Views on the News

May 23, 2009


Views on the News*  

The ambition of the Obama administration to increase government control over what had been previously private business institutions is breathtaking in scope and virtually unlimited.  A case can be made for aggressive government control of companies that took bailout money, but you would think those that didn't take bailout money should be free to make their own decisions.  It is striking that government officials place so much blame on private-sector decisions and fail to acknowledge the much greater significance that government policies played in bringing on the financial crisis.  It is fairly clearly driven not by a rational assessment of what will best promote a return to health of the financial system, but by an ideological conviction that more government control over the private sector is always desirable.  The model does not appear to be classic socialism, in which the State takes direct ownership of the most important means of production, as some have claimed.  It is closer to the economic model that was applied in fascism, in which ownership of important firms was left in nominally private hands, but regulations were so pervasive that large firms were essentially creatures of the state, serving political rather than economic purposes.  It is worth noting, however, that until the recent meltdown, most European countries, while maintaining certain levels of prosperity, experienced slower economic growth, less innovation, and unemployment levels approximately double what prevailed in the United States.  This is hardly a model calculated to promote robust recovery from the current recession. 


Obama is bent on becoming a major player in, if not centrally controlling, America's health-care, automobile and banking industries, but the track record in running businesses has been abysmal.  Medicare is no different, economically, than a regular health-insurance company, which has an "unfunded liability" of nearly $38 trillion, which is the amount of benefits promised but not covered by taxes over the next 75 years.  Governments run enterprises share a number of characteristics:

·    Governments are run by politicians, not businessmen, and politicians can only make political decisions, not economic ones with a short-term bias.

·    Politicians need headlines, so there is a need for action, even when doing nothing would be the better option.

·    Governments use other people's money, while corporations play with their own money and benefit directly by their decisions.

·    Government does not tolerate competition since non-profits can not compete with profit-seeking companies.

·    Government enterprises are almost always monopolies and thus do not face competition at all, but competition is exactly what makes capitalism so successful an economic system.

·    Successful corporations are run by benevolent despots, who decide company policy, organize the corporate structure, and allocate resources which allow a company to act quickly when needed.

·    Government is regulated by government, but is effectively an unregulated monopoly, and has a dismal record of regulating itself.

Capitalism isn't perfect, but according to Winston Churchill's famous description of democracy, it's the worst economic system except for all the others.  The inescapable fact is that only the profit motive and competition keep enterprises lean, efficient, innovative and customer-oriented.


Barack Obama has a disturbing habit of saying one thing in his speeches but endorsing something very different in his actions.  People seem to hear only his lofty rhetoric and appeals for unity while turning a deaf ear to his polarizing language and actions.  He masquerades as a fiscal disciplinarian while authoring nationally bankrupting budgets in perpetuity.  He endorses capitalism as a superior economic system while condemning it as "unfair" and decries achievers as "selfish" and "greedy."  He's set on restructuring our economy away from the free market and toward government control, from taking over private businesses to setting executive salaries to subsidizing mortgages to nationalizing healthcare.  He calls forced union membership "free choice."  Obama said he doesn't believe people should demonize those holding opposing views and that each group can "make its case to the public with passion and conviction . . . without reducing those with differing views to caricature," while caricaturing all pro-lifers as "right-wing ideologues who want to take away a woman's right to choose"?  Obama, like other extreme pro-abortion advocates, doesn't care much whether the unborn is a human life, because he has strongly endorsed partial-birth abortion, which occurs at a stage at which even the most morally darkened soul couldn't deny the baby is fully human.  Apparently government transparency is a priority, but only if it serves his own interests.  He certainly changes his outward language when necessary to be less incendiary and appear less extreme, but there is no evidence he's changed his convictions regarding the people who disagree with him on this issue.




