View the Obama Agenda presentation in its entirety, as posted on change.gov the day before “Obama-Biden Transition Project” removed it on 2008-Nov-8.
“The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.”
-Thomas Jefferson“The American people will never knowingly adopt Socialism, but under the name Liberalism they will adopt every fragment of the Socialist program until America will one day be a Socialist nation without knowing how it happened.”
-Norman Thomas, six time candidate of the Socialist Party for President of the United States, in 1959“Here is my principle: Taxes shall be levied according to ability to pay. That is the only American principle.”
-Franklin Delano Roosevelt“We want to take money and put it back in the pocket of middle class people.”
-Joe Biden, 2008-Sep-18, telling ABC Good Morning America host Kate Snow why it's patriotic to be pickpocketed
“Anyone making over $250,000…”
“Is going to pay more. You got it. It's time to be patriotic, Kate. It's time to jump in, it's time to be part of the deal, it's time to help get America out of the rut.”“From each according to his abilities, to each according to his needs.”
-Karl Marx“The New Deal is plainly an attempt to achieve a working socialism and avert a social collapse in America; it is extraordinarily parallel to the successive 'policies' and 'Plans' of the Russian experiment. Americans shirk the word 'socialism', but what else can one call it?”
-H.G. Wells, The New World Order, 1939“They don't truly believe that our government has an obligation to take care of the needs of the people.”
-Charles Rangel, D-NY, 2005-Feb-3, at the FDR memorial, protesting GWB's no-brainer proposal to make retirement savings private and inheritableexchange in Congressional hearings on fuel prices, held 2008-May-22, video here:
“I can guarantee to the American people, because of the inaction of the United State Congress, ever increasing prices, unless the demand comes down — and the five dollars will look like a very low price in the years to come, if we are prohibited from finding new reserves, new opportunities to increase supplies.”
-John Hofmeister, president of Shell oil
“And guess what this liberal will be all about? This liberal will be all about socializing-- uh umm [hesitant pause]-- would be about [another hesitant pause] basically, taking over, and the government running all of your companies.” -Maxine Waters, D-CA35“I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it.”
-Benjamin Franklin“Were we directed from Washington when to sow, and when to reap, we should soon want bread.”
-Thomas Jefferson“The meaning of peace is the absence of opposition to socialism.”
-Karl Marx“The United States is not a nation to which peace is a necessity.”
-Grover Cleveland (President of the US 1885-1889 and 1893-1897)“You see, the left isn't forgiving or civil. Instead they are violently, feverently committed to their unholy war to tear down American democracy and replace it with their version -- an Americanized version -- of communism.”
-David Horowitz, 2000-Jan-31“There's a strange contradiction lurking in all this revisionism: the United States is arguably farther along the road to Marx's communist Utopia. After all, the major means of production are collectively owned, thanks to the stock market and mutual funds. The country certainly boasts of an informed proletariat. And, as Mr. Cheek noted, `With our social security system and Medicare, we are far more socialized in practice than China, which has neither.'”
-Craig S. Smith, in "Workers of the World, Invest!", in the New York Times, 2001-Aug-19 (full article below)“By any reasonable measure, the United States today is a little over fifty percent socialist. That is to say, more than fifty percent of the total resources in the country, of the total input, is directly or indirectly controlled by governmental institutions at all levels - federal, state and local. Yet we in the United States have the highest standard of living of any country in the world. We are a very rich and prosperous country. It is an extraordinary tribute to the productivity of the market system that, with less than fifty percent of the resources, it can produce the kind of standard of living and the kind of society we have.”
-Milton Friedman, from The Drug War As A Socialist Enterprise“If all that Americans want is security, they can go to prison. They'll have enough to eat, a bed and a roof over their heads.”
-Dwight D. Eisenhower“... the majority, oppressing an individual, is guilty of a crime, abuses its strength, and by acting on the law of the strongest breaks up the foundations of society.”
-Thomas Jefferson, Letter to P.S. Dupont De Nemours, 24 April 1816 (translated by Barbara MacKinnon)“Socialism has a bad name in America, and no amount of wishful thinking on the part of the left is going to change that.... the words Economic Democracy are an adequate and effective replacement.”
-Derek Shearer, in Economic Democracy: The Challange of the 1980's (1980)“A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.”
-Thomas Jefferson“One peculiar aspect of all this is that the defenders of left-wing shock artists are themselves so easily shocked. When Karen Finley performed unnatural acts with root vegetables onstage, we were told this was an exercise of her constitutional rights. But the same people professed horror when Anita Hill alleged that Clarence Thomas had made ribald remarks in the 1980s. When Ward Churchill called 9/11 victims "little Eichmanns," he was exercising his academic freedom, but when John Bolton called Kim Jong Il a tyrant it was outrageously undiplomatic. Urinating on a crucifix is art (Andres Serrano's "Piss Christ"), but "mishandling" a Koran is a crime against humanity. And so on.”
-James Taranto, writing in Best of the Web 2005-Jun-10
In Wickard v. Filburn, 317 U.S. 111 (1942) the Supreme Court of the United States upheld, with only one justice dissenting, the New Deal institution of government-set limits on agricultural production, and the general principle of involuntary subjugation of private economic activity to absolute government control. The decision (hyperlinked above) explains “The general scheme of the Agricultural Adjustment Act of 1938 as related to wheat is to control the volume moving in interstate and foreign commerce in order to avoid surpluses and shortages and the consequent abnormally low or high wheat prices and obstructions to commerce.”. Of course, minimizing such inefficiences is precisely what free markets do by their nature, and what command economics (of the sort instituted by the 1938 Act) cannot do by their nature. The Wickard precedent has not been reversed - it is still the law of the land. Filburn was convicted under the 1938 Act of growing wheat on his own land and feeding it to his own family as bread, under the rationale that by growing his own wheat, he was therefore not buying wheat on the open market, and thus his agricultural activities were under the purview of interstate commerce regulation even though he didn't move anything in interstate commerce (indeed, precisely because he didn't move anything in interstate commerce). If you think there's something fishy going on here, you're right, obviously - this is the sort of thing Joseph Heller wrote about in Catch 22. It's also the sort of thing that starved ten million Ukrainians to death under Stalin's boots.
On 2004-Nov-29, the government's attorney in Ashcroft v. Raich (Paul Clement) argued in the Supreme Court, apparently with no sense of irony whatever, that Congress can preempt medical marijuana laws by the Wickard rationale, because marijuana grown and consumed by a patient in his household consistent with state law reduces demand in, and therefore bears upon, the interstate market in marijuana - a market Congress has completely criminalized. Lawrence Solum, in attendance for the hearing, jotted down a remarkable statement by Clement:“Congress is trying to increase the price for marijuana by creating a black market.” Later, justice Stevens asks the respondent's attorney (Randy Barnett), “If you reduce demand, then you will reduce prices? Wouldn't it increase prices?” The theory of the government attorney, and these two quotes, make amply clear just what level of dementia possesses many of the agents and much of the machinery of government. Solum's complete transcript of the proceedings is here.
On Monday, 2005-Jun-6, SCOTUS released its decision in Ashcroft v. Raich: “Liberalism to cancer patients: Drop dead.” (to quote Daniel Henninger of the Wall Street Journal). The majority decision, hinging on Wickard, was supported by all four consistently socialistic justices - Stevens, Ginsburg, Souter and Breyer - joined by Kennedy and Scalia. Sandra Day O'Connor (a cancer survivor) and Clarence Thomas (a strict constructionist) both wrote dissents.
For an account of leftist luminary Noam Chomsky's affiliation with the neo-Nazi and Holocaust denial movement, consider Werner Cohn's Partners in Hate: Noam Chomsky and the Holocaust Deniers, with this short intro. Both are from David Horowitz's Front Page Magazine. Also worth perusing is an open exchange between Christopher Hitchens and Noam Chomsky in late Sept-early Oct 2001, in which Hitchens takes Chomsky to task for his intellectually incoherent and evasive de facto defense of fundamentalist Islamism (now (2004) widely and accurately called “Islamofascism”).
Here is a large collection of articles on wacky left hero Michael Moore.
Check out The New Soldier, the infamous book by John Kerry and Vietnam Veterans Against The War.
Here is a must-see, a collection of photos from the 2004-Mar-20 anti-war demonstrations in San Francisco. Take a gander, they're revealing! (Also check out ProtestWarrior.org.)
Read how the radical left in the west is systematically facilitating Islamofascist terrorism: Solidarity With Terror, from Front Page Magazine, 2004-Jul-2, by Lee Kaplan
Almost 400 years ago, the Puritans discerned the destructiveness of socialism. They collectivized their agriculture bringing a famine upon themselves, then foreswore collectivization. Here one of their number describes the discovery [emphases mine]:
William Bradford, Of Plymouth Plantation 120--21
1623
All this while no supply was heard of, neither knew they when they might expect any. So they began to think how they might raise as much corn as they could, and obtain a better crop than they had done, that they might not still thus languish in misery. At length, after much debate of things, the Governor (with the advice of the chiefest amongst them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves; in all other things to go on in the general way as before. And so assigned to every family a parcel of land, according to the proportion of their number, for that end, only for present use (but made no division for inheritance) and ranged all boys and youth under some family. This had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.
The experience that was had in this common course and condition, tried sundry years and that amongst godly and sober men, may well evince the vanity of that conceit of Plato's and other ancients applauded by some of later times; that the taking away of property and bringing in community into a commonwealth would make them happy and flourishing; as if they were wiser than God. For this community (so far as it was) was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort. For the young men, that were most able and fit for labour and service, did repine that they should spend their time and strength to work for other men's wives and children without any recompense. The strong, or man of parts, had no more in division of victuals and clothes than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labours and victuals, clothes, etc., with the meaner and younger sort, thought it some indignity and disrespect unto them. And for men's wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc., they deemed it a kind of slavery, neither could many husbands well brook it. Upon the point all being to have alike, and all to do alike, they thought themselves in the like condition, and one as good as another; and so, if it did not cut off those relations that God hath set amongst men, yet it did at least much diminish and take off the mutual respects that should be preserved amongst them. And would have been worse if they had been men of another condition. Let none object this is men's corruption, and nothing to the course itself. I answer, seeing all men have this corruption in them, God in His wisdom saw another course fitter for them.
[source URL: http://press-pubs.uchicago.edu/founders/documents/v1ch16s1.html
source publication: Bradford, William. Of Plymouth Plantation, 1620--1647. Edited by Samuel Eliot Morison. New York: Modern Library, 1967.]
from the Wall Street Journal, 2010-Jan-28, p.A18:
Staying the Course
The same agenda in more humble clothes.So much for all of that Washington talk about a midcourse change of political direction. If President Obama took any lesson from his party's recent drubbing in Massachusetts, and its decline in the polls, it seems to be that he should keep doing what he's been doing, only with a little more humility, and a touch more bipartisanship.
That's our reading of last night's lengthy State of the Union address, which mostly repackaged the President's first-year agenda in more modest political wrapping. "Our administration has had some political setbacks this year, and some of them were deserved," he said, in his most notable grace note.
He also showed more willingness to engage with Republicans than he or his party have shown during the last year of bending to the left on Capitol Hill. But whether this outreach is anything more than rhetoric will depend on a change of policy. And on that score, we heard mostly what Democrats used to say about George W. Bush and Iraq: Stay the course.
That was especially true on the two most important domestic issues of his Presidency—health care and the economy.
On health care, Mr. Obama offered a Willy Loman-esque soliloquy on his year-long effort, as if his bill's underlying virtues and his own hard work haven't been truly appreciated by the American public. He showed no particular willingness to compromise, save for a claim that he was open to other ideas.
And he re-pitched the health bill now in Congress with the same contradiction—covers more people but saves money too—that all but the most devoted partisans long ago dismissed as unbelievable. The President sounded to us like a man who is still hoping Democrats will find a way to sneak this monstrosity into law despite its unpopularity.
Mr. Obama's economic pitch also differed little from last year, when the jobless rate was 7.2%. He offered a spirited defense of the stimulus, though the jobless rate is now 10%, and he promised more of the same this year, especially on "green jobs." He also offered some minor if welcome tax cuts for small business, and $30 billion in handouts for "community banks" to be able to lend more.
Yet at the same time, he couldn't resist more banker baiting, and he promised that he's determined to see tax rates rise for millions of Americans next year when the Bush rates are set to expire. He also pushed more exports while saying he'll raise taxes on some of our biggest exporters, otherwise known as multinationals that "ship our jobs overseas." Mr. Obama believes he can conjure jobs and a durable expansion from the private sector while waging political war on its animal spirits. It can't be done.
This reflects a larger problem, which is his belief that economic growth springs mainly from the genius of government. Thus Mr. Obama presented a vision of an economy soaring to new heights on "high-speed railroad" and "clean energy facilities" and 1,000 people making solar panels in California. He seems not to appreciate that what really drives growth are the millions of risks taken each day by millions of individuals, far from the politicking and earmarks of Congress or the Department of Energy.
Many of the President's opponents will welcome this failure to change because they sense partisan opportunity. But our guess is most Americans will be disappointed because they sense a Presidency that began with such promise but now finds itself at a crossroads and doesn't really know what to do—except to stay on the same road that got it into trouble. This could be a long year.
from the Wall Street Journal, 2010-Feb-4, by Peter Landers, with Janet Adamy and Alicia Mundy contributing:
Public Health Tab to Hit Milestone
For the first time, government programs next year will account for more than half of all U.S. health-care spending, federal actuaries predict, as the weak economy sends more people into Medicaid and slows growth of private insurance.
The figures show how federal and state spending is taking a bigger role while Congress hesitates over a health-care overhaul.
Government health programs are a growing burden on the federal budget, which is running annual deficits of more than $1 trillion, and rising health costs continue to batter private industry.
By 2020, according to the new projections, about one in five dollars spent in the U.S. will go to health care, a proportion far beyond any other industrialized nation.
"It's going to be a desperate issue five to 10 years out," said Gail Wilensky, the former top Medicare official in the George H.W. Bush administration. She said the U.S. will have to decide soon between raising revenue to pay for Medicare or reducing benefits.
Public funds accounted for 47% of the $2.34 trillion of national health spending in 2008, the last year for which figures are available. The federal Centers for Medicare and Medicaid Services estimates in a paper to be published Thursday in the journal Health Affairs that the proportion will rise to 50.4% by 2011. Last year, the federal actuaries had predicted the 50% mark wouldn't be reached until around 2016.
The latest estimate assumes Congress will act to prevent a sharp cut in Medicare payments to doctors, which is set to take effect in March under current law. Congress has consistently done so in earlier years.
The rise in Medicare, the federal health program for the elderly and disabled, and Medicaid, the federal-state program for the poor, is driving an increase in overall health spending.
The paper estimated that U.S. health spending hit $2.5 trillion in 2009, up 5.7% from the previous year. That represents 17.3% of gross domestic product, up from 16.2% in 2008, because the overall economy shrank last year. A decade from now, health spending is projected to hit about $4.5 trillion a year.
Growth of Medicaid accounts for much of the shift toward publicly funded health care. The paper predicted enrollment in Medicaid would rise 5.6% this year and spending would rise 8.9%.
Meanwhile, the number of people with private health insurance is falling slightly because of high unemployment.
Many states are having trouble funding their share of Medicaid. President Barack Obama's budget proposal for the fiscal year beginning Oct. 1 calls for $25 billion in federal help for covering Medicaid costs.
Over the longer term, the public share of health spending is expected to rise further because the first baby boomers will turn 65 in 2011 and become eligible for Medicare.
Also, the rising number of elderly will add to Medicaid spending on nursing homes and other services for the poor. The actuaries estimated that the public share would reach 52.6% by 2019.
Medicare and Medicaid account for the bulk of government spending on health care. Federal and state programs for veterans, children and others make up the rest.
Democratic health-overhaul bills would expand the public role further by widening eligibility for Medicaid and giving lower-income people subsidies to buy insurance.
Republicans said the bills would make the government too deeply involved in health care. The legislation is in doubt now after a Republican victory in last month's Senate election in Massachusetts.
Mr. Obama often described his health plan as an effort to counter the sharp rise in health costs.
His plan included cuts to the growth of Medicare, but Republicans noted that much of the money raised was going to new programs such as the subsidies.
House Minority Leader John Boehner of Ohio said the report illustrates that the Democrats' bill is the wrong answer to lowering health costs.
"They need to scrap it, and start working in a bipartisan way on the step-by-step reforms to lower costs that the American people want," he said.
"There is nothing inherently wrong with crossing this threshold, especially in light of the recession. These data show that government programs are working as intended," said Rep. Charles Rangel (D., N.Y.), chairman of the House Ways and Means Committee. "However, these projections do reinforce the need to enact comprehensive health reform, like the legislation passed by both chambers, that lowers costs for individuals and businesses and improves coverage."
Government spending on health care in the U.S. is estimated to have accounted for 8.4% of GDP in 2009.
That is nearly equal to total health spending—public and private—in some European countries such as Britain and Italy, according to Organization for Economic Cooperation and Development data.
from the Wall Street Journal, 2009-May-14, p.A17, by Steve Malanga:
Unions vs. Taxpayers
Organized labor has become by far the most powerful political force in government.Across the private sector, workers are swallowing hard as their employers freeze salaries, cancel bonuses, and institute longer work days. America's employees can see for themselves how steeply business has fallen off, which is why many are accepting cost-saving measures with equanimity -- especially compared to workers in France, where riots and plant takeovers have become regular news.
But then there is the U.S. public sector, where the mood seems very European these days. In New Jersey, which faces a $3.3 billion budget deficit, angry state workers have demonstrated in Trenton and taken Gov. Jon Corzine to court over his plan to require unpaid furloughs for public employees. In New York, public-sector unions have hit the airwaves with caustic ads denouncing Gov. David Paterson's promise to lay off state workers if they continue refusing to forgo wage hikes as part of an effort to close a $17.7 billion deficit. In Los Angeles County, where the schools face a budget deficit of nearly $600 million, school employees have balked at a salary freeze and vowed to oppose any layoffs that the board of education says it will have to pursue if workers don't agree to concessions.
Call it a tale of two economies. Private-sector workers -- unionized and nonunion alike -- can largely see that without compromises they may be forced to join unemployment lines. Not so in the public sector.
Government unions used their influence this winter in Washington to ensure that a healthy chunk of the federal stimulus package was sent to states and cities to preserve public jobs. Now they are fighting tenacious and largely successful local battles to safeguard salaries and benefits. Their gains, of course, can only come at the expense of taxpayers, which is one reason why states and cities are approving tens of billions of dollars in tax increases.
It's not as if we haven't seen this coming. When the movement among public-sector workers to unionize began gathering momentum in the 1950s, some critics, including private-sector labor leaders such as George Meany, observed that government is a monopoly not subject to the discipline of the marketplace. Allowing these workers -- many already protected by civil-service law -- to organize and bargain collectively might ultimately give them the power to hold politicians and taxpayers hostage.
It wasn't long before such fears were realized. By the mid-1960s, dozens of cities across America were wracked by teachers' strikes that closed school systems. Groups like New York City's transit workers walked off the job in 1966, bringing business in Gotham to a near halt. The United Federation of Teachers led an illegal strike which closed down New York City schools in 1968.
Widespread ire against strikes by public workers produced legislation in many states outlawing them. That prompted government workers to retreat from the picket lines into the halls of government. In Washington, they organized political action committees, set up sophisticated lobbying efforts, and used their muscle to help elect sympathetic public officials.
Today, public-sector unions sit atop lists of organizations that devote the most money to lobbying and campaign contributions.
In Pennsylvania, a local think tank, the Commonwealth Foundation, counted the resources of the state's teachers union a few years ago. It had 11 regional offices, 275 employees and $66 million in annual dues. In Connecticut, representatives of the teachers union camped outside the legislators' doors in 2005 to keep tabs on school reformers who were calling on these officials to expand school choice.
And in California, unions spent more than $50 million in 2005 to defeat a series of ballot proposals that would have capped growth in the state's budget. Now the state's teachers union is putting its clout behind a ballot initiative, to be voted on next week, that would restore more than $9 billion in educational spending cut from the state's budget.
The results of such efforts are evident in the rich rewards that public-sector employees now enjoy. A study in 2005 by the nonpartisan Employee Benefit Research Institute estimated that the average public-sector worker earned 46% more in salary and benefits than comparable private-sector workers. The gap has only continued to grow. For example, state and local worker pay and benefits rose 3.1% in the last year, compared to 1.9% in the private sector, according to the Bureau of Labor Statistics (BLS).
But the real power of the public sector is showing through in this economic crisis. Some five million private-sector workers have lost their jobs in the last year alone, and their unemployment rate is above 9% according to the BLS. By contrast, public-sector employment has grown in virtually every month of the recession, and the jobless rate for government workers is a mere 2.8%. For anyone who thinks such low unemployment numbers are good news, remember that the bulging public sector must be paid for with revenues that most governments don't currently have. This is one reason for a spate of state and local tax increases, such as $5 billion in tax increases New York state passed in April, and $12 billion in tax increases California's legislature agreed to in February that will only become law if voters pass a series of ballot initiatives next week.
The next lesson we are likely to learn is that voter revolts against new taxes are no longer effective because of the might that these public- sector groups now wield. The tax-cut uprising of the late 1970s began in California with Proposition 13 capping property taxes. It then spread to more than a dozen states before it became a national movement that helped elect Ronald Reagan. The next tax revolt, during the recession of the early 1990s, helped sink officials like New Jersey Gov. James Florio and produced ballot propositions in places like Colorado that capped spending or made tax increases more difficult.
Now powerful and savvy, public unions have moved effectively to quash antitax movements. In New Jersey, public unions derailed a taxpayer revolt in 2005 by using their legislative clout to water down a bill that would have created a state constitutional convention to enact property-tax reform. Meanwhile, under pressure from unions, state legislatures in places like Florida have been tightening rules and requirements for passing voter initiatives and referenda -- blunting a favorite tool of antitax groups.
In states like Iowa where public unionization rates are still low government workers have had to accept concessions. But allies of the unions in Washington are working to rectify that situation with union-friendly legislation like the card check bill, which will make organizing much easier.
In the private sector such efforts will still be subject to the demands of the marketplace. Employers who are too generous with pay and benefits will be punished. In the public sector, however, more union members means more voters. And more voters means more dollars for political campaigns to elect sympathetic politicians who will enact higher taxes to foot the bill for the upward arc of government spending on workers. That will be the pattern for the indefinite future unless taxpayers find a way to roll back the enormous power public workers have acquired.
Mr. Malanga is a senior fellow at the Manhattan Institute.
from City Journal, 2005-Winter, by Steve Malanga:
The Real Engine of Blue America
Is it really true that America is politically divided between conservative “Red” states in the southern and middle sections of the country and liberal “Blue” states on both coasts? Not exactly: a close look at the district-by-district voting patterns of the coastal states in the 2004 elections brings into crystal-clear focus the real nature of our political divisions. There’s really no such thing as a Blue state—only Blue metropolitan regions. Indeed, the electoral maps of some states that went for John Kerry in 2004 consist mostly of Red suburban and rural counties surrounding deep Blue cities.
What makes these cities so Blue is a multifaceted liberal coalition that ranges from old-style industrial unionists and culturally liberal intellectuals, journalists, and entertainers to tort lawyers, feminists, and even politically correct financiers. But within this coalition, one group stands out as increasingly powerful and not quite in step with the old politics of the Left: those who benefit from an expanding government, including public-sector employees, workers at organizations that survive off government money, and those who receive government benefits. In cities, especially, this group has seized power from the taxpayers, as the vast expansion of the public sector that has taken place since the beginning of the War on Poverty has finally reached a tipping point. In New York City, this coalition has helped roll back some of the reforms of the Giuliani years. In California cities and towns, it is thwarting the expansion of private businesses, Wal-Mart above all. In nearly 100 municipalities, it has imposed higher costs on tens of thousands of businesses by persuading city councils to pass “living-wage” laws.
This increasingly powerful public-sector movement results from the merging of two originally distinct forces. First are the government-employee unions, born in the 1950s and nowadays the 800-pound gorillas of policy debates in many statehouses and city councils. Today, public unions don’t merely use their power to win contract concessions for their members. They help elect sympathetic legislators and defeat proponents of smaller government; they lobby for higher taxes, especially on the rich and on businesses; and they oppose legislative efforts, such as privatization initiatives, aimed at making government smaller and more efficient.
For years, government employees had no right to organize, on the grounds that there was no competition in the delivery of essential government services and that therefore public unions could hold cities and states hostage by going on strike. Even some private-sector union leaders questioned the wisdom of letting public-sector workers organize and giving them the right to strike. But that began to change in the mid-1950s, when the American Federation of State, County, and Municipal Employees (AFSCME) began lobbying for the right of local workers to organize and bargain collectively. The organization scored its first major victory in 1958, when it persuaded New York City mayor Robert Wagner, looking to strengthen his union support, to give municipal workers collective bargaining rights. Over the next several years, other states and cities, especially those with strong union movements, also passed laws allowing public employees to unionize. Buoyed by these victories, AFSCME’s membership rose from 100,000 in 1955 to 250,000 by 1965 and to more than 1 million by 1985.
Other government-employee organizations followed AFSCME’s lead. In 1960 the American Federation of Teachers (AFT) set out to win collective bargaining rights for U.S. teachers, using Mayor Wagner and labor-friendly New York as a test case. Though New York’s first teachers’ walkout, in November 1960, had little public support, the union movement gained adherents among teachers nationwide, so that over the next five years there were 36 strikes against municipal school systems. In 1966 alone, another three dozen strikes occurred, as teacher militancy rose in places like Newark, Baltimore, and Youngstown, Ohio. Meanwhile, membership in the AFT more than doubled to 136,000 from 1960 through 1966.
In retrospect, most of the warnings voiced in those tumultuous years proved accurate. Political leaders and labor experts predicted that government-employee unions would use their monopoly power over public services to win contracts with work rules far more generous and undemanding than in the private sector, and that without the restraints on salaries and benefits that the free marketplace imposes on private firms, unions would win increasingly meaty compensation and pension packages that would be impossible to roll back once enacted.
But what critics did not anticipate was how far public-employee unions would move beyond collective bargaining and inject themselves into the electoral and legislative processes. Today, the endorsement of a public-sector union is crucial to the election of many local candidates, and public unions now often spend far more on lobbying and political advertising on local issues than any business group does. Nor could the critics have envisioned a time when a shrinking private-sector union movement would forge alliances with the public sector, and when the lines between the two would increasingly blur, as formerly private-sector unions, like the Service Employees International Union (SEIU), would come to represent increasing numbers of health-care and other workers whose jobs depend on public money.
Reinforcing the public-employee unions in the powerful new coalition of tax eaters are the social-services groups spawned by the War on Poverty. Nominally private, they are sustained by and organized around public funding. Before the War on Poverty, most social-services agencies were privately funded and had little stake in government spending policies. Groups like Catholic Charities, for instance, received less than 10 percent of their support from government sources. But all that changed beginning in 1965, when federal spending on social services soared, increasing from $800 million to $2.2 billion between 1965 and 1970, and then rocketing to $13 billion by 1980. This geyser of money transformed many formerly private welfare organizations into government contractors, and their employees into quasi-public workers. It also spurred the creation of vast new networks of such organizations, as social-services entrepreneurs conjured into being a constellation of housing groups, subsidized day-care centers, employment-training programs, health clinics, and much more—all designed to tap into the new War on Poverty money.
This social-services funding vastly expanded the publicly supported workforce almost overnight. Before the 1970s, the government didn’t even count private social services as a sector, because it was so small. But in 1972, a Bureau of Labor Statistics employment census found 550,000 people working in the sector. By 1980, that number had more than doubled to 1.1 million. The sector’s upward arc has continued unabated since then, with especially fast growth during the 1990s. Today the field teems with some 3.3 million workers, most supported by government-funded programs. Whereas in the early 1970s private social services accounted for less than 1 percent of the American workforce, today it accounts for 3 percent of jobs.
