1. I’m glad a deal was struck. I hate Planned Parenthood — you cannot get to the right of me on abortion — but the way ahead on abortion is not the same as the way ahead on the budget. I am for seizing every marginal gain to be had on this issue, but the funding restrictions were only tinkering around at the edges. You want to win on abortion, you have to win 1600 Pennsylvania Avenue. Thanks to the usurpation of the Supreme Court — and the American people’s continuous, inexplicable tolerance of that — Congress is not really where the pro-life action is. As it stands, vulnerable Senate Democrats ought to be mercilessly reminded in 2012 that their party leader was willing to shut down the U.S. government in order to protect public subsidies for abortion — something that even many moderate pro-choicers oppose.

2. Yes, the deal could  have been better. And if it had been twice as good as this one — or ten times as good — it still could have been better.

3. But this is not the deal that matters. This is small potatoes compared to getting the Ryan reforms enacted, especially on entitlements. If Republicans had drawn the line in the sand on this deal, they might have saved the country a few billion dollars. If they draw the line on the Ryan program, they might save the country. That is the real fight. Mind the trillions, and the billions will take care of themselves.

A question for the young ones: Perhaps you’d like an 88 percent tax increase? Perhaps not. If not, then the United States government must spend less on the major entitlement programs — Social Security, Medicare, and Medicaid. And that has to happen approximately now.

Rep. Paul Ryan’s budget addresses Medicare and Medicaid spending, and the Democratic whining about that fact already is under way. Representative Ryan’s budget would cut some $4 trillion off the deficit in ten years. And we cannot get spending under control without reforming the entitlements — they are the main drivers of spending. Axing NPR and foreign aid is not going to balance the books.

The Democrats’ plan will be to make Paul Ryan the most hated man in America, if not the world. The campaign will be — and already is — personal. It will be personal because the facts are not on their side. Our choices are: 1. raise taxes severely, and pretend that that is not going to have catastrophic economic consequences; 2. court a national fiscal crisis on the Portugal model but on a significantly larger scale, and pretend that that is not going to have catastrophic economic consequences; 3. cut spending.

If I were a Republican strategist, I’d be preparing to make sure that the number 88 is on the tip of every tongue. Ryan’s entitlement reforms are intelligent and they are reasonable — an 88 percent tax hike is neither. And that’s the choice.

Ezra Klein writes:

Read that again: Every single Senate Republican has endorsed a constitutional amendment that would’ve made Ronald Reagan’s fiscal policy unconstitutional. That’s how far to the right the modern GOP has swung.

He says that like it’s a bad thing.

But, 18 percent, guys? Even God only asks for ten.

Arguing that the Fed should embrace a more aggressive growth agenda, David Leonhardt writes in the New York Times:  

By any standard, joblessness is a bigger problem than inflation.  

Never mind those pesky Austrian-econ types and their argument that many of our economic problems are caused by artificially low interest rates (cheap money = boom built on sand = bust). That “by any standard” stuck in my head.  

As Rush Limbaugh says when he sees something interesting in the New York Times: I wonder if that’s true?  

Because inflation acts slowly and because its costs are dispersed, most people do not much notice it when the rate is very low. But inflation is a pernicious tax on savings and investment. How much does it cost us?  

Since inflation reduces both the value of savings and the value of debts (since you get to pay off your debts in devalued dollars, which seems to be the main attraction of inflation for Uncle Sam), you don’t consider inflation against present income, but against net worth. In 2010, , the net worth of the United States was about $70 trillion. That’s household wealth, savings, investments, non-farm non-financial businesses, tangible assets like real estate, etc., minus household debts, business debt, etc. A very low rate of inflation — say a measly 2 percent — therefore costs a big fat $1.4 trillion a year, i.e., it’s a second deficit. (I know that this is an imperfect measure for lots of reasons, but it gives a good idea of the scale  of the thing.)  

So, about that $1.4 trillion: Is that a smaller problem than unemployment “by any standard”?   In the most recent BLS report, Joe Government put the number of unemployed Americans at about 13.7 million.   Meaning that the cost of 2 percent inflation every year is, give or take a little, about equal to what we’d spend writing a check for $102,189.78 to every unemployed American. That’s a bunch of jack.  

I’m a poet, not an economist, but I find it hard to buy the argument that we must — must — devalue all of our savings every year (which is what inflation does) in the name of monetary stability. I think a trillion bucks is too much to pay for monetary stability, especially when it doesn’t offer all that much, you know, monetary stability.

Of course there are trade-offs from inflation: but practically all of the costs fall on savers and investors, and all of the benefits accrue to debtors and spenders. I do not much like those incentives.

Two percent inflation costs $1.4 trillion a year: Don’t forget the second deficit.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

The House has voted to kill HAMP, a con game being run by mortgage-servicers on American mortgage borrowers with the blessings of the Obama administration. HAMP, as I have argued, isn’t a defective program: It is a scam, a rip-off designed to be a rip-off.

