Tuesday, March 24, 2009

More on the Economy

I have left the economy and President Obama alone (like he cares) to focus on more interesting things. However, he continues to take direct action to make the economy he inherited from Bush worse. Let's start with this op-ed Mr. Obama wrote, and which posted in only three newspapers in the U.S. (the Baltimore Sun, Chicago Tribune, and Los Angeles Times). The other papers that received the posting were all overseas. He's the President of the United States, and he has important things to say to the world. Wouldn't you think it would appear in every paper in this country? It's not like it wouldn't get out via the Internet to other locations, but jeez, that works both ways--an email from the POTUS would get top billing everywhere. So, again: why the directed posting? Might as well read it now, before it disappears:

We are living through a time of global economic challenges that cannot be met by half measures or the isolated efforts of any nation.

Translation: Obama believes that the activist stance he's taken on the economy here needs to be taken globally. If Obama considers his first budget (over $3 trillion) a "half-measure," one can only feebly guess what a full measure of activism will look like. Yow.

Now, the leaders of the Group of 20 have a responsibility to take bold, comprehensive and coordinated action that not only jump-starts recovery, but also launches a new era of economic engagement to prevent a crisis like this from ever happening again.

"Bold, comprehensive, and coordinated action." Translation: He's giving a green light to the leaders of the world to soak their local rich people.

No one can deny the urgency of action. A crisis in credit and confidence has swept across borders, with consequences for every corner of the world. For the first time in a generation, the global economy is contracting and trade is shrinking.

Actually, there are many folks who could deny the need for urgency when it comes to government action. As I've written before, this economic slowdown was no worse than some recessions seen in the last 25 years, and none of those situations required a massive, unprecedented government intervention in the market.

Trillions of dollars have been lost, banks have stopped lending, and tens of millions will lose their jobs across the globe. The prosperity of every nation has been endangered, along with the stability of governments and the survival of people in the most vulnerable parts of the world.

Way to encourage us and talk about hope, Mr. President.

Once and for all, we have learned that the success of the American economy is inextricably linked to the global economy. There is no line between action that restores growth within our borders and action that supports it beyond.

True. But more to the point, the global economy is dependent upon the American economy. If our economy starts turning ugly due to government takeovers of businesses, people will stop investing here. So when Obama does things that are bad for the American economy, like spending three trillion dollars we don't have and does not exist, that harms the global economy.

If people in other countries cannot spend, markets dry up -- already we've seen the biggest drop in American exports in nearly four decades, which has led directly to American job losses. And if we continue to let financial institutions around the world act recklessly and irresponsibly, we will remain trapped in a cycle of bubble and bust. That is why the upcoming London Summit is directly relevant to our recovery at home.

So if you know that some banks are behaving badly but individuals need to spend, why not just give individual private citizens a big chunk of change ($5-10,000) and let the bad banks fail?

My message is clear: The United States is ready to lead, and we call upon our partners to join us with a sense of urgency and common purpose. Much good work has been done, but much more remains.

Translation: This is my economy, and I'm not through tinkering with it yet.

Our leadership is grounded in a simple premise: We will act boldly to lift the American economy out of crisis and reform our regulatory structure, and these actions will be strengthened by complementary action abroad. Through our example, the United States can promote a global recovery and build confidence around the world; and if the London Summit helps galvanize collective action, we can forge a secure recovery, and future crises can be averted.

Translation: If you think you can go overseas to get away from my policies, think again, pal. I'm going to ask every nation on Earth to do things my way.

Our efforts must begin with swift action to stimulate growth. Already, the United States has passed the American Recovery and Reinvestment Act -- the most dramatic effort to jump-start job creation and lay a foundation for growth in a generation.

Stimulus is not working. Banks refuse to loan, businesses refuse to spend, and consumers refuse to spend because they're afraid of what might happen next. "Dramatic" is accurate. The stimulus is not jump-starting job creation, except on a temporary basis within government agencies--for instance, ACORN is looking to get some work supervising the Census.

Other members of the G-20 have pursued fiscal stimulus as well, and these efforts should be robust and sustained until demand is restored. As we go forward, we should embrace a collective commitment to encourage open trade and investment, while resisting the protectionism that would deepen this crisis.

And stimulus isn't working overseas, either. Protectionism is almost inevitable, as every government must protect the jobs of its own citizens first.

Second, we must restore the credit that businesses and consumers depend upon. At home, we are working aggressively to stabilize our financial system. This includes an honest assessment of the balance sheets of our major banks, and will lead directly to lending that can help Americans purchase goods, stay in their homes and grow their businesses.

This must continue to be amplified by the actions of our G-20 partners. Together, we can embrace a common framework that insists upon transparency, accountability and a focus on restoring the flow of credit that is the lifeblood of a growing global economy. And the G-20, together with multilateral institutions, can provide trade finance to help lift up exports and create jobs.

