Since the election there have been more sightings of Elvis than of Joe Biden. I expect to see his picture on a milk carton any day now. Could it be that
the Obama team is worried about what his next gaffe will be?
Biden was added to the ticket to compensate for Obama’s lack of foreign policy experience. Then he came out with his prognostication that Obama would be tested in his first six months in office by some provocative international incident. We haven’t heard from him since.
In 1988 Texas Governor Anne Richards got tons of press for her quip about Bush the Elder: “Poor George, he was born with a silver foot in his mouth.”
George was Shakespeare compared to Joe.
My favorite was the one intended to criticize W for not acting more quickly to calm the financial crisis. Joe informed us that, when the market crashed in 1929, President Roosevelt went on TV to restore the confidence of the American people. Of course, not only was Roosevelt not elected until 1932, but American households did not begin to get TV until after WWII.
Can you imagine the media frenzy if Sarah Palin had said that?
There’s an old story about a woman who had two sons. One went off to sea and the other became Vice-president: neither was ever heard from again.
The working man’s friend did make the news for renting a $4 million house on Nantucket for Thanksgiving. Sooner or later it will be announced that the VP Elect is heading up some special project of little consequence. In the meantime I’m selling bumper stickers. FREE JOE BIDEN.
Saturday, November 29, 2008
Thursday, November 27, 2008
Bailouts, Stimulus and Inflation
Obamania is giving way to bailoutmania. We may not have any good alternatives, but the creation of money, unprecedented in magnitude, is setting us up for the next disaster.
When the current recession ends, as it will at some point, we will be faced with only two options, inflation or another recession, this one resulting from the government ratcheting up interest rates to soak up the excess liquidity. For those of us old enough to remember the early 1980s, those photos of Paul Volker looking over Obama’s shoulder are a clue as to which option might be favored.
I expect to see Obama soon sporting a prince-nez on his nose and his cigarette (yes, he does) in a 3 inch holder tilted up at a jaunty angle from a grinning, confident face. The only problem is that it is well known today that Roosevelt’s New Deal extended and exacerbated the Depression and that it was only WWII that got us out.
The Dems are planning a big, new fiscal stimulus package intended to spur a flurry of consumer spending. One-time fiscal stimuli don’t work. If a starving person is given a carton of food during a famine, he will not host a feast and consume it. He will save it and try to stretch it out as long as possible because he doesn’t know when he will get more. The Bush stimulus in May 2008 did nothing to spur consumer spending.
A better way to stimulate spending is with a permanent tax cut. People will spend more because they know they can count on more after-tax income going forward.
We are also being threatened with New Dealesque jobs program replacing bridges and building and remodeling schools. The problem with these is that after the Congressional wrangling over the pork, architectural/engineering work, contract bidding, etc. it will two years before these projects result in jobs. By that time the economy will have already begun to recover. The net result will be even more inflationary pressure.
Then there is the dangerous phenomenon of all sorts of corporations maneuvering for space at the bailout trough. But that is a subject for another day. Suffice it to say that all this money has to be paid back with interest or by substantially devaluing the currency, in other words, printing money. Both options are grim for US taxpayers and consumers.
When the current recession ends, as it will at some point, we will be faced with only two options, inflation or another recession, this one resulting from the government ratcheting up interest rates to soak up the excess liquidity. For those of us old enough to remember the early 1980s, those photos of Paul Volker looking over Obama’s shoulder are a clue as to which option might be favored.
I expect to see Obama soon sporting a prince-nez on his nose and his cigarette (yes, he does) in a 3 inch holder tilted up at a jaunty angle from a grinning, confident face. The only problem is that it is well known today that Roosevelt’s New Deal extended and exacerbated the Depression and that it was only WWII that got us out.
The Dems are planning a big, new fiscal stimulus package intended to spur a flurry of consumer spending. One-time fiscal stimuli don’t work. If a starving person is given a carton of food during a famine, he will not host a feast and consume it. He will save it and try to stretch it out as long as possible because he doesn’t know when he will get more. The Bush stimulus in May 2008 did nothing to spur consumer spending.
A better way to stimulate spending is with a permanent tax cut. People will spend more because they know they can count on more after-tax income going forward.
We are also being threatened with New Dealesque jobs program replacing bridges and building and remodeling schools. The problem with these is that after the Congressional wrangling over the pork, architectural/engineering work, contract bidding, etc. it will two years before these projects result in jobs. By that time the economy will have already begun to recover. The net result will be even more inflationary pressure.
