Hoist by his own petard.
That's President Barack Obama.
Having assumed office with an illusory mandate to "transform America," he tossed aside public opinion, ignored voters' traditional preference for moderate, not radical, change, and set out to impose his vision of dominant government and a citizenry willing to say, okay, when a designated bureaucrat tells them their time has come to die. In doing so, Obama's minions bribed lawmakers to vote for measures opposed by a majority of voters and made a mockery of the legislative process.
House Speaker Nancy Pelosi will be an unduring symbol with her call for Congress to pass a bill cobbled by insiders so that rank and file members could find out what's in it.
As the nation's debt grew by trillions of dollars, voters recoiled in horror while Obama remained unfazed, and perhaps unwitting. There is, after all, little evidence that Obama has any understanding of economics aside from the obvious fact that many of America's corporate elite will throw money at radical politicians so long as those politicians protect and nurture their corporate interests.
As a leftist nurtured in marxist truisms, he is, of course, dedicated to Keynesian economics, a dressed up ideology that encourages politicians to pay off voting blocs and interest groups that share their aspirations in the guise of "stimulus."
Now, 19 months into his presidency, Obama expresses puzzlement at the stubborn refusal of the American economy to recover despite more than a trillion dollars in "stimulus" spending. Speculation is rife that the economy will turn down again, producing a dreaded double-dip recession.
What's going on?
Sane America has gone on strike against the Obama administration's obsessive effort to impose rule by a leftist elite, including "czars," that has seized control of government and uses it to impose policies that most Americans oppose.
To counter this bizarre assault on American values, individuals, families, small businesses and large corporations are reasserting their individuality and desire for freedom by hoarding cash, withholding spending to thwart a government that some regard as wayward, and many view as their enemy.
If the economy were to recover strongly and quickly, the Democrat-controlled Congress could ramrod the rest of Obama's statist agenda and complete the government takeover of matters traditionally reserved for individual discretion. That is, for many of us, a frightening vision.
By hoarding cash, American individuals and businesses are slowing or stopping the recovery and thwarting the onset of death panels, carbon taxes, social engineering by the Environmental Protection Agency and other nightmarish aspects of the Obama scheme.
So far, the citizenry is defeating Obama and his thug army - the left wing of the Democrat Party.
In 71 days the voters can derail the Obama agenda and begin the process of repealing the parts that have been enacted by reducing the Democrat Party to minority status in the House and Senate.
That's the stimulus that unhappy and frightened voters are looking for, and it would begin to revive the economy.
Once Obama has lost his congressional accomplices, the leftist assault on individual liberty will lose its thrust and American consumers will again be willing to spend and businesses to invest in future growth.
A full blown recovery is unlikely to happen, however, until Obama has an epiphany or is clearly headed for the ranks of easily ignored ex-presidents. At that point, celebratory spending will begin, to be followed by the normal pursuit of things we didn't know we needed until we started believing that we still have a future.
That moment is not yet at hand. If Democrats want to speed its arrival, they could initiate a repeal of Obamcare, begin the abolition of Fannie Mae and Freddie Mac, and start neutering the EPA.
Watching the death throes of costly, redundant, wayward and sometimes corrupt government institutions would be the best stimulus of all.
Showing posts with label recovery. Show all posts
Showing posts with label recovery. Show all posts
Monday, August 23, 2010
Friday, August 13, 2010
Obama boasts about what some call "a terrible precedent"
General Motors plans an initial public offering as soon as today -- a first step in the government's effort to sell its ownership stake to private investors. The IPO comes on the heels of a much publicized plant tour by President Obama, who'll certainly hail the stock sale as proof he made a smart decision by bailing out the automaker with billions of taxpayer dollars.
But, to us, the IPO will be proof of something else: a White House that purposefully trampled the legal rights of investors -- many of whom, like us, are small savers -- to benefit its political supporters. Rather than a model of success and foresight, the GM episode is a model of corruption and cronyism.
Let's review the sordid history. Last year, the federal government bought a majority stake in GM for about $50 billion -- a sum equal to GM's market capitalization in 2000, when it was making record profits.
It should hardly be a surprise that the new GM, with so much money to work with (plus a special $16 billion tax benefit) would start inching into the black again. After all, Ford, without government help, has posted after-tax earnings of about $4.7 billion for the first half of this year -- more than twice GM's, even with the $1.3 billion second-quarter profit that "Government Motors" announced yesterday.
