Copyright 2012 by John T. Reed

Politicians are liars.

Rick Santorum is a politician.

Therefore,…

But Santorum is a very skilled liar. He makes a good teaching aid.

Anti right-to-work

During one of the debates, Santorum was attacked for being pro union shop, that is, anti-right-to-work. He was in favor of forcing workers to join unions or at least pay dues to them in order to get a job.

To win the Republican presidential nomination, he has to be anti-union, pro right-to-work. He said he is but he had to be pro-union to “represent his constituents” in Pennsylvania, a pro-union state.

Well, that sounds like a perfectly reasonable, satisfactory explanation.

No, it isn’t.

If you thought it was, you got a warning about your gullibility and susceptibility to smooth talking BS artists.

I don’t know whether he is pro-union or anti-union. He has talked out of both sides of his mouth on that subject depending on whether he was running for Pennsylvania senator or U.S. president. He should be anti. The whole purpose of unions—to prevent competition between workers for jobs—is immoral.

He would now have us believe he has been anti-union all along. He wasn’t “representing constituents.” He was lying to voters to to get, then keep, his senator job. Run-of-the-mill political hack.

Earmarks

Santorum likes earmarks. He voted for a zillion of them. He finally now opposes them. He says it is better for the local congressman or senator to decide specifically how money should be spent, not some Washington bureaucrat.

Well, that sounds like a perfectly reasonable, satisfactory explanation.

No, it isn’t.

First, Congress and the President have spent, or promised to spend in the future, trillions more than they should have. Santorum and the rest of them should be prosecuted, tried, convicted, and incarcerated for that. Earmarks are just pork to buy votes with taxpayers’ money.

Second, earmarks originally were disguised so voters could not tell which member of Congress requested a given earmark and what special interest the earmark benefited. Congress refused to identify the sponsor. And the sponsor worded the earmark so you could not even tell which special interest was benefiting. A typical example would exempt, say,“ a corporation incorporated inOhio in March, 1883” from a particular tax law.

Huh?

Who dat? Typically some big household-name corporation with lots of K Street lobbyists.

Investigative journalists started decoding that crap. Voters were outraged. Congress agreed to identify the sponsors. They also stopped writing the earmarks in code.

Santorum says the earmarks never amounted to that much money. Well, that says it all, doesn’t it? In Washington, saying billions are not that much money is code meaning it’s just taxpayers’ money so we don’t need to be careful or reluctant about spending it.

Am I saying Romney is better in this regard? Nah. He’s another politician. If he had gotten elected in 1994 when he ran for Senate against Ted Kennedy, I would not be confident that Romney would have opposed earmarks or would have declined to “represent his constituents” when it came to right-to-work type legislation.

But the bare fact is Rick Santorum is the classic political hack who voted for all the spending and most of the laws that are now sending America’s federal government into bankruptcy. Romney did not do that in Washington, but that may only be because he lost the election to join Santorum in the Senate.

Because of his politics-as-usual terms in Congress, Rick Santorum should be incarcerated, not inaugurated. The fact that he can smooth talk voters into forgetting all that is a testament to his skill as a liar and the voters’ inability to recognize total BS when it’s thrown right in their face.

All other things being equal…

I read somewhere that all lawyers either graduated from Harvard Law School or got a rejection letter from it. I am sure that’s an exaggeration, but I am not sure that Santorum did not get a rejection letter from Harvard Law School. I got one. I applied to HLS while I was a first-year student at Harvard Business School. Specifically, I was applying for the joint MBA-JD program. I graduated from the MBA program but was rejected by the Law School.

Romney got accepted by the MBA-JD joint program and graduated from both.

Michelle and Barack Obama also both graduated from HLS, but I discount that because of affirmative action. I do not believe Michelle deserved to get into or graduate from either Princeton or HLS. She was told that both in high school and in college that she did not have what it takes to go to Princeton or HLS. Her diplomas are all skin color “accomplishments.” I suspect the same is true of Barack. That’s why he won’t release his SAT scores or grades. So don’t anyone point out the Obama is HLS. He is affirmative action. Whole different ball game. I would be HLS if I were black.

All other things being equal, the guy who got accepted into, and graduated from, both HBS and HLS makes more sense to be president than the guy who got rejected by HLS.

Santorum probably also has a rejection letter from HBS. Why do I say that? He has an MBA from Pittsburgh and a law degree from Dickinson School of law. Hell, with two grad degrees from schools that were not on any top-ten list, it sounds like he’s got a whole drawer full of rejection letters from top business and law schools. That should not be dispositive for everything in the rest of his life, but it is a pertinent fact.