Then there is the dangerous phenomenon of all sorts of corporations maneuvering for space at the bailout trough. But that is a subject for another day. Suffice it to say that all this money has to be paid back with interest or by substantially devaluing the currency, in other words, printing money. Both options are grim for US taxpayers and consumers.
Monday, November 24, 2008
The American Era: R.I.P.
The past week I have been AWOP (absent without posting). There certainly has been plenty going on. Obama’s announcement of his economic team was actually, to me, somewhat reassuring. Make no mistake (as Obama likes to say), we are going to see a huge expansion of government. Crises such as wars and the Depression have always led to growth in government and this will be no exception. Chief-of-staff Rahm Emanuel’s statement, “Never waste a crisis,” is clear evidence that history again will be prologue.
I think Hillary Clinton is a good choice for Secretary of State. I believe she will put America’s interests second only to her own. She’s smart, tough and can put on that big smile while she’s deciding where to plunge the dagger. I like that in a diplomat. None of this Jimmy Carter guilty appeasement for her.
Barack may think that by bringing her on board he has neutralized a Senate enemy. But he may have let the Trojan horse inside the gates. And, to stretch the equine analogy a bit, Obama is getting the stud (“I did not have sex…”) with the mare. Does anyone really think the Clintons have given up on 2012? The clashes between Hillary and Rahm Emanuel will make the war with the Taliban look like a Sunday croquet game. It will be great theatre if we get to see it.
Getting back to economics, we are witnessing the end of the American Era. Our decades of living on credit, as individuals and as a Nation, have caught up with us. In a financial crisis cash is king and we don’t have the cash. As long as oil was north of $100 the Saudis, Russians and Iranians were holding the money bags. But the collapse in oil prices has them scrambling, too.
The Chinese are the cash kings. We’ve been shipping our dollars over there for years in exchange for cheap goods. Plus the Chinese themselves boast a 50% savings rate. Their economy is hurting, too, but they have a couple of trillion in reserves, more than enough to finance their own recovery and take advantage of our illiquidity at the same time.
Instead of the sole superpower, we will now be first among equals. With 25% of the world’s economy, we won’t become a second rate nation overnight. We will, however, have fewer options and a lower average standard of living.
Of greater consequence is the fact that we will no longer be the deterrent to aggression and tyranny that we have been for the past six decades. With the end of The American Peace will come more international conflict and a more turbulent world.
I think Hillary Clinton is a good choice for Secretary of State. I believe she will put America’s interests second only to her own. She’s smart, tough and can put on that big smile while she’s deciding where to plunge the dagger. I like that in a diplomat. None of this Jimmy Carter guilty appeasement for her.
Barack may think that by bringing her on board he has neutralized a Senate enemy. But he may have let the Trojan horse inside the gates. And, to stretch the equine analogy a bit, Obama is getting the stud (“I did not have sex…”) with the mare. Does anyone really think the Clintons have given up on 2012? The clashes between Hillary and Rahm Emanuel will make the war with the Taliban look like a Sunday croquet game. It will be great theatre if we get to see it.
Getting back to economics, we are witnessing the end of the American Era. Our decades of living on credit, as individuals and as a Nation, have caught up with us. In a financial crisis cash is king and we don’t have the cash. As long as oil was north of $100 the Saudis, Russians and Iranians were holding the money bags. But the collapse in oil prices has them scrambling, too.
The Chinese are the cash kings. We’ve been shipping our dollars over there for years in exchange for cheap goods. Plus the Chinese themselves boast a 50% savings rate. Their economy is hurting, too, but they have a couple of trillion in reserves, more than enough to finance their own recovery and take advantage of our illiquidity at the same time.
Instead of the sole superpower, we will now be first among equals. With 25% of the world’s economy, we won’t become a second rate nation overnight. We will, however, have fewer options and a lower average standard of living.
Of greater consequence is the fact that we will no longer be the deterrent to aggression and tyranny that we have been for the past six decades. With the end of The American Peace will come more international conflict and a more turbulent world.
Sunday, November 16, 2008
Plans, "Events" & the Bond Market
In his victory speech, Barack Obama referred to The Great Depression, talked about “remaking the Nation brick by brick” and assured us “Our union can be perfected.” Time will tell if this was merely a manifestation of his hubris and self-delusion of whether he was starting to prepare Americans for the major shift to the left that he hopes to impose.
