A Liberal Utopia: President Obama’s vision of North Africa and the Middle East.  The President gave his highly anticipated “Middle East” speech today at the US State Department in Washington, DC.  It described a world that can most easily be seen through rose colored glasses with a liberal mindset, especially the first part on politics and human rights.

His thoughts on economic reform were somewhat entertaining given the debate going on in Congress over the debt ceiling and our at home spending problems.

The President proudly announced his intention to offer $1 billion in debt relief, and another $1 billion in loan guarantees.  Excuse me, Mr. President, you do realize the government you’re running has a little debt & deficit problem don’t you? 

Plus, President Obama wants to get the IMF & World Bank involved in Egypt and Tunisia right away to advise how best to proceed with the economic reforms.  As you know, the US is the largest contributor to the budgets of both international institutions.  Rather than let the Egyptians and the Tunisians indicate where best to focus scarce resources to best transform their economies, the President wants to allow three of the worlds least effective institutions, the World Bank, the International Monetary Fund (IMF), and the European Bank for Reconstruction and Development (EBRD) to take the lead.  I feel bad for the people of Egypt and Tunisia on this one, and you should too.  Tied with the standard globalist language on trade and investment, the economic reform proposals offered by the President seem naive, even comic in some regards, and not obviously beneficial to the US in the medium term.

On Israel and Palestine, the Presdient took a stand with the Palestinians in saying the two state solution is the only way, and importantly, the borders should be those that existed in 1967 before the 6-Day Arab/Israeli war.  Israel will not be pleased.

The speech was typical Obama.  Lots of lofty language, symbolism, anecdotes, and hope, with little mention of reality and the facts on the ground.  It wasn’t his best delivery.  As usual he went teleprompter, though stumbled a handful of times.  I suspect someone may get a tongue lashing over one or two of the stumbles.

I’m increasingly having a hard time taking our well spoken President seriously.  It may be that he is constantly in our face.  It may be the sense of his rejecting of the way things are and speaking in terms of the way he hopes they are provided he doesn’t intimate he recognizes the way they are…do you get that? You know what I mean?

It’s campaign time again, so we’ll be getting more and more of this type of rhetoric.

On Tuesday, May 17, 2011, the United States of America reached yet another self-imposed debt ceiling.  This time the number is a whopping $14.3 trillion, just about 100 percent of the total economic output of our economy for a year.  Not good.

In 1944, our national debt reached $204.1 billion. We reached the $1 trillion mark in 1981.  By 2008 our national debt zoomed to $10 trillion.  Only 3 years later, we reached $14.3 trillion.

In the 37 years from ’44 to ’81, we added $796 billion in debt ($21.5b per yr), having come through the end of WWII, the Marshall Plan, the Korean War, the Vietnam War, President Johnson’s Great Society expenditures, two oil price shocks and the economic malaise of the 1970’s.

In the 27 years from ’81 to ’08, we added $9 trillion in debt ($333.3b per yr), having come out of the recession of the early 1980’s, the stock market crash of ’87, the housing collapse of the late 1980’s, the S&L crisis, the mild recession in the early 1990’s, the tech bubble burst in the late in 2000, the following economic slowdown, the attacks of 9/11 followed by War on Terror, and Katrina.

In the 3 years from ’08 to ’11, we added $4.3 trillion in debt ($1.43t per yr),  having come out of the housing and financial market collapses, the ensuing economic recession, and the ongoing military expenditures in Iraq  and Afghanistan.

While we have had periods in our history where our national debt as a percentage of our GDP (total economic output per year) has been higher than it is now (1946 122%), the trend in the total outstanding debt is on a disturbing path.  When you look at the rate of change of the rate of change (the second derivative) of our debt path, it becomes alarming.  We cannot continue on this current path.

Conservatives know they have some leverage in the debate over whether or not to again raise the debt ceiling.  To force Liberals to agree to meaningful spending cuts in exchange for another incremental increase in the debt limit is reasonable.  Ideally, we don’t raise the limit at all, therefore forcing spending cuts.

However, there is a real challenge here…cash flows.  The US treasury doesn’t get smooth cash flows in, but the cash flows out are legally smooth.  Social security payments on the 1st., and interest payments on the 15th. for example.  While we certainly generate enough government revenue (taxes) on a yearly basis to assure payments of interest on our debt, national defense, and most entitlement responsibilities (ss, medicare, medicaid), on a week-to-week, or month-to-month basis it isn’t so.

We cannot miss an interest payment to holders of US Treasury bills and bonds.

Since I don’t have the details of the US Treaury’s cash flows I can’t be absolutely certain, though it may be, in order to avoid missing an interest payment in the near term, the ceiling will have to be bumped up one last time to allow the Treasury to auction more bills and bonds.  This would have to be quickly followed by real spending cuts to include “mandatory” entitlement programs.

This recurring frenzy must stop once and for all.  Interest on our national debt will be our un-doing if we don’t reverse course ASAP.  We had this debate in the ’08 cycle, we had it in the ’10 cycle, we’re going to have again in the ’12 cycle.  Let us recognize what that means.  Those we are sending to Washington are saying one thing on the campaign trail, and doing another when we make them victorious and send them to Washington, DC.