Warren Buffet on the economy and the effort of the government to “stimulate” it:
While praising efforts by Federal Reserve Chairman Ben Bernanke and others to stimulate the economy, he said the economy “can’t turn around on a dime” and that their efforts could trigger higher inflation once demand rebounds.
“We are certainly doing things that could lead to a lot of inflation,” he said. “In economics there is no free lunch.”
Funny how, when someone like Warren Buffet – who has been a supporter of Obama – says things like ‘trigger inflation’ and ‘no free lunch’, people who were previously playing the denial game (massive spending is necessary and good) suddenly figure there may be a problem. Meanwhile the laws of economics have continued to function despite the denial.
For the most part the press has ignored Buffet’s words and they’ve been downplayed by the administration. But perhaps if those who’ve been in denial are willing to consider Buffet’s warnings, they’ll be open to listening to others. Such as warnings about the double talk that’s been coming out of the Obama administration the past few weeks. For instance:
Confidence (too little) and uncertainty (too much) define this crisis. Obama’s double talk reduces the first and raises the second. He says he’s focused on reviving the economy, but he’s also using the crisis to advance an ambitious long-term agenda. The two sometimes collide. The $787 billion “stimulus” is weaker than necessary, because almost $200 billion for extended projects (high-speed rail, computerized medical records) take effect after 2010. When Congress debates Obama’s sweeping health care and energy proposals, industries, regions and governmental philosophies will clash. Will this improve confidence? Reduce uncertainty?
A prudent president would have made a “tough choice” — concentrated on the economy; deferred his more contentious agenda.
Instead he’s decided he’s not going to let a “good crisis” go to waste and pursue his very expensive agenda which has nothing to do with the economic crisis (or alleviating it). All the while he preaches about crisis, catastrophe, sacrifice, tightening belts and doing with less even as he plans to expand government beyond anything we’ve ever seen.
It is an amazing performance.
It is time to get real about what the promised cap-and-trade tax means to the average American.
Politicians love cap and trade because they can claim to be taxing “polluters,” not workers. Hardly. Once the government creates a scarce new commodity — in this case the right to emit carbon — and then mandates that businesses buy it, the costs would inevitably be passed on to all consumers in the form of higher prices. Stating the obvious, Peter Orszag — now Mr. Obama’s budget director — told Congress last year that “Those price increases are essential to the success of a cap-and-trade program.”
Essentially Congress will be creating a new commodity literally out of thin air. It will only create a certain amount of that commodity and so create instant scarcity. As we all know, scarcity drives up prices. The next year, the plan is to remove a portion of the created commodity from the market creating even more scarcity and driving prices for the commodity even higher.
Imagine steel as the commodity. Imagine steel prices going through the roof. Do you suppose they might effect the price of, say, automobiles? Metal buildings? The price of building a bridge or sky scraper?
So who, in the final analysis, is going to end up paying for this increase in steel prices? Why the final consumer, of course. Naturally, with steel, in some cases you can choose to consume (buy a new car, rent an office or approve the bridge) or not consume. However, with the CO2 tax on all industry, to include manufacturing, service, transportation and energy, you have little choice in the matter of consumption. You will be picking up the tab for this.
That brings us full circle to the promised tax cut for 95% of America and my promise that what government gives with one hand it takes with another, making the tax cut illusory at best:
Hit hardest would be the “95% of working families” Mr. Obama keeps mentioning, usually omitting that his no-new-taxes pledge comes with the caveat “unless you use energy.” Putting a price on carbon is regressive by definition because poor and middle-income households spend more of their paychecks on things like gas to drive to work, groceries or home heating.
After all the caterwalling the left does about “progressive taxation” they are about to implement the most regressive tax I can imagine. And as I’ve pointed out, the tax is pervasive, touching just about all aspects of life. Food prices will rise. Energy prices will go through the roof.
The Congressional Budget Office — Mr. Orszag’s former roost — estimates that the price hikes from a 15% cut in emissions would cost the average household in the bottom-income quintile about 3.3% of its after-tax income every year. That’s about $680, not including the costs of reduced employment and output. The three middle quintiles would see their paychecks cut between $880 and $1,500, or 2.9% to 2.7% of income. The rich would pay 1.7%. Cap and trade is the ideal policy for every Beltway analyst who thinks the tax code is too progressive (all five of them).
