Sunday, November 29, 2009

The Big Issues: Unemployment and the National Debt

While President Obama fritters away his time entertaining Hollywood celebrities, the real problems of the American economy get worse and worse.

Unemployment is a severe as any time in US history except for the decade of the 1930s. There are no guarantees that we won't reach the levels reached in the 1930s. Certainly, if Obama continues his war on business, we have a good chance of repeating the disastrous 1930s on his watch. He (and his advisors) seem to have no clue about the weakness in the economy. Worse, they don't even seem to care.

The national debt nightmare is historic. This is a crisis of immense proportions. Health care and (what is left of) climate change are relatively minor issues compared to the growing prospect of a US fiscal bankruptcy. Such a bankruptcy within the next twenty years is now an odds-on outcome. What are the Obama people saying? Nothing. On the matter of the exploding national debt, the Obama Administration is curiously silent. Does Obama care about the national debt problem. Does he understand it?

Sadly, this is an Adminstration that seems completely out of touch with the real problems that Americans face. There are no polls showing health care and climate change among the top two concerns of Americans -- none. Unemployment and the rising deficits are at the top of all public opinion polls.

I guess unemployment and the national debt were not topics that came up in the coffee shops at Harvard.

Saturday, November 28, 2009

A Transaction Tax -- Another Bad Idea

The transaction tax idea that is now floating through Congress is another absurdly bad idea. This one originated in the minds of Congressional Democrats, ever on the hunt for more tax dollars. Imagine that such a tax is enacted. China will be all for it. Taxing transactions in the US makes them more expensive if done in the US. Why not do the same transactions in China and avoid the tax?

If you want a good laugh, read Paul Krugman's defense of the transaction tax. Krugman seems to see this as a way of punishing bad guys and rewarding good guys. When the transactions move to China, how does that punish bad guys and reward good guys?

By making the US less competitive by imposing transaction taxes on security transactions, these transactions will simply take place somewhere else.

China must love American Democratic politicians. China could not write a better script.

Friday, November 27, 2009

The Jobs Summit -- Another Obama Joke

Having done everything possible to kill jobs and discourage employers from hiring, President Obama has now decided to hold a "Jobs Summit." The job that he seems most concerned about is his own. It is now obvious to everyone that this President has no understanding of even the simplest of economic principles.

Watch for the President to formulate some type of program that would reward his few remaining supporters. This is not about jobs; it is about politics. This President has no interest in creating jobs. If he was, he would immediately abandon "cap and trade" and "Obamacare" and focus his attention on proposals that would encourage free markets to produce jobs. An example of this might be a proposal that would lower payroll taxes or lower income or capital gains taxes. But, Obama's agenda is the exact opposite.

The President will not be happy until unemployment climbs above 15 percent. If he succeeds in getting Obamacare and Cap-and-Trade passed, he can probably get there. But the public is opposed, by very large numbers, to both of these proposals. The public has a better understanding of Economics than this President. Thank goodness.

Thursday, November 26, 2009

On to Copenhagen

Now that the Asian photo-ops are over, President Obama is off to Copenhagen. As the evidence for climate change induced by mankind's carbon emissions has exploded in a cascade of fraud and political chicanery, the President, undaunted by the facts, is headed off to Copenhagen in the attempt to drive some more stakes into the staggering health of the US econoomy.

Serious scientists no longer believe there is any evidence of global warming. Indeed, the emerging concensus seem to favor a coming ice age. No doubt, the "political" climatologists (think Al Gore), will eventually decide that "global cooling" is the real problem. Conveniently, the Al Gores of the world will then discover that only if the US economy returns to the stone age can we prevent a new ice age. Gore's view is that if everyone but Gore himself will lower their carbon footprint, then we can be saved.

So, off he goes...our young and inexperienced President. The gang at Copenhagen will love him, no doubt. Unfortunately for Obama, the folks in Copenhagen don't vote in the US. Folks in the US no longer buy the global warming myth and would prefer that the President shelve his global warming crusade and focus on real problems, like unemployment and a staggering US economy. Trips to Asia and to the Baltic, no doubt, serve to take the President's mind off the real problems that face ordinary Americans. But, that doesn't make these real problems any less problems.