Representatives Henry Waxman and Ed Mackey released the closely-held details of his bill rationing energy use in the name of global warming, the “American Clean Energy and Security Act of 2009 (ACES).”  On paper, the Waxman-Markey bill puts a cost on carbon dioxide by imposing a ceiling, or cap, on greenhouse gas emissions and then setting up a market for regulated industries, such as the electric power sector, to buy and sell allowances to pollute under that cap.  Waxman packaged energy allowance allocations, much like ration coupons.  Waxman released a two-page memo to describe the now 1,000 page bill, which is apparently how many pages it takes to hide the biggest tax increase in U.S. history.  In the Democrats’ now-commonplace Orwellian mode, the two-page memo was full of “protections” the bill offers, laid out in boldface type: “Protection from electricity price increases,” “Protection from natural gas price increases,” “Protection from home heating oil price increases,” “Protection of low- and moderate-income households.” Then comes “Transition assistance for industry,” comprised of “Protection for energy-intensive, trade-exposed industries” and “Protection for domestic energy production.”  The 2010 Budget specifically seeks to raise taxes on domestic oil exploration by $31 billion over 10 years, a larger tax increase than on any other industry.  In addition, oil and gas producers would bear a disproportionately heavy share of other tax increases on business, more than $320 billion.  The real hidden catch of the cap-and-trade system is that it will require consumers to pay twice: first for emission allowances and then for the construction of new low- and zero-carbon power plants.  Obama has revealed his subliminal agenda to control energy by increasing costs when he predicted: “Under my plan of a cap and trade system, electricity rates would necessarily skyrocket.”  All sources of energy costs will increase as the impact of this legislation works its way through the industry.  Pain at the electric meter will cause consumers to reduce electricity consumption by 26%.  Higher gasoline prices will have forced households to cut consumption by 15%.  In total, for the years 2012–2035, a family of four will see its direct energy costs rise by $22,800.  Waxman touts his bill with claims of offering protection, if from a menace found nowhere but in the very same bill.  The economic impact is very predictable since as energy prices rise, income and employment will fall.  Because families will spend larger portions of their incomes on energy they will have less to spend on basic needs, less to invest, less to buy luxury items.  Economies are handicapped when the burden is high, and cap-and-trade (indirectly) and a carbon tax (directly) increases that burden.  Rather than leading towards energy independence, Obama’s proposals would drive oil and gas production abroad and make American oil and gas uncompetitive in a global market.  The levies would punish domestic American companies and benefit countries with large reserves such as Venezuela, Saudi Arabia, Iran and Russia.  It's alarming that the economic problems that will be created by CO2 emission restrictions mean nothing to the global warming bill's sponsors and those who'll support it.  In an unprecedented and unwise fashion, it turns the American energy industry over to the federal Environmental Protection Agency by giving the agency the authority to change the rules on allowances every five years.




Obama has “doubled down” on the auto industry by imposing mileage standards that will force auto manufacturers to build cars that are less safe and overpriced.  GM and Chrysler have been bailed out for the benefit of the labor unions.  Regardless of what happens to them from a business point of view, the union will be supported by the government, which means these companies no longer have to be competitive in any meaningful sense, and they're also no longer subject to the iron law of free-market capitalism.  So what does the government do?  Obama seeks regulatory authority to impose a new standard of 35.5 mpg by 2016 and, for the first time, limits (a 30% reduction) on car greenhouse gas emissions.  The cost of this change will result in at least an additional $1,300 per car, causing people to keep their existing polluting cars longer, defeating the purpose of the program.  This double jeopardy is that this increased cost of these new vehicles will be on top of the increased cost of energy from the Cap and Trade legislation!  This change will also require downsizing cars to meet the higher standards, making them smaller and lighter and making them less safe in crashes.  The administration claims 1.8 billion barrels of oil will be saved over the lifetime of the program, but this is insignificant when it is much easier to open the Arctic National Wildlife Refuge in Alaska to make 17 billion barrels of recoverable oil available.  The administration also claims this program will remove 900 million metric tons of carbon dioxide from the air, but this is negligible and carbon dioxide is a naturally occurring element and a weak greenhouse gas.  Man contributes less than 4% of the total volume of CO2, which itself makes up just 0.038% of the atmosphere... a tiny fraction of a tiny fraction.  Never forget the Post Office and Amtrak, two enterprises run by the federal government, has never made a profit and are falling further and further behind its competition.  Obama is taking advantage of a crisis in the automobile industry to implement an unaffordable and ineffective environmental program, when the auto companies could not refuse. 


