October 24, 2023
Dear Friends and Family,
This is the first of six segments on the five wars we are currently engaged in. The format for all six will include the respective problem definition that you read in segment 15, followed by excerpts on problem solutions, and ending with a problem solution that I created.
This segment’s excerpts on the Capital War are directed at increased taxes, reduced spending, and accelerated growth. That is followed by a lesson from Ronald Reagan stating that in many cases the long-term benefits of an initiative cannot be calculated in dollar terms and therefore we have to rely on the judgment of leadership at the time. Then three presidential candidates’ (DeSantis, Kennedy, and Trump) provide additional perspective. The excerpts end with a potential solution that would yield significant accelerated growth.
Some of the wisdom contained in the excerpts has been incorporated into my potential solution at the end of the segment. [Note: I doubt the debate I propose will ever transpire].
Happy Learning,
Harley
Dear Friends and Family,
This is the first of six segments on the five wars we are currently engaged in. The format for all six will include the respective problem definition that you read in segment 15, followed by excerpts on problem solutions, and ending with a problem solution that I created.
This segment’s excerpts on the Capital War are directed at increased taxes, reduced spending, and accelerated growth. That is followed by a lesson from Ronald Reagan stating that in many cases the long-term benefits of an initiative cannot be calculated in dollar terms and therefore we have to rely on the judgment of leadership at the time. Then three presidential candidates’ (DeSantis, Kennedy, and Trump) provide additional perspective. The excerpts end with a potential solution that would yield significant accelerated growth.
Some of the wisdom contained in the excerpts has been incorporated into my potential solution at the end of the segment. [Note: I doubt the debate I propose will ever transpire].
Happy Learning,
Harley
SEEKING WISDOM FOR AMERICA – SEGMENT 16
THE CAPITAL WAR
PROBLEM DEFINITION
Government spending has exceeded revenues for each of the last 22 years. As a result, our national debt has increased from $5.6 trillion in 2001 to $33 trillion today or a 589% increase. Three long-term measurements of economic health – debt-to-GDP ratio, interest bite (annual debt service-to-federal tax receipts), and government spending-to-GDP ratio – indicates we are in trouble on all three which will become much worse by Congressional Budget Office projections.
This has led two rating agencies to downgrade the credit rating for the U.S. government. Having reduced creditworthiness results in less investors wanting to invest in loaning us money to finance our exorbitant debt. Being underfunded on the debt will likely result in “printing money” to meet the shortfall (i.e., loaning money to ourselves). This eventually lessens the value of the dollar on the global market which in turn reduces the use of the dollar for international trade which lessens the dollar’s use as the world’s reserve currency. Lessening the dollar’s use as reserve currency not only leads to increases in interest rates to finance our debt but importantly results in a loss of power to influence geopolitical aspects of the world.
Further, significant government overspending in 2021 and 2022 lead to inflation. To control inflation our central bank (the Federal Reserve) increased the Federal Funds rate by 5.25% with eight rate increases. This not only increased the country’s expenses by $1 trillion/year (and increase of 16.7%) but also in the interest rates on all loans throughout the country. In its entirety we have a downward spiraling capital market that needs to be reversed.
The Congressional Budget Office (CBO) projects that under current trends, the debt could exceed 200% of GDP by the year 2050 and interest payments on the debt will take up nearly 40% of all federal revenues, versus a good economic health target of below 15%.
The resolution to the spending problem is exacerbated by three things:
WISDOM ON POTENTIAL SOLUTIONS -- EXCERPTS
THREE POTENTIAL FINANCIAL SOLUTIONS EXIST – Increase Taxes, Reduced Spending and Accelerated Growth
INCREASE TAXES: Large-scale alternations to tax law seen over recent history have been studied closely by experts, and the data suggests that the desired outcomes have seldom been achieved. Recent tax cuts have, in fact, tended to increase deficits, but tax increases tend not to improve the deficit picture to a substantial degree. Ultimately neither tax cuts nor tax increases can be fully understood in isolation because their impacts also depend on the government’s spending behavior.
Source: America’s National Debt: Examining the Facts by Thomas Arndt (2022).
REDUCED SPENDING: A Business Perspective to the Federal Budget: Total “spending” breaks out into two key categories: spending for current-year operations and spending for longer-term (capital) investments. In business, the two spending categories are called operating budgets and capital budgets, respectively, and they are analogous to what economists’ call “consumption” versus “investment.”
State and local governments typically keep their operating and capital budgets separated. They must balance their operating budgets. They are well-versed in borrowing money for capital projects like roads, bridges, airports and water systems (by floating municipal bonds, for example).
However, the federal government mixes it together with the operating budget before it calculates deficits and surpluses. The “businesslike” perspective provides a much-improved basis for debating the elements of the budget.
