Month: July 2009

To paraphrase Churchill, never has so much, of such consequence, been done so quickly, only to fail so spectacularly, creating far more ominous repercussions.

Six months into the Obama administration, the broad outlines of Obamaism are clear. A renewed faith that vastly expanded government can solve economic, environmental and health care challenges that face the country. Conversely, Obamaism treats as axiomatic a deep seated suspicion of the private sector and wealth creation, and redefines the proper role of taxation as that of wealth transfer and redistribution.

Wherever one stands on Obama’s ideological intent, thinking people have to take pause for the factual assessments of the Obama record to date, and the fresh estimates and projections on the impact of new programs awaiting approval.

Simply put, we face terrifying financial and economic calamities as a result of Democrat-sponsored government action. The colossal irony is that for all the pain and dislocation these new policies cause, so very little is genuinely achieved regarding the President’s stated objectives. In fact, these provocative new policies are defended in a series of bewildering, contradictory, one-dimensional or even simpleton explanations from the President and Congressional leaders.

“We have to do something.”

Watch the talk shows and interviews with senior officials. When the Mainstreams come to a hard question on cost or purpose, even the most hilariously indefensible proposal will be met with the solemn “Well, we have to do something” defense. This both creates and defends a sense of crisis that insufficiently substitutes for meaningful or elementary policy review.

The President himself is wedded to a rhetorical device that makes any critique of his own plan into a defense of the status quo. Effective as a sound bite, it intentionally misstates the nature of the debates on his program, and is intended to deflect scrutiny and doubt until his policies are law.

This is a government premised on the idea that, “Doing something is absolutely essential, because doing anything other than what we are proposing is effectively doing nothing, which is a victory for the status quo, and thus why we have to do something.”

Joseph Heller would be more than amused.

Stimulus: back in February the President said that failure to pass the nearly trillion dollar Stimulus bill would lead to increased unemployment and greater debt. The Administration promised 3.5 million new or “saved” jobs.

Today, there are 2.2 million more unemployed and 2009’s deficit will be four times as large as 2008’s. Moreover, in structuring the Stimulus, the Congressional Budget Office (CBO) notes that only 11% of the funds will be spent in 2009. The last tranche – 27% – will be spent in 2012.

Where is the logic in this given today’s economic conditions?

In touting its success, Administration officials point to teachers and police and firefighters who have been retained on the job. This is obviously important to localities.

But this isn’t “stimulus.” No new jobs are being created as a result. There is no jump start to economic activity. This is simply a government transfer payment to states. And unless the economy improves, filling state coffers with tax revenue, when the payment runs out, so will those public sector jobs. The fact is that the underlying recession goes unaddressed in the Stimulus.

And would it come as a shock or surprise to anyone that these “Stimulus successes” are unionized jobs, demonstrating the new national pecking order coming from Washington?

Vice President Biden said that the Administration under estimated the economic conditions on assuming office and thus the resulting structure and size of the Stimulus. Do we take him at his word?  The President, without any hint of irony said days later that the Stimulus is working exactly as planned, all evidence to the contrary notwithstanding. Given the promises, how is that possible? When will these leaders be held to account?

Cap N’ Trade: perhaps one of the most invasive, disruptive, expensive and ultimately futile government initiatives in recent memory. The concept is to monetize the value of Greenhouse Gas Emissions (GHG) and begin restricting their use through a permit and trading system that, in theory, will result in nationwide clean technology deployment to combat global warming.

In practice, the legislation is a massive, economy-wide regulatory intervention on anything that doesn’t breathe. Nothing is too small to escape attention. The House bill had explicit efficiency standards including a subsection on “art work light fixtures.” Another section details standby power needed for hot tubs.1

And, ironically, the Cap N’ Trade could be dangerous to your health.

Consider that the state of California requires warning labels on canned tuna sold in the state because of the potential toxic effects of the .12 milligrams of mercury in the tuna. But in the Cap N’ Trade bill, Congress mandates that new GHG compliant light bulbs containing up to 4 milligrams of mercury become standard in our homes and offices in 2012.  The light bulbs are so poisonous that the EPA has created specific clean up procedures if the light bulbs break. Those procedures are so alarming that it will be no small wonder if home owners don’t stock up on safe bulbs now or consider candles as an alternative.2

Beyond the health risks, the economic dislocation and energy scarcity, the bill is a tax on, well, everything. Coal fired power plants and refineries and obvious targets. But like the increase in the price of oil ripples through the economy, so will Cap N’ Trade.

It will affect what kind of car you are allowed to buy, the costs of gasoline, the cost of electricity, the cost of food, and even the cost of dry cleaning, along with standards of performance and cost for every imaginable appliance.

It is simply the largest tax increase in American history, and oddly for the Democrats, the most regressive, as those at the lower income strata pay more for energy and essentials.

But having turned our homes into potential toxic waste dumps, taxed our businesses, retarded economic growth, depleted our disposable income to pay higher prices for goods across the board, the bill will do nothing to curb global warming. As Joe Biden would say, “let me say that again.”  The bill will do nothing to curb global warming.