Among those voting to end this fraud were 18 House Democrats including George Miller, a Nancy Pelosi protégé who told the Huffington Post:

What we saw was just a commonality of abuse by servicers, the banks, of our constituents. They were being lied to. Their documents were being lost on a regular basis. Their phone calls were not returned. They were told they’d be handed off to another person, that never took place. They were told they would be eligible in a couple months, that never took place.

This is consistent with the experience of many (too many) HAMP borrowers.

The question is: Why do most Democrats support this rip-off?

The answer is: Because it is backed by one very important Democrat: Barack Obama.

And why does Obama support it?

HAMP doesn’t really stop a lot of foreclosures, but it does slow the process down, and the Obama administration (along with the Committee to Reinflate the Bubble) is desperate to prop up the housing market by any available means, even, apparently, if that means giving an excruciatingly raw deal to a lot of vulnerable homeowners, some of whom were duped into intentionally falling behind on their mortgages in order to qualify for HAMP modifications that never came. Obama’s Treasury Department has said that it cannot even do anything to punish banks that violate HAMP’s rules.

The Obama administration knows that the housing crash isn’t over: Wall Street Journal, 21 March:

Sales of previously occupied homes in the U.S. sank by 9.6% in February and prices fell to the lowest level in nearly nine years, indications that the market remains depressed.

Existing-home sales decreased from a month earlier to a seasonally adjusted annual rate of 4.88 million, the lowest level since November, the National Association of Realtors said Monday.

The results were worse than forecast. Economists surveyed by Dow Jones Newswires had expected home sales to decline by 3.9% to an annual rate of 5.15 million.

The results called into question whether the U.S. housing market is recovering or falling further.

Housing prices ultimately are going to find their bottom. The Obama administration does not wish for that to happen at a politically inconvenient time — not with unemployment still high, gasoline prices headed up, and significant inflation in food and energy prices hovering over the economy. But HAMP is an embarrassment: Basically, the banks pretend to put borrowers on the road to a permanent loan modification and then begin conveniently losing paperwork, neglecting to process it in a timely fashion, suddenly discover documentation problems, etc., with the end result that many borrowers end up far worse off than they were before. Many who might have been able to avoid losing their homes will lose them because of the corrupt way in which HAMP has been implemented.

Congress should not only end this program, it should open an investigation into the fraud connected with it. If there is any truth at all to the stories being relayed by HAMP victims, some bankers should go to jail over this.

This is an excellent idea. Why is this sort of thing even debated? It should be SOP.

“An outrage!”

So says the guy who was once elected as a Republican about the very reasonable budget proposed by the Democrat. Strange times.

“Proportionally, the cuts that are inflicted on New York City are an outrage,” [NYC mayor Michael] Bloomberg said a day after Gov. Andrew Cuomo announced a tentative $132.5 billion state budget deal that is expected to restore more than $136 million of threatened education money to the metropolis.

Governor Cuomo has turned out to be a pleasant surprise so far. (Don’t worry — I’m sure he’ll get worse!) The budget is getting balanced with no new taxes or borrowing. Not too shabby, especially for New York. Other governors should be tipping their hats — he isn’t doing this in Montana.

Perhaps Cuomo has noticed that Texas is now home to more Fortune 500 headquarters than New York is, and has decided that it would be a lot easier to balance future budgets with a healthier tax base, one with higher levels of employment and better wages. Perhaps the mayor should take a subway ride up to the Bronx, where the nominal unemployment rate is 12.5 percent (and the real unemployment rate God alone knows how much higher) and ask himself if weighing the city and state down with more taxes and more debt is really the best way to turn things around.

Either way: Can we call this the official end of Bloomberg for President? The great manager is looking overwhelmed.

But three cheers for Andrew Cuomo. For now.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Let me introduce you to the Worrell Professor of Anglo-American Studies (really!) at Wake Forest University, Prof. David Coates, the even dimmer Democrat’s George Lakoff. Professor Coates, writing in the Huffington Post, is interested in (can you guess?) “Reframing the Deficit Debate,” as his headline puts it. “Reframing” means “engaging in rhetorical obfuscation,” i.e. bamboozling the proles, which is fun to do but doesn’t make the numbers come out any different.

Yeah, I know, all this panicky deficit talk is just part of the Vast Right-Wing Conspiracy — the one apparently headed by former Clinton chief of staff and Obama deficit-panel appointee and dyed-in-the-wool Democrat Erskine Bowles, who co-authored a warning that the country is headed for “the most predictable economic crisis in its history.” Predictable by whom? Not by Prof. David Coates of Wake Forest U.

(Okay, before I go on: “Professor of Anglo-American Studies”? What in hell is that? I picture a guy spending long, fruitless, frustrated grad-school afternoons poring over ancient Brooks Bros. inventory lists and real-estate listings in Greenwich, Conn.)

