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Views on the News

October 16, 2010

Views on the News*

Lenin famously described his strategy for communist domination as "one step forward, two steps back," but he did not mean to suggest steps of equal length. The step forward was a lot more like two large steps, and the two steps back were more or less symbolic, designed to diffuse opposition.   Clearly, in the past two years the United States has moved two giant steps in the direction of socialism. We have seen the redistribution of hundreds of billions of dollars, the seizure of major industries by the state, the re-emergence of a hard-core welfare state, the virtual nationalization of healthcare, takeover by regulation of the energy and financial sectors, and much more. This resurgence of state control has been accompanied by the new power of labor unions, environmental lobbyists, tort lawyers, and state bureaucracies.  But now, having reached the limit of what the public will stomach, the Leninists who run the Democratic Party see that it is time for two baby-steps back. Those steps back are taking the form of a new suggestion of inclusiveness and bipartisanship (even of openness to business interests), talk of repeal of some parts of the healthcare bill, talk of making some parts of the Bush tax cuts permanent (after the election, of course), talk of a balanced budget (pay-go once again). As this list suggests, the step back is nearly all talk, in the midst of an election campaign, designed to preserve Democrat majorities. The steps back, in other words, are not an actual retreat, they are merely talk. As soon as the election is over, the strategy of moving forward will resume; this time in the lame-duck session of Congress. There, those who have been voted out of office or retired knowing they were headed for defeat will attempt further steps forward, and there will be nothing to restrain them. Card check, cap and trade, tax increases on small business owners, confiscatory death taxes-all of it is being readied for a whirlwind session that resembles a medieval dance of death, which, for the more radical members of Congress, is what it will in fact be. The dying majority of radical Democrats is celebrating one last time, in an orgiastic lovefest of uncontrolled spending. Once conservatives control Congress and the White House, hopefully in 2012, nothing less than a total makeover will be acceptable.

(“Two Steps Forward” by Jeffrey Folks dated October 10, 2010 published by American Thinker at http://www.americanthinker.com/2010/10/two_steps_forward.html )

American Leftism suffers from a psychosis which is now beginning to break out due to the ongoing collapse of the left's epic dream. Leftists have always believed that one clear shot, one opportunity to put their policies into play without opposition from "reactionary interests," would result in a political chain reaction, success leading to further success and finally absolute triumph as the New Socialist Jerusalem came into being with almost no effort on their part. It's extremely ahistorical since exactly the same circumstances existed in 1933 and 1964 due to historical accident and liberals botched things then exactly as they are doing now. Leftists really believed that Obama embodied their moment since he held all the cards: majorities in both houses; a slavish press that viewed him as no less than a godling; an enthusiastic public; even an acquiescent international establishment, overlooking a few holdouts such as Kim and Ahmadinejad. No left-of-center president has had a smoother road before him -- not FDR, not Lyndon Johnson. Yet Obama's efforts amount to utter failure: not because of opposition from the "party of no;" not because of circumstances; not because of sabotage; but because of Obama's "success" itself. He got the bills passed, guaranteed that their execution would be in the hands of extra-constitutional figures beholden only to him, and got them funded by means both legal and illegal. He launched them, and they crashed, and they burned, because they cannot work. They have never worked anywhere they have been tried -- not in Europe, not in Asia, not in Africa, nowhere across this wide world. These failures were hurriedly stuffed down the memory hole, enabling the left to hope for another shot sometime down the line, but now they have bigger problems. The first is that the memory hole has in large part been filled in over the past decade and a half by such things as the internet and the New Media. It's no longer a simple matter, or even possible, to shove nationwide failures out of sight. The second is the fact that this time, they bet everything on Obama. The collective feeling was: it had to work; the third time was the charm; because O was the messiah. This is why the left is being overwhelmed by psychosis, because they are up against the wall with no way out. Success eludes them, and after November, the left will lose its collective mind. The acting out will intensify; the assaults will grow more vicious as the dream continues its collapse. Anyone who has ever stood against them: the Tea Parties, the GOP, ordinary Americans asserting their rights, will be targeted but it will come to nothing: no socialist paradise; no universal nanny government; and certainly no police state because the American People have finally woken up from their self-induced trance!  

(“The American Left Slides Into Psychosis” by J.R. Dunn dated October 11, 2010 published by American Thinker at http://www.americanthinker.com/2010/10/the_american_left_slides_into.html )

 

Barack Obama is being politically crushed in a vise: from above, by elite opinion about his competence; and from below, by mass anger and anxiety over unemployment. With the exception of core Obama Administration loyalists, most politically engaged elites have reached the same conclusions: the White House is in over its head, isolated, insular, arrogant and clueless about how to get along with or persuade members of Congress, the media, the business community or working-class voters. Elites feel the President has failed to meet that challenge and are convinced he will be unable to do so in the remainder of his term. Moreover, there is a growing perception that Obama's decisions are causing harm - that businesses are being hurt by the Administration's legislation and that economic recovery is stalling because of the uncertainty surrounding energy policy, health care, deficits, housing, immigration and spending. Many members of the general public appear deeply skeptical of Obama's capacity to turn things around, especially, but not exclusively, those inclined to dislike him - Tea Partiers and John McCain voters, but also tens of millions of middle-class Americans, including quite a few who turned out for Obama in 2008. Obama has exacerbated his political problems not just by failing to enact policies that would have actually turned the economy around, but also by authorizing a series of tactical moves intended to demonize Republicans and distract from the problems at hand. He has wasted time lambasting his foes when he should have been putting forth his agenda in a clear, optimistic fashion, defending the benefits of his key decisions during the past two years (health care and the Troubled Asset Relief Program, for example) and explaining what he would do with a re-elected Democratic majority to spur growth. Throughout the year, we have been treated to Obama-led attacks on George W. Bush and Dick Cheney, Rush Limbaugh, Congressman Joe Barton (for his odd apology to BP), John Boehner (for seeking the speakership) and Fox News (for everything). The politically good news for Obama is that no matter what the outcome of the midterm elections, everything changes in January. Republicans will have a greater obligation, politically and morally, to help govern, rather than thwart and badger. Americans seem to think that the Obama Administration hasn't much to offer, except more of the same that isn't working, so Republicans will have an opportunity to lead with ideas that actually work and that Americans actually want!

(“Why Obama is Losing the Political War” by Mark Halperin dated October 11, 2010 published by Time Magazine at http://www.time.com/time/politics/article/0,8599,2024718,00.html )

Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that together finance more than $5 trillion in mortgages, are insolvent if you don’t count the $150 billion already injected into them by the federal government and should be broken up and dissolved. The common shares of these state-corporate hybrids have lost more than 99% of their value, both have been delisted from the New York Stock Exchange, and since September 2008 they have been official wards of the state. The largest owner of their obligations is now the United States Federal Reserve. Housing finance inflation was at the center of the financial crisis, and the GSEs were at the center of housing finance inflation. Any meaningful reform of the mortgage system, and therefore the financial problems underlying the recession, must deal directly with Fannie and Freddie. But last summer our elected representatives instead passed a 2,300-page financial “reform” act that purposefully avoided addressing this central issue. Discussions of how to reform Fannie and Freddie have now belatedly begun on Capitol Hill and in the Obama administration. The process will be complicated and controversial. But if we are to avoid future distortions and government-inflated bubbles in the housing market, Fannie and Freddie can and should be dismantled. The first step is to put the GSEs into receivership (as opposed to the current conservatorship), so that the small remaining value of the common shares and all their governance rights are wiped out. Then the restructuring can proceed, Julius Caesar style: divide them into three parts.

·    The first of those parts, unfortunately, must be a “bad bank,” a liquidating trust that will bear Fannie and Freddie’s deadweight losses—the $150 billion spent by the Treasury so far, plus the additional losses that are embedded in the GSEs’ portfolios and will be realized over time. According to various estimates by the CBO and private analysts, it will cost in the range of $200 billion to $400 billion to make whole the foreign and domestic creditors of Fannie and Freddie. That cost will unjustly be borne by taxpayers.

·    The second of the three parts should be formed by privatizing Fannie and Freddie’s prime mortgage loan securitization and investing businesses. All their intellectual property, systems, human capital, and business relationships should be put into truly private companies, sold to private investors, and sent out into the world to compete, flourish, or fail like anybody else. As fully private enterprises, they will be free to do anything they think will create a successful business—except trade on the taxpayers’ credit card.

·    The third part to be carved from Fannie and Freddie should consist of governmental only activities, such as housing subsidies and nonmarket financing of risky loans. These should move explicitly to the government, where they will be fully subject to the discipline of Congressional approval and appropriation of funds in a transparent way, subject to the disciplines of democracy. These functions of Fannie and Freddie should be merged into the structure of the Department of Housing and Urban Development, along with the government mortgage programs of the Federal Housing Administration and Ginnie Mae.

It is unrealistic to expect to end Freddie and Fannie all at once, but by clarifying where we should arrive, we can start the journey. Congress already has a proposal from Congressman Jeb Hensarling, the GSE Bailout Elimination and Taxpayer Protection Act, which lays out a transition to a world with no GSEs. Hensarling’s bill would increase Fannie and Freddie’s capital requirements, reduce their role in the mortgage market, and establish a sunset on the GSE charters. The failure of Fannie and Freddie creates a perfect opportunity to restructure these hybrids, leaving no Government-Sponsored Enterprise (GSE) behind.

(“Nightmare on Every Street” by Alex J. Pollock dated November 2010 published by Reason Magazine at http://reason.com/archives/2010/10/11/nightmare-on-every-street )

 

Boom or Bust: first the “Dot-Com;” next “Real Estate;” and now “Renewable Energy” - will we never learn that they all require viable, growing markets? Over the last decade there have been two disastrous economic "bubbles." The first was the Dot-Com Bubble of 1999-2000, and the second was the Real Estate Bubble of 2007-2008.  Both of those bubbles were artificially inflated in their rise, and both "popped" for the exact same reason.  They were both based on a false foundational premise in that they sought to serve phantom markets that simply didn't exist (or at least not at the time). Unfortunately, the Obama administration's distorted ideas for creating jobs and stimulating growth of our weak economy are predicated upon the exact same phantom assumptions that led to these two major economic calamities. Generally speaking, booming markets are a good thing.  In boom times, everyone who wants a job can have one and people prosper.  Spinoff industries are created in a ripple effect. Investment capital pours in as everyone wants to get in on the action.  Cupboards are full - Happy days! But what happens when vast amounts of money are spent on a product or service no one really wants or needs?  Disaster -- especially when the root cause of the product's failure was because its raison d'être was "a solution looking for a problem." In the case of the Dot-Com Bubble, the primary false assumption came from a new business model of online advertising billed as the new promised land of untold fortunes. Technology had made it such that any company, small or large, could have an internet website, and scores of new websites sprang up promising to become oases of desirable and useful content that would attract millions of eyeballs, all of which could be monetized by advertising revenue from legions of major advertisers, generating exponential revenues -- which, in turn, would drive both online and offline shopping revenue.  It was going to be great! Boom time! One small problem: at the time, neither those vast audiences of eyeballs nor the hordes of advertisers with their multimillion-dollar advertising budgets bothered to show up to the vast majority of the multitudes of new websites and generate any real revenue for them.  Consequently, very few of those first Dot-Com companies managed to survive. Bust time. Thus, all those prosperous years during the 1990s of millions being made selling all the web hosting services, web servers, networking gear, computers, firewalls, telecommunications bandwidth, web design services, graphics work, e-commerce systems, ad serving, and an ocean of software created a vast infrastructure of "capability" -- but with no genuine critical mass of actual "market demand" to pay for it all. A similar cycle happened with the Real Estate Bubble.  Under the guise of "increasing affordable housing" and boosting homeownership rates, the federal government coerced mortgage lenders to make otherwise unwise loans to just about anyone with a pulse, regardless of creditworthiness. Suddenly, there was tremendous artificially inflated demand for new houses.  Construction took off like wildfire, stimulating all the related industries, from lenders to realtors - Boom time! One small problem: there weren't any more people able to faithfully make substantial mortgage payments than there were before the boom.  All these new properties were being built for an assumed new incremental population of allegedly responsible home owners, which, in reality, turned out to be yet another phantom market.  Consequently, foreclosures became epidemic - Bust time. And just like during the Dot-Com boom, there was an initial period of peer-to-peer business activity that served to mask the underlying calamity approaching.  That is, a lot of those new houses were purchased by all the people in the housing industry itself: home builders, construction workers, realtors, etc, but they were a finite group, too.  So even when all the inside players had a new house, the industry kept on building more until the real problem eventually revealed itself -- i.e., there was no substantial and sustainable market for all the expanded inventory. Speculative investors made the situation even worse, buying the easy credit houses as the property values rose rapidly amid the pseudo-demand, and then flipping them when the construction was complete to other investors eager to get in on the rapid appreciation game.  This Ponzi scheme came to an abrupt halt as soon as everyone began to realize that no one was showing up to buy all the excess homes and actually live in them. Consequently, cities across America now have thousands of either never lived in or quickly abandoned brand new homes rapidly decaying into blight areas. These two disastrous "Boom & Bust" examples should therefore give us significant pause when observing the Obama administration attempting to "jump start" our economy. Ask yourself:

·    What good is building a $40,000 electric car that can go only 40 miles per charge, a car that no one wants and most people can't afford?

·    What good is pumping billions into windmill and solar panel companies when virtually no one is lining up to buy and implement these technologies?

·    What good is doling out billions in "state fiscal stabilization" (i.e., shoring up state government employee unions and teachers unions pension funds) in terms of creating any new jobs?

·    What's going to happen to the florescent light bulb business and other "green" businesses when it's finally acknowledged that the only justification for existence came from a hoax?

Thus, the trillion-dollar question becomes: Where's the legitimate and sustainable market for anything the Obama administration is doing to "stimulate economic growth"? Yes, it is physically possible for the government to fashion and fund programs that put a lot of people to work for some length of time.  But if a program doesn't produce some legitimately needed product or service that can be monetized and eventually become self-sustaining without tax dollars, then those jobs are really no different from a 1930s WPA job of digging ditches one day only to be filled up the next day -- another make-work illusion of the welfare state. Small business, the biggest economic growth engine of our economy, has made it crystal clear that loans, subsidies, and tax credits aren't the "stimulus" they need to thrive and expand; they need more paying customers -- real market demand. The disastrous disconnect of Keynesian futility is: the federal government may think it has the power to stimulate economic activity, but in reality, it is completely impotent when it comes to stimulating actual and not phantom market demand for anything other than what it itself consumes. This is why, as Thomas Paine said, "The government is best that governs least."

(“If We Build It, They Will Come… Won’t They?” by Robert Gelinas dated October 9, 2010 published by American Thinker at http://www.americanthinker.com/2010/10/if_we_build_it_they_will_come.html )

Barack Obama's foreign policy so far has been dominated by process -- and its most notable product has been deadlines, but still no real positive results yet. His administration hasn't produced an Israeli-Palestinian peace -- but it has brought the two sides to the bargaining table. It hasn't stopped Iran's nuclear weapons program -- but it has orchestrated new sanctions to force Tehran to negotiate. It hasn't extracted the United States from Afghanistan -- but it has put in place a strategy that is supposed to make that possible. It has done all this with painstaking diplomacy, with highly orchestrated internal and external consultations -- and at times with stumbling trial and error. It has also set a remarkable number of clocks ticking:

·    One clock is measuring whether U.S. troops will be ready to begin handing off security to Afghanistan's army by July 2011, when withdrawal of American troops will begin.

·    Another clock paces Israeli Prime Minister Binyamin Netanyahu and Palestinian President Mahmoud Abbas as they try to conclude a "framework agreement" by next September, when the one-year timetable Obama encouraged them to establish will expire.

·    A third follows Iran's nuclear program where the administration said last spring that Iran was two to five years away from producing a bomb.

·    A final clock governs Iraq -- where Obama has promised a complete withdrawal of U.S. troops by the end of 2011.

Obama's foreign policy record hardly figures in this fall's midterm election. That's at least in part because of its inconclusiveness: It has neither failed nor produced tangible outcomes. A year from now, thanks to the artificial timetables, the record should be in -- just in time for the 2012 Presidential campaign.

(“Obama administration relies on diplomacy by timetable” by Jackson Diehl dated October 11, 2010 published by The Washington Post at http://www.washingtonpost.com/wp-dyn/content/article/2010/10/10/AR2010101003123.html )

 

A growing number of Americans, including libertarians, are suggesting that the U.S. should adopt a "Fortress America" foreign/defense policy: withdraw all of its troops from all foreign countries, end all aid to foreign governments, and withdraw from all alliances. Such a policy was obsolete and unfeasible already during the 20th century, but it makes even less sense now, during the 21st century, in today's world. During the times of Washington and Jefferson, not only was this isolationist policy feasible, but it was the best choice for the U.S. because the country was simply too weak and too young to influence the world or fight mighty enemies. Back then, there were no empires hell-bent on world conquest and imposing their ideology on the entire world. Even Jefferson didn't refuse to undertake military interventions he believed necessary: he built up a navy and sent it to North Africa to fight Barbary pirates. A "Fortress America" policy became obsolete during the early 1920s and 1930s, when fascist regimes were established in Europe and began to threaten the world. Unfortunately, the U.S. continued this obsolete, ridiculous policy right until December 7, 1941 and it took over two thousand dead Americans for the U.S. government to realize that it shouldn't continue its isolationist policy. After WWII, a new threat to world peace, and to the United States, emerged: an aggressive, totalitarian Soviet Union. Eventually, the Cold War was won by the U.S., partly because of Truman's globalist policies, including his decisions to create NATO and defend West Berlin and South Korea. An isolationist ("noninterventionist") foreign policy, a "Fortress America," makes no sense today. There are global threats to global peace and to the U.S. itself -- threats that won't stop targeting the U.S. even if it declares neutral status tomorrow. This is because the rulers of China, Iran, and North Korea, and the leaders of al-Qaeda, do not recognize "neutral states." China's goal is global hegemony and expelling the U.S. from Asia and other regions of the world completely. Iran is the world's largest sponsor of terrorist organizations and Al-Qaeda and other jihadi terrorist organizations aim to establish a global caliphate, and they won't spare the U.S. regardless of American foreign policy. The reason why all U.S. presidents since Harry Truman, regardless of party label, believed that the U.S. must be engaged in the world to protect the U.S. and its interests. There is no factual basis to justify a "noninterventionist" foreign policy because it would practically mean abandoning the entire foreign world to countries and organizations hostile to the U.S. and drastically worsened relations with America's allies, including such stalwarts as the U.K. and Australia.

(“Why Not a ‘Fortress America’ Policy?” by Zbigniew Mazurak dated October 14, 2010 published by American Thinker at http://www.americanthinker.com/2010/10/why_not_a_fortress_america_pol.html )

 

* 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. Updates have been made this week to the following issue sections:

·  Politics at http://www.returntocommonsensesite.com/intro/politics.php

·  Budget at http://www.returntocommonsensesite.com/dp/budget.php

·  Crime at http://www.returntocommonsensesite.com/dp/crime.php

·  Immigration at http://www.returntocommonsensesite.com/dp/immigration.php

·  Legal at http://www.returntocommonsensesite.com/dp/legal.php

·  Terrorism at http://www.returntocommonsensesite.com/fp/terrorism.php

·  United Nations at http://www.returntocommonsensesite.com/fp/unitednations.php

 

David Coughlin

Hawthorne, NY

www.ReturnToCommonSensesite.com