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Views on the News

January 10, 2009

 

Views on the News:          

NO MORE BAILOUTS! – eventually we have to learn from our mistakes from the last bailout  / stimulus package: stop believing hyperbole of impending economic collapse, demand sufficient time to adequately review, agree on the details, and require program accountability.  They say that those who don’t learn from history are destined to repeat it.  Karl Marx famously observed that “history repeats itself, first as tragedy and then as farce,” so why are we embarking on a new farce?  We are being greeted almost daily with new bailout proposals, with one forthcoming from the president-elect, Americans ought to ask whether history suggests if they will work.  Neither our recent history nor the evidence from our last comparable economic crisis suggests such efforts will prove effective.  What’s worse is that the bailout approach undermines what has historically been the ultimate source of economic stimulus - the American worker and entrepreneur.  The market-based economy of our country, responsible for creating 200 years of wealth, is now threatened as never before in our Republic.  The clearest indication that they lack any coherent strategy is the twisted history of Treasury Secretary Henry Paulson’s $700 billion Troubled Asset Relief Program (TARP). Presented to Congress in September 2008 in the vaguest of terms in a three-page proposal, the TARP was sold to lawmakers as a desperately needed asset purchase plan designed to remove illiquid assets from banks’ balance sheets. Yet no sooner had Congress approved this proposal than it quickly morphed into a program aimed at infusing capital in an ad hoc manner, first into the banking system and then into AIG, the troubled insurance giant. Worse still, the TARP funds may now be used to bail out the automobile industry, which would move the program even further from its original objective of restoring financial market stability and also spur other struggling industries to demand their own share of the $700 billion.  Meanwhile the Republican minority in the Senate held-out for some modest measures of accountability, in exchange for the cash, demanding that the United Autoworkers Union adjust assembly line wages so as to make them more compatible with those of the successful foreign car companies with manufacturing operations here in the U.S.  Of course, the United Autoworkers Union refused to agree to accountability, and the legislation failed.  President Bush quickly stepped-in to bankroll the auto industry’s dysfunction for a few more months, dipping-in to the Treasury Department’s “bank bailout” fund and dolling-out a few billion to General Motors and Chrysler.  This was a flagrant violation by Bush of the intended purposes of the bank bailout fund.  Worse yet, the President then attempted to explain his maneuver in an interview with CNN, stating, in a moment of frightening irrationality, that “I abandoned free market principles to save the free market system."  The car companies will be back in Washington this year, begging President Obama and the new Congress for more money, and declaring that without a “bailout” the world will end.  They have discovered examples of the UAW losing millions of dollars of union members’ dues in failed business investments - ranging from a startup airline that never “got off the ground,” to a left-leaning talk radio network that operated at a loss of $75,000 a month, to the acquisition of golf resorts to facilitate the UAW’’s “golf summer school” program.  With this kind of corruption and reckless mismanagement, it’s no mystery why the American car business can produce decent enough vehicles, and still remain unprofitable.  Yet, this is the kind of failure that American’s are being forced to sustain, with the allocation of their tax dollars.  Obama condemned the “anything goes” policies of the last administration, but now claims that only government can fix the problem that the government caused initially.

·         Democrats misused regulation to force banks to lend to people who could not repay with Carter’s Community Reinvestment Act.

·         Democrats misused regulation to force banks to increase the percentage of their loans to sub-prime mortgages with Clinton’s Housing and Urban Development targets.

·         The Democrats protected Fannie Mae and Freddie Mac from critical oversight in Congress precipitating the housing bubble bursting in 2008.

·         Now these same Democrats (Senators Chris Dodd and Chuck Schumer and Congressman Barney Frank) were instrumental crafting the 2008 Financial Sector bailout!

·         What makes us believe they will do a better job fixing the problem than causing the problem in the first place?

·         Will we never learn from our mistakes?

All that money is just a gift to the Democrats to spend in whatever ways will advance the interests of their constituents and of the Democratic Party.  The bank bailout bill, whose cost rose to $850 billion after Congress added pork to it, “has neither reversed the economic crisis nor protected the taxpayers, but rather has added $850 billion dollars to their tax bill and raised the national debt ceiling from $10 trillion to $11.3 trillion, which has the potential long-term effect of further weakening the economy.

