Greenspan's clowns & McCain's weasels

With the election behind us, it's time now for another installment of good news and optimism, of the kind you can find nowhere else, and probably wouldn’t want to anyways. No matter what the weather is doing outside, no matter what the papers may say, I’m always sunny on the inside, because that’s just who I am. 1. Bach’s Mood Music. When we read anything about the economy these days, we should have Bach’s “Toccata & Fugue in D minor” playing in the background.

2. Recession Graphs. Some analysts are predicting an “L-shaped” recession. Some say it will be a “V-shaped” recession. Some say “U-shaped.” But I say it will be a “Clown-shaped” recession, with a graph that resembles the mug of Maestro Greenspan.

3. Capstone. How ironic that a former disciple of uber-capitalist Ayn Rand helped turn public opinion against free markets, ultimately paving the path to a more socialist government.

4. Close the Door Behind You. How sad that the only elected politico hammering the banks on their taxpayer financed “executive bonuses” is that bald whiny little Henry Waxman. Democrat. Where the heck are the Republicans? Perhaps they sit away in silence, counting campaign contributions. Time to go, folks, time to go….

5. Oops, I guess they’re already gone. Nice try from McCain there in 2008, but no cigar. Not even a cigarillo. It just goes to show ya – Neoconservatism never pays.

6. McCain’s Weasels. As predicted, the knives have come out of the McCain camp contra Palin. They waited a full 24 hours after the election to unsheathe and slice away in full pettiness mode. Glad to see Michelle Malkin and RedState tracking down the leakers, holding them accountable.

7. Relatedly. I don’t like the kind of women that don’t like Sarah Palin.

8. No Foreign Cars. If we bail out GM, and then Ford too, we will have enacted an ex post facto form of trade protectionism. If a taxpayer saves money buying a Toyota, but then must pay more taxes to bail out GM, what’s the point in buying a Toyota? Might be simpler to just raise tariffs on imports. Or better yet, pressing the logic, ban them altogether.

9. Ricardo’s High-Water Mark. The global free trade consensus seems poised to diminish. But, worry not, this won’t be your grandfather’s Smoot-Hawley. To save itself, America will soon feel a need to re-industrialize. You know, actually make stuff. Right here at home. Pretty soon this will be the accepted wisdom. How did it ever come not to be?

10. Corollary. Sans free trade, the EU will find itself en route to disintegration. Which would be just fine, really.

11. With Bones in their Noses. Power traveled further from Truth under the Bush Administration. Truth became less powerful, as our democratic republic became less constitutional. The Paulson Plans cases in point – an open-air looting of America, no congressional oversight. The elite strategy of profit-taking up to the point of bankruptcy and then, too big to fail, chiseling out their taxpayer bailouts. Wealth thus transferred from Wal-Mart shoppers towards Saks Fifth Avenue. Meanwhile, the masses have no idea what’s happening. They cannot penetrate today’s propaganda, much less tomorrow’s. When potential leaders arise capable of pointing out sundry truths to such corrupt power, the cannibals generally arrive in the nick of time.

12. Feeling Vindicated. Early spring this year, predicted deflation on the near-horizon. And so now here it is. And it’s actually not all bad. Diminishes the power of the state, and those overly connected to the state, over time. Might even slow down a certain socialist in the Oval Office. So of course deflation will be fought tooth and nail. It will become the Enemy. Osama Bin Deflation. But the powers that be may have been too greedy in the recent past to win this fight now. The little guy may accidentally walk away with this one.

13. Related Prediction. Mises will trump Keynes when all is said and done with the present economic crisis. Bad news for Bernanke-Paulson-Greenspan.

Life is grand, let us rejoice. But I repeat myself.

Yours in Optimism, Norman Vincent Peale

Bad omens for economic policy

Not for nothing has economics long been known as the “dismal science”. Not only is it inherently boring, but hardly anyone truly understands it. Even among the few with some understanding, rarely are they able to communicate it to others. Harry Truman famously demanded a “one-armed economist” because he was so frustrated with economic advisors who kept saying “on the one hand this could happen, but on the other that could happen”.

I once had the honor of serving on a board with Milton Friedman, a remarkable man who not only understood economics better than just about anyone, but who also could explain the dismal science with a clarity comprehensible even to dolts like myself. Through an amazingly popular television series in the 1970s - “Free to Choose”-and in hundreds of newspaper columns, Friedman gave to a wide audience some basic grasp of economic theory and reality. For this feat as well as being proven “right” on the Big Questions, Friedman can fairly be called the most influential economist of the 20th century.

