Views on the News

May 1, 2010

Views on the News*

Americans, lead by Independents, are waking up to divisive, partisan socialist agenda that was not the “Change” and “Hope” that they voted for in the election. The advantage in public support the Democratic Party built up during the latter part of the Bush administration and the early part of the Obama administration has all but disappeared. During the first quarter of 2010, 46% of Americans identified as Democrats or leaned Democratic, while 45% identified as or leaned Republican, which is the closest party division since the first quarter of 2005, when the parties were tied at 46%. The six-point rise in Republican support since the first quarter of 2009 is due entirely to a growing proportion of independents that lean to the Republican Party, rather than an increase in the percentage of Americans who identify as Republicans outright. Close to nine-in-ten rate economic conditions today as either poor (49%) or only fair (39%), numbers that have changed little since last June. A majority does not expect an imminent turnaround: more than a third (36%) say they think economic conditions will be about the same a year from now, while 19% say they expect conditions to worsen. Public perceptions of two of the federal government’s most sweeping efforts to right the economy could be contributing to the pessimism. More than six-in-ten (62%) say the economic stimulus package enacted by Congress last year has not helped the job situation, while about half (49%) say the government’s loans to banks and other financial institutions did not help prevent a more severe economic crisis. Meanwhile, the public sees little government progress toward fixing the causes of the financial crisis. About four-in-ten (42%) say they see just a little progress; 25% say they see no progress at all. Obama’s popularity has remained flat even after the Health Care Reform bill was bulldozed through Congress, which also may explain why the approval of Congress remains at an all time low.

(“Party Affiliation Gap in U.S. Narrowest Since 2005” by Jeffrey M. Jones dated April 23, 2010 published by Gallup at http://www.gallup.com/poll/127499/Party-Affiliation-Gap-U.S.-Narrowest-2005.aspx

“Pessimistic Public Doubts Effectiveness of Stimulus, TARP” dated April 28, 2010 published by Pew Research at http://people-press.org/report/?pageid=1709 )

President Obama came to office promising an era of political comity, but even he has had to concede that his first 15 months in office haven't lived up to his campaign hope of transcending partisan divisions. While it takes two to tangle, we think the hyper-polarization owes more than a little to Obama's own rhetorical habits. More than any President in memory, Obama has a tendency to vilify his opponents in personal terms and assail their arguments as dishonest, illegitimate or motivated by bad faith. The President is especially fond of employing this blunt rhetorical force against business. In his September address to Congress on health care, Mr. Obama did not merely disagree with opponents but accused them of being "cynical and irresponsible," spreading "misinformation," and making "bogus," "wild" or "false" claims through "demagoguery and distortion." Politics is not beanbag, but most Presidents leave this kind of political attack to surrogates or Vice Presidents. Demonization of opponents is a tactic straight out of the Saul Alinsky “Rules for Radicals” playbook calling for personalization of enemies as a means to the end. A President may reap a short-term legislative gain from this kind of rhetoric, but he also pays a longer-term price in ill-will and needless polarization. Presidents speak to all of America and they best build consensus through argument and persuasion, not by singling out political targets, cultivating resentment, questioning motives and mocking differences of principle or political philosophy. His rhetorical method seems especially discordant coming from a President who still insists, in between these assaults, that he is striving mightily to change the negative tone of American politics. If the President and his advisers are wondering why his approval ratings are falling even as the economy is recovering, they might look to his own divisive conduct and the contempt he too often shows for anyone who disagrees with him.

(“On Presidential Rhetoric” dated April 22, 2010 published by The Wall Street Journal at http://online.wsj.com/article/SB10001424052748704448304575196121075748664.html#printMode )

The Obama administration rush to expand government has galvanized opposition by states to federal initiatives that encroach into Constitutional state reserved powers. The Constitution’s Tenth Amendment says that the states defined the total scope of federal power as being specific enumerated purposes, with all others reserved by the states. When Congress enacts laws and regulations that are not made in Pursuance of the powers enumerated in the Constitution, the People are not bound to obey them and may nullify their applicability in their states. In 2007, Maine introduced a non-binding resolution opposing the REAL ID Act, since joined by 25 other states. In 2008, Oklahoma introduced a simple non-binding resolution reaffirming the Constitution as defined by the 10th amendment, since joined by 11 other states. In 2009, Montana introduced a bill to nullify some federal gun laws and regulations, since joined by 7 other states. In 2009, one state rep in Arizona introduced a state constitutional amendment to effectively ban a national health care plan in that state, and has been joined by 3 other states. These simple, single acts by courageous people have grown into a state-level resistance to unconstitutional federal acts the likes this country has possibly never seen. 14 states have now passed laws nullifying unconstitutional federal laws on marijuana. Now, in the absence of any serious commitment to enforce the nation’s immigration laws, Arizona is attempting to these laws on their own. During the last eruption of the national immigration debate, Congress passed a law mandating a fence along the border. The Bush administration bid it down to a high-tech “virtual fence,” and the Obama administration has ceased constructing even that. Obama ignores the Constitution when it gets in the way of his federal government expansion, but ignores its use when it does not support his liberal agenda.

