$100 billion is a drop in the bucket.  We have no money.  I thought the message of the November 2010 elections was crystal clear:  cut federal spending.  This message seems lost on many in GOP leadership positions.  What we expect are deep cuts and bold proposals.  Rand Paul has been leading the charge by suggesting across-the-board cuts.  This is what Tea Partiers expect.  You can’t cut enough from the budget. 

This was an important vote and will not be forgotten by the Tea Partiers who made calls, stood in the blistering cold and scorching heat at so many rallies in 2009 and 2010, and gave their time to help candidates during last the last election cycle.

Our socialist friends and the mainstream media want us to believe that the protests in Wisconsin are organic, grassroots demonstrations.  Out comes the class warfare card.  The reality is that this is an astroturf operation if there ever was one.  Obama’s campaign organization–Organizing for America–and the Democratic National Committee–are funding and busing in union members throughout the country.  This is classic campaign politics.  Obama wants to win re-election and he can’t do that without the union vote. 

This is where the Tea Party movement needs to step in and help out the govenor.  The movement can’t fade away now that November 2010 has come and gone.  This is another fight that needs to be won.

by Charles Goyette

Charles Goyette has made an important contribution to the conservative and investment literature by distilling complicated economic and financial matters into an easily digestible volume.  This is a must-read for conservatives and personal investors in search of a better understanding of a host of economic and financial topics including:  the federal bailouts, the national debt, monetary policy and the Federal Reserve, inflation, and the role of gold in currency valuation throughout history.

The author’s thesis is simple:  America’s massive national debt, coupled with reckless intrusions by government regulators, have put this country on a crash course toward high inflation and dollar devaluation.  Goyette divides the book into four sections:  Where We Are, How We Got Here, What Happens Next, and What to Do.

The author provides common sense strategies for personal investors looking to shield their assets from the dollar devaluation.  Goyette provides the reader with a blueprint for building a diversified investment portfolio with holdings in tangible commodities including gold, silver, and oil.  He even provides information on specific investment vehicles such as the SPDR Gold Shares exchange-traded fund to help you jump-start your investment research.  One of the best features of the book is that it has an appendix full of investment resources.  Of course, before you invest in anything you should always do your own research and never, ever buy on speculation.

This book also highlights the damage that has been done to our economy by incompetent public officials (Republicans and Democrats) in Congress, the Federal Reserve, and the Executive Branch.  Timothy Geithner stands out, though:

Timothy Geithner, soon to be named President Obama’s new treasury secretary, was the president of the Federal Reserve Bank of New York at the time.  He had solemnly explained the prior April that but for the Fed’s bailout, the failure of Bear Stearns would have led to falling stock prices and downward pressure on real estate prices.  Such a failure, said Geithner, would have led to “a greater probability of widespread insolvencies, severe and protracted damage to the financial system and, ultimately, to the economy as a whole.”  This, of course, is precisely what happened after the bailout.  (pg. 14)

Government bailouts and Keynesian economic policies do not work.  Yet we have public officials like Geithner who continue to occupy positions of power despite incredibly poor past performance.  Geithner was dead wrong on the Bear Stearns bailout.  The company failed and was sold in a fire sale to JP Morgan Chase.  So why would Geithner think that an even bigger bailout, the Troubled Asset Relief Program (TARP), would work months later?

Empirical evidence should have told him that bailouts were ineffectual.  Government has an innate compulsion to “try to do something.”  Instead, they should let the market correct itself.  This means that companies who made poor business decisions should reap the consequences.  The government’s meddling in the markets has created an environment of socialized risk and privatized gain.

How to win a free copy of The Dollar Meltdown by Charles Goyette:

Penguin was kind enough to give me three copies of the book to give away to readers of Hope is Not a Foreign Policy.  The rules are simple.  For each action you take (see list below), leave a comment indicating what you’ve done.  Leave a new comment for each new action that you take.  For example, if you blog about the giveaway on your blog, leave a comment.  If you post the giveaway on your Facebook News Feed, leave a comment.  The winners will be determined by a randomized number drawing, so the more comments you leave, the better your chances of winning.

• Call your Representative or Senator and tell them to cut at least $61 billion from the Continuing Resolution (HR 1) which will fund the government through Sept. 30.  More is better, but this CR cannot be passed without significant cuts.  Let me know who you called.
• Blog about the book giveaway on your blog and link to Hope is Not a Foreign Policy.  Post the link to your blog post in the comments section.  This counts as 3 entries.
• Post the giveaway on your Facebook News Feed
• Tweet about it on Twitter
• Post the giveaway on a forum.
• “Like” this on Facebook
• Add this post to StumbleUpon, Delicious, or Reddit
• Follow Hope is Not a Foreign Policy on Networked Blogs
• Let me know which potential Republican presidential candidate you’ll be pulling for.

