Wednesday • September 8 • 2010
Vol.II • No.XXXVI
Manchester, N.H.
In the farewell speech that she gave on her way out the door, chief economic adviser Dr. Christina Romer admitted that the Obama administration stimulus that she helped to design has been a miserable failure.
The Obama administration’s fiscal stimulus was meant to boost aggregate demand and get the economy going again. Estimates of GDP show that the United States is still 6% under its pre-crash trend, and that her plan hasn’t worked as expected.
“The United States still faces a substantial shortfall in aggregate demand… this shortfall in demand, rather than structural changes in the composition of our output… is the fundamental cause of our continued high unemployment,” Romer told the crowd at the National Press Club in Washington, D.C.
And since the stimulus yielded such dismal results, Dr. Romer advised that we do it again.
Romer today called for a second round of fiscal stimulus to further boost aggregate demand, a tacit admission that her first round was a failure:
While we’d all like to find the inexpensive, magic bullet to our economic troubles, the truth is, it almost surely doesn’t exist. The only surefire way for policy makers to increase aggregate demand in the short-run is for the government to spend more and tax less. And in my view we should be moving forward on both fronts… the key is that we need to take action, and we need to do it quickly.
The "tax less" part won't play well in lefty circles where resident geniuses demand that tax cuts be paid for while bailouts be borrowed. Whatever. It's all such a mystery.
“To this day, economists don’t understand why firms cut production as much as they did, or why they cut labor so much more than they normally would,” said Romer. “The current recession has been fundamentally different from other post-war recessions… Rather than being caused by deliberate monetary actions, it began with interest rates at low levels… Precisely what has made it so terrifying, and so difficult to cure, is that we have been in largely uncharted territory.”
Gee Doc, do you think the impending regulatory and economic one-two punch from ObamaCare and other "reforms" might have discouraged private businesses from staffing up? It appears she does not, nor has it occurred to anybody else in this utterly clueless administration.
On the left they are nearly unanimous in their disapproval of Glenn Beck's Restoring Honor rally. Bill Press, for instance, decided that the Lincoln Memorial, being sacred ground and all, was no place to talk about God. Meanwhile back at Ground Zero, the site of those towers turned into rubble in the name of radical Islam, talking about and worshiping Allah is very much OK, and to object to it is very much bigoted. Richard Fernandez essay takes an analytical view of the situation.
Some things are never OK if you’re Glenn Beck. Some things are always OK if you’re the Imam Rauf. It’s just like certain programming languages, which have rules like: x or y if x is false, then y, else x. In this case ‘conservative’=false. Also, anyone who the Left doesn’t like =’conservative’. From this all else follows. This is especially important when it comes to identifying evil or potentially evil people.
The bar is set at whatever level progressives say the bar ought to be set depending upon who or what is measured. Progressives have their established order of precedence in these things.
Paul Krugman, prominent opinion writer at the New York Times, says we are not in the midst of an economic recovery, contrary to what administration officials might say. It's hard not to agree with with him on that point. On the other hand you might disagree with his prescription for it.
So what should officials be doing, aside from telling the truth about the economy?
The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash. Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.
It is upon this try-something-try-anything approach that some may disagree, particularly the part about raising inflation targets. Back in May the Mary Anastasia O'Grady had a conversation with Richard Fisher of the Dallas Federal Reserve Bank, who warned against monetizing US debt.
I think the trick here is to assist the functioning of the private markets without signaling in any way, shape or form that the Federal Reserve will be party to monetizing fiscal largess, deficits or the stimulus program."
The very fact that a Fed regional bank president has to raise this issue is not very comforting. It conjures up images of Argentina. And as Mr. Fisher explains, he's not the only one worrying about it. He has just returned from a trip to China, where "senior officials of the Chinese government grill[ed] me about whether or not we are going to monetize the actions of our legislature." He adds, "I must have been asked about that a hundred times in China."
This raises a couple of questions. If the Fed raises inflation targets, embarking on a courses that monetizes the debt, with what is it going to buy more long-term and private debt? Who is going to finance the US deficit, and at what interest rate?
He returns to events on his recent trip to Asia, which besides China included stops in Japan, Hong Kong, Singapore and Korea. "I wasn't asked once about mortgage-backed securities. But I was asked at every single meeting about our purchase of Treasurys. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States. That seems to be the issue people are most worried about."
