LINK

LINK

Even more so under the current administration.

Seth

LINK

Seth

HT to huffpost

It is well known that Warren Buffett has been an outspoken supporter of the president. But in a recent CNBC call-in show he had a few things to say to him. The entire transcripts are here and here.  For the record, he is not dissing Obama and he does have some valid things to say to Republicans in this conversation.  But I am now detecting a pattern of the emerging disaffection with what Obama has done so far.  These moderates are saying, “we agree with what you want to do but you can’t do all of it right now…there are more urgent matters than doing your entire domestic agenda in the first 100 days.”  Buffett is particularly bothered by the common idea among the left and this administration that a crisis is something that you have to exploit for the sake of your agenda.

Here are some money quotes:

…I think that the Republicans have an obligation to regard this as an economic war and to realize you need one leader and, in general, support of that. But I think that the–I think that the Democrats–and I voted for Obama and I strongly support him, and I think he’s the right guy–but I think they should not use this–when they’re calling for unity on a question this important, they should not use it to roll the Republicans all.

AND

…job one is to win … the economic war, job two is to win the economic war, and job three. And you can’t expect people to unite behind you if you’re trying to jam a whole bunch of things down their throat. So I would absolutely say for the–for the interim, till we get this one solved, I would not be pushing a lot of things that are–… are contentious, and I also–I also would do no finger-pointing whatsoever. I … `George’–`the previous administration got us into this.’ Forget it. I mean, you know, the Navy made a mistake at Pearl Harbor and had too many ships there. But the idea that we’d spend our time after that, … pointing fingers at the Navy, we needed the Navy. So I would … no finger-pointing, no vengeance, none of that stuff. Just look forward.

AND

Well, I was going to mention to Joe that you’ve heard this comment recently from some Democrats recently that a `crisis is a terrible thing to waste.’…it’s an economic war, and–I don’t think anybody on December 7th would have said a `war is a terrible thing to waste, and therefore we’re going to try and ram through a whole bunch of things and–but we expect to–expect the other party to unite behind us on the–on the big problem.’ It’s just a mistake, I think, when you’ve got one overriding objective, to try and muddle it up with a bunch of other things.

I have expunged words  from the text to make it more readable.  Wherever I did that I replaced with three dots.

Seth

HT to AmericanThinker

END NOTE - Obama doesn’t get it…MSNBC said…”But he argued that a far-reaching overhaul of the nation’s education system is an economic imperative that can’t wait, despite the urgency of the financial crisis and other pressing issues.”

I have linked to John Mauldin before. In this week’s Outside the Box column he has a guest column with some very trenchant analysis.

LINK

Seth

PS If you are already depressed you may want to avoid reading.

I have made a number of posts the last few days of people who legitimately call themselves moderates who are having second thoughts about this administration.  And, for the record, I believe the number of moderates who are going to become angry in the weeks ahead is going to grow.  Maybe even Andrew Sullivan will come around.

Scott, during the election cycle, assured us that Obama is “left of center”.  And, in fact, I believe there was some anecdotal evidence to suggest that to be the truth.  (Some public comments, and some advisors on his campaign come to mind.)  Nevertheless, Steve and I argued back and forth with Scott that Obama is pretty far left and some concessions were made on both sides along the way…and I would say that we ended the discussion with some HOPE that maybe Scott was right.

And with that as the context I have to say this…I am EXTREMELY disappointed in his first 45 days in office.  EXTREMELY.  Perhaps I haven’t looked hard enough or perhaps I have looked in all the wrong places…but I have not seen the slightest moderate impulse from Obama.  (With the possible exception of foreign policy.)

Which brings me to my main point.  What does it mean to be a moderate?  And why is their a growing unease among them about Obama’s start?

Here is my analysis.  (This is all over-simplified to make my point.)