The guy’s a professor, but he writes like an undergraduate circa 1993, one who has just discovered the words “dominant discourse”: “The dominant discourse in national American politics these days is a discourse on deficits.” (The discourse is a discourse!) The phrase “dominant discourse” reappears, and it is Professor Coates’s goal to correct it. He proposes to do this by repeating things that are at best half true and at worse less than half true. Item No. 1 on his rhetorical agenda is declaring: “We are not broke.” You’ve heard that one a lot lately, no? It’s like there was a memo or something.

Here’s Coates: “We are not broke. We are certainly not broke in the sense of facing any immediate problem of financing public debt. On the contrary, the federal government is currently able to borrow at a historically low rate of interest — lower indeed now than immediately before the 2007–8 financial melt-down.” He does not write, though I assume he knows, that one very large factor influencing those currently low interest rates is that the federal government is not selling a lot of bonds to the real bond market. The Fed, under the “quantitative easing” program, is buying most of what Uncle Sam is selling, and it is simply printing the money to do so. As readers of this column know, players in the real bond market already are saying that they will not finance U.S. borrowing until interest rates go up. Which means that we probably will face an “immediate problem of financing public debt” at the current artificially low rates once the government has to actually, you know, sell all those bonds to willing investors. But if you define “Not Broke” as “Ben Bernanke can still exnihilate money into existence, can’t he?” then, true, we’re not broke, and never will be. And neither will Zimbabwe.

Coates “reframing” ploy No. 2:  Cutting spending won’t really reduce the deficit. Here’s our man: “Cutting programs is not the best way to cut the deficit.  . . . At least 75 percent of the current shortfall in government revenues is a product of the recession. Another 11 percent is a product of decisions taken, by this administration and its predecessor, to wage a series of Middle Eastern wars. The best way to cut the deficit is to end those wars and to retrigger sustained economic growth, not least by greater public expenditure on infrastructure and human capital.” But we were running a deficit before the recession, and the recession does not explain the generally negative fiscal outlook that preceded it. Neither do tax cuts for “the rich.” As the CBO puts it: “The sharp rise in debt stems partly from lower tax revenues and higher federal spending related to the recent severe recession and turmoil in financial markets. However, the growing debt also reflects an imbalance between spending and revenues that predated those economic developments.” Spending on what? At the height of the Iraq War, the federal government was spending more on education than it was on the war. (And state and local governments spent far more on education than Washington did.) The Iraq War, CBO reports, cost $709 billion; the Obama stimulus will cost more than that ($814 billion) by the time it has run its course, CBO finds. (An excellent exploration of all this and more is here.) Coates complains about the Bush tax cuts and says we need tax increases on “the rich” to balance things out; in reality, Bush’s tax cuts for the middle class ($2.2 trillion) cost far more in forgone revenue than the cuts for “the rich,” which can be measured in measly billions, rather than trillions.

You see how this reframing thing works, right? You get tenure for this stuff, which is awesome.

Given the obvious deceit of the deficit hawks’ campaign, it is “little wonder then,” as Professor Coates puts it, “that public opinion polls regularly put deficit reduction low on the list of the nation’s pressing issues.” Except for the 40 percent of Americans who listed it as their No. 1 or No. 2 concern (as opposed to 56 percent for jobs).

How broke are we, really? This broke:

Our national debt is $14.3 trillion or so. Our GDP in 2010 was about $14.7 trillion. On the more commonly cited metric of publicly held debt to GDP, the United States, at 59 percent, is closer to European bailout-bait such as Spain (63 percent), or even basket case Portugal (83 percent), than it is to responsible countries like Australia (22 percent), New Zealand (26 percent), or Canada (34 percent). Under CBO’s most realistic scenario, our debt would hit 185 percent of GDP by 2035. I write would because, of course, it won’t: Unsustainable levels of U.S. debt will cause a major global financial crisis well before reaching that level. Probably more like the 110 percent CBO sees us hitting by 2025. The year 2025 is not some Buck Rogers date in the sci-fi future; that’s fourteen years from now.

All of this could be dealt with, and dealt with good ’n’ proper, Coates thinks, if our stumbling president would just learn how to reframe it. (Question: If a professor of Anglo-American studies says our first black president suffers mostly from failure to heed the advice of professors of Anglo-American studies, does that make him a racist? Discuss among yourselves.) 

Coates: “The President would do well to remember that the important thing about legacies is that they have to be defended. Given the accommodatory strategy now prevalent in his White House, there is a genuine and growing danger that his administration may yet be the first in U.S. history to have surrendered its legacy before it has even left office.” (Confession: I included that last bit only as a pretext to note that “accommodatory” is a word unknown to the rascals who edited my Webster’s Third. Maybe it’s not English, but Anglo-American.)

