Serious Question: Why Would You Vote For Obama?

 

I assume if you’re planning on voting for President Barack Obama (D-USA) in 2012, that you voted for him in 2008. Furthermore, I would hope that your vote in 2008 actually had something to do with what he campaigned on. So, let’s roll the tape, shall we?

Major campaign issues from 2008:

• The Economy. Well, with now a record 37 months at 8% or higher unemployment, you’d be hard pressed to argue that he’s turned around the economy, despite a $787 billion stimulus package (hey, where’d that money go, btw?)
• Close Gitmo. Last I checked, Gitmo is still open.
• Get us out of Iraq and Afghanistan. No. And…no.
• Maybe you’re a supporter of gay marriage. Well, how much progress has been made here by the Obama administration? Err…none. In point in fact, I do expect Obama to make a serious push on this front later this year, closer to November. But remember, from January 2009 to January 2011, Obama had both chambers of Congress in his pocket. He could’ve passed anything he wanted to pass related to gay marriage. In a snap. But he didn’t. Remember this post when something doesn’t pass this year and he blames it on the Republicans. If you don’t, I will. And I’ll remind you. Again.
• High gas prices. Ooops.
• The federal deficit and exploding debt. He was going to cut the deficit in half. Last Thursday, Obama passed President George W. Bush’s deficit total. It took him 38 months to pass Bush’s 96 months of out of control spending. Yes, the economy exacerbated that. But I’ve discussed this before. And, surely, if that matters to you, then you’re upset about the fact that our credit rating has been downgraded? And you’re upset about the Democrats failure to pass a budget? But wait, that’s not Obama’s fault, you say! Well, is he, or is he not the leader of the Democrat party? If he pressured Senate Majority Leader Reid (D-NV) to pass a budget, would one get passed? Bet the farm on it.
• Improve race relations. Well, I think we can all agree that hasn’t happened. And isn’t going to as long as that racist thug runs the Department of Justice.
• Tax cuts for 95 percent of working families. Never happened.
• No new taxes for middle class. Well, sure, as long as you don’t count cigarettes, healthcare, or don’t own a small business.
• Improve foreign relations, particularly with the Middle East. Based on this search, that doesn’t appear to have happened.
• He did get ObamaCare passed, but let’s be honest with ourselves. This is not the law that even liberals wanted or were promised. It costs more, does less, and pretty much ensures that every single conservative criticism is going to come true.

Did I miss something? Did something really, you know, awesomely awesome occur in the last 3 years? Or are you just too stupid to realize that the man is a liar who hates America, wants to destroy it, and will say anything to get your vote?

Greece Fire

When I was in college, I remember hearing often that American knowledge of world events was very poor. There were even several studies released about that time which asked random Americans simple questions about current events all over the world. The results were depressing, to say the least.

I admit that I’m not without fault here, myself. Particularly at the time, I remember that my geography skills were somewhat lacking, and that I wasn’t always aware of why we were involved in various political situations around the globe. I did score much higher than the average American when I took the tests used for those studies, and I suppose that I should be consoled by that. I wasn’t. I knew before I took the quizzes that my knowledge wasn’t good. It appeared that most of my peers were blissfully unaware of their ignorance.

But now we have the internet. News from everywhere is right in front of us all day long. Things should be much better, right?

Sadly, I don’t see any indication of that. If that was the case, America, and certainly our political class, would be paying much more attention to what’s going on in Greece. The fire has already been lit, and the politicians are just trying to decide what to throw on it. I see them reaching for the water now…

 

As I said just last week, America is at the tipping point. Want to see what will happen when we tip over? Watch Greece. But we’re obviously not watching Greece. We’re not learning from them, and we’re certainly not adopting any sort of defensive posture to prepare ourselves against the coming Greece fire. When (and it is almost certainly “when”, not “if”) Greece falls, the effects will be felt far and wide.

See this from Stacy McCain at the Greenroom at HotAir.

One U.S. analyst said that the “downside” risk, if European leaders can’t come up with a bailout deal, “is effectively a financial system meltdown.”

The political situation in Greece is not encouraging. The Greek parliament will vote this week on an austerity plan — which bankers are demanding in order to extend the country further credit — and it is by no means certain that the unpopular cost-cutting measures will pass: “If Greece refuses to accept more austerity measures, the consequences for Greece, the EU and indeed the global economy could be dire.”

I don’t know about you, but seeing the words “financial system meltdown” and “consequences for…the global economy could be dire” don’t exactly inspire me with confidence. Nor do words like this:

A European debt crisis is likely once again to make banks fearful of lending to one another bringing about the freezing of financial markets similar to the credit crisis in 2009.  And this time a huge stimulus package will not be in the offing.  Nor can Greece resort to the age-old beggar they [sic] neighbor approach of devaluing its currency since it is on the euro and not the drachma.