Perhaps the greatest truth that Friedman articulated was that as a general rule government intervention is bad for national economies and free markets are good. If you ranked the success of national economies over the last century the best (e.g.- the United States) had relatively the least government intervention while the worst (e.g.- the Soviet Union) had the most. Similarly free markets did best and non-free worst.

Despite this pretty clear track record left-wing opinion has relentlessly preferred giving government the primary role in managing national economies.

We were painfully reminded of these truths during the recent economic meltdown. Anyone doubting the general economic ineptitude of government had only to watch the ludicrous and downright dangerous posturing of our Democratic Congress as the crisis unfolded.

Turning the wisdom of Friedman upside down, Democrats outdid each other in laying all possible blame on free markets. Chanting a mantra of “greed” and “corruption” (phenomena unknown in Congress, of course) they instantly fingered “Wall St. fat cats” as the villains of the piece.

Piling hypocrisy on top of absurdity, no one shouted these accusations louder than Barney Frank and Chris Dodd -who arguably had more responsibility for the genesis of this disaster than any other two people in the country. Once again was George Orwell’s famous dictum validated: The Big Lie repeated loud enough and often enough does work.

Complementing the demonization of free markets was the obscene notion that our country’s salvation was to be found in –you guessed it- massive government intervention.

Blending irony with hypocrisy and betting on public memory loss many of the very same people (e.g. Chris Dodd) who had whooped through the landmark deregulatory legislation signed by Bill Clinton repealing the Depression era Glass-Steagall Act now howled that the economy desperately needed wall-to-wall Congressional oversight and bureaucratic regulation of just about everything.

The Congress’ last great outburst of regulatory mayhem came in the wake of the Enron collapse. Demonstrating its usual genius for producing “cures” far worse than the “disease” Congress passed the Sarbanes-Oxley bill, a bureaucratic nightmare that delivered a body-blow to U.S. entrepreneurial activity, and drove much of it overseas.

What we are going to get starting in January by way of “fixing the economy” from the Democratic triumvirate of Obama, Reid, and Pelosi will make Sarbanes-Oxley look like a relatively minor and benign piece of progressive legislation.

Throughout our past American greatness has been driven by an engine of economic opportunity unparalleled in the history of the world. Its’ indispensable fuel was freedom- freedom to dare, to risk , to choose, to innovate, to adapt, and above all to work hard with a just expectation that one would be allowed to benefit from the fruits of one’s labor.

Today- confirmed by the late election -new doctrines are abroad in the land. They value the collective over the individual. Their hallmarks are not work, risk, reward but entitlement, grievance, and envy. The engine of opportunity is now to be lubricated with class warfare. Growth gives way to redistribution.

This scenario may seem gloomy, but that is needed to get people’s attention. America has often been likened to a sleeping giant, frequently slow in awakening to danger, but once aroused, it is capable of extraordinary feats in meeting the greatest challenges.

We must hope that that capacity is far from exhausted.

William Moloney’s columns have appeared in the Wall St. Journal, USA Today, Washington Post, Washington Times, Philadelphia Inquirer, Baltimore Sun, Denver Post, and the Rocky Mountain News.

Bush fatigue

I noted yesterday in a post on my blog entitled "The Morning After" that I believe Obama's victory on Tuesday was as much a product of the public's "Bush fatigue"as it was any ringing affirmation of the liberal policies that Obama will pursue as president. I argue this because Obama ran primarily as a centrist, coopting the Republican tax-cut mantra by promising his tax reduction for "95% of working Americans" and talking up his desire in general for middle class tax relief. It was a great strategy and proved extremely effective -- particularly given McCain's ineptness in arguing that the Obama plan amounts to another entitlement program. In the end, of course, we all know that with the Democratic robber barons in Congress leading the way, tax increases are coming for everyone -- and not just the "rich" folks making in excess of $250k per year. In my view there is no fundamental "realignment" in this election -- the country remains a center-right nation that wants small government and low taxes. In today's Wall Street Journal, Pat Toomey makes a very compelling argument to this effect:

"A poll commissioned by the Club for Growth in 12 swing congressional districts over the past weekend shows that the voters who made the difference in this election still prefer less government -- lower taxes, less spending and less regulation -- to Sen. Obama's economic liberalism. Turns out, Americans didn't vote for Mr. Obama and Democratic congressional candidates because they support their redistributionist agenda, but because they are fed up with the Republican politicians in office. This was a classic "throw the bums out" election, rather than an embrace of the policy views of those who will replace them."

This is exactly the point I've been making: the 2008 election -- like in 2006 -- was a referendum on George W. Bush and the Republican "bums" that the public associates with failure. It was not a ringing endorsement of "spreading the wealth around" and doesn't amount to an affirmation that wanting to keep more of your hard earned money is "selfish". This was not a realignment toward socialism. It was a rejection of Bush, pure and simple.

