Thursday, December 31, 2009

A Year of False Choices

We are now at the end of one of the most incredible economic and political years in American history.

The year began with hope. The financial system seemed to have stabilized since the trauma of the Fall of 2008. The new president had campaigned as a post-partisan consensus builder and promised "change you can believe in." One of Barrack Obama's favorite campaign lines was to decry the "false choices" that prior administrations had made.

It all looked easy. Just put a nice guy in office -- someone articulate and worldly -- and our problems could be solved. Outside the United States, no American was more popular and more heralded than Barrack Obama as 2009 began.

Unemployment was growing as the New Year began and the economy was a serious worry. The unemployment rate was getting near 7 percent and threatened to get worse before it got better. There was still great fear in the credit markets, but a slight thaw seemed to have begun in the first few weeks of January.

There was good reason for hope and optimism as 2009 began. There was reason to hope that the new president could be a force for good and could bring a divided country together.

By the third week of January, choices began to be made.

The new Administration's first item of business, unique in American history, was to castigate the previous adminstration and to blame all domestic and foreign ills on past administrations. Where America faced problems, they were not the fault of dealing with difficult situations. No, that was not the problem. The problem was that American policy was wrong in every particular. Previous Administration had seen "false choices," when in reality, Obama seemed to believe, there were easy choices.

On the domestic front, the easy choice was to use the stimulus package to reward public employees, line the pockets of campaign supporters, and provide relief to those who were deemed worthy. Gone from the "stimulus package" was any serious "infrastructure" or "payroll tax cuts" or any of the elements that Obama's early January bi-partisanship had seemed to promise. Instead, the stimulus package was legislation worthy of the Chicago political climate from which Obama emerged. It was pure political pork with no stimulating effect whatever on an economy that was weakening. $ 800 billion was simply wasted for no purpose other than pure politics.

The next step was to take on the business community. The bully pulpit of the presidency was transformed into an attack dog aimed at business at all levels. The main target, early on, was the financial sector whose employees were described by Obama as purveyors of "greed and corruption." New czars were created by Obama to oversee large sectors of the American economy to be sure that they played by the Obama and Democratic party play book. On every occasion, Obama made clear his antipathy to the business community and his mistrust of the profit motive. In effect, the new president declared war on business -- a war that he continues to this day.

By March, it was clear that this Administration had no understanding of the deepening recession and, apparently, not much interest either. Instead, the Obama Administration focused on "climate change" and "health care reform." To the new president, these were the big issues and the growing ranks of the unemployed were not a problem.

As the summer of 2009 passed and unemployment climbed past the ten percent level for the first time since the early 1980s, the president continued to focus his attention on "climate change" and "health care," issues that were no longer in the top five issues considered important by the American public according to every opinion poll taken.

In the Fall, the public antipathy to the health care debate in Congress reached a tipping point as a majority of Americans preferred no action to the bills being debated in Congress. By Christmas Eve, the day of the successful Senate vote on the Obama health care bill, the public opposition was nearly two to one. All 60 Democratic Senators thumbed their nose at the public and voted to approve the most unpopular major piece of legislation in American history. Obama applauded their vote. The "public be damned" attitude of the Obama Administration and the Congress was on full display by Christmas day.

Now as the year is ending, it is clear that the Obama Administration is completely adrift. Even if the "health care bill" ultimately becomes law (which is not likely), it is clear that the final product achieves none of the objectives set out by Obama in his campaign. Obama's climate change agenda has become the butt of late night television comedy skits. Obama's personal popularity has sunk faster than any president in history during his first year in office.

Until the Obama Administration policies are dismantled or abandoned, the American economy will not really recover. It will either limp along or worse. This Administration despises business and free markets and that attitude (and accompanying policies) will prevent a serious business recovery. It was Roosevelt's antagonism toward business that helped to prolong the 1930s recession. Obama seems like Roosevelt in this regard.

The leader that Obama should look back to is Ronald Reagan. Reagan inherited an economy every bit as bad as the one that Obama inherited. Reagan did not lay the blame on his predecessors. Instead Reagan encouraged business, pushed through (a Democratic Congress) the largest tax cut in American history, and the economy responded with the greatest economic expansion in world history. (True bi-partisanship flourished under Reagan since he dealt mostly with Democratic Congresses).

