rand paul

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On The Debt Ceiling & Drowning the Government in the Bathtub

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The mainstream coverage of the debt ceiling standoff and the prospect of government shutdown and how that thing is seen by the people who might precipitate it is predicated upon a fundamental misunderstanding. To the Tea Partiers and Grover Norquist-Ted Cruz-Rand Paul wing of the Republican Party, a government shutdown is seen less as a potential disaster in which markets and society are sent into turmoil, and more as a potential wonderland of enforced austerity where with the government handcuffed, the creative forces of the free market are finally unleashed.

The libertarian financial analyst Mish Shedlock exemplifies these sentiments:

Looking for a reason to support a government shutdown? If so, please consider Obama Stripped to Skeleton Staff in a Government Shutdown.

Mish points to the austerity measures the government would be put under:

 A U.S. government shutdown means President Barack Obama will have fewer people to cook meals, do the laundry, clean the floors or change the light bulbs, according to a White House contingency plan.

About three-fourths of president’s 1,701-person staff would be sent home. The national security team would be cut back, fewer economists would be tracking the economy and there wouldn’t be as many budget officials to track spending.

Of the total, 438 people work directly for the president. Under a shutdown, 129 could continue working, according to the contingency plan.

Biden, who has a staff of 24, would have had to make do with 12.

Obama’s national security staff of 66 would be cut to 42. Similar staff cuts would be imposed at the White House Office of Management and Budget, the Council on Environmental Quality, the Council of Economic Advisers and the Office of National Drug Control Policy, which are all part of the president’s executive office.

Mish concludes:

Fantastic Idea

If you think that a government shutdown is a fantastic idea (I sure do), then please contact your elected representatives and let them know.

But there are at least two other factors beyond simply wanting less government that may make a government shutdown and debt default attractive to the Tea Party wing.

The first of which is that the austerian worldview exemplified by the Wall Street Journal editorial page — in which large-scale deficit spending was expected to precipitate soaring interest rates and inflation — has largely been proven wrong by events. Interest rates and inflation have remained low. The Tea Party wing of the Republican Party now has an opportunity to try to make their initially wrong predictions come true by throwing the United States into default on its debt, and sending a message to markets and international investors that the US government and US Treasury debt is not a safe asset. Whether or not a government shutdown would actually result in a debt default (the Treasury would under such an eventuality likely prioritise debt service), and whether this would actually lift interest rates significantly are other matters, but shutting down the government and defaulting on the debt would certainly enforce austerity which is what the Republicans and especially the Tea Party wing want.

The second — and perhaps the greater factor — is the desire to prevent Obamacare taking effect. Now, I am not convinced that Obamacare can bring down healthcare costs as much as a Canadian-style or European-style system. Obamacare is certainly not an ideal system, although its earlier implementation in Massachusetts does appear to be fairly successful . But it does bring the United States much closer to something approaching universal coverage. With the message of the last Republican election campaign being that 47% of the population (the “takers”) is mooching off 53% of the population (the “makers”), Obamacare is seen by the Tea Party wing and probably the Republicans in general as the last turning point on the road to socialism. And avoiding the implementation of Obamacare is something that, I think, the Republican Party and especially the Tea Party wing will go all out to do.

Now, how far the Republicans are willing to go down this road remains to be seen. The more moderate wing may be willing to settle for a deal that avoids government shutdown in return for increasing the pace of austerity. But the impending implementation of Obamacare, and the general attraction of a government shutdown will strengthen the will of the Tea Party wing to not negotiate.

Personally, while I do think we are in the long run headed toward a world of increased decentralisation and a lesser state role (primarily as the result of technology), I don’t think a government shutdown will do anything to advance the cause of human liberty. In fact, I think a longer-term shutdown would probably end in civil unrest — a lot of people are dependent on government spending for income — and market turmoil (not least because markets seem to have priced in an easy resolution to the standoff). So the standoff will almost certainly end in a deal permitting a debt ceiling increase. How much carnage will occur before then remains to be seen.

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Judge, Jury & Executioner

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I’ve criticised Rand Paul in the past on a few issues, but none of my previous doubts and nitpicks can dilute the sheer brilliance of his almost-thirteen-hour filibuster.

