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Economic Litter

My wife is smart to advise me not to watch things like a Presidential address to Congress, both because of the nonsense in the actual speech, but also because of the fawning the press does over this “great American tradition” and how wonderful it is to have all of these dignitaries in the same room. Well, I watched and took some notes. And here is a brief summary of the nonsense in the speech. It is amazing that Americans cannot see right through much of the hypocrisy. After all, the commentators are all in agreement that the President’s approval ratings are so high that the American people are basically giving him free rein to do what he wants. By the way, since when did the Founders envision such a massive assumption of power in the Executive branch?

The Good

  • Obama seems to have committed America to a no torture policy. That is good. It is amazing we have to state that as policy, but at least it is on the record now.
  • Obama believes in budget transparency for the Iraq war – indicating all of the real costs on budget, and taking a closer look at the no bid contracts that seem to have led to much fraud and abuse of the system.

The Bad

  • he might believe in budget transparency for the war, but not for anything else. For all of the talking about the problems with Medicare and Social Security, not once did he mention the magnitude of the costs we face (particularly with regard to the former) and perhaps compare them to the magnitude of the current crisis we now face.
  • he and the thiefs in Congress, on top of expanding the budget by $800 billion for a payoff stimulus bill, plan on increasing the budgets of federal agencies by 8 percent this year. That is insane even if the economy is scalding hot.  It is downright criminal now, particularly at a time when Obama is praising everyone else’s ability to tighten their belts.
  • That is particularly appalling when the forked tongue comes out again. We learn about this budget expansion only after he tells people (so it MUST be true) that he is not a big government socialist. Yeah, and that is after he spends 10 minutes talking about huge government “investments”in energy, health care and education. Say it loud, say it clear, and scream it from the rooftops … YOUR PRESIDENT IS A HARDCORE SOCIALISTand the worst kind, because he is not even as honest about it as the traditional collectivists.

But that isn’t even the worst, here is a rundown of the UGLY (this tends to be in the order he delivered it on Tuesday night). Each and every one of these can be an economics exam question.

