Questions and Observations

Free Markets, Free People

The Danger Of Trying To Be Funny

Barack Obama accepted an invitation to be on the Jay Leno show for a number of reasons. One was to show he was hip, cool and could be funny. He apparently felt the timing was right for another charm offensive. Secondly, he wanted to go where no sitting president had ever gone – a late night comedy show. Three is related to two – he hoped to reach an audience that he may have otherwise been unable to reach with his budget message. And four, the media coup that would result would hopefully reverse his seeming slide in popularity.

Of course the risk was that he wouldn’t be funny and thus bomb or that he’d say something he shouldn’t have and everything else would be forgotten while the gaffe dominated the coverage. Looking at the risk vs. the reward and completely involved in the hubris surrounding Obama, his handlers obviously thought the risk was minimal. Sure enough the gaffe scenario materialized and completely overshadowed the hopes he had about his appearance.

Sometimes, it seems, you can be too clever for your own good. And Obama’s “Special Olympics” remark, meant to be self-deprecating, was instead taken as an insult to Special Olympians. The irony, of course, is the petard upon which he was hoisted is one of the left’s own making.

Humor has become a “no tolerance” zone when it comes to some subjects. Offending an underprivileged, “special”, racial, ethnic, or in a few cases, religious(you have to be of a “protected” religion to qualify) group has become a mortal sin.

Everyone knew what Obama meant when he used the term “Special Olympics” concerning his attempts to bowl. It wasn’t mean, it certainly wasn’t meant to denigrate the effort of Special Olympians nor was he attempting to purposely offend them. Instead he was taking a shot at himself and his inability to do better than he has in that particular game. And he did so with a poor choice of words, the result of an unthinking attempt to be humorous on a humor show.

Had he instead compared his effort to a white guy trying to play basketball or a Christian trying to win converts in Saudi Arabia, approved hilarity would have ensued and his all of his hopes for his appearance might have born fruit.

You’d think, as a child of the left, he’d know that, wouldn’t you?

~McQ

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Zombie Ideas And Moral Hazard

Paul Krugman has seen the new Treasury plan (the “Geithner plan” as he calls it) that addresses the problem with the banks and he finds it wanting:

The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.

The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.

The plan itself is a three part plan as described here:

The plan to be announced next week involves three separate approaches. In one, the Federal Deposit Insurance Corporation will set up special-purpose investment partnerships and lend about 85 percent of the money that those partnerships will need to buy up troubled assets that banks want to sell.

In the second, the Treasury will hire four or five investment management firms, matching the private money that each of the firms puts up on a dollar-for-dollar basis with government money.

In the third piece, the Treasury plans to expand lending through the Term Asset-Backed Securities Loan Facility, a joint venture with the Federal Reserve.

The Geithner Plan

The Geithner Plan

The goal of the plan is to leverage the dwindling resources of the Treasury Department’s bailout program with money from private investors to buy up as many of those toxic assets as possible and free the banks to resume more normal lending.

 As noted, Krugman is not impressed. In fact, he suddenly discovers the problem of “skewed incentives” and “massive” moral hazard:

To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.

But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem.

Or to put it another way, Treasury has decided that what we have is nothing but a confidence problem, which it proposes to cure by creating massive moral hazard.

How in the world could the level of intrusion contemplated by the government create anything but “skewed incentive” and “massive moral hazard”? But that aside, will it work?

Per Krugman, probably not:

This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work.

What an awful mess.

Indeed. And an amazing admission by Krugman who was as sure as anyone in the tank for Obama that he’d be “the answer” to all of our problems. Instead he’s discovering what a lot of Obama supporters are discovering – Obama’s an empty suit who is more interested in the perks and rewards of the office than the work it entails.

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Quote Of The Day

From, of all people, Paul Krugman (discussing the AIG debacle specifically and financial policy generally):

This administration, elected on the promise of change, has already managed, in an astonishingly short time, to create the impression that it’s owned by the wheeler-dealers. And that leaves it with no ability to counter crude populism.

