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Views on the News

March 14, 2009

 

Views on the News:  

Both economists and lawmakers are beginning to question whether Obama's agenda of increased government activism is helping, or hurting the economy, by sowing uncertainty among businesses, investors and consumers that could prolong the recession.  Although the administration likes to say it "inherited" the recession and trillion-dollar deficits, the economic wreckage has worsened on Obama's still-young watch.  As much as Obama wants to blame Republicans exclusively, there is plenty of blame to go around for the current stock market crash, notably: 

·    The Federal Reserve whose initial mistakes set off the crisis.

·    The Bush administration for failing to adequately control government spending.

·    Congress for encouraging irresponsible lending by Fannie Mae and Freddie Mac, passing a series of destructive regulatory measures (including the Community Reinvestment Act, Sarbanes-Oxley, etc.), and engaging in wasteful spending.

·    Obama administration, which has already made a boatload of bad decisions, including the tax increase proposals mentioned above, an irresponsible and counterproductive "stimulus bill," the new "omnibus" spending bill, and a host of destructive trade and regulatory proposals.

Every day, the economy is becoming more and more an Obama economy.  More than 4 million jobs have been lost since the recession began in December 2007 — roughly half in the past three months alone.  Stocks have tumbled to levels not seen since 1997, and are down more than 50% from their 2007 highs and 30% since Obama's election.  The markets are clearly registering a vote of "no confidence" in the Democrat Congress and the Obama administration.  Polls show that Obama's personal approval ratings is steadily declining, down to 56%, and remain greater than support for his specific policies.  The reason for this decline most likely has to do with doubts about the administration's policies and their impact on peoples' lives. 

·    88% they are worried that the steps Obama is taking to fix the economy may not work and the economy will get worse. 

·    82% say they are worried about the amount of money being added to the deficit. 

·    78% are worried about inflation growing.

·    69% say they are worried about the increasing role of the government in the U.S. economy.

With three-quarters saying that they expect the economy to get worse, it is hard to see these numbers improving substantially.  According to Pew Research "He still has a fair amount of political capital, so the public is willing to cut him some slack and go along with him for a while, but the public will have to get some sense that the kinds of things he's proposing are going to work, or are showing some signs that they are working."  Has anyone noticed that the only markets that have failed are the ones distorted with major government controls, regulations, subsidies, or taxpayer guarantees?

 

The President, his chief of staff, Rahm Emanuel, other high administration appointees and congressional lefties are embarked on a very deliberate strategy of frontloading and ramming through big legislative packages and executive orders designed to "remake" America.  White House Chief of Staff Rahm Emanael was caught saying: "Not letting a good crisis go to waste."  The people who voted for him were promised swift and effective action towards getting the markets repaired by President Obama, but they have dropped about 400 points each week since he's taken power.  Instead Obama resorted to using the Cloward-Piven strategy to overcome opposition by overloading and undermining government bureaucracy.  The week after the stimulus passed, Obama turned to supporting another $400 billion in increased spending, for this year alone, in the so-called omnibus spending bill.  Obama promised an earmark free, pork free, bare bones budget, but depending how you count, his omnibus bill contained 9,000 earmarks.  The next week, Obama proposed an additional $275 billion housing bailout.  Obama's budget reserved another $250 billion for still more bank bailouts, on top of the remaining $350 billion from the TARP bailout that Obama has also committed to spending.  The budget also reserved still another $638 billion "down payment" on a new national health care entitlement that will be the biggest entitlement of all, even though we can't afford all the entitlements we already have.  Democrats are planning to bundle carbon-trading and renewable-electricity initiatives into one comprehensive measure, to speed the process and minimize the review process.  As of last month, we know that more than 55% of the American people wanted help for the economy to come primarily through the reduction of taxes.  The same poll found that only a little over 20% think more government spending was the answer.  Yet it is important to point out that there are now far more economists on record that have advised the President against larger government and pushed him towards tax relief, than those who supported the increased centralized control of a soft socialism that President Obama seems destined to aim for.  If it makes no sense to the free market economists that populate the best economics programs across the nation, if it weakens the ability for the average family to make ends meet, and if it does not increase the number of people actually working, why is President Obama so stubbornly continuing to pursue his economically diabolical plan of destruction?  The answer is that it is part of Obama’s master plan to "not let a good crisis go to waste."  We should expect a return to the stagflation of the 1970s, since Obama is returning us to the outdated, long discredited Keynesian economic policies of the 1970s.  That will even likely include the gas shortages and gas rationing of Jimmy Carter, plus the new innovation of widespread blackouts and brownouts.  When Obama talked about change, did anyone think he meant going back to the brain-dead policies of the 1970s?

