Contracts aren't important in Obamaland

In today's news, Barack Obama threw a hissy fit over the AIG bonuses. We already know that our President is not a big fan of executive compensation and bonuses, but today he flipped his lid. AIG is planning to pay out over 165 million dollars in bonuses, while receiving nearly 150 billion dollars in government funds. AIG is a quasi-private/public institution that only exists in it current form because of bail-out dollars. Our President is upset that this government funded "company" is paying out $165 million dollars in bonuses. In fact, Obama has claimed that he will stop this "reckless and greedy" company from paying out bonuses. There is only one, sorta kinda big problem with Obama's statement. The bonuses are contractually agreed upon. Or in other words, AIG is legally bound to pay out bonuses that were established before financial troubles occurred. Barack is aware of this, but vows to stop them anyways. Realistically, who knows whether the bonuses will help retain the remaining talent at AIG, or simply waste millions of dollars. At the end of the day, contracts are legally binding, and Barack doesn't seem to care.

Barack Obama's blatant disregard for legally binding contracts shouldn't come as a surprise. His 275 billion dollar housing bailout calls for judges to rewrite loans if lenders refuse to rewrite loan terms, clearly ignoring the legal power of contracts. Barack's refusal to respect contractual obligations always stems from the same motive; economic equality. He doesn't care if bonuses are awarded to productive employees, if AIG is contractually bound to pay them, or if a lender believes a loan can be repaid at its agreed upon rate, Barack wants economic equality, and for that he will sacrifice legal equality.

Before the government "invested" billions of our dollars they should have read the fine print. They should have seen the guarantees and obligations. Then again, maybe they did and just didn't care.

Reality Check

Well, I have been gone for practically an eternity. Now it is apparent that my previous posts were an unrestrained exercise in futility, Barack Obama is our president. I wish our president the best of luck and sincerely hope that this is a prosperous time for the United States. I haven't given my thoughts on credit failings, financial troubles, economic contraction, or the already enacted stimuli, but now I have been pushed to act.

Currenly, the Senate is debating a 900 billion dollar "stimulus package", backed by the Obama administration. First of all, this 900 billion dollars is NOT a stimulus. The majority of the bill focuses over 600 billion dollars on new spending, and the balance is doled out in poorly structured tax cuts.

The 600 billion dollars in spending includes tremendous amounts of pork, but the stimulus itself comes in the form of infrastructure projects. Hmmm, this sounds eerily familiar. In the 1930's the New Deal was aimed at doing the exact same thing. Ready for this..... It didn't work, not in the least bit. Unemployment stayed at almost exactly the same levels from the passage of the New Deal to start of World War II. Decades of economic trial and error have proven that Keynesian fiscal stimuli are ineffective. Furthermore, the projects proposed in the Obama stimulus, that he touts as so urgent, will not come to fruition or even start for another few years. Friedman, the economist not the populist writer, concluded that government fiscal stimulus," hampered recovery from the contraction, prolonged and added to unemployment and set the stage for ever more intrusive and costly government."

So, looking beyond the pork and the waste of the bill, its premise is entirely flawed. Government spending will not create jobs and will not increase consumer spending. Consumers base their spending patterns on long-term income projections. Neither government spending nor the tax rebate checks included within the bill will positively change long-term income projections.

Now, for what truly angers me. I was pleased that House Republicans unanimously opposed this bogus piece of legislation and that ten Democrats also voted against it, but the bil still passed the House and is moving on to the Senate. Today, our President, who did not consult the opposition once in the construction of the bill, encouraged the bill's opponents to put their modest differences aside. Wait, modest differences? The implementation or timing of a small tax cut would be a modest difference, but unified opposition to a bill that doesn't accomplish any real stimulus and costs the American tax payer 900 billion dollars, I would not call that a modest difference.

Cal it arrogance, simple naivete, or even stupidity, but President Obama needs a reality check.