The giveaway will close on Friday, February 25.  Good luck!

Liberals and Democrats are split into two camps:  There are those Democrats who remember the Left’s shameful behavior during the Vietnam War and are reluctant to propose cuts out of fear for appearing weak.  Then there are liberals and Democrats who can’t cut enough from the defense budget and have lost sight of the important fact that one of the few constitutional responsibilities of the federal government is to provide for the “common defence.”

Then there is a third category which includes liberals and Democrats, conservatives and Republicans:  politicians with defense contractors in their states.  These politicians are reluctant to cut defense programs even when they’re no longer needed in order to protect jobs in their districts and states.  The F-22 is a case in point.

So what did President Obama do with the Fiscal Year (FY) 2012 defense budget?  He did what was politically safe and made no cuts to the baseline budget but slightly reduced funding for the wars in Iraq and Afghanistan.  As a liberal Democrat, he is extra sensitive to being perceived as weak and can’t afford the political risks associated with larger cuts to the defense budget; he does want a second term so why stoke the Jimmy Carter comparisons?  Justin Fishel writing at FoxNews.com provides a good snapshot of the FY 2010, 2011, and 2012 budgets:

In 2010 there was a base budget of $531 billion, with an additional $130 billion to fund the wars in Iraq and Afghanistan, known as OCO (Overseas Contingency Operations) funding. President Bush called it Global War on Terror or GWOT funding, a term dropped by Obama. Later in 2010 President Obama added another $33 billion in supplemental spending to fund the 30,000-man troop surge in Afghanistan.

2010 grand total: $694,000,000,000

The proposal for FY 2011 asked for a $549 billion base, with $159 in OCO spending.

2011 proposed grand total: $708,000,000,000

The FY 2012 defense budget asks for $553 billion in base spending, with $118 billion for the wars. That significant decrease in war spending is directly related to heavy troop withdrawals in Iraq.

2012 proposed grand total: $671,000,000,000

In January Secretary Gates announced a plan to cut $78 billion in defense spending over five years.  The largest savings would come from shrinking the size of the Army by 27,000 soldiers and the Marines by 15 – 20,000 in the year 2015.  That assumes the war in Afghanistan will be over for the U.S. by the end of 2014.

If you’re going to cut defense spending it makes sense to slash ineffective pet programs, of which the Pentagon has many, rather than funds for ongoing operations in Iraq and, especially, Afghanistan.  I don’t agree with our current strategy in Afghanistan, but if we have troops in harm’s way we have  a moral obligation to fully fund them.  Anyone who has worked in the Pentagon has seen these pet programs and inefficiencies, though Secretary of Defense Robert Gates has made some significant progress in streamling Pentagon operations.

Thinking about the defense budget in a vacuum is strategically unsound but a common practice in Washington.   A budget is required to help an organization achieve its objectives; a budget is a means to an end.  So this begs the question:  what is our grand strategy?  Rather than reflexively opposing cuts to the defense budget, conservatives should not cower from reasonable cuts to the defense budget.  Any analysis should consider the following four questions:

• For what reasons does America engage in foreign affairs?
• What are America’s national interests?
• What are the threats those interests?
• What is America’s grand strategy?

The answers to these questions will determine what kind of military is required to support these ends and how much it will cost.  I believe that our current grand strategy is too costly and disconnected from the national interest and Constitution.  I recently laid out my vision for a conservative foreign policy in the Washington Examiner in a piece entitled, “It’s time to end big government internationalism.” In it I argued:

Since the end of the Cold War, American statesmen have defined the national interest in far too broad of terms, squandering taxpayer dollars in support of a foreign policy that does not clearly advance America’s core national interests.  In FY 2008, Washington provided foreign aid to about 154 countries.  Today, the U.S. military has a presence in about 150 countries.  The majority of these aid packages and military deployments do little to promote America’s national interests; still, this type of big government internationalism has become unquestioned convention for the Washington foreign policy establishment and conservatives are as guilty as their liberal counterparts in pushing the global welfare state.

