Ron Paul Head to Head With Obama in New Poll; The Ideas Matter, The Politics Don’t

April 15, 2010 · Posted in Politics · 1 Comment

Rassmussen Poll: Obama 42% – Ron Paul 41%

Pit maverick Republican Congressman Ron Paul against President Obama in a hypothetical 2012 election match-up, and the race is – virtually dead even.

A new Rasmussen Reports national telephone survey of likely voters finds Obama with 42% support and Paul with 41% of the vote. Eleven percent (11%) prefer some other candidate, and six percent (6%) are undecided.

Ask the Political Class, though, and it’s a blowout. While 58% of Mainstream voters favor Paul, 95% of the Political Class vote for Obama.

But Republican voters also have decidedly mixed feelings about Paul, who has been an outspoken critic of the party establishment.

Obama earns 79% support from Democrats, but Paul gets just 66% of GOP votes. Voters not affiliated with either major party give Paul a 47% to 28% edge over the president.

Paul, an anti-big government libertarian who engenders unusually strong feelings among his supporters, was an unsuccessful candidate for the Republican presidential nomination in 2008. But he continues to have a solid following, especially in the growing Tea Party movement.

Twenty-four percent (24%) of voters now consider themselves a part of the Tea Party movement, an eight-point increase from a month ago. Another 10% say they are not a part of the movement but have close friends or family members who are.

(Want a free daily e-mail update? If it’s in the news, it’s in our polls). Rasmussen Reports updates are also available on Twitter or Facebook.

Thirty-nine percent (39%) of all voters have a favorable opinion of Paul, while 30% view him unfavorably. This includes 10% with a very favorable opinion and 12% with a very unfavorable one. But nearly one-out-of-three voters (32%) are not sure what they think of Paul.

Perhaps tellingly, just 42% of Republican voters have a favorable view of him, including eight percent (8%) with a very favorable opinion. By comparison, 42% of unaffiliated voters regard him favorably, with 15% very favorable toward him.

Twenty-six percent (26%) of GOP voters think Paul shares the values of most Republican voters throughout the nation, but 25% disagree. Forty-nine percent (49%) are not sure.

Similarly, 27% of Republicans see Paul as a divisive force in the party, while 30% view him as a new direction for the GOP. Forty-two percent (42%) aren’t sure.

Among all voters, 19% say Paul shares the values of most Republican voters, and 27% disagree. Fifty-four percent (54%) are undecided.

Twenty-one percent (21%) of voters nationwide regard Paul as a divisive force in the GOP. Thirty-four percent (34%) say he is representative of a new direction for the party. Forty-five percent (45%) are not sure.

But it’s important to note than 75% of Republicans voters believe Republicans in Congress have lost touch with GOP voters throughout the nation over the past several years.

Sarah Palin, the former governor of Alaska and the GOP’s vice presidential nominee in 2008, is another Republican who has been bucking the party’s traditional leadership and was the keynote speaker at the recent Tea Party convention in Nashville. Fifty-nine percent (59%) of Republican voters say Palin shares the values of most GOP voters throughout the nation. Just 18% of Republicans see Palin as a divisive force within the GOP.

Rasmussen Reports released survey findings yesterday that take a closer look at the political views of those who say they’re part of the Tea Party movement. Among other things, 96% of those in the movement think America is overtaxed, and 94% trust the judgment of the American people more than that of America’s political leaders.

When it comes to major issues confronting the nation, 48% of voters now say the average Tea Party member is closer to their views than Obama is. Forty-four percent (44%) hold the opposite view and believe the president’s views are closer to their own.

Fifty-two percent (52%) believe the average member of the Tea Party movement has a better understanding of the issues facing America today than the average member of Congress. Thirty-five percent (35%) of voters now think Republicans and Democrats are so much alike that an entirely new political party is needed to represent the American people. Nearly half (47%) of voters disagree and say a new party is not needed

If the Tea Party was organized as a political party, 34% of voters would prefer a Democrat in a three-way congressional race. In that hypothetical match-up, the Republican gets 27% of the vote with the Tea Party hopeful in third at 21%. However, if only the Democrat or Republican had a real chance to win, most of the Tea Party supporters would vote for the Republican.