From that same article:

The broader implications for the U.S. are set forth in a Congressional Research Service Analysis in 2010.  The report concluded there were five major implications.

First, many expect that if investors lose confidence in the future of the Eurozone, and more current account adjustment is required for the Eurozone as a whole, the value of the euro will weaken.  A weaker euro would likely lower U.S. exports to the Eurozone and increase U.S. imports from the Eurozone, widening the U.S. trade deficit.

Second, the United States has a large financial stake in the EU.  The EU as a whole is the United States’s [sic] biggest trading partner and hundreds of billions of dollars flow between the EU and the United States each year.  Widespread financial instability in the EU could impact trade and growth in the region, which in turn could impact the U.S. economy.

Third, a Greek default could have implications for U.S. commercial interests.  Although most of Greece’s debt is held by Europeans (more than 80%), $14.1 billion of Greece’s debt obligations are owed to creditors within the United States.

Fourth, the global recession has worsened the government budget position of a large number of countries.

Fifth, debates over imbalances between current account deficit and current account surplus countries within the Eurozone are similar to the debates about imbalances between the United States and China.  These debates reiterate how the economic policies of one country can affect other countries and the need for international economic cooperation and coordination to achieve international financial stability.

People have been predicting this since late 2009, and it’s quite easy to see that America is following the same path. Yet we haven’t done anything at all. We may have to join in the European financial bailouts just to keep the entire system from collapsing. But who’s going to bail out us? We don’t have the money to do this. We decided to spend it on stimulus and health care instead. If I had confidence in our own government to solve the fiscal problems here, I might be less worried. I’d be hopeful that we could throw the weight of the U.S. dollar behind some assistance to Greece and to the euro. That kind of confidence would be criminally insane at this point, however.

Here’s why:

The … government must also contend with a political and social crisis. The main political parties remain poles apart and the prospects of reform by consensus appear close to zero. Opposition also comes from the powerful public-sector unions, an increasingly fearful public, and disparate political forces maintaining constant street protests.

[…]

Added to these conflicts is an institutional weakness that questions the ability of any government … to deliver serious reform. Many parts of the public bureaucracy verge on the dysfunctional. Their staffs are too big — the result of parties in power using public jobs as electoral favors — too unskilled, too rigid from confused and archaic legal procedures, too hierarchical, and lacking morale. Too often, the [person] in charge lacks efficient means, information and technical know-how from those he or she seeks to direct. Such problems are all the more grave when policies are highly controversial and uncertain to be sustained.

What country is being discussed in that section? Did you think of the United States? No, it’s Greece again. Eerily similar description though, wasn’t it? Was this on some right wing site like HotAir? No, it’s in today’s New York Times. Things could go south as early as this week in Greece. More likely, the politicos will find a way to stave off the crisis for another few months, perhaps a year. That’s if Greece government manages to survive that long. A military coup or civilian overthrow is not out of the question. What happens then? I don’t know. And no one else does either, no matter what they claim.

When I was growing up, I remember that it seemed like just about every day there was some government being toppled in Africa or the Middle East. It always seemed so remote. It was just something I saw on TV that didn’t really matter (to me, anyway…I’m sure it was vitally important to those living through it). Our Keynesian economics debt ruled world isn’t like that anymore. When Greece falls, it’s going to at the very least, worsen the “economic downturn” worldwide. And that’s an absolutely hopelessly optimistic best-case scenario. Worst case scenario? I’m the doom-n-gloom guy lately, and even I don’t even want to think about it. Wars have started over less. Much less.

But I’m sure President Barack Obama (D-USA) can handle this. After all, he’s been incredible at crisis management so far, hasn’t he?

Government Doesn’t Create Demand

I mentioned this in a recent post, but I feel that this deserves more attention than a simple one liner.

First, a true recovery from a recession requires lower unemployment. Lower unemployment means that more people have more money to consume more goods and services which enables more producers to hire more people. Lather, rinse, repeat.

So, while all the media will constantly remind you (during a Democrat Presidency anyway) that unemployment is a lagging indicator on recovery, it’s the most important indicator. Especially for the unemployed or for those fearing unemployment.

Therefore, you’ll notice that almost all government interventions in recessions involve trying to encourage hiring. The few that don’t tend to encourage spending, which hopefully also encourages hiring.