The bailout's announced goals required a more limited intervention than what Washington concocted. For example, a deal could have been brokered with strategic investors, as in a normal distressed sale, with GM's assets -- including its valuable Cadillac and Chevrolet brands and an expanding foothold in China -- passing from weak hands to strong.
But the fact that the administration mainly solicited advice from bankruptcy experts, rather than those in industry, is evidence that alternative solutions weren't considered.
Instead, politicians ran the company their way -- raining taxpayer money on key electoral states like Michigan and rewarding their staunch financial backers in the United Auto Workers union.
The devil, in this case, was in the details of the bankruptcy plan that the government pushed through:
Bondholders -- investors ranging from large institutions to retirees just scraping by, who loaned GM a total of $27 billion -- received just 10 percent of the company. By contrast, the government's $50 billion gave it about 61 percent.
And the union -- in return for the $20 billion that GM owed its health trust -- got a remarkable 17.5 percent of the stock plus $2.5 billion in cash plus $6.5 billion in preferred stock carrying a dividend of about 9 percent.
In other words, the UAW got three to four times as much as the bondholders for a smaller claim on GM's assets. The union even boasted to its members in May 2009 that it had made no concessions on pay, health care or pensions in the restructuring.
In effect, the government divided up GM's creditors into favored and unfavored groups, then gave a fat stake in the reorganized business to the favored (a k a longtime Democratic Party donors). On top of that, Washington also ordered the shutdown of 1,650 GM dealers and another 1,000 Chrysler dealers as part of its takeover.
In last month's audit, TARP's inspector general criticized the Treasury Department for that very decision. Treasury didn't show why the cuts were "either necessary for the sake of the companies' economic survival or prudent for the sake of the nation's economic recovery." The move "substantially contributed to the accelerated shuttering of thousands of small businesses."
Remember this as the president brags about recent gains in auto-industry jobs: Even though some plants have added union jobs, many in the dealerships have been lost.
But our main concern is what happens going forward. A terrible precedent has been set.
But, to us, the IPO will be proof of something else: a White House that purposefully trampled the legal rights of investors -- many of whom, like us, are small savers -- to benefit its political supporters. Rather than a model of success and foresight, the GM episode is a model of corruption and cronyism.
Let's review the sordid history. Last year, the federal government bought a majority stake in GM for about $50 billion -- a sum equal to GM's market capitalization in 2000, when it was making record profits.
It should hardly be a surprise that the new GM, with so much money to work with (plus a special $16 billion tax benefit) would start inching into the black again. After all, Ford, without government help, has posted after-tax earnings of about $4.7 billion for the first half of this year -- more than twice GM's, even with the $1.3 billion second-quarter profit that "Government Motors" announced yesterday.
The bailout's announced goals required a more limited intervention than what Washington concocted. For example, a deal could have been brokered with strategic investors, as in a normal distressed sale, with GM's assets -- including its valuable Cadillac and Chevrolet brands and an expanding foothold in China -- passing from weak hands to strong.
But the fact that the administration mainly solicited advice from bankruptcy experts, rather than those in industry, is evidence that alternative solutions weren't considered.
Instead, politicians ran the company their way -- raining taxpayer money on key electoral states like Michigan and rewarding their staunch financial backers in the United Auto Workers union.
The devil, in this case, was in the details of the bankruptcy plan that the government pushed through:
Bondholders -- investors ranging from large institutions to retirees just scraping by, who loaned GM a total of $27 billion -- received just 10 percent of the company. By contrast, the government's $50 billion gave it about 61 percent.
And the union -- in return for the $20 billion that GM owed its health trust -- got a remarkable 17.5 percent of the stock plus $2.5 billion in cash plus $6.5 billion in preferred stock carrying a dividend of about 9 percent.
In other words, the UAW got three to four times as much as the bondholders for a smaller claim on GM's assets. The union even boasted to its members in May 2009 that it had made no concessions on pay, health care or pensions in the restructuring.
In effect, the government divided up GM's creditors into favored and unfavored groups, then gave a fat stake in the reorganized business to the favored (a k a longtime Democratic Party donors). On top of that, Washington also ordered the shutdown of 1,650 GM dealers and another 1,000 Chrysler dealers as part of its takeover.
In last month's audit, TARP's inspector general criticized the Treasury Department for that very decision. Treasury didn't show why the cuts were "either necessary for the sake of the companies' economic survival or prudent for the sake of the nation's economic recovery." The move "substantially contributed to the accelerated shuttering of thousands of small businesses."
