When the problems of Greece hit close to home

Americans have been in shock watching the images of buildings — and even people — in flames as the government of Greece implements austerity measures to stop the bleeding caused by decades of irresponsible fiscal policies and socialism. We Americans naturally think, "thank God I still live in the US. That could not happen here."

Recently Dale Hurd of CBNNews.com has painted a dark future of our own republic if we do not change our spending priorities. Furthermore, he points out several scenarios — none of them pleasant — if we fail to fundamentally change the direction our country is going.

Hurd points out in his column that the "federal debt as a percentage of the Gross Domestic Product now stands officially at around 60 percent. But with the course the country is on, it will hit 150 percent in 10 years, and 300 percent by 2050" (emphasis added). He goes on to compare our situation with the one in Greece, which began to spiral when its debt reached 115 percent of GDP. We will reach and surpass that number in less than ten years. Because Greece is a member of the European Community and its currency is tied to the Euro like most member countries, other countries have (at least) a short term incentive to bail the country out in order to protect the value of their money. Those countries are, in fact, doing just that. Who will bail out the United States? Considering the disdain by other countries towards the US, one should not have any hope that others will come to the rescue.

The columnist quotes Anne Vorce of the Committee for a Responsible Federal Budget, who said she is not sure when America will enter economic crisis, but noted that "The problem is you don't know when you reach a tipping point until you reach it, but we're well beyond normal peacetime historical experience already." If the US entered into any additional major national security conflicts or faced any series of natural (or other disasters), we could find our situation deteriorate rapidly.

What I found most disconcerting about the article was the words by Hurd about the future of the United States of America. He said we only have to look to our friends in Argentina to find a disturbing window of the future. "Before World War II, Argentina was one of the most prosperous nations in the world. With a strong industrial base and thriving middle class, it attracted immigrants much like America. But within 15 years, Argentina went one of the richest nations to one of the poorest. Argentina President Juan Peron, who some historians say was a fascist, fomented class warfare and bashed business, banks and the wealthy. He made labor unions his allies and unleashed massive social spending that the nation couldn't afford." This sounds eerily familiar as we have a sitting President with certain obvious "corporatist" inclinations and disdain for those in the entrepreneurial (most of whom are middle income) class.

So what does the future hold? Experts point to several possible scenarios, none of which offer much to be optimistic.

Long term economic stagnation. We as a nation simply get use to doing without. High unemployment becomes the rule rather than the exception and the idea of an expanding economy and growing opportunities becomes something for the history books. Many experts see this as one of the better scenarios.

On the opposite end — and the worst case scenario — we have a government that goes into default. This means it cannot fulfill financial obligations, pay its bills, and it leads to a rush on the dumping of its Treasury bonds as countries no longer see us as a good investment.

Another possibility is hyperinflation. On a single day last year the US Government pumped $1.4 trillion into the money supply in order to offset the high cost of bailouts. This "funny money" has the potential of devaluing all dollars that are out there and it appears this approach to monetary policy could become a permanent part of our economic strategy.

The bottom line is that the US is going to have to make tough decisions about the future of our spending or the consequences of our behavior will make decisions for us. "Doing nothing" is a course that was followed by countries like Argentina that was propelled from a major economic player into third world status. There has to be a better way for the United States of America.

Kevin Price is a nationally syndicated columnist and host of the Price of Business on CNN Radio. Learn more about him and his activities at www.PriceofBusiness.com.

Quantifying the shift to government dependence

I love lists, indices, and other interesting compilations of information. However, a recent report by the Heritage Foundation called the Index of Dependence on Government was very disturbing indeed. The numbers numbers this report certainly makes one look and they should be most alarming to even the most casual observer.

The index looks at several indicators when it comes to the growth of dependence on government. For example, how much have federal social programs grown? To what degree have such programs "crowded out" what were once social obligations and services carried out by the family, community organizations (e.g., churches), and local governments? In sum, William Beach, Director of the Center for Data Analysis at the Heritage Foundation, asks, has the civil society yielded significant ground to the public sector? After all, problems are solved by friends, neighbors, family, and religious groups, they are simply maintained when they fall into the hands of government. Quantifying the size of the shift to dependence is exactly what the index attempts to do.

The index currently stands at 240, based on data running through 2008. That is up three points from the 237 points from 2007. The growth in the index has been astonishing since 2001, growing by 31.2 percent when it stood at 183. The growth is even more profound when you look at the orgins of the indes in 1980, in which the base year for the index started at a mere 100). This enormous growth has happened over 30 years.

