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Views on the News

March 7, 2009

 

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Be careful what you wish for, because you may get it as Obama has found out now that he has successfully used the declining economy as his major election issue.  The root cause of the housing bubble was the federal government forcing banks to give mortgages to people who could not afford them.  This policy began with Democrat President Carter’s Community Reinvestment Act, then energized by Democrat President Clinton’s use of Housing and Urban Development targets for prospective mortgagees, then enabled by Congressional Democrats Chris Dodd and Barney Frank shepherding Fannie Mae and Freddie Mac into over-extending credit.  Finally this social reengineering bubble burst within two months of the Presidential election just in time for Obama to exploit this financial crisis for political advantage.  Obama preaches doom and gloom because he is so anxious to cram through every last spending bill, tax increase on the so-called rich, new government regulation and expansion of healthcare entitlement that he must preserve the atmosphere of crisis as a political necessity.  Only by keeping us in a state of panic can he induce us to vote for trillion-dollar deficits and spending packages that send our national debt soaring.  He entered office amid a disaster, and he is transforming it into a catastrophe, all to pass every last bit of government spending and move us a bit further to the left before his political capital dwindles.  The Mainstream Media manipulators of public opinion use fear to enhance the power of the political elite over the “useful idiots” who believe every lie.  This crisis is being sold as the failure of capitalism so that the captains of the ship of state can accrue more power at the expense of those of us confined to steerage.  This crisis is more accurately described as a failure of the fascistic marriage of corporate and political power, but we are asked to ignore the truth hidden behind a curtain of legislation and campaign contributions.  We are told to ignore a Federal Reserve System set up by bankers for the benefit of bankers and politicians.  Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery.  From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence, and thus a longer period of recession or subpar growth.  Obama’s stimulus package is little more than a down payment on a socialist economy since it raises taxes on the successful, brings back the welfare state, hands out favors and cash to friends of one political party, while imposing government control over the entire free market in ways that just a year ago would have seemed unimaginable.

 

Obama’s words and actions have caused unintended consequences further eroding the economy until the “Obama Recession” is now virtually out of control.  Those who own wealth are pushing it to the sidelines, as a young and inexperienced president tries to jam through the most sweeping economic changes in over 70 years.  The prospect of these changes becoming law has already radically altered our nation's economy.  Many upper-income taxpayers already are planning to cut back on work and investments to stay under $250,000 in income, the point where Obama's punitive taxes kick in.  No one wins from this, yet Obama seems oblivious.  It is his pronouncements, reinforced by the developments they kindle and catalyze, that are destroying good businesses, bankrupting responsible people and wiping out even conservative financial institutions.  The Dow Jones Industrial Average has fallen faster under President Obama than under any new president in at least 90 years.  Bloomberg reports that since Inauguration Day, the Dow has fallen 31% since the Election and 20% since Inauguration, leading at least one investor to dub this the "Obama bear market."  The market collapse makes it evident that it is Obama who is the problem, where he should, instead, be the solution.  This spending, of questionable utility in overcoming the current recession/depression, is so far out of line with what the economy can handle that it will do more harm than good when the inevitable inflation hits.  Proof that his spending will have little impact on the depression is the vast increase in money supply with no commensurate improvement in the economy.  None of this should come as any news to Obama, since he likely knows all this.  However he is determined to pass his agenda of bigger government, nationalized healthcare and vastly greater spending even at the price of inflation and subsequent recession.  Obama puts ideology first and the economy a distant second.  The stock market has figured out his priorities and is responding accordingly.  Another bad sign is that 100,000 highly educated, well-trained Indians now living in the U.S. will return home in the next few years, and Chinese have indicated the same intentions.  Immigrant entrepreneurs are highly sensitive bellwethers of economic and social conditions.  They know where the opportunities are, and where they aren't, and they vote with their feet.  Home sales continue to fall, unemployment is rising sharply, and business investment is prostrate.  Such an economy cries out for tax cuts, but we get none; just punishment of those with wealth who might be able to pull us out of the slump.  Americans are angry and divided.  The sources of our anger vary depending on political persuasion, but it is all a deception designed to distract us from the theft of our freedom and treasure by politicians whose sole interest is power.