  • He actually cited oil imports, high health care spending and globalization as causes of the current crisis!
  • His stimulus bill would “create or save” 3.5 million jobs. Well, once you add the word “save” to this scenario, any outcome whatsoever can be pointed to asa success. Nice bait and switch Mr. President. I recall your campaign promise to create 3 million jobs. I guess you’ll tote that out in 2012 again.
  • “95% of us are getting a tax cut” … well, if lump sum transfers now qualify as a tax cut, and particularly if they are not funded, and particularly if they are getting “paid out” to people that do not pay income taxes right now, then call it that … otherwise, call it a crumb for the proletariat.
  • “Nobody messes with Joe” … as he quips in a good ol’ yuck it up style. I felt like I was watching the Ed Sullivan show. Joe Biden has been directed to oversee a task force to make sure the porkulus bill gets spent wisely. Maybe we need someone to mess with Joe to make sure it is spent better?
  • Recovery.gov. If we find it worthwhile to monitor how we spend the next $787 billion, why then is it not even more apparent that we need to do the same for the first $3 trillion that the thiefs get to allocate at their will?
  • For all the talk about “Bush lying” what the current President is doing is just as awful. This administration is a fear mongering bunch of liars. Among the first words he uttered are, “WE ARE IN CRISIS.” Well, that’s surely a way to scare people into supporting anything you do. Of course, he never tells the American proletariat why they are in crisis. 7.6% unemployment is hardly a crisis. Even 9% is not a crisis. The typical unemployment rate in Western Europe is 10%, and many politicians and Americans envy what is going on over there in Europe. He claims banks are not lending to people who want credit. That claim is so utterly and empirically verifiablly false that I cannot believe his advisors let him get away with it. In order for us to hit the employment problem that we saw at the onset of the Great Depression, an additional 30 million people would have to lose their jobs – more than the entire state of New Yorkhas people.
    • If there is any problem in lending, it is that people do not wish to borrow right now – and that includes individuals as well as entrepreneurs. But if you were an entrepreneur, would you undertake a risky, long-term project right now?
    • But there is not a problem with lending. The problem is the US Government. As hard as it is to believe, just as there is not an infinite supply of good doctors or apples or computers or schools, there is also not an infinite supply of loanable funds. And when the $11 trillion ton gorilla of the US government wants to participate in the credit market, it does make it a wee-bit more difficult for little guys to obtain credit on good terms. But, since the President and his congress and the cabinet all have long term experience running businesses, I expect them to understand that.
  • It’s funny how in one breath the Administration is saying how THEY will advance credit to individuals and companies for auto loans, college loans and small business loans … and in the next breath they are saying that they will do whatever they can to make sure the big banks (i.e. the rent-seeking class) do not fail. Well Mr. President, do you see that if you TAKE OVER the intermediation function, then we do not “need” banks? Also, extra credit for you if you understand this, don’t you realize that you are demonstrating yourself that the traditional banks are not necessary to get the intermediation process going?
  • Your housing plan is an economic abomination. You even cite proudly how much your abrogation of contract law will benefit troubled homeowners … the average bailee will have their mortgage payments reduced by $2,000 per year, or about$167 per month. Now anyone reading this knows that while $167 per month is nice, it will be nothing compared to how seriously bad a situation these troubled homeowners are in. We are talking insolvency to the tune of hundreds if not thousands of dollars a month.
    • Of course, a few minutes later he applauds his efforts to make credit more available for those young and prudent couples who have a dream of getting a new home. Well, mortgage rates are near 5% … which is basically “free” compared to the historical average, and well below the rates that “got us into trouble” in the first place. So credit is there … and these people don’t have houses. The sad irony is that the President’s housing plan is doing precisely the opposite of what is in the interest of potential homeowners … and on two fronts. First, he is seeking to preventing house prices from falling by an amount that the “market” (there is that evil word again) is indicating they need to be at. If you are a potential homebuyer, do you prefer to buy a $200,000 home at a 5% interest rate, or would you prefer to figure out a way to finance that same home priced at $150,000? I think it’s a no brainer … which is why we get the opposite political policy. Second, and this is perhaps worse, the President’s housing plan explicityly gives lawyers/judges the power to rewrite mortgage contracts in a bankruptcy proceeding – including the ability to write down the principal amount on loans. Quiz time again … what will this do to banks’ and other intermediaries’ interest/ability to make loans to potential home buyers in the future? Of all of the things you could do for the housing market, we are getting the two very worst things. 
  • He admitted directly in the speech that he will not let any big companies fail. So I guess demand curves no longer slope down. Moral hazard anyone? Credibility anyone?
  • “This time we will spend the money right.” Sounds like the alcoholic wife beater to me.
  • Talk about fear mongering … he argued that if we “do nothing” as a government, that the recession/depression could last as long as a decade! Talk about audacity. This guy is claimed to be a calming and assuring leader? Not only is that simply so far in the tail as to be ignorable, but it is not supported by anything we see in the data, or even anything we see from historical precedent. Bonus points to anyone who can tell me how long the longest post-WWII recession lasted. Hint … it was nowhere near a decade long.
  • He spouts the Socialist party line that all of our problems today were the result of the government not doing enough, and not having enough regulations in place. I guess he means this guy doesn’t matter. Or ignores this (it is so big that you cannot download the whole thing). I guess he means that he’ll just put the right regulators and regulations in place. You know, the Madoff scheme was too complex for our regulators to pick up on? It was a scheme made popular in the 1920s … and something that the regulations of the 1930s were explicitly designed to correct. Well, giving our regulatory bodies 75 years to get it right is just not enough time now, is it? That’s what the Soviet leaders told their people for 75 years as they starved and suffered from having nothing on the shelves … “our prosperity will come in the future …” Some people still believe that.
  • He virtually attributes all of the spectacular growth in 19th and 20th century America to the government. After all, government had the foresight to lay railroad track during the Civil War, and to pave highways during the 1950s and to put some people on the moon in the 1960s. And that is why crop yields have skyrocketed, and that is what scientists have found cures for many infectious diseases, and that is what I am able to write this on a flat-panel TV monitor right now, and that is why Tiger Woods is able to crush a driver 350 yards, and that is why my brother has contact lenses and I have stylish glasses, and that is why my morning coffee tastes so good with Nestle Creamer in it, …
  • Mr. President, all the government can do is keep the train tracks clean so that the engine of progress can move along. Anything else you try to do beyond that will destroy the tracks, and change the gauge of the tracks as we move from one place to another, or will pile up lots of rubble in front of the tracks. He understands this, right? Of course, so he is committing MASSIVE federal funding to “energy”, “health care” and education.
    • On energy … he takes a completely protectionist stand (funny, because later in the speech the forked tongue comes out again, saying that global protectionism will hurt all countries … yeah, but it is ok if we do it). He argues that we need to produce all the clean energy technology here ourselves, and of course if the wind turbines and solar panels are produced somewhere else (even if they solve the Global Warming problem and free up American resources to produce other things) we are somehow worse off for it.
      • Again, on protectionism, his quote was, “we want to prevent escalating protectionism …” only 5 minutes after exclaiming … “the automobile was invented in America, and it should be produced right here in America …”
    • On education, he wants by 2020 for America to lead the world in college graduation rates. In addition, he asked boldly for every American to get an additional year of higher education. That is freaking insane. Quick exam question folks: using basic supply demand analysis, illustrate why this will make America considerably poorer. There is a reason why the military draft was ended. And by the way, the best way to achieve his goal, and not only have it cost little, but have Americans get paid for it … it to open the immigration gates to any educated foreigner! Incidentally, that would “solve” our entitlement crisis, our credit crisis, our savings crisis, our inner city crisis, and more. But why do something that is Pareto improving? Oh yeah, it is bad politics, and awfully nationalistic.
    • On health care … well, need I say anything more. He claimed that health care costs are why American jobs are outsourced! Now that is a good one. I’d like to see his economic team show him that research. Again, that is an outright fabrication. To think about why, ask yourself what would happen to employee compensation if overnight the US government took over the entire health care system. Hint: ask yourself what would happen to the overall compensation of Wal-Mart workers if each of us decided to leave them a $5 tip every time we checked out, or what would happen to compensation of waiters/waitresses if Americans stopped tipping them altogether …
  • He proudly supports increasing taxes on the top 2% of this country … and claims this will have no impact on the remaining 98%. Quiz question, and you don’t get to graduate with an economics degree unless you can answer this … under what conditions will raising taxes on the top 2% of income earners (this includes proprietors by the way) NOT have ANY impact on the rest of us? Is that likely? Again, in lefty-socialist world, demand curves either do not exist, or have infinite slope …
  • Nowhere in that laundry list of nonsense did he address anything that at the margin will make working, investing, risk-taking, more attractive here in America. And nowhere did he talk about the right kind of nationalistic competition – that corporate tax rates are much higher here than in other countries, and that marginal individual tax rates here are higher than in many countries.
  • Then we see the usual parading of extraordinary citizens around for political advantage. But the two that interested me were the Florida banker and the SC school-girl. The banker was lauded for demanding a $60 million bonus from his company, and then quietly giving it away to all of his employees. That was celebrated as the sacrificial attitude that makes America great. Well. sacrifice it was not – it was freely and voluntarily done by this gentleman. Second, it was HIS money … he was not taking $60 million from his neighbors by gunpoint and giving it awayto his workers. That is quite a different thing Mr. President … and right now me and every single American walking the Earth have a gun pointed at us “asking us to volunteer” $10,000 per year in taxes (fed revenues divided by US population) and “to voluntarily lend” you $50,000. Not exactly the same things, are they? On to the South Carolina school girl. She was adorable and her story touching – her school is on a railroad track that is disruptive, and walls are crumbling and the roofs leaking … and she just wants a chance to become a doctor, lawyer, congressman or even President. It was a public school. And of course, you know what the lesson we were suppsed to get was.

