A whack across the nose April 14, 2009
Posted by wonderingin in Politics, World affairs.add a comment
“North Korean dictator Kim Jong Il is said to be a film buff, so perhaps he’s familiar with the classic “Groundhog Day,” in which Bill Murray plays a TV reporter who is condemned to relive February 2 over and over again. Kim must figure the members of the U.N. Security Council have seen it too, since they insist on reliving the same hopeless diplomacy toward his nuclear provocations.”
Better yet, the diplomats are crazy. The definition – continuing to do the same thing over and over again and yet somehow expecting a different outcome.
The only two things Kim understands and which have any chance of changing his behavior are:
- tying a noose around his wallet and
- a stiff whack on the nose
Where are the 2 x 4’s?
Everyone should pay income taxes April 14, 2009
Posted by wonderingin in Politics, The Economy.add a comment
Ari Fleischer says everyone should pay taxes – my sentiments exactly.
Brushing up on “Rules for Radicals” April 3, 2009
Posted by wonderingin in Politics, Regulation, The Economy.add a comment
“[Saul] Alinsky’s 1971 book, ‘Rules for Radicals,’ is a favorite of the Obamas. Michele Obama quoted it at the Democratic Convention.”
- The President is ‘Keeping Score’, WSJ
By now, most people who read the papers or watch the news have realized that President Obama is fully intent on re-making the American economy and the government’s role in it as he promised during the campaign.
The velvet glove of the President’s hopeful rhetoric apparently covers an iron fist as Congressman Peter DeFazio is quickly learning after he voted against the stimulus bill.
Reasonable people will always differ on the manner and nature of government and economic policy. Democracy is a messy system and the full and open debate of important matters is essential if the country as a whole is to accept significant changes over the longer term.
The great risk to American capitalism in all of this is the growing sense of individual entitlement – everyone wants something to be paid for by someone else!
Where is the sense of personal responsibility?
Who will invest to create the needed jobs if incentive is rewarded with higher taxes and greater regulation?
Maybe the rest of us should be reading ‘Rules for Radicals’ to figure out what we are up against. I’ve ordered my copy.
Topping a tree stunts it’s growth March 24, 2009
Posted by wonderingin in Business, Politics, The Economy.add a comment
During his prime time press conference this evening, President Obama was asked whether he regretted his budget proposal to eliminate itemized deductions for mortgage interest or charitable contributions:
“No because I think it was the right thing to do,” he said, [noting] the provision only affects 1% of the American people. “I think this was a good idea, I think it was a realistic way for us to raise some revenue,” he said, “It’s not going to cripple them, they’ll still be well to do.”
President Obama apparently still does not understand that topping a tree stunts its growth. Most of the people in the top 1% or 5% are in the top bracket because they earn the money and generate the wealth in this country. Take away their incentives and why should they work so hard?
In addition to reducing incentives for work, Mr. Obama also seems to think that the top 1% or 5% can solve all of the nation’s financial problems. There is only so much money there and eventually the well will run dry.
It’s time to draw the line on government spending and the Proposed Budget for Fiscal 2010 would be a good place to start.
AIG – When Principles Collide March 16, 2009
Posted by wonderingin in Business, Financial Markets, Politics, Regulation.add a comment
The mess at AIG represents a colossal conflict between two almost sacred principles of a free market democracy – the sanctity of contracts and accountability for taxpayers’ money.
Contracts – The insurance industry, more than most businesses, rests squarely on the sanctity of its contracts. In return for their premiums, policyholders literally receive nothing but a contractual promise from an insurance company that lawful claims for damages will be honored (and paid) by the company. Indeed, the very foundation of our financial and commercial markets rests on the reliability of contractual arrangements and customary business practices among companies and their suppliers and customers.
Taxpayer Accountability – On the other hand, the screaming about where the AIG bailout money went and the bonuses proposed to be paid hits raw nerves everywhere. People expect companies and individuals being helped by the government to comply with a higher standard including that they sacrifice themselves by not taking advantage of taxpayers.
How this conflict gets resolved will inevitably set a dangerous precedent. Contracts will either become increasingly vulnerable to involuntary politically motivated modification or abrogation, or growing taxpayer cynicism about bailouts will lead to taxpayer demands for a dramatic increase in government regulation of the markets and the economy.