Now, the best way to do this, and arguably the only successful way to do this is to reduce restrictions on businesses. You can do this by lowering taxes, removing burdensome regulations, or doing similar things for investors, allowing them to invest in businesses, giving them a funding shot in the arm.

If you reduce the cost of doing business, businesses can lower their prices to the appropriate demand point, and increase sales. They can also hire more people, enabling them to produce up to the demand level (assuming they are behind), and also increase sales.

So, doing this increases demand for employment, and demand for goods and services, and the economy marches forward. Success.

This only works if there’s no inventory glut, which does often happen with big ticket items in a recession. However, the first part helps even with an inventory glut. Reducing cost of doing business enables businesses to better handle the lower profit margins of an inventory glut, and stay in business. You can also make adjustments to taxation to lower the taxes on companies with high inventory.

This may or may not allow the businesses with glut to lower their price points to the appropriate demand point, and yet still make enough money to stay in business. This is not necessarily a bad thing. Often inventory gluts are caused by being unresponsive to a changing marketplace. If the business goes out of business due to their inventory glut, then the business was not needed anyway. If the good or service produced by that business is needed, someone else will produce it, or buy out the inventory and resell it. So, the end result is that in this case, demand is not increased, but that production is lowered to match demand. The remaining producers now get a bigger piece of the overall pie, and can once again grow their business. Again, success. Probably at a slower rate than the businesses that didn’t have a glut, but still success.

It’s also worthwhile pointing out that these big ticket items with an inventory glut are often dealing with the glut because people have delayed purchases due to employment concerns. If their employment situation stabilizes due to their business being able to save money, there will be increased demand for the big ticket items. No more glut. Success.

So, no matter how you slice it, getting out of the way of business succeeds when trying to get out of a recession. And it does it by increasing demand for employees and for goods and services.

And that’s what we’ve generally done in previous recessions.

Now, let’s look at the current recession.

First, we sent a lot of funding to public sector projects, rather than private sector ones. For example, in some states, school systems and first responders got a ton of money from the Federal government, but were required to use a large portion of that money to hire people. Note that the government didn’t do anything to create demand. They just gave out money to hire people. And they paid the salaries for two years. Guess what? The two years is up, and the states are discovering that they can’t afford to pay those people anymore. A lot of them are going to get the axe. Oops. Projects like these only succeed in lowering unemployment as long as the government dollars are paying for them. At taxpayers expense.

Second, the government handed out tens (hundreds?) of billions of dollars to companies suffering from inventory glut. They didn’t originally do anything to deal with the glut itself (more on that later), they just gave them money so they could keep their employees around and produce more goods in a market that was already saturated. In other words, companies were rewarded for not being able to respond to a changing marketplace. It’s not hard to see that this can’t turn out well. Also it sets a precedent that if you’re a large enough company and you’re too big to fail, then you don’t have to worry about failure. Go ahead and make whatever bad decisions you want. The government will always be there to rescue you. At taxpayers expense. No need to worry about demand. You’ve got the government. And still no demand.

Third, the government interfered in the free market, and instead of reducing expenses for business across the board, they created rules allowing greener industries to create green products and services at less costs. Or they gave one time tax breaks to consumers of these green products and services. This creates demand, but it’s artificial demand and is unsustainable. If a product or service can’t succeed in the free market without government intrusion, then it won’t continue to succeed once that intrusion is taken away. Thus, either the government has to keep on funding these green industries at taxpayer expense, or watch them die. The demand created here is temporary at best.

Fourth, the government finally realized that it needed to do something about demand for the inventory glut on these big ticket items, particularly houses and cars. So, we got some big short term tax breaks for new home buyers and the Cash for Clunkers program.

The tax breaks for home buyers was nice, but it didn’t do anything to create a bigger market of buyers, it just enabled people on the fence for buying to buy a bit sooner. And since there was already a glut, it didn’t put home builders back to work, because the tax incentives went away before the glut had been consumed. In fact, there’s still a glut. And no demand for new homes, or new home builders.

The Cash for Clunkers program was a disaster. It enabled people to get some nice incentives to trade in their old fuel inefficient car for a brand new more efficient car. Again though, this is a case of the government picking winners and losers. You couldn’t trade in your clunker on a nice new full-sized SUV. You had to get a fuel efficient vehicle. So, didn’t help that SUV glut at all. Furthermore, the clunkers were destroyed rather than join the used car market, so a big chunk of the used car market was destroyed. So here, not only did we not create demand, but we decreased supply. Low income earners could no longer afford to buy used cars. Brilliant. And not only that, just like with the home buyer tax credits, once the program was over, new car sales declined again. Because demand wasn’t created, just pushed forward. Once again, these programs create either no growth or unsustainable growth. The growth can only be maintained as long as the program is maintained. At taxpayer expense.