These are "real choices" not "false choices." Elections matter. If Obama continues to crush the American economy, the public will have some choices to make in 2010. The public might be ready for "change we can believe in" by November. Obama was wrong. There are no "false choices."

Wednesday, December 30, 2009

Trickle Down -- Revisited

The Reagan years (1981-88) are often described as the years of "trickle down economics." The idea, of course, is that if you make businesses profitable, then good things will "trickle down" to employees. This idea is broadly lampooned by left wing columnists (typically untrained in economics). But, is the idea wrong?

When Reagan entered office in early 1981, the economy was in shambles. Inflation was above ten percent and unemployment was headed in that direction. Eight years later prosperity was rampant. Inflation was low single digits and unemployment was nearing the five percent level. The stock market had risen nearly 300 percent in eight years. Not a bad record. "Trickle down" worked pretty well.

But the left did not like Reagan and did not like the 1980s. Why? What is wrong with full employment and the absence of inflation? Good question.

The answer is that the left has trouble making a case for big government if the economy is doing well and the public is prospering. Nothing makes a left winger more angry than the idea that the public is doing well. That's not good for the left. So, columnist after columnist attacked Reagan as an out-of-touch, senile, and misanthropic politician. But, Reagan didn't mind. He cheerfully continued to talk about America as the "city on the hill" that promoted the individual and saw big government as the enemy. Meanwhile, the economy boomed and "trickle down" trickled down -- full employment and rising incomes for the American public.

The Obama crowd entered office with unemployment at seven percent and growing. Their first order of business was to attack business. Lashing out at "greed and corruption," Obama was quick to put in place pay czars and urge a raft of new regulations and restrictions on business. The Obama agenda promised new taxes, new employer mandates, and an environmental agenda that could easily double utility costs at present usage levels. Obama and his Democratic cohorts seized every opportunity to publicly lash out at business and business leaders.

Banks were forced into a tight noose. Some were given large doses of cash and told what they could or could not do. Other financial institutions faced increased regulatory scrutiny that actively discouraged them from making new loans. The result: predictably lending dried up in major areas of the American economy. If that wasn't enough, Obama pushed Congress to pass punitive legislation on credit card lenders which had the effect of reducing and eliminating credit card access for many Americans, especially those most in need of credit.

In short, in defiance of "trickle down" economics, the Obama Administration and its allies declared war on business. By forcing business to its knees, the Obama folks were moving toward a more just world, not a "trickle down" world.

Well, they have succeeded. If you are able to get and keep a job, you have many more mandated benefits today than last question about it. The problem is getting that job and keeping it.

The point of "trickle down" is that when businesses prosper, they hire more employees, pay them more and treat them better. When business is disastrous, then businesses lay people off, pay them less, and treat them worse. The Obama folks seem to prefer this latter scenario.

The economy is not getting better. Businesses are terrified by the Obama Administration and there is no "trickle down." We need to bring back "trickle down" economics.

Monday, December 21, 2009

Interesting "Surge" for the Economy

An unprecedented surge in the hiring of "temporary workers" has taken place over the past four months. This surge accompanied a continued loss of permanent jobs to the economy, as the economy grew slowly in overall output. What does this mean?

In prior recessions, an early surge in temporary workers quickly led to the hiring of permanent employees. Not so, this time. Why?

According to William J. Dennis, Jr., director of research for the National Federation of Independent Business:

"When a job comes open now, our members fill it with a temp, or they extend a part-timer's hours, or they bring in a freelancer -- and then they wait to see what will happen next."

There is a message here. The Obama mandates are making it less and less attractive to hire full time employees. While permanent employment will eventually pick up, we are headed toward much higher unemployment levels for a recovery than has been the postwar (post World War II) pattern. The overwhelming presence of big government overseeing the financial sector and the pattern of existing and proposed mandates on employees is stifling the natural forces of economic recovery.

Cap-and-trade, health care reform and "card check" are enough to discourage anyone from expanding their business and hiring employees -- temporary or otherwise. Only the select beneficiaries of Obama largesse (read: green industries) have anything to celebrate from this government's war on the economy.

The normal credit provision from the financial system has been strangled by regulatory overkill, financial uber czars, and credit card legislation. Now, new and expensive new SEC rules, combined with the excessive costs of Sarbanes-Oxley, threaten to dampen the outlook for public companies as well.

The Democrats war on business and on employees continues unabated. The midnight cloture vote on health care is an icon for future disaster for the American economy.

