Obamanomics

[martinbsmithjr]

Larry Elder
Obamanomics Fails: Will the President See the Light?

EMAIL LARRY ELDER | COLUMNIST'S ARCHIVE


The position of chair of the Council of Economic Advisers is open. How President Barack Obama fills it can tell us whether he's finally gone wobbly on Obamanomics -- maybe in time to arrest some of the damage. Would President Obama, to fill a Supreme Court vacancy, ponder whether to nominate liberal Ruth Bader Ginsburg or conservative Antonin Scalia? Would his finalists come down to Sonia Sotomayor or Samuel Alito? Elena Kagan or John Roberts?
Laughable, of course. Such a range of choices would mean that the left-wing Obama does not know whether he wants a "constitutionalist" or a proponent of the "living, breathing document" school of jurisprudence -- whether he wants a "strict constructionist" or whether he wants a jurist who decides cases based, as he put it, on "empathy." We know where he stands. And it is not on the side of Clarence Thomas.
Now, for the chair of the CEA, would Obama's list of possibilities include both the Obama-sympathetic left-wing economist Paul Krugman and supply-side economist Lawrence Kudlow?

Don't laugh. A Washington Post columnist actually suggested that Obama consider these two polar opposites. Honestly, Kudlow? To paraphrase press secretary Robert Gibbs, somebody needs drug testing. Kudlow, a former member of the Reagan administration and current CNBC host and syndicated columnist, advocates lower taxes, free trade, smaller government and less regulation. Krugman, a Princeton professor and New York Times columnist, wants more "stimulus" spending and called the first package "too small and too cautious." They're as different as George Patton and John Lennon. Obama wouldn't hire Kudlow to caddie his golf clubs, let alone to lead his team of economic advisers.

Obama is a community organizer, a person who, by definition, wants government to do more, not less. Obama rails against the "greed" of capitalism and believes that "at a certain point, you've made enough money." He urges higher taxes on the rich to "spread the wealth." He admits that higher capital gains taxes actually produce less revenue but supports a hike so that the rich pay a higher percentage -- a matter of "fairness." He doesn't understand that government subsidization of the housing market -- through Fannie Mae, Freddie Mac, the Federal Housing Administration and the Community Reinvestment Act -- sparked the unsustainable run-up in home prices. He ignores the consensus among economists and says, "The American dream ... means that we raise the minimum wage not just every 10 years, but all the time."
This is not a man who plans to get in touch with his inner Milton Friedman.

"I was wrong," Obama would say by selecting Kudlow. "Unemployment is near 10 percent. It remains high despite the passage of several stimulus packages predicted to jump-start the economy, several extensions of unemployment benefits, takeovers of two domestic automakers, and bailouts of banks and other financial institutions. We are now going in a new direction."

The outgoing CEA chair, Christina Romer, pushed for the $787 billion stimulus and predicted that its passage would prevent unemployment from reaching 8 percent. When unemployment busted past that level, Romer reportedly lost power and influence.
Was she ever comfortable? When Obama chose her, some thought it a sign that Obama wanted to govern as an economic moderate. A San Francisco newspaper called Romer "decidedly centrist." OK, that's San Francisco. But she and her economist husband wrote a paper in which they sounded like Ronald Reagan: "Tax increases are highly contractionary. ... Tax cuts have very large and persistent positive output effects." But Obama believes President George W. Bush wrongly gave tax cuts to the rich, who "didn't need them and didn't even ask for them." "Every economist who's looked at it," said President Obama, "says that the Recovery Act has done its job." This is true -- except for all the economists who think it failed.

Stanford economist Michael Boskin says, "The permanent government expansion and higher tax rate agenda is a classic example of what not to do during bad economic times." Heritage Foundation economist J.D. Foster says, "The problem with the idea of pump-priming the economy through deficit spending is that the government must first pump money out of the economy by borrowing it. Government spending increases public demand; government borrowing reduces private demand. Governments don't create purchasing power. They destroy it through inflation or transfer it through borrowing and spending."
What about Krugman? The Post columnist writes, apparently with a straight face: "Krugman is best known for his New York Times columns arguing that the $787 billion, debt-busting stimulus bill was not enough. ... Maybe it's time for Krugman to put his money where his mouth is. You think government needs to spend more to get us out of this funk? Okay, Paul. Here's the key to the car." No, we've been driving that car for nearly two years. Voters elected a dangerous left-winger who trusts government to run health care, car companies, banks and the student loan program. The driver-in-chief not only sees no need for a course correction, he wants to step on the gas.