Because the clientele for social services is concentrated in the big cities, much of the growth in social-services employment took place there, too. In New York, for example, social-services jobs increased from 52,000 to 183,000 between 1975 and 2000, so that by the end of the millennium more New Yorkers worked in social services than on Wall Street. In Philadelphia, social-services jobs more than doubled to nearly 30,000 from 1988 (the first year for which numbers are available) to 2000. In Boston, during the same period, these jobs increased by 67 percent to nearly 55,000, while in Chicago they grew by nearly 140 percent to 83,000. In all these cases, social-services employment grew much faster than the cities’ economies as a whole. And cities poured their own funds into such programs to augment the (much greater) federal spending, especially in the early 1980s, when the Reagan administration restrained the growth of federal social-services programs. New York City, for instance, increased its spending on programs for the homeless from $8 million in 1978, two years before Reagan beat Jimmy Carter, to $100 million annually by 1985. In the early 1980s, New York State increased its spending on alcohol and drug addiction programs alone by two-thirds to nearly $500 million.
Almost from the War on Poverty’s inception, these social-services employees and their clients began to show themselves a powerful political force, as when New York welfare workers, for example, mobilized recipients in the early 1970s to storm government offices demanding higher benefits. Some social-services agencies organized their employees and clients into grassroots political operations, parlaying their huge empires built on government and foundation money into political power. Ramon Velez, for example—whose Bronx network of government-funded health centers, alcoholism clinics, and other programs garnered over $300 million in government money over 25 years—engineered the election of several city council and state assembly members in the Bronx, and Velez himself served on New York’s city council.
At the same time that the War on Poverty was gearing up and federal spending on social services was beginning to soar, the Johnson administration created the two gigantic health-care programs, Medicaid and Medicare, providing care to the poor and the elderly, respectively. In the process, Washington vastly changed the economics of U.S. medical care, turning it increasingly into a government-funded industry. From the very start, Medicaid and Medicare, initiated within a year of each other, cost far more than anyone had expected, because they encouraged overuse of the health-care system, prompted overbilling by doctors and hospitals, and led to widespread fraud. In less than five years, the federal budget for Medicaid rose to $6 billion from just $1.2 billion in its first year, 1966, while expenditures by the states, which shared the program’s cost, also ballooned. With so much money pouring in, the country’s health-care industry mushroomed. In the entire decade before the federal programs began, U.S. health-care employment had increased by about 800,000 jobs, but in the first ten years of Medicaid and Medicare, the growth rate more than doubled, and the industry added more than 2 million new jobs, including more than 1 million in hospitals.
The new federal programs made many hospitals dependents of the state, especially in cities with the largest Medicaid populations. Within a few years, urban hospitals that had previously received very little federal money were living principally on Medicaid and Medicare. And once government had become a prime payer in the health-care system, hospitals that had low occupancy rates or duplicated services provided by other local institutions could survive on government dollars rather than being forced to close. Such institutions could gold plate their treatments of patients in order to increase revenues, so that hospitalizations and length of hospital stays increased. As a result, by 1980—to take only one example—experts estimated that New York City had 5,000 more hospital beds than it really needed. Also as a result, at least in part, health-care jobs grew from 3.9 percent of the U.S. private workforce in 1965 to nearly 10 percent today. Shrinking the bloated system and stemming abuses became politically impossible. Above all, what would become of all those who worked in hospitals that should be closed?
The gradual government takeover of health care—a process still continuing—has transformed the industry’s institutions, executives, and workers into lobbyists for ever-greater public monies and expanding programs, and tireless foes of efforts to restrain costs. Hospitals and health-care unions were the chief opponents of the Gingrich Congress’s efforts to balance the federal budget in the mid-1990s in part by cutting the growth of Medicaid and Medicare, and these special interests successfully derailed some of the steepest proposed cuts. At the state and local levels, especially in cities where the industry heavily depends on Medicaid and Medicare, hospitals and hospital workers have become two of the most influential power blocs. In New York State, for instance, a coalition of hospitals and unions spent $13 million in 1999, a record for Albany, lobbying to turn back cuts in the state’s huge Medicaid system. Dennis Rivera, the head of Local 1199, a New York City–based union of health-care workers, has become the most powerful union leader in the state, far more influential than the head of the state AFL-CIO.
The electoral activism of this New New Left coalition—public-employee unions, hospitals and health-care worker unions, and social-services agencies—has reshaped the politics of many cities. As the country’s national political scene has edged rightward, thwarting their ambitions in Washington, these groups have turned their attention to urban America, where they still have the power to influence public policy.
Increasingly in U.S. cities, the road to electoral success passes through the public- employee/health-care/social-services sector. In New York, for instance, more than two-thirds of city council members are former government employees or ex-workers in health care or social services. The first Latino speaker of the California State Assembly, Antonio Villaraigosa—who narrowly lost the 2001 election for mayor of Los Angeles and served as a national co-chair of John Kerry’s presidential campaign—is a former organizer for the Los Angeles teachers’ union. Jane Campbell, the current mayor of Cleveland, snapped up a $3,000 grant back in 1974 to start WomenSpace, a feminist advocacy group, and used her role as executive director of the organization to launch a 20-year career in elective office in Ohio. Kansas City mayor Kay Barnes entered public life working as a paid staffer in the 1960s for the Cross-Lines Cooperative Council, a local social-services network, and she later helped found and run the Women’s Resource Service, an advocacy center on the campus of the University of Missouri–Kansas City.
One reason that these politicians have succeeded electorally is that those who work in the public sector have different voting priorities from private-sector workers or business owners. An exit poll conducted by City Journal of the 2001 New York mayoral election found that private-sector workers heavily backed Michael Bloomberg, the businessman candidate who had been endorsed by Rudy Giuliani and had run on a pledge of no new taxes (which he broke after his first year in office), while those who worked in the public/health-care/social-services sectors favored his Democratic opponent, who ran on a promise of raising taxes to fund further services. In the race, Bloomberg won among private-sector voters by 17 percentage points, while the Democrat won by 15 points among those who worked in the public/nonprofit sectors.
And of course public-sector workers, who know they are going to the polls to elect their bosses, make sure to remember to vote. Though they make up about one-third of New York City’s workforce, public/nonprofit-sector voters made up 37 percent of the electorate in the 2001 mayoral race. Minority workers who earned their living in the public sector were dramatically more likely than their private-sector counterparts to vote.
With so much of their economic future at stake in elections, the tax eaters have emerged as the new infantry of political campaigns, replacing the ward captains and district leaders of old-time political clubs. Today it’s the members of the New New Left, through their unions and community-based organizations, who are most likely to run political phone banks, distribute campaign literature and run get-out-the-vote efforts for their favored candidates. Indeed, when a member of the Local 1199 health-care workers union ran for New York’s city council in 2003, a local Democratic politician noted admiringly that the candidate, through her union colleagues, could field “a million foot soldiers.” And, like the old Tammany Hall and other urban political machines, these efforts have sparked complaints. Members of the New New Left advocacy group ACORN, which ran aggressive voter-registration drives in many cities during the 2004 elections, were accused of submitting fake or forged registrations in places such as Duluth, Cincinnati, and St. Petersburg, Florida.
Perhaps it’s not surprising that the urban Left has evolved into so narrow a movement, promoting no more than its own self-interest. Though it started out as a romantic, if wrongheaded, idea, the War on Poverty was the child of idealists who really believed that a benevolent, paternalistic government could offer solutions that America’s private economy couldn’t provide for the poor. But the most cherished ideals and programs of the movement have turned out to be demonstrably wrong, and many Americans now reject them. Unlimited welfare proved an economic and social disaster, producing an underclass of perpetual recipients who, after years on the dole, felt incapable of functioning as productive citizens. Liberalization of the criminal laws and judicial leniency, part of a War-on-Poverty mind-set that saw criminals as victims of society, only led to soaring crime rates, which drove law-abiding citizens out of cities and condemned those who could not leave to lives of fear. Government-funded alcohol and drug rehabilitation programs that placed little emphasis on personal responsibility and individual redemption had zero effect on the rise of addiction.
By the mid-1990s, Americans were eager for reform, and they got it. Changes in welfare law that imposed time limits on assistance and required recipients to work have turned out to be a great success, reducing public-assistance rolls and getting millions of people back to work, without raising the poverty rate. Tough, activist policing innovations have sharply reduced crime, freeing millions of Americans, especially those in inner cities, from fear.
In the face of such realities, the new urban Left has emerged as an increasingly cynical coalition ever more focused on goals that benefit its members and their allies, even though it retains the jargon of “social justice.” The living-wage movement is largely the work of unions more interested in laws that bolster union membership and derail privatization or productivity-boosting measures than in legislation that genuinely helps the poor. Many of the living-wage laws enacted around the country exempt unionized companies from adhering to wage guidelines, encouraging firms to unionize. Legislative bodies commandeered by these advocates have cynically enacted laws that have been a boon to their allies but have harmed the cities themselves, as for example the New York City Council’s passage of a living-wage law that raised the wages of home health-care workers but cost the city and state millions of dollars—in the midst of the city’s worst budget crisis ever. In the same spirit, in municipalities throughout California, the New New Left coalition has successfully advocated for laws that restrict consumers’ choices by making it difficult for Wal-Mart and other nonunion retailers to open in places where unionized stores predominate.
But by donning the mantle of “social justice” and invoking the liberation language of the 1960s—for example, in its campaigns to win domestic-partner benefits for municipal workers—the New New Left has managed to dupe a generation of celebrity liberals, idealistic young voters, and religious leaders who have become their allies in the Blue-state coalition. Actor buddies Matt Damon and Ben Affleck have campaigned for living-wage laws in their home state of Massachusetts, while clergy hold pro-living-wage religious services, blissfully unaware of how unions have hijacked the movement for their self-interested goals. The union representing television and radio actors urged its members to boycott California stores during the state’s 2003 supermarket-industry strike, and celebrities like actress Melissa Gilbert joined workers on the picket lines. Groups like ACORN rely in many of their campaigns on the volunteer labor of idealistic college students, who are unaware of the controversy that the organization generates by refusing to pay its own workers minimum wages and by using federal legislation like the Community Reinvestment Act to shake down banks.
Regardless of how transparent its aims now seem, this new coalition will remain formidable in the cities, because the tax-eater sector is now so large that it can easily thwart reforms aimed at undermining its programs. But the coalition is also becoming the real power in national campaigns, working both within the Democratic Party and outside it. AFSCME, the AFT, and SEIU were among the largest contributors to the Media Fund, a $65 million advertising effort aimed at defeating President Bush in 2004. Those groups, plus ACORN, also supplied much of the manpower for the national voter-registration effort aimed at defeating the president. A succession of Democratic presidential hopefuls traveled to New York to seek the blessing of 1199/SEIU union chief Dennis Rivera, who once held a seat on the Democratic National Committee, and when John Kerry picked his running mate, he immediately called SEIU boss Andrew Stern, a John Edwards supporter, to say, “I heard you.” About one in ten delegates to the 2004 Democratic National Convention was a member of a teachers’ union.
The tax-eaters’ party has seized control of many of America’s cities; now it is trying to make the next big leap.
from the Wall Street Journal's Political Diary, 2010-Jan-27, by John Fund:
Oregon Is for Tax Hikers
Last night, Oregon voters narrowly voted in favor of two ballot measures to raise the top income tax rate to 11% and hike the state's business income tax. Voters apparently bought the argument that the alternative would be painful cuts in public education and basic services. Oregon faces a $727 million budget deficit.
AFSCME and SEIU, the state's powerhouse public employee unions, can take satisfaction that their members will escape layoffs or furloughs, even though the average union member earns one-third more than the state's average private sector worker. Oregon's Democratic legislature carefully crafted the tax hikes so they would fall on corporations and the wealthiest 2% of taxpayers, those earning over President Obama's $250,000-a-year threshold. Unlike other states, Oregon's budget gap was small enough that voters could be sold the idea that the cost of closing it could be borne solely by "the rich." Even so, the tax hikes lost or broke even among the four-fifths of voters outside Multnomah County, which is dominated by the liberal bastion of Portland. A 71% "yes" vote in Multnomah was required to push the tax increases over the top.
Secondly, the state's unique vote-by-mail system clearly limited the morale boost anti-tax forces might have gotten from last week's Massachusetts earthquake. Polling places in Oregon no longer exist and most voters send in their ballots two weeks or more before they are tabulated. That means some 80% of ballots in yesterday's election were mailed before the results of Massachusetts were known. In short, Oregon's election process was perfectly suited to the political clout of the public employee unions, who could organize their supporters over a period of weeks to make sure everyone on their lists voted.
For all that, even Democratic Gov. Ted Kulongoski sounded less than euphoric about the outcome, telling The Oregonian Editorial Board that the state has dodged one bullet but probably faces a decade of slow growth, joblessness and income stagnation -- suggesting Oregon may actually have learned something from the tax-and-spend experiment in the next state to the south.
from the Associated Press via the Washington Post, 2010-Jan-14, by Jim Kuhnhenn, with Tom Raum, Stephen Ohlemacher and Chris Rugaber contributing:
Analysis: Obama playing banks against taxpayers
WASHINGTON -- It's not just about bad banking.
President Barack Obama's biting criticism of big banks frames the problem as a struggle between jobless, suffering Americans and banks making big profits and paying "obscene" bonuses.
It's populism straight out of Frank Capra's "It's a Wonderful Life," and it aims to score political points in the midst of a weak economic recovery that is fueling public doubts about the president's own economic policies.
Obama proposed a 10-year, $90 billion tax on the largest financial institutions on Thursday, saying he wanted the money to back any shortfall in the $700 billion Troubled Asset Relief Program launched to bail out foundering firms at the height of the financial crisis.
Obama's haves-versus-have-nots message was as explicit as any political message he has delivered as president.
"If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers," he declared. "We want our money back."
To drive the point home, he also said:
"My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people, folks who have not been made whole and who continue to face real hardship in this recession."
Whether his plan stands a chance in Congress remains to be seen. House leaders and rank-and-file liberals cheered the bank tax. In the Senate, Banking Committee Chairman Chris Dodd, D-Conn., also welcomed the plan. But Democratic Sen. Max Baucus of Montana, the chairman of the Senate tax-writing Finance Committee, was more cautious.
"I remain committed to working with the president, and my colleagues across the aisle, to make sure this proposal is right for America and for American taxpayers," he said in a statement.
Critics of the plan assailed it as bad economic policy that would force banks to simply pass on the costs of the tax to consumers, drying up lending even further and hurting cash-strapped small businesses.
What's more, the tax would also apply to institutions that either chose not to take bailout money or have already paid it back, with interest. And General Motors Co. and Chrysler Group LLC, two automakers that received $66 billion in TARP loans, would not be subject to the tax even though they are not expected to make the government whole.
GOP Rep. Scott Garrett of New Jersey, a member of the House Financial Services Committee, called the plan a "job-killing initiative that will further cripple the economy by increasing fees passed on to consumers and small businesses, while reducing consumer credit."
But the White House made it clear the administration would make things quite uncomfortable for politicians who object.
"They can explain that to their constituents and to the American people," White House spokesman Robert Gibbs said. "If you want to be on the side of big banks, then you're certainly - this is a great country - you're free to do so."
To banks' claims that the tax is unfair, Lawrence Summers, Obama's top economic adviser, pointed out that 15 million people are unemployed. "It's surprising to me to see institutions who have benefited so substantially at a time when there is so much economic distress among others in the country to be complaining about the justice of what has happened to them from their executive suites," he said.
So, prospects of actual passage aside, the real impact of Obama's vocal stance is that it draws unfavorable attention to Wall Street just as the public learns that the bailed-out financial institutions are now on such sound footing that they are declaring profits and paying bonuses.
For bankers, bonus season could not have come at a more difficult time. Unemployment remains stubbornly at 10 percent, the Senate is writing new banking regulations and a special commission is examining the causes of the financial meltdown.
For Democratic lawmakers who find themselves uncomfortably defending their past votes in favor of the huge rescue fund, Obama's finger wagging also provides them with a needed narrative line.
"It was tough to make the TARP vote and the bankers are making it even tougher," Rep. Steve Cohen, D-Tenn., said referring to executive bonuses. "They are pigs at the trough."
Obama's proposal drew some praise from international quarters. Dominique Strauss-Kahn, managing director of the International Monetary Fund, said the United States has sent "a very good signal" to the world.
"I really celebrate this proposal by the U.S. government because it shows the political momentum to move in this direction is still there," he said.
But for now, Obama's message was strictly domestic.
from the Wall Street Journal, 2009-Dec-12, p.A18:
More, More, More
Watch what they spend, not what they say.When it comes to spending, the Democrats who run Washington can't decide on their message. On the one hand, as President Obama said this week, they claim we have to "spend our way out of this recession." On the other, they keep telling us the deficit is too large and isn't "sustainable." In this tug of political spin, watch what they spend, not what they say.
And that means watching this weekend's expected Senate vote on a 1,088-page $445 billion "omnibus" package of spending bills to fund the government for fiscal 2010. The House passed a similar elephant earlier this week, allowing federal agency budgets to increase spending by some $48 billion, or about 12% from 2009. That increase—when inflation is negligible—is in addition to the $311 billion in stimulus already authorized or out the door for these programs. Adding this new stash means that federal agencies will have received a nearly 70% increase in the last two years.
Oh, and that's not all. The President and Congress also want to spend as much as $200 billion more from the Troubled Asset Relief Program on still another stimulus, though this time we are supposed to call it a "jobs" program, because stimulus now has a dirty political name.
This $445 billion bill for 2010 covers most of the domestic agencies of government, but not defense. In the first two months of this fiscal year, which began October 1, Uncle Sam is already $292 billion in the red. That's more than in the first two months of last year and at a time when the economy is growing again, so perhaps the President means we need to keep spending our way out of recovery. After the spending bill, Congress will then turn to passing a $1.8 trillion increase in the national debt ceiling, which should get them past the November elections.
Not that the press corps cares anymore, but the omnibus also continues the earmark explosion that Speaker Nancy Pelosi vowed to end when she was trying to oust Republicans in 2006. The Heritage Foundation counts 5,224 earmarks, bringing the total for the year to about 10,000, or about 23 for every Congressional district. There is money for bike paths, skate board parks, museums, water-taxis to resort towns, and other absolute necessities.
Senator Kent Conrad, the ranking Democrat on the Budget Committee, is a walking example of the split Democratic spending personality. He frets that U.S. debt will soon be 114% of GDP, a level he says is "absolutely unsustainable" and a "threat to the economic security of America." Yet he keeps voting for every spending bill and will vote for the multitrillion health bill too.
Even harder to figure is Mr. Obama, who is likely to sign this budget behemoth even as he keeps telling us it's time to "make the hard choices necessary to get our country on a more stable fiscal footing in the long run." Word is that his 2011 budget proposal will propose a spending freeze of some kind, which is another election-year pivot.
After so much double talk, we've concluded this is all part of a conscious political strategy. Spend so much and run up the deficit to unprecedented levels, then turn around and claim that there's a fiscal crisis that can only be solved with higher taxes. They spend, you pay.
from the Wall Street Journal's Political Diary, 2010-Jan-19, by Mary Anastasia O'Grady:
Leftward, March!
The Democrats' tax carve-out for union members with Cadillac health-insurance plans is only the latest example of the preferential treatment that Big Labor has been promised from the federal government in return for its support. Less publicized but equally pernicious deals are also in the making. One such arrangement seems to involve militant elements of the AFL-CIO and their radicalized foreign outreach efforts.
A rumor now swirling in labor circles is that the White House is planning to resurrect a position in the State Department known as Special Representative for International Labor Affairs and fill the slot with a decidedly extreme voice: Barbara Shailor, director of the international department of the AFL-CIO.
The idea to put Ms. Shailor at State is said to be that of John Podesta, who runs the Center for American Progress, which also produced Dan Restrepo, now serving as President Obama's Special Assistant and Senior Director for Western Hemisphere Affairs on the National Security Council. Mr. Restrepo's claim to fame so far in this administration is helping craft the White House Honduran policy to push for the return of deposed President Manuel Zelaya last summer. That effort was a disaster
The State Department labor job has been vacant since President George H. W. Bush left office. Back then it was used to promote U.S. labor values -- like free speech, the right to organize and a non-politicized work environment -- in American embassies around the globe. But that's so yesterday. Today's AFL-CIO has more in common with the state-sponsored labor movements of Benito Mussolini, Juan Peron, Fidel Castro and Hugo Chávez. And it wants to reach out to fellow travelers around the hemisphere, expand their numbers and combat independent, private-sector labor unions in places like Colombia that are backing free trade agreements. In short, it wants to globalize its anti-globalization movement.
For that job Ms. Shailor is the right person. She was brought into the AFL-CIO in 1995 by then-new Chief John Sweeney and quickly set about "weeding out" veterans of the old labor movement who had backed U.S. efforts to win the Cold War. She's also the wife of Robert Borosage, a notorious 60's hard-left radical, whom the National Right to Work Committee in 2005 said had "served as an unctuous apologist for Fidel Castro and a number of other brutal Communist dictators."
Ms. Shailor's name has also been tossed around as a possible U.S. representative to the World Bank. The State Department did not respond to our inquiry about the rumors. But Latin America's independent labor movement is already having a tough enough time under repressive governments in the region. The last thing it needs is to be battling Uncle Sam along with local tyrants.
from the Wall Street Journal, 2009-Nov-9, p.A18:
The Lords of Entitlement
Every medical insurance decision will be subject to rationing by politics.Speaker Nancy Pelosi defied policy logic and public opinion late Saturday night, ramming through the House a nearly 2,000-page health-care leviathan that counts as the biggest expansion of the federal government since the New Deal. As President Obama likes to say, this was a "teachable moment" about our current government.
The vote was 220 to 215, with 39 House Democrats joining all but one Republican in opposition. Mrs. Pelosi had to cajole and bribe her way to the magic 218, and the list of her promises must be stacked to the ceiling.
The lone Republican, Joseph Cao, represents a Democratic-leaning Louisiana district and extracted a promise that Mr. Obama would increase Medicaid payments to his state, and even then he only voted after Democrats had already hit 218. Let no one suggest this was the "bipartisan" health reform that Mr. Obama has long promised.
The bill is instead a breathtaking display of illiberal ambition, intended to make the middle class more dependent on government through the umbilical cord of "universal health care." It creates a vast new entitlement, financed by European levels of taxation on business and individuals. The 20% corner of Medicare open to private competition is slashed, while fiscally strapped states are saddled with new Medicaid burdens. The insurance industry will have to vet every policy with Washington, which will regulate who it must cover, what it can offer, and how much it can charge.
We have little sympathy for the insurers, or for that matter most of the other medical providers who signed on to this process only to claim now to be appalled by the result. The insurance lobby—led by Aetna CEO Ron Williams—made the Faustian bet that it could trade new regulations for more new subsidized customers who would face a tax penalty if they didn't buy their insurance. The Pelosi bill includes the regulation but guts the tax penalty because it's unpopular. Insurers will thus have to cover more sick people with fewer dollars, as healthy folk opt out of coverage until they are sick.
This writing was on the wall months ago, but the insurers chose to play an inside game rather than shape public opinion. Judging by their weekend statement—criticizing the House bill but vowing to seek "bipartisan" reform—they will now throw themselves at the mercy of the Senate. Good luck with that. The real victims are their customers, most of whom will pay more for insurance as the new mandates raise costs.
Mrs. Pelosi's craftiest political turn was a last-minute compromise to strip federal funds from insurance plans that cover abortions. The deal—negotiated by Michigan Democrat Bart Stupak and supported by the National Right to Life Committee—gave cover to 40-some Democrats to support the larger bill.
However, as subsidized costs soar, government will have no choice but to ration medical care, starting with the aged and grievously ill. Is pre-natal life more valuable than the elderly? We're reminded of the way pro-lifers supported Anthony Kennedy over Laurence Silberman for the Supreme Court in 1987 merely because Mr. Kennedy was a Catholic who claimed to personally oppose abortion. Mr. Stupak played the right-to-lifers like a Stradavarius.
The real importance of the abortion uproar is as preview of the politics that will dominate every medical coverage issue if ObamaCare becomes law. Every decision of what to insure or not—when an MRI can be used, or whether a stage-four breast cancer patient can get Avastin or some future expensive drug—will become subject to political intervention over moral disputes or budget constraints. Heretofore, these decisions have largely been made between a doctor and patient. This is the real "right to life" issue.
Perhaps the most unsurprising news in this drama was the collapse of the Blue Dog "deficit hawks." Enough of them always cave in the end to give Mrs. Pelosi her way. It's nonetheless worth noting the surrender of that most vocal scourge of deficits, Tennessee's Jim Cooper, who voted aye on grounds that the bill can be improved in the Senate.
But Max Baucus's Finance Committee bill includes a similar gimmick of making the numbers look good by using 10 years of new taxes to finance only seven years of spending (six in the House). The deficits explode in the second decade and beyond in both bills.
The House also contains a new government long-term insurance program that starts collecting premiums in 2011 but doesn't starting paying benefits until 2016 and then runs out of money in 2029. North Dakota Democrat Kent Conrad called it "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of" in an interview with the Washington Post in late October. Mr. Cooper has with a single vote made his entire career irrelevant.
Yet 39 other Democrats were given a pass on the vote, as the leadership knows how unpopular this bill is in most of America. They know this legislation is not the result of some national consensus in favor of expanding state power. Its passage was possible only because of temporary liberal majorities that are intent on fulfilling their dreams of a cradle-to-grave entitlement state. If they lose Blue Dog seats, or even their majority, in the short term, so be it. As the party of government, Democrats believe they will benefit in the long run from a much larger government.
Unless the Senate has an epiphany of common sense, Americans will be paying the bills for this willful exercise for generations to come.
from the Wall Street Journal, 2009-Nov-10, p.A24:
Confessions of an ObamaCare Backer
A liberal explains the political calculus.The typical argument for ObamaCare is that it will offer better medical care for everyone and cost less to do it, but occasionally a supporter lets the mask slip and reveals the real political motivation. So let's give credit to John Cassidy, part of the left-wing stable at the New Yorker, who wrote last week on its Web site that "it's important to be clear about what the reform amounts to."
Mr. Cassidy is more honest than the politicians whose dishonesty he supports. "The U.S. government is making a costly and open-ended commitment," he writes. "Let's not pretend that it isn't a big deal, or that it will be self-financing, or that it will work out exactly as planned. It won't. What is really unfolding, I suspect, is the scenario that many conservatives feared. The Obama Administration . . . is creating a new entitlement program, which, once established, will be virtually impossible to rescind."
Why are they doing it? Because, according to Mr. Cassidy, ObamaCare serves the twin goals of "making the United States a more equitable country" and furthering the Democrats' "political calculus." In other words, the purpose is to further redistribute income by putting health care further under government control, and in the process making the middle class more dependent on government. As the party of government, Democrats will benefit over the long run.
This explains why Nancy Pelosi is willing to risk the seats of so many Blue Dog Democrats by forcing such an unpopular bill through Congress on a narrow, partisan vote: You have to break a few eggs to make a permanent welfare state. As Mr. Cassidy concludes, "Putting on my amateur historian's cap, I might even claim that some subterfuge is historically necessary to get great reforms enacted."
No wonder many Americans are upset. They know they are being lied to about ObamaCare, and they know they are going to be stuck with the bill.
from the Wall Street Journal, 2009-Nov-1:
The Worst Bill Ever
Epic new spending and taxes, pricier insurance, rationed care, dishonest accounting: The Pelosi health bill has it all.Speaker Nancy Pelosi has reportedly told fellow Democrats that she's prepared to lose seats in 2010 if that's what it takes to pass ObamaCare, and little wonder. The health bill she unwrapped last Thursday, which President Obama hailed as a "critical milestone," may well be the worst piece of post-New Deal legislation ever introduced.
In a rational political world, this 1,990-page runaway train would have been derailed months ago. With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time. Taxes will need to rise precipitously, even as ObamaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.
Yet at this point, Democrats have dumped any pretense of genuine bipartisan "reform" and moved into the realm of pure power politics as they race against the unpopularity of their own agenda. The goal is to ram through whatever income-redistribution scheme they can claim to be "universal coverage." The result will be destructive on every level—for the health-care system, for the country's fiscal condition, and ultimately for American freedom and prosperity.
