tax Cuts (don't) Make You Rich!

The Wealth Gap is tearing this nation apart! The government has got to do something about it. We are on the verge of class warfare with people falling on each other in the streets like wild animals. Joe Lunchbucket is going to beat Mortimer Whitecollar to death with a crowbar any minute now. For the love of God, we've got to change the tax code to deal with this!

I did a little experiment with Excel. I played around with 6 simplified scenarios. The first set is the wealth accumulation of a tradesman, Joe Lunchbucket. Joe gets a job at age 18 and makes $20K. His expenses are the same. His income rises at 4% and his expenses at 2%. He then either gets married at 22 or not to a tradeswoman who works outside the house and then either gets divorced or not at age 35. If he marries, they have two kids and their expenses rise commensurately. Here's what their accumulated wealth as a function of age looks like. Click on the image for a larger version.


Here are the charts for Mortimer Whitecollar. Mortimer gets a BA and enters the workforce at age 22. He starts at $60K. He has the same growth and constraints as Joe.


What happens when you get tax cuts? How about tax increases? Well, move Joe's graph up or down by a couple hundred bucks a year. Move Mortimer's up or down by a couple of thousand.

Whoop de do.

David Wessel, writing in the Wall Street Journal, has an interesting column on the effect of the tax cuts on the Wealth Gap. If you ignore all other effects, the tax cuts make a big difference. If you look at the real world, they don't.

Politicians want to seem like they have some kind of major influence on your lives. They debate and posture and pose and blather endlessly about how they will get the country moving again or their opponents will bring about a new Dark Ages. Short of a Hugo Chavez-style socialist implosion, they really don't have much of an effect at all.

In terms of the Wealth Gap, you can't change the tax code to eliminate the effects of education and divorce. Divorce and education have million to multi-million dollar effects on net worth. Tax cuts are orders of magnitude less.

A Quick Commentary on Atlas Shrugged

After reading a post by the Instawife asking if it was time for the productive people of the US to "go John Galt", I picked up an audio copy of the book referenced in that post, Ayn Rand's Atlas Shrugged.

Wow.

I'm about a quarter of the way through the book and already it's made me see the world in a different way. I now understand the people who said reading it changed their lives. Having said that, I don't completely agree with the idea of going John Galt.

Barack Obama is a parasite. He is encouraging more of us to become parasites, too. For example, Barack has never worked in an oil field. He has never worked in the companies that make deep water drilling rigs, specialized drill bits for deep earth drilling, or the ones that make pipelines. Yet his car is always filled with gasoline and the engine lubricated with oil. The oil companies he wants to loot make far less on their invested money than do the companies of his rich, parasite-encouraging contributors like Apple or Google.

Parasite.
Barack and his friends are perfect examples of the looters described in Ayn Rand's novel. They produce nothing that we use and instead sieze wealth to distribute to yet more people who produce nothing.

There are communities where Atlas Shrugged has been played out perfectly. In Zimbabwe, the looters drove off the white farmers who created the country's wealth and took all of their land and equipment. As individual farms were looted and farmers murdered, farmers who had yet to be attacked went John Galt, packed up and left the country, leaving their farms in the hands of the looters.

In some of our own inner cities, the looter class has similarly driven off productive businesses. In states such as California, a looter government is driving out businesses. Companies would rather go John Galt than stay and have the products of their labor siezed by the government and handed out to parasites.

And yet, going John Galt is an act of defeatism. It's running away from the problem and not confronting it. It's what you do when the parasites become too strong and too numerous to fight. We're not there yet.

If you don't like the Obama concept of spreading the wealth out to the people behind you through soul-rotting forced income redistribution which incubates still more parasites, then do something else with it. If you donate some of your income to organizations like the Concord Coalition, which tries to educate people about our disastrous debt problem, then it is not available to parasites like Obama and is actually used to fight them.

While I love the book, I'm not yet ready to go John Galt. I'm not yet ready to quit. More later.

On the Globalized Economy and Wealth

Today, the outstanding blog Carpe Diem points us to a cool online tool that tells you just where you rank on the planet in terms of wealth.

A single American living at the poverty level of $10,294 annual income (in 2006) would be in the top richest 13.25% people in the world.

An American worker earning the minimum wage of $6.55 (July 2008) would be in the top richest 12.64% people in the world.