At this point, one might ask the same question I did a few years ago. Why doesn’t the federal government start accounting for the budget in a businesslike way, instead of mixing everything together into the stinky, homogeneous mass of gray goo called the “unified budget?” Their answer boiled down to this: the alternative is too hard to do. Even so, because it might be too hard to sort out the numbers doesn’t mean we shouldn’t try to frame the policy debates this way.
Source: Neutering the National Debt by Steve Conover, Ph.D. (2015).
Making Choices: COMMENT ILLUSTRATION: Climate Change: Given Congress’ continual excessive spending, clearly, we do not have the resources to address both climate change and bolstering our military to defend against Chinese Communist Party aggression. The pros and cons of both need to be articulated, compared and debated in front of the American public, so they can make a decision on which to pursue (instead of flip-flopping dependent on which party is in power).
With respect to climate change the evidence of need cannot start with a consensus of IPCC scientists. The excessive carbon dioxide hypothesis needs to be stated and scientific evidence supporting the hypothesis presented. That needs to be followed by testimony of the IPCC modeling experts on the potential environmental disasters posed and the probability of occurrence. This should be followed by the Biden administration providing their complete solution to remedy the potential dangers with associated costs and probabilities of success. Debate should then follow.
That is little to ask given that the Democratic Party wants $50 trillion or so to address climate change while severely and negatively impacting our economy, revamping our energy sources and infrastructure, and devastating our land mass in the process. Given the magnitude of the investment, the general public should have the opportunity to fully understand the investment and have the ability to weigh in on the decision.
ACCELERATED GROWTH: Growth is what turns debt and deficits into non-problems. Period. It’s true for individuals, families, small businesses, and large businesses. It’s true for local governments and state governments. And it’s true for the federal government: economic growth makes tax receipts grow, which reduces the government’s “debt service degree-of-difficulty.” On the surface, it sounds easy. But history tells us that a nation’s political environment can make it difficult or impossible.
On the Left, Larry Summers, former economist in the Obama White House and Treasury Secretary in the Clinton administration, also understands the importance of a growth agenda and wrote about it in the Washington Post in late 2013. An excerpt:
THE CAPITAL WAR
PROBLEM DEFINITION
Government spending has exceeded revenues for each of the last 22 years. As a result, our national debt has increased from $5.6 trillion in 2001 to $33 trillion today or a 589% increase. Three long-term measurements of economic health – debt-to-GDP ratio, interest bite (annual debt service-to-federal tax receipts), and government spending-to-GDP ratio – indicates we are in trouble on all three which will become much worse by Congressional Budget Office projections.
This has led two rating agencies to downgrade the credit rating for the U.S. government. Having reduced creditworthiness results in less investors wanting to invest in loaning us money to finance our exorbitant debt. Being underfunded on the debt will likely result in “printing money” to meet the shortfall (i.e., loaning money to ourselves). This eventually lessens the value of the dollar on the global market which in turn reduces the use of the dollar for international trade which lessens the dollar’s use as the world’s reserve currency. Lessening the dollar’s use as reserve currency not only leads to increases in interest rates to finance our debt but importantly results in a loss of power to influence geopolitical aspects of the world.
Further, significant government overspending in 2021 and 2022 lead to inflation. To control inflation our central bank (the Federal Reserve) increased the Federal Funds rate by 5.25% with eight rate increases. This not only increased the country’s expenses by $1 trillion/year (and increase of 16.7%) but also in the interest rates on all loans throughout the country. In its entirety we have a downward spiraling capital market that needs to be reversed.
The Congressional Budget Office (CBO) projects that under current trends, the debt could exceed 200% of GDP by the year 2050 and interest payments on the debt will take up nearly 40% of all federal revenues, versus a good economic health target of below 15%.
The resolution to the spending problem is exacerbated by three things:
- Congressional funding by huge Omnibus Bills that are so large with such short time periods to review, it is almost impossible to provide much scrutiny to the spending. Further, the spending legislation is done separately from debt ceiling authorization, psychologically lessening the need to reduce spending.
- Adoption of Modern Monetary Theory in practice absolves the House of Representatives from any fiscal responsibility. The theory is interpreted that we don’t have to worry about the country’s debt because we can borrow all we want due to the fact that the dollar is the world’s reserve currency. In effect, the theory’s application will lead us to lose reserve currency status for the dollar because of overspending.
- The hysteria surrounding Climate Change is clouding objective judgement. First, climate change is an unsettled science, so we don’t really understand the urgency. Second, the fix we are focused on – wind turbines and solar panels – cannot possibly do the job plus the $50 trillion required with such solutions is unaffordable. A combination of nuclear power plus natural gas to power our country might be able to do the job at a much lower cost, but no one is focused on it.