The poll results cited by Toomey clearly back up this position:

"Consider the most salient aspects of Mr. Obama's economic agenda: the redistribution of wealth through higher taxes on America's top earners; the revival of the death tax; raising the tax on capital gains and dividend income; increased government spending; increased government involvement in the housing crisis; a restriction on offshore drilling and oil exploration in Alaska's Arctic National Wildlife Refuge (ANWR); and "card check" legislation stripping workers of their right to a secret ballot in union elections.

On each of these issues, swing voters stand starkly against Mr. Obama. According to the Club's poll, 73% of voters prefer the federal government to focus on "creating economic conditions that give all people opportunities to create wealth through their own efforts" over "spreading wealth from higher income people to middle and lower income people." Two-thirds of respondents prefer to see the permanent elimination of the death tax, and 65% prefer to keep capital gains and dividend tax rates at their current lows."

These results read like a Conservatives dream: a focus on individual effort to create wealth, elimination of the death tax and low tax rates. Unfortunately, the voters -- in rejecting McCain as another vestige of the Bush Administration -- elected someone who stands in opposition to all of these positions. Obama is on record as supporting increases in the death tax, capital gains and dividend taxes, income taxes on the highest tax bracket, the expiration of the Bush tax cuts and many other tax increases. One of the poll results that shocked me from Tuesday was that Obama won among tax payers in the $200,000 and above income category -- the very category that he was openly targeting for a tax increase. Voters seem to be against tax increases -- but they didn't vote that way on Tuesday.

This seeming contradiction is tough to explain. It is a given, of course, that many voters don't pay attention to the details, and vote on the basis of emotion and personality. On that score Obama won hands down. Many of the voters in swing states ended up voting against their stated interests and desires, by electing Obama and increasing Democratic majorities in the House and Senate. The emotional wave of "change" -- coupled by an incoherent Republican opposition and a total failure of leadership -- created a Democratic wave. Caveat emptor: they just bought something that was both defective and dangerous.

How long will it take before massive "buyer's remorse" sets in? That depends on how well Obama is able to manage the massive liberal forces that will now be pushing him hard to the left. Whether it be the far-left interest groups that poured massive money into his campaign, or the Democratic leadership in Congress that wants socialism on a grand scale, Obama faces some powerful groups that want precisely what most Americans do not. Whether he can (or will) resist this and govern more to the center is unclear. Nothing in Obama's past indicates a courage of conviction or a willingness to buck his party's power brokers. If Obama is unable (or unwilling) to control these forces, he will quickly find himself with a groundswell of opposition among those who decided (against logic) to vote for him. It won't be pretty.

In the end, this election amounted to a clear signal to conservatives that the issues that fueled the Reagan Revolution -- smaller government, less regulation and low taxes -- still resonate broadly with the American people. George W. Bush was never a leader of this movement, and his prolifigate spending and lack of fiscal discipline helped to ruin the Republican brand. Now, Conservatives need new leadership and new ideas that will take the Reagan-era philosophies and update them for a new generation of Americans. Barack Obama won the presidency but he hasn't changed America.

Fairness? Just the opposite

Obama admits that raising taxes decreases revenue. He does not hide that his goal in increasing taxes on individuals and small business owners who qualify for his tax hike is emphatically not to increase tax revenue. Because a "single mom" gets taxed at a higher rate than "her boss's investments," Obama is willing to sacrifice necessary revenue in the service of what he defines as "fairness." But how is it "fair" to tax the boss's money at the same rate as the "single mom's" (or more likely, a higher rate) when the money is first earned, and then not only tax it again, but raise the second tax on it - merely because it is invested? Don't we want to encourage investment in American companies?

How is it "fair" to deprive the country of essential tax revenue needed to decrease the deficit and run all our bloated government programs (programs that only McCain is willing to reform)? Don't we want the deficit to shrink instead of grow?

And how is it "fair" to the "single mom" who relies on her job to care for her family's needs to jeopardize her employment by increasing the tax burden on her boss (who very well may be a "single mom," too)?

According to Obama, wanting to keep the money you earn (and invest it and even decide for yourself which non-profit gets your donations) is what he calls, "selfish," and the most recent figure for who will get taxed under his plan has changed to people making more than $120,000.

Obama even believes that a good way to "spread the wealth around" is to take your money and give checks to people who don't pay taxes - more than 40% of the people getting Obama's "tax relief" money pay no federal taxes at all. That's not "fair," that's "welfare" and it traps people in poverty.

This isn't "restoring fairness to the tax code." This is creating the appearance of fairness in the tax code. But it isn't honest and it isn't fair. It's class warfare - divisive and polarizing. What happened to the Obama of, "there's not a liberal America and a conservative America; there's the United States of America" fame?