Living Wage = Death to American Competition

Taken from a remarkably inaccurate site, the official Obama website, as a plan to combat poverty : Create a Living Wage: Obama will raise the minimum wage and index it to inflation to make sure that full-time workers can earn a living wage that allows them to raise their families and pay for basic needs such as food, transportation, and housing.

Looking beyond the fact that his plan is socialist in nature, I want to assess the impact it would have on American competition and the sad truth that it would not really benfit anyone.

If the Unites States were to implement a so-called "living wage" it would further chase away domestic and foriegn investment. Corporations are already faced with tremendous challenges in the U.S. and are willing to examine alternative solutions (ie outsourcing and moving operations) At some point, as the millions and millions continue to ring up, companies will leave. It will become impossible to compete with both freer market countries of the far east and the eastern bloc. Thus, labor market demand will fall increasing unemployment in posistions that are most easily outsourced, HURTING the people that Barack so dearly wants to help.

Ethanol and Barack - The lie of the unintelligent

All you seem to hear about energy these days, is how ethanol is going to save the day followed my immeasurable cheering, and then somewhere in the background the sound of cash registers and economists calculating imminent inflation increases. Don't get me wrong ethanol itself is not a bad concept, but the use of corn based ethanol is for the lack of a better word, unintelligent.

What certain politicians fail to mention is that corn based ethanol is a net negative, and we have imposed a hefty tariff (54 cents a gallon) against Brazil's significantly cheaper sugar-based ethanol. Furthermore, the process of producing ethanol from corn actually wastes more fossil fuels than it saves. And even more interestingly, corn farming is expected to increase 10%, eliminating CO2 reducing forests. However, sugar-based ethanol is much more efficient to produce and results in less oil dependence. And guess what? We don't have to subsidize it. So to summarize, ethanol costs us in subsidies, inflation, and potential saving, and if that was not enough ethanol hurts the environment.

Now for the kicker, last year the Bush Administration attempted to remove the Ethanol Tariff, but it was blocked by a few mid-western Senators. And the leader of these senators..... One Barack Obama. But why stop there, Senator Obama is also in favor of farm subsidies , especially for corn farmers. So, Senator Obama supports protectionist domestic ethanol production , but wait, there is more . Not only does he support domestic ethanol production, but he supports reducing CO2 emissions 80% by 2030 with a cap and trade policy and stricter emissions standards. Hmmm, he is in favor of oil using, pollution increasing and consumer killing ethanol, but he also wishes to reduce CO2 emmisions and stop "Global Warming." Interesting strategy he's got.

The definition of stupid: "lacking or marked by lack of intellectual acuity" - You decide.

Barack's Protectionist Plans

It is 2008 and the Populist voices continue to garner support. In this election it has found a strong ally in the phenomenon that is Barack Obama. Over and over, Barack Obama has criticized our current free trade policies and has claimed to advocate for the American worker, and I mean that singularly. Because protectionism does just that, it gives short term aid to the few at the expense of the many. The utilization of comparitive advantage has been proven to benefit the United States. All we have to do is look at NAFTA, which Obama has promised to repeal. Since NAFTA was ratified ten years ago, The U.S. economy has added 18 million new jobs, manufacturing output has increased by 41% (opposed to 31% in the previous ten years), and trade with Mexico has tripled.

It hard to understand why politicians such as Obama continue to advocate a strange breed of mercantilism. Will someone please get this guy some coffee because he needs to wake up to the real world, a world where competition reigns supreme, a world where America thrives under competition instead of shirking away from it.

When will candidates stop playing union games and stop advocating a dying breed? Our economy is streamlining and consumers are reaping the rewards of free trade and foreign production, yet the story of the unemployed North Carolina textile worker still captivates many, but I ask you this, who will speak for the consumer, the Wal-mart shopper, the poorest of the poor, when protectionism strips dollars away? A lot less elegant than the protectionist story, but a lot bigger impact.