Remember this as the president brags about recent gains in auto-industry jobs: Even though some plants have added union jobs, many in the dealerships have been lost.
But our main concern is what happens going forward. A terrible precedent has been set.
Friday, January 29, 2010
Kimberley Strassel: In stoking his political base, Obama stifled economic recovery
The problem with fires is that they can blow in any direction. Consider the White House, which is seeing a backdraft from the anti-Wall-Street flame it has been dousing with gasoline.
His agenda on the ropes, President Obama made a calculated decision to pivot to populism. The Massachusetts Senate race highlighted a fed-up public. The White House strategy: Channel that anger away from itself and to easier targets. Its opening shots were a new tax on banks, new restrictions on banking activities, and Mr. Obama roaring, "We want our money back!"
The president fed the fire with his State of the Union address. Americans are angry at "bad behavior on Wall Street." It is time to "slash the tax breaks for companies that ship our jobs overseas." Lobbyists are trying to "kill" financial regulation. American "cynicism" is the result of "selfish" bankers, CEOs who "reward" themselves "for failure" and lobbyists who "game the system." (No mention of Cornhusker Kickbacks or backroom union deals, but never mind.)
For an administration that claims to know its political history, the White House appears to have misread at least one decade. FDR was re-elected in 1936 for many reasons, but among them was his fiery denunciations of "economic royalists," "economic tyranny," and "economic slavery." Business knew it was in the president's crosshairs and put its capital on strike. The economy didn't recover until the war.
Team Obama is already witnessing a repeat. The U.S. economy ought to be flying out of recession. Yet bank lending is sluggish. Companies refuse to hire. Business is going elsewhere to raise capital: China last year outstripped the U.S. as a center for initial public offerings. The market gyrates on Washington's latest political drama.
.A venture capitalist recently remarked to me that the uncertainty the administration has created is "nothing short of paralyzing."
His agenda on the ropes, President Obama made a calculated decision to pivot to populism. The Massachusetts Senate race highlighted a fed-up public. The White House strategy: Channel that anger away from itself and to easier targets. Its opening shots were a new tax on banks, new restrictions on banking activities, and Mr. Obama roaring, "We want our money back!"
The president fed the fire with his State of the Union address. Americans are angry at "bad behavior on Wall Street." It is time to "slash the tax breaks for companies that ship our jobs overseas." Lobbyists are trying to "kill" financial regulation. American "cynicism" is the result of "selfish" bankers, CEOs who "reward" themselves "for failure" and lobbyists who "game the system." (No mention of Cornhusker Kickbacks or backroom union deals, but never mind.)
For an administration that claims to know its political history, the White House appears to have misread at least one decade. FDR was re-elected in 1936 for many reasons, but among them was his fiery denunciations of "economic royalists," "economic tyranny," and "economic slavery." Business knew it was in the president's crosshairs and put its capital on strike. The economy didn't recover until the war.
Team Obama is already witnessing a repeat. The U.S. economy ought to be flying out of recession. Yet bank lending is sluggish. Companies refuse to hire. Business is going elsewhere to raise capital: China last year outstripped the U.S. as a center for initial public offerings. The market gyrates on Washington's latest political drama.
.A venture capitalist recently remarked to me that the uncertainty the administration has created is "nothing short of paralyzing."
Friday, September 18, 2009
Economy will recover despite government efforts
"Recessions don't peter out in 10 days, of course. But they do eventually end, with or without central bankers' help. According to the National Bureau of Economic Research, the US went through 32 recessions between 1854 and 2001, the average duration of which was about 17 months - or a few months shorter than the current recession, so far.
"Even a severe downturn can be followed by rapid recovery without aggressive central bank intervention. In the 1921 recession, wholesale prices, industrial production, and manufacturing employment all fell by 30 percent or more within a year. Yet by early 1922, the US economy had recovered fully from its mid-1921 low. What's more, it did so with no help from the Fed, which was determined to let the recession take its course, so as to hasten the restoration of the prewar gold standard.
Bernanke, in contrast, has been praised for taking bold, innovative measures to tame a supposedly unprecedented economic collapse. But his innovations included errors of both commission and omission that almost certainly deepened the recent downturn, making it last that much longer."
My take: As I have argued earlier, politicians rush to take ameliorative action early in recessions not to end the recessions but to position themselves to take credit for ending the recessions. They hurry because they don't know when the recessions will end through the normal workings of a free economy. Just as they are loathe to waste an economic calamity, so are they loathe to waste the return of better times.