 

Obama and the Democrats are using the Cloward-Piven playbook to overwhelm Republicans with more legislation than they can possibly handle.  The "Cloward-Piven Strategy" seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse.  Cloward-Piven's early promoters cited radical organizer Saul Alinsky as their inspiration.  This activism relies on the tactic of overloading the system, using mass movements whose outward purpose seems to be providing material help to the downtrodden, but whose real objective is to draft poor people into service as revolutionary foot soldiers; to mobilize poor people en masse to overwhelm government agencies with a flood of demands beyond the capacity of those agencies to meet.  The flood of demands is calculated to break the budget, jam the bureaucratic gears into gridlock, and bring the system crashing down.  Fear, turmoil, violence and economic collapse would accompany such a breakdown, providing perfect conditions for fostering radical change.  The Cloward-Piven strategy depended on surprise.  Once the American people recover from the initial shock of a succession of trillion dollar spending bills, the pragmatic backlash will begin.

 

 

This country is being bombarded by a succession of government spending programs that are of astronomic size and dubious return and Congress is given insufficient time to understand.  The first out-of-control government spending was when George W. Bush bailed out Wall Street with $700 billion.  The next huge spending program was Obama’s stimulus bill for $787 billion.  Then the recent $410 billion omnibus spending bill is being railroaded through Congress to keep government moving until September.  Next Obama informed us last week that another $634 billion is required for a down payment on universal health care.  Next Obama is asking for a roughly $3.6 trillion budget for 2010 despite the fact that the White House projects a 2009 budget shortfall of $1.5 trillion -- triple the $455 billion in 2008.  Now a bill has been introduced in Congress to give the FDIC, the agency that stands behind Americans' bank deposits, temporary authority to borrow as much as $500 billion from the government to shore up the deposit insurance fund.  Do not be surprised if Obama has another trillion dollar spending program queued up as the next phase of his rush to transform America into his socialist gulag.

 

To understand Barack Obama, you have to recognize that he has established a clear pattern of calculated misrepresentations to mislead and confuse the public as to what he is doing and what he believes.  For example, he repeatedly says he is only interested in what works, not ideology.  That is meant to mislead and distract you away from his left wing extremist ideology, which is really what governs his policies and actions.  If you carefully examine his economic policies, you see he thoroughly avoids proven, practical policies that would stimulate economic growth, and pursues left-wing ideology instead.  Nowhere in his economic program is there any reduction in tax rates, which is what creates real incentives for economic growth.  Instead, he proposes in his new budget to sharply increase tax rates, because of his liberal/left ideology.  Instead of reducing government spending, just a few weeks ago he adopted the largest increase in government spending in world history through his so-called economic stimulus bill, which will only stimulate the increased welfare and Big Government that Obama believes in ideologically.  Obama's new budget proposes the largest increase in Federal spending since World War II, an insane one-year increase of 33% over the prior budget, from $3 trillion in fiscal 2008 to $4 trillion for fiscal 2009.  That whopping $4 trillion is the largest Federal spending total in U.S. history.  Obama introduced his budget with much fanfare regarding his promise to cut the federal deficit in half by 2013, but that will never remotely happen.  It serves its purpose for now, which is to distract you from the astounding deficit the budget does propose for this year: $1.75 trillion, more than three times the highest previous total except for World War II.  This is the deficit Obama has proposed for the rest of this year, resulting from the $1 trillion in increased spending he just adopted in the no-stimulus stimulus bill, and the $400 billion supplemental spending bill he supported and adopted in addition the next week, and the $275 billion housing bailout he proposed the next week, and the $638 billion he has proposed as a "down payment" on a new national health insurance entitlement that will be the most expensive entitlement of all, and the additional $250 billion in bank bailouts he is considering proposing.  That is all after only little more than a month in office.  This is pure left-wing extremism, which does not even remotely imply responsibility.

