Obamanomics: Keynesianism, Deficits, Big Government

President elect Barack Obama has made clear that his first priority upon seizing control of the presidency will be an economic "stimulus" package intended to give the ailing economy a shot in the arm. This package will likely look something like the stimulus of this past summer when the Bush Administration and the Democratic Congress spent 150 billion dollars to send everyone a few hundred bucks, hoping that this would increase aggregate consumer demand and prevent the economy from entering into a recession... It didn't. That stimulus package proved a complete failure in accomplishing its stated goals while tacking on another 150 billion to the already obscene federal budget deficit. A University of Michigan study showed that only one fifth of people went out and spent this stimulus money, while most people saved it or used it to pay off debts, thus resulting in no substantive benefits to the macroeconomy. Unfortunately, Barack Obama, Nancy Pelosi, Barney Frank and co. along with the media wing of their agenda (The New York Slimes... typo) are planning to push forward what will likely be a much bigger stimulus plan. Such an action would be a flat out mistake.

A central component of this ill conceived stimulus plan would be a massive public works program to "rebuild our crumbling infrastructure," one of Barack's million dollar phrases during the campaign cycle. In fact, Obama promises to "create" 2 million jobs in public service projects such as the building of roads and bridges. Obama also promises to spend 15 billion dollars a year that will "create" 5 million "green" jobs in the alternative energy sector. Unfortunately, the Obama plan will not "create" any jobs and will likely result in a net less of jobs, wealth, and productivity. If I went to the money tree in my backyard and pulled a hundred billion dollars from its leaves, I could then use that money to create jobs. I would hire a Swedish model as a personal assistant, find me a personal chef that makes a fine steak, and maybe even by myself a personal zoo and hire people to take care of my giraffes, etc. I'd be overflowing in so much cash that I'd probably even hire some people to build windmills and rebuild our "crumbling infrastructure" (is it really crumbling? I always wished Obama could back that up with facts. I haven't come across any crumbling bridges or highways) like Obama wants. The net result of my acquiring a hundred billion from my money tree would be the creation of many jobs. This would be a great way to boost employment in this tenuous economy. Unfortunately, the federal government does not possess one of my money trees (and I'm keeping mine so they never will). Thus in order to "create" these two million jobs building tunnels, filling potholes, sweeping dirt off the roads, or whatever else Obama has in mind, he needs to take that money from somewhere else. The money used to "create" all of these jobs, will come from two sources: the rich and borrowing (mainly from China). By hiking taxes on the rich, many jobs will be lost to make up for all of the new one's "created." When the rich have less money, there is less investment capital available for start up companies. When these start ups do not receive adequate financial backing, they cannot expand their operations or hire more people. When you tax the rich, money flows out of the markets, causing even further decreases in stock prices. Thus people's savings and retirement plans are hurt, they spend less, companies do not earn as much, and they need to let employees go. When the rich ain't as rich, they let go of their maids, their dog walkers, and those Wall Street guys taking a beating might decide they only need three secretaries rather than four. If instead you decide to borrow the money, you simply have to pay it back later. Thus, for the extra jobs "created" now, we lose jobs in the future (with interest). The government cannot spend its way out of a recession. This is the failed, antiquated idea of John Maynard Keynes, the early 20th century British economist who advocated increased deficit spending during times of recession in order to boost the economy. This is what FDR tried in the New Deal. At first, the economy expanded as more people became employed by his public works programs. However, the economy nosedived again in 1937 because of a lack of private investment capital (because the government took all of your money if you made any) and attempts to repay the ballooning fiscal deficit that paid for earlier New Deal programs. Thus stock prices did not regain their pre-depression values until the 1950's and the New Deal never really got us out of the Depression. This is the path down which the Democrats will take us... more government, less private innovation. If we actually wanted to stimulate the economy, we would reduce marginal tax rates across the board, thus increasing the incentive for people to work and produce. Such tax cuts under JFK led to an economic boom in the 60's which was stifled after years of liberalism, government expansion, excessive regulation and relative stagnation under Johnson, Nixon, and Carter. This trend was of course reversed with the massive tax cuts of Reagan that ushered in a new era of prosperity (even Clinton's tax hikes took us nowhere near pre-Reagan tax levels, allowing the economy to continue its expansion). Even the Bush tax cuts helped pull us out of the 9/11 recession as according to a Goldman Sachs economic model they resulted in significant GDP growth. Instead of following the successful past model of cuts in marginal tax rates to stimulate the economy, we give handouts to all (regardless if you actually pay taxes) and spend government money like it's going out of style. Now, if anybody truly believes that the government is more efficient than the private sector, I would like to challenge that person to a high stakes poker match because that person is clearly an imbecile who just doesn't get it....

