Recommended: The Stimulus Evidence One Year On

I recommend Robert Barro's article The Stimulus Evidence One Year On in today's Wall Street Journal. Barro is a professor of economics at Harvard University and a senior fellow at Stanford University's Hoover Institution, so while some people might not like what he has to say, he has credentials and data to support his arguments, which is more than most public opinions on this matter are based on.

The article is long and a bit technical, so for those not inclined to wade through the detail his conclusion is summed up in his last paragraph:

Thus, viewed over five years, the fiscal stimulus package is a way to get an extra $600 billion of public spending at the cost of $900 billion in private expenditure. This is a bad deal.

This conclusion is not particularly surprising, even without understanding the technical aspects of the economics behind it.

When government spends money, that money has to come (eventually, at least) from taxes on individuals and corporations, and that taxed money is therefore not available for corporations to invest in new equipment and factories and research, or for individuals to spend for consumer products. Of course the government spends it instead of the corporations or individuals, but only after taking out it's "administrative costs" (paying the hundreds of thousands of government employees involved in collecting, tracking, allocating, spending, and monitoring the process, maintaining the thousands of government buildings, etc.)). That "administrative cost" is about 20% these days, or one dollar out over every five. So it's not surprising that the "government spending" so beloved of politicians is inherently less effective than private spending.

Recommended: The Presidents New Health Care Proposal

An interesting analysis of the possible strategies (or lack of strategy) behind the President's Health care summit later this week, and his just-published health care proposal, can be found in the blog posting The President's New Health Care Proposal on KeithHennessey.com.

Health Care version 2.0

As promised, the White House has today posted their revised health care proposal. It can be found here, though readers will find it is long on promises but short on details - more of a campaign pitch then a legislative proposal. The CBO (Congressional Budget Office) says there isn't enough detail in the new plan to make a cost estimate for it.

Still, it does include some improvements. The outrageous special deal for unions on so-called "Cadillac" health care plans has been extended to everyone. The Nebraska Medicare "bribe" has been extended to all states (the good is that it is no longer a special deal just for Nebraska; the bad is that it adds enormous additional expense).

It still doesn't deal with the tort reform needed to control the sky high price of malpractice insurance that drives so much expensive defensive medicine. It still doesn't change the fee-for-service incentives that drive unnecessary procedures. It doesn't address at all the fact that Medicare, as currently constituted, will bankrupt the government in a decade or so - in fact it expands Medicare, and increases the Medicare costs.

There still seems to be little in it that will really bend down the health care cost curve. It adds yet more regulatory bureaucracy, expanding the government even more. And the claim that all this will happen and 31 million more people will get insured, many with government subsidies, and yet it simply won't cost us anything in the long run is pretty hard to believe.

Much will depend on how willing President Obama really is to move back to the center on this bill, and settle for a smaller bill that includes the more widely-supported parts. It also depends on how willing the Democratic Congress is to accept a smaller, less liberal bill. And it may also depend on whether Republicans decide their best strategy is to continue to oppose it. It is, after all, still an amalgam of the House and Senate bills that the Democrats put together after excluding Republicans entirely from the drafting sessions - as near as I can tell it does not contain a single one of the ideas that the Republicans have offered during the recent floor debates. So Republicans might well see this as simply a warmed-over version of the same bills they have opposed all along, with the same central fatal flaw....it adds about a trillion dollars of additional expense to a federal deficit that is already wildly out of control.

Recommended: Excuses for Obama's Failure to Lead

Charles Krauthammer has an interesting piece in today's Washington Post entitled Excuses for Obama's Failure to Lead.
In it he argues that the federal system is in fact operating as it should, and the Senate in particular is operating to prevent legislation that is too far left for the country, just as it has in previous administrations blocked legislation that is too far right for the voters. Krauthammer argues that the current problems are not rooted in the system, but rather in President Obama's failure to lead effectively.

I certainly have the feeling that President Obama is better at campaigning than at governing. He makes great speeches, and says all the right things, but in fact when it comes to governing he seems to have outsourced most legislative details to Congress, with little White House guidance and no visible attempts to forge working coalitions across ideologies or party lines. The problem may be that, good as he is on the campaign trail, he simply lacks any experience governing. In that respect, former governors seem to make better presidents, because they have actually had to balance a budget and manage a legislative body before they got to the presidency, something entirely foreign to President Obama before he took office.

