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Free Markets, Free People

Christopher Buckley Also Has Second Thoughts

The scion of conservative legend Bill Buckley seems to have suddenly misplaced his rose colored glasses as well:

The strange thing is that one feels almost unpatriotic, entertaining negative thoughts about Mr. Obama’s grand plan, as if one were indulging in—call it—the audacity of nope. It is on the one hand clear that something must be done about our economic woes. But that is very different from saying that spending these vast, oceanic sums of money is the right corrective to a decade of fiscal incontinence.

One thing is certain, however: Government is getting bigger and will stay bigger. Just remember the apothegm that a government that is big enough to give you everything you want is also big enough to take it all away. And remember what de Tocqueville told us about a bureaucracy that grows so profuse that not even the most original mind can penetrate it.

If this is what the American people want, so be it, but they ought to have no illusions about the perils of this approach. Mr. Obama is proposing among everything else $1 trillion in new entitlements, and entitlement programs never go away, or in the oddly poetic bureaucratic jargon, “sunset.” He is proposing $1.4 trillion in new taxes, an appetite for which was largely was whetted by the shameful excesses of American CEO corporate culture. And finally, he has proposed $5 trillion in new debt, one-half the total accumulated national debt in all US history. All in one fell swoop.

He tells us that all this is going to work because the economy is going to be growing by 3.2 percent a year from now. Do you believe that? Would you take out a loan based on that? And in the three years following, he predicts that our economy will grow by 4 percent a year.

This is nothing if not audacious hope. If he’s right, then looking back, March 2009 will be the dawn of the Age of Stimulation, or whatever elegant phrase Niall Ferguson comes up with. If he turns out to be wrong, then it will look very different, the entrance ramp to the Road to Serfdom, perhaps, and he will reap the whirlwind that follows, along with the rest of us.

Have you ever seen such a mish-mash of contradictory thoughts?

“If this is what the American people want, so be it …”, said the modern day Pilate as he washed his hands of it all.  And then the acknowledgement that these things being passed into law will never go away?

Where was he during the run-up? Eagerly lapping up the kool-aid and projecting his idea of hope and change on the blank screen Obama provided. And now he voices concern? Now he’s not sure about what seems to be planned?

What a fundamentally dishonest guy Chris Buckley is – sell the agenda knowing full well the probable outcome of its implementation and is now saying “well if this is what the American people want, they can’t complain when it takes us all to hell”. If you want to tap into an unlimited source of renewable energy, hook something up to Bill Buckley’s grave. He’s probably spinning so hard he could power NYC.

~McQ

[HT: RWN]

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David Brooks Finally Figures It Out

Well sort of.  He tells us in his latest piece that he considers himself a “moderate-conservatitve” (what in the world is that?) and he finds the Obama budget (and agenda) waaay to “progressively liberal” for his taste.

Like David Broder, he seems to be surprised by that.

But the Obama budget is more than just the sum of its parts. There is, entailed in it, a promiscuous unwillingness to set priorities and accept trade-offs. There is evidence of a party swept up in its own revolutionary fervor — caught up in the self-flattering belief that history has called upon it to solve all problems at once.

So programs are piled on top of each other and we wind up with a gargantuan $3.6 trillion budget. We end up with deficits that, when considered realistically, are $1 trillion a year and stretch as far as the eye can see. We end up with an agenda that is unexceptional in its parts but that, when taken as a whole, represents a social-engineering experiment that is entirely new.

The U.S. has never been a society riven by class resentment. Yet the Obama budget is predicated on a class divide. The president issued a read-my-lips pledge that no new burdens will fall on 95 percent of the American people. All the costs will be borne by the rich and all benefits redistributed downward.

The lesson the left learned from the Clinton era is to move boldly and unapologetically toward what they want while they have the power and popularity to do so instead of screwing around with moderation, incrementalism and governing from the center. And the Republicans only reinforced the lesson when they tip-toed around while they had power, seemingly more worried about being liked than getting things done that agreed with their principles. Well, as Brooks and the “moderates” who were fooled into thinking Obama would be another Clinton have found out, there’s nothing “centrist” to this bunch now in power.