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The absurdity of the legal framework built up by the Bush and Obama administrations was a house of cards for Paul to poke at and watch crumble. Paul’s key question is does Obama believe he can order the killing of an American citizen, on American soil, based on nothing more than his own judgment that the person is a threat?

Under the Fifth Amendment, suspects are entitled to the due process of law:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

And how can any President claim that his own judgment, or that of his Attorney General counts as the due process of law? The targeted drone killings that have occurred in foreign lands — and which Holder admits could theoretically occur on American soil — are very simply extrajudicial killings. And extrajudicial killings are utterly barbaric, incompatible with modern civilisation, incompatible with any notion of human rights or due process, and incompatible with the Constitution.

The status quo evolved very much out of post-9/11 paranoia, as exemplified by Dick Durbin’s Cheneyesque questions aimed at Paul toward the end of the Filibuster, and by Eric Holder’s initial written response referencing Pearl Harbour and 9/11:

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Neither Rand Paul nor myself are suggesting that an attempted violent attack should not be stopped using necessary means (although not excessive means). But if an act of terror has not commenced (and even in many cases where an act of terror has commenced) it should be possible to arrest and question a suspect, rather than killing them. If a suspect can be arrested, charged and tried, there should be no reason why that should not happen.  And unless an act of terror has actively commenced, or unless a suspect can be convicted beyond reasonable doubt in a court of law the government’s suspicion is only a suspicion, and the government has absolutely no business detaining or punishing a suspect.

After 9/11, due process was effectively suspended, and for all of Obama’s lip-service to “change”, this mindset prevailed through his first and into his second administration. Rand Paul’s dogged, tireless questioning — as well as the work of questioners in the media such as Glenn Greenwald, Conor Friedersdorf, Spencer Ackerman, and Micah Zenko —  is acting as a catalyst to break the public and governmental mindset that allowed for the suspension of due process. Due process matters. If it hasn’t been proven that someone has broken the law why should they be punished for it? As humans we have inalienable rights. The fear of terrorism does not trump the right to be tried under the presumption of innocence.

The strength of Rand Paul’s argument means that defenders of the status quo have had to resort to spurious or ad hominem arguments to mount a defence of the President’s position — attacking Paul’s positions on other issues, for example. It was encouraging to see Rand Paul questioning the entire notion of targeted killings and signature strikes altogether, and not just worrying about the prospect of such affairs on American soil. Due process is preferable in all circumstances.  I would have preferred to see Osama bin Laden captured and tried, rather than killed.  Due process is not a sign of moral weakness, but a sign of cultural strength, of sanity, of civilisation.

The Obama administration must eventually understand that their position is untenable. Large swathes of the mainstream media are coming around to the idea that Rand Paul is asking important questions and that due process is more important than national security panic and threat inflation. Paul has struck a blow for the Constitution at the right moment, and to a judicial edifice that has become bloated and corrupt, treating too-big-to-fail bankers with impunity, while coming down like a tonne of bricks on minor intellectual property infractions. He has harnessed the image of a lone filibustering Senator standing up to the machine of the establishment to strike a blow to those who are trying to defend the indefensible. At the very least, Rand Paul has made real oversight of the drone program possible. Hopefully, the days of signature strikes and of targeted killings are numbered. Hopefully, the Constitution and Bill of Rights will reign supreme again in Washington D.C.

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The Real Fiscal Cliff

It’s that time of year again — time to kick the can.

No prizes for guessing what investors expect Congress to do:

And 2013 seems likely to give way to can-kicking in 2014, and 2015 and 2016 and 2017 and on — the GAO estimates that by 2080 the US public could hold 8 times as much government debt as the US generates GDP. Just as Japan has never truly dealt with its debt complex — and instead chose the path of cycles of deflation, an endless liquidity trap, a soaring debt-to-GDP ratio, and mandating financial institutions into buying treasuries — so America will continue to kick the can as long as rates and nominal inflation can be kept low, and goods and energy (the real underlying economy) kept flowing. Which — going by the Japanese example — could be a very long time.