The rapid increase in the number of dependents has been accompanied by a comparable increase in the number of people who do not pay taxes. That number has grown from 21.3 percent in 1980 to 34 percent in 2008. 20 million tax filers did not pay a penny in taxes, 48 million Americans paid nothing at all.

Beach believes this shift to government dependence should be alarming to Americans. In addition to providing a huge financial drain on social service programs and the probability of long term dependence without consequences or shame (after all, recipients are mere "numbers" in the bureaucratic game); this harms civil society of its traditional and necessary role in providing assistance and the path towards independence through relationships that are closer to home. These include the family, community groups, religious organizations, and local governments. Local governments are far more effective than the federal government in breaking dependence because of their much more limited budgets and greater accountability, because they are closer to voters. Although the focus of the index is on the shift from society to government, this study also indicates the decay of civil society itself as reflected in its declining role in this most important area of life.

The biggest concern of all that comes from this index, in my opinion, may be what is around the corner -- the huge number of Baby Boomers that will bring the largest retirement of people in the history of the world. This phenomenon is taking place at a time when the number of people who do not pay taxes is growing rapidly. America has been on the path towards economic ruin for years. Now it seems we are in the process of fast tracking that process.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Lessons Obama Should learn from FDR

We are familiar with the various quotes about the lessons of history. Bottom line, if we do not learn them, we will find ourselves reliving them. Since the election of Barack Obama to the President of the United States, we have seen this Administration try an approach to government that we have seen before and we have plenty of evidence as to how effective it is.

During the Great Depression, Franklin Roosevelt moved to have the government take over huge amounts of the economy after the nation experienced a meltdown.. The man he hired to over see that project was Secretary of Treasury Henry Morgenthou, Jr. Morgenthou was both a trusted adviser to Roosevelt and one of his very close friends.

Morgenthou was called on to take an ambitious approach to the nation's economic problems with a primary objective of relieving the pain of unemployment caused by the protracted decline in the economy. That approach was centered on massive increases in government spending and intervention in a manner never seen in our nation's year. After eight years of this expansion, the Secretary had the following to say to Congressional leaders: "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong ... somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises ... I say after eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!"

During the Great Depression, the government assumed a larger role in "helping" people with their poverty through politically driven programs that rewarded battle ground states that money could influence into the Democrat column. Furthermore, by taking away the personal accountability that came from state run agencies and private organizations, the government's approach led to chronic unemployment and the crushing of the spirit of people who simply wanted a job. Most disheartingly in the end, it didn't work. After a decade of throwing money at the problem, nothing had fundamentally changed.

Albert Einstein is credited with saying that the definition of insanity is doing the same thing over and over again and expecting different results. People are the same now as they were back in the 1930s. Human nature hasn't changed. Free markets and individual responsibility works and government does not. Let's hope we learn that lesson sooner than Henry Morgenthau.

For additional lessons from the Great Depression, consider New Deal or Raw Deal? by economic historian Burt Folsom.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

Obama takes from Vets to Expand Welfare Rolls

If it were any other President at any other time, I would be shocked. For Barack Obama, the latest announcement is nothing more than business as usual. Recently, members of the Obama administration (including the President) met with members of several veteran organizations, including the largest of such groups -- The American Legion. Leaders of that organization are up in arms because of what they heard and it is for good reason.

In a press release from the organization, we learn that the leader of the Legion (Commander David K. Rehbein) is "deeply disappointed and concerned” after a meeting with President Obama today to discuss a proposal to force private insurance companies to pay for the treatment of military veterans who have suffered service-connected disabilities and injuries. The Obama administration recently revealed a plan to require private insurance carriers to reimburse the Department of Veterans Affairs (VA) in such cases. " The release goes on to point out that Obama "is looking to generate $540-million by this method, but refused to hear arguments about the moral and government-avowed obligations that would be compromised by it."

Finally, the Legion points out that "This reimbursement plan would be inconsistent with the mandate ‘… to care for him who shall have borne the battle…’ given that the United States government sent members of the armed forces into harm’s way, and not private insurance companies." To saddle private insurance companies with this cost could lead to discrimination towards those who served in the military when they consider covering vets. Furthermore, since policy have financial limits, this policy could take away coverage for other family members who might need it. On a broader note, many fear this type of policy is part of Obama's larger objective to burden private insurance companies with higher costs in order to weaken them as part of the Administration's on going objective to make a case for socialized medicine. Insurance companies will be forced to raise premiums in order to pay for this additional liability. Obama will point to this situation as an indicator of inefficiencies among insurance companies.

