Trump-Pelosi Budget and Fiscal Sabotage


I have to be honest. Working with the reality of numbers often hurts my brain. I’m not good at. Justin Smith seems to have a great grasp of number realities when it comes to deficit spending, the National Debt, Gross Domestic Product and the need of a Balanced Budget.

 

Justin is displeased with the results of the Trump Administration/Pelosi budget agreement and urges a Presidential veto. No matter how much the numbers are painful, the inevitable result will be catastrophic if this Federal accounting disparities continue.

 

However, the realities of America’s political divide demonstrated by near even splits of opposing ideologies in Congress means neither the Socialists nor the fiscal Conservatives will get what they want. Perhaps an idiotic budget compromise keeps the government operating rather than frozen. EVEN THOUGH it’s doom and gloom, if voters DO NOT opt soon for fiscal responsibility a national catastrophe will occur.

 

Trump’s hands are tied by political realities, if voters want a different outcome untie divisive politics – OR ELSE.

JRH 7/26/19

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Trump-Pelosi Budget and Fiscal Sabotage

A Coward’s Financial Agreement

 

By Justin O. Smith

Sent 7/25/2019 7:06 PM

 

A coward’s financial agreement is the phrase that best describes the budget deal recently agreed upon by President Trump and Speaker Nancy Pelosi, that just passed the House with a vote of 284 to 149 at 2:14 CST on July 25th, since it avoids any real battle over government spending by suspending the debt ceiling until July 2021. It raises spending caps and lifts the debt ceiling in the name of avoiding a fiscal crisis, but in reality and ignoring any lessons from 2008, this explodes U.S. debt in a way never seen in U.S. history, and it exhibits President Trump’s willingness to meekly surrender to another massive expansion of the federal budget, that creates a short term political “win” for the DC Establishment of both parties and a long term loss for the American people.

 

This deal received 65 Republican votes, and it spends $2.7 trillion over the next two years. It commits President Trump to signing spending bills that add $320 billion above spending limits set in a 2011 agreement that established automatic spending cuts. This Pelosi Dream Deal also says there will be absolutely no limit on how much new debt the federal government can accumulate between now and July 31rst 2021.

 

The Washington Post was absolutely correct, when it recently wrote that the budget and debt deal would not contain actual spending cuts, since the $150 billion in new spending cuts demanded by White House budget director Russell Vought soon materialized as only [about] 70 billion in actual cuts, that don’t go in effect for ten years and are likely to be reversed by Congress at a later date. This marks a retreat for the White House.

 

Reported by the Wall Street Journal, Maya MacGuineas, president of the Committee for a Responsible Federal Budget, stated on July 22nd: “This deal would amount to nothing short of fiscal sabotage.” [Blog Editor: I found quote at USA Today]

 

And yet, rather than debate the most serious issue of the day and seek real solutions, the cowards of both parties hid behind “bipartisanship”, in an erroneous, corrupt and wrong-minded fashion, and cooperated to serve their own personal political interests, as DC’s supposed “elite” elected class.

 

Our current National Debt Ratio to the Gross Domestic Product has averaged right at 100 percent, between 2010 and the present. This is even higher than the 94 percent [average] the nation saw between 1944 and 1950.

 

Incredibly, the federal government spent $3,355,970,000,000, in the first nine months of this fiscal year, while running a $747,115,000,000 deficit. President Trump’s Treasury is currently issuing U.S. dollars faster than it did in fiscal 2009 — even when adjusted for inflation — when President Bush signed the bailout legislation for failing banks and President Obama signed a Stimulus bill focused on ending our economic recession.

 

Noted by The Hill, grave concerns on the economy were expressed by the Congressional Budget Office on July 23rd [Blog Editor: I could not confirm a 7/23/19 date, the links in thos paragraph relate to a 6/25/19 date], and the CBO wrote in its budget projection that U.S debt is on track to increase from 78 percent of the GDP to an “unsustainable” level of 144 percent of the GDP over the next thirty years, even if spending caps aren’t lifted and taxes are raised. Now, with the passage of this bill, we are on track to see the debt rise to 219 percent of the GDP, unless President Trump can be persuaded to send the bill back with a demand that more actual spending cuts must be made.

