Unemployment, Obama's rosy outlook--

Barack Obama's has chosen his favorite economists, the ones who unwaveringly support his plans. A number of Obama administration economists have quietly shared their trepidation, and others in the CBO have simply stated that he is wrong. But just as our President has employed selective listening in the past, he has done again. Team Obama believes that unemployment will top out at 9%. The latest jobs report estimates 8.6% unemployment, with no job growth in sight. The problem is that Barack's government heavy team, is filled with cronies in awe of of his persona. Here is a great take from WSJ blogs:

http://blogs.wsj.com/deals/2009/04/03/mean-street-the-coming-obama-jobs-disaster/?mod=yahoo_hs

Obama has avoided blame for nearly every one of his other miscues, but if his forcasts are as far off as they have the potential to be, the fallout will be unavoidable.

AIG Bonus Fallout

Congress, the President, the attorney generals of ny and conn, and the media humiliated and disgraced bonus recipients, no matter what their involvement was.

Here is the fallout: http://www.nytimes.com/2009/03/25/opinion/25desantis.html?pagewanted=1&_r=1

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.

Slightly off-subject - great article

Here is an excellent and brief article from The Business Insider on Fed Chairman Bernanke's policy stance:

http://www.businessinsider.com/ben-bernanke-is-still-stuck-in-the-1930s-2009-3

Who is John Galt?

A brief respite from the traditional critique:

Over the past few months, the government has clearly asserted itself as a tremendous force in the economy. Intervention has risen and our President has advocated various forms of socialism. The response throughout much of the population has been growing frustration and anger. Interestingly, one the most acclaimed and well-written novels of all time has seen a serious up-tick in sales. According to the Ayn Rand Institute, sales of Atlas Shrugged have "almost tripled over the first seven weeks of this year compared with sales for the same period in 2008."

It is an incredible novel, and I highly recommended reading it .

For more information:

http://freakonomics.blogs.nytimes.com/2009/03/09/the-atlas-shrugged-index/

For Purchase:

http://www.amazon.com/Atlas-Shrugged-Ayn-Rand/dp/0451191145

Barack is pro-choice, just not when it comes to schools

Barack Obama recieved much of his education at private schools, which was made possible thorugh generous scholarships. D.C. schools are reknowned for being some of the worst in the country, and the President would not dare to send his children there. However, he and democrats in Congress are pushing to eliminate a successful school voucher program, that has allowed thousands of students an escape.

For more information:

http://www.cato.org/pub_display.php?pub_id=10008

http://online.wsj.com/article/SB123604286020215187.html

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/24/AR2009022403815.html

Barack and Brown- an unhappy couple

I believe that our relationship with our neighbors across the pond is important maintain. It has allowed for greater connectivity in financial centers and will help to repair our credibility in world relations.

Our President has promised to repair our image in the world and improve communication with other countries. Recently, British PM Gordon Brown came for his first visit to the United States. Ideologically, Obama and Brown are very similar, and Brown has been supportive and respectful of Obama in a number of ways. However, this respect has certainly not been mutual.

President Obama removed Churchill's bust from the White House and offered it back to the Brits, and even was incredibly insulting during Brown's visit. Obama cancelled Brown's indoor press conference due to snow, and senselessly gave Brown a box of 25 dvds as a gift. Thats right, our president gave a box dvds to another country's leader. To put this in perspective, Brown gave Obama a first edition biography of Winston Churchill and a historicallly valuable artifact from the HMS Gannet, a British sloop.

Pretty sad, and pretty classless on Obama's part. Especially, because this has sent a clear and unfortunate message to the British.

Article on the fiasco in the UK with a little speculation: http://beltwayblips.dailyradar.com/stor /was_lady_macbeth_behind_barack_obama_s_snub_of_gordon/

http://blogs.telegraph.co.uk/iain_martin/blog/2009/03/04/president_barack_obama_just_plain_rude_to_britain_dont_call_us_in_future

Time for the Times

While meandering the web and world news, I came upon a succinct piece by Fed President William Poole. It is not his most eloquent article, but he hits the nail on the head.