Neither outcome will be good for the American economy in the long run. In hindsight, bankruptcy might have been a better choice.
President Obama is betting against the American people. March 9, 2009
Posted by wonderingin in Politics, The Economy.add a comment
President Obama’s recently released budget blueprint proposes to dramatically increase the government’s share of spending and decision-making in the economy. He thinks he knows better than the people at large what’s good for them.
And yet, our economic strength as a country has always been driven by the collective self-interested actions of millions of business owners and workers. The economy works best when people are free to make their own choices and pursue their own interests.
Our economic success is also driven by the wisdom of crowds. Under proper conditions, large groups of people make much better decisions than individuals.
President Obama may have won the election by 53% or so of the vote, but the other 47% of the electorate knows a shell game when they see one.
Cap (your income) and trade (your assets) March 8, 2009
Posted by wonderingin in Energy, Environment, Politics, Regulation, The Economy.2 comments
President Obama’s cap and trade proposal for reducing greenhouse gases is a tax pure and simple. Anything that generates $500 – $600 billion for the government to spend on other things by definition has to be a tax.
Cap and trade really means: “I am going to cap your income and force you to trade down your standard of living because I need that money for other things.”
Never mind that:
- the underlying climate science is still subject to debate,
- Obama proposes to launch an untested scheme of dubious merit on a large scale without prototyping or testing, or that
- creating a giant new revenue source for politicians is begging for irresponsible behavior of the worst sort.
Business leaders are finally beginning to wake up to the danger.
Where are the rest of you?!!
Turkey and dressing February 25, 2009
Posted by wonderingin in Economics, Politics.add a comment
“It’s a turkey,”
was Fred Siegel’s description of President Obama’s stimulus plan. Claiming that the stimulus is neither timely nor targeted, Siegel, an urban historian in NYC, stated, “Obama is doing what he knows. This is how business is done in Chicago. Everyone gets cut in.”
Read the article in USA Today.
The reality is that any large spending legislation needs broad participation to gain sufficient support for passage. This bill was no different.
There is an interesting graph at www.recovery.gov (a White House web site) showing the spending allocations by major category. While the graph looks positive (more money in tax relief than any other category), the proof will be in the details of exactly how and when the money is spent and whether that spending will lead to investment and jobs. (Investment must come before jobs – not the other way around.)
Last night in his Address to Congress, President Obama added the dressing and gravy. While we have lots of problems he said, things will get better. The address was a necesasry “feel better” speech, but the hard work will still fall to each of us to make good decisions about savings and investment.
The economy has the flu January 10, 2009
Posted by wonderingin in Financial Markets, Politics, The Economy.add a comment
The Democrats proposed spending and tax cut stimulus plans remind me of the old sales recruiting tactic – “let’s throw them [new sales people] up against the wall and see if enough stick to make our numbers.”
Many others seem to agree:
“We have very few good examples to guide us,” said William G. Gale, a senior fellow at the Brookings Institution, the liberal-leaning research organization. “I don’t know of any convincing evidence that what has been proposed is going to be enough.”
The stimulus plans are being driven by a fear (mainly by politicians) that doing nothing or doing too little will cause the recession to be worse or last longer than otherwise might be possible.
All of this economic stimulus is a bit like taking antibiotics for the flu – you hope it will help and you feel better by doing something. But in reality, most of the time the flu must simply run its course.
Economic activity is cyclical – the business cycle has not been banished and it likely never will be. Cycles are also driven by momentum. A growth cycle gains momentum as it feeds on itself until it becomes unsustainable or suffers from some external shock.
By the same token, down cycles gain downward momentum as businesses and individuals pull in their financial horns in acts of self-protection. No government program is likely to prevent that from continuing for a while.
We should treat the current economic contagion like we would treat the flu - with plenty of rest, fluids, and pills for the fever while keeping the patient quiet and warm.
What does that mean in economic policy terms?
- Continue to stabilize the financial system through capital injections, loss sharing and regulatory reform
- Comfort the worst afflicted with direct assistance including extended unemployment insurance, healthcare assistance, and mortgage foreclosure mitigation
- Do not pervert normal economic incentives with more government subsidies, tax law law changes or regulation which do little to support long-term economic growth or job creation
- Be patient and wait it out.
