Barack Obama was elected in large part on a promise to end a war. Instead he started a new one – against prosperity, the free-market system, what is known all over the planet as the American Dream. Tragically, he seems to be winning – at least for the moment – as deficits, debt, unemployment, and leading economic indicators point in the wrong direction.
Within the past week Americans learned that the federal deficit for the current year has already passed $1 trillion.
Even the Obama administration admits that FY 2009 red ink will exceed
$1.8 trillion which will be four times greater than the previous
largest annual deficit incurred in 2008, George Bush’s last year in
office.
Deficit spending during the Bush administration led to much of his
plummeting poll numbers and the defeat of dozens of congressional
Republicans. But, campaign promises to the contrary, the Obama
administration with a generous assist from the Democrats on Capitol
Hill are making the over-spenders of the Bush-era look like dime store
amateurs as the following chart demonstrates:
More bad news; of the more than $4 trillion that the government will spend this year, 46 cents of every dollar is borrowed, burdening us and most especially future generations of Americans.
Thomas Jefferson saw the dangers of debt clearly. In a 1789 letter to
his neighbor and friend, James Madison, the author of the Declaration
of Independence wrote of the immorality of one generation passing debt
to another:
"The earth belongs to each of these generations, during its course, fully, and in their own right. The 2d. generation receives it clear of the debts and encumbrances of the 1st. The 3d of the 2d. and so on. For if the 1st. could charge it with a debt, then the earth would belong to the dead and not the living generation. Then no generation can contract debts greater than may be paid during the course of its own existence."
Jefferson would not be very pleased with our current fiscal state of affairs.
USA Today brought the problem into a much more personal context
in a recent front page feature explaining that “Taxpayers are on the hook for an extra $55,000 per household to cover rising federal commitments made just in the past year for retirement benefits, the
national debt and other government promises.” According to the
national daily, the average personal debt per household in America is
$121, 953 consisting primarily of mortgage and various consumer debt
obligations. However, each household also has a burden of $546,668 of
the federal government’s obligations – and that debt is exploding with
absolutely no plan or hope of paying it off in anybody’s lifetime.
A great deal of that growing debt is held by foreign nations, raising
an obvious question about the wisdom of America’s mortgage being held
by creditors that don’t share an interest in our long term success as a
nation – some are outright hostile toward the US.
China is our largest “banker” holding over $1 trillion of the
Treasury’s IOUs. Most economists believe an economically healthy
nation can manage a small amount of debt without serious consequences.
The benchmark is typically less than 3% of GDP. Treasury Secretary Tim
Geithner was recently in the Middle East pledging to the Arab nations
and others that “soon” the US would again have deficit spending below
that consensus high water mark. But, even the Congressional Budget
Office does not see the US coming even close to Geithner’s wishful
thinking anytime soon, as the following chart shows.
Because of our relative size, as goes America’s economy, so goes the
world economy. And, the world is aware of America’s economic woes.
The July Bloomberg Global Confidence Index fell to 39.13 from 43.57
in June. A score below 50 indicates economic pessimists outnumber
optimists. As worrisome as the global outlook is, according to
Bloomberg, participants in the survey rated the U.S. economy worse than
the rest of the world at only 29.5, down markedly from 36.7 the
previous month.
President Obama and his administration wonks argued that the $787
billion economic stimulus was essential to keep unemployment under 8%.
Well, a trillion of red ink later, unemployment is at 9.5% - more than 10% in 15 states - without an end in sight.
Mort Zuckerman, chairman and editor in chief of US News and World
Report wrote a recent op-ed for the Wall Street Journal with the
ominous headline of “The Economy is Even Worse Than You Think.”
Zuckerman blasts the poorly targeted, woeful efforts of the government
stimulus known as the American Recovery and Reinvestment Act of 2009,
saying, “It was supposed to be about jobs but it wasn't. The Recovery
Act was a single piece of legislation but it included thousands of
funding schemes for tens of thousands of projects, and those programs
are stuck in the bureaucracy as the government releases the funds with
typical inefficiency.”
Zuckerman thinks the worst is yet to come as, “Job losses may last well
into 2010 to hit an unemployment peak close to 11%. That unemployment
rate may be sustained for an extended period.” Not encouraging words.
The unprecedented threats have not escaped even the Chairman of the
Federal Reserve, Ben Bernanke, who has done little to bolster any
confidence during the economic downturn. Nonetheless, even he warned
Congress that, “Unless we demonstrate a strong commitment to fiscal
sustainability in the longer term, we will have neither financial
stability nor healthy economic growth. Maintaining the confidence of
the financial markets requires that we, as a nation, begin planning now
for the restoration of fiscal balance.” Apparently, Congress didn’t
pay much attention to Bernanke’s warning, nor the concerns of a growing
number of economists.