Fifth, and finally, not only did the government not get out of the way of business, it did just the opposite. It created a huge new healthcare program with lots of regulations and compliance expenses for every business. President Barack Obama’s (D-USA) administration wanted to increase taxes on all small business as well, but this was eventually defeated by the GOP, by forcing the President to sign the extension of the Bush tax cuts. The uncertainty over this caused many businesses to delay hiring. Also, this uncertainty caused investors to delay their investments or put their money elsewhere. They may finally start hiring and investing now, but they still have to deal with burdensome regulations and ObamaCare.

Speaking of which, we also get the EPA imposing higher CAFE standards, the FCC imposing Net Neutrality rules, the NLRB interfering with business rights to expand where they want, and literally hundreds of other agencies doing everything they can to restrict business. All of these increase the cost of doing business, and therefore make it harder for business to hire new people. In other words, the exact opposite of what is necessary to create demand for employment.

And without demand for employment there is no recovery.

The government can’t create demand. All it can do is fake it for a while, or destroy it altogether.

Paul Krugman: Hey, Let’s Spend More Money On Failed Programs

Nobel Laureate Dr. Paul Krugman penned another winner for the New York Times this weekend, entitled Against Learned Helplessness. I understand helplessness, but it’s pretty arrogant for Krugman to use the word “learned” in any article he writes. The man hasn’t learned anything since 1956. But I digress.

He starts out well. He identifies part of the problem:

Unemployment is a terrible scourge across much of the Western world. Almost 14 million Americans are jobless, and millions more are stuck with part-time work or jobs that fail to use their skills. Some European countries have it even worse: 21 percent of Spanish workers are unemployed.

Nor is the situation showing rapid improvement. This is a continuing tragedy, and in a rational world bringing an end to this tragedy would be our top economic priority.

This being Krugman, he’s incapable of understanding why the situation is not showing rapid improvement, the failed economic policies of the last few years.

I doubt he reads this blog, but just in case he does, I’ll provide a helpful chart.

I think I’ve shown this chart before, or a similar one. The red line is the current recession in terms of employment. The other lines represent the previous recessions, post WWII. Personally, I would have liked to see the Great Depression on this chart as well, because I think it would be instructive. Anyway, you’ll notice that this recession has been longer and deeper than any other. Well, yeah, kind of figured that part out already. But you should also notice that the recovery rate was much faster after all other deep recessions. Only the very shallow recessions tended to have long recovery, and this isn’t a shallow one.

So, why did we recover so much quicker after the other recessions? Because government did the right thing. They created incentives for business to hire and to create products and services, and they got out of the way of business. During this recession, we have done the exact opposite. We haven’t cut taxes. We’ve created huge new burdensome government programs and regulations, and we have the NLRB trying to prevent companies from expanding. Finally, we spent trillions of dollars on political favors which accomplished nothing, but created a crushing public debt load which is also limiting growth.

I firmly believe that every single economic decision that President Barack Obama (D-USA) has made has been wrong. He should be channeling George Costanza.

 

If he had, he’d be cruising towards re-election and no one would be talking about the economy. Our President could learn a lot from George. And so could Krugman. Which brings me back to my point.

More from Dr. Krugman:

So someone needs to say the obvious: inventing reasons not to put the unemployed back to work is neither wise nor responsible. It is, instead, a grotesque abdication of responsibility.

[…]

So what did the O.E.C.D. have to say about high unemployment in its member countries? “The room for macroeconomic policies to address these complex challenges is largely exhausted,” declared the organization’s secretary general, who called on countries instead to “go structural” — that is, to focus on long-run reforms that would have little impact on the current employment situation.

And how do we know that there’s no room for policies to put the unemployed back to work? The secretary general didn’t say — and the report itself never even suggests possible solutions to the employment crisis. All it does is highlight the risks, as it sees them, of any departure from orthodox policy.

Yes, someone needs to state the obvious. Dr. Krugman, you’re an idiot. Using the government to put people back to work is always destined to fail. Where have you been the last few years? It fails for more reasons than I can count, but let’s start with three simple ones. Government programs have long start up times and delayed payouts, and they don’t create demand. The last is the most important. When you allow the private sector to produce, that creates demand for employment, because it creates a produce-spend-consume cycle. Government programs don’t create such cycles unless they’re continually fed with other people’s money.

As for how we know that there’s no money to put these people back to work, I present another chart for you.

 

Or vs. GDP:

That’s how we know.