Many Republican and Democratic policymakers conflate American diplomatic, economic, and military primacy with omnipotence.  As a result, they have consistently failed to reconcile America’s desired end states with its available means—eschewing important economic realities such as the $14 trillion national debt while failing to make the difficult tradeoffs often required of effective statesmen.  In order to avoid the fate of previous great powers, the United States should adopt an economically sustainable grand strategy that advances a set of more narrowly defined national interests, encourages burden-sharing among its allies, and is consistent with the Constitution.  More specifically, Washington should reduce its global footprint, keep its military power in abeyance, and discharge that power only in defense of the national interest.

The sole aim of Washington’s international engagement should be the preservation of American political and economic liberty—not to remake the world in its image.  In his book, A Foreign Policy for Americans, former U.S. Senator Robert Taft argued, “I do not believe it is a selfish goal for us to insist that the overriding purpose of all American foreign policy should be the maintenance of the liberty and peace of our people of the United States…”

So where would I cut?  I would do a few things right off the bat.  I would redeploy the 50,000 military personnel we currently have in Europe (it costs serious money to train, equip, and sustain forces in a foreign country).  Correspondingly, I would scale back our commitments to NATO.  NATO is a military alliance without a clear mission.  It achieved its Cold War-era objectives, but it is no longer useful in the 21st century; it should be replaced with bilateral or smaller multilateral alliances to increase burden-sharing and reduce the stress on the U.S. force.  The alliance’s biggest test in recent years–Afghanistan–has yielded disappointing results.  The International Security Assistance Force (ISAF)–the NATO military organ in charge of operations in Afghanistan–places the vast majority of the burden on the U.S.  Some troops have quipped that ISAF really stands for “I saw an American fight.”

I would also adopt a new strategy in Afghanistan, one that significantly reduces our land (conventional ground forces) commitments and emphasizes special operations forces and airpower.  In terms of major acquisition programs, I would initiate a sweeping program review to weed out costly programs which are not required to achieve our military and defense policy objectives.  Each military service has pet programs which continue to exist more because they embody the service culture (read U.S. Air Force and the F-22) than actual military requirements.  Weapons acquisition must be driven by military requirements, not service cultures or Capitol Hill politics.

Defense is one of the few legitimate responsibilities of the federal government.  There are many other programs, which are well beyond the scope of the government’s responsibilities, which should be eliminated all together to address our dire fiscal situation.  Conservatives need to realize, however, that there is nothing unconservative about reasoned and rational cuts to the defense budget.  The fact remains that there is waste in the Pentagon and part of that waste stems from an overly costly grand strategy, one that is disconnected from America’s core national interests.  Republicans in Congress must think very carefully about this nation’s involvement in foreign affairs and whether our current strategy is appropriate.  The Tea Party movement should take this opportunity to extend its limited government message to U.S. foreign policy.  Without pressure from the Tea Party movement, many Republicans will shrink from this challenge.

Relative to other states in the region, Egypt is not a major oil exporter.  But Egypt has been a stable ally of the U.S. in a turbulent region for the last thirty years.  Egypt fought alongside U.S. forces during the Gulf War and has honored its peace treaty with Israel, thus preventing another major regional war between the Arab states and Israel—which would be calamitous for global energy prices.

Today, as it has been for the last thirty years, stability remains our core interest in Egypt.  Instability creates uncertainty and uncertainty means higher gas prices for Americans.  Four-dollar-a-gallon gasoline will slow America’s anemic economic recovery even further.  Can you imagine what six- or eight-dollar-a-gallon gasoline would mean for America’s ailing economy?

Former White House chief of staff Rahm Emanuel famously remarked, “You never want a serious crisis to go to waste.”  Washington policymakers should use the crisis in Egypt to initiate a three-step approach to ensure stable gas prices in the near-term and energy independence in the long-term.

1.       Washington must support the outcome that results in near-term stability. This means that the Obama administration should not support a hasty transition to a democratic form of government which could see the rise of belligerent forces such as the Muslim Brotherhood.  Of course there is a natural tension here for Americans who are rightly inclined to support self-determination, but this is one instance where the stability provided by a benign dictatorship (like that of former Egyptian President Hosni Mubarak) is preferable to the democratic rise of an Islamist government.  Mubarak’s civilian dictatorship provided relative stability for decades in Egypt; only time will tell whether the new military dictatorship is benign or malignant.  Washington should support a deliberate transition to increase the likelihood that the new popularly elected government is a pro-Western, democratic regime.

