Friday, November 21, 2014

King Barack's Unconsititutional and Divisive Executive Action on Deportations ... Lessons for the U.S. from Japan's Struggles with Debt, a Decades Long Stagnant Economy and the Perils of Deflation

President Obama described his illegal and unconstitutionally based executive order granting amnesty to 5 million illegal immigrants in a nationally televised speech last evening. In so doing he said the Constitution was no restraint on his unilateral actions.

So let's chalk another victory up for the small minded and mean spirited partisan politics that is pervasive in America today.  And this wrongheaded and intentionally divisive decree came from someone whose views and policies were just 'shellacked' at the polls by We the People. And from the same person who once taught constitutional law at the prestigious University of Chicago.

Political gamesmanship as practiced by our elitist President Obama still reigns supreme throughout America. In other words, the views of Congress, the duly elected representative of We the People, and the constitutional rule of law be damned.

The King has spoken, and the minions, aka We the People, must obey. Screw the Founding Fathers, the Constitution and the very idea of presidential restraint through the constitutionally decreed doctrine of separation of powers. By intentionally setting aside the basic rules of our Constitutional democracy, the President has simply decided to make law rather than enforcing and duly executing the laws as written by Congress.

Personally I'm all for opening the borders to those who wish to come to America, work hard and raise their families in a free, safe and open society, and I don't know anyone who doesn't feel the same way. But what about the more than 300 million American citizens today? Aren't we, our kids and grandkids also entitled to fair treatment by a President who will focus his efforts on working with Congress to get our borders secure, our laws enforced and our economy moving again? Aren't we entitled to getting an elitist and intrusive big spending government out of the way?


Here's the real problem. Our President is the biggest elitist of all. Along with other Jonathan Gruber types in his administration, he believes that We the People are the stupid ones. He says he's tired of waiting for Congress to act on immigration. Well, why didn't he act in 2009 or 2010 when his party controlled Congress? Or prior to last month's election, which he said he would until his party asked him to wait for the results of that election? And we all know how that ended.

Well, I'm tired of him talking down to us stupid ones. I'm also tired of waiting for him to act on Keystone, middle class tax cuts, government waste, fixing or repealing ObamaCare, government spending on education from K-12 through college, the Benghazi investigation, IRS abuse, and more. Yet he wants to score political points and fight with those who don't agree with him. He's a load, and here's why.

Our country is in a mess economically, but the fundamental attention of our politicians will now be focused on immigration policy and the President's Constitutional authority.  While President Obama continues to ignore jobs and the need for economic growth and in lieu thereof concentrates his efforts on illegal immigration and deportations, the rest of us should take some time to focus on the U.S. economy.

So let's discuss America's and the world's economic state of affairs. In the rest of the world, it's a troublesome situation, to say the least, and especially in Europe and Japan, although things seem to be weakening substantially in China as well. We're the cleanest dirty shirt in the world's soiled economic laundry right now, even though we have many challenges of our own to overcome.

For those who remember the high inflation of the 1970's, it's hard for us to accept that inflation may be dead. It's particularly difficult to believe that inflation is behind us since we've been printing money like it's going out of style for many years now. And yet inflation isn't our problem right now and won't be for many more years at least. Not even close.

Our problem instead is a slow growing economy with high levels of debt, high unemployment and weak wage gains. We've tried 'stimulating' the economy with large amount of government spending, but the economy stays weak. We've tried 'stimulating' economic growth with low interest rates, but the economy stays weak. Yes, this time is different.

So while the politicians are debating immigration, let's look at Japan and what it has to teach us about the dangerous possibility of debt driven deflation. What's happening in Japan could happen right here in the U.S. if we don't get a middle class tax cut, government spending under control, our economy growing at a healthy clip and lots of good jobs being created.

As evidenced by the Keystone Pipeline fiasco, U.S. energy policy sucks, but unlike Japan's situation, domestic energy  policy can be in large part a way out of our long-in-the-making economic troubles. So while both countries have aging populations and heavy debt loads, we have less relative debt and lots of energy there for the taking -- two big advantages that must not be wasted or taken for granted.

With all that as background, let's turn to Japan and see why its lessons of a weak economy, an aging population and enormous debt burdens are very much worth taking the time to study.

We are the world's largest economy that operates as a democracy. Japan is the second largest, and it has many lessons to teach about growing government spending, an aging society and a debt ridden and moribund economy. At some point demographics and an ever increasing debt load combine to form an effective roadblock to resuming the kind of economic growth that is linked to a healthy, prosperous and forward looking society. When that occurs, implementing tax increases only serves to make a bad situation worse, and no additional revenues to pay down the debt will be forthcoming to the government's coffers.

