Is The Private Sector “Doing Just Fine”? Definitely Not.

President Barack Obama’s statement, later “clarified,” and explained by his faithful MSM spinners as “taken out of context,” created quite a little stir as his GOP opponent, Former Massachusetts Governor Mitt Romney, got a nice new point of attack in the presidential campaign. The president apparently was trying make the point that the public sector was suffering more; he wanted to push his idea of bailing our cities and states.

The public sector under Obama has grown greatly, and the private sector (other than some large companies and  some Obama cronies) has had, and still has, the worst of it. The May employment figures testify to the continuing trials and struggles of millions of American families. May figures were worse than those of April.

Only 69,000 jobs were added, not as good as the weak 115,000 for April. Over 120,000 per month are needed just to keep pace with population growth. The total number of unemployed persons grew by 225,000 to 12,725,000. The “official” (U-2) unemployment rate rose from 8.1 percent to 8.2 percent. The U-6 measure of total unemployed and underemployed rose by 300,000 to 14,800,000. Teenage unemployment was down slightly, but still very high at 24.6 percent. Overall, a dismal situation, and not improved.

In a U.S. News and World Report article, Rick Newman points out that small business is especially hurting.

Small businesses are reeling. Small business optimism has emerged from the cellar, but it's still at recessionary levels, according to surveys from the National Federation for Independent Business. Spending and hiring plans are extremely weak, which is bad news because small and medium-sized businesses create the majority of new jobs in the economy. Big businesses, by contrast, tend to consolidate employment via mergers and acquisitions and various types of scaling and streamlining. Some pockets of the private sector are actually doing okay. They're just not the ones where most Americans work.

The public sector is, on the whole, doing much better than the private sector, but Obama’s sympathies are mostly with the public sector. He wants more billions of dollars to protect the jobs of teachers, police officers and firefighters, but, as Newman points out, these public employees have fared better than private sector blue-collar workers.

Rush Limbaugh had a very interesting response to the president’s comment, as the following indicates:

Polls such as Rasmussen are showing Obama and Romney about even among likely voters. I would like to see the results of a poll among unemployed people.

While Obama inherited a difficult situation, he has done many things to make it worse. When he had Democratic majorities in both houses of Congress who were ready to rubber-stamp whatever he wanted, his main concern was not unemployment or the economy, but rather getting his socialist Obamacare and cap-and-trade laws passed. He has blamed everyone except himself for his failure to significantly improve things in over three years in office. He doesn’t have the ability to deal successfully with the economy. People are indicating that they trust Romney more than Obama on the economy. It is puzzling that Obama, after his economic failures, foreign policy disasters, multiple race card plays, nanny-state proposals, and serious scandals, still has a chance to win the election.

Romney needs to forcefully articulate conservative principles, educate more people on capitalism, and get the GOP united behind him. If he does, he is very likely to be successful.

Photo: Sculpture of 1930 breadline from FDR Memorial. Via Public Domain Pictures.

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No Record to Run on, Just Fear and Loathing among Different Groups

Dreamstime.com

Barack Obama’s so-called "Forward" re-election strategy is the most un-presidential in memory as his policies are the most offensive and anti-constitutional.

The man who seemed to have all the answers in 2008, and convinced enough people that he was going to be the post-racial and post-partisan president, has turned out to be the “most-racial and most-partisan” president (as Rush Limbaugh described him), and he is doubling down on his class warfare themes that the evil rich should be paying a substantially larger share of income taxes, and the not-rich should have perpetual government-paid benefits from cradle to grave, starting with Head Start (which doesn’t work), and ending with Medicare (which he is going to be raiding further for the benefit of Obamacare).

Never mind that there is no mention of cutting anything except defense, with cuts which would gut our defense readiness and leave us more vulnerable in terms of national security. Any dollars cut from defense (or anything else) will never be used to reduce the deficit, but only to increase spending on liberals’ beloved, bloated social programs.

The president’s ideal of American life is pictured in the Obama campaign’s presentation “The Life of Julia” which pictures a woman relying on government help from age 3 onward, as though she could barely function if (shudder!) the awful Romney actually reduced spending on such stuff. She evidently must receive government-(i.e., taxpayer)-paid contraception, education grants, student loans, and healthcare lest she perish for lack of government funding. Obama nowhere hints of self-reliance or independence from the public trough. His ridiculous “War on Women” and “Buffett Rule” propaganda illustrate the class-warfare-based pandering to groups he hopes will support him as they did in 2008.

His support for re-election must come from hardened socialists, radical feminists and environmentalists, and other leftist fringe interests, and people who are not paying attention to economic realities, but like his “sincerity” and think his promises are somehow trustworthy.

President Barack Obama has no record that he can run on. He has empty promises, fear and resentment among various groups, the pathetic pleading of ignorance of the actual economic situation that existed when he took office, and blaming of George W. Bush, bad weather, an uncooperative Congress, etc., etc., for the continued bad economic and business environment characterized by continued massive unemployment and “growth” so slow it still doesn’t look like a recovery. But not to worry, increased government spending, more entitlements, more job-destroying EPA and Dodd-Frank-type regulations are his answer, along with more golf outings and vacations for the First Family.

Unemployment figures for April 2012 according to the U.S. Bureau of Labor Statistics include the following: 8.1 per cent official unemployment rate; 115,000 jobs added in April; teenage unemployment rate 24.9 per cent; Number of unemployed persons at 12.5 million; number of people “marginally attached to the labor force” (not counted as unemployed) at 2.4 million (these had looked for work sometime in the last 12 months, but not during the 4 weeks preceding the survey, and their number includes 968,000 “discouraged workers” who had given up looking for work; persons unemployed for 27 weeks or longer at 5.1 million; persons working part time because their hours had been cut or because they couldn’t find full-time work at 7.9 million.

These numbers indicate a great deal of economic difficulty and misery for many American families. The Administration seems to have very little with which to improve this situation, and one must suspect that in the socialist/Marxist world, government dependency is a good thing, and people in economic distress tend to look to government for the help they need. In this case, they would be looking to a government that is more interested in restructuring American society to their socialist/Marxist model than in correcting the economy, which would actually recover quite well if left alone by government.

Mitt Romney is made out to be a villain because he’s (1) “rich,” (2) “out of touch,” and (3) planning to cut spending on some of Obama’s dear socialist programs, (4) and maybe even restore the defense budget so that it won’t be so deeply into the danger zone.

Romney is, politically, our only hope at present for any kind of “return to normalcy,” which we very urgently need. Four more years of Obama? More coddling of “Occupy,” more forced unionism, more illegal immigration, less freedom, and lots more spending until our debt has to be dealt with via cheap, cheap dollars, and savings and investment are all but wiped out, along with our currency. That could make Greece’s present situation look positively desirable by comparison. We won’t get another Reagan, but we can hope for a pretty good non-Obama. If Romney is half as good a president as Calvin Coolidge, we will be immensely better off than if Mr. Obama is re-elected.

