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Views on the News

February 28, 2009

 

Views on the News:          

Those who thought they were electing a savior may soon realize that not only is Obama no messiah for the American economy, but he wouldn’t want to be a savior even if he could be.  Financial markets don’t want more government debt or a scramble for “shovel-ready” spending projects.  They want the skeletons in the banking sector’s closet exposed and expunged.  Meanwhile from the time Obama was elected to the present, the Dow Jones Industrial Average overall fell over 20%.  The only thing guaranteed by the spending stimulus is more national debt.  In 2008 the Congressional Budget Office forecast the 2009 deficit at $1.2 trillion, but now Obama’s new plan increases the deficit to $1.7 trillion.  The predicted 2009 federal deficit stood at 8.3% of GDP before Obama’s package sent it to about 12%.  Many on Wall Street and Main Street voted for Obama hoping that he would be bipartisan, above politics, and, for many, rein in spending and deficits.  They thought his left-wing associations and votes were purely the artifact of necessity and political ambition.  When the credit and liquidity crunch hit, they thought Obama would be smart enough to fix it, presuming it can be “fixed”.  Unfortunately this was a triumph of hope over observation, since we have elected a president who has no real business or investment experience.  It may be that Obama is talking down any recovery and loving that word “crisis” to buy himself lowered expectations and time.  He is using the current economic mess as cover for scores of leftist programs and projects.  We have a severe confidence problem, one which is being exacerbated into a crisis by every move Washington makes.  The fear being “stimulated” by many political, media, and economic actors is central to the increasingly evident effort to change the United States into something never intended by the founders.  While claiming to support enterprise and entrepreneurship, Obama promised to continue waging ideological war on capitalism, on bankers, high income earners, Wall Street, the financial system, investors and free trade.  The Mainstream Media dutifully did their part to help fill it with a continuous cacophony of worry messages, designed to stoke people’s fears and prepare the public for the socialized “stimulus” solutions designed and packaged by political soothsayers.  Obama’s approval rating of 68% in January has now slipped to 59%.  59% of U.S. voters also agreed with Ronald Reagan that “government is not the solution to our problem; government is the problem.”  Obama's new disapproval rating of 24% is significantly higher than the average for a month-old new presidency.  Obama is invested in depressing the American people to extend the recession beyond 2009 to justify his next bloated spending programs: Omnibus 2009, “stimulus” 2.0, and TARP 3.0.

 

 

The economic recovery is already underway on its own despite the administration’s attempts to impede the workings of the market and will become more obvious over the coming months.  The “stimulus” package has been deemed either insufficient or overkill depending on your political persuasion, but certainly not stimulating.  Despite the determined efforts of politicians to prevent the inevitable, our economy is undergoing a much needed reallocation of resources.  The housing market, which everyone believes must be healed before recovery can begin, is quietly healing itself.  The news of the credit markets’ death also seems to have been a bit premature.  While banks are certainly requiring more in the way of a downpayment and may actually call your employer to verify you are indeed gainfully employed, it is obvious that banks are lending.  Leading economic indicators have risen two months in a row.  Productivity, which fell in the bad recession of 1981-82 and during the Great Depression, was up 3.2% in the fourth quarter.  Incomes, adjusted for the recent deflation in the CPI, are rising.  Obviously, we are still in recession and there is more pain to come, but the gloomy mood that surrounds the Obama administration is either manufactured for some political purpose or completely unwarranted.  The idea that only government can come to the rescue at this point is not only entirely too convenient for an administration determined not to waste a crisis, but also false.  The current crisis is not near the magnitude of some of the previous crises we’ve faced in the history of the US, and we recovered from them all despite the interference of our clueless politicians.

