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by Al Martin
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by Al Martin
Defunding Obama Care, Govt Shutdown, Et Al
(9-25-13) Financial media like CNBC and Bloomberg are promoting the “government shutdown” and defunding Obama Care as the next “crisis” du jour. CNBC even has a clock with flashing numbers counting down to the October 1 date when the government must pass a budget – or else.
Typically polls by financial media are aimed at a more sophisticated audience and they are about 60/ 40 on Obama Care, meaning 60% against Obama Care. Part of that however is that there is a bias that you would expect to find in the financial media polls which is comprised largely of people who are going to be on the losing end of Obama Care, namely those people that own businesses.
The clamor about a government shutdown is simply hype because what we saw last time was that so-called government shutdown by not having a coherent budget was actually helpful in reducing the budget deficit. Since the nation is politically hamstrung and the government can proffer no useful fiscal legislation, then the next best thing is to at least force the reduction of spending, which is what failures to provide budgets do.
September 30 is the end of the fiscal year – and of course we went through the same thing last September as well as the September before. The result was the reduction in budget deficits. Because spending bills can’t get authorized. This has actually been helpful in terms of keeping a lid on budget deficits.
What is happening then is a non-purposed redux of the Eisenhower years, except in the Eisenhower years it was done on purpose whereas now it’s being done by circumstance This was the Eisenhower Hands Off Approach since Eisenhower spent most of his presidency on the golf course. In Obama’s case, what helps a Hands Off approach is when you can’t pass a budget and budget authority lapses after a certain date – in this case September 30, then budget authority lapses, Congress can not vote in any new spending bills.
The Eisenhower Hands Off Approach was largely responsible for the economic growth in the mid-1950s and this was something that was done by design. Now we are having a redux in that hands off approach except it is not being done by design but by circumstance – the circumstance being the inability of Congress to pass a coherent budget. This is a good thing but it would not have been a good thing in the Eisenhower years, but now with a $1.6 trillion annual budget deficit, it is a good thing because it prevents government from doing further harm. That’s what has changed between the Eisenhower years and now.
Now anything that prevents government from spending, since this government has demonstrated it can no longer be a positive force and it can no longer be useful and it can no longer proffer useful stimulative fiscal policy, then you have to resort to Plan B which is at least to prevent government from being part of the problem by increasing budget deficits.
Now the Republicans have to continue to pander to their constituency, both above and below, as they say in politics. The feet on the ground as the old campaigners say – “putting bums in the voting booth” as illustrated in the classic film “The Great McGinty” is one thing. However on top of that, the Republicans still have to pander to business and industry because that’s where their personal money comes from once they leave office.
Regarding the defunding Obama Care part of the bill, of course it won’t get passed – even as Ted Cruz and Rand Paul continue to “catapult the propaganda,” as George Bush Jr. once famously said, about “standing up” to Obama Care.
People should understand that the Republicans, particularly those in the House don’t have any choice – if they want to remain in office.
As has been pointed out even by Republicans in the Senate, Obama Care is now the law of the land and it is something that has already passed. It would have been easier had the regime worked the bugs out of it in advance, but the tack they’re taking is the tack that everybody in Washington takes – let’s get it passed, let’s get it enacted, let’s get it funded, then we’ll try to work the bugs out of it.
The Republicans know they can’t get rid of it. The public plurality is such that there aren’t enough people against it to try to get rid of it. Meanwhile the Republicans have adopted a delaying strategy and a strategy of throwing monkey wrenches – because that’s all they can do.
In fact Obama Care would actually help more Working Class Republicans than it would harm. Why? Because Working Class Republicans would be the greatest beneficiaries on a percentage basis.
More Working Class Republicans as a percentage of the numbers have lost the private health care that they had either through work or that they paid for themselves than have Working Class Democrats because far fewer Working Class Democrats had health care to begin with. Obama Care disproportionately helps the very same Working Class Republicans who are against it – on ideological grounds.
The problem with these Working Class Republicans has always been the same. They become opposed to something on ideological grounds because they don’t understand the economics behind it. Thus they try to block measures that would actually be beneficial for them. The reason they’re taught not to understand is because Obama Care which would disproportionately benefit Working Class Republicans would hurt disproportionately the Republican structure at the top which is business and industry since they’re going to have to absorb much of the cost.