Americans are worried about the economy and their jobs. They oppose the various Obamacare plans under consideration by Nancy Pelosi and Harry Reid. Americans are also dubious about Obama's climate change agenda. They wish the President had some interest in their real problems, not his goofy left wing agenda. But the "change" President doesn't appear willing to change any time soon.

Tuesday, November 24, 2009

3rd Qtr GDP is Anemic

Today's revisions to the GDP estimate for third quarter 2009 are stark testimony to the failure of the Obama economic agenda. There is no real recovery in this data. The new reality is Obama stagnation, soon to be made significantly worse if the health care legislation floating through Congress becomes law.

This Administration is beginning to make Jimmy Carter look good. Obama seems to think that the way to resuscitate a beaten fighter is to hit him with a two by four. Every part of the Obama agenda will cost jobs and run the national debt to a level unheard of in American history. All of this probably sounded good in the coffee houses of Harvard, but it is slowly destroying the great American economic engine. What used to the be the envy of the world is becoming the sick patient whose life support is being removed piece by piece.

Fortunately, Americans live in a democracy and when an Adminstration takes a sledge hammer to crush their hopes and dreams, the public has its own chance to talk back -- in the voting booth in 2010 and 2012. There is no popular support for any part of the Obama agenda and a declining minority support for the President himself. This self destructive Administration and its fawning Congress has now received another terrible report card.

Saturday, November 21, 2009

Change You Can Believe In

You have to wonder about the slogan: "Change You Can Believe In." This sounded good back when the poll numbers showed that Barrack Obama was a fresh new face with fresh new ideas. Now, it seems the haunting background to a growing nightmare.

The recently released Gallup Poll shows that Obama's favorables have now slipped below 50 percent. Support for his health care proposals vanished long ago. Various polls show that approximately 60 percent of the public are opposed to Obama's health care proposals. There is no public support left for any of the Obama agenda.

Wow! What a difference ten months makes.

Perhaps the new slogan should be: "Change You No Longer Believe In." .

There seems to be a "death wish" in the rush by the Democratic Congress to impale themselves on the bureacratic and costly disaster known as health care reform. This seems a way to take a majority party and turn it into a perpetual minority. Republicans should quietly pray for a victory for Obama in the health care battle in Congress. This will assure a Republican takeover in 2010 and 2012.

Friday, November 20, 2009

Early Death Rattles

An Administration in chaos. There were calls yesterday for Tim Geithner's resignation as Secretary of the Treasury from both sides of the aisle, Democratic as well as Republican. Why?

The Administration made a dramatically wrong guess back in January of this year. They thought that the economic slide would be mild. Their own forecast, part of the paperwork supporting their $ 800 billion stimulus package, estimated that unemployment would go no higher than eight percent. As a result, the stimulus package was no stimulus at all. It simply provided relief to very select groups picked by the Obama Administration, mostly along political grounds. There was no real effort to help struggling employers and employees battle the economic problems that they were facing.

The result, perfectly predictable, was that the economy proved to be far worse than the Obama folks thought. Now, they blame the Bush Administration. No one is buying that...not Democrats, not Republicans. Obama and his Treasury Secretary are in the crosshairs of the public anger over the economy. They have earned that spot by foolish policies and their policies to dramatically expand the national debt.

Now, having added a trillion dollars to the national debt and proposed even higher future debt levels in their health care plans, the Obama Administration is feeling the heat from the public. That will continue. Unemployment is not going to get any better for quite some time. For that, the Administration deserves full credit. Every plank of the Obama Administration program destroys jobs.

The public's downbeat view of the Obama economic plan will continue until someone in that Adminstration wakes up. That probably won't happen until sometime in November of 2010.

Until then, American businesses and workers will continue to suffer the predictable effects of an Administration in chaos.