Uh, I guess the honeymoon is over?!

~McQ

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Misguided populism and selective taxation

“A government big enough to give you everything you want, is strong enough to take everything you have.” – Thomas Jefferson

David Boaz has written a great post explaining why selective taxation, like we saw yesterday as the House passed a 90% tax on AIG bonuses, is a form of tyranny:

Everybody’s angry. But anger doesn’t make good law. And there are real questions about both the wisdom and the legality of such legislation. Bloggers like Conor Clarke, Megan McArdle, and Eugene Volokh have asked if the bonus tax is legal or constitutional. And thank goodness for bloggers who ask the questions that members of Congress and print journalists seem to ignore!

The bloggers wonder if after-the-fact taxes on specific people violate the constitutional ban on bills of attainder and ex post facto laws. (Ex post facto = after the fact.) Good questions indeed. But they should go further and ask, Are laws like this tyrannical? Ex post facto legislation isn’t just bad because it’s unconstitutional. It’s unconstitutional because it’s bad. (Nate Silver did raise these broader questions, arguing that the bonus tax bill was like the congressional intervention into the Terri Schiavo case: quite possibly legal and constitutional, but “it represented a gross overreach of the chamber’s authority, and ultimately undermined, at least a little bit, the rule of law.”)
[...]
The rule of law requires that like people be treated alike and that people know what the law is so that they can plan their lives in accord with the law. In this case, a law is being passed to impose taxes on a particular, politically unpopular group. That is a tyrannical abuse of Congress’s powers. And in addition, it is retroactive legislation, changing the law upon which AIG and its employees had relied. As James Madison wrote in Federalist 62, “It will be of little avail to the people, that the laws are made by men of their own choice, if the laws . . . undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow.”

Selective taxation is tyranny. Ex post facto legislation violates the spirit of the liberal order, even if a particular piece of legislation can be “structured” to pass constitutional muster.

I saw some of the speeches by members of Congress yesterday. It wasn’t about taxpayer money being involved, because the bonuses make up a fraction of the TARP money, and if it really was about the taxpayers, each of them need only look in the mirror to see the real reason our dollars are being wasted. It was an opportunity to bash business by playing on this misguided populism that has taken hold in our country.

People need to stop and realize that if we allow our government to do this to people receiving these bonuses, what makes us think they won’t do it to us.

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A Million French Can’t Be Wrong …

Yes, it is spring and that means protest season in France (note the previous attempt in January didn’t turn out too well due to global warming effects).  This time, though, it’s not the “youths” doing the protesting.  Instead we are treated to union driven protests.

 The reason?

The protests, which drew substantially more people into the streets than a similar outpouring Jan. 29, were depicted by union leaders as part of a sustained campaign to pressure President Nicolas Sarkozy to do more to defend French people against the economic upheaval that has unfurled across the planet since the fall. In particular, they called on him to raise low-end wages and unemployment benefits and to make it harder for business leaders to fire employees when profits sink.

It's a win-win - Kerry goes too!

It's a win-win - Kerry goes too!

And we complain about our liberals being economic ignoramuses. Per the French mob, the ticket to recovery is to raise wages, raise unemployment benefits and prevent businesses – which most likely pay for those unemployment benefits (not to mention higher wages) – from letting workers go when their profits sink. Wow … economics worthy of Timothy Geithner, Barney Frank and Chris Dodd.

See, the French really deserve our Congress for their legislature. They’d be absolutely perfect together. Simpatico. Nancy Pelosi would be the toast of Paris and Harry Reid – ok, even the French wouldn’t put up with Harry Reid, so let’s not get too carried away. But seriously, have you ever seen a mob and a Congress (or administration for that matter) that thought so much alike?

It’s like a marriage made in heaven. The Congress and administration could transfer themselves to a country where the economic damage has already been done and the economy is already chronically lethargic, the welfare state is established to include universal health care and the control they seek over industry and business is already in place. They’d be happier (and have much less work to do ruining their economy even further), we’d be happier (trust me, we would), and my guess is the French would just swoon over Obama.

