Fighting to Preserve Liberty in America
Photo by Neil T
I had no idea. I thought that runaway spending was a bad thing. I know that in business as well as in our personal lives when we borrow and spend far beyond the amount of money we take in, trouble comes calling. How did I get it so mixed up?
“I always use the word extreme, that’s what the caucus instructed me to do the other week, extreme cuts and all these riders, and Boehner’s in a box but if he supports the Tea Party, there’s inevitably [be] a shutdown. – Senator Charles Schumer (D-NY)
In an article in the Wall Street Journal yesterday, Senator Marco Rubio said:
Every generation has had to confront and solve serious challenges and, because they did, each has left the next better off. Until now.
It brought to mind the movie Generation Zero, that chronicles the origins of the great financial meltdown that we have experienced. In that movie they point to one of the contributing factors the transition in power from those who lived through the Great Depression and World War II to the Baby Boomers, who knew little deprivation in their lives. Now as these boomers, of which I am one, took the reins of power, caution was thrown to the wind.
The Federal Communications Commission (FCC) made a power grab to control the Internet and there is a raging debate on both sides. Rather than take a position to rollback the FCC action or let it stand, I offer a third alternative. Shutdown the FCC.
The imagery in my mind was triggered by an editorial in the Wall Street Journal by John Fund, when he described Obama in a “political tailspin.” Close your eyes and picture the pilot Barack Obama screaming, “I’ve never flown a plane before!!!” as he furiously toggles switches and twists dials. Biden in the co-pilot seat is flipping through a copy of Piloting for Dummies, shouting back, “Neither have I. I always sat in the back!!!” At the same time, Jimmy Carter is trying to calm Obama down and talk him through pulling plane out of its deadly dive while muttering as an aside, “It’s all Fox News fault.” Then together they all scream, “WE’RE ALL GONNA DIE!!!!”
Such is the political landscape this bright Wednesday morning. The sky is clear here in New York, but politically it is anything but that. The news came out yesterday that the recession ended eighteen months after is started in December 2007. That means it was about five months after Obama took office and just three months after the massive stimulus package passed, which means the economy recovered on its own, without the stimulus.
Two disparate news items this weekend got me thinking. The main stream media is all abuzz with Chelsea Clinton’s wedding, even to the point of throwing the term royalty around. It is estimated that the wedding will cost $3-$5 million, although Sally Quinn of the Washington post puts the bill at closer to $1 million. The comparison was then made to the cost of Jenna Bush’s wedding, a mere $100,000. This became fodder for The Joy Behar Show. Comedian Judy Gold leaped at the opportunity to take a shot at Bush, “Yeah, well, if he could have found a way for us to pay for Jenna`s wedding, he would have done that, okay, he likes to spend other people`s money.” An interesting perspective on other people’s money that I will return to later.
The other news items was an article in The New York Times, by Bob Herbert titled “A Sin and a Shame,” lamenting that corporations are hording cash and not hiring people and it is all so unfair, in fact, sinful. This is while this government is spending huge amounts of money that someone will have to pay back, massive new programs like ObamaCare that we are still uncovering what that will cost, and enormous tax increases about to kick in on January 1 when the Bush tax cuts expire. Perhaps they are hording cash for a reason? Perhaps they are not hiring because they don’t know what any new employees will cost under these new programs, or for that matter what their existing employees are going to cost? Perhaps it is because the latest economic reports show GDP shrinking and if that continues why would you start hiring if your business is going to slow down with the rest of the economy?
We have two very divergent views of the economy today. One view is held by those who actually work in the private economy and the other view is held by those in the ivory towers of government, which brings me back to the weddings. I really don’t care what the Clintons or the Bushes spend on their daughter’s weddings. It’s their money. But perhaps it is instructive to look at where that money came from.