•The spending surge. The Congressional Budget Office figures the House program will cost $1.055 trillion over a decade, which while far above the $829 billion net cost that Mrs. Pelosi fed to credulous reporters is still a low-ball estimate. Most of the money goes into government-run "exchanges" where people earning between 150% and 400% of the poverty level—that is, up to about $96,000 for a family of four in 2016—could buy coverage at heavily subsidized rates, tied to income. The government would pay for 93% of insurance costs for a family making $42,000, 72% for another making $78,000, and so forth.
At least at first, these benefits would be offered only to those whose employers don't provide insurance or work for small businesses with 100 or fewer workers. The taxpayer costs would be far higher if not for this "firewall"—which is sure to cave in when people see the deal their neighbors are getting on "free" health care. Mrs. Pelosi knows this, like everyone else in Washington.
Even so, the House disguises hundreds of billions of dollars in additional costs with budget gimmicks. It "pays for" about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years. The House also pretends Medicare payments to doctors will be cut by 21.5% next year and deeper after that, "saving" about $250 billion. ObamaCare will be lucky to cost under $2 trillion over 10 years; it will grow more after that.
• Expanding Medicaid, gutting private Medicare. All this is particularly reckless given the unfunded liabilities of Medicare—now north of $37 trillion over 75 years. Mrs. Pelosi wants to steal $426 billion from future Medicare spending to "pay for" universal coverage. While Medicare's price controls on doctors and hospitals are certain to be tightened, the only cut that is a sure thing in practice is gutting Medicare Advantage to the tune of $170 billion. Democrats loathe this program because it gives one of out five seniors private insurance options.
As for Medicaid, the House will expand eligibility to everyone below 150% of the poverty level, meaning that some 15 million new people will be added to the rolls as private insurance gets crowded out at a cost of $425 billion. A decade from now more than a quarter of the population will be on a program originally intended for poor women, children and the disabled.
Even though the House will assume 91% of the "matching rate" for this joint state-federal program—up from today's 57%—governors would still be forced to take on $34 billion in new burdens when budgets from Albany to Sacramento are in fiscal collapse. Washington's budget will collapse too, if anything like the House bill passes.
• European levels of taxation. All told, the House favors $572 billion in new taxes, mostly by imposing a 5.4-percentage-point "surcharge" on joint filers earning over $1 million, $500,000 for singles. This tax will raise the top marginal rate to 45% in 2011 from 39.6% when the Bush tax cuts expire—not counting state income taxes and the phase-out of certain deductions and exemptions. The burden will mostly fall on the small businesses that have organized as Subchapter S or limited liability corporations, since the truly wealthy won't have any difficulty sheltering their incomes.
This surtax could hit ever more earners because, like the alternative minimum tax, it isn't indexed for inflation. Yet it still won't be nearly enough. Even if Congress had confiscated 100% of the taxable income of people earning over $500,000 in the boom year of 2006, it would have only raised $1.3 trillion. When Democrats end up soaking the middle class, perhaps via the European-style value-added tax that Mrs. Pelosi has endorsed, they'll claim the deficits that they created made them do it.
Under another new tax, businesses would have to surrender 8% of their payroll to government if they don't offer insurance or pay at least 72.5% of their workers' premiums, which eat into wages. Such "play or pay" taxes always become "pay or pay" and will rise over time, with severe consequences for hiring, job creation and ultimately growth. While the U.S. already has one of the highest corporate income tax rates in the world, Democrats are on the way to creating a high structural unemployment rate, much as Europe has done by expanding its welfare states.
Meanwhile, a tax equal to 2.5% of adjusted gross income will also be imposed on some 18 million people who CBO expects still won't buy insurance in 2019. Democrats could make this penalty even higher, but that is politically unacceptable, or they could make the subsidies even higher, but that would expose the (already ludicrous) illusion that ObamaCare will reduce the deficit.
• The insurance takeover. A new "health choices commissioner" will decide what counts as "essential benefits," which all insurers will have to offer as first-dollar coverage. Private insurers will also be told how much they are allowed to charge even as they will have to offer coverage at virtually the same price to anyone who applies, regardless of health status or medical history.
The cost of insurance, naturally, will skyrocket. The insurer WellPoint estimates based on its own market data that some premiums in the individual market will triple under these new burdens. The same is likely to prove true for the employer-sponsored plans that provide private coverage to about 177 million people today. Over time, the new mandates will apply to all contracts, including for the large businesses currently given a safe harbor from bureaucratic tampering under a 1974 law called Erisa.
The political incentive will always be for government to expand benefits and reduce cost-sharing, trampling any chance of giving individuals financial incentives to economize on care. Essentially, all insurers will become government contractors, in the business of fulfilling political demands: There will be no such thing as "private" health insurance.
***
All of this is intentional, even if it isn't explicitly acknowledged. The overriding liberal ambition is to finish the work began decades ago as the Great Society of converting health care into a government responsibility. Mr. Obama's own Medicare actuaries estimate that the federal share of U.S. health dollars will quickly climb beyond 60% from 46% today. One reason Mrs. Pelosi has fought so ferociously against her own Blue Dog colleagues to include at least a scaled-back "public option" entitlement program is so that the architecture is in place for future Congresses to expand this share even further.
As Congress's balance sheet drowns in trillions of dollars in new obligations, the political system will have no choice but to start making cost-minded decisions about which treatments patients are allowed to receive. Democrats can't regulate their way out of the reality that we live in a world of finite resources and infinite wants. Once health care is nationalized, or mostly nationalized, medical rationing is inevitable—especially for the innovative high-cost technologies and drugs that are the future of medicine.
Mr. Obama rode into office on a wave of "change," but we doubt most voters realized that the change Democrats had in mind was making health care even more expensive and rigid than the status quo. Critics will say we are exaggerating, but we believe it is no stretch to say that Mrs. Pelosi's handiwork ranks with the Smoot-Hawley tariff and FDR's National Industrial Recovery Act as among the worst bills Congress has ever seriously contemplated.
from the Weekly Standard, 2009-Nov-9, web-posted 2009-Nov-1, by William Kristol:
The Pelosi Plan
... and the Swine Flu Democrats.In 1993, a newly elected Democratic president and a Democratic Congress pushed through a tax increase on a party-line vote. The next year Democrats lost control of Congress, with House Speaker Tom Foley defeated in his reelection bid and the Senate seat of retiring majority leader George Mitchell going Republican.
In 1995, the newly elected Republican Congress tried to reduce the rate of growth of Medicare. The proposal was pilloried by the Clinton White House as drastic and unconscionable. The bill did not become law, the Gingrich revolution came to a screeching halt, and Bill Clinton was reelected in 1996, defeating Bob Dole, who, Clinton tirelessly pointed out, had attempted to bring about those Medicare cuts in collusion with Newt Gingrich.
Politicians aren't altogether stupid. No president or congressional majority has tried to raise taxes since 1993. No president or congressional majority has tried to slash Medicare since 1995.
Until now. With Barack Obama as her front man, House Speaker Nancy Pelosi--the real power in the Democratic party--has gone Clinton and Gingrich one better. Clinton tried to hike taxes. Gingrich sought to cut Medicare. Pelosi wants to do both at once. This is quite a feat: She's combined the most unpopular Democratic and Republican proposals of the last generation in one piece of legislation.
And her timing is impeccable. Pelosi has decided to raise taxes and discourage employment just as joblessness approaches 10 percent. She's decided to cut Medicare reimbursements just as seniors' retirement accounts have shrunk. She's decided to advance a huge spending bill just as the deficit is at historic highs. She's decided to insist on federal funding of abortion just as the issue seems to have reached some sustainable middle ground. And she's decided to put forward a 2,000-page piece of legislation with a mind-boggling array of scary instances of bureaucratic coercion and farcical examples of nanny-state liberalism--all nuggets of political gold for Republicans--at a time when the public is sick of statist overreaching and big-government meddling.
This is the Pelosi Plan to wreck our health care system and--the bright side!--the Democratic majority along with it. This week we'll see whether enough of her fellow House Democrats intervene to prevent her from devastating their party. There will be no Republican votes for the Pelosi Plan of tax hikes and Medicare cuts. Will there be enough Democratic resistors so the bill is either withdrawn or defeated?
It's hard to say at this point. The arm-twisting and palm-greasing haven't yet produced enough Democrats to put the Pelosi Plan over the top. The substantive case against various versions of the legislation made for months by an army of nonpartisan experts and wonks has had an effect. The state of the American economy and the federal budget gives sane Democrats pause as they consider enacting a sprawling new entitlement. And as Americans read the legislation over the next week, they'll find so much that is ill-considered, cumbersome, deceptive, and house-of-cards-like that it all just may collapse of its own weight.
Or it may collapse because of swine flu.
After all, we're seeing a big government health care program in operation right now--the Obama administration's effort to deal with the swine flu problem. No, come to think of it, it's now the swine flu emergency. Last week, President Obama so legally designated it. How's that test case in government-run emergency care going?
Turn on your local news to find out. You'll see false reassurances, broken promises, rationing which doesn't provide the promised rations, queues lengthening while supplies run out, and lots of bureaucrats explaining just why things aren't working quite as their centrally planned plans had planned.
The swine flu emergency is a foretaste of life under the Pelosi Plan. Surely this spectacle, happening in real time before us, will give even more Democrats pause. Do they really want to be known as the Swine Flu Democrats?
I suspect that late this week, at least 40 House Democrats will heed the wishes of the American people and refuse to rubberstamp the Pelosi Plan. And once it has been relegated to the dustbin of history, sensible members of Congress from both sides of the aisle will get together to pass reasonable, incremental health care reforms.
from Reuters, 2009-Nov-5, by John Whitesides and Donna Smith, with additional reporting by Andy Sullivan and editing by Alan Elsner:
Health reform gets boost before close vote
WASHINGTON - With a close vote looming in the U.S. House of Representatives, President Barack Obama's push for healthcare reform was boosted on Thursday by the support of powerful lobbies representing doctors and seniors.
House Democratic leaders struggled to round up enough party moderates to reach the 218 votes needed to pass Obama's top domestic priority ahead of a planned Saturday vote.
Obama will visit the Capitol on Friday to make a personal plea for support. He said endorsements from the American Medical Association representing doctors, and AARP, the lobbying group for older Americans, were a powerful argument.
"I urge Congress to listen to the AARP, listen to the AMA, and pass this reform for hundreds of millions of Americans," Obama said in a surprise appearance in the White House briefing room. "We are closer to passing this reform than ever before."
Failure in the Democratic-controlled House would be a huge political blow to Obama, and Democratic leaders scrambled to win over some party moderates who have lingering concerns about the bill's cost and its provisions on abortion.
"I think it's going to be close," House Democratic leader Steny Hoyer said but added he was confident the bill would get the votes of 218 of the 258 Democrats.
Asked if she had the votes, House Speaker Nancy Pelosi said: "We will."
Republicans are united in opposition to the sweeping overhaul, which is designed to rein in costs, expand coverage to millions of uninsured and bar insurance practices such as denying coverage to people with pre-existing conditions.
They have objected to the bill's price tag of just more than $1 trillion and what they say is its excessive government interference in the private healthcare and insurance markets.
'A LONG WAY FROM 218'
"I can't figure out how many votes they've got," Representative Eric Cantor, the No. 2 House Republican, told reporters. But he said Pelosi "is a long way from the 218 necessary."
About 1,000 protesters opposed to the healthcare reform effort gathered on the lawn outside the Capitol, waving yellow "Don't Tread on Me" flags and signs, including one reading "Stop the Obama-nation of America."
If the healthcare bill passes the House, action would move to the Senate, which is preparing its own version. Obama wants to sign a bill by year's end, but Senate Democratic leader Harry Reid has indicated that deadline might slip.
AARP said the House bill would help seniors pay for their prescription drug coverage and strengthen Medicare, the government-run health program for the elderly.
"We can say with confidence that it meets our priorities for protecting Medicare, providing more affordable health insurance for 50 to 64-year-olds, and reforming the healthcare system," Nancy LeaMond, executive vice president, said.
Along with the doctors' and seniors' lobbying groups, the American Cancer Society also endorsed the bill.
The overhaul would spark the biggest changes in the U.S. healthcare system since the creation of the Medicare health program for the elderly in 1965. Congressional budget analysts said it would extend coverage to 36 million uninsured people living in the United States,
The House bill would require individuals to buy insurance and all but the smallest employers to offer health coverage to workers. It also would provide subsidies to help purchase insurance and would eliminate the industry's exemption from federal antitrust laws.
Many changes in the bill would only take effect in 2013.
House Democratic leaders are trying to address the concerns of about 40 members who want to be sure federal subsidies are not spent to pay for abortions. Democrats who support abortion rights want to ensure the bill does not exceed current restrictions on using federal money to finance abortions.
The Senate's version of a healthcare bill has been bogged down as Reid awaits cost estimates from congressional budget analysts and searches for an approach that could win the 60 votes needed to overcome Republican procedural hurdles.
Republican Senator Jon Kyl said failure or a very close vote in the predominantly Democratic House would give pause to some moderate Senate Democrats from conservative states who have not committed to backing the healthcare measure.
"It will be very difficult for folks in those places to support the kind of legislation that Harry Reid is going to put on the floor," Kyl told reporters.
The House and Senate bills both include a government-run public insurance option that Obama and supporters say would create competition in the insurance market. Critics say it would lead to a government takeover of the sector.
If the two chambers pass their bills, the differences would have to be reconciled before a single reform bill goes to Obama for his signature. "I think we can do all this before Christmas," Pelosi told reporters.
from the Wall Street Journal's Best of the Web, 2009-Nov-5, by James Taranto:
Pelosi's Suicide Pact
The voters be damned: That seems to be Speaker Nancy Pelosi's attitude in the wake of big Democratic losses on Tuesday. "House Democratic leaders, undeterred by delays in the Senate or this week's Republican electoral triumphs, plan to call a vote Saturday on the most sweeping overhaul of U.S. health-care policy in four decades," Bloomberg reports:
The House will move on the $1.05 trillion legislation that would cover 36 million uninsured people and create a government plan to compete with private insurers even after the election of Republican governors in New Jersey and Virginia. President Barack Obama will go to Capitol Hill tomorrow to meet with House Democrats, as they seek the 218 votes they need to pass the bill, a Democratic leadership aide said.Politico reports that "leaders expect a close vote, with a one-or two-vote margin, and no Rs." They plan to pass this monstrosity without bipartisan support and with the bare minimum of support from their own party. "Pelosi has reportedly told fellow Democrats that she's prepared to lose seats in 2010 if that's what it takes to pass ObamaCare," The Wall Street Journal reports. Is she mad?
No, not really. Or we should say only ideologically, in that she loves the monstrous idea of socialized medicine. Given that, though, her actions make perfect sense in terms of practical politics. After all, this is likely to be the high-water mark for liberal Democrats. They're likely to lose House seats next year anyway, and there's no guarantee President Obama will be re-elected. At 69, Pelosi stands a good chance of facing a death panel before she leads a majority of this size again.
Besides, her seat is in no jeopardy. She comes from a safe ultraliberal district. The same is true of the Democratic committee chairmen, who had to be able to win re-election even in lean years like 1994. According to Wikipedia, no member of the left-wing Congressional Progressive Caucus has lost re-election in a general election (Rep. Cynthia McKinney of Georgia lost a primary to another CPC member).
So Pelosi will probably still be speaker a year from now, even if her caucus is diminished. In the worst-case scenario, she'll be minority leader, with hopes of returning to the speakership on the strength of President Obama's re-election coattails. This is a small price to pay for the privilege of seizing control of Americans' health care.
To prevail, however, she will still need to persuade some Democrats who do not share her fervor for socialized medicine to risk their jobs for it. As Politico reports:
Election Day losses in Virginia and New Jersey have congressional Democrats focused like never before on jobs---their own.While the White House and party leaders are urging calm, Democratic incumbents from red states and Republican-leaning districts are anything but; Tuesday's statehouse defeats have left them acutely aware that their votes on health care reform and other major Obama initiatives could be career-enders in 2010 or beyond."I should be nervous," said Rep. Parker Griffith, a freshman Democrat from Huntsville, Ala.Griffith said the Democratic rank and file is "very, very sensitive" to the fact that issues being pushed by party leaders "have the potential to cost some of our front-line members their seats."The June vote for Cap'n Trade was just 219-212, with 8 Republicans voting "aye." If no GOP members back ObamaCare, Pelosi will need fewer defections this time around. And if, as Politico predicts, the margin really is a single vote or two, any marginal Democrat who votes "yes" will bear responsibility for foisting this on his constituents.
It may be that Pelosi is savvy enough not to try to push this through without being certain enough of her members are willing to sign her suicide pact. Or perhaps this is a desperation move, since the chances of passing ObamaCare would only diminish as the election results sink in. Or both--Pelosi may have the votes and be acting out of desperation.
Of course, even if the House passes this thing, it still has to get past the Senate. Majority Leader Harry Reid has got to be the least happy man in Washington. Unlike Pelosi, he does not have a safe seat. In fact, liberal electoral maven Nate Silver ranks Reid as the most vulnerable Senate incumbent up next year.
The Associated Press reports that Reid "signaled Tuesday that Congress may fail to meet a year-end deadline for passing health-care legislation, leaving the measure's fate to the uncertainties of the 2010 election season." Another Associated Press report notes that far-left groups like MoveOn.org are threatening to campaign against moderate Democrats if they oppose ObamaCare:
The group said Tuesday it was launching radio ads aimed at moderates [Blanche] Lincoln and Sen. Mary Landrieu, D-La., accusing each of "siding with insurance companies." It was also mailing sharply worded brochures to tens of thousands of households in Arkansas, Louisiana, Nebraska, North Dakota and even Maine--home of moderate GOP Sen. Olympia Snowe--urging recipients to pressure their senators. . . .Conflict between ideological groups and moderate lawmakers is not uncommon in either party.Yet the intensity of the progressive arm-twisting--and the resentment it is stirring among targeted senators--reflect the stakes as Congress tackles the top domestic priority of President Barack Obama and the Democratic Party.Even if Pelosi gets her way, there's reason to hope the Senate will be the death panel for ObamaCare.
from the Wall Street Journal, 2009-Nov-4, by Michael Barone:
Tuesday's Biggest Loser: the Union Agenda
The GOP victories reveal fissures in the coalition that elected Barack Obama.If you were watching television on Tuesday night as the election returns came in showing Republicans capturing the governorships of Virginia and New Jersey, you probably missed seeing the biggest losers of the evening. You may have caught the concession speech of Creigh Deeds, who ran 12% behind Barack Obama's winning percentage of the vote in Virginia, and that of Jon Corzine who, after spending over $100 million of his own money on three campaigns, ran 13% behind Obama's winning percentage in New Jersey and got evicted from Drumthwacket, the governor's mansion in Princeton.
But you missed seeing the guy who may have been the biggest loser of all—a man who according to recently released White House logs has been a guest in the White House 22 times since Barack Obama became president, more than any other single individual.
That man is Andy Stern, who has boasted that the Service Employees International Union, which he heads, ponied up something like $60 million for Barack Obama and other Democrats in the 2008 campaign cycle. Altogether, Mr. Stern and other labor union leaders reportedly gave Democrats some $400 million last year.
This was, to borrow a word from Mr. Obama, an audacious gamble. Unions these days represent only 8% of private-sector employees (and that's counting General Motors and Chrysler as private sector) and some unions went into debt to make these contributions. Public employee unions of course are financed by taxpayers, who pay the salaries from which dues are extracted, but even so their resources are ultimately limited.
What have the unions gotten in return? Some not insignificant things. The Obama administration bludgeoned General Motors and Chrysler bondholders, in what I called an episode of "gangster government," and effectively turned over the two auto companies to the United Auto Workers. The building trades got project labor agreements—i.e., plenty of dues money flowing to their coffers—in the $787 billion stimulus package.
A lot of that stimulus money went as well to state and local governments. The goal was to spare public employee union members from the vicissitudes of the recession to which the rest of us are subject—and to keep that dues money flowing in.
But the union leaders have been frustrated on their No. 1 goal, the card check bill that would effectively abolish the secret ballot in unionization elections. A couple of bulky guys in varsity jackets visit your home and, um, persuade you to sign a card, and later the union—with the help of a mandatory arbitration clause—impose contracts on employees and rake in the dues money.
Just about every House Democrat voted for the misleadingly titled "Employee Free Choice Act," and every Senate Democrat cosponsored it when George W. Bush was president and it had no chance of becoming law. As Barack Obama was inaugurated, Atlantic blogger Marc Ambinder was speculating on how many Republicans would come on board.
Instead, support evaporated as Democrats from places as dissimilar as Arkansas and California thought hard about what life would be like with card check. Today the bill looks dead no matter how many Democrats are elected to Congress.
And after Tuesday's elections, it looks like fewer Democrats will be elected to Congress in 2010 than in 2008. In the election results and the exit polls there are clear signs that the Obama majority coalition has splintered.
Mr. Obama benefited last year from a big turnout of young voters, who backed him by a 66% to 32% margin. This year young voters formed only about half as large a percentage of the electorate in Virginia and New Jersey as they did in 2008, and in Virginia they voted about as Republican as their elders.
The big-government programs of Obama Democrats evidently have less appeal than those trendy posters and inspiring rallies and cries of "We are the change we are seeking." I have yet to see survey research showing that young Americans want to work under union contracts, with their 5,000 pages of work rules and rigid seniority systems. That doesn't sound like a tune that appeals to the iPod generation.
Economically, the Obama majority was a top-and-bottom coalition. The Democratic ticket carried voters with incomes under $50,000 and over $200,000, and lost those in between. As the shrewd liberal analyst Thomas Edsall has noted, there's a tension between what these groups want. High earners in non-Southern suburbs have been voting Democratic since the mid-1990s largely because of their liberal views on cultural issues; low earners vote Democratic because they want more government money shoveled their way.
Tuesday's elections suggest those whose money gets shoveled are having second thoughts about this odd-couple coalition. In Virginia, Republican gubernatorial candidate Bob McDonnell carried affluent and immigrant-heavy Fairfax County, which Barack Obama carried by 21%. In New Jersey, Republican Christopher Christie cut Democrat Jon Corzine's margin in demographically similar Bergen County from 16% in 2005 to 1%. A Republican was elected county executive in Westchester County, New York, and the Republican candidate for state Supreme Court in Pennsylvania carried the four-county suburban Philadelphia area—turf that voted 57% for Barack Obama in 2008.
A health-care bill financed by either higher taxes on high earners or on those with generous, employer-provided health insurance, looks like a hard sell in high-earner constituencies. It looks politically risky especially for newly elected Democrats.
Mr. McDonnell carried nine of Virginia's 11 congressional districts, and the three districts that Democrats captured from Republicans last year voted 62%, 61% and 55% for the Republican this time. No wonder Senate Majority Leader Harry Reid is talking about postponing health-care votes until next year.
The unions' unprecedented political push in 2008 has not been unnoticed by the voters. Mr. Corzine's cozy relationship with public employee union heads proved a liability in New Jersey, and in Virginia Mr. McDonnell campaigned hard against card check and the Obama agenda. The Gallup organization reports that Americans are less pro-union than they have been at any time since it first started asking the question in 1936. Maybe around the country union members will start asking their leaders what they have gotten for all the money they've spent on politics.
Mr. Barone is senior political analyst for the Washington Examiner, resident fellow at the American Enterprise Institute, and co-author of "The Almanac of American Politics 2010" (National Journal).
from FrontPageMag.com, 2009-Sep-11, by David Horowitz:
.The Manchurian Candidate
Those who were surprised by the White House appointment of Van Jones – a self-styled “communist,” and a proponent of the idea that the Katrina catastrophe was caused by “white supremacy,” haven’t been paying attention to developments on the left since the fall of Communism, or to president Obama’s extensive roots in its political culture. Van Jones is the carefully groomed protégé of a network of radical organizations -- including Moveon.org -- and of Democratic sponsors like billionaire George Soros and John Podesta, former Clinton chief of staff and co-chair of the Obama transition team.
At the time of his appointment as the President’s “Green Jobs” czar – and despite a very recent 10-year history of “revolutionary” activity – Jones was a member of two key organizations at the very heart of what might be called the executive branch of the Democratic Party. The first is the Center for American Progress which was funded by Soros and is headed by Podesta. The second is the Apollo Alliance, on whose board Jones sits with Podesta, Carol Browner and Al Gore. This is a coalition of radicals, leftwing union leaders and corporate recruits, which had a major role in designing Obama’s green economy plans, including the “cash for clunkers” program. The New York director of the Alliance, who will be writing its applications for tens of millions of dollars in “stimulus” funds, is Jeff Jones (no relation) who was a co-leader of the terrorist Weather Underground along with Obama’s close friend and political ally William Ayers.
According to his own account, Van Jones became a “communist” during a prison term he served after being arrested during the 1992 Los Angeles race riots. For the next ten years Jones was an activist in the Maoist organization STORM – “Stand Together to Organize a Revolutionary Movement.” When STORM disintegrated Jones joined the Apollo Alliance and the Center for American Progress Democrats. As he explained to the East Bay Express in a 2005 article, he still considered himself a “revolutionary, but just a more effective one.” “Before,” he told the Express, “we would fight anybody, any time. No concession was good enough;… Now, I put the issues and constituencies first. I’ll work with anybody, I’ll fight anybody if it will push our issues forward.... I’m willing to forgo the cheap satisfaction of the radical pose for the deep satisfaction of radical ends.”
Pursuing the deep satisfaction of radical ends is the clear sub-text of Jones’ 2007 book, The Green Collar Economy which comes with a Forward by Robert Kennedy Jr. and enthusiastic blurbs from Nancy Pelosi and Al Gore. According to Jones, the Katrina tragedies were caused by global warming, white supremacy, free market economics and the “war for oil” in Iraq. This “perfect storm” of social evils deprived poor blacks of the protection of adequate levees and private vehicles which would have allowed them to escape. The fact that a fleet of public buses was available but the black mayor and the black power structure in New Orleans failed to deploy them go unmentioned in Jones’ indictment of white racism. Instead, “The Katrina story illustrates clearly the two crises we face in the United States: radical socioeconomic inequality and rampant environmental destruction.” To deal with these crises “we will need both political and economic transformation – immediately.”
How did John Podesta and Al Gore and Barack Obama come to be political allies of a far left radical like Van Jones, a 9/11 conspiracy “truther” and a supporter of the Hamas view that the entire state of Israel is “occupied territory?” To answer this question requires an understanding of developments within the political left that have taken place over the last two decades, and in particular the forging of a “popular front” between anti-American radicals and “mainstream liberals” in the Democratic Party.
The collapse of Communism in the early Nineties did not lead to an agonizing reappraisal of its radical agendas among many who had supported it in the West. Instead, its survivors set about creating a new socialist international which would unite “social justice” movements, radical environmental groups, leftwing trade unions, and traditional communist parties – all dedicated to the revival of utopian dreams.
The new political force made its first impression at the end of the decade when it staged global demonstrations against the World Trade Organization and the World Bank. The demonstrations erupted into large-scale violence in Seattle in 2001 when 50,000 Marxists, anarchists and environmental radicals, joined by the giant leftwing unions AFSCME and SEIU, descended on the city, smashed windows and automobiles, and set fire to buildings to protest “globalization” – the world capitalist system.
In the direct aftermath of the 9/11 attacks, the anti-globalization forces morphed into what became known as the “anti-war” movement. An already scheduled anti-globalization protest on September 29 was re-redirected (and re-named) to target America’s retaliation against al-Qaeda and the Taliban. The new “peace” movement grew to massive proportions in the lead up to the war in Iraq but it never held a single protest against Saddam’s violation of 17 UN arms control resolutions, or his expulsion of the UN arms inspectors. It did, however, mobilize 35 million people in world-wide protests against America’s “imperialist war for oil.” The orchestrators of the demonstrations were the same leaders and the same organizations, the same unions and the same “social justice” groups that had been responsible for the Seattle riots against the World Trade Organization and the international capitalist system.