WISDOM ON POTENTIAL SOLUTIONS -- EXCERPTS
THREE POTENTIAL FINANCIAL SOLUTIONS EXIST – Increase Taxes, Reduced Spending and Accelerated Growth
INCREASE TAXES: Large-scale alternations to tax law seen over recent history have been studied closely by experts, and the data suggests that the desired outcomes have seldom been achieved. Recent tax cuts have, in fact, tended to increase deficits, but tax increases tend not to improve the deficit picture to a substantial degree. Ultimately neither tax cuts nor tax increases can be fully understood in isolation because their impacts also depend on the government’s spending behavior.
Source: America’s National Debt: Examining the Facts by Thomas Arndt (2022).
REDUCED SPENDING: A Business Perspective to the Federal Budget: Total “spending” breaks out into two key categories: spending for current-year operations and spending for longer-term (capital) investments. In business, the two spending categories are called operating budgets and capital budgets, respectively, and they are analogous to what economists’ call “consumption” versus “investment.”
State and local governments typically keep their operating and capital budgets separated. They must balance their operating budgets. They are well-versed in borrowing money for capital projects like roads, bridges, airports and water systems (by floating municipal bonds, for example).
However, the federal government mixes it together with the operating budget before it calculates deficits and surpluses. The “businesslike” perspective provides a much-improved basis for debating the elements of the budget.
At this point, one might ask the same question I did a few years ago. Why doesn’t the federal government start accounting for the budget in a businesslike way, instead of mixing everything together into the stinky, homogeneous mass of gray goo called the “unified budget?” Their answer boiled down to this: the alternative is too hard to do. Even so, because it might be too hard to sort out the numbers doesn’t mean we shouldn’t try to frame the policy debates this way.
Source: Neutering the National Debt by Steve Conover, Ph.D. (2015).
Making Choices: COMMENT ILLUSTRATION: Climate Change: Given Congress’ continual excessive spending, clearly, we do not have the resources to address both climate change and bolstering our military to defend against Chinese Communist Party aggression. The pros and cons of both need to be articulated, compared and debated in front of the American public, so they can make a decision on which to pursue (instead of flip-flopping dependent on which party is in power).
With respect to climate change the evidence of need cannot start with a consensus of IPCC scientists. The excessive carbon dioxide hypothesis needs to be stated and scientific evidence supporting the hypothesis presented. That needs to be followed by testimony of the IPCC modeling experts on the potential environmental disasters posed and the probability of occurrence. This should be followed by the Biden administration providing their complete solution to remedy the potential dangers with associated costs and probabilities of success. Debate should then follow.
That is little to ask given that the Democratic Party wants $50 trillion or so to address climate change while severely and negatively impacting our economy, revamping our energy sources and infrastructure, and devastating our land mass in the process. Given the magnitude of the investment, the general public should have the opportunity to fully understand the investment and have the ability to weigh in on the decision.
ACCELERATED GROWTH: Growth is what turns debt and deficits into non-problems. Period. It’s true for individuals, families, small businesses, and large businesses. It’s true for local governments and state governments. And it’s true for the federal government: economic growth makes tax receipts grow, which reduces the government’s “debt service degree-of-difficulty.” On the surface, it sounds easy. But history tells us that a nation’s political environment can make it difficult or impossible.
On the Left, Larry Summers, former economist in the Obama White House and Treasury Secretary in the Clinton administration, also understands the importance of a growth agenda and wrote about it in the Washington Post in late 2013. An excerpt:
“Spurring growth is an area where neither side of the political spectrum has a monopoly on good ideas. We need more public infrastructure investment, but we also need to reduce regulatory barriers that hold back private infrastructure. We need more investment in the basic science behind renewable energy technologies, but in the medium term we need to take advantage of the remarkable natural gas resources that have recently become available to the United States.”
Source: Neutering the National Debt by Steve Conover, PhD. (2015).
“The only way out of our spending crisis (Debt Burden, Social Security, Medicare) is attaining 4 to 5% growth in GDP. The last 6 quarters it has been 1.3%. The way to achieve that growth is via energy” – to produce more, to buy less, to export while being self-sufficient at home. That requires drilling for oil and gas. Changing regulations on nuclear energy is another way which is the most climate friendly.
Source: Larry Kudlow, Economic Advisor to President Donald Trump (8/9/2023)
THE LESSON FROM RONALD REAGAN: The following is an excerpt from Reagan’s address to the nation in 1989.
“The only way out of our spending crisis (Debt Burden, Social Security, Medicare) is attaining 4 to 5% growth in GDP. The last 6 quarters it has been 1.3%. The way to achieve that growth is via energy” – to produce more, to buy less, to export while being self-sufficient at home. That requires drilling for oil and gas. Changing regulations on nuclear energy is another way which is the most climate friendly.