 

 

The markets' recent precipitous decline is a reaction not just to the absence of any plausible bank rescue plan, but also to the suspicion that Obama sees the continuing financial crisis as usefully creating the psychological conditions - the sense of crisis bordering on fear - for enacting his "Big Bang" agenda to federalize and/or socialize health care, education and energy, the commanding heights of post-industrial society.  Obama and his lieutenants understand that the economic crisis is their chance to make broad and fundamental systemic change.  This approach is clever politics, but intellectually dishonest to the core.  Instead of focusing on the urgent problems facing the country, the credit crisis and the collapse of the housing market, he's diverting scarce resources and attention to solving health care, reforming education, and stopping global climate change.  Worse, his efforts to tackle these intractable issues involve fiscal policies that exacerbate the current financial crisis.  Their plan for systemic change fits within a definite ideological framework.  Health, education and energy - worthy and weighty as they may be - are not the cause of our financial collapse, and they certainly are not the cure.  Obama compared the market’s fluctuations to a campaign tracking poll, using the only frame of reference his limited experience offers.  Obama promised at his health care summit to "launch a new effort to conquer a disease that has touched the life of nearly every American by seeking a cure for cancer in our time."  President Obama has approached running the country as a perpetual campaign constantly selling his ideas in a series of teleprompter aided campaign speeches.  So the president is using Shock and Awe to mislead and baffle natural conservatives, cow critics and overwhelm opposition with a broad agenda pressed ahead simultaneously.  Obama is betting that deception, speed and force will win the day and by the time the dust settles, he hopes to present Americans with a fait accompli.            

 

 

For every real or imaginary "crisis" facing this country and the world, it seems, liberals have a new trillion-dollar government program ready to go.  The flagship proposal at the health care summit was the national adoption of electronic medical records that would “save” some $80 billion a year, safeguard against medical errors, reduce malpractice lawsuits, and greatly facilitate both preventive care and ongoing therapy of the chronically ill.  Unfortunately the basis for the medical records proposal is a theoretical study published in 2005 by the RAND Corporation with no compelling evidence to support the theoretical claims, and is really an elegant exercise in wishful thinking.  When it comes to the crisis of illegal immigration, liberals pretend that nothing can be done, and they complain that every proposed solution is ineffective, expensive or intrusive.  Contrary to the liberals' no-can-do approach toward our wide-open borders, at least three "shovel-ready" solutions are readily available to close dangerous gaps in our border security: E-Verify, No-Match Letters and US-VISIT.  In broadening the goal of Cap-and-Trade legislation from the paramount goal of reducing Greenhouse Gases (GHGs), primarily carbon, and mitigating climate change, to that of raising, conservatively, well over $600 billion in revenue for his social programs, the President has raised the ante on this ambitious proposal.  Obama’s energy policy restricting oil exploration domestically and investing in unproven technology will only increase our dependence on foreign oil.  Remember that every Republican in the House voted against the first "American Recovery and Reinvestment Act of 2009" bill because the bill did not grow the economy, create long term private sector jobs, or fix any of the underlying economic problems.  Now Congressional Democrats are already conceding that the bill will fail to achieve any of its objectives, so they are hinting at the need for second “stimulus” spending bill.  How many times can the American people be fooled by this same approach of throwing good money after bad ideas?