Recommended: Public sector: An anchor as we sink

I recommend Katherine Kersten's article Public sector: An anchor as we sink, in the Feb 14, 2010, issue of the Minneapolis Star Tribune. I found some of the statistics startling.

The federal government has added almost 9,000 jobs a month, and the federal payroll has spiked a whopping 10.5 percent, since the current recession began in December 2007, according to data from the Bureau of Labor Statistics.

and

The average federal worker now earns $71,206, compared with $40,331 in the private sector, according to an analysis by USA Today. "Federal employees making salaries of $100,000 or more jumped from 14 percent to 19 percent of civil servants during the recession's first 18 months," the paper reports -- and that's before overtime pay and bonuses are counted.

and

New data from the Bureau of Labor Statistics show that, for the first time in history, a majority of American union members -- 52 percent -- now work for the government. James Sherk of the Heritage Foundation points out that "three times more union members now work in the Post Office than in the auto industry."

Recommended: How To Tame The Budget Deficit

Fareed Zakaria, on his Global Public Square program on CNN this week, mentioned the article How To Tame The Budget Deficit in the Feb 4, 2010 issue of Time magazine. He is right. It is a good article, long but well worth reading.

Should America emulate Europe?

Far left liberals like House leader Nancy Pelosi want America to emulate the European model – characterized by a large government sector, high taxes, income redistribution from the wealthiest to the poorest, universal government-supported health care and welfare, and stringent regulation. They would really like a government universal health care plan. They certainly want to preserve and even expand Social Security, Medicare and Medicaid (even though these will bankrupt the government in their current form), and they would dearly love to soak the rich and the successful for as much as they can, and feed that money to the poorer elements of our society.

This, they argue, would be better for America than the free-market, lightly regulated, (relatively) small government model advocated by conservatives, and which America has been following (more or less, but less and less as time goes by) for the past few decades.

Unlike many Utopian suggestions, this is one for which we have some real data – the performance of Europe itself over the past few decades.

• Economically, how has the European model fared? Over the past four decades Europe's core economies--the E.U. 15--have lagged behind the U.S. in terms of both gross domestic product and job growth. Overall, the E.U. 15's share of the global GDP has declined to 26% from 35% while the U.S. has held on to its share, now roughly equal to that of its European counterparts. Europe’s lost GDP has of course shifted to East and South Asia.

• In terms of government debt, how has Europe fared? The US public debt, already frightening enough, now stands at about 40% of GDP, though the proposed Obama budget will shortly push it much higher. In 2008 the combined European Union public debt stood at 61.5% of GDP.

• In terms of government expenditures, how does Europe look? The US federal government expenditures now stand at about 20% of GDP. In 2008 the EU combined public (government) expenditures amounted to 46.8% of GDP, or almost half of the economy.

• In terms of unemployment, how does Europe look? Before this recession started, US unemployment varied between 4% and 6%. EU unemployment, before the recession started, was generally 2% to 4% higher.

• In terms of productivity, how does Europe look? Average gross domestic product (GDP) in the US is about 40% higher than average GDP of the EU-15 when measured at purchasing power parity (PPP).

There is nothing in these numbers that suggests to me that emulating the European model would make America better. In fact, looking at the most serious problems we now face in the country – a massive public debt, a Social Security and Medicare system that will shortly bankrupt the government and a government that can’t keep it’s spending in line with its revenues, these all seem to me to have arisen from policies that emulate Europe.

Recommended: Senate Woes Flag Wider Disease

An article worth reading and thinking about is Gerald Seib's piece Senate Woes Flag Wider Disease in the Deb 15, 2010, Wall Street Journal. Seib argues that while the increasing use of the filibuster is certainly one of the proximal causes of the Senate's current dysfunction, the root cause lies much deeper in the increasing polarization of the parties, driven by several disparate circumstances - the 24 hour news cycle, the lack of social friendships across the aisle, the decline of moderate Democrats and Republicans in the Senate, etc.

Of course, at root, those moderates are gone because we the voters didn't elect them. Instead, under the influence of expensive paid advertising, talk show hosts, the rabid blogosphere, and TV we have all increasingly elected far right or far left "ideologically pure" Senators and Representatives. And when one of our Congressmen or Congresswomen have shown any moderate tendencies, any tendency to stray from ideological purity, they get attacked viciously BY THEIR OWN PARTY AND FOLLOWERS! So at root we the voting public are at fault. We the voting public are the reason there are so few moderates left in Congress.

