In the midst of this crisis, a fundamental shift in power is occurring across the Continent.  Regardless of the eventual solution, Greece will no longer be solely responsible for its fiscal policy, but will be under the stringent watch of the European Commission, the European Central Bank, and who knows what other Continental countries or NGOs.  As I said in September, the severe problems caused by attempting a common currency under different fiscal regimes has only two ultimate solutions: the dissolution of the Euro Zone of the centralization of Continental fiscal policy.

And thus far, the negotiations over Greece’s insurmountable debt problem have trended toward one of those two outcomes.  On the one hand, if the next emergency loan passes, prominent economic adviser Marie Diron at the Ernst & Young ITEM Club warns that strict oversight will become the new model for European fiscal policy: “In practice countries will watch closely over the finances of others, ensure laws are passed and implemented, and corrective measures can be taken to avoid future debt contagion between member states.”  Regardless of who exercises that oversight, the silence that has greeted this shift in sovereignty is stunning, and it doesn’t take a genius to figure out that ultimate fiscal control will be exercised by the nation or nations that have the financial wherewithal to keep the sick nations of Europe above water.

However, it is becoming increasingly unlikely that those countries which exercised “responsible” fiscal policies (by comparison at least)  will also be willing to subsidize the poor fiscal decisions of their Continental neighbors.  The International Monetary Fund, already heavily exposed to toxic European debt, announced that it will only be supplying €13bn of the €130bn package currently being negotiated, leaving the nation’s of Europe to come up with almost €120bn, a sum which may not be forthcoming.  Angela Merkel’s German Christian Democratic Union has been steadily losing support, compounded by the scandal-ridden departure of President Wulff on Friday.  Under electoral pressure, German officials may have no choice but to push for more stringent economic oversight of debtor nations, or, as was the case this week, for the swift exit of Greece from the Euro Zone and a declaration of bankruptcy.

In either event, just kicking Greece out the Euro Zone will not solve the systemic problems associated with the high debt burdens of other nations like Italy and Spain.  And after debtors take a “hair-cut” on Greek debt, their willingness to take on further sovereign debt liabilities from other European nations seems likely to suffer, requiring higher interest rates that those nations simply can’t afford.  This is the situation Europe’s finance ministers face today as they head into negotiations over the next round of bailouts to Greece and by tonight, perhaps we will have a better idea about whether Europe is headed towards great fiscal centralization or a schism in monetary policy.

Thou shalt not speak ill of any fellow Republican.

This was a rule Reagan followed for the rest of his political career, but its a rule that the so-called “Reagan Republicans” currently facing off for the 2012 Republican candidacy appear to have forgotten.  Which begs the question: Whatever happened to Reagan’s 11th Commandment?

For that matter, what happened to the Candidate Gingrich that appeared in last year’s summer debates? The man who attracted applause for his friendly demeanor towards his fellow candidates and for reminding the country that the primary focus of these debates should be on unseating Obama.  As his popularity grew, his focus shifted towards defaming Mitt Romney, and his favorability ratings have plummeted.  Perhaps the true staying power of Mitt Romney’s campaign has been his laser-like focus on Obama.  Sure he’s had to respond to the challenges about his record, but throughout the primary season his message has been consistently aimed at winning in November, 2012.

As Romney gets closer to winning the nomination, its time for the Republican Party to stop dithering and start focusing.  Regardless of who becomes the nominee, the incessant and increasingly personal attack against the candidates will only hamper the ability of the GOP to present a unified front against the opponent who really matters — President Obama.  Regardless of who wins in South Carolina, attacking Mitt Romney’s career in a private equity firm is counterproductive.  Who cares if he saved jobs, created jobs, whatever; that wasn’t his job.  His vast personal fortune would indicate that Romney was good at his actual job–making money.  If Gingrich, Perry, et al, want to run as conservatives, its time to be less-focused on criticizing Romney’s business history and spend more time articulating how their policy positions are different from his.  Otherwise the South Carolinians will see right through their negativity and hand Romney his third consecutive win.