With the recent hubbub about Obama’s dog-eating, and Obama’s desperate attempt to be all things to all people of the leftist extreme, I can’t help but be reminded of Benjamin Franklin’s proverb and its potential political applications: “He that lies down with Dogs, shall rise up with fleas.” (Poor Richard, 1733)

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Debt Overshadows Other Urgent Problems

Rep. Paul Ryan (R-WI)

The liberal establishment has embarked on a phony campaign about a made-up issue, the so-called GOP War on Women. Only those Rush calls feminazis, i.e. the feminists who want to assure that as many abortions as possible are performed, (and now want every woman to get “free” birth control pills, courtesy of the insurance companies, Catholic institutions, etc.), really think there’s any such “war.” This whole dreary mess has been drummed up to conceal President Obama’s colossal failure on the economy, failure which threatens to make most other political issues moot.

When the next collapse hits, and it will unless things are reversed soon, there will be more widespread financial failure, which will be much more difficult to remedy than it would be to fix these things now. But what does Obama propose? More spending and higher taxes. That’s his answer for the economy. Don’t bother with the Keystone XL pipeline, or opening up more drilling, ANWR, deep water, fracking, or anything else, other than heavy subsidies and guarantees for Chevy Volt and the Solyndras of our country and other Obama cronies, and more crippling regulations for everyone else.  There is no way this qualifies as anything better than bad judgment. Obama’s economic policies are indefensible, no matter what the Administration says.

Energy Secretary Steven Chu says they’re trying to get gas prices down now, instead of up to European levels as Chu recommended in 2008. Maybe that’s true, until after the election. As Rush Limbaugh says this in his program transcript for 03/13/2012:

So in 2008, Chu said, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.”  That's what he said in 2008.  He was reminded of that comment today during his congressional testimony, and he backed away from it. “I no longer share that view,” said Chu to Senator Mike Lee, Republican, Utah.  Chu said, “When I became Secretary of Energy, I represented the United States government, and I think right now in this economic very slow return these prices could very well affect the comeback of our economy.” It sounds like he's not sure that gasoline prices might have a deleterious effect on the economy. 

So Chu is now saying his previous statements are no longer operational.  That's how the Democrats characterize their gaffes.

This just in – Rush Limbaugh site headline 03/15/2012: “Report: Obama to Release Oil from Strategic Reserve in Response to National Emergency of His Falling Poll Numbers.”

Mitt Romney has a great point about what we might receive from a re-elected Obama with no constraining concern about re-election. Of course, the global warming alarmists still want gas prices to increase so as to “force” development of “green” energy. (How’s that going lately? Hmm, Chevy Volt, Solyndra, and more recently, the Massachusetts state-aided -- by millions of dollars-- Evergreen Solar, which moved its manufacturing operations to China, and is now in federal bankruptcy court, as described by John Hayward at HumanEvents.)

Obama insists that oil is the “fuel of the past.”

Obama said that because the United States accounts for 20 percent of the world's consumption of oil but has only 2 percent of its petroleum reserves, “we're not going to be able to just drill our way out of the problem of high gas prices. Anybody who tells you otherwise either doesn't know what they're talking about or they aren't telling you the truth.”

Conservatives beg to differ. Just check Newt.org for an opposing view. Newt’s policy for getting gasoline to $2.50 per gallon or lower is certainly possible.

What Obama is saying is that he (Obama) is not going to be doing anything about it because in his view, nothing can be done. So don’t bother him with complaints about it.

Meanwhile, liberals are aghast at his drop in the polls, which can primarily be explained by the price of gasoline and the continuing high unemployment rate – about which nothing can be done either, apparently, other than vast increases in government spending, and stretching out unemployment payments even further.

According to Michael Barone, the president’s sinking numbers should not be surprising in spite of a temporary boost from the anti-Rush Limbaugh comments, etc.:

But the economic news has not been all that striking. We had a quarter in which economic growth reached 2.8%. We've had two months with job growth of better than 200,000.

Peachy. But in 1983, the year before Ronald Reagan's re-election, the gross domestic product rose 8.9% not just for one quarter but over the whole year. There were two months when job growth was 729,000 and 660,000.

That's the kind of economic recovery that enables an incumbent president's campaign to run a credible "Morning in America" ad. If the Obama campaign ran one now, it would be fodder for "Saturday Night Live" and Jon Stewart.

But as bad as the gas prices and unemployment numbers are, there’s an even bigger threat to our economy: the massive and increasing debt.

In February, the government posted its highest monthly deficit in history, $229 billion, according to the Congressional Budget Office.

We are on track for another trillion-dollar-plus deficit this year, with no letup in sight. Our national debt now substantially exceeds our GDP. This cannot be sustained, and unless decisive and large measures are taken soon to correct it, we will face economic consequences which would be hard to believe. Many things would be at risk: national security, the dollar, and freedom, let alone Social Security and any general prosperity. Four more years of Obama would bring us to the very edge of the cliff, and most likely over it.

This is not intended to create fear, but simply to call attention to current realities that urgently need correction. When failing companies, banks, states, or countries are bailed out, it means debt is taken on by the government (i.e., taxpayers), debt which should have been liquidated through bankruptcy. Let failing entities fail, and the resources they misapplied can be reallocated to something more useful. When private businesses are subsidized by the government because they can’t make it in the marketplace, a serious error takes place. Everything the government subsidizes is a money-losing operation headed for failure unless the government continues to bail it out, throwing good money after bad. It’s like betting on a racehorse that has a bad leg. It’s unlikely to win no matter what you do.

Greece gives us something of an economic example in miniature. But there is no one to bail out the United States. Not Europe, Russia, China, India or Brazil. We need not experience the worst-case version of this, but we seriously need to stop all bailouts and government subsidies and stop this foolish spending. Only Republicans speak with any seriousness about cutting spending. With Democrats, it’s a little talk and no action. Any “cuts” they speak of are just slowing down the rate of growth, and even that never happens.

Until our fiscal house is in order, and some control is exercised over monetary policy, we should not expect great growth. Four more years of Obama practically guarantees more and worse economic decline.

Rep. Paul Ryan (R-WI) addresses the debt problem in this brief video from his CNN appearance prior to CPAC 2012:

His CPAC speech is here. Ryan’s budget proposal is perhaps the only serious attempt to address the problem. The Democrats are offering nothing but more debt.

Keynesians Keep Trying to Control the Economy

Henry Hazlitt

President Obama’s economic policies have been based largely on his administration’s interpretation of John Maynard Keynes’ General Theory of Employment, Interest, and Money (Harcourt, Brace & Co., 1936). Federal Reserve Chairman Ben Bernanke likes Keynesianism also. Keynes became popular largely by proposing massive deficit spending as a key element for getting out of the Great Depression. Politicians loved the idea, because they like to spend money, and Keynesianism gave them cover to do so without raising taxes, should they so choose.