The tool for doing these calculations is called the Global Rich List. Try it out. My annual income makes me a plutocrat in global terms.

Now that companies can move their operations to so many other places, places like China and India and now that those countries are moving away from socialist idiocies, we, dear reader, have to compete with those people for jobs. Those people to whom $12,000 a year represents a huge raise. That's why wages are stagnant. Wages won't rise in the developed world until India and China are close to parity with us.

If we institute the kinds of economic constraints suggested by the Global Warming crowd, I can't see how that is going to happen. Development takes consumption of resources. All this talk about cap and trade, if instituted globally, amounts to a clamp on development and therefore on wages. Wage differentials like this lead to a loss of jobs.

If we wait a little while, we may all end up living in the Ruins of Detroit.

The Soviet Union Was Indeed Socialist

At Jordan Petereson's suggestion, I'm listening to The Gulag Archipelago these days. I find it absolutely enthralling. I can't turn it off when I'm in the car. Lots of things are occurring to me as I listen, but instead of trying to summarize them all in one post, I'll drag them out to the annoyance of you, my readers. You're welcome.

The first thing is that the USSR was indeed socialist. When confronted with the mountains of dead, modern socialists retort that it wasn't true socialism.

The objection is irrelevant.

The retort misses the point.

Consider:

• They had free healthcare.
• They had free education.
• They had free housing.
• They had guaranteed jobs.
• Profits, such as they were, were handed over to the State.

Finally, their income inequality was a fraction of ours. Pick a Soviet year and then sum up the total net wealth of all of the big dudes of the Party. I would bet dollars to donuts that their total wealth wouldn't come within a tenth of what Bill Gates has today. Ergo, their income inequality was less than ours, a strong measure of socialism, if socialists are to be believed.

Socialism isn't judged on cruelty or injustice. It's an economic system wherein everyone shares everything pretty much equally. No system in real life is totally one thing or another, so the fact that it had imperfections isn't an indication that it wasn't socialist, it only shows that the USSR existed in the real world. The piles of corpses mean nothing when judging if they were socialist or not. It's like saying an apple isn't an apple because its tree is lopsided.

So let us agree that, whatever their faults, the Soviets were socialist. More tomorrow.

Plus, their East German pals had cool cars like the Trabant.

Dave Ramsey, B-Daddy and more Leisure Time

Over at The Liberator Today, B-Daddy points out yet another income redistribution effort.

...the health care legislation is designed to transfer wealth, the House version includes an income surtax on the "wealthy." Harry Reid's version calls for an increase in the Medicare payroll tax for those making over $250,000 per year.

Marginal tax rates for the wealthy, that is, the taxes paid on your last dollar of income, are going up, up, up. If you lived the Dave Ramsey lifestyle and had a modest home and modest cars while making as much money as you could, the Democrats' effort to raise taxes on the well-to-do could result in lots and lots more leisure time for you!

If you're living below your means, then increases in marginal tax rates could be met by working less and less. You wouldn't have crushing bills to pay, so you'd be able to cut back your hours. And why not, if the government is just going to take those earnings anyway?

Who is John Galt?

Income Inequality Is Bad Because ...

... because if we don't give money to the people who don't have it, they will burn everything down.

Der Spiegel has a front page editorial on why the rich need to be taxed more. We need to buy off the barbarians.

We know how the death of our society will look from the recent riots in London. We are threatened by social instability, which could lead to societal collapse and anarchy -- our own private Somalia. To avoid that will require a serious effort by the powerful. Our system needs a complete change of course. A politics of inequality got us into this crisis. If we keep going down that road, it will cause our downfall.

Nowhere in the article is any recognition that behavior has an impact on wealth and income. We're not trying to achieve any of the old goals of the War on Poverty back in the 60s and 70s, we're just keeping our cities from burning down.

Back in the day, we talked about the poor as people who just needed an opportunity, a chance to make something of themselves. Now they're unreasoning, feral animals that are so stupid that they will destroy everything if they don't get another $100 a week.

There's also no recognition of the improved lot of the poor over the past several decades. Bradley Wright's new book, Upside: Surprising Good News About the State of Our World, details this quite nicely. Data like his is ignored. The mere existence of inequality is the cause for rioting, no matter how much anyone already has.

Talk about intellectually bankrupt, these guys have totally thrown in the towel on trying to make a rational argument.

