Reagan's Legacy Army

Among Reagan's list of accomplishments, one that goes relatively under the radar is his repeal of the Fairness Doctrine.

Under FCC Chairman Mark S. Fowler, a communications attorney who had served on Ronald Reagan's presidential campaign staff in 1976 and 1980, was appointed by Reagan to head the FCC.^[10] The commission began to repeal parts of the Fairness Doctrine, announcing in 1985 that the doctrine hurt the public interest and violated free speech rights guaranteed by the First Amendment.

While the Repeal of the Fairness Doctrine will play a minor role in Reagan's overall policy legacy, it will play a major role in shaping his legacy. That's because the repeal of the Fairness Doctrine ushered in Rush Limbaugh. Limbaugh all but created the talk radio format now dominated by conservatives.

During the Fairness Doctrine, if you were to put on someone like Rush, you also had to put on someone with his opposite beliefs...to be FAIR. Little did anyone know that there were a lot more conservatives wanting to talk politics with the people at large for hours at a time than Democrats. During the Fairness Doctrine days conservative talk radio had no place because you also had to have liberal talk radio.

With the handcuffs taken off, Rush Limbaugh ushered in a new age. A lot of people are so called Reagan Conservatives. Talk show hosts have a special place in their hearts for Ronald Reagan. That's because he created them.

Winston Churchill once said, "I don't fear history for I intend to write it." Reagan didn't likely set out to write history but repealing the Fairness Doctrine has effectively done that. He created an army of history writers in talk radio that will until the end of time write history favorably to him. Now, my liberal readers will say that history won't only be written by talk radio. That's true. Nothing is as organized against Reagan's legacy, however, as talk radio is organized in favor of it. He's effectively insured that history will be written in his favor with the repeal of the Fairness Doctrine.

What Obama Might Be Thinking Now

President Obama has been mocked and ridiculed for making this statement.



It's a fairly inexplicable statement. After all, Presidents that are great usually get a second term. Second, presidents rarely believe that sacrificing their own power is worth anything. What does Obama mean by this? Well, a clue may be found in this statement he made before he became president.

I don't want to present myself as some sort of singular figure. I think part of what's different are the times. I do think that, for example, the 1980 election was different. I think Ronald Reagan changed the trajectory of America in a way that you know Richard Nixon did not, and in a way that Bill Clinton did not. He put us on a fundamentally different path because the country was ready for it. I think they felt like, you know, with all the excesses of the 60's and the 70's and, you know, government had grown and grown but there wasn't much sense of accountability in terms of how it was operating. And I think people just tapped into – he tapped into what people were already feeling, which is we want clarity, we want optimism, we want you know a return to that sense of dynamism and you know, entrepreneurship that had been missing, alright?

It's important to note that he saw Reagan as transformational whereas Clinton wasn't. Obama doesn't want to settle for incremental change. He wants to significantly change our society in a way that will make him a mythical figure.

Clinton balanced the budget, reformed welfare, and cut the capital gains tax. All those made him successful and they gave him a second term. They didn't however make him a transformational figure in the mind of President Obama.

That may explain Obama's stubborn pursuit of health care reform, cap and trade, and possible immigration reform. No matter how unpopular health care reform gets, Obama likely in fact views it as the sort of transformative change that is worth anything. He may in fact be willing to sacrifice a second term, his party's popularity, and anything else to pass it. That's because health care reform, in his mind, will be transformative on a scale that will make him transformative.

Of course, Obama himself said that Reagan presented a governance that the "country was ready for". Clearly, the country isn't ready for his health care reform but Obama is still willing to force in on the country. In that way, he views himself differently than Reagan. He'll transform the country even if it isn't ready for it.

This makes Obama an ideologue that is more loyal to his ideology than even to his own power. As such, he's willing to advance this ideology no matter the consequences. If that's the case, that also makes him very dangerous.

The Jobs Summit

The President held his jobs summit today.

Chronic unemployment isn't merely academic but rather "a struggle that cuts deep and touches people across the nation," President Obama said at a much-anticipated jobs summit Thursday where he acknowledged skepticism over the ability to produce results.

Still, the president claimed progress toward an economic recovery while saying much more work needs to be done -- even as the left wing of his party accused his administration of not doing enough to increase employment.

Obama sought fresh ideas from the 130 corporate executives, small business owners and labor leaders who attended the jobs forum. The president said the leading question of the day is "how do we get businesses to start hiring again."

After his opening remarks, the group broke into smaller study groups. Obama planned to address the entire group again at day's end.

I've said it before. Politicians hold summits, councils, and advisory committees when there's a problem they know they need to address and they have answers. Instead, politicians want the folks to think they're making every effort on this matter.

That's what's happening here. The optics on this thing, however, are horrible. In reality, it's the president's policies that are horrible. Wasn't the stimulus supposed to create jobs? Why has he been in office for nearly a year and only now getting ideas to create jobs? Wasn't job creation a top priority? Wouldn't a jobs summit have been the first thing he convened?

Of course, when things are going bad the optics are always bad on everything. The real problem is that we've spent record amounts of money and have a 10.2% unemployment rate to show for it. If he hadn't held a jobs sumit, his opponents would be complaining that people are struggling and the president isn't doing anything.

Now, they'll complain that it's either worthless or ten months too late. Either way, their complaints will resonate only because the unemployment rate is so high and there's a reason to complain.

Back when the stimulus was about to pass, Bill O'Reilly said that Obama was staking his presidency on its success. He said that there was something admirable in taking that large a gamble on such a policy. I suppose there is something admirable in believing so much in a policy that you stake your presidency on its success. It's even more admirable, however, if said policy actually works.

Back at the beginning of his presidency, Ronald Reagan faced a unique problem. He faced high unemployment and high inflation. While he was working on cutting taxes to stimulate the economy, Paul Volcker was raising interest rates to reverse inflation. Of course, the second stunted the first and it was driving factor in the double dip recession that occurred. Reagan never wavered and he never questioned Volcker as he was stemming inflation. I was too young to remember so I don't know if Reagan held any jobs summits in 1982 when things looked bleak. Reagan wound up watching his Republican allies suffer heavy losses in those mid terms. Then, in 1983, the economy began a remarkable turnaround that ultimately only ended in 2008. Reagan indeed, also, staked his presidency on a bold policy, dropping the top rate from 72% to 28%. It's even more admirable that he risked everything on a policy that worked.

The jury is still out on whether or not Obama's gambit will work. It may still shake out that running up a near $2 trillion deficit will create jobs. We're still years away from making a final judgment. That said, Obama is now married to his stimulus. The fate of his presidency rests entirely in it working and leading to economic prosperity. It will be that success or failure and not any jobs summit that will matter. This is the story of the day but the real story is the fate of the stimulus.

Krugman's One Man Reagan Assault Continues

Paul Krugman appears to be determined to try and rewrite the history of the Reagan years all on his own. He continues with this piece.

Let’s talk for a moment about why the age of Reagan should be over.

First of all, even before the current crisis Reaganomics had failed to deliver what it promised. Remember how lower taxes on high incomes and deregulation that unleashed the “magic of the marketplace” were supposed to lead to dramatically better outcomes for everyone? Well, it didn’t happen.

To be sure, the wealthy benefited enormously: the real incomes of the top .01 percent of Americans rose sevenfold between 1980 and 2007. But the real income of the median family rose only 22 percent, less than a third its growth over the previous 27 years.

Moreover, most of whatever gains ordinary Americans achieved came during the Clinton years. President George W. Bush, who had the distinction of being the first Reaganite president to also have a fully Republican Congress, also had the distinction of presiding over the first administration since Herbert Hoover in which the typical family failed to see any significant income gains.

Only Paul Krugman would think that the years 1981-2007 were bad for all Americans. Furthermore, he seems to blame Reagan for the Bush years even though Reagan had been out o office for 16 years by then. First, comparing the year 1953-1980 to 1981-2007 is totally misleading. We were still only ten years removed from the Great depression at the beginning of that era. Much of the gains were making up for years and years of enormous economic losses. Furthermore, the "income" gained in most of the seventies were due mostly to inflation. None of this Krugman puts into context.



More than that, here's a very inconvenient fact that Krugman also doesn't mention about the Reagan years. The last two years of the Carter Presidency produced stagflation which continued into the Reagan presidency. A recession was created largely because Paul Volcker raised interest rates in order to beat the inflation that was occurring after Carter's reign. So, poverty, which began rising in 1978, didn't stop rising until 1983. From there, it continued to drop steadily until it reached levels of 1978.