The irony is that, while Obama is trying to increase the burden of those fighting men and women who have protected our country, this Administration is also pressuring governors to increase the welfare rolls by allowing people who are not even seeking employment to receive benefits. For example, Gov. Haley Barbour noted, that if his state of Mississippi wanted to receive $54 million in increased unemployment benefits from the Obama "stimulus" package, they will have to expand the benefits to include those not actively looking for employment or even willing to take a job if offered. If Barbour didn't take it, he will receive only 4 billion of the expanded benefits. It is clear why governors would be resistant to such a bizarre policy approach. Obama is single handily restoring the welfare policies that wereso pervasive before 1996, when a bipartisan approach was used to reform a system of economic dependency.

Obama wants to harm our veterans and benefit those who will not work. What a strange world we live in today.

Kevin Price is Host of the Price of Business, the longest running show on CNN 650 (M-F at 11 am). Eric Bolling of Fox News and Fox Business and says that Price’s Blog “is very influential and moves the blogosphere.” Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com.

Obama Wants to Restore Welfare "As we Knew It"

Hidden in the media coverage about Barack Obama is the eloquent argument being made by Republican Governors regarding their concerns over the stimulus package. The media believes that these politicians are jockeying for higher office. The truth is, most are opposed to the massive growth of the federal government and are particularly concerned about the bill's various "hitches" designed to force states to take positions that they are opposed to. Worse than being critical about these governors, many in the mainstream media are ignoring them entirely.

Robert Schlesinger has noted at US News and World Reports that the New York Times reviewed the views of GOP candidates and their thoughts on Obama's stimulus package and stated that "in terms of presidential politics, the most notable name in the Times piece is Florida Gov. Charlie Crist, who campaigned with Obama for the stimulus package last week. Glaringly absent from the Times piece were governors like South Carolina's Mark Sanford, Louisiana's Bobby Jindal, Mississippi's Haley Barbour and Alaska's Sarah Palin—all governors recently named in the Washington Post's excellent 'The Fix' column as being among the five most influential and powerful voices in the Republican Party (the other person named was former Massachusetts Gov. Mitt Romney). Palin and Jindal are often named as contenders in 2012, and Barbour gave 2008 a long look before passing on it. Sanford is chairman of the Republican Governor's Association."

Haley Barber has been particularly persuasive in discussing his concerns, stating on Fox News that the Obama measure would force states to allow people to receive welfare, even if they are not willing to work, if they want to enjoy the complete package. For example, Barbour notes, that if the state of Mississippi wants to receive $54 million in increased unemployment benefits, they will have to expand the benefits to those not actively looking for employment or willing to take it if offered. If Barbour doesn't take it, he will receive less than $4 million of the expanded benefits.

We haven't seen this kind of pressure on the restoration of the Welfare State since Bill Clinton and Republicans in Congress led the efforts to reverse many of the damaging policies that led to multi generational poverty. I consider that to be one of the the greatest policy achievement of the 1990s. This achievement is threatened as the Obama policies are implemented in the states.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

The Squeeze on Entrepreneurs

Over 80 percent of all businesses in this country are created by small business and over 90 percent of all jobs are created by such entrepreneurs, according to the Small Business Administration. It seems that this important engine of economic growth is under a constant state of siege by the government that continually taxes these companies without limits in order to subsidize those in poverty on the one end extreme and to bailout some of America's wealthiest businesses on the other. I cannot recall a time in this nation's recent history where small businesses have been under such pressure and yet have also been more important to the economy's future.

How important are small businesses? According to the SBA, entrepreneurs:

• Represent 99.7 percent of all employer firms.


• Employ about half of all private sector employees.
  
• Pay nearly 45 percent of total U.S. private payroll.
  
• Have generated 60 to 80 percent of net new jobs annually
  over the last decade.


• Create more than half of non farm private gross domestic
  product (GDP).


• Hire 40 percent of high tech workers (such as scientists,
  engineers, and computer workers).


• Are 52 percent home-based and 2 percent franchises.


• Made up 97.3 percent of all identified exporters and produced 28.9 percent of the known export value in FY 2006.


• Produce 13 times more patents per employee than large
  patenting firms; these patents are twice as likely as large
  firm patents to be among the one percent most cited.

The logic behind bailing out failed auto companies and financial institutions is because these type of companies individually employ large numbers of people. If a Ford or a GM go under, tens of thousands (or even hundreds of thousands) will be instantly unemployed and the ripple effect will be more like a tidal wave. However, if the local movie rental place, the convenience store, and sandwich restaurant go under, that only translates into a dozen or so positions. However, thousands of these small businesses going down, on the other hand, paints a much different picture.

