If the government had to pay the 5% rate that it was offering before the financial crisis on today’s debt, the annual interest payments would be $535 billion, twice CBO’s projection for total federal spending on Medicaid this year. If Uncle Sam had to pay 6% on its debt, the annual interest payments of $642 billion would surpass total federal spending on Medicare, currently $484 billion. Such a radical change in budget math could trigger a political panic and intense pressure for tax increases, perhaps even for a European-style value-added tax.

As I rolled last week’s Supreme Court arguments and the commentary thereon around in my mind, the Ferguson and Berkowitz pieces offered a possible answer to two questions that conservatives had been mulling: Why was the quality of the government’s argument so weak, and why were liberal elites so baffled that their side was being pummeled? Well, if you have given into relativism, shun the notion that the Constitution is fixed rather than infinitely malleable, and take little interest in the historical context and political philosophy in which our political system is grounded, you are going to be, let me put this bluntly, ignorant. You’re going to be out-argued and out-maneuvered by smart people who think relativism is bunk, seek to undercover the meaning and intent of the Constitution, and luxuriate in the study of the Founders.

In sum, the left systematically has dumbed its side down, to the point where supposedly well-educated elites are untrained and unaware of our country’s history and constitutional traditions. The left thinks words have no fixed meaning (health care and health insurance, are close enough, so they insist we can define the latter to be the former.) The liberal elites have a poor grounding in market economics so they swallow the idea that health-care insurance is “unique” because others’ purchases affect your cost of goods. (Surprise: all markets operate this way.) They advance illogical and counterfactual arguments (e.g., withdrawing a 100 percent subsidy for health care to seniors is a “mandate”) because they are unused to vigorous debate that upsets their preferences dressed up in a thin veil of factual distortion. (Sorry, taking away a freebie is not remotely the same in logic or in law as requiring you purchase something.)

via The closing of the liberal left’s mind – Right Turn – The Washington Post.

So we’re slowly getting the picture of ‘exorbitant privilege’ — every other country in the world has to hold a lot of dollars and worry about its exchange rates with respect to the dollar, but the U.S. doesn’t have to requite these monetary affections and anxieties. There are a lot of reasons why this is a pretty sweet deal for the U.S. Just think about the most basic one: If another country’s central bank (or its private companies) wants more U.S. dollars to hold and we in the U.S. don’t want as much of their domestic currency, then they will trade real goods for our dollars — which are printed by the Treasury by fiat for a negligible cost. In a very real sense, the dollars that are simply held abroad — including, which Eichengreen didn’t mention, those held by international criminals, who trust the full faith and credit of the U.S. government beyond any other — represent the value of goods and services that we in the U.S. got basically for free from other countries. This is what economists call seignorage. 

 

 

Monday I spoke to a smart political mind who had been watching focus groups of wavering Obama voters in swing states, and he said that one word that those voters kept coming back to, again and again, was “naïve.” (The term was to describe the president, not themselves.) Those who voted for Obama won’t call him stupid, and certainly don’t accept that he’s evil. But they have seen grandiose promises on the stimulus fail to materialize, Obamacare touted as the answer to all their health care needs and turn out to be nothing of the sort, pledges of amazing imminent advances in alternative energy, and so on. He seemed to think that reaching out to the Iranians would lead to a change in the regime’s behavior and attitudes. He was surprised to learn that shovel-ready projects were not, in fact, shovel-ready. He was surprised to learn that large-scale investment in infrastructure and clean-energy projects wouldn’t great enormous numbers of new jobs. He’s surprised that his past housing policies haven’t helped struggling homeowners like he promised. He’ssurprised that his signature health-care policy has become as controversial as it has. The “recession turned out to be a lot deeper than any of us realized.” When a woman says her semiconductor engineer husband can’t find a job, Obama says he’s surprised to hear it, because “he often hears business leaders in that field talk of a scarcity of skilled workers.”

The poor guy. He’s always getting blindsided.

[F]rom the year of Obama’s birth, 1961, through the last year of the Reagan administration, 1988, the United States of America accrued $2.4 trillion in new debt — again, in inflation-adjusted (2011) dollars. So Obama is now insisting that he be allowed to rack up the same amount of inflation-adjusted debt in the next 15 months as Kennedy, Johnson, Nixon, Ford, Carter, and Reagan did during Obama’s first 27 years.