2.       Washington must take steps to weaken the price-fixing OPEC. It must no longer be the policy of the United States to tolerate the price-fixing Organization of the Petroleum Exporting Countries (OPEC).  For far too long the international community has allowed this cartel to set the price of oil at artificially high levels.  At its best, the interests of these countries are orthogonal to Washington’s; at its worst, as in the case of Iran and Venezuela, member countries actively work against the interests the United States.   Lest we forget that the 1973 energy crisis occurred when OPEC refused to ship oil to states that supported Israel in the Six-Day War.  The U.S. should explore the prospects of entering into exclusivity agreements with member states to fracture the cartel.  If Country X can proffer more from an exclusive arrangement with Washington than with OPEC, why remain a member?  Don’t forget that many of the OPEC members have single commodity economies; without oil exports their economies would collapse.  Washington needs to use this blunt reality as bargaining leverage.

3.       Washington must make energy independence a national security priority. It remains popular for politicians to talk about “energy independence” but the reality is that U.S. energy policy has not undergone the changes required to put this country on a path toward energy independence.  The Obama administration has declared war on the coal industry through its proposed cap-and-trade legislation (and likely forthcoming EPA regulations); the licensing process for building new nuclear power plants has not been accelerated and the administration refuses to grant additional offshore drilling permits.  What is required is an integrated energy strategy which includes the expansion of offshore drilling and a significant increase in the development of nuclear power, along with an expansion of natural gas, solar, and wind sources.   Washington should use tax policy to incentivize to automakers to make hybrid automobiles more affordable.  Nuclear power is perhaps the greatest untapped resource in the United States.  France generates more than 75% of its electricity from nuclear power while the United States generates only 20%.  Nuclear power suffered a public relations crisis during the Three Mile Island incident from which the industry has never fully recovered.  The reality is that the United States Navy has been using nuclear propulsion safely since the late 1940s and if Washington is going to cast off the yoke of energy dependence, then nuclear power must be dramatically expanded.

Energy independence is both an economic and national security issue and the situation in Egypt underscores this point.  Our dependence on foreign oil requires that we engage in a dangerous and hostile region; this reality has guided U.S. foreign policy for too long.  This trend is reversible but requires immediate action at the highest levels of the U.S. government.

For whatever reason, the talk radio giants have elected to mischaracterize Mitch Daniels’s record when it comes to the “social issues,” seizing on Daniels’s “truce” comment from last year.  Sound bites aside, as Indiana blogger Josh Gillespie notes, the governor’s ”record on pro-life issues has been immaculate.”  Mike Fichter of Indiana Right to Life further testifies to the governor’s steadfastness in supporting pro-life legislation (see sound clip “Gillespie on FTRradio.com”).

Daniels’s record is one of a firmly pro-life politician.  Gillespie notes that one critic of Daniels’s “truce” comment concedes, “Few would claim that Gov. Daniels is a social liberal.  In fact, he has a good track record on social issues.”  The “truce” comment is really a matter of rhetorical emphasis.  Daniels is pro-life and his record proves that.  But Daniels is not Gary Bauer.  He is going to spend the bulk of his time talking about this nation’s fiscal crisis and proposing serious, albeit sometimes politically unpopular, solutions.  What do you get with Mitch Daniels?  A competent executive with a proven record as a governor who has a laser beam focus on the national debt.

Will he support pro-life legislation?  Will he re-institute the Mexico City policy?  Will he appoint strict constructionists to the bench?  His record gives me confidence that he would do all of these things as president.  I urge my fellow conservatives to look at the record before making knee-jerk judgments based on 10-second sound bites.

The president’s budget plan fails to make any meaningful reforms to entitlements (Medicare, Medicaid, Social Security) which accounts for roughly 40% of the annual budget.  What is more, Obama doesn’t include any of the recommendations from the much-heralded debt commission which he established.  “The only way we can make these investments in the future is if our government starts living within our means,” Obama said of his proposed budget. “What we’ve done here is make a down payment.”  This is doublespeak at its worst; he preaches about fiscal responsibility while in the same sentence pushing for new spending.  We simply don’t have the money to pay for any of this; we can’t even cover this year’s budget.  I’m not a mathemetican, but you can’t tell me that 2 plus 2 = 5 and expect me to believe it.  The budget proposes an 11% increase in education spending.  The Department of Education should be abolished; federal involvement in the education system has resulted in no measurable enhancements in the delivery of education.  Education should be left to the states. 