 

The parallels between Obama’s policies and those of FDR are numerous… and ominous.  FDR raised the top marginal income-tax rate (to 79%, then again to 90%), discouraging entrepreneurs from investing and starting new businesses; Obama vows to hike income taxes (while limiting deductions) for couples and businesses earning more than $250,000.  FDR tried massive new government programs, and while they created jobs, they were largely make-work jobs that didn't last; Obama hopes to create 3.5 million jobs to build, among other things, "wind turbines and solar panels." betting that the industries of the future are green.  FDR re-regulated the economy, including the banking and finance industries; Obama plans to meddle in the same industries.  FDR talked down free trade and talked up protectionism, which only hurt exports; Obama is singing the same tune for the benefit of the unions to whom he admits he's greatly indebted.  FDR set standard wages; Obama wants to put in place federal rules that require businesses to pay above-market, union-level wages, meaning fewer jobs will be created.  FDR employed Keynesian deficit spending that didn't work and just piled up a massive debt; Obama is implementing his own New Deal which includes a staggering $15 trillion gross national debt, which, combined with contracting GDP, could push the total debt burden well above 70% of GDP.  FDR created massive welfare programs without means-testing that prolonged unemployment; Obama is mandating that states dole out federal stimulus money based on census data alone as stealth welfare, just like his tax credits.  The reason the New Deal didn't work was not that government didn't do enough, but that it did too much.  The economic growth and job creation that this country so sorely needs now must ultimately come from the private sector.

 

 

The $787 billion malapropism known as the "American Recovery and Reinvestment Act of 2009" was full of irony.  While promising "unprecedented responsibility, transparency, and accountability" in securing passage of the largest ad hoc spending bill in U.S. history, the Obama team instead permitted their Congressional allies to rush through a 1,000-page monstrosity with no effective deliberation, no promised prior posting, and no lawmaker coming close to fully reading the pork-laden bill.  The bill guarantees the failure of his economic program, a prolonged downturn, and a golden opportunity for the revival of his political opponents.  The market's subsequent reaction to the bill is indicative of its likely efficacy, but let us think critically about the broader challenge of stoking recovery.  A fundamental axiom of economic growth is that private capital investment is the one true "stimulus" that works, that creates sustainable employment and the path to wealth creation.  Despite his oft-promised job-creating infrastructure improvements, Obama's so-called "stimulus" plan spends only about 15% of its nearly trillion dollar price-tag on actual infrastructure.  Rather than investment, the Obama plan rolls back welfare reform, nearly doubles the national debt, and throws money at a random collection of government pork.  The major reason the U.S. economy did not turn around in the 1930s was precisely because private investment failed to recover until the mid-1940s.  The larger footprint of government spending "crowded out" the true source of economic growth, productive private investment.  The “stimulus” provides for the creation of a federal health care bureaucracy not unlike Hillarycare where decisions that should be made by doctors and patients will belong to bureaucrats deciding cost-effectiveness.  In addition higher government spending promotes higher tax rates.  There are no growth-inducing tax cuts on corporate profits, capital gains, or on marginal income, and there is no effective plank which advocates saving.  This spending-leads-to-growth concept is a perennial failure that can actually harm an economy.  Its advocates suffer from a crucial error in their understanding of economics: for in fact, consumption is an effect, and not a cause, of economic growth.  Basically more spending without the greater output of goods and services that results from increased saving and investment, and concomitant higher real incomes, can only lead to higher prices and inflation.  Absent inducements to sustainable growth, the fiscal stimulus program will only add to the U.S.'s debt burden.  By ignoring both economic logic and history, Obama has condemned the world to repeat an unpleasant past.