(“What to do about National Health Care? Nullify Now!” by Michael Boldin dated April 27, 2010 published by Intellectual Conservative at http://www.intellectualconservative.com/2010/04/27/what-to-do-about-national-health-care-nullify-now/

“Hysterics against Arizona” by Rich Lowry dated April 27, 2010 published by National Review Online at http://article.nationalreview.com/432612/hysterics-against-arizona/rich-lowry )

Congress has missed its April 15 deadline for enacting a budget resolution, and it is unclear if Congress even plans to bother completing a budget at all this year. After spending the spring passing an expensive and unpopular health care bill, the House and Senate did not even complete a single mark-up of the budget resolution by the April 15 deadline for full enactment. Indications are that the Senate may pass one, yet the House likely will not, which would prevent a conference committee and final enactment of a binding budget. Not only is Congress ignoring the immediate budget picture, but it has punted the long-term decisions to a deficit commission that is structured to avoid transparency and accountability. Some may suggest that passing a budget is unnecessary until President Obama’s deficit commission finishes its work and offers a budget course. This would ignore the reality that Congress is under deadline to finance the FY 2011 spending bills before September 30, well before the commission is even scheduled to release its report. Like the failure to pass a budget, the President’s deficit commission is an exercise in ducking accountability. The budget resolution, which sets an annual framework for taxes and spending, is one of the few pieces of legislation that Congress must pass annually. Several problems arise from not passing a budget. First, it prevents Congress from capping discretionary spending for fiscal year (FY) 2011. The House and Senate may “deem” spending targets for their appropriations committees, but the respective spending targets may not even match each other. Not passing a budget also means that Congress will not muster the leadership to set a framework for legislation paring back runaway entitlement spending this year. Perhaps most importantly, not passing a budget means not carving out budgetary priorities for any extension of the 2001 and 2003 tax cuts, even for low-income families. Beyond the technical challenges, not passing a budget signals that Congress refuses to level with the American people on the nation’s spending and deficit challenges. All over the country, recession-weary families are examining their income and spending, making difficult decisions, and setting family budgets. Yet Congress, despite a $1.5 trillion deficit in 2010 and historic deficits as far as the eye can see, cannot be bothered to set any budget framework for the next few years. There are likely two central reasons why Congress may not pass a budget.

· First, Congress spent the past few months focused on passing health care legislation, which significantly worsened the budget picture, leaving less time for lower priority concerns such as setting a budget framework for the next several years.

· Second, Members of Congress are likely hesitant to show the American people how seriously they have damaged America’s current long-term budget picture.

This Congress has refused to pare back runaway spending and deficits, and many of its Members may now hesitate to pass a budget resolution that shows the resulting trillion-dollar deficits. Instead, Congress is likely to try burying this vital issue in this election year. After rapidly expanding government and deficits over the past 16 months, this Congress may now make history by not even passing, much less enacting through conference committee, an annual budget resolution. By abandoning their basic responsibility of setting a budget, Congress will have no blueprint to rein in spending and deficits. This will make entitlement reform even more difficult and leave the fate of the 2001 and 2003 tax cuts in limbo. Congress’s refusal to go on the record with a credible deficit reduction blueprint is consistent with the President’s deficit commission, which will wait until after the election to be addressed by a lame duck Congress—and was formed after the President had already locked in even more spending and deficits. The unsustainable long-term expansion of spending and deficits is perhaps the greatest economic challenge of this era and too bad Congress cannot be bothered to address it.