America has been accumulating the results of Keynesianism for decades, and is now dangerously close to a real day of reckoning concerning our huge national debt. Europe is already considering seeking a bailout from China. What Americans often fail to think about is: Who’s going to bail the U.S. when we get to that point? And we surely will unless some serious changes in direction are made fairly soon. The answer: No one. There is no one to bail us out. Would we end up repudiating our debt? Would we write it off in bankruptcy, allowing treasury bills to become worthless? Who knows?

Henry Hazlitt’s 1959 book, The Failure of the New Economics: An Analysis of the Keynesian Fallacies (D. Van Nostrand Co., Inc.) refutes Keynes at numerous points, quoting extensively from his book. (Ebook version of the Hazlitt work is available for free download at Mises.org.) Hazlitt was closely associated with Austrian school economics of Ludwig von Mises, Fredrich A. Hayek and others, and was a prolific writer and champion of individual liberty. [1]

Since the days of Franklin D. Roosevelt, Keynesians have dominated government economic policy and academic instruction, countered somewhat by classical theorists and monetarists, vastly growing the government, with some relief along the way, but leading to the distress we have experienced since the 2008 financial crisis and the concurrent recession. Keynes held “full employment” as the goal, but the Keynesians have delivered now-chronic high unemployment.

When Michelle Bachmann says that it “wouldn’t take that long” to turn the economy around, and when she says that her policies would lead us back to $2.00-a-gallon gasoline, she should be taken seriously, because she has a much better grasp of our economic situation than the current powers that be. She has some understanding of market forces, and does not have the contempt for the free market that the socialist regime has.

It is an axiom of economics that for economic growth, there must be saving and investment, and profits. Saving leads to availability of credit and it leads to investment. Keynesianism has led the Federal Reserve to set interest rates at near zero, and they have announced plans to keep them there for a long time. This stifles saving and investment. The Fed has encouraged easy availability of credit by pumping money, created out of thin air, into the system. Keynes discouraged individual saving and wanted low interest rates. He also wanted government to control investment. Small excepts from Hazlitt:

“The outstanding faults of the economic society in which we live,” Keynes begins, “are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes” ([Keynes] p. 372).

There are four chief things wrong with this statement:
(1) The vagueness of Keynes's "full employment" concept …
(2) Prolonged mass unemployment is not the fault of our economic “society,” but of governmental interventions in labor-management relations, wage-rates, and money and
banking policy—the very kind of intervention that Keynes wished to increase.
(3) The distribution of wealth and incomes is in the main neither “arbitrary" nor “inequitable” in a competitive free market system. As John Bates Clark showed so brilliantly in “The Distribution of Wealth” (1899) “free competition tends to give to labor what labor creates, to capitalists what capital creates, and to entrepreneurs what the coordinating function creates.” Individual inequities are bound to occur, but they are not systematic. Capitalism itself tends constantly to reduce them by its rewards to production. If we are looking for really “arbitrary” and “inequitable” distribution, we can find it in the East, or in backward and “underdeveloped” countries, or in Communist Russia and China—in short, in either pre-capitalistic or socialist societies.
(4) It is even a misnomer in capitalist countries to call this process “distribution.” Income and wealth are not “distributed” but produced, and in general go to those who produce them. [Hazlitt, Pp. 374-375]

Keynes's arguments against “liquidity” and against “speculation” are untenable. Speculative anticipations and risks are necessarily involved in all economic activity.
Somebody must bear them. What Keynes is saying is that people cannot be trusted to invest the money they have themselves earned, and that this money should be seized from them by government officials and spent or “invested” in the directions in which those officials (seeking to hold on to political power) deem best. [Hazlitt, Page 430]
(Emphasis added)

President Obama has been accused of a “class warfare” attitude because of his insistence upon raising taxes on millionaires. His liberal base likes any policy aimed at going after the “rich,” or, redistribution of income. The president in his September 20 speech accused House Majority Leader John Boehner of having a “my way or the highway” position for not being willing to accept any tax increases, but Obama himself adopts a “my way or the highway” stance with the opposite position.

Obama wants to take more money out of the hands of job creators to “invest” in things his administration would like to “invest” in, i.e., spend for. Government, in their view, owns all the money, and they only let us keep whatever portion of it they choose.



Rep. Paul Ryan (R-WI) appeared on Fox News Sunday the day before the president’s speech and indicated that Republicans would not be able to accept much of what the president was expected to propose, and characterizing it as “class warfare” approach. Ryan explained why more new taxes are not the answer:



Socialist policies lead to authoritarian controls and less freedom. Obama’s jobs bill and tax proposal, though unlikely to become law, do illustrate the Keynesian tax and spend philosophy. Obama’s wish is to get higher taxes now, and make “cuts” some time in the future – cuts which are unlikely to happen if liberals have their way.

As I have said before, class envy is the very lifeblood of liberalism, and exploiting and promoting the class struggle is the process. It has this in common with communism. Obama, the great uniter, is now reduced to pandering to labor unions by threatening “the rich” with higher taxes and more regulations, for his own political purposes. Neither his “jobs” bill nor his proposal for “paying for it” is likely to gain any ground, nor would they help with the actual problems if they were to be passed. The proposals are certainly no better than the previous “stimulus” and would create at least one more new government agency, the “Infrastructure Bank.” As if we didn’t have enough slush funds already (see Fannie and Freddie).


[1] See Keynes vs. Hayek rap video here. Sequel here.

Photo: Ludwig von Mises Institute, via Wikipedia.

Economic Principles That Should Be Put into Practice

Image via Wikipedia

Paul Volcker, President Obama, and GE CEO Jeffrey Immelt

The same people in government who create economic crises and problems for America are the ones who propose to solve them, by doing more of the things that created them. The futility of this approach should be obvious, but somehow isn’t. Since so many economists have been taken in by Keynesianism, they are thereby largely precluded from considering other approaches. Therefore, we have things like President Obama’s latest “jobs” bill proposal. It’s like the previous “stimulus” plan, except it would also add an “infrastructure bank,” i.e. a slush fund/piggy bank for liberal politicians to fund union-friendly projects that would create little to nothing in terms of addressing the actual problems of unemployment.

The “jobs” bill would cost nearly half a trillion dollars, which the president proposed to pay for, initially, by letting the super committee figure it out, and then, more recently, proposed raising taxes on those awful oil companies and rich people.

Government officials could get a clue about how the economy works if they would listen to Peter Schiff in the following video of Schiff’s appearance on MSNBC’s Morning Joe (video via The Daily Bail, dated March 25, 2009) [1]:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Quoth Schiff: “Keynes. It's nonsense. He's like a witch doctor in medicine. You can't follow Keynes. Keynes didn't understand economics.”

That the economy should be based on savings, investment, and production, rather than endless borrowing and spending, ought not to be such a hard concept to grasp. Also, politicians should understand that propping up, even enshrining the mistakes that led to the crisis simply compounds the errors and prevents market corrections.