Recommended: Why Did Rome Fall—And Why Does It Matter Now?

Victor Davis Hanson, a well-known historian and scholar whose books are on my book list, has just written an article entitled Why Did Rome Fall—And Why Does It Matter Now? that is well worth reading and pondering.

Hanson argues that affluence sapped the hard-working spirit of the Romans, but that their system continued for a long time because it kept encompassing new peoples from the periphery whose spirits weren't yet sapped by affluence. He wonders if there isn't a parallel in American life, in which the hard-working, thrifty habits of our forefathers have largely dissipated, yet we stay afloat because of all the "new peoples" (read Chinese workers, these days) we keep encompassing in our global economy - people who are still willing to work hard.

The climate change debate

I’ve noticed over the years that the popular debate on a subject (among people who aren’t experts) is often miles away from the professional debate (among experts) on the same subject. For example, on the nature-nurture question, the popular debate hinges around whether genetics has anything at all to do with people’s abilities, while the expert debate (based on data, not political correctness) is about whether genetics accounts for 40% or 60% of the outcome.

So too with the climate change debate. The popular debate (among people with strong views but no data), now fueled by some intemperate but not especially incriminating e-mails between a few British climate scientists, is about whether there is any real climate change at all. The expert debate (among climate scientists who study the field and have data) is about just how much and how fast the effects of climate change will be felt.

There are four data-supported indisputable facts that support the argument that the climate is changing:

1. From chemistry we now know that the surface temperature of the Earth is roughly 60º F higher than it would otherwise be thanks to greenhouse gasses that collectively make up about 3 percent of the mass of our atmosphere. The two most important of these are carbon dioxide and methane.

2. From several different sources (air samples trapped in glaciers, plant growth rates, the rate at which shells (calcium carbonate) are dissolved in sea water, etc) we know that carbon dioxide levels have increased sharply by about 40% since the beginning of the industrial revolution.

3. From what we now know of chemistry and physics, in the absence of any feedbacks except for temperature itself, doubling carbon dioxide would increase the global average surface temperature by about 1.8º F.

4. Global temperatures have been rising for roughly the past century and have so far increased by about 1.4º F.

In addition, there is observational data to support this warming. The story that the Himalayan glaciers were disappearing may have been incorrect, but there is no doubt that the arctic ice sheet and winter sea ice are disappearing. There is no doubt that the permafrost is disappearing in large areas of northern tundra (releasing yet more methane, by the way). There is no doubt that some deposits of frozen methane hydrates in shallow portions of the ocean are melting (releasing yet more methane).

So while there may be a good deal of disagreement among experts as to how much and how fast our climate will warm, there is almost no disagreement that warming is occurring. Of course, data means little to those who are emotionally attached to a contrary position.

Recommended: Why Washington Can't Reform Healthcare

I highly recommend Bill Frezza's piece Why Washington Can't Reform Healthcare on RealClearMarkets today. He has a refreshing outlook on the problem. He argues that the reason health care costs are such a problem is that government regulation (mostly Medicare pricing) has created a market in which there are no reliable price signals. The price we pay for, say, a colonoscopy is not set by a free market exchange (what is it worth to me? how much will a competitor down the street charge?), it is set by what some bureaucrat in Washington thinks it ought to be set at. The article is quite readable, and wholly sensible.

Of course we have seen this problem before in all the centrally-planned economies that have eventually collapsed from their own inefficiency (think the old Soviet Union). Trying to control prices and resource allocation by bureaucrats never works right, because the bureaucrats never have enough information to do the job right, and because they have every incentive to take payoffs from special interests to manipulate the prices and resources.

One would think we all would have learned that lesson since it has been repeated often enough in history. But then how many people (especially politicians) ever really read history?

More on an interesting move….

Senate majority leader Harry Reid’s surprise revision of the jobs bill continues to be puzzling. It now appears that he even surprised the White House, who had just announced with some fanfare that they had a bipartisan jobs bill, and he certainly seems to have surprised most Democratic Senators, who are now scrambling to try to reassemble a bipartisan coalition around this revised bill.

He also seems to have surprised House majority leader Nancy Pelosi, who is clearly not happy that the new $15 billion Senate bill doesn’t have nearly as much in it as the $154 billion House bill she got passed. Her response to the proposed new Senate bill has been tepid at best, if not downright hostile.