[ragman]

An interesting dilemma posed by Bill Gross.  Will we go on with the economic condition we now find ourselves in or will we make changes that could lead to an economic fall into the abyss?     The problem with Bill Gross is I usually walk away from his articles more confused than ever.    Just leave Fannie and Freddie alone?  How do we continue to pump billions of dollars into them?

Bill Gross and Mortgage Rates

Posted By Francis Cianfrocca On August 25, 2010 @ 9:59 am In Blogs, Markets & Policy | No Comments



You might think Bill Gross has gone for out-and-out socialism. [1] He says that it’s impossible to go forward unless the Federal govt continues its current policy of originating and guaranteeing (through Fannie and Freddie) 95% or more of all mortgage issuance.

That may sound silly, but think of the trenchant question he asks: what if Fannie/Freddie leave conservatorship and either become private entities, public entities with no public debt guarantee, or close their doors? What will it take for people just like him to step up and buy about $5 trillion worth of mortgage debt without a taxpayer guarantee?

His answer? Between 300 and 400 basis points. That means retail mortgage rates would go from less than 5% today to between 8% and 9%. This makes perfect sense. It’s the cost of the risk associated with lending money to homeowners. Today, that risk is borne entirely by the taxpayers. (Evidence: Treasury is pumping about $20 billion dollars per quarter into Fannie and Freddie to make up their losses.)


If mortgage rates rise to nearly 9%, the immediate effect will be a huge hit to the value of all outstanding mortgage securities. Many of those securities are now held by large and small banks who have been allowed to pretend that they’re worth more than they are, for capital-requirements purposes. If those portfolios get slugged again, it’s not going to be possible to keep making believe that the US banking system is solvent. You’d see a cascade of foreclosures in every region, and a collapse of prices in other financial assets, followed by another Great Depression. (This is precisely the scenario that yours truly was warning about in early 2009, that got solved by capital-requirement forbearance, aka “pretend and pray.”)

And there’s more, because if you make mortgages far more expensive (never mind that this would simply be acknowledging reality), then housing prices would collapse too. Millions more people would suddenly be underwater on their mortgages and stuck in place.

So for all ends and intents, we’re caught in a box. We can’t allow interest rates to rise to any kind of a rational level, unless the Fed is prepared to simply accept a $5 trillion asset class in repo at par. That means there are no normal policy tools, and no way to counteract the weak economy. I would bet money that there are people in the Fed who are now seriously debating the potential consequences of simply creating $5 trillion.

Doing nothing is actually a plausible option if we’re willing to live with long-term stagnation and high unemployment. In fact, it might be the safest thing to do.

[martinbsmithjr]

My perspective is that the sooner we take the taxpayers off the hook the better off we will be in the long run. The fact is that the market will sort it all out and the risk and return relationship will rationalize the whole market. The facts are the facts and no amount of hopeful wishing is going to change that. If some banks go out of business then they go out of business - this is what used to be called capitalism. If nothing else it should simply be capped right now and the paper that Freddie and Fannie are holding sold off to the highest bidder. Once rational entities own this paper they will act rationally and figure out a way to keep those people in their homes and paying something for the privilege. If not, there will be a huge inventory of rental properties out there that will be cheap enough, because of the glut of rental properties, for people to be able to afford.

What we absolutely can't afford to do is just what we are doing - throwing good money after bad. Take the hit now and at the same time get rid of the unaffordable transfer payments of welfare, medicare, social security, the education scam and the rest and go back to free market capitalism. Will there be some short term problems yes, but the result will be a return to what America once was, the last best hope of mankind. All the naysayers will say we really can't do that because of the poor people and I say that is why we have charities and churches and the reason we give them tax breaks. This would also bring pricing in medical services, housing, education and even prepackaged food to something more realistic.

I have seen poor people before. In fact I am just back from Africa where there are actually poor people. Most of them seem relatively happy without a cable color television, air conditioning, Big Macs and Air Jordans. We cannot continue to allow the politicians to use the underclass as a voting block to continue to take from the productive segment of the society and send part of it back to the poor with the government having taken 40% to 60% to keep another voting block happy - government employees. We don't need all these public employees and we don't need the IRS charade where they pretend to know what the rules are and we pay our accountants and attorneys to stop us getting raped financially.