The more spending the government does to try to jump-start the economy, and the more money the Fed prints to put into the system, the worse the situation will become. Unless definite measures are taken to reduce the size and scope of government and to make actual significant cuts in federal spending, and to stop all bailouts, subsidies, and other corporate welfare, the outlook is for more economic deterioration to an extent determined by how much of this is not done.

Obama calls for “investment,” meaning government spending, but what is needed is for government and the Fed to step aside and let private saving and investment take place. If there could be some certainty as to low taxes and less regulation (get rid of Obamacare and Dodd-Frank, and rein in the EPA), the business climate would look much more favorable, and the economy would soon improve. If interest rates could be set by the free market, investors could experience acceptable returns, and would be willing to risk capital.

Until the GOP can take control of House, Senate, and White House, there won’t likely be a lot of progress, and even if they do, it will remain to be seen how they would proceed. But it isn’t yet too late to start improving things. It’s over a year until election time, and during the interim, we’ll have to cope with high unemployment, high deficits, and whatever the “super committee” comes up with. If the economy can be interfered with less by government and the Fed, some good things can still happen over the next year or so. Let the recession play itself out, and the market will begin correcting the economy.


[1] “Look Out Krugman, Belief In Keynes Is Belief In Self-Delusion: Peter Schiff Tells The Truth About The Recession And Government Spending (MSNBC Morning Joe Video),” The Daily Bail.

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Infrastructure Bank – Another Plan That Won’t – and Can’t – Work

                      Image via WikipediaWhen you see a “jobs creation” approach that didn’t work, doesn’t work, and can never work, why urge Congress to try it again?

Back in March of this year Eric Jaffe at Infrastructurist.com wrote

Democrats John Kerry and Mark Warner joined Republican Kay Bailey Hutchison to propose the BUILD Act yesterday. The bipartisan legislation would create a national infrastructure bank the senators are calling the American Infrastructure Financing Authority — the term “bank” being anathema these days. [1]

I’ve always admired Sen. Hutchison, but this may be evidence that her decision to retire from the Senate is a good one.

This proposal didn’t get anywhere at the time, but the “Infrastructure Bank” is on President Obama’s list of ideas for job creation. According to Jaffe’s article, the Federal Government would provide billions of dollars and many billions more would come from private investors (Wall Street, etc.) and these funds would be invested and applied to infrastructure projects. Wow, what an idea.

According to Jaffe, “The upside is clearly good. Less clear is whether the plan can get off the ground.” Of course it didn’t, fortunately, at the time.

Conn Carroll at The Washington Examiner (08/14/2011), has a better evaluation of the idea: it’s just another “stimulus.”

The first thing to note about this proposal is that it's not really a bank. Banks use deposits from some customers to fund loans to other customers, and they make money by charging interest to borrowers at higher rates than they offer to depositors.

Obama would run his bank a little differently. Instead of forcing borrowers to pay money back, Obama's National Infrastructure Innovation and Finance Fund would “directly provide resources for projects through grants, loans, or a blend of both.” Another word for “grant” is “gift,” so basically Obama's infrastructure bank would be just giving money away.

But then how would Obama's bank stay in business? Simple. Congress would give it $5 billion to spend every year…. [2]

Tackling those “shovel ready” jobs, I suppose.

Carroll mentions other similar failed measures associated with “stimulus” projects. The article is well worth reading.

It’s clear that Keynesian spending will not bring about the desired recovery, but will likely put us back into recession. The August jobs figures (zero net jobs added, prior month revised downward, nominal unemployment rate still 9.1%) suggest that nothing being done now is helping much at all. And more billions added to the debt? As Victor Davis Hanson observes, the ever-present Keynesian excuse is that we haven’t spent enough.

But how much would be enough? We already have so much debt it will never be paid back except through massive inflation.

The entire approach of government intervention, and Federal Reserve intervention in the free market not only doesn’t help the situation, but promotes the false idea that somehow the free market has failed. In fact, the entire financial crisis and the current economic downturn are the fault of government and the Fed. Private sector blame consists of failing to adequately protest bad government policies, creating bad securities, and, understandably, accepting the bailouts when bankruptcy was deserved, which would have liquidated the debts rather than sticking the taxpayers with them.

But Keynesianism, as currently practiced, knows no real limit of spending to try to stimulate the economy. See how it has stimulated things so far.

[1] Eric Jaffe, “Kerry, Hutchison Propose National Infrastructure Bank,” 03/16/2011, Infrastructurist.com.


[2] Conn Carroll, “Infrastructure bank is just another stimulus boondoggle,” 08/14/2011, The Washington Examiner.

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Unemployment Up! What a Surprise! But Why Is It Surprising?

Dreamstime.com

Economists were reportedly taken by surprise when the June unemployment figures showed 9.2 per cent unemployment, with only 18,000 jobs added. May’s figures were revised downward from 54,000 jobs added to only 25,000. Bureau of Labor Statistics figures show 14.1 million people unemployed, including 6.3 million unemployed for 27 weeks or more, and 982,000 discouraged workers among 2.7 million “marginally attached” to the labor force, people who wanted and were available for work, but not counted as unemployed because they had not looked for work in the 4 weeks preceding the BLS survey. Another 8.6 million were working part time when they would prefer to work full-time.


For an article on comparatively rosy expectations, see this.


The New York Times reports as follows:

Economists were stunned. They had been expecting job growth to strengthen in June as oil prices eased and supply disruptions caused by the Japanese tsunami and earthquake receded. Instead, the government’s monthly snapshot of the labor market showed that several industries, including construction, finance and temporary services, shrank. At the same time, leading indicators like wages and the length of the average workweek, which tend to grow before employers begin adding more jobs, actually contracted. [1]

Of course, these days, analysts always seem surprised at unfavorable economic news, perhaps still waiting for good results from Obama’s “stimulus,” and when the results don’t come, some complain that it’s because the stimulus was too small. Anyway, they don’t want us to cut spending any time soon.

The reasons for the unfavorable unemployment picture and its continuation are not that difficult to understand. The Heritage Foundation’s Morning Bell blog article of July 8 sums it pretty well. Mike Brownfield explains that in order to keep up with population growth, 100,000 to 125,000 new jobs are needed each month. Also, he quotes Rep. Paul Ryan and comments as follows:

“Investors and businesses make decisions on a forward-looking basis. They know that today’s large debt levels are simply tomorrow’s tax hikes, interest rate increases, or inflation – and they act accordingly.” [– Ryan]

It is this “debt overhang,” and the President’s threatened tax hikes, Obamacare, his incessant meddling in business (whether through the EPA or the NLRB) and the uncertainty those actions generate that are weighing on U.S. growth, investment and job creation today. [2]

The article contains some interesting insights, and I recommend reading the whole piece.