Many businesses have already tried to manipulate the loopholes by keeping total employment under 30 hours. When this finally becomes a done deal, those loopholes are all going to be taken out to make sure this thing works. Once it is in place, you will see Republican Working Class opposition to it on ideological grounds begin to wane when they actually figure out how they are benefiting from it. Social Security and Medicare were no different when they were first passed. They were full of bugs that were subsequently worked out. They had to be in order to make them work.
What made them unsustainable in the long term is when politicians bowed to political popularity -- and once again abandoned fiscal discipline and made these programs provide much more than they could – and that is something which always occurs down the line after a new federal mandate. This always happens to so called mandated programs down the line.
Like all mandates it starts out being a funded mandate and then later on it becomes an unfunded mandate because it becomes politically popular to unfund it. Because people don’t have to pay for the benefits they’re receiving. Which is what people want.
Ultimately it’s not the politicians’ fault or the political parties’ fault. Ultimately it is the people’s fault – not all the people’s fault, but the bottom 82% constituting the Unwashed – because they can’t make the connection between the tax revenue they pay in the public purse and the liabilities on it.
You still find public opinion polls among the Working Class Republicans or Democrats that seem to believe The Government can provide or that it’s coming out of the “Government’s pocket.” This results from a lack of economic knowledge and understanding..
All of the government’s post-war mandate programs are all moving in the direction of social welfarism, not by design, but because politicians in both parties will invariably do that which is politically popular and not that which is fiscally sound. Consequently the American so-called social safety net becomes increasingly socialized because it becomes increasingly like a pyramid scheme, which is the way that social safety nets in social welfare nation-states are funded.
This is the idea of this pyramid scheme where you need ever more warm bodies underneath paying taxes to support the layer on top. That’s how things get defunded over time because the liabilities they accrue by consistently expanding benefits without increasing revenues into that program creates an ever larger deficit within that program. Therefore more and more of that program becomes a GFO or Generally Funded Obligation of the government.
Just like the Patriot Act, Obama Care is here to stay and it will become one of the so-called post-war mandates. It will start out being funded from business and industry largely, but over time, it will become effectively defunded as the parameters of Obama Care expand and the revenues to support the expansion of those parameters isn’t there. There’s no way to avoid this. The bottom line is that this is one of the great Achilles’ Heels of democracy. If we didn’t have a democracy, politicians would not have to do that which is politically popular but fiscally unsound. An apolitical technocratic government is always more efficient.
You have to take one factor out of the equation and that is to prevent politicians from doing that which is politically popular and instead to do that which is fiscally sound. How? By not pandering to the Unwashed who create the problem through their own stupidity.
At least with a limited one-party democracy, you wouldn’t have this constant shift in economic policy that becomes corrosive over time.
The planet’s economic collapse is being caused by democracies and it will be the principal reason for the planet’s economic collapse. Why? Because democracy causes fiscal exhaustion.
After all the 82% of the Unwashed think democracy is wonderful because they’ve been told it’s wonderful. They don’t have a clue. So why should they tout it when they don’t have a clue? Their lack of understanding of economics and markets makes them a liability.
* AL MARTIN is an independent economic-political analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. As a former contributor to the Presidential Council of Economic Advisors, Al Martin is considered to be a source of independent analysis for financially sophisticated and market savvy investors.
After working as a broker on Wall Street, Al Martin was involved in the so-called "Iran Contra" Affair as a fundraiser for the Bush Cabal from the covert side of government aka the US Shadow Government.
His memoir, "The Conspirators: Secrets of an Iran Contra Insider," (http://www.almartinraw.com) provides an unprecedented look at the frauds of the Bush Cabal during the Iran Contra era. His weekly column, "Behind the Scenes in the Beltway," is published weekly on Al Martin Raw.com, which also publishes a bimonthly newsletter called "Whistleblower Gazette."
Al Martin's new website "Insider Intelligence" (http://www.insiderintelligence.com) will provide a long term macro-view of world markets and how they are affected by backroom realpolitik.
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