Of course there is talk of subsidizing those at the lower end of the economic ladder so the impact of rising prices is lessened. Naturally that also negates the impact of the cap-and-trade system. In the end, your tax dollars subsidze the system while increased prices are passed along by so-called polluters. As the price of permits rise over the years, permit holders pay the increasing cost, pass it along and you again subsidize it. The rich can afford it, the poor will be subsidized, so who will get squeezed? Why that middle class that Obama and Biden are so concerned with.
Economically, estimates are that we’re going to have a miserable year in ’09 and possibly ’10. But we may begin to see a recovery really start to take hold in ’11, just in time for the 2012 presidential election. The smart politicians in Washington plan to delay cap-and-trade implementation until 2012. The reason should be obvious. If cap-and-trade has the expected impact on the economy, we could very well see the recovery stall and head back into recession. But politically the timing would be perfect. The mirage of recovery would be just enough to keep the current administration in power for another 4 years, before the economy wrecker of cap-and-trade begins to do its work.
Patterico does it by producing a 2006 poll:
The difference, of course, is instead of 51% of Democrats telling a polling company they wanted Bush to fail, an influential conservative came right out and said it about Obama.
The point for the left? You can quite pretending you’re witnessing something never seen before and climb on down from the throne of self-righteousness to your usual seat on the stool of hypocrisy (dissent no longer being the “highest form of patriotism).
In this podcast, Bruce, Bryan, Michael and Dale talk about the week’s events, and the indications the provide into the President’s apparent intellectual incuriosity.
The direct link to the podcast can be found here.
The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.
Heh … I love it when this sort of thing happens. Unfortunately it doesn’t happen often enough.
The saccharine conventions of showbusiness were thrown out of the window last week, when the Hollywood actress Maria Conchita Alonso was collared by paparazzi and asked if she was pleased about her former co-star Sean Penn’s recent Oscar victory.
“He’s an amazing actor. I can’t take that away from him,” she said of Penn, who worked with her on the 1988 cop film Colors. “It’s just that he has no clue at all what’s going on in Venezuela. He’s been praising Hugo Chavez, who is a dictator and a killer. He should shut up about what he doesn’t know.” Alonso, who was raised in Venezuela, was apparently upset by a glowing article that Penn had written for The Nation magazine about her homeland’s charismatic but increasingly dictatorial left-wing President.
Of course Penn’s not the only one from Hollywood in the thrall of Chavez:
Other Hollywood liberals face public criticism, most notably Oliver Stone, currently filming an adulatory authorised biopic of Mr Chavez. Stone could be joined in the pillory by Danny Glover, who was given $18m by Mr Chavez in 2006 to make a left-leaning film about Haiti’s 19th-century leader, Toussaint Louverture. Harry Belafonte sparked outrage two years ago when he appeared on a platform with Mr Chavez to call George Bush “the greatest terrorist in the world”.
The term “useful idiots” describes them well.
For some, bravery and courage is rooted so deep, the heroic becomes almost common place. Sergeant First Class Frederick Rowell exemplifies this fine character trait. SFC Rowell, a US Army infantryman, was deployed to Iraq for two tours, both of which took place during some of the most pivotal moments of that ongoing campaign, and both times he distinguished himself with valor and heroism.
SGT Rowell was not originally scheduled to deploy to Iraq with a combat unit. In fact, he was an instructor at Ft. Polk. Rowell had joined the army at age 17, and had served 6 years stateside duty until then. But when a call came down for volunteers to join an infantry unit deploying to Iraq, without consulting anyone he stepped forward. 48 hours later he had said good bye to his wife and family and was on an airplane bound for Kuwait.
In the thunder run that was the invasion of Iraq, then-Sergeant Rowell was involved in the critical fight for the Baghdad International Airport. April 4, 2003 was the first great test of this young non-commissioned officer’s dedication to his fellow soldiers. Remember, he’s just joined them and hasn’t really trained with them extensively to this point. But as you’ll see he rose to the occasion.
After dismounting his Bradley fighting vehicle, Rowell’s unit came under heavy automatic and rocket-propelled grenade fire. After assessing the severity of the fire, Rowell covered his comrades as they fell back to their Bradley. During this withdrawal phase, he noticed another fire team was pinned down far from cover and taking heavy fire. For those of you unfamiliar with the structure of an infantry platoon, two fire teams make up a squad of about 10 infantrymen. 4 squads make up a platoon. So a fire team is about 5 soldiers led by a sergeant.