At best, business is risky, and when government adds threats of higher taxes, publishes new and invasive, costly regulations, and takes on ever-increasing debt, these things add to the already substantial market risks and can hardly help but slow things down. Everything we buy has been produced and sold by businesses, who have seen to it that we have stores (or website warehouses) filled with merchandise. Merchants are trying to put on the market the things that people want, in spite of all government’s efforts to stop innovation, competition, and profitability, and punish success. We should appreciate the fact that in order to have job growth, there must be profits and expansion. For some good information on the nature of business, see this.


The result of Obama’s economic activities will be to further slow or reverse economic growth unless serious changes are made. The Administration shows no inclination toward a pro-growth approach, but instead wants more spending and more taxes.


[1] Motoko Rich, “Job Growth Falters Badly, Clouding Hope for Recovery,” 07/08/2011, The New York Times.


[2] Mike Brownfield, “Morning Bell: An Economy in Panic,” 07/08/2011, The Foundry blog at The Heritage Foundation.

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• The Great Jobs Drought (growthology.org)

Some Comments on President Obama’s Cleveland Speech on the Economy

In this article, I am commenting on some of the things President Barack Obama said in his September 8, 2010 speech in Cleveland, Ohio (more precisely, Parma, Ohio). Lest his remarks be taken uncritically, I have tried to provide some counterpoint. The President’s statements are in bold and everything else is not in bold. [1]

Instead of coming together like past generations did to build a better country for our children and grandchildren, their argument is that we should let insurance companies go back to denying care for folks who are sick, or let credit card companies go back to raising rates without any reason.  Instead of setting our sights higher, they’re asking us to settle for a status quo of stagnant growth and eroding competitiveness and a shrinking middle class.

The argument is that we should not have socialized medicine, and while the insurance industry regulations need to be revisited, it was not necessary, and it is an unwise policy to replace the entire health care structure. Most Americans agree with this. Obama’s and liberals’ answer to everything is more government control and/or more government spending. I haven’t heard any conservatives “asking us to settle for a status quo of stagnant growth and eroding competitiveness and a shrinking middle class.” Those are precisely the things Obamanomics are bringing us through higher taxes, over-regulation, bailouts and government takeovers. If government would simply get out of the way, a free market would very soon restore prosperity.

“Past generations” felt compelled to support the big government policies of FDR during the Great Depression, which vastly expanded government size and power, and contributed to worsening and prolonging the Depression. (See my previous article here.)

With all the other budgetary pressures we have – with all the Republicans’ talk about wanting to shrink the deficit – they would have us borrow $700 billion over the next 10 years to give a tax cut of about $100,000 each to folks who are already millionaires.  And keep in mind wealthy Americans are just about the only folks who saw their incomes rise when Republicans were in charge.  And these are the folks who are less likely to spend the money – which is why economists don’t think tax breaks for the wealthy would do much to boost the economy.

“Economists” in that last sentence must refer to Keynesian economists who think the only solution to our economic problems involve massive government spending. Obama shows his narrow outlook on this situation when he says the wealthy are “less likely to spend the money.” If they did receive a continuation of the Bush tax cuts, they would be very likely to spend the money on business investment that would create jobs.

How they can still get people to believe the following myths is somewhat surprising:

Myth #1: The Bush tax cuts decreased, and continuation of them would decrease revenues to the government. Not so. Check tax cuts back to JFK, Reagan, and Bush, and you will find that revenues to the government increased under these tax cuts. Revenues would increase again if all the Bush tax cuts were extended. Boehner’s suggestion of extending all the Bush tax cuts for two years, and rolling back spending to 2008 levels, would produce a substantial improvement quickly. If businesses knew their tax rates were frozen for two years, they would feel free to expand and hire.

Myth #2: Increasing taxes on the wealthy does not harm others in society. Not so. Increasing taxes on the wealthy equals increasing taxes on those who are in a position to provide jobs, if the economy encouraged it. Figures from the Bureau of Labor Statistics show clearly that this isn’t happening now. Obama’s argument appeals mainly to class envy.

This isn’t to punish folks who are better off –- God bless them.  It’s because we can’t afford the $700 billion price tag... And for those who claim that our approach would somehow be bad for growth and bad for small businesses, let me remind you that with those tax rates in place, under President Clinton, this country created 22 million jobs and raised incomes and had the largest surplus in our history.

Jobs were created and the surpluses happened after Republicans gained control of Congress in 1994. Clinton and Gore got on board with this reality, announcing that “the era of big government is over,” something that Obama would never do. For him, the era of big government is just beginning. And, punishing some of the wealthy by redistributing some of their wealth would please Obama.

As Jake Tapper of ABC News reported,

The president defined the Republican economic philosophy as, “Cut taxes, especially for millionaires and billionaires.  Cut regulations for special interests.  Cut trade deals even if they didn’t benefit our workers.  Cut back on investments in our people and our future.” [2]

“Millionaires, billionaires, and special interests” means employers, whose wealth and income Obama wants to redistribute. Of course, here, as elsewhere, when Obama says “investment,” he means “government spending.”

Also,

Senate Republican Leader Mitch McConnell in a statement pushed back against Mr. Obama’s speech.

“If the President wanted to have an immediate impact on hiring, he could begin by changing his mind and announcing today his opposition to the job-killing tax hikes on small businesses,” McConnell said, “ America’s job creators have already been hit with higher health care costs and related taxes, new bureaucracy and a financial regulation bill. Americans want jobs, not more government, more debt and more taxes. Let’s start today with a declarative statement against tax hikes on the small businesses that are critical to expand and create jobs.” [3]

And, Obama would have us believe that it’s somehow John Boehner’s fault that our economy is in such dreadful condition.

The President derided House Minority Leader John Boehner as representing simply saying “no” to Obama’s policies without proposing any positive steps to helping the economy. Not true, of course, but the “no” aspect is valuable too. As one of Jake Tapper’s commenters said,

No is a pretty sound position when the nation is careening off a cliff in massive debt.

America is on a path to bankruptcy. This is no longer news and no longer debatable. What remains in question is, what are we going to do about it? [4]

Interestingly, The Hill is reporting today (09/08/2010) that momentum is building for extending all the Bush tax cuts, since the President avoided a direct veto threat, and Sen. Ben Nelson (D-Neb.) expressed support for extending them:

Sen. Ben Nelson (Neb.), a centrist who has been a key vote on several Obama administration initiatives, said Thursday that he supports extending all of the George W. Bush-era tax cuts until the economic recovery has taken root. Raising taxes on wealthier taxpayers could hurt the economy, he said…. 

Tax policy experts expect Congress to approve an extension of all of the Bush-era rates in a lame-duck session after the elections. [5]

This could make Obama’s argument a moot point, which would be good news. Also, that's the only good argument I've heard for having a lame-duck session. The Democrats are trying to figure out something to help the economy before the elections (such as announcing this?), and they know that Obama’s policies aren't working.

The past several months have helped many Americans gain perspective on Obama’s policies. People who previously had little desire to follow day-to-day politics now find that they must pay closer attention, because these things hit them in the pocket book, lessen their freedom, and weaken the nation. After Election Day, it appears that Obama’s party will be less powerful in Congress.