The only departure from the pattern by the Obama administration lay in its resort to fascist policies, such as the takeover of General Motors and Chrysler and its unparalleled spending. If the past is prologue, the administration's self-congratulation will be unusually loud and especially offensive.
Chances are that economic historians will find that the frantic anti-recession efforts worsened the recession, as President Franklin Roosevelt's policies did in the early 1930s.
Markets work, but liberal politicians don't want to acknowledge that fact.
"Even a severe downturn can be followed by rapid recovery without aggressive central bank intervention. In the 1921 recession, wholesale prices, industrial production, and manufacturing employment all fell by 30 percent or more within a year. Yet by early 1922, the US economy had recovered fully from its mid-1921 low. What's more, it did so with no help from the Fed, which was determined to let the recession take its course, so as to hasten the restoration of the prewar gold standard.
Bernanke, in contrast, has been praised for taking bold, innovative measures to tame a supposedly unprecedented economic collapse. But his innovations included errors of both commission and omission that almost certainly deepened the recent downturn, making it last that much longer."
My take: As I have argued earlier, politicians rush to take ameliorative action early in recessions not to end the recessions but to position themselves to take credit for ending the recessions. They hurry because they don't know when the recessions will end through the normal workings of a free economy. Just as they are loathe to waste an economic calamity, so are they loathe to waste the return of better times.
The only departure from the pattern by the Obama administration lay in its resort to fascist policies, such as the takeover of General Motors and Chrysler and its unparalleled spending. If the past is prologue, the administration's self-congratulation will be unusually loud and especially offensive.
Chances are that economic historians will find that the frantic anti-recession efforts worsened the recession, as President Franklin Roosevelt's policies did in the early 1930s.
Markets work, but liberal politicians don't want to acknowledge that fact.
Sunday, August 23, 2009
Sign makers for recovery see surge in sign making
Mark Steyn:
"Still, what do I know? Evidently, it's stimulated the sign-making industry, putting America back to work by putting up "PUTTING AMERICA BACK TO WORK" signs every 200 yards across the land. And at 300 bucks a pop the signage alone should be enough to launch an era of unparalleled prosperity, assuming America's gilded sign magnates don't spend their newfound wealth on Bahamian vacations and European imports. Perhaps if the president were to have his All-Seeing O logo lovingly hand-painted onto each sign, it would stimulate the economy even more, if only when they were taken down and auctioned on eBay.
Meanwhile, in Brazil, India, China, Japan and much of Continental Europe the recession has ended. In the second quarter this year, both the French and German economies grew by 0.3 percent, while the U.S. economy shrank by 1 percent. How can that be? Unlike America, France and Germany had no government stimulus worth speaking of, the Germans declining to go the Obama route on the quaint grounds that they couldn't afford it. They did not invest in the critical signage-in-front-of-holes-in-the-road sector. And yet their recession has gone away. Of the world's biggest economies, only the U.S., Britain and Italy are still contracting. All three are big stimulators, though Gordon Brown and Silvio Berlusconi can't compete with Obama's $800 billion porkapalooza. The president has borrowed more money to spend to less effect than anybody on the planet."
"Still, what do I know? Evidently, it's stimulated the sign-making industry, putting America back to work by putting up "PUTTING AMERICA BACK TO WORK" signs every 200 yards across the land. And at 300 bucks a pop the signage alone should be enough to launch an era of unparalleled prosperity, assuming America's gilded sign magnates don't spend their newfound wealth on Bahamian vacations and European imports. Perhaps if the president were to have his All-Seeing O logo lovingly hand-painted onto each sign, it would stimulate the economy even more, if only when they were taken down and auctioned on eBay.
Meanwhile, in Brazil, India, China, Japan and much of Continental Europe the recession has ended. In the second quarter this year, both the French and German economies grew by 0.3 percent, while the U.S. economy shrank by 1 percent. How can that be? Unlike America, France and Germany had no government stimulus worth speaking of, the Germans declining to go the Obama route on the quaint grounds that they couldn't afford it. They did not invest in the critical signage-in-front-of-holes-in-the-road sector. And yet their recession has gone away. Of the world's biggest economies, only the U.S., Britain and Italy are still contracting. All three are big stimulators, though Gordon Brown and Silvio Berlusconi can't compete with Obama's $800 billion porkapalooza. The president has borrowed more money to spend to less effect than anybody on the planet."