The good news is that the American public is opposed to the President and the Congress by overwhelming numbers. Nearly 60 percent of the public are now opposed to the Congressional action on health care. But, the President doesn't care, nor does the Congress. "Bi-partisanship" has taken on a new meaning. Not only the opposition is left out of the equation, the public's views don't matter either.

No amount of rhetoric and obfuscation can blur the real issues. The economy is in deep trouble and the Administration and the Congress could care less as they pursue their own agenda regardless of the negative consequences for the economy and for the unemployed.

Friday, December 18, 2009

Obama's "Unprecedented Deal" in Copenhagen

As President Obama ducked into Air Force One to conclude his bizarre trip to Copenhagen, he declared that "an unprecedented deal" is in the works. No details of course. China, meanwhile, announced that they had no intention of agreeing to reduce carbon emissions and signalled their long stated intention of permitting growing levels of carbon emissions from their industries. Ditto for India. So, exactly who is going to limit carbon emissions? No one in Copenhagen, that's for sure. So, one wonders what Obama means by "an unprecendented deal?"

Pundits noted that Hugo Chavez was really the star of the Copenhagen show. He received thunderous applause as he denounced capitalism and bragged about his brutal dictatorship in Venezuela. The climate summit crowd love it. Chavez and "global warming" advocates had a love fest. They are certainly on the same page. Fortunately, opinion polls now show that most Americans and Europeans no longer buy into the global warming nonsense and they don't care much for Chavez either. Wonder if Obama is noticing?

An Administration in Freefall

More and more, the Obama Administration looks like a failed presidency in only its first year in office. Obama says he would give himself a B+ rating as president, but the polls suggest that voters would not give Obama a passing grade.

By focusing on health care reform and ignoring the growing unemployment levels in the economy, Obama has seriously misread the national will and the economic issues that face the country. His Administration seems completely out of touch. His speech today in Copenhagen reinforced this "out of touch" theme. Polls in the US show that the American public no longer supports the Obama climate initiatives and they have lost faith in the "global warming" siren song as well. Still Obama pushes on. By suffocating the economy with new, unlegislated, EPA carbon emissions guidelines, Obama attempts to thwart the public will.

The Admistration itself is in conflict with itself. On issue after issue, the White puts forth strident views often that contradict one another and consistently White House views are in opposition to the views of the American public, as evidenced by the polls. Obama and Sarah Palin are now neck and neck in favorability ratings and it won't be long before Obama will wish wistfully to change places with Palin.

The intriguing question is: will the White House wake up? or will the White House continue on a collision course with the American public and with history.

Who would have thought....just a year ago?

Wednesday, December 16, 2009

"We Will Go Bankrupt.....

So said President Obama when contemplating the possibility that Obamacare may not make it through Congress. Well, that's quite an admission. So, Obama admits that we are on the way to bankruptcy as a nation. Wonder why? Try: social security, medicare, and medicaid -- Obama's three favorite programs. The only way out, according to Obama, is for him and his gang to take control of medicare and medicaid and force spending cuts. Wonder what cuts he has in mind?

Apparently there is $ 500 billion in "easy" medicare/medicaid spending cuts if only Congress will pass his Obamacare. And if they don't? Then I guess the Administration will not bother to make the "easy" $ 500 billion in spending cuts, even though it is well within their legal authority to do so. Strange policies.

Only if we agree to destroy our private insurance system and add 30 million uninsured to the insured rolls will we get to save this $ 500 billion. Why the quid pro quo? Why didn't Senator Obama push for these $ 500 billion in easy medicare/medicaid cuts before he was elected to the White House? There is an answer.

You guessed it. The $ 500 billion in savings is a myth. Only by cutting actual services to the aged that now depend on medicare and medicaid can this be accomplished.

I guess that's how we avoid bankruptcy. Let the old folks go without the care that was promised. That's change that Obama can believe in. According to the polls, not many other Americans believe it though.

The public opposition to Obamacare is now approximately two to one (that's about the same as the opposition to the closing of the Gitmo there is some consistency in the Obama approach to public issues).

We are on a path to bankruptcy, unless the 2010 and 2012 bring a real change in the political direction of the country. With Obama, it's just a question of which road to bankruptcy we take.

Yes, Howard, Kill The Bill

Howard Dean, former Chairman of the Democratic Party, has urged Senate Democrats to "kill the bill." He is, of course, speaking of the Obamacare Bill that is frantically seeking to nail down 60 Senate votes for cloture to push the legislation toward enactment.