His Chief of Staff, Rahm Emanuel, said that the first order of business would be some executive orders to prevent drilling in Utah and restore Federal funding for stem-cell research. Next will be a new stimulus plan. Then would come “the four reforms,” education, health care, energy and taxes.
Education reform does not mean improving results by introducing more competition and choice into the system. It means paying off the teachers’ unions by throwing more money at them. Talk about “the failed policies of the past.”
Healthcare reform doesn’t mean giving more control to Doctors and patients. Nor does it mean tort reform to control ruinous litigation. It means giving more control to Washington bureaucrats and pouring more taxpayer dollars into the industry, thus increasing demand and, therefore, costs.
Energy reform means more restrictions on developing our most efficient domestic sources and subsidizing uneconomical alternative sources like wind and solar that will take decades to begin to replace coal and oil and natural gas. Remember the campaign promises about “reducing our reliance on foreign oil”? This will end up being the big middle class tax increase when fuel and energy prices skyrocket in a few years.
Tax reform means higher taxes for that shrinking percentage that pays taxes. This will lead to a weak economy, declining living standards and, the real point, more reliable Democrat votes from an increased number of people dependent on government.
But the best plans can get derailed. When asked by a reporter what would shape his term in office, former British Prime Minister Harold MacMillan replied, “Events, my dear boy, events.” George W. Bush can attest to that, since the 9/11 attacks eight months after he took office set the agenda for his entire two terms.
There’s another reality that will put a damper on Obama’s utopian vision. When Bill and Hillary Clinton were laying out their grandiose plans in 1993, then Treasury Secretary, Bob Rubin, rudely informed them that the bond market would respond with punishing interest rates, causing a recession and assuring Bill of being a one-termer. We can only hope.
His Chief of Staff, Rahm Emanuel, said that the first order of business would be some executive orders to prevent drilling in Utah and restore Federal funding for stem-cell research. Next will be a new stimulus plan. Then would come “the four reforms,” education, health care, energy and taxes.
Education reform does not mean improving results by introducing more competition and choice into the system. It means paying off the teachers’ unions by throwing more money at them. Talk about “the failed policies of the past.”
Healthcare reform doesn’t mean giving more control to Doctors and patients. Nor does it mean tort reform to control ruinous litigation. It means giving more control to Washington bureaucrats and pouring more taxpayer dollars into the industry, thus increasing demand and, therefore, costs.
Energy reform means more restrictions on developing our most efficient domestic sources and subsidizing uneconomical alternative sources like wind and solar that will take decades to begin to replace coal and oil and natural gas. Remember the campaign promises about “reducing our reliance on foreign oil”? This will end up being the big middle class tax increase when fuel and energy prices skyrocket in a few years.
Tax reform means higher taxes for that shrinking percentage that pays taxes. This will lead to a weak economy, declining living standards and, the real point, more reliable Democrat votes from an increased number of people dependent on government.
But the best plans can get derailed. When asked by a reporter what would shape his term in office, former British Prime Minister Harold MacMillan replied, “Events, my dear boy, events.” George W. Bush can attest to that, since the 9/11 attacks eight months after he took office set the agenda for his entire two terms.
There’s another reality that will put a damper on Obama’s utopian vision. When Bill and Hillary Clinton were laying out their grandiose plans in 1993, then Treasury Secretary, Bob Rubin, rudely informed them that the bond market would respond with punishing interest rates, causing a recession and assuring Bill of being a one-termer. We can only hope.
Monday, November 10, 2008
What's Good for GM?
In the 1950s then GM President Charlie Wilson was reported to have said, “What’s good for GM is good for America.” What he actually said is “…what was good for America was good for GM and vice-versa.” That was when GM had over a 50% US market share. That was then: this is now. Today GM has a 20% market share and is close to bankruptcy.
Which is where it should go. But it won’t. The government bailout of the banking system, as bad as it was, was probably necessary to prevent a financial calamity on a par with the Great Depression. No capitalist economy can survive without a functioning banking system. But it can survive without a domestically owned auto manufacturing industry.
I say “domestically owned” because the US actually has a thriving auto manufacturing industry, but it is not in Michigan, Ohio and Indiana, it is not American owned and it is not saddled with staggering pension and healthcare obligations resulting from years of unholy collusion between auto executives and the United Auto Workers.
In the booming post-WWII years, when cars were selling faster than they could be made, the auto industry agreed to practically every union demand just to keep the factories humming and the money rolling in. Then came the oil shocks of the 1970s and cheap, fuel-efficient Japanese imports. American cars, meanwhile, became unreliable gas-hogs.