George Herbert Walker Bush, Jenna’s grandfather, was born into a successful family. His father was a banker and a Senator. But after getting out of the Army after WWII he went to Yale and upon graduation, moved away from that family and settled in Texas to start an oil company. He went into private business and put his own money at risk. What that means, to those who never took that chance, is you may be successful and make a lot of money, you may be successful and make a little money, you may fail and lose your money. Chances are greater that you will lose than win, but that is the American Dream. If you lose, you have to start over by trying to earn and save up what you lost to try again, if you have the guts and drive. Bush succeeded in forming Bush-Overby and later with Zapata Petroleum. He became President of Zapata for ten years and then Chairman for another two, before going into politics. By then he was a millionaire in his own right.
George Walker Bush, Jenna’s dad, attended public school in Midland, Texas, where his parents had settled. He went to private school after the family moved to Houston. He later attended Yale University and became the only president to get an MBA which he did, from Harvard. Like his father, he went into the oil business starting several independent oil exploration companies. He later bought a stake in the Texas Rangers baseball team for $800,000 and was instrumental in building the team’s attendance. He later sold his stake for $15 million. Then he went into politics.
The two Bushes know risk, know about taking chances and became millionaires on their own before going into politics. They also learned lessons about spending money and doing so prudently.
Bill Clinton went into politics almost immediately after getting his law degree. He was Attorney General and then Governor of Arkansas. As governor he had a governor’s mansion. He ran for president and upon winning traded in his governor’s mansion for the Executive Mansion, aka the White House. He had been on the government payroll and living in government provided housing almost his entire working life. The sweat of the people in who paid their taxes paid him. After leaving office, Mr. Clinton was able to write books about his experience and make speeches commanding six figures a pop. His wife did pretty much the same. They lived off the people and ended up very rich. They didn’t create a product or service, they didn’t create jobs, and they didn’t meet a payroll.
I can hear the screams from the left right now, “What do you mean he didn’t create a job or meet a payroll?” Try this test. If Bill Clinton’s opponent was elected rather than Bill Clinton, would there still be a government payroll and government jobs? If yes, Bill Clinton didn’t create them. If either of the Bushes didn’t create their companies would there be jobs at those companies or payrolls? No.
What about some other famous politicians who tell us what to do? Let’s look at Al Gore. Here is another individual that spent the bulk of his career in government. He was a member of Congress, a United States Senator, Vice President and presidential candidate. Today he is very rich. It is said he may become the first “green billionaire”. If he went into his current endeavors before a life in government, would the story be the same? Or is it because of his name, reputation, and connections that he made at the public trough, that he is wallowing in riches, and telling the rest of us to reduce our carbon footprint while his mansions consume ten times the energy of his neighbors?
Charlie Rangel spent most of his life in government. He rose through the ranks and now has a waterfront condominium in the Dominican Republic, writes the tax laws but does not observe them, and is a wealthy man. Conservatives don’t believe in rent control or rent stabilized apartments, but Charlie does. After all, how can poor and middle income people afford to live in places like Manhattan if greedy landlords have their way. So Charlie Rangel who makes $174,000 per year, plus his chairmanship pay, has not one, not two, not three, but four rent controlled apartments. Is he poor or middle class? No, he is the political class. He took three adjoining rent controlled apartments and had them joined together, while the fourth apartment served, illegally, as his campaign headquarters. What about the poor and blue collar workers who could live in Manhattan if three of your four rent controlled apartments weren’t being horded by you? Let them eat cake.
John Kerry is in the news for trying to avoid $500,000 in taxes on his new yacht. Here is another individual who spent his entire working life in government. He can tell the rest of us to pay more taxes while he garners favors spending our money. He is the richest man in the Senate but with prenuptial agreements with his wife he only lists personal assets of between $400,000 and $1.8 million and joint assets with his wife of $300,000 – $600,000. So how does he buy a $7 million yacht? I am not suggesting anything nefarious, it’s obvious his wife paid for it, but do you think he is in touch with someone trying to make a payroll in the private sector? You pay taxes; John Kerry has advisors to figure out how to avoid them.
