Resurrect Capitalism!

March 21, 2009

Cut Spending!!!

Filed under: Obama, bailouts, debt, politics, socialism — Tags: , — admin @ 8:16 am

In the Bush years Democrats made a lot of hay about the size of the Federal deficit and cumulative debt levels.  I agree with those criticisms and think that it is irresponsible to increase government debt levels unless you have an overwhelmingly good reason to do so.

In 2004 then Representative Ramm Emanuel criticized Bush’s deficit in 2004 when it was a “paltry” $375B.

“The deficit is going to be a symbol of their credibility problem, and the budget is going to be the document we use” to make that argument, said Rep. Rahm Emanuel, D-Ill., a member of the House Budget Committee

In between the “stimulus” plan, endless bailouts, and ludicrously large budget plans Obama’s debt levels are unfortunately going to dwarf the Bush deficits.

President Barack Obama’s budget would produce $9.3 trillion in deficits over the next decade, more than four times the deficits of Republican George W. Bush’s presidency, congressional auditors said Friday.

Apparently Mr. Emanuel would not call this a “credibility problem”.  We now see how hollow those Bush budget criticisms were.  I think the true numbers would be worse than this as the budget assumptions do not assume plunging tax revenues, which is almost certain to happen.

I said previously that Obama is a dangerous man because he has never had to test his ideas against the constraints of reality.  He is an unconstrained idealist.  This is pretty evident with his reaction to the gargantuan debt levels his plans will saddle America with:

But Obama insisted on Friday that his agenda is still on track. “What we will not cut are investments that will lead to real growth and prosperity over the long term,” Obama said. “That’s why our budget makes a historic commitment to comprehensive health care reform. That’s why it enhances America’s competitiveness by reducing our dependence on foreign oil and building a clean energy economy.”

This guy seriously thinks that a “clean energy economy” (effectively subsidies on renewable energy and massive taxes on cheaper energy sources) is going to cause economic growth.  He seriously thinks that massive government control of healthcare (more massive than the nearly 50% it already controls in America) is going to be a big growth boost.

Time to scale back the agenda, Mr. Obama.  We are all limited in what we can do, no matter how badly we want it, and you are no exception.  How much debt are we going to saddle our children with???  Fortunately it looks as though Democrats in Congress are not going to just follow his agenda.  Let’s hope.

March 17, 2009

Growth of the Command Economy

Filed under: bailouts, politics, socialism — Tags: — admin @ 9:01 pm

The bad news keeps piling up for Capitalists.  The central planners in our government are throwing their weight around more forcefully than ever.

Hybrid automobile sales have fallen off a cliff.  This February the total number of hybrid sales were 2/3 less than in April of 2008.  The market is clearly providing feedback: hybrids are not in demand.  However, thanks to government intrusion into the auto industry via bailouts automakers now feel compelled to make hybrids to appease politicians.

…automakers feel they have little choice but to make more hybrids. Though car buyers are losing interest, politicians are pushing them as key to reducing U.S. dependence on foreign oil and limiting the global-warming gases Supply & Demand: Dead in the Auto Industry?that cars emit into the atmosphere.

In January, President Obama called on the industry to “thrive by building the cars of tomorrow” and prepare for federal and state regulations that could push average fuel economy above 40 miles per gallon by 2020.

“The automakers are in the situation of needing to pacify politicians that are in the position to bail them out with expensive fuel-efficient cars,” said Rebecca Lindland, auto analyst with IHS Global Insight. “But shouldn’t it be more about satisfying the needs of the American consumer?“

I couldn’t have said it any better myself.  Obviously the only way the automakers will regain financial health is by making vehicles that people actually want to pay for.  Instead they are making vehicles that socialist politicians like.  “Supply and demand” has been transformed to “bailout and command”.

Let this be a lesson for CEO’s on the brink: accepting bailouts is the financial equivalent of selling your soul.  You buy yourself some breathing time but you get a massive ball and chain clamped to your ankle.  I feel no pity for executives who think they are taking the easy way out.

This is a chilling thought but the seeds of a command economy are planted.

March 14, 2009

Central Planning for Growth and Recovery?

Filed under: Obama, politics, socialism — Tags: , , — admin @ 6:52 am

A few days ago President Obama said to a group of businessmen that things in the economy are “not as bad as we think they are”.  No one in the mainstream media called him out on that rather abrupt flip-flop from just last month:

Obama warned that failure to pass an economic recovery package could plunge the nation into an even longer, perhaps irreversible recession

Quite a startling contrast with his more recent statements.

