The Economy, Continued

George W. Bush handed off a bad economy to Barack Obama. I believe we can all agree on this. However, after that, the perception of economic reality between conservatives and liberals diverges. For example, Bush took the wrong step--after cutting taxes during the '01-03 recession--of attempting a massive government bailout/intrusion into the economy. The '08-'09 recession has been the result of a collapse in home prices, credit, and some of the financial and industrial concerns that depended on the credit markets. The bail-outs under Bush and Obama, administered by the Secretary of the Treasury, have not worked. Credit remains tight, more mortgages are failing, and credit remains tight. Enter Barack Obama.

It is time to stop blaming George W. Bush for the economy. This economy has been Obama's for a month now. Gone is the soaring rhetoric of "hope" and "change." Now we are treated to grim reality, "It's going to get worse before it gets better," and more excuses for the government to intrude into the private sector.

A jolt of government spending on private-sector products and services could temporarily juice the economy, though John Maynard Keynes himself said that incentives were necessary to encourage businesses to invest and expand. Those incentives generally include tax cuts and reductions in regulations. The Obama stimulus plan has not done this. It has focused on government spending on government-focused activities that increase the federal bureaucracy but does not increase private-sector productivity, which has always been more dynamic and profitable than government activity. It has increased taxes on the people with the most money, who would be the ones paying the most taxes and investing in the most profitable businesses. He has proposed a massive new dose of federal spending that the nation cannot afford, foreign investors do not want to subsidize (or want concessions to support), and which could inflate the currency in the long run.

Furthermore, President Obama and his party in Congress have attached regulations and strings to their version of the bailout money. President Obama has criticized CEOs for flying in private jets or going on business travel to expensive places, potentially damaging businesses and jobs in those industries. The more the government interferes, the less businesses are likely to take risks, for fear of being targeted or criticized for their attempts at success.

Obama has preached about a new "era of responsibility," but the government bailing out businesses and individuals who made bad decisions guarantees more irresponsibility in the future because somewhere, somehow, people believe that the government will always bail them out if they screw up. Indeed, the bigger the screwup (billions of dollars lost), the more likely it is that a company will get a bailout!

Obama wants more Americans working, but extending unemployment benefits or upping the benefits is an incentive to stay home and let the government take care of you. And so forth.

In short, I believe President Obama's policies and public statements are making the economy worse, not better. I want my country to be rich. Heck, I want to be rich! I want my 401(k) back. I've been told I need to "give Obama a break." At what point can the voters make him accept responsibility? When the Dow doubles down a couple more times? When unemployment hits 10%? 15%? 25%, as it did under Roosevelt? At what point can we stop blaming Bush? And saying things like "Well, Bush did X worse" is not helpful, nor is it a terribly effective defense of Obama. Bush is not president anymore, Obama is, and I want him to know what he is going to do that will be good for the economy.

I want the president to cut taxes. I want him to ease up on the private sector. I want him to stop telling businesses that it's not appropriate to travel to Las Vegas or Orlando for conventions. I want him to stop criticizing anyone able to afford a private plane. I don't want him to spend more in one year than most of the most expensive years-long projects in American history. If he's going to spend taxpayer money, let it be for basic infrastructure, basic research and development (including space exploration), quality academic and trade education, and temporary relief of economic hardship. If he really wanted to kick up the economy, he could cut the number of the federal regulations (and the bureaucracy responsible for increasing their number), bypass bailing out banks and other companies, and send every taxpayer $10,000. We would probably still come out ahead...plus, he'd stimulate consumer spending like nothing anyone has ever seen! I could get behind a program like that.

Heck, if he did all that, I might vote for him in '12!

What's In the Stimulus Bill?

Far be it for me to be ungracious...I'd like to thank CNN.com for providing this summary of some of the more interesting items included in President Obama's "stimulus" bill.