Back to the basics. Let the market work. I know I am just cruel old white man that cares nothing for his fellow man and should willingly give most of the assets accumulated over a lifetime of hard work to the government so they can buy votes. I will take all the hits. Call me cruel, call me racist, call me Scrooge - I don't care if we don't fix this we will all end up serfs on the federal estate.

[clover]

Ragman-  that article is so true.

Along the same line:

Gridlock Is Our Greatest Hope
The case for divided government

David Harsanyi | August 25, 2010


Get ready for the most productive and decent political condition known to man: sweet gridlock. You get nothing. And after what you've been through these past few years, you deserve it.

Hey, things are tough. A new Rasmussen poll says 48 percent of voters regard President Barack Obama's political views as "extreme." Not surprising, seeing as—how can I put this without being hyperbolic?—Washington has been doing to the economy what Piranha 3D has done to cinematic excellence.

So with Democrats in deep trouble, it's time to start pondering this creepy and amorphous "anti-incumbent" wave.

Weird, isn't it, that few (if any) fiscally conservative Republicans seem to be troubled by this indiscriminate rage of voters? Perhaps—and this is a stretch, I realize—these voters are disturbed or enraged specifically by the policy choices of Democrats? After all, there are polling experts who suggest that Republicans might take back the House. Some assert that even the Senate may be in play.

Don't worry. Unlike recent momentous, history-altering elections that saw Democrats sweep into power—The Thumpin'!—this midterm is nothing more than a reflection of some misguided fears about the economy ginned up, presumably, by Fox News.

Whatever the why, Republicans will have enough votes to prevent any more great leaps forward. Nothing of consequence will happen. And nothing could be better.

This week, House Minority Leader John Boehner (R-Ohio)—emboldened by the prospect of an unearned return to power—asked the president for the resignations of his economic team of Tim Geithner and Larry Summers. (As if it makes a difference which technocrat is meddling with your life.)

Republicans would, unlike the last time out, make significant cuts in spending and taxes, ease the overbearing regulatory system, and repeal nationalized health care.

Maybe. But in the near term, the president certainly would veto any ideologically unpalatable legislation. Just as certainly, he never would allow Republicans to undo his major legislative "accomplishments." If Republicans do take over the Senate, Democrats can filibuster legislation just as easily.

There is no greater check on power in Washington than two strong political parties.

Safe to say there will be enough secure Democrats and secure Republicans that legislative activity will be winnowed down to the bare necessities—namely, politics without policy results. And that's fine by me.

What we need now is to stop the implementation of any more bright ideas and give everyone a break.

I recently read a Newsweek piece ("On Our Own") examining the nation's economic troubles. Government, the story explained with a straight face, "seems to have run out of ideas for rebuilding the economy, but businesses and consumers are figuring it out for themselves."

Out of ideas? Hardly. And that's the problem. But what I particularly liked about the piece was that it neatly summed up the prevailing "idea" of the Washington establishment: Without government's help, you're on your own (a condition, incidentally, that is supposed to be scary).

Washington is stocked with folks who possess the extraordinary gift of believing that they have the ability to manage and organize complex economic systems—and our behavior in them.
The one thing that they won't accept is that businesses, consumers and citizens can "figure it out for themselves."

We need gridlock to help them. And us.

[ragman]

Yes,  for many years I always thought that gridlock was good.  I couldn't understand the arguments against it in the last election.    

Just leave us alone, we will figure it out!  It is the moving targets that kill ya.

[clover]

I watched in the mid 2000's as 3 fast food restaurants were built within blocks of each other........strip malls were built every square mile.  What did they think was going to happen?  It's time to hunker down, pay down the debt and stop spending...without killing off the retired or punishing the working class.  Growth will soon be a locally motivated phenomenon...not a national one

[ernieB]

Did someone script this for Clover or do I agree with him, Oh, woe is me

[klcman]

We were all advised you had blocked him...........

[clover]

Quit stirring shit   (it'll screw up your Karma!........I mean...if you're working on that....otherwise....)

[klcman]

somebody has to do it!  karma?   long gone, pal ( virtual & literal) 

[martinbsmithjr]

OPINION      AUGUST 28, 2010
The Death of Conservatism Was Greatly Exaggerated
In 2008 liberals proclaimed the collapse of Reaganism. Two years later the idea of limited government is back in vogue.