But never mind all that: No problem here, nothing to see, move along, we’ve got reframin’ goin’ on! And when those Social Security checks stop showing up (or when you start cashing them for radically devalued dollars), remember that Professor Coates of Wake Forest U. assured you that it was only a matter of reframing. But keep this in mind: Lots of really bright people with real money on the line (as opposed to political rhetoric, which is not cheap, but free) are betting their own that this does not work out well.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

What General Electric has in common with the guy who runs Obama’s IRS: not paying taxes. That New York Times report on G.E.’s remarkable ability to avoid paying U.S. taxes has been getting a lot of attention today, but there was one paragraph that reminded me of why I’m a flat-tax guy:

G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

As government extends its reach over every aspect of the economy, this sort of corporatism will only become more deeply entrenched in fields like health care and energy. What G.E. has done with taxes, the insurance giants will do (and have done) with Obamacare. Everything looks  like ethanol.

But I’ll take a little bit of issue with Ezra Klein’s response:

So patriotic! It really explains why President Obama tapped Jeffrey Immelt, GE’s CEO, to lead the President’s Council on Jobs and Competitiveness. If this isn’t the sort of corporate behavior America needs more of, what is?

I’m sort of creeped out by this particular usage of the word “patriotic,” as though the alternative to the profit-maximizing corporation were the Great People’s Patriotic General Electric Corporation. (I also intensely dislike the proposition that paying taxes is an expression of patriotism, as though the state were the nation.) But I’ll say this: Yes, this is exactly the sort of corporate behavior America needs more of, inasmuch as our corporate-tax regime is kind of dumb, and also kind of corrupt, and one way of cleaning that up is to abolish it.

In spite of our having the second-highest nominal corporate-income tax rate in the developed world (Hello, Japan!), the rates actually paid by businesses vary wildly according to their political clout. Progressives look at that and see the evidence of businesses’ having undue influence on Washington; I look at that and see evidence of Washington’s undue influence on business. But it’s a two-way street, and the end product smells the same.

There are many arguments for a flat tax: Compliance costs are lower, it’s easier to understand, it doesn’t create a divide-and-conquer dynamic with regard to the tax brackets, it aligns taxpayers’ incentives, etc. But there’s a practical moral argument, too: The tax code is corrupt. Using the tax code as a cookie jar full of special favors for friends and supporters is corrupt. It does not matter that it’s legal, it is immoral. The purpose of taxes is to raise revenue for the government, not to repay political favors or to bribe voters with their own money. I do not think our tax system probably is really salvageable: Obamacare is not the only thing that should be repealed and replaced.

While everybody else was filling out their college-basketball brackets, I was working on my fantasy federal budget (I know, I know, I’m a lot of fun on dates), which is not yet complete, but which I will share when it is. (I’m planning a fantasy-budget reader contest.) My revenue side assumed a true flat tax on all forms of personal income — salaries, benefits, bonuses, dividends, inheritances, capital gains, etc. — and, once I’d trimmed the federal government back as small as I think we could realistically get it, figured that I could fund it with a flat rate of about 20 percent, and no corporate income tax. (I think this might be good for investment.)

The upside of the fiscal crisis that our country insists on marching toward is that it will give us the opportunity to enact radical reform of some of our most important institutions, and the tax code should be high on the list. A federal/state/local system that produces a $3.2 billion tax benefit for G.E. but taxes the pants off of poor people to fund useless schools that do their children very little good (and a great measure of harm, in many cases) is an unbearable burden. It has to go.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Let me introduce you to the Worrell Professor of Anglo-American Studies (really!) at Wake Forest University, Prof. David Coates, the even dimmer Democrat’s George Lakoff. Professor Coates, writing in the Huffington Post, is interested in (can you guess?) “Reframing the Deficit Debate,” as his headline puts it. “Reframing” means “engaging in rhetorical obfuscation,” or hoodwinking the proles, which is fun to do but doesn’t make the numbers come out any different.

Yeah, I know, all this panicky deficit talk is just part of the Vast Right-Wing Conspiracy — the one apparently headed by former Clinton chief of staff and Obama deficit-panel appointee and dyed-in-the-wool Democrat Erskine Bowles, who co-authored a warning that the country is headed for “the most predictable economic crisis in its history.” Predictable by whom? Not by Prof. David Coates of Wake Forest U.

(Okay, before I go on: “Professor of Anglo-American Studies”? What in hell is that? I picture a guy spending long, fruitless, frustrated grad-school afternoons poring over ancient Brooks Bros. inventory lists and real-estate listings in Greenwich, Conn.)

The guy’s a professor, but he writes like an undergraduate circa 1993, one who has just discovered the words “dominant discourse”: “The dominant discourse in national American politics these days is a discourse on deficits.” The phrase “dominant discourse” reappears, and it is Professor Coates’s goal to correct it. He proposes to do this by repeating things that are at best half true and at worse less than half true. Item No. 1 on his rhetorical agenda is declaring: “We are not broke.” You’ve heard that one a lot lately, no? It’s like there was a memo or something.