• $2 billion earmark to re-start FutureGen, a near-zero emissions coal power plant in Illinois that the Department of Energy defunded last year because it said the project was inefficient.
• A $246 million tax break for Hollywood movie producers to buy motion picture film.
• $650 million for the digital television converter box coupon program.
• $88 million for the Coast Guard to design a new polar icebreaker (arctic ship).
• $448 million for constructing the Department of Homeland Security headquarters.
• $248 million for furniture at the new Homeland Security headquarters.
• $600 million to buy hybrid vehicles for federal employees.
• $400 million for the Centers for Disease Control to screen and prevent STD's.
• $1.4 billion for rural waste disposal programs.
• $125 million for the Washington sewer system.
• $150 million for Smithsonian museum facilities.
• $1 billion for the 2010 Census, which has a projected cost overrun of $3 billion.
• $75 million for "smoking cessation activities."
• $200 million for public computer centers at community colleges.
• $75 million for salaries of employees at the FBI.
• $25 million for tribal alcohol and substance abuse reduction.
• $500 million for flood reduction projects on the Mississippi River.
• $10 million to inspect canals in urban areas.
• $6 billion to turn federal buildings into "green" buildings.
• $500 million for state and local fire stations.
• $650 million for wildland fire management on forest service lands.
• $1.2 billion for "youth activities," including youth summer job programs.
• $88 million for renovating the headquarters of the Public Health Service.
• $412 million for CDC buildings and property.
• $500 million for building and repairing National Institutes of Health facilities in Bethesda, Maryland.
• $160 million for "paid volunteers" at the Corporation for National and Community Service.
• $5.5 million for "energy efficiency initiatives" at the Department of Veterans Affairs National Cemetery Administration.
• $850 million for Amtrak.
• $100 million for reducing the hazard of lead-based paint.
• $75 million to construct a "security training" facility for State Department Security officers when they can be trained at existing facilities of other agencies.
• $110 million to the Farm Service Agency to upgrade computer systems.
• $200 million in funding for the lease of alternative energy vehicles for use on military installations

One thing becomes clear to the careful reader: there is very little spending on private-sector activities, theoretically where the most help is needed, since the economy is usually the result of private citizens buying and selling goods and services, not the government. However, that is clearly not the point of this bill. I think like a private citizen and member of the private sector, so I look at results, not intentions. "He means well" doesn't cut it with me if his policies further damage the economy. I loved this line (he says, dripping sarcasm):

“Let’s not make the perfect the enemy of the essential,” Obama said while acknowledging criticisms of the plan. “A failure to act and to act now will turn crisis into catastrophe and guarantee a longer recession.”

Regarding making "perfect" the enemy of the "essential," Obama is so far off the mark as to require a course in basic economics. Massive government spending on more government is not a stimulus for the private sector, but only the government.

Then there's his assertion that a failure to act will guarantee a longer recession. Hardly. His willingness to tinker with the economy on a scale that would have beggared even Franklin D. Roosevelt's imagination, is a recipe for sure extension of the recession. The economy managed to recover from the previous two recessions--1991-93 and 2000-02--with little to no government intervention. And the unemployment rate was as bad or worse in '92 as it is now.

Because of the housing market (caused in part by government action), perhaps government activists feel they need to make amends? I'm baffled, but economic historians have shown that government activism tends to lengthen economic recession and strengthen government, while leaving "the forgotten man" basically untouched.

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I'm utterly frustrated by the "bailouts" and the "stimulus," neither of which will do much to stabilize the markets. I've already laid down the law on myself--if I get another "stimulus check," I'm sending it back to Uncle Sam, unopened, unspent, but not unanswered. My opinions will be received (if not read), along with the uncashed check. Let the IRS make of that what they may. Why would I do such a thing when the government is sending me "free money?" Consider this: several companies have received bailout money already, and when they have used the money as they see fit, they have been pummeled in the media for spending it in various ways (executive junkets, upgrading the corporate offices, etc.). There's a simple lesson in those events. As Robert A. Heinlein would put it, "TANSTAAFL: There Ain't No Such Thing As A Free Lunch." Suppose I, Bart Leahy, Private Citizen, spent my taxpayer-funded gimme check any way I wanted, and I spent it in a way the government did not approve of? Aren't they attaching strings to my economic activity? Aren't they, in fact, infringing upon my freedom?