(“As Deficit Deepens, Congress Refuses to Enact a Budget Blueprint” by Brian Riedl dated April 22, 2010 published by The Heritage Foundation at http://www.heritage.org/Research/Reports/2010/04/As-Deficit-Deepens-Congress-Refuses-to-Enact-a-Budget-Blueprint )

Since the Obama administration took over, Washington has passed two recovery bills costing more than $800 billion, but the employment results have still not appeared. Less than a month after his inauguration, President Obama signed the $787 billion stimulus bill. The promises flowed freely and the White House said that by the end of 2010, 3.5 million jobs would be created or saved, with 90% of them in the private sector, and unemployment would peak at 8%. A little more than a year later, with unemployment at nearly 10%, Congress passed a jobs bill that includes $17.5 billion in tax cuts, business credits and subsidies for state and local construction bonds, and also bumps $20 billion into the federal highway trust fund to be spent on highway and transit programs. As expected, the jobs bill included another round of empty promises. The results meanwhile are abysmal, as Washington is spending a lot of other people's money on initiatives that won't achieve what they were intended to. Economic history tells us that government spending does not create private-sector jobs, though it does help boost public-sector employment, which does nothing to promote economic growth. A government cannot spend a country into prosperity or even out of a recession. Stimulus legislation merely redistributes wealth to the politically connected and the politically favored. Jobs, the real jobs that will move us ahead, are generated through economy-fueling private investment. Those investment dollars cannot be loosed if the government is taking them out of the capital markets through taxes, including those taxes needed to pay for useless recovery bills. Since the bill was passed, the net job loss has been 3.5 million, and when added to the number of jobs the stimulus was supposed to create, the net loss is almost 7 million which by any objective definition constitutes a failure. Now that the first two spending bills have obviously failed, Washington is toying with the idea of implementing a value-added tax, which would suck even more dollars from the private sector and retard job creation even more.

(“Don’t Try This Again” dated April 26, 2010 published by Investor’s Business Daily at http://www.investors.com/NewsAndAnalysis/Article.aspx?id=531387 )

President Obama's so-called Financial Regulatory Reform bill institutionalizes permanent TARP bailout authority across the entire financial sector and for any company that can be deemed involved in financial activity of any sort. The bill grants permanent bailout authority to the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Treasury. They are empowered to force into receivership any company they deem in danger of default that is "substantially engaged in activities… that are financial in nature." This takes potential bailouts and takeovers well beyond banking, even beyond the financial sector, to almost any business in the country. For who is not engaged in activities "that are financial in nature," which at least arguably includes credit cards, lending, borrowing, insurance, issuing stock, selling on time, participating in exchanges of any sort, brokerage, pensions, and buying, selling, and holding stock, securities, foreign currencies, commodities, or speculative instruments of any sort. The auto companies have had their own finance arms, and other large manufacturers facilitate financing for their customers as well. No further Congressional authorization would be needed for firms to be seized, for unlimited funds to be spent on bailouts, and for the FDIC to impose new levies on financial institutions to get more bailout funds. The shareholders of any such seized company need not be compensated for the loss of their property, and are unlikely to be. The Dodd bill provides that the shareholders are not to receive any such compensation until all claims against the company, and the Federal bailout fund, are fully repaid. The Feds have access to unlimited funds under the bill because it authorizes the FDIC to borrow from the Treasury "up to 90% of the fair value of assets" of any company it seizes. One of the uses of such funds under the Dodd bill is for the FDIC to "make additional payments" over and above what a claimant might be entitled to in bankruptcy, if these payments are necessary "to minimize losses" to the FDIC "from the orderly liquidation" of the failing firm. In other words, the agency would be able to borrow huge sums so that it could make more generous payments to creditors than they would receive in bankruptcy. This is one form of bailout authorized under the bill, with the government smuggling funds to politically favored creditors. The biggest problem with this is that it would encourage lenders to fund "too big to fail" institutions, enabling them to increase leverage with cheap money, and pursue riskier returns. Such moral hazard perpetuates cycles of failure, economic waste, inefficiency and bailout. It also disadvantages smaller, less politically favored banks, institutions and companies who will suffer without these competitive advantages of too big to fail. Another possible bailout method under the Dodd bill is for the government to keep a firm in operation after seizing it, using the borrowed funds to pay off creditors. The FDIC would also have the power to keep the company operating by issuing securities of the seized firm to be sold to the Treasury, which could then keep or sell the securities. Another source of such bailout funds is the $50 billion resolution fund financed by a new tax on large financial institutions, with the FDIC authorized to charge additional assessments as necessary. With just about any company subject to such possible seizure, and then continued operation, the potential for bailout socialism is obvious. Still another option under the Dodd bill is for the government to seize the competitors of politically favored institutions, and even to sell those seized firms to the favored too big to fail operations. All of these possible government seizures and bailouts are expressly shielded under the bill from any judicial review. With such arbitrary government power to favor some firms and punish others, the financial community, and, indeed, business overall, will be political captives of the Obama Administration and the reigning Washington Democrats. Just as with the health care bill, this reality of the legislation President Obama is promoting is not stopping him from telling us just the opposite. Vilifying Wall Street for causing the financial crisis is just another political propaganda stunt taking advantage of the gullible to provide cover for the permanent bailout socialism power grab. While the financial community did lapse into some excesses that was mostly in response to the incentives provided by badly misguided government policies, and by itself would not have caused much broader economic harm. The real cause of the financial crisis was those badly misguided government policies. The crisis was rooted in the incredibly loose, cheap dollar, low interest rate monetary policies of the Fed from 2001 to 2006. Those policies were so loose that negative real interest rates were maintained for 2 ½ years, even while the economy was already expanding briskly. Such negative real rates were like payments to financial firms to take on excessive leveraging and risk, which is exactly what they did in response. The excess money poured into a hot housing market during those years, creating the housing bubble. When the inevitable bursting of that bubble came, the financial crisis was the natural result, bringing down all the overleveraged firms. Greatly exacerbating the problem was misguided, counterproductive overregulation, not deregulation or lack of regulation. It began 30 years ago with the Community Reinvestment Act, abused under President Clinton in the 1990s, along with HUD and Justice Department discrimination suits, initiating the bad loan policies of the subprime mortgage market. Banking regulators promoting cheap, easy mortgages only added to the problem. Fannie Mae and Freddie Mac then spread the problem throughout the financial community, worldwide, promoting securities based on those junk mortgages. The credit rating agencies backed by government regulation further misled everybody by granting AAA ratings to those securities. This began the housing bubble even before the Fed got going. As the government interference cascaded through the market, the domino affect caused the bubble to burst, the trillions in weak mortgages to default, and causing chaos in financial markets.

