Saturday, November 27, 2010

The man who hasn't got a clue

All his simplistic policies have turned to ashes

Larry Elder

President Barack Obama walked into the Oval Office in January 2009 during a severe economic downturn led by a meltdown in housing prices -- and promptly made things worse.

By bailing out banks, insurance companies and auto firms -- done to a lesser extent by the previous administration -- Obama rewarded poor performers and punished their better-managed competitors. Prevented from pouncing on wounded rivals and thus increasing market share or buying the assets of the wounded at fire sale prices, Ford, for example, watched GM and Chrysler get a cash infusion from taxpayers. Despite GM's recent "successful" public offering, taxpayers lost billions of dollars.

Obama and the Democratic congressional supermajorities passed a nearly trillion-dollar economic "stimulus" package and then proceeded to award fiscally irresponsible states with "stimulus" funds, helping postpone the day of reckoning when states must meet their budgets by reducing spending and cutting the size of government. Stimulus supposedly "saved or created" 3.5 million jobs, but it merely succeeded in transferring money from the pockets of producer taxpayers into the pockets of others.

Obama spends billions to "invest" in mythical "green jobs of the future." Investing is the job of the private sector, which uses private funds to produce a product that addresses a need or desire. Success is determined by the willingness of the consumer to pay good money for said product. A bad bet means somebody loses his own money -- a possibility that the private investor weighed before he chose to risk his capital.

But government "investments" are driven by politics, with decisions made by bureaucrats operating under rosy scenarios with romantic wish lists. When taxpayer money goes down a rathole -- as is far more likely than with privately invested money -- nobody gets fired, but the country is impoverished a little bit more.

ObamaCare puts 30 million Americans on the rolls of the medically insured. Since its passage, insurance companies -- citing the cost of ObamaCare mandates, rules and regulations -- jacked up their premiums and cut coverage. Over 100 waivers have been granted to companies and organizations that, but for these waivers, would have had to drop coverage, increase copays or reduce medical benefits. Nice to have friends in high places.

The AARP, a staunch proponent of ObamaCare, announced a reduction in benefits for its own employees, lest the tax kick in for so-called "Cadillac plans." To "bend the cost curve," ObamaCare promised cuts in Medicare reimbursement. So doctors are dropping their Medicare patients.

The administration signed into law new banking and financial regulations that keep intact the very government agencies that helped precipitate the housing meltdown -- Freddie Mac and Fannie Mae. Under policies aimed at allowing everyone with a pulse and a dream to buy a home, these "government-sponsored entities" allowed the players in the housing market -- banks, borrowers, investment banks and buyers of "exotic securities" -- to play with taxpayer money.

The Obama administration's various government efforts to "keep homeowners in their homes" are floundering, serving only to postpone the necessary market re-pricing of homes that are now worth less than they once were. Cash for Clunkers induced people who were going to buy cars anyway into making their purchases earlier. When the program ended, car buying slumped. The result was more taxpayer dollars removed from the hands of producers and put into the hands of recipients.

The administration, with some Republican support, increased the minimum wage and several times extended unemployment compensation -- both well-intended policies, but job killers nonetheless.

Obama promised to raise taxes on the rich, who, under Bush, got tax cuts they "didn't need" and "didn't ask for." So the rich sit on their money, not knowing whether they will be allowed to spend or save or invest it -- or whether Washington has other ideas. Most Bush-era tax cuts expire at the end of the year, and if not extended, rates will go up on income, capital gains, dividends and estates.

The recent Republican takeover of the House and loss of the Senate's Democratic supermajority likely mean that the rates will be extended for all -- including the dastardly, job-creating rich. But businesspeople cannot plan -- and are thus reluctant to hire -- until they know whether their taxes are going to increase.

Candidate Obama demagogued against trade agreements that "shipped jobs overseas," and promised to tweak the Bush administration-negotiated treaty with South Korea. According to the U.S. Chamber of Commerce, the pact would create 250,000 jobs in America and it would open up exports to a NAFTA-sized market. But during his recent trip to Asia, Obama failed to get the South Koreans to go along with his changes aimed at benefiting the American auto and beef industries. The South Koreans said no, insisting that they had a deal and that if the U.S. won't do business with them, other countries will.

