"The most significant threat to our national security is our debt," Admiral Michael Mullen, Chairman, Joint Chiefs of Staff, August 27, 2010

Tuesday, October 30, 2012

"Debt stinks"


"Now they work for us."

Friday, October 26, 2012

In His Own Words - Thomas Peterffy

Simple wisdom from a man who has lived and experienced the hollow words of politicians, bureaucrats and community organizers.  Please take out one minute and listen to Mr. Peterffy.

Thank you Mr. Peterffy for caring enough to make this effort.

Wednesday, October 24, 2012

Spreading the Malarkey Around

Joe Biden says Paul Ryan dispenses a bunch of malarkey.  Well,  after you spend a few minutes with this essay and video, you decide.

The video captures Michigan’s three principal elected officials – Jennifer Granholm, former governor; Debbie Stabenow and Carl Levin, senators and their favorite white house occupier and his brilliant energy czar – Senor Chu promoting a malarkey conspiracy based on one of Obama's green energy investments - A123 Systems.

These highly regarded and well paid malarkey spreaders not only deliver “whoppers” including exaggerated claims and false representations but they unwittingly provide an answer to anyone wondering why the state of Michigan is an economic disaster. By the way, Michigan’s sister state and the home of our president , Illinois, has pedal to the metal to follow Michigan’s proven disastrous leadership combination of democrat politicians, their union masters and tens of thousands of bureaucrats.  

Please watch and listen –

63,000 jobs!!!  It is simply a lie – a very, very big lie.   Oops, we mean a "whopper."  More malarkey quotes from the Obama gang –

  • “I’m calling to congratulate A123 systems on this tremendous milestone.”  Obama
  • “Michigan becomes the advanced battery capitol of North America.” Granholm
  • Hundreds of employees today, thousands by next year.”  Levin
  • Having the innovation happening right here in the United States.”  Stabenow

The quotes are from just last year.  Here is the quote from today's homepage of A123’s website – “…A123 and its U.S. subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.”  Obama's answer to our energy problem just went bankrupt - one year after receiving glorious praise for its imaginary results.

Does anyone remember Barack and the silly Axelrod making up "malarkey" campaign ads about Romney and his bankrupt “Bain” companies?  This one is real folks.  This bankruptcy is very real and it happened entirely on Obama’s watch.  Obama funded the company (no, not with his money), ballyhooed its make believe accomplishments and now gets to pass along one more bad debt to overburdened taxpayers.  We know Romney can't say it because the Hollywood media will pillory him if he does, so we will say it – the dwindling number of taxpayers in America get to pick up one more Obama bad debt.

Here is one more Obama “whopper” that the media will not cover even though it just occurred during last Monday’s debate.  Here is what Obama said about Romney and the auto company bailouts – you (Romney) said let them go bankrupt – no federal aid or assistance for the auto companies.  Here is the exact quotation from the Romney article on auto bankruptcy which Obama said didn't exist –
“The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.”  Mitt Romney, November 18, 2008, published in the NYTimes

The bold/underlining is ours - you can check out the article for yourselves at:  http://www.nytimes.com/2008/11/19/opinion/19romney.html

Will Obama correct himself?  C’mon.  Will Candy Crowley show up to correct Obama at his next campaign stop?  C'mon.  It’s okay for the president of the United States to drop a whopper in order to get some Ohio car worker votes.  It’s okay for the media to ignore the whopper.  After all, it’s just “malarkey.”

The pot calls the kettle black.  The American president "airbrushes" recent events to get a few more votes.  And he thinks others respect him?  Bet he's got some A123 stock he will sell you.

It’s time for a change.

Monday, October 22, 2012

Ask Him About the Debt, Please

Hours of debates behind us.  Thousands of hours of campaign meet and greets behind us.  Tens of thousands of hours of chit chat on the television and articles in newspapers and magazines and on the Internet – all behind us.  And who has a clue about the debt?  Next year?  Four years from now?  Eight years from now?

Tonight they will chatter at each other about Iran and Europe and Russia and China – maybe Fidel will get a few minutes.  Surely they will be all so brilliant about the all so many informed accomplishments in Afghanistan and support for our good friends, the Israelis.  Blah blah blah.

Will anyone suggest that a country up to its eyeballs in debt is neither a leader nor an economic power nor a dependable, reliable friend?  Will anyone ask how a country with a massive outflow in its balance of payments because of so much foreign oil purchased is really going to be seen as an omnipotent military power?  Is someone maybe going to mention that we spend much more on military activities than the next 10 countries combined and yet the world is awash in hate, conflict and tension?  Oh sure, we know, things would be much worse if we didn’t do what we do.  Talk about malarkey.