Yet Obama doesn’t just want his $2.4 trillion. He wants this on his own terms. He has threatened to veto Republican legislation to cut, cap, and balance spending in exchange for raising the debt ceiling by $2.4 trillion, because he claims that “setting arbitrary spending levels” is not “necessary to restore fiscal responsibility.” This, from a president under whom the federal government is spending a little over $7 this year for every $4 it takes in, and a president who has refused to reform entitlements even though (according to his own budget) mandatory spending alone will exceed total federal revenues this year (and that’s before Obamacare has really even kicked in), and under whom annual deficit spending has been more than twice as high as a percentage of the gross domestic product than under any other recent president.

Obviously Obama thinks he is entitled to spend whatever he wants…. and the debt is someone else’s problem.  That is exactly why he can’t be re-elected.

Here’s a great quote from the interview:

Paul:  The dance music is expendable, quite honestly because its interchangeable.  you can virtually take any one of those tracks… and take one of 10 singers and put it on… and it really doesn’t change [the music].  So.. is it successful, ya, is it serving a pupose, absolutley… will it stand the test of time… the genere might but I don’t think that necessarily most of those artists will.

Interviewer:  Does it bother you that the artists aren’t really playing instruments?

Paul:  I’m bothered by very little at this point in my life.  I find it troublesome that when people go to see an act live… they aren’t seeing something live.  They are seeing it live (I should correct it) but they aren’t hearing it live.  Is that person up there dancing around? Absolutely. Are they singing? Not a chance.  Is the band playing? Hardly.  You could virtually have the band walk off stage… have the singer walk off stage and just keep that music playing and that’s bothersome to me because I think that people deserve more… people deserve more than just a show.  They deserve passion, they deserve real sweat, they deserve commitment… and thats the kind of music I grew up listening to.  So… I think that the people miss out.  They may enjoy it… but there is a lot more to be had.

Earth is the sole abode of intelligent life in the galaxy, the product of a profoundly improbable sequence of cosmic, geologic and climatic events—some thoroughly documented, some inferable from fragmentary evidence—that allowed our planet to become a unique refuge where life could develop to its full potential.

Chief among these, paradoxically, was a near-cataclysmic planetary collision during Earth’s infancy, which gave birth to the moon. Such encounters were relatively common in the harum-scarum chaos of an early solar system that teemed with veering planets and asteroids. In its suicidal blow against our world, the Mars-size impactor generated enough heat to liquefy both itself and Earth’s exterior. Its dense, metallic core plunged inward to join our planet’s existing metallic center, while the rest swept up part of the fiery terrestrial shell to form the moon.

One consequence of Earth’s tumultuous youth was the thinning of its rocky crust. This has provided the planet with a lively tectonic existence, complete with vapor-spewing volcanoes, continents that divide and drift, and an ecologically advantageous global-temperature-regulation system. Earth’s swollen metallic core remained liquid; its constant churning gives rise to electrical currents that generate a far-flung magnetic cocoon that shields us from dangerous solar particles. (The creation of Eden is far more complex than one might have heard.)

Another fortuitous coincidence on Mr. Gribbin’s checklist is the moon’s large size relative to Earth, a ratio unique in the solar system. Without such a gravitational partner to restrain the disrupting tugs of the sun and Jupiter, our planet might suffer paroxysms of axis-tilting. (Try to run a civilization when your once-temperate hemisphere suddenly heels over to an Arctic orientation.) Mr. Gribbin outlines how a series of climate-altering Ice Ages and tectonic shifts benefited human ancestors roaming the grasslands of East Africa.

Though too few noticed, this month Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California. The state’s cost of borrowing for $800 million of new 10-year general obligation bonds rose to 3.1%—which is 110 basis points higher than the 2% on top-rated 10-year bonds of more financially secure states.

This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating.

So much for that. In its downgrade statement, Moody’s panned Illinois lawmakers for “a legislative session in which the state took no steps to implement lasting solutions to its severe pension underfunding or to its chronic bill payment delays.” An analysis by Bloomberg finds that the assets in the pension fund will only cover “45% of projected liabilities, the least of any state.” And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.

How much more evidence do we need that high taxes and big government are unsustainable?  Do liberals even care?