 

Representative Chip Roy (R-TX) was upset with President Trump for negotiating through Treasury Secretary Steve Mnuchin, rather than Office of Management and Budget Director Russell Vought. As reported by the Wall Street Journal, Roy exclaimed, “The president should be listening to (White House Chief of Staff) Mick Mulvaney and Russ Vought, and he should not be listening to Steven Mnuchin, period.” Roy added that “Senate Republicans will never find a corner where they can go and hide”, implying that Senate Republicans are untrustworthy regarding fiscal responsibility.

 

Once consumed by fiscal worries, this coward’s agreement is one more sign that makes it more than clear, both houses of Congress and both the Democratic Party and the Republican Party have become Big Spenders, and Congress is no longer concerned about the extent of the budget deficits or the debt they add. The DC Establishment no longer cares, even as our national debt hits one trillion annually and rapidly approaches $23 trillion.

 

According to the Washington Post, Senate Majority Leader Mitch McConnell (R-KY) recently stated: “Nobody has lost an election by spending too much money”, in regard to Chief of Staff Mick Mulvaney’s effort to pay for the spending deal.

 

After the last massive spending deal, President Trump vowed never to sign another one. And yet, here he is again, at the ready and far too willing. He just keeps confirming to the American people that he really is a Big Government Guy and a Big Spender.

 

Today, America barely hears any objections over the exorbitant debt. When Trump campaigned in 2016, he bragged about his ability to prosper from his own debt. He told CNN, on May 4th 2016: “I’m the king of debt. I love debt.” … adding the next day … “if the economy crashed, you could make a deal … if the economy was good, it was good … you can’t lose.”

 

But that’s not just the reality of matters for most Americans who live paycheck to paycheck, and it is just not smart for anyone or any nation to accumulate debt; at some point another bubble will burst in our economy, since Wall Street hasn’t stopped any of the bad business practices that caused the 2008 crisis. And, an economic collapse of 2008 magnitude will pale in comparison to the coming economic catastrophe that deals such as this one are sure to create. Most of our national debt has been monetized, and any bailout for the American people will be virtually non-existent.

 

Niall Ferguson, senior fellow at Stanford University’s Hoover Institute, has warned that empires fall when interest on their debt equals what they spend on defense. According to the Office of Management and Budget, this will happen around 2024. If interest rates increase, it could arrive much sooner.

 

Unfortunately, America is currently a nation focused on instant gratification, selfishness and greed, and seems oblivious to the dangerous path it is on. Whether or not the nation can afford all the current government benefits, plus the desired additional costs of free university educations and free healthcare for all, and even though our credit card is maxed out, Americans seem intent on voting for politicians who promise to borrow money to give them what they want.

 

Everyone would do well to recall that in Psalm 37:21 it says, “The wicked borroweth, and payeth not again: but the righteous sheweth mercy, and giveth.”

 

Noting that Congress’s out-of-control spending “is ripping off the American family”, former Congressman Dave Brat recently delivered the following observation to Tony Perkins at Washington Watch, as he looked across the Atlantic: “There’s evidence you can be pathetic for a long time. And the evidence is called Europe. … eventually … debt will impinge on your economic growth rate as it has been. And what’s really missed in the point is it’s intergenerational theft. And I mean that quite literally. We are stealing from our kids and the next generation to the extent that our deficit is $1 trillion. We’re spending $1 trillion and getting the goods from it right now — and the kids are going to have to pay for [everything] we’re consuming. And so it is literally theft. So they’re going to have to work hard, pay their taxes, get tax increases, pay off the debt, and pay all their own personal bills for our runaway spending binge.”

 

America has embraced reckless spending and She doesn’t even pretend to repay what She owes. She incurs more debt daily at an unprecedented rate and most of Her current leaders do not acknowledge that this is even a problem. And so, if our leaders have one shred of human decency and honesty, of a personal or intellectual kind, rather than pander for votes, their bipartisan action should warrant a majority of both parties to end this deal and move forward on a deal that truly cuts all unnecessary spending, or President Trump must reconsider this deal and veto it, rather than continue on a path that watches our deficit soar and attacks our nation’s solvency and the future prosperity of America.