So those evil corporations started by those evil men like George Herbert Walker Bush and George Walker Bush, know the value of a dollar. They know we are not out of the woods yet and so to protect the jobs that their companies still have they are not hiring but are building their rainy day funds. Perhaps Bob Herbert should ask why his employer is shedding jobs left and right. Perhaps this is his safe way of doing so, but on the other hand the New York Times is hardly hording cash. Its circulation is crashing because people like Bob Herbert are so out of touch with the rest of America; no one wants to read his rants any longer.
So perhaps Bill Clinton spends millions on Chelsea’s wedding because he didn’t learn the value of a dollar. He lived of the government for many years and then just held out a basket and it was miraculously filled with more money than he can count. George Bush spent $100,000 on a wedding because he knows how hard it is to earn a dollar. What we need is less of the political class telling us what to do, and then handing us the bill and more entrepreneurial Americans who risk their own money, watch it like hawks, create jobs and generate wealth that they then reinvest in America.
Best wishes to Chelsea and Marc.
This week we saw President Obama come out swinging to that old class warfare tune. Lashing out at Republicans in Congress for not adding to the deficit by extending unemployment benefits, he implied they were heartless and cruel. The president used the same tired prop of the straw man, that is, accusing “the same people” without naming any of those people. He uses this tactic because if he actually named the people he was accusing he would have to produce facts to back up the charges and Obama, as usual, doesn’t have any.
But here’s what he does have. He has a record of focusing his energy on passing ObamaCare instead of focusing on growing the economy. He is layering on more uncertainty of huge government programs and impending taxes that are scaring most small businesses from any hiring until the dust settles and they can tally up the bill. He has Republicans who are ready to go along with the extension in benefits, if and only if, they are paid for. With only about half of the $787 billion stimulus bill money spent, which is working fabulously by the way, taking the needed $30 billion from that kitty should be obvious.
President Obama also has a chief economic advisor named Larry Summers. Mr. Summers wrote an article on unemployment for the Concise Encyclopedia of Economics while at Harvard and in it he raised the following points:
It seems as if President Obama has painted himself into a corner. The stubbornly high unemployment numbers are poised to ravage the Democrats in the mid-term elections. But if his advisor, Mr. Summers, is to be believed, the unemployment benefits he is trying to use as a campaign issue against the Republicans is probably propping up the unemployment numbers.
The American people have reached their limit on deficit spending and want it reined in. The Democrats put in place something called Paygo, which means pay as you go. If you want something, you have to pay for it. However, the Democrats are bypassing their own rule at every turn. You can’t have it both ways, ceremoniously pass a Paygo rule for the purpose of the photo op and to look responsible, and then spend recklessly once the klieg lights go dark.
What prompted this president to conduct his Rose Garden show with three unemployed Americans used as props? Could it be that Nancy Pelosi is hopping mad that this president has not been helping Democrats to get reelected in the fall? If so, perhaps that was the point of the Rose Garden performance, nothing but election year politics. And you wonder why the American people are becoming increasingly cynical about their government?
Daniel Henninger wrote in the Wall Street Journal:
Senate Majority Leader Harry Reid tells of congratulating freshman Sen. Obama on a phenomenal speech. Without a hint of conceit, Mr. Obama replied, “Harry, I have a gift.”
In the article he also describes this observation:
Harvard Law Prof. Charles Ogletree told how Mr. Obama spoke on one contentious issue at the law school, and each side thought he was endorsing their view. Mr. Ogletree said: “Everyone was nodding, Oh, he agrees with me.”
That’s essentially how he got elected. With a heaping helping hand from the popular media, many people saw Obama as a blank screen upon which they could project their own views and see those as Obama’s own. He’s our man! He listens. He cares deeply. For a politician it is a phenomenal gift. For a legislator it is an extremely valuable gift. For an executive it is poison.