All of this is simply economic nonsense. No one doubts that the years 1983-2007 were 25 years of near uninterrupted growth. So, some, like Krugman, will isolate misleading statistics in order to make it seem as though Reagan's policies didn't benefit all. Frankly, I'm sure they didn't. It isn't the president's job to see to it that each and every American succeeds. That's up to each individual. The president is supposed to create an economic environment most conducive for success. That's exactly what Reagan did with his tax cuts and deregulation. The rest was up to the individual.



Worse than that, Krugman continues to blame the era of "deregulation" on the mortgage crisis and he furthermore blames Reagan for all of this.

There’s a lot to be said about the financial disaster of the last two years, but the short version is simple: politicians in the thrall of Reaganite ideology dismantled the New Deal regulations that had prevented banking crises for half a century, believing that financial markets could take care of themselves. The effect was to make the financial system vulnerable to a 1930s-style crisis — and the crisis came.

“We have always known that heedless self-interest was bad morals,” said Franklin Delano Roosevelt in 1937. “We know now that it is bad economics.” And last year we learned that lesson all over again.

Or did we? The astonishing thing about the current political scene is the extent to which nothing has changed.

This is the standard liberal line, deregulation caused the crisis. Krugman, like most liberals, can't actually point to a specific piece of deregulation which shows you just how weak the case is. I'll say the same thing that I say each and every time this argument is advanced. Fraud, more than anything, contributed to the crisis. Fraud is not now, was not then, nor will ever be legal. No one deregulated fraud out of our regulatory handbook. As such, most of the problematic loans, and the financial instruments they created, were not done legally. That isn't a lack of regulation but enforcement, and that's a totally different problem. It's not Ronald Reagan's fault that regulators looked the other way while teachers, plumbers, and janitors systematically ballooned their incomes on application in order to qualify for loans.



All of this Krugman uses to make an absurd argument for the public option.

The debate over the public option has, as I said, been depressing in its inanity. Opponents of the option — not just Republicans, but Democrats like Senator Kent Conrad and Senator Ben Nelson — have offered no coherent arguments against it. Mr. Nelson has warned ominously that if the option were available, Americans would choose it over private insurance — which he treats as a self-evidently bad thing, rather than as what should happen if the government plan was, in fact, better than what private insurers offer.

But it’s much the same on other fronts. Efforts to strengthen bank regulation appear to be losing steam, as opponents of reform declare that more regulation would lead to less financial innovation — this just months after the wonders of innovation brought our financial system to the edge of collapse, a collapse that was averted only with huge infusions of taxpayer funds.

Krugman goes on to quote Upton Sinclair in saying "It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” The implication being that opponents of the public option are simply tools of the health insurance industry. The irony here is that the charge would apply to Krugman himself. He's made quite a living espousing Keynesian style economics and bigger government. In that respect, the "public option" is near a fantasy. There are plenty of good arguments against it but Krugman would never hear of them since his entire paycheck depends on believing something different.

The Obama Presidency and Liberalism

I think it's fair to say that the Obama presidency could be viewed as a controlled experiment on the worthiness of liberalism. With a very liberal president and overwhelming Democratic majorities, America is going to get a heavy dose of liberalism until at least 2010. (unless that is the President has a moderate epiphany as I suggested) Yet, if the president continues on his current path, he will also lead an imprint for history to judge liberalism in America.

So far, that judgment is incomplete but it's also near an incomplete failure. We first started with the stimulus. On the economy, the president famously said, "only government has the resources to jolt our economy back into life". He went on to say, "Tax cuts alone can't solve all of our economic problems" and so totally rejecting the conservative fiscal solution to an economic recession. Nothing could be more liberal than seeing the government as the driver of economic growth. So, he passed his $787 billion stimulus. Its results so far have been well documented. Our unemployment rate is inching toward ten percent. Our deficit is nearing two trillion dollars and we've only spent one tenth of it. Meanwhile, the president took over several banks, two auto companies, and an insurance company. One way or another, the outcome of all this government intervention will also be a historical judgment on liberalism as well.

In fact, though, the greatest judgment against liberalism so far has been the president's total inability to move his agenda going forward. In fact, despite overwhelming popularity, he barely got the stimulus through. Since then, he's been totally impotent. Things don't look to get any better. Cap and trade barely passed the House and the Senate has no plans to take it up anytime soon. Health care reform is in even worse shape. What sort of a judgment on liberalism is it if the liberal party has veto proof majorities in both chambers and still can't pass a liberal agenda? One might ask if liberalism can't pass now when will it pass.

Even lesser known policies like his $75 billion loan modification plan have been colossal failures. It's important to point out again that this judgment is still incomplete. The economy could have a stunning turnaround and by this time next year our unemployment might be in the 6's. GM and Chrysler might both be profitable by 2012 and the government will have sold its shares by then. In light of all of this, the president will then be able to pass sweeping health care, energy, and education reform. In 2012, we'll be a liberal nation and history's judgment on liberalism in America will be a glowing success. It's still early and so the judgment is incomplete.

There will also be those liberals that will claim that the Bush presidency was a failing referendum on conservatism. That is a popular and totally inaccurate argument. There are some liberals that claim the tax cuts caused the recession we are in now. That's just ludicrous. The tax cuts were enacted in 2001-2003. The recession didn't occur for five years. The two have nothing to do with each other. Others proclaim that deregulation caused the meltdown. Of course, it wasn't a lack of regulation but a lack of enforcement that lead to the crisis. It isn't a conservative policy to look the other way on mass fraud, but a bad policy. In fact, most of Bush's biggest problems came from embracing liberal ideas, big budget deficits, bloated government programs and bailouts. In fact, history's judgment on conservatism should already be written with the wildly successful Reagan presidency. Yet, those with an agenda attempt to cloud the issue. Our economy came out of a recession because government shrank, regulations were slashed, and taxes were cut. Yet, some cloud the issue and leave that debate open still.

Make no mistake, by November 2010, and certainly November 2012, history will be ready to judge liberalism as well. While its currently incomplete, the judgment so far is a total failure.

President What Works Best

During the presidential campaign, Barack Obama was fond of saying things like this.

In the interview, for example, he argued that his proposals on health care and the economy, which call for a stronger government role and more regulation, were really about what works.

“I’m interested in solving problems as opposed to imposing doctrine,” he said. “I see a lot of convergence of interests among people who in traditional terms are considered to be divided politically.”

It was in keeping with his campaign theme. He defied ideology. He was portrayed by the media as someone with extraordinary intellect. So, he played that into a persona of an individual that could bring all sides together, listen to all ideas, and then decide what's best ideology be damned. By presenting himself as the pragmatic moderate he could defy traditional ideological stereotypes even while carrying a ridiculously liberal voting record. The political landscape has been littered with failed electoral runs of those that have been typecast into an ideology. Barack Obama wasn't going to allow that to happen to himself.



The president has continued this theme all the while painting opponents as beholden to ideology.

There are things that can be done that – Republican, Democrat, liberal, conservative – we all know need to happen. The challenge is going to revolve around how do we deal with the 20 percent of the stuff where people disagree?” Obama said. “This whole issue of the public plan is a good example, by the way. I mean, right now, a number of my Republican friends have said, ‘We can't support anything with a public option.’ It's not clear that it's based on any evidence, as much as it is their thinking, their fear that somehow, once you have a public plan, that government will take over the entire health-care system.”

Here, the president paints anyone against the public option as being beholden to ideology and not viewing the world as "what works best". As such,their objections are merely ideological.

The simple reality is that President Obama has been anything but the pragmatist above ideology. President Obama once famously told Eric Cantor in response to a concern by Cantor, "well I won so I trump you on that". That's not exactly the pragmatist that weighs all policies and chooses the best one.

More than one off handed statement are the sum total of policies that President Obama has engaged. The stimulus was written and debated exclusively by Democrats. All of the Republicans tax cuts were excluded. They were excluded from any part of crafting it. On the stimulus, what works is what he and his allies wanted.

The same is true of both health care and energy. He's not entertaining health savings accounts. Yet, he's demanding the public option, and accuses opponents of that option of being beholden to ideology. On energy, he wants cap and trade. He refuses to consider off shore drilling, nuclear power expansion, and any Republican ideas. On all of his domestic proposals, what works best for the president is a massive expansion of the government. For someone that wants to consider what works best over ideology, it's peculiar that what works best seems to overwhelmingly wind up being a liberal idea.