Rather than compete by improving quality and fuel efficiency, the American producers prevailed upon their friends in Congress to pass steep import duties on foreign imports. That led the Japanese, and later the Germans, to set up plants in the US, in the South, far from Detroit and from the UAW.
That brings us to the present sad state of affairs. The US companies can no longer compete because the money they should have been spending on new-product development has been going to pensions and healthcare instead. GM is second only to the US government in healthcare spending. GM says bankruptcy is out of the question because nobody will buy a car from a company in bankruptcy.
There are two reasons why the American auto industry will get a government bailout. First, the Democrats will do anything to avoid letting several hundred thousand union jobs disappear. Second, Congress long ago committed the American taxpayer to something called the Pension Benefit Guaranty Corporation. There is no way the pols are going to tell the American taxpayers that they are now on the hook for all these union benefits.
The rational option is to let them go bankrupt so they can renegotiate these onerous labor contracts and emerge as viable, competitive entities. Don’t hold your breath.
Which is where it should go. But it won’t. The government bailout of the banking system, as bad as it was, was probably necessary to prevent a financial calamity on a par with the Great Depression. No capitalist economy can survive without a functioning banking system. But it can survive without a domestically owned auto manufacturing industry.
I say “domestically owned” because the US actually has a thriving auto manufacturing industry, but it is not in Michigan, Ohio and Indiana, it is not American owned and it is not saddled with staggering pension and healthcare obligations resulting from years of unholy collusion between auto executives and the United Auto Workers.
In the booming post-WWII years, when cars were selling faster than they could be made, the auto industry agreed to practically every union demand just to keep the factories humming and the money rolling in. Then came the oil shocks of the 1970s and cheap, fuel-efficient Japanese imports. American cars, meanwhile, became unreliable gas-hogs.
Rather than compete by improving quality and fuel efficiency, the American producers prevailed upon their friends in Congress to pass steep import duties on foreign imports. That led the Japanese, and later the Germans, to set up plants in the US, in the South, far from Detroit and from the UAW.
That brings us to the present sad state of affairs. The US companies can no longer compete because the money they should have been spending on new-product development has been going to pensions and healthcare instead. GM is second only to the US government in healthcare spending. GM says bankruptcy is out of the question because nobody will buy a car from a company in bankruptcy.
There are two reasons why the American auto industry will get a government bailout. First, the Democrats will do anything to avoid letting several hundred thousand union jobs disappear. Second, Congress long ago committed the American taxpayer to something called the Pension Benefit Guaranty Corporation. There is no way the pols are going to tell the American taxpayers that they are now on the hook for all these union benefits.
The rational option is to let them go bankrupt so they can renegotiate these onerous labor contracts and emerge as viable, competitive entities. Don’t hold your breath.
Wednesday, November 5, 2008
Socialism and National Security
OK. It is what it is. America has elected the most liberal and least qualified President in its history and large majorities of his party in Congress.
To understand the “change” that’s coming, we need only to look at the Democrat coalition: labor unions, government employees, the environmental lobby, trial lawyers and a huge, catch-all group best described as net tax beneficiaries (people who receive more from government than they contribute). And let’s not forget the haters of America’s economic and military hegemony.
So we can expect bigger government, more spending, higher labor costs, trade protectionism, more regulation of industry, especially energy, more litigation and the much promised increased redistribution of income.
Also, given the recent partial nationalization of our banks (with insurance and auto manufacturing soon to follow), it’s hard to see this Government resisting the temptation to use this newly acquired leverage to indulge the left’s penchant for central planning and social engineering.
As those with a basic grasp of economics know (which obviously excludes a majority of voters), this means higher taxes (maybe not next year, but soon)
for the shrinking number who pay taxes, higher prices for almost everything and, consequently, a lower standard of living for the average American.
For a rough idea of how this will look, think Western Europe, whose average standard of living is about 30% below ours. But even if we were willing to accept such a restructuring in the interests of greater “equality” or “fairness”,
there would be one big problem. The Euros have been able to pursue their welfare state because they’ve had the American military covering their backs ever since WWII. American taxpayers have subsidized European socialism.
The Dems will try to pay for all their new spending by cutting in the only budget category they ever cut, defense. If we are going to be like Europe, who’s going to cover our backs?
Only American military power, when combined with the will to use it, has prevented a major war for 60+ years. History shows that weakness invites aggression. Will we choose socialism at the cost of national security? We can be sure that the tyrants and fanatics of the world are watching.