Pulling the Trigger
As a politician or a legislator you are in the role of persuader; somebody else makes the decision to vote for you or vote with you, respectively. As an executive you are in the role of the decider. You must make a decision and every decision, especially the tough ones are going to make a good many people unhappy. Perhaps that explains why, in the Illinois Senate, Obama voted “Present” so many times. Voting “Present” rather than “Yea” or “Nay” allowed him to hold that special place where everyone felt he agreed with them. Too many decisions one way or another would have tarnished “the gift”. So why is “the gift” poison for an executive? If you don’t have “the gift” and you make a decision your opponents may disagree with you, but they are not surprised. If you have “the gift” and you make a decision, those on the short side feel betrayed and angry, because they thought you agreed with them and then “sold out” and decided the other way.
Obama is in a tight spot where he has to make decisions and decisions have consequences. When you make a decision it is very hard to make it seem like everyone got their way. His complete lack of executive experience is telling. If he had some executive experience, such as a mayor or a governor, he might have had enough practice learning how to make his decisions appear to satisfy everyone, as his campaign speeches did. But that’s the thing about decisions. If everyone supports them, they’re not much of a decision, like deciding to pardon a turkey on Thanksgiving. Everyone enjoys the decision, but it’s really not what we elect presidents for.
I’ll Have the Waffles, Please
If you watch closely, you can see that Obama is struggling to preserve “the gift”. He said he is for closing Guantanamo, but not yet. He is for pulling out of Iraq, but no timetable. The general he put in charge of Afghanistan, McChrystal, said he needed 40,000 more troops, but Obama could not bring himself to say yes or no. He had to ponder, think, consult, weigh alternatives, and three months later, he gave McChrystal what he asked for. Those on the left complained that he was not pulling out. Those on the right complained that he wasted precious time while our troops were on the battlefield. His backers tried to give him the fig leaf of showing gravitas. He can’t seem to find the magic formula where everyone applauds him. From “the gift” he has gone to “the anti-gift”. Instead of satisfying everyone, he is finding that he is satisfying no one.
Move On
It’s time for Obama to “Move On”. He should put “the gift” in his trophy case right next to his Nobel Peace Prize. It got him to the White House. How much more can he ask of such a thing? So drop the pretense. We all know he is a hard left guy, so he should just be who he is. He may suddenly face a more hostile press, or they may love him more, although that would be hard to believe. But when he makes a decision he will at least please his base, and then his opponents can fight his statist goals without being branded as racists. As a hard left guy he will probably not get re-elected because America is not a hard left country, on the contrary the majority of Americans describe themselves as conservative. But by choosing he can try to do what he can within one term. It will be a battle. Obama’s poll ratings have dropped steadily since his inauguration and the Democrats are likely to lose seats in Congress this fall. As an old acquaintance once said to me, “It’s like standing in the middle of the road. Choose left or choose right, but choose; otherwise you get hit by traffic coming in both directions.”
The New York Times had some, what was to me, shocking news today. The article said that there was now consensus that the Obama stimulus plan was working. Is this the same kind of consensus that man-made global warming was settled science, despite the glaring evidence that carbon dioxide emissions continue to grow while the globe stopped warming ten years ago? This is also close on the heels of breaking stories of extraordinary misinformation if not outright deceit on how the $787 billion is being spent.
Smoke and Mirrors
Early on in the article we have this gem:
“The legislation, a variety of economists say, is helping an economy in free fall a year ago to grow again and shed fewer jobs than it otherwise would. Mr. Obama’s promise to “save or create” about 3.5 million jobs by the end of 2010 is roughly on track, though far more jobs are being saved than created, especially among states and cities using their money to avoid cutting teachers, police officers and other workers.”
There is no mechanism that exists to measure a job saved. None. So how do they do it? It goes something like this:
“Here, Mr. Stimulus Funds applicant, I have this check for you for $642,000. No can you tell me, if I give this to you, how many jobs would you create or save?”
“Create? Er, none.”