But I digress.  In this same meeting with businessmen President Obama has started to flesh out his vision for how to get the American economy moving and growing again. Being a socialist through and through it should be no surprise that Obama’s plans involve bigger government and bigger sums of money being spent.

“What we need to do is go back to fundamentals,” he said. “And that means driving our healthcare costs down. It means improving our education system so our children are prepared and we’re innovating in science and technology. And it means that we’re making this transition to the clean energy economy.”

On the surface these sounds like sensible remarks.  But boiled down to essentials they will involve ever more bureaucracies consuming ever more massive sums of money.

How will Obama “drive our healthcare costs down”?  Why, by increasing the governments role in healthcare.  I can’t remember the last time the government subsidized anything and made it cheaper, but that’s just me.  Obviously Obama doesn’t care about costs as much as having socialized healthcare.  Most people would be surprised to learn that government spending comprises nearly 50% of all healthcare expenditures in this nation.  How much more expensive will it get when the government’s share of healthcare funding increases, as it will surely do under the Obama administration?

Education, like healthcare, is another area where government interference has been massive and costs have increased much more rapidly than inflation.  Of course Obama will never see this connection.

There are certainly things Obama could and should do to stimulate the economy but they don’t fit in with his socialistic vision.  Make America a more appealing place to do business.  Trim regulations.  Allow people and businesses to keep more of their own time and money.  Let people be free!

The economy will recover and the recovery will not by led by a man who has never been tested by market forces.

March 5, 2009

Obama Just Doesn’t Get It

Filed under: Obama, economics, politics, socialism — Tags: , — admin @ 5:44 pm

After slightly more than 1 month in office it is blindingly obvious that Obama has no clue how the economy works.  He has no clue how to stoke economic growth and he has no clue how to lead us from this economic morass we find ourselves in.  He thinks any spending by the government equals economic growth.

I guess we shouldn’t have expected much from a social worker with a law degree, a man who has arguably never held a real job in his entire life.  But the American people were interested in something other than the party of George Bush and now we are really in a mess.

As the economy falters Obama’s response is higher taxes, higher regulations, and more welfare (both corporate and personal).  He has effectively killed off welfare reform of the 1990’s.  Massive bailouts are proceeding at a sickening pace.  The debt was bad under Bush.  Obama will make the debt much, much, much worse.

I have waited and saved patiently for years to be able to buy a house.  Now thanks to Obama people who had no business buying homes are having their mortgages modified so as to be more affordable.

Obama wants to make energy more expensive through his “green” energy  plans.  He wants businesses to pay more taxes.  He wants massive new government programs in healthcare and welfare.

Obama is a socialist, plain and simple.  After seeing socialism in every single form fail in every single mode of implementation a rational person might question the premise.  But not Obama.  He loves the siren song of socialism and he’s going to try to implement it no matter what the consequences.

But the people I really blame for this are Republicans.  They claimed to be supporters of capitalism and free enterprise but they spent massively and traded in their principles for expediency.  Now they have lost credibility and their numbers in Congress have diminished to the point that they can do little to stop the full socialist onslaught.

Republicans will be back but they must first renew their committment to the system that made America great: Capitalism!

In the meantime our economy will be trashed by a man who is in way over his head.  I shudder to think of what havoc the community organizer will cause.

February 14, 2009

Panic

Filed under: economics, politics, psychology — Tags: — admin @ 12:02 pm

It’s interesting to be living through a financial panic.  Mind-blowing stuff is happening on a daily basis (trillion dollar bailouts are disgustingly routine these days).  Financial institutions that have lasted untold calamities have collapsed in the past 6 months.  And we’re going to see increasingly dramatic events.  It seems like everything is falling apart.  In times like these you need to keep your head screwed on more tightly than ever before.

panic_attack

I strongly disagree with the premise that our economy is going to collapse without government intervention.  Uncertainty is in the air and some people cannot handle it.  Think of all the turmoil our economy has survived in the past: numerous financial panics, the Revolutionary War, the Civil War, World Wars I & II, the Great Depression, stagflation in the 1970’s, and many other times of massive uncertainty.