Here’s Coates: “We are not broke. We are certainly not broke in the sense of facing any immediate problem of financing public debt. On the contrary, the federal government is currently able to borrow at a historically low rate of interest — lower indeed now than immediately before the 2007–8 financial melt-down.” He does not write, though I assume he knows, that one very large factor influencing those currently low interest rates is that the federal government is not selling a lot of bonds to the real bond market. The Fed, under the “quantitative easing” program, is buying most of what Uncle Sam is selling, and it is simply printing the money to do so. As readers of this column know, players in the real bond market already are saying that they will not finance U.S. borrowing until interest rates go up. Which means that we probably will face an “immediate problem of financing public debt” at the current artificially low rates once the government has to actually, you know, sell all those bonds to willing investors. But if you define “Not Broke” as “Ben Bernanke can still exnihilate money into existence, can’t he?” then, true, we’re not broke, and never will be. And neither will Zimbabwe.

Coates “reframing” ploy No. 2:  Cutting spending won’t really reduce the deficit. Here’s our man: “Cutting programs is not the best way to cut the deficit. . . . At least 75 percent of the current shortfall in government revenues is a product of the recession. Another 11 percent is a product of decisions taken, by this administration and its predecessor, to wage a series of Middle Eastern wars. The best way to cut the deficit is to end those wars and to retrigger sustained economic growth, not least by greater public expenditure on infrastructure and human capital.” But we were running a deficit before the recession, and the recession does not explain the generally negative fiscal outlook that preceded it. Neither do tax cuts for “the rich.” As the CBO puts it: “The sharp rise in debt stems partly from lower tax revenues and higher federal spending related to the recent severe recession and turmoil in financial markets. However, the growing debt also reflects an imbalance between spending and revenues that predated those economic developments.” Spending on what? At the height of the Iraq War, the federal government was spending more on education than it was on the war. (And state and local governments spent far more on education than Washington did.) The Iraq War, CBO reports, cost $709 billion; the Obama stimulus will cost more than that ($814 billion) by the time it has run its course, CBO finds. (An excellent exploration of all this and more is here.) Coates complains about the Bush tax cuts and says we need tax increases on “the rich” to balance things out; in reality, Bush’s tax cuts for the middle class ($2.2 trillion) cost far more in forgone revenue than the cuts for “the rich,” which can be measured in measly billions, rather than trillions.

You see how this reframing thing works, right? You get tenure for this stuff, which is awesome.

Given the obvious deceit of the deficit hawks’ campaign, it is “little wonder then,” as Professor Coates puts it, “that public opinion polls regularly put deficit reduction low on the list of the nation’s pressing issues.” Except for the 40 percent of Americans who listed it as their No. 1 or No. 2 concern (as opposed to 56 percent for jobs).

How broke are we, really? This broke:

Our national debt is $14.3 trillion or so. Our GDP in 2010 was about $14.7 trillion. On the more commonly cited metric of publicly held debt to GDP, the United States, at 59 percent, is closer to European bailout-bait such as Spain (63 percent), or even basket case Portugal (83 percent), than it is to responsible countries like Australia (22 percent), New Zealand (26 percent), or Canada (34 percent). Under CBO’s most realistic scenario, our debt would hit 185 percent of GDP by 2035. I write would because, of course, it won’t: Unsustainable levels of U.S. debt will cause a major global financial crisis well before reaching that level. Probably more like the 110 percent CBO sees us hitting by 2025. The year 2025 is not some Buck Rogers date in the sci-fi future; that’s fourteen years from now.

All of this could be dealt with, and dealt with good ’n’ proper, Coates thinks, if our stumbling president would just learn how to reframe it. (Question: If a professor of Anglo-American studies says our first black president suffers mostly from failure to heed the advice of professors of Anglo-American studies, does that make him a racist? Discuss among yourselves.) 

Coates: “The President would do well to remember that the important thing about legacies is that they have to be defended. Given the accommodatory strategy now prevalent in his White House, there is a genuine and growing danger that his administration may yet be the first in U.S. history to have surrendered its legacy before it has even left office.” (Confession: I included that last bit only as a pretext to note that “accommodatory” is a word unknown to the rascals who edited my Webster’s Third. Maybe it’s not English, but Anglo-American.)

But never mind all that: No problem here, nothing to see, move along, we’ve got reframin’ goin’ on! And when those Social Security checks stop showing up (or when you start cashing them for radically devalued dollars), remember that Professor Coates of Wake Forest U. assured you that it was only a matter of reframing.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Holy crow: A former SEIU executive spells out his plan for destroying JP Morgan, creating a new financial crisis, and destabilizing the American economy, via Glenn Beck’s Blaze.

Listen to the tapes and make your own judgment.

China’s trade deficit, I mean:

China will probably post a trade deficit in March after reporting a surprise deficit in February, as its efforts to stimulate imports take off, Commerce Minister Chen Deming said on Sunday.

Economists also said the country’s shrinking trade surplus and rising imports will help tighten capital liquidity, curb inflation and reduce pressures on yuan appreciation.

In February, China witnessed a trade deficit worth $7.3 billion, the first such deficit since last March. “China will further expand imports this year. Besides February, China will likely see a trade deficit in March,” said Chen, who did not elaborate on the figures, at the 12th China Development Forum in Beijing,.