Frankly, I don't so much mind the president acting with a distinct ideology. What is offensive is two fold. First, his assertion that he is about "what works" implies that prior presidents didn't do what they believed worked. It's as if Ronald Reagan wasn't doing what he thought would work but intentionally implementing that which he thought would fail. Everyone wants to implement what works. What you think works defines your ideology. The president continues to mistake what he thinks works and what actually works. No one has a monopoly on what does work. That's what debate is for. It's arrogant to presume that you have a monopoly on those ideas. The president's assertion is both disingenuous and arrogant. He continues to presume that he is the one that is right and everyone else is wrong. That's not what works best but just plain arrogant.

It's All Reagan's Fault?

Paul Krugman continues his one man assault on the legacy of Ronald Reagan with a column today that essentially blames the entire financial meltdown on one obscure law passed during the Reagan era, the Garn-St. Germain Depository Institutions Act of 1982. This is an act that essentially deregulated S&L's and was one factor in their eventual demise in the late 1980's. Now, Krugman purports to blame this very same act on the current crisis. Now, I was very skeptical of Conservatives blaming the Community Reinvestment Act for the crisis. It's very rare that an obscure law actually creates this much damage. That's because if it did, we would have heard of it long before. Krugman attempts to do the same thing here. Here is some of his thesis.

The immediate effect of Garn-St. Germain, as I said, was to turn the thrifts from a problem into a catastrophe. The S.& L. crisis has been written out of the Reagan hagiography, but the fact is that deregulation in effect gave the industry — whose deposits were federally insured — a license to gamble with taxpayers’ money, at best, or simply to loot it, at worst. By the time the government closed the books on the affair, taxpayers had lost $130 billion, back when that was a lot of money.

But there was also a longer-term effect. Reagan-era legislative changes essentially ended New Deal restrictions on mortgage lending — restrictions that, in particular, limited the ability of families to buy homes without putting a significant amount of money down.

These restrictions were put in place in the 1930s by political leaders who had just experienced a terrible financial crisis, and were trying to prevent another. But by 1980 the memory of the Depression had faded. Government, declared Reagan, is the problem, not the solution; the magic of the marketplace must be set free. And so the precautionary rules were scrapped.

Here, Krugman, the economist, simply doesn't know his economic history. He purports to blame this act for the explosion of such aggressive loans as no money down loans. Of course, this is totally baseless. First, FHA has always been around and it always required only 3% down. Second, sub prime had been around long before this act. The explosion of sub prime had to do with a man named Lew Ranieri who created and innovated the process of mortgage securitization. This lead directly to mortgage backed securities. Please note, I don't blame Ranieri for this crisis anymore than I blame Reagan.

Second, sub prime was always a place where folks could go to for little and no money down loans. Remember, sub prime offered significantly higher rates. As such, there had to be something that it offered to attract business. One of those things was the ability to put little or no money down.

When I first entered mortgages, no money down sub prime loans were fairly popular. They were also carefully contructed. Never could you get a no money down loan without proving income for instance. Bankruptcies, foreclosures, a lack of credit depth and far too many previous lates were often also deal killers. Also, credit scores were required to be relatively high, 660 or so.

That all changed at the end of 2003 and the beginning of 2004. From then until the end of 2006, sub prime loans became more and more aggressive and less and less restrictive to no money down loans. By the end of 2006, it was not uncommon to get a no money down loan without proving income with as low a credit score as 620.

In fact, it wasn't the explosion of no money down loans per se that created this crisis, but rather, that explosion while forgiving other risk factors. None of this had anything to do with the obscure act that Krugman is fixated with. As I have said over and over, I believe this was directly related to the Fed's lowering the Fed funds rate below one percent and keeping it there for nearly two years. This allowed banks to borrow cheaply. Real estate was the only thing moving then and so banks put a great deal of money there. Since they then had more money than loans, they wound up creating new ones.

Krugman has been on a tear against deregulation since this crisis started. Yet, Krugman mistakes one very important point. It wasn't deregulation that caused any of this to begin with. It was in fact a lack of enforcement. Most of these stated loans were done fraudulently. Fraud was always illegal. It wasn't as though the government made a new rule that allowed someone to lie about how much income they made. They didn't. They just didn't enforce this critical regulation. Had mortgage professionals faced any penalty for systematic fraud most of this wouldn't have happened. So, as Krugman goes on a tear about the evils of deregulation, he misses the point entirely. This wasn't caused by deregulation but a lack of enforcement.

The Silly Notion of Post Partisanship

If you want to create a spirited political debate, I suggest doing one of these two things. Tell a conservative that FDR's economic policies saved us from a perpetual depression. Also, tell a liberal that Ronald Reagan's economic policies saved us from Carter's stagflation and ushered in an era of economic growth. Here are two transcendant Presidential figures and yet nothing draws the ire of partisans than giving either any credit. It's in this context that I wonder about President Obama's proclamation that he will be post partisan. If Reagan and FDR didn't accomplish such a goal, how will he?

It is a confounding idea proposed by President Barack Obama. The idea that he will somehow be post partisan. This is one of those nice sounding concepts that's difficult to define, and in my opinion, impossible to attain. In his inauguration speech , here is what he said on the matter.

Now, there are some who question the scale of our ambitions - who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage.

What the cynics fail to understand is that the ground has shifted beneath them - that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works - whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public's dollars will be held to account - to spend wisely, reform bad habits, and do our business in the light of day - because only then can we restore the vital trust between a people and their government.

Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control - and that a nation cannot prosper long when it favors only the prosperous. The success of our economy has always depended not just on the size of our Gross Domestic Product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart - not out of charity, but because it is the surest route to our common good.

Barack Obama is fond of saying that he wants to get beyond partisanship and do what works, what is right. It appears that President Barack Obama has fallen for the common fallacy of debate. There is a massive difference between thinking you are right and actually being right. President Obama should realize that if he does what he thinks is right that this will NOT make him special as member of the exclusive club of Commander in Chiefs. I hope that almost all decisions, if not all, were made by those before him by those that thought that particular decision was right.

Yet, just because he does what he thinks is right, this doesn't mean he will suddenly become post partisan. So far, in the first forty eight hours of his Presidency two issues have come to the forefront. The first is the issue of the stimulus package. This is a massive spending bill with tax credits masquerading as tax cuts. No real conservative would ever in their right mind support this stimulus package. Nor would any conservative with anything near a megaphone hold their tongue in criticizing it. There is absolutely nothing post partisan about this stimulus.

The second issue is the issue of GITMO and enhanced interrogations. He will try and end both. There is no hawkish GWOT thinker that thinks either is a good idea. Once again, no hawkish GWOT thinker with anything near a megaphone will mute their criticisms of the decision to close GITMO and end enhanced interrogations. So, what exactly is post partisan about this?

Ironically enough, if Barack Obama were to look for a post partisan model he need only look at his predecessor. President Bush supported tax cuts, free trade, but also a prescription drug benefit and a massive bailout. There's absolutely nothing about this set of ideas that is partisan. We can only assume that President Bush proposed all of these things because he thought they were the right thing to do. Isn't that post partisan? President Bush was one of the most socially conservative Presidents. Yet, his immigration policy was rather liberal. He proclaimed his intention to run a humble foreign policy only to do a 180 degree turnaround following 9/11. None of this was done on a purely partisan level. We can only believe that President Bush did all of these things together because he thought they were right. Yet, we don't think of President Bush as anything near post partisan.

So, President Obama has one of the most liberal voting record. He's proposed nothing but liberal ideals. Yet, he wants us to believe he's post partisan. It appears that to him post partisan means his decisions are right and anyone that disagrees is no longer post partisan. If that's the case, not only is it terribly arrogant to the point of hubris, but he will be in for a big surprise when he finds that partisan opponents to any of his decisions will not be muted.

Video of the Day

The best thing about listening to Reagan speak is how Reagan was always able to keep a perfect rhythm to the speech. That, in my opinion, is his genius as a public speaker. This speech, more than most, had that genius on display. The way he builds up to the line

Mr. Gorbachev tear down this wall

is just absolutely brilliant.

My Favorite Reagan Quote in Reverse

In case you don't know my favorite quote it is of course

the nine most terrifying words in the English language are 'I'm from the government and I'm here to help'

Now, I was ready for a deep defense of this philosophy when I saw the headline entitled Bigger Government=More Prosperity in the New Yorker. However, the backing for the philosophy backing more government comes down to this paragraph.