Enforcing the rule of law is an important and proper role for the government to play. But the practice of regulating even the smallest aspects of life, from the amount of lime in dishwasher detergent (if you’ve noticed your glasses not shining as much – that’s why) to how companies have to provide for their employees healthcare needs. And with the economy on the rocks, the uncertainty created by the bureaucrats in Washington makes hiring impossible, as this Georgia company so aptly captured in their new company policy: We are not hiring until Obama is gone.

And here is the dilemma.  Since social programs are run on a model almost identical to a Madoff-style Ponzi scheme (Bernie Madoff’s inspiration was the Social Security Administration), people have been paying into the system for years, but that money has been spent on previous beneficiaries.  So to hear these programs described as “entitlements” is deeply offensive to them, belying the thousands of dollars they paid into the system.  This feeling is clearly evident in recent commercials put out by the AARP and other lobbying groups for the elderly, who are concerned about losing benefits from programs they’ve been helping fund for their entire lives.  Thus the dilemma is to find a solution that recognizes the contributions made in the past, while somehow controlling costs in the long-run.

In addressing this dilemma, the first thing to note is that NO current recipient is in danger of losing their coverage under any currently proposed plan, not even the much-maligned budget put forward by Paul Ryan or the GOP Cut, Cap, and Balance plan.  The practice of preying upon seniors’ insecurities is particularly disingenuous and heinous, and images of grandma falling off a cliff are common ploys meant to shield Democratic intransigence to addressing the long-run insolvency of these programs.  Let’s be clear — nobody wants to cut the benefits of any person in either Medicare or Social Security.

The goal is to slowly transition the country off of these programs.  Both Social Security and Medicare were put in place by people who cared deeply about the well-being of America’s seniors.  But both programs will soon face absolute collapse (no benefits for anyone) without a drastic surge in the U.S. working age population.  Yet because those programs are offered, people have been relying on them, and instead of saving for their own retirements and their future healthcare needs, they spend their money in the present and rely on the government to pay for them in the future.  This type of moral hazard is not sustainable.

The only solution is to begin privatizing Social Security and Medicaid.  The word “privatize” is often looked upon in a negative light, but in this case, I’m referring not to the privatization of how benefits are delivered (though this also represents a significant opportunity for savings), but to how payments into the system are treated.  The Ponzi Scheme model has long been off-limits to the corporate world–it should now be made off-limits to government.  The ideal would be to make participation optional, but that plan is not politically feasible, and given the warped expectations of the American citizenry, would likely end in a lot of people opting out, spending the extra money as if it were increased income, and entering retirement as unprepared as if they’d been participating, only now without any of the benefits.  Instead, Congress must begin putting individuals’ payroll and FICA taxes  into separate individual accounts, which can’t be used to fund current beneficiaries.

This plan is not without its disadvantages.  Eliminating the sole revenue source for the Social Security trust fund would place an enormous financial burden on the general fund.  For years the government has been using the Social Security Trust as a piggy bank for their spending binges, leaving neatly stacked IOU’s in their wake.  Now the reverse would occur, as the general fund would have to take on the responsibility for paying out Social Security and Medicare benefits, a liability not to be taken lightly.

Yet the benefits of the plan far outweigh, and help to mitigate, those costs.  Instead of entitlement programs, we’d now have entitlement accounts, which would be structured much like the 401(k) pension accounts so prevalent in the private sector.  And just imagine the economic growth that will be facilitated by directing those funds into investment rather than government spending.  Even from a Keynesian perspective, this shift will be demand neutral, as income formerly directed into government expenditures will reenter the model as private investment.  Only now that money will be earning a profit.  Plus if you give Americans several investment options, you create a market for these accounts, with money naturally flowing towards those investment portfolios with higher annual returns, and away from those which earn less.  But most importantly, the individual gets to choose where his/her money goes, which is immensely preferable to the current system where that money goes where the government wants.

Furthermore, this structure aligns the interest of the government with economic growth, which is also in the interest of the American people, many of whom have 401(k)’s tied to market mutual funds or other index portfolios and who will also now have their social security account structured in a similar fashion.  This realignment of interests will be actuated by filling the massive revenue hole created by shifting social security and Medicare spending onto the general fund with a temporary (which hardly seems likely, but in an uncharacteristic moment of optimism, I’ll dare to dream) new tax on the return on investment earned by the private accounts.  The better the economy does, the higher the return on investment in those accounts (interest of the the account holder) will be, and the higher the revenue generated (interest of the government) will be.  The interests of everyone involved are aligned.