 

The passage of the “stimulus” bill certainly marked the end of at least one thing: Obama’s empty promise to bring transparency to the legislative process.  As a candidate, Obama vowed that “when there’s a bill that ends up on my desk as president, you, the public, will have five days to look online and find out what’s in it before I sign it, so that you know what your government’s doing.”  Lawmakers had only a few hours between when the final bill was presented and when it was voted on late on a Friday night.  The bill came in at more than 1,000 pages, and lawmakers required at least five days to review it.  Meanwhile, Obama clearly violated the spirit of his promise by announcing his openness pledge but resorting to political business as usual.  Obama held a news conference to announce, “It also contains an unprecedented level of transparency and accountability so that every American will be able to go online and see where and how we’re spending every dime.”  Not only did Americans not know what we were getting, lawmakers didn’t know what they were signing.  Obama talked a good game for open government, “We can all agree that government ought to spend money efficiently.”  This problem has caused Congressman Ron Paul to re-introduce the “Sunlight Rule” proposal to give the House sufficient time to fully understand everything that they were supposed to vote on.  The proposed rule “prohibits any piece of legislation from being brought before the House of Representatives unless it has been available to Members and staff in both print and electronic versions for at least ten days.”  It also sets up guidelines for conference reports and manager’s amendments that make changes to a bill be made available 72 hours before being set to a vote in both print and electronic versions.  If government money can’t withstand public scrutiny, then it shouldn’t be spent.”  It is becoming more and more common that Obama says one thing to the press and his actions tell a totally different story!

 

State governors, seeing long-term spending commitments forced on them by the Obama “stimulus” plan, are saying they will refuse to take some of this money.  Governors of both parties expressed unhappiness about strings attached to federal stimulus money but most said the money is needed for their states’ ailing economies.  This is a Constitutional confrontation between the federal government and the states unlike any in our time.  The strings attached to this federal money would have required states to change its law in expanding unemployment insurance, and then require states to raise taxes on business to keep the benefits in place once the federal money is gone.  Liberals don’t respect the Constitution, and liberals in Congress don’t hesitate to propose legislation that would clearly violate it.  The current push to give Washington, D.C. a voting representative in the House of Representatives is a good example; since this bill is patently unconstitutional.  Eleven states have passed resolutions that call on Obama to “cease and desist” from his reckless government expansion and also indicate that federal laws and regulations implemented in violation of the 10th Amendment can be nullified by the states.

 

Obama returned to his role as “Salesman in Chief” appealing directly to the American people with his teleprompter-aided “State of the Union” speech which was long on platitudes and short on any implementation detail, just like his campaign speeches.  The path he outlined in his quasi “State of the Union” address is to remake America on the model of a European welfare state.  He claimed that he doesn’t believe in bigger government, but the remainder of his speech was a list of new and expanded government programs.  Strangely enough Obama decided not to invest in 1.2 million new jobs or $8.2 trillion in additional GDP by re-imposing bans on drilling in the Outer Continental Shelf.  Obama said he would create a new nationalized lending system, a government super-bank of sorts, that will provide auto loans, college loans, and loans to small business.  Senator Bobby Jindal immediately rebutted Obama’s arguments with "The way to lead is not to raise taxes and put more money and power in hands of Washington politicians."  Jindal also said Obama’s plan will expand the government, "increase our taxes down the line, and saddle future generations with debt."  This is the path President Obama set for us: to a European welfare state, bankrupt and disarmed.

 