Emissions from China, India, Mexico and Brazil – among other developing countries that have refused to sign on to a Kyoto II which would restrict their economic development – will build and deploy energy emitting capacity well in excess of  the minute US reduction. The net result will be anincrease in global GHG.

Yet, the President was in full rhetorical splendor commenting on the House bill. He called the bill “a bold and necessary step,” and then, defaulting to form, said, “There are those who argue that the status quo is acceptable, those who would have us continue our dependence on foreign oil and our reliance on fossil fuels despite the risks to our security, our economy and our planet.”

That there was no such debate on the terms the President outlined is only further evidence of the vacuousness of the Democrat’s global warming strategy.  One is left to consider if there is any sanity to a policy that risks the dislocation and restricted economic potential for each of us – and collectively as a nation – for such negligible impact.

Health Care: that the US health care system is in need of reform is undeniable.  We face the paradox that our aging population is living longer, enabled in part by a vibrant private health care sector that is creating technologies and medications to extend life still further.

Government programs, created in an era of different actuarial tables and vastly more limited means of treatment, are overwhelmed with patients and costs, while litigious America has warped medical common sense care into a “leave no test behind” requirement that is wasteful and counterproductive, driving up costs further across the public and private sectors.

To address the health care challenge, President Obama promised reform that would control costs, guarantee quality, affordability and accessibility, while expanding coverage to meet the needs of the 45 million “uninsured.”  Sadly, what the Democrats in Congress have done addresses none of these things effectively, and in some cases makes a bad situation worse.

Under the House plan(s) the government would subsidize premiums for individuals earning between 133%-400% of the poverty level. Medicaid eligibility would be greatly expanded to include all individuals up to 133% of the poverty level.  A family a four with an income up to $88,000 would be eligible for some form of assistance.

The House plan insists upon a “public insurance option” to compete with private insurance companies. In doing so, Democrats take a big step toward forcing Americans into government run health care. As government entities are not subject to market realities, and have unlimited ability to set prices, the government option necessarily becomes more attractive out of necessity for potential customers, driving the private market out. It will leave a system of price contortions based on legislative fiat instead of reality.

According to the Congressional Budget Office (CBO), preliminary analysis indicates that the plans would increase the deficit by a staggering $1-1.5  trillion dollars between 2010-2019. “Preliminary” is the key word. Consider the experience of Medicare. In 1965, when the program was created, the government projected that inflation-adjusted cost in 1990 would be $12 billion.  The actual cost in 1990 was $107 billion.  What similar unknowns lurk in Obama-care?

Beyond the costs of expansion, the CBO has determined that none of the Democratic plans under consideration do anything to control costs.  CBO Chief Elmendorf stated, “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.  And on the contrary, the legislation significantly expands the federal responsibility for health care costs.”

Medicare, Medicaid and Social Security are already headed toward insolvency without this massive new entitlement. Add in health care reform and you are accelerating that unsustainable trajectory bringing general financial ruin to our public treasury.

To pay for their plan Democrats would dramatically increase taxes on those making more than $280,000, with a surcharge starting at 1% and going up to 5% on millionaires. This is supposed to generate $544 billion. The remaining $500 billion to $1 trillion is supposed to come in program “savings,” promised by various health care interest groups, and, ironically, benefit cuts to seniors in Medicare.

But not just the rich would take a hit. As part of the plan, those who don’t sign up for health care would be taxed at 2.5% of their income courtesy of the IRS. Small businesses that don’t have health plans will have to pay up to 8% of their payroll as a “fee.”

In focusing reform on expansion of access first instead of cost control, the Democrats have set the nation up for another completely unrealistic and unaffordable entitlement that will necessarily lead to more government control and ultimately rationed care.

Aside from issues of care quality and accessibility, all of this has a huge impact on the economy. Capital generators and wealth creators would be taxed at close to confiscatory rates. The National Tax Foundation has stated that the top tax rate for Americans that includes federal, state and local levies will top 50% in 39 states as a result of the new Democratic health plan.

Yet despite these tax increases, the Obama budget blueprint calls for mandates and spending that will still require up to $9 trillion in additional borrowing.

At what point do we become a “banana republic?” When do we lose our Triple A rating?  When will the Chinese figure out that we have no intention of being serious in reigning in our debt and begin refusing to buy any more of our bonds? What happens when we can no longer finance our public spending beyond revenues?

More broadly, look to the hidden and indirect costs of Cap N’ Trade and the pending expiration of the Bush tax cuts in 2011. Will the private sector, the entrepreneurs and small businesses that create jobs and wealth through expanded products and services, continue to do so with such painful tax and regulatory disincentives?  The Obama program gives risk takers no reason to take risk.

As I have said before, the emerging, fundamental paradox of the Obama program of massive government spending is that robust economic activity is it’s only path to salvation. Yet key elements of the legislative program are themselves the biggest drag on economic growth through misallocating resources, increasing public debt, new direct and indirect taxation, market uncertainty and  colossal federal intrusion into the workings of the private market at all levels and sectors.

Stimulus that doesn’t stimulate. Emissions caps that don’t slow emissions. Health care improvements and cost savings promised by the people who brought you Katrina relief.

OK, joke’s over.