Sunday, November 15, 2009

The US Savings Rate

Why does the US have the lowest savings rate in the world? This was a question that would not have been asked in the 1950s and 1960s, because the US did not have the lowest savings rate in the world back then.

So, why did the US savings rate plunge to zero after the mid 1970s?

The answer to this question tells us what will happen to the savings rate for the US of the future.

Most pundits argue that Americans will increase their savings in the future because "they have learned" that leverage is dangerous. Is that what Americans have learned? Or have they learned the exact opposite?

Americans began to save much more of their income after the great economic difficulties of the 1930s battered the economic prospects of average Americans. The new higher savings rates persisted right through the second World War and right up until the mid 1970s. Then what happened?

What happened is that Richard Nixon and a Democratic Congress expanded the entitlements known as Social Security and Medicare to the point that the vast majority of Americans realized that the need to save was now greatly reduced. Why save for the future, if the government will take care of that future? After the expansion of Social Security and Medicare, the savings rate collapsed.

Savings has increased over the past sixteen months, but that increase will dissipate when (and if) the economy begins to show some signs of life. Why should anyone save for medical emergencies, if the government takes over the medical system and outlaws insurance schemes designed to deal with medical emergencies? No reason. Why should Americans save for their old age if the government guarantees income for their old age? No reason.

Americans rationally choose not to save. Once the fear of the current economic climate goes away, Americans will return to that rational choice and the savings rate will slide back to zero or negative territory.

Why do the Chinese save over forty percent of their income? Because they have to. There is no government safety net to encourage Chinese to spend as much of their current income as possible, as there is in the United States. The Chinese high savings rate will persist. The US savings rate will go to zero once more.

What is the significance of the savings rate? Those who save will eventually own everything and those who dissave will work through their assets till they no longer have any. What this means is that, over time, the great wealth of the United States will be transferred to those who save. Americans' wealth will be reduced and Chinese wealth will be increased.

These trends have been in place for decades and will, once the US regains its economic footing (presumably, after Obama has been retired back to the community organizing world), resume. Entitlements reduce and perhaps eliminate the need and the desire to save.

Saturday, November 14, 2009

State Budgets Imploding Too

California is not the only state in big, big trouble. Governor Patterson of New York state announced this week that New York state will run out of cash in four weeks. New Jersey, Oregon, and California all have income tax rates north of ten percent and they are likely to raise them even higher. Why?

The states suffer from the same malady that afflicts the federal government: entitlements and income transfers. In truth, what most of us think of as government costs very little. In our first century and a half as a nation, the US government absorbed barely one percent of the nation's national product. That was back in the days when government was supposed to provide police, a court system, deliver the mail, provide for the national defense, build roads and bridges and provide for basic education. All of these items are absurdly cheap to produce and would require only a modest government expenditure at all levels.

Instead of one percent of national product, the Obama agenda, if enacted, would move government to nearly forty percent of national product (if you include state and local government activities in the mix). Why? Does government cost that much more? No. Government, actual government, is dirt cheap. What isn't cheap are entitlement programs and income transfers?

Social security, medicare and medicaid are enough, by themselves, to bankrupt the nation and will bankrupt the nation and the various states unless curtailed or eliminated. But these are just the beginning. The vast bulk of government activity since the early 1930s has been to take wealth and income from one group of citizens (mostly from citizens not yet born) and give to another group of citizens (current voters).

States are unwilling partners in this grand scheme of income transfers. That's why they are going broke too. You can only borrow so much from unborn Americans. Eventually those holding US and state debt will balk. They are beginning to balk already.

Not only do these income transfers suggest bankruptcy within a generation for the US government and for most states (especially the larger states of California, New York, New Jersey, Illinois, Michigan and Massachusetts), it distorts incentives for ordinary people, reducing the efficiency of the economy, slowing the growth of technology, and dampening entrepreurial enthusiasm.