 

President Obama has not offered a stimulus or budget plan to grow our economy and stave off job loss, but rather is using the economic crisis to forward a Keynesian social engineering project that amounts to LBJ’s Great Society on steroids.  First, Obama is concentrating on “greening” the economy, on transforming healthcare and education, none of which are at the root of the economic meltdown.  Republicans should be showing why Obama’s plan will not and cannot restore the needed confidence in the markets.  Second, Republicans can begin rebuilding market confidence by doing what Obama and Geithner prefer to just talk about: present a plan to save the financial markets from further government intervention and to undo what President Bush started last fall: the nationalization of our financial industry.  Republican Congressman Rob Bishop and Senator David Vitter have introduced “The No Cost Stimulus Act of 2009” that would grow the economy, create private sector jobs, and address energy needs by fast pathing offshore energy leasing, opening up ANWR to drilling, and streamlining regulatory requirements for new nuclear reactor plants at no cost to the American people.

 

Obama's bank bailout plan provides no relief for any homeowner whose mortgage exceeds the total value of his home.  These folks are the ones who have been conned into taking sub-prime mortgages so loaded with brokerage commissions, interest rate subsidies, bank fees and lawyer and title-company charges that the amount of the mortgage has ballooned.  These high mortgage amounts, coupled with declining property values, have turned about 20% of American mortgages upside down, so that the debt exceeds the value of the property.  By excluding these homeowners from help, Obama is guilty of a holier-than-thou hypocrisy.  Was it not Fannie Mae and Freddie Mac that encouraged such over-mortgaged properties?  Was it not the Democrats in Congress who passed legislation urging Fannie and Freddie to weaken the standards to allow more low and lower-middle income families to buy homes?  When HUD Secretary Cisneros demanded that Fannie and Freddie invest 42% of their assets in buying low- and lower-middle-income mortgages, and when his successor Andrew Cuomo raised the quota to 50%, what did they think would happen?  When they explicitly told Fannie and Freddie not to insist on down payments in the mortgages they purchased, how did they think the purchase would be funded?  Obviously, if you don't require the borrower to put money down, the full purchase price must be covered by the mortgage.

 

We need to stop the "if you fail we will bail" cycle before we bleed the American taxpayer to death.  The "too big to fail" argument is premised on the proposition that unless government props up gigantic companies that made gigantic errors in judgement, their demise will bring about the demise of the American economy.  It should come as no surprise that A.I.G. and the auto companies themselves are the authors of that story.  Quite likely, their failure will have an adverse impact on the economy, and more jobs will be lost, and more companies will fail.  But it looks like this is going to happen whether or not we spend the combined income of the next several generations.  Why waste the money of responsible Americans on companies that come back for more and more?  Even worse than this financial folly is the precedent being set by the federal government.  The market rewards hard work and wisdom and punishes laziness and folly.  By protecting these companies from the natural consequences of their profligacy, the federal government is encouraging poor decision-making and risky behaviors, while simultaneously discouraging the hard work and sacrifice of responsible individuals and companies.  Let the people who sacrificed, saved, and made wise decisions keep their money—they obviously know how to handle money better than the companies that are spending billions and still going under. It may hurt more in the short run, but our economy will be stronger and healthier for it.

 

Peter Orszag, Obama's budget director, called the $410 billion omnibus spending bill "uglier than we would like" -- and in the next breath urged Congress to go ahead and pass it anyway.  Republican proposals to improve the bill would have saved billions of taxpayer dollars, but every one of them was turned aside.  Newsmax listed the bill’s top 10 non-earmark boondoggles:

·    $97 Million for a Program That’s Being Cancelled — Reliable Replacement Warhead program cancelled based on scientists’ recommendation that it’s unnecessary. 

·    Amtrak Rides the Gravy Train — Congress keeps using tax dollars to subsidize it, with a 10%.

·    Congress Pays Itself — the discretionary spending bill fund contains an 11% increase in legislative branch operations, which members of Congress use to run their offices.

·    Stealth Earmarks — once an expenditure is no longer an earmark per se, it is apt to receive far less public scrutiny ($3.5 billion of undisclosed earmarks).

·    Caving in to Castro — the Castro government was notorious for late payments, the U.S. required that Cuba pay in advance for its purchases, but this requirement has been waived.