 

By Justin O. Smith

______________________

Edited by John R. Houk

Source links and text embraced by brackets are by the Editor.

 

© Justin O. Smith

 

State-Owned Banks: Economic Save-All or Socialism


John R. Houk

© June 2011

 

I get many emails from Tony Newbill that usually relates to the development of a New World Order (NWO). Newbill basically is my Conspiracy Theory guru. Although I placed great strength into a lot of Conspiracy Theory in my early days of Internet usage and somewhat prior to my embracement of the Internet (i.e. the good ole days of books and magazines), these days I am not so much inclined. And yet, I still hold onto the thought that some Conspiracy Theories have an inkling of truth that should pick-up the ears of caution for all Americans.

 

There are two pet peeves of mine that many would classify as Conspiracy Theories, yet I believe their threat is very real to the American way of Life, Liberty and the Pursuit of Happiness. Those two threats are the theopolitical nature of Islam and Marxist/Socialism.

 

Tony Newbill (and a few others) has convinced me there is a third threat. That threat is the ubiquitous undercurrent of the United Nations associated Agenda 21 (SA HERE). Agenda 21 appears to be a blend of Marxist/Socialism and wealthy Leftist global elites (including Americans) that have an agenda to manage the global population via the ecology, food production, and societal transformation to prevent population blow-back from an unhappy populace, population control by any means necessary and you get the idea.

 

In essence Agenda 21 has the concept of many power tentacles that makes the typical power to the people deception of Socialism, Marxism, Leninism, Trotskyism, Stalinism, Gramscism, and Maoism and so on to be backward concepts of political science in comparison.

 

There is one commonality in the midst of Political Islam, Marxist Socialism and Agenda 21. That commonality is the destruction of the American influenced Capitalism/Free Enterprise and the destruction of Judeo-Christian values that has been a huge influence in the development of Western Society as well as American life.

 

That commonality of hate from the triumvirate of global transformationists is probably a series of essays in itself. Tony Newbill sent me an email a couple of months ago wondering about State-Owned banks:

 

Feasibility of a CA State-owned Bank: The California Assembly Bill 750 Introduced to Study the Feasibility of a CA State-owned Bank; the USA needs this for ALL States Fast, because this is what’s heading our way.

 

Bill AB 750 is sponsored Assemblyman Ben Hueso. The Bill is entitled Bergeson-Peace Infrastructure and Economic Development Bank Act.

 

The link was sent April 14, 2011 so if it is still functional (and it was as of today), then California State Assembly Committee work may have amended the Bill since the date I received it. The point I wish to examine though is the operation of a State-owned bank. At first glance a State-owned bank has the appearance of Socialism. It is Socialism in the sense that the State government owns and manages the bank separate from private enterprise.

 

Leftists like to point out a State-owned bank is owned by the people. However, the reality is the people have zero to do with the bank policy or bank management. A State-owned bank would be managed at the least by the State bureaucracy and at most by some direct accountability to a State Governor. That is not “people” ownership that is government ownership.

 

Then there is the centrist politician (both Democrat and Republican) that might provide the illusion of saying a State-owned bank is owned and accountable to the taxpayers. You know, like the Police Force on State and local arenas are taxpayer supported thus accountable to elected representatives. The thing is a majority of law enforcement are not directly accountable to the voting taxpayer. Most States have some sort of County elected Sheriff; most Police Chiefs or heads of State Police are appointed. Police organizations are accountable to budgets developed by City Councils or State Congresses but that is a long way from direct accountability to taxpaying voters. Policies are set in blue print by a bureaucracy and executed by the interpretation of the Chief Police executive.

 

The same undoubtedly apply to a State-owned bank, right?

 

Here is the paradigm that has inspired many States and not just California to explore the potential to create a State-owned bank. That paradigm comes from the only State-owned bank currently in operation in America. That State is North Dakota. North Dakota has had a State-owned bank for about 91 years.