Found in the New York Times: http://www.nytimes.com/2009/03/01/opinion/01poole.html?_r=1&scp=1&sq=poole&st=cse

Government is Not the Answer

I woke up in a cold sweat, head pounding, and mind racing. Democrats claim that they felt powerless for the past 8 years, and I often did too. Reckless spending and bureaucratic cronyism were far too abound. However, the majority of the problem stemmed from action abroad and inaction at home. I have learned I can deal with inaction. What stirred my thinking was a fear that I often exaggerated in public, but hadn't truly realized.

I expected President Obama to moderate when elected, I expected troops to be brought home, Guantanamo to close, and international realtions to evolve. Some of those potential changes were encouraging, it was time to reassert dominance through development rather than intrusion. It was time to shed to the strict social code that the neo-conservative movement had encouraged.

What I did not expect from President Obama was his sheer arrogance and ineptitude. But most offensively and concerning, his embrace of altruism. I can deal with his political pandering and rosy "lies" of change. What I cannot deal with is his embrace of sacrificial bull crap.

We are America. We were founded on the ideals of individualism and have succeeded as a meritocracy. We offer freedom to succeed, freedom to fail, and freedom of thought. I will not sacrifice my success for the benefit of another, by demand. I will give to charity, I will give back to the community, but I will not be asked to give back by force, and I expect no one to give to me. What have I done to deserve "benefits" and what has anyone else done to deserve mine. We are a nation that has strayed from the call of accountability and embraced entitlement, but not fully on our own accord. Populism reigns rampant, but our President has sanctioned it. He has made it honorable to beg and dishonorable to produce. He has granted authority to the looters and made wealth the stem of evil.

He wishes to increase taxes on the most productive members of our society, he claims they have enough to spare.

I claim, it is their decision to give.

He wants to tax investment, because the wealthy are benefiting.

I claim its their right.

He claims the poor are powerless.

I say its by choice.

We are threatened by a force that has been enabled. We have have enabled it.
But I tell you this: I will sleep at night, I will live my life, because freedom will prevail. The looters of our world will be dispelled, and success will cease to be condemned. I know this because I will no longer enable.

I ask you this: Will you allow yourself to fall victim to altruism, or will you stand with me?

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.

Barack is confused

So, a couple nights ago I, like usual, decided I would watch the democratic debate to see if anything was worthwhile. (It was not.) My favorite portion of the debate came when the traditionally cottage cheese soft, Charles Gibson began asking about capital gains. Barack Obama had previously stated that he would raise the capital-gains tax to 28% from its current level of 15%. Gibson then asked, "But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent,” Mr. Gibson said. “And George Bush has taken it down to 15 percent. And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?”

Mr. Obama's response reflected his complete and utter incompetence. He responded by stating the need "finance health care for Americans who currently don't have it”

Hold up-- Does he not understand that revenue went up when the capital gains tax was reduced to 15%. That means less of a tax burden on tax payers and greater revenue. I don't think that he understands the concept of the laffer curve or common sense in general.

If he wanted to attack the statistic, he could. It is a pretty simple argument to suggest that changes in capital gains rates drove an increase in the realization of investment profits, but he didn't even make an effort. It concerns me that he seems so unwilling to invest the necessary time to understand the concepts.

The Tax Burden- Obama versus Barstool Economics

Well, I would like to tackle Barack Obama stance on the Federal Income Tax. Mr. Obama claims that the tax burden is currently to hard on the middle and lower classes and the Bush Tax Cuts were unfair.

Here is a blurb from Obama's Campaign site:
Tax Cuts for Wealthy Instead of Middle Class: The Bush tax cuts give those who earn over $1 million dollars a tax cut nearly 160 times greater than that received by middle-income Americans

What is trully comical, is that the percentage cut actually favored by the the lower classes, the dollar amount was simply less because they earn less. Please allow me to introduce my favorite story: (I was introduced to this by the blog of Harvard Economist Greg Mankiw, my apologies to the original author.)

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve."Since you are all such good customers", he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his "fair share?"They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings."I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, "but he got $10!""Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I!""That's true!!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!""Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"The nine men surrounded the tenth and beat him up.The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

Admittedly, this analogy is not perfect, but is a fantastic way of bringing our tax system to life. And the final paragraph makes light of an important issue, our tax policies are driving corporations and individuals away, and that can and will have a negative impact.

Obama - 0
Reality and Barstool Economics - 1

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.