As I listen I am reminded that it's not just the Asians who have expressed concern. In his Kennedy School speech, Mr. Fisher himself fretted about the U.S. fiscal picture. He acknowledges that he has raised the issue "ad nauseam" and doesn't apologize. "Throughout history," he says, "what the political class has done is they have turned to the central bank to print their way out of an unfunded liability. We can't let that happen. That's when you open the floodgates. So I hope and I pray that our political leaders will just have to take this bull by the horns at some point. You can't run away from it."
According to Mr. Fisher, what Krugman recommends is the political solution – to print our way out of our unfunded liabilities. Nothing surprising about that. Paul Krugman is, above all else, political.
Intel CEO Paul Otellini speaking at a technology forum:
"the next big thing will not be invented here. Jobs will not be created here. And wealth will not accrue here. Ultimately, we will face an inevitable erosion and shift of wealth—much like we are witnessing today in Europe."
[...]
"Our combined state and federal corporate income tax rate"—about 38%—"is the second highest in the industrial world. It is precisely these high statutory corporate rates that punish the most dynamic and innovative firms and hinders their ability to compete globally," Mr. Otellini said. "I can tell you that it costs $1 billion more to build, equip and operate a semiconductor manufacturing facility in the U.S. Ninety percent of the cost difference is the result of tax and incentive policies. With such policies, are we surprised that companies are investing overseas?"
Ms. Irshad Manshi, professor of leadership at New York University, is working on a book that promotes the advance of liberal reform within Islam. In today's Wall Street Journal she poses some questions regarding the Ground Zero Mosque. In the interest of tolerance she would like to know:
• Will the swimming pool at Park51 be segregated between men and women at any time of the day or night?
• May women lead congregational prayers any day of the week?
• Will Jews and Christians, fellow People of the Book, be able to use the prayer sanctuary for their services just as Muslims share prayer space with Christians and Jews in the Pentagon? (Spare me the technocratic argument that the Pentagon is a governmental, not private, building. Park51 may be private in the legal sense but is a public symbol par excellence.)
• What will be taught about homosexuals? About agnostics? About atheists? About apostasy?
• Where does one sign up for advance tickets to Salman Rushdie's lecture at Park51?
Don't hold your breath waiting for an answer.
In what may become the most stunning of upsets this season, incumbent Republican Senator from Alaska, Lisa Murkowski, trails TEA Party favorite Joe Miller in the Alaska Republican primary. Miller was a virtual unknown with $84,000 in the war chest compared to Murkowski's $1.86 million, until Sarah Palin endorsed him.
How Lisa Murkowski (might have) lost1. The stunning news that developed over night in Alaska -- with 98 percent of precincts reporting, attorney Joe Miller (R) leads Sen. Lisa Murkowski (R) 51 percent to 49 percent -- reveals the depth of anti-incumbent sentiment in the country, the power of former Alaska Gov. Sarah Palin (and the tea party movement) and the perils of prognostication in low turnout intraparty fights.
First, the numbers. With 429 of 438 precincts reporting, Miller stands at 45,909 votes while Murkowski has 43,949 votes. According to the Alaska Division of Elections, more than 16,000 absentee ballots were requested and fewer than half (7,600) had been returned as of Monday night.
Absentees won't start to be counted for another six days and there are clearly enough outstanding votes for Murkowski to stage a comeback. If she was to lose, however, Murkowski would be the third Senator to fall in a party re-nomination contest this year.
How did we get here?
Yes, that is the question progressives must ponder. How did we ever come to this! Journolister extraordinaire David Weigel was at a loss.
There was evidence that Miller could win. It was just obscure, because Alaska handicappers didn't see evidence that a combination of lucky factors were breaking his way. (Gutierrez quoted Alaska sources exclusively.) The Palin endorsement got him uncritical national media attention. The Tea Party Express bought $500,000 in ads for Miller, which was the largest single buy in the state. Perhaps most importantly, the Measure 2 anti-abortion proposition was bringing out conservative voters. Meanwhile, Miller hadn't exactly lit the state on fire (one rally brought in nine people).
Did the rest of the media ignore Miller because of bias, then? I don't think so...
Media? Biased? Couldn't be! Though Weigel admitted he was embarrassed to have badly underestimated Miller, his analysis of the primary results suggest he is still doesn't have a clue.