(“The President’s Permanent TARP Bailout Socialism Bill” by Peter Ferrara dated April 28, 2010 published by The American Spectator at http://spectator.org/archives/2010/04/28/the-presidents-permanent-tarp )

Beneficial, pro-growth, financial regulatory reform would begin with repeal of the Community Reinvestment Act, along with the breakup and privatization of Fannie Mae and Freddie Mac, followed by fundamental reform of the Federal Reserve, tethering it to a price rule for monetary policy focused on stable prices and a strong dollar. Then we need a permanent end to bailouts, TARP, and too big to fail, not the institutionalization of these anti-market policies. Congress needs to modernize bankruptcy laws to enable the rapid, expedited closure of large, failing financial firms. Bankruptcy courts with long developed expertise and legal precedent could then act outside of political influences. Appointed receivers and conservators could continue operation of still viable components of firms until they can be sold, close and liquidate portions that are not viable, and distribute available resources to creditors under long established rules. Creditors can be given equity in place of their debts, displacing current shareholders, to the extent necessary. This would all be done without any public taxpayer funds. Creditors and buyers of the viable assets would advance any necessary capital. Another essential reform component is stronger, enforced, capital and liquidity requirements, which would prevent overleveraging and provide a bigger cushion for financial firms. Reforms should also require legally enforceable derivatives contracts to be traded on public exchanges, where the prices, terms, and components of the derivatives would be transparent and publicly known. President Obama is patterning his presidency after Franklin Roosevelt in the 1930s, who similarly demagogued Wall Street over the Depression, and built a political machine that lasted a generation. You can see this pattern as well in the retro Keynesian stimulus, the economically counterproductive tax increases on the "rich," his health insurance company demagoguery, and elsewhere. America did not vote for Obama and the Democrats because we wanted to go back to the 1930s. In 2008, voters wanted to return to the prosperous 1990s, and since Obama is not taking us there, America will now turn to the Republican Congressional majorities to lead us back to prosperity.

Medicare's Office of the Actuary analysis reveals some uncomfortable conclusions about ObamaCare that undermine the administration’s business case and benefits. President Obama's health care bill aimed to achieve universal coverage while at the same time reducing costs. In reality, this contradictory strategy will ensure that Americans enjoy less health care, of poorer quality, and from fewer doctors. The Medicare study looks ahead 10 years and reaches two conclusions about the new health care overhaul: More people will be covered, and costs will continue to soar. There are many danger signs for ObamaCare and many of its promises will be broken:

· People losing coverage - About 14 million people will lose their employer coverage by 2019, as smaller employers terminate their plans and workers who currently have employer coverage enroll in Medicaid. Half of all seniors on Medicare Advantage could lose their coverage and the extra benefits the plans offer.

· Huge fines for companies - Businesses will pay $87 billion in penalties in the first five years after the fines trigger in 2014, partly because they can’t afford to offer expensive, government-mandated coverage and partly because some of their employees will apply for taxpayer-subsidized insurance.

· Higher costs for consumers - Tens of billions of dollars in new fees and excise taxes will be passed through to health consumers in the form of higher drug and devices prices and higher premiums,” according to Foster.