Yet America is not Japan. The key difference? The balance of trade, and the flow of goods and services. While Japan’s debt is overwhelmingly domestically held, and while Japan has long been a net-exporter, the USA imports more goods and services than any nation in history:

And more and more US debt and currency is in the hands of the nations that export the goods and services on which America’s economy functions. Here’s the total debt held by foreigners:

And here’s the dollar reserves of various Asian exporter nations:

So when the can is kicked, the Asians — and especially the Chinese — feel they are getting screwed.

As Xinhua noted the last time America faced the fiscal cliff:

The U.S. has long been facing the same problem: living beyond its means. At present, the country has debts as high as 55 trillion U.S. dollars, including more than 14 trillion U.S. dollars of treasury bonds.

And last October:

Economists agree that as the United States’ largest foreign creditor, China should contemplate ways to pull itself out of the “dollar trap,” as the U.S. economy is faltering with its debt piling up and its currency on the brink to depreciate.

China must make fuller use of the non-financial assets in its foreign reserves, as well as speed up the diversification of investing channels to resist a possible long-term weakening of the dollar, said Xia Bing, director of the Finance Research Institutes of the Development Research Center under the State Council.

Zheng Xinli, permanent vice chairman of China Center for International Economic Exchanges, has suggested that Chinese companies boost overseas investment as a way to absorb trade surpluses and fend off the dollar risk.

Now to some degree the Asians knew the bargain they were getting into in buying US treasuries. They were never buying a claim on the US economy, or on the US gold reserves. They were buying a claim on reproducible Federal Reserve notes, and since 1971 the bargain has been that this is a purely fiat currency. Ultimately, if they do not feel like the US will be solvent in the long run, they should not have started lending to it. But now they are the largest real creditor, they have no choice but to keep on buying and keep on stabilising, simply because a functional US economy and a solvent US treasury is about the only way they will see any return at all.

Yet if they don’t exert leverage on the US, then the US seems unlikely to do much at all. Without a little turmoil, legislators have very little incentive to act. If the exporter nations feel as if they are getting screwed, they are only more likely to escalate via the only real means they have — trade war. And having a monopoly on various resources including rare earth minerals (as well as various components and types of finished goods) gives them considerable leverage.

More and more Asian nations — led by China and Russia — have ditched the dollar for bilateral trade (out of fear of dollar instability). Tension rises between the United States and Asia over Syria and Iran. The Asian nations throw more and more abrasive rhetoric around — including war rhetoric.

And on the other hand, both Obama and Romney — as well as Hillary Clinton — seem dead-set on ramping up the tense rhetoric. Romney seems extremely keen to brand China a currency manipulator.

In truth, both sides have a mutual interest in sitting down and engaging in a frank discussion, and then coming out with a serious long-term plan of co-operation on trade and fiscal issues where both sides accept compromises — perhaps Asia could agree to reinvest some of its dollar hoard in the United States to create American jobs and rebuild American infrastructure in exchange for a long-term American deficit-reduction and technology-sharing agreement?

But such co-operation would require real trust and respect — and I just don’t see it. China’s leaders deeply resent the West for the opium war years, and the humiliation that came with the end of the Chinese empire — and they see America as profligate, and culturally degenerate. And America’s leaders see China as an unstable anti-democratic dictatorship, not a prospective partner.

So the future, I think, will more likely involve both sides jumping off the cliff into the uncertain seas of trade war, currency war, default-by-debasement, tariffs, proxy war and regional and global political and economic instability.

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The Trouble with Rand Paul

Rand Paul just endorsed a man who is deeply hostile to human liberty.

Perhaps that’s Rand’s idea of playing politics? Come to the table, strike a deal, get what you can. Trouble is, it’s tough striking a good deal when the guy on the other side of the table believes that the government should be allowed to claim — without having to produce any evidence whatsoever — that certain people are terrorists, and therefore should be detained indefinitely without any kind of due process.

That’s textbook tyranny.

Yes, I would have [signed the NDAA]. And I do believe that it is appropriate to have in our nation the capacity to detain people who are threats to this country, who are members of al Qaeda. Look, you have every right in this country to protest and to express your views on a wide range of issues but you don’t have a right to join a group that has killed Americans, and has declared war against America. That’s treason. In this country we have a right to take those people and put them in jail. If I were president I would not abuse this power. But people who join al Qaeda are not entitled to rights of due process under our normal legal code. They are entitled instead to be treated as enemy combatants.