A second watershed came in the run-up to the 2004 elections when billionaire George Soros decided to integrate the radicals – including their political organization ACORN -- into the structure of Democratic Party politics. Together with a group of like-minded billionaires, Soros created a “Shadow Party” (as Richard Poe and I documented in a book by that name) whose purpose was to shape the outcome of the 2004 presidential race. “America under Bush,” Soros told The Washington Post, “is a danger to the world,…” To achieve his goal, Soros created a galaxy of 527 political organizations headed by leftwing union leaders like SEIU chief Andrew Stern and Clinton operatives like Harold Ickes. As its policy brain he created the Center for American Progress.
Soros failed to achieve his goal in 2004 but he went on working to create new elements of the network, such as the Apollo Alliance. Four years later the Shadow Party was able to elect a candidate who had spent his entire political career in the bowels of this movement. Obama’s electoral success was made possible by the wide latitude he was given by the press and the public, partly because he was the first African-American with a chance to be president and partly because his campaign was deliberately crafted to convey the impression that he was a tax-cutting centrist who intended to bring Americans together to find common solutions to their problems. When confronted with his long-term associations and working partnerships with anti-American racists like Jeremiah Wright and anti-American radicals like William Ayers, he denied the obvious and successfully side-stepped its implications.
Just eight months into his presidency, however, a new Barack Obama has begun to emerge. With unseemly haste Obama has nearly bankrupted the federal government, amassing more debt in eight months than all his predecessors combined. He has appeased America’s enemies abroad and attacked America’s intelligence services at home. He has rushed forward with programs that require sweeping changes in the American economy and is now steamrolling a massive new health-care program that will give the government unprecedented control of its citizens.
Among the hallmarks of this new radical regime the appointment of Van Jones stood out for its blatant departure from political normalcy. In his White House role, the radical Jones would have represented the president in shaping a multi-billion stimulus package, which could easily function as a patronage program of particular interest to his political allies in the “Apollo Alliance,” ACORN and the leftwing unions. In the classic manual for activists on how to achieve their radical goals, Obama’s political mentor Saul Alinsky wrote: “From the moment an organizer enters a community, he lives, dreams, eats, breathes, sleeps only one thing, and that is to build the mass power base of what he calls the army.” As the president’s green jobs commissar, Van Jones had entered the trillion-dollar community of the federal government and would soon have been building his radical army. The rest of us should be wondering who his sponsors were within the White House (senior presidential advisor and long-time “progressive” Valerie Jarrett was certainly one). Then we should ask ourselves what they are planning next.
David Horowitz is the founder of The David Horowitz Freedom Center and author of the new book, One Party Classroom
from Pajamas Media, 2009-Oct-16, by Roger Kimball:
A Maoist in the White House
Jeremiah Wright. William Ayers. Van Jones. Where does the rogues’ gallery of Barack Obama’s radical friends end? These people are not liberals. They are not “progressives.” They are radicals who hate America and in many cases have advocated or even perpetrated violence in an effort to destroy it.
Thanks to Glenn Beck, the American public has now been introduced to yet another radical member of Obama’s inner circle: Anita Dunn, Interim White House Communications Director, former top advisor to Obama’s political campaign, and wife of Obama’s personal lawyer, Robert Bauer.
In a speech before high school students last June, Dunn spoke passionately about her two favorite political philosophers, “the two people I turn to most” for answers to important questions like “how to do things that have never been done before.” Who are these paragons? One was Mother Teresa. Dunn didn’t have much to say about her. Most of her enthusiasm was lavished upon her other favorite fount of political wisdom: Mao Tse-Tung.
Mao Tse-Tung. That would be the deviant monster who, quite apart from his disgusting personal life, engineered the mass murder of anywhere from 50 to over 100 million people. Estimates vary so widely because murder on that wholesale scale is difficult to tabulate, especially in a country as backwards as China was under Mao’s long reign. But there is little doubt that Mao has the grisly distinction of being the greatest mass murderer in history.
Yet this is the man that one of Obama’s closest advisors commends to an audience with warmth and enthusiasm. In 1947, she tells her audience, Chiang Kai-Shek seemed to hold all the cards: he had the army, the airforce, and yet Mao went on to victory, telling people, as Anita Dunn told her listeners, “You fight your war and I’ll fight mine.” Don’t believe me? Listen:
N.B.: Anita Dunn is not just an Obama hanger-on. She is part of his inner circle, one of his top aides, along with David Axelrod, Rahm Emmanuel, and Robert Gibbs. What does it mean that someone in that position proffers one of the greatest monsters the world has ever seen for emulation?
Anita Dunn calls Mao a “political philosopher.” In fact, as a real philosopher, the late, great Leszek Kolakowski, understood, Mao’s real achievement was as “one of the greatest, if not the very greatest, manipulator of large masses of human beings in the twentieth century.” His violent peasant revolution mouthed Marxist slogans, but at its core was less Marxist than a particularly rebarbative form of anarchic and anti-intellectual tyranny. “The obfuscation of Western admirers of Chinese Communism,” Kolakowski observes toward the end of his magnum opus, Main Currents of Marxism, “is scarcely believable.” I wish he were still here for Anita Dunn.
In the 1960s and 1970s, many American universities, along with some other Western redoubts of privilege and irresponsibility, harbored a few deluded characters who declared themselves Maoists and were fond of toting around his pathetic compendium of absurdity, “The Little Red Book.” These creatures were the sorriest detritus of our own cultural revolution. Some destroyed themselves. Others grew up, in whole or part, and were absorbed by a rich and forgiving society into the tissues of American life. Only now is it clear that some of the most radical and benighted have subsisted long enough in the outer corridors of power to find themselves suddenly translated into its inner sanctum, the White House and other top agencies of the United States government. It is an eventuality that would be risible were it not repulsive and, indeed, frightening.
So, we have a self-professed admirer of Mao Tse-Tung in a top job at the White House. Where does it end? Where?
from Fox News, 2009-Oct-23, by Major Garrett:
Anita Dunn's Husband Emerging as Top Contender to Replace White House Counsel
Bob Bauer, the top lawyer for the Democratic National Committee and husband of White House Communications Director Anita Dunn, is under serious consideration to replace Greg Craig.
White House Communications Director Anita Dunn's husband is emerging as the top candidate to replace Greg Craig as White House counsel, Fox News has learned.
Dunn's husband, Bob Bauer, is President Obama's personal lawyer and a former counsel to his campaign, as well as the top lawyer for the Democratic National Committee.
Senior White House officials declined to comment, but Democrats close to the situation said Bauer is under serious consideration to replace Craig, who is expected to leave the White House by the end of the year.
White House Press Secretary Robert Gibbs said no decisions have been made on Craig's future or on any potential replacement.
Dunn, who has leveled sharp criticism at Fox News in recent weeks, is also expected to leave the White House by the end of the year. She took the communications post on an interim basis in late April, replacing Ellen Moran, who resigned to become chief of staff at the Commerce Department.
Dunn, who also served as a top campaign adviser to Obama's presidential campaign, declined to comment on any role her husband might play in the administration.
During the campaign, Bauer played a significant role in Obama's decision to forgo general election spending limits, allowing Obama to vastly out-fundraise and outspend Republican rival John McCain.
Bauer is highly regarded in Democratic circles as a tenacious and brilliant lawyer with an expertise in election law and the convergence of law and politics. In addition to his current work for the DNC and his role as general counsel to Obama's presidential campaign, Bauer has also been counsel to the Democrats' national Senate and House campaign committees.
He was also chief outside counsel to former Senate Democratic Leader Tom Daschle during the impeachment trial of President Clinton and counsel to New Jersey Sen. Bill Bradley's presidential campaign in 2000.
Bauer is currently chairman of the Political Law Group at the Washington law firm of Perkins Cole LLP. He graduated magna cum laude from Harvard University in 1973 and received his law degree in 1976 from the University of Virginia.
from the Wall Street Journal, 2009-Nov-2, p.A4, by Jonathan Weisman:
Democrats' Quiet Changes Pile Up
WASHINGTON -- While President Barack Obama still faces stiff headwinds on a range of major legislation on his agenda, he has been signing into law a slew of smaller initiatives that had gathered dust on the Democratic wish list for years.
Many of the bills had been blocked by Republicans who considered the measures unnecessary expansions of government or too costly. But facing Democratic majorities in Congress, conservatives are picking their battles and in many cases letting the legislation roll through.
Last week, Mr. Obama signed defense-policy legislation that included an unrelated measure widening federal hate-crimes laws to cover sexual orientation and gender identification -- 12 years after it was first introduced. The same legislation also tightened the rules of admissible evidence for military commissions, an issue that consumed Congress in debate in 2007 but received almost no attention this go-round.
Other new measures signed into law since the administration took office, all of which kicked up controversy in past congresses, make it easier for women to sue for equal pay, set aside land in the West from development, give the government the power to regulate tobacco and raise tobacco taxes to expand health insurance for children. Congress and the White House, in the new defense-policy bill, also killed weapons programs that have survived earlier attempts at termination, among them, the F-22 fighter jet, the VH-71 presidential helicopter and the Army's Future Combat System.
Rob Nabors, the White House's deputy budget director, called the series of new laws "a very, very quiet but important victory."
To conservatives, they are Democratic payback to liberal interests. "The left knows what it wants," says former Republican House Speaker Newt Gingrich. "It's been trying to get it for some time, and this is its moment."
Some promises that Mr. Obama made during his campaign, such as repealing much of the post-Sept. 11, 2001, Patriot Act, allowing openly gay service members into the military or making major changes to the 2001 No Child Left Behind Act have gone nowhere.
But other issues that once consumed Congress are now sailing into law, often without much public notice. Senior White House political adviser David Axelrod said his opponents in Congress are absorbed with defeating Mr. Obama's health-care overhaul, what he calls "the shiny object that they've chased." As a result, he contends, other measures have been left to pass into law.
Rep. Tom Price (R., Ga.), a conservative leader in the House, concedes that, in some cases, Republicans are being outflanked. "The administration is pushing so many things so rapidly it's difficult to concentrate on all of them," he said.
In his first year in office, President George W. Bush had more modest success with a conservative wish list. His 2001 tax cut ended the tax penalty on marriage, a longstanding Republican desire, and it slowly phased out the estate tax. But Mr. Bush didn't champion many other conservative wishes, which had been pushed by the Republican-dominated Congress during the years Bill Clinton was in the White House. Proposals from some in the party to eliminate certain government agencies in Washington and roll back work-place and environmental regulations stayed on the shelf.
In contrast, the Obama White House has reached into the Democratic archives, as some of the measures illustrate:
The hate-crimes bill became law 11 years after the slayings of the men it is named after: Matthew Shepard, a 21-year-old gay man left for dead on a split-rail fence in Wyoming, and James Byrd, a black man dragged to death behind a pickup truck in Texas.
The legislation gives the Justice Department the power to investigate and prosecute an expanded definition of hate crimes and to pre-empt local police when Washington decides too little is being done about a crime. The legislation has long been controversial. In fact, it took 14 votes in Congress to pass it. Opponents believe the measure is an unwarranted expansion of federal power. They also say it creates a new category of violent crime that isn't necessary because the acts it addresses would be crimes regardless of motivation. Mr. Price, the congressman, called it an "unconstitutional thought-crimes law."
The new public-lands law signed this spring was also once hotly debated. Among other things, the new law declares 1.2 million acres of Wyoming range land off-limits to oil and natural-gas development. Some who opposed the measure see an essential problem: The U.S. Geological Survey, they note, has estimated the area holds large natural-gas and oil deposits, which could help the U.S. toward energy independence.
Regarding the new tobacco law, the Food and Drug Administration and allies in Congress have been seeking regulatory authority over tobacco since the early 1990s. Republicans have argued for just as long that a federal regulatory agency established to police medicine and food had no business regulating a legal product that is neither. Indeed, they argued, because the FDA couldn't create a tobacco product that is safe, regulatory authority could in the end make tobacco illegal.
The legislation expanding children's health insurance has been equally controversial. Mr. Bush vetoed the expansion of the State Children's Health Insurance Program twice in 2007. While there were supporters of the measure in both parties, who were concerned that too many children were without health insurance, opponents said the price tag was too big and would ultimately outstrip the revenue from tobacco taxes designed to pay for it.
Republicans also say that as eligibility for government health insurance moves up the income scale, parents could drop private coverage to enroll their children in a government plan. The new law makes families with incomes up to 300% of the federal poverty level -- or $63,600 for a family of four -- eligible. The previous cutoff was 200%, or $42,400 for that same family.
from the Wall Street Journal, 2009-Oct-18:
ObamaCare's Tax on Work
Middle-income families will face a big marginal rate increase.None of the new distortions that the Senate health-care bill will layer onto the already-distorted tax code have received the attention they deserve, but in particular its effects on marginal tax rates could use scrutiny. Incredibly, for those with lower incomes, ObamaCare will impose a penalty as high as 34% on . . . work.
Central to Max Baucus's plan—assuming the public option stays dead—is an insurance "exchange," through which individuals and families could choose from a menu of standardized policies offered at heavily subsidized rates, provided that their employers do not offer coverage. The subsidies are distributed on a sliding scale based on income, and according to the Congressional Budget Office 23 million people will participate a decade from now, at a cost to taxpayers of some $461 billion.
Think about a family of four earning $42,000 in 2016, which is between 150% and 200% of the federal poverty level. CBO says a mid-level "silver" plan will cost about $14,700 in premiums, of which the family will pay $2,600—since the government would pay the other $12,100. If the family breadwinner (or breadwinners, because the subsidies are based on combined gross income) then gets a raise or works overtime and wages rise to $54,000, the subsidy drops to $9,900. That amounts to an implicit 34% tax on each additional dollar of income.
Or consider a single worker earning $20,600 and buying an individual "silver" policy with a premium at $5,000. Again according to CBO, if his income rises to $26,500, his subsidy plummets to $2,700 from $4,400 (including a cost-sharing subsidy that goes away). This is a 29% marginal tax; moving to other income levels yields increases in the neighborhood of 20% to 23% for both individuals and families. Jim Capretta, a fellow at the Ethics and Public Policy Center, calculates that when combined with other policies like the Earned Income Tax Credit that also phase out, the effective marginal rate would rise to nearly 70% at twice the poverty level.
The incentives for low-wage workers are especially perverse. The exchanges give them a huge break and then take it away gradually as their income goes up. Usually such phase-outs are used to make sure "the rich" don't benefit from IRS dispensations, but here they will have a giant effect on decisions about whether and how much to work, since each additional hour worked reduces the subsidy.
As CBO noted in a July health brief, "Higher [marginal] tax rates also reduce people's incentive to raise their income in other ways, such as working harder in the hope of winning raises; accepting new positions or responsibilities with higher compensation; or investing in their future earning capacity through education, training or other means." This disincentive effect will be especially hard on workers in the middle of their careers and who may not see the same potential for upward mobility as younger workers, but who could earn more through work and effort.
These marginal rate "cliffs" are also a sneaky way for Congress to lower the "scorable" cost of the bill without appearing to do so, because diminishing these rate hikes would boost the total cost of the subsidy. For the same reason, the subsidy is only extended to certain favored people, making it deeply unfair to those not allowed into the exchanges. Families earning identical amounts of money could pay wildly different taxes—a family earning $42,000 and getting insurance through an employer wouldn't receive close to $12,100 from the current tax exclusion for employer-sponsored coverage—while some families earning more money than others will pay significantly lower taxes.
This is an equity catastrophe waiting to happen—and senior Democrats know it. They're laying a political booby-trap that will transfer even more health spending to government after ObamaCare passes.
A far better and cleaner alternative would be to extend the same tax exclusions to individuals that employees receive if they get coverage from their employers. The current bias for one type of insurance has persisted for decades despite its unfairness and irrationality. But ObamaCare will keep all that, while in the process creating many new problems.
from the Wall Street Journal, 2009-Sep-22, p.A23, by Bret Stephens:
Summits of Folly
Mr. Obama bankrupts his country while appeasing his foe.Beggar thy neighbor, bankrupt thy country, appease thy foe. As slogans (or counter-slogans) go, it isn't quite in a class with Amnesty, Acid and Abortion. But it pretty much sums up President Obama's global agenda—and that's just for the month of September.
In 1943, Walter Lippmann observed that the disarmament movement had been "tragically successful in disarming the nations that believed in disarmament." That ought to have been the final word on the subject.
So what should Mr. Obama, who this week becomes the first American president to chair a session of the U.N. Security Council, choose to make the centerpiece of the Council's agenda? What else but nonproliferation and disarmament. And lest anyone suspect that this has something to do with North Korea and Iran, U.S. Ambassador Susan Rice insists otherwise: The meeting, she says, "will focus on nuclear nonproliferation and nuclear disarmament broadly, and not on any particular countries."
But the problem with this euphemistic approach to disarmament, as Lippmann noticed, is that it shifts the onus from the countries that can't be trusted with nuclear weapons to those that can. Is Nicolas Sarkozy, with his force de frappe, about to start World War III? Probably not, though he has the means to do so. Should Mr. Obama join hands with Iran and the Arab world in pushing for Israel's nuclear disarmament, on the view that if only the Jewish state would set the right example its enemies would no longer want to wipe it off the map? If that's what the president believes, he should say so publicly, especially since he's offering the same general prescription for America's nuclear deterrent.
Of course what the administration wants is to set the right mood music for its upcoming talks with Iran. Mr. Obama would be better served having a chat with Moammar Gadhafi, who will be seated just a few chairs away at the Security Council: The mood music for his disarmament was set by the 4th Infantry Division when it yanked Saddam Hussein from his spider hole in December 2003. Col. Gadhafi gave up his WMD a week later.
Then again, it's not as if the administration doesn't know how to play hardball when it has a real villain in its sights. Like Chinese tire makers, for instance, who last week were slapped with a 35% tariff because Mr. Obama owed political favors to his friends in Big Labor. Quite something for a president who last year sounded off on the dangers of "trade policy [being] dictated by special interests."
In an op-ed in this newspaper, Brookings Institution economist Chad Bown noted that "the count of newly imposed protectionist policies like antidumping duties and other 'safeguard' measures increased by 31% in the first half of 2009 relative to the same period one year ago."
That's a global trend, and the sort of thing a group like the G-20, which meets Thursday and Friday in Pittsburgh, is supposed to set its teeth against. Instead, the agenda will be given over to such brainstorms as capping bankers' bonuses—"a critical part of our broader reform agenda," according to Treasury Secretary Tim Geithner. Now there's a way to attract the best and the brightest to the world's dullest profession.
The G-20 also has no plans to put the brakes on further infusions of stimulus spending, the removal of which British Prime Minister Gordon Brown says would be an "error of historical proportions." But what's really historical is the explosion in the debt-to-GDP ratios of the G-20 countries, which the IMF predicts will rise to 81.6% next year from 65.9% in 2008. For the U.S. the jump is especially pronounced—to 97.5% next year from 70.5% last. Only Japan and Italy will be deeper in the red; even Argentina looks good by comparison. This is before the first baby boomer hits retirement age next summer, to say nothing of the liabilities coming from ObamaCare.
What happens to countries with these kinds of fiscal burdens? They decline. In 1983, Japan's gross government debt stood at 67% of GDP. It has since tripled. West Germany's was a little under 40%. It is twice that today. These used to be the economies of the future. They are, or ought to be, the cautionary tales of the present.
Meanwhile, Mr. Obama is earning kudos from the Russian government for his decision to pull missile defense from central Europe, even as Poland marked the 70th anniversary of its invasion by the Soviet Union. Moscow is still offering no concessions on sanctioning Iran in the event negotiations fail, but might graciously agree to an arms-control deal that cements its four-to-one advantages in tactical nuclear weapons.
Also on the presidential agenda this week is a meeting with Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority President Mahmoud Abbas. Too bad for all concerned that the two-state solution has been superseded by the three-state fact on the ground.
And all of this in a single month. Just imagine what October will bring.
from the Wall Street Journal, 2009-Oct-28, p.A22:
Escape From New York
A new study says taxes are driving people away.An old saying goes that the time to live in New York is when you're young and poor, or old and rich—otherwise, you're better off somewhere else. That wisdom is getting an update this week from a study by the Empire Center for New York State Policy that shows middle-class people leaving the state in droves.
Between 2000 and 2008, the Empire State had a net domestic outflow of more than 1.5 million, the biggest exodus of any state, with most hailing from New York City. The departures also have perilous budget consequences, since they tend to include residents who are better off than those arriving. Statewide, departing families have income levels 13% higher than those moving in, while in New York County (home of Manhattan) the differential was even more severe. Those moving elsewhere had an average income of $93,264, some 28% higher than the $72,726 earned by those coming in.
In 2006 alone, that swap meant the state lost $4.3 billion in taxpayer income. Add that up from 2001 through 2008, and it translates into annual net income losses somewhere near $30 billion. That trend is part of a larger march for New York: In 1950 the state accounted for 19% of all Americans, but by 2000 that number had fallen to 7%. The city's main saving grace has been its welcome mat for foreign immigrants, who have helped to replace some of those who flee.
As the study's authors, E.J. McMahon and Wendell Cox, suggest, no single reason can be fingered for a million migrants seeking their fortunes across state lines, but one place to start is New York's notorious state and local tax burden. According to the Tax Foundation, between 1977 and 2008, New York has ranked first or second in the country for its state-local tax burden compared to the U.S. average.
In the years considered by the Empire Center study, New York's state and local tax burden ranged between 11% and 12% of income. The peak year for taxes, 2004, was followed by the peak year for departures—as New York lost nearly 250,000 people to other states in 2005. And that's before another big tax hike this year.
That pattern is consistent with the annual migration patterns, showing that highly taxed and economically lackluster states were most likely to end up in residents' rear view mirrors. According to the annual study by United Van Lines, states like New York, New Jersey, Michigan and Illinois have been big losers in recent years.
In the Empire Center study, two of the top states to send taxpayers to New York—Illinois and Michigan—were also among the worst population losers overall. Greener pastures that drew New Yorkers included states like Florida, North Carolina and Pennsylvania, in addition to the usual suburban locales of New Jersey and Connecticut.
Liberals continue to insist that they can raise taxes ever higher without any effect on behavior, but the New York study is one more piece of evidence that this is a destructive illusion.
from City Journal online, 2009-Oct-28, by William Voegeli:
Time Is on California’s Side
. . . but time isn’t.Contrarianism is a well-established investment strategy. “Be fearful when others are greedy, and greedy when others are fearful” is one of Warren Buffett’s favorite maxims. During the scariest hours of last year’s financial plunge, Buffett put lots of money where his mouth was, buying a significant equity position in Goldman Sachs that has already proven extremely lucrative. Of course, if it were easy to make such investment decisions, we would all be as rich as Buffett. Contrarians who made a big bet on Lehman Brothers in the summer of 2008 are now sleeping on friends’ couches. Sometimes the darkest hour is just before dawn, and other times it’s just before death.
Contrarianism is not confined to high finance: newspapers and magazines are desperate to offer perspectives that set them apart from their competitors. Time, for example, has decided to make a contrarian play on California. In recent months, other publications have featured articles with titles like “Who Killed California?,” “Sundown for California,” “End State,” “Death of the California Dream,” and “California: Worst Place in the History of the Universe for Multicelled Organisms.” (Okay, not the last one, but the others are real.) Convinced that every scrap of negative information has already been “priced in” to California’s public profile, Time offers a cover story this week titled “Despite Its Woes, California’s Dream Still Lives.”
The question is whether California is Goldman Sachs or Lehman Brothers. Does the state, despite its current problems, remain a fundamentally sound enterprise whose residual strengths will secure a bright future? Or has this once proud and prosperous endeavor passed a tipping point after too many bad decisions and practices, with no options left except to prolong and mitigate its own decline?
A contrarian investor risks his money. A contrarian publication risks its reputation—but only to the extent that anyone is going to remember, years from now, that its predictions turned out to be wrong. Time hedges its bets anyway. Though it assures us that California “will be back” because the state “continues to have a powerful claim on the future,” there’s never a hint when California will be back, which means that the story’s breathless accounts of all the cool, crucial stuff that the California economy will produce are not just presently but indefinitely unfalsifiable.
The article’s strange blend of journalism, futurism, and boosterism is unfalsifiable in another sense. Time argues—to be more precise, it labors to leave the impression—that California will be rescued and energized by its think-outside-the-box entrepreneurial culture, in which worker “creativity” inevitably outweighs mundane drawbacks like high taxes and stagnant wages. “We only do ideas that challenge the status quo, and California is the only place we’d do it,” says one innovator, while another tells the magazine, “Inventing a better gadget isn’t enough anymore. We’re trying to reshape the way people live.”
But as any Los Angeles Clippers fan will tell you, the essence of deluded optimism is habitually overvaluing every encouraging trend and dismissing the importance—or existence—of every ominous one. Time interrupts its ode to the shimmering future of “the mecca of high tech, biotech and now clean tech” for a few unavoidable “to be sure” paragraphs about California’s troubles. Yes, “California has legitimate problems that inspire legitimate criticism,” such as the acquired inability to manage its public finances or govern itself. These have created “some staggering debts and other governance problems that need to be resolved.”
Problems aren’t necessarily going to be resolved just because they “need to be,” however. General Motors had problems—with quality control, customer satisfaction, and labor costs—that needed to be resolved. Every two or three years, it would announce a sweeping new commitment to get out in front of those problems, right up until it filed for bankruptcy. Without explaining why, Time assumes that California’s mold-breaking entrepreneurial spirit will somehow triumph over the state’s problems. But the fact that lots of the state’s innovators came up with important new products and processes in the past no more guarantees that they will do so in the future than GM’s 50 percent market share in the distant past ensured the company’s self-perpetuating dominance.
And it’s going to occur to more and more entrepreneurial pathfinders that one of the boxes they can think outside is California itself. There’s no geographic monopoly on creativity. Bright ideas that need to be delivered to customers by employees are rendered untenable when prospective workers can’t find affordable housing, stand long commutes, put up with declining public schools and services, or accept rising taxes. As Joel Kotkin of NewGeography.com wrote last year, “California can still attract many newcomers, particularly young and ambitious people who dream of a career in Hollywood or Silicon Valley. The problem is that when you grow up and have failed to secure your own dotcom or television series, life in Texas, Arizona, North Carolina, or even Kansas starts looking better.”
Time stacks the deck in favor of its rosy scenario by ignoring some critical trends altogether and providing a one-sided account of others. You wouldn’t know from the cover story that California even has public-employee unions, much less that they “wield immense—even hegemonic—influence” over the Democratic majority in the state legislature, according to one of the state’s best political writers, Dan Walters of the Sacramento Bee. Nor would any Time reader have reason to suspect that the state’s taxpayers are on the hook for $300 billion, according to the governor’s latest estimate, to close the gap between what California has promised to pay retired public employees and what its pension funds have the ability to pay. The California Foundation for Fiscal Responsibility periodically files Freedom of Information Act requests with CalPERS and CalSTRS, the pension managers for retired civil servants and public educators, respectively. It then posts a list of all those receiving pensions in excess of $100,000 per year. The latest iteration shows 9,233 members in the club. Not all are retirees, exactly; some, taking advantage of a 1999 law that facilitated retirement at age 55 for public workers, are working elsewhere in government or as “private-sector” consultants to some public entity, drawing six-figure paychecks to supplement their six-figure pensions.
Time applauds California’s voters for approving “huge bonds” for stem-cell research and a high-speed rail line, and its politicians for adopting “first-in-the-nation greenhouse-gas regulations, green building codes and efficiency standards for automobiles and appliances that have rearranged the national energy debate.” These expensive innovations are going to pay for themselves, it appears, because California is “by far the national leader in green jobs, green patents, supply from renewables and savings from efficiency. It’s also leading the way toward electric cars, zero-emission homes, advanced biofuels and a smarter grid.” Which is all terribly exciting, unless it turns out that the green economy of the future is always in the future. Kotkin pointed out recently that California’s achievement of creating 10,000 green jobs annually has been overwhelmed by the loss of 700,000 jobs in the state since the start of the recession.
Worse, the state’s economic policies are based not on environmental planning but on “environmental preening,” according to Troy Senik, author of the forthcoming California at the Crossroads. The state is committed, by law, to greenhouse-gas emissions in 2020 that are no larger than its emissions in 1990. Since California’s population (like every state’s) will be much larger 11 years from now than it was 19 years ago, this goal will be impossible without “massive economic regression,” according to Senik. “Such is the fate of Californians: to live in a state where environmentalism is a religion and economics a superstition.”
