Is nobody seeing the warning signs?

I opened my international political economy textbook from my basic college international political economy class and I found this. It's about developing countries, but the principles are clear. What are our political leaders reading?

"Economic crises emerged in the early 1980s in large part as a consequence of governments' decision to cover their budget and current-account deficits with foreign loans. Using foreign loans to finance budget and current-account deficits is not an inherently poor choice. But two factors made this decision a particularly bad one for developing countries in the 1970s. First, many of the funds that governments borrowed were used to pay for large infrastructure projects or domestic consumption, neither of which generated the export revenues needed to repay the loans. As a result, the amount that developing countries owed to foreign lenders rose, but their ability to repay the debt did not.

Second, between 1973 and 1982, developing countries were buffeted by three international shocks: an increase in the price of oil, a reduction in the terms of trade between primary commodities and manufactured goods, and higher interest rates on the foreign debt those countries accumulated. These shocks increased the amount of foreign debt that developing countries owed to foreign banks, raised the cost of paying that debt, and greatly reduced export earnings."

It goes on to explain how India of the 70s and 80s, at the time recognized as "one of the most regulated economies in the world," accumulated inefficiencies in state-run enterprises that dominated their manufacturing sector. "The government responded to flagging growth by expanding its expenditures sharply throughout the 1980s. The resulting budget deficit contributed to a persistent trade deficit, which the government financed by borrowing from abroad. By1990 India had become vulnerable to a balance of payments crisis."

Our government is currently embarking on a dramatic deficit spending spree. Deficit spending means the money they spend does not exist, yet. In order to spend, the government must either print money, which means assigning assumed future value to pieces of paper (think Dumb and Dumber, with Harry and Lloyd returning the briefcase of ransom money with IOUs. "We're good for it." Uuuh-huh). Otherwise, the government can get money through loans from foreign banks such as China. As you can see above, this is a dangerous cycle.

I guess my point here is that the redistribution of capital or incurring of foreign loans by the government is leading us into crisis. "Stimulus", social programs, or taxes on the wealthy do not change any of the fundamental problems with the economy, but may in fact exacerbate them.

*Oatley, Thomas. International Political Economy: Interests and Institutions in the Global Economy. 3rd. ed. New York: Pearson Education, Inc., 2008.

Revenge of the Democrats

Yesterday, I watched some of the stimulus bill conference between House and Senate leaders. In that small portion of the stimulus bill proceedings I saw some of the reasons why this Democrat regime will fail and what the next two or four years will be like.

I am particularly referring to the point in the conference when Senator Chuck Grassley of Iowa (yes, a Republican providing input to the stimulus proceedings. Good news, right? Keep reading) admonished the Democratic leaders in the future to be more inclusive in forming major legislation. He was firm, but not antagonistic; conciliatory, by referencing how his own party had shut out Democrats in the past, citing certain incidents in the past involving Rep. Charles Rangel; traditional, by appealing to the history of major legislative work done in the Senate and its bipartisan character; and he was aspirational, not offering condemnation but supplication for a more cooperative future. He said, "I could talk about the substance of the bill, but the point is: we could have a better substance with more votes and got the job done better." It was fair and only about how the legislators work together, not any policy issues.

How did Harry Reid respond to his colleague of more than twenty years and his senior in terms of years served in the Senate? He murmured, "I appreciate you my Republican colleagues complaining about conferences. But you did all yours in secret. We haven't done that. This is an open conference." Reid also stated, "No one needs to lecture me on deficits, because you invented them. Republicans invented deficits." He answered with recriminations about how Republicans shut them out of conferences in the past and handled past legislation. He injected policy differences into the discussion. Not once did he acknowledge the goodwill and wisdom behind Sen. Grassley's comments or actually respond to this offer to work together better in the future. He tried to balance the vengefulness of this statement with empty platitudes and flattery for his colleagues ("One of my friends is Thad Cochran."), but it was clear what his point was. "WE won and you guys were jerks, so I don't really care what you think."

I don't know if there is a more clear indicator that the purpose of the Democrats is revenge. They are still reveling in the victory over the barbarian Republicans and taking every opportunity to reassert that victory. The mask of goodwill has already fallen off. This just reaffirms my last post that said that hubris would be the downfall of the Democrat Party. The lights have come up and the confetti has been swept off the floor, but the Democrats are still dancing.

People are beginning to realize this, too. Check out the open from the last Saturday Night Live:


Let's just hope the Democrats realize that it's time to move forward before it does serious damage to our country. Or is it too late now?