“Hmmm,” the bureaucrat mutters, staring down at the check in his hand, “what about jobs you would save? You know, if I don’t give you this nice, rather large check, how many of your people would you be forced to lay off?”
“Oh, I get it,” the potential recipient says with a wink and a smile, “probably all of them!”
The bureaucrat scribbles down a number, and hands over the check, walking away shaking his head.
That’s about how it’s done. The government surveys the people getting the money and asks them what would have happened if they didn’t get the stimulus. And what would you expect them to say? Keep the check?
Revenue Starved States
What a concept, “Revenue Starved States.” The article complains that not enough money was provided to “Revenue Starved States.” Does he mean states like California and New York? I believe the correct term is states where spending is out of control. It means states where taxes are so high that people are moving out in droves, and among them the “wealthy” people they love to tax to the eyeballs, meaning a dramatically shrinking revenue base. After all, if one of the wealthiest people in the state, who is part of the group that pays 70% of the taxes, moves out of the state or (out of the country when it gets bad enough), that means a lot of people are going to see their taxes raised to make up for it. So the statists seem to think a stimulus package that keeps these bloated bureaucracies fat, dumb and happy is the way to go, until when exactly?
The Multiplier Fallacy
The other great fraud being foisted on us is the multiplier effect, where for each dollar of stimulus money spent more than a dollar of economic activity results:
That sort of impact is what makes federal aid to state governments rank high in economists’ reckoning of the stimulus value of various proposals. Every dollar of additional infrastructure spending means $1.57 in economic activity, according to Moody’s, and general aid to states carries a $1.41 “bang” for each federal buck.
Even more effective are increases for food stamps ($1.74) and unemployment checks ($1.61), because recipients quickly spend their benefits on goods and services.
Okay, then how is this for a solution. Let’s spend $10 trillion on infrastructure, food stamps and unemployment checks, since they will result in $15 trillion or so in economic activity, because of the multiplier, right? For that matter, let’s have the government spend $100 trillion and we’ll really be rocking.
Where’s the So Called Consensus
From what I read in the article, there was only one economist that could be called a conservative, Martin Feldstein, that they were willing or able to quote, and this was his take on the stimulus.
While some conservatives remain as skeptical as ever that big increases in government spending give the economy a jolt that is worth the cost, Martin Feldstein, a conservative Harvard economist who served in the Reagan administration, said the problem with the package was that some of its tax cuts and spending programs were of a variety that did little to spur the economy.
“There should have been more direct federal spending that would have added to aggregate demand,” he said. “Temporary tax cuts and one-time transfers to seniors were largely saved and didn’t stimulate spending.”
That’s it? That’s the consensus? It seems to me that he is pointing out what was wrong with the package rather than what was right. He was in the Reagan administration and he knows what works: permanent cuts in marginal tax rates. Those dreaded tax cuts for the “rich.” The thing is that when the people above the subsistence level get to keep more of what they earn, yes it does belong to them and not to the government, they tend to invest it, which means the provide capital to businesses that grow and create jobs. Yes, capitalism. What the stimulus does is take money away from these people, or borrows it and steals it from future generations, and gives that money, as in the example above, to highway projects, food stamps and unemployment checks. The first of these may create jobs until the road project is completed, but the latter two only increase the dependency of those recipients on the government. So how exactly does the stimulus plan that puts money into a highway project and unemployment benefits, help a banker who got laid off? How does it help the unemployed executive from United Technologies? It doesn’t. It’s like a drug fix. You may feel good for a while, but then it wears off and you need another fix.
The Genius of Government
You would think that with all the examples of government planning lying on the waste heap of history, the statists will finally catch on that they can’t successfully pick the winners and losers in an economy. Government has to get out of the way and let the market work.
Government must be drastically cut down to size. Think of the popular TV show “The Biggest Loser.” Picture the governments of the United States, California, New York, New Jersey, Rhode Island, Michigan, Nevada, for starters, as contestants. Let’s see who can lose the most weight. Ready? Go.