Ron Paul: We can do better with peace than with war!

This is Ron Paul at a recent Southern Republican Leadership Conference:

People one Step Closer to Waking Up

The reason why I am showing all this is not that I have any particular hopes in Ron Paul in his potential function as a president or anything like that. Anybody who wants to see how much of a chance a fiscal conservative who supports limited government has once elected, just look to California.

But it is undeniable that he has inspired millions of people through the ideas of freedom and peace. And these ideas are really all that matters in the long run.

We can’t expect people to understand right away that we need to eliminate the government at some point. Nor should we be so demanding. The process of economic and moral education and enlightenment is gradual, not abrupt.

Nor, on the other hand, should we be complacent. The coming Congressional elections will be a landslide victory for the Republicans, in that I stand by my prediction from over a year ago, simply for the reason that most people will think that they suck less than the Democrats.

This is of course all nonsense. But for a few true (but inconsequential) believers, such as Rand Paul (KY), Peter Schiff (CT), and John Dennis (San Francisco), most of what we’ll see is business as usual, even with a largely Republican Congress.

The political machinery is vicious. No matter how good your intentions, it will either swallow you up and corrupt you or spit you our right away. There is nothing good whatsoever that can come out of violence. This is at the root of all political problems and it will never go away until we abdicate from this mad fantasy that is the government.

Tags: Politics, president obama, ron paul

Obama’s Laughable “Spending Freeze” Proposal

January 30, 2010 · Posted in Government · Comment

The AP writes:

Obama also has proposed a three-year freeze on most domestic spending, beginning in the budget year that starts Oct. 1. Spending related to Medicare, Medicaid, Social Security and national security would be exempt.

OK, so Medicare, Medicaid, Social Security, and spending on war, killing people, dropping bombs, etc. will be exempt from this “spending freeze”. I wonder why?

Maybe a quick look at your average annual federal budget will help clear this up, I am here using the federal government’s budget for 2010:

The only category above that is not surely exempt from the “spending freeze” is “Other Discretionary Spending”, 20% of the total budget. Note that nobody talks about cutting any of that. It’s merely going to stay where it already is.

Meanwhile, on the remaining 80% we are being blatantly assured by the President, by virtue of the fact that he is exempting them from the outset, that they will in fact continue to grow moving forward.

On top of that, even out of those 20% of other discretionary spending there is certainly some of it that falls under one or the other holy cow categories, namely Military, Medicare, Medicaid, or Social Security. Thus the total subject to the freeze is rather around 12.5%

As Mish points out:

Exemptions

The $154 billion jobs plan pending before Congress

Medicare

Social Security

The $787 billion economic stimulus plan already being implemented

Department of Defense

Homeland Security

Veterans Administration

International operations.

What’s Covered

One eighth of the total annual budget

This is so ridiculous I don’t know how the administration is not embarrassed to death to present it. Moreover “The freeze would be measured overall and would not be applied across the board.” The freeze is only for three years.

How can anyone in the Administration expect to be taken seriously about budget deficits after presenting this ridiculous plan?

What the administration is serious about is a strategy of extend and pretend. The sheeple are upset about budget deficits, so what do they get? The president announcing a spending freeze (that is none), endorsing a “deficit reduction task force” and talking day in day out about the importance of “tacking the deficit”, while simultaneously spending $787 billion on a stimulus, pushing through another $150 billion for a “jobs plan”, and spending more than any previous administration on wars.

By the way, the deficit task force got rejected in Congress … it is pretty amazing that they can’t even agree on at least talking about deficits, so please don’t even dare to think that they will actually do anything about it, other than of course raising your taxes as they always have.

Tags: budget deficit, president obama, spending freeze

The Laws of Obamanomics a.k.a Interventionism

December 2, 2009 · Posted in Interventionism · 1 Comment

The Examiner writes in a book review Obamanomics defined: Big Government in service of Big Business:

The Laws of Obamanomics

Underlying Obamanomics are some basic economic facts and political realities. These are the Four Laws of Obamanomics, paired below with some of the lobbying strategies that exploit these laws.

