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 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 8, 2009

Obama is Killing the Economy With Uncertainty

Filed under: Obama, capitalism, psychology, turmoil, uncertainty — Tags: — admin @ 7:25 pm

One of the reasons recessions turn into depressions is that people hesitate to commit their capital to new investments due to uncertainty.  Right now credit is tightening up because people do not know the true extent of bad loan losses.  It is unknown who is suffering losses and to what extent.  The zeitgeist is one of panic and confusion.

One of the absolute worst things our government can do right now is to create more uncertainty.  And yet that’s exactly what Obama is doing on multiple fronts.  The problem is in trying to figure out how Obama’s bailouts, tax increases, changes in regulations, and modifications to social programs will affect businesses.

Many health care stocks are down because of fears of new government restrictions and mandates as part a health care overhaul. Private student loan providers were pounded because of the increased government lending role proposed by Obama. Industries that use oil and other carbon-based fuels are being shunned, apparently in part because of Obama’s proposal for fees on greenhouse-gas polluters [NOTE: greenhouse gases are not pollution!].

The obvious expectation is that Obama’s actions will harm all of these industries.  But nobody can have a firm estimate of how badly Obama’s programs will damage the industries in question because nobody knows what legislation will pass. Why commit your precious funds to a particular investment that could be wiped out with a new law or a bureaucrat’s whim?

I see an economic stalemate forming, just like during the Great Depression when people with capital hesitated to invest it due to massive uncertainty.

Obama’s endless bailouts are also creating massive uncertainty.  Investors are staggered by the sums being alloted and are wondering where the money will come from.  Inflation seems to be the most likely way to finance them.  Of course inflation devalues a currency and the plausible specter of it creates additional uncertainty.

Many deficit hawks also worry that the trillions of federal dollars being doled out by the administration, Congress and the Federal Reserve could sow the seeds of inflation down the road, whether the measures succeed in taming the recession or not. The money includes Obama’s $3.6 trillion budget and the $837 billion stimulus package he signed last month.

So in addition to creating uncertainty with tax increases and new programs and regulations that threaten to strangle entire industries the “stimulus efforts” are creating uncertainty in our currency.

The best thing for our government to do would be to get out of the way and let the market sort out the winners and losers.  Let the insolvent entities go bankrupt and separate the healthy parts of banks from the cancerous divisions.  Of course this is not a painless process and the bailout recipients are heavily invested in lobbyists.

At least some Republicans are recognizing that eternal life support is short-circuiting the market feedback.  Republicans will be back in power but they first need to rediscover their free market roots.  A fantastic quote from Senator John McCain:

“The best thing that could probably happen to General Motors, in my view, is they go into Chapter 11,” Senator John McCain said on the “Fox News Sunday” program today.

The automaker could reorganize and renegotiate its labor contracts to come out “stronger, better, leaner,” McCain, from Arizona, said.

Why couldn’t McCain have said this during his campaign?  [In my opinion one of the worst things McCain did during his presidential run was to "suspend" his campaign and throw his full support behind the TARP bailout].  Bankruptcy was created for a reason.  What Obama doesn’t seem to understand is that bankruptcy is not synonymous with liquidation.  Just because a company goes bankrupt does not mean that it will no longer exist.

At this point everyone who is paying attention knows that Obama is a socialist.  He is a very dangerous man-  he’s an idealist with an immense amount of power who has never tempered his plans against the constraints of reality.  The question (and source of uncertainty) is, how far will he be able to enact his agenda?  That is the fundamental unknown.

March 6, 2009

A Symptom of Financial Illiteracy

Filed under: Obama, capitalism — Tags: , — admin @ 11:03 pm

This Wednesday Obama said in a speech:

“Profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it”

This is a small gaffe but at the same time it is very telling.  Anyone who has ever paid attention to financial markets knows that Obama meant to say “price to earnings ratio”.  Maybe community organizing isn’t good economic experience after all.

economically clueless

economically clueless

March 5, 2009

Insatiable Gluttons

Filed under: Obama, entitlements, socialism, taxes, unions — Tags: , — admin @ 8:54 pm

It seems like every new day brings further news of layoffs, declines, and economic setbacks.  People are cutting spending.  Businesses are spending less as well.  With incomes down, unemployment up, and profits declining it is obvious that tax revenues will fall a bit everywhere.

So the logical course of action is to CUT SPENDING.  Of course Obama thinks that government can magically allocate capital better than private enterprise, so the federal government is instead dramatically increasing expenditures.

Surely state governments will be cutting expenditures, right?  Well, they are trying to.  The problem is that the wards of the state don’t like it when you mess with their hand-outs.  In New York City massive protests are underway to demonstrate against spending cuts:

Organizers estimate that 50,000 people have lined Broadway with a message to Gov. David Paterson that cuts are not the answer to fixing New York’s budget problems.

The protesters are made up of a widespread coalition of labor unions, community groups, and even families uniting to have their voices heard. Dubbing it a “Rally for New York,” they are rallying against proposed state and city budget cuts to public services, education, health care, along with other programs that impact families and the economy in New York.