To their horror, they find they’re getting exactly what they were told they would get and, for some reason, they’re surprised and don’t like it. But without them, this little progressive song and dance never had a chance of hitting the main stage.

Now, per Brooks, its up to the moderates to save the country.

Oh goodie.

Pardon me if I don’t hold my breath. The squishy middle save us from anything? Based on what?  What principles do they rally too?  As easily as they were gulled in the last election, they have little credibility when it comes to such activities. And to whom or what would they appeal? Other moderats who were as clueless as they were? Then what?

But losing the middle would be a bit of a blow to the Obama administration’s plans. Obama is presently trading off of his popularity and there seem to be more questions about his true intentions than satisfactory answers. A loss of popularity might stiffen the spines of some blue dog Dems and slow this rocket sled to hell down a bit. Of course, it seems there’s a RINO in the weeds for every blue dog that says no, so I’m not sure what real impact that would have.  But hey, even the RINOs may get the message (again, not holding my breath).

I know it’s not much to hope for, but it is interesting to see the scales finally begin to fall from moderate eyes.  It demonstrates the brilliance of the candidate being the projection screen and with a few key words like “hope” and “change”, conning the middle into pretending that the fantasies they’ve conjured up and projected on him would become reality.  Now we pay the piper for that little screw up, don’t we?

~McQ

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Atlas Appears To At Least Be Warming Up

As you might imagine, the 5% (the taxable “rich”) are trying to figure out how to become a part of the 95% (the “tax cut” rest):

President Barack Obama’s tax proposal – which promises to increasetaxes for those families with incomes of $250,000 or more — has some Americans brainstorming ways to decrease their pay, even if it’s just by a dollar.

I’m sure this comes as a horrific surprise to those who have been clapping their hands gleefully in anticipation of the “rich” finally “getting theirs”. But the “rich”, or at least some of them, may have other ideas. The following anecdote best illustrates the most important points:

Dr. Sharon Poczatek, who runs her own dental practice in Boulder, Colo., said that she too is trying to figure out ways to get out of paying the taxes proposed in Obama’s plan.

“I’ve put thought into how to get under $250,000,” said Poczatek. “It would mean working fewer days which means having fewer employees, seeing fewer patients and taking time off.”

Generally it means being less productive,” she said.

The motivation for a lot of people like me – dentists, entrepreneurs, lawyers – is that the more you work the more money you make,” said Poczatek. “But if I’m going to be working just to give it back to the government — it’s de-motivating and demoralizing.”

Like the probable results of the Obama plan so far?

Fewer employees (that’s jobs for those missing the point), less money (which means a tax cut instead of a tax increase), less production (scarcity), less in taxes for the government and thus less in revenue with which to meet its spending goals.

She is, of course, exactly right – working to make the government’s coffers fatter is both de-motivating and demoralizing.  

So assuming that the majority of that percentage of the population now under the tax hike gun is successful in lowering their earning profile  to the “tax cut” category,  what alternative does that leave for a government hungry for revenue?

It can redfine “rich”.  

The cycle repeats with the “new” rich going through the same type of cutting back – letting employees go, doing less work and leaving government with less anticipated revenue.  The engine of commerce – the engine of prosperity and jobs – goes into reverse as each new attempt to secure the funding necessary to move the dream agenda forward is scuttled by selfish Americans not willing to work just to hand over what they earn to government.

I can’t imagine why people still wonder why I want to see the Obama agenda fail?

~McQ

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The Shape of Things to Come

It seems so hard to remember those halcyon days, long ago, when there was some optimism about the country’s economic future. Why, it seems like just last week, when Fed Chairman Ben Bernanke was telling us to be cautiously optimistic about the near future.

In his twice-yearly testimony to Congress, Bernanke conceded the economy was undergoing a “severe contraction”, but held out hope of recovery if the White House’s latest bail-out helped to unblock lending to households and businesses.

“Only if that is the case, in my view there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery,” he told the Senate banking committee, adding that healthier global markets would also be essential if the US economy was to return to health.

Some were willing to go even farther, in those happier days of February, 2009.  Some chap named Bernard Baumohl of the Economic Outlook Group who seems really to believe that happier days are just around the corner.