Once his own fire team was in the relative safety of his Bradley fighting vehicle, Rowell did not hesitate to act to aid the pinned down fire team.
Charging across about 300 meters of open terrain under fire from Iraqi forces, Rowell arrived at the location of the isolated fire team to find it leaderless and with a severely wounded soldier. Rowell took charge and sprang into action. He gave the team direction, telling them where to concentrate their fire and deploying them to maximize it. After he had them laying down cover fire he began applying first aid to the wounded soldier. As the enemy attack became more focused and more intense, Rowell threw himself on top of the soldier, using his own body as a shield while another Bradley fighting vehicle attempted to close in on their beleaguered position.
“I had to lay on him. He was in shock, moving his legs around and the rounds were coming in everywhere. I was afraid he was going to get hit again. So, I laid on top of him. About this time I got shot in the plates, in my Interceptor Body Armor. I got shot there.”
As he was covering the injured soldier with his own body, Rowell took a direct hit from an AK-47 round in his back. The good news is, it was stopped by his body armor. But it was a round that would have almost certainly killed the soldier under Rowell who had been stripped of his protective vest in order to treat his wounds. With the evacuation vehicle blocked from coming any closer, Rowell hoisted the wounded soldier onto his back and ran some 100 meters to that vehicle in order to evacuate the severely wounded soldier. His action was credited with saving the soldier’s life. He then lead the withdrawal of the rest of the fire team to the safety of US lines.
4 years later, now Staff Sergeant Rowell was again deployed to Iraq, as a part of the Surge.
On September 11th of 2007, Rowell, now squad leader, was on a scouting mission to observe insurgent activity in a volatile part of Baghdad. The idea, of course, was to get soldiers into areas they’d never previously been in to begin to root out the terrorists and protect the population.
His squad was split into two observation posts in two buildings. They were there to observe activity on a road on which IEDs were frequently planted. As Rowell said, it was a ‘real bad’ part of Baghdad. He and his soldiers were located on the 2nd floor of an abandoned house when they observed some activity during the night.
An enemy scout was snooping around the house in which they were located. He tried to get into the door then backed off and disappeared before they could do anything. Rowell hoped they hadn’t been compromised, but in a few minutes 3 of the enemy rushed across the area near the house and up to it, then withdrew. What the soldiers didn’t know is the enemy had planted a 2L soda bottle loaded with homemade explosives and a pressure plate near the door. The terrorists then opened fire from three different directions. SSG Rowell contacted his platoon headquarters and reported that he was under fire and his position had been compromised. His platoon leader ordered them to withdraw to his position.
As enemy fire poured in on them, Rowell planned to move his squad to the other observation post. He planned his route and the order in which they’d move out of the building, and how they’d support each other as they moved. He lined the men of his squad up in the order they’d go and then gave them the order to go. Rowell was second in line.
But the first soldier down the stairs was severely injured by the IED the terrorists had planted earlier. As Rowell stepped out of the door, the blast blew Rowell off the second floor landing and knocked him unconscious. He lay there for 4 or 5 minutes before regaining consciousness as the battle raged around him. His squad had pulled back into the house.
Rowell regained his focus – despite being later diagnosed with a traumatic brain injury – and looked around to assess the situation. He said “I saw a body out there and I saw it moving.” He rose to his feet, running to the aid of his comrade, Spc Jonathan Prusner. Prusner’s left leg had been blown off below the knee. Under heavy fire, Rowell pulled Prusner back into the building, treated him and defended him from the numerous attackers. In the meantime his platoon leader had requested the quick reaction force, a Stryker platoon, to move to the ambush location to rescue the squad.
On other thing I should add – SSG Rowell was completely deaf from the IED explosion at this time. He couldn’t hear a thing. And although his hearing would return at a later date, he was unable to communicate by radio at this time. So he had only one option left to him when it became necessary to direct the fire of the quick reaction force upon their arrival.
He ran back out into the fire storm and physically directed the reinforcements fire onto the enemy positions. He then helped evacuate Spc. Prusner into one of the Strykers. Finally on the way out of the kill-zone, Rowell manned the roof gun on the Stryker as they evacuated the injured to a combat hospital.
In these two events, Rowell’s heroism was undeniable. He is the epitome of a combat infantryman and non-commissioned officer. By ignoring his own safety and using his body as a shield to protect a wounded soldier in 2003, he was awarded the Silver Star. For coming to the aid of Spc. Prusner and displaying steadfast courage under harrowing fire in 2007, he earned the Bronze Star Medal with the “V” device for Valor.