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Except, if the government had any evidence they were really members of al-Qaeda and engaged in a war against America they could be charged with offenses under current laws and tried in front of a jury of their peers. As was proven when Judge Katherine Forrest struck down the indefinite detention provision of the NDAA as unconstitutional, the real detention targets are people like the ones who brought the case — writers, investigative journalist and whistleblowers: people like Chris Hedges, Noam Chomsky, Daniel Ellsberg, Jennifer Bolen, and Birgitta Jonsdottir.

Rand Paul might have done some good work trying to filibuster the Patriot Act, but endorsing Mitt Romney goes beyond the pale. The NDAA is Romney’s most egregious transgression against liberty, but not far behind are his desire to start a war against Iran, to increase military spending, to start a trade war with China and his belief that corporations are people.

I know I will never agree with any politician on every single dimension of every single issue, and that to some extent politics will always involve compromise. Certainly, I disagree with Ron Paul on some issues. But Mitt Romney’s stances on these issues seem much, much, much closer to Barack Obama than they do to Ron Paul. In fact, he might as well have endorsed Obama for President.

And the Ron Paul supporters are noticing: Rand has probably burnt most bridges to his Father’s supporters now. His Facebook page has seen a huge outpouring of fury:

Just lost a lot of faith in a man I otherwise adored.

You suck Rand! Traitor!

That’s why this country is doomed! Even the person you trust is a sell-out. I’m done with politics, people deserve what they get. Let the country run itself to the ground, and still people will not understand what freedom and self-responsibility is about. People want big gov’t, big brother every step of the way. Well, they got it. The rest of us, might as well try to move to another country or find an island and move there.

I knew I’d never vote for Mitt… Now I know I’ll never vote for Rand.

He has fully sold out to the bankers

Endorsing Romney is tantamount to an utter sell-out of conservative principles.

Did George Washington, Thomas Jefferson and James Madison try to compromise with King George? Or — when it became obvious that they were facing tyranny — did they stand up for the principles of liberty?

I have always been uncomfortable with the children of politicians becoming politicians. Every anointed child feels like a step away from meritocracy. Dynasties are dangerous, because the dynasty itself comes to be more important than the qualities of the politicians. Who would Rand Paul be if he wasn’t Ron Paul’s son? Just another neocon. Neocons often have a few “unfashionable” libertarian or constitutionalist sympathies; look at Charles Krauthammer. But — unlike Ron Paul — the neocon never has the spine to do much about their libertarian or constitutionalist sympathies. They just ride on the establishment steamroller, into foreign occupations, empire building, corporate welfare, and banking bailouts. Into Iraq, and soon into Iran.

Rand Paul just got on the steamroller.

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Romneythink

Mitt Romney’s campaign is founded on a huge contradiction:

Out of one side of his mouth he claims he wants to balance the budget, and out of the other side of his mouth he claims he wants to vastly increase military spending:

Romney set himself apart on Friday, arguing that a weaker military and a smaller global footprint will compromise America’s leadership in the world.

“The United States should always retain military supremacy to deter would-be aggressors, and to defend our allies and ourselves,” he said.

Romney said he wants to increase the military budget, mentioning specific projects from naval shipbuilding to a missile defense system. It’s a traditional Republican view of defense that was music to this crowd’s ears.

Doesn’t he realise that military spending is already by far the largest component of non-discretionary spending?:

America is already the world’s greatest military spender:

In spite of this, America has struggled to defeat a bunch of Islamist lunatics and goatherders in Afghanistan — the same people that dragged down the Soviet Union. They too committed huge resources and capital to fighting absurd wars of imperial conquest (or should I say “proletarian liberation”) abroad, and subsequently their empire collapsed.

Americans make up less than 5% of the global population, but account for more than 50% of global military spending. America is already in massive debt, and the more America commits herself to policing the world, the bigger that debt seems to get. This situation is totally unsustainable. Cutting back on the imperialism will give America more manpower, brainpower, capital and resources to use at home to rebuild her domestic economy. The only Presidential candidate who talks about that fact — one which is in my opinion surely the most pressing of our time?

Ron Paul.