“We are not doomed to a lost decade of the sort experienced by Japan in the 1990s,” Mr. Baumohl says. “Nor are we in a depression. We view the drop in GDP in the last quarter, which we may see repeated in magnitude this quarter, [as] symptomatic of a recession in its final convulsive stages, to be followed by a recovery in the second half of the year.”

Oh, wait.  That was last week.

This week started off with the S&P 500 dropping another 4.66% today, closing at 700.82, and the Dow off by 4.24% to close at 6,763.29.  Well, you can’t slip something like that past the boys at the Dallas Morning News.

“The number 7,000 is not what is important,” said Hugh Johnson, chairman of Illington Advisors in Albany, N.Y. “What is important to everyone is the message that the market is sending us with these losses.”

And that message is that the current recession probably will be longer and more severe than most people expected. For months, the consensus on Wall Street was that the low of 7,500 that the Dow hit in November 2008 would mark the bear market bottom.

Many market analysts predicted that while the Dow would “retest” that low, it would not break through it. They were wrong. The scary thing now is where the Dow and the broader Standard & Poor’s 500 index will make their next stand.

As I’ve mentioned several times, both on the blog, and on the podcast, the historical long-term trend is for the average P/E ratio to drop back to 15.  Well, that implies that our equilibrium point is somewhere in the vicinity now of 6,000 on the Dow, and about 620 or so for the S&P.  So we’ve still got a ways to go if that historical trend holds true.

Of course, we also have a tendency to drop below an average P/E of 15 as we pull back off the highs, so a 5,000 Dow doesn ‘t seem like an overly pessimistic prediction.

I know I’ve been consistently downbeat on the economy for the last several months, and nothing I’ve seen since I started writing about this in 2007 has changed my mind.  I’m not counting on a recovery in 2009, or even in 2010.

 

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Things That Need To Be Said…Unofficially

Sometimes, a message has to get out there, so that the people who need to hear it can hear it.  Often, however, the message can’t be gotten out by presidents, finance ministers, or Fed officials.  But, someone has to make the arguments.  Samizdata’s Brian Micklethwait takes up the task today.

It needs to be said that under certain circumstances easily now imaginable, many Western citizens would argue, strongly and vocally, that those idiot foreigners who are now lending money to Western governments should in due course be told: sorry sunshine, you ain’t ever going to get it back. Our governments are bankrupt. Why the hell should we and our descendants in perpetuity be paying tribute to you? You knew that the money to pay you back would have to be stolen from us. You assumed we’d just cough up indefinitely. Well, we damn well won’t. You are now a definite part of our problem, and telling you to take a hike is going to be part of our solution. Our thieving class is now “borrowing” money from your thieving class like there is no tomorrow, and we are not responsible for the actions of either gang. A plague on both your houses.

We want you foreign thieves to stop lending to our thieves, now. And the best way for us to convince you that you should indeed stop lending, is to tell you that you are extremely liable never to see most of your money back.

Which has the added virtue of probably, approximately, being true, already.

We probably won't be able to borrow money from these guys for much longer...

We probably won't be able to borrow money from these guys for much longer...

The last sentence is the real kicker, because it’s beginning to look more like a question of when, rather than if.  And, who of course.  Of the Western nations, my favored picks, in no particular order, for winning 1st place in the 21st Century Debt repudiation race are, in no particular order:  Hungary, Italy, Ireland, Spain, and Portugal.

Second place will be too close to call.

And you don’t have to couch it in Mr. Micklethwait’s incendiary libertarian rhetoric about their thieves and our thieves.  I mean, I agree with it, but the plain fact is that even if you grant that everyone has the best intentions in the world, it still seems that we are very close to a tipping point where it could begin to happen.  Bruce wrote about it earlier today.

If one of the Euro Zone nations decide to revert to Lira or Escudos, or whatever, the news that such a deal is in the offing will not only hammer the nation that tries, but anyone else who looks iffy, and, untimately, the Euro itself.

Investors are not going to sit around and wait to have their Euro-denominated paper revalued in Drachma.  They’ll immediately start dumping that paper, and moving all the assets they can out of not only the offending nation, but any other country that looks like a weak sister.  As the article Bruce quoted notes, “Such a wholesale shift would lead to a collapse in the money supply…”  Gee, you think?