1) During a legislative debate, whichever business has the best lobbyists is most likely to win the most favorable small print. Similarly, once a bill has passed, the business with the best lawyers and lobbyists will best be able to craft the regulations and learn how to game them. A big business, counting on this fact while lobbying for more government spending or control, is employing The Inside Game.

2) Regulation adds to overhead, and higher overhead crowds out smaller competitors and prevents startups from entering the industry. When corporations, knowing this, lobby for more regulation of their industry, I call this the Overhead Smash.

3) Bigger companies are often saddled by inertia, meaning robust competition is a threat. Adopting regulations that stultify the economy is the equivalent of raising the basketball hoop to twenty feet at half-time: it protects the lead of whichever team is ahead. When Big Business seeks to stultify the economy to hold back smaller competitors, I call it Gumming the Works.

4) Government regulation grants an air of legitimacy to businesses, boosting consumer confidence, often beyond what is warranted. This is The Confidence Game.

While I agree that all these laws do accurately describe the current US economic policy under the current president, I ask: How did those laws differ under Bush, or under Clinton for that matter, or under Bush Sr., or under Reagan??

People have to realize: What is outlined above does not outline some new phenomenon. These are, simply put, the laws of interventionism, the system that has dominated the entire past century. All the problems we are facing today can be traced back to it, all the cures prescribed to fix our problems are just more of very things that caused our problems.

It is a system under which, during all the bogus back and forth, all the talk in the media from left or from right, all the discussions about tax hikes by 4% or by 5%, about whether or not we should send 30,000 or 40,000 hitmen into a foreign country, about whether we should spend $5 billion or $7 billion in yet another foreign aid bill, about whether this or that government institution should oversee banks, or whether centrally decreed interest rates should be .25 or .5 percent, one thing has remained consistent and uncontested by the blind public for decades: the growth of government.

Tags: Interventionism, obama, obamanomics, president obama

Barack Obama Wins Nobel Peace Price – How About Actually Making Some Peace First?

October 9, 2009 · Posted in Foreign Policy · Comment

President Obama won the 2009 Nobel Peace Price:

President Obama was awarded the 2009 Nobel Peace Prize on Friday.

The first African-American to win the White House, Obama was praised by the Norweigan Nobel Committee for “his extraordinary efforts to strengthen international diplomacy and cooperation between peoples.”

“Only very rarely has a person to the same extent as Obama captured the world’s attention and given its people hope for a better future,” the committee said. “His diplomacy is founded in the concept that those who are to lead the world must do so on the basis of values and attitudes that are shared by the majority of the world’s population.”

The committee also said Obama has “created a new climate in international politics.”

In his short time in office, Obama has acted on a wide range of issues from the economy to terrorism and wars in Afghanistan and Iraq.

Obama is the fourth U.S. president to receive the award, joining presidents Jimmy Carter, Woodrow Wilson and Theodore Roosevelt.

This year’s peace prize nominees included 172 people and 33 organizations. The committee does not release the names of the nominees.

The bottom line is, so far President Obama hasn’t made any peace. In fact, his budget proposes more military spending than war-mongering President Bush ever dared to pass. So I think to award him a Nobel Peace Price is at best premature.

You can talk about peace all you want, at some point you have to live up to it. So bring the troops back home. End the senseless war in Afghanistan, bring troops back home from Iraq. Bring them home from Germany, Japan, South Korea, and Saudi Arabia.

Maybe then Mr. Obama would be worthy of a Nobel Peace Price.

But until and unless all that happens idle talk and superficial prices have no meaning to me.

Tags: 2009 nobel peace price, president obama

Obama’s Handling of Economy – As of Latest Poll More Disapprove Than Approve

July 24, 2009 · Posted in Politics · Comment

The latest Gallup poll of President Obma’s handling of the economy shows that 47% approve and 49% disapprove of his handling of the economy, a steady decline since the beginning of his presidency:

Click on image to enlarge.