When Mr. Obama took office the United States owed $10.6 trillion.  Today, we owe $16.2 trillion.  $5.6 trillion in less than four years.  We know Mr. Obama does not have the “take responsibility gene.”  We know he does not believe that “the buck stops here” when he sits in his comfy chair in the oval office.  But the history books will lay the responsibility for the largest debt ever in the history of the world firmly in his lap.  We know that no country, no alliance, no region, no empire has ever won “the race to the top” with debt.  We know that the more the debt rises the lower the power and the influence and the esteem of the United States falls.  They even grasp the concept of inverse relationships at Harvard university.  They just don’t seem to teach it anymore.

Unfortunately, the Hollywood media and specifically, Jim Lehrer and Candy Crowley do not understand this concept.  Will Bob Schieffer?  We’ll see.  TheFundamentals has sent questions to anyone connected with these debates who will receive them – all about the debt.  Foreign policy leadership coming from a country that cannot balance its budget is the same as electing a man president who would sign bills and laws to place debt on unborn children.  Reelecting him is just plain nuts.

Cripes, someone ask him about the debt, please. 

Thursday, October 18, 2012

"Americans need to realize..."

Don’t you just love it when the people who work for us – the public servants, speak down to us?  Don’t you just love it when they start out their brilliant observations with introductory comments such as – “Americans need to know”, or, “Americans need to understand” or “the people should recognize...”   Well, this brief essay is one persons response to arrogant, condescending blather flowing like detritus from the mouths of coddled, highly paid public employees who don’t have much of a clue about just how much we Americans do grasp, recognize and understand.

"We will do our very best to think through the best security possible, but we can't keep people behind 20-foot walls (Comment from TheFundamentals – have you been to any embassies recently?) and expect them to do their jobs…Americans need to realize (emphasis added) our civilians serving our country are putting their lives on the line…in this inherently risky and dangerous world."

This is Mrs. Clinton’s recent observation about the killing of four Americans overseas.  Mrs. Clinton, here is what many Americans realize –

You, Mrs. Clinton, your boss, Mr. Obama, your fellow cabinet members and many of your associates, assistants and assistants to associates enjoy a very high level of convenience, security and accoutrements that are not enjoyed by very many citizens, regardless of their jobs, community standing or personal risk exposure.

These costly accoutrements are provided to you at the expense of, and in many cases at the inconvenience of, those very Americans who “need to realize....”

Perhaps a slight turn around in your language would be both appropriate and logical.  To wit, try this on – “We in government make decisions and then expect others to carry out these decisions.  In many cases there are so many layers of assistants and associates that the “carrying out” bears no resemblance to the initial decision – not in word, not in intent; not in practice.  This is what Americans need to realize.  By the time it leaves my office – gets to my first assistant – then on to his/her associate – to be presented to a committee which meets on the first Tuesday following the last week of the fourth quarter unless it is a public holiday in which case it is deferred to the last Monday of the preceding month, things sometimes go awry.

In other words, what you could have said Mrs. Clinton was, “I don’t have a clue what is going on.  When can I quit?”

To that end, at least this one American has both an answer and a realization – Soon, Mrs. Clinton, very soon we hope.  Perhaps as soon as November 6, 2012.  Don’t be bashful in recognizing that we citizens will be okay when you leave.  We will survive, without your dedication and brilliance.  We encourage you to take with you – Ben Bernanke, Timmy Geithner, Leon Panetta (you know him as Mr. Bureaucrat) and the ever so delightful, Janet Napolitano.  God speed to you all.  Thank you for your service.  Enjoy those pension checks.  We hope you and your friends realize that many of us worked very hard for a long time to make your retirement so comfortable.


Tuesday, October 16, 2012

A Bad Deal

In 2008, then Chicago mayor – Richard Daley, with the city council’s approval, sold the city’s parking meters and all the revenue produced by them to an outfit called, Chicago Parking Meters LLC for $1.15 billion.  LLC got the ownership rights for 75 years.  Yes, that is not a misprint – 75 YEARS.   LLC got a good deal – a really good deal.

These pages have referred to this deal on several occasions as a “bad deal.”  Yesterday the new mayor, Rahm Emanuel, went public and called the 75 year sale, a “bad deal.”