Germany, of course, would probably get the lion’s share of that new money, and to avoid a general economic collapse, they’d probably have to dump the Euro, too, and redenominate all that nice cash in Deutschemarks to avoid getting hammered as the rest of the Euro Zone economies collapse.  Or, Germany might be the Euro Zone.  Maybe France, too. France is more of a hindrance than a help, really, but palling around with the French is the price Germans paid for re-admittance to the human race, after the recent…unpleasantness.

No finance minister can yet say such unpleasant things publicly.  But someone needs to to say them, especially since they are starting to sound less and less extreme.

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DC vouchers in trouble

The omnibus budget bill that passed the House last week could destroy school vouchers in Washington, DC and the Washington Post is urging the Senate to restore the funding:

Rep. Davis R. Obey (Wis.) and other congressional Democrats should spare us their phony concern about the children participating in the District’s school voucher program. If they cared for the future of these students, they wouldn’t be so quick as to try to kill the program that affords low-income, minority children a chance at a better education. Their refusal to even give the program a fair hearing makes it critical that D.C. Mayor Adrian M. Fenty (D) seek help from voucher supporters in the Senate and, if need be, President Obama.

Last week, the Democrat-controlled House passed a spending bill that spells the end, after the 2009-10 school year, of the federally funded program that enables poor students to attend private schools with scholarships of up to $7,500. A statement signed by Mr. Obey as Appropriations Committee chairman that accompanied the $410 billion spending package directs D.C. Schools Chancellor Michelle A. Rhee to “promptly take steps to minimize potential disruption and ensure smooth transition” for students forced back into the public schools.

We would like Mr. Obey and his colleagues to talk about possible “disruption” with Deborah Parker, mother of two children who attend Sidwell Friends School because of the D.C. Opportunity Scholarship Program. “The mere thought of returning to public school frightens me,” Ms. Parker told us as she related the opportunities — such as a trip to China for her son — made possible by the program. Tell her, as critics claim, that vouchers don’t work, and she’ll list her children’s improved test scores, feeling of safety and improved motivation.

But the debate unfolding on Capitol Hill isn’t about facts. It’s about politics and the stranglehold the teachers unions have on the Democratic Party. Why else has so much time and effort gone into trying to kill off what, in the grand scheme of government spending, is a tiny program? Why wouldn’t Congress want to get the results of a carefully calibrated scientific study before pulling the plug on a program that has proved to be enormously popular? Could the real fear be that school vouchers might actually be shown to be effective in leveling the academic playing field?

This week, the Senate takes up the omnibus spending bill, and we hope that, with the help of supporters such as Sen. Joseph I. Lieberman (I-Conn.), the program gets the reprieve it deserves. If it doesn’t, someone needs to tell Ms. Parker why a bunch of elected officials who can send their children to any school they choose are taking that option from her.

The vouchers cover up to $7,500 ($6,000 average), the average cost per student in DC is $24,600. So it’s hardly a substantial amount of money in comparison to the amount of money spent on the average student and the vouchers are having a positive impact for students.

Members of Congress and the President have made the choice to send their kids to private school. If they don’t trust the government to educate their kids, why should the residents of the District of Columbia?

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Why The Surprise That Limbaugh Wants Obama To Fail?

 You know I’ve been reading all the opinions being tossed around about that statement by Limbaugh, and I’ve thought about it for a while, and I just can’t find anything wrong with it.

Here’s a confession: I’d be lying out of my 3rd point of contact if I said I wanted him to succeed. That’s because “success” would mean the subversion of everything I find important into something I loathe. It would mean the supplanting of free market and capitalistic economic mechanisms with those designed by government. It would mean sanctioning and approving govenment driven market distortions. It would mean approving government picking economic winners and losers. It would mean agreeing that it is the job of government to provide health care, welfare, and retirement. And on and on we go.

So I’d be absolutely full of it if I said, with a smile, “of course I want Mr. Obama to succeed, he’s our President and no patriotic American wants to see a President fail”.

Well, except those patriotic Americans of the left during the last 8 years.

But you know, that doesn’t count. 8 years of  claiming to be “in the darkness”,  governed by “a loser” and an “incompetent” who was taking us down the road to “totalitarianism” and who had to be stopped wasn’t at all the same as Rush Limbaugh stating he wants Obama to fail.