… witness a presidency in decline. To anyone who wonders what is at the root of this development, read my post from February, Obama Makes an Unnecessary Gamble:

Obama is gambling with the future of his administration. If he doesn’t deliver true change, things will get worse and worse. If he shoves this bill down the throats of the American people, it will be him and Democrats in Congress who will have to share the blame. This bill was never his bill. It was the Congressional Democrats’ bill, led by Harry Reid and Nancy Pelosi. Now Obama has made it his bill. All the scandals, wasteful projects and corruption that will be uncovered under the projects funded by it will be associated with him. His partisan speech today might very well have marked an early end to bipartisanship for the rest of his tenure.

His fundamental misunderstanding on this matter is that he believes these disagreements are nothing but political games. They are not. They reflect sincere and deep-rooted concerns of the direction where this country has headed. They represent the voices of millions of frustrated workers, businessmen, housewives, students, and retirees calling their representatives, jammed fax machines, letters, town hall meetings, and the like. The movement for liberty is not one of political expediency. Its members are not in it for personal, monetary, or political gain. They are in it for true conviction and with all their heart. But on top of that, it is a movement of substance, reason, logic, and sound understanding of historical and economic facts. There is nothing in the world that could change some one’s mind, once one has understood the true blessings of Freedom, Liberty, Peace, Prosperity, and Happiness. It is a patient movement. It is not in a rush. It isn’t going away. It will grow stronger year by year. To ignore it would be the biggest mistake Obama could make now.

If he continues doing it, the political retaliation will ensue sooner or later in the next Congressional elections and maybe in the next presidential elections. This is an unnecessary, harmful, and avoidable political gamble.

He had his chance, he did not take it. He did not even talk one bit about freedom, liberty, or peace. He continues to ignore the demands that come from those who are asking for nothing but to be left alone. I don’t see him realizing this. To the contrary, he is becoming more and more arrogant and shallow. This is the reason why it is rather likely that his presidency is bound to be a failure.

Tags: gallup, president obama

Obama on Solid Track to Top Bush’s Deficits

July 14, 2009 · Posted in Government · Comment

The AP reports Budget deficit tops $1 trillion for first time:

The deficit of $1.09 trillion so far this year compares to an imbalance of $285.85 billion through the same period a year ago. The deficit for the 2008 budget year, which ended Sept. 30, was $454.8 billion, the current record in dollar terms.

Revenues so far this year total $1.59 trillion, down 17.9 percent from a year ago, reflecting higher unemployment, which cuts into payroll taxes and corporate tax receipts.

Under the administration’s budget estimates, the $1.84 trillion deficit for this year will be followed by a $1.26 trillion deficit in 2010, and will never dip below $500 billion over the next decade. The administration estimates the deficits will total $7.1 trillion from 2010 to 2019.

Just to get an idea of how reliable these government estimates are: Please note that not too long ago, in its 2009 budget document, the government said that it was expecting a deficit of $611 billion for 2009, and $300 billion and lower for the years to come.

I noted back then that these numbers are way off and in February proposed the following figures:

Now that we have updated figures on coming expenses it’s time to update the deficit predictions:

$1.65 trillion for 2009

$1.6 trillion for 2010

$1.95 trillion for 2011

$2.2 trillion for 2012

As you can see, now my 2009 figure is optimistic already. I expect same will apply to the following years. I also said in that same post:

If President Obama keeps spending like this, and really wants to cut the deficit in half by 2013, he will at one point be faced with no other choice but to raise taxes on all Americans, rich, middle class, and poor. This is of course nothing new. Taxes have been rising in the US for the past century.

Back then there was no talk about those kinds of taxes. Since then through now we have heard more and more such proposals.

A national sales tax:

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Taxes on health benefits:

An effort by Senator Max Baucus of Montana to develop compromise health care legislation has come under sharp assault by fellow Democrats who have urged him to abandon a plan to help pay for the bill by taxing some employer-provided health benefits.

A tax on generous employer-provided health plans is favored by Republicans and several centrist Democrats. But opinion polls show the idea to be generally unpopular, and several senators up for re-election in 2010, including the majority leader, Senator Harry Reid of Nevada, have said they oppose it.