Now let’s say Daley was the CEO of a public company, one with traded public securities.  What would happen?  Well, without engaging in much external research, we can list some possible outcomes and consequences:

·         He’d be fired, terminated, let go

·         He would lose compensation, benefits and pensions rights, or at least a portion thereof

·         He’d lose investment value in his stock holdings or stock options because the market would lower the price of the company’s stock to reflect the financial impact of the “bad deal”

·         He would be sued – the company would be sued – the directors and officers would be sued

·         Possible government action – department of justice and/or SEC investigations would unfold and further legal – civil and perhaps, criminal, indictments could follow

·         Reputations would be damaged, in some cases, permanently and fines and even possible jail sentences could occur

So, what happened to retired mayor Daley?  Nothing.  Nada.  None of the above.  Not a smidgen of financial or legal or governmental deterioration or impact.  As a matter of fact, exactly the opposite.  Daley is collecting a big pension, over $200,000.00 per year; is enjoying fancy status as “of counsel” to a large law firm and is now on the board of directors of the Coca-Cola company.

But, what about the “bad deal?”  Who pays for the “bad deal?”  Doesn’t someone have to lose something or account for something or somehow be held accountable for Daley’s “bad deal?”

Yes.  The Chicago taxpayers are completely, fully and with no recourse to anyone else, responsible for Daley’s “bad deal.” 

So, as Paul Harvey used to say, “Now you know the rest of the story.”

When TheFundamentals says we need good and regular government financial reporting signed under penalty of law by the key elected and hired government officials and employees, we are not simply being pejorative toward politicians and bureaucrats.    When TheFundamentals calls for outlawing public employee unions, we are not simply stating a convenient position based on some anti union bias or prejudice.  We are demanding that the same level of accountability which applies to anyone in the private sector be applied to those in the public sector.  All deals must be ‘arms length” transactions with personal, legal and civil consequences to the parties.  We are demanding that arrangements, in which any government official benefits and the costs go to someone else, cease, immediately.

Why did we bring the unaccountability of deals made with public employee unions into this posting?  When Emanuel called the parking meter fiasco, a “bad deal” he could just as easily have been referring to the contract with the Chicago teachers union which he and his minions negotiated and which he agreed to.  It, too, is a “bad deal.”  There is no money to pay the terms that Emanuel agreed to.  Yet Emanuel struts around as if he is doing some great thing – for the “kids” is his new spin.  Who will have to pay?

The same group that pays for Daley’s bad deal.  In order for a republic to work, the people must rule.  If that ruling concept is to be delivered via a “representative democratic system” then the representatives must be held personally and legally accountable for their actions to the people and, in the absolute, to the legality and financial soundness of their actions.  Today, all we have is “spin” and a growing list of “bad deals.”



Wednesday, October 10, 2012

In His Own Words – The Obama Question

“Do I want this job?”

There has been a great deal of discussion about Mr. Obama’s poor debate performance.  This essayist did not see it that way at all.  Mr. Obama delivered a message consistent with his previous words, speeches and actions.  He did it in a way consistent with prior mannerisms and delivery techniques.  He was exactly on message and character.  His opponent came with facts and analysis that either refuted Mr. Obama’s positions or were packaged in a very different message of governance and objectives. 
 Nevertheless, there is much more to be learned about Mr. Obama.   The media in America refuses to go there.  TheFundamentals does it now.
One fundamental is looking back over someone’s career to measure their stick-to-it-tiveness.  How have they persevered over the years; their career?  How have they met challenge and still attained accomplishment?  Met defeat and still come back for more?  Tackled big issues; difficult issues and implemented solutions even if they require compromise and settling for much less than desired?

Here, in his own words, is Mr. Obama speaking to his motivation level, as he knows himself:  

Any objective analysis of Mr. Obama’s job record shows a move-on type of career ladder.  Sure he has won elections in ever expanding electorate races and sure he has some very notable pieces of glamour and recognition on his resume – Nobel peace prize – senator – president – and a few others.  And he did get his health care initiative through the congress.  No small set of accomplishments.  But listen to him describe his own background; his experience and his skill set. 
This is what Mr. Obama thinks is important to be successful:
·         Organize resources, both federal and state, and municipal to make a difference on issues that count like education, health care, jobs and economic development
·         Articulate and frame the issues most important to voters
·         Background as an attorney; represented affordable housing agencies; chaired major philanthropic entities; been a community organizer
·         Vision and imagination and hard work  

At no time does he ever mention measurable accomplishments - everything he says is a form of political speech - what we call vagaries - that sound good but have nothing to do with putting food on the table; gasoline in the car and mailing checks in to pay bills.  Not one word of practical, real life experience; not a sentence of increasing yield from a farm; squeezing one more drop of oil from a well or realigning a factory to produce more goods at a lower cost and of a higher quality than the Chinese manufacturers or even the factory in the next state.  No sense of responsibility for specific accomplishments or even targets.
What happens when you strive for lofty, but not measurable, goals?