The administration continues to perpetuate the idea that we can tax ourselves out of this crisis.  Americans for Tax Reform (ATR) conducted analysis of the president’s FY2012 budget and identified a number of new tax increases including raising the top marginal income tax rate from 35% to 39.6% and raising the capital gains and dividends rate from 15% to 20% along with a host of other tax increases which represent a $1.5 trillion tax hike over the next decade.  Just what a weak economy needs:  more taxes. 

This budget isn’t even close to addressing America’s fiscal crisis.  Obama’s talk of “tough choices” is pure fiction.  The president took the low road here and did what was easy, dressing up a financially irresponsible budget in courageous rhetoric.  But this budget required no political courage and offered no leadership.  The Republicans need to chop a lot more than $100 billion from this behemoth.  What House and Senate Republicans need to do is adopt Sen. Rand Paul’s plan which would cut $500 billion from the budget in FY2012.  Paul’s plan, which has been criticized by Republicans and Democrats alike as a bridge too far, would trim the projected $1.6 trillion budget deficit by just one third.  How can anyone claim to be serious about deficit reduction and then say that Paul’s plan is too aggressive?  Certainly not anyone who owes their election to the Tea Party, I hope.

Below is a map of the 2008 presidential election.  As we all painfully recall, Obama captured several states that voted for George W. Bush in 2000 and 2004 including Colorado, Indiana, North Carolina, Nevada, Virginia, and, of course, Florida.  Obama also captured Iowa, New Mexico, and Ohio which voted for Bush in 2004.   At the end of the day, Obama captured 365 electoral votes to McCain’s 173.

To defeat Obama in 2012, the Republican candidate will need 270 electoral votes.  This will require the Republican candidate to hold every state McCain won in 2008 and pick up Florida, North Carolina, Virginia, Ohio, Nebraska, and win either Colorado, Nevada, or Iowa.  This is certainly not any easy task but it is very possible and reinforces the fact that, with the right candidate, Obama is beatable.  Republicans have a good shot of picking up Colorado, Nevada, or Iowa; New Hampshire may even be in play based on Obama’s margin of victory in 2008.  Here are a few plausible scenarios in which the Republican candidate would defeat Obama in 2012 (I used the great site 270toWin.com to explore these ”what-if” scenarios). 

• Win all of McCain’s states plus Florida, North Carolina, Virginia, Ohio, Nebraska, and Colorado = 275/263
• Win all of McCain’s states plus Florida, North Carolina, Virginia, Ohio, Nebraska, and Nevada = 272/266
• Win all of McCain’s states plus Florida, North Carolina, Virginia, Ohio, Nebraska, and Iowa =272/266
• Win all of McCain’s states plus Florida, North Carolina, Virginia, Ohio, Nebraska, and New Hampshire =270/268

The good news for Republicans and conservatives is that Obama will be playing defense in 2012, especially considering the largely favorable reapportionment figures.  The bad news is that Obama can hemorrhage 95 electoral votes from his 2008 totals and still win a second term.  So the question for conservatives is which candidate can hold the states McCain won in 2008 and pick up Florida, North Carolina, Virginia, Ohio, Nebraska, and either Colorado, Nevada, Iowa or New Hampshire?  This is the question conservatives need to ask themselves as the Republican nominating process begins.  It makes no sense to nominate a candidate who has no chance of getting to 270 electoral votes in the general election.    

Sarah Palin is an incredibly effective fundraiser and has an impressive ability to rally conservatives.  However, as I mentioned earlier, when it comes to independent voters her numbers are not favorable, and you absoutely need to win independents in order to win the presidency.  Unfortunately, the media has done such a number on her favorability ratings that a major reversal is no longer realistic at this point.  Looking at the electoral map it is unclear to me how she could win enough states to get to 270.  I think there are several prospective candidates who have a realistic path to 270 including Mitch Daniels, Mitt Romney, Mike Huckabee, Tim Pawlenty, and possibly Haley Barbour.  Sarah Palin, Newt Gingrich, and Ron Paul do not seem to have viable paths to 270.

Palin could, however, do well in some of the early Republican primary and caucus states.  While I don’t believe that she has a clear path to the nomination, she could win or do very well in some of the early states including Iowa and South Carolina.  The objective of this article is to prompt conservatives to think about the general election now.  Nomination contests are ugly as passions always run high.  Everyone believes that their candidate is the one.  We can’t lose focus, though, of our ultimate objective:  to make sure that Barack Obama is a one-term president.  To realize this objective, we need to put up a candidate who can get to 270.  This doesn’t mean that we have to compromise our principles of limited government, but it does mean that we need to nominate a candidate who is conservative and electable at a national level.