For two years, Obama has practiced Obamalism: Spread the wealth; redistribute income; punish success; reward ineptitude; and encourage the victicrat-entitlement mentality by making the lack of health insurance the responsibility of others.



What’s Wrong With the Jobs Market?

What's needed is exactly what Obama and the Donks won't do

The terrible job market has vexed an entire generation. It shows no hope of improving anytime soon. Young people are shut out. College students are taking refuge in matriculation without end. Thirty-somethings are zoning out in their parents' basements and attics. Despair for the future has become a theme of American public life.

The question we must ask is: why is unemployment stuck at 10% in the narrowest measure and as high as 30% for some demographics?

The usual answer is that the broad economy is not recovering. That’s true but superficial; it explains nothing. We have a problem of a specific kind with the jobs market. To see it as just a symptom of slow growth is an excuse for politicians and central banks to resort to reckless policies in the name of fixing the big problem without addressing the reality on the ground.

Some new data reported by the Wall Street Journal helps get to the core of the problem in greater detail. In the current environment, which the National Bureau of Economic Research (NBER) laughably calls a recovery, business start-ups of job-creating companies have not kept up with closings.

As compared with other recession aftermaths, new businesses are not hiring as they once did. The number of companies with at least one employee continues to fall at a rate we’ve not seen in 18 years. Everyone speaks of this as a recovery, but the numbers don’t add up. New jobs in new companies are appearing a rate 15% less than the last recovery.

Let’s try to understand what is going on here. In boom times, companies tend to bloat up in every area, especially in their staffing. Unemployment is always a feature of the bust because businesses shed jobs and expect more efficiency and productivity out of the remaining staff. Many businesses close and lose all employees.

Whereas workers once had no problem finding jobs and naming their price, there is now a surplus of workers and a job shortage, at least at the wages that the unemployed are demanding.

What usually fills the gap here are new businesses. In recovery times, entrepreneurs initiate new projects and hire the unemployed workers to staff them. The unemployed are usually willing to work for less and are willing to learn new skills in a new business environment. These new businesses become a major source for economic growth and rising living standards.

Without new businesses, there would be no net job growth at all. In post-bust economies, it is these new businesses that are responsible for soaking up the excess labor. That’s because the older and larger businesses are not willing to take on the risk of new employees and have already adjusted to doing business with fewer.

Until these businesses come along, unemployment will likely persist. And this is precisely what is happening right now. And so, now that we have a better idea of the mechanics of the high unemployment rate, we have a better idea of what question to ask and how to solve the problem.

Where are these new businesses and why are they not starting as we might expect? Let us count the ways.

New businesses need to depend on a stable legal environment and a bright outlook for the future. These are both missing. The supposed recovery has been phonied up in every conceivable way: nationalizations, bad debt swept under the carpet, money creation by the Fed, make-work jobs paid for by the taxpayer. No one really believes all the hokum. The question is not whether the recovery is phony; it is: what is real and what is not real? No one knows for sure.

Despite every attempt by the Fed to provide oceans of free credit, banks are still extremely reluctant to lend when the payoff is not there and the risks of lending are extremely high. This means that prospective new businesses have to raise their own capital from a massively depleted capital stock.

Looking at the risks, it makes far more sense to hire no employees beyond temporary contract workers. Consider the payroll tax, the largest burden on both employees and employers. It does not benefit either party at all. It is sheer robbery that vastly increases the cost of hiring.

The problem of health-care mandates is very intense. Employees who expect these benefits are mostly going to choose between obtaining them and getting a job. But for certain firms and under some conditions, they are unavoidable and unpayable.

Business taxes are all too high and probably going higher. Regulations on all businesses in every sector of life have been intensifying for decades. No industry is free of them. Even formerly frontier sectors like software are becoming legal thickets of patents, protections, and scary mandates.

The minimum wage is way too high to encourage new job growth among new businesses. And given all the legal mandates and potential lawsuits, everyone knows that once you hire employees, you are pretty much stuck with them for some period of time. You can test the waters. But you have to be sure. And no one is sure.

Businesses thrive in an environment of freedom. But enterprise is no longer free in any area. In boom times, the consequences are less obvious. In the bust, the regulatory thicket, the taxes and mandates, and the legislative threats all become decisive in a way they were not before.