The next Obama budgetary expansion is the colossal omnibus spending bill encompassing the remaining nine appropriations bills for fiscal year 2009 sloughed off by House Speaker Pelosi.  This omnibus spending bill has been called "the largest increase in discretionary spending since the Carter administration."  Republicans asked again for an open process from the secretive Democrat leadership this time around.  Legislation negotiated in secret produces bad public policy.  The omnibus spending bill was originally placed on the legislative calendar over two weeks ago, yet that proved inconvenient to ramming through the obscene “stimulus” bill.  Over half of the “American Rescue and Reinvestment Act” of 2009 had nothing to do with growing the economy or long term job creation, only pork spending on liberal government programs.  Democrats were not comfortable trying to pass the bloated trillion dollar “stimulus” spending bill while porking up another half-trillion in omnibus spending.  Republicans called for a freeze that "could ensure that essential government functions are carried out without any cuts while still protecting taxpayers from spending increases during a time of economic hardship."  Candidate Obama said "When I'm president, I will go line by line to make sure that we are not spending money unwisely."  His statement is the height of hypocrisy since he claimed there were “no earmarks” in the $787 billion “stimulus” bill, when over half had nothing to do with economic rescue or reinvestment.  President Obama has a lot of trimming to do when he unveils the $410 billion omnibus spending bill that's riddled with about 9,000 earmarks totaling $5 billion.  Many of the earmarks, loosely defined as local projects inserted by members of Congress, were inserted last year as the spending bills worked their way through various committees.  These local projects should go through the regular legislative process, subject to detailed hearings and bipartisan votes.  If Obama was really serious about eliminating earmarks, the “stimulus” bill passed would have been one quarter the size and this Omnibus spending bill would be less than half as large.

 

 

Now that Obama has signed his $787 billion “porkulus” spending bill and unveiled his $400 billion omnibus pork spending bill, he has offered up his $3.6 trillion budget… when will we say “enough is enough?  The fiscal 2010 budget sets aside a “reserve fund” of $634 billion as a “down payment” on the costs of universal health care coverage over 10 years.  This budget, while not specifically calling for additional bank bailout funds, also creates a allocation of $750 billion for the Treasury Department to purchase financial assets of struggling banks.  Obama also asked Congress to deliver a “cap and trade” system to control greenhouse gas emissions.  This economy-killer was couched in utopian terms: he asked Congress to send him “…legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America.”  Obama committed himself to the largest annual stealth tax increase in the history of America, with this proposal, raising taxes by an estimated $300 to $330 billion a year.  Obama appears ignorant of the European experience with that system, since it doesn’t drive the production of any other energy, it creates an inherently corrupt system of marketing “carbon credits” and has proven to result in an increase in carbon pollution.  On top of all this the president promised to reduce the deficit by two-thirds by the end of his first term, promising to reduce $2 trillion in spending over the next ten years.  He said, “We’ll eliminate the no-bid contracts that have wasted billions in Iraq, and reform our defense budget so that we’re not paying for Cold War-era weapons systems we don’t use.”  He hasn’t thought this idea through yet, since all of these weapons that we haven’t had to use because they did the job for which they were designed: to deter our conventional enemies from making war on us.  Key points were missed such as: how much his programs would cost and would they even work?  This is the path President Obama set for us: to a European welfare state, bankrupt and disarmed.

 

 

Obama now seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003.  President Obama is putting the finishing touches on an ambitious first budget that seeks to cut the federal deficit in half over the next four years, primarily by raising taxes on businesses and the wealthy and by slashing spending on the wars in Iraq and Afghanistan.  Obama said he is determined to "get exploding deficits under control" and said his budget request is "sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline."  Reducing the deficit, he said, is critical: "We can't generate sustained growth without getting our deficits under control."  Making war on business is no way to stimulate the economy.  Obama’s proposals reflect a stunning disregard for the impact of government policies on economic output and a clear preference for jobs created by government spending rather than private investment.  Obama faces the long-term challenge of retirement and health programs that threaten to bankrupt the government years down the road, as well as the more immediate problem of deficits bloated by spending on the economy and financial system bailouts.  Overall, tax collections under the plan would rise from about 16% of the economy this year to 19 percent in 2013, while federal spending would drop from about 26% of the economy, another post-World War II high, to 22%.  Obama’s ambitious goal to cut the federal deficit in half is at best aggressive, but probably more accurately unachievable since his government plans have a voracious spending appetite that will only increase over time.