China runs a trade deficit with many of its largest trading partners, but not with the United States (as you may have heard). The United States has a large trade deficit, but Chinese goods are not the main source of that. The main component of our trade deficit, about half, is oil. With oil and other commodities prices going through the roof (a fact that all the best people will tell you has nothing, nothing at all to do with all those dollars and euros being summoned out of the vasty deep), China is in a difficult situation. A command-and-control economy is a hard thing to manage if the cost of rice gets too high.

Economic trouble for China is not good news for the United States. (Beijing is not the source of our economic problems; Washington is.) For one thing, China helps keep consumer inflation down in the United States by providing us with very cheap goods at a very low profit for themselves. (A command-and-control economy is a hard thing to manage if unemployment gets too high.)

And while the belief that China is “America’s Banker,” buying up all of our federal debt, is a considerable exaggeration, Beijing does buy a lot of bonds. Or at least it has been buying. But big bond funds aren’t buying, OPEC isn’t buying, Japan probably isn’t going to be in the position to be buying in the near future. Even the Fed, which has been buying under the “quantitative easing” program, is supposed to stop buying this summer. Scarcity is a real thing, and at some point the question for Chinese authorities is: another barrel of oil or another barrel of Treasuries? Lots of other potential investors are demanding higher interest rates on U.S. government debt, and so will the Chinese, probably. The marginal barrel of oil looks pretty good by comparison.

Rising interest rates on government debt are a real problem if you are forecasting deficits in the $1 trillion-plus range. There aren’t a lot of trillion-dollar players out there. (China holds just over $1 trillion in U.S. government debt.) Rising interest rates and huge government debts are very big concerns if your economy doesn’t seem to be what it once was, if your government faces a shutdown because the president’s party cannot abide by even the most modest deficit-reduction measures, etc. Congress may vote to raise the national debt ceiling, but the markets get a vote, too. China is putting a brave face on its trade deficit (and, who knows, maybe this really is what Beijing wants; I kind of doubt it), and the United States, being a big commodities exporter (I’ve seen it estimates that the United States accounts for half of the world’s grain exports), stands to profit from higher global food prices. But if that profit is accompanied by economic turmoil in China, then we’re buying trouble for ourselves.

Of course, if our debt-to-GDP ratio were more sane, we would not have to worry nearly as much about Chinese bond buyers or Libyan oil.

Just a thought.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

I’m no titan of industry, but I do wonder: How the hell do you lose your shirt renting parking spaces in New York City — at Yankee Stadium, no less? (Via Megan McArdle.)

(This will be the closest thing to sports reportage you get from me.)

This remind you of anything?

March 14 (Bloomberg) — Oil exporting countries are cutting holdings of U.S. government debt as energy prices rise, helping depress the dollar, the worst performing major currency of the past six months.

Treasuries owned by oil producers and institutions such as U.K. banks that are proxies for Middle East nations fell 9 percent in the second half of 2010 to $654.6 billion, the first decline in the final six months of a year since the Treasury Department began compiling the data in 2006. The sales may continue, if history is any guide, because Barclays Plc says Middle East petroleum exporting nations have traditionally placed only 25 percent of their savings in dollar-based assets.

PIMCO, OPEC: not buying what we’re selling.

And does anybody think that the No. 3 U.S. government debt buyer, Japan, is going to be in the market for a while?

Here’s a little piece of knowledge:

“I moved my clients out of any mutual funds that held Treasuries 12 to 18 months ago, including the Pimco Total Return Fund,” said Steven Tibbitts, owner of Tibbitts Financial Consulting, a $50 million advisory firm.

In place of Treasuries, he has moved clients into floating-rate-bank-loan funds and international bonds, including emerging-markets debt.

“It’s not a matter of whether rates rise, because they will, and when they do, it will be negative for longer-term bonds, especially longer-term government bonds,” Mr. Tibbitts said.

Question: Who thinks the U.S. government will still have a AAA rating in five years? Answer in the comments and tell me why/why not.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

So, the guy behind the world’s largest bond fund is dumping U.S. government debt.

Got your attention yet?

Bill Gross of Pacific Investment Management Co. (PIMCO) is no great fan of  U.S. government debt to start with: His fund also zeroed out its holdings of Uncle Sam’s IOUs back in 2009, but had added some back into the portfolio. No more. He’s not buying what Washington is selling, and he’s urging others to dump U.S. bonds, too. Bloomberg reports:

Gross in his February commentary urged investors to reduce holdings of Treasuries and U.K. gilts and buy higher-returning securities such as debt from emerging-market nations. “Old-fashioned gilts and Treasury bonds may need to be ‘exorcised’ from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint,” Gross wrote.

So, what’s wrong with U.S. government debt? With deficits running at insane levels but interest rates still low, the risk-reward ratio is out of whack, even compared to “emerging-market” countries — read: those Third World regimes whose farcical finances we used to regard with a mixture of scorn and pity, until we began emulating them. All the money-printing down at the Fed is taking a toll:

Gains in so-called headline inflation matter more for the U.S. economy than Fed Chairman Ben S. Bernanke suggests and rising oil prices may cut U.S. gross domestic product by a quarter to half a percentage point, Gross said March 4 in a radio interview on “Bloomberg Surveillance” with Tom Keene.