[1] Items in bold are from “Remarks by the President on the Economy in Parma, Ohio,” 09/08/2010, WhiteHouse.gov.

[2] Jake Tapper, “Still Fear vs. Hope? Obama Attacks John Boehner, GOP’s Economic Vision,” 09/08/2010, ABC News, Political Punch.

[3] Ibid.

[4] Commenter “Skip” at Tapper article 09/08/2010. See [2].


[5] Vicki Needham and Ian Swanson, “Momentum builds for extending all of President Bush’s tax cuts,” 09/09/10, The Hill, On the Money blog.


Photo: Senator Ben Nelson of Nebraska, official portrait, via Wikipedia.

Obama Blames Bush and Whines about the Economy, or Happy Labor Day to the Unemployed

Now President Barack Obama wants approval for a $50 billion “jobs bill,” that Republican leaders rightly point out would have little effect other than increasing US indebtedness when spending is already out of control. No new jobs would be brought about until next year perhaps, and the bill is hardly worth its price tag.

And Obama has turned up the volume, for campaign season, on his “Blame Bush” strategy, which by now is wearing quite thin. Obama, during his presidential campaign seemed to be confident about having all the answers, but since his economic policies have been a big failure thus far, he has to blame Bush, propose more stimulus, and do more whining.

An AP article reporting on Obama’s newest stimulus proposal includes the following about Obama’s statements to a “cheering crowd at a labor gathering” in Milwaukee:

Casual in brown slacks and open-collar white shirt with rolled-up sleeves, Obama took a populist tack in his speech, mixing attacks on Republicans with praise for working-class and middle-class Americans.

He said he'd “keep fighting, every single day, every single hour, every single minute to turn this economy around.” He said interest groups he has battled “talk about me like a dog.” [1]

I’m not sure if he meant that even during vacation times he’d keep “fighting.” Or when he could spare some time from whining about groups that “talk about me like a dog,” he’d “fight.” He did say every single day, hour, and minute. That doesn’t leave much time for other things. Such inspirational rhetoric from the Chief.

He talks about helping the middle class at the same time he is destroying the middle class. And young people trying to enter the job market are probably rethinking their devotion to the Messiah’s “hope and change” promises. There have been changes, but not what was hoped for. There are 14.9 million people still unemployed, and another 8.9 million underemployed [2], and still more who have given up looking for work, but Obama hails the “positive news” of 54,000 private sector jobs created.

Oh, and by the way, Obama wants to exempt companies from paying Social Security taxes on newly-hired people that were unemployed. And, he wants to continue R&D tax benefits. In the context of the employment and tax picture as seen by employers, these things are not enough to encourage hiring to any significant degree.

Further, the AP article reports as follows:

He also acknowledged that the past eight months of modest private-sector job growth hasn't been enough to bring down the unemployment rate. He said economic problems facing families today are “more serious than ever,” and seemed to ask the audience in Milwaukee — and voters nationwide — for patience.

“Now here's the honest truth, the plain truth. There's no silver bullet, there's no quick fix to these problems,” he said, adding that it will take time to “reverse the damage of a decade worth of policies” that caused the recession. [3]

He’s right about the problems getting worse under his administration. And his policies certainly can’t and won’t improve things much. He is wrong about “‘a decade worth of policies’ that caused the recession,” if he means something other than the real estate bubble and the misbehavior of Fannie Mae and Freddie Mac, resulting from actions and inaction of the Democrats and the Fed, and Bush’s ill-advised last-minute acceptance of (Democrat) Paulson’s demand for a $700 billion bail-out blank check.

Obama’s beloved health care bill ensures that there won’t be fiscal sanity for the foreseeable future, and his promotion of the cap and trade bill proves he doesn’t care. Obamacare and the impending EPA regulations on CO-2, plus the end of the Bush tax cuts, the double-dip, and the worsening of real-estate troubles, virtually guarantee that banks and businesses will keep holding on to their cash for some time. Economists who say the economy will improve around 2014 may be counting on Obama being out of office by then. If Republicans gain control of Congress this year and de-fund Obama’s main initiatives and overturn his regulations, and extend the Bush tax cuts, things could get better much sooner.

Meanwhile, the President stays in campaign mode, though his message now is far less appealing to his election supporters than in 2008. But he can campaign. He just isn’t good at governing.

[1] Darlene Superville, Associated Press, “Obama assails GOP, promotes new jobs program,” 09/06/2010. Yahoo! News.

[2] Bureau of Labor Statistics, “The Employment Situation -- August 2010,” 09/03/2010.

[3] Superville, see [1].

Photo: Vintage 1956 postage stamp with Labor Day theme (Dreamstime.com)

Governing the “Ungovernable”

Some liberal observers, noticing President Barack Obama’s lack of success in advancing his signature agenda items, “health care reform” and cap and trade, are theorizing (or concluding) that America has become ungovernable.

Newsweek takes up this matter, blaming “obstructionist Republicans, spineless Democrats and an increasingly incoherent electorate” for America’s supposed ungovernability. [1]

The fact that “health care reform” is not yet a done deal is supposed to illustrate the problem. All liberals agree that Obamacare is sorely needed and would greatly relieve a lot of suffering. Yet the Republicans won’t get on board with it, and a majority of Americans, having been informed about it (since the Democrats’ initial dead-of-night, unread-bill effort to pass it didn’t quite work) selfishly don’t want to lose their current coverage, with which they are moderately satisfied, and pay substantially more in taxes.

It’s true that people don’t want to lose their coverage and pay high taxes for the proposed plan. It’s not selfishness, but rational self interest. And, people are becoming more aware of the Constitution and the federal government’s numerous efforts at violating it, thus curtailing freedom. Republicans simply don’t want their name attached to such an offensive piece of legislation, and some may even recognize that this whole area is outside the federal government’s legitimate constitutional authority.

Another consideration is that the Obama Administration has focused on getting their socialist agenda items enacted when the public’s concern was jobs and the economy, about which nothing successful was being done. There was no consensus on cap and trade or the health care effort, both of which could be seen as hurting the economy.

It’s not that America is ungovernable. It simply lacks executive and legislative leadership.

Charles Krauthammer remarks on the similarity of these most recent complaints of ungovernability to the Carter years: “In the latter days of the Carter presidency, it became fashionable to say the office had become unmanageable and was too big for one man. Some suggested a single, six-year presidential term. The president's own White House counsel suggested abolishing the separation of powers and going to a more parliamentary system of unitary executive control. America had become ungovernable.” Then he shows how, in contrast to Ronald Reagan and Bill Clinton, Jimmy Carter was not able to provide the needed leadership. [2]

Thence the “malaise.” Are we going to be hearing that term again soon?