Well, lets look at his home city and his home state.  He left behind a city and a state in massive fiscal and financial crisis.   Not one task even ventured much less accomplished to balance the budgets in Chicago and in Illinois.  And now he has a similar track record in Washington and his budget for the next four years, which he will not even address, calls for more of the same – trillion dollar deficits – trillions of more debt.  By the time he leaves Washington, if reelected, the country will owe more than $20 trillion.    Education in his home state is a mess.  Pension reform?  Not even touched.  Corruption?  More and more politicians and bureaucrats indicted and jailed. Obama ethics proposals?  Nada.
Obama has built the largest federal government bureaucracy ever and it is in shambles – he cannot even catalog much less manage much less cutback the excessiveness that dominates the homeland security department; the defense department; health and human services and department of state.  His intelligence apparatus is scattered and clueless in most of the Middle East and Asia.  And he shows no interest in micromanaging these out of control bureaucracies. 

He appears to be disengaged.  Not fully present.  Mind drifting elsewhere.  Where? Who knows?  The golf course; pickup basketball games; Bill Clinton like rise above the fray and just let the masses glow as you pontificate on your nonsense – your vast experience – to fawning audiences?  This guy Obama does not have a track record of following through; getting a job done; setting measurable objectives; kicking butt in weekly/monthly follow up meetings; measuring progress or disciplining lack of progress – he is not a manager and he has not one four year stretch of any real job record of accomplishments.  He constantly deflects responsibility to others; he blames others.  He likes to be the top guy – don’t we all?  But he does not like the day in/day out grind that is the necessary requisite of accomplishing something.
We see a lazy guy overwhelmed by the monstrosity that he himself promoted.  We see a fellow who once tried to believe in "community organizing"  and "framing issues"  and "mustering resources"  and bringing his "special vision" now sitting on top of an out of control mess with no energy to backtrack, dismantle or face up to failure.  We see a guy watching his appointee’s line up at the departure window.  Today his vision is that four years out things are going to end badly.  Why not exit now and get a seat on Bill’s “Clinton Initiative” board of directors?  Let the rich eastern boy have a go.

We’ll see.  It is not just TheFundamentals that sees a lazy, impractical man in the white house.   Please take out a few minutes to read this article from a lifelong democrat who sees much of the same:  http://www.thedailybeast.com/articles/2012/10/08/buzz-bissinger-why-i-m-voting-for-mitt-romney.html

Monday, October 8, 2012

Truth Telling


“But if you want to be president, you owe the American
people the truth.”  BHObama, Denver, CO, October 4, 2012
From his lips to God's ears......
Mr. Obama, citing his policy of being a “truthful” president, has asked his supporters to distribute and display, proudly, this new bumper sticker which clearly presents his truthful position on government spending, deficits and debt:


Thursday, October 4, 2012

Trickle Down Government

Boy, is politics fun – expensive fun but nevertheless anyone with any interest in this magnificent republic of ours has just got to go away from last night with a sense that we will persevere, rise again and get our mojo back.  No one guy or gal; even one with a currency printing press and some goofy, misguided economic policies based on personal fears can derail this powerful engine of prosperity and achievement.

A couple of specifics –

·         Anyone who thinks the long run game of having a complacent and compliant press in your corner – a press that refuses to challenge power – to question policy and actions – in other words to do its job; is a good thing just got a firsthand lesson of why Obama and his minions would have been much better served with a real press challenging him over the last four years instead of America’s slobbering Hollywood media.

·         The five son’s remark is classic – because it illustrates in living color that Romney the man is a fellow who does not get sucked into easy come solutions sold by pandering politicians to entitled and expecting voters.  He neither offers those solutions nor buys into them when confronted with them.

·         Telling the entitled moderator who has fed at the public trough for decades that his subsidy is about to end is the best recent example of vertebrae strength and testicular weight that we have observed in a long, long time.