There are really two kinds of moderates.  Conservative Moderates (right-of-center) and Liberal Moderates (left-of-center).  They are really two different groups.  Generally speaking, conservative moderates are fiscal conservatives who are socially progressive (and therefore part ways with right-conservatives on social issues).  Liberal moderates are fiscal conservatives who are socially progressive (and therefore part ways with liberals on economics issues.)

So, of the four groups–left liberals, center liberals, center conservatives, and right conservatives–3 OF THEM ARE FISCAL CONSERVATIVES.  This is VERY TELLING.

As I said…I realize that this is a little simplistic so let me grant a little complexity.  Both of the center groups may in fact be for higher taxes or minimum wages or other anti-Austrian economic principles.

So, in what sense are these three groups fiscally conservative.  For the purposes of my post…by fiscally conservative here is what I mean…DRUM ROLL PLEASE BECAUSE THIS IS MY MAIN POINT…fiscal conservatives are people who believe that Business and Free Enterprise and Entrepreneurship are the engine of the American economy.  In other words, when it comes to the economic recovery…they don’t trust in Government…they trust in people and private sector organizations.  People and organizations who put their fortunes and capital at risk to start new ventures, invent new gadgets, produce new whatzits, propose new ideas, expand the plant’s capacity, supply a need and otherwise fill in what’s lacking.  It is predicated on two almost axiomatic principles.  One, is that the government doesn’t produce anything and, two, the government can’t employ everyone, even if Obama wants to try.  So, in order to fulfill it’s good intentions the government has to TAX (confiscate people’s property through the threat of imprisonment) which removes money from the economy and use that to hire more employees who actually don’t produce anything.

My hope and the hope of moderates everywhere was that there would be some indication at some level that Obama realizes this.  We were hoping to detect some impulse somewhere in his policy-making that understands that in the end that there is only so much hiring that the government can do (whether through government jobs or temporary make-work) and that it is up to the private sector to do the real hiring of real people doing real jobs providing real goods or services.

In his time in office Obama has demonstrated ALMOST NONE of that impulse.  Certainly nothing that will make a real difference.  This is made VERY clear through everything he has done but mostly through the $1,000,000,000,000 spendulus bill (which Republicans were right to say lacked enough stimulative provisions) and now his $3,500,000,000,000 budget proposal.  The budget proposal. particularly is what is beginning to alarm people.  There is NO SIGN of compromise in that bill.  There is absolutely NO INDICATION in the bill that Obama believes that business is the key to the recovery.  Nothing.  Nil.  Nada. Nyet.  Zip.

Let’s make my point personal.  Do you work?  Do you work for the government or a business?  What about most of your friends…government or business?  Of those who you know who have entered the unemployment rolls…did they used to work for government or business?  (I know the answer.  Government employees never lose their jobs…even when they are incompetent and there is a recession.)  Are they more likely to find a job working for a business or the government?

Everything Obama has done screams, “In Government We Trust.”  He could have done SO MUCH to stimulate this ecomomy and he is missing his opportunity.  He could have temporarily suspended payroll taxes (which has the double effect of putting more money into consumers hands and freeing up business capital at the same time).  He could have cut corporate tax rates which are the highest in the world.  He could have suspended some of his more progressive programs until the economy recovers and could absorb them easier.  For example, he could have suspended the HUGE TAX increase he is about to foist on everyone in America through his Energy Cap and Trade policy.  He could have avoided putting a cap on charitable giving (still part of the private sector economy who unlike government actually will do some good in these times), he could avoid tinkering with the home mortgage deduction when the housing industry is in a shambles, he could have avoided taxing the wealthiest people in America who need to spend their money to build new business or expand existing ones.  He could have avoided demonizing whole sectors of our economy (banking and healthcare come to mind–not all of them behaved wrongly) and demonstrated speech and behavior that didn’t demonize America’s most successful people and businesses.  He could have asked unions to concede more to companies in these difficult times rather than promising a nationwide push for unionization of more industries across every state in the union.