Rick Santorum is roughly what Shelby Steele said Barack Obama was, a mediocrity, in the Congress of the last 20 years.

You say all other things are not equal? Correct. Romney was a big success in business, the Olympics, and served a term as chief executive of a state government. Santorum was in Congress from 1990—when he was 32—until 2007. Santorum practiced law for four years, then became a political camp follower until winning his first election, and never held an executive job in his life. He was, and is, a run-of-the-mill, dime-a-dozen, “spend the nation into bankruptcy,” Washington politician who made his living by bringing home the pork and “representing his constituents’” socialist union views.

We need a fiscally responsible third party

I am not a Romney supporter. I think Romney and the Republicans are too timid to fix the debt problem and the other problems, other than Iran nukes, are insignificant. I will probably vote Libertarian. Romney will probably win. It won’t matter. There is a good chance that the U.S. government will be unable to sell bonds during the next administration. That will force the government to default on the national debt and cut federal spending overnight by about 50%. He and his party will be on the receiving end of the winner’s curse.

If a Republican is in the Oval Office when that happens, Republicans will get blamed and will be banished to the political wilderness for 50 years or more.

What is needed is a new third party that brands itself clearly as the no-kidding, fiscal-responsibility party, predicts the federal bankruptcy, and is ready, like Churchill just before World War II, to assume power when the American people finally realize that electing and reelecting Democrats and Republicans who promised about $150 trillion worth of benefits to a nation that pays $2 trillion a year in taxes was insane.

In the late 1930s, British Prime Minister Neville Chamberlain appeased Hitler in order to get “peace for our time.” Churchill denounced him and said England should act against Hitler before he got stronger. The British people wanted to believe Chamberlain’s attractive lie, and did. It cost them millions of lives and billions of British pound in war costs. When the war started, Churchill immediately became prime minister and remained there for the duration of the war.

Both the Democrats and Republicans are appeasing the senior and federal benefits crowd in order to get “never-ending government benefits for our time.” Our Churchill will be elected president and his party will take over Congress when the bond market goes on strike and forces the American people to either hyperinflate the U.S. dollar, or default on the national debt and cut spending.

Unfortunately, we have no Churchill or Churchillian party waiting in the wings for the American people to be wised up by events.

It’s going to be a hell of a mess when the U.S. Treasury holds a bond auction and no one bids. If the Federal Reserve buys the bonds instead of the real bond market, which is almost certain, hyperinflation will result.

A reader asks:

1) No one bids a the bond auction, or actually, they are, say, only 50% of the bonds desired to be sold actually sold.


2) So lower the the price / raise the interest/change the terms/ until the market clears !!! Just like sears or a thrift store! JUst keeping marking those bonds down and down and down in price and SOEMBODY will by everysingle one of them...especially if you change some terms, dall options, repricing options one you own them...whatever.

3) he appraised value of my house in $980k, I put a FSB sign in my front yard say $500k, 30 day close, all cash...and I will have it sold TODAY!

4) I don't get you use the term "failed reasury bond auction"...it must mean something else than I have described.

please inform me.

I answer:

A. we do not collect enough taxes to pay higher interest rates on $16 T. We collect $2.3T a year in taxes $2.3T ÷ $16T = 14%. As the interest rate we pay on our bonds approaches 14%, it crowds out all other federal spending. Lenders have debt-coverage ratio standards. They all refuse a debt-coverage ratio of 100% which would be ours if interest rates hit 14%. Rating agencies would downgrade us as our DC ratio approached 100% which would cause our interest rates to go up and force some bond buyers to stop buying because they are required to buy AAA by law or policy. Canada is now selling Canadian bonds denominated in U.S. dollars. They are a hot ticket because U.S. bonds are now rated AA+ by S&P whereas Canada is rated AAA.
B. In the absence of negative value like toxic cleanup costs that exceed post-clean-up value, all real estate has a market clearing price. However, with bonds, all you get is a piece of paper which is worthless if the loan is either not paid or paid with worthless currency and is a loss transaction if the loan is only partially paid with good currency. In various recent crises, the bond market went on strike—refused to buy certain bonds at any price—like the Long-Term Capital Management crisi. Greek bonds I believe wen up to about 20% in 2011 then they had failed bond auctions.

John T. Reed