Although his early remarks suggested this was just a political move on his part to trap Republicans into an unpopular vote ahead of the November elections, subsequent remarks suggest a more reasonable approach – he may have decided it was just too big a piece to bite off at one time in the present political climate (probably true), and that the original bill was simply too bloated with pork, earmarks, and unrelated issues (certainly true). If that was his real motive, then his move was quite sensible, though why he chose to surprised everyone, including his own party and the White House, is still puzzling.

Of course, there is still the question of whether the new bill does anything useful. The centerpiece of the new slimmed-down bill is $13 billion in 1-year payroll tax breaks for employers who hire people previously unemployed and receiving unemployment insurance. It’s not clear that really produces any new jobs. Employers will hire more people only when they think there is enough new business to justify the new hire – a payroll tax break on a new hire a business doesn’t need isn’t going to be enough to motivate them to hire people they don’t need. So in fact about the only people who will be helped are businesses who were going to hire new people anyway.

An interesting move

Senate Democratic leader Harry Reid has been working for weeks with Republicans to produce a truly bipartisan jobs creation bill. Now that he has produced a truly bipartisan bill that had Republican support, he has turned around and stripped out all of the Republican suggestions (including tax breaks), as well as some of the things Democrats wanted (extension of unemployment benefits, subsidies for health insurance). It is true the stripped down bill is much less expensive ($15 billion vs $85 billion over the next decade) which is very good. But expense does not seem to have been his motive. Instead, his public comments suggest he was just setting up a political trap for the Republicans - daring them to vote against a "jobs" bill that, in theory, they helped write.

If I were a Republican senator, I would be leery of ever again working with Harry Reid. With the nation truly in crisis, it is bewildering that Congress is still playing such childish games.

Recommended: Five ways to reform health care

President Obama's "bipartisan health care summit" is fast approaching, though how bipartisan it will be remains to be seen. House and Senate Democratic leaders have apparently rushed to put together a set of deals that would set the stage for passing the legislation through the "resolution" option, which requires only 51 votes in the Senate. That doesn't sound like they are very interested in any Republican ideas that may be offered at the summit.

You may find it interesting to read the article Five ways to reform health care in today's Washington Post. The author is Tim Pawlenty, who just happens to be the Republican governor of Minnesota, and a potential Presidential candidate. In general I agree with his approach, which is much more likely to really cut costs and not expand the federal debt than the Democrat's current plan. Of course, liability reform would require taking on the trial lawyers, who are an influential part of the Democratic base, so no such plan is likely to come out of the current Congress.

Recommended: How a New Jobless Era Will Transform America

I recommend Don Peck's article How a New Jobless Era Will Transform America in this months Atlantic Monthly. It's a long article, but very important.

The Greek Crisis

Those of you not following the world news closely may have missed the fact that Greece is in a severe financial crisis - its government debt has simply gotten out of hand. Many European countries have this problem and will eventually face similar crises, but for Greece the crisis has arrived. Niall Ferguson has written a good article in today's Financial Times entitled A Greek crisis is coming to America. His point is obvious - the U.S. public debt is also growing at an unsustainable rate, and we too will face a Greek crisis sometime in the future - perhaps sooner than Washington politicians think.

Of all the pressing issues that face the nation today, I think none ranks higher than our public debt problem. The federal debt is probably the worst problem, especially with the future obligations imposed by Medicare, Medicaid and Social Security. But state finances are also in deep trouble. And this isn't just a short-term problem incurred by the current recession. It has been a growing problem for decades, and if the current Democratic administration gets its way with their proposed budget, it will rapidly get worse.

Realistically, we as a nation not only cannot afford more new and expensive government programs, however persuasive the arguments for them. We cannot even afford all the government programs we currently have. Either we need to raise taxes substantially (30-50% or more above current rates) to pay for all these programs and our two current wars, or we need to cut total government spending by at least 50%. Neither move will be popular, but there is no free lunch in the real world, whatever Congress thinks.

In the end, the Greeks, a small nation, may get bailed out by Germany, a far larger nation. If America hits such a crisis, who is big enough to bail us out? Nobody! That means we default on our debts, and if you think this recession was bad ...........