The most unfortunate thing about Time’s article is that whatever chance California has to reverse its decline depends on voters’ and leaders’ coming to grips with its serious problems and alarming prospects. The state is in such bad shape because it has become accustomed to making promises it can’t keep or afford, evading hard decisions, placating interest groups by doing long-term damage to the public interest, and telling people what they want to hear instead of what they need to hear. The worst thing for a state trying to sober up is a national magazine article saying that it doesn’t need to. For California’s sake, let’s hope that the Time story neither reflects nor shapes how Californians think about their state’s future.
William Voegeli is a contributing editor of The Claremont Review of Books and a visiting scholar at Claremont McKenna College’s Salvatori Center. He is the author of Never Enough: America’s Limitless Welfare State, which will be published by Encounter in 2010.
from the Wall Street Journal, 2009-Oct-13, by Douglas Holtz-Eakin:
The Baucus Bill Is a Tax Bill
Middle-class families would get hit with a double-digit increase in their marginal tax rate.Remember when health-care reform was supposed to make life better for the middle class? That dream began to unravel this past summer when Congress proposed a bill that failed to include any competition-based reforms that would actually bend the curve of health-care costs. It fell apart completely when Democrats began papering over the gaping holes their plan would rip in the federal budget.
As it now stands, the plan proposed by Democrats and the Obama administration would not only fail to reduce the cost burden on middle-class families, it would make that burden significantly worse.
Consider the bill put forward by the Senate Finance Committee. From a budgetary perspective, it is straightforward. The bill creates a new health entitlement program that the Congressional Budget Office (CBO) estimates will grow over the longer term at a rate of 8% annually, which is much faster than the growth rate of the economy or tax revenues. This is the same growth rate as the House bill that Sen. Kent Conrad (D., N.D.) deep-sixed by asking the CBO to tell the truth about its impact on health-care costs.
To avoid the fate of the House bill and achieve a veneer of fiscal sensibility, the Senate did three things: It omitted inconvenient truths, it promised that future Congresses will make tough choices to slow entitlement spending, and it dropped the hammer on the middle class.
One inconvenient truth is the fact that Congress will not allow doctors to suffer a 24% cut in their Medicare reimbursements. Senate Democrats chose to ignore this reality and rely on the promise of a cut to make their bill add up. Taking note of this fact pushes the total cost of the bill well over $1 trillion and destroys any pretense of budget balance.
It is beyond fantastic to promise that future Congresses, for 10 straight years, will allow planned cuts in reimbursements to hospitals, other providers, and Medicare Advantage (thereby reducing the benefits of 25% of seniors in Medicare). The 1997 Balanced Budget Act pursued this strategy and successive Congresses steadily unwound its provisions. The very fact that this Congress is pursuing an expensive new entitlement belies the notion that members would be willing to cut existing ones.
Most astounding of all is what this Congress is willing to do to struggling middle-class families. The bill would impose nearly $400 billion in new taxes and fees. Nearly 90% of that burden will be shouldered by those making $200,000 or less.
It might not appear that way at first, because the dollars are collected via a 40% tax on sales by insurers of "Cadillac" policies, fees on health insurers, drug companies and device manufacturers, and an assortment of odds and ends.
But the economics are clear. These costs will be passed on to consumers by either directly raising insurance premiums, or by fueling higher health-care costs that inevitably lead to higher premiums. Consumers will pay the excise tax on high-cost plans. The Joint Committee on Taxation indicates that 87% of the burden would fall on Americans making less than $200,000, and more than half on those earning under $100,000.
Industry fees are even worse because Democrats chose to make these fees nondeductible. This means that insurance companies will have to raise premiums significantly just to break even. American families will bear a burden even greater than the $130 billion in fees that the bill intends to collect. According to my analysis, premiums will rise by as much as $200 billion over the next 10 years—and 90% will again fall on the middle class.
Senate Democrats are also erecting new barriers to middle-class ascent. A family of four making $54,000 would pay $4,800 for health insurance, with the remainder coming from subsidies. If they work harder and raise their income to $66,000, their cost of insurance rises by $2,800. In other words, earning another $12,000 raises their bill by $2,800—a marginal tax rate of 23%. Double-digit increases in effective tax rates will have detrimental effects on the incentives of millions of Americans.
Why does it make sense to double down on the kinds of entitlements already in crisis, instead of passing medical malpractice reform and allowing greater competition among insurers? Why should middle-class families pay more than $2,000 on average, by my estimate, in taxes in the process?
Middle-class families have it tough enough. There is little reason to believe that the pain of the current recession, housing downturn, and financial crisis will quickly fade away—especially with the administration planning to triple the national debt over the next decade.
The promise of real reform remains. But the reality of the Democrats' current effort is starkly less benign. It will create a dangerous new entitlement that will be paid for by the middle class and their children.
Mr. Holtz-Eakin is a former director of the Congressional Budget Office and a fellow at the Manhattan Institute.
from the Wall Street Journal's Best of the Web, 2009-Oct-14, by James Taranto:
'We're Going to Let You Die'
Who said it? Hint: It wasn't Sarah Palin.David Espo of the Associated Press is certainly excited about what the Senate Finance Committee did yesterday:
Historic legislation to expand U.S. health care and control costs won its first Republican supporter Tuesday and cleared a key Senate hurdle, a double-barreled triumph that propelled President Barack Obama's signature issue toward votes this fall in both houses of Congress.
Michael Cannon of the Cato Institute throws some cold water on the double-barreled hurdle-clearing of a signature-propellent, noting that lots of special interests--not just industry groups but unions, wealthy constituents of Democratic congressmen, and even coal miners--have reason to oppose this legislation. "Can President Obama and the congressional leadership satisfy [these] groups?" he asks. "My guess is, probably not, and this misguided effort at 'reform' will therefore die. Again."
Let's hope he's right. Meanwhile, if you're not part of a special interest but just a regular American who hopes one day to grow old (because it beats the alternative), NewsBusters.org has a timely reminder that proponents of "health-care reform" don't necessarily sympathize with that aspiration. NewsBusters links to another Morgen Richmond YouTube clip, this one of a speech that Robert Reich, who served as President Clinton's labor secretary, delivered on the subject in 2007:
I will actually give you a speech made up entirely--almost at the spur of the moment, of what a candidate for president would say if that candidate did not care about becoming president. In other words, this is what the truth is, and a candidate will never say, but what candidates should say if we were in a kind of democracy where citizens were honored in terms of their practice of citizenship, and they were educated in terms of what the issues were, and they could separate myth from reality in terms of what candidates would tell them:
"Thank you so much for coming this afternoon. I'm so glad to see you, and I would like to be president. Let me tell you a few things on health care. Look, we have the only health-care system in the world that is designed to avoid sick people. [laughter] That's true, and what I'm going to do is I am going to try to reorganize it to be more amenable to treating sick people. But that means you--particularly you young people, particularly you young, healthy people--you're going to have to pay more. [applause] Thank you.
"And by the way, we are going to have to--if you're very old, we're not going to give you all that technology and all those drugs for the last couple of years of your life to keep you maybe going for another couple of months. It's too expensive, so we're going to let you die. [applause]
"Also, I'm going to use the bargaining leverage of the federal government in terms of Medicare, Medicaid--we already have a lot of bargaining leverage--to force drug companies and insurance companies and medical suppliers to reduce their costs. But that means less innovation, and that means less new products and less new drugs on the market, which means you are probably not going to live that much longer than your parents. [applause] Thank you."
As noted in our transcription, Reich's Berkeley, Calif., audience applauded the idea of taxing the young, killing the old, and stifling lifesaving innovations. One suspects that these ideas would not be greeted as warmly in most other American locales, which is why elected politicians who are actually trying to sell such ideas cloak them in euphemisms about "universal care," "reform," "cost cutting" and so forth.
from the Wall Street Journal's Best of the Web blog, 2009-Sep-22, by James Taranto:
Liberium ad Absurdum
Do Zbigniew Brzezinski and Jimmy Carter help or hurt Obama when they say lunatic things?Zbigniew Brzezinski, the man who advised Jimmy Carter on national security, offers some informal advice to President Obama in an interview with the Daily Beast, an oddly named Web site:
How aggressive can Obama be in insisting to the Israelis that a military strike might be in America's worst interest?We are not exactly impotent little babies. They have to fly over our airspace in Iraq. Are we just going to sit there and watch?What if they fly over anyway?Well, we have to be serious about denying them that right. That means a denial where you aren't just saying it. If they fly over, you go up and confront them. They have the choice of turning back or not. No one wishes for this but it could be a Liberty in reverse.This is insane on several levels. The USS Liberty was a U.S. ship that the Israelis accidentally attacked during the Six Day War in 1967--although conspiracy-minded anti-Semites suggest the attack was deliberate. Is Brzezinski a conspiracy minded anti-Semite, or is he suggesting that he would like to see the U.S. shoot down Israeli planes accidentally?
Whatever he may mean by the creepy analogy, though, Brzezinski seems to be making a serious policy suggestion--one that represents a reductio ad absurdum of the Obama administration's foreign policy. The administration has bent over backwards to be conciliatory toward enemies and adversaries (Iran, North Korea, Russia) while taking a tough line with America's allies (Israel, the Czech Republic, Poland, Honduras, possibly Afghanistan). But even the Obama administration hasn't militarily attacked an ally to protect an enemy.
This is something of a pattern. Quite a few Obama supporters have made statements that are meant to be supportive of the administration yet are far crazier than anything the president or any of his men have said. Obama, for example, denies that his planned government takeover of the health-care system would result in old people being put to death. Most Democrats and liberal mediaoids repeat this denial as if it were gospel truth.
But not Todd Gitlin, an unreconstructed New Leftist from the 1960s, who complained a couple of weeks ago that Obama was "still not willing to talk to Americans straight about the need to limit high-tech medicine for the very old and very frail." Also not Newsweek, a liberal opinion magazine, which published a piece recently titled "The Case for Killing Granny."
Or consider Jimmy Carter's recent remarks to the effect that it is racist to criticize Obama. The president himself has been very careful to renounce such a view, because he's sensible enough to realize that berating someone as a racist--especially someone who voted for a black man as president, as many of Obama's critics did--is no way to persuade him. But Americans are getting berated left and right by people who say they support Obama. Newsweek even attacked American babies as racist.
Does all this lunacy help or hurt President Obama? We could argue it either way. Maybe it helps by making Obama look reasonable by comparison. Or maybe it hurts by making the least charitable interpretations of Obama's policies look plausible. If no one believed America should attack Israel or set up death panels, then it would follow logically that Obama does not believe those things. Since some people--some Obama supporters--do believe these things, it becomes harder to dismiss them outright.
from the Wall Street Journal's Best of the Web blog, 2009-Sep-10, by James Taranto:
My Mother the Car
Under ObamaCare, it would be illegal to live without a permit.Most criticisms of ObamaCare have focused on its cost in terms of money and lives, but it's worth noting that in exchange for spending trillions of dollars in taxpayer money to set up a system that will inevitably ration care, President Obama proposes a fundamental curtailment of your individual freedom.
In his speech to a joint session of Congress last night, the president offered what presumably was meant to sound like an innocuous, or at least reasonable, analogy:
Unless everybody does their part, many of the insurance reforms we seek--especially requiring insurance companies to cover pre-existing conditions--just can't be achieved. And that's why under my plan, individuals will be required to carry basic health insurance--just as most states require you to carry auto insurance.In fact, no state requires individuals to carry auto insurance. The owner of a car, which may be either an individual or a corporate entity, is required to carry insurance as a condition for a government permit allowing the car to be driven on public roads. Individual drivers, of course, are also required to obtain a government license, which requires fulfilling other conditions.
Driving is such a central part of most Americans' lives that the cliché that "driving is a privilege" seems a bit nonsensical. It feels like a right. There even is a constitutional right to travel--an unenumerated one, but one whose existence is not in serious dispute. Yet here is how Justice John Paul Stevens described that right in Saenz v. Roe (1999):
The "right to travel" discussed in our cases embraces at least three different components. It protects the right of a citizen of one State to enter and to leave another State, the right to be treated as a welcome visitor rather than an unfriendly alien when temporarily present in the second State, and, for those travelers who elect to become permanent residents, the right to be treated like other citizens of that State.The right to travel is not a right to drive, but if a state were to require visitors to provide proof of insurance when arriving by train, plane or bus, on foot, or as a passenger in a private car, this would clearly violate the first two components of the right to travel.
Obama's proposal to coerce all Americans into buying health insurance is even more intrusive than our hypothetical state requirement would be. The ObamaCare mandate would violate not only the right to travel but the right to remain at rest. The implication of the auto-insurance analogy is that the president believes Congress has the authority to require Americans to obtain a government permit to live.
The one consolation of losing our freedom is that if the ObamaCare mandate passed, it would be fun to see the look on all those silly young voters' faces when they realize that the guy they so fervently supported is going to force them to turn over a large share of their meager earnings to insurance companies.
Speaking of which, Obama spent a lot of time in his speech last night demonizing insurance companies as cruel and money-hungry, while also calling for a law mandating the purchase of their product. Politicians have said similar things about, say, the tobacco industry. But so far as we know, no one has ever proposed forcing every American to smoke two packs a day.
9/11 and 9/9--II
Last week we noted the oddity of a wartime president, at a time of military and political peril in the war, summoning Congress into joint session to deliver a speech on domestic policy. We wondered if he would even mention Afghanistan in his address. He did:Now, add it all up, and the plan I'm proposing will cost around $900 billion over 10 years--less than we have spent on the Iraq and Afghanistan wars, and less than the tax cuts for the wealthiest few Americans that Congress passed at the beginning of the previous administration.This is worse than not having mentioned it at all. Obama has claimed to be committed to victory in Afghanistan, yet he has now reduced that effort to a trope, a justification--and a complete non sequitur at that--for obscene new levels of government spending.
Be Civil, You Damn Liar
Were we alone in being put off by the president's tone last night? He came across at petulant and thin-skinned. "We did not come to fear the future," he said toward the end of the speech. "We came here to shape it." And how dare anyone stand in our way?Here are some more excerpts:
Some of people's concerns have grown out of bogus claims spread by those whose only agenda is to kill reform at any cost. The best example is the claim made not just by radio and cable talk show hosts, but by prominent politicians, that we plan to set up panels of bureaucrats with the power to kill off senior citizens. Now, such a charge would be laughable if it weren't so cynical and irresponsible. It is a lie, plain and simple.There are also those who claim that our reform efforts would insure illegal immigrants. This, too, is false. . . .I will not waste time with those who have made the calculation that it's better politics to kill this plan than to improve it. I won't stand by while the special interests use the same old tactics to keep things exactly the way they are. If you misrepresent what's in this plan, we will call you out.He also said, "I still believe we can replace acrimony with civility." Physician, heal thyself.
For the past few weeks Obama has been under fire from the Angry Left, for being "weak." It got to the point that there was even some loose talk of a Howard Dean primary challenge in 2012. (Which would be a hoot, but don't get your hopes up--the talk was very loose.) Last night's address ought to restore the loyalty of those people, whose fundamental error is to mistake distemper for strength. It seems to us, however, that railing against your opponents and calling them "liars" is unlikely to win over skeptics of the policy.
The president was not the only man in the chamber who behaved disagreeably. At the point when he stated that illegal aliens would not be covered--a highly dubious claim, as we noted last month--someone in the audience heckled him: "You lie!"
The heckler turned out to be Joe Wilson. No, not the blowhard husband of the lady we dare not name for fear of revealing her supersecret desk job at CIA headquarters. This Joe Wilson, as we noted in 2004, is a Republican representative from South Carolina. CQ Politics reports that "House Majority Whip James E. Clyburn, a fellow South Carolinian, said Wilson's heckling was more damaging to South Carolina's reputation than the exploits of Republican Gov. Mark Sanford, who admitted to having an extramarital affair with an Argentinian woman."
Clyburn did not say if it was more or less damaging than Rep. Preston Brooks's caning of Sen. Charles Sumner on the Senate floor, or than secession.
"Later," the Associated Press reports, "Wilson was contrite":
"This evening I let my emotions get the best of me," he said in a statement. "While I disagree with the president's statement, my comments were inappropriate and regrettable. I extend sincere apologies to the president for this lack of civility."Three jeers to Wilson for jeering and one cheer for his contrition.
Barack Obama, meanwhile, has yet to apologize.
ObamaCare State U
The president last night did not repeat his comparison of the so-called public option--a government-run insurance company--to the post office. He did, however, introduce a new analogy:By avoiding some of the overhead that gets eaten up at private companies by profits and excessive administrative costs and executive salaries, [government insurance] could provide a good deal for consumers, and would also keep pressure on private insurers to keep their policies affordable and treat their customers better, the same way public colleges and universities provide additional choice and competition to students without in any way inhibiting a vibrant system of private colleges and universities.This is a more emotionally resonant comparison than the post office, inasmuch as it appeals to everyone's pride: state U grads' in having gone there, Ivy Leaguers' in not having gone there.
But higher-education costs, like health costs, have been skyrocketing for years, and for a similar reason: artificially inflated demand as a result of regulation, subsidies and third-party payments. But can Obama really be ignorant enough to believe that higher ed is an example of competition leading to cost control?
from the Wall Street Journal, 2009-Sep-28, p.A21, by Michael O. Leavitt, Al Hubbard and Keith Hennessey:
Health 'Reform' Is Income Redistribution
While many Americans are upset by ObamaCare's $1 trillion price tag, Congress is contemplating other changes with little analysis or debate. These changes would create a massively unfair form of income redistribution and create incentives for many not to buy health insurance at all.
Let's start with basics: Insurance protects against the risk of something bad happening. When your house is on fire you no longer need protection against risk. You need a fireman and cash to rebuild your home. But suppose the government requires insurers to sell you fire "insurance" while your house is on fire and says you can pay the same premium as people whose houses are not on fire. The result would be that few homeowners would buy insurance until their houses were on fire.
The same could happen under health insurance reform. Here's how: President Obama proposes to require insurers to sell policies to everyone no matter what their health status. By itself this requirement, called "guaranteed issue," would just mean that insurers would charge predictably sick people the extremely high insurance premiums that reflect their future expected costs. But if Congress adds another requirement, called "community rating," insurers' ability to charge higher premiums for higher risks will be sharply limited.
Thus a healthy 25-year-old and a 55-year-old with cancer would pay nearly the same premium for a health policy. Mr. Obama and his allies emphasize the benefits for the 55-year old. But the 25-year-old, who may also have a lower income, would pay significantly more than needed to cover his expected costs.
Like the homeowner who waits until his house is on fire to buy insurance, younger, poorer, healthier workers will rationally choose to avoid paying high premiums now to subsidize insurance for someone else. After all, they can always get a policy if they get sick.
To avoid this outcome, most congressional Democrats and some Republicans would combine guaranteed issue and community rating with the requirement that all workers buy health insurance—that is, an "individual mandate." This solves the incentive problem, and guarantees that both the healthy poor 25-year-old and the sick higher-income 55-year-old have heath insurance.
But the combination of a guaranteed issue, community rating and an individual mandate means that younger, healthier, lower-income earners would be forced to subsidize older, sicker, higher-income earners. And because these subsidies are buried within health-insurance premiums, the massive income redistribution is hidden from public view and not debated.
If Congress goes down this road, health insurance premiums will increase dramatically for the overwhelming majority of people. Even if Congress mandates that everyone have health insurance, many will choose to go without and pay the tax penalty. If you think people are dissatisfied with health care now, wait until they understand that Congress voted to mandate hidden premium increases and lower wages.
There are wiser and more equitable ways to ensure that every American has access to affordable health insurance. Policy experts and state policy makers have experimented with different solutions, including high risk pools and taxpayer-funded vouchers subsidized for those who are both poor and sick. Medicaid, charity care, and uncompensated care provided by hospitals cover some of these costs today.
These solutions are imperfect, but so are the reforms being proposed in Congress. Congress should be explicit about who will pay more under its plans.
—Mr. Leavitt, former secretary of Health and Human Services (2005-2009), has served as the administrator of the Environmental Protection Agency and a governor of Utah (1993-2003). Mr. Hubbard (2005-2007) and Mr. Hennessey (2008) served as directors of the White House National Economic Council.
from Reuters, 2009-Oct-8, by Andy Sullivan, with additional reporting by Lisa Lambert and editing by Peter Cooney:
Senate Democrats unveil jobless benefits extension
WASHINGTON - Unemployment benefits would be extended by up to 14 weeks in all 50 U.S. states under a bill introduced by Senate Democrats on Thursday.
Jobless people in states where the unemployment rate is above 8.5 percent would also get an additional six weeks of benefits under the measure, which is backed by Senate Majority Leader Harry Reid and Senate Finance Committee Chairman Max Baucus, among others.
Backers had hoped for quick passage, but a vote was delayed until next week after Republican Senator Jon Kyl objected.
Reid said families hard hit by unemployment cannot afford Republican objections to extending benefits.
"It is unfortunate that Senate Republicans have chosen to object to this much needed assistance. It is my hope that they will put partisanship aside and support an extension of unemployment benefits next week," Reid said.
The national unemployment rate of 9.8 percent is at its highest level in 26 years, and congressional Democrats have been working to extend jobless benefits for those who risk exhausting them -- roughly 2 million people by the end of the year, according to some estimates. Some 400,000 may have already used them up.
The bleak jobs picture could put many Democrats at risk in next year's congressional elections unless voters are convinced they are doing all they can to help the economy.
Democratic leaders and President Barack Obama are considering measures such as extending an $8,000 tax credit for first-time homebuyers or launching new construction programs.
They could face opposition from Republicans who say existing measures have only added to the U.S. budget deficit while doing little to jump-start growth.
The U.S. government more than doubled its spending on unemployment insurance to $120 billion in the fiscal year that ended September 30, according to the Congressional Budget Office.
The House of Representatives passed a narrower bill last month that would extend benefits only for workers in high-unemployment states. Some 28 states, plus Puerto Rico and the District of Columbia, had unemployment levels above the 8.5 percent threshold in August.
In the Senate, New Hampshire Democrat Jeanne Shaheen sought to broaden the House bill to include workers in states like hers, which have not been hit as hard. She backs the current bill.
If the Senate bill passes, it would have to be reconciled with the House version before Obama could sign it into law.
Unemployed workers typically are eligible for up to 26 weeks of payments from the government as they look for another job, although actual benefits vary by state.
Congress has already extended that limit twice and some workers are now eligible for up to 79 weeks of benefits.
from the Wall Street Journal, 2009-Sep-29:
Rhetorical Tax Evasion
The IRS says it will fine or jail you for not paying Obama's mandate levy.President Obama's effort to deny that his mandate to buy insurance is a tax has taken another thumping, this time from fellow Democrats in the Senate Finance Committee.
Chairman Max Baucus's bill includes the so-called individual mandate, along with what he calls a $1,900 "excise tax" if you don't buy health insurance. (It had been as much as $3,800 but Democrats reduced the amount last week to minimize the political sticker shock.) And, lo, it turns out that if you don't pay that tax, the IRS could punish you with a $25,000 fine or up to a year in jail, or both.
Under questioning last week, Tom Barthold, the chief of staff of the Joint Committee on Taxation, admitted that the individual mandate would become a part of the Internal Revenue Code and that failing to comply "could be criminal, yes, if it were considered an attempt to defraud." Mr. Barthold noted in a follow-up letter that the willful failure to file would be a simple misdemeanor, punishable by the $25,000 fine or jail time under Section 7203.
So failure to pay the mandate would be enforced like tax evasion, but Mr. Obama still claims it isn't a tax. "You can't just make up that language and decide that that's called a tax increase," Mr. Obama insisted last week to ABC interviewer George Stephanopoulos. Accusing critics of dishonesty is becoming this President's default argument, but is Mr. Barthold also part of the plot?
In the 1994 health-care debate, the Congressional Budget Office called the individual mandate "an unprecedented form of federal action." This is because "The government has never required people to buy any good or service as a condition of lawful residence in the United States."
This coercion will be even more onerous today because everyone will be forced to buy insurance that the new taxes and regulations of ObamaCare will make far more expensive. Too bad Mr. Obama's rhetorical tax evasion can't be punished by the IRS.
from the Wall Street Journal, 2009-Oct-9, p.A18:
The Greatest Show on Earth
Step right up: A new entitlement that cuts the deficit!Washington spent the week waiting for the Congressional Budget Office to roll in with its new cost estimates of the Senate health-care bill, and what a carnival. Behold: a new $829 billion entitlement that will subsidize insurance for tens of millions of people—and reduce deficits by $81 billion at the same time. In the next tent, see the mermaid and a two-headed cow.
The political and media classes are proving they'll believe anything, as they are now pronouncing that this never-before-seen miracle is a "green light" for ObamaCare. (What isn't these days?) The irony is that the CBO's guesstimate exposes the fraudulence and fiscal sleight-of-hand underlying this whole exercise. Anyone who reads beyond the top-line numbers will find that the bill creates massive new spending commitments that will inevitably explode over time, and that this is "paid for" with huge tax increases plus phantom spending cuts that will never happen in practice.
The better part of the 10-year $829 billion overall cost will finance insurance "exchanges" where individuals and families could purchase coverage at heavily subsidized rates. Senate Finance Chairman Max Baucus kept a lid on the cost by making this program non-universal: Enrollment is limited to those who aren't offered employer-sponsored insurance and earn under 400% of the poverty level, or about $88,000 for a family of four. CBO expects some 23 million people to sign up by 2019.
But this "firewall" is unlikely to last even that long. Liberals are demanding heftier subsidies, and once people see the deal their neighbors are getting on "free" health care, they too will want in. Even CBO seems to find this unrealistic, noting "These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation." Scratch "often."
Then there are the many budget gimmicks. Take the "failsafe budgeting mechanism" that would require automatic cuts in exchange spending if it increases the deficit. CBO expects 15% reductions in exchange subsidies each year from 2015 to 2018, even though the exchanges don't open until 2014. That kind of re-gifting should have been laughed out of the committee room, but the ruse helps to move future spending off the current budget "score."
Mr. Baucus spends $10.9 billion to eliminate the scheduled Medicare cuts to physician payments—but only for next year. In 2011, he assumes they'll be reduced by 25%, with even deeper cuts later. Congress has overridden this "sustainable growth rate" every year since 2003 and will continue to do so because deeper cuts in Medicare's price controls will cause many doctors to quit the program. Fixing this alone would add $245 billion to the bill's costs, according to an earlier CBO estimate.
The Baucus bill also expands ailing Medicaid by $345 billion—even as it busts state budgets by imposing an additional $33 billion unfunded mandate. The only Medicare cut that isn't made merely on paper is $117 billion in Medicare Advantage, which Democrats hate because it gives one of five seniors private insurance options.
Recall that when President Obama started the health-care debate, the goal was "bending the curve"—finding a way to reduce both Medicare and overall health spending. Budget director Peter Orszag talked about "game changers," which CBO has now outed as nonchangers. Comparative effectiveness research about what treatments work best? That will save all of $300 million in Medicare, even as it costs $2.6 billion in new taxes on premiums. More prevention and primary care will increase spending by $4.2 billion.
Meanwhile, the bill piles on new taxes, albeit on health-care businesses so the costs are hidden from customers. Insurance companies offering policies that cost more than $8,000 for individuals and $21,000 for families will pay $201 billion per a 40% excise tax, which will be passed down to all policy holders in higher premiums. Another $180 billion will hit the likes of drug and device makers, including $29 billion because companies won't be allowed to deduct these "fees" from their corporate income taxes. Then there's the $4 billion in penalty payments on those who don't buy insurance because all of ObamaCare's other new taxes and mandates have made it more expensive.
Senate Finance votes next week, and no doubt this freak of political nature will pass amid fanfare and self-congratulation that their new entitlement will reduce deficits. Never mind that such a spectacle has never happened in the history of the republic. P.T. Barnum had nothing on this crowd, and the bill hasn't even hit the Senate floor yet.
from FOXNews.com, 2009-Sep-18, by Andrew Napolitano:
Was Joe Wilson Right?