Last night was only the beginning folks. Listen to that talk carefully. It outlined every American-Socialist dream and did it proudly and in defiance of everything this country was founded on. It happened during the crisis. Not even trillions of dollars of budget deficits are stopping this train from leaving the station. In fact, the Socialists are using those deficits to justify this expansion … you see, they inherited these deficits from the evil capitalist Bush, and the crisis was caused by evil capitalist Bushes and the like, so when we invest in our Socialist agenda, we will be able to undo all of these things. Great, have a lovely day folks. And there is nowhere you can go if you don’t like it, we are supposedly the “free-est” country on earth.

He finished his talk with reminding us that, “despite our differences” we should all remember that “we love America” and that should be what keeps us together as we work through the various policies he favors. Well, I do not love “America” … after all, what does he or she look like? Where does that person live? Does that person love me? This “America” was at best an idea, and it was an idea conceived in liberty, and not socialism. So if there was an America for me to love, it had a stake driven through its heart a long time ago (probably most convincingly during the last Messianic administration). I am not in this together. I do not wish to do anything for a parasite that sees me as unworthy, greedy, petty and trivial. I do not wish to support a class of people (rich, middle and poor alike) that view private property as theft, that view the idea of individual responsibility and accountability as “outdated” and “reactionary.”  I do not wish to support a class of people that thinks that the harder I work, the more rights they have over me. I do not wish to support a class of people that wish to tell me how to raise Amelia and Isaac, our two children. I do not wish to support a class of people that think I am not mature enough to eat right or exercise right or sleep enough or play sports with the proper equipment, or use the right kind of car, or save enough money, or to compete against organized workers or to compete against licensed workers. I do support my family. I do support my friends. I do support my students. I do support the “strangers” that I encounter on an everyday basis either directly or indirectly via the interconnectedness of our economic lives. What else do you expect from me Mr. President? You can’t tax my mind and my reason.

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