Recently promoted to Sergeant First Class, Rowell’s reaction is precisely what you would expect – “I was only doing my job”, he says. He has become very good friends with the young man that he saved, but who lost his leg. That’s because they’re both recovering together at the Warrior Transition Center at Walter Reed Medical Center. The bond they formed in combat has helped them both in their recovery process. And SFC Rowell also credits the rock steady support he’s received from his wife and family. Said Rowell:
“My wife has been there to help me out. Been very supportive. All around I think the greatest Army wife out there ever.”
What is it SFC Rowell wants to do as soon as he’s recovered from his injuries? He says, “I want to get back to soldiers”.
And the soldiers who end up with SFC Rowell as their platoon sergeant will be among the most fortunate infantrymen in the Army. And that is why SFC Frederick Rowell, United States Army infantryman, and awarded the Silver Star, Bronze Star with Valor device and Purple Heart during two deployments in support of Operation Iraqi Freedom, is someone you should know.
Or, perhaps, “all of the above”. From the UK Telegraph:
Sources close to the White House say Mr Obama and his staff have been “overwhelmed” by the economic meltdown and have voiced concerns that the new president is not getting enough rest.
British officials, meanwhile, admit that the White House and US State Department staff were utterly bemused by complaints that the Prime Minister should have been granted full-blown press conference and a formal dinner, as has been customary. They concede that Obama aides seemed unfamiliar with the expectations that surround a major visit by a British prime minister.
But Washington figures with access to Mr Obama’s inner circle explained the slight by saying that those high up in the administration have had little time to deal with international matters, let alone the diplomatic niceties of the special relationship.
Allies of Mr Obama say his weary appearance in the Oval Office with Mr Brown illustrates the strain he is now under, and the president’s surprise at the sheer volume of business that crosses his desk.
A well-connected Washington figure, who is close to members of Mr Obama’s inner circle, expressed concern that Mr Obama had failed so far to “even fake an interest in foreign policy”.
And here we were led to believe Mr. Obama was this cool, multitasker under full control and able to handle everything the job entailed.
That’s what we were led to believe.
Some of us, however, said that of all the jobs on the planet this wasn’t the one for OJT. This isn’t a job where one aspect of the duties can be ignored to concentrate on others.
Guess which group looks more prescient at the moment?
Apparently Timothy Geithner isn’t the financial “rock star” he was touted to be if his handling of the Asian crisis 10 years ago is any indication.
While Obama may have “inherited” the financial problems, the bear market is all his.
Speaking of lay-offs, this isn’t going to make our jet jocks feel very secure.
The new slogan of the Democrats – never let a good crisis go to waste. So this is a “good” crisis?
Take a look at this page and tell me where are the promised tax money from rich folks is going to come from.
If you don’t believe government is contemplating some pretty heavy care rationing when and if they get control, read this little beauty carefully.
Even George McGovern finds the pending card check legislation desired by unions to be “fundamentally wrong” and undemocratic.
Grey wolves “delisted” from endangered species list.
No time for Gordon Brown, but plenty of time for Brad Pitt. Wonder if Pitt got a 25 volume DVD set too?
Is Obama preparing the way for a massive defense spending cut?
Even Paul Krugman is getting a little antsy about the apparent lack of focus of the Obama administration on the financial crisis.
It appears Hugo Chavez recognizes a kindred spirit when he sees one.
The Senate is one vote short of passing the omnibus spending bill with 9,000 earmarks. All I wonder is which Republican will cave first?
I think what is happening at the Seattle Post-Intelligencer and other newspapers is an indication of where that industry is headed:
The Seattle Post-Intelligencer reports that its owner, Hearst Corp., has made offers to some staffers to participate in an online-only version of the newspaper.
The paper says an unspecified number of the P-I’s roughly 180 employees received “provisional offers” Wednesday and Thursday to work for the online venture, if the Web site is approved by Hearst’s senior management.
Hearst announced in January it would put the P-I up for sale and either close the paper or go to an online-only publication if it couldn’t find a buyer by March 10. There has been no word on a possible buyer.
These are very tough times for the print media. And, at least among the big dailies, they’re burning through money like GM with no bailout in sight. They’re stuck with a business model that no longer works. And it has happened in a very short time, relatively speaking. The problem is, those who run the business have never faced times like this. Already in trouble before the financial crisis, the trouble has now been accelerated beyond measure.