Yes, but since at best Murkowski is going to win closer than any polls suggested, here are two things that affected the race. The first: The Tea Party Express threw around $500,000 into the campaign on Miller's behalf. That's huge money in Alaska. Second: Measure 2, a parental consent ballot initiative, brought out pro-life voters who have never trusted Murkowski. Sarah Palin's early endorsement also handed Miller credibility and media attention which, in a GOP primary, was more important than Palin's increasing unpopularity in the state.
Weigel must get his news from the mainstream media. Among media luminaries Palin is hugely unpopular and becoming more unpopular by the day. Outside of the media echo chamber, she may not fare so poorly. Weigel's misperception of Palin's unpopularity could be the reason he blew it so badly.
He was not alone. On Monday Slate's Alexandra Gutierrez predicted Miller's defeat, a defeat she seemed to relish as an embarrassment for Palin.
On Tuesday, in her home state, Sarah Palin's favorite will probably get trounced. Joe Miller is widely expected to lose by a large margin to incumbent Sen. Lisa Murkowski in the Republican primary—an embarrassing defeat for the former governor, who has endorsed Miller, but also to Miller's other major backer, the Tea Party Express.
Well that didn't happen. But how else could you explain it? MSNBC's First Read has the way. The MSNBC crowd figures that Anger Trumps Accomplishments. After all, there couldn't very well be any thought process involved.
Stunning development: Murkowski trails Miller by 1,960 votes in AK GOP Senate primary… We might not know the final result for days... How to explain why McCain easily won in AZ but Murkowski is in trouble: Anger is trumping accomplishments… That’s a lesson vulnerable Democrats might want to learn…
About that lesson. Everybody knows there is a bit of anger out there among the electorate, but Democrats and other incumbents may want to consider the possibility that anger is a direct result of their accomplishments. Especially their accomplishments over the last 18 months, but before that as well.
They may consider it, but I suspect it won't take. Progressives will regroup to refine their message. The question will always be, "Why don't those rubes get it?"
Meanwhile Sarah Palin's endorsements have been doing pretty well recently.
Tuesday’s Republican primaries showed that Sarah Palin's power should not be discounted.
Four candidates backed by the former Alaska governor pulled off primary victories, while a fifth, Alaska attorney Joe Miller, appeared to be on the verge of pulling off a major upset by defeating Sen. Lisa Murkowski.
People are naturally drawn to a winner, and right now Sarah is looking like the big winner. It's going to be an exciting November. Most exciting is going to be to watch the meltdown in the mainstream media and other hotbeds of progressivism.
Democrats plan to campaign against George W. Bush this fall, and their primary weapon of attack is going to be the cost of the Iraq War and how it decimated the economy. Good luck with that one. Mark Tapscott offers some perspective.
The meme is simple: The economy is in a shambles because of Bush's economic policies and his war in Iraq. As American Thinker's Randall Hoven points out, that's the message being peddled by lefties as diverse as former Clinton political strategist James Carville, economist Joseph Stiglitz, and The Nation's Washington editor, Christopher Hayes.
The key point in the mantra is an alleged $3 trillion cost for the war. Well, it was expensive to be sure, in both blood and treasure, but, as Hoven notes, the CBO puts the total cost at $709 billion. To put that figure in the proper context of overall spending since the war began in 2003, Hoven provides this handy CBO chart showing the portion of the annual deficit attributable to the conflict:
In fact, the first two years of Obama's stimulus cost more than the entire Iraq War.
According to Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, John Maynard Keynes is the true originator of Voodoo Economics.
You remember Joe. During a campaign stop in the 2008 presidential election, Samuel Joseph Wurzelbacher asked Obama whether higher taxes would punish his business. Obama answered in part, “I think when you spread the wealth around, it’s good for everybody.”
Obama’s words captured Democrats’ ideology: outside of fairy tales, only government can play Robin Hood, taking money from the rich and giving it to the poor.
The problem, of course, is that high tax rates inevitably cause economic harm. Such a link is at the core of economics. If you reduce the reward for an activity, you get less of it. Democrats and the economists who serve them deny that harm so they can spread the wealth around.
The Tax Alternative
If the economy is in deep trouble, there are two economic policy steps that one could take in order to create a positive stimulus: reduce tax rates, or spend more money. (The so-called tax cuts in the 2009 stimulus had little effect because they were primarily credits and deductions, rather than reductions in marginal rates.)
