Unlike libertarians, most conservatives simply don’t want small government. They want their own version of big government. Of course, they have done a pretty good job of fooling American voters for decades by repeating the phrases “limited government” and “small government” like a hypnotic chant.

It’s interesting that conservatives only notice “big government” when it’s something their political enemies want. When conservatives want it, apparently it doesn’t count.

- If a conservative wants a trillion-dollar foreign war, that doesn’t count.

- If a conservative wants a 700-billion-dollar bank bailout, that doesn’t count.

- If a conservative wants to spend billions fighting a needless and destructive War on Drugs, that doesn’t count.

- If a conservative wants to spend billions building border fences, that doesn’t count.

- If a conservative wants to “protect” the huge, unjust, and terribly inefficient Social Security and Medicare programs, that doesn’t count.

- If a conservative wants billions in farm subsidies, that doesn’t count.

It’s truly amazing how many things “don’t count.”

Benedict went on to point out the lack of concern these same people had with the government expansion of President Bush and the health care mandates of another CPAC favorite – Mitt Romney.

While I’m by no means a supporter of the Obama Administration, the idea that many Conservatives seem to have that all the problems we are faced with started on January 20, 2009 is completely ludicrous**.

These are the same people who would gladly support Sarah ‘the Quitter’ Palin, ‘Mandate’ Mitt Romney, or ‘Tax Hike Mike’ Huckabee – none are what I would call ‘limited government’ by any stretch of the imagination.

*And even the anarchists among us who oppose all government regardless of size

**Ditto for those Bush haters of the left who believes every problem we face now began 8 years prior. If we are honest, the problems we face today go back at least as far back as Woodrow Wilson (and probably even before him)

Well, at least we’ve been prepared. If the economy sucks, it’s Obama’s fault. If the economy prospers, it’s a dangerous mirage brought about by Obama’s failed policies. What do you think are the odds that the media will buy this?

Oh, I’d say those odds are about zero. They’ve already swallowed the “things are shitty but the Obama administration saved them from being a depression” line.

How can I be so sure? Because about 7 hours prior to Drum’s post, Ezra Klein said this:

You have to sympathize with the Obama administration: It has done more to save and create jobs than any White House in recent memory. It stabilized a financial system that was teetering on the edge of collapse, and that would have sent unemployment skyrocketing if it had fallen. The administration passed an $800 billion stimulus bill that has already created more than 1.6 million jobs and is likely to create 2.5 million by the time it ends. And still it’s hammered, on the one hand, for not doing enough to create jobs, and on the other hand, for high deficits, which are a direct product of how much the administration’s doing to create jobs.

To that, I’ve got a question. What are the odds that the media will understand that the true problem is not that Obama is to blame or that Obama is our savior, but that this economy is the reckoning of 30+ years of bad government policy by both parties, and is not some transient moment?

Yep, just about zero.

1) They determine a plan to spend money, sell it as low spending.
2) Despite pundits claiming it will be much higher than projected, they claim it’s not true.
3) When the spending is actually measured, it’s often higher than pundits’ estimates.

We’ve all seen the trajectory of the politicization of economic data:

1) Administration makes overly optimistic forecast.
2) Initial numbers (compiled by the government) look good (but below politician’s forecast).
3) Months later, numbers are quietly revised downward even further.

So tell me, if these are the optimistic numbers, just how royally screwed are we?

At the end of 2010, the unemployment rate, according to the administration’s forecast, will be 9.8%. At the end of 2011, the rate will be at 8.9%. And at the end of 2012, after the next presidential election, the unemployment rate will be 7.9%.

I guess rose-colored glasses don’t change the fact that you’re staring into a pile of shit.

Enjoy.

from RJ Matson, NY Observer

Hat Tip: Ritholtz, The Big Picture

It’s another record-high for the U.S. National Debt which today topped the $12-trillion mark. Divided evenly among the U.S. population, it amounts to $38,974.34 for every man, woman and child.

Technically, the debt hit the new high yesterday, but it was posted on the Treasury Department website just after 3:00 p.m. ET today. The exact calculation of the debt is a 16-digit tongue-twister and red-ink tsunami: $12,031,299,186,290.07

This latest milestone in the ever-rising journey of the National Debt comes less than eight months after it hit $11 trillion for the first time. The latest high-point is not unexpected, considering the federal deficit for the just-ended 2009 fiscal year hit an all-time high at $1.42-trillion – more than triple the previous year’s record high.

Much of the increase in the deficit and debt is attributed to government spending outpacing revenue – both exacerbated by the recession and the government response to it – including hundreds of billions in bailouts and stimulus spending and tax cuts along with decreased tax revenues due to rising unemployment.

In recent days, President Obama has spoken of the need to bring the rising deficit and debt under control.

“I intend to take serious steps to reduce America’s long-term deficit – because debt-driven growth cannot fuel America’s long-term prosperity,” he said in remarks prepared for delivery to the leader’s meeting last Sunday at the Asia Pacific Economic Cooperation summit.

The National Debt has increased about $1.6 trillion on Mr. Obama’s watch, though less than $4.9 trillion run up during the presidency of George W. Bush.