 

What the economy needs to recover from today’s crisis is classic conservative medicine packaged as a Republican Alternative Plan: smaller government, lower taxes, and less interference in the free market.  Too much government interference in the free market caused this problem, so bigger government and more interference can only make the economy worse.  Three criteria are crucial for evaluating fiscal stimulus packages:

·         First, does the program target the weakness in the economy that caused the recession, or is it largely peripheral?

·         Second, are the funds going to be spent in a timely fashion?

·         Third, does the program fundamentally strengthen the economy going forward into the expansion phase?

Permanent tax rate cuts on personal, small and large businesses offer a much better option and will have an immediate impact by putting money back in people’s pockets.  The incoming chairman of the Council of Economic Advisers, Christina Romer, has estimated that the macroeconomic benefits of tax cuts can be two to three times larger than common estimates of the benefits related to spending increases.  The relative advantage of tax cuts over spending is even clearer when the recession is centered on the household balance sheet.  Lowering corporate tax rates will make money available for new investment and job creation.  A look at the economy's current circumstances suggests that a large fiscal stimulus is needed, but a badly designed one will, in the words of an old song, merely leave America "another day older and deeper in debt."  Washington will saddle future generations with unprecedented debt because of the economic interventions Obama is planning, not despite them.  Bernard Madoff is accused of selling a pyramid scheme, while the federal government Ponzi schemes of Social Security and Medicare are rapidly approaching a collapse of their own!  Unless conservatives can propose some way to transition these federal programs to private ownership the federal government will default with no legal obligation to provide this future benefit.  Another area that Republicans must address is a solution to the illegal immigration crisis, controlling the border, addressing regular flow of new immigrants, and dealing with illegal immigrants who are already here.  Republicans must articulate and propose better alternative solutions and also must communicate directly to the American people why these ideas are superior to the current stimulus approach of “throwing good money after bad.”  The most important thing to remember is not to surrender conservative principles as a gift to the Democrats to spend in whatever ways will advance the interests of their constituents during the Obama honeymoon.  The new House and Senate rules suppressing dissent by the Republican minority is a harbinger of how real the Democrats are in their quest for so called “bipartisanship! The stimulus package Obama and the Democrats are pushing is of questionable value and will put the nation’s deficit well north of a trillion dollars for the first time in history.  Outnumbered overwhelmingly and facing an enormous amount of pressure to act, Republicans’ options are limited, but Republicans should push for a package that includes more tax relief than spending, and for the tax relief to be better-designed and permanent.  If we must have an economic stimulus package, we might as well have one that really stimulates the economy.

 

Obama has already predicted that the economy will get worse before it gets better, so it is safe to say he either knows something we don’t or he expects that his actions will make things worse.  The current recession has been dubbed the “Obama Recession” since it was orchestrated by Democrats as a political issue to aid in the election of the Democrat candidate.  Obama imagines himself as a reincarnation of FDR rescuing the economy from the Great Depression, but reality is that the New Deal was a bust , failing utterly to restore prosperity, and elongating a two year recession into a ten year calamity only ended by a World War!  Obama warns, “If we don’t act swiftly and boldly, we could see a much deeper economic downturn that could lead to double-digit unemployment.”  Didn’t we hear this same apocryphal story justifying the last Federal bailout plan?  Explaining why we must spend more federal money and go further into debt, an approach that could spark hyperinflation and even national bankruptcy, Obama said that “We must make strategic investments that will serve as a down payment on our long-term economic future.” The scary part is that Obama only views his $850 billion stimulus package as a down payment on his strategic investments required by his long-term economic plan.

 

Apparently Obama doesn’t think he can “transform” America into a socialist state with his stimulus package, so he is positioning himself for round two when this one fails to achieve its objectives.  What Obama is really telling us is that he does not expect his stimulus program to be effective ending his Recession, so more drastic government intervention will be required.  Barack Obama has dubbed his behemoth fiscal stimulus proposal the "American Recovery and Reinvestment Plan."  But if truth in advertising were required of White House plans, only one title would fit the trillion-dollar-plus-and-growing bill: “The Generational Theft Act of 2009.”  He declared that “this plan must be designed in a new way—we can’t just fall into the old Washington habit of throwing money at the problem.”  Yet this is precisely what his plan does, since every job a government program creates probably costs two in the private sector.  If Obama was sincere in his desire to deliver prosperity, he would endorse fundamental changes to ensure the financial crisis can not re-occur and undermine the American economy:

·         Decentralize and privatize the Fannie Mae and Freddie Mac.