 

There is a better way to end the recession than throwing money at every liberal wish list program.  Obama is trying to end a recession and spark a recovery by the highly dubious means of shoveling vast amounts of federal dollars into domestic spending.  He is consciously trying to mimic FDR and the New Deal.  There is only one problem with this:  FDR’s New Deal was an economic failure!  Roosevelt tried a variety of different projects, programs, and spending to get us out of the Great Depression, but it required the Second World War to bring us out of the Depression.  Military spending could bring us out of the recession now.  Federal dollars spent on national defense go towards the upkeep of our men and women in uniform, the acquisition of goods and services from our industrial base, and the research and development of new technologies.  If Obama wants to spend huge oceans of tax dollars, this is the best investment he can make.  We have forgotten just how much 9-11 cost our economy.  Pumping up the military would also insure that we could win any war on terrorism or against any potential enemy. 

 

There are much simpler approaches to address the financial industry problems without nationalizing the banks and Americans do not support Obama’s bailout ideas.  Lately the Federal Deposit Insurance Corporation (FDIC) has been seizing banks it deems insolvent at the rate of about two a week.  When the FDIC seizes a bank, it takes over the bank’s bad assets, pays off some of its debt, and resells the cleaned-up institution to private investors.  The real question is why not take this same approach with major banks that are similarly insolvent.  The real question is why the Obama administration keeps coming up with proposals that involve huge handouts to bank stockholders.  The administration initially floated the idea of offering banks guarantees against losses on troubled assets.  Now the administration is talking about a “public-private partnership” to buy troubled assets from the banks, with the government lending money to private investors for that purpose.  Remember, the longer we live with zombie banks, the harder it will be to end the economic crisis.  What we have now isn’t private enterprise, it’s lemon socialism: banks get the upside but taxpayers bear the risks.  The downside is that it’s perpetuating zombie banks, blocking economic recovery.  Let bankruptcy courts modify the terms of individual home mortgages.  We are talking about Chapter 13 bankruptcies, in which troubled borrowers reorganize their debt, not walk away from it (that's a Chapter 7 bankruptcy).  Judges can already restructure loans for vacation homes, boats and business properties, so doing the same for a primary residence seems reasonable.  The idea is to make monthly mortgage payments easier to meet and thereby keep more people in their homes.  This can be done by lowering the interest rate, extending the length of the mortgage or cutting the principal amount owed.  55% of American adults say the federal government would be rewarding bad behavior by providing mortgage subsidies to financially troubled homeowners.  76% of Americans are not willing to pay higher taxes to help people who cannot afford to make their mortgage payments.  53% of Americans also oppose a plan for the federal government to pay off a portion of the mortgages only for people who can’t afford their current payments.  Just 33% of all adults support having the federal government to pay up to $100,000 of the mortgage balance owned by every single homeowner in America.  59% said they expected the value of their home to rise over the next five years, but adults were much less optimistic about the housing market over the next couple years.  Remember long-term government ownership isn’t the goal: like the small banks seized by the FDIC every week, major banks would be returned to private control as soon as possible.  

 

Attorney General Eric Holder revealed himself as “Racist in Chief” by accusing Americans of being cowards for not discussing racism, discounting all the progress made over the last 60 years. The charges of "racism" and endless calls for "dialogue" about race are more about power grabs, money and intimidation than sin.  The race industry thrives on empty rhetoric and phantom threats to maintain a position of legitimacy.  Dr. King's dream of a colorblind society based on character content, while vaguely celebrated, would be, if achieved, the diversity industry's worst nightmare.  Real racism camouflages itself in the righteousness of modern liberalism.  Clothing itself in virtuous reaction to ancient wrongs, the liberal mind scoffs at the reality evinced in Patrick Moynahan's famous warning of the "dumbing down of deviancy" or as more delicately put by George W. Bush as the "soft bigotry of low expectations."  A civil war and a civil rights movement were the necessary purgation and trials to bear in bringing us to our present condition.  It is time to delight in the common good, recognize the efforts of our forbears, and start to judge individuals by the size of their hearts and the strength of their characters.  American society has achieved the goal of equal opportunity and only time will eventually deliver “equal” outcomes, so it is finally time to let go of civil rights victimology.

 

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