But now I know. Obama can’t have done any of these things because at his core he doesn’t believe in them.  In other words, he is not a moderate.  AND he has to do the political payback to all of those exreme leftists who got him elected which he is doing in spades.  AND he has to seize the opportunity of this downturn to accomplish as much of the leftist wish-list as he can.

Do you think I am wrong.  For you Obama supporters out there (Scott, are you listening) could you please present to me 3 things that Obama has done in the last 50 days that are “”business friendly”.  Only 3.  Not 10.  Not 50.  Just 3.  Leave a comment.

Now…here is the upside of all of this.  Obama will either have to shift-to-the-center (which is good for the country) or he will keep us in recession/depression long enough that Republicans will sweep the 2010 elections (which will be good for the country).   And then he might just become a decent president.

Do you agree?  If not, tell me please, what has been moderate about Obama so far?

Seth

PS.   One closing thought.  I will start with where I began.  I have said in earlier posts that the Daily Kos has their head in the sand.  What I say in this post is WHAT THEY DON’T GET.  Remember the 3 of 4 segments I mentioned earlier in the post that all hold some form of fiscal conservatism in common.  The 2 center groups and the right group.  TOGETHER these three groups EASILY represent enough voters to defeat ANY democrat.  The Daily Kos thinks we are leftist country.  But at best we are a left-moderate-to-right-moderate country.  True progressives account for less than 30% of the voting electorate.  I hope Kos and other lefties keep NOT getting this.  It will help us in 2010.

Jim Cramer…host of CNBC’s Mad Money had a RANT (sorry I couldn’t find the exact link…here is the link to Mad Money) the other day on his show where he argued that Obama’s proposals were killing the stock market.

As a result, O’s press secretary Robert Gibb’s dissed him like everyone else who doesn’t treat Obama like the Messiah.

Cramer has now published a rebuttal.  Very reasonable response.  Read the whole thing.

Seth

He says what I fear.  One good thing though…

Noteworthy up here on Wall Street, a great many Obama supporters — especially hedge-fund types who voted for “change” — are becoming disillusioned with the performances of Obama and Treasury man Geithner.

Great post.  Read it.

Seth

HT to AmericanThinker

I have quoted John Mauldin before.  He is a very non-partisan (yet pro-markets) investment analyst who publishes a first rate email newsletter.  Here are his recent words reflecting on the Obama policies.

A Few Thoughts on Taxes and Budgets
This week saw President Obama give us a budget with a projected deficit of $1.75 trillion dollars, and a massive tax increase on the “wealthy.” But hidden in the details was an even larger tax increase on everyone. Obama wants to create a cap-and-trade program for carbon emissions. This is expected to generate $79 billion in 2012, $237 billion by 2014, and grow to $646 billion by 2019. These will be payments by energy (primarily utility) companies to the government. That will cause utilities to have to raise the prices they charge customers for energy. Such a level of taxation is eventually 4-5% of total US GDP. That is not small potatoes. And since the wealthy do not use all that much more power than the rest of us, it will affect the lower incomes disproportionately.
It will take money out of consumers’ pockets and transfer it to the government. You can call it cap-and-trade, but it is a tax. And a huge one. Anything that will take 4% of GDP away from consumer spending is not business friendly. And by driving the cost of energy up, it will drive high-energy-using businesses away from the US to developing countries where energy is cheaper. It will make it even harder for people to save money and drive up costs for the elderly and retired. But it will make the environmental lobby happy.
Further, Obama’s accounting magicians assume that the US economy is going to grow by 1.2% this year and 3.2% next year and at a blistering 4% pace after that. Since that is not likely to happen, the deficits will be far worse than projected. Since large taxpayers can see the tax increase coming, it is likely that they will shift behavior, and tax revenues will be less than projected.
Several analysts have noted that you could tax 100% of the income of the “wealthy” and still not balance this budget. While the bottom 95% may not see their taxes rise this year, you can bet they will see them rise in the future. While the US can run multi-trillion-dollar deficits for a few years, it cannot run them for long without serious consequences for interest rates and inflation. And when our entitlement program problems hit in the middle of the next decade? You can count on higher taxes.
Just as a fragile economy is ready to pick itself back up, a large series of tax increases will help slow it down and may push us back into recession.