Keeping things in perspective December 20, 2008
Posted by wonderingin in Politics, The Economy.add a comment
In the midst of all the dreary economic news and tales of scandal, we should also remember that most things in America still work pretty well.
******
“This is a good time to remember who we are…. We are the largest and most technologically powerful economy in the world, the leading industrial power of the world, and the wealthiest nation in the world…. We are the oldest continuing democracy in the world, operating, since March 4, 1789, under a vibrant and enduring constitution that was formed by geniuses and is revered, still, coast to coast. We don’t make refugees; we admit them. When the rich of the world get sick, they come here to be treated, and when their children come of age, they send them here to our universities. We have a supple political system open to reform, and a wildly diverse culture that has moments of stress but plenty of give.
…while terrible challenges face us—improving a sick public education system, ending the easy-money culture, rebuilding the economy—we are building from an extraordinary, brilliant and enduring base.”
- Peggy Noonan, Who We (Still) Are, WSJ, 12/20/08, p. A15
Elephants in the room December 15, 2008
Posted by wonderingin in Politics, The Economy.add a comment
President-elect Barack Obama has won praise for his economic and national security teams – both indications, some would argue, of an intent to govern from the center and with continuity during a time of war and economic crisis.
But now the new administration’s true color (green) is showing brightly in the naming of the energy and healthcare teams. Mr. Obama is smart, smooth and pragmatic. But he is not likely to let a little recession and financial crisis get in the way of his big plans.
Americans rarely accept big changes except during a crisis, and some have argued that the current crisis might actually make it easier to make big changes in areas such as business regulation, energy, and healthcare.
Some elephants stand in the way of rapid, large-scale change.
Healthcare – activists like to point to the insurance companies and the drug companies as the bad guys, but the real conflict will come between the already squeezed healthcare provider community (doctors and hospitals) and those seeking to contain costs (squeeze the docs some more) and those seeking to improve healthcare for the uninsured (squeeze the docs even more).
Affordable, universal healthcare and reducing healthcare costs are in direct conflict. They are in fact mutually exclusive without rationing. And rationing is the big elephant in the room which no one is talking about.
Read – Why Americans pay more for healthcare
Energy – the rapid decline in the price of oil has let much of the air out of this balloon. Yes, we need to find new sources of energy and reduce our reliance on foreign oil. Neither of those are likely to happen quickly with oil at less than $50 per barrel.
Wind and solar power were not economical without government subsidies with oil over $100 a barrel. How will that work at $50? Energy sensitivity only works in Europe because gasoline costs $9 a gallon. And no one is suggesting that Americans would tolerate a gas tax of even $1 or $2 dollars per gallon let alone $7.
The climate change and energy policy changes demanded by progressives could only happen quickly if Americans were willing to dial back their standard of living significantly – another big elephant in the room.
Our standard of living is in jeopardy December 12, 2008
Posted by wonderingin in Finance, Politics, The Economy.add a comment
The American standard of living is in jeopardy as never before.
Our collective historical economic success has been built on the hard work and personal responsibility of the free enterprise system. Personal saving and investing were hallmarks of that success.
Now, however, we are a nation of debtors as well as a debtor nation. And the proceeds of that debt have been spent on consumption (by individuals) and transfer payments (more consumption) by government.
There is a limit to how much we can borrow. The Wall street investment banks have reached that limit and are contracting rapidly. Consumer borrowing and spending have also contracted sharply in recent months.
Only the Federal Government seems to have unlimited borrowing capacity as every economic sector queues up for its own rescue. But the government’s borrowing capacity is also finite, and we may in fact be approaching that limit faster than we think.
The Federal Government has committed approximately $1 trillion of borrowed money to various bailout and rescue schemes, and the federal budget deficit for fiscal 2009 may exceed $1 trillion in a total economy of less than $15 trillion.
And that’s before President-elect Obama’s administration tees up regulatory reform, energy reform and healthcare reform. Any time a Democratic administration legislates “reforms,” higher spending and taxes are usually involved.
How will we pay for all of it? More taxes on the rich will not cover the bill. Sounds like more borrowing.
And yet our principal lenders have increasing concerns at home. China’s $500 billion domestic stimulus package will reduce the amount of their foreign currency reserves available to buy our debt, and the rapid decline in oil prices below $50 will surely reduce Treasury purchases by the oil states.
Sooner or later, we must learn to live on what we earn. That time may be sooner than we think.