The private account model has been most noticeably championed by Nobel laureate economist Milton Friedman and is now one of the primary policy options advocated by Republicans in the House of Representatives, most notably Paul Ryan (R-WI).  In 1981, Chile adopted Friedman’s suggestions after their pay-as-you-go system became unsustainable, implementing an entirely employer-based system of private accounts.  Since its inception, those accounts have yielded an average annual return of 12.9% for their owners, who are individual Chileans, not the government.  Plus the capital structure in Chile almost doubled over the course of the ensuing years and Chile now has one of the most advanced infrastructures in Latin America.

As workers are shifted into private accounts, each year will see a decrease in the revenue gap which must be met by the account revenue tax.  Each year the amount of workers who can enter the fixed benefit plans will decrease and those entering the fixed contribution plan will increase.  Within the next fifty years, Social Security and Medicare as we know them will have disappeared, replaced by a sustainable personal account system.  Economic growth and job creation are a guaranteed result as income formerly lost to government ineptitude is returned to the private market to create jobs, advanced technologies, and better products for the American people.  And the elderly don’t lose their current benefits in the process!  What’s not to like?

It would be easy to dismiss President Obama’s remarks as simply campaign rhetoric.  After all, he is clearly on the campaign trail, veiling his trips under the guise of rallying support for a Jobs bill he knows will never pass.  And those trips just so happen to take him to crucial battleground states he will need to carry in order to achieve victory in 2012.  Obama is not interested in governing right now, he’s interested in maintaining his own power.

But let’s take the President’s remarks seriously, and evaluate the claim that Republicans are ignorant.  Of course, the mere fact that splitting up the jobs bill into component parts was a suggestion initially proposed by Republicans, evidencing a nuanced understanding on the part of the GOP that the Jobs bill included items they both support and oppose, is almost enough to undermine the President’s jibe.

Perhaps the better question, however, is does the President understand economics?  When the stimulus bill was passed, President Obama promised unemployment would not rise above 8% — unemployment hasn’t seen the underside of 9% since April.  The President promised his stimulus bill would save or create millions of jobs — private sector job growth is at an all time low, but at least the amount of government employees is increasing.  Pretty much none of the President’s claims about the economy has had any basis in reality.  Comment below on whether you think the GOP doesn’t understand the Jobs bill, or Obama doesn’t understand the economy.

So who’s to blame?  It’s undeniable that the bank fees will fundamentally impact many Americans, myself included.  And with incomes already suffering in the continuing recession, another $60 in bank fees simply for using a debit card is a fee Americans can ill afford.  But is it the bank’s fault?

Senator Dick Durbin, author of the swipe fee provision in the Dodd-Frank bill, says yes.  In responding to Bank of America’s announcement, Durbin excoriated the bank saying, “Bank of America is trying to find new ways to pad their profits by sticking it to its customers.  It’s overt, unfair, and I hope their customers have the final say.”  Durbin went so far as to say that Bank of America’s customers should, “vote with your feet, get the heck out of that bank!”

Yet Durbin’s own remarks evince all the failures of logic and lack of economic understanding that made his original swipe fee such a bad idea.  It was his amendment that necessitated the changes in debit card fees, with banks simply changing to the new economic conditions in which they operate.  Because if they don’t find some way to be profitable, their shareholders will make their displeasure known with their feet.  And with all reciprocal holdings that exist in the banks today, if Bank of America, the largest American bank, were to face a run on its stock, the entire financial industry would be soon to follow.

The inherent difficulty facing Democrats is that they need the banks to extend loans, because in their economic model, the economy will not recover without easy access to credit, but the vast majority of American distrust Wall Street, as the burgeoning Occupy Wall Street movement shows.  Thus they had to bail the banks out of bad real estate holdings and shelter them from the worst of the financial meltdown, because without the banks, the economy would collapse.  But when people saw the special treatment the banks got, they were outraged, and then you get the swipe fee bill.  Now Bank of America is trying to prevent a multi-million dollar drop in its profitability in an already soft market, prompting a United States Senator to call for the functional equivalent of a bank run by Bank of America customers.  This is unprecedented in American history.