The United States health care industry is not without its problems and there are known areas for improvement, but a major overhaul as Obama is advocating is just not warranted!  The U.S. has the best health care system in the world, which explains why so many people from other countries with universal health care travel here for treatment.  We have of course wonderful doctors and wonderful hospitals.  The current health care system needs an overhaul because the costs continue to rise while people have fewer choices and are less secure that the coverage they have today will be there tomorrow.  The U.S. spends over $2.4 trillion on health care (almost 17% of GDP), and the government accounts for almost one-half of all health care spending.  Americans are also facing fewer choices.  Today, 85% of all employers offer only one health plan for their employees.  Similar restrictions on personal choice face enrollees in government programs. In Medicaid, 23 percent are not accepting new Medicaid patients, and 18% are accepting only some.  In Medicare, serious legislative efforts are underway that will likely chip away at seniors' access to the private plans they want in Medicare.  This churning in the health insurance markets, and the lack of portability, is almost entirely the result of outdated government policies.  Something else that is needed is a Healthcare Transparency Act, so that consumers will know how good their doctors are, how good their hospitals are, how good their insurance plans are, not only in terms of consumer satisfaction but in terms of clinical measures; like how many people have died within 30 days when this doctor operated on them; how many people wait on the line for 30 minutes when they called to complain with this health insurance company, and so on.  Switzerland has the best free market system that we should look to emulate, treating health insurance much like auto insurance as a competitive free market opportunity.  Instead of a Medicare or Medicaid equivalent poor people receive a voucher equal to the average expenditure of the average Swiss, and they then purchase their own insurance.  The Swiss have universal coverage, since they buy their own health insurance and they spend 40% less as a percentage of GDP.


The Federal Reserve’s unprecedented actions in the realm of monetary policy have provoked a backlash among the American people because of the bubbles it has created in the past and the potential hyperinflation it might cause in the future.  The Fed is the lender of last resort, with the authority to lend to a wide variety of institutions on the basis of many kinds of collateral.  Ted has responsibility for supervision and regulation of member banks and bank holding companies, as well as the duty under the Federal Reserve Act to preserve the integrity, efficiency and accessibility of the payment system.  One of the fallacies of modern economics is the idea that a central bank is required in order to keep inflation low and promote economic growth.  It is the central bank's monetary policy that causes inflation and depresses economic growth.  Inflation is an increase in the supply of money, which in our day and age is directly caused or initiated by central banks.  A common misconception is that the Fed is completely independent of political pressures.  While the Fed has far too much authority to make agreements with foreign governments and central banks, or create temporary liquidity facilities, the chairman, are appointed by the president every four years, with the advice and consent of the Senate.  The fact that a single entity, the Federal Reserve, engages in and has a monopoly on monetary policy has detrimental effects on the economy.


Obama’s popularity and the economic statistics fell, pretty much in tandem from his inauguration until early April.  Since his inauguration, unemployment rose by two points, consumer confidence fell, and over 2 million jobs were destroyed.  Over the same term, the president's approval ratings fell from a post-inaugural level of 65% to 50%.  The moment is likely to come when the after-effects of the cure will overcome the recovery from the economic disease.  The signs of a negative economic reaction to Obama's program are already quite visible.  Interest rates on ten year Treasury bills have risen by 50% since January in anticipation of the coming bout with inflation.  The treasury's debt is soaking up funds, and so is the sale of toxic assets from banks.  The demands for capital set in motion by Obama's spending spree and his bank bailout plans are already blocking investment in economic growth.  Last week the president warned that the deficit (which he caused) is growing too large and that inflation (as a result of his policies) might be looming ahead.  This pseudo confession is likely his attempt to prepare the way for tax increases, since his increasing spending and the deficit will force inevitable tax increases.  At some point soon, the public will wake up to discover that we are now in a recession caused by Obama's programs not by the shocks of 2008, and it is only a matter of time until Obama’s ratings will sink further as a consequence.