By PETER BERKOWITZ

Last August left little doubt that a conservative revival was underway. Constituents packed town-hall meetings across the country to confront Democratic House members and senators ill-prepared to explain why, in the teeth of a historic economic downturn and nearly 10% employment, President Obama and his party were pressing ahead with costly health-care legislation instead of reining in spending, cutting the deficit and spurring economic growth.

Still, whether that revival would have staying power was very much open to question. A year later—and notwithstanding the Democrats' steadily declining poll numbers and the mounting electoral momentum that could well produce a Republican majority in the House and a substantial swing in the Senate—it still is.

Sustaining the revival depends on the ability of GOP leaders, office-holders and candidates to harness the extraordinary upsurge of popular opposition to Mr. Obama's aggressive progressivism. Our constitutional tradition provides enduring principles that should guide them.

In late 2008 and early 2009, in the wake of Mr. Obama's meteoric ascent, the idea that conservatism would enjoy any sort of revival in the summer of 2009 would have seemed to demoralized conservatives too much to hope for. To leading lights on the left, it would have appeared absolutely outlandish.

In late October 2008, New Yorker staff writer George Packer reported "the complete collapse of the four-decade project that brought conservatism to power in America." Two weeks later, the day after Mr. Obama's election, Washington Post columnist E.J. Dionne proclaimed "the end of a conservative era" that had begun with the rise of Ronald Reagan.

And in February 2009, New York Times Book Review and Week in Review editor Sam Tanenhaus, writing in The New Republic, declared that "movement conservatism is exhausted and quite possibly dead." Mr. Tanenhaus even purported to discern in the new president "the emergence of a president who seems more thoroughly steeped in the principles of Burkean conservatism than any significant thinker or political figure on the right."

Messrs. Packer, Dionne and Tanenhaus underestimated what the conservative tradition rightly emphasizes, which is the high degree of unpredictability in human affairs. They also conflated the flagging fortunes of George W. Bush's Republican Party with conservatism's popular appeal. Most importantly, they failed to grasp the imperatives that flow from conservative principles in America, and the full range of tasks connected to preserving freedom.

Progressives like to believe that conservatism's task is exclusively negative—resisting the centralizing and expansionist tendency of democratic government. And that is a large part of the conservative mission. Progressives see nothing in this but hard-hearted indifference to inequality and misfortune, but that is a misreading.

What conservatism does is ask the question avoided by progressive promises: at what expense? In the aftermath of the global economic crisis of 2008, Western liberal democracies have been increasingly forced to come to grips with their propensity to live beyond their means.

It is always the task for conservatives to insist that money does not grow on trees, that government programs must be paid for, and that promising unaffordable benefits is reckless, unjust and a long-term threat to maintaining free institutions.

But conservatives also combat government expansion and centralization because it can undermine the virtues upon which a free society depends. Big government tends to crowd out self-government—producing sluggish, selfish and small-minded citizens, depriving individuals of opportunities to manage their private lives and discouraging them from cooperating with fellow citizens to govern their neighborhoods, towns, cities and states.

Progressives are not the only ones to misunderstand the multiple dimensions of the conservative mission. Conservatives have demonstrated blind spots, too.

In 2010—in an America in which the New Deal long ago was woven into the fabric of our lives—conservatives can not reasonably devote themselves exclusively to limiting the growth of government. Government must effectively discharge the responsibilities it has had since the founding of the republic, but also those it has acquired over more than two centuries of social, political and technological change.

Those responsibilities include putting people to work and reigniting the economy—and devising alternatives to ObamaCare that will enable the federal government to cooperate with state governments and the private sector to provide affordable and decent health care.

A thoughtful conservatism in America—a prerequisite of a sustainable conservatism—must also recognize that the liberty, democracy and free markets that it seeks to conserve have destabilizing effects. For all their blessings, they breed distrust of order, virtue and tradition, all of which must be cultivated if liberty is to be well-used.

To observe this is not, as some clever progressives think, to have discovered a fatal contradiction at the heart of modern conservatism. It is, rather, to begin to recognize the complexity of the conservative task in a free society.

To be sure, the current conservative revival was not in the first instance inspired by reflection on conservative principles.

