Newsletter 67 (Fall 2012),
Advocating smaller, more focused, less costly government since 1996.


                      Secure America’s

                      Future Economy





     Economic prosperity (profits, jobs)      Stagnant economy
     Essential government services supported      Essential government services crowded out
     Limited social outlays      Open-ended social outlays
     Fiscal sustainability      Soaring deficits
     Stable prices      Rampant inflation and/or debt repudiation

Political observers are putting lots of time and effort into analyzing the issues at stake in this year’s election, but the fundamental choice is pretty simple.

Model one is the SAFE agenda of smaller, more focused, less costly government – focused on meeting needs that cannot be provided by the private sector, notably the maintenance of social order and security from external threats.  Humanitarian assistance is provided as well, through voluntary assistance and/or government programs at the local or state level.  Local control of the social safety net should help to ensure that support programs do not become institutionalized and spiral out of control.

Model two is a welfare state, in which the federal government promises a cornucopia of benefits to satisfy everyone’s needs.  In theory, this is a systematic and compassionate solution to poverty, illnesses, disability, etc. In practice, the promises will outstrip available resources because people inclined to say “enough” will be outnumbered and outvoted by a growing army of beneficiaries. Based on an essay in “After the Welfare State,” Tom Palmer, Students for Liberty/Atlas Economic Research Foundation, 2012.

Which model would you prefer, and which candidates seem most likely to deliver it?


       Blame game       A word to the wise
       Just do  it     Watch your wallet
     Hillsdale College       Fed follies
     Collateral damage      Head for the hills

Blame game - With the national debt up $5.4 trillion since the president took office, one might think the fiscal problem would be a liability for him in the coming election.  But not everyone agrees.  See, e.g., GOP is now the party of fiscal irresponsibility, UD Professor Saul Hoffman, (Wilmington, DE) News Journal, 9/21/12.

One aspect of Hoffman’s case is solid, namely President Bush did allow the budget surplus that he inherited to be frittered away. Leviathan on the right, Michael Tanner, Cato Institute (2007).

However, the rate of debt increase has accelerated dramatically under the current president. SAFE letter, 8/25/11.

The deficits for FY 2002-2009 (covered by Bush budgets) totaled $3.5 trillion.  That is a sorry eight-year result, but President Obama is on track to log deficits of $4.8 trillion in half the time (FY 2010-2013) according to the Office of Management and Budget data.

Just do it Everyone talks about cutting government spending, to give a new twist to an old line, but nobody does anything about it.  Most government programs grow faster than the economy, and new programs are created as well. Much of the cost is being borrowed, so the national debt keeps climbing.

Thoughtful people realize this pattern cannot continue. At some point, lenders will curtail their investments in government bonds, interest rates will soar, and the Fed will print money to cover the government’s obligations.  It’s not a question of whether a fiscal meltdown is brewing, but only when the window of time to prevent it will slam shut.

Someone will holler whatever spending programs are cut, so the politicians come up with excuses for deferring action.

Some say government spending must be maintained at current levels until the economy recovers in accordance with the tenets of Keynesian economics, but the empirical evidence is thin. 

New Deal spending did not cure the Great Depression in the 1930s, nor did the $800 billion fiscal stimulus program (combination of temporary tax cuts and spending measures) approved in 2009 accomplish much.  Permanent tax cuts did spark an economic rebound in the Reagan era, but the envisioned spending cuts were largely blocked by Congress so the deficit soared as well.

Some insist spending cuts must be accompanied by tax increases.  Perhaps such a “balanced approach” is politically unavoidable, but we don’t like the idea.  There are many opportunities for spending cuts in the bloated federal budget. Revenue gains from tax increases might prove disappointing because higher taxes depress economic growth.  And as experience has shown, tax increases tend to be diverted into new spending versus being applied to reduce deficits.

With the elections coming up, voters should be pressing the candidates to state clearly whether and how they propose to cut spending – but will this happen?

Bill O’Reilly (Fox News) speculates that 70% of Americans are paying more attention to their electronic devices than to election issues.  Video (2:31),

Hillsdale College plans a three-year effort to re-educate 50 million Americans about the original intent of the Constitution – limiting government so liberty could flourish. That’s great, because many people seem confused by this point nowadays.

There is no need to wait, as Hillsdale already has an outreach program.  Here’s a link to sign up for Constitution 201.

This on-line course is free (although a donation is suggested to defray costs), and you can start any time.

Mark Twain – We often grumble about the biases of the “mainstream media,” and rightly so.  But here’s a Twain quip that suggests slanted coverage has been around for a while.  “If you don’t read the newspaper, you are uninformed; if you do read the newspaper, you are misinformed.”

Collateral damage – At the August 17 meeting of the Retired Men’s Luncheon Club, SAFE member Jim Venema gave a talk on the school busing order for northern New Castle County, which went into effect in 1978. 

Based on his personal experience in contesting the order and later seeking to end it, which included serving as president of the National Association of Neighborhood Schools, Jim can speak with authority about the ins and outs of what went on. 