But notice the problem for the Robin Hooders: If you cut tax rates in a recession in order to stimulate the economy, then you are conceding that lower tax rates can be a good thing. And if that’s true, then higher tax rates will be harmful -- something the left has always denied.
So the Obama economic team was left to rely totally on spending in its response to the recession.
So, how's that stimulus working? Well, here we are in August after 18 months of a stimulating Obama administration, and the jobless claims for the week ending August 14th hit 500,000, which is the worst it's been since November 2009. Where do we go from here?
As the economic data again head south, it will be much harder to devise successful economic policies because of the budgetary hole that the Keynesians have dug for us.
In all likelihood, the data will soon be so convincingly bad that we’ll again debate the need for an economic stimulus. Let’s hope that when that begins, all will finally concede that the ideas of John Maynard Keynes are as dead as the man himself, and that Keynesianism is the real voodoo economics.
Paul Krugman, opinion writer for the New York Times, is OK with that. A staunch adherent to Voodoo Economics, he reassures us that Obama stands firm.
So far, the Obama administration is standing firm against this outrage. Let’s hope that it prevails in its fight. Otherwise, it will be hard not to lose all faith in America’s future.
Krugman thinks extending the Bush tax cuts won't help the economy because rich people already have too much money to spend.
...it’s hard to think of a less cost-effective way to help the economy than giving money to people who already have plenty, and aren’t likely to spend a windfall.
Is it me, or is this just plain stupid? If the windfall is unlikely to be spent, the most probable alternative is that it will be invested. And the funny thing about investments is that somewhere along the line somebody has got to take that invested cash and turn it into something that provides a return for the investor. In other words, it is almost guaranteed to promote economic growth, which generally translate into jobs down the line.
Krugman has long since nailed his flag to the mast. There is no way he can admit that lower marginal tax rates can help the economy. For Krugman, it would seem, it's better that next week's jobless claims hit 1,000,000 than to have high income tax payers get a tax break. And if the Obama administration continues to follow the kind of advice Krugman has to offer, we may just see it.
Update: Via Instapundit and The Anchoress, we find evidence of the true effect of the Bush Tax Cuts. My emphasis below.
Surprising Jump in Tax Revenues Is Curbing Deficit
By EDMUND L. ANDREWS
Published: July 9, 2006WASHINGTON, July 8 — An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief.
On Tuesday, White House officials are expected to announce that the tax receipts will be about $250 billion above last year's levels and that the deficit will be about $100 billion less than what they projected six months ago. The rising tide in tax payments has been building for months, but the increased scale is surprising even seasoned budget analysts and making it easier for both the administration and Congress to finesse the big run-up in spending over the past year.
Tax revenues are climbing twice as fast as the administration predicted in February, so fast that the budget deficit could actually decline this year.
Such a paradox. Cut taxes for on the rich, the rich pay more taxes, and government receipts rise dramatically. Dim bulbs on the left, including Krugman and Obama, have painted themselves into a corner, though. By demonizing the rich they don't get to take advantage of the boom in tax receipts that comes when the rich make more money and pay more taxes on it. The economy belongs solely to Obama, now.
Dick Cavett took to the New York Times the other day with an editorial column extolling his astonishing wonderfulness. In figurative fashion, Cavett stood up and stood tall in Real Americans, Please Stand Up. He leads by example, you might say, showing his lesser countrymen what America is really about.
All this talk about the mosque reminds me of two things I heard growing up in Nebraska.
I had a 6th grade teacher who referred to American Indians as “sneaky redskins” and our enemies in the Pacific as “dirty Japs.” This abated somewhat after I asked one day in class, “Mrs. G., do you think our parents would like to know that you teach race prejudice?” She faded three shades.
The rest of that year was difficult.
As a war kid, I also heard an uncle of mine endorse a sentiment attributed to our Admiral “Bull” Halsey: “If I met a pregnant Japanese woman, I’d kick her in the belly.”
These are not proud moments in my heritage. But now, I’m genuinely ashamed of us.
Not proud moments? Color me skeptical. Was the story about chastising his 6th grade teacher put in there to point out his own shortcomings? Please. Quite the contrary. In his own mind Cavett is the yardstick by which other Americans may be measured, and it turns out other Americans just aren't measuring up. In fact, most Americans are repugnant enough to Cavett that he now says he is genuinely ashamed.