·         Abolish the mark to market regulations.

·         Repeal the Bank Holding Company Act.

·         Repeal the Community Reinvestment Act.

Obama's infrastructure program will create jobs in some industries, but at the expense of jobs in other industries.  Obama plans to expand government assisted health care and unemployment compensation which will undoubtedly increase the unemployment rate and dis-incent people from finding new jobs.

 

Never forget that Obama is a student of Saul Alinsky, who taught that the key to Marxist change is to exaggerate existing pain to justify otherwise unacceptable change.  We also know from unvarying experience, beginning with the Roosevelt New Deal, that government stimulus spending never ends a recession; in fact such spending tends to prolong and to worsen a recession.  One reason for the failure of stimulus programs is that consumers, already fearful of losing jobs, tend to use stimulus payments to reduce debt and to increase savings.  Very little of it goes to added consumption goods spending.  President Bush’s stimulus program early in 2008 was a flop.  President-elect Obama’s will end the same way.  Another and more fundamental reason is that business does not like uncertainty.  When the Federal government begins tinkering with the economy, as it did in the Depression and as it is doing now, it creates new layers of bureaucracy to administer new and more restrictive business regulation.  Obama has indicated that he will create an "Economic Recovery Accountability and Transparency Board” as a new Marxist central planning board for the American economy, in which a collection of politically connected experts will be empowered to decide which industrial enterprises are worthy of investment and which are not.  Obama has also positioned himself for a never ending spending binge by not defining what the stimulus is supposed to accomplish and how it could be judged a success or failure.  Government stimulus spending financed with more debt adds to inflationary pressures.   This is what occurred in the 1970s stagflation.  During a high inflation period, which almost certainly will hit us within the next couple of years, people’s nominal incomes increase, but their costs of living will rise even faster.  The proposed “tax cuts” will not stimulate the economy by "putting money in people's pockets" which they can then spend, since it doesn't do anything to change the basic incentives governing the economy, and because just borrowing money and then sending it out to people, in "tax rebate" checks or welfare checks, doesn't add anything to the economy on net.  The “tax cuts” proposed are a temporary distraction targeted at delivering rebate checks to people who pay little if any taxes already, so this is really just another socialist redistribution of wealth.

 

Socialism is “Government control of the population,” that includes production, property, income, information and thought.  The huge inefficient government monolith (state) attempts to micro-manage every aspect of the economy and society.  The result is general poverty for all but the elites, disdain and punishment for excellence with rewards for mediocrity and failure to contribute to the society.  Winston Churchill said, “Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.”  The Democrat progressives socialists engineered and nurtured recession is scheduled to become an endless socialist depression under the ObamaNation vision.  Energy and food have been declared as not needed by the seething masses, various “Climate Change” and “Green” schemes endorsed by the ObamaNation will very shortly start to starve us for energy and food.  Obama named John Holdren as cabinet level Assistant to the President for Science and Technology, so expect political misuse and abuse of science to further the environmental agenda.  The Mainstream Media will expand trying to explain away the mess, however eventually people will figure out the Democrat progressive socialist agenda has caused them to become paupers and all hell will break loose.  The sad truth is that, by the time the American public realizes that the change to socialism makes conditions worse, it may be too late to reverse the changes with even more pain.

 

2008 marked the year that the Mainstream Media came out of the closet as a partisan wing of the Democrat party, with open support and cheerleading for leftist candidates.  Their bias is so obvious and palpable that it destroyed the trust that readers had in the papers, and without trust there is no good reason to read them.  This desperate decline of print media nationwide is a result not merely of competition from the Internet and of shortened attention spans and lighter reading habits of the public, but also of a growing disgust by the public with what the newspapers and wire services offer.  It is no coincidence that the papers having the most high-profile problems are also the papers that most often are accused of a liberal bias.  The disconnect evident in the establishment media's botching of religious matters extends, quite clearly, to a disdain by the media of many other cultural aspects of "middle America" and middle America reciprocated by not reading the papers.  As the major print media significantly cuts back its news staff and loses more and more money and even faces possible bankruptcy, the tendency of conservatives is to say "good riddance."

 

If you are sick and tired of government and politics as usual, read my web site with its individual issue analysis and recommendations at: http://www.returntocommonsensesite.com Remember this site is updated every Saturday. Individual issue updates this week include:

 

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David Coughlin

Hawthorne, NY