The rationale for the order was that while the schools of the City of Wilmington had been desegregated by 1967, they were still largely black as a result of residential patterns.  It was theorized that greater racial admixture, to be achieved through mandatory busing, would result in full equality and an improved educational experience for black students. 

Some major problems resulted in practice, notably busing cost (vehicles, drivers, gas, student time), teacher salaries in suburban schools raised to the previously higher city level, closure of city high schools, reduction of parental involvement in their children’s schools and eroding school discipline.  Although the order was lifted in 1995, experts believe the negative effects of this social experiment are still being manifested in Wilmington’s school system and crime problems today. 

It would be hard to find a better example of how well intentioned government programs can go awry, causing more problems than they solve.

A word to the wise – SAFE founder Bill Morris suggested in a previous issue that readers put salt water in plastic bottles and leave the bottles in their freezers.  If the power fails, the frozen salt water starts melting at a lower temperature than 32 degrees F, absorbing heat and postponing the melting of frozen food.

This idea paid off recently for Bill, who has a freezer in the basement and a refrigerator upstairs.  The refrigerator failed.  Bill and his wife, Lois, put frozen salt water from the freezer into boxes along with refrigerator food.            

Bill has another suggestion for cheap insurance against the (hopefully remote) possibility of a national disaster.  To protect against a food shortage, buy one-pound bags of dried beans.  They are in sealed plastic bags.  Put the bags in mouse-proof containers.  The stored beans give Bill a comfortable feeling.  So does his earthquake insurance.

Watch your wallet - Here is another nugget from Mark Twain: “No man’s life, liberty, or property is safe while the legislature is in session.”

To put the point in a modern context, we would add that regulators can do a lot of damage too (e.g., see the next story), and they are in session all year around.

Fed follies – In September, the Federal Reserve doubled down on its support for job creation and economic recovery by (A) starting to buy $40B in mortgage-backed securities a month, (B) extending Operation Twist (a program to sell short-term Treasury notes while buying longer-term obligations), and (C) committing to maintain historically low interest rates until at least mid-2015. 

This third round of “quantitative easing” (aka printing money) will likely perpetuate deficit spending, depress investment returns, and prolong the housing bust.  See the 9/17/12 blog entry for detailed discussion.

Won’t these actions stoke inflation?  Yes, and the inflation “target” is about 2% per year.  Chairman Ben Bernanke says the Fed will ensure things don’t get out of hand, but we and others think they are playing with fire. See US is high on “monetary heroin,” Peter Schiff of Euro Pacific Capital, 8/30/12, video (4:36).

Head for the hills - “Delaware coast in the crosshairs” was the theme of a three-day series on sea level rise (SLR) in the News Journal. The series presented extensive evidence, both statistical and anecdotal, of coastal zone damage due to encroaching seawater.

Ocean beaches have been preserved by bringing in sand, which may wash away in the next severe storm.  Meanwhile, Delaware Bay beaches are not being protected effectively, and property owners fear they may be forced out.  Some farms and marsh areas are threatened by saltwater intrusion.

Fine, but the commentary about SLR causation was incomplete. Studies show that the sinking of coastal land accounts for about one half of the relative SLR that has been observed.

As for claims that global warming and SLR will inexorably speed up – with more violent storms causing severe flooding – due to a buildup of CO2 in the atmosphere (it’s currently about .04%) from the human burning of fossil fuels – there is lots of evidence to the contrary.  See, e.g., a letter from three eminent scientists (at the American Physical Society, Princeton, & MIT) that was published in the Wall Street Journal on 8/13/12.

It is increasingly clear that doubling CO2 is unlikely to increase global temperature more than about one degree Celsius, not the much larger values touted by the global warming establishment.

Our thoughts about the SLR series (blog entry, 8/27/12) have been duly conveyed to the News Journal.


SAFE Board

Andrew Betley, (302) 239-9679

Edgar Fasig, treasurer, (302) 999-0611

Dan Kerrick, (302) 658-7101

Steve McClain, (302) 998-3910

Jerry Martin, (302) 478-5064

Bill Morris, (302) 475-7060

Ryck Stout, (302) 478-9495

Bill Whipple, president, (302) 464-2688

For e-mail addresses see:

Secure America’s Future Economy (SAFE)

SAFE is a non-partisan, all-volunteer organization that was founded in 1996.  We advocate smaller, more focused, lower cost government, to be achieved by cutting spending, restructuring “entitlements,” simplifying taxes, and rationalizing regulations.

The SAFE agenda is promoted through:

# Our website, including a weekly blog.  Members can help to spread this content by forwarding links or downloads to their families, friends, and contacts. 

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# Letters to the editor, microblogs, videos, public events, and legislative contacts.

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To join SAFE or renew membership, please complete our form  and mail it with your check to SAFE, 214 N. Spring Valley Road, Wilmington, DE 19807. Thank you!