Source: Larry Kudlow, Economic Advisor to President Donald Trump (8/9/2023)
THE LESSON FROM RONALD REAGAN: The following is an excerpt from Reagan’s address to the nation in 1989.
“The way I see it, there were two great triumphs, two things that I’m proudest of. One is the economic recovery, in which the people of America created – and – filled 19 million new jobs. The other is the revery of our morale. America is respected again in the world and looked to for leadership.”
It could be quite a while before another U.S. president will be able to say anything similar to that. On the other hand, it could happen sooner rather than later if we’d just think a little harder about the principles behind the policies that deliver those results. Those fundamental principles were packed efficiently inside two of his favorite aphorisms: “Peace through strength”; and (“Trust ‘em but cut the cards.”) The policies of his administration were shaped by his view of government’s responsibilities: provide a secure environment for the long term; enable, don’t encumber, the free market; invest in the financial health of the private sector; then trust the people and the economy to flourish, again under these new, more favorable conditions. Fortunately for the nation, Reagan never backed away from those first principles.
With the fall of the Soviet Union in the summer of 1991, the Cold War ended, the threat of a thermonuclear war between superpowers was eliminated. Reagan’s investment in long-run national security would ultimately pay off handsomely. It turned out to be one of our best investments ever – and as anyone with private-sector financial experience knows, utilizing debt financing to help fund good investments is a perfectly sound financial practice.
But which are the good investments? How do you determine when the supposed benefits of any given investment proposal are a) intangible, and b) in the future. For just a few examples, try answering the following: What is the net present value, in U.S. dollars of …
Source: Neutering the National Debt: How Reagan Got It Right, and How Today’s Left and Right Get It Wrong by Steve Conover (2015)
Presidential Candidates Ideas:
By Ron DeSantis: If the government abuses its authority, the House can withhold funding to the offending executive branch departments until the abuses are corrected. Indeed, because executive branch departments are dependent on Congress for the continuation of their operation, Congress has great leverage to shape executive branch behavior by making funding conditional to the desired behavior. The Founders wisely structured the Constitution so that this most important authority is lodged in the legislative body that is closest to the people and that has the most frequent elections. There is, thus, the opportunity for near immediate recourse whenever the government abuses its power. Rather than wield the power of the purse to hold the administrative state accountable and curtail its scope, Congress has effectively placed the government on autopilot through the routine use of so-called continuing resolutions and omnibus appropriation bills.
A continuing resolution simply extends the current appropriations into a date specified in the future, but invariably does nothing to rein in any wayward agencies. Even when Congress does appropriation bills, it usually takes the form of a single omnibus bill that typically runs over two thousand pages and does nothing to reshape the federal Leviathan. Both mechanisms essentially forfeit the oversight authority of Congress because those running federal agencies know that such oversight is not backed up by a willingness to use the power of the purse to hold them accountable.
Source: The Courage to Be Free: Florida’s Blueprint for America’s Revival by Ron DeSantis (2023)
Robert Kennedy’s Website: A key aspect of American revitalization is our healthcare system, which consumes nearly one-fifth of GDP. It isn’t a matter of shifting the burden of who pays. The problem is much deeper. Healthcare spending per capita has increased twelve-fold since 1960. Are we twelve times healthier? Quite the contrary. A Kennedy administration will go beyond making existing modalities available to all, to include low-cost alternative and holistic therapies that have been marginalized in a pharma-dominated system. We will move from a sick care system to a wellness society.
Source: Robert Kennedy’s Presidential Campaign Website
Donald Trump’s Website: President Trump will unleash the production of domestic energy resources, reduce the soaring price of gasoline, diesel, and natural gas, promote energy security for our friends around the world, eliminate the socialist Green New Deal and ensure the United States is never again at the mercy of a foreign supplier of energy.
Source: Donald Trump’s Presidential Campaign Website
GROWTH POTENTIAL:
The Energy Revolution: America sits atop enormous reserves of natural gas, much of it produced in shale rock formations. For years, oil and gas men labored to develop the capability to access and harvest those vast reserves.
As a result, America has now become a world leader in the production of natural gas. In 2019, we exported more energy than we consumed. The shale gas revolution secured America’s energy supply and put us on the path to energy independence. It freed us from dependence on oil cartels and positioned America as a central player in global energy markets. Other countries started coming to us for energy supplies, not only the other way around. American workers benefited hugely, so did the environment. It put people to work – over 100,000 Pennsylvanians directly and another 377,000 indirectly, according to one estimate. All that production and labor created tax revenue, which then supported schools, social services, and housing. Because the natural gas produced in places like Pennsylvania is cleaner than coal or the gas produced anywhere else, it did wonders for the environment.