Okay, I freely admit that I spent the previous checks--what were they for, $300 and $600?--so I'm not as much of an ideological purist as I'd like to think. I'm also still paying off a federally funded student loan, too (note that I am paying it back, though, not defaulting). Anyhow, so why take a stance against handouts now? Probably because I don't need the money, as I did in 2001 and 2007. If I'm comfortable by my lights, why should I take a handout, especially a handout that's coming out of my own taxes, anyway? Why not just cut my taxes $1,000 or whatever and leave me be? For one thing, the stimulus of '01 cost about $100 billion, as opposed to $800B, and it was accompanied by actual tax cuts, which have a longer-lasting effect on my ability and willingness to spend. And besides, this time, who knows? There might really BE restrictions and detailed strings attached. Am I going to be the next private citizen pilloried for spending my "stimulus" in an "inappropriate" or "shameful" manner? Hardly.

Now one suggestion that has been floated around out there is to just send every individual taxpayer around $10,000, which is what the bailout would amount to per person. This isn't as stupid an idea as some people might think. Libertarian sociologist Charles Murray actually recommended a scheme like this in his 2007 book In Our Hands, in which he proposed to eliminate much of the vast welfare bureaucracy and just automatically send every citizen a $10,000 check every year to do with as they pleased...with the understanding that no other relief would be coming. Heck, with ten grand, I could pay off my debt and my European vacation, leaving me flush and debt-free for 2010, and the next $10,000 available for investment purposes. Of course the current government wouldn't do that, any more than economic liberal George Bush would have done it. But jeez, there's got to be a way to send a message to Washington that resonates: "Leave us alone!" doesn't seem to sink in anymore.

Airsick Yet?

As of now (October 13, 2008, 9:56 a.m. Central Time), the markets are up, perhaps in response to the global bailout, which amounts to the G7 nationalizing the capital market, perhaps because they think and hope that the market hit bottom last week. One can hope.

The Weekly Standard had an article last week about how conservative Republicans have gotten their reaction to the market all wrong. We're too nationalist, too protectionist, too anti-free trade. Here's the problem with unlimited free trade (also called "globalization"): supply and demand pushes businesses to move their labor-intensive, unskilled work to places with plentiful cheap labor and fewer regulations. This puts unskilled workers in the U.S. out of work. If those unskilled workers are unable to find other work or go where the work is, they can end up on the welfare rolls, creating a drain on the economy. Jerry Pournelle is not a huge fan of labor unions, though he does consider a minimal protectionist tax on imported goods enough of a buffer to preserve some jobs in the U.S.

We still make a lot of stuff, but as more nations' populations become industrialized and educated, the more competition we will face. Our lead in exports comes from creating and exporting high-tech, big-ticket items like commercial aircraft. What happens when our workforce is no longer as skilled as it once was--and government schools are not what they once were? There are a lot of things going on, and our leaders need to give them serious attention:

• Our borders need protection.
• Our children must be educated in both intellectual and physical trades.
• Our citizens need jobs that support families.
• Our energy supplies need to be increased and new energy technologies developed.
• We need accountability among individuals, in businesses, and the government on the subprime mortgage and capital market crash.

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And then there's this little bit from Barack Obama. His commercials lately have been touting a tax cut for 95% of Americans. Impossible, ladies and gentlemen. The bottom 50% of taxpayers get all their money back after April 15. Here's why:

Mr. Obama's campaign promise, which he has repeated in his speeches and in the presidential debates, stems from his "Making Work Pay" tax cut that will give a $500 refundable tax credit to every worker or $1,000 to each working couple. But because this provision in his economic-recovery plan is "refundable," a large number of middle- to lower-income workers who have no income-tax liability after taking tax credits and deductions the that [sic] Internal Revenue Service allows, will be given the equivalent of the tax cut in the form of direct payments from the U.S. Treasury - funded by higher-income taxpayers. [Emphasis mine.]

That is not a tax cut. That is a giveaway. It's a handout, like those "stimulus checks" we got this year and after 9/11. It's redistribution of wealth. Call it what you will, but calling it a tax cut is a lie. It's taking money from those who have more of it and handing it off to those who don't have as much and hoping they spend it in ways that will keep the economy going. In other words, the standard socialist policies we've seen before from this party.

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I was recently accused of hating the poor. The individual thought I wanted the poor to be poor. No, wrong. Wrong squared. I want everyone to have the opportunity to get rich! That means reducing taxes and regulations that hamper businesses. It means allowing individuals to keep more of their money. Why should I work hard to get rich if the harder I work, the more the government takes? And who the heck is the government to say that they have the right to take my money if I someday manage to make $250,001? Why should any of us accept this? Arrgh. I'm heading for the showers. Let's be careful out there.