With evidence piling up that the stimulus isn’t working as planned or promoted, someDemocrats are calling for a Son-of-Stimulus,
professing that the problem isn’t mistaken policy but too little
spending. At least for the moment, Obama is saying “No” to a second
economic stimulus package – but, then he’s already demonstrated how
quickly he can go back on a promise or flip-flop on a principle.
As if the deterioration of the economy, and the failure of the spending
policies enacted in just the first half this year to do anything
positive are not ominous enough, Obama and the Democrat leadership are
hell-bent on pushing through even more legislation that will destroy
more jobs, add to staggering debt, and weaken an already reeling
economy.
The House has passed the Waxman-Markey bill commonly known as
Cap-and-Trade. However, as Ben Lieberman, Sr. Policy analyst for
Energy and Environment in the Thomas A. Roe Institute for Economic
Policy Studies at The Heritage Foundation says, the legislation is “nothing more than an energy tax in disguise.”
Lieberman’s analysis of the provisions of the legislation estimates
electricity costs would soar 90%, gasoline by 58%, and natural gas by
55% by 2035” putting an additional burden of $4,600 on a family of four
and hitting low income people the hardest.
Obama and the Democrat leaders fraudulently claim Cap-and-Tax (it is a
tax bill, not a trade bill) will create jobs. But, as Lieberman
discovered, because of the increase energy costs that will eventually
be passed on to consumers, the legislation would have devastating
impacts to the economy resulting in enormous job destruction – not
growth. “We estimate job losses averaging 1,145,000 at any given time
from 2010-2035. And note that those are net job losses, after the
much-hyped green jobs are taken into account,” Lieberman testified to
members of the Senate. Hardest hit may well be the nation’s farmers who
are extremely dependent on energy sources and cost. “Higher gasoline
and diesel fuel costs, higher electricity costs, and higher natural
gas-derived fertilizer costs all erode farm profits, which are expected
to drop by 28 percent in 2012 and average 57 percent lower through
2035,” predicts Lieberman.
Indeed, a March report documents
that a similar ill-conceived effort by the government of Spain to
create green jobs and battle the global warming demons actually
destroyed 2.2 jobs for every 1 it created at a cost to the Spaniards of
$753,000 per new job. Worse, the study concluded that only 1-in-10 of
the green jobs was permanent.
The whole cap-and-tax argument is based on the presumption that earth’s
temperature is rapidly increasing and we must endure whatever cost and
hardship necessary to save life as we know it while there is still
time. Regardless of a decade of global cooling and growing questions
within the scientific community, Obama and his Democrat cohorts have
declared the case closed. The administration even attempted to bury an EPA
report by two of their own, Alan Carlin and John Davidson, that cited
numerous reasons to slow down before rushing into an expensive and
potentially fruitless battle with a still misunderstood, perhaps even
phantom, demon called global warming.
Lost in the debate seems to be the fact that even if the earth were to be warming, man’s contribution
is minimal, and thus our ability to change the equation is similarly
very small. About 98% of the atmosphere is nitrogen (78%) and oxygen
(20%), leaving just 2% of what is commonly referred to as “greenhouse”
gases. Contrary to popular conception, the earth actually needs these
gases to absorb radiation from the sun to keep us warm enough to
sustain life as we know it. Too little of these gases and the earth
becomes a big ice cube, and too much and we eventually start to bubble.
Of the 2% of the atmosphere that is in the category of greenhouse
gases, the vast majority is water vapor. 3.6% of all greenhouse gas is
the often vilified carbon dioxide (CO2), the primary target of the
cap-and-tax legislation. It is clear that emitting excessive carbon
molecules is not in the best interest of sustained life on the earth.
However, man’s portion of the total equation seems pretty minimal; so
too, then his ability to make much of a difference seems limited.
As the following chart demonstrates, only 3.4% of atmospheric carbon
dioxide is a result of human activity. Does that mean man can throw
caution to the wind and be anything less than a good steward of the
environment? Of course not! But, it does at least beg the question if
nationalizing the energy industry – as this legislation clearly will
lead to – as well as burdening the economy with higher taxes greater
debt, and huge job loss is really the right thing to do? Especially
now?
On the heels of cap-and-tax, congress took up Obama’s signature issue,
government operated universal health care. The House plan would cost $1.5 trillion, stick small businesses with an 8% payroll penalty fee
if they don’t provide employee coverage, add a surtax to top income
brackets, and create another government behemoth bureaucracy that would
literally hold your and your family’s life in their hands.
Speaking last month to the nation’s largest association of doctors, the American Medical Society (AMA), Obama repeated his familiar pledge
that, “If you like your doctor, you will be able to keep your doctor,
period. If you like your health care plan, you’ll be able to keep your
health care plan, period. No one will take it away, no matter what.” In
what is becoming a far too lengthy list of broken promises, however,
the House bill that he celebrated as a milestone achievement contains
provisions to do just the opposite.