And he’s about right for them – they’ve always believed in style over substance, always thought more of themselves than others have and always had a sense of hubris which never equaled their performance.

It’s freakin’ perfect.

Why didn’t we think of this before?

~McQ

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Former CBO Director Now Finds CBO Numbers Not So Good

This parallel world that exists only within the DC beltway and where the laws of economics don’t apply has got to be merged again with the real world we all live in as soon as possible:

Despite new estimates that say President Barack Obama’s budget would generate unsustainable large deficits averaging almost $1 trillion a year, the White House insisted Friday that the flood of red ink won’t swamp its costly agenda.

The Congressional Budget Office figures released Friday predict Obama’s budget will produce $9.3 trillion worth of red ink over 2010-2019. That’s $2.3 trillion worse than the administration predicted in its budget just last month.

Worst of all, CBO says the deficit under Obama’s policies would never go below 4 percent of the size of the economy, figures that economists agree are unsustainable. By the end of the decade, the deficit would exceed 5 percent of gross domestic product, a dangerously high level.

Just feast your eyes on those statements. First – 10 years of trillion dollar deficits “won’t swamp” the “costly agenda” of the Obama administration? Really? Or is it just that the administration refuses to acknowledge the reality of the coming deficits and intends to imperil the economy to push its social agenda forward? Which is more likely true?

And how does the administration address the CBO projections?

White House budget chief Peter Orszag said that CBO’s economic projections are more pessimistic than those of the White House, private economists and the Federal Reserve and that he remained confident that Obama’s budget, if enacted, would produce smaller deficits.

About those deficits?

About those deficits?

Orszag, the former director of the CBO, now finds the CBO just isn’t an entity in which we should put much stock when it comes to budget analysis – especially when it finds such budget numbers “unsustainable”. Nope. Instead we should heed the Fed – which has proven to be such an economic font of solutions in this current crisis – and unnamed “private economists” whose only claim to fame is they agree with the administration’s projections. The organization Orszag previously led suddenly has a credibility problem.

However Orszag did have to admit that if the CBO is right, well, that’s a horse of a different color:

Even so, Orszag acknowledged that if the CBO projections prove accurate, Obama’s budget would produce deficits that could not be sustained. “Deficits in the, let’s say, 5 percent of GDP range would lead to rising debt-to-GDP ratios that would ultimately not be sustainable,” Orszag told reporters.

Of course there have been many economic analysts prior to the CBO projections who have found the administration’s projections to be very optimistic in outlying years, in fact the term “rose colored glasses” seems most apropos.

So which makes more sense to you in this particular time of financial crisis- listen to those who say your projections are too rosy and trim them back (and the deficits they produce) to ensure that should it happen as the more pessimistic projections hold, you don’t chance pushing the nation into a period of unsustainable debt, or waive them off and take the chance that you’re right and they’re not?

“Caution” seems like a very important watch-word at this point, or it should be.

Instead we’re seeing a “damn the icebergs, full speed ahead” attitude from the crew of the economic Titanic.

~McQ

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From Here To Electricity

Share photos on twitter with Twitpic

Any rumors that the President and his muse were on the outs is pure folly, despite Obama been seen speaking out in public alone. From an interview with the TOTUS:

Teleprompter, is the president ever argumentative with you, or is he compliant with your instructions?

Teleprompter Of The United States

Teleprompter Of The United States


Good question. Look, like any relationship, we have our ups and downs. Last year on the campaign trail, The Big Guy came to me and told me that like the cigarettes, he really felt like he needed to start working through his dependency. Then he went out and did this townhall session on health care.

Suffice it to say, we aren’t having those unpleasant discussions any more.

[Photo by www.therightscoop.com; HT: HAHL]

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Good Thing That Doofus Bush Is Out Of Office (UPDATE)

Because Mr. Smooth is much less likely to commit the same sorts of gaffes he was:

Leno asked the president whether the White House bowling alley had been “burned and closed down” in light of Obama’s gutter ball embarrassment on the campaign trail last year.