Jay Cost at Real Clear Politics faults Obama for two errors: First putting Nancy Pelosi (too far left) in charge of writing the health care legislation, and second, insisting on comprehensive reforms. “If the truly great Henry Clay could not pass the Compromise of 1850 through the Congress in a single package, what made Barack Obama think he could sign comprehensive energy and health care reforms?” [3]

As Krauthammer points out, economist Paul Krugman even blames the filibuster, although in the G.W. Bush days, he warned against “extremists” trying to get rid of the procedure, when liberals were using it to block Bush’s judicial nominees. [4]

It seems clear that liberals, very reluctant to acknowledge the demonstrated lack of leadership ability in their top government officials, must cast blame elsewhere: the public, the Republicans, and the basic structure of government (i.e., the Constitution), for their failures.

When Republicans return to power, perhaps they will remember how to lead. They have some good examples to look to. Of course, so do the Democrats.


[1] Michael Cohen, “America the Ungovernable,” 01/25/2010, Newsweek.

[2] Charles Krauthammer, “It’s vogue again to declare America ungovernable,” 02/20/10, Houston Chronicle,

[3] Jay Cost, “America Is Not Ungovernable” 02/08/2010, Real Clear Politics.

[4] Krauthammer, see [2].

Photo: Dreamstime.com

Budget, Bipartisanship, and Jobs

President Barack Obama wants to have a bipartisan “summit” on health care, with the bills already passed serving as a starting point. He says he wants bipartisanship, but by that he seems to mean Republicans getting on board with his attempted government takeover of the health care and health insurance industries. GOP leaders have been warned (if such warning were needed) that this is an Obama political trap for PR purposes. If they attend the meeting, look for plenty of GOP disclaimers beforehand, and no GOP support for Obamacare in its current Senate or House version.

Why does everyone regard “partisanship” as a bad thing? It’s the essence of our political system. People act as though they are “shocked, shocked, to find politics going on in Washington!” If there had not been strong rejection by the GOP and the American people against Obamacare, it would now be a statute passed under cover of darkness with minimal disclosure of what is in the legislation, and plenty of intimidation, threats, bribes and various kinds of payoffs. So far, it hasn’t passed. One can only hope it’s dead and ready for burial.

The Administration’s focus for months has been so much on health care that it is hard to see their failures on foreign policy and, especially, the economy, as anything other than simple neglect. Why else did it take months to decide on a course of action for Afghanistan, even after a relatively recent pronouncement that policy had already been decided? Why else is the Administration closed to any course other than massive, unprecedented, and un-repayable debt as the remedy for the recession?

As a Washington Examiner editorial of February 5, 2010, points out, as the title says, “Recession chugs on except in government.” It is rather startling to me that, as the editorial says, 41 percent of the unemployed have been so for 27 weeks or more. [1] That’s over six months if you don’t want to take time to calculate it.

The main thing that government has done is extend unemployment benefits for more months, and create or “save” government jobs. The economy as a whole dropped 20,000 jobs in January. The stimulus has been an abject failure, and was mainly a very expensive pork bill which has done basically nothing to stimulate the private-sector economy. It seems obvious that the very unpopular “health care reform” has taken top priority, over the main issues citizens are concerned with, jobs and the economy.

Congress will be raising the debt limit to $14.3 trillion, so as not to need another increase before the November elections. Mr. Obama states that we need to rein in the deficits, yet proposes a new $3.8 trillion budget full of tax increases and unnecessary spending. Investors Business Daily editorializes, “As we've noted, the debt that will be added over the next decade or so will break all records. Indeed, by some recent estimates our debt will surge $13 trillion by 2020, more than twice the total debt accumulated in our nation's first 220 years of existence.” [2]

It appears that the appeal of Keynesianism (as interpreted by the current Democratic leadership) is so strong, that it is felt that deficit spending, to whatever degree is desired, is fine, as long as you talk about someday reducing the deficit.

Everyone agrees that this course is “unsustainable,” but the Democrats expect us to “sustain” it for a decade or so anyway. As Mark Steyn writes, “But if they're ‘unsustainable,’ what happens when they can no longer be sustained? A failure of bond auctions? A downgraded government debt rating? Reduced GDP growth? Total societal collapse? Mad Max on the New Jersey Turnpike?” [3]

The really discouraging aspect in all this, to me, is not simply the very unfavorable situation we are currently in, but the plain fact that what is being done is making things worse, not better. We may see some interim improvements, but with the government persisting in out-of-control spending for as far as the eye can see, regardless of results, we are truly in danger of, not only another recession, not only another financial crisis, but a true financial collapse.

Obama still wants to pass cap and trade and “health care reform.” At present, there is a strong possibility that neither of these items will pass, but the fact that they are seriously proposed shows either economic ignorance or economic malice of a high degree. The job killing and extreme taxation associated with these things, not to mention the severe loss of freedom, points to the fact that the Obama Administration is leading America toward, not recovery, but financial failure. Then I suppose the proposed answer from the liberals will be more socialism, claiming that capitalism has failed, when it is government that is failing day by day in a huge way. In other words, a continuation of much of what they’re doing now.

Nothing that is being done by the current administration bodes well for the jobs picture. Obama says it’s “hard” and will require “sacrifice,” but he seems to be doing his best to extract “sacrifice,” necessary or not. People have been sacrificing a lot lately. It’s time for some relief, and that will come when a sense of fiscal responsibility is restored and the situation is honestly analyzed. When we have multiple trillions of dollars of unfunded liabilities in Social Security, Medicare, and Medicaid, which can never be paid, and when the government is ready to impose many billions of dollars of unfunded mandates on the states, plus the aforementioned new taxes, a real recovery in the near future is not feasible, and it’s because of government.

The GOP’s main responsibility now is not to “work with Obama to solve problems,” but to stop the Obama economic agenda to the greatest extent possible. Sometimes, being the “Party of No,” is the best course. First, restore sanity, then think about bipartisanship.


[1] Washington Examiner editorial, “Recession chugs on, except in government,” 02/08/2010.

[2] Investors Business Daily editorial, “Collapsing Ceiling,” 02/04/2010.

[3] Mark Steyn, “If 'Unsustainable' Is New Normal, Collapse Is Closer Than We Think,” 02/05/10, Investors Business Daily.

Photo: Dreamstime.com

Unemployment Numbers: Same Old, Same Old for Months To Come?

If you are looking for a job, no one needs to tell you that the American people, including employers, aren’t seeing much of a recovery from the recession. The “improvements” we’ve seen have been mostly from temporary government programs like “Cash for Clunkers” and various other government money going into the economy. Not really the stuff of healthy recovery. The following words from the Bureau of Labor Statistics give a brief description. Their web site gives more details:

“THE EMPLOYMENT SITUATION -- DECEMBER 2009

“Nonfarm payroll employment edged down (-85,000) in December, and the unemployment rate was unchanged at 10.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment fell in construction, manufacturing, and wholesale trade, while temporary help services and health care added jobs.

“Household Survey Data

“In December, both the number of unemployed persons, at 15.3 million, and the unemployment rate, at 10.0 percent, were unchanged. At the start of the recession in December 2007, the number of unemployed persons was 7.7 million, and the unemployment rate was 5.0 percent….