Health tax for high income earners:

Democratic lawmakers in the U.S. House of Representatives want to increase taxes on the highest- earning American families to help pay for an overhaul of the nation’s health-care system.

Legislation to be unveiled on July 13 would raise $540 billion over the next decade by setting a 1 percent surtax on couples with more than $350,000 in annual income, said Representative Charles Rangel, chairman of the tax-writing Ways and Means Committee. Higher rates would take effect for those earning $500,000 and $1 million, Rangel said.

… we shall see how many more ways and suggestions to loot and tax the people into oblivion they will come up with over the following months.

Meanwhile, contact your representatives. Tell them your opinon. Tell them you will do everything in your power to vote them out of office in 2010 if they vote for any more boondoggles.

Tags: deficit spending, deficits, president obama

President Obama – Elevating Bush’s Inattention to Deficits to an Art Form

July 10, 2009 · Posted in Government · 2 Comments

Here is a fine, uncompromising, and devastating take down of President Obama’s economic policies:

Last week, we discovered that the state of California will gladly pay you Tuesday for a hamburger today.

With California mired in a budget crisis, largely the result of a political impasse that makes spending cuts and tax increases impossible, Controller John Chiang said the state planned to issue $3.3 billion in IOU’s in July alone. Instead of cash, those who do business with California will get slips of paper.

The California morass has Democrats in Washington trembling. The reason is simple. If Obama’s health-care plan passes, then we may well end up paying for it with federal slips of paper worth less than California’s. Obama has bet everything on passing health care this year. The publicity surrounding the California debt fiasco almost assures his resounding defeat.

It takes years and years to make a mess as terrible as the California debacle, but the recipe is simple. All that you need is two political parties that are always willing to offer easy government solutions for every need of the voters, but never willing to make the tough decisions necessary to finance the government largess that results. Voters will occasionally change their allegiance from one party to the other, but the bacchanal will continue regardless of the names on the office doors.

California has engaged in an orgy of spending, but, compared with our federal government, its legislators should feel chaste. The California deficit this year is now north of $26 billion. The U.S. federal deficit will be, according to the latest numbers, almost 70 times larger.

Bleak Picture

The federal picture is so bleak because the Obama administration is the most fiscally irresponsible in the history of the U.S. I would imagine that he would be the intergalactic champion as well, if we could gather the data on deficits on other worlds. Obama has taken George W. Bush’s inattention to deficits and elevated it to an art form.

The Obama administration has no shame, and is willing to abandon reason altogether to achieve its short-term political goals. Ronald Reagan ran up big deficits in part because he believed that his tax cuts would produce economic growth, and ultimately pay for themselves. He may well have been excessively optimistic about the merits of tax cuts, but at least he had a story.

Obama has no story. Nobody believes that his unprecedented expansion of the welfare state will lead to enough economic growth. Nobody believes that it will pay for itself. Everyone understands that higher spending today begets higher spending tomorrow. That means that his economic strategy simply doesn’t add up.

Character Deficit

Back in the 1980s, Reagan’s own economist, Martin Feldstein, spoke up when he felt that the Reagan administration was pushing the deficit too far. Where are the economists with such character today? Apparently, the job description for economists has transformed from recommending policies that are defensible to defending whatever policies that the political hacks in the West Wing dream up.

As bad as the California legislature has been over the years, it has never entered a fiscal crisis like the one that we face today and then doubled down with a massive spending increase. In the end, when times got tough, patriotic and sensible Californians of both parties stood up and began acting like adults.

Maybe the same thing is starting to happen in our nation’s capital. The key players in Washington are Senator Evan Bayh and 15 Senate Democrats who joined him this year in forming a coalition of moderates. One thing that has distinguished moderate Democrats from the garden variety of the species is heightened concern about fiscal responsibility.

Off a Cliff

With the price tag of Obama-care likely to exceed $1 trillion, moderate Democrats face a simple choice. They can jump off the cliff with the president, or they can stay true to the principles that they have espoused throughout their careers.

There are reassuring signs that principle is winning. One of the most expensive components of the Obama plan is the so- called public-insurance option, which opponents fear would result in massive government subsidies. Senator Mary Landrieu said that she is “not open” to a public option that will compete with private insurance.