The lessons we are learning from government is that obsolescence and a lack of competitiveness are only a problem if your business is small. The larger a company is, the more resistant it can afford to be to necessary change, the less important it is too make tough decisions, and the more likely that company will receive a free pass for poor performance. What type of companies are we going to have if they are not allowed to fail? Companies that are destined to fail at a huge cost to taxpayers who keep them up for years. The biggest victims will be the huge entrepreneurial class who more than carries its own in job creation, but also has among the biggest tax burden.

The government control, subsidy, and even ownership of large businesses has historically been known as fascism. We don't like the term because we think of our enemies during World War II. Unfortunately, if the shoe fits, we are destined to wear it. What is most striking is that this desire to accommodate the most massive of businesses at the expense of small ones seems to transcends party lines. Both McCain and Obama joined George Bush in propping up many big businesses begging to fail. I wonder, at what point, will these small businesses that have a big impact will simply declare "enough!"

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Obama Calls for Black Reparations

Ever since the conversation between "Joe the Plumber" and Barack Obama, people have been up in arms over the Illinois' Senator and his socialist leanings. Obama declared he wanted to "spread the wealth" and do so with the earnings of those with higher incomes.



Now, John McCain and his allies are looking for examples of Obama's socialistic leanings at every opportunity they can find and, unfortunately, missing an equally alarming and dangerous story. Currently, McCain supporters are referring to a 2001 radio interview in which the then Illinois state senator was discussing the civil rights movement. During the interview he pointed out that: "The Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society… and one of the, I think, tragedies of the civil rights movement was, um, because the civil rights movement became so court focused I think there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalition of powers through which you bring about redistributive change. In some ways we still suffer from that."

The radio interview (click the image above) does make it clear that Obama supports the redistribution of wealth. He is a socialist. Socialism, unfortunately, has been a part of the liberal mantra for years. The list of Marxist sounding quotes by Obama's Democrat opponent, Hillary Clinton, is exhaustive in its own right. During her run for the Presidency, Clinton said:

• "We're going to take things away from you on behalf of the common good."
• "It's time for a new beginning, for an end to government of the few, by the few, and for the few..... And to replace it with shared responsibility for shared prosperity."
• "(We) ....can't just let business as usual go on, and that means something has to be taken away from some people."
• "We have to build a political consensus and that requires people to give up a little bit of their own turf in order to create this common ground."
• "I certainly think the free-market has failed."
• "I think it's time to send a clear message to what has become the most profitable sector in (the) entire economy that they are being watched."

Therefore, "socialism" has become a common Democrat agenda. Obama, in this interview, goes further. He is discussing the targeting of specific ethnic groups for payment to another ethnic group. He is a socialist that believes that the majority population today should be forced to pay for the treatment that black people received generations ago. This is ethnic and class warfare at its worst. In a culture that has become too comfortable with the redistribution of wealth, this largely missed story among the socialist rhetoric rampant today could actually make Americans think twice.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

The High Cost of Socialized Banking

I am no fan of welfare. In fact, I take every opportunity to take shots at systems designed to reward laziness, inefficiency, and the subsidizing of poverty. Although there seems to be far more opportunities to write about welfare for the poor, I have even greater disdain for the subsidizing of the rich. So when the stories of banks "on the ropes" and the pending government bailouts hit the news, I was disgusted.

The federal government has announced it was willing to shore up Fannie Mae and Freddie Mac by purchasing its stock if it proved "necessary." Libertarians and liberals were quick to call this "fascism." Strong word, but since fascism entails government "partnership with" and subsidy to business, the shoe fits. That is exactly what the Bush administration appears to be advocating. I can't stomach an administration that, on the one hand, decries welfare for the poor but is willing to dig deep into the government's coffers for big business.

How deep? According to Forbes, "It's going to be a mind-popping $25 billion over fiscal 2009 and 2010, according to the Congressional Budget Office (CBO), which released its estimate of the rescue plan Tuesday morning. Let's put that in perspective: $25 billion for two financial institutions compared with $125 billion for the entire S&L industry in 1989-1991? Ouch." By the way, the S&L crisis was another example of government fascism in support of the rich.

There is another concept in economics that irresponsible banks need to learn. Moral hazard. Moral hazard is the possibility or probability that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Who knows, the current banking crisis may be linked to the S&L crisis of the 1980s and 1990s. If we allowed S&Ls to face the full brunt of their decisions, who knows, financial institutions may have thought twice before diving so quickly into the sub prime loans they are suffering from today. Lesson NOT learned, since government is strongly entertaining bailing financial institutions again.

Welfare is usually dangerous and harmful. When it is done to benefit big business, it is the adding of insult to injury.