That was then, this is now. Then it was patriotic dissent. Now it’s an unspeakable outrage.

Well, let me go on record here, not that it counts for much. It’s nothing personal toward Mr. Obama. He’s a nice enough guy for someone who I think has an agenda which will destroy this country and the institutions which have made us the most prosperous and powerful nation in the world. So it’s not personal. It’s political.

It’s about what he represents politically. It’s about his political agenda. And since he’s the driving force behind his political agenda it’s rather hard to separate the man from the movement, wouldn’t you say?  I guess I could be real cagey about it and say, “of course I want to see Mr. Obama succeed, but I want his agenda to fail”.

Makes no sense does it?

Nor does saying, “this has nothing to do with Obama, it’s about the agenda, and I want it to fail”. That’s as false as any other statement which tries to separate Obama from his agenda. And that bears saying again – it’s “his agenda”.  If Iraq was “Bush’s war”, this spending monstrosity and the plans that go with it are “Obama’s agenda”, aren’t they?

Well, unsurprisingly, I want that agenda to fail.

Crash.

Burn.

If you want to interpret that to mean I want Obama to fail, so be it – that’s up to you.

But don’t even try to pretend that this is something new or unique to the right after the last 8 years. And for the record, I wanted much of Bush’s agenda to fail as well – Medicare Part D, NCLB, etc.

So save your self-righteous hypocrisy about Limbaugh’s desire to see Obama fail for someone who cares. To be perfectly clear, I want to see the Obama agenda to go down in flames too. If that happens to take Obama with it – oh well.

~McQ

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Notes on the “Big Plan”

Two major points about the budget plan the Obama administration has out there (from the Heritage Foundation):

Spending: Obama’s budget proposes $1.13 trillion in regular discretionary spending for 2010. This is a full 12% increase over the 2009 spending baseline. On top of this the Obama budget increases entitlement spending by another $700 billion. The proposed post-recession spending level of 22% of GDP has been exceeded only 8 times in the post-war era. And these numbers do not include the spending priorities of the unchecked far left in Congress.

The Chicago Tribune reports today “President Barack Obama will break a campaign pledge against congressional earmarks and sign a budget bill laden with millions in lawmakers’ pet projects … Taxpayers for Common Sense, a watchdog group, identified almost 8,600 earmarks totaling $7.7 billion.”

Deficits: The Obama budget claims to cut the deficit in half by 2012, but relies on audaciously optimistic economic forecasts that no one believes in. Adding the “stimulus” bill to a realistic budget baseline yields a projected 2010-2017 cumulative budget deficit of $8.4 trillion – 2.5 times the size of President Bush’s deficits over the same 8-year time period. Before the recession, revenues were 18 percent of GDP and spending was 20 percent. After the recession, President Obama would maintain revenues at 19 percent of GDP, and spending at 22 percent. In other words, all new tax revenues would finance new spending, rather than deficit reduction. President Obama’s structural budget deficit would exceed President Bush’s.

So you have, in the time of economic contraction and massive deficit, a 12% increase over the 2009 spending baseline in discretionary spending. 12%. And entitlement increase of $700 billion. In an 8 year time period (should he be re-elected in 2012) Obama plans to add 8.4 trillion to the debt – a full 2.5 times larger than the huge debt George Bush added. This is a phenomenal and eventually crippling level of borrowing and spending. There is no end in sight. Where the Bush administration spent 2% above the revenue, even with an increase in revenue from increased taxation, the Obama administration plans on maintaining a 3% spending gap of revenue/spending.

Untenable, unsustainable and ultimately, utterly destructive to a market economy.

~McQ

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Successful NYC Trip …

I just barely beat the global warming home. Otherwise, I had a great trip up to New York City. Here’s some of the highlights:

The Empire State building as seen from the roof of my sister's apartment building.

The Empire State building as seen from the roof of my sister's apartment building.

Looking across the East River into Queens

Looking across the East River into Queens

I made it a point to go take pictures in Central Park. These are from the Bethesda Terrace which is Mid-Park around 72nd Street.

Angel of the Waters at Bethesda Terrace, Central Park

Angel of the Waters at Bethesda Terrace, Central Park


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