Of course, Obama has only been in office ten months, not eight years.

Since Barack Obama took the Oath of Office, the national debt has increased from $ 10,626,877,048,913.08 to $ 12,031,299,186,290.07. That’s an increase of $ 1,404,422,137,376.99 over 302 days, or $ 4,650,404,428.40 per day, $ 193,766,851.18 per hour, $ 3,229,447.52 per minute, and $ 53,824.13 per second.

Anyone want to bet how long it will take to get to $ 13 trillion ?

My guess is August 15, 2010.

When Ludwig von Mises first arrived in the United States after escaping from Nazi Europe, and pretty much up until the present day, he was essentially ignored by the mainstream economics community in the United States. It was only through the assistance of American businessmen that he was able to get a job teaching at New York University, and, even then, the work he did had nothing to do with official university activities because he was, effectively, shunned for his uncompromising defense of the free-market.

Earlier this week in The Wall Street Journal, though, Mises is given credit for being one of the few economists in the 1920s to foresee the impending Great Depression:

Mises’s ideas on business cycles were spelled out in his 1912 tome “Theorie des Geldes und der Umlaufsmittel” (“The Theory of Money and Credit”). Not surprisingly few people noticed, as it was published only in German and wasn’t exactly a beach read at that.

Taking his cue from David Hume and David Ricardo, Mises explained how the banking system was endowed with the singular ability to expand credit and with it the money supply, and how this was magnified by government intervention. Left alone, interest rates would adjust such that only the amount of credit would be used as is voluntarily supplied and demanded. But when credit is force-fed beyond that (call it a credit gavage), grotesque things start to happen.

Government-imposed expansion of bank credit distorts our “time preferences,” or our desire for saving versus consumption. Government-imposed interest rates artificially below rates demanded by savers leads to increased borrowing and capital investment beyond what savers will provide. This causes temporarily higher employment, wages and consumption.

Ordinarily, any random spikes in credit would be quickly absorbed by the system—the pricing errors corrected, the half-baked investments liquidated, like a supple tree yielding to the wind and then returning. But when the government holds rates artificially low in order to feed ever higher capital investment in otherwise unsound, unsustainable businesses, it creates the conditions for a crash. Everyone looks smart for a while, but eventually the whole monstrosity collapses under its own weight through a credit contraction or, worse, a banking collapse.

The system is dramatically susceptible to errors, both on the policy side and on the entrepreneurial side. Government expansion of credit takes a system otherwise capable of adjustment and resilience and transforms it into one with tremendous cyclical volatility.

(…)

We all know what happened next. Pretty much right out of Mises’s script, overleveraged banks (including Kreditanstalt) collapsed, businesses collapsed, employment collapsed. The brittle tree snapped. Following Mises’s logic, was this a failure of capitalism, or a failure of hubris?

Mises’s solution follows logically from his warnings. You can’t fix what’s broken by breaking it yet again. Stop the credit gavage. Stop inflating. Don’t encourage consumption, but rather encourage saving and the repayment of debt. Let all the lame businesses fail—no bailouts. (You see where I’m going with this.) The distortions must be removed or else the precipice from which the system will inevitably fall will simply grow higher and higher.

That was Mises’ argument in The Theory Of Money And Credit, but he did so much more than that. In Socialism, first published in 1921, Mises laid out in detail the reasons why the centrally planned economy of nations like the USSR could never produce a rational economy and were doomed to failure. He was, of course, proven right in that regard as we learned only twenty years ago. Mises’ magnum opus is Human Action: A Treatise on Economics and while it’s not easy reading it is well worth consuming for even the amateur student of economics.

Here’s hoping people will start taking Mises’ lessons to heart before we make the same mistakes all over again.

And yet, there was budget director Peter Orszag rushing to a lunch with Chinese bureaucrats on a Monday in late July. To his surprise, when Orszag arrived at the site of the annual U.S.-China Strategic and Economic Dialogue (S&ED), the Chinese didn’t dwell on the Wall Street meltdown or the global recession. The bureaucrats at his table mostly wanted to know about health care reform, which Orszag has helped shepherd. “They were intrigued by the most recent legislative developments,” Orszag says. “It was like, ‘You’re fresh from the field, what can you tell us?’?”

As it happens, health care is much on the minds of the Chinese these days. Over the last few years, as China has become the world’s largest purchaser of Treasury bonds, the government has grown increasingly sophisticated in its understanding of U.S. budget deficits. The issue has become all the more pressing in recent months, as the financial crisis and recession pushed the deficit to record levels. With nearly half of their $2 trillion in foreign currency reserves invested in U.S. bonds alone, the Chinese are understandably concerned about our creditworthiness. And this concern has brought them ineluctably to the issue of health care. “At some point, if you refuse to contain health care costs, you’ll go bankrupt,” says Andy Xie, a prominent Shanghai-based economist, formerly of Morgan Stanley. “It’s widely known among [Chinese] policymakers.” Xie himself wrote a much-read piece on the subject in 2007 for Caijing magazine–kind of the Chinese version of Fortune.