Yes, Japan is facing a huge long term mess, and there is no simple or easy way out of it. The situation in Japan today offers many worthwhile lessons for America. Continuing down the path of bigger government and its tax and spend Keynesian ways will lead us straight to Japan. And straight to Europe too, for that matter.

Japan's Keynesian Recession is subtitled 'The familiar advice to spend more and raise taxes fails again.' It's a lesson that teaches where following the Keynesian road of tax and spend will take us:

"Shinzo Abe has made little secret of his plans to postpone next year’s consumption-tax increase and call a snap election. Monday’s third-quarter GDP statistics show why the Japanese Prime Minister may be rediscovering his political backbone. Japan’s economy contracted at a 1.6% annual rate, meaning the country is officially in recession.

The numbers surprised analysts, who had predicted a bounce after the April 1 consumption-tax increase tanked the economy in the second quarter. Instead consumption barely budged and is still down 4.7% since April. Companies chose to play it safe and drew down inventories rather than increase production. The real economy contracted more severely than the GDP numbers suggested, since a fall in imports inflated the trade surplus.

The third quarter continues a depressing pattern. This is Japan’s fourth recession since 2008, and even when the economy is technically growing it remains on life support. Annual growth has averaged 0.85% since 1992. Annual growth has averaged 0.85% since 1992.

This year’s contraction is much worse than that of 1997, the last time Japan increased the consumption tax. That recession was dismissed by the Ministry of Finance mandarins as a fluke or the result of the Asian financial crisis. They were wrong. . . .

The Prime Minister desperately needs to re-establish his economic-policy credentials as growth slumps and his popularity declines. Mr. Abe raised hopes in 2012 that he could reinvigorate Japan, and voters gave him a large majority in parliament. So far he has squandered that opportunity by setting the wrong priorities.

Mr. Abe overcame resistance within the Ministry of Finance and Bank of Japan to appoint BOJ Governor Haruhiko Kuroda, who has pursued aggressive monetary bond-buying. But inflation has barely budged and lending is flat; businesses complain that they’ve been hurt by the weakening yen. Mr. Kuroda doubled down on Oct. 31, but so far he has only delivered more proof that monetary policy alone can’t sustain economic growth. . . .

Since Japan’s bubble economy burst in 1990, Tokyo has tried to spend its way back to prosperity.

Government expenditure has risen to about 40% of GDP from 30%, and national debt has swelled to 227% of GDP. The additional spending provides only a temporary growth blip, but debt rises and then taxes rise to finance it, harming growth and further increasing debt.

In the snap election, voters are likely to trim Mr. Abe’s 61% majority in the lower house of the Diet. But he should get a second chance to turn an electoral mandate into national revitalization. To do so, he has to deliver on the most important part of his economic program, the stalled “third arrow” of reform to liberalize the domestic economy and cut tax rates.

More than Japan’s future is at stake. Since 2008 the U.S. and most of Europe have copied Japan’s strategy of government-driven growth, and the result has also been bigger governments with less growth. Having tried everything else, Mr. Abe will have to embrace supply-side reform if he wants to fulfill his growth promise."

Summing Up

America needs a big middle class tax cut to get our economy back on track and give our families hope for the future and confidence that our kids and grandkids will live in a free, prosperous, safe and healthy society.

King Barack has chosen to ignore the needs of our middle class citizens and their kids and grandkids, and instead concentrate his efforts on the divisive topic of illegal immigration and deportations. In my opinion, he's doing that in no small part to change the topic of political debate in America.

Our national debt is suffocating, our economy is slow, our jobs are few and our population is aging. And while we aren't anywhere near Japan with respect to how much national debt we've accumulated, we need to pay attention and make a special  and concerted effort not to replicate what they have done to themselves.

To repeat, America needs a middle class tax cut and a big one at that. Many of us, both young and old, need to go on individual debt diets as well.

We also need less government spending and a serious reduction in its unaccountable, wasteful and non-productive partisan ways.

Good intentions and happy talk are no substitutes for responsible behavior.

Our public schools, our colleges, our postal service and health care, including ObamaCare, are a just a few of the areas where we need to implement common sense based changes.

Means testing entitlements is also an idea whose time has arrived.

In Japan the fat lady is already singing, and in America we need to listen up.

Let's get our American act together before the tax and spend debt bomb ruins our economy and makes paupers of us all.

Sorry for all the rambling but that's my take.

Thanks. Bob.

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