Is Obama Deliberately Trying to Torpedo the Economy?

As I've thought about my post yesterday wherein I showed that a family of four will have an additional $70,000 of debt over the next three years courtesy of the Federal government, it got me thinking and somewhat afraid.

Our family is doing pretty well. We can pay off loans and are trying to knock out our mortgage ahead of time. Having said that, there's no way on Earth I can take on an additional $70,000 over the next three years, particularly when the years beyond that will be equally bad. If I can't do it, how can anyone expect the average family, making about $40-50K to do it? We're getting buried, all of us.

Is it deliberate? Victor Davis Hanson thinks so.

I think the key was not so much the spending excess or new entitlements. The point instead was the consequence of the resulting deficits, which will require radically new taxation for generations. If on April 15 the federal and state governments, local entities, the Social Security system, and the new health-care programs can claim 70 percent of the income of the top 5 percent of taxpayers, then that is considered a public good — every bit as valuable as funding new programs, and one worth risking insolvency.

Individual compensation is now seen as arbitrary and, by extension, inherently unfair. A high income is now rationalized as having less to do with market-driven needs, acquired skills, a higher level of education, innate intelligence, inheritance, hard work, or accepting risk.

In essence, Obama is deliberately setting up a crisis where the only possible solution will be to tax successful people into submission. In previous posts, I've argued that Obama's goals are not to increase jobs or improve the economy, but to save the planet and redistribute wealth. In my mind, there's no way adding $70,000 of debt to every American family is anything but a deliberate effort to kill capitalism and hence, the American economy.

In the end, we will all be equal. Equally poor.

Broken Mental Models

Ted Anthony, a patient, kind-hearted and highly proficient AP writer, made the mistake of asking me a question.

That’s a really interesting statement. Can you elaborate?

— Ted Anthony (@anthonyted) June 20, 2020

To borrow from G. K. Chesterton, it's probably a bad idea to ask for clarification from someone only too ready to write blog posts on the slightest provocation, but Ted did it and now I must respond.

Here's a data point that I feel is instructive. If the embedded video is fussy, here's the direct link to it.

There was a better one from Tucker's Friday show that I can't find online, so I will summarize it. A business owner in Charleston, SC, had his shop attacked by Black Lives Matter rioters while his staff and customers were still in it. Calling 911 accomplished nothing. The people managed to escape out the back, but his shop was destroyed.

In the name of Social Justice, left wing political leaders knowingly chose the left wing mobs over the shop owners. There are mountains of problems with their mental models, but I'll pick three of them for this post.

Ragged Red Rules

Why do you have police? Police exist to enforce the law. How do you get laws? Laws are enacted by the democratically elected legislature, signed by the executive and interpreted by the courts. Remove the police, either through defunding, withdrawal for racial reasons or simply stop responding to 911 calls and you have no laws. Without enforcement, the laws become words on paper.

If you've invested your life in a fixed asset like a shop or a factory and the police vanish, what's left to you other than arming yourself and your employees and enforcing your own laws? How many people know the rules regarding defense of life, home or business? Remove the police and you'll end up with 100 heavily armed shop owners interpreting the laws on the spot. The results will be mixed, to say the least. Mixed with a lot of blood.

The left has no model for this. When I watch interviews with store owners who have been burned out by the left's own BLM / ANTIFA crowd, the end result is blindingly obvious. Either the merchants are going to leave or they're going to arm themselves. The blue cities are in this position because they lacked the mental framework to predict this. That shines out as clear as day when you listen to the Chicago aldermen talk to their mayor during the riots.

Gratuitous paragraph: Part of the broken mental model of the left is the source of wealth. All wealth comes from people engaged in private commerce. The government gets its money by taxing said private commerce. That's it. There is no other source. Progressives think money comes from the government and are regularly shocked at what happens when businesses leave. That's part of why they don't protect them. They don't understand the owners and they don't understand their value to the community.

Countering Violence With Retreat

The recent destruction of monuments in San Francisco are the perfect example of this broken mental model. It's indescribably delicious because the final monument whacked was one for Ulysses S. Grant. Dig this.