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Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Jonathan Hoenig: Capitalist Pig?

Jonathan Hoenig -- known as the "Capitalist Pig" (and proud of it) and a regular contributor to Fox News and Fox Business -- was a guest today on the Houston Business Show. I have great guests all the time and Jonathan is one of my favorites.

I like Jonathan because he's not ashamed about his passion about free markets. He doesn't merely discuss economic efficiency, but economic morality, a greatly missed theme in discussions today. What do I mean by "economic morality"? There is a morality to everything, including political economy. When government gives something to one group "for free," they do it at the expense of others. This redistribution of wealth is immoral.

While others decry the fact that governments efforts in philanthropy (aka, "welfare") because they do an inefficient job, Hoenig argues that it is wrong. Period. It's fine to decry the terrible job the government does in redistributing wealth. But if government some how became efficient at it, would it some how make such actions "good"? I don't think so and neither does Jonathan Hoenig and his arguments are a refreshing edition to the political and economic debate.

The Rise of Pessimistic "Conservatives"

Having cut my political teeth on the philosophy of Ronald Reagan, I have a hard time seeing "pessimistic" and "conservative" in the same sentence, but such a group is quickly on the rise. What's most interesting about this group is that they claim Ronald Reagan as their philosophical ancestor. I think the former President would be rolling in his grave if he knew that those claiming his mantle have become xenophobic about immigration and anti-free trade. But those are the exact positions many on the Right are proclaiming.

Pat Buchanan was the first conservative to get on this bandwagon back in 1992 when he ran as an alternative to Bush I and in direct opposition to the North American Free Trade Agreement. At the time, only hard left, pro-labor, candidates (remember Dick Gephardt) adhered to such positions. Slowly, but surely, it is becoming conservative dogma. I'm afraid that, in another decade or two, it will be on the same level of common held Republican beliefs as tax cuts generally are. Unfortunately, undermining free trade has a very different result than cutting taxes.

The reason people are opposed to free trade is because other countries (whom we trade with) don't practice it and it results in the "exportation" of jobs. There is no doubt that other countries are protectionist, but those countries suffer from extremely high prices and fewer choices than we enjoy. Are you ready to pay multiples more for the type of goods we buy from China in order to artificially prop up the prices of goods from more friendly nations? Punishing our trade partners with tariffs or quotas, punishes our consumers more than it hurts competitive nations and it leads to a reduction in the quality of goods we produce while "enjoying" such "protection." People advocate eliminating free trade because of "jobs" being exported to these countries? What jobs? The unemployment is this country is 4.5 percent, which is considered almost zero (four percent is the actual number) by most economists when you factor in voluntary unemployment, illegal activity, seasonal unemployment, etc. Protectionism will not only fail to protect jobs, but destroy them; because so many jobs (sales, marketing, legal, import, etc.) are created by trade into this country. In the end, attacking free trade will attack our prosperity and our jobs.

Regarding immigration, I understand the concern of conservatives wanting to protect our country, but te populist view does nothing to help the problems coming from it. The problem is that the system doesn't offer hope to people who want to contribute to this nation of immigrants, much opportunity to do so legally. Rather, they force people underground and allows those of us who have been here longer to act holier than thou and call them criminals. I, in particular, find this offensive. My mother was born and raised in England, met my father during World War II and came to this country, eventually giving birth to me. I know I'm the child of an immigrant. It just happens I'm one that our country finds attractive. You, too, are a descendent of immigrants unless you are a Native American. It is by luck I'm a citizen of the greatest country of the world, not by any effort on my part. We must offer opportunities to others, but they must make sense. Here are a few ideas:

* Require people to be in this country for an extended period time (minimum of ten years) before they are allowed to become citizens. This, in my opinion, should be the case regardless of where they come from.

* Provide a fast track program for those from foreign countries willing to serve in our military. Over 60,000 people serve in the US military from foreign countries. That kind of sacrifice deserves special consideration. We should consider expanding this program, especially during these times.

* Allow a long term separate status of people who never get citizenship, but work, send some money home, and eventually return there. That is the desire of many, if not most of them.

* Curtail welfare programs for immigrants, placing severe restrictions.

* Move away from an income tax and go towards a consumption tax, to make sure everyone is paying for the blessings of liberty with every purchase they make.

These are just a few things we can do to keep valuable labor important to this country (again, at 4.5 percent unemployment, there are many jobs Americans don't want to do) here, without compromising our security. In fact, it will make us more secure than ever to know who these persons are, where they live, and what they are doing here. America is a nation of immigrants. Reforms like this will make them legal ones.