“Unemployment rates for the major worker groups--adult men (10.2 percent), adult women (8.2 percent), teenagers (27.1 percent), whites (9.0 percent), blacks (16.2 percent), and Hispanics (12.9 percent)--showed little change in December. The unemployment rate for Asians was 8.4 percent, not seasonally adjusted….”

“About 2.5 million persons were marginally attached to the labor force in December, an increase of 578,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey....” (Source: Bureau of Labor Statistics) (Emphasis added)

The report for December was worse than many analysts expected. According to an AP story giving some analysis of the BLS report, “Counting the people who have given up looking for work and the part-time workers who would rather be working full-time, the so-called underemployment rate edged up to 17.3 percent in December. The record high is 17.4 percent, reached in October.”

“It was the second straight month the unemployment rate came in at 10 percent. The only reason it didn't rise was that 661,000 people stopped looking for jobs and left the work force.” [1]

The 17.3 and 17.4 percent figures compare to the 25 percent unemployment rate during the depths of the Great Depression. The U.S. saw 85,000 jobs lost in December. UPS is planning to lay off 2,000 workers and Lockheed-Martin will cut 1,500 jobs later this year. There are numerous applicants for most jobs that are advertised.

According to the AP article, “But the jobless rate is likely to rise in coming months as more people see signs of an improving economy and start looking for work again. Some economists think it could near 11 percent, which would be the highest since World War II, by June.” [2]

The government’s plans, including the recently-passed House “jobs” bill, call for government funding of programs to create jobs, extend unemployment benefits, and give money to states to help with their budget shortfalls. None of these measures is a substantial attempt to address the problem. Instead, it represents more government debt, and, by increasing the deficit, actually makes matters worse because it discourages more private-sector hiring outside of the specific targets of the legislation. The Senate is reluctant to act on the House bill.

Government policies, and uncertainty about what (or how bad) future policies will be, continue to discourage private-sector employers from expanding and hiring. One must wonder what the priorities of this government are, because they seem obsessed with getting a massive health-care taxing and entitlement program in place as soon as possible, before anything else is done. That is the top priority at the moment. Most people, including employers, and many in health care related industries oppose this legislation. It is an economic downer for everyone, except some insurers, and people who might benefit by getting government subsidies in Obama’s redistribution efforts. Don’t look for it to be any kind of boost to the economy. Just the opposite.

How can banks, manufacturers, and employers in general feel free to expand credit and payrolls when they are under a strong threat of numerous and expensive new taxes and regulations coming from government? It should be fairly obvious that economic recovery is not the government’s current plan, because virtually nothing is being done to encourage private-sector economic activity, and many things are being done to prevent it from increasing.

The government appears to want to control (if not own) every aspect of the economy, and that is largely the problem. Memo to government: It’s not rocket science. Let’s just stop trying to tax and spend our way out of this with more pork projects and entitlements. Get out of the way and let the market work. We’ll see good results fairly quickly.

[1] Jeannine Aversa and Christopher S. Rugaber, “Report suggests a year of high unemployment ahead,” Associated Press, at Yahoo! News, http://news.yahoo.com/s/ap/20100108/ap_on_bi_go_ec_fi/us_economy

[2] Ibid.

Photo: Dreamstime.com

Bankers Try To Respond to Government’s Mixed Signals

Let’s convince everyone that unemployment is due to fat cat bankers stubbornly refusing to lend money to small business, and also that their deliberately excessive lending is what caused the financial crisis – that and the policies of the Bush Administration. That seems to be part of Obama’s economic strategy. They’ve succeeded in getting many people to think that “fat cat bankers” are the main problem:



Obama didn’t run for office to help out “a bunch of fat cat bankers on Wall Street,” he says, but that is precisely what he did by supporting the TARP bailouts. He enabled banks that wanted to pursue risky behavior by ameliorating their risk. In other words, as some have noted, allowed them to be “capitalist” with profits, but “socialist” with losses.

Big bankers, looking to position themselves for maximum advantage in whatever the government decides, are making noises to indicate, “Yes, we’re on board with ‘stepping up’ to help with the lending slowdown,” but also, in response to government warnings and what they astutely perceive as threats, they are being very cautious about making any kind of risky loans. They are keeping more reserves, meaning that less money is available to lend. So, they’re damned if they do and damned if they don’t.

As video at Wall Street Journal online notes, the President has a style that could create awkwardness, planning a big meeting with bankers so he and they can “work together,” after lambasting them on a 60 Minutes broadcast the previous evening. Some of the bankers probably felt like giving Mr. Obama a less than courteous reply. But, as mentioned, they want to be in an advantageous position somehow.

The “pay czar” is going to see to it that banks that still owe TARP money are going to keep bonuses to a minimum, and those who don’t owe money are to some degree restraining their bonuses. This large reduction in bonuses has hit hard in New York (state and city), since a great deal of tax revenue results from these bonuses. Unintended consequences…

The government wants new financial industry regulations to tell banks how to manage their business when the government’s management of its own financial business is out of control and getting worse. The House has passed a version of a regulatory bill, expanding government power (the theme of the Obama presidency) over risky or failing organizations. In the name of preventing bubbles and meltdowns, they actually will prevent a lot of prosperity by suppressing risk. And they wonder why banks aren’t on board with this.

“Large banks, from J.P. Morgan Chase to Citigroup Inc., lobbied against parts of the measure. They said the bill would penalize them for being large, through tougher capital requirements and higher fees, and would give the government greater authority to either seize large companies or order them to decrease their size.” [1]

American Banking News states:
“But as those in the banking industry rightly say, you have the White House speaking out of one side of its mouth while regulators are speaking out of the other side of their mouths.

“Regulators are telling the banks to strengthen their capital ratios and to be on the lookout for default trends going forward. In those cases the regulators are advising the banks to cut back on lending.

“But we already know that the big hit the banks are going to take on commercial lending hasn’t even arrived yet, and is going to kick in during the second half of 2010. So Obama attempting to pressure them to lend in order to try to get the economy back on track is ignorant at best, and terrible as far as business operations go.” [2]

So, which is it? Be cautious and don’t take risks with your bank’s money, or be open to more risk, possibly leading to more of the mortgage problems that led to the financial crisis? It seems the government wants to be able to blame bankers for whatever economic problems they can blame them for. Just so long as they can deflect criticism from their own policies.


[1] Elizabeth Williamson, “Obama Slams ‘Fat Cat’ Bankers,” 12/14/2009, The Wall Street Journal online, at http://online.wsj.com/article/SB126073152465089651.html?mod=WSJ_hp_mostpop_read

[2] Gary Bourgeault, “Obama Administration Clueless on Banking Issues, Sending Mixed Messages to the Industry,” American Banking News.com, 12/10/2009, at http://www.americanbankingnews.com/2009/12/10/obama-administration-clueless-on-banking-issues-sending-mixed-messages-to-the-industry/

Photo: Dreamstime.com