Apparently massive tax increases wouldn’t “impact” the economy according to these protesters.  New York state already has among the highest taxes and costs of business in America.  Further tax increases would only exacerbate that.  Maybe all commerce can move down South.

the public sector
the public sector

Balancing a budget isn’t “rocket surgery”.  If you’re spending too much then you’re spending too much and you need to cut back.  The knee-jerk solution is not to further squeeze the taxpayers who are already enduring massive decreases in wealth and income.

Funny but I don’t see “downsized” private sector employees protesting.  Maybe it’s because they are mentally adults and accept that resources are finite and that nobody owes them a living.

The public sector is an insatiable glutton.  Its capacity to consume is infinite and it must somehow be stopped.  Of course as part of Obama’s “stimulus plan” there is a lot of money doled out to state governments to prop up their excessive spending habits.  Obama is doing EVERYTHING wrong in his handling of this crisis.

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 21, 2009

Piling on the Pain

Filed under: Obama, socialism, taxes — Tags: , — admin @ 10:00 pm

Details of Obama’s proposed budget for the next fiscal year are leaking out.  Our president is trying to cut the budget deficit.  This is tough to do
when you spend trillions of dollars on various socialist programs.

To be fair, I do approve of Obama’s plans to wind down war efforts in Iraq and Afghanistan.  At this point in time I think it is pretty clear we’re not going to make any lasting changes in those regions.  We have cleaned up Iraq significantly; that combined with our fiscal situation makes the present an ideal time to withdraw.  At some point they have to pull their own weight.

You might think if you are trying to reduce debt you should cut government services, but in this new budget Obama wants to greatly expand the size and scope of government.

In addition to tackling a deficit swollen by the $787 billion stimulus
package and other efforts to ease the nation’s economic crisis, the
budget blueprint will press aggressively for progress on the domestic
agenda Obama outlined during the presidential campaign. This would
include key changes to environmental policies and a major expansion of
health coverage that Obama hopes to enact later this year.

Obviously there is a massive contradiction between “tackling the deficit” and enacting “a major expansion of health coverage”, especially in an era of collapsing tax revenue. The government already accounts for nearly half of all healthcare expenditures in America, but Obama thinks this is not nearly enough.

And as for “key changes to environmental policies”, now is an absolutely dreadful time to enact CO2 taxes.  For starters there has still been no evidence that our CO2 emissions are causing the earth to warm.  And even if you did believe that anthropogenic CO2 emissions were causing harmful warming of the earth, due to the economic downturn CO2 output is already falling without any government regulations. Does piling a new cost on to the shoulders of already stumbling consumers sound like a way to stimulate economic growth?

New taxes on individuals and businesses would likewise be disastrous.  American corporate tax rates are already among the highest in the developed world.  Obama’s budget would make this even worse.  If your profits are already declining you would get to keep even less of your money under Obama’s proposed budget.  Does this sound like a good way to create jobs and stimulate economic growth?

The key to reviving the economy is to let the market clear the deadwood and heal itself.  The best thing for the government to do is to get the hell out of the way.  Obama is trying to stunt this at every step of the process.

I don’t like the USSA (United Socialistic States of America) very much these days.  Obama needs to be careful about pushing things too far.  He does not realize it but he faces a growing risk of a backlash.  The anger among hardworking, responsible Americans is palpable and growing with every new socialist plan that Obama conjures up.  The boiling point is somewhere, not too far away…

February 10, 2009

Socialist Rot

Filed under: Obama, decline, entitlements, freedom, socialism — Tags: , — admin @ 10:39 pm

Socialism is bad in for multiple reasons.  Most significantly it fails miserably in achieving the goals stated by its advocates (improved economic performance through central planning).  It places severe burdens on productive people.  Higher taxes and increased regulations restrict your freedom (if you work or produce something of value, that is).

But perhaps the ugliest effects of socialism are on the recipients of handouts.  When your survival depends on persistent freebies from the state you lose something.  Your independence, your life force, your vis viva slowly withers.  The survival instinct fades.  You become helpless, a shell of your former self.  I don’t look down on people who accept help in times of need.  The problem of course is when “time of need” becomes indefinite.  It’s OK to accept help from others.  But as soon as you take the help for granted you are ruined on the inside.

I’m posting a few clips that disgust me. Clips like these are anecdotes and are not necessarily representative of America as a whole.  These clips show people begging President Obama for help in meeting their day to day needs.

Apparently the handouts in Ft. Myers, Florida are not good enough for Ms. Henrietta Hughes.  She feels the need to shake her beggar’s cup straight to the man at the top:

Could you imagine getting in front of this crowd, in front of those television cameras, in front of your president, and demanding help?  It boggles my mind.

Then you have Julio, who looks hopped up on some type of drug.  He has worked at McDonalds for 4.5 years, claims that he can’t get anything better, and thinks he is owed premium healthcare:

Regardless of their citizenship these folks are not true Americans.  They are not self-reliant and don’t appear to want to be so.  They wouldn’t fight for their freedom.  They will fight tooth and claw to take away your freedom, however.  And Obama will try to oblige them.

Look at how pleased Obama seems in these videos.  These are the kind of voters he likes.  He will very happily sell your hard-earned tax dollars down the river in exchange for their votes. Besides which, he gets to play savior.

The fate of a society is determined by the attitudes and actions of the common man.  Let’s hope the above folks aren’t the new median.

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.

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