 

Obama’s plan to help distressed “homeowners” avoid foreclosure is known on Wall Street as the “mortgage cramdown.”  Treasury Secretary Timothy Geithner, has virtually promised a continuation of the Bernanke/Bush weak dollar.  Higher interest rates and a collapse of U.S. Treasury bonds seem assured, and a run on the dollar cannot be ruled out.  His mortgage plan abrogates contracts, so no one is trading these bonds and no one will if they think a judge can simply tell a mortgage holder he doesn’t have to pay what he owes.  The mortgage “cramdown” is just one of many contradictions in the economic policies of the Obama team.  Treasury Secretary Geithner hasn’t produced a plan yet to save the banks that are still holding more than $1 trillion in bad mortgage and real-estate debt.  If banks sell these securities at market prices, they have to write down massive losses and become insolvent, barring a massive government bailout.  Geithner says he’s working on a plan to unclog the system, to have the banks sell the toxic assets at a price that wouldn’t result in massive losses.  Yet the president’s mortgage plan assures just the opposite; if a judge can simply say that a homeowner doesn’t have to pay his entire mortgage payment, the bonds that these mortgages are packed into fall in value.  There is a growing sense among people who understand the markets that things could still get dramatically worse, even as the Dow Jones Industrial Average dips below 7,000, about half the level of its high point before the crisis began two years ago.

 

The Omnibus Appropriations Act of 2009 is a sprawling, $410 billion compilation of nine spending measures that lacks the slightest hint of austerity from the federal government or the recipients of its largess.  The omnibus increases discretionary spending by 8% over last fiscal year's levels, dwarfing the rate of inflation across a broad swath of issues including agriculture, financial services, foreign relations, energy and water programs, and legislative branch operations.  The president apparently plans to sign the $410 billion "omnibus" spending bill, even though it is loaded with some 9,000 unscrutinized earmarks and the largest increase in discretionary spending (save for a brief increase after the September 11, 2001 terrorist attacks) since the Carter administration.  The bill is larded with pork and would significantly increase fiscal year 2009 spending by funding agencies that just received a major boost from the “stimulus” bill.  Such increases might be appropriate for a nation flush with cash or unconcerned with fiscal prudence, but America is neither.  Drafted last year, the bill did not pass due to Congress's long-standing budgetary dysfunction and the frustrating delays it yields in our appropriations work.  Since then, economic and fiscal circumstances have changed dramatically, which is why the Senate should go back to the drawing board.  The national debt now exceeds $10 trillion which is almost double what it was just eight years ago, and the debt is growing at a rate of about $1 million a minute.  Our nation's current fiscal imbalance is unprecedented, unsustainable and, if unaddressed, a major threat to our currency and our economic vitality.

 

Obama has proposed a $3.6 trillion budget that our economy could not afford even if it were in perfect health.  The economic budget is contradictory at best, and possibly reckless in its extreme.  Policies that will certainly make a very bad situation even worse, and when things do get better, they will certainly not be better enough to compensate for the pain we are experiencing.  Among the transformative legislation he aims to ram through Congress are a nationalized health care system (he proposed $635 billion to start), a “cap and trade” system as a stealth tax increase aimed at reducing carbon dioxide emissions, and a new government fund to make college tuition and auto loans.  Obama’s global warming tax is expressly designed to pay for new middle-class welfare entitlements, even though it takes away from the beneficiaries about the same amount they will fork out in increased energy costs.  New energy taxes of $646 billion will hit the middle-class hard.  The Obama administration has proposed increasing taxes on every American, to the total tune of $1.4 trillion.  Our children will face higher taxes for decades to come!  Obama wants to spend billions to convert our economy to something it is not: a highly-regulated “green” economy supposedly saving billions by converting to the use of “clean energy.”  These are not investments that pay off: they are costs that breed the necessity for more and more spending.  This budget reduces defense spending to a level not sustained since the dangerous days before World War II, while increasing nondefense spending (relative to GDP) to the highest level in U.S. history.  This budget damage is done before addressing the impending explosion in Social Security and Medicare costs.  Obama is declaring war on “investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds.”  In just eight years, our national debt will double to $20 trillion, as nondefense federal spending jumps from the long-term average of 16.5% of GDP to above 23%.  Democrats have an overwhelming majority in both housed of Congress, but Obama wants us to believe he will gain bipartisan support for his bloated budget, but will probably not get any Republican support for his next in a series of never-ending liberal spending programs.  This is how governments turn short-lived recessions into long-term depressions.

