A Birdy for Bush

The Daily Reckoning – Weekend Edition
February 17-18, 2007
Baltimore, Maryland
by Kate “Short Fuse” Incontrera


Ricky Martin – yes, of “Living La Vida Loca” fame – had a special message for President Bush during a recent concert.

He flipped him off.

During his performance, the singer stuck up his middle finger when he got to the lyric in one of his songs that mentioned Bush.

In defending his action in an email to the AP, Martin said, “My convictions of peace and life go beyond any government and political agenda and as long as I have a voice on stage and offstage, I will condemn war and those who promulgate it.”

And Senor Martin isn’t alone in his beef with the president and the current administration. Yesterday, the Senate voted to see if Bush should send 21,500 more troops to Iraq. The outcome of this vote was not surprising: the Republicans blocked this Democratic effort to pass a symbolic resolution opposing President Bush’s troop buildup in Iraq. The Democrats fell four votes shy of the 60 needed on a procedural vote to consider a nonbonding resolution.

Even if the Dems had won the vote, though, Bush made it very clear that “congressional opposition would not deter him from proceeding with the deployment of another 21,500 troops, designed primarily to quell sectarian violence in heavily populated Baghdad,” reports the AP.

This war, which has cost over 3,133 American soldiers their lives, is shaping up to be the most expensive war in American history…and now a government audit shows that there has been close to $60 billion in taxpayers money squandered in Iraq.

From the AP:

“The three top auditors overseeing work in Iraq told a House committee their review of $57 billion in Iraq contracts found that Defense and State department officials condoned or allowed repeated work delays, bloated expenses and payments for shoddy work or work never done.

“More than one in six dollars charged by U.S. contractors were questionable or unsupported, nearly triple the amount of waste the Government Accountability Office estimated last fall.

“‘There is no accountability,’ said David Walker, who heads the auditing arm of Congress. ‘Organizations charged with overseeing contracts are not held accountable. Contractors are not held accountable. The individuals responsible are not held accountable.'”

So far, this war has cost $8.4 billion a month – and the costs just keep rising. And don’t forget about Bush’s request for $100 billion in “emergency” war money.

And you think it’s bad when your kids ask you for 20 bucks.

Short Fuse
The Daily Reckoning

P.S. This past week, Addison traveled to New Hampshire to join David Walker and the Concord Coalition on their Fiscal Wake-Up tour. You can read Addison’s full report, below…

— The Daily Reckoning Book of the Week —

Empire of Debt: The Rise of an Epic Financial Crisis – Now available in paperback!
by Bill Bonner and Addison Wiggin

After a generation of being spoon-fed reality by media, it’s understandable that Americans are confused about the state of their nation. In Empire of Debt, Bonner and Wiggin wield their sardonic brand of humor to expose the nation for what it really is – an empire built on delusions.

Americans are rapidly facing a choice: recognize these dangerous delusions and take steps to avoid their collapse. Or remain ignorant of them and risk losing all of their wealth when the house of cards comes crashing down.

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THIS WEEK in THE DAILY RECKONING : Too busy shoveling snow to read The Daily Reckoning this week? We know the feeling. That’s why we’ve catalogued all the issues from this past week, just for you, below…

The ‘Justes’ and the Good: More Real Heroes, Part II 02/16/07
by Bill Bonner

“In part two of this essay, Bill Bonner discusses the simple act of planting trees. What’s so heroic about planting trees, you ask? Read on to find out how one man changed the face of an entire landscape forever…”

The ‘Justes’ and the Good: More Real Heroes, Part I  02/15/07
by Bill Bonner

“There are those who live life only for themselves, and then there are those who live to inspire life in others. In part one of this follow-up to his piece Real Heroes, Bill Bonner cites two major examples of what it means to truly live life to the fullest. Read on…”

About Those Proposed IMF Gold Sales    02/14/07
by Doug Hornig

“A blue-ribbon panel recently advised the IMF to sell gold as a way of trying to clean up its finances. The news initially spooked some weaker holders and hedge fund managers, most of whom are clueless about the overarching trends driving gold. However, as Doug Hornig asserts, the proposed IMF sales represent much ado about nothing…other than perhaps creating a buying opportunity, that is…”

Unbalanced Trade       02/13/07
by James Turk

“The trade deficit for December hit $61.2 billion, which is wider than those who wager on these types of things had anticipated. In an excerpt from his book, James Turk ponders the deficits and wonders when foreign investors are going to get fed up with the U.S. dollar. Read on…”

Inflationary Bonfire      02/12/07
by The Mogambo Guru

“As the monetary moon becomes full, our angry economist howls about the bonfire of inflation, in an attempt to warn those who are smart enough to listen about the inherent dangers of such a terrible, terrible economic occurrence. Read on…”

FLOTSAM AND JETSAM: Addison braved the ice and snow storms that were ravaging the East Coast this past week to join the Concord Coalition, and the head of the Government Accountability Office, David Walker, in New Hampshire for their Fiscal Wake-Up tour. Read his full report, below…

What’s the Big Deal About the Federal Debt, Anyway?
by Addison Wiggin

When we were doing research for our book, Empire of Debt, we discovered something about the United States that was more than a little disturbing. Not many people know that Franklin Delano Roosevelt ran for president in 1932 on a platform that included both a balanced budget amendment and a pledge to keep the U.S. dollar backed by gold. Once elected, he proceeded to seize all the gold in the country… and run up more debt than all the miscreants who’d occupied the Oval Office before him.

Apparently having made such bold promises to get elected weighed on FDR’s mind, because for some odd reason he felt compelled to justify his actions. He invited a host of academics, theoreticians, socialists and other do-gooders to Washington to help explain his behavior. The quacks came out of the woodwork. And within a few years, FDR had a working theory:

“It’s a public debt… we owe it to ourselves… therefore, we never have to pay it back!”