Many other Democratic Senators, including Ben Nelson, Blanche Lincoln, and Tom Carper, also oppose the public option. As the cost estimates increase and support wanes, the Senate Finance Committee is even going as far as to pursue its own health-care plan, meaning that the health-care end game is now in sight.

Tax Bite

Moderates might support Obama’s health-care objectives if the bill also included tax increases to cover the spending increases. But those tax increases would likely be unpopular, making it almost impossible to pass a bill.

Given the increasing public concern about deficits that heightened significantly last week because of the California crisis, there are only two possibilities left. Either the Obama plan will come crashing down or Senate Democrats will concoct some bill that has health in the title but costs almost nothing and does even less. With Al Franken arriving in the Senate and providing Democrats with a crucial 60th vote, the latter seems most likely.

…the author may be partisan or biased, but that doesn’t make one’s statements false. This administration is not going anywhere. It is caught in a mess that it won’t be able to get out of gracefully. The political retaliation will follow sooner or later as reasonable movements expose its blunders.

The only way this will not happen is if Obama manages to turn the corner and paddle back at some point. I don’t see that happening anywhere or anyhow or anytime soon. As I have said before. President Obama had the greatest of opportunities. He could have hit the ground running and changed course, do unpopular but necessary things, let the correction of the consumption business cycle run through as quickly as possible, and blame it all on the previous excesses. Instead he went full throttle in the wrong direction. He continued Bush’s fiscal policies. He mocked those who stood up for responsibility and against spending programs. He made a completely unnecessary gamble:

Obama is gambling with the future of his administration. If he doesn’t deliver true change, things will get worse and worse. If he shoves this bill down the throats of the American people, it will be him and Democrats in Congress who will have to share the blame. This bill was never his bill. It was the Congressional Democrats’ bill, led by Harry Reid and Nancy Pelosi. Now Obama has made it his bill. All the scandals, wasteful projects and corruption that will be uncovered under the projects funded by it will be associated with him. His partisan speech today might very well have marked an early end to bipartisanship for the rest of his tenure.

His fundamental misunderstanding on this matter is that he believes these disagreements are nothing but political games. They are not. They reflect sincere and deep-rooted concerns of the direction where this country has headed. They represent the voices of millions of frustrated workers, businessmen, housewives, students, and retirees calling their representatives, jammed fax machines, letters, town hall meetings, and the like. The movement for liberty is not one of political expediency. Its members are not in it for personal, monetary, or political gain. They are in it for true conviction and with all their heart. But on top of that, it is a movement of substance, reason, logic, and sound understanding of historical and economic facts. There is nothing in the world that could change some one’s mind, once one has understood the true blessings of Freedom, Liberty, Peace, Prosperity, and Happiness. It is a patient movement. It is not in a rush. It isn’t going away. It will grow stronger year by year. To ignore it would be the biggest mistake Obama could make now.

If he continues doing it, the political retaliation will ensue sooner or later in the next Congressional elections and maybe in the next presidential elections. This is an unnecessary, harmful, and avoidable political gamble.

Tags: deficits, president obama

Prolonged Detention – Change?

May 24, 2009 · Posted in Politics · Comment

We all know that President Obama will not deliver change. Prolonged detention is just another proof…

Tags: president obama, prolonged detention

Budget Deficits Widen as Expected

May 11, 2009 · Posted in Government · Comment

The White House announced that the budget deficit is expected to top $1.8 trillion for 2009:

With the economy performing worse than hoped, revised White House figures point to deepening budget deficits, with the government borrowing almost 50 cents for every dollar it spends this year.

The deficit for the current budget year will rise by $89 billion to above $1.8 trillion — about four times the record set just last year. The unprecedented red ink flows from the deep recession, the Wall Street bailout, the cost of President Barack Obama’s economic stimulus bill, as well as a structural imbalance between what the government spends and what it takes in.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.