The Chinese, unfortunately for them, have worked their way into a suicide pact with America. They are simply too heavily invested here to see any serious problems with our economy, government, or monetary base. Had they not spent the last decade buying up enormous Treasury holdings, they could let us implode our economy and “fix” our debt/spending issues through debasing our currency, and then swoop in to buy assets on the cheap once we hit bottom. But that’s not on the agenda. If we take the low road, we’re towing them along for the ride.

Obama says he won’t accept a bill that adds to the deficit. I don’t believe him, since I’ve already seen him fail to live up to his promises on taxes and legislative transparency. Even worse, though, he’s got the folks who plan to finance that deficit worried. And the last group you want to scare are the ones you’re trying to get to lend you money.

Hat Tip: Ezra Klein

This only adds to my worries about the Weekend at Bernie’s aspects of this recovery (and kudos to “Hedge fund guy” who first used the analogy). The Japanese spent much of the 1990s propping up their economy and sticking sunglasses on its face; every time they let go, it slumped again.

The discussion is the extent to which the economy will falter when government stops throwing money at the problem. It’s an issue that I doubt we’ll need to worry about, though, as our government has shown no signs of stopping.

There have been 11 recessions since the Great Depression. And we’re nowhere close to being in the 12th one now. This isn’t just a matter of opinion. Words — even words as seemingly subjective as “recession” — have meaning.

…

Whatever the political outcome this year, hopefully this will prove to be yet another instance of that iron law of economics and markets: The sentiment of the majority is always wrong at key turning points. And the majority is plenty pessimistic right now. That suggests that we’re on the brink not of recession, but of accelerating prosperity.

Yes, folks, that was Sep 14, 2008!

He goes on to talk about how employment, industrial production, and the housing market really aren’t that bad and not in for anything severe.

I’m all for optimism. Any chance I can get some of whatever Luskin was smokin’?

I think Barry Ritholtz at The Big Picture puts it best:

If you had a time machine, knew the future, and purposefully tried to write something where every word was literally wrong, you could not have done a better job.

Go read the whole thing. Then decide whether you can take the MSM’s announcement of green shoots seriously.

“Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren, America has a debt problem and a failure of leadership.”

— Senator Barack Obama (Ill), 2006

We need to raised the debt ceiling above $ 12 Trillion.

— President Barack Obama, 2009.

Now they’ve run out of money. And in a complete and utter coincidence, which nobody could possibly have predicted, new housing starts are drying up!

California Building Industry Association says the state’s homebuilders hit the brakes on starting new housing after the state’s $10,000 tax credit for buyers of new homes ended in early July. The state incentive had ignited a modest building and buying burst when it started in March.

According to July stats from the Construction Industry Research Board:

1. Builders pulled permits for 3,011 total California housing units in July, down 14 percent from June.
2. 2,045 California single-family permits, down 29% from June — that was the busiest month since July 2008.
3. In Orange County, 62 homes were permitted in July — down 43% from June and off 69% from a year ago.

Says CBIA’s president, Robert Rivinius: “Our homebuilders reported a significant drop in traffic last month, largely due to the state closing the window on the homebuyer tax credit. Activity stopped as quickly as it started, which is bad news for housing and the broader economy.”

The recovery will be solid when economic gains are due to real fundamental improvement in the economy. Relying on the effects of government largesse as a sign of rebound, though, is not especially trustworthy.

Many auto industry analysts and dealers expect sales volumes to fall now that the program is over. They worry that many people who took advantage of the program were merely accelerating purchases they would have made later in the year.

If that’s true, the premature sales could hurt automakers, which increased production in the third quarter to replenish clunker-depleted inventories that had already grown low because of factory shutdowns over the summer.

Cash for Clunkers is essentially an inflationary policy. This is a policy well described by Adam Smith Milton Friedman, with the exact same consequence:

In a dynamic world demands are always shifting, some prices going up, some going down. The general signal of increasing demand will be confused with the specific signals reflecting changes in relative demands. That is why the initial side of faster monetary growth is an appearance of prosperity and greater employment. But sooner or later the signal will get through.

As it does, workers, manufacturers, retailers will discover that they have been fooled. They reacted to higher demand for the small number of things they sell in the mistaken belief that the higher demand was special to them and hence would not much affect the prices of the many things they buy.

The government has arbitrarily and falsely increased demand for a specific good (new cars). They’ve done so by throwing money at it (a locally inflationary policy) and the automakers are ramping up production in response to what they THINK is a more stable recovery. But they may soon find, as Adam Smith Friedman predicted, that they have been fooled.

Here’s what Obama had to say:

Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and outside-the-box thinking that has helped put the brakes on our economic freefall

I thought it might be useful to take a look at some highlights of this Solon, this central – planner whom George Bush put in charge of the money supply:

Of course, as usual, Obama is dead wrong: the Federal Reserve’s actions have actually prolonged the downturn, made it worse, and have laid the foundations for an even bigger crash down the road.

In the days before the election, I told many of my fellow Massachusetts residents that Obama was not so much a break from George Bush as a continuation of his worst policies. I am sorry to say that he has been proving me right since. And this is yet another nail in the coffin of an administration that is showing itself to be even more incompetent than the Bush presidency.