To an outside observer, though, there’s something interesting about that graph: the decades after government got so big just happen to be the decades of greatest shared prosperity in the history of the U.S. A large and growing middle class, rising levels of education, greater income mobility, continued increases in life expectancy, dramatic improvements in the quality of life of the elderly, and so on, all happened only after government revenues rose to what Mankiw apparently believes were objectionable levels. That doesn’t necessarily mean that the increase in the size of government had anything to do with the postwar economic boom. But, at the very least, Mankiw’s graph shows that the supposed negative economic effects of government-spending increases are, at best, empirically very hard to see.

The author is speaking about a chart by conservative economist Greg Mankiw that argues against big government.

Now, this is a stunningly weak argument. I don't know how Mr. Suroweicki determines that the last 65 years has been the most prosperous and full of growth in our nation's history. For instance, we haven't expanded our borders at all.

Furthermore, the last six five years have also benefitted from inventions that have lifted our economy to new stratospheres and many of them were created right before the expansion of government: the automobile, the plane, the television, the radio, the light bulb, and more recently the internet. Suroweicki's supposition then is that we need not worry about government expansion because for the last sixty five years while government has expanded we've also had great economic prosperity.

Talk about a horrible thesis. He doesn't address the idea that the two may likely have correlated rather than caused one another. He puts no context to the growth during the period and the expansion. He simply says that government expansion is a good thing since we have expanded government a lot over the last sixty five years and we've had great growth at the same time.

I would argue that the growth occurred because of several very important inventions, most of which were invented right before the expansion. Furthermore, the growth occurred due to the innovation of the private markets. The growth had little to do with government expansion and of course besides saying it Mr. Suroweicki doesn't back up his theory. If this is the best proponents of big government have, I am ready to debate each and everyone of them.

Demand Side Vs. Supply Side Economics

A couple weeks back I put my hat into one of the most sophisticated economic arguments, monetary vs. fiscal policy. An argument that is even more sophisticated is one on supply vs. demand side economics. A demand sider, or often called a Keynesian, believes that getting an economy out of a rut requires stimulating demand. By this I mean that a demand sider would want to do things to stimulate consumer spending. A supply sider believes that the best way to stimulate an economy is to stimulate business investment. Now President Elect Obama is CLEARLY a demand sider. Since the beginning, he has staked out a position in which the middle class get more tax cuts, rebate, and spending so that the middle class spends more. His package includes only breaks for those in the middle. He has nothing for those on the supply side, the wealthy and businesses.

One of my problems with demand siders is I can never tell where politics end and where policy starts. It's easy to be a demand sider since it is also a very populist position. After all, you are giving to the class of people that has the bulk of the population, the middle class.

My main problem with demand siders is there is no solid evidence in history of demand side economics ever working. Supply side economic policy, on the other hand, has a fairly rich history of working. For instance, Ronald Reagan was a supply sider. He cut the top rate from 70% to 28% and within a couple years our economy was humming in what amounted to a near 25 year roll of economy prosperity. Ireland cut their corporate tax rates dramatically and it lead to a massive growth in that country's GDP. President Bush, 2001-2003, cut all taxes across the board and staved the economy from a serious depression and ultimately lead to a period of growth that lasted five years, until recently of course. JFK made similar tax cuts with similar results as well.

Demand siders often point to FDR, but as I analyzed, his economic record is rather complicated. Others point to the Clinton years, though it's still unclear to me what Clinton did to stimulate the economy. Besides these two examples, one is hard pressed to show any historical examples of demand side economics working.

One of the reasons that demand side economics has such popularity is the media's total distortion of the two policies. Because Republicans are most commonly associated with supply side economics, its effectiveness is downplayed. Whereas it is Democrats that are more commonly associated with demand side economics, and thus, the media plays up its effectiveness. For instance, George Bush rarely gets credit in the media for the effectiveness of his tax cuts. Clinton's economic policies are played up. FDR has been so lionized that his economic policies have been played up way beyond their actual effectiveness in my opinion.

As such, we are about to enter a period of serious economic malaise with an economic policy that is totally unproven. Rather than cutting taxes that have worked in the past. Rather than going with a strategy that has a history of effectiveness we are going with one that has scant evidence it works. This incarnation of demand side economics may in fact work but if it does, it will be the first time, from my view.

Sarah Palin's Path to the White House 2012

I have been hesitant to comment or speculate on 2012 because it's foolish and in many ways useless. Furthermore, we just finished up a long and tumultuous election, and so we may need a break from speculating on elections. It's a point of debate, of great debate to some, whether or not she is fit to be President. What is, in my opinion, beyond debate is that her path to the White House is as clear as anyone short of the President elect. Here is the blue print.

2009-2011, January

For the next two years plus, Palin has a job and if she has any further ambitions, all she should focus on now is being Governor of Alaska. As most know, she entered the Presidential race with about 80% approval ratings. That's likely to dip some if not a lot for a myriad of reasons. Her national combative profile likely turned off a lot of people in Alaska which likely didn't have such an image of her. An approval rating that high is always going to fall. Just ask President Bush, he had an even higher ratings in the early part of 2002. Finally, with oil prices dipping, the economic outlook of Alaska becomes a lot more unclear.

Here is the reality. Palin has done a remarkable job as Governor. She re negotiated a corrupt contract with the oil companies. She passed landmark legislation on ethics reform. She cut taxes and she even sent each and every citizen a check. While her job performance has been excellent, it has also been in a very favorable environment.

Now, the economy will become a much bigger burden. Her opponents will feel emboldened after her higher profile, and the glare of the media spotlight will be on her. Now is when she, as they say, will really earn her paycheck. The next two years will likely be nowhere near as successful as the prior two, and frankly they don't have to be. If Palin maintains approval ratings above 55% when she leaves office, she will be in perfect position to run for President in 2012. She should wait as long as possible, but I wouldn't seek another term beyond the current one. Running for President takes almost two years. It will take up most of her time. She shouldn't run for re election unless she is committed to serve. She wants to wait as long as possible so that the legislature doesn't have an opportunity to consider her a lame duck.

One thing that is not up for debate is that Palin is now a star. That's why the next two years should be spent governing effectively. She will get plenty of publicity in a manner that a governor and certainly one from Alaska has never received. However she governs, her record will be on display for a national audience, and that's why it's vital that she govern effectively.

2011 February on

I would wait weeks not months following the inauguration of the next Congress to announce an exploratory committee. Announcing early, early than most, gives her a few vital advantages. First, she can immediately set up geographically within the continental United States. Her ability to navigate a Presidential campaign from Alaska is limited. She needs to immerse herself inside the continental U.S. and the sooner the better. Second, it immediately allows her to fundraise. You think that Obama's fundraising prowess is impressive, wait until Palin runs her own national campaign.

By fundraising early, Palin can knock out a lot of opponents because they will see just how much she has raised and realize they simply can't compete.

Then, she immediately does the formal rounds. CPAC is normally held in late February or early March. It is the single biggest and most important gathering of Conservatives in any given year. Talk about a target rich environment. There is no more audience more favorable to Palin than this one. It's also the perfect opportunity to formally throw her hat in the Presidential ring. If she did that, the announcement would be the talk of the conference. It would take the oxygen from any other potential opponent as well. As such, while we would still be a year out, just by maneuvering correctly she would immediately have an early commanding lead.

Palin will then need to make the rounds to other hallmark events like the Iowa County Fair. Palin will have an opportunity to develop a very unique campaign theme. First, she will be the first truly consistent conservative to be a serious Presidential candidate since the standard bearer, Ronald Reagan. Republicans have been itching for the next generation of a consistent conservative and now they will have their chance. She can combine this with a uniquel populist theme. She needs to develop the populist theme by highlighting those portions of her record. Her record as a whistle blower, taking on her own party, and taking on the oil companies. Those are the sorts of things that are likely to be very appealing to moderates and independents if framed correctly. Finally, when this is combined with the historic nature of her campaign, she has a chance to develop a very formidabel coalition.

2012 will either be very ripe for Palin or it will be an uphill battle for any Republican. If we are still facing an economic malaise, unemployment north of 6.5% for instance, it will give her a perfect opportunity to make the campaign a referendum on Obama's first term. Furthermore, it's clear that Obama and the Democrats are ready to spend in an unprecedented manner and so deficits will likely be at unprecedented levels by 2012. This will give her another opportunity to make the comparison between Obama's government expansionist policies and her own record in making government efficient.