And Francis Scott Key is down, *right* as a police officer says “you’ve made your point, we’re not gonna let you pull this statue down,” with the crowd cheering and shouting “next one!” pic.twitter.com/8sbjmhMRXf

— Joe Rivano Barros (@jrivanob) June 20, 2020

Oh, so they're not going to let them tear down another statue, are they? And just how do they propose to stop the BLM / ANTIFA goons? Words. Talking. An open dialogue. It's all in the left wing mental model. If we just understand one another, if we try to get along with the other side, we'll find common ground and come to a mutually-beneficial agreement.

Grant came down directly afterwards.

The mob is willing to use violence. If you aren't, you'll lose. It's really simple and the mob can see it. At some point in time, you're going to have to bust heads and / or shoot people to stop this. Allowing it to continue is incredibly corrosive to society. Most people pulled over by the cops for a traffic violation are going to think of the rioters smashing and looting and see that there are two sets of rules. The BLM / ANTIFA mob gets to do what they want while you have to follow the law. Where does that lead?

Nothing Is Changing

In the end, it's the fundamental flaw in the left's mental model that makes all this pointless. The problem isn't race and it isn't racism, it's the loss of the traditional family. Dig these two data points.

Reading proficiency scores from South Senior High School in Minneapolis.

Reading proficiency scores from East High School in Cheyenne.

I didn't take the time to find more dramatic examples from Great Schools, but this tracks with the 60 or so schools I've sampled.

Here are two problems for the race-crazed among us.

1. If racism is such a huge problem, why are black kids doing better in ultra-white, Trump +40 Wyoming than in ultra-progressive, pluralistic Minneapolis? With nothing to slow down the redneck KKK there, wouldn't you expect the black children to be brutalized to the point of catatonia? How can they study with all that hate? It's almost like racism, particularly on the right, is not a big factor.
2. If blacks were inferior, why would they excel anywhere? They're doing it in Cheyenne. It's almost like race is irrelevant. Crazy!

The next time you want to wave racial data around, whether that's crime or education or income, take a look at family structure data as well and ask yourself which one seems to be a better indicator of performance. Spoiler: It's family structure.

That means the entire lefty worldview, the one that sounds like it came from a Mein Kampf madlib where the races are the blanks, is seriously flawed. The solutions we're pursuing will result in no changes unless they accidentally change marriage rates.

Summary

This is a stream-of-consciousness hobbyist blog and I'm tired of this post. I want to go have breakfast and then take the dogs for a run so I'm quitting here.

Oh, wait, that's not a summary. How about this one to answer the original question.

The Democrats own the education industry and outside of Fox and maybe the WSJ, they own the news media. Through those institutions, they taught our children that America is full of racism and hate and, as currently constructed, is illegitimate. We need to fundamentally transform it! That was great because it got the Democrats votes. Unfortunately, they went a bit too far and now the little monsters are telling the Democrats trying to manage the blue cities that America is full of racism and hate and is illegitimate. Burn it all down!

Lacking accurate mental models, the Democrat establishment can't cope with the violence and is about to get whacked upside the head by the fiscal repercussions while accomplishing nothing.

That's why they're in last place on the scoreboard.

Predictions for 2009

This blog has turned into an econo-political blog over the last several months as I've gone through the exercise of teaching myself a little about the financial markets. In this post, I'm going to do some predictions and we'll see how much I've learned when we revisit it in a few months.

This is going to be a long and wordy post, so feel free to click away now.

First off, I would argue that there are massive economic forces at work that drown out everything else. The biggest of these is the spending binge that Obama and the Democrats have begun. Fred Barnes had this to say about Obama's start.

When Barack Obama met with TV anchors at a White House lunch last week, he assured them he likes being president. "And it turns out I'm very good at it," he added. Well, not exactly. What Obama is actually very good at is campaigning. He did it for two years as a presidential candidate, and it's pretty much what he's been doing in the six weeks since he was sworn in ...

He talks about "hard choices" but hasn't made any. With large Democratic majorities in Congress, he's free of worry about rebellion on Capitol Hill...

But there's a problem. Candidates don't have to deal with reality. They talk about the wonderful things they can accomplish as if advocating them is the same as achieving them. They live in a world of political make-believe in which everything from reconciling conflicting interests to paying for costly programs is easy.

That's the world Obama continues to inhabit. Like a candidate, he's a quick-change artist, constantly switching roles. Twice last week, he insisted he doesn't favor "big government." Then he proposed a budget that would vastly expand the size and reach of the federal government, add $600 billion to the deficit, and produce a one-year shortfall of $1.2 trillion (or more).