 

 

Obama has crowned Rush Limbaugh as the thought leader of the conservative movement and the voice of opposition to liberals.  The Saul Alinsky “Rules for Radicals” playbook requires political opposition to be personalized so enemies can be directly attacked and demonized in the media.  Michael Steele and the Republican National Committee have not filled the political opposition leadership void.  Democrats in a carefully calculated campaign are seeking to divert attention toward radio host Rush Limbaugh, and away from a debate about our alternative solutions on the economy and the irresponsible spending binge they are presiding over.  Rush is very proud to hope America prospers and to hope Obama fails to implement his socialist policies and programs, since he believes when Obama succeeds America suffers.  White House Chief of Staff Rahm Emanuel coordinates the Democrat “talking points” propaganda daily with CNN media shills Paul Begala and James Carville.  This Democrat demonization strategy will backfire since it has galvanized the Republican Party and provides an opportunity to articulate alternatives that are in stark contrast to Obama’s failed policies:

·         Republicans need to articulate a clear economic alternative to the mishmash of liberal spending programs seen so far, that will actually stimulate GDP growth, create long term private sector jobs, and ensure a strong dollar

·         Republicans also need to define a clear energy alternative with a goal of energy independence with ample supplies to fuel economic growth and to reverse Obama’s placing off limits 163 million acres of public land and the outer continental shelf to oils and gas leasing.

·         Environmental leadership is needed to expose the climate change hoax as an attack on capitalism to bilk the successful into paying to alleviate their prosperity “guilt,” and to overturn any “Cap and Trade” stealth income redistribution tax”

·         Republicans must be able to articulate an immigration alternative that: encourages legal immigration, secures our borders, assimilates immigrants into our society, enforces our current laws, and does not reward illegal behavior.

·         Finally Republicans need to provide entitlement leadership showing how to transition from our current bankrupt systems to personal and private health care and social security.

Newt Gingrich is an academic first who has been out of office for many years and has emerged as a Republican intellect-in-chief and solution thought leader.  The president will not accept Limbaugh's offer to debate the issues, since it would not be in Obama's personal interests to shift the public's attention from childish insults about Rush to substantive policy.  The smartest thing Republicans could do would be to embrace Rush Limbaugh as a thought leader and cheer him on as he says things that Republicans dare not say out loud.

 

One healthy sign is the silent majority has finally had enough and has begun to fight back, organizing protests against out of control federal spending, dubbed (Boston) “Tea Parties.”  Last Friday, thousands of Americans turned out to protest reckless government spending in the pork-laden stimulus package, the earmark-clogged budget bill, the massive mortgage-entitlement program and taxpayer-funded corporate rescues.  These "Tea Party" protests spanned the sunny Santa Monica pier to the icy streets of Chicago and Cleveland to rain-drenched Atlanta, overflowing the grounds of the St. Louis Gateway Arch, with massive turnouts in Greenville, S.C., and crowds of several hundred each in New York City and Washington, D.C., and all points in between.  Like those who demonstrated before them in Seattle, Denver, Mesa, Ariz., and Overland Park, Kan., two weeks ago, the “Tea Party” participants held homemade signs that said it all: "Your mortgage is not my problem"; "Liberty: All the stimulus we need"; "No taxation without deliberation."  Not surprisingly the Mainstream Media chose not to publicize these protests very much.  The perpetual Borrow-Spend-Panic-Repeat machine in Washington depends on the capitulation of the wealth producers.  There's only one monkey wrench that can stop the redistributionist thieves' engine and it is engraved with the word: “Enough.”

 

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