And this downturn is going to sink us and send us back to the dark ages without government assistance?  I am skeptical to the extreme.

The main flaw with the “total collapse” theory is that not all financial institutions are unsound.  Many banks actually maintained rational lending standards in the past 5 years.  New banks untainted by the excesses of the near-past are seeing a wide array of opportunities open.

A good example is Discover, the credit card issuer.  Discover Financial Services has been derided as a low-tier credit card company but they maintained more prudent lending practices during the Great Credit Bubble.

while other issuers were still courting customers with multiple mortgages, Discover flagged borrowers with two home loans, keeping their credit limits low. As a result, say analysts, Discover has less exposure to the riskiest markets

Now they can reap the benefits as their rivals wobble:

Discover, the sixth-largest credit card issuer, is the one laughing now. Earnings jumped 57% in the past fiscal year, compared with a 34% decline at AmEx and a $46 million loss at Capital One Financial (COF). The company is trying to capitalize on others’ pain to gain market share and boost its international presence. “This is the classic tale of slow but steady winning the race,” says Dennis Moroney, a research director at TowerGroup.

The business landscape is changing dramatically.  But it’s not going to dissolve without socialistic “stimulus” plans like the panic mongers say it will.  Understand something crucial here: many panic mongers have a vested interest in having you believe the system is at risk of going under without bailouts.  Socialists in our government (and there are many, including our president) are using this panic as an opportunity to increase the size and scope of government.  Socialist CEOs want you to believe that allowing them to collapse due to their own bad decisions will ruin our entire economy.

In a nutshell A LOT of people have A LOT to gain by getting you to believe that your well-being is dependent on government stimulus efforts.

February 13, 2009

Mystery Meat

Filed under: politics, pork — Tags: , — admin @ 9:14 pm

A very disturbing aspect of the bailouts: it seems as though not a single senator will have the chance to read the actual $790B stimulus plan before voting on it.  The reason is because it takes a while to read 1071 pages of anything but the vote is going to be held in a rush.

The bill is expected to land on President Obama’s desk no later than Monday, and the president is expected to sign it into law–whether the nation’s lawmakers have read it or not.

Call me cuckoo, but I’d like to at least have the fantasy that our elected officials know what they are voting for.

Sen. Roland Burris (D-Ill.), President Barack Obama’s successor in the Senate, seemed baffled by the thought of actually reading the entire bill–as did his press secretary.

“I think it’s about 800 pages,” Burris’s press secretary said before laughing lightly. “We’ll do the best we can.”

Fuck you, Roland Burris!

Fuck you, Sen. Burris’ press secretary!

I don’t think saddling our children with extreme amounts of debt is something to flippantly blow off.  My teachers made me read 1000 page books in some classes.  But I guess the standards are looser when you’re voting on increasing debt levels by many hundreds of billions of dollars.

It’s obvious that the bill is being rushed through in an effort to strong-arm opposition.  It’s also obvious that the amount of pork and wasteful spending in the bill will be of biblical proportions.

February 11, 2009

And Then the Unthinkable Happened…

Filed under: entitlements, politics, unions — Tags: , , — admin @ 11:52 pm

The city of Vallejo, CA made the news last year for going bankrupt.  The city coffers swelled during the 2000’s real estate boom.  As that bubble popped real estate tax revenue dried up and the town went bankrupt due to its unsustainable obligations.  One of the major costs that broke the city was the cost of employing public sector union members.

Now, after much haggling and legal wrangling with the bankrupt municipality the unthinkable has happened: public employee union members actually accepted a cut in entitlements.  Public employee unions typically fight tooth and claw against getting small increases in benefits & pay (never mind outright decreases) so this is actually significant.  OK, so the town had to go bankrupt to renegotiate its union contracts but at least it happened.  This is why bankruptcy was created.  It allows an entity to renegotiate unsustainable agreements.

Some concessions CAMP members made in their supplemental contract include dismissal of all bankruptcy-related damage claims against the city, limited unpaid furlough in the next two fiscal years, a reduction in medical benefits coverage — starting in 2010 — and further reduced retiree medical benefits for new hires. Also, new employees will be unable to cash out accrued sick leave or gain longevity pay.

Notice what didn’t happen: the union members are not down and out.  Unions don’t want to accept even the smallest cuts and will wage fear-mongering propaganda campaigns about the horrors that await the budget ax.  But ultimately the union members accepted mild entitlement concessions so that their city could regain solvency.  Sounds like a win-win deal to me.