None of these problems are intrinsic to the business cycle. They are all imposed by government. The same problem afflicted the economy during the Great Depression, but back then the central planning was newly imposed. Now is different: the old central planning is killing us day by day, even without dramatic new legislation.

It could all be changed. Congress and the president and the courts could reverse it all tomorrow, restoring an environment of freedom and free enterprise. Jobs would recover quickly. Hope would be back in a matter of weeks and months. The economy would genuinely recover.



Pelosi Could Guarantee Destruction of Democrats in 2012

It was the dumbest thing the Democratic members of the U.S. House could have done. And it is already jeopardizing the chances of President Obama to reverse the fortunes of himself and his party. "It" was making Nancy Pelosi the minority leader of the House, and thus the head of what is now an even more liberal delegation of lawmakers.

I find it interesting when a veteran news/talk celebrity like Barbara Walters asks President Obama to respond to Sarah Palin's comment that if she runs for president in 2012, she believes she could win. Obama at first gracefully dodges the question, only to have Walters laugh and condescending suggest that surely he believes he could defeat Palin. So we're to assume automatically that Palin is a lightweight, but that someone like Pelosi is a political pro and an asset to her party.

If Pelosi is such a pro, she should realize that her hard stand of opposing an extension of tax cuts for so-called "wealthy Americans" as part of an extension of the George W. Bush tax cuts is placing what few moderates she has from her own party in Congress in political hot water. Moreover, this puts her at odds with the president. That's not to say he wants to extend these cuts for those who earn over $250,000 as a family. Rather, it's to say that, at least for the short term, he desperately needs to do so.

The problem is that Pelosi, who at one point was known vaguely by the public, is now becoming the left-wing spokesperson and a potential obstructionist to compromise. This will only hurt her own party and the president as she rises in name identification. It was Pelosi who was unapologetic for the beating her colleagues took in the elections. Now even major national newspapers are reporting that she is becoming a huge thorn in the side of a president who desperately needs to appear more moderate in order to have a prayer of re-election in 2012.

I have drawn the comparison between the Obama administration and that of Jimmy Carter's more than once. Now history truly is repeating itself. In the 1970s, Thomas "Tip" O'Neill was a powerful Democratic speaker of the House. At first, he and Carter worked together. But when Carter began challenging pet projects of O'Neill's, and also failed to push for universal heath care, O'Neill turned into the Nancy Pelosi of his era.

Many forget that while the Democrats held onto the House in 1980, O'Neill was used as a major weapon by the GOP in that year's presidential election. They argued that the Democrats were too liberal and that Carter had to go. And so Jimmy Carter went. Doubtless he was painfully aware of the large target O'Neill had placed on his back.

It seems likely that the more soon-to-be Minority Leader Pelosi opens her mouth, the more she will appear out of touch with political reality. For example, she never flinched over the use of government planes to fly her across the country, to and from her district. Did it ever dawn on her that the Republican speaker that Democrats most loved to hate, Newt Gingrich, generally flew commercial airliners to and from his district, most often in coach, unless he had earned a legitimate "frequent flier" upgrade?

This was before Pelosi's party got spanked on Election Day, of course. Her refusal to acknowledge the consequences of the elections, and her desire to soldier on with a pure leftist agenda, create not just problems for Obama with the public, but potentially within his own party, as well.

While Hillary Clinton has emphatically denied that she will seek the presidency, a recent PollPosition national survey showed her basically tied among likely voters in a Clinton-Obama contest in 2012. And recent surveys have shown Clinton's favorable polling percentages are higher than Obama's, while the president's unfavorable percentages among voters are higher than Clinton's.

Could this explain why, throughout the early days of the recent North Korea-South Korea crisis, Secretary of State Clinton has been nowhere to be found? Can you say "Bobby Kennedy in 1968"?

With President Obama having to deal with an inflexibly leftist Democratic House caucus, and at the same time needing to recapture the support of moderate voters who abandoned the Democrats in the recent election, the last thing he needs is a louder, shriller and more stubborn Nancy Pelosi. It could spell doom for him in the next presidential contest. Just ask Jimmy Carter.



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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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