If Palin is shrewd, she will make the case that the country lost its way as soon as the government got away from conservative principles. The last time we had a truly economic conservative President was Reagan. His record of deregulation, tax cuts, and deregulation unleashed the power of our economy that only stopped a couple months ago. The country will be reintroduced to the corrosive effect of regulations following Obama's "new regulatory framework" (whatever that maybe), and so the environment will be ripe for a renewed deregulatory spirit. Politics is very cyclical. Tax cuts, free markets and small government are concepts largely out of favor. We will have four years of the exact opposite. There's nothing like exposure to the opposite to make people appreciate such concepts again. These will all be themes ripe to run on in 2012, and they are all concepts that Palin not only believes in but has a record of accomplishing.

She will have to get past people's fears that she is a novice on foreign policy. The best way to do this is to get out in front of tough interviews and answer difficult foreign policy questions. Hopefully, she learns from the mistakes of the McCain campaign and she allows herself to be the most media accessible and non discriminatory candidate we have had. The more foreign policy questions she answers with confidence, clarity and detail, the more she will get over this hurdle. She will have the next two years to observe, process, and develop her own foreign policy philosophy. If she uses it wisely, she will be ready for these questions come 2012. Finally, she must emphasize competence. She must emphasis a history of accomplishment. It was the total lack of competence that defined the Republicans from 2002-2008, and to make a clean break, Palin must run on a record of competence. (which is another reason why all of this is predicated on having two more successful years as governor. It's hard to run on competence with a record of incompetence)

All right, it's four years out, but this is about as detailed a path to the Presidency as you will find.

Our Economic Future is Gloomier than our Present

Economic downturns, more often than not, are not only difficult to avoid but frankly in many ways a natural part of the economic cycles. Despite what some politicians claim, our economy can't actually hum along in prosperity forever without ever slowing down. That said, while most downturns are unavoidable, the length and ferocity is entirely due to the response, or lack thereof, by the government. For instance, the recession of the early 1930's turned into the Great Depression by the combination of of protectionist trade policies and tax increases. The economic malaise of the mid 1970's was perpetuated by the combination of price controls and tax increase and it turned into a period of stagflation. Reagan turned this into an economic boom by the combination of interest rate increases by the Fed, to tackle inflation, followed by tax cuts which spurred the economy. Given that the length and ferocity of an economic downturn is directly related to the government's response to an economic downturn, we should all be much more worried about our economic future than our economic present.


1) The bailout is a total and complete debacle.


Despite the impression that some politicians may give, wastefully spending billions of borrowed Dollars by the Federal government is not actually a productive use of resources. It is now clear to me that the bailout will wind up being the biggest boondoggle in the history of our government. The Feds are no longer buying up toxic assets. Instead, they are simply giving financial services companies money. Furthermore, the definition of what company qualifies continues to expand. On top of this, companies that aren't struggling at all like the Hartford are applying for some of this money. Worst of all, so far the money that's been received isn't being used to lend. Rather these companies are using this money to merge. While this may all be great for the individual companies involved, it will do absolutely nothing to help the economy at large. Furthermore, running up a massive new government tab only adds inflationary pressure to an economy already facing a recession. That is the nightmare scenario


2) The auto bailout is the financial bailout lite.


If the financial bailout isn't enough, now the automakers are asking for their own piece. Of course, this bailout will do nothing to rectify their many fundamental problems. As such, their bailout is another colossal waste of money. It would be a massive scandal on its own if not for the massive bailout I already mentioned.


3) The government wants to waste more money with a stimulus package, unemployment extensions, and foreclosure moratoriums.


We already had a stimulus package in the summer and that was a colossal failure. Yet, no later than the next administration, the government will send about $600 to each individual again. Barack Obama is also talking about extending unemployment benefits and foreclosure moratoriums. These are great policies for those that benefit from them, but they do absolutely nothing to help the economy.


4) The government is focusing on the wrong groups in the mortgage crisis.


The government is determined to save borrowers from themselves. Their main priority is to stop a run on foreclosures. As such, they are doing everything in their powers to stop it. The FDIC recently announced that they would insure the losses of banks that give troubled borrowers loan modifications. (which would give more affordable terms to those that have terms they can't afford now) The government is talking about underwriting new loans for troubled borrowers. All this does is keep folks in homes they should never have gotten into in the first place. What the government needs to do is do everything it can to help these borrowers remove themselves from their homes as quickly and painlessly as possible. Instead, they are doing everything possible to keep these borrowers in their homes. That only perpetuates the mortgage crisis, not resolve it.


5) The whole government is entirely clueless


This isn't about Barack Obama, the Democrats, the Republicans. It's about all of them. There is no one in the government that has a handle on what government policies will help. Does anyone really believe that focusing only on the middle class will help the economy out of this mess? If you don't like that policy there isn't much alternative. That's because the Republicans are fresh out of ideas altogether. As such, we will get a middle class tax cut, massive new wasted spending, and potential tax increases for the wealthy and corporations. That certainly doesn't give me confidence. The future of our economy is what we really need to worry about.

The Far Left Economic Mindset

Anyone that is frightened by what economic horror the policies of an Obama administration may bring only needs to read this piece by William Jones to know their fear is not without merit. Jones attempts to draw comparisons between what Obama may do and every liberal's favorite economic Presidency, that of FDR. It isn't merely the positive connections that Jones draws, but rather the missed opportunities of FDR's administration that Jones hopes Obama won't miss. Here are the most relevant parts.

Obama invoked that legacy repeatedly during the campaign, from the account of how his grandfather benefited from the GI Bill to his proposals to create jobs and economic growth through federal investment in education, industrial innovation and infrastructure. Such rhetoric allowed him to claim the legacy of the most popular and successful government programs in American history, but it also displayed some of the limitations of New Deal policies, particularly in their ability to address racial inequality. We can thus turn to the history of those programs for an indication of how the Obama administration will confront the interrelated problems of economic and racial inequality in the twenty-first-century United States.

Despite conservatives' alarm about "the slippery slope to socialism," Franklin Roosevelt displayed a strong aversion to direct control over the economy. Instead, his administration relied on civil society groups to implement and enforce government policies. Rather than impose wage and price regulations to stabilize the economy, for example, the National Recovery Administration allowed business associations to establish standards and then empowered unions to enforce them. That unprecedented mobilization of civil society sowed the seeds for the industrial union movement, which proved critical to Roosevelt's re-election in 1936 and deepened his commitment to social democratic reform in the late 1930s and early '40s.

...

But there is a more troubling side to the New Deal's legacy, which will not be resolved through populist appeals to the struggling middle class. A growing body of scholarly literature has shown that the same reliance on civil society that inspired the labor movement also prevented the Roosevelt administration from addressing deeply ingrained racial inequalities. While unions improved wages and conditions for industrial workers, they had little impact on the agricultural and service sectors, where the vast majority of blacks and Latinos labored for low wages without collective bargaining rights, health insurance or even Social Security. The GI Bill offered mortgage assistance and scholarships to all veterans but did nothing to ensure that African-Americans could use those benefits to attend segregated colleges or buy homes in segregated neighborhoods. Indeed, had Obama's paternal grandparents lived in the United States it is unlikely they would have shared the sepia-toned vision of the New Deal era that was so pervasive in his campaign material.

...

President-elect Obama has an opportunity to further racial and economic justice by fusing the New Deal and civil rights traditions. He expressed that link directly in Philadelphia in March, when he insisted that unless Americans confront racial inequality directly, they will "never be able to come together and solve challenges like healthcare, or education, or the need to find good jobs for every American." Such a confrontation would entail strengthening the Equal Employment Opportunity Commission and other civil rights agencies, while addressing racial inequalities in primary school funding, economic development and incarceration. Just as the GI Bill benefited white veterans more than black ones, race-neutral policies are likely to exacerbate existing inequalities.

This piece, and the thoughts behind it, have three frightening ideas. If these ideas are taken by President Obama then I believe we are headed toward economic disaster.