I guess he's the same Obama that followed, "people don't expect government to solve all their problems" with "But..."

Dr. Pamela Zuker received her Ph.D. in Human Development and Psychology from the University of Chicago where she performed research at the National Opinion Research Center (NORC). She also holds degrees in Anthropology and Clinical Psychology, and practiced marriage, child, and family therapy before focusing on positive psychology. Her current research is on the role of meaning in adult life. She lives in the Roaring Fork Valley with her husband and two children.

America at the tipping point

Today, Daniel Henninger has a brilliant piece in the Wall Street Journal that lays bare the true significance of an Obama victory. Rather than being representative of a repudiation of "the last eight years", a victory for Obama will usher in a new and philosophically revolutionary change in the basic tenets of both the American economy and society. An Obama administration -- aided with huge Democratic majorities in the House and Senate -- will not be a "one-off" example of an over-reaction to the financial crisis that demands an immediate (but temporary) change in direction to right the ship.Rather, as Henninger so eloquently puts it, with this election the U.S. is at a "philosophical tipping point". This is spot on, and echoes the theme of many of my posts for the past several months. America is about to take a sharp 90 degree left turn, away from our history of free-market capitalism based on a risk/reward calculus, and toward a model of state-controlled system based on a no-risk/high security formula. It's a fundamental shift, as Henninger states:

The goal of Sen. Obama and the modern, "progressive" Democratic Party is to move the U.S. in the direction of Western Europe, the so-called German model and its "social market economy." Under this notion, business is highly regulated, as it would be in the next Congress under Democratic House committee chairmen Markey, Frank and Waxman. Business is allowed to create "wealth" so long as its utility is not primarily to create new jobs or economic growth but to support a deep welfare system.

This move toward "welfare capitalism" is exactly where Obama will take us over the next four years. And it is a tipping point because it is largely irreversible; the Great Society has now been with us for over 40 years, and its core elements -- Medicare and Medicaid -- are programs that make up a huge percentage of our entitlement spending. It is easy to giveth -- but it is much harder politically to "taketh away".  This is the issue we will face with Obama -- who plans an historic expansion of public-funded healthcare, energy development and welfare programs. As I've written previously, this will result not just in new taxes, but in the growth of a huge and growing dependent class that lives off government but does nothing to help fund it.The impact of this will be to move America back in the pack, to the economic alsorans of France, and Germany. As Henninger again writes:

Now comes Barack Obama, standing at the head of a progressive Democratic Party, his right hand rising to say, "Mothers, don't let your babies grow up to be for-profit cowboys. It's time to spread the wealth around."What this implies, undeniably, is that the United States would move away from running with the high GDP, high-growth nations rising today as economic and political powers and move over to retire with the low-growth economies we displaced -- old Europe.As noted in a 2006 World Bank report, spending in Europe on social-protection programs averages 19% of GDP (85% of it on social insurance programs), compared to 9% of GDP in the U.S. The Obama proposals send the U.S. inexorably and permanently toward European levels of social protection. This isn't an "agenda." It's a final temptation.

A temptation to remake America in the model of the "progressives left" -- which sees capitalism as a model that fundamentally offends them. It offends the notion that America should be about equality of outcome, not opportunity. At the heart of this is a super-charged version of those who believe that "self-esteem" matters more than keeping score, and the idea that some will win while others lose is not acceptable. Never mind that in our economy, those who win do so not because of some hereditary right that is baked in as a birthright, but rather because of their drive to succeed. The left wants to discount the winners so as not to offend those who are less able (or willing) to succeed. This is at the core of the progressive movement: don't brag, walk softly, don't make anyone else feel badly and -- most importantly -- spread your wealth around so as not to make anyone feel inferior.

What this ignores, of course, is that human nature desires independence and self-sufficiency, not dependence on others. Those who actively support this kind of system are the progressive intellectuals who live in a world of theory, rich liberals who feel guilty about their success, and students whose brains have been scrambled by the left-wing politics of the universities. But the vast middle -- who will vote for Obama on November 4 because they have been hoodwinked into thinking that he is more Bill Clinton than Jacques Chirac -- don't want a handout. They want opportunity. And opportunity is not granted by a statist model of economics, but rather by life-giving tax cuts and a light regulatory burden that will ignite the economy and create new jobs. That's the right tonic for America and those who have too little -- not a government handout in the form of a cash payment that serves only to affirm their lower lot in life.

But this is not Obama's view of the world. And if he wins on Tuesday, we will see America make a choice that will fundamentally alter the philosophical underpinnings of our great capitalist democracy.

It will be a choice we will long remember-- and long regret.