Right now, we are living in the euphoria that accompanies a credit card buying spree at the mall. Every store is open and our plastic is out. We're rushing here and there buying everything we've ever wanted. Obama has made no move at all to stop the Democrats in Congress from getting anything they wanted. Earmarks festooned the recent Stimuloid Porkgasm™ and infested the omnibus spending bill he just signed and he didn't make a peep. In fact, he claimed they weren't there. He has put forth a budget that is truly monstrous and promises gargantuan deficits. The Democrats in congress are larding it up with more earmarks and rushing to pass it as fast as they passed the Porkgasm.

That's the situation, now here are the predictions.

Short version: There is no one left to fund this spending spree. We will end up repudiating all this debt by printing money and inflating it away. That will lead to an increase in the minimum wage, higher unemployment, more debt and finally, wage and price controls.

Long version: It doesn't matter how safe Treasuries are if there's no one left to buy them. That's where we are right now. Foreign governments, all dealing with their own internal problems, don't have any money to lend us. Japan's economy is getting killed. Europe is in a financial meltdown worse than ours. That leaves China as our last hope for loans.

Forget it. Their economy is far worse than they let on. Asia economics expert Brad Setser is starting to wonder about them.

Throw in some indirect evidence that China slowed quite sharply at the end of last year, and there isn’t yet much evidence that Asia is going to help pull the rest of the world out of its slump. Right now Asia’s sharp deceleration implies it is adding to the forces that are pulling the global economy down, not propping it up. The IMF’s global forecasts — which presume that growth in India and China keep output in the emerging world from falling as sharply as it is expected to fall in the mature economies — consequently still seem on the optimistic side.

What evidence is there that our credit line has run out? Take a look at what Across the Curve has been blogging over the last few days. Here's some samples taken from various recent posts.

Over the course of the afternoon I did locate some (bond) traders who had observed real end user selling from investors who were casting their financial vote on the Obama budget. Those sellers looked at the budget and apropos Roberto Duran fighting Sugar Ray Leonard they cried, “no mas.” ...

I think that an era of unheard of concessions for Treasury issuance is possible too. The funding needs of the Treasury are prodigious and given the details of the budget released today it will only increase in the near term. The wholesale market ( primary dealers) has shrunk in size and the amount of balance sheet available to those in the market has contracted, too. I think that it is only a matter of time until demand slackens and the Treasury faces 10 basis point and 15 basis point tails on a regular basis (A tail is the number of basis points between the level at which the issue was trading in the brokers market and the level at which the auction stops.)

It has happened in other markets and it seems only logical to me that it should happen in this market also. If that pattern were to develop. I think it would force the hand of the Federal Reserve and would hasten their entry into the market as a buyer of Treasuries. (Emphasis mine. This means printing money to cover the debt.) ...

Prices of Treasury coupon securities tumbled today as investors drowned themselves in the spittle of never ending Treasury issuance. From the perspective of bond traders the recovery in the stock market added to the woes of the fixed income markets. We are approaching a junction at which fundamental economic data does not matter. (Emphasis mine.)

Going back to the issue at hand - paying for the spending spree - where else can we get the money? How about retirement accounts? Well, I would argue that anyone who could move their 401(k) out of the stock market and into Treasuries has done so already, or at least the majority has. There aren't any investors with money left to invest on the scale Obama needs. Remember, we're talking about $2T+ budget gaps. He needs 50 Bill Gateses to give him all of their money this year, 50 different ones next year, 50 more the year after that ...

How about if we tax the rich? Our Prelate the Primates has something to say about that.

A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That’s less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable “dime” of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.

So China doesn't have the money, the rest of the world doesn't have the money, retirement accounts don't have the money and those %#@^%@^&* rich swine don't have the money. How about those greedy pigs in big business?

Exxon is the biggest big business out there. What if we taxed every penny they made in profits? Well, they made $81.8B in profits last year and we took $36.5B of that in taxes already. That leaves only $45.2B left. Even if we took it all we would be left with this subtraction problem:

$2,000B - 45.2B = 1,954.8B

We would need to find an additional $1.95T to pay for the spending spree.

So the rest of the world doesn't have money to loan us, even if we killed all the greedy, rich people and harvested their organs we wouldn't have enough and gutting those corporate fatcats won't give us enough money, where does that leave us?