The credit for galvanizing ordinary people and placing individual freedom and limited government back on the national agenda principally belongs to President Obama, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid. Their heedless pursuit of progressive transformation reinvigorated a moribund conservative spirit, just as in 1993 and 1994 the Clintons' overreaching on health care sparked a popular uprising resulting in a Republican takeover of Congress.

The Gingrich revolution fizzled, in part because congressional Republicans mistook a popular mandate for moderation as a license to undertake radical change, and in part because they grew complacent and corrupt in the corridors of power.

Perhaps this time will be different. Our holiday from history is over. The country faces threats—crippling government expansion at home and transnational Islamic extremism—that arouse conservative instincts and concentrate the conservative mind.

Mr. Berkowitz is a senior fellow at Stanford University's Hoover Institution.

[ragman]

Here is an Email that I just received from a friend.  Yes, Mike I'm not absolving Bush, he went along with this crap. 

Subject: For the Record
     You need to put some stress on these facts which seem to have been lost
     in all the b.s. that is flowing out of the D's.
              For the Record:

            The day the democrats took over was not January 22nd 2009 it
was actually January 3rd 2007 the day the Democrats took
over the House of Representatives and the Senate, the start
of the 110th Congress. The Democratic Party controlled a
majority in both chambers for the first time since the end
of the 103rd Congress in 1995.


             For  those who are listening to the liberals  propagating
the fallacy that everything is  "Bush's Fault", think about
this:

              January 3rd, 2007 was the day the Democrats took over the
Senate and the Congress. At the  time:
             The  DOW Jones closed at 12,621.77


           The  GDP for the previous quarter was  3.5%

           The  Unemployment rate was 4.6%

           George Bush's Economic policies SET A RECORD of 52 STRAIGHT
MONTHS of JOB CREATION!


           Remember the day...

           January 3rd, 2007 was the day that Barney Frank took over the
House Financial Services Committee and Chris Dodd took over
the Senate Banking Committee.

           The economic meltdown that happened 15 months later was in
what part of the economy?
           BANKING AND FINANCIAL SERVICES!

           Thank  Congress for taking us from 13,000 DOW, 3.5 GDP  and
4.6% Unemployment to this CRISIS by dumping  5-6 TRILLION
Dollars of toxic loans on the  economy from YOUR Fannie Mae
and Freddie Mac fiasco's!
           (BTW:  Bush asked Congress 17 TIMES to stop Fannie  & Freddie
- starting in 2001, because it was financially risky for the
U.S. economy, but no one was listening).

          And who took the THIRD highest pay-off from Fannie Mae AND
Freddie Mac?
OBAMA.
           And who fought against reform of Fannie and Freddie???
           OBAMA and the Democratic Congress.
           So when someone tries to blame Bush...

          REMEMBER JANUARY 3rd, 2007.... THE DAY THE DEMOCRATS TOOK
OVER!" Bush may have been in the car, but the Democrats were
in charge of the gas pedal and steering wheel they were
driving. Set the record straight on Bush!
          So as you listen to all the commercials and media from the
Democrats who are now distancing themselves from their voting
record and their party, remember how they didn't listen to you
when you said you didn't want all the bailouts, you didn't
want the health care bill, you didn't want cap and trade, you
didn't want them to continue spending money we don't have.

          I'm not forgetting their complicity in getting us into this
mess, and I'll be marking my vote accordingly!
           "It's  not that liberals aren't smart, it's just that  so much
of what they know isn't so" -Ronald  Reagan

[deadserious]

Here is an Email that I just received from a friend.  Yes, Mike I'm not absolving Bush, he went along with this crap. 

I don't think you should point out the failures and lies of our good president Mr. George W. Obama.  It's not patriotic.

[clover]

Legislation changes policy.......

George Bush vetoed only 12 bills......the first on stem cell research in 2006......the other 11....guess when 2007-2009.

He vetoed every major piece of legislation proposed by Pelosi \Reid.....so in essence policy enacted prior to the arrival of a Democratic Congress in 2007 was not changed until 2010.  

Nice try ragman....but no cigar.....the article is bull shit

[clover]

Here is an Email that I just received from a friend.  Yes, Mike I'm not absolving Bush, he went along with this crap. 

I don't think you should point out the failures and lies of our good president Mr. George W. Obama. 

Someone else figured it out