In 2019, our country saw a 2.9% reduction in emissions, the largest of any country in the world, thanks in large part to the shale gas revolution. In fact, U.S. emissions have declined substantially since fracking entered regular use; greenhouse gas emissions from power generation dropped 41% from 2005 to 2019, while shale production increased sixfold.
Drillers can extract the gas, but it needs to be able to move it. For that, it depends on pipelines domestically and harbor terminals for overseas shipments. On both counts government – at the state and federal level – is getting in the way. New England needs energy resources. Pennsylvania natural gas is the best possible option. But they can’t get the permits required to build a pipeline connecting the two. Likewise, our European allies need alternatives to Russia’s oil and gas. We should be providing it to them, but it takes millions of dollars and many years to go through environmental impact reviews to build a gas terminal in Philadelphia.
President Biden made it that much worse. On his first day in office, he canceled the Keystone XL Pipeline and put in place regulations restricting new gas production and raising the costs of existing production. His regulatory blanket drove private capital away from the industry by creating uncertainty and reducing the return on investment. Americans lost good jobs. Russia was emboldened to invade Ukraine. It was a cause of the follow-on inflation. That’s what happens when government gets in the way. It doesn’t just slow and misdirect innovation. It hurts everyday Americans by depriving them of better products, lower prices, more advanced medicines, and so on. It hurts the country by weakening America’s standing and relative competitiveness. And it even hurts the environment. American natural gas, after all, is far cleaner and produced more safely than that which comes from Russia, Saudi Arabia, or Venezuela.
Energy is just one example. Across the country, laws and regulations impede our ability to innovate. Regulations regularly lag technological progress, preventing new ideas or capabilities from making it to market – just as the EPA hemmed in fracking.
For the innovation strategy to succeed, we must address three primary weaknesses of the country’s legal and regulatory ecosystem that are so apparent in our energy sector: the slow pace of change, distorting effects, and unnecessary work restrictions. These three simultaneously delay American innovation and undermine the ideas that make America exceptional. Our government has created an ecosystem that encourages passivity, discourages risk-taking, and obstructs the pursuit of happiness. That must change. We need a few principles to act as guideposts for the never-ending campaign to restore our government to its proper place in American life.
The fracking revolution is just the start. Researchers have made breakthroughs in nuclear fusion and can now generate more energy than is required to catalyze the fusion. Others are drilling deep into the earth’s surface to harness the vast geothermal energy potential, and nuclear reactors are becoming cheaper, smaller, and more efficient. We’ve only scratched the surface of what unbridled American ingenuity and industriousness can do to ensure energy dominance and protect the environment. These are bold moves, but renewing America will require a courageous commitment to innovation. The biggest risk of all is that we stop taking risks at all. If our government wants to create a genuine acceleration in the U.S. technological development, it will have to expect and accept failure, as any entrepreneur can attest. Congress will have to give R&D projects some freedom to fail and learn from those failures, and Washington will have to make bets on the future. Unfortunately, the government is not set up to do either of those things well.
Source: Superpower in Peril: A Battle Plan to Renew America by David H. McCormick (2023)
In short, if we fail to elect officials who will get us back onto a pro-growth agenda soon, I think it’s a decent bet that our grandkids will be living under a different form of government. If that’s what happens, and our grandkids are lucky, the new government will take power peacefully; if they’re unlucky, violently. If they’re lucky, something like a benevolent dictator will be in charge; if they’re unlucky, it will be whichever predator wins the power struggle. Those are the not-so-pretty futures I envision if we don’t get the economy moving forward at a better pace and soon.
Source: Neutering the National Debt by Steve Conover, PhD. (2015)
POTENTIAL SOLUTION
To win the Capital War we have to do two things: increase the growth rate of our economy and strife for effective government spending (reductions). Our situation is dire enough we likely cannot do one without the other to achieve success – both are needed.
Accelerated Growth: The experts say we need 4 to 5% growth to pull us out of decline. How is that possible when we have only achieved 1.3% for the last six quarters? As a country we are blessed with natural resources, specifically energy producing natural resources. So, utilizing them to produce low-cost energy for consumption is the most likely way to achieve that level of growth, in fact likely the only way. The problem is only about one-half of the country will support that.