The Fed.

The inescapable conclusion is that Obama and the Democrats will simply print the money they need. Here's where the predictions come in.

Once you commit to printing money to pay your bills, your currency become a dangerous thing for foreigners to hold. I'm not willing to go all the way like Peter Schiff and claim that the dollar will no longer be the global currency, but I am willing to predict that once the Fed starts buying Treasuries in earnest, global demand for them will dry up. Would you buy stock in a company that issued endless shares? Of course not.

Once global demand dries up, it will force the Fed to take a larger and larger role in funding the deficit. Dollars will vomit forth from the Fed with no corresponding increase in real wealth in the country. That's inflation. Once inflation begins, the real value of the minimum wage will fall. What do Democrats do when that happens? Why, they raise the minimum wage, of course. Raising the minimum wage has been repeatedly shown to increase unemployment. Increased unemployment leads to lower tax revenues and increased government spending. That leads to larger deficits, which will have to be funded by more printed money.

The end result will be a decline in real wages and a decline in savings. What's the point of putting money in the bank if it's just going to erode away? Here's another prediction. Wage and price controls. If inflation heats up before the next congressional election, what do you suppose the interventionist Democrats will do? Will they allow the greedy corporations to make obscene profits on the backs of the poor by raising prices on the things people need to survive? Hardly.

How will you know if this is happening? Well, the first thing to watch are the Treasuries. If you watch TBT, you can get a feel for what is happening. TBT shorts long-term Treasuries. If TBT rises, that tells you that the US is trying to borrow more than people want to lend it. Here's the recent 3-month chart of TBT.


As the global crisis unfolded, entities around the world threw their money into Treasuries as a safe haven. TBT went way, way down. It should have kept going down as the crisis has only gotten worse in the last 3 months. Instead, it's rising because "we are approaching a junction at which fundamental economic data does not matter."

The next thing to watch for is an announcement by the Fed that they will step in and buy Treasuries. They will have to because falling Treasury prices mean higher interest rates - interest rates that the government has to pay on the debt.

After that and perhaps before, watch for a dropoff in foreign purchases of Treasuries, particularly from China. Some countries will start selling them in order to pay their bills.

Finally, watch the price of gold. As these things start to happen, more and more investors will stop seeing Treasuries as a safe haven and will look for another one. Gold isn't an investment, it's a way to stabilize your financial worth. I usually think gold is a stupid thing to buy, but in times like this, when nothing else seems safe, it's attractive. (Note to readers: I am not recommending you go out and buy gold! This is a thought exercise and not investment advice. Gold may be a good idea, but you need to do your own research on it.)

There. I went way out on a limb and made wild predictions. There are probably only 3 or 4 people still reading. I hope you enjoyed it. In a few months I'll likely come back and repudiate all of this and delete the post, claiming I never wrote it at all.

:-)

How To Self Destruct And Not Be Aware Of It

... intellectually, that is.

Tracy Jan, whose Twitter bio says she specializes in "race & immigration, thru the lens of $, econ & biz," penned this WaPo thumb-sucker about racial inequalities in Minneapolis where it was immediately retweeted by lots of WaPo luminaries of similar mental wattage. The logical flaw in it is so massive that you only need three small excerpts to illustrate it.

First, Minneapolis has seen terrific economic development and been graced with bountiful and well-intentioned progressive policies aimed at ending racial inequalities. The result was the opposite of what the progs wanted.

(T)he prosperity fueled by the region’s Fortune 500 companies and progressive policies has not translated into economic equality. Instead, the wealth gap between Minneapolis’s largely white population and the city’s black residents has deepened, producing some of the nation’s widest racial disparities in income, employment and homeownership.

OK, so we've now established a negative correlation between progressive policies plus economic growth and black performance. Her solution? More, more, more of the same.

Such disappointments offer cautionary notes for those promising change in Minneapolis and other areas of the country in the aftermath of protests against police brutality and systemic racism — and raise questions about how far the movement to shift funding from police departments to other services can go toward delivering racial justice.

Kind-hearted people have tried their hardest to help blacks in their city and after decades of diligent work, they haven't simply failed, they've made things worse. Tracy thinks the problem is leprechauns systemic racism.

Economists, lawyers and civil rights advocates in the Twin Cities say progressive tax policies could not make up for other aspects of structural racism...