More from the Doc:

The core of our economic problem is, instead, the debt — mainly mortgage debt — that households ran up during the bubble years of the last decade. Now that the bubble has burst, that debt is acting as a persistent drag on the economy, preventing any real recovery in employment. And once you realize that the overhang of private debt is the problem, you realize that there are a number of things that could be done about it.

For example, we could have W.P.A.-type programs putting the unemployed to work doing useful things like repairing roads — which would also, by raising incomes, make it easier for households to pay down debt. We could have a serious program of mortgage modification, reducing the debts of troubled homeowners. We could try to get inflation back up to the 4 percent rate that prevailed during Ronald Reagan’s second term, which would help to reduce the real burden of debt.

The W.P.A. was the cornerstone of President Franklin Delano Roosevelt’s (D-USA) policies to end the Great Depression. Most rational economists now realize that FDR’s policies extended the Great Depression, not ended it. What ended the Great Depression was WWII, and in one of Krugman’s few moments of clarity, he even admitted that in 2008.

 

Unsurprisingly, today’s Krugman does not have this clarity. Instead, he wants to try policies that he knows do not work, because his core philosophy is based entirely on Keynesian economics, and introspection is not an option for him. His ego will not allow him to admit that he’s wrong and that Keynesian economics has failed. So, instead he continues to push failed policies, and since he’s the the most favorite living economist, his words matter. His influence matters. And we all pay the price.

Hat Tip: NewsBusters

Stimulus: Saving & Creating Government Jobs Since 2009

Yes, that’s the result of a recent analysis of the stimulus package. You should download the PDF and read it, but here’s the money quote (emphasis mine):

Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to o set state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services. This suggests the possibility that, in absence of the ARRA, many government workers (on average relatively well-educated) would have found private-sector employment had their jobs not been saved. Searching across alternative model specifications, the best-case scenario for an effectual ARRA has the Act creating/saving a net 659 thousand jobs, mainly in government.

So, their analysis has a net loss of about half a million jobs, and their best case analysis is a net gain of a half a million jobs. The researchers note that the different conclusions are usually based on the “Keynesian multiplier”, an item that is taken on faith by Keynesians with absolutely no empirical evidence in support of it.

So, depending on worst case or best case, we spent about $1.5 million for every lost job or saved job, respectively. Government spending at its finest. I’m telling you, the government could have gotten me fired for free, or saved my job for a lot less than $1.5 million. However, if the government wants to spend $1.5 million on me for two years of work, I will happily accept the money.

No matter how you slice it, whether you agree with the pessimistic numbers (I do), or the optimistic, Keynesian ones, the stimulus package has been a dismal failure.

When I was growing up, there was this joke/riddle that was popular:

Q: What do you call 50 dead lawyers at the bottom of the ocean?

A: A good start.

Today, I think you should replace lawyers with “Keynesian economists”. A lost decade is a best case scenario if these policies are allowed to continue.

Another Great Post at Catallaxy

This is becoming one of my favorite blogs. I don’t even remember how I found it. I was probably looking up something on Keynesian economics.

Anyway, Steve Kates reviews the recent paper (PDF) by the Republican Party Joint Economic Committee. His summary is fairly blunt (emphasis mine), which is why I like this blog.

This is a measured very sober empirically-based study that reverses the entire direction of Keynesian-based policy. Whether this is the future of economic theory, it is the present of economic policy. We are looking at a world in which policy has run well ahead of the textbook theories economists now teach. If you have grown up on the C+I+G version of macroeconomics, then what you have learned has with near certainly passed its use-by date.

It’s important to hear (or read) someone saying this so emphatically. CIG is stated as an absolute fact by Keynesian and is their ultimate fallback defense.

For those that don’t know, the formula in question is:

GDP = C + I + G

where:

GDP = Gross Domestic Product

C = Private consumption

I = Gross Investment

G = Government Spending

The problem is that this formula, while the basis of post-1936 macroeconomics, is fundamentally flawed. From it you can assume that all you ever need to do to grow the GDP, and thus the economy, is have the government spend more. And that’s the fundamental belief behind Keynesian economics. However, it ignores the fundamental truth behind government spending, and that’s government cost.

When I go to work and do my job, my employer pays me for my work, and I spend that money, giving some other company income so that they can pay their employees who can go out and spend money on still more companies who can pay still more employees.

The reason you can include my consumption and ignore my cost in the GDP is that my income is earned. I provided a service, which allows the company I work for to sell their product and have their buyers increase the public consumption part of the formula.

In other words, I am not only a consumer, but also a producer.