·         $90 billion of Obama subsidies for green energy against the $2.8 billion for oil companies that Obama keeps whining about.  We enjoyed this one for a very particular reason – Obama had the audacity (think Nixon claiming he was not a crook) to say anyone who knows him knows he is not a whiner – well, hello, we have a whiner in chief at 1600 Pennsylvania avenue.

·         And our last observation – these pages owe their beginning to the promiscuity of one of America’s bad presidents – George W. Bush and his four congresses.  Why?  Our founding principle:  deficits = debt = destruction.  Mr. Romney put it right on the line; early in the debate.  He called the debt “IMMORAL.”  He said it is immoral to place debt on our children and our grandchildren.   He said it is immoral to expect them to pay the interest charges and repay the debt.  MR. ROMNEY IS RIGHT.  MR. OBAMA IS WRONG.

Why did we call this brief post – trickle down government?  Well, we can’t take credit for it.  Kim Strassel at the Wall Street Journal made the observation that whoever thought up that slogan should get a raise.  We agree.  The imagery is classic.


Wednesday, October 3, 2012

Debate Prep - Health Care Costs in the "Land of the Free"

Here is a comparison of health spending per capita in 15 developed countries:

Source:  OECD Health Data

Life expectancy in the U.S.A. is slightly over 78 years.  In every one of the other 14 countries listed above, life expectancy is at or greater than 80 years – in many it is over 81 years of age.  Conclusion – spending double and triple on health care, per capita, may be good for the health care industry – its employees and businesses – doctors, pharmaceutical and equipment manufacturers, insurance companies, hospitals and nurses, but it is neither cost effective nor needed nor productive.

Was it always this way?  Here is a look back some years at the growth of health care costs:

There was a time, in the 1970’s, when the U.S.A. was in the ballpark – spending $356 per capita compared with $225 average; about $130 per person more.  Currently, it spends $7,538 compared with $3,944 average –
That’s $3,594 more per person per year and yet our life expectancy is less than every other country in this survey!  
If you take a second look at these charts, the country that spends the least per capita is Japan - $2,729 per person.  They have the highest life expectancy of all – almost 84 years of age!  Almost supports the conclusion that the more a country spends on its health care bureaucracy, the sooner its citizens die.

The next time you see TV advertisements for drug products or listen to some chatty Cathy on a Hollywood media broadcast yap about “health breakthroughs” or some politician talk about taking care of grandma, ask them how much it will cost and how much the life expectancy will increase – no, not some vague answer – you now have the statistics – make them tell you the specific result it will have on these cost and life expectancy numbers.  Make them prove it.  Hold them accountable for their answer.  Even better – let them spend their own money; not taxpayers.

The US congress; the US president and Ben Bernanke keep this bubble alive – a total of 537 men and women.  It’s that simple if you wish to correct the situation.  Don't expect any assistance from public employee unions!

Tuesday, October 2, 2012

Debate Prep - Federal Government Spending under Obama and Bush II

The purpose of this essay is to provide you with the facts you may need for accurate evaluation of campaign rhetoric and to formulate your own questions for the candidates.  Here are the known federal government spending amounts for Obama and Bush II administrations along with the percent of GDP those levels represent:

112th congress:
            2012 –            $ 3.5 trillion               24.3 %
            2011 –            $ 3.5 trillion               24.1 %

111th congress:
            2010 –            $ 3.6 trillion               24.1 %
            2009 –            $ 3.8 trillion               25.2 %

110th congress:
            2008 –            $ 3.0 trillion               20.8 %
            2007 –            $ 2.7 trillion               19.7 %

109th congress:
            2006 –            $ 2.7 trillion               20.1 %
            2005 –            $ 2.5 trillion               19.9 %

108th congress:
            2004 –            $ 2.3 trillion               19.6 %
            2003 –            $ 2.2 trillion               19.7 %

107th congress:
            2002 –            $ 2.0 trillion               19.1 %
            2001 –            $ 1.9 trillion               18.2 %

Our source for all the numbers and percentages in this essay is:  www.whitehouse.gov   In other words, these are Mr. Obama’s numbers.

Here is a recap by presidential term:  Obama four year spending, 2009 – 2012, totaled $ 14.4 trillion, an average of 24.4 % of GDP.  In the first Bush II term, 2001 –  2004, spending totaled $ 8.3 trillion, averaging 19.2 % of GDP; second term, 2005 – 2008, spending totaled $ 10.8 trillion, averaging 20.1 % of GDP.  Those are the facts – Obama facts.  Average spending per year for Bush II first term - $ 2.1 trillion; Bush II second term - $ 2.7 trillion and Obama first term - $ 3.6 trillion.  % of GDP for Bush II, two terms is 19.7 %; Obama one term – 24.4 %.