Hmm. I wonder if you could test that hypothesis by looking at cities whose structure cannot suffer from structural racism? Cities like Memphis, St. Louis, Detroit and Baltimore where the leadership structure is almost entirely made up of blacks. Blacks who, presumably, wouldn't be structural racists against their black populations.

Ooh, wait, we can do that! Thanks to the WaPo, we have that data as well! Here are the four worst American cities for violent crime, certainly a marker of performance.

1. Memphis
2. St. Louis
3. Detroit
4. Baltimore

I'll leave it to you to research their political leadership.

In the rest of the essay, Tracy lays out in nauseating detail why Tracy's world view is utter nonsense. Her colleagues at the WaPo apparently subscribe to the same one.

We have the worst news media in history.

I'm hoping for clear skies tonight to take some moon photos with my new camera. I'm really hoping for that so I can share some photography instead of this kind of trash.

The Arts And Sciences Require Wealth And Stability

This is a tiny bit of something I've been noodling over since the London riots. Artists and scientists are luxury goods. In the short- and medium-term, you don't need them to live. You only buy luxury goods when you've got plenty of disposable income and you're secure in the future. I think the London riots, in the context of massive social spending in England, are symptomatic of societal poverty and disorder.

I would further suggest that by fighting traditional societal mores, artists and academics in general* have cultivated the very conditions that threaten themselves. They've fought to overturn and subvert traditional institutions like churches and societal mores and have replaced them with the relativism that led to interviews like this.

Buildings burned, businesses ruined and no remorse. Where will the artists and academics get their money now?

Related and a very good read: Our Precentor of Measurements has a short post and a link to an excellent essay on being a Superversive. It was quite provocative and clarified things for me.

* - Originally I had called out scientists, but I think this is unfair. When I think about my own alma mater, I'm not sure the science and engineering departments cared a hoot about which way the societal wind was blowing.

Income And Wealth Are Markers Of Behavior

It makes a difference which skills you develop.

Best Undergrad College Degrees By Salary	Starting Median Pay	Mid-Career Median Pay
Petroleum Engineering	$93,000	$157,000
Aerospace Engineering	$59,400	$108,000
Chemical Engineering	$64,800	$108,000
Electrical Engineering	$60,800	$104,000
Nuclear Engineering	$63,900	$104,000
Applied Mathematics	$56,400	$101,000
Biomedical Engineering	$54,800	$101,000
Physics	$50,700	$99,600
Computer Engineering	$61,200	$99,500
Education	$35,100	$54,900
Art	$33,500	$54,800
Special Education	$36,000	$53,800
Recreation & Leisure Studies	$33,300	$53,200
Horticulture	$35,000	$50,800
Culinary Arts	$35,900	$50,600
Athletic Training	$32,800	$45,700
Social Work	$31,800	$44,900
Elementary Education	$31,600	$44,400
Child and Family Studies	$29,500	$38,400

Secular, Post-Modern Self Destruction

Going in a Marxist direction, we've decided that history is moving inexorably towards socially liberal democracy. With this in mind, we helped topple the governments of Libya and Egypt and have sat by idle while Syria and Iraq have collapsed. To intervene with the necessary large numbers of infantry would be so very 19th Century, you know.

We did away with being judgmental so we no longer see wealth and income as markers of behavior. Instead, they're symbols of inequality and we spend lots more than we earn working hard to make outcomes more equal. We borrowed in pursuit of this, so we're now all heavily in debt with most post-modern nations running about 100% of GDP in national government debt.

War is no longer necessary as we've decided that we can coerce other nations into doing our bidding through economic sanctions, so, other than the US, the post-modern west is completely disarmed.

Babies are a choice, pregnancy something to be avoided, sex is beautiful in all its forms and marriage a relic of a bygone age. The post-modern West now has minuscule birth rates and declining populations.

And finally ...

National borders were deemed oppressive and judgmental, so we did away with those in all but the most theoretical sense. We've now got unfettered migration from war-torn and impoverished hell holes into our enlightened, post-modern nations.

And the result is ...

Hundreds of thousands of refugees from places with no cultural similarity to the post-modern West are rushing through undefended borders to populate lands that the West is evacuating through attrition. They are adding financial commitments to countries who can't pay the ones they have right now. Those same nations are currently dealing with the first fiscal domino, Greece, who is both bankrupt and insolvent.