I was close with my estimate for 2009, but I also pointed out that my numbers are still fairly optimistic. Please consider President Obama’s Budget for FY 2010 – A Continuation of the Bush Era:

The president’s budget estimates tax receipts of $2.2 trillion, $2.4 trillion, $2.7 trillion, and $3 trillion for 2009, 2010, 2011, and 2012, respectively. These estimates are laughable (…) Now that we have updated figures on coming expenses it’s time to update the deficit predictions:

* $1.65 trillion for 2009
* $1.6 trillion for 2010
* $1.95 trillion for 2011
* $2.2 trillion for 2012

I still think my numbers are assuming a very optimistic scenario and expect actual deficits to get even worse. And I repeat:

If President Obama keeps spending like this, and really wants to cut the deficit in half by 2013, he will at one point be faced with no other choice but to raise taxes on all Americans, rich, middle class, and poor. This is of course nothing new. Taxes have been rising almost consistently in the US for the past century.

Tags: budget deficit, deficit spending, president obama, us budget

Obama Tries to Square the Economic Circle

April 17, 2009 · Posted in General Economics · 1 Comment

Just a quick and simple example to demonstrate President Obama’s tragic cluelessnes when it comes to grasping our economic problems.

In his speech on the economy on April 14th he said:

IT IS NOT SUSTAINABLE TO HAVE AN ECONOMY WHERE IN ONE YEAR 40% OF OUR CORPORATE PROFITS CAME FROM A FINANCIAL SECTOR THAT WAS BASED ON INFLATED HOME PRICES, MAXED OUT CREDIT CARDS, OVERLEVEREGED BANKS, OVERVALUED ASSETS. IT’S NOT SUSTAINABLE TO HAVE AN ECONOMY WHERE THE INCOMES OF THE TOP 1% HAVE SKYROCKETED WHILE THE TYPICAL WORKING HOUSEHOLD HAS SEEN THEIR INCOMES DECLINE BY NEARLY $2,000. THAT’S JUST NOT A SUSTAINABLE MODEL FOR LONG-TERM PROSPERITY.

Yes. An overleveraged banking system and an overleveraged economy are unsustainable. Overleveraging occurs when a business enters into more obligations than it can provide equity collateral for. Like for example a bank that makes $10 available in credit transactions for every $1 it receives. One would think that he got at least this point.

Unfortunately the teleprompter later on also made him utter the following words in that very same (!!!) speech:

ALTHOUGH THERE ARE A LOT OF AMERICANS WHO UNDERSTANDABLY THINK THAT GOVERNMENT MONEY WOULD BE BETTER SPENT GOING DIRECTLY TO FAMILIES AND BUSINESSES INSTEAD OF TO BANKS, ONE OF MY MOST FREQUENT QUESTIONS IN THE LETTERS THAT I GET FROM CONSTITUENTS IS “WHERE’S MY BAILOUT?” I UNDERSTAND THE SENTIMENT. IT MAKES SENSE INTUITIVELY AND MORALLY, BUT THE TRUTH IS THAT A DOLLAR OF CAPITAL IN A BANK CAN ACTUALLY RESULT IN $8 OR $10 OF LOANS TO FAMILIES AND BUSINESSES. THAT’S A MULTIPLIER EFFECT THAT CAN ULTIMATELY LEAD TO A FASTER PACE OF ECONOMIC GROWTH. THAT’S WHY WE HAVE TO FIX THE BANKS.

This is not a joke. He seriously said these two things in one and the same speech. I could understand if he were to hold different speeches to different interest groups and lie to each of them in a different way by appealing to their particular constituents. After all he is nothing but an average politician who knows no better than to play this game.

But what he is doing here is rooted in a much more tragic circumstance: President Obama has no clue about how precisely this fractional reserve system caused excessive credit expansion and leverage and thus created the business cycle with its inevitable culmination, the credit crunch.

He is lost in a maze of inconsistencies and won’t get out of it until he realizes that he has appointed the wrong man as Secretary Treasury and that the Federal Reserve System is inherently broken precisely because of the concept of fractional reserve banking. Just as we can’t square the circle, we simply can’t borrow, spend, and leverage our way out of too much debt, too much consumption, and too much leverage.

It didn’t work in the Great Depression. It won’t work now.