1) The lionization of FDR's New Deal



FDR casts a massive historical shadow, however one of the unfortunate by products of this is that he gets all sorts of economic credit he simply doesn't deserve. I say it over and over but it's worth repeating, unemployment was still more than ten percent in 1940. Of course, GDP began growing only about a year plus after he took office, however given how much he spent, it better have. Still, he didn't necessarily bring jobs back to the nation. Furthermore, the by product of FDR's New Deal is that we have a bunch of failing and flawed government programs like Social Security, Medicaid and Fannie Mae. If FDR is the model we choose, it is the wrong model.



Reagan, it could be argued, took over an economy in just as bad a shape. We not only had double digit unemployment but interest rates and inflation. Within three years though, the economy not only turned around but took off. Unlike FDR, Reagan relied on tax cuts to spur the economy. FDR relied on government spending. The results speak for themselves. If FDR is Obama's model, we may still have double digit unemployment come 2016.



2) The insistence on all or nothing socialism.



Jones uses the same M.O. as most liberals in dismissing Obama's and FDR's pseudo Socialism. Unless either is a full blown Socialist, all fears are overblown. Yes it's true, FDR didn't nationalize everything and give total control to the federal government. That doesn't mean that there wasn't plenty to fear from FDR's Socialistic tendencies. He partially socialized health care, retirement, and housing, and each of those programs (Medicare, Social Security, and Fannie Mae) are a burden on our economy to this day. He presided over the biggest expansion of government in the history of our nation and it's only gotten bigger since then. If Barack Obama expands the government as much FDR did, we will face a bureaucracy that will get in the way of everyone and everything.



3) Economic recovery isn't enough. We also need economic justice or social engineering.



We already know that Barack Obama has an affinity for economic justice or social engineering. He said as much in his infamous 2001 WBEZ inteview.



The far left isn't merely content with President Obama fixing the economy. The far left wants him to engage in social engineering through eupimisms like "social and economic justice". Jones wants Obama to create policy that will lift up African Americans, and he wants Obama to create programs that even out the playing field.

The far left will have President Obama's ear and they won't merely demand a new New Deal. Furthermore, they will demand that this version of the New Deal not only lifts our economy but creates some sort of social equality. Furthermore, unless it is entirely Socialist, we need not worry about any of the policies that get us there.

Why We're a Center Right Nation

Often you hear pundits make the claim that the United States of America is a center right nation. This claim is generally presented as fact and even liberal pundits rarely make much of an argument against it. What no one ever discusses is why our country is a center right nation. It's time for that discussion. I see two main reasons for this.

1) Our roots and our forefathers are all center right by today's definition.

America has always been built on the idea of self reliance. Our country was founded in Judeo Christian philosophy. The ten commandments provided the roots for our Constitution. Furthermore, limited government was at the center of the conflict that lead to the Revolutionary War.

By today's standards, the Founding Fathers would all be considered Conservative. Is there any doubt that they would be fiscal conservatives? All of these entitlement programs, expansions of the federal government, and massive new bureaucracies would go against everything the believe in. Furthermore, they would all be strict constructionists when it comes to the Constitution. Of course they would, they're the ones that wrote it. They would be find groups like the ACLU as perverting everything they meant. How would the founding fathers feel about those forces that are trying to limit the expression of faith in the public square? How would they feel about the attack on Christmas? All of this is likely to have the Founding Fathers rolling over in their graves.

This country was founded in large part by folks who became outcasts because of the religion they practiced. The Founding Fathers wanted a nation in which everyone felt free to express their religious beliefs everywhere. The culture war between the Traditionalists and the Secular Progressives would have the Founding Fathers on the side of the Traditionalists.

When the founders of the nation are center right, there is a certain natural movement to that direction. Furthermore, it is much easier to make a center right argument when you are able to invoke any of the founders. It's much easier to make an argument defending the 2nd amendment when you can pull any of a thousand quotes from the likes of Thomas Jefferson defending your position. Movements like those limiting the use of firearms fly in the face of the manner in which the founders wanted this nation to look. Having the Founding Fathers as one's ally in a debate certainly strengthens any argument exponentially.

2) Most of the things that have worked in the past have been ideas from the center right.

I know that liberals will disagree furiously however history has a way of cutting through the fog. If someone wants to argue about the effectiveness of tax cuts, we only need to look at how well they worked in the case of Ronald Reagan and JFK. Government expansion like the New Deal and the Great Society are colored with much more complicated histories.

Our country is littered with failing and ineffective government programs like Social Security, Medicare, and Fannie Mae. Anyone that champions the idea of regulating business needs only to look at the effects of Sarbanes-Oxley to see the end result of such endeavors. Reagan, on the other hand, championed a policy of deregulation and what followed was decades of nearly uninterrupted growth.

The debate has been colored a bit by the economic Clinton and Bush years. Liberals have argued that tax increases lead to economic expansion, and they further argue that the spirit of deregulation lead to the financial disaster we are in now. Those arguments, however, are still on going and I would counter both as absurd.

On military matters, we saw how aggressive military expansion by Reagan eventually lead directly to the disintegration of the Soviet Union. Furthermore, we saw how Clinton's gutting of the military lead directly to our weakening intelligence apparatus and ultimately 9/11.

Reagan attempted to give amnesty in the mid 1980's to millions of illegal immigrants and twenty years later we see almost twenty million more living in America.

Frankly, I would dare a liberal to come up with one truly liberal policy that they can stand behind as a beacon of success in America's history. On the conservative end, we see an endless stream of fiscal conservatism, strong military, and deregulation leading to effective governance.

So, there you have it. We are a center right nation, and that's because that is our roots and those are overwhelmingly the policies that have worked. As such, don't let a liberal fool you into thinking the election will mean some sort of seismic shift in the manner in which our country's philosophy will be structured. We are a center right nation and we'll stay that way.

Argentina and My Favorite Reagan Quote

Last week, Argentina announced a bold measure.

Argentina's President Cristina Fernandez has signed a bill that will nationalise the country's 10 private pension funds.

The move will put the government in control of almost $30bn (£18bn) of investments and is aimed at protecting them from the global market turmoil.

Shares slumped amid fears of the move's impact and critics accused the government of trying to grab the funds.

The bill needs the backing of Congress, where the ruling party has a majority.

Argentina's pension funds were struggling with corruption and the country of Argentina was struggling to make payments on its own debts. This move was supposed to calm the panic setting in on the country.

So, how has the move been seen in the country? The Argentine stock market has spoken.

THE main stock index in Argentina plunged more than 16 per cent overnight, after the president announced plans to nationalise private pension funds. Markets also fell 11 per cent on Tuesday.

President Christina Kirchner moved to nationalise $US30 billion ($A44.3 billion) in private pension funds yesterday, saying it was necessary to protect retirees in the global financial crisis.

Some analysts saw the move as a tactic by the government to get hold of cash to help service the national debt of some $US150 billion ($A221.5 billion). Argentina defaulted on its debt in 2001.

In fact, the market has lost more than a quarter of its value only four days prior. Rather than calming the market, this bold government intervention has only put them into more of a panic.

There is of course a bit of cruel irony in a third world government with a long history of its own corruption attempting to nationalize an industry in order to root out corruption. Maybe, that's one reason why the market has responded as it has. Furthermore, maybe just maybe, the markets know better than bureaucrats and policy makers. No matter how dire the situation Socialization and nationalization isn't the way to go. The government which intended to help only made things worse and once again Ronald Reagan was right

the nine most terrifying words in the English language are 'I'm from the government and I'm here to help'

...

Obama, Reagan, and Marginal Taxes

When he was interviewed by Bill O'Reilly, Ed Meese explained why Ronald Reagan had such a strong low tax philosophy. Meese explained that when Reagan was still an actor, his friends in the business told him to only make two movies yearly. That's because once he made a third movie, he wound up in a much higher tax bracked and as a result wound up taking home much less. Reagan couldn't believe anyone would be encouraged not to work and became a fervent pro tax cut advocate as a result. By cutting taxes, Reagan hoped to encourage people to work, and the economic revolution that was created under his administration proved him right.



In the book, The Working Poor, David Shipler examines a similar phenomenon to what Reagan witnessed as an actor only from the perspective of the very poor. Because there are so many giveaways at the very bottom like food stamps, Medicaid, and the earned income tax credit folks that start to work their way out of poverty wages often wind up taking less home. That's because as their income rises, many of these benefits go away. As such, while their pre tax income maybe higher, after they stop qualifying for all of these giveaways, their post tax income is lower.



This brings me to this article by the Wall Street Journal examining Obama's tax proposals. The key to the piece is this graph.

Here is how Wikipedia explains the marginal tax rate.