I’ve worked in and around the industry for almost 25 years. Newspapers had a tendency to make money despite themselves sometimes, and were always a profitable business. In effect, they held a pretty solid position as being one of the only outlets for news in a city, region or state. Sure television had some effect, but not at all the effect many in the business worried about. Detailed stories, not 30 second to a minute coverage found on TV, could only be found in newspapers.
Another critical aspect of newspaper revenue was classified ads. They were the go-to place for jobs, cars, real-estate, etc. It was that revenue and advertising revenue which kept them profitable. Subscriptions never were their primary source of revenue.
Then Al Gore invented the internet. And newspaper big-wigs worried about the impact. The impact was subtle at first. But as the breadth and depth of the ‘net grew, newspapers finally figured out the ‘net was a serious threat to them. The problem was they believed they were in the printing business instead of the news delivery business. So we saw these attempts to jazz up newspapers with more color and snappier features. But none of that really matters when the news that’s delivered is a day old and available when it happens on line. Stale news does not sell well.
Then production costs started to go up. Newsprint has gone through the roof. Aluminum costs (plates) have risen dramatically. All the while, ad revenues have steadily dribbled away as advertisers found newer, cheaper and vastly wider coverage on-line. Classified advertising began slowing as eBay and Craig’s List began siphoning away potential customers with their wider reach. Firms tying to fill jobs went on-line as well.
Page count dropped. Subscriptions no longer even covered the cost of the newsprint each edition required. Web widths were cut. Every economy that can be thought of was enacted. Production facilities have been shut down and consolidated. Automation has been used to replace headcount. Vendors have been squeezed for every penny that can be squeezed. But formerly profitable newspaper groups are now hemorrhaging money and frankly they don’t know how to stop it.
That’s not to say all newspapers are in that sort of trouble. Interestingly the small town newspapers seem to be doing okay. They’re not raking in the money they used too, for sure. But they seem to be surviving. One of the reasons is they are in a unique position which large town and city newspapers don’t enjoy anymore. In many cases they are the sole source of news for that community. Some have local TV stations that cover news as well, but the in-depth coverage over many weeks that local stories sometimes require can only be found in the paper. Additionally many of these small town papers have a production facility that is bare bones but has been printing other business for years – neighboring weekly papers, commercial work, etc. So their production facility is at least paying for itself. And while they have an on-line presence, it is more of a business an archive site. They don’t deal much in national and international news. They’re focused almost exclusively on the community they serve and the news it generates. If you want national or international news, go to CNN – they know you do that anyway.
With the closing of the Rocky Mountain News, the possible closure of the San Francisco Chronicle and the Seattle P-I’s decision to go on-line only, you can see the larger newspapers are still struggling to find a business model that works. I’m of the opinion, and have been for a while, that the small town model, adapted for the larger communities, is the way to go – with an tight focus on covering the community they serve, an on-line presence that adds instead of detracting from the print edition and a plan for the future which takes the operation on-line through devices like the Kindle 2, provided as a part of the subcription for a certain subscription length.
Of course that means that the production end of it, which has been my bread-and-butter for many, many years, will go the route of the dinosaurs, at least among the larger newspapers. But I think that is the future. Small town papers will hold out for a while longer and continue to print, but the economies of scale won’t be there which enable paper companies to offer low prices on newsprint. My guess is, unless they have a tremendous base of commercial printing (other than newspaper printing), they’ll eventually come to a point where print production is cost prohibitive as well.
All of this, of course, means a much leaner staff for future newspapers. It will also mean a different way of billing -for subscriptions, advertising, etc. Single issue billing, subscription billing, even particular articles can be billed. And without the cost of production factored in, the pricing should be reasonable. In order for that to be attractive to potential buyers, the papers are going to have to deliver and necessary and attractive product that news consumers want.
That is the problem they are presently wrestling with. What is that product and how do we produce it and get paid to produce it?
I have no idea how this will shake out, but unlike many, I certainly don’t want to see newspapers go away. I think they’re a critical part of our nation’s democratic voice. But they are going to have to change and change radically to survive. It is going to be interesting to watch this over the next few years as the newspaper business goes through what the fed refuses to let the auto industry go through. My guess is, after all the bankruptcies, consolidations and mergers take place, a leaner, more focused and profitable business model will emerge. Whether they’ll be called “newspapers” is anyone’s guess, but they’ll still be with us in some form or fashion.