Obama has quietly copied most of the Bush terrorism policies, has expanded some of it, and has narrowed only a bit.  If hypocrisy is the homage that vice pays to virtue, then the flip-flops on previously denounced anti-terror measures are the homage that Barack Obama pays to George Bush.  Within 125 days, Obama has adopted with only minor modifications huge swaths of the entire, allegedly lawless Bush program.  Obama has embraced the Bush view that, as a legal matter, the United States is in a state of war with al Qaeda and its affiliates.  Obama still has not publicly acknowledged that Bush’s surge was a success in Iraq and victory has been achieved.  The only announcement Obama has made about Iraq is his plans to withdraw some combat troops to fulfill one of his campaign promises, even if the withdrawal is slower than promised.  Obama has even embraced the surge counterinsurgency strategy in Afghanistan after attacking the same strategy and forecasting its failure in Iraq.  After campaigning on how he would make a clean break with Bush-era policies, once he was elected Obama is finding many of these policies were well thought out and must be retained.  One of the first things Obama did once inaugurated was to sign an executive order closing Guantanamo detention center, but is now considering keeping it open since no other country has volunteered to incarcerate the prisoners.  Despite early rhetoric, the Obama administration will continue to use the Bush-Clinton standard of foreign country assurances concerning torture, a standard that prohibited rendition only when it is "more likely than not that the suspect will be subjected to torture.”  Another reversal was the White House adopting Bush administration legal arguments for the authority to continue warrantless wiretapping.  The Justice Department has concluded that they must detain some (up to 100) suspected terrorists indefinitely, even when Guantanamo is closed.  The Obama administration is set to revive a system of military tribunals to try suspected terrorists at Guantanamo Bay, after making a big show of suspending all Guantanamo trials.  Obama's review found that America's criminal-justice system is especially ill-suited to dealing with unconventional combatants.  The main difference between the Obama and Bush administrations concerns not the substance of terrorism policy, but rather its packaging.  Another explanation for the congruence between Obama and Bush policies is that governing is much harder than campaigning.  Obama presented his personal opinions and distortions on terrorism in his terrorism speech but had no credible proof to disprove Cheney’s enhanced interrogation techniques being “…legal, essential, justified, and the right thing to do.”  Arrests this week of four New York Islamists planning to blow up two synagogues and a National Guard base just reinforces that that Global War on Terror is still active and deadly.  Obama is very quick to apologize for U.S. faults abroad, but is very slow to apologize to his predecessor on terrorism policies that were valid and he has continued contrary to his campaign rhetoric. 


The Republican Party doesn't need a makeover, only a re-announcement!  Its problem is not that the principles for which it has historically stood are out of vogue.  The problem is that its leaders did not live or govern by these principles.  The party of fiscal conservatism became a profligate.  Under George W. Bush, Republicans ratcheted spending to new highs, rewarding favored special interests with unprecedented giveaways of taxpayer money.  The party of traditional values abandoned those values, embraced graft and greed and tried to conceal the peccadilloes of its in-house pedophile, Mark Foley.  The party of limited government embraced "big government conservatism."  Voters reacted with revulsion, since Americans hate hypocrisy, and they threw the hypocrites out.  In order to regain relevancy, the GOP must once again become the party of principle.  It must once again select leaders willing to tackle the hard issues with wisdom, eloquence, confidence, and goodwill.  The American people want resolve and integrity, decency and class.  The only road to reclaiming the mantle is as the party of ideas, ideas derived from a coherent conservative tradition: protecting innocent life, projecting a strong defense, limiting government, expanding freedom, lowering taxes, keeping government off of the taxpayer's back and out of his pocket, valuing families.  These are the ideals that made America great.  For the Republicans to recover their vitality, they must reclaim the principles that are at the heart of the Republican tradition.  They must return the party to its roots.  If they fail to do so, the voters will inevitably conclude that the Grand Old Party is not worth saving.  Californians' rejection of five tax-and-spend ballot measures on Tuesday's ballot was the first outcome of a national Tea Party movement that elitists can no longer dismiss.  The question is not whether we should rename Democrats as “Democrat Socialists,” but rather what better ideas do we have for this country to undo the damage Obama has done to the nation.


* There is so much published each week that unless you go out of your way to find it, you will miss important breaking events.  I package the best of this information into my “Views on the News” each Saturday morning for your reading pleasure and to fill in factual vacuums. 


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


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David Coughlin

Hawthorne, NY