To address that problem there should be a formal public debate between a Democratic member and a Republican member of Congress. The debate should lead off with the head of the Congressional Budget Office explaining our debt, debt burden, the increase and implications of the debt burden in 2023, their projections on the impact of the debt burden ten and twenty years out, and the amount of growth needed to maintain our debt where it is currently. Then the two parties’ representatives debate how to achieve the growth rate in a formal debate fashion (timed responses back and forth supporting their position and opposing the other debater’s position). If both positions are energy, then the party advocating achieving the growth rate with wind, solar and hydroelectric power explains how that could transpire (cost, time, land requirements, amount of rare earths) with a second expert explaining attaining the same growth rate via nuclear power and natural gas (cost, time, land requirements, amount of rare earths). The opposing party should then challenge the need to do so without the use of oil and/or coal. This debate should occur at least a month before any ballots are sent out for the 2024 election.
Effective Government Spending: The existing appropriation process for our country is horrifically bad – huge Omnibus bills mixing operating costs with investment capital, thousand-page bills put together by lobbyists and Federal bureaucrats pushed through at a pace that no one has time to read and digest. The executive branch issuing executive orders and regulations that dictate where Congress can’t spend money (e.g., a pipeline or drilling). A process where gamesmanship is more important that objective facts (e.g., making the bill so large that people can slip in their “pet” project and hope it is not noticed) or (titling a bill as Inflation Reduction Act when it is funding climate change initiatives). That process must change if the country is to survive financially.
Here are some principles to follow in instituting an improved appropriation process.
There also needs to be a transition process going from the comingling of operating and investment funds as well as establishing a good operating cost base. To accomplish this operating transition teams should be created to review every department’s expense record and cull out all that are investment items, any one-time expense charges, and any cost due to irregularities they may appear. The result establishes the operating budget for that particular department for the next year. The audit teams may consist of outside people, CBO employees or federal bureaucrats from other departments. Efforts to reduce people, programs, and other efficiencies should occur later, potentially with incentives.
The unabbreviated version of the above can be found in the pdf document below.
With the fall of the Soviet Union in the summer of 1991, the Cold War ended, the threat of a thermonuclear war between superpowers was eliminated. Reagan’s investment in long-run national security would ultimately pay off handsomely. It turned out to be one of our best investments ever – and as anyone with private-sector financial experience knows, utilizing debt financing to help fund good investments is a perfectly sound financial practice.
But which are the good investments? How do you determine when the supposed benefits of any given investment proposal are a) intangible, and b) in the future. For just a few examples, try answering the following: What is the net present value, in U.S. dollars of …
- Having several days warning before landfall of a category 5 hurricane?
- Reducing the time and paperwork required to start a company?
- The dollar’s status as the world’s reserve currency?
- Figuring out how to control nuclear fusion?
- Building detection and deflection capability against earth-busting asteroids?
- Preventing a nuclear war between superpowers?
- Thwarting and EMP or cyber warfare attack on our electrical grid?
Source: Neutering the National Debt: How Reagan Got It Right, and How Today’s Left and Right Get It Wrong by Steve Conover (2015)
Presidential Candidates Ideas:
By Ron DeSantis: If the government abuses its authority, the House can withhold funding to the offending executive branch departments until the abuses are corrected. Indeed, because executive branch departments are dependent on Congress for the continuation of their operation, Congress has great leverage to shape executive branch behavior by making funding conditional to the desired behavior. The Founders wisely structured the Constitution so that this most important authority is lodged in the legislative body that is closest to the people and that has the most frequent elections. There is, thus, the opportunity for near immediate recourse whenever the government abuses its power. Rather than wield the power of the purse to hold the administrative state accountable and curtail its scope, Congress has effectively placed the government on autopilot through the routine use of so-called continuing resolutions and omnibus appropriation bills.
A continuing resolution simply extends the current appropriations into a date specified in the future, but invariably does nothing to rein in any wayward agencies. Even when Congress does appropriation bills, it usually takes the form of a single omnibus bill that typically runs over two thousand pages and does nothing to reshape the federal Leviathan. Both mechanisms essentially forfeit the oversight authority of Congress because those running federal agencies know that such oversight is not backed up by a willingness to use the power of the purse to hold them accountable.
Source: The Courage to Be Free: Florida’s Blueprint for America’s Revival by Ron DeSantis (2023)
Robert Kennedy’s Website: A key aspect of American revitalization is our healthcare system, which consumes nearly one-fifth of GDP. It isn’t a matter of shifting the burden of who pays. The problem is much deeper. Healthcare spending per capita has increased twelve-fold since 1960. Are we twelve times healthier? Quite the contrary. A Kennedy administration will go beyond making existing modalities available to all, to include low-cost alternative and holistic therapies that have been marginalized in a pharma-dominated system. We will move from a sick care system to a wellness society.
Source: Robert Kennedy’s Presidential Campaign Website
Donald Trump’s Website: President Trump will unleash the production of domestic energy resources, reduce the soaring price of gasoline, diesel, and natural gas, promote energy security for our friends around the world, eliminate the socialist Green New Deal and ensure the United States is never again at the mercy of a foreign supplier of energy.