The government is not a producer. The money it acquires is un-earned (yes, I know civil defense, education, etc., but those are a small part of the federal budget these days, and there are other problems with including these anyway). So, the government must take the money it acquires. This means there are fewer dollars available for public consumption, so fewer dollars left to pay producers to produce consumable products and services. In other words, G starves C (and I, but that’s more than I want to get into right now).

But C is the most important part of the equation. Without C, eventually there is no I, and no G, since those two variables depend on C.

And there is the fatal flaw in Keynesian economics.

Keynesians will tell you that I’ve missed something important. They aren’t planning on starving C, because they’re using short term deficit spending. Except history shows us that it’s never short term. And even if it were, it still must be paid for eventually. Even if you let this debt go on forever, you have to at least pay the interest. And in the end, the only way to pay for it is by starving C.

Also, G spending picks winners and losers generally in a way that is the antithesis of the free market, therefore rewarding producers that might not (and probably would not) have ben rewarded otherwise, at the expense of producers who would have. High G spending destroys the free market, which destroys a country’s future ability to produce products and services worthy of consumption. In other words, not only does G spending today starve C now, but it starves C in the future as well.

I’ve been saying this for a while, but it’s worth repeating. Given the Global Financial Crisis of 2008, and the near worldwide Keynesian response, we have empirical evidence and an enormous number of data points that all show one thing. Keynesian economics fails. And it fails spectacularly.

At this point, anyone who still believes in Keynesian economics should be locked up, as they are clearly a threat to their own safety as well as the safety of those around them.

Under What Conditions Are Keynesian Approaches Relevant And Good Policy?

That’s the title of a wonderful article from economist Steve Kates at Catallaxy Files today.

He lowers the boom (emphasis mine):

The problem with the question asked – “Under what conditions are Keynesian approaches relevant and good policy?” – is that the answer is becoming more evident every day. There are no conditions when Keynesian approaches are relevant and good for policy. A Keynesian policy is a deficit-financed increase in public spending during recessionary periods to hasten a return to strong growth and full employment. It has never worked. Not during the New Deal, not during the Stagflation of the 1970s, not in Japan in the 1990s nor has it worked right up to this minute as embodied in the “stimulus” packages that followed the Global Financial Crisis. Economic theory is in crisis mode although no one goes around pointing it out. But whatever we economists might teach in the classroom, no one actually framing policy will ever again base what they do on the need to restore aggregate demand through higher levels of public spending. We may continue to teach it but no one will do it. Keynesian theory, so far as public policy is concerned, is dead in the water.

Never.

We have a President that continues to believe it does. See the problem?

Bend Over, Here He Comes Again

President Barack Obama (D-USA) officially kicks off his 2012 campaign today. You can watch the video here. It’s rare for a sitting President to start campaigning so soon, but let’s face it, campaigning is the one and only thing he’s good at.

And he’s not even that good at that.

So, this blog is officially kicking off our campaign to add him to the unemployment lines.

So, let’s look at a couple of highlights from his first two years in office, shall we?

Well, there’s this from Moe Lane:

And this:

And more on unemployment from the 405 club, showing what the unemployment numbers look like assuming static levels in workforce participation.

But let’s move on from unemployment and general human misery. How about American public debt? The Heritage Foundation has us covered here.

But at least he ended all those wars that President George W. Bush started, right?

According to this site, the Obama death toll stands at 1,118.

Hey, but he promised to bring down gas prices. Let’s check GasBuddy.com.

And then there’s one of my personal favorites, the corporate tax rate from Cato@Liberty:

But he did lower our health care costs, right? Again, the Heritage Foundation sets us straight.

Really, with numbers like these, I can understand why he would want to start campaigning before his opponents.

And if you think these numbers are bad, imagine what he could do to America in a second term, when he doesn’t have to worry about trying to get re-elected.

Bend over, here he comes again, America.

Raising the Debt Ceiling–Or, Why Everyone In Washington And The Media Has Lost Their Minds

This is going to be a long one.

Watch the clip (click the image) from Fox’s self-proclaimed libertarians, Glenn Beck and Judge Andrew Napolitano.

Here’s the thing, not raising the debt ceiling would create havoc that’s unimaginable.

First, we’re going to default on some of our financial obligations. That means no one is going to want to buy our stuff anymore unless it’s something they absolutely can’t get anywhere else. In the 21st century, there’s very little that falls into that category. They’ll still be willing to sell us stuff, but not for dollars. They’ll want gold or something with a definite tangible value.