One side effect of all of this is a growing and permanent group of unemployed Americans. While the economy will probably stagger along (at Japanese growth levels), those who are adversely effected by the government's overwhelming new role in the economy, will not recover quickly. Minorities, old folks, women are the most likely victims of the Obama economy. Obama folks will attribute this to racism, sexism, etc.

The real truth is that government programs that favor groups, end up hurting the very groups that they favor. If Joe can sue you, then you would be better off hiring Sam not Joe. If you are going to force feed your employee benefits program into a new Orwellian Obamacare, then why not outsource? Why not do that part of your business that requires employees by importing that part from China. They don't have Obamacare and aren't going to have Obamacare. The Chinese can see clearly where the US is taking itself.

Gradually, the American public is waking up to the disaster of the Obama Administration. Public opinion polls have turned dramatically against the President and against his political party. That doesn't mean that the President and his party won't ram their unpopular programs through this Congress. The President and the Congress seem unconcerned about what the public thinks and unconcerned about the number one problem facing the economy -- unemployment. Fortunately, 2010 and 2012 aren't that far away.

Thursday, November 12, 2009

A Jobs Summit? Is He Kidding?

You have to admit that this President has a sense of humor if not a sense of direction. Now as the unemployment rate roars into double digit territory, the President, at last, seems to have taken notice. Having proposed one job killing measure after another since taking office, the President and his merry band now wonder why the unemployment rate is roaring along and the economy is mired in a very deep recession.

Get a message to this President....somebody, please....if you want people to hire people, give them some incentive to do so. Why make employees so expensive and so toxic (with litigation threats because of age, gender, race, etc.) that all employers want to do is reduce their work force. Isn't their anyone in the White House that gets it. Economics 101.

This White House seems to think that raising the minimum wage and making health care more expensive and more burdensome to businesses (and raising everyone's electrical bills to further cool off an already cooling global environment) is an inducement to hire employees. What a joke? No one in this administration seems to have any idea how jobs get created. The Obama folks seem to think that raising taxes on businesses, raising taxes on families and mandating more employer costs for employees will encourage hiring.

And now, a jobs summit. Obama's statement today is priceless:

"We all know there are limits to what government can and should do even during such difficult times, but we have an obligation to consider every additional responsible step that we can to encourage and accelerate job creation in this country."

Is he kidding? How can this be a serious statement, given the Obama jobs-killing agenda. I am surprised that they haven't proposed a law mandating that hiring an employee be made a criminal offense. It's getting pretty close to that already.

The polls now show clearly that the public has figured out that Obama has no idea about the economics of unemployment and they are angry. The public is nearly two to one opposed to Obamacare and they are taking it out on Democratic candidates according to recent polls in Connecticut and Ohio.

Even staunch Obama fans like Bob Herbert of the NY Times can see where this is going. Herbert's opinion piece in the NY Times on November 9th, entitled "A Word, Mr. President" shows that even liberal Democrats are fed up with the Obama Adminstration's preoccupation with destroying our health care system and are urging the President to shelve that agenda and focus on the economy and unemployment.

Health care is dead, cap and trade is dead, card check is dead. This is a failed presidency and it is only ten months old.

Sunday, November 8, 2009

The House is Not Enough

The narrow vote (five vote margin)in the House of Representatives for the passage of the Obamacare bill just shows how far away the road to victory for Obama really is. Senator Harry Reid has already announced that there will be no vote in the Senate until 2010, within months of the Congressional elections. Once the Senate votes, there will be need to be a new bill refashioned by a conference committee composed of House and Senate members to be brought back before both the House and Senate. This is likely not to occur until the Spring of 2010, at which time every member of the House of Representatives will be scrambling to get re-elected. 80 Democratic Congressman are in Congressional Districts that McCain carried over Obama in 2008. All of these folks are in trouble over Obamacare. Obamacare is dead regardless of the House vote on Saturday.