 

Now think of that. North Dakota has had a State-owned bank that has not only weathered the near decade long Great Depression that began in 1929, but has survived various economic assaults on banks from inflation, bad loans and especially the biggest American recession (someday it may be called a depression) that assaulted our economy because of the domino effect of the bad paper loans of Fannie May and Freddie Mac. Indeed the Bank of North Dakota (BND) actually registered a profit of $62 Million in 2010 when privately owned banks were struggling to survive. Now millions might sound like small scale for a State profit; however North Dakota’s population is 672,591 (2010 census).

 

The thing that is exciting other States that are contemplating the feasibility of a State-owned bank is the potential of per capita percentages adjusted to bigger populated States. That $62 Million profit in North Dakota might comparatively be in the hundreds of millions or in the billions with larger States that have larger economies.

 

When a State-owned bank makes a profit in competition with private banks based only fiscal decisions rather State mandated regulation favoring the State-owned bank, is that not Capitalism in action? Or is it still Socialism merely because the State owns and manages their bank?

 

Let us face one reality that applies to me and probably to a majority of other Americans. We the People for the most part are not economists. We rely on our ideological favorites that we want to trust to keep us informed, right? So here I go making some no-name blogger non-economist presumptive thoughts on State-owned banks.

 

My thought on State-owned banks at first glance is indeed they are an act of Socialism. Yet the BND paradigm is a successful competitive one that has brought prosperity rather than the typical Socialist atrophy that follows bureaucratic management. So let’s read a few pro-State-owned bank thoughts.

 

Mother Jones: How was the bank formed?

Eric Hardmeyer: It was created 90 years ago, in 1919, as a populist movement swept the northern plains. Basically it was a very angry movement by a large group of the agrarian sector that was upset by decisions that were being made in the eastern markets, the money markets maybe in Minneapolis, New York, deciding who got credit and how to market their goods. So it swept the northern plains. In North Dakota the movement was called the Nonpartisan League, and they actually took control of the legislature and created what was called an industrial program, which created both the Bank of North Dakota as a financing arm and a state-owned mill and elevator to market and buy the grain from the farmer. And we’re both in existence today doing exactly what we were created for 90 years ago. Only we’ve morphed a little bit and found other niches and ways to promote the state of North Dakota.

MJ: What makes your bank unique today?

EH: Our funding model, our deposit model is really what is unique as the engine that drives that bank. And that is we are the depository for all state tax collections and fees. And so we have a captive deposit base, we pay a competitive rate to the state treasurer. And I would bet that that would be one of the most difficult things to wrestle away from the private sector—those opportunities to bid on public funds. But that’s only one portion of it. We take those funds and then, really what separates us is that we plow those deposits back into the state of North Dakota in the form of loans. We invest back into the state in economic development type of activities. We grow our state through that mechanism.  

 

 

MJ: So you are able to invest in certain areas because they provide a public good.

EH: Yeah, or a direction, whether it’s energy or primary sector type of businesses. We have specific loan programs that are designed at very low interest rates to encourage activity along certain lines. Here’s another thing: We’re gearing up for a significant flood in one of the communities here in North Dakota called Fargo. We’ve experienced one of those in another community about 12 years ago which prior to Katrina was the largest single evacuation of any community in the United States. And so the Bank of North Dakota, once the flood had receded and there were business needs, we developed a disaster loan program to assist businesses. So we can move quite quickly to aid with different types of scenarios. Whether it’s encouraging different economies to grow or dealing with a disaster.

MJ: What do private banks think of you?

EH: The interesting thing about the bank is we understand that we walk a fine line between competing and partnering with the private sector. We were designed and set up to partner with them and not compete with them. So most of the lending that we do is participatory in nature. It’s originated by a local bank and we come in and participate in the loan and use some of our programs to share risk, buy down the interest rate. We even provide guarantees similar to SBA to encourage certain activity for entrepreneurial startups. Aside from that, we also act as a bankers’ bank or a wholesale bank. So we provide services to banks, whether it’s check clearing, liquidity, or bond accounting safekeeping. There’s probably 20 other bankers’ banks across the country. So we act in that capacity as kind of a little mini-fed actually. And so we service 104 banks and provide liquidity to them and clear their checks and also we buy loans from them when they have a need to overline, whether it’s beyond their legal lending limit or they just want to share risk, we’ll do that. We’re a secondary market for residential loans, so we have a portfolio of $500 to $600 million of residential loans that we buy.