“Bernanke tends to think this doesn’t matter — at least in terms of headline versus the core — we do,” Gross said.

What this means, of course, is pressure on the U.S. government to offer higher interest rates on its bonds. Gross says that the rates need to go up about 1.5 percent to reflect market realities. And market realities, ignored for the past few years, are going to start reasserting themselves as “quantitative easing” ends and the Fed stops buying U.S. debt that the markets don’t want.

As things stand, interest on the debt (at about 6 percent of all federal spending) is equal to about one-third of all discretionary spending combined (about 19 percent of the budget). Current forecasts have debt-service costs alone amounting to nearly $1 trillion by 2020, consuming 20 percent of all federal tax revenues. That’s a vicious circle: Bigger deficits add to the total debt, which drives up the cost of debt service, which creates bigger deficits, shampoo, rinse, repeat, and wake up in Argentina circa 1999–2002.

Which gets us back, as usual, toward the one inevitable, undeniable fact of American life at this moment: The major entitlement programs — Social Security, Medicare, Medicaid — other “mandatory” spending, national defense, and interest on the debt make up more than 80 percent of federal spending. Everything else put together accounts for less than $1 in $5 of government outlays. Assuming we don’t default on our national debt, interest on the debt is the one spending item that is truly off the table. Even if we cut national-defense spending to zero, that would only get us just over halfway toward eliminating the trillion-dollar deficit headed our way in 2012. (We aren’t cutting national-defense spending to zero.) Meaning that major reform of the entitlement programs is not optional. It is do or die.

Bernanke & Co. have baked inflation into this cake, and catastrophic state and local finances mean that Washington really can’t pass off its spending schemes onto the governors, mayors, and state legislatures.

You may think the Ryan Roadmap looks harsh and disruptive. But we simply must start dealing with these things right now, while we have some resources, some options, and some time. It will be much more harsh and disruptive to try to deal with these things after the fiscal crisis is upon us, when inflation is skyrocketing, unemployment is through the roof, and the markets start demanding a very high premium to finance the debt of Washington, the states, and the cities, if indeed investors are willing to do so at all.

We are in an extraordinarily dangerous period, one that calls for real leadership in Washington, where the geniuses in charge are currently locked in a death struggle over whether to cut nothing or next to nothing.

NPR? Foreign aid? Food stamps? That isn’t going to do it. The fact that we’re even having a discussion about whether we have to federally subsidize experimental opera companies in Topeka suggests that the message has not quite hit home. Maybe when the Social Security checks stop coming, Americans will notice. Which is to say, when it’s too late.

To be clear, PIMCO in and of itself is not disastrous — it is just a mile marker on the road to Fiscal Armageddon. But it is one worth noting.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Michele Bachmann  (and I) call it “gangster government.” The Washington Post calls it “three-Pinocchio” government, assigning the Democrats’ most recent budget claims a credibility rating of roughly You’ve Got To Be Kidding Me. Seriously: Even the Washington by-God Post is getting the message about Fiscal Armageddon.

At issue are Democratic claims that they are offering the Republicans a meaningful compromise on spending cuts, that they are meeting them “halfway.” Which, as the Post points out, is true, if your baseline is an imaginary budget that was never enacted. Congressional Democrats never could be bothered to actually pass a budget on their watch (and, seriously, if you were them, would you want to put all those numbers together in one handy place? Or would you rather spread the spending out so it’s hard to see?), so Obama’s 2011 proposal was never enacted. That means that the only real numbers we have to go on are actual 2010 spending, from which Democrats propose to trim a grand total of approximately nothing.

Quoth the Post:

The Democrats’ posturing that they have met Republicans “halfway” on budget cuts does them no credit. Either they should take a stand and say they won’t accept any further cuts, or they should begin a real negotiation that leads to a higher number. Obama signaled he was willing to deal when he said he was “prepared to do more.” But the persistent claims of going “halfway” when in fact Democrats have done little to engage Republicans on the issue will only hurt their credibility in the long run.

Given the uncertain constitutional status of Obamacare, and given the sneaky way it’s been budgeted for, how about we hold onto that $105 billion in implementation spending that Michele Bachmann is so excited about until we’ve got a Supreme Court ruling on the mandate, etc? That does not seem to me unreasonable, and making the Republicans’ $60 billion in cuts $165 billion would move us that much closer to national solvency.

If somebody isn’t already planning the next rally on the Mall to remind Republicans of why they’ve got a House majority and what we expect them to do with it, it’s time to get moving. The Republicans have been properly wary of overreach thus far, but this is the point at which political momentum can easily be dissipated. Spending-cut precedents have to be established, with real credibility, before we move on to the next — and significantly harder — task, which is straightening out the entitlement mess. (By which I mean straightening out the Medicare mess, mostly. Social Security and Medicaid are relatively easy fixes, but Medicare is going to be a beast.)