Some analysis:  The 111th congress was completely controlled by democrats.  The 112th congress was split – senate under republicans; house under democrats.  There is no federal government agency spending without congressional approval.  There are several self funding agencies but they still require congressional authorization.  The federal reserve however is a different story and it does not need separate authorization when it comes to spending.  But, today, our focus is congressional and presidential authorized spending.

We can conclude that democrat control of congress and the white house, even with republican control in the house for two years, is not a foundation on which spending limits and controls can be expected.  Any situation going forward from today that mirrors the current control of congress and the white house will produce equal or increased spending levels from the 2012 amounts noted above.  Looking ahead – Romney is making a specific campaign pledge to bring spending back to 20% of GDP level over his four year term.  Mr. Obama projects spending on his website from 2013 – 2016 to increase to just over $ 4.0 trillion per year which is 22.7% of GDP for the period. 

Monday, October 1, 2012

The Economic Model for the American Welfare State

About 45 years ago, America set about to become a welfare state.  The several key identifying characteristics of a welfare state are:

·         A mentality that there is a government solution to almost every possible real and imagined issue that some person or group or business identifies or embraces

·         In that process, fundamentals leave the arena – fundamentals such as setting priorities; balancing budgets; directing government toward those limited priorities and a constant philosophy of discipline – discipline the citizenry and, more important, disciplining the government

·         Once fundamentals leave, the vacuum created is filled with welfare state concepts – great society; war on hunger; war on poverty; equal opportunity for all; better education; endless, affordable health care and spreading democracy to everyone to name just a few

·         Laws multiply – lawyers multiply – lawsuits multiply – lots of groups try to get into the game – get their piece of the action – government employment multiplies and budgets are no longer balanced so debt rises until the only buyer of the debt is the government itself.  They print money.  And it devalues.  Business – making something; growing something finds more attractive surroundings elsewhere

·         Finger pointing – aka the blame game – supplant discussion and debate that used to focus on the fundamentals.  Now it focuses on who did what to whom and rhetoric replaces rationality – if something goes wrong there must be someone to blame as long as it is not me/us

·         Once rhetoric rules – examples would be political correct nonsense; hope and change; best times ahead of us; and references to economic theories (Keynesian, Austrian, Bulgarian, monetarism, socialism, etc.) all is lost – the welfare state is now firmly established

We actually got a brief reprieve in the 90’s because of the so-called technology revolution.  New products, services, efficiencies, businesses – all came along just as we Americans were embracing the welfare state.  The timing was good and not good.  Good for those who wished to believe that we could ignore fundamentals and build this great society and that we were on top of our game and our best days were ahead of us.  Bad because it was temporal – passing and once it ran its brief course all we had were the fixed costs of the welfare state.  The costs were firmly in place; the revenues; the money to pay for all the welfare goodies didn’t/couldn’t keep up. 

Any economic model for business or government includes revenues and expenses and the revenues must be adequate to pay for both the fixed and the variable costs.   And fixed costs are always the problem – they exist even if there is no revenue.  The variable costs at least only show up when there is revenue.  You can only do as much as you have the revenues to cover the costs.

America doesn’t.  The larger the welfare state – in pure numbers, the more discipline required of welfare state operators.  China could not run a welfare state – neither can India; Indonesia, Russia and even large portions of Europe cannot afford high cost welfare states.  The business model doesn’t work – not enough revenues to cover the costs.  The costs are mostly fixed.

If you wish to build a welfare state, keep it small – think Switzerland or Sweden or the Netherlands.  Japan built one and it is dying.  The United States built a big one – Clinton thinks he had it solved when he was in office.  He owes it all to the temporary benefits of the technology bubble.   Bush II can thank the real estate bubble until it burst during his last year in office.  Obama is foolish enough to think all we need do to get it back on track is raise taxes on the well to do. 

If only it were true.  The solution to our problem?  Simple – we need a new technology revolution or some other bubble – Bernanke is trying to build one in the stock market and endless government bureaucracy.  Maybe someone can invent a formula to convert sea water into oil or perhaps friendly space aliens will arrive with robotic slaves dedicated to meeting our needs and then some.  You get the idea. 

Next time you want to build a welfare state, run the business model first.  And, watch out for those fixed costs.