Of course, if we can’t export, and we can’t use dollars to import, that’s going to kill the economy. Now, we’re just talking about defaulting on our new debt, not existing debt. But the interest rate will go up on the existing debt, thus increasing our financial obligations. And we won’t be able to meet the new obligations, so we’ll default on some more. That will in turn hurt the economy even more, which means the government will receive less revenue and will, in turn, have to default on more debt.

Countries have gone to war for less. We might suddenly find ourselves fighting a war on several fronts. One that it’s extremely doubtful we can win.

If we don’t raise the debt ceiling, we might as well hang up a big sign on all of our ports of entry that says “GOING OUT OF BUSINESS! EVERYTHING MUST GO!” Because that is what will happen. I know Beck and Napolitano are trying to say that we are in a horrible situation and we’re going to have to make hard choices and take some extreme actions to save ourselves. And some of these actions will likely create short term hardships, such as extending this recession.

And they’re right. And I don’t have a problem with that. I felt at the time, and still do feel, that it was a mistake to bail out the auto industry. I felt at the time, and still do feel, that TARP was a mistake.

But not increasing the debt ceiling isn’t going to create short term hardships. We’d be looking at a generation long recession. Maybe longer. You don’t save the country by destroying it.

But…

These aren’t the only two people that have lost their minds.

Let’s look at President Barack Obama’s (D-USA) economic advisor, Austan Goolsbee.

As I say, that’s not a game. I don’t see why anybody’s talking about playing chicken with the…with the debt ceiling.

If…if we get to the point where you’ve damaged the full faith and credit of the United States, that would…that would be the first default in history caused purely by insanity.

The reasons why people, not just Beck and Napolitano, are talking about playing chicken with the debt ceiling, are a) there aren’t many other options left (I’ll explain that below), and b) “nyah, nyah…you started it!”.

Or, as Driscoll says in the above linked article:

Here’s a suggestion: If you don’t want people to play chicken with the debt ceiling, then DON’T PLAY CHICKEN WITH THE DEBT CEILING.

He’s absolutely correct. Goolsbee acts like this is all the Republicans fault and the situation here is a binary one. Raise the debt ceiling and accept our big government spending, or don’t. He makes no room for compromise.

Then Driscoll gives what he thinks Goolsbee should have said. The problem is that it’s just as dumb as what Goolsbee actually said.

Here is the correct answer to Jake Tapper’s question:

Jake, there is no possibility that the Congress of the United States will decline to meet the obligations of the United States. We share with the new majority in the House of Representatives a commitment to move toward a balanced budget in the months ahead. But there is no possibility that the Congress of the United States will decline to meet the obligations of the United States.

Ok, I’ve just attacked the Libertarian response to this problem, the Democratic response, and the Republican response.

Why? Because they’re all recipes for failure.

Look, the Democrats have put the Republicans in a no-win scenario. We have to cut spending, but we’re going to hit the debt ceiling before we have a chance to cut the spending. So, unless you want the havoc I described above, we’re going to have to raise it. I mentioned that back in November.

We’re also going to have to accept the fact that deficits are going to be extraordinarily high for a while, and that we may have to raise the debt ceiling again.

The problem with raising it, is that it’s like a heroin addict saying “just give me one more hit, and then I’ll go clean”. You might say to yourself, “let’s just raise it a little bit, long enough to fix some problems, and make it clear that we’re not going to raise it again.”

That’ll never work. See, the big spenders have all the leverage. There’s no incentive for them to stop spending. That scenario I described above is like a pair of Aces showing in 7 card stud. Once we fold, they know they have us beaten forever.

And that’s what’s wrong with Driscoll’s response. He wants us to fold one more time. Glenn is right about what happens then. It’s over. The Democrats have won. The country will still be destroyed though, just in a different way.

Megan McCardle recently examined the situation in Japan, in an article entitled “Japan and the Limits of Keynesianism”

When I was starting out as a journalist, I frequently had Japan used to illustrate Adam Smith's precept that "there's a lot of ruin in a nation"; any time someone was tempted to get hysterical about government borrowing in America or elsewhere, someone else would inevitably point out that Japan's debt burden was well over 100% of GDP, and the country still hadn't collapsed.  But while there is a lot of ruin in a nation, there isn't actually an endless supply, and Japan may well be finally approaching the limits.

[…]

Japan has simply reached the limits of Keynesian policy in an economy which has never managed to jolt itself back up to a healthy rate of growth.  Demographics is obviously a big contributor to that slow growth, and there are a whole host of secondary factors one could nominate, but whatever the reason, they have now had two decades of anemic growth, which they have fitfully attempted to address with stimulus.  Maybe not enough stimulus, maybe badly designed, but they've certainly tried to follow the basic Keynesian playbook:  borrow money and spend it when times are bad, in the hopes that you can bring back growth.

