Barack Obama’s favorite economic narrative goes like this: The Republicans drove us into the ditch and he has been able to pull us out only part of the way. Therefore, though times are bad, reelecting Republicans would mean undoing all his good work. Challenging this narrative is none other than very liberal Colombia University economics professor Jeffrey Sachs. Sachs argues that instead of beginning to pull us out of the ditch, the Obama administration, unlike the Merkel one, drove us deeper into the ditch. Why? Because they panicked and opted for short term solutions. Sachs know. He was there:
Did you know that in 1933, when the country was sick and nobody knew what to do about it, people got in their cars, drove to Washington, presented themselves at the White House, and said “What can I do to help?”
With nearly 10% nationwide unemployment it’s hard to distinguish where the downturn ends from where the sluggish recovery begins, but I think most Americans believe the worst is over. We weathered the storm. In spite of supreme mismanagement by this administration, earmarked with bogus bailouts, a failed stimulus package, a healthcare plan most Americans oppose, and a litany of other big-government bonanzas, the American economy has proved its resiliency. But before you think we’re back on our feet, be warned: there’s a tax tsunami on the horizon.
For those who haven’t yet seen it, here’s a link to the July 27 report by the Congressional Budget Office entitled “Federal Debt and the Risk of a Fiscal Crisis.” A few highlights from the report (and remember, the head of the CBO is a Democrat):
The country is in a funk. The economy seems to be going from bad to worse. What happened? The simple answer is that all the frantic Democratic legislation designed “to change the country” made matters worse for everybody and most especially for poor and the middle class, the very people Obama claims to want to help. Wall street and Pennsylvania Avenue are at each others throat and, if the American Dream is not dead it is in a coma. That is what former Fed Chairman Alan Greenspan New York mayor Michael Bloomberg explained to Dick Gregory on Meet the Press. Greenspan described the two Americas thus:
David Cameron, Britain’s new PM, has apparently learned little from Barack Obama’s experience. He is undertaking his own international humiliation tour in hope of reaping economic benefits. It is difficult to believe that this is making the Brits feel proud. Already, Simon Tisdal of the Guardian call’s him Obama’s useful idiot
Only a power hungry know nothing such as Donald Berwick could describe the British health care system as a boon to the have less. The truth is that the British sick find themselves in the same position as the Soviet hungry. They have to stand in long lines to buy tasteless bread. That has been my conclusion after listening to the story innocently told by Pat, my Northern Irish (County of Armagh) singing teacher, in response to a fellow classmate revelation that she is about to go through Cataract surgery:
Here we go again. Corporations are making money not by producing a product and marketing it, but by loading consumers with loans they cannot pay and then sticking the taxpayers with the bill. Only this time, it’s not houses and mortgages but “higher” education and student loans.
Lenin predicted that capitalists will sell the rope with which Communists will hang them. At the moment, one must wonder if debt is not the rope with which the slave world will hang the free one. Alan Greenspan warns that we will soon begin to feel the noose. But Krugman worries that if we stop spending we will end up in a 1930s type depression. Reading a review of Raghuram Rajan book on Fault Lines: How Hidden Fractures Still Threaten the World Economy it struck me yet again that US problem lies not merely in borrowing too much but in borrowing too much to keep up consumption.
Anyone who read Obama’s books should have expected as much but few took him at his word. Now they are learning to do so. The Economist editors write (6/12/10 p. 13): “Mr Obama deserves to be pegged back. This newspaper supported him in 2008 and backed his disappointing-but-necessary health-care plan. But he has done little to fix the deficit, shown a zeal for big government and all too often given the impression that capitalism is something unpleasant he found on the sole of his sneaker. ”
Enough is enough. All the big Obama stimulus shovel did was create additional long term burdens for the US private economy in the shape of additional government jobs. It is time to ignore fallacious Summers/Rohmer arguments about being “penny wise and pound foolish.” 200 billion dollars should not be considered a penny especially as they need to be borrowed and paid back with interest. It is time to put down the only shovel they can. Even a Harvard study has concluded that it is simply making the unemployment hole deeper. It is bad enough that the American drilling moratorium, is about to make Ahmadinejad’s day. The US will have to buy continue to buy foreign oil. No wonder the price of oil started rising again.
Instead of “Allah Akbar” a southern Iranian crowd interrupted Ahmadinejad with chants of “We are Unemployed.” Official Iranian unemployment stands at 11%; unofficial at 25% and the country suffers from a double-digit inflation (about 20%). The drop in oil prices and production hence, income is a major problem for a government which subsidizes everything from electricity to gasoline, from bread to other food staples.
A couple of months ago, President Obama called on the US to double its exports in two years. Indeed, his Assistant U.S. Deputy Commerce Secretary Ro Khanna says that Obama sees export growth as the right way to reduce unemployment: “Really, with this president the link between exports and job creation has never been made clearer.” Terrific idea. The trouble is that the weakening of the Euro means that America’s exports have just become more expensive, European (especially German) exports less expensive “with Renminbi having appreciated by 24% against the Euro since November> This means that China less willing to raise the value of its currency and Europe less willing to join the US in pressuring it to do so. Indeed, whatever hopes Clinton or Geithner had of a being able to return from China with promises of a prompt Chinese devaluation must be gone with the wind. Indeed, Hu says China to hold firm on yuan policy for it has its own priorities points out Head of China Research, Jonathan Fenby that China is $2500bn in the debt which it cannot case it and the value of which fluctuates in a manner it cannot control. Of course, one may add that its hopes that it could use the Euro to reduce its dollar exposure has been dashed along with American hopes that a booming China would be a democratizing China.