The theory had descended from the dusty grey matter of the nation’s elite schools. In fact, we have a musty copy of a book, one of the few remaining we could find on the Internet, sitting on the windowsill near the desk in our office. “An Economic Program for an American Democracy” was penned in 1937 by “Seven Harvard and Tufts Economists” and helped justify, at least politically, the deficit spending that paved the way for many of the New Deal programs with which we are grappling to this day.

Two of those programs, Social Security, and its 1960s Great Society cousin, Medicare, now comprise 13 percent of the Federal Budget. In 20 years, they will consume almost twice that. By 2030, Medicare alone will be $5 trillion in the hole, in 2004 dollars. And the overall fiscal imbalance of the government will have skyrocketed from today’s $8.6 trillion shortfall to over $25 trillion. And that’s only if one thing happens: nothing.

But increasingly, “nothing” is less and less of a viable choice for the hapless lawmaker in Washington. “Like many of its citizens,” writes Matt Crenson in AP while covering the Concord Coalition’s, Fiscal Wake-Up Tour, “the United States has spent the last few years racking up debt instead of saving for the future. Foreign lenders – primarily the central banks of China, Japan and other big U.S. trading partners – have been eager to lend the government money at low interest rates, making the current $8.6 trillion deficit about as painful as a big balance on a zero-percent credit card.”

As the hapless Daily Reckoning reader knows, we traveled with the Concord Coalition on the leg of the Fiscal Wake that took them straight into the heart of a New England Nor’Easter this week. It’s the very dependence on foreign lending at cheap rates that has some on the tour spooked. In a presentation she’s entitled “Why Deficits Matter”, Isabel Sawhill, a senior fellow at the Brookings Institution, ranks dependency on foreign lending as the number one of four critical reasons for being concerned with the federal debt. Rapidly rising costs of paying the interest on that debt… sticking our kids and grandkids with the bill… and rendering ourselves incapable of dealing with financial, environmental and economic crises… rate just behind.

We’ve come a long way from “It’s a public debt… we owe it to ourselves… and therefore never have to pay it back!” As good as shouting that at the top of our lungs might feel. (Try it!)

“Foreign lenders might lose their enthusiasm for lending money to the United States,” continues Crenson of the AP. “Because treasury bills are sold at auction, that would mean paying higher interest rates in the future. And it won’t just be the government’s problem. All interest rates would rise, making mortgages, car payments and student loans costlier too.”

“American consumers have as much of a borrowing problem as their government,” Crenson writes, taking a page right out of the Daily Reckoning Handbook, “so higher rates could moderate overconsumption and encourage saving [hah!] But a big jump in interest rates could cause economic catastrophe.” [Oy… with a guy from AP telling it like this… we might have to start looking for new work.]

“The United States is suffering from four deficits,” David Walker, the nation’s accountant-in-chief, tells crowds all along the Fiscal Wake Up Tour’s raucous route. “We have fiscal deficits in Washington; trade deficits with the rest of the world; our citizens are suffering deficits in savings… and most importantly, this country has a deficit in leadership.”

In 2008, for the first time in at least a couple of blue moons, the sitting Vice President will not be seeking the presidency following his boss’s two-year term ends. Good riddance to them both, some might say. But that throws the field wide open to a compendium of new reckless vote mongers from all across the political spectrum.

The Concord Coalition, for their part, is going to assemble 10 questions that every presidential wannabe should answer. “If they can’t answer these 10 critical questions about the nation’s finances,” bellows Mr. Walker, “they don’t deserve to be your president. We can’t AFFORD to have them be the next president.”

So what are the ten questions? Good question.

As you may know, we’ve been filming the Fiscal Wake Up Tour for a documentary we’re assembling along the lines of our book Empire of Debt. How’d you like to get involved? How’d you like to submit your ten questions… while we see if we can’t get every pretender-to-the-office to answer them on the record?

If you have some questions you’d like to see answered… write ’em down and send ’em to Short Fuse (kincontrera@dailyreckoning.com). We can’t guarantee they’ll make the film, but we can guarantee we’ll consider every one of them…

Enjoy your weekend,

Addison Wiggin,
The Daily Reckoning

P.S. At one stop on the tour, there was an earnest young woman who’d turned her mini-van into a 12-foot tall mobile pie chart. The chart showed how $60 billion dollars of the federal government’s discretionary spending budget was spent on Cold War era weapons that have been mothballed for safekeeping. She had some plan for redirecting the money into social programs and a trust fund for Medicare.

Earnest as she was, while we were chatting her up, we came to the realization she had done some of her math wrong. Poor girl.

She had made up some pens, too; a ball point pen, with a chart that unrolled from inside the pen outward to the side. The chart showed Federal Spending at large on one side… and Global Military Spending on the other. We thought the pen was clever, even if the math was wrong, so we brought one home to our seven-year-old son.

“Oh, cool…” he said. The pen really was clever.

“Dad, what’s Military Spending?” he then asked.

“I don’t know… tanks and airplanes and guns and stuff…”

“Oh…” slight pause “Dad, what’s Federal Spending?”

“That’s all the spending done by the Federal Government.”

“What’s ‘government’?”

“Umnn… the people who we elect to run the country.”

“Dad, what’s ‘elect’ mean?”

“Those are the people you vote for.”

“Oh…” He sat still for a while longer. Put the pen down and starting assaulting his younger brother. Poor kids… they’ve already got a bill for $27,000 – each – waiting for them, we couldn’t help but thinking. And they don’t even know what great things government can do yet.

The Daily Reckoning