There is no question that under the present law, Congress simply cannot pick and choose which "persons" to whom it will afford social benefits and to which "persons" it will not. How could the president not have known that?
Congressman Joe Wilson (R-SC) has been disciplined by his colleagues in the House of Representatives because he called President Obama a "liar" during the president's address to a joint session of Congress last week. The statement that the president made, which apparently provoked the Congressman's outburst, stated that illegal aliens would not receive health care benefits under the president's government option proposal, which essentially proposes a Medicare-type program for everyone in America under the age of 65.
The president was the editor-in-chief of the Harvard Law Review when he was in law school. -- This is the single most prestigious position to which any law student can aspire. The president was also a member of the faculty of the University of Chicago Law School, where he taught constitutional law. This is the most difficult to join and most demanding of all law school faculties in the country. His legal education and his academic credentials as a legal thinker are truly extraordinary. From this we can conclude that he knows, or ought to know, the basic law of the land.
The Constitution imposes on the government numerous burdens that we as individuals do not have. For example, I can tell my nephew to keep quiet at the dinner table because I don't like what he said about grandma, but the First Amendment prevents the government from keeping him silent on a street corner when he criticizes it. Similarly, I can give a gift to some of my nephews and nieces because they are great kids, but I don't need to give gifts of equal value, since I can spend my money on gifts however I wish. But the government has some burdens here that individuals do not. The Constitution requires that the government treat all persons similarly situated in a similar manner. This is the essence of "Equal Protection," which the Constitution requires of the states and the federal government.
In the late 1970s, the State of Texas enacted legislation that denied a public school education to the children of illegal immigrants and denied state aid to municipalities that attempted to educate those children. Many illegal immigrants filed suit and all of the cases made their way to the Supreme Court. In a landmark ruling, that most lawyers know about, and that every professor of constitutional law knows about, called Plyler vs. Doe (1982), the Court ordered Texas to make the same education available to illegal immigrants as it does to citizens. In so doing, the Court held that: (a) the Constitution protects "persons;" and (b) persons are citizens as well as strangers, people born here and people who end up here, people here lawfully and people here unlawfully; and (c) in the area of social services, whatever benefits the government makes available to the general public cannot be kept away from a class of persons based on their immigration status or that of their parents.
It is because of this ruling that Proposition 187 in California, which attempted to do via a referendum what Texas attempted to do via legislation, was invalidated. It is clear from the broad language in the Plyler case that providing an education is in the same class of social benefits as providing health care.
Now, back to Congressman Wilson and President Obama. Can anyone really suggest that the Harvard Law School-educated University of Chicago-employed professor of constitutional law did NOT know the law when he contended that the Congress can keep universal health care away from illegals? He must have known that, short of amending the Constitution to re-define "persons" and "Equal Protection," whatever the Congress makes available by way of social services to the general population, it must make available to all persons.
There is no question that under the present law, Congress simply cannot pick and choose which "persons" to whom it will afford social benefits and to which "persons" it will not. How could the president not have known that?
Judge Andrew Napolitano is the senior judicial analyst for FOX News Channel.
from Dow Jones Newswires, 2009-Sep-22, by Corey Boles:
House Votes To Further Extend Unemployment Insurance Benefits
WASHINGTON--House lawmakers Tuesday approved a further extension of unemployment insurance benefits for jobless Americans in states with the highest levels of unemployed.
If approved by the Senate, it would be the fourth time Congress has extended federal jobless benefits since the recession began in December 2007.
The latest 13-week extension would be available to residents in the 25 states that have had an average jobless rate of at least 8.5% for three months - about 70% of the U.S. population House Democrats said.
The House voted 331-83 in favor of the measure, with a strong majority of lawmakers of both parties approving it.
The Senate will look closely at the House extension, Majority Leader Harry Reid, D-Nev., said Tuesday, and aides said lawmakers there are expected to approve the extension shortly.
Assuming they do, the total federal assistance for unemployed Americans in the hardest hit states would stand at 46 weeks. States provide additional benefits, although the length of time they are available differs from state to state.
The national unemployment rate reached 9.7% in August, with the rate in the weakest states like Michigan breaching 15%.
Without action, House Democrats estimate 400,000 long-term unemployed people could exhaust their benefits by the end of September, rising to 1 million by the end of the year.
Despite the continuing doldrums in the job market, many economists agree there are signs the U.S. is coming out of the deepest economic recession since the Great Depression. The job market is generally among the last parts of the economy to recover after a downturn, and many experts believe the national rate will continue rising, reaching double digits next year and remain stubbornly high for some months to come after it peaks.
The benefits extension wouldn't add anything to the burgeoning federal budget deficit, lawmakers said. They said it would be paid for by increasing efficiencies in the system.
Since the recession began, Congress has extended federal jobless assistance from the 13 weeks available before the downturn, and added $25 a week to the average benefits paid out. The average payment is now around $300 a week, Democratic aides said.
from the Wall Street Journal, 2009-Aug-25, by Fouad Ajami:
Obama's Summer of Discontent
The politics of charisma is so Third World. Americans were never going to buy into it for long.So we are to have a French health-care system without a French tradition of political protest. It is odd that American liberalism, in a veritable state of insurrection during the Bush presidency, now seeks political quiescence. These "townhallers" who have come forth to challenge ObamaCare have been labeled "evil-mongers" (Harry Reid), "un-American" (Nancy Pelosi), agitators and rowdies and worse.
A political class, and a media elite, that glamorized the protest against the Iraq war, that branded the Bush presidency as a reign of usurpation, now wishes to be done with the tumult of political debate. President Barack Obama himself, the community organizer par excellence, is full of lament that the "loudest voices" are running away with the national debate. Liberalism in righteous opposition, liberalism in power: The rules have changed.
It was true to script, and to necessity, that Mr. Obama would try to push through his sweeping program—the change in the health-care system, a huge budget deficit, the stimulus package, the takeover of the automotive industry—in record time. He and his handlers must have feared that the spell would soon be broken, that the coalition that carried Mr. Obama to power was destined to come apart, that a country anxious and frightened in the fall of 2008 could recover its poise and self-confidence. Historically, this republic, unlike the Old World and the command economies of the Third World, had trusted the society rather than the state. In a perilous moment, that balance had shifted, and Mr. Obama was the beneficiary of that shift.
So our new president wanted a fundamental overhaul of the health-care system—17% of our GDP—without a serious debate, and without "loud voices." It is akin to government by emergency decrees. How dare those townhallers (the voters) heckle Arlen Specter! Americans eager to rein in this runaway populism were now guilty of lèse-majesté by talking back to the political class.
We were led to this summer of discontent by the very nature of the coalition that brought Mr. Obama, and the political class around him, to power, and by the circumstances of his victory. The man was elected amid economic distress. Faith in the country's institutions, perhaps in the free-enterprise system itself, had given way. Mr. Obama had ridden that distress. His politics of charisma was reminiscent of the Third World. A leader steps forth, better yet someone with no discernible trail, someone hard to pin down to a specific political program, and the crowd could read into him what it wished, what it needed.
The leader would be different things to different people. The Obama coalition was the coming together of disparate groups: the white professional liberals seeking absolution for the country in the election of an African-American man, the opponents of the Iraq war who grew more strident as the project in Iraq was taking root, the African-American community that had been invested in the Clintons and then came around out of an understandable pride in one of its own.
The last segment of the electorate to flock to the Obama banners were the blue-collar workers who delivered him Ohio, Pennsylvania and Indiana. He was not their man. They fully knew that he didn't share their culture. They were, by his portrait, clinging to their guns and religion, but the promise of economic help, and of protectionism, carried the day with them.
The Obama devotees were the victims of their own belief in political magic. The devotees could not make up their minds. In a newly minted U.S. senator from Illinois, they saw the embodiment of Abraham Lincoln, Franklin Delano Roosevelt and John F. Kennedy. Like Lincoln, Mr. Obama was tall and thin and from Illinois, and the historic campaign was launched out of Springfield. The oath of office was taken on the Lincoln Bible. Like FDR, he had a huge economic challenge, and he better get it done, repair and streamline the economy in his "first hundred days." Like JFK, he was young and stylish, with a young family.
All this hero-worship before Mr. Obama met his first test of leadership. In reality, he was who he was, a Chicago politician who had done well by his opposition to the Iraq war. He had run a skillful campaign, and had met a Clinton machine that had run out of tricks and a McCain campaign that never understood the nature of the contest of 2008.
He was no FDR, and besides the history of the depression—the real history—bears little resemblance to the received narrative of the nation instantly rescued, in the course of 100 days or 200 days, by an interventionist state. The economic distress had been so deep and relentless that FDR began his second term, in 1937, with the economy still in the grip of recession.
Nor was JFK about style. He had known military service and combat, and familial loss; he had run in 1960 as a hawk committed to the nation's victory in the Cold War. He and his rival, Richard Nixon, shared a fundamental outlook on American power and its burdens.
Now that realism about Mr. Obama has begun to sink in, these iconic figures of history had best be left alone. They can't rescue the Obama presidency. Their magic can't be his. Mr. Obama isn't Lincoln with a BlackBerry. Those great personages are made by history, in the course of history, and not by the spinners or the smitten talking heads.
In one of the revealing moments of the presidential campaign, Mr. Obama rightly observed that the Reagan presidency was a transformational presidency in a way Clinton's wasn't. And by that Reagan precedent, that Reagan standard, the faults of the Obama presidency are laid bare. Ronald Reagan, it should be recalled, had been swept into office by a wave of dissatisfaction with Jimmy Carter and his failures. At the core of the Reagan mission was the recovery of the nation's esteem and self-regard. Reagan was an optimist. He was Hollywood glamour to be sure, but he was also Peoria, Ill. His faith in the country was boundless, and when he said it was "morning in America" he meant it; he believed in America's miracle and had seen it in his own life, in his rise from a child of the Depression to the summit of political power.
The failure of the Carter years was, in Reagan's view, the failure of the man at the helm and the policies he had pursued at home and abroad. At no time had Ronald Reagan believed that the American covenant had failed, that America should apologize for itself in the world beyond its shores. There was no narcissism in Reagan. It was stirring that the man who headed into the sunset of his life would bid his country farewell by reminding it that its best days were yet to come.
In contrast, there is joylessness in Mr. Obama. He is a scold, the "Yes we can!" mantra is shallow, and at any rate, it is about the coming to power of a man, and a political class, invested in its own sense of smarts and wisdom, and its right to alter the social contract of the land. In this view, the country had lost its way and the new leader and the political class arrayed around him will bring it back to the right path.
Thus the moment of crisis would become an opportunity to push through a political economy of redistribution and a foreign policy of American penance. The independent voters were the first to break ranks. They hadn't underwritten this fundamental change in the American polity when they cast their votes for Mr. Obama.
American democracy has never been democracy by plebiscite, a process by which a leader is anointed, then the populace steps out of the way, and the anointed one puts his political program in place. In the American tradition, the "mandate of heaven" is gained and lost every day and people talk back to their leaders. They are not held in thrall by them. The leaders are not infallible or a breed apart. That way is the Third World way, the way it plays out in Arab and Latin American politics.
Those protesters in those town-hall meetings have served notice that Mr. Obama's charismatic moment has passed. Once again, the belief in that American exception that set this nation apart from other lands is re-emerging. Health care is the tip of the iceberg. Beneath it is an unease with the way the verdict of the 2008 election was read by those who prevailed. It shall be seen whether the man swept into office in the moment of national panic will adjust to the nation's recovery of its self-confidence.
Mr. Ajami teaches at the School of Advanced International Studies, The Johns Hopkins University. He is also an adjunct fellow at Stanford University's Hoover Institution.
from the Washington Post, 2009-Sep-4, by Charles Krauthammer:
Obama, the Mortal
What happened to President Obama? His wax wings having melted, he is the man who fell to earth. What happened to bring his popularity down further than that of any new president in polling history save Gerald Ford (post-Nixon pardon)?
The conventional wisdom is that Obama made a tactical mistake by farming out his agenda to Congress and allowing himself to be pulled left by the doctrinaire liberals of the Democratic congressional leadership. But the idea of Harry Reid and Nancy Pelosi pulling Obama left is quite ridiculous. Where do you think he came from, this friend of Chávista ex-terrorist William Ayers, of PLO apologist Rashid Khalidi, of racialist inciter Jeremiah Wright?
But forget the character witnesses. Just look at Obama's behavior as president, beginning with his first address to Congress. Unbidden, unforced and unpushed by the congressional leadership, Obama gave his most deeply felt vision of America, delivering the boldest social democratic manifesto ever issued by a U.S. president. In American politics, you can't get more left than that speech and still be on the playing field.
In a center-right country, that was problem enough. Obama then compounded it by vastly misreading his mandate. He assumed it was personal. This, after winning by a mere seven points in a year of true economic catastrophe, of an extraordinarily unpopular Republican incumbent, and of a politically weak and unsteady opponent. Nonetheless, Obama imagined that, as Fouad Ajami so brilliantly observed, he had won the kind of banana-republic plebiscite that grants caudillo-like authority to remake everything in one's own image.
Accordingly, Obama unveiled his plans for a grand makeover of the American system, animating that vision by enacting measure after measure that greatly enlarged state power, government spending and national debt. Not surprisingly, these measures engendered powerful popular skepticism that burst into tea-party town-hall resistance.
Obama's reaction to that resistance made things worse. Obama fancies himself tribune of the people, spokesman for the grass roots, harbinger of a new kind of politics from below that would upset the established lobbyist special-interest order of Washington. Yet faced with protests from a real grass-roots movement, his party and his supporters called it a mob -- misinformed, misled, irrational, angry, unhinged, bordering on racist. All this while the administration was cutting backroom deals with every manner of special interest -- from drug companies to auto unions to doctors -- in which favors worth billions were quietly and opaquely exchanged.
"Get out of the way" and "don't do a lot of talking," the great bipartisan scolded opponents whom he blamed for creating the "mess" from which he is merely trying to save us. If only they could see. So with boundless confidence in his own persuasiveness, Obama undertook a summer campaign to enlighten the masses by addressing substantive objections to his reforms.
Things got worse still. With answers so slippery and implausible and, well, fishy, he began jeopardizing the most fundamental asset of any new president -- trust. You can't say that the system is totally broken and in need of radical reconstruction, but nothing will change for you; that Medicare is bankrupting the country, but $500 billion in cuts will have no effect on care; that you will expand coverage while reducing deficits -- and not inspire incredulity and mistrust. When ordinary citizens understand they are being played for fools, they bristle.
After a disastrous summer -- mistaking his mandate, believing his press, centralizing power, governing left, disdaining citizens for (of all things) organizing -- Obama is in trouble.
Let's be clear: This is a fall, not a collapse. He's not been repudiated or even defeated. He will likely regroup and pass some version of health insurance reform that will restore some of his clout and popularity.
But what has occurred -- irreversibly -- is this: He's become ordinary. The spell is broken. The charismatic conjurer of 2008 has shed his magic. He's regressed to the mean, tellingly expressed in poll numbers hovering at 50 percent.
For a man who only recently bred a cult, ordinariness is a great burden, and for his acolytes, a crushing disappointment. Obama has become a politician like others. And like other flailing presidents, he will try to salvage a cherished reform -- and his own standing -- with yet another prime-time speech.
But for the first time since election night in Grant Park, he will appear in the most unfamiliar of guises -- mere mortal, a treacherous transformation to which a man of Obama's supreme self-regard may never adapt.
from the Wall Street Journal, 2009-Sep-21, p.A18:
Obama's Nontax Tax
On a Sunday show, the President offers a revealing definition.President Obama didn't make much news on his round of five Sunday talk shows yesterday, with one notable exception. The President revealed a great deal about his philosophy of government and how he defines a tax increase. It turns out the President thinks a health-care tax is not a tax if he thinks the tax is for your own good.
Appearing on ABC's "This Week," Mr. Obama was asked by host George Stephanopoulos about the "individual mandate." Under Max Baucus's Senate bill that Mr. Obama supports, everyone would be required to buy health insurance or else pay a penalty as high as $3,800 a year. Mr. Stephanopoulos posed the obvious question about this kind of coercion when "the government is forcing people to spend money, fining you if you don't [buy insurance]. . . . How is that not a tax?"
"Well, hold on a second, George," Mr. Obama replied. "Here's what's happening. You and I are both paying $900, on average—our families—in higher premiums because of uncompensated care. Now what I've said is that if you can't afford health insurance, you certainly shouldn't be punished for that. That's just piling on. If, on the other hand, we're giving tax credits, we've set up an exchange, you are now part of a big pool, we've driven down the costs, we've done everything we can and you actually can afford health insurance, but you've just decided, you know what, I want to take my chances. And then you get hit by a bus and you and I have to pay for the emergency room care, that's . . ."
"That may be," Mr. Stephanopoulos responded, "but it's still a tax increase." (In fact, uncompensated care accounts for about only 2.2% of national health spending today, but that's another subject.)
Mr. Obama: "No. That's not true, George. The—for us to say that you've got to take a responsibility to get health insurance is absolutely not a tax increase. What it's saying is, is that we're not going to have other people carrying your burdens for you anymore . . ." In other words, like parents talking to their children, this levy—don't call it a tax—is for your own good.
Mr. Stephanopoulos tried again: "But it may be fair, it may be good public policy—"
Mr. Obama: "No, but—but, George, you—you can't just make up that language and decide that that's called a tax increase."
"I don't think I'm making it up," Mr. Stephanopoulos said. He then had the temerity to challenge the Philologist in Chief, with an assist from Merriam-Webster. He cited that dictionary's definition of "tax"—"a charge, usually of money, imposed by authority on persons or property for public purposes."
Mr. Obama: "George, the fact that you looked up Merriam's Dictionary, the definition of tax increase, indicates to me that you're stretching a little bit right now. . . ."
Mr. Stephanopoulos: "I wanted to check for myself. But your critics say it is a tax increase."
Mr. Obama: "My critics say everything is a tax increase. My critics say that I'm taking over every sector of the economy. You know that. Look, we can have a legitimate debate about whether or not we're going to have an individual mandate or not, but . . ."
Mr. Stephanopoulos: "But you reject that it's a tax increase?"
Mr. Obama: "I absolutely reject that notion."
If you can follow this reasoning, then you probably also think that a new entitlement is the best way to reduce entitlement spending. The Congressional Budget Office estimates that the Senate's individual mandate will result in new revenues of some $20 billion over 10 years because some people will choose to opt out of ObamaCare—or because they can't afford to buy in, given that other taxes and regulation will make health care more expensive. If that $20 billion doesn't count as tax revenue, then what is it?
And for that matter, what doesn't count as a nontax under Mr. Obama's definition? All taxes can be justified in the name of providing some type of service, however wasteful. Mr. Obama complains that "My critics say everything is a tax increase," as if that is his political problem. His real problem is that the individual mandate really is a tax, but the President doesn't want voters to think of it that way, because taxes are unpopular.
from the Washington Times, 2009-Sep-18, by Stephen Dinan:
Obama: Legalize illegals to get them health care
President Obama said this week that his health care plan won't cover illegal immigrants, but argued that's all the more reason to legalize them and ensure they eventually do get coverage.
He also staked out a position that anyone in the country legally should be covered - a major break with the 1996 welfare reform bill, which limited most federal public assistance programs only to citizens and longtime immigrants.
"Even though I do not believe we can extend coverage to those who are here illegally, I also don't simply believe we can simply ignore the fact that our immigration system is broken," Mr. Obama said Wednesday evening in a speech to the Congressional Hispanic Caucus Institute. "That's why I strongly support making sure folks who are here legally have access to affordable, quality health insurance under this plan, just like everybody else.
Mr. Obama added, "If anything, this debate underscores the necessity of passing comprehensive immigration reform and resolving the issue of 12 million undocumented people living and working in this country once and for all."
Republicans said that amounts to an amnesty, calling it a backdoor effort to make sure current illegal immigrants get health care.
"It is ironic that the president told the American people that illegal immigrants should not be covered by the health care bill, but now just days later he's talking about letting them in the back door," said Rep. Lamar Smith of Texas, the top Republican on the Judiciary Committee.
"If the American people do not want to provide government health care for illegal immigrants, why would they support giving them citizenship, the highest honor America can bestow?" Mr. Smith said.
But immigrant rights groups see the speech as a signal that Mr. Obama is committed to providing health care coverage for anyone in the United States legally, regardless of their citizenship status.
"It's the first time I've certainly heard, publicly, him talking more about legal immigrants," said Eric Rodriguez, vice president for research and advocacy at the National Council of La Raza (NCLR). "I think that was certainly positive progress. We were absolutely concerned about not hearing that."
On Wednesday, hours before Mr. Obama's speech, the NCLR had given the administration a public scolding, demanding that Mr. Obama needed to make "a public commitment ... to ensure that those who are here legally are covered."
A White House spokesman did not respond to questions about where the White House would make the cutoff for eligibility, and Mr. Rodriguez said he's still waiting for an answer from the administration.
"We don't know where they mean to draw the line," he said. "Our biggest concern is that most people don't realize legal immigrants are currently barred from receiving health care benefits for the first five years in the country."
Under the 1996 welfare overhaul, most federal aid programs are restricted to citizens and legal immigrants who have been in the country for at least five years. Democrats have tried this year to chip away at that rule.
Immigration has dogged Mr. Obama in the health care debate. Rep. Joe Wilson, South Carolina Republican, shouted, "You lie," when the president, in an address to Congress last week, said his plans wouldn't cover illegal immigrants.
Lawmakers - who got an earful from constituents back home during August - have insisted on extra checks to make sure illegal immigrants do not have access to taxpayer-funded programs.
Senators have worked on language that would prevent illegal immigrants from buying insurance through a proposed insurance exchange envisioned in the health care reform package.
But the NCLR said that could lead to situations where some members of a family would be covered and others, including children of illegal immigrants, wouldn't be.
Mr. Obama said legalizing illegal immigrants is a way to take the sting out of the entire issue.
But Republicans said by pushing to legalize illegal immigrants, Mr. Obama is signaling that those here illegally eventually will get access to taxpayer-funded benefits.
Still, the push to pass a legalization bill is beginning to gain steam, even as advocates fret that the White House is moving too slowly.
On Thursday, Rep. Luis V. Gutierrez, Illinois Democrat and an outspoken advocate for legalization, agreed to take leadership in writing a new, more generous bill.
"We simply cannot wait any longer for a bill that keeps our families together, protects our workers and allows a pathway to legalization for those who have earned it," Mr. Gutierrez said. "Saying immigration is a priority for this administration or this Congress is not the same as seeing tangible action, and the longer we wait, the more every single piece of legislation we debate will be obstructed by our failure to pass comprehensive reform."
from the Wall Street Journal, 2009-Sep-17, p.A22:
Public Option Lite
The Baucus plan would make insurance even more expensive.Senate Finance Chairman Max Baucus finally unveiled his health-care plan yesterday to a chorus of bipartisan jeers. The reaction is surprising given that President Obama all but endorsed the outlines of the Baucus plan last week. But the hoots are only going to grow louder as more people read what he's actually proposing.
The headline is that Mr. Baucus has dropped the unpopular "public option," but this is a political offering without much policy difference. His plan remains a public option by other means, imposing vast new national insurance regulation, huge new subsidies to pay for the higher insurance costs this regulation will require — and all financed by new taxes and penalties on businesses, individuals and health-care providers. Other than that, Hippocrates, the plan does no harm.
***
The centerpiece of the Obama-Baucus plan is a decree that everyone purchase heavily regulated insurance policies or else pay a penalty. This government mandate would require huge subsidies as well as brute force to get anywhere near the goal of universal coverage. The inevitable result would be a vast increase in the government's share of U.S. health spending, forcing doctors, hospitals, insurance companies and other health providers to serve politics as well as or even over and above patients.
The plan essentially rewrites all insurance contracts, including those offered by businesses to their workers. Benefits and premiums must be tailored to federal specifications. First-dollar coverage would be mandated for many services, and cost-sharing between businesses and employees would be sharply reduced, though this is one policy that might reduce health spending by giving consumers more skin in the game. Nor would insurance be allowed to bear any relation to risk. Inevitably, costs would continue to climb.
Everyone would be forced to buy these government-approved policies, whether or not they suit their needs or budget. Families would face tax penalties as high as $3,800 a year for not complying, singles $950. As one resident of Massachusetts — where Mitt Romney imposed an individual mandate in 2006 — put it in a Journal story yesterday, this is like taxing the homeless for not buying a mansion.
The political irony here is rich. If liberal health-care reform is going to make people better off, why does it require "a very harsh, stiff penalty" to make everyone buy it? That's what Senator Obama called it in his Presidential campaign when he opposed the individual mandate supported by Hillary Clinton. He correctly argued then that many people were uninsured not because they didn't want coverage but because it was too expensive. The nearby mailer to Ohio primary voters [“Hillary's health care plan forces everyone to buy insurance, even if you can't afford it... and you pay a penalty if you don't.” -AMPP Ed.] gives the flavor of Mr. Obama's attacks.
And the Baucus-Obama plan will only make insurance even more expensive. Employers will be required to offer "qualified coverage" to their workers (or pay another "free rider" penalty) and workers will be required to accept it, paying for it in lower wages. The vast majority of households already confront the same tradeoff today, except Congress will now declare that there's only one right answer.
The subsidies in the Baucus plan go to people without a job-based plan and who earn under three times the federal poverty level, or about $66,000 for a family of four. Yet according to a Congressional Budget Office analysis we've seen, the plan isn't much of an improvement over the current market.
Take a family of four making $42,000 in 2016. While government would subsidize 80% of their premium and pay $1,500 to offset cost-sharing, they'd still pay $6,000 a year or 14.3% of their total income. A family making $54,000 could still pay 18.1% of their income, while an individual earning $26,500 would be on the hook for 15.5%, and one earning $32,400 for 17.3%. So lower-income workers would still be forced to devote huge portions of their salaries to expensive policies that they may not want or be able to afford.
Other Democrats want to make the subsidies even bigger, but Mr. Baucus told reporters on Monday that, "We're doing our very best to make an insurance requirement as affordable as we possibly can, recognizing that we're trying to get this bill under $900 billion total." Another way of putting this is that he is hiding the real cost of his bill by pinching pennies to meet a less politically toxic overall spending number. In that sense, the House health bill — which clocked in at $1.042 trillion because it was more generous upfront — was more honest, though not by much.
Like the House bill, Mr. Baucus uses 10 years of taxes to fund about seven years of spending. Some $215 billion is scrounged up by imposing a 35% excise tax on insurance companies for plans valued at more than $21,000 for families and $8,000 for individuals. This levy would merely be added to the insurers' "administrative load" and passed down to all consumers in higher prices. Ditto for the $59 billion that Mr. Baucus would raise by taxing the likes of clinical laboratories and drug and device makers.
Mr. Baucus also wants to cut $409 billion from Medicare, according to CBO, though the only money that is certain to see the budget ax is $123 billion from the Medicare Advantage program. Liberal Democrats hate Advantage because it gives 10.2 million seniors private options. The other "savings" come from supposedly automatic cuts that a future Congress is unlikely to ever approve — that is, until this entitlement spending swamps the federal budget. Then the government will have no choice but to raise taxes to European welfare-state levels or impose drastic restrictions on patient care. Or, most likely, both.
***
To sum up, the Baucus-Obama plan would increase the cost of insurance and then force people to buy it, requiring subsidies. Those subsidies would be paid for by taxes that make health care — and thus insurance — even more expensive, requiring even more subsidies and still higher taxes. It's a recipe to ruin health care and bankrupt the country, and that's even before liberal Democrats see Mr. Baucus and raise him, and then attempt to ram it all through the Senate.
from the Wall Street Journal, 2009-Sep-7:
Obama and the Left
The lesson of the rise and fall of Van Jones.The abrupt resignation of White House aide Van Jones, deep in the news hiatus of Labor Day weekend, will probably be forgotten in a few days. But it's a story that still deserves elaboration for what it says about the political coalition that helped to elect President Obama and whose demands are leading him into a cul-de-sac.