Source: Donald Trump’s Presidential Campaign Website
GROWTH POTENTIAL:
The Energy Revolution: America sits atop enormous reserves of natural gas, much of it produced in shale rock formations. For years, oil and gas men labored to develop the capability to access and harvest those vast reserves.
As a result, America has now become a world leader in the production of natural gas. In 2019, we exported more energy than we consumed. The shale gas revolution secured America’s energy supply and put us on the path to energy independence. It freed us from dependence on oil cartels and positioned America as a central player in global energy markets. Other countries started coming to us for energy supplies, not only the other way around. American workers benefited hugely, so did the environment. It put people to work – over 100,000 Pennsylvanians directly and another 377,000 indirectly, according to one estimate. All that production and labor created tax revenue, which then supported schools, social services, and housing. Because the natural gas produced in places like Pennsylvania is cleaner than coal or the gas produced anywhere else, it did wonders for the environment.
In 2019, our country saw a 2.9% reduction in emissions, the largest of any country in the world, thanks in large part to the shale gas revolution. In fact, U.S. emissions have declined substantially since fracking entered regular use; greenhouse gas emissions from power generation dropped 41% from 2005 to 2019, while shale production increased sixfold.
Drillers can extract the gas, but it needs to be able to move it. For that, it depends on pipelines domestically and harbor terminals for overseas shipments. On both counts government – at the state and federal level – is getting in the way. New England needs energy resources. Pennsylvania natural gas is the best possible option. But they can’t get the permits required to build a pipeline connecting the two. Likewise, our European allies need alternatives to Russia’s oil and gas. We should be providing it to them, but it takes millions of dollars and many years to go through environmental impact reviews to build a gas terminal in Philadelphia.
President Biden made it that much worse. On his first day in office, he canceled the Keystone XL Pipeline and put in place regulations restricting new gas production and raising the costs of existing production. His regulatory blanket drove private capital away from the industry by creating uncertainty and reducing the return on investment. Americans lost good jobs. Russia was emboldened to invade Ukraine. It was a cause of the follow-on inflation. That’s what happens when government gets in the way. It doesn’t just slow and misdirect innovation. It hurts everyday Americans by depriving them of better products, lower prices, more advanced medicines, and so on. It hurts the country by weakening America’s standing and relative competitiveness. And it even hurts the environment. American natural gas, after all, is far cleaner and produced more safely than that which comes from Russia, Saudi Arabia, or Venezuela.
Energy is just one example. Across the country, laws and regulations impede our ability to innovate. Regulations regularly lag technological progress, preventing new ideas or capabilities from making it to market – just as the EPA hemmed in fracking.
For the innovation strategy to succeed, we must address three primary weaknesses of the country’s legal and regulatory ecosystem that are so apparent in our energy sector: the slow pace of change, distorting effects, and unnecessary work restrictions. These three simultaneously delay American innovation and undermine the ideas that make America exceptional. Our government has created an ecosystem that encourages passivity, discourages risk-taking, and obstructs the pursuit of happiness. That must change. We need a few principles to act as guideposts for the never-ending campaign to restore our government to its proper place in American life.
The fracking revolution is just the start. Researchers have made breakthroughs in nuclear fusion and can now generate more energy than is required to catalyze the fusion. Others are drilling deep into the earth’s surface to harness the vast geothermal energy potential, and nuclear reactors are becoming cheaper, smaller, and more efficient. We’ve only scratched the surface of what unbridled American ingenuity and industriousness can do to ensure energy dominance and protect the environment. These are bold moves, but renewing America will require a courageous commitment to innovation. The biggest risk of all is that we stop taking risks at all. If our government wants to create a genuine acceleration in the U.S. technological development, it will have to expect and accept failure, as any entrepreneur can attest. Congress will have to give R&D projects some freedom to fail and learn from those failures, and Washington will have to make bets on the future. Unfortunately, the government is not set up to do either of those things well.
Source: Superpower in Peril: A Battle Plan to Renew America by David H. McCormick (2023)
In short, if we fail to elect officials who will get us back onto a pro-growth agenda soon, I think it’s a decent bet that our grandkids will be living under a different form of government. If that’s what happens, and our grandkids are lucky, the new government will take power peacefully; if they’re unlucky, violently. If they’re lucky, something like a benevolent dictator will be in charge; if they’re unlucky, it will be whichever predator wins the power struggle. Those are the not-so-pretty futures I envision if we don’t get the economy moving forward at a better pace and soon.
Source: Neutering the National Debt by Steve Conover, PhD. (2015)
POTENTIAL SOLUTION
To win the Capital War we have to do two things: increase the growth rate of our economy and strife for effective government spending (reductions). Our situation is dire enough we likely cannot do one without the other to achieve success – both are needed.