Optimistic that nearly a trillion dollars of bailout funds could help stabilize the economic and civil unrest engulfing Greece, the markets rallied from last week’s bizarre performance to post the biggest one-year gains in more than a year. Hopefully this good news can help silence the chattering classes who are attributing all economic ills to the troubled Mediterranean nation, and end this media-driven frenzy.
While the world is viewing US treasuries as a safe heaven, Americans think they are a rather risky proposition. In a recent FT/Harris poll, 46% of the American people think it likely that the US government will ‘default’ in the next decade and only 33% think such ‘default’ unlikely. Only the French are more pessimistic about their government finances. 53% of the French expect their government to default in the next decade while 27% think it unlikely. The Germans are the most optimistic. Only 28% believe their government may ‘default’ while 43% think it unlikely.
Since taking office 15 months ago, the Obama administration has pressed a systematic suffocation of the free market—from the government takeovers of health care, the autos, student loans, and the banks to the attempted takeover of the energy sector to the new oppressive tax and regulatory schemes. The president has often chimed in on how evil, nasty, and greedy various segments of the private sector are (bankers, insurance companies, you name it.) He’s singled them out, wagged his finger, and declared that they will pay for their vile profit-seeking ways.
Greece just moved out of the frying pan and into the fire. Violence has broken out across that country, resulting in deaths and anarchy, because the parliament has voted to try to save the economy with deep, deep spending cuts. Greece has been on a spending binge for decades, The government subsidized everything—from health care to vacations—and consequently, rang up an outrageous and unsustainable debt.
Some months ago the Obama administration put out the word that the economy is doing great and 10% unemployment should be considered the new normal. As the unemployed were almost exclusively persons without college degrees seeking employment in the small business sector, the intellectual, media and political elite could not care less. Tim Geitner can make the Sunday rounds unafraid that he would be asked about horrific unemployment statistics, such as the 41.1% Black youth unemployment or the “unexpected” rise in the number of persons applying for unemployment benefits a second week in a row or that the initial unemployment claims data have not really changed in the past five and a halve months despite repeated administration assertions to the contrary.
Rahm Emanuel, Barack Obama’s court Jew, famously said that a crisis should not be wasted. Well, the Obama administration has made a very good use of this one. By relatively shielding the wealthy and the educated, the Obama bureaucracy loving elite has used the crisis to make the less prosperous and less educated poorer and more dependent on government largess. How? By using tax payer money to employ the educated and by pumping money into the stock markets through zero percent bank landing. The result? Two Americas. A 95.1% employed college graduate America increasingly drawn to secure, well paid, prestigious if unproductive government jobs and an the increasingly underemployed rest.
Barack Obama promised to focus like a laser on the economy. So, why doesn’t he? Why does he continue to focus like a laser on health care? On bashing Israel? On Bashing Karzai? On bashing Palin? On signing meaningless anachronistic Cold Warlike treaties with Russia? On studying off shore drilling? In short, on doing everything and anything except focusing on the economy?
No, indeed. Obama stands up only to allies. He reminds on of Herod of whom Caesar remarked that he would rather be Herod’s pig than Herod’s son! Countries would rather be Obama’s enemies than his allies and the Chinese understand that only too well. XINUA reports: China says Google issue will not affect China-U.S. ties;
Yesterday Congress passed a health care reform bill that none of its members read. It doesn’t apply to legislators and their families. It required bribing representatives who seemed to waver by exempting constituents and special interests. It is not funded, but it does pass on a trillion-plus debt load to the various states when the country is the midst of recession. It will not affect how insurance companies do business, but it might force increase political campaign contributions to congressional advocates of change we can believe in.
As I watch with unease the US explosive trade deficits with China and its effects on the American-Chinese balance of economic, strategic and moral power, I cannot but remember that this is part of the “proud” legacy of the Clinton administration decision to stop treating China as the Communists dictatorship it is and start treating it as a NORMAL state by granting it permanent status of a most favorite nation which Albright renamed “normal” status. The change freed China from a yearly review of its human rights record and enabled China to join the WTO.
So, here’s the deal; one year ago, Mark Hanes of CNBC fame said that he thought the market may have hit a bottom. One year later; it has proven to be prophetic. The market is up 60 percent from last year’s bottom and Hane’s is taking full credit for it. CNBC shamelessly is following suit. All morning long, they have done nothing but extol Mark Hane’s call of the market bottom. Let me share with you just one exchange I heard this morning. Hanes was talking to another market analyst who said, “Hey, Mark, I called the market bottom two weeks after you did, so I did pretty well,” to which Haines said, “ I called it within two minutes.” And, that is when I wanted to throw up.
Dubai is getting nervous. The royal family worries that their goal of becoming ( even replacing) Switzerland is being undermined by Iran’s enemies. Switzerland helped the Nazi regime survive and flourish economically and got handsomely paid for her “efforts.” For many decades it even avoided censure for so doing.
President Obama’s various legislative initiatives have so unsettled the business world that it went Galt (on strike). Big business is making money by cutting expenses and investing elsewhere. Small businesses merely hoping to survive. Citizens who are not rushing to pay up debts, worry that what remains of their savings is about to be taxed away. Atlas Shrugged and the Road to Serfdom are best sellers and Democratic politicians are preparing to become unemployed.