To see why, one need only read today's article in the NY Times by Peter Goodman entitled "The Recession's Over, But Not the Layoffs." Jobs are far more important than Obamacare to the voters, as one would expect since nearly 60 percent of voters are now polling against Obamacare. Barely 40 percent of the electorate supports Obamacare at this point. What matters to voters is the economy and their jobs. Obama has forgotten this, but the public has not.

Goodman's article is an interesting one. He notes that for some reason (unstated in the article) businesses are continuing to lay off employees and are reluctant to hire new employees even as business improves. Why? Goodman really gives no reasons, but the reasons are obvious. Government mandates have made employees much, much more expensive. This means that businesses will find other ways to produce goods rather than hire much more expensive employees.

The entire Obama program, whether one thinks of Obamacare, Cap and Trade, or card check, simply reinforces businesses in their determination to avoid hiring. Only die-hard leftwing Democrats like Paul Krugman deny the obvious. But, then, Klugman is not a businessperson and he doesn't care what their problems may or may not be. But, at the end of the day, businesses make the hiring decisions, not politicians. Obama policies and threatened Obama policies are enough to convince to any rational businessperson to put off hiring as long as possible and to outsource to China and India as much as possible.

No surprises here.

Friday, November 6, 2009

Obamacare Is Dead

There will be no health care "reform." Obamacare is dead.

The centerpiece of the Obama legislative program will never make it. It may, narrowly, pass the House of Representatives on Saturday, but the chances in the Senate have dimmed dramatically. There is some chance the vote will fail in the House on Saturday. We shall see. The AMA and the AARP may be supportive, but their membership is not.

History buffs will note the striking similarity between Clinton's first year in office and Obama's. Both stumbled on health care "reform." Clinton wisely abandoned the effort. Obama seems determined to go down with the ship. If, by some miracle, Obamacare survives, Obama will be drowned by voter revulsion in 2012. Clinton woke up; Obama sleeps on.

Obama turns out to be a tone deaf politician. Who would have expected that?

Wednesday, November 4, 2009

Seismic Shift in Independant Voters

The numbers were dramatic yesterday in both Virginia and New Jersey. In 2008, independent voters in both states favored Obama. By nearly two to one margins, independents yesterday voted for the Republican gubernatorial candidate in both Virginia and New Jersey. That dramatic shift reflects lots of things, no doubt. But, clearly the Obama economic policies do not sit well with these voters. Exit polls said that "economic issues" were the top area of concern for more than eighty percent of the voters in both states.

The exception was the 23rd district race in New York State, where 55 percent of the voters chose candidates supporting the Obama programs. The peculiar dynamics of that three way race may explain the outcome, but, on the issues, the results were favorable to the Obama program.

But, Virginia and New Jersey were the big enchiladas and the results from independents should help focus the White House on measures to aid the ailing economy instead of more programs designed to crush it. Hopefully, this will put the brakes on health care legislation, cap and trade and card check -- all programs that threaten the economy with no offsetting benefit.

Tuesday, November 3, 2009

NY Times Distorts the News Once Again

Dateline: New York's 23rd Congressional District where the Republican Candidate, Dede Scozzafaza, dropped out of the special election to fill this heavily Republican Congressional seat and endorsed the Democratic Candidate Bill Owen. This leaves Conservative Party candidate, Doug Hoffman, in a position to pick up the Congressional seat. (Obama received 52 percent of the vote in this district over John McCain twelve months ago).

According to the NY Times today, the issue that prompted Doug Hoffman to enter the race and surge to a commanding lead were: 1) abortion; 2) gay marriage. According to the times, Scozzafaza supports both, but Hoffman is opposed. But, in actuality, few voters in the 23rd have any interest whatever in either of these issues. (It's worth noting that a majority of Americans, right or wrong, agree with Hoffman on these issues).

No, the real issues, not mentioned by the NY Times is that Scozzafaza supported the Obama stimulus package, supports Obama's health care plans, and support the infamous "card check" plan that denies workers a vote on whether or not to have a union. On those issues Scozzafaza, her Democratic opponent and President Obama are in 100 percent agreement. Those are the real issues. And Doug Hoffman disagrees with all three on these issues.