In my recollection, no sitting U.S. Senator has ever called for a bank run on a major financial institution, for obvious reasons.  Banks hold only a fraction of their total liabilities in reserve, so they are perpetually vulnerable to a sudden influx of customers withdrawing their money.  Even the slightest hint that Bank of America may be vulnerable to a bank run could endanger the entire financial sector and throw us right back into another meltdown situation.

The only consistent theme throughout the debate over modern banking regulations is that the consumer always loses.  The more the government intervenes in the banking industry, the more consumers will get charged for the same services, or they’ll pay the same amount for worse services, or the bank will fold under entirely.  Regardless, the consumer never wins in the fight between big government and big banking.

The solution is to get government out of banking regulating entirely.  But since the government funds about a third of its operations through the bond market, it is inextricably tied to the fate of the big banks, who are major holders of American sovereign debt.  As long as the government must rely so heavily on bonds to fund its spending programs, their defense of the financial industry will continue.  In the short run, the simplest solution would be to repeal Dodd-Frank, or at the very least, pass an act negating the nonsensical swipe fee that is causing this current disturbance.  And while that effort is already underway in the House, it will surely fail the 60 vote test in the Senate, and consumers will continue to suffer because of bad government regulation, just as I predicted in June.

It seems not so long ago that Democrats, reveling in their 2008 victories, were decrying GOP opposition to stimulus policies as against the voice of the American people.  Three years later, Republicans control the “People’s House,” and Democrats are quite content to implement their policies through bureaucracies, federal rule-makings, even expressly telling Presidential advisers to circumvent Congress as far as possible.  And while that undoubtedly raises Constitutional questions, the GOP should resist the temptation to denounce Obama’s methods.  President Obama’s ideological affiliation was clear when he entered office, and he is using every tool at his disposal to implement it in the few months he has remaining.  Republicans should be equally unapologetic about dismantling it in the near future using whatever methods they ca devise.  The country is locked in an ideological conflict and institutional structure is simply a tool to implement ideology, a tool to be conveniently abandoned the moment its usefulness is through.

While the race for U.S. President looms large on the national political stage, an equally important battle is shaping up over control of the U.S. Senate.  Democrats currently hold 53 seats, including the two independents who traditionally caucus with them, and the Republican Party is campaigning hard to capture some of those seats, adding to their current total of 47.

In Pennsylvania, Senator Bob Casey’s seat will be hotly contested by Republican candidates hoping to repeat the 2010 success of now-Senator Pat Toomey.  After his election in 2006, Senator Bob Casey became the first Pennsylvania Democrat to be elected to the U.S. Senate for a full-term since 1962.  The GOP is anxious to not let Senator Casey repeat that feat, and the field of challengers features prominent businessmen, party leaders, and grass roots activists.

This week one of the candidates, Marc Scaringi, visited Grove City College, meeting with members of the faculty and student body. During his stay, the candidate agreed to a short interview, giving Grove City students a candid look at his campaign and the challenges that must be overcome.

As a Senatorial candidate, Scaringi has an impressive litany of political and professional experiences to recommend him.  He entered politics during the 1994 Republican Revolution as a staff member for then-Senator Rick Santorum, working in the very office he is now a candidate for.  After spending several years in Washington, Scaringi returned to Pennsylvania to work on Mike Fisher’s campaign for Attorney General and spent the years following their victory working in that office.

While working with Mike Fisher, Scaringi completed law school at night, and went on to form his own practice outside Harrisburg.  Running a small law practice became the full-time occupation for Scaringi, and what initially started as a practice run by him and his wife became a successful firm with 17 employees and three branch offices.

“I worked in the very office I’m now running for.” Scaringi said when asked what sets him apart as a candidate. “I know the pressures Washington places on people, I know the pitfalls to avoid, and I know how the process works.”  According to Scaringi, it is this wealth of experience, both in Washington and at home as a small businessman, that gives him a competitive edge over the field of Republican challengers.