The Detroit automakers should do the same thing as the city of Vallejo.  Go bankrupt and renegotiate your labor agreements.  Wring some concessions out of them and regain the ability to profitably manufacture cars.  Instead the bailout of the Detroit three has prevented (at least temporarily) the marketplace feedback from influencing labor agreements.  We taxpayers are footing the bill for unsustainable UAW union labor practices.

On that note, here is a sad story: the main manufacturing plant in my Central New York hometown, Magna International / New process Gear, is closing down.  The factory has been financially wobbling for some time and the closing was precipitated by UAW members voting against accepting wage and benefit concessions.  Some of my friends from high school and family members work for that plant.  They didn’t want pay cuts but now they are going to get a 100% cut in pay. Through the years the UAW fought tooth and claw against every single effort to control labor costs and this “no” vote was simply the straw that broke the camel’s back.

I don’t want to think about what this closing will do to the area:

When the afternoon shift let out, there wasn’t a worker in sight at the normally crowded McShane’s. “All the factory jobs we’ve already lost - General Motors, Marcellus Casket Company, Carrier, Crouse Hinds, Syracuse China, and now Magna, what’s left?” asked [McShane's manager] Doran.

Nothing is left.  My home region used to be a manufacturing powerhouse.  Now it is a vegetable on life support, with various handouts from the state as the dominant industries.  Some of the job losses are due to outsourcing but many of those jobs have just moved to more business-friendly climates down south.  The tax and regulatory environment simply make New York state an uncompetitive place to do business.  Upstate New York needs capitalism badly.

Say hello to your future, New York:

detroit_ruins

The Rage Simmers

Filed under: bailouts, politics — Tags: — admin @ 10:20 pm

This might as well be me…

I don’t think politicians realize the anger that most Americans have about these bailouts.  We are alllowing a social worker with a law degree and a tax cheat to saddle our children and grandchildren with a ghastly amount of debt (assuming we actually pay it).  Disgusting and despicable.

February 7, 2009

Stimulus Packages == Magical Thinking

Filed under: Obama, capitalism, economic growth, politics, psychology, socialism — Tags: , , , , , — admin @ 10:01 am

I’m very skeptical of government sponsored “stimulus packages”.  There are a number of inconsistencies underlying them, and they have a miserable track record at achieving their desired results.  But right now we’re in a financial panic.  In our politicians’ minds critical thinking and examination of the results of previous stimulus efforts are subordinate to the need to DO SOMETHING, NOW.

We’ll set aside the fact that for Obama’s stimulus package (which he tells us needs to be passed NOW) the vast majority of spending will not even happen this year. We shall also set aside the fact that hundreds of billions of dollars of the proposed package are going to welfare of some sort and cannot by any stretch of the imagination cause lasting economic growth.

I’m really puzzled by the assumptions lurking beneath a stimulus package proposal.  The idea is that our government can print money and  through deficit spending  allocate it to a variety of programs, with lasting economic growth somehow resulting.  This is classic Keynesian economics and it has been tried in a variety of nations and circumstances, never with the desired result ensuing.  Keynesian economics does however have the appeal of “something for nothing” and politicians who want to be seen as proactive cannot resist the promises of stimulus packages.

Economic growth is caused by solving / improving problems.  The industrial revolution caused economic growth by freeing up labor.  The horse and carriage, railroads, automobiles, and airplanes all caused economic growth by improving transportation options.  The computer automated countless tasks and freed up considerable mental effort.  The internet caused economic growth by improving the transfer of information.  The theme is that to get economic growth, to improve the standard of living, things need to improve. The catch of course is that it is difficult to improve things.

Government stimulus packages do not improve things.  People who advocate stimulus plans suffer from “magical thinking“:

According to psychologist James Alcock, “‘Magical thinking’ is the interpreting of two closely occurring events as though one caused the other, without any concern for the causal link.

Having more wealth is a consequence of economic growth.  Stimulus advocates take the consequence of growth to be the cause of growth. In essence they confuse cause and effect.  In their minds more money spent implies more wealth.  As a result any amount of money spent on anything should cause economic growth.   Money for artists that no one likes, money for STD prevention, money for bridges to nowhere-  it doesn’t matter to them as funding is equivalent to growth.  Quoting our President:

Ratcheting up the sarcasm, the president said: “So then you get the argument, ‘well, this is not a stimulus bill, this is a spending bill.’ What do you think a stimulus is?”