As a candidate, Barack Obama was at pains to offer himself as a man of moderate policies, and especially of moderate temperament. He said he would listen to both the right and left, choosing the best of each depending on "what works." He sold himself as a center-left pragmatist. When his radical associations—Reverend Jeremiah Wright, William Ayers—came to light, Candidate Obama promptly disavowed them. Now comes Mr. Jones, with a long trail of extreme comments and left-wing organizing, who nonetheless became the White House adviser for "green jobs." This weekend he too was thrown under the bus.
However, Mr. Jones wasn't some unknown crazy who insinuated himself with the Obama crowd under false pretenses. He has been a leading young light of the left-wing political movement for many years. His 2008 book—"The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems"—includes a foreword from Robert F. Kennedy Jr. and was praised across the liberal establishment.
Mr. Jones was a senior fellow at the Center for American Progress, which was established, funded and celebrated as the new intellectual vanguard of the Democratic Party. The center's president is John Podesta, who was co-chair of Mr. Obama's transition team and thus played a major role in recommending appointees throughout the Administration. The ascent of Mr. Jones within the liberal intelligentsia shows how much the Democratic Party has moved left since its "New Democrat" triangulation of the Clinton years.
Mr. Jones's incendiary comments about Republicans and his now famous association with a statement blaming the U.S. for 9/11 had to have been known in some White House precincts. He was praised and sponsored by Valerie Jarrett, who is one of the two or three most powerful White House aides and is a long-time personal friend of the President.
Our guess is that Mr. Jones landed in the White House precisely because his job didn't require Senate confirmation, which would have subjected him to more scrutiny. This is also no doubt a reason that Mr. Obama has consolidated so much of his Administration's governing authority inside the White House under various "czars." Mr. Jones was poised to play a prominent role in disbursing tens of billions of dollars of stimulus money. It was the ideal perch from which he could keep funding the left-wing networks from which he sprang, this time with taxpayer money.
This helps explain why the political left is so upset about Mr. Jones's resignation. Listen to David Sirota, another left-wing think-tank denizen and activist, who wrote the following Sunday on the Huffington Post Web site:
"Finally, the Jones announcement will inevitably create a chilling effect on the aspirations of other movement progressives. Van is a fantastic person who has done fantastic work. He's kept his advocacy real and didn't compromise his principles. And so when he was appointed to a high-level White House job, it seemed to validate that you could, in fact, keep it real and also advance in American politics and government. That is to say, his story seemed to prove that an outsider could also succeed on the inside—and that outside advocacy doesn't automatically prohibit you from one day working on the inside."
Mr. Sirota is speaking for many on the movement left who believe they helped to elect Mr. Obama and therefore deserve seats at the inner table of power. They are increasingly frustrated because they are discovering that Mr. Obama will happily employ "movement progressives," but only so long as their real views and motivations aren't widely known or understood. How bitter it must be to discover that the Fox News Channel's Glenn Beck, who drove the debate about Mr. Jones, counts for more at this White House than Mr. Sirota.
No President is responsible for all of the views of his appointees, but the rise and fall of Mr. Jones is one more warning that Mr. Obama can't succeed on his current course of governing from the left. He is running into political trouble not because his own message is unclear, or because his opposition is better organized. Mr. Obama is falling in the polls because last year he didn't tell the American people that the "change" they were asked to believe in included trillions of dollars in new spending, deferring to the most liberal Members of Congress, a government takeover of health care, and appointees with the views of Van Jones.
from the Wall Street Journal, 2009-Aug-24, by Pete du Pont:
The High Cost of Liberalism
Taxes too high? You ain't seen nothing yet.Congress is in recess and many Americans are on vacation, but all that will end when Labor Day has passed and the House and Senate are back at work.
And that means the Europeanization of America will again be in full gear, from expanding government control and regulation of as many things as possible, to raising taxes, expanding the size of government, and reducing the choices individuals are allowed.
The Treasury reports that our country's federal debt has doubled in nine years, rising steadily, year by year, to $10.72 trillion from $5.67 trillion in 2000. Our deficit for the current year fiscal year, which ends Sept. 30, is expected to total $1.8 trillion, four times last year's figure, leaving us with a federal debt of $38,500 for every U.S. resident. Our economy is doing poorly; it will shrink about 2.6% this year. Unemployment in July reached 9.4% and will likely further increase, and tax revenues are down $353 billion over the first 10 months of this fiscal year.
So we can easily see what is just around the corner. Earlier this month Treasury Secretary Tim Geithner and Larry Summers, director of the National Economic Council, opened the door, suggesting that taxes on all taxpayers will have to go up. As Stephen Moore noted in The Wall Street Journal, "it would take almost $16,000 more from every household in America to balance the budget this year." We certainly won't get to balanced budgets for decades, but substantially higher taxation seems inevitable.
All of which leads to the essential economic question: Which tax increases do the current administration and Congress intend to enact? There are more than a dozen, all of which would negatively affect our economy.
One has already been signed into law by President Obama: an increase in the tax on tobacco, to $1.01 a pack of cigarettes from 39 cents, and to as much as 40 cents a cigar from a nickel--increases of 159% and 700%, respectively. This is expected to bring in $8 billion a year. Next up is a possible increase in alcohol, beer and wine taxes, raising about another $6 billion annually, and perhaps another $5 billion a year on sugary drinks will be enacted.
Then come a series of substantial tax increases that are on the Washington agenda that, if enacted, will create real problems for our country's economy.
First, allowing the expiration of the previous Bush administration tax cuts at the end of 2010. These reductions increased government tax receipts by $785 billion (just as the Kennedy and Reagan tax cuts increased tax revenues) and gave us eight million new jobs over a 52-month period. The cuts go away if Congress does nothing, raising tax rates on the top earners will to 39.6% from 35%, and on the next-highest bracket to 36% from 33%. The Joint Committee on Taxation estimates that 55% of these tax increases will come from small-business income.
Next comes Rep. Charles Rangel's additional tax increases, a part of the House health-care bill. The House Ways and Means chairman calls for a 1% surtax on couples with more than $350,000 in income, 1.5% on incomes more than $500,000, and 5.4% on incomes more than $1 million. The extra tax would kick in at lower levels for unmarried taxpayers. And if promised health-care cost savings don't materialize, the surtaxes would automatically double.
The House health-care bill contains several tax increases that would hit couples earning under $250,000 a year, contrary to President Obama's promises: $8.2 billion of tax increases for people using health savings accounts or other tax-free savings to purchase over-the-counter drugs; a "Comparative Effectiveness Research Tax" of $2 billion on all private and "public option" insurance, plus up to 8% paid by employers--mostly small businesses--that don't offer health insurance. There is even a proposed tax on individuals who do not have health insurance.
Then come some other tax increases the administration has favored:
• An increased tax on American companies doing business in other countries.
• Raising or abolishing the wage cap on Social Security taxes, which would effectively convert Social Security into a welfare program.
• Reducing the tax benefit for itemized deductions like charitable contributions, which would reduce philanthropy.
And then there's the Waxman-Markey "cap and trade" bill that has passed the House and will be taken up in the Senate this fall. It would give the government total control of the production, prices, availability and use of energy and add a global energy tax to imported goods--serious American protectionism. It would shrink America's economy by $400 billion each year and cause the loss of some 2.5 million jobs. For a household of four it would cost an average of about $3,000 a year. By 2035 the total family annual increased cost would be $4,600 for power, food, supplies, gasoline and transportation.
All told, the administration and Congress are pushing massive tax increases. Without a specific proposal we don't know how much taxes would go up if the Social Security ceiling is raised, but add the others up and we see up to $200 billion--and it could well be much more--in annual tax increases on businesses, individuals and the overall economy, which is already in recession.
The Wall Street Journal's Daniel Henninger observes that "to an independent voter or moderate Democrat, President Everyman is starting to look like a salesman for the superstate." These many proposed tax increases reinforce the point. They not only would be economically damaging, but chart a very scary course for our country.
from the Wall Street Journal, 2009-Aug-28, by Terry Anderson:
Native Americans and the Public Option
After decades of government-run care, some Indians are finally saying enough.Bozeman, Mont.
Montana Sen. Max Baucus, a leading architect of national health-care reform, visited the Flathead Indian Reservation near Pablo, Mont., in May, and he was confronted with a surprising critique. "I hope any [new health-care] plan does not forget the nation's first people," Dr. LeAnne Muzquiz told the senator. Another person in the audience, according to the newspaper the Missoulian, followed up by telling the senator that the legislation pending in Congress would in fact do just that.
Native Americans have received federally funded health care for decades. A series of treaties, court cases and acts passed by Congress requires that the government provide low-cost and, in many cases, free care to American Indians. The Indian Health Service (IHS) is charged with delivering that care.
The IHS attempts to provide health care to American Indians and Alaska Natives in one of two ways. It runs 48 hospitals and 230 clinics for which it hires doctors, nurses, and staff and decides what services will be provided. Or it contracts with tribes under the Indian Self-Determination and Education Assistance Act passed in 1975. In this case, the IHS provides funding for the tribe, which delivers health care to tribal members and makes its own decisions about what services to provide.
The IHS spends about $2,100 per Native American each year, which is considerably below the $6,000 spent per capita on health care across the U.S. But IHS spending per capita is about on par with Finland, Japan, Spain and other top 20 industrialized countries—countries that the Obama administration has said demonstrate that we can spend far less on health care and get better outcomes. In addition, IHS spending will go up by about $1 billion over the next year to reach a total of $4.5 billion by 2010. That includes a $454 million increase in its budget and another $500 million earmarked for the agency in the stimulus package.
Unfortunately, Indians are not getting healthier under the federal system. In 2007, rates of infant mortality among Native Americans across the country were 1.4 times higher than non-Hispanic whites and rates of heart disease were 1.2 times higher. HIV/AIDS rates were 30% higher, and rates of liver cancer and inflammatory bowel disease were two times higher. Diabetes-related death rates were four times higher. On average, life expectancy is four years shorter for Native Americans than the population as a whole.
Rural Indians fare even worse, as data from Sen. Baucus's home state show. According to IHS statistics, in Montana and Wyoming, Indians suffer diabetes at rates 20% higher, heart disease 12% higher, and lung cancer rates 67% higher than the average across all IHS regions in the country. A recent Harvard University study found that life expectancy on a reservation in neighboring South Dakota was 58 years. The national average is 77.
Personal stories from people within the system reveal the human side of these statistics. In 2005, Ta'Shon Rain Little Light, a 5-year-old member of the Crow tribe who loved to dress in traditional clothes, stopped eating and complained that her stomach hurt. When her mother took her to the IHS clinic in south central Montana, doctors dismissed her pain as depression. They didn't perform the tests that might have revealed the terminal cancer that was discovered several months later when Ta'Shon was flown to a children's hospital in Denver. "Maybe it would have been treatable" had the cancer been discovered sooner, her great-aunt Ada White told the Associated Press.
Such horror stories are common on reservations, where the common wisdom is "don't get sick after June"—the month when the federal dollars usually run out. Late last year, the Montana Quarterly interviewed Tommy Connell, a member of the Blackfeet tribe and a worker in the IHS hospital in Browning, Mont. He didn't pull any punches in his assessment of the IHS. "They're lying to us," he said of promises over the years of more funds and better care. "You can pass just about any bill you want, but to appropriate money to that bill, that's another thing."
Dismal statistics prompted Mr. Baucus to declare a "health state of emergency" on the Fort Peck Reservation in northeastern Montana and to order an investigation of the IHS's use of funds. In July 2008, the Government Accountability Office reported that the IHS simply lost $15.8 million worth of equipment such as trucks and Jaws of Life machines between 2004 and 2007. It also found that $700,000 worth of computers were ruined by bat dung.
Tribal contracting—the alternative to IHS-run hospitals and clinics—offers some hope for improvement by giving tribes more flexibility in administering their own hospitals and clinics. Kelly Eagleman, vice-chairman of the Chippewa Cree Band on Montana's Rocky Boy's Reservation, understands the effect of a top-down bureaucracy. Of his tribe, he says, "We tend to want to blame a system, but we don't look at ourselves. We all smoke. We lay on the couch. But when something happens to us, we're the first to point and say that the clinic should have fixed us."
The Chippewa Cree Band has opted to provide its own health care with funding from the IHS. Dr. Dee Althouse, a physician at the Rocky Boy's Reservation, is still frustrated by funding constraints. She told the Montana Quarterly that she often finds herself working to save lives and limbs, deferring routine health care until there is money available. Yet even with limited funds, ongoing research by the Native Nations Institute reported earlier this year that tribal management leads to better access and better quality care than relying on the IHS-run system.
The Chippewa Cree Band runs its own hospital and has hired a registered dietician who has gotten the local grocery store to implement a shelf-labeling system to improve consumer nutritional information. They've also built a Wellness Center with a gym, track, basketball court, and pool. These are small steps that won't immediately eliminate heart disease or diabetes. But they move in the direction of local control and better health.
At a time when Americans are debating whether to give the government in Washington more control over their health care, some of the nation's first inhabitants are moving in the opposite direction.
Mr. Anderson is executive director of the Property and Environment Research Center in Bozeman, Mont., and a senior fellow at Stanford University's Hoover Institution.
from the Wall Street Journal, 2009-Jul-15, by Thomas Szasz:
Universal Health Care Isn't Worth Our Freedom
What would Thoreau have made of the current debate?People who seek the services of auto mechanics want car repair, not "auto care." Similarly, most people who seek the services of medical doctors want body repair, not "health care."
We own our cars, are responsible for the cost of maintaining them, and decide what needs fixing based partly on balancing the seriousness of the problem against the expense of repairing it. Our health-care system rests on the principle that, although we own our bodies, the community or state ought to be responsible for paying the cost of repairing them. This is for the ostensibly noble purpose of redistributing the potentially ruinous expense of the medical care of unfortunate individuals.
But what is health care? The concept of reimbursable health-care service rests on the premise that the medical problem in need of servicing is the result of involuntary, unwanted happenings, not the result of voluntary, goal-directed behavior. Leukemia, lupus, prostate cancer, and many infectious diseases are unwanted happenings. Are we going to count obesity, smoking, depression and schizophrenia as the same kinds of diseases?
Many Americans would willingly pay for insurance to protect them against the exorbitant cost of treating their own leukemia. But how many Americans would willingly pay for insurance to protect them from the expenses of treating their own depression?
Everyone recognizes that the more fully we wish insurance companies to defray our out of pocket expenses for our car repairs, the higher the premium they will charge for the policy. Yet foregoing reimbursement for trivial or unnecessary health-care costs in return for a more suitable health-care policy is an option unavailable under the present system. Everyone with health insurance is compelled to protect himself from risks, such as alcoholism and erectile dysfunction, that he would willingly shoulder in exchange for a lower premium.
The idea that every life is infinitely precious and therefore everyone deserves the same kind of optimal medical care is a fine religious sentiment and moral ideal. As political and economic policy, it is vainglorious delusion. Rich and educated people not only receive better goods and services in all areas of life than do poor and uneducated people, they also tend to take better care of themselves and their possessions, which in turn leads to better health. The first requirement for better health care for all is not equal health care for everyone but educational and economic advancement for everyone.
Our national conversation about curbing the cost of health care is crippled by the vocabulary in which we conduct it. We must stop talking about "health care" as if it were some kind of collective public service, like fire protection, provided equally to everyone who needs it. No government can provide the same high quality body repair services to everyone. Not all doctors are equally good physicians, and not all sick persons are equally good patients.
If we persevere in our quixotic quest for a fetishized medical equality we will sacrifice personal freedom as its price. We will become the voluntary slaves of a "compassionate" government that will provide the same low quality health care to everyone.
Henry David Thoreau famously remarked, "If I knew for a certainty that a man was coming to my house with the conscious design of doing me good, I should run for my life." Thoreau feared a single, unarmed man approaching him with such a passion in his heart. Too many people now embrace the coercive apparatus of the modern state professing the same design.
Dr. Szasz is emeritus professor of psychiatry at Upstate Medical University in Syracuse, New York. He is author of "The Myth of Mental Illness," among other books (HarperCollins, 1961).
from Mike Hanlon's blog, 2009-Aug-14:
I want my referee
Currently, consumers enter into a health-care contract with an insurance company. This contract has an asymmetric payoff, in that the insurance company gains when a consumer stays healthy, and the consumer gains if they fall ill. If a consumer falls ill, the insurance company would like to renege on its obligation. Yet it cannot, because the contract is enforced by an unbiased referee. That referee is the United States government.
The fundamental problem with the Democrat's health care proposal is that it will cause the the government to abandon its "referee" role in order to become my "contractual opponent." Democrats suggest that government can play the role of both opponent and referee. Maybe I'm too competitive, but I prefer when my opponent and my referee are not the same person.
Opposition to "health care reform" is not so much philosophical as it is practical. Sarah Palin learned something at the University of Idaho that a lot of folks didn't learn at Harvard: when contractual payoffs are asymmetric, you need a referee to ensure compliance. I want my referee, and the Democrats are trying to take it away from me. Doesn't that justify a little anger?
To clarify, this debate is one of degrees. The government has been involved in providing health care for decades, and from that perspective, perhaps current proposals may not seem so radical. Yet at some point, the government's engagement as a contractual opponent will cause it to abandon the role of referee. My concern is that the current proposals before Congress would push us well past that point.
I'm not much interested in defending the current system we use to provide and finance health care in the United States. However, the "right way" to do it (whatever that may be) is going to incorporate the role of an unbiased referee. Health insurance contracts are designed such that the insurer (regardless of whether it's an insurance company or the federal government) always has an incentive to shirk on their end of the bargain. The referee's job is to make sure they don't.
from the Wall Street Journal, 2009-Aug-12, p.A15, by John Mackey:
The Whole Foods Alternative to ObamaCare
“The problem with socialism is that eventually you run out
of other people’s money.”—Margaret Thatcher
With a projected $1.8 trillion deficit for 2009, several trillions more in deficits projected over the next decade, and with both Medicare and Social Security entitlement spending about to ratchet up several notches over the next 15 years as Baby Boomers become eligible for both, we are rapidly running out of other people’s money. These deficits are simply not sustainable. They are either going to result in unprecedented new taxes and inflation, or they will bankrupt us.
While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction—toward less government control and more individual empowerment. Here are eight reforms that would greatly lower the cost of health care for everyone:
• Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees’ Personal Wellness Accounts to spend as they choose on their own health and wellness.
Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan’s costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.
• Equalize the tax laws so that that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.
• Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.
• Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.
• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.
• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor’s visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?
• Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.
• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren’t covered by Medicare, Medicaid or the State Children’s Health Insurance Program.
Many promoters of health-care reform believe that people have an intrinsic ethical right to health care—to equal access to doctors, medicines and hospitals. While all of us empathize with those who are sick, how can we say that all people have more of an intrinsic right to health care than they have to food or shelter?
Health care is a service that we all need, but just like food and shelter it is best provided through voluntary and mutually beneficial market exchanges. A careful reading of both the Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter. That’s because there isn’t any. This “right” has never existed in America
Even in countries like Canada and the U.K., there is no intrinsic right to health care. Rather, citizens in these countries are told by government bureaucrats what health-care treatments they are eligible to receive and when they can receive them. All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce treatments.
Although Canada has a population smaller than California, 830,000 Canadians are currently waiting to be admitted to a hospital or to get treatment, according to a report last month in Investor’s Business Daily. In England, the waiting list is 1.8 million.
At Whole Foods we allow our team members to vote on what benefits they most want the company to fund. Our Canadian and British employees express their benefit preferences very clearly—they want supplemental health-care dollars that they can control and spend themselves without permission from their governments. Why would they want such additional health-care benefit dollars if they already have an “intrinsic right to health care”? The answer is clear—no such right truly exists in either Canada or the U.K.—or in any other country.
Rather than increase government spending and control, we need to address the root causes of poor health. This begins with the realization that every American adult is responsible for his or her own health.
Unfortunately many of our health-care problems are self-inflicted: two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending—heart disease, cancer, stroke, diabetes and obesity—are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.
Recent scientific and medical evidence shows that a diet consisting of foods that are plant-based, nutrient dense and low-fat will help prevent and often reverse most degenerative diseases that kill us and are expensive to treat. We should be able to live largely disease-free lives until we are well into our 90s and even past 100 years of age.
Health-care reform is very important. Whatever reforms are enacted it is essential that they be financially responsible, and that we have the freedom to choose doctors and the health-care services that best suit our own unique set of lifestyle choices. We are all responsible for our own lives and our own health. We should take that responsibility very seriously and use our freedom to make wise lifestyle choices that will protect our health. Doing so will enrich our lives and will help create a vibrant and sustainable American society.
Mr. Mackey is co-founder and CEO of Whole Foods Market Inc.
from the Wall Street Journal, 2009-Aug-18:
Whole Foolishness
The left boycotts a progressive retailer.August is the slowest month for political bloggers, so to chase away the summer doldrums, several on the left have decided to gin up a retail boycott. The object of their wrath: Whole Foods CEO John Mackey's op-ed in these pages last week, presenting alternative ideas for health-care reform.
Perish the thought. The response to the piece on liberal Web sites has been frothy, with bloggers lining up to reproach Mr. Mackey for his transgression against progressive orthodoxy. A post on the Web site DailyKos called Mr. Mackey a "right-wing zealot," and his opinions "asinine."
To punish the op-ed offense, bloggers encouraged shoppers to stay away from Whole Foods and to spread the word through Facebook groups and store-front protests.
Those who actually read Mr. Mackey's piece may find the racket puzzling. The CEO suggests ways to reform health care without a new deficit-busting entitlement. He'd equalize tax laws between individual and employer-provided health insurance, make health costs more transparent and let people check off a form on their taxes to make a voluntary, tax-deductible donation to people who have no insurance. "Like food and shelter," Mr. Mackey wrote, health care is "best provided through voluntary and mutually beneficial market exchanges."
These are views held by plenty of voters, but no matter; the hardest cases on the left have had it in for the Whole Foods CEO for a while. Mr. Mackey drew the left's ire for his position against unionization in Whole Foods stores. Instead, the company adopted a raft of its own progressive employee policies, such as letting workers vote on their own benefits packages, including health savings accounts.
Too often, business leaders who have useful contributions on a public issue are too fearful or self-interested to say what they really think. Detroit CEOs paid lip service to fuel-mileage standards even as the rules destroyed their business. The pharmaceutical industry after years of defending its business model hopped quickly into line for the Administration's health-care reform.
Whole Foods is a publicly traded company, so the effects of a real boycott would mainly damage the pocketbooks of those nice Whole Foods employees and its stockholders. They may have little to worry about. Summer is nearly over and when the weekend farmers markets close, a real protest would require the store's hyperprogressive customers to withdraw forever from the Whole Foods community to get their artisanal foods at the supermarket chain down the block.
Meantime, Mr. Mackey's piece has stirred a conversation about health care among people whose first instinct isn't political thuggery. Whole Foods' Web site has its share of angry customers, but they have been joined by many supporting Mr. Mackey's position. His piece has been among the most emailed articles in this paper the past week.
Mr. Mackey wrote his op-ed to join a national debate on a subject that will affect his company and employees. He deserves credit for exercising his right to free speech, no matter the risk this currently entails in our politics.
from the Wall Street Journal, 2009-Oct-3, p.A11, by Stephen Moore:
The Conscience of a Capitalist
The Whole Foods founder talks about his Journal health-care op-ed that spawned a boycott, how he deals with unions, and why he thinks CEOs are overpaid."I honestly don't know why the article became such a lightning rod," says John Mackey, CEO and founder of Whole Foods Market Inc., as he tries to explain the firestorm caused by his August op-ed on these pages opposing government-run health care. "I think a lot of people who got angry haven't read what I actually wrote. There was a lot of emotional reaction—fear and anger. I just wanted to get people to think about whether there was a better way to reform the system."
Mr. Mackey has flown into Washington, D.C., for a board meeting of the Global Animal Partnership, a group that advocates for the humane treatment of animals. There was no private jet: He arrived on Southwest Airlines from Austin, Texas, and he bought the "Wanna Getaway" bottom basement fare. "I barely got the last aisle seat," he says. While in town he stays in the bedroom of his regional president, who lives in Maryland.
For the 12th straight year, Mr. Mackey's company has been praised as one of the "100 Best Companies to Work For" by Fortune Magazine. Whole Foods sells healthy food, practices "socially responsible trade," and prides itself on promoting foods that are grown to support "biodiversity and healthy soils." Mr. Mackey donates 5% of company profits to charity and has been one of America's loudest critics of runaway compensation on Wall Street. And he pays himself $1 a year. He would seem to be a model corporate citizen.
Yet his now famous op-ed incited a boycott of Whole Foods by some of his left-wing customers. His piece advised that "the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us closer to a complete government takeover of our health-care system." Free-market groups retaliated with a "buy-cott," encouraging people to purchase more groceries at Whole Foods.
Why did he write the piece in the first place?
"President Obama called for constructive suggestions for health-care reform," he explains. "I took him at his word." Mr. Mackey continues: "It just seems to me there are some fundamental reforms that we've adopted at Whole Foods that would make health care much more affordable for the uninsured."
What Mr. Mackey is proposing is more or less what he has already implemented at his company—a plan that would allow more health savings accounts (HSAs), more low-premium, high-deductible plans, more incentives for wellness, and medical malpractice reform. None of these initiatives are in any of the Democratic bills winding their way through Congress. In fact, the Democrats want to kill HSAs and high-deductible plans and mandate coverage options that would inflate health insurance costs.
The Whole Foods health-care story has been largely ignored by proponents of a government-run system. But it could be a template for those in Washington who want to drive down costs and insure the uninsured.
Mr. Mackey says that combining "our high deductible plan (patients pay for the first $2,500 of medical expenses) with personal wellness accounts or health savings accounts works extremely well for us." He estimates the plan's premiums plus other costs at $2,100 per employee, and about $7,000 for a family. This is about half what other companies typically pay. "And," he is quick to add, "we do cover pre-existing conditions after one year of service."
Whole Foods also puts several hundred dollars into a health savings account for each worker.This money can be used to cover routine medical expenses, like drug purchases or antismoking programs. If that money is not used in a year, the workers can save the money to pay for expenses in later years.
This type of plan does not excite proponents of a single-payer system, who think that individuals can't make wise health-care choices, and that this type of system is "antiwellness" because it discourages spending on preventive care.
Mr. Mackey scoffs at that idea: "The assumption behind that is that people don't care about their own health, and that somebody else has to—a nanny or somebody—has to take care of me because people are too stupid to make these decisions themselves. That's not been our experience. We find our team members [employees], not surprisingly, seem to care a whole lot about their health."
Not surprisingly, Mr. Mackey is a fanatic about healthy eating. "A healthy diet is a solution to many of our health-care problems. It's the most important solution. How much sugar do you think Americans consume?" he asks. I shrug and he rattles off the statistics: "Every man, woman and child consumes, on average, 43 teaspoons of sugar a day. In 13 days that adds up to a five-pound bag of sugar."
"We can spend all the money we want on bypass surgeries, chemotherapy and diabetes, but . . . two-thirds [of Americans] are overweight, one-third are obese." He's on a roll: "And it's not that they have to shop at a Whole Foods Market. But people need to eat whole food plant foods, primarily . . . whole grains, fruits, vegetables, nuts and seeds. That diet supports our lives. We ought to live to be 90 or 100 without getting any diseases."
Healthy eating, curbing the obesity epidemic—it's hard to find much of anything Mr. Mackey says that's controversial. But the health-care reform lobby continues to attack Whole Foods as if he were an apostate.
In response to the hullabaloo, Mr. Mackey has been understandably defensive. In early September, he wrote about the op-ed on his blog: "I gave my personal opinions. Whole Foods has no official position on the issue." So I ask him, does he regret writing the article? "I regret the controversy that it caused for Whole Foods, but I don't regret writing it, because I think what I said is true and it needed to be said. I wasn't seeing anyone else saying it."
Then he adds, half-jokingly: "I've written one op-ed piece in 31 years. It might be 31 more before I write another one."
I ask if he thinks the attacks were instigated by unions. While many other grocery chains are unionized, Whole Foods is not. "Well, the unions have had an adversarial relationship with us," he replies. "I don't think all the protests are strictly union-based, but I do think the unions have contributed to that. I think they've piled on and in some cases are orchestrating some of it." He says he can't divulge private information about whether the boycott hurt sales, but the stock hasn't taken any hit.