The day following release of the House bill, the sharp eyed editors at
Investor’s Business Daily disclosed that, “on Page 16 is a provision
making individual private medical insurance illegal… The provision
would indeed outlaw individual private coverage. Under the Orwellian
header of ‘Protecting The Choice To Keep Current Coverage,’ the
‘Limitation On New Enrollment’ section of the bill clearly states:
‘Except as provided in this paragraph, the individual health insurance
issuer offering such coverage does not enroll any individual in such
coverage if the first effective date of coverage is on or after the
first day’ of the year the legislation becomes law.”
So, the editors go on to explain, “Those who currently have private
individual coverage won’t be able to change it. Nor will those who
leave a company to work for themselves be free to buy individual plans
from private carriers.” Research done by The Lewin Group predicts
that as many as 2/3 of all Americans currently with private coverage
plans (about 120 million) would end up in the government program. If
sooner or later you run out of options, what choice remains?
The truth finally comes out: the “Public Option” in Obama-Care means
only one option – his option – and sooner or later, you’ll have no
other option.
Obama-Care, just like Hillary-Care before it, is based on the myth that
government can deliver health care better and cheaper to everyone.
That fantasy ran into a big stumbling block when Congress’s own budget
expert, Doug Elmendorf, Director of the Congressional Budget Office, testified last week
before the Senate. "In the legislation that has been reported, we do
not see the sort of fundamental changes that would be necessary to
reduce the trajectory of federal health spending by a significant
amount,” Elmendorf told the Finance Committee. “And on the contrary,
the legislation significantly expands the federal responsibility for
healthcare costs."
Obama has continually promised that his government plan would “bend the
curve” in rising health care costs in America. Committee Chairman Max
Baucus asked Elmendorf about the direction that the proposed
legislation would actually push costs, and the director had to admit,
“the curve is being raised.” Oops!
Existing Medicare and Medicaid obligations already threaten America’s
long-term fiscal solvency. Mr. Obama, Speaker Pelosi, and Senator
Reid, how about addressing the problems of existing programs before
creating another entitlement program to hasten the nation’s bankruptcy?
If not driving the train that is the Democrat’s agenda, Big Labor is
certainly shoveling the coal to fire the engines. Back in 2007, the
new Democrat majority in Congress bowed to the unions and implemented a
multi-staged increase in the minimum wage. The third increase to $7.25
an hour is mandated to happen this Friday, July 24. For all their
proclaimed concern about “saving and creating jobs” the Democrats
apparently chose to skip over this jobs killer, too. A University of
California-Irvine study calculates that “the 70-cent per hour minimum
wage hike this month would kill “about 300,000 jobs for those between
the ages of 16-24.” Youth unemployment is already at 24%,
for blacks it is an alarming 38%. Yet, there is not even discussion of
holding off on the scheduled mandated increase among the Democrats (See the following chart).
Apparently these aren’t jobs worth “saving” as happy union bosses make
far more campaign contributions than unemployed nineteen year olds.
Another Democrat policy mystery involves Fannie Mae and Freddie Mac,
the two GSEs (government sponsored enterprises) that we taxpayers have
bailed out for failed mortgage underwriting policies resulting in $150 billion of losses thus far since the third quarter of 2007. As Rep. Darrell Issa articulates so very well in this month’s A Line of Sight, the unwillingness to address the glaring problems for years with the government sponsored mortgage giants are inexcusable.
Everyone understands that the decline in the housing markets
precipitated by mortgage loan defaults led the way into the current
economic mess. Recently, Dr. Stan Liebowitz, Professor of Economics at
the University of Texas-Dallas, released findings of his research
into the cause of over 800,000 residential foreclosures. The following
summary by Liebowitz demonstrate clearly that despite the common
perception that the sub-prime market and ARM (adjustable rate
mortgages) payment increases were behind all the loan defaults, over
half of all foreclosures were due to the borrower having little or
negative equity in their home – policies previously implemented by
Fannie and Freddie as directed by the politicians on Capitol Hill.
Nonetheless, coincidental with Liebowitz’s report, the Obama administration announced a relaxing of mortgage underwriting criteria
to 125% of value for Fannie and Freddie borrowers that find themselves
“underwater” that will create another new class of borrowers with
negative home equity.
Similarly the Wall Street Journal reports that Barney Frank
(D-MA), Chairman of the House Financial Services Committee, has written
a letter demanding Fannie and Freddie relax standards “to take more
risk in condo developments with high percentages of unsold units, high
delinquency rates or high concentrations of ownership within the
development.”