A marginal tax rate is the tax rate that applies tothe last dollar of the tax base (taxable income or spending),[1] and often applied to the change in one's tax obligation as income rises:

Think of marginal taxe rates, as they apply to income taxes, as the punishment for making more. Under the current tax plan, there is little or no more punishment for making more until an individual starts making six figures. Then, their taxes begin to shoot up progressively.

Under Obama's tax plan, there is significant punishment for extra income at only $25,000. In other words, the few thousand that someone makes more than $25,000 will be taxed significantly. As such, someone that is used to keeping most of their paycheck will see the extra income taxed very heavily. Of course, this punishment doesn't include all of the government giveaways that Mr. Kipler described in his book. What Obama's tax plan will do is literally punish those that see their income rise from $25,000 to say $27,000. Because many of the giveaways begin to get phased out as income goes up, many folks will actually see their after tax income actually go down as their income goes up.

Here is how the Journal describes this phenomenon.

There's another catch: Because Mr. Obama's tax credits are phased out as incomes rise, they impose a huge "marginal" tax rate increase on low-income workers. The marginal tax rate refers to the rate on the next dollar of income earned. As the nearby chart illustrates, the marginal rate for millions of low- and middle-income workers would spike as they earn more income.

Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of "making work pay," but in practice they can be a disincentive to working harder, especially if you're a lower-income couple getting raises of $1,000 or $2,000 a year. One mystery -- among many -- of the McCain campaign is why it has allowed Mr. Obama's 95% illusion to go unanswered.

In other words, because Obama has so many tax giveaways to those at the bottom, and many of those giveaways go away as you earn more, the marginal tax begins to go up dramatically at just $25,000 per year. So, when Barack Obama says that 95% of the people will get a tax cut, what he doesn't say is all those people that will get a tax increase as their own pre tax income rises. It's one of the many flaws of offering tax cuts to those that pay no taxes.

Examining Bush's Legacy

Presidents often leave office with popularity that differs from their popularity. For instance, when Calvin Coolidge left office the economy of the 1920's was still roaring. While polls weren't a mainstay of politics, it's likely that if they were he would have left office with high marks. Harry Truman, on the other hand, left office at the end of the protracted Korean War. His approval ratings were even worse than the current President's. Yet, generations later, it is Truman that is seen as a President of significant esteem while Coolidge's administration is generally dismissed. Then again, often times Presidents leave office with the same marks as their legacies. Jimmy Carter left office deeply unpopular and his legacy hasn't been helped since he left office. Ronald Reagan left office with similar popularity to that which he enjoyed throughout his Presidency. His legacy hasn't suffered one bit since he left office. So, what will be the fate of President Bush? Only time will tell, and his legacy will certainly be determined by folks with more power and influence than me. That said, with months left, I will take a stab at determining his legacy.

There is no doubt that 9/11 will determine a great deal of Bush's legacy. The fact that there have been no attacks on our soil since 9/11 may be minimized by his opponents, the media, and an increasingly apathetic public, but it's likely that history will give that feat more significance. Ironically enough, this will gain more significance depending on how future President's record is on the same matter.

That said, his foreign legacy is will be interlocked with the war with Iraq. While the war has been a terrible drag on his current popularity, history has a way of looking at wars differently than the public does while they are happening. The Civil War dragged Lincoln's popularity down significantly. In fact, all wars that last long enough will do that to a President. In fact, President Lincoln faced an eerily similar opposition from the Democratic Party that President Bush faced from the same Democratic Party in 2007. Just like the current President, Lincoln was able to beat back the opposition and soon after the North made a stunning turn around and ultimately history proved Lincoln right. President Bush faced his own showdown with the opposition, and the war saw a similar remarkable turn around.

Winston Churchill once said something very relevant about this subject

history is written by winners

No matter how difficult the road to victory has been in Iraq, the U.S. is now on its way to victory. The difficulty of the Civil War is downplayed in most history books. Lincoln is now lauded as a President that showed leadership and courage in guiding the country through its dark hour. Most people don't realize that his political opponents as well as many in the press demonized and criticized Lincoln in ways then that would make the attacks on the current President seem mild. Here is just an example from the 1864 Democratic Party Platform.

Resolved, That this convention does explicitly declare, as the sense of the American people, that after four years of failure to restore the Union by the experiment of war, during which, under the pretense of a military necessity of war-power higher than the Constitution, the Constitution itself has been disregarded in every part, and public liberty and private right alike trodden down, and the material prosperity of the country essentially impaired, justice, humanity, liberty, and the public welfare demand that immediate efforts be made for a cessation of hostilities, with a view of an ultimate convention of the States, or other peaceable means, to the end that, at the earliest practicable moment, peace may be restored on the basis of the Federal Union of the States.

Victory proved Lincoln right and his critics wrong. The same fate may await the current President. Certainly, I believe that his legacy vis a vis Iraq will be much better than its current perception of his Presidency. If victory is attained, then the Bush Doctrine will also see a vindication. If Iraq becomes a functioning Democracy, then all those critics that said that Democracy couldn't happen in the Middle East will be proven wrong. While it is a concept lost on Americans now, a functioning and free Iraq still free decades later will be a remarkable lasting legacy for the current President.

Domestically, the President will be tied to two significant economic events, theinternet bubble and the real estate bubble. While his opponents and the media try and downplay his tax cuts, I suspect history will give them their due. When Bush came into office, the internet bubble had cost three trillion dollars in paper losses from March through December of 2000. Only eight months into his term, 9/11 caused one million jobs lost in its immediate aftermath. Its total impact was trillions. At roughly the same time, Enron began a domino effect of significant companies like WorldCom admitting that their profits throughout the nineties were nothing more than fraud. This was the economic landscape that President Bush was left with. Yet, the recession of 2001-2003 was rather mild. It never tured into a depression even though the economic perfect storm of the three events I described should have put the country into one. While opponents pretend as though his tax cuts did nothing, and often they claim they hurt, that is just nonsense. Bush never got credit for the economic recovery that his tax cuts stimulated from the antagonistic press corp and equally antagonistic political opponents, however, history has a way of cutting through such nonsensical spin.

The real estate bubble will likely, however, be as big a stain on his legacy as his tax cuts will contribute to it. I am of the opinion that Alan Greenspan deserves most of the blame for the crisis, however I don't know if history will isolate one individual the way I have. Calvin Coolidge's legacy was stained because he stood idly by while speculative behavior drove the economic boon. That all came to an end when the stock market crashed on October 29th, 1929 and his own legacy was sealed on that fateful day. The current President ignored similarly speculative behavior throughout his Presidency often touting the explosion of home ownership while it was happening. Just as history has been cruel to Coolidge for ignoring the warning signs that lead to the crash of 1929, history maybe just as cruel to Bush for ignoring similar warning signs.

In my opinion, the biggest stain on Bush's legacy will come from his relationship with Vladimir Putin. While Bush considered Putin a friend, Putin was slowly not only consolidating power internally, but looking to consolidate power externally. Bush totally misread Putin when he said that he looked into his soul and saw a good man. Putin is a thug, and because Bush didn't see this right away, he allowed this thug to gain in power while Bush looked the other way. In my opinion, Putin is on a collision course for a new Cold War and this one will likely have real military battles. If that happens, Bush's neglect will be a huge stain on his legacy.

Bush's most lasting act as President may wind up being overlooked in his legacy, and that is his choices of John Roberts and Sam Alito to the Supreme Court. Supreme Court justices seem to be dismissed in historical terms, and that's inexplicable to me. Dwight Eisenhower famously pointed to Justice Brennan and Justice Warren as the two biggest mistakes of his Presidency. Yet, those two mistakes have had negligible effects on his legacy. Certainly, the debacle of Katrina will be a stain, however I am not sure just how much history will judge it. What's unclear is how much his legacy will be stained by his total lack of fiscal discipline and the corruption that this lead to. All in all, I believe that President Bush will have a fairly mixed legacy. He will certainly be seen in history as a much better President than any of his critics will ever admit. At the same time, his legacy is much more stained than any of his long time supporters will care to admit.

What Obama Needs to do Tonight

All right, there will be no shortage of pundits, columnists, and bloggers giving Barack Obama unsolicited advice about what his speech should do tonight. Senator Obama certainly doesn't need my advice and given that we are political opponents he would certainly take anything I say with a grain of salt.