"I sometimes think that unions don't understand that we live in a free society and people have the right to not select union representation if they don't want it. I oftentimes hear things like 'Whole Foods is preventing people from unionizing,' which is a lie. That's illegal. We can't prevent anyone from unionizing," Mr. Mackey says.
So why aren't they choosing it? "Because it's not in their best interest," he insists. "We have better benefits and higher pay" than Whole Foods' unionized competitors. "We wish the unions would respect people's right to not have a union." Do they keep agitating? "Yeah, they do."
John Mackey is unlike any other Fortune 500 CEO I have met. He's got ruffled, curly hair, is thin and amazingly fit. He recently completed a three-week hike on the Appalachian Trail. He dresses casually, and his demeanor is almost always laid back. But his close friends say, don't let that fool you. Mr. Mackey is fiercely competitive and hates to lose—two traits that help a lot in business.
His odyssey from a long-haired counterculture anticapitalist in the early 1970s to running a company that now has $8 billion in sales and 280 stores—is a remarkable tale in itself. He attended the University of Texas where he studied philosophy and religion. "I never got my college degree," he admits proudly.
He started Whole Foods in 1978 with one store in Austin with $45,000 of seed capital raised from families and friends. "We lost half of it in the first year and then made $5,000 the next year." He wanted to double down and asked the board to put up more money to expand and build bigger stores. "And of course they thought I was nuts. 'You lost half of our money in the first year.'"
The fledgling CEO convinced them that "if we don't grow, we probably won't survive." The first major super store in 1980 was a success "almost by 3 o'clock on the day it opened." It's been an upward trajectory of profits and sales ever since.
"Before I started my business, my political philosophy was that business is evil and government is good. I think I just breathed it in with the culture. Businesses, they're selfish because they're trying to make money."
At age 25, John Mackey was mugged by reality. "Once you start meeting a payroll you have a little different attitude about those things." This insight explains why he thinks it's a shame that so few elected officials have ever run a business. "Most are lawyers," he says, which is why Washington treats companies like cash dispensers.
Mr. Mackey's latest crusade involves traveling to college campuses across the country, trying to persuade young people that business, profits and capitalism aren't forces of evil. He calls his concept "conscious capitalism."
What is that? "It means that business has the potential to have a deeper purpose. I mean, Whole Foods has a deeper purpose," he says, now sounding very much like a philosopher. "Most of the companies I most admire in the world I think have a deeper purpose." He continues, "I've met a lot of successful entrepreneurs. They all started their businesses not to maximize shareholder value or money but because they were pursuing a dream."
Mr. Mackey tells me he is trying to save capitalism: "I think that business has a noble purpose. It's not that there's anything wrong with making money. It's one of the important things that business contributes to society. But it's not the sole reason that businesses exist."
What does he mean by a "noble purpose"? "It means that just like every other profession, business serves society. They produce goods and services that make people's lives better. Doctors heal the sick. Teachers educate people. Architects design buildings. Lawyers promote justice. Whole Foods puts food on people's tables and we improve people's health."
Then he adds: "And we provide jobs. And we provide capital through profits that spur improvements in the world. And we're good citizens in our communities, and we take our citizenship very seriously at Whole Foods."
I ask Mr. Mackey why he doesn't collect a paycheck. "I'm an owner. I have the exact same motivation any shareholder would have in the Whole Foods Market because I'm not drawing a salary from the company. How much money does anybody need?" More to the point, he says, "If the business prospers, I prosper. If the business struggles, I struggle. It's good for morale." He hastens to add that "I'm not saying anybody else should do what I do."
Well, that's not exactly true. Mr. Mackey has been vocal in his opposition to recent CEO salaries. "I do think that it's the responsibility of the leadership of an organization to constrain itself for the good of the organization. If you look at the history of business in America, CEOs used to have much more constraint in compensation and it's gone up tremendously in the last 30 years."
He bemoans the trend that once a Fortune 500 CEO made about 25 times the average worker pay, and now that's climbed to 300 times average employee pay. He says this violates the principle of "internal equity—what your leadership is getting paid relative to everyone else in the organization."
But there's one other institution John Mackey thinks needs a makeover—and that's government. He describes what the Federal Reserve has done with massive money creation as "debauchery of the currency." He thinks the bailouts were a travesty.
"I don't think anybody's too big to fail," he says. "If a business fails, what happens is, there are still assets, and those assets get reorganized. Either new management comes in or it's sold off to another business or it's bid on and the good assets are retained and the bad assets are eliminated. I believe in the dynamic creativity of capitalism, and it's self-correcting, if you just allow it to self-correct."
That's something Washington won't let happen these days, which helps explain why Mr. Mackey felt compelled to write that the Whole Foods health-insurance program is smarter and cheaper than the latest government proposals. As he races out the door to catch a flight to spread the gospel of conscious capitalism elsewhere, I only hope he gets an aisle seat. He deserves it.
Mr. Moore is senior economics writer for The Wall Street Journal editorial page.
from the Wall Street Journal's Political Diary, 2009-Apr-21, by Allysia Finley:
Sicko II
It's a case of the broke leading the broke. Just as Democrats in Washington are pitching sharply higher taxes to fund a trillion-dollar "universal" health-care entitlement partly modeled on a similar experiment in Massachusetts, the Bay State is finding its own "universal" plan increasingly underfunded and unworkable.
To help reduce the budget deficit, lawmakers agreed last month to save $130 million by yanking coverage from 30,000 legal immigrants -- thereby eliminating a hallmark of "universal" coverage. Gov. Deval Patrick subsequently vetoed the provision and countered with a proposal to fund about half the cost of covering the greencard holders, whose fate remains in limbo.
The Massachusetts plan was supposed to lead to lower costs by getting the uninsured off emergency room care, but since the plan was enacted in 2006, state spending has increased a whopping 42%, and insurance premiums have been rising at nearly double the national average. Now a commission appointed by Gov. Patrick and the Democratic legislature is already pressing a radical overhaul, using an idea rejected nationally in 1993 along with HillaryCare -- "global budgets." Doctors and hospitals would be paid a fixed rate per patient. They'd have to figure out how to meet patient medical needs without going over-budget and taking a loss.
"Providers would have to work within a predetermined budget, forcing them to better coordinate patients' care, which could improve quality and reduce costs," reported the Boston Globe, giving a hopeful spin. Right. God help anyone who gets sick in Massachusetts at the end of a quarter.
from the Wall Street Journal, 2009-Jul-18:
Their Own Medicine
Senators prefer the insurance they have.In the health debate, liberals sing Hari Krishnas to the "public option" -- a new federal insurance program like Medicare -- but if it's good enough for the middle class, then surely it's good enough for the political class too? As it happens, more than a few Democrats disagree.
On Tuesday, the Senate health committee voted 12-11 in favor of a two-page amendment courtesy of Republican Tom Coburn that would require all Members and their staffs to enroll in any new government-run health plan. Yet all Democrats -- with the exceptions of acting chairman Chris Dodd, Barbara Mikulski and Ted Kennedy via proxy -- voted nay.
In other words, Sherrod Brown and Sheldon Whitehouse won't themselves join a plan that "will offer benefits that are as good as those available through private insurance plans -- or better," as the Ohio and Rhode Island liberals put it in a recent op-ed. And even a self-described socialist like Vermont's Bernie Sanders, who supports a government-only system, wouldn't sign himself up.
Of course, they also qualify now for generous Congressional coverage. Most Americans won't have the same choice. Some will be transferred to the new entitlement as it uses its taxpayer bankroll to dominate insurance markets. Others work for businesses that will find it easier to dump their policies and move employees to the federal rolls. Democrats also know that the public option will try to control health spending by squeezing payments made to doctors and hospitals, and by not paying for treatments that Washington decides are too expensive, which will result in inferior care.
No doubt Mr. Dodd acceded to the Coburn amendment to blunt such objections, and in any case he'll strip it out later in some backroom. Judd Gregg was the only GOP Senator to oppose it, on humanitarian grounds. As he told us in an interview, the public option "will be so bad that I don't think anyone should be forced to join."
from the Wall Street Journal, 2009-Sep-2, by Karl Rove:
Obama and the Perfect Political Storm
It's hard to sell change voters don't think they need.August was the worst month of Barack Obama's presidency. And he seems to know it—he is now planning to deliver a speech to a joint session of Congress 232 days into his administration in a desperate attempt to save his biggest domestic priority, overhauling health care.
He has already had the budget-busting $787 billion stimulus package, a budget that doubles the national debt in five years, an earmark-laden appropriations bill that boosted domestic spending nearly 8%, and a cap-and-trade energy tax that limped through the House with dozens of Democratic defections (and which has stalled in the Senate). These achievements are unpopular, so they are boomeranging on him.
Mr. Obama's problems are legion. To start with, the president is focusing on health care when the economy and jobs are nearly everyone's top issue. Voters increasingly believe Mr. Obama took his eye off the ball.
In addition, Mr. Obama is trying to overhaul health care without being able to tap into widespread public unhappiness. Nearly nine out of 10 Americans say they have coverage—and large majorities of them are happy with it. Of the 46 million uninsured, 9.7 million are not U.S. citizens; 17.6 million have annual incomes of more than $50,000; and 14 million already qualify for Medicaid or other programs. That leaves less than five million people truly uncovered out of a population of 307 million. Americans don't believe this problem—serious but correctable—justifies the radical shift Mr. Obama offers.
Moreover, he's tried to sell it with promises Americans aren't buying. He says ObamaCare will save money, but American believe it comes with a huge price tag because the Congressional Budget Office has said it will.
Workers are also rightly concerned they won't be able to keep their current coverage. Many businesses will drop their health plans and instead pay a fine equal to 8% of their payroll costs, which is less than what they pay for employee coverage.
Families believe they will be pushed into a government plan as the "public option" drives private insurers out of the market.
Health-care providers fear they'll be forced to follow one-size-fits-all guidelines drafted by bureaucrats, instead of making judgments for specific patients.
And seniors are afraid of Mr. Obama's plan to cut $500 billion from Medicare over the next decade, including $177 billion for Medicare Advantage. It's simply not possible to cut that much from Medicare without also cutting services seniors need.
Each of these concerns is energizing opposition among many previously uninvolved voters and political independents. Members of Congress, especially those in closely contested districts, saw this firsthand when they returned home in August.
The administration's problems have been compounded by tactical mistakes. Allowing House Speaker Nancy Pelosi to push for a Democrat-only bill shatters any claim Mr. Obama can make to bipartisanship, a core theme of his candidacy. Leaving the legislation's drafting to Congress has tied the president's fortunes to Mrs. Pelosi, who has a 25% approval rating nationwide, and Senate Majority Leader Harry Reid, whose approval rating is 37% in Nevada.
Sen. Jim DeMint (R., S.C.) was inartful but basically correct when he said if Mr. Obama loses on health care, "it will be his Waterloo." It would destroy confidence in the ability of Democrats to govern. Mr. Obama knows this, which is why he will stop at nothing to get a bill, any bill, on which the label "health-care reform" can be stuck.
Given the Democratic congressional margins, Mr. Obama has the votes to do it, but at huge costs to him and his party. Legislation that looks anything like the bill moving through the House will contain deeply unpopular provisions—including massive deficit spending, tax hikes and Medicare cuts—and create enormous ill will on Capitol Hill. This will be especially true if Democrats rely on parliamentary tricks to pass a bill in the Senate with 51 votes. The public's reaction in August showed that the president is creating the conditions for a revolt against his party in the 2010 elections.
On the other hand, if Mr. Obama jettisons the public option, he may spark a revolt within his party. The Democratic base is already grumbling and could block a bill if it doesn't include a public option.
Presidents always encounter rough patches. What is unusual is how soon Mr. Obama has hit his. He has used up almost all his goodwill in less than nine months, with the hardest work still ahead. At the year's start, Democrats were cocky. At summer's end, concern is giving way to despair. A perfect political storm is amassing, and heading straight for Democrats.
Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.
from the Wall Street Journal, 2009-Jul-17:
A Reckless Congress
Democrats want to ram through one of the greatest raids on private income and business in American history.Say this about the 1,018-page health-care bill that House Democrats unveiled this week and that President Obama heartily endorsed: It finally reveals at least some of the price of the reckless ambitions of our current government. With huge majorities and a President in a rush to outrun the declining popularity of his agenda, Democrats are bidding to impose an unrepealable European-style welfare state in a matter of weeks.
Mr. Obama's February budget provided the outline, but the House bill now fills in the details. To wit, tax increases that would take U.S. rates higher even than most of Europe. Yet even those increases aren't nearly enough to finance the $1 trillion in new spending, which itself is surely a low-ball estimate. Meanwhile, the bill would create a new government health entitlement that will kill private insurance and lead to a government-run system.
Hyperbole? That's what people said when we warned about this last fall in "A Liberal Supermajority," but even we underestimated the ideological willfulness of today's national Democrats. Consider only a few of the details:
A huge new income surtax. The bill's main financing comes from another tax increase on top of the increase already scheduled for 2011 under Mr. Obama's budget. The surtax starts at one percentage point for adjusted gross income above $350,000 in 2011, rising to two points in 2013; a 1.5 point surtax at incomes above $500,000, rising to three in 2013; and a whopping 5.4 percentage points in 2011 and beyond on incomes above $1 million.
This would raise the top marginal federal tax rate back to roughly 47% or 48%, if you include the Medicare tax and the phase-out of certain deductions and exemptions. With the current top rate at 35%, this would be the largest rate increase outside the Great Depression or world wars.
The average U.S. top combined state-federal marginal tax rate would hit about 52%. This would be higher than in all but three (Denmark, Sweden, Belgium) of the 30 countries measured by the OECD. According to the nearby table compiled by the Heritage Foundation, taxpayers in at least five U.S. states would pay higher marginal rates even than Sweden. South Korea, which Democrats worry is stealing American jobs, would be able to grab even more as its highest rate is a far more competitive 38.5%.
House Democrats say they deserve credit for being honest about the tax increases needed to fund their ambitions. But then they also claim that this surtax would raise $544 billion in new revenue over 10 years. America's millionaires aren't that stupid; far fewer of them will pay these rates for very long, if at all. They will find ways to shelter income, either by investing differently or simply working less. Small businesses that pay at the individual rate will shift to pay the 35% corporate rate. When the revenue doesn't materialize, Democrats will move to soak the middle class with a European-style value-added tax.
Phony numbers. Democrats will have to come up with something, because even the surtax puts their bill at least $300 billion short of honest financing. The public insurance "option" doesn't even begin until 2013 and the costs are heavily weighted toward the later years, but the tax hikes start in 2011. So under Congress's 10-year budget window, the House bill is able to pay for seven years of spending with nine years of taxes. Andy Laperriere of the ISI Group estimates the bill would add $95 billion to the deficit in 2019 alone.
Then there's yesterday's testimony, from Congressional Budget Office (CBO) Director Doug Elmendorf, that ObamaCare's cost "savings" are an illusion. Mr. Obama claims government can cover more people and pay less to do it. But Mr. Elmendorf told the Senate Finance Committee that "In the legislation that has been reported we don't see the sort of fundamental changes that would be necessary to reduce the trajectory of federal spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health-care costs."
Further on the public plan: "It raises the amount of activity that is growing at this unsustainable rate."
No matter, Speaker Nancy Pelosi is whisking the bill through House committees even before CBO has had a chance to score it in detail. As Wisconsin Republican Paul Ryan put it to us, "We will not have read it, and we will not have a score of it, but we will have passed it out of committee."
A new payroll tax. Unemployment is at 9.5% and rising, but Democrats will nonetheless impose a new eight percentage point payroll tax on employers who don't provide health insurance for employees. This is on top of the current 15% payroll tax, and in addition to a new 2.5-percentage point tax on individuals who don't buy health insurance. This means that any employer with more than $400,000 in payroll would have to pay at least 25% above the salary to hire someone. Result: Many fewer new jobs, with a higher structural jobless rate, much as Europe has experienced as its welfare states have expanded.
Other new taxes, including an as yet undetermined levy on private health plans. This tax, which Democrats say could raise $100 billion or so, would make it even harder for private plans to compete with the government plan, which would already benefit from government subsidies and lower capital costs. For good measure, the House bill also gets the ball rolling on tax increases on foreign-source corporate income.
We could go on, and we will in coming days. But the most remarkable quality of this health-care exercise is its reckless disregard for economic and fiscal reality. With the economy still far from a healthy recovery, and the federal fisc already nearly $2 trillion in deficit, Democrats want to ram through one of the greatest raids on private income and business in American history. The world is looking on, agog, and wondering why the United States seems intent on jumping off this cliff.
from the Wall Street Journal, 2009-Jul-14:
The Small Business Surtax
The Obama Democrats pick income redistribution over job creation and economic growth.Jason Furman owes an apology to Michael Boskin, the Stanford economist who wrote a year ago on these pages that Barack Obama would raise American income tax rates nearly to 60%. Mr. Furman, then in the Obama campaign and now at the White House, claimed this was wrong and that Democrats would merely raise taxes back to their Clinton-era level.
House Democrats are now proving that Mr. Boskin had it right, and before it's over even he may have underestimated how high taxes will go. In the middle of a recession and with rising unemployment, Democrats have been letting it leak that they want to raise U.S. tax rates higher than they've been in nearly 30 years in order to finance government health care.
Every detail isn't known, but late last week Ways and Means Chairman Charlie Rangel disclosed that his draft bill would impose a "surtax" on individuals with adjusted gross income of more than $280,000 a year. This would hit job creators especially hard because more than six of every 10 who earn that much are small business owners, operators or investors, according to a 2007 Treasury study. That study also found that almost half of the income taxed at this highest rate is small business income from the more than 500,000 sole proprietorships and subchapter S corporations whose owners pay the individual rate.
In addition, many more smaller business owners with lower profits would be hit by the Rangel plan's payroll tax surcharge. That surcharge would apply to all firms with 25 or more workers that don't offer health insurance to their employees, and it would amount to an astonishing eight percentage point fee above the current 15% payroll levy.
Here's the ugly income-tax math. First, Mr. Obama has promised to let the lower Bush tax rates expire after 2010. This would raise the top personal income tax rate to 39.6% from 35%, and the next rate to 36% from 33%. The Bush expiration would also phase out various tax deductions and exemptions, bringing the top marginal rate to as high as 41%.
Then add the Rangel Surtax of one percentage point, starting at $280,000 ($350,000 for couples), plus another percentage point at $400,000 ($500,000 for couples), rising to three points on more than $800,000 ($1 million) in 2011. But wait, there's more. The surcharge could rise by two more percentage points in 2013 if health-care costs are larger than advertised -- which is a near-certainty. Add all of this up and the top marginal tax rate would climb to 46%, which hasn't been seen in the U.S. since the Reagan tax reform of 1986 cut the top rate to 28% from 50%.
States have also been raising their income tax rates, so in California and New York City the top rate would be around 58%. The Tax Foundation reports that at least half of all states would have combined state-federal tax rates of more than 50%.
Mr. Rangel also wants to apply his surcharges to investment income like capital gains. So the combined effect of repealing the Bush tax cuts and the new surcharges would be to raise the tax on stock appreciation by at least 60% -- to as high as 24% from 15% today. President Obama has been worrying about a capital squeeze on small businesses, but raising the capital gains tax would only further starve them of funds.
Democrats claim these tax increases on the rich won't do any economic harm. They should read the work of Christina Romer before she became chief White House economist. Ms. Romer and her husband, David Romer, a Berkeley economist, have published multiple studies on the impact of tax policy changes over the past 100 years. One of their findings is that "tax increases appear to have a very large, sustained and highly significant negative impact on output." In other words, tax hikes are an antistimulus.
Another implication of the Rangel plan is that America's successful small businesses would pay higher tax rates than the Fortune 500, and for that matter than most companies around the world. The corporate federal-state tax rate applied to General Electric and Google is about 39% in the U.S., and the business tax rate is about 25% in the OECD countries. So the U.S. would have close to the most punitive taxes on small business income anywhere on the globe.
Mr. Rangel and House Democrats are also banking on the idea that raising tax rates by 20% will raise 20% more tax revenue, but that's like telling Wal-Mart it can raise prices by 20% and get 20% more profit. When taxes on the rich rise, their reported income tends to decline. The last time the top federal income tax rate was 50%, the richest 1% paid only about 25% of all income taxes. Today, at a 35% rate they pay nearly 40%.
A new study by the Kaufman Foundation finds that small business entrepreneurs have led America out of its last seven post-World War II recessions. They also generate about two of every three new jobs during a recovery. The more the Obama Democrats reveal of their policies, the more it's clear that they prize income redistribution above all else, including job creation and economic growth.
from the Wall Street Journal, 2009-Jul-16, by Karl Rove:
The President Moves the Economic Goalposts
The stimulus isn't working as originally advertised.So what's a president to do when the promises he made about his economic stimulus program fail to materialize? If you're Barack Obama, you redefine your goals and act as if America won't remember what you said originally. That's a neat trick if you can get away with it, but Mr. Obama won't. His words are a matter of public record and he will be held to them.
When it came to the stimulus package, the president and his administration promised, in the words of National Economic Director Larry Summers, "You'll see the effects begin almost immediately." Now it's clear that those promised jobs and growth haven't materialized.
So Mr. Obama is attempting to lower expectations retroactively, saying in an op-ed in Sunday's Washington Post that his stimulus "was, from the start, a two-year program." That is misleading. Mr. Obama never said if his stimulus were passed things might still get significantly worse in the following year.
In February, Mr. Obama said this about the goals of his stimulus package: "I think my initial measure of success is creating or saving four million jobs." He later explained the stimulus's $787 billion would "go directly to . . . generating three to four million new jobs." And his Council of Economic Advisors issued an official analysis showing that the unemployment rate would top out in the third quarter of this year at just over 8%.
That quarter began on July 1, and unemployment is now 9.5%, up from 7.6% when Mr. Obama took office. There are 2.6 million fewer Americans working than there were on the day Mr. Obama was sworn in. The president says now that unemployment will exceed 10% this year, and his advisers say it will remain high through much of next year.
Earlier this year, Mr. Obama assured us that most of the stimulus money "will go out the door immediately." But it hasn't. Only about 7.7% of the stimulus has been spent in the six months since its passage, and more of it will be spent in the program's last eight years than in its first year. So now the president claims he said something different. "We also knew that it would take some time for the money to get out the door," Mr. Obama said in his weekly radio address on Saturday.
One problem with Mr. Obama's stimulus bill that is rarely talked about is that it will force a huge, and likely permanent, increase in discretionary, domestic spending. That portion of federal spending was $393 billion in President George W. Bush's last budget. Democrats immediately raised it to $408 billion for this fiscal year and now face the question of whether to make the stimulus a one-time expenditure or a permanent spending increase.
Federal education spending is a good example. As part of the stimulus, Mr. Obama nearly doubled education spending to $80 billion from $41 billion. If Congress adds that and other stimulus spending into the baseline for future budgets, discretionary domestic spending could mushroom to $550 billion or $600 billion next year. If that happens, Mr. Obama will have broken his pledge that the stimulus would be temporary spending.
As is Mr. Obama's habit, he has answered his critics by creating straw-man arguments. In last weekend's radio address, he attacked detractors as those who "felt that doing nothing was somehow an answer." But many of Mr. Obama's critics didn't feel that way. They offered -- and Mr. Obama almost completely ignored -- constructive ideas to jump-start the economy.
For example, House Republicans offered an alternative recovery package of immediate tax cuts and safety-net measures that cost half as much as Mr. Obama's stimulus program. Republicans have also calculated that their plans would have created 50% more jobs than the stimulus. They reached that estimate by using the same job-growth econometric model that the president's Council of Economic Advisors used for the stimulus.
While in Moscow recently, Mr. Obama answered questions on whether his administration had misread the economy by saying "there's nothing that we would have done differently." Let me suggest two things: He could have proposed pro-growth policies rather than ones that retard economic recovery with a massive increase in deficit spending. And he could fulfill his promise to speak to us honestly rather than selling his proposals with promises and goals he rapidly discards.
In his 1946 essay "Politics and the English Language," George Orwell wrote about words used in a "consciously dishonest way." "That is," Orwell wrote, "the person who uses them has his own private definition, but allows his hearer to think he means something quite different." Americans are right to wonder if their president is using his own private definitions for the words he uses to sell his policies.
Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.
from the Wall Street Journal, 2009-May-26, p.A17, by Bret Stephens:
Obama and the 'South Park' Gnomes
Too many initiatives that require a leap of faith.Sometimes it takes "South Park" to explain life's deeper mysteries. Like the logic of the Obama administration's policy proposals.
Consider the 1998 "Gnomes" episode -- possibly surpassing Milton Friedman's "Free to Choose" as the classic defense of capitalism -- in which the children of South Park, Colo., get a lesson in how not to run an enterprise from mysterious little men who go about stealing undergarments from the unsuspecting and collecting them in a huge underground storehouse.
What's the big idea? The gnomes explain:
"Phase One: Collect underpants.
"Phase Two: ?
"Phase Three: Profit."
Lest you think there's a step missing here, that's the whole point. ("What about Phase Two?" asks one of the kids. "Well," answers a gnome, "Phase Three is profits!") This more or less sums up Mr. Obama's speech last week on Guantanamo, in which the president explained how he intended to dispose of the remaining detainees after both houses of Congress voted overwhelmingly against bringing them to the U.S.
The president's plan can briefly be described as follows. Phase One: Order Guantanamo closed. Phase Two: ? Phase Three: Close Gitmo!
Granted, this is an abbreviated exegesis of his speech, which did explain how some two-thirds of the detainees will be tried by military commissions or civilian courts, or repatriated to other countries. But on the central question of the 100-odd detainees who can neither be tried in court nor released one searches in vain for an explanation of exactly what the president intends to do.
Now take the administration's approach to the Middle East. Phase One: Talk to Iran, Syria, whoever. Phase Two: ? Phase Three: Peace!
In this case, the administration seems to think that diplomacy, like aspirin, is something you take two of in the morning to take away the pain. But as Boston University's Angelo Codevilla notes in his book, "Advice to War Presidents," diplomacy "can neither create nor change basic intentions, interests, or convictions. . . . To say, 'We've got a problem. Let's try diplomacy, let's sit down and talk' abstracts from the important questions: What will you say? And why should anything you say lead anyone to accommodate you?"
Ditto for Mr. Obama's approach to nuclear weapons. In a speech last month in Prague, right after North Korea had illegally tested a ballistic missile, Mr. Obama promised a new nonproliferation regime, along with "a structure in place that ensures when any nation [breaks the rules], they will face consequences." Whereupon the U.N. Security Council promptly failed to muster the votes for a resolution condemning Pyongyang's launch.
Now Kim Jong Il has tested another nuke, and we're back at the familiar three-step. Phase One: Propose a "structure." . . .
It was also in his Prague speech that Mr. Obama repeated his pledge to "confront climate change by ending the world's dependence on fossil fuels, by tapping the power of new sources of energy like the wind and sun."
Never mind that neither the wind nor the sun are new sources of energy. It so happens that the U.S. gets about 2.3% of its energy resources from "renewable" resources of the kind the president advocates while fossil fuels account for about 70%. The reason for this, alas, has nothing to do with the greed of the oil majors. But it has much to do with something known as "energy density": Crude oil has almost three times as much of it as switchgrass, supposedly the Holy Grail of our green future. A related problem is that heat invariably dissipates, meaning that it will always be difficult to turn diffuse sources of energy, like wind, into concentrated ones.
In Gnome-speak, then, Mr. Obama's energy policy goes something like this: Phase One: Inaugurate the era of "green" energy. Phase Two: Overturn the first and second laws of thermodynamics. Phase Three: Carbon neutrality!
Take any number of Mr. Obama's other initiatives. Rescue Detroit? Phase One: Set a national mileage standard for passenger cars of 39 miles per gallon and force auto makers to make the kind of cars that drove them to bankruptcy in the first place.
Reduce the deficit? Phase One: Approve $3.5 trillion in government stimulus, and then await the mythical Keynesian multiplier.
Pay for