Again, the major banks are not loaning. They're trying to find a new level at which to leverage their assets. A loan-to-asset ratio of 30:1 is obviously too much, so they're holding onto their assets and reassessing what how much they're willing to loan out to businesses. He can talk a good game about getting foreign banks and nations to encourage trade, but they're as paralyzed as the U.S.

Third, we have an economic, security and moral obligation to extend a hand to countries and people who face the greatest risk. If we turn our backs on them, the suffering caused by this crisis will be enlarged, and our own recovery will be delayed because markets for our goods will shrink further and more American jobs will be lost.

I wonder if the countries and people who face the greatest risk also happen to be the ones who don't pay their bills.

The G-20 should quickly deploy resources to stabilize emerging markets, substantially boost the emergency capacity of the International Monetary Fund and help regional development banks accelerate lending. Meanwhile, America will support new and meaningful investments in food security that can help the poorest weather the difficult days that will come.

Yes, by all means, let's do a bailout for even more organizations.

While these actions can help get us out of crisis, we cannot settle for a return to the status quo. We must put an end to the reckless speculation and spending beyond our means; to the bad credit, over-leveraged banks and absence of oversight that condemns us to bubbles that inevitably bust.

There is some truth here. However, if you allow people and banks to fail and learn from the consequences of failure, wouldn't that be a better deterrent than bailing them out and teaching them nothing? I don't believe more government regulation would help. I'd like to see what Goldman Sachs does to encourage internal reform after they return their federal bailout money.

Here's a simple way to encourage responsibility, which I've been pushing since at least 2000: Give people frequent flyer or bonus miles for paying their bills, not racking them up.

Only coordinated international action can prevent the irresponsible risk-taking that caused this crisis. That is why I am committed to seizing this opportunity to advance comprehensive reforms of our regulatory and supervisory framework.

The argument against this is rather like the argument against having a nationalized school or healthcare system. If you have only one solution or system for everybody, and that solution or system is wrong, then everybody suffers. Instead, individual countries, states, and businesses should be allowed to experiment to see what works. Some experiments might fail, but successful experiments can be copied as well. That's part of the joy of the diversity of the market. If the government IS the market, there is no diversity, and everyone rises or falls at the whims of those in power.

All of our financial institutions -- on Wall Street and around the globe -- need strong oversight and common sense rules of the road. All markets should have standards for stability and a mechanism for disclosure. A strong framework of capital requirements should protect against future crises. We must crack down on offshore tax havens and money laundering.

There is some truth in this. Capitalism survives best in an environment where the rule of law is exercised consistently and fairly. Unfortunately, Obama's policies are neither. His bailouts are going to specific businesses, just as his party is threatening specific individuals within those businesses with mob-like behavior. I'm not for money laundering, so I'll let that item stand as is. However, I like it how the offshore tax havens bit is thrown in at the end, like an afterthought. This is why the issue in Switzerland matters. Obama is determined to prevent people with money from moving that money overseas to avoid his impending higher taxes. If the taxes were lower here, people wouldn't need the tax havens because they'd be willing to pay the lower rates. The same applies with income taxes, though I doubt Obama is a fan of the Laffer Curve anyway.

Rigorous transparency and accountability must check abuse, and the days of out-of-control compensation must end. Instead of patchwork efforts that enable a race to the bottom, we must provide the clear incentives for good behavior that foster a race to the top.

Now I still don't understand why some companies are willing to give bonuses to executives that have run the company into the ground. That's a battle I'll need to fight on my own as a stockholder. However, it is still the company's business as to who gets paid what. It is not the government's business. I happen to be one of those people who would like to be rich someday. There have to be private-sector means of curbing the spending of good money on bad behavior. I'd rather see a stockholder revolt than a taxpayer revolt. One item makes the business page. The other makes the front page, and usually involves bloodshed.

I know that America bears our share of responsibility for the mess that we all face. But I also know that we need not choose between a chaotic and unforgiving capitalism and an oppressive government-run economy. That is a false choice that will not serve our people or any people.

"We need not choose between a chaotic and unforgiving capitalism and an oppressive government-run economy." Ah, the eternal lure of the "Third Way." Clinton tried it, and had to back off after the '94 elections. We already have Third Way thinking in America: it's called the welfare state. That's where a large, capitalist society willingly accepts high taxes to provide long-term relief and support of poor people in the form of transfers of wealth.

This G-20 meeting provides a forum for a new kind of global economic cooperation. Now is the time to work together to restore the sustained growth that can only come from open and stable markets that harness innovation, support entrepreneurship and advance opportunity.

Anyone else bothered by the notion of "harnessing" innovation?

The nations of the world have a stake in one another. The United States is ready to join a global effort on behalf of new jobs and sustainable growth. Together, we can learn the lessons of this crisis, and forge a prosperity that is enduring and secure for the 21st century.

"Join me, I am popular and know what to do!" Well, we can only hope. Unfortunately, Mr. Obama is more focused on government controls than private-sector prosperity. I am not inspired. And I still want to know why this op-ed wasn't posted elsewhere. It's not like most of America's newspapers would turn him away.

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