·    Agriculture -- Sowing Seeds for Fiscal Disaster? economists do not generally expect it to play a leading role in getting the country out of the recession.

·    Kicking Poor Kids Out of Rich Schools — eliminated the D.C. Scholarship Opportunity Program, it helps disadvantaged inner city kids attend private schools.

·    Pricey Diplomacy — the State Department is in line for a huge budget increase under the spending plan, while the country is losing 700,000 jobs a month.

·    Regulatory Excess — according to Bloomberg.com, regulatory agencies across the board would receive a huge shot in the arm.  

·    Reasons for Concern — federal spending expanded by 8.3%, more than twice the rate of inflation, but doesn’t take into account the $700 billion bailout or the $787 billion fiscal stimulus plan. 

After criticizing President Bush for using signing statements, Obama issued one of his own, declaring five provisions in the omnibus spending bill to be unconstitutional and nonbinding, including one aimed at prevented punishment of whistleblowers.  Obama only embarrassed himself when he signed off on the Omnibus bill with 9,000 new earmarks even as he unveiled new rules to restrict such so-called earmarks.

 

Barack Obama sermonized every Sunday about the evils of earmarks, but now can't muster the backbone to practice what he preached.  When he became a candidate, he said: "We can no longer accept a process that doles out earmarks based on a member of Congress' seniority, rather than the merit of the project."  In September 2008, Obama said: “We need earmark reform, and when I am president, I will go line by line to make sure that we are not spending money unwisely.”  Empty rhetoric, it turns out, because when Obama became president, he signed the $787 billion so-called "stimulus" bill filled with earmarks.  In fewer than 90 days, Obama's signed off on not one, but two monster spending bills with billions of dollars in earmarks in each, and there is no evidence he is going to stop.  This is one more example of business as usual in Washington, and nothing like "The One" who took the last election by storm, promising change and hope.  Politicians understand that not all earmarks are pork, and not all pork comes in the form of an earmark.  They also appreciate the ease of inserting pet projects into large spending bills without any debate or scrutiny.  The more earmarks there are in a bill, the harder it will be to vote against it.  The reason is simple: with every earmark, a congressman or senator gains a personal stake in the passage of a bill he or she might otherwise oppose.  Signing the omnibus bill with its 9000 earmarks and a cost of $8 billion, Obama has redefined the term of hypocrisy!

 

 

Obama’s proposed budget shows all the vision, restraint, and grace of a grasping committee chairman, using the cover of a still-unresolved banking crisis to push through a broad liberal wish list before anyone notices the costs and complications.  In 2007, the federal budget deficit was $162 billion, but in 2009, the budget deficit is projected to be 11 times larger: $1.752 trillion.  These deficits are not just temporary.  The budget numbers are based on a very "rosy" economic scenario, and the deficit will be substantially larger than projected.  The budget forecasters assumed that the economy would grow at a 3% annual rate starting in April and that real GDP would fall just 1.2% in 2009 from 2008.  Then, from 2010 through 2013, the administration assumes that real GDP will grow at a 4% annual rate.  To put this in perspective, that is twice as fast as the economy's 2% annual rate of growth between 2004 and 2008.  This is not impossible, but the only other periods that came close to this 4% growth rate for such a prolonged period of time were in the late-1990s and mid-1980s.  One thing to note is that both of these periods followed major shifts toward freer markets and tax cuts, not bigger government and tax hikes.  Being the astute politician that he is, Obama has already paid the politically obligatory lip service to the principle of fiscal responsibility by declaring his intention to cut the federal deficit in half by the end of his present four-year term.  There is another problem with Obama’s implied projection of reducing the deficit from $1.7 trillion to $850 billion: The numbers don’t add up.  Obama said that he would achieve this reduction through a combination of increased taxes on the incomes of the top five percent of Americans and reductions in military spending, but that’s impossible.  Rasmussen data shows that people now actually oppose Obama's budget, 46% to 41%.  The only possible way to rein in runaway deficits is to slash runaway federal spending.

 

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