Obama replied, “No, no. I have been practicing . . . I bowled a 129.”

The audience roared with laughter, and the late-night talk show host assured Obama “that’s very good, Mr. President.” To which Obama interjected, “It’s like — it was like Special Olympics, or something.”

The audience laughed. But the White House didn’t let the comment linger without clarification.

“The president made an offhand remark making fun of his own bowling that was in no way intended to disparage the Special Olympics,” White House spokesman Bill Burton told reporters flying aboard Air Force One after the taping of the show, according to a transcript released by the White House. “He thinks that the Special Olympics are a wonderful program that gives an opportunity to shine to people with disabilities from around the world.”

Ummm. Got it (and yes, I believe it – it was a poor attempt at humor by someone who still hasn’t figured out he needs to be very careful with his speech). That’s what you get when you let him go talk sans the teleprompter. And even with a teleprompter, he’s had some fun lately, hasn’t he?

Irish Prime Minister Brian Cowen was just a few paragraphs into an address at a St. Patrick’s Day celebration at the White House when he realized something sounded way too familiar. Turns out, he was repeating the speech President Barack Obama had just given.

Cowen was set to speak twice at the White House on Tuesday night because there were two different parties going on at the executive mansion. No matter — he would give the same speech to the two different audiences.

But Cowen was 20 seconds into his second address when it dawned on him that he was giving word for word the speech that Obama had just read from the same teleprompter.

Cowen stopped and looked back at the president to say, “That’s your speech.”

Obama laughed and returned to the podium to offer what might have been Cowen’s remarks. In doing so, President Obama thanked President Obama for inviting everyone over.

Of course no one expects these things to get the play they’d have gotten if the “Doofus-in-Chief” had still been in residence. You see, Mr. Obama is “brilliant” and consequently, these little gaffes are of no consequence or importance. On the other hand, Bush was a boob, and thus the same sorts of little gaffes pointed out how horribly the country had erred in picking him.

There. Glad we’ve settled that finally.

UPDATE: Apparently Obama was wrong about “Special Olympics” bowlers as well:

Kolan McConiughey, a Special Olympics competitor who has bowled three perfect 300 games, tells TMZ that the Prez has to score a lot higher than 129 to beat him. Kolan says he bowls an average of 266.

So with a 129, he might not even make the SO cut.

~McQ

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Constitution? We Don’t Need No Stinkin’ Constitution!

As the Senate takes up its version of the violation of Article 1, Section 9 of the Constitution, also known as the bill to tax the hell out of the AIG bonuses, one note of sanity sounds through. Sen. John Kyl:

“I don’t believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding the facts and the potential unintended consequences,” he said.

“Frankly, I think that’s how we got into the current mess,” he added.

Heh … ya think?

Not that it matters – this will most likely pass the Senate as well and be signed into law by “Constitutional Law Professor” and President Barack Obama, but when it ends up in court and is declared unconstitutional, it shouldn’t come as a surprise. The Constitution always takes a back seat to populism and CYA.

~McQ

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The Transcendant Brilliance of Timothy Geithner

So much for I only knew about this last Tuesday”.   And this was the guy Democrats said we had to have beceause his brilliance was such that we should over-look his tax problems?

Treasury Secretary Timothy Geithner told CNN Thursday his department asked Sen. Chris Dodd to include a loophole in the stimulus bill that allowed bailed-out insurance giant American International Group to keep its bonuses.

In an interview with CNN’s Ali Velshi, Geithner said the Treasury Department was particularly concerned the government would face lawsuits if bonus contracts were breached.

Freakin’ amazing.

Geithner told Velshi Thursday he takes full responsibility for the situation.

After spending most of a week denying he even knew about it prior to last week. I don’t think Geithner understands what taking “full responsiblity” really means (or should mean).  Oh, and see Goodwin’s quote below.

~McQ

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