“That’s the whole point,” he said, as the audience hooted and applauded.

Our President suffers from an acute case of magical thinking.  In his book any government spending will cause net economic growth.  I’ll accept that in a package ~ $1T in magnitude SOME lasting economic growth will be stimulated.  But the question is not will SOME economic growth be stimulated but will the NET effect be economic growth? All of this spending has to be financed somehow, and the funds will be taken from people who given the choice would allocate their capital differently.

turning lead into gold

stimulus packages: just another attempt at turning lead into gold

The basic premise underlying all government stimulus packages is that government is somehow more efficient at allocating resources (i.e. capital) than individuals.  Stimulus packages are the distilled quintessence of SOCIALISM.  Socialism everywhere it has been tried has had miserable results at stimulating growth (academics don’t even debate this, but some say the economic stagnation was a worthwhile trade-off for other more ephemeral benefits).  But somehow this time socialism is going to work and it is allegedly going to save us all.

I’m not the only one skeptical of stimulus attempts.  The Congressional Budget Office concludes that Obama’s stimulus plan will hurt the economy more than doing nothing.

The beauty of capitalism is that as a politician you don’t have to do anything.  You just remove constraints and let people solve their own problems.  Grant people the freedom to allocate their resources as they see fit.  The downside to this is that voters who want to have their cake and eat it too will hold you as a politician responsible for solving their economic problems.  Capitalism is not perfect (nothing is) but just like the laws of thermodynamics you will not do any better.

Our Congress is on the verge of making a grave mistake, one that our children and grandchildren will be paying for.

February 5, 2009

Arrogance Is NOT An Argument

Filed under: economics, politics, psychology — Tags: , , — admin @ 7:37 pm

obama_smug

President Obama says that we need to act FAST and implement his stimulus plan or the results could be catastrophic.  We should be seeing the real Obama more and more now that he must take off the mask of the idealistic agent of change and be a real politician.

Well, he should be acting like a guy who has to solve real problems with real constraints.  But he writes as if he is still in campaign mode, with more of the same fluffy rhetoric that was old as soon as he got elected:

So we have a choice to make. We can once again let Washington’s bad habits stand in the way of progress. Or we can pull together and say that in America, our destiny isn’t written for us but by us. We can place good ideas ahead of old ideological battles, and a sense of purpose above the same narrow partisanship. We can act boldly to turn crisis into opportunity and, together, write the next great chapter in our history and meet the test of our time.

His stimulus bill is stalled in the senate due to massive amounts of pork that have nothing whatsoever to do with economic stimulus.  You’d think he would take the opportunity to address these criticisms and explain why this spending is not wasteful.  Instead he just spouts off platitudes as if to brush aside those who stand in the way of his vision.

In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis — the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.  I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long.

He really doesn’t present ANY argument for his stimulus plan.  He soothingly describes the general symptoms of what ails us but he does not say HOW his plan will stimulate growth.  He just flatly states that his plan will stimulate the economy.

The economy is bad-  OK, agreed.  So explain to me how spending $1T or so on programs that are at best remotely connected to economic growth is going to revive our economy.  Don’t just try to make me panic:

Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.

The last line really gets my goat.  The notion that we will descend into an irreversible decline unless we implement his stimulus plan smacks of astounding arrogance.  In fact this entire op-ed piece reeks of smug arrogance.  I’m getting the impression that Obama has always pretty much had things go his way and doesn’t feel the need to justify any of his actions or decisions. If you don’t agree with him, why, you are a bitter husk of a person holding up progress and you need to step aside.

I’m skeptical of any stimulus measure that involves politicians allocating taxpayer dollars.  We need real economic growth (that is, we need to SOLVE PROBLEMS and improve things) and that is something that we do, not the government.  I think that our government can and should try to indirectly stimulate the economy by relaxing (perhaps only temporarily) regulations that add considerable costs to business.

Normally I would favor tax cuts but with our deficit at cringe-inducing levels already I’m not so sure that is the best course of action.  But if our government were to spend $1T on stimulus I would rather have $1T in tax cuts.  The deficit would increase by the same amount but at least we would be able to keep more of our cash and stimulate real growth in the process.

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