But for Japan, at least, the growth has not materialized.  Few economists would advise undertaking a fiscal adjustment, on the scale that Japan requires, in the face of the current crisis.  The problem is, there hasn't been a good time for retrenchment in 20 years.  I can't blame the politicians for trying to restore some semblance of normal growth in the run-up to elections.  But at some point, they're going to have to cut back, whether or not it's a good time. 

So, the GOP finds themselves in a no-win scenario. They don’t have time to fix the spending problems before we hit the debt ceiling. If they raise the debt ceiling, they lose all leverage they have to lower spending keep from raising it any further and they send us further down Japan’s path. If they don’t raise the debt ceiling we get economic meltdown at the very least. Also, if they cave, they’re going to anger the fiscal conservative wave that got them elected in the first place.

But McCardle hits the crux of the matter for both Japan and the U.S. It’s not debt. It’s the debt to GDP ratio. And that’s what we should be limiting.

Japan’s debt to GDP ratio is obscenely high. Almost 200%.

Where’s ours?

2011 projection is about 95%. Not obscenely high, but still extremely high. I don’t think we want to trade economic situations with many of the countries who are higher than us. They include Zimbabwe, Japan, Lebanon, Greece, Italy, Iceland, and Belgium.

But, you say, hey, we’ve got quite a ways to go. We’re safe for a while. We can raise the debt some more.

I don’t think so.

Last year it was 83%. The year before 69%. The year before that 64%. So, we’re growing fast. And the projections are for the debt to explode over the next several years. We’ll likely catch up with Japan before the end of this decade. That’s where the spendthrifts (on both sides of the aisle) of this decade have sent us.

So, what can the GOP do?

Simple.

Set the debt ceiling as a percentage of GDP, and require it to shrink.

Set it for 95% (or maybe 96% or even 97%) for this year. But in the resolution allowing this, also require that it shrink by x% (2, 3, 5, 10?) each year, until it’s at some predefined level (0%? That’s what the balanced budget folks would like. I like 30%, but I’m willing to listen to other numbers).

Then if Obama wants to have the debt at $20 trillion or higher, all he has to do is grow the economy to support it.

Also, doing it this way guarantees that either spending cuts or economic growth is going to have to occur, and fast. And by changing what we’re limiting, we escape out of the situation we’re currently in for long enough to actually do something about it, without blinking. We’re still facing those two up Aces, but instead of folding, we called and made it to the next round of betting.

Would such a plan work? I don’t know. But at least it’s not guaranteed not to work, like Beck’s, Goolsbee’s, and Driscoll’s plans. Like I said, we’re still facing those two up Aces. Frankly, we probably have to have control of the White House to solve this problem, but maybe this solution will allow us to stay in the game until we can kick the current occupant out.

Keynesian Economics 101

The Center for Freedom and Prosperity has a good, but not great, video on what’s wrong with Keynesian Economics. Consider this video a first day lecture on Econ 101 or even Keynesian Econ 101. There’s much more to this class to come.

Still, the video is worth watching. Take a peek below.

 

Ed Morrissey at Hot Air nails it with his summary:

Think of it as a Cash for Clunkers economic plan on a larger scale.  The intention is to fool people into spending money in order to give the illusion of growth, and have that illusion somehow become reality through a process best known as FM; the M stands for “magic,” and you can guess what the F means.  The problem is that the interventions run out of steam quickly without addressing the actual issues of income and asset value that drives organic consumer spending.  Instead of increasing the size of the pie, we just cut it in different shapes.

The policies implemented in the early 1980s, in contrast, focused on generating growth in investment and income by reducing the government’s role in the economy and their bite out of it.  That approach succeeded in long-term growth and prosperity by increasing the size of the pie.  Critics scoff at this as “trickle-down economics,” but as the last two years showed, the Reagan approach worked while Keynesian Obamanomics has mainly generated nothing but short-term gimmicks and long-term stagnation.

In truth, Keynesian economics ONLY works if you have a surplus that you’re willing to spend to stimulate the economy. Keynes even basically said so, a fact that’s forgotten by his purported followers these days. Otherwise, as noted below, the only way to get a temporary stimulus is by borrowing. And the stimulus is indeed temporary so more borrowing is needed to keep it going. And more borrowing, and more borrowing.

This is essentially President Barack Obama’s (D-USA) plan. The problem is that the borrowing creates a burden on the economy, thus requiring the need for more stimulus.

And more borrowing.

If you can see the death spiral here, you’re smarter than the average Democrat in Washington, D.C. If you can’t, please run for office. You’ll fit right in.