Oh yea, and didn't the libs complain throughout the whole campaign cycle about those damned Republicans and their budget deficit? Just wait until we see what they do about deficits, considering that their "stimulus" will tack on at least 300 billion to the debt during Obama's first year alone although the far left (Paul Krugman of the New York Slimes and this year's winner of the Nobel "Commie" Prize in Economics) advocates an even bigger 600 billion dollar budget busting stimulus. And we also have to pay for the libs promises of free health care, free preschool, more government college tuition grants, etc etc on top if this stimulus. The dems promise the world but how will they pay for it?Funny how deficits are only a problem when those Republicans are in office....

Detroit Bailout Idiocy

Well the incoming Obama-Pelosi-Reid regime has already made clear its intent to lend a hand to America's failing "Big Three" auto companies. The Dems are contemplating rescue measures on the tune 0f 25-50 billion dollars to save these failing companies from bankruptcy. On the surface such a bailout of the auto industry would appear a continuation of the 700 billion dollar TARP plan to rescue America's crumbling financial institutions. However, these plans are fundamentally different.

The TARP plan was clearly a necessity to rescue America's entire financial system. A failure of the financial sector would create a cascade of negative effects that could lead to something like another Great Depression. When banks fail, lending stops, business activity slows, business expansion halts, jobs are lost...... the whole world goes to shits. So the financial bailout was not really a choice- and once these institutions become profitable again as they almost always have been, the taxpayer should get the majority of that money back, and may even end up making money on the deal. Such a positive turn around proves highly unlikely for the auto industry. America's auto companies are a joke - they can't make a decent automobile that Americans actually want to buy in significant numbers. The free market has spoken and people generally prefer German, Japanese, and other foreign cars. "Innovation" is not exactly thriving in Detroit. Toyota makes better cars, and many of those cars happen to be made right here in the USA, creating hundreds of thousands of solid middle class jobs right here at home. Another significant problem for American auto companies is the power of the commie United Autoworkers Union whose demands for benefits have overwhelmed American auto companies to the point where they could hardly turn a profit even if people actually wanted to buy their shitty cars. UAW workers receive about 80 bucks an hour on average in wages and benefits, while Toyota workers in America see about 48 an hour. Thus not only does Toyota make better cars, but they make em cheaper. If the Big Three want to pay their workers that much, fine by me. It's a free country (sort of) and they can pay their employees whatever the hell they want (actually it doesn't quite work that way because of the minimum wage and other pesky government controls on private enterprise). However, I'll be damned if as the taxpayer I have to subsidize these outrageous benefits for employees whose companies are failing. If the government is going to give a single penny in benefits to these failing companies, let the UAW tear up their labor contracts and let's start paying those employees what they're worth, not what their parasitic, commie unions demand. If the UAW thugs get one penny of my taxpayer dollars, I will be throw a hissy fit.

Now to be fair, the TARP plan will also be providing taxpayer dollars to fund the stratospheric bonuses of imbecile Wall Street executives whose reckless trading practices contributed significantly to the current sorry state of the economy (although the consensus is to blame everything on those "greedy bankers" while deflecting all blame from the Democrats and the Community Reinvestment Act that forced banks to give loans to people in low income areas that they could not afford in order to promote "home ownership"). It is outrageous for the taxpayers to be funding bonuses or even high salaries for these people. Unfortunately, however, we need a stable financial system and financial services happens to be one of the few industries that helps America retain its competitive edge in the global economy. And hopefully the plan won't end up being a "bailout" at all as these companies will return to profitability and pay the taxpayer back for their emergency loans. But those Wall Streeters should be hurting more than they are... and there should not be one penny of bonus dollar to any company executive receiving even a nickel of federal aid. I don't want to pay them bonuses for fucking up.