· A program created to fail - The new “CLASS Act” long-term-care insurance program will face “a significant risk of failure… There is a very serious risk that the problem of adverse selection will make the CLASS program unsustainable.”

· Spending increases - Under the new law, national health spending will increase by $311 billion over the coming decade. Instead of bending the federal spending curve down, it will move it upward “by a net total of $251 billion” over the next decade.

· “Free-riders” - An estimated 23 million people will remain uninsured in 2019, roughly 5 million of whom would be undocumented aliens; the remainder would be the 18 million who decline to get coverage and who will pay the penalty.

· Spending reductions are fiction - Estimated reductions in the growth rate of health spending “may not be fully achievable” because “Medicare productivity adjustments could become unsustainable even within the next ten years, and the reductions in the scope of employer-sponsored health insurance could also become an issue.”

· You can’t keep your doctor - Fifteen percent of all hospitals, nursing homes, and other providers treating Medicare patients could be operating at a loss by 2019, which will “possibly jeopardize access to care for beneficiaries.” Doctors are threatening to drop out of Medicare because cuts in Medicare reimbursement rates mean they can’t even cover their costs.

· Coverage but no care - A significant portion of those newly eligible for Medicaid will have trouble finding physicians who will see them, and the increased demand for Medicaid services could be difficult to meet.

· Premium increases - The Joint Economic Committee Republicans explained the impact of a rarely mentioned $14.3 billion per year tax on health insurance, effective in 2014. They find this tax will be mostly passed through to consumers in the form of higher premiums for private coverage. It will cost the typical family of four with job-based coverage an additional $1,000 a year in higher premiums and will fall largely, and inequitably, on small businesses and their employees.

This Medicare study is further evidence of how badly ObamaCare missed the point. All along, high cost has been the fundamental problem with American health care; the lack of universal coverage was only one symptom. The problem of coverage would have been solved long ago, largely by the private sector, if the medical tab in the U.S. were more like that in other advanced nations. At 17% of GDP and rising, the nation's health care economy is a case study in how to structure incentives, price signals and buying power to maximize inflation. Those who receive services hardly ever pay for them directly, and prices are rarely revealed, much less advertised. What was billed as “health care reform," in other words, actually reformed nothing and if anything will make the underlying problems worse.

(“ObamaCare’s Danger Signs” by Grace-Marie Turner dated April 23, 2010 published by National Review Online at http://healthcare.nationalreview.com/post/?q=Y2U5YjAzMjkxODY1YTViYmNjN2JjNGZjYWY4ZjliNDc= )

The old Republican National Committee (RNC) has some fundamental problems and their GOP platform no longer represents the core conservative values of its members. The battle lines for the future of America’s conservative party have been drawn, though not all that clearly yet. It is the old RNC and their loyal guard, against the new GOP made up of constitutionally conservative activists across the country. The RNC has been wrongly loyal to the dollar instead of their core constituency. The RNC endorses whichever candidate brings the most money to the RNC table, instead of whichever candidate best represents the will of their constituents, and as a result, much of the old RNC funding dried up long before the first Tea Party event. The old RNC is on the ropes… not because of constitutional conservatives looking for constitutionally minded leaders, but because the RNC sold its conservative soul for the almighty dollar years ago and it is almost indistinguishable from the Democratic Socialists across the aisle today. For constitutionally conservative patriots, the GOP is either a conservative party or a party no longer of any use to American patriots. Our nation already has a global socialist party in the DNC and we don’t need two global socialist parties. We need a real alternative, not just a lesser evil option. The Democrat controlled Congress has set new records for low approval ratings and Obama’s approval ratings have almost flip-flopped since his inauguration only fourteen months ago. Most Americans believe that the nation is headed in the wrong direction and only 28% of voters say they trust anyone in Washington DC today. If that doesn’t spell out the need for REAL CHANGE, nothing does. As is evidenced by every related poll, the GOP platform is more closely aligned with average American sentiments of individual freedom and liberty, smaller government and lower taxes, and it is also the party ripe for the taking at the moment. If conservatives are successful taking over the GOP, there is a real possibility that the new reinvigorated Republican party can emerge as the new populist party to lead the country for years to come.

(“Old RNC vs. New GOP – Upholding the Constitution” by J.B. Williams dated April 26, 2010 published by American Daily at http://americandaily.com/index.php/article/3398 )

* There is so much published each week that unless you search for it, you will miss important breaking news. I try to package the best of this information into my “Views on the News” each Saturday morning. No individual issue updates this week.

David Coughlin

Hawthorne, NY