That said, I have noticed something about Obama's speech making. That is that his soaring rhetoric has, for months, given him diminishing returns. He gave his campaign theme, message, and purpose with his uplifting and soaring rhetoric. His message of unity, hope and change were themes that the public at large were desperate for. That said, after a while of speaking of the nebulous unity, hope and change the public began to ask how he would accomplish all of these things. In fact, George Will described his predicament well today.

When Barack Obama feeds rhetorical fishes and loaves to the multitudes in the football stadium Thursday night, he should deliver a message of sufficient particularity that it seems particularly suited to Americans. One more inspirational oration, one general enough to please Berliners or even his fellow "citizens of the world," will confirm Pascal's point that "continuous eloquence wearies." That is so because it is not really eloquent. If it is continuous, it is necessarily formulaic and abstract, vague enough for any time and place, hence truly apposite for none.

Speaking on the subject Dick Morris said the most effective acceptance speech was delivered by Al Gore. He said that speech was more like a State of the Union speech. In it, he produced a laundry list of ideas that he was looking to implement. That speech gave Gore, in Morris' recollection, a bounce of nearly ten points.

But what can Obama learn from Gore? Well, Gore basically gave a State of the Union speech - at the risk of boring the audience, he laid out to TV viewers a complete presidential program, delving into each area of substance and articulating his plans in detail and with specificity.

The media highlighted his prolonged kiss with Tipper on the stage as the reason for his bounce, but it was really a speech bursting with specifics that gave him his edge.

Voters have been very impressed by Obama's opening act. His charisma, intellect and message have thrilled tens of millions, especially among the young. But, so far, he's had no second act - he's been unable to follow up the generalities with specifics or to put flesh on the skeletal message of change.

Now, in his acceptance speech, the nominee needs to go where he hasn't been before and answer the implicit question voters always ask of candidates who run on promises of change: Where's the beef?

One of the knocks on Obama is that he speaks in broad terms and never tells anyone how he will accomplish any of his lofty goals. Iran is on its way to get a nuclear weapon. We are struggling for victory in Afghanistan. We are on the brink of victory in Iraq. Gas prices continue to be near all time highs. Russia appears insistent on relaunching the Cold War. We have nearly 50 million uninsured. The economy is struggling to recover from the real estate bubble's burst. There will likely be up to three Supreme Court Justices chosen by the next President. In other words, there will be plenty on the plate for the next President. Simply saying hope, change, and unity is not enough for this speech.

This speech must get into specifics and the more specific the better. If he says he will spend X dollars on alternative energy, that is good. If he explains how his program will differ from all previous alternative energy investments, that will be effective. If he proclaims that his health care plan will provide insurance for all uninsured, that is good. If he explains how his plan will reduce health care costs to all, that will be effective.

This speech will test Obama's oratory skills. It will NOT be what the crowd in Invesco Stadium will want to hear. Detailed plans of policy will likely bore most of his most ardent fans who are mostly seduced by the soaring rhetoric. Furthermore, the massive crowd and elaborate set up is not exactly the backdrop for detailed numbers explaining tax policy. If the speech bores people his opponents will quickly produce the narrative that his specifics aren't as effective as his soaring rhetoric.

Furthermore, I am of the opinion that his specifics are frankly cut and cloath standard boiler plate classic liberalism. If he lays out a play to spend a lot of money, increase the size of government a lot, and raise a lot of taxes, my hope is that John McCain's campaign immediately releases this release

Listening to Barack Obama's speech I couldn't help but be reminded of something Ronald Reagan once said, the nine most terrifying words in the English language are I'm from the government and I'm here to help

Barack Obama's speech will need to thread a very sharp needle. He will have to finally put a lot of meat on the bones. He will have to do it while keeping the crowd riled up, and he will have to do it without exposing a classic liberal philosophy that will then be torn apart in the next convention. That may be a tall order but those that have doubted his oratory skills have overplayed their hands before.

Barack Obama's Back to the Future Economics

I have noticed a terrible habit by Barack Obama surrogates. Whenever they attempt to try and justify one of his plethora of tax increases, they do it by going into the past and finding a time when that particular tax was higher. Here is what Obama surrogate, Larry Summers, said recently.

The Obama campaign called on former Clinton administration Treasury Secretary Lawrence Summers to defend Sen. Obama's plans. "At a time when the 10-year interest rate is in the three's, at a time when it is clearly lack of demand for products rather than the cost of capital that is inhibiting investment, the idea that a return to the tax policies of the 1990s would somehow damage the economy in a substantial way seems to me supported by neither theory nor evidence nor the longer-term history," Mr. Summers said.

Of course, it is interesting that Mr. Summers talks about economic theory and evidence. That's because there is no serious economic theory or evidence that says the right way to make decisions on tax rates is to compare them to other eras. Of course, these comparisons are really significantly more sinister and dangerous than merely that lack of logic. Look at how Obama advisors, Jason Furman and Austen Goolsby,make their comparisons.

The top capital-gains rate for families making more than $250,000 would return to 20% -- the lowest rate that existed in the 1990s and the rate President Bush proposed in his 2001 tax cut. A 20% rate is almost a third lower than the rate President Reagan set in 1986.

...

The estate tax would be effectively repealed for 99.7% of estates, and retained at a 45% rate for estates valued at over $7 million per couple. This would cut the number of estates covered by the tax by 84% relative to 2000.

Overall, in an Obama administration, the top 1% of households -- people with an average income of $1.6 million per year -- would see their average federal income and payroll tax rate increase from 21% today to 24%, less than the 25% these households would have paid under the tax laws of the late 1990s.

So, depending on the tax increase, it might be compared to the Reagan Era, the beginning of the Clinton era, the end of the Clinton era, or even the Bush era. In other words, we're supposed to believe that his tax increases are perfectly acceptable and will work just fine because sometime in history they were higher. Of course, we have no comparison between the level of his tax proposals and any one era in whole. Furthermore, why are they making these comparisons in the first place?

To me, this is tax equivalent of what Bill O'Reilly refers to as excusing bad behavior by pointing to behavior that was even worse. The Obama administration wants to raise income taxes, capital gains taxes, corporate taxes, and even taxes in death, and they justify each tax increase by pointing to an era, a different one always, in which the same tax was even higher. We're supposed to feel fine paying 25% more in capital gains taxes that's still less than it was in 1986. Furthermore, we're supposed to feel fine paying more in income taxes because that is still lower than that was in 1992. Nonsense, I say.

Here are some periods in history that you will never hear an Obama advisor ever reference. 1912, that's because the income tax wasn't created until 1913. Somehow the country not only survived but thrived for about 150 years without an income tax at all. We created trains, automobiles, the telephone, the radio, and went through the industrial revolution all without taking one penny of income tax. 1968, that's because that was the period that began the rapid expansion of the capital gains tax. Before then, the capital gains tax was usually in single digits. How exactly is a comparison to either the Clinton, the Reagan, or the Bush era any more relevant than the nineteen teens or 1968?

Of course, none of these comparisons are at all relevant. The only things that matters when making a tax decision are what the taxes are now and how those taxes compare to our competitors. Why would one compare the income tax now to the income tax in 1986 when we are facing a unique economic dynamic that doesn't lend itself to such a comparison. We didn't just go through a real estate boon that just crashed in 1986. Since we didn't how exactly is the tax rate then relevant to a current discussion of taxes.

The Obama campaign would like the country to disregard policies that won't merely put us into a recession but a depression by engaging in misdirection. They want everyone to forget that the country is facing trillions of dollars in tax increases because they can always find a period in time when taxes were even higher. That's not a tax policy. That's an excuse to raise taxes in an obscene and justify it by some sort of pseudo economic explanation.

What I don't understand is how folks that make economics their living can be so oblivious to this? Larry Summers, Austen Goolsby and Jason Furman all have long careers in economics and yet they are peddling pseudo economics that wouldn't pass the mustard of basic Economics 101. This would be laughable and pathetic if it weren't so dangerous.

The Obama administration is planning on raising trillions of dollars worth of taxes at a time when our economy is already weakening. Many times, like to corporate tax, that makes our taxes, already uncompetitive with the rest of the Western world, even less competitive. They justify it all by proclaiming that there were times when all these taxes were even higher. Unfortunately, our economy doesn't know or care what our taxes were in 1986. It will be affected just the same no matter how high they were then. The simple fact that all these justifications fail to address is that tax increases stunt the economy. When the economy is already weakening, any artificial stunting is a recipe for a DEPRESSION.