Thursday, July 30, 2009
Nouriel Roubini sees "very rough and bumpy" road
"...we are now closer than we were six months ago to the end of the worst financial crisis since the Great Depression and worst global recession in decades. But the road ahead will be very rough and bumpy: The recession in advanced economies will continue through year-end, the recovery will be very anemic and well below trend, the risks of a double-dip W-shaped recession are rising, and the growth recovery of emerging-market economies will be constrained by the weakness of advanced economies."
http://www.forbes.com/2009/07/29/global-economy-depression-recession-unemployment-consumption-opinions-columnists-nouriel-roubini.html
http://www.forbes.com/2009/07/29/global-economy-depression-recession-unemployment-consumption-opinions-columnists-nouriel-roubini.html
Saturday, January 31, 2009
The path to recovery: appoint tax cheats
A sense of hopelessness seems to have taken root in Washington, where a pathway out of the recession has opened and no one seems to have noticed.
The first clue was economist Timothy Geithner's payment of taxes he had failed to pay on a timely basis because his confirmation as U.S. treasury secretary required it. After all, he was about to take charge of the Internal Revenue Service.
Then Tom Daschle, a former senator from South Dakota and subsequent lobbyist, stepped up to pay his back taxes to gain confirmation as secretary of Health and Human Services. Who wants a tax cheat in charge of the system that oversees treatment of Americans made sick and suicidal by the IRS?
Taken together, these contributions are small potatos. President Obama should now go after bigger game.
Sen. John Kerry, D-MA, is extremely rich, having married an heiress to the Heinz ketchup fortune. Appoint him ambassador to France, where he would be comfortable. He may have been as careless with his tax returns as he was with his military record in Vietnam. Moreover, his seat would be safe since Massachusetts does not allow Republicans to live there.
How about George Soros? He already owns and runs the Democrat Party, and is so rich that no computer can count his assets. Assign the entire Internal Revenue Service to check his filings and fly-speck his dealings. He undoubtedly owes a few hundred billion dollars because of an oversight or two.
Appoint Soros to anything he wants, but require Senate confirmation so he has to pay up to get it.
Al Gore has grown rich by inspiring hysteria about global warming. Put him in charge of the world thermometer, but require confirmation.
Other potential targets, er prospects:
Mayor Michael Bloomberg of New York City, America's premier advocate of nanny government. Empower him to regulate hairlines, permissable foods and fingernail clippers, but only if he pays up.
Rep. Barney Frank, aka The Banking Queen. Empower him to reset the interest rate of every mortgage in America, but only if he rats out other Democrats who enriched themsleves while pretending to work for Fannie Mae and Freddi Mac.
Ambition built this country. If we harness ambition to the demands of recovery, we can tax our way back to prosperity. It's the Democrat Party's way.
The first clue was economist Timothy Geithner's payment of taxes he had failed to pay on a timely basis because his confirmation as U.S. treasury secretary required it. After all, he was about to take charge of the Internal Revenue Service.
Then Tom Daschle, a former senator from South Dakota and subsequent lobbyist, stepped up to pay his back taxes to gain confirmation as secretary of Health and Human Services. Who wants a tax cheat in charge of the system that oversees treatment of Americans made sick and suicidal by the IRS?
Taken together, these contributions are small potatos. President Obama should now go after bigger game.
Sen. John Kerry, D-MA, is extremely rich, having married an heiress to the Heinz ketchup fortune. Appoint him ambassador to France, where he would be comfortable. He may have been as careless with his tax returns as he was with his military record in Vietnam. Moreover, his seat would be safe since Massachusetts does not allow Republicans to live there.
How about George Soros? He already owns and runs the Democrat Party, and is so rich that no computer can count his assets. Assign the entire Internal Revenue Service to check his filings and fly-speck his dealings. He undoubtedly owes a few hundred billion dollars because of an oversight or two.
Appoint Soros to anything he wants, but require Senate confirmation so he has to pay up to get it.
Al Gore has grown rich by inspiring hysteria about global warming. Put him in charge of the world thermometer, but require confirmation.
Other potential targets, er prospects:
Mayor Michael Bloomberg of New York City, America's premier advocate of nanny government. Empower him to regulate hairlines, permissable foods and fingernail clippers, but only if he pays up.
Rep. Barney Frank, aka The Banking Queen. Empower him to reset the interest rate of every mortgage in America, but only if he rats out other Democrats who enriched themsleves while pretending to work for Fannie Mae and Freddi Mac.
Ambition built this country. If we harness ambition to the demands of recovery, we can tax our way back to prosperity. It's the Democrat Party's way.
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