The “bipartisan health care summit”

President Obama has proposed an all-day televised bipartisan health care summit between Democrats and Republicans, to be held Feb 25th. Republicans are understandably cautious, concerned that this may just be political theater rather than a real discussion. Of course, if President Obama’s position is (as he seems to have indicated in recent interviews) that the discussion starts from the bills the Democrats crafted in the House and Senate without any Republican input, then the Republicans are right to be suspicious, and would be well within their rights to refuse to attend. A real bipartisan discussion would start fresh, with no preconditions. A discussion that starts with the Democrat’s whole wish list, and then perhaps grudgingly adds a few minor sops for Republicans, is hardly bipartisan.

I don’t expect much more than political posturing to come out of such a meeting, because at root the liberals and conservatives start with diametrically opposed philosophies. Liberals think more federal government involvement is good and necessary. Conservatives think more federal government involvement is bad and destructive. It’s hard to see much of a middle ground there. There are a series of peripheral health care issues on which both sides could agree, and perhaps the Democrats will finally come to their senses and craft a much smaller, less sweeping bill that incorporates those bipartisan agreements and can draw some Republican votes, but I doubt it. The liberals seem blinded by their ideology, and the conservatives smell victory at the polls this November. Neither side seems to have much incentive to compromise.

Personally I am not impressed with most government programs, as I have noted in previous posts. Some federal programs certainly work, but with a level of inefficiency and cost that would never survive in a free-market environment. Many federal programs don’t work, but get funded anyway year after year because they have Congressional and special interest supporters. The authors of the Constitution worried about the federal government getting too big and too strong, because they had seen the results of such governments in England and Europe. They would be, I am sure, absolutely appalled at the size and intrusiveness of our current federal government. And they would suspect, quite rightly, that that much power and money concentrated in the federal government would lead to massive abuses and corruption.

Of course, we will reduce the size of the federal budget and the scope of federal programs one way or another – the current level is simply not sustainable. If we aren’t smart enough to do it ourselves, natural economic forces in the world will do it for us, probably in a much less pleasant manner.

An aside.....

As readers of this blog have probably already discerned, I'm not happy with many of the domestic policies of President Obama's administration, nor am I impressed with the results (if any) of his "gentler, kinder" approach to foreign policy. I would be happy to see the Democrats lose their Congressional majority in the next election, so that they can get over the fantasy that Congress can cram any liberal, big government program they like down our throats.

But that isn't to say that I am delighted with the Republican alternatives on offer (what alternatives?). Sarah Palin just isn't going to cut it as a presidential candidate. Nor was I thrilled with many of the Bush administration's policies. His administration's deficits look better only in comparison to the outsized Obama deficits. His attempt to run two wars without paying for them was as unrealistic as President Obama's fantesy that he can provide health care coverage for 36 million more Americans without it costing the rest of us anything.

There seems little prospect of changing the essential nature of Congress (pandering to special interests in return for campaign contributions, avoiding hard political choices, blaming the other party for all problems), regardless of which party is in power. Perhaps the best that can be hoped for is that neither party controls all the levers of government, so that neither party can cram their ideology down our collective throats.

But that leaves a real worry - we do have a few problems, like the national debt problem, that really do need immediate, courageous, decisive, unpopular government action. How are we going to get the Washington political establishment, irrespective of party, to ever step up to that?

Reviews of Obama's first year

It may be a measure of how bad things have become for the current Democratic administration that the Huffington Post, a liberal blog, has posted an article entitled Core Chicago Team Sinking Obama Presidency. It references a scathing article entitled America: A fearsome foursome in the Financial Times by Edward Luce that is getting a lot of attention in the media world and on the web. The Los Angeles Times also has an article on this today, entitled President Obama Day 386: What's happened to him?

The gist of all these articles is that, despite President Obama's smooth eloquence, what we have elected is a tough Chicago politician, who has surrounded himself with equally tough advisers and henchmen - in essence a Chicago political machine in the White House, used to running over all opposition. And these authors argue that does not bode well for anything bipartisan, or in the long run for the Democratic Party. Certainly there is no evidence yet that President Obama or his advisers have been listening to the polls or the by-election results on the matter of health care, or government deficits, or any of the other issues roiling the public these days.

A democracy is always temporary in nature....

Alexander Fraser Tytler, Lord Woodhouselee (1747-1813), a Scottish lawyer and history professor at the University of Edinburgh, is reputed to have said about the fall of the Athenian Republic some 2,000 years earlier:

‘A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always vote for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.’