To read his whole newsletter click here.

Seth

George Will says that this report, published by the US Governments Accountability Office, a division of the department of the Treasury, says that America’s ACTUAL deficit is not the widely reported 10,000,000,000,000 but rather 54,000,000,000,000.

This is if you account for the governments unfunded liabilities for Social Security and Medicare.  In case you think that’s a fudge…that is the way every business is required to reports liabilities.  Just because a liability isn’t due for 30 years doesn’t mean it’s not a liability.

To read the whole George Will article click HERE.  (Login to WaPo is required.)

Seth

Robert Samuelson, moderate economics op-ed editorialist for the Washington Post opines in today’s paper that the stimulus is mostly just a collosal waste of money and a huge, unexamined advancement of the long-time liberal wishlists not to mention political payback to all of Obama’s political supporters.  (Although that is my way of interpreting the result).

HT to AmericanThinker.com

Seth

Ben Stein is known for his libertarian/right wing political views.  What many may not know is that he has an undergraduate degree in economics and that his father was a famous economist who advised President Nixon. He seems to have surprised some people by coming out in favor of a bailout of the automobile industry as well as a large fiscal stimulus in this column.

I am certain that he is right about fiscal stimulus.  And I am coming around to agree with him on a bailout of the auto industry.  I am certain of this, as the economy becomes flooded with cheap dollars, the value of the dollar will drop against other currencies and foreign investment is going to shrink dramatically.  It’s a good time to buy gold.

Steve

A few months ago Scott posted the following:

Good People: This Email is a little long. Written by a Professor of Economics at the University of Georgia, it is very informative. miles

The wealthy pay most of the taxes, so it should be no surprised that they get a larger percentage of the tax cut total back! It is only fair.

——

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.

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

My friend TNT got this same email from a friend and replied as follows. I thought this was good:

Under the Obama as Bartender plan, instead of reducing the cost of all the beers to $80, he would keep it at $100 (he would really like to increase this amount but knows that he can’t in the current economic climate so he keeps things the same). He does however change the way he charges the 10 guys as follows:

2 of the first four men that didn’t pay anything before would receive $3 each for drinking their beers.

The next 2 that also didn’t pay anything before would would receive $1 each for drinking their beers.

The fifth guy and sixth guy would now pay nothing.

The seventh would still pay $7.

The eighth guy would pay $15.

The ninth guy would pay $21.

The tenth guy would pay $65.

The tenth guy then goes to another bar (we’ll call it China) where he can drink cheaper because

1) they don’t have to pay for other people’s drinks

2) the drinks are cheaper because the bar owner doesn’t waste all of his money on non-sense spending

When that hapens, the first 4 guys are left wondering why they don’t get paid to drink beer anymore. They then complain to the bartender that he promised them money to drink his beer. He throws his hands up and says “Sorry, I really thought that payment plan for you guys would work. By the way, guys 7-9 now have to pick up more of the tab now that the tenth guy left. And the rest of you guys need to get a job so you can pay for at least some of yours.” They all riot and the bar is torn to shreds. The bar that the tenth guy went to (remember, its name was China) takes over Obama’s bar ( they got it for a good price too since they were the majority debt holders of the Obama bar anyway).

Just to play both sides fairly, the McSame plan would be as follows:

He would still lower the costs of the beers to $80, even though it still costs him $100 or more to serve them, the difference of which he borrows from the other bars down the street, mostly the China bar. Every one would pay a little less for their beers as they did in the original story.