“What Pennsylvania needs is the right man, with the right message.” And the message for this electoral cycle, according to Scaringi, is jobs and the economy.  “The economy is a mess because of out-of-control government spending and the irresponsible accumulation of debt.”

As one of several Republicans in the field, Scaringi’s greatest challenge will be fundraising.  Several of his rivals are wealthy businessmen with the cash-on-hand to fund a full-scale Senatorial campaign that will end up costing millions of dollars. A well-funded campaign is essential for electoral success.

When asked what his campaign was doing to address this, Scaringi reported that their campaign had recently attracted the attention of some influential Republican donors in the state.  Yet his focus is on the message, not the money.  “Santorum outspent Casey in ’06, but still went on to lose.  We need the right message, not a RINO with deep pockets.”

And Scaringi’s message is a return to limited constitutional governance.  When asked what programs or line items he would cut, the candidate responded, “I think we should look to the Constitution for guidance.” The Department of Education and the Department of Housing and Urban Development were both mentioned as programs offensive to the Constitution that could be done away with.

The candidate applies this same logical process to the country’s foreign policy, which he would necessarily be a part of as a Senator. As Scaringi put it, “The interventionist policies of previous administrations are ill-advised and will ultimately be detrimental to the security interests of the American people.” It’s for this reason that Scaringi opposed the war in Iraq, and currently opposes the ongoing use of U.S. forces in Lybia. Yet there are nations that constitute legitimate security threats, among which Scaringi identified Iran and North Korea as potential trouble-spots.

The primary election to determine who goes on to challenge Senator Casey is tentatively set for next April.  Six months is a long time in the ephemeral realm of politics, and the direction the economy takes will have profound ramifications for races both here in Pennsylvania and across the nation. Candidate Scaringi’s experience in politics puts him in good shape to conduct a viable state-wide campaign, but only time and the Pennsylvania voters will decide who gets to challenge Casey in November, 2012.

A bystander captured the entire incident on video and though NYPD officials affirmed the use of pepper spray, they have since launched an investigation into the decision of the officer, since identified as Deputy Inspector Bologna.

The unfolding drama has only heightened the media frenzy surrounding the protest, which is characterized both by its continual presence, located just off of Wall Street in New York’s Zuccotti Park, and the message of its participants.  The eclectic mix of signs includes slogans like, “Wall Street is Our Street,” and “Debt Equals Slavery,” which are only matched in their disjointedness by the random assortment of people who bear them.

The President’s Jobs Act features policy proposals similar to those that he pushed during the recent debt ceiling negotiation.  The bill includes $447 billion in new spending on infrastructure, unemployment benefits, and rehiring laid off state employees.  To pay for this new spending, the Jobs Act will close corporate tax loopholes for oil and gas companies, increase the carried income tax on hedge funds, and increase the marginal tax rate on individuals earning more than $200,000.

Proponents of the President’s proposals are martialing their forces to push the bill through Congress by as early as next week.  On Monday, the President officially sent the text of the Jobs Act to Congress and called on them to pass it during a mid-day address from the Rose Garden.  However, the ultimate success of this measure will not be determined by the President’s speeches, but on the content of the bill, which will face serious scrutiny in the Republican-controlled House of Representatives.

With Congressional approval near an all-time low after the damaging debt ceiling debate, the resistance to the President’s proposals may be less fierce.  Yet the Jobs Act encapsulates many of the same policy propositions that have been consistently rejected by Speaker Boehner and House Republicans.  And while the President has included a reduction in the Payroll Tax as a part of the jobs package, the tax increases on top income earners is unlikely to gather enough Republican support to pass the House.

Yet perhaps the most daunting challenge facing the President’s Jobs Act is that its policies bear many similarities to the much maligned stimulus bill, which has thus far failed to generate substantive economic recovery.  This new $447 billion increase in government spending would be larger than the per annum spending of the American Recovery and Reinvestment Act.  Plus the inclusion of tax increases with stimulus spending is unlikely to attract support from Republican lawmakers, putting the success of the President’s plan in serious jeopardy.

Originally printed in the Collegian, Grove City College Newspaper.