Recommended: Big Government's Big Shortfall

Robert Samuelson has an article in today's Washington Post entitled Big Government's Big Shortfall that elaborates on the argument I made in my last post.

Some real numbers

Just to cut through all the Washington hype and political sound bites, consider the following facts:

The federal deficit under President Obama’s proposed budgets will approach $20 trillion in 2020. At that size, the annual interest payment alone will be more than we spend on all discretionary domestic programs put together.

As currently constituted, Medicare, Medicaid and Social Security will by 2020 account for about half of all government spending.

Democrats like the idea of taxing the rich to solve the deficit problem. Unfortunately, those who are in the top 5% income bracket already pay over 50% of all federal taxes, so soaking the rich some more doesn’t work – there aren’t enough of them. If we took all of their income it wouldn’t be enough. That means that to balance the projected federal budget by 2020 (just balance it – not even begin to pay off the debt), taxes on all of us would need to go up by about 30%.

Republicans like the idea of cutting government spending to solve the deficit problem. The 2020 deficit is projected to be about $1.3 trillion. That could be eliminated if all discretionary non-security domestic programs, including aid to education, the National Institutes of Health, and air-traffic controllers, were eliminated. Or we could cut Social Security, Medicare and Medicaid outlays in half. That would just balance the budget, it wouldn’t do anything to pay back what we already owe.

Clearly we have a massive problem, much more than can be solved with a few token budget cuts around the edges and a lot of cute sound bites from politicians.

Recommended: America is Not Ungovernable

I recommend Jay Cost's piece today in RealClearPolitics, entitled America is Not Ungovernable. Cost argues that the founders deliberately designed the federal government so that it had limited powers, and so that it was hard to enact new programs unless there was a wide consensus in support the new proposals. He disagrees with pundits who have been claiming that we have become ungovernable - he argues instead that President Obama simply hasn't governed well, that he has let Speaker Pelosi become, in effect, a prime minister and shape legislation too liberal for the Senate and the voters to accept.

He argues that the Republicans aren't just obstructionists - they are doing the only thing the system allows a minority to do when they disagree with the approach proposed. He argues that the Democrats aren't "spineless" - the moderates who are being troublesome are in fact representing the views of their constituents, just as they are supposed to do. He argues that "the people" aren't to blame - they haven't misunderstood the health bill; they just don't like the approach taken.

I find his arguments persuasive. Certainly there is a wide consensus in the nation that health care needs reform; there just isn't a wide consensus that the Democrat's plan is the right way to enact that reform.

Recommended: Populist Constitutionalism & the Tea Parties

I recommend the article Populist Constitutionalism & the Tea Parties by Larrey Anderson in American Thinker, Feb 7, 2010. To the extent that the Tea Party movement is in fact rooted in the idea of returning to the intent of the founders in the US Constitution, it sounds like a good idea to me.

Recommended: Charting Our Way to Solvency

I recommend George Will's article Charting Our Way to Solvency, in today's Feb 7, 2010 Washington Post. Unlike the Democrat's plan to restore national solvency (what plan??), here are some pretty innovative ideas. The devil is in the details, of course, and all of these ideas may not work out as expected, especially after they have been through the Congressional meat grinder, but nonetheless here is some original thinking at last!

The "Roadmap for America's Future" mentioned in the article can be found on Rep. Paul Ryan's site. Of course it involves getting rid of the tax breaks for all the special interests (including those of us who get a home mortgage deduction), it involves giving up liberal dreams of cradle-to-grave government subsidies, and it require reducing the size of government. Whether that could ever get through a Congress full of representatives whose campaigns are funded by all those same special interests is an interesting question.

Recommended: Obama Outsmarts the Terrorists

There is an interesting article entitled Obama Outsmarts the Terrorists, by Peter Beinart on The Daily Beast. Beinart argues, in effect, that only overreaction from the US has kept al Qaeda going. Without US overreaction (invading Muslim countries, Abu Ghraib torture and Guantánamo Bay prison), al Qaeda's endless slaughter of Muslims rapidly erodes their popular support around the world, and especially in Muslim countries. President Obama's measured response to terrorism, Beinart argues, is an effective approach to reducing the power of the terrorists.

An interesting view, and persuasively argued.