Now this Detroit bailout scheme really highlights the policy priorities of the left in this country. They want to throw billions and billions in government money to horribly mismanaged auto companies that are controlled largely by parasitic unions while at the same time punishing the evil "Big Oil" which happens to be one of the few profitable industries in this country right now. Instead of thanking "Big Oil" for providing us with that evil gasoline and home heating oil we demand (should we all live in caves by candlelight?), we not only deride them as wanting to destroy the environment (even though they're simply supplying a highly demanded product at a relatively low rate of marginal profit compared to that of other industries) but the Democrats want to create a special tax just for them. The "windfall profits tax" that would make Nancy Pelosi weak at the knees would force oil companies not only to pay their 35% corporate tax (one of the highest corporate tax rates in the world) but would add an additional tax just for them. So the liberals say, "Hey Oil Companies, you're making too much money right now and Barney Frank wants some to pay for welfare programs and tax cuts for people who don't pay taxes." What's next? If another industry is making too much money for the Democrats' comfort will the Democrats create a special tax for them? I love the left... let's punish the winners who are helping our economy grow to provide billions to the losers in Detroit... Capitalism ain't dead but it's dying....

Obama Anxiety

Well the Dow and the S&P 500 have plunged 10% in the two days since Obama became president. I thought prior to the election that Obama's economic policies would be disastrous for an already struggling economy. It would appear that Wall Street agrees with me. This drop signals the largest two day drop of the market since 1987. I can already feel "change in the air"...

Congratulations Barack Obama!

I want to wish Barack Obama and his supporters my sincerest congratulations on his victory over John McCain. The Obama campaign will go down as one of the most effectively run political operations in American history and the victory was well desserved. The McCain campaign will likely go down as one of the most incompetent. The truth is, however, that any Republican would have faced a daunting task of running for president following the highly unpopular President Bush, whose approval rating now hovers in the mid 20's. McCAin's ability to garner over 47% of the national popular vote as well as win many states shows that the Republican party and the right are alive and well in the USA. Furthermore, Democratic gains in the House and Senate proved significant, though hardly overwhelming, as the Democrats fell short of a 60 seat filibuster proof majority in the Senate. So all in all, it could have been a lot worse.
The Obama Administration and the Democratic Congress will signal the first time since 1994 that the Democrats controlled the presidency and both houses of Congress. Last time the Democrats had full control, the Clinton universal healthcare debacle ensued, leading to the massive Republican Congressional victories of 1994 and the so-called "Contract with America." Whether or not such an immediate backlash will occur against this Democratic monolith, time will tell. If Barack Obama can retain some of the centrism that helped him win the White House, it is likely that he and his party will lead the country for years to come given the current unpopularity of Republicans. If, however, and it worries me, the government takes a massive turn towards the left, a great conservative backlash will ensue in the 2010 Congressional elections, mark my words. This is still a conservative country though we wanted change during a time of crisis. That change is coming. May it be change for the better.

We can still win this thing!

A new Zogby poll has McCain leading 48-47 nationally! Though McCain continues to trail by an average of a few points nationally, I think he has a much better chance than the polls are predicting. Even polls that have Obama up handily have his support hovering around or even slightly below 50%. This election is largely a referendum on Barack Obama; therefore, if undecided voters have not come around to embrace him in this late stage of the game, it is highly likely that that those undecideds will break heavily towards John McCain. This proved a common trend in primary season, where Obama often underperformed his poll numbers against Hillary Clinton, either because of some sort of "Bradley Effect" where some white voters had second thoughts about voting for a black man or simply because voters had some anxiety about Obama's lack of experience or his extremely liberal voting record. Furthermore, the McCain campaign is finally formulating a more cohesive case against Barack Obama, highlighting his elite leftist worldview centered around "spreading around the wealth" and unconditional negotiations with terrorists and the despicable world leaders who provide them with material support. GET OUT AND VOTE! GET YOUR FRIENDS TO VOTE AND TOGETHER WE WILL TAKE DOWN THE OBAMA TAX, SPEND, AND REDISTRIBUTE MENACE.