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

So the Democrats are drawing their line in the sand: at $6 billion in spending cuts.

A top Senate Democrat said Sunday that the $6 billion in additional spending cuts that his party offered is the limit Democrats can accept – drawing a line well short of Republicans’ goal with less than two weeks to go before a government shutdown if the two sides can’t agree.

Sen. Richard J. Durbin of Illinois, the second-ranking Democrat in the chamber, said the $6 billion proposal, released Friday, has “pushed this to the limit” on domestic spending. That comment stands in sharp opposition to a House Republican bill containing an additional $57 billion in cuts below 2010 spending.

Republicans should take up cudgels over this. $6 billion is nothing: Congress spent $3.3 trillion in 2010. $6 billion is 0.001 of that, a number that rounds down to about zero. Nothing.

Republicans are rightly afraid that a government shutdown will turn into a replay of their Clinton-era troubles, and they should be careful. But if you’re  going to have a fight, this is the fight to have: Democrats are saying in essence that every dollar of federal spending is sacred, that spending is never coming down, and that government has a prior claim on the wealth of generations of Americans unborn. I don’t usually give advice to politicians, but I’d make a marquee message out of that fact: Even after the shellacking, Democrats are willing to cut nothing of any significance. This isn’t shaping up to be a replay of 1995; it’s shaping up to be a replay of 2010.

Via my favorite libertarian jazz critic: Iowahawk grabs a Paul Krugman talking point and grinds it into a fine paste. One of those things that makes me think, “Dang, I wish I’d written that.”

Highlight:

White students in Texas perform better than white students in Wisconsin, black students in Texas perform better than black students in Wisconsin, Hispanic students in Texas perform better than Hispanic students in Wisconsin. In 18 separate ethnicity-controlled comparisons, the only one where Wisconsin students performed better than their peers in Texas was 4th grade science for Hispanic students (statistically insignificant), and this was reversed by 8th grade. Further, Texas students exceeded the national average for their ethnic cohort in all 18 comparisons; Wisconsinites were below the national average in 8, above average in 8.

Do read the whole thing.

Question for Jay Nordlinger: Why isn’t there a Nobel Prize for computer science? We need to create one, in order to bestow it upon the unknown genius who wrote the cliché-conjoining algorithm that produces editorials for the New York Times.

There is more stupidity and wishful thinking in today’s editorial, headlined “The Hollow Cry of ‘Broke,’” than I can add up. (And I’m not bad at simple addition.)

Let’s start with the outright error: The Times argues that the problem with our governments’ budgets is not spending, but insufficient taxation. We have a revenue shortfall, and “a substantial part was caused by deliberate decisions by state and federal lawmakers to drain government of resources by handing out huge tax cuts, mostly to the rich.” Mostly to the rich.

Cost of extending the Bush tax cuts for “the rich,” meaning families making more than $250,000 a year: about $800 billion.

Cost of extending the Bush tax cuts for the non-rich, meaning those making less than $250,000 a year: about $2.2 trillion.

My always-suspect English-major math says that the tax cuts for the middle class and poor were 2.75 times as expensive as tax cuts for the “rich.” (No, I don’t make $250,000 a year, but, contra Ezra Klein, I don’t think that a family making $250,000 a year is necessarily rich. Maybe in Lubbock, Texas, maybe not in New York, N.Y. Question: Where do you think more of those families are to be found?) I can’t think of a way to make that add up to “mostly for the rich.”

The Times says our deficit is “too large for comfort,” but says that even modest spending cuts would be disastrous. (No, I can’t think of how to make that add up, either.) Let’s consider:

U.S. national debt: about $14 trillion.

U.S. GDP:  About $14 trillion.

Symmetry! Not the good kind.

Obligations of U.S. federal, state, and local governments, including sovereign debt, bonds, pension liabilities, and entitlement liabilities, i.e. the real national debt: About $130 trillion.

GDP of Planet Earth: About $60 trillion.

If you owe more than twice the sum total of the planet’s economic output and you think you are not broke, what the hell qualifies as broke? Do we have to take out a zero-down mortgage on Centaurus A? The Times, I note, has experience with several definitions of broke. Pinch Sulzberger owed a heck of a lot less proportional to his income when he hocked the family heirloom.

Boehner et al. are forcing through some spending cuts. The Times is aghast: “In a matter of days, the Senate will be forced to take up the House bill to make more than $61 billion in ruinous cuts over the next seven months, all under the pretext of “fiscal responsibility.” Ruinous. That $61 billion amounts to 1.7 percent  of FY2010 spending. How big a decline is 1.7 percent? The New York Times lost 8.7 percent of its readers in the first half of the 2010 reporting period, and it’s still in business. We’re feeding Leviathan dollars by the trillions and it’s going to be ruined by a 1.7 percent cut? Horse. . . feathers.

 —  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Against the big rip-off.