To understand the “change” that’s coming, we need only to look at the Democrat coalition: labor unions, government employees, the environmental lobby, trial lawyers and a huge, catch-all group best described as net tax beneficiaries (people who receive more from government than they contribute). And let’s not forget the haters of America’s economic and military hegemony.
So we can expect bigger government, more spending, higher labor costs, trade protectionism, more regulation of industry, especially energy, more litigation and the much promised increased redistribution of income.
Also, given the recent partial nationalization of our banks (with insurance and auto manufacturing soon to follow), it’s hard to see this Government resisting the temptation to use this newly acquired leverage to indulge the left’s penchant for central planning and social engineering.
As those with a basic grasp of economics know (which obviously excludes a majority of voters), this means higher taxes (maybe not next year, but soon)
for the shrinking number who pay taxes, higher prices for almost everything and, consequently, a lower standard of living for the average American.
For a rough idea of how this will look, think Western Europe, whose average standard of living is about 30% below ours. But even if we were willing to accept such a restructuring in the interests of greater “equality” or “fairness”,
there would be one big problem. The Euros have been able to pursue their welfare state because they’ve had the American military covering their backs ever since WWII. American taxpayers have subsidized European socialism.
The Dems will try to pay for all their new spending by cutting in the only budget category they ever cut, defense. If we are going to be like Europe, who’s going to cover our backs?
Only American military power, when combined with the will to use it, has prevented a major war for 60+ years. History shows that weakness invites aggression. Will we choose socialism at the cost of national security? We can be sure that the tyrants and fanatics of the world are watching.
Sunday, November 2, 2008
Pass the Kool-Aid
In my last posting I said it’s going to be close and, at least for the popular vote, there is some recent confirmation. According to Dick Morris, the Friday Zogby poll of 1,000 likely voters put McCain ahead 48-47. And he's closing the gap in Pennsylvania. I’m not going so far as to predict a McCain victory, but the fat lady is just warming up.
Since reneging on his promise to abide by public finance rules, Obama has raised more money than was spent by both candidates combined in 2004.
Newsmax.com reports that 118 donors appear to not be US citizens and hundreds more have “yellow flags” such as no Social Security number or a known US address. Federal law requires donors to be US citizens or permanent residents.
That investigation focused only on donors disclosed by the Obama campaign. But it has taken $218 million from donors it refuses to disclose.
McCain has posted all of his donations on his website.
We’re used to the double standard, but still have to ask, where is the media outrage? Where is the righteous indignation about “buying the presidency” and possible illegal contributions? Well, we know the answer.
Actually, there is nothing wrong with raising lots of money, as long as it’s legal. The problem is that there are legitimate concerns about the legality of some of these donations. Some have been traced to Nigeria, Kenya and Europe.
This brings us back to the question of who this guy really is. Who are his friends? Admitted and unrepentant terrorist Bill Ayers. Rev. “God damn America” Wright. Convicted felon Tony Rezko. A former deputy of Louis Farrakhan says that Obama had “an open line” to the Nation of Islam leader.
How can it be that America appears to be on the verge of electing this man to the Office of President of the United States? Pass the kool-Aid, Rev. Jones.
Since reneging on his promise to abide by public finance rules, Obama has raised more money than was spent by both candidates combined in 2004.
Newsmax.com reports that 118 donors appear to not be US citizens and hundreds more have “yellow flags” such as no Social Security number or a known US address. Federal law requires donors to be US citizens or permanent residents.
That investigation focused only on donors disclosed by the Obama campaign. But it has taken $218 million from donors it refuses to disclose.
McCain has posted all of his donations on his website.
We’re used to the double standard, but still have to ask, where is the media outrage? Where is the righteous indignation about “buying the presidency” and possible illegal contributions? Well, we know the answer.
Actually, there is nothing wrong with raising lots of money, as long as it’s legal. The problem is that there are legitimate concerns about the legality of some of these donations. Some have been traced to Nigeria, Kenya and Europe.
This brings us back to the question of who this guy really is. Who are his friends? Admitted and unrepentant terrorist Bill Ayers. Rev. “God damn America” Wright. Convicted felon Tony Rezko. A former deputy of Louis Farrakhan says that Obama had “an open line” to the Nation of Islam leader.
How can it be that America appears to be on the verge of electing this man to the Office of President of the United States? Pass the kool-Aid, Rev. Jones.
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