Accelerated Growth: The experts say we need 4 to 5% growth to pull us out of decline. How is that possible when we have only achieved 1.3% for the last six quarters? As a country we are blessed with natural resources, specifically energy producing natural resources. So, utilizing them to produce low-cost energy for consumption is the most likely way to achieve that level of growth, in fact likely the only way. The problem is only about one-half of the country will support that.
To address that problem there should be a formal public debate between a Democratic member and a Republican member of Congress. The debate should lead off with the head of the Congressional Budget Office explaining our debt, debt burden, the increase and implications of the debt burden in 2023, their projections on the impact of the debt burden ten and twenty years out, and the amount of growth needed to maintain our debt where it is currently. Then the two parties’ representatives debate how to achieve the growth rate in a formal debate fashion (timed responses back and forth supporting their position and opposing the other debater’s position). If both positions are energy, then the party advocating achieving the growth rate with wind, solar and hydroelectric power explains how that could transpire (cost, time, land requirements, amount of rare earths) with a second expert explaining attaining the same growth rate via nuclear power and natural gas (cost, time, land requirements, amount of rare earths). The opposing party should then challenge the need to do so without the use of oil and/or coal. This debate should occur at least a month before any ballots are sent out for the 2024 election.
Effective Government Spending: The existing appropriation process for our country is horrifically bad – huge Omnibus bills mixing operating costs with investment capital, thousand-page bills put together by lobbyists and Federal bureaucrats pushed through at a pace that no one has time to read and digest. The executive branch issuing executive orders and regulations that dictate where Congress can’t spend money (e.g., a pipeline or drilling). A process where gamesmanship is more important that objective facts (e.g., making the bill so large that people can slip in their “pet” project and hope it is not noticed) or (titling a bill as Inflation Reduction Act when it is funding climate change initiatives). That process must change if the country is to survive financially.
Here are some principles to follow in instituting an improved appropriation process.
- Operating appropriations should be separate from investment appropriations, not comingled as they are today. Ideally there would be one operating appropriation package that must be lower than estimated revenues for the year (e.g., a Balanced Budget)
- Investment appropriations should be:
- Project specific, e.g.,
- Expansion of Nuclear Energy for the Purpose of Generating Electricity via Development of Enhanced Safety Precautions and Subsides, or
- Expansion of Natural Gas Usage via infrastructure initiatives, specifically Pipelines and Natural Gas Facilities for Export, or
- Purchasing 120 battleships to Enable our Navy to effectively Compete with China’s Navy in the Event of Worldwide Naval Conflict, or
- Upgrading the Country’s Three Electrical Grids to Be Able to Withstand an EMP Attack
- Hiring and Additional 87,000 Internal Revenue Agents
- A Payroll Protection Program to Protect Peoples Employment and Income because of a Pandemic
- Each investment appropriation should contain an objective background statement of need, on how the money will be spent, a cost estimate for the entire project, how much money for this particular investment, a summary of benefits, and an implementation timeline. In some cases, how the endeavor will transpire such as a Payroll Protection Program. The request should be made in five pages or less.
- Each appropriation request must be a standalone request and not dependent on another appropriation.
- The appropriation should include a statement of funding by private enterprise that will accompany the appropriation, if applicable.
- A statement accompanying the request should state the source of funds, e.g., operating budget, cost savings greater than the request (with accompany verification), or increased debt.
- Each investment appropriation should come before the House of Representatives with debate being limited (as is done in committee hearings) followed by a yea or nay vote.
- Investment appropriations must be limited to investments in the future and therefore be limited and specific with a contingency for potential overruns. Each appropriation should be reviewed and audited. The date for the audit should be specified and included in the request with personalized audit responsibility. The reported results should be taken into consideration for any future investment appropriations.
- A set schedule should be established for review and approval so that such requests can be compared to other requests so priorities among projects is achieved. The scheduled review and approval process should begin with an updated report of investment monies allocated to date in the fiscal year and how much is being financed by debt and the associated impact on the annual debt burden.
- Project specific, e.g.,
There also needs to be a transition process going from the comingling of operating and investment funds as well as establishing a good operating cost base. To accomplish this operating transition teams should be created to review every department’s expense record and cull out all that are investment items, any one-time expense charges, and any cost due to irregularities they may appear. The result establishes the operating budget for that particular department for the next year. The audit teams may consist of outside people, CBO employees or federal bureaucrats from other departments. Efforts to reduce people, programs, and other efficiencies should occur later, potentially with incentives.
The unabbreviated version of the above can be found in the pdf document below.
| america_16l_the_capital_war_--_segment_16.pdf |