MJ: So what’s the advantage of a publicly owned “bankers’ bank” instead of a privately owned one?


EH: Our model is we use our deposit base to help [other banks] with funding their loans, even providing fed funds lines with our excess liquidity—we buy and sell fed funds and act as a clearinghouse for check clearing activity. That would be the benefit or different model. We’re a depository bank and can bring that to bear
. (How the Nation’s Only State-Owned Bank Became the Envy of Wall Street; By Josh Harkinson; Mother Jones; Mar. 27, 2009 6:33 PM PDT)

 

What is the economic environment that makes the Bank of North Dakota successful that perhaps may not apply in another economic venue?

 

Because all state funds in North Dakota pass through BND, including regulatory and licensing fees, the institution is extremely well-capitalized. Because BND sticks to investing conservatively on behalf of the people and businesses of North Dakota, and ignores hinky transactions such as credit-default swaps, it has weathered the depressions and recessions of the 20th and 21st centuries with little turbulence.


In the midst of the current economy, with every other state in the country wrestling with crippling debt, North Dakota has none. It has billions in surplus. In addition to paying state government a competitive interest rate, BND issues dividends to the state. According to a March 7 article by Ellen Brown for GlobalResearch.ca, in 2008, the bank provided the state a 26 percent return in dividends alone
. (Can State-Owned Development Banks Save America?; By Zane Fischer; Santa Fe Reporter; 03.16.2011)

 

The above quote is from a New Mexico newspaper. I quoted the part about BND; however the article was about a prospect of New Mexico entering the State-owned banking business. The author Zane Fischer refers to Ellen Brown of who I found an article that promotes California AB 750. Brown salivates about the potential a State-owned bank might do to save California from its debt woes. But note Brown relates to applying a California paradigm which is actually untested like the BND which has been tested successfully under the paradigm of an agricultural and business incentive economy that has avoided Housing as a principle business.

 

California is the eighth largest economy in the world, and it has a debt burden to match. It has outstanding general obligation bonds and revenue bonds of $158 billion, largely incurred for infrastructure. Of this tab, $70 billion is just for interest. Over $7 billion of California’s annual budget goes to pay interest on the state’s debt.

 

As large as California’s liabilities are, they are exceeded by its assets, which are sufficient to capitalize a bank rivaling any in the world. That’s the idea behind Assembly Bill 750, introduced by Assemblyman Ben Hueso of San Diego, which would establish a blue ribbon task force to consider the viability of creating the California Investment Trust, a state bank receiving deposits of state funds. Instead of relying on Wall Street banks for credit – or allowing a Wall Street bank to enjoy the benefits of lending its capital – California may decide to create its own, publicly-owned bank.

 

California joins eleven other states that have introduced bills to form state-owned banks or to study their feasibility. Eight of these bills were introduced just since January, including in Oregon, Washington State, Massachusetts, Arizona, Maryland, New Mexico, Maine and California. Illinois, Virginia, Hawaii and Louisiana introduced similar bills in 2010. For links, dates and text, see here.

 

 

The Center for State Innovation, based in Madison, Wisconsin, was commissioned to do detailed analyses for the Washington and Oregon bills. Their conclusion was that a state-owned bank on the model of the Bank of North Dakota would have a substantial positive impact in those states, increasing employment, new lending, and government revenue.

 

What California Could Do with Its Own Bank

 

Banks create “bank credit” from capital and deposits, as explained here. Under existing capital requirements, $8 in capital can be leveraged into $100 in loans, drawing on the liquidity provided by the deposits to clear the outgoing checks. Assuming a 10% reserve requirement (the amount in deposits normally held in reserve), $8 in capital and $100 in deposits are sufficient to create $90 in loans ($100 less $10 held back for reserves).