The issue that brings Cavett to his present state of distress is the Ground Zero Mosque and the deplorable fact that a substantial majority of Americans believe the construction of a mosque so close to the site of the 9/11 World Trade Center attacks is inappropriate. What's worse, they say so – out loud. Such a thing is beyond Cavett's comprehension.
I remain amazed and really, sincerely, want to understand this. What can it be that is faulty in so many people’s thought processes, their ethics, their education, their experience of life, their understanding of their country, their what-have-you that blinds them to the fact that you can’t simultaneously maintain that you have nothing against members of any religion but are willing to penalize members of this one? Can you help me with this?
Let me just step out on this limb and suggest that the wonderful Cavett isn't really serious about wanting help. Yes, he says he wants to understand, but I suspect he's quite convinced that he understands only too well. He said so with the mention of his 6th grade heroism. It's bigotry, he thinks, and on a massive scale. There is a vastness of moral failure in Americans. The fault lies in their thought processes, their ethics, and their education. That "those people" with all of their advantages don't see things his way, why it boggles his mind.
But as is so typical with progressive elites, Cavett misleads by attacking a strawman. Otherwise the column doesn't work. It's the constitution and the rule of law, he says.
I like to think I’m not easily shocked, but here I am, seeing the emotions of the masses running like a freight train over the right to freedom of religion — never mind the right of eminent domain and private property.
I have yet to hear anybody suggest that Muslims do not, or should not, have the right to worship as they see fit and to build their places of worship wherever local zoning laws allow. In a rare moment of brevity and clarity, President Obama put it perfectly though he refused to take a position on it.
"I was not commenting and I will not comment on the wisdom of making the decision to put a mosque there (near Ground Zero)," Obama said.
That is the question. Muslims have the right to build it. Their purpose they say is to bridge the gulf between people of different faiths. But should they build it? Wouldn't they more effectively bridge differences by respecting the feelings of others and building the mosque in another location. That's what they want to do, bridge the differences, isn't it?
Andrew McCarthy, the former Assistant United States Attorney for the Southern District of New York, doesn't think so. Mr. McCarthy was lead prosecutor in the case of the 1993 World Trade Center bombing which resulted in the conviction of Sheik Omar Abdel Rahman and eleven others. Recently, McCarthy had this to say.
In 1991, the Muslim Brotherhood’s American leadership prepared an internal memorandum for the organization’s global leadership in Egypt. It was written principally by Mohamed Akram, a close associate of Sheikh Qaradawi. As Akram put it, the Brotherhood
must understand that their work in America is a kind of grand jihad in eliminating and destroying the Western civilization from within and “sabotaging” its miserable house by their hands and the hands of the believers so that it is eliminated and God’s religion is made victorious over all other religions.
[...]
The Ground Zero project to erect a monument to sharia overlooking the crater where the World Trade Center once stood, and where thousands were slaughtered, is not a test of America’s commitment to religious liberty. America already has thousands of mosques and Islamic centers, including scores in the New York area — though Islam does not allow non-Muslims even to enter its crown-jewel cities of Mecca and Medina, much less to build churches or synagogues.
The Ground Zero project is a test of America’s resolve to face down a civilizational jihad that aims, in the words of its leaders, to destroy us from within.
Meanwhile, the wonderful Cavett frets that America's image suffers when Americans ask Muslim leaders to build their new mosque somewhere else. Says Cavett,
Set aside for the moment that we are handing such a lethal propaganda grenade to our detractors around the world.
You can’t eat this particular cake and have it, too. The true calamity, of course, is that behavior of this kind allows the enemy to win.
It's mildly shocking to discover that Cavett thinks there is an enemy. But I have to wonder what war does he suppose we are in, that will be lost on the basis of this "propaganda grenade?" And who is this enemy? Can he possibly think there is real a war going on? Hard to imagine. More likely, he thinks there is a massive misunderstanding. A failure born out of the faulty thought processes of faulty Americans prevents Islamic terrorists from understanding the wonderfulness of an America that has Dick Cavett in it. If only they could see. Surely there would be world peace.
Jennifer Horn, a Republican from Nashua who is running for Congress in New Hampshire's 2nd Congressional District, knows what's at stake this November.
The single greatest threat to our nation is a Congress that has spent us to the brink of collapse and runs rampant on our individual liberties.
We need a new Congress.