Recommended: The Electorate vs. Obama's Agenda

I recommend Charles Krauthammer's article The Electorate vs. Obama's Agenda in yesterday's Washington Post. Although hubris and arrogance seem to permeate Washington politics in both parties, it is particularly noticeable these days in the liberals, probably because they are in power at the moment.

One can only wonder, for example, at the arrogance of Speaker Pelosi, determined to push through the health bill irrespective of the clear message from polls and recent by-elections that the majority of the electorate doesn't want it. Well, these things have a way of sorting themselves out at the next election.

Recommended: The Sporting Mind

Once again David Brooks has written an interesting, offbeat Op Ed in the Feb 5, 2010, New York Times entitled The Sporting Mind. Highly recommended.

It is worth pondering what keeps a nation as disparate as ours, drawn from all corners of the earth, supporting a massive variety of religions, political views, cultural outlooks and world views, from simply falling apart. It is truly a remarkable feat, not widely emulated elsewhere on the globe.

Recommended: America's Two Economies

I recommend the article in today's Feb 3, 2010 Forbes, entitled America's Two Economies.

The authors compare several economic statistics across this recession and several previous recessions. Here is a sample chart from the article:


The authors argue that the "recovering"economy touted by the administration spin doctors, and the "real" economy are not the same, and that this recession is recovering much more slowly than previous recession, in spite of the stimulus packages (plural, because although they don't call recent spending a "second stimulus package", in effect it really is).

Obama's Deficits: Not His Fault?

Excerpt from Robert Robb's Feb 3, 2010 article Obama's Deficits: Not His Fault? on RealClearPolitics:

The Bush tax cuts expire this year. Except for the legacy costs of the Iraq war, Obama is free to recommend changing anything Bush did. The deficits he recommends from 2011 on are purely his own.

And they are massive, and driven by spending.

Obama proposes that the federal government spend over 25 percent of GDP in 2011, compared to a historical average of around 20.5 percent. He justifies this as necessary to continue to fight the recession.

Obama, however, projects that the recession will be fully over in 2011 and robust growth under way. Yet he proposes that federal spending continue to be nearly 24 percent of GDP through 2020.

In other words, rather than wind down the additional recession spending after recovery, Obama is proposing that it simply become a new, higher base.

After the World War II debt was reduced, accumulated federal debt never exceeded 50 percent of GDP until 2009, when it reached 53 percent. Under Obama's recommendations it would grow to 77 percent by 2020.

If Obama were to recommend a path to return spending to its historical share of economic output, in 2020 the deficit would be just $255 billion, about what the federal government spends each year on large capital projects, and just 1 percent of GDP. In other words, not a problem. And federal spending would have still increased by more than 4 percent a year since 2008.

Instead, Obama recommends a 2020 deficit of over $1 trillion and a troubling 4.2 percent of GDP.

Recommended: Deficit Balloons Into National-Security Threat

Gerald Seib in today's Wall Street Journal, in an article entitled Deficit Balloons Into National-Security Threat, argues that the growing size of our national debt is no longer an inconvenience, it is now a serious threat to our nation. The alarming chart below, from his article, speaks for itself:




The Democrats would like to blame the Bush administration, which certainly didn't show much fiscal restraint. But in fact, the Obama administration deficit is larger in the first year than the total Bush excesses over his eight years in office, so that argument is weak at best. Nevertheless, it hardly matters who is at fault here - all that matters now is convincing Congress to do something effective about it, and that seems like a tall order.

Recommended: Politicians in Wonderland

I recommend Thomas Sowell's Feb 2, 2010, article Politicians in Wonderland. Sowell is the author of Economic Facts and Fallacies, a wonderful book that explores the reality behind a lot of our economic myths. It's not yet on my book list because I haven't finished reading it.

Sowell makes the point that politicians frequently mandate things that they "think" are good for us, without really thinking through the unintended consequences. For example, a mandated minimum wage sounds like a good idea, but one unintended consequence is that lots of low-paying jobs just disappear (are moved offshore, or automated, or are just eliminated) when the governmental mandates a wage higher than some low-skill people are worth. Now instead of having a low-paying job, they have no job at all - hardly what the politicians intended.

Sowell argues much the same thing is happening as Congress works through things like the health care bill (a bill, by the way, that will not affect members of Congress at all, since they have their own federal "Cadillac" health care plan which is largely exempted from the restrictions and taxes they intend to impose on the rest of us.)