 

In North Dakota (population 647,000), the Bank of North Dakota has $2.7 billion in deposits, or $4000 per capita. The majority of these deposits are drawn from the state’s own revenues. The bank has nearly the same sum ($2.6 billion) in outstanding loans.

 

California has 37 million people. If the California Investment Trust (CIT) performed like the BND, it might amass $148 billion in deposits. With $12 billion in capital, this $148 billion could generate $133 billion in credit for the state (subtracting 10%, or 14.8 billion, to satisfy reserve requirements).

 

There are various ways the state could come up with the capital, but one possibility that would not require new taxes or debt would be to simply draw on the treasurer’s existing pooled money investment account, which currently contains $65 billion in accumulated revenues dispersed to a variety of funds. This money is already invested; a portion could just be shifted to the CIT. Since it would be an investment in equity rather than an expenditure, it would not cost the state money. Rather, it would make money for the state. In recent years, the Bank of North Dakota has had a return on equity of 25-26%. Compare the 25-30% lost in the two years following the 2008 banking crisis by CalPERS, the California Public Employees’ Retirement System, which invested its money on Wall Street.

 

There are many inviting possibilities for applying the CIT’s $133 billion in credit power, but here is one easy alternative that illustrates the cost-effectiveness of the approach. Assume the bank invested $133 billion in municipal bonds at 5% interest. This would give the state close to $7 billion annually in interest income – nearly enough to pay the interest tab on the state’s debt.

 

Choosing Prosperity

 

What California can do with its own bank, other states can do as well, on a scale proportionate to their populations and economies. North Dakota has a population that is less than 1/10th the size of Los Angeles; the BND produced $62 million in revenue last year and $2.2 billion in loans. Larger states could generate much more.

 

We have been trapped in an austere neo-liberal economic model in which the only alternatives are to slash services, raise taxes, and sell off public assets, all in a futile attempt to “balance the budget” in a shrinking economy. We need to start thinking outside the box. We can choose prosperity, and public banks are a key tool for achieving that end. (WHAT A PUBLIC BANK COULD MEAN FOR CALIFORNIA; By Ellen Brown; ThePeoplesVoice.org; May 20th, 2011)

 

If you have read down this far, I have a question. Did anyone notice Brown attached California’s needs to North Dakota’s paradigm? There was a lot of talk of a deposit based banking paradigm as in North Dakota. Also Brown connects everything from tax revenue to State government bureaucracy being tied to the bank.

 

Here is the thing I noticed though. Brown’s delight of tying all California revenue through a State-owned bank seems to lead to the possibility of moving budgetary money around to meet State needs covered by the State-owned deposits. Now I know in a perfect world with the revenue flying in on all cylinders that this would not be a big deal to move bank deposits or borrowing against bank deposits to shore up a State need to be a big deal. BUT what would happen if the borrowing on deposits to shore-up say social programs began to exceed the deposits? Keep in mind the North Dakota paradigm did not eliminate private enterprise banks but indeed worked with partner situations with the private banks. Also keep in mind the BND is not a Federally insured bank. The bank deposits are insured by the State of North Dakota.

 

With this in mind private banks play a huge role in California as opposed to North Dakota. California has been in the red so long that there might be a little distrust to place money in a Federally UNINSURED bank. I am thinking deposits in a State-owned bank in California could be just as bad news for the Californian economy if the State-owned banking revolves around California’s huge economy that goes way beyond agriculture and small businesses. I am betting some Governor, State Congress or bureaucrat might be willing to gamble in a less than conservative manner which could backfire.

 

If there is crisis in State-owned banking I am guessing a State like California would have to implement greater tentacles of Socialism that will indeed make the Bank of North Dakota look like a true Capitalist venture. Then Constitutional issues could arise because I am just unsure how Socialized a State can be outside the U.S. Constitution.

 

It seems to me that large State economies cannot work out a semi-Socialist/Capitalist success as has happened in North Dakota.

 

JRH 6/3/11