Economic Politics

    There is a thought that the only economic number that matters for President Obama's reelection is the headline unemployment rate as of November 6, 2012. Unfortunately, reality is a bit more complex.

    I am among the group that believes that a "Budget Grand Bargain" is needed if the country is to avoid effective bankruptcy. Paul Ryan offered his half - Medicare reform; Medicaid reform; discretionary budget cuts; some military spending cuts; cleansing the tax code of loopholes - hoping that President Obama would respond with Social Security reform, more military cuts, and some increased taxes. Unfortunately Obama chose to use Ryan's opening offer as a foil for his 2012 presidential campaign. Standard and Poor's responded with a warning that they might downgrade US debt from its AAA status. (A downgrade from AAA would prevent many pension plans and mutual funds from holding Treasuries.) Oy vey.

    Polls show that the American public is confused and schizophrenic. They (we) want balanced budgets, and a cap on the authorized debt limit, but oppose changes to Social Security or Medicare, higher taxes on themselves, and many discretionary spending reductions.  Obama offers "shared sacrifice" by increasing taxes on the top 2 % with half of the public paying no federal income tax at all, unidentified cuts to Medicare costs, unidentified cuts to military spending, and a trillion dollar reduction in debt service costs. The cynical political bet is that voters will care much more about short term jobs than long term debt, that the "blame Bush" argument has legs, and that he can demagogue the "rich bankers" in public while taking their donations and protecting their profits and bonuses in private.

    Even if you can fool 51% of the people often enough, there are several reasons why this "continue to march" approach will likely not work:

    1. The game will change.  The Fed's program of buying $600 billion of treasury bills to keep interest rates low will end in June and is unlikely to be extended. Extended unemployment benefits will expire well before the election.

    2. Central banks in Europe and Asia are increasing their interest rates to control inflation. As the fed keeps our rate near zero in a futile effort to support housing, the value of the dollar has declined an average of about 10% in the past year and the decline is accelerating. The result - exporters of commodities such as oil which are priced in dollars have increased their prices to maintain revenues. Jimmy Carter got us to 13% inflation by a similar route.

    3. Housing will not be robust. We artificially increased the portion of home ownership from its long term 65% to a high of 69% and it will take years to work off the excess. Foreclosures will continue; the "refinancing ATM" is history.

    4. Even in the best of times,the twin forces of globalization and technology are helping millions of people around the world, but the American middle class is being hollowed out.   With no business experience or perspective in the administration, Obama has nothing to say or do about the central problem. (This is Romney's wheelhouse.)

    With a billion dollar war chest, no international or domestic accomplishments to point to other than passing the unpopular Obamacare, and nothing to say about creating real jobs, it is no surprise that Team Obama is taking the low road of class warfare.

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    This week's video is an amusing MSNBC/Huffington Post explanation that Obama's low ratings are a result of being dragged down by the Republican Congress' low ratings.

bill bowen - 4/29/11  

Comments

[Jack R.]

Ugh, tough times..

[Bill McCormick]

And the BEAT goes on----

Pretty unbelievable that we now embark on fights over the death of Bin Laden. Did he have a gun? Did we take away his son? Shall we release the photo? Did he actually surrender and then we murdered him? Did we find him from Waterboarding information? Should Bush or Obama get the credit? Whatever happened and who gets the glory doesn't matter--he's dead. It is a SYMBOLIC end and a revenge killing designed to inhibit Al Qeada's (another spelling debate versus Al Qaida) terrorist attacks on it's enemies. It will likely have little real impact in the long run. The intell we collected may help reduce their attacks and define more high value targets for the Special Froces and the Drones to attack in the short run but the beat goes on--there area 100's of thousands more of them in the world. This IS the new world of our children and our armed forces to deal with. we fought the cold war they will fight the hidden wars.

These debates over unanswerable questions are destroying America's ability to compromise on solutions and move forward. The debate over abortion is 50/50. The debate over how much help to give the disadvantaged or to even define disadvantaged can be argued forever. The debate over how much free education do you provide can not be answered. The debate over how much money we spend on police versus firemen versus the military versus roads versus clean water versus environmental protection versus public parks, etc is continuous. America, it seems, wants to argue over everything. If business people did that they would all exceed budgets, freeze on solutions and fail. Politicians are failing us when they lack the courage to compromise.

And, in true Obama Administration fashion we have the new Secretary (to be) of Defense announcing that we will show the death photo last night and today the President saying we will not. We're back to normal already.

[Bill McCormick]

EVERYONE WANTS SOMETHING FOR NOTHING-----

Nice article, Bill. Paints the age old picture of a society that wants something for nothing and a set of politicians willing to give it to them.

As Jimmy Carter found out the process of printing money to satisfy the social needs of society leads to high inflation, lower dollar value and in general a stagnant economy. this is a form of taxation on all and is an unsustainable policy. We are quietly engaged in that process once again under this leadership.

Secondly, we have a set of people on the left who want to tax the rich and make no cuts in spending. Well the rich are already taxed very high. And the spending is already high and projected to get much higher. So the proposal from the President is not to just increae the taxes on the wealthy but in order to make any significant revenue gain he must push the tax increases down to the $250K level which is not the wealthy. They are basically the management class of people in the country and the small business owners. No Rockstar makes $250k. No Wall Street revenue generator makes $250k. No Fortune 1000 CEO makes $250k. So, taking more money from this set of people makes no sense.

Thirdly, 50% of Americans who drive on the roads, call the police, send their kids to public schools, etc pay zero federal Tax. And yet they want Medicare, schools, college grants, roads, police protection, emergency help, food stamps, unemployment extensions, etc guaranteed. Guaranteed how? By taxing the other 49%. In essence they want everything for nothing. I left out Social security because the politicians already took that money from escrow to pay the deficits of the past. They owe that money back. It should have been an annuity for the tax payers. And, I remind you that half that money was paid in by their employers another high tax on American business. Do you think Chinese companies pay for social security for their employees? I suppose if they did their government would take it from them as well.

In essence we have a society where 50% of the people want everything they can get for nothing at the expense of the other 49%. Does anyone except politicians believe a country can survive by doing this?