It is one thing to have not learned the lessons of the Great
Depression, but to ignore the reality of the present is quite another
matter. Frank and others still on Capitol Hill have been around long
enough to share the guilt of creating the failed policy that led to the
current crisis, but not so long that they can claim loss of their
memories. Someone needs to take away their shovel so they at least
stop digging us into an ever deepening hole. As an IBD editorial screamed on July 2 with the revelation of the latest unemployment statistics, “Stop the Madness that’s Killing Jobs.”
Just as during the Depression of the 1930s, government intervention –
particularly by unproductive deficit spending and misguided policies –
is worsening the recession and delaying recovery. “Why is this job
decline happening?” IBD asks rhetorically. “The private sector — the
real engine of economic and job growth — won't hire because it's scared
of what it sees coming out of Washington,” they answer.
The editors continue, “On the horizon, as far as the eye can see, are
higher taxes, uncontrolled spending and layers upon layers of new
regulations. Who would hire new workers faced with that?”
Ominous warnings abound that what the new team in town is doing isn’t working. Respected economist Larry Kudlow is worried
that not only is America being challenged for global economic dominance
by the Chinese, but he fears we are rapidly moving in the failed
direction of the Europeans. “Heavy government controls at home, along
with an income-leveling social policy couched in economic-recovery
terms, is no way to run a railroad,” Kudlow thinks. “We’re going the
wrong way,” the CNBC commentator said.
American families and small business are dangling from rope strung up
by their own government. Instead of high taxes, more regulation,
runaway spending, and burdensome debt, Washington ought to be looking
for every way possible to loosen the hangman’s rope and let us breathe
again. In my book A Return to Values: a Conservative Looks at his Party
I wrote extensively on what can be done to actually foster economic
expansion and wealth creation. It’s pretty simple – maximize personal
freedom, not crushing government control.
Much of what I believe is consolidate in something I came across
decades ago called “Lincoln’s Principles.” As I first read the ten
brief statements of belief, I thought how similar they were to the
principles of my parents and what I thought were the foundational
principles of American greatness. If these were conservative
principles, Republican principles, I concluded that I belonged in the
Party that professed them.
However, beyond principles for only some Americans - the GOP - I
believe Lincoln’s Principles are the cornerstone for the perpetuation
of what has always drawn generations of pilgrims to our borders. The
free-market opportunities, prosperity, the chance to get ahead and
leave something better for your children – the American Dream.
Lincoln’s Principles are worth reviewing again:
- You cannot bring about prosperity by discouraging thrift.
- You cannot strengthen the weak by weakening the strong.
- You cannot help small men by tearing down big men.
- You cannot help the poor by destroying the rich.
- You cannot lift the wage-earner by pulling down the wage-payer.
- You cannot keep out of trouble by spending more than your income.
- You cannot further the brotherhood of man by inciting class hatred.
- You cannot establish sound security on borrowed money.
- You cannot build character and courage by taking away man’s initiative and independence.
- You cannot help men permanently by doing for them what they could and should do for themselves.
Today, the American Dream is at risk. It is under attack by those
who think prosperity and profit is a bad thing, that wealth is to be
confiscated and redistributed as government sees fit, rather than
through the charity and benevolence of the one who created it. They
fail to realize that the promise of prosperity stimulated improvements
to every generation’s quality of life, our health, our homes, our
productivity, our transportation, our communication, our safety and
security, our knowledge of our neighborhood as well as our universe,
and our freedom. The American free-market economy created not only the
highest standard of living and the greatest economic engine in the
history of the world, but it created the greatest defender of freedom
and liberator of oppressed peoples. Humanitarian aid from the United
States of America has fed, clothed, and healed countless of the world’s
desperate and impoverished peoples. The American Dream – that idea and
living example that all men really are created equal and deserve equal
opportunities, protections, and individual freedom under a uniformly
guaranteed and administered rule of law - has inspired dissidents
suffering under the heel of tyrants across the globe to fight for their
own freedom in their own homeland. None of this would have been
possible without the reality and perpetuation of the American Dream
from the time of Jefferson and our Founding Fathers through the present.
However, the Dream is at risk, and too many aren’t even paying
enough attention to be aware of the consequences of what is happening
around them with blinding speed. President Reagan said, “Freedom is
never more than one generation away from extinction. We didn't pass it
to our children in the bloodstream. It must be fought for, protected,
and handed on for them to do the same, or one day we will spend our
sunset years telling our children and our children's children what it
was once like in the United States where men were free.”
Reagan is revered for ending the Cold War with the Soviets. But, he
knew there were other threats to our freedom as well. Reagan also
restored to health an economy weakened by the highest “misery index”
(unemployment plus inflation) in American history during the Carter
years, and set the stage for the unprecedented expansion of the twenty
years that followed his Presidency. He did it by adherence to
conservative principles and tax cuts that left money in the pockets of
the people that earned it rather than in the government’s treasury.
Every generation of American’s has been able to affirm to the next that
freedom as they had known it had been faithfully preserved. Will we be
able to say the same to our children?