Dean is miffed that the "Public Option" has disappeared from the bill. The "Public Option" is just the quickest way to get nationalized health care. The bill, even without the public option, promises nationalized health care anyway. So, Dean should not worry. It's simply a matter of time.

It will be interesting to see if any on the left desert Obamacare at this late stage. The Senate Bill is so terrible it is unlikely that there will be any defections from the left.

The best hope to kill this horrible piece of legislation will be in the House of Representatives in January, when everyone is running for election. The public hates Obamacare and the House Democrats know it.

Tuesday, December 15, 2009

Obama and the "Fat Cats"

The majority of the big bankers, who Obama labeled "fat cats" this past Sunday, voted, funded and supported Barrack Obama for President (including famously Jamie Dimon and Lloyd Blankfein). Now they cheerfully meet with Obama, smile for the cameras, and gloat in the knowledge that there is really nothing he can do to get to them. Except for Wells Fargo, all the big banks have either paid off the TARP money or soon will. Even Wells Fargo has signaled its intention this week to repay TARP money. Thus, all Obama can do is make "fat cat" statements.

Obama knows and the bank CEOs know that there are no plans to expand small business lending -- not now, not next year. The regulators, for one, will not permit it. The OCC is forcing America's banks to reduce their commitment to small businesses. All the bombastic rhetoric by Obama aside, small business is in the deep freeze in the US and will not come out of the deep freeze until Obama and his Democratic majorities have gone down to defeat.

The truth, as Obama knows well, is that the American economy is going nowhere. If Obamacare passes, there is a real possibility of a double dip recession and unemployment levels will begin to increase from current levels. Obama seems in a fog about the economy. Larry Summers, his chief economic advisor, says the recession is over. It isn't (as Christine Romer, Obama's Council of Economic Advisors chieftan, pointed out after Summers' absurd comment).

Besides the possibility of the recession deepening, the other economic problem that Obama policies are aggravating is the national debt. The Obama Administration's own forecasts imply a tripling of the national debt within a decade. Clearly this is an underestimate. It is hard to see a way out of this, given the Obama program.

The "fat cats" aren't worried though. Their man Obama continued the Bush bailouts and have provided zero percent funding for the banking industry. Who needs to lend to small business even if the Obama regulators reversed themselves and permitted it. The banking industry doesn't need to lend to small business and they won't as long as Obama is around.

Friday, December 4, 2009

The Not-So-Reluctant Warrior

The nuanced approach by President Obama toward military activities -- evidenced by his West Point speech this week on Afghanistan -- is a far cry from his warrior approach to economic issues.

During the 2008 campaign, Obama, famously, declared his intention to destroy the American domestic coal industry. The plan: tax and regulate it out of business. Obama realized that if you tax something enough and put enough bureacratic hurdles around it, it will no longer be economically viable. He was right.

Which brings me to the unemployment problem. What if your plan was to destroy the American worker? What would you do? Why not place enormous taxes on the employment of labor and threaten even more with massive health care mandates? That should do the trick. Meanwhile, Congress is pushing for a guaranteed five day sick leave for American workers -- another enormous tax on employees. On top of the piles of payroll taxes, business taxes, costs of litigation (think "hostile work environment"), and the enormous regulatory burden of OSHA and other business nightmares, the gap between what it costs to hire a new employee and what the employee gets in wage and salary grows by leaps and bounds. Why not find new and interesting ways to avoid hiring employees? Sounds like a plan.

Obama is correct. If you make something completely uneconomic, businesses will find alternatives. Hiring employees has become extremely uneconomic for small businesses. Obama did not begin this trend, but he is pursuing the toxification of employees with vigor with the help of his Democratic Congress.

The Jobs Summit is a joke. Every business person can tell you why businesses are looking for ways to avoid adding employees -- costs. This Administration and this Congress are not reluctant warriors on the jobs front. The Obama Administration has declared war on business and employees and are pursuing that war with a vengeance.

The threat of "card check" alone is enough to dissuade a small businessman from taking on new employees and actively encourages small business to continue to reduce staffing levels.

High unemployment levels are the "new normal." It is common practice now for Obama and his Congressional colleagues to decry the economy of the 1980s and 1990s, when unemployment plunged to the four percent level. No one wants to return to that -- except, perhaps, people looking for a job.