The story still ends with the tenth guy taking his business to the China bar and the China bar taking over McSame’s bar. The only difference is the bar didn’t get destroyed in the process. I’m not sure that is all that much better, but I’d rather NOT have to spend my nights posting watch with a shotgun on my roof if I didn’t have to.

All the while there are 3 other bartenders out there that could actually fix the problems the bar is having, but most of the patrons are too drunk and think they only have a choice between McSame and Nobama.

I wonder which dialect of Chinese I should try to learn first?

TNT

Seth

Greg Mankiw gives very sensible advice to the President-Elect:

• Listen to your economists
• Embrace some Republican Ideas
• Pay attention to the government’s budget constraints
• Recognize your past mistakes

Read the whole thing for the particulars.

Steve

LINK

Seth

This letter by Steven Horwitz, Professor of Economics at St. Lawrence University, beautifully rebuts the notion that the current economic meltdown was a failure of free-markets.  He indicts five government interventions in the market as being largely culpable:

• Fannie Mae and Freddie Mac insured loans that would never have happened in a truly free-market while forcing banks to underwrite loans to “distressed areas” that never would have gotten approved using traditional underwriting standards.
• With the  1994 renewal and revision of the Community Reinvestment Act, “Congress explicitly directed Fannie and Freddie to expand their lending to borrowers with marginal credit as a way of expanding homeownership.”
• The worst hit areas in the country are characterized by significant land use regulations which drove up the prices of homes and contributed to risky borrowing.
• The Federal Reserve, “nominally private but granted enormous monopoly” powers to regulate the currency, drove down interest rates and fueled the borrowing binge.
• Finally, in 2004 and 2005, as penance for an accounting scandal, Fannie and Freddie agreed to expand their lending to low income customers.  “Both agreed to acquire greater amounts of subprime and Alt-A loans, sending the green light to banks to originate them. From 2003 [corrected on 10/19/08] to 2006, the percentage of loans in those riskier categories grew from 8% to 20% of all US mortgage originations“

Horwitz letter does not deny or mitigate the place that “greed” played in this crisis.  Indeed, profit seeking and maximization are like the air we breathe or gravity, ever-present and unavoidable.  He opines:

No free market economist thinks “greed is always good.” What we think is good are institutions that play to the self-interest of private actors by rewarding them for serving the public, not just themselves. We believe that’s what genuinely free markets do. Market exchanges are mutually beneficial. When the law messes up by either poorly defining the rules of the game or trying to override them through regulation, self-interested behavior is no longer economically mutually beneficial. The private sector then profits by serving narrow political ends rather than serving the public. In such cases, greed leads to bad consequences. But it’s bad not because it’s greed/self-interest rather because the institutional context within which it operates channels self-interest in socially unproductive ways.

Near the end of the letter Horwitz states:

We can disagree in good faith about what to do next, and we can disagree in good faith about the degree to which government intervention caused the problems, but blaming a non-existent free market for a crisis that clearly was to some extent the result of government’s extensive interventions in that market is unfair. So if I have persuaded you of nothing else, I hope deeply that I have persuaded you of that.

In the end, all I can ask of you is that you continue to think this through. Explaining this crisis by greed won’t get you far as greed, like gravity, is a constant in our world. Explaining it as a failure of free markets faces the obvious truth that these markets were far from free of government. Consider that you may be mistaken. Consider that perhaps government intervention, not free markets, caused profit-seekers to undertake activities that harmed the economy. Consider that government intervention might have led banks and other organizations to take on risks that they never should have. Consider that government central banks are the only organizations capable of fueling this fire with excess credit. And consider that various regulations might have forced banks into bad loans and artificially pushed up home prices. Lastly, consider that private sector actors are quite happy to support such intervention and regulation because it is profitable.

Horwitz also superbly explains why industry often supports regulatory regimes (it reduces competition) and often tend to “capture” the regulatory mechanisms that are supposed to be overseeing their activities. Read the whole thing.

Steve

HT to Don at Cafe Hayek