Something tells me that the secular, progressive, post-modern West hasn't much longer to go.

The FBI Is Becoming The Gestapo

... that is, the surveillance and enforcement arm of a political party, the Democrats.

I've kept up a very modest interest in the whole Russia collusion thing. I've missed most of the details, but can't help tracking the general trend. The idea that the Russians favored Trump is ludicrous because they rely almost exclusively on petroleum products for their income and Trump's proposed policies would lower oil prices. There is simply no way a kleptocracy like Russia would favor an American presidential candidate guaranteed to threaten their wealth. It's ignorant stupidity to suggest otherwise.

The FBI is neither ignorant nor stupid.

If I were in the FBI, one of the things that would terrify me would be getting heavily involved in a general election campaign for president. Were someone to suggest that we surveil a presidential candidate or his staff, I'd need video of that staff accepting piles of cash from illegal sources or standing over dead bodies with dripping knives in their hands. Talk about a third rail!

The FBI went through the multi-level approval process of performing surveillance on Trump's team on the basis of an obviously fabricated document created by a known purveyor of political muck.

The FBI typically has a cordial relationship with Congress. Every department tries hard to do so as Congress controls their budgets and has extensive power beyond that. It's why you see department heads sitting respectfully while congressmen grandstand at their expense.

Yesterday, while reading a news article about the #ReleaseTheMemo campaign wherein Representative Nunes has written a 4-page summary of the FBI's corruption in the service of the Democrats, specifically Hillary Clinton as directed by President Obama, it hit me. The FBI must be completely out of control. That's the only reason something as damaging as this would be considered by Nunes and the rest.

Think how far down the list of levers to influence the FBI you'd have to go before you got to releasing a memo to the pubic informing them that the most powerful law enforcement agency in the country is hopelessly compromised. How desperate would you have to be? Some have said that this is all to protect Trump, but I'm not buying any of that. There are plenty of Rs in Congress who despise Trump and would be much happier with President Pence.

This is all just a continuation of the Hillary email scandal corruption, so it should be no surprise even if it's nauseating.

Do you want any president, be it Trump, Obama or whoever, to use the FBI to influence elections?

Giving The Gardener A Raise

Wife kitteh and I are at the stage in our lives where we've got decent investments and real estate. We spent many decades building these and now we reap the fruits of our labors and self-denial.

Looking at our investment statements, we're making money hand over fist. The money that's being printed is almost all ending up in the stock market and real estate, driving prices up and up and up. Those what got are getting more.

Inflation for consumer goods is real. I've tracked a few items at Costco over the last couple of months and I don't believe inflation is only 8%. My bet is that if you didn't doctor the numbers, it would be about double that. 

We've got a gardener who comes every other week and a housecleaning crew that comes every other week. We haven't given them a raise in a few, inflation-benign years because they can be replaced easily for the same or less than we're paying, thanks to the "compassionate" open borders. Meanwhile, they live in a world of cash and rent. While we see big increases in our wealth, their real income and assets are going down. Those what don't got are getting robbed.

This is obscene.

We don't have to, but we're going to give them a healthy raise. The progs would call this trickle-down and to that I'd say that your policies result in financial drought for the working poor. All that borrowing and spending has put piles of dollars in my pockets at the expense of these people.

The transfer payments that led to this debt were really transfers from my gardener to me.

Don't Blame Heather Gillers

... she's been honestly reporting the fiscal problems of Chicago, particularly the school district. Here's a sample.

Chicago Public Schools, already $6 billion in debt, passes $700M borrowing plan 6-0: http://t.co/VtKXcya8rc

— Heather Gillers (@hgillers) February 25, 2015

By my calculations, each man, woman and child in Chicago owes about $2500 on the school debt. The debt is about $6.7B and the population is about 2.7M. That debt, by the way, is independent of the rest of Chicago's government debt, Illinois' government debt or the Federal government debt.

I discovered Heather by searching and clicking around the Chicago Tribune's site. Her Twitter feed was easy to find and scrolling down through time, she's produced one honest report of the school finances after another.

If you think awareness of government debt would make much of a difference in the fiscal trajectory of cities, states or the nation in general, her tweets and articles should give you pause.

Glenn Reynolds had a series a while back with the theme, wealth and income are markers of behavior. I'd suggest that debt and borrowing are markers of culture.