Every poll in the 23rd district shows voter interest in these latter, bread and butter economic issues, and no interest whatsoever in the social issues. Why the NY Times has so distorted the facts of this campaign is open to speculation.

In any event, the battle in the 23rd District of NY State is a battle over economic issues, not social issues. If Hoffman wins, it is a repudiation of the Obama agenda, not a statement about voter preferences on social issues...regardless of what the NY Times may like to think.

Monday, November 2, 2009

A Catastrophe for Americans

Today's Wall Street Journal analysis of the Pelosi Health Care Bill is detailed and accurate. The Journal editorial describes the Pelosi bill as ranking "with the Smoot-Hawley tariff and FDR's National Industrial Recovery Act as among the worst bills Congress has ever seriously contemplated." Amen. No wonder 56 percent of Americans are opposed to this bill, which effectively destroys the American health care system and US fiscal credibility. If this passes and becomes law, watch for US Treasury auctions to get more and more dicey.

Sunday, November 1, 2009

Referendum on Health Care Reform

The voters finally get a shot. Obama was elected to deliver bipartisan reform to many problems that Americans face. Events, however, overtook the Obama presidency. That happened in the Bush presidency with 9/11 coming in the first year of the first Bush Term.

What happened to Obama is that the recession, somewhat mild (7 percent unemployment) when he was inaugurated, quickly went from mild to severe. Now, in his tenth month in office, Obama faces almost ten percent unemployment with that rate likely to grow not decline in coming months.

After 9/11 President Bush made "fighting terror" his number one priority, for good or evil. Obama has chosen to mostly ignore the recesssion.

The stimulus bill initiated by the Obama White House in February was written by the House of Representatives Democratic leadership -- mostly Nancy Pelosi. The bill was a grabbag of new entitlements, wealth transfers, and a host of political payoffs to somewhat shadowy groups (like Acorn). There was little infrastructure spending in the $800 billion bill that was passed into law by heavy Democratic majorities. It is now painfully obvious that this law has provided virtually no stimulus. So, now what?

Obama's refusal to acknowledge the ever-deepening recession and growing unemployment is causing a major reassessment by voters of the Obama presidency. It is showing up in every opinion poll.

Americans, for good reason, do not want Obama's health care reform. The latest polls were 56 percent opposed and only 40 percent favorable. But, Obama and the Democrats remain undaunted by the growing unpopularity of their proposals. "Cap and trade" isn't even supported by the major environmental groups who, you would think, would be behind Obama's major environmental initiative. "Card Check" is mostly a sop to well paid union executives. The public, while liking Obama, doesn't support any of his economic agenda.

At some point the White House should "listen up." Tuesday might provide that magic moment.

Virginia is a good example of a referendum on White House policies. McDonnell began his campaign as a race against the Obama policies and that is exactly what has brought him thumping poll majorities. Governor Corzine is in serious trouble in New Jersey, a state where Democratic candidates for governor normally pull over 60 percent of the electorate. In upstate New York, a Republican candidate on record as favoring "Card Check" and the bulk of the Obama health care program has been forced to withdraw by overwhelming public opposition to the Obama program. Look for the third party candidate, Hoffman, to win that race handily.

Bill Clinton was able to rescue his presidency by backing away from Hillarycare, the absurd health care reform proposals advanced by Clinton's wife and overwhelmingly rejected by the public and by Democratic lawmakers. Clinton went on to become a very popular president and was handily re-elected to a second term. Clinton reversed course when he saw that the public was not on his side on the issues.

So, what is Obama doing? He is arguing that the 56 percent of Americans who oppose his health care reform are unpatriotic, ignorant, and mostly liars. Well, maybe so. but 56 percent is 56 percent.

Obama's narrow band of followers is not likely to provide enough numbers to survive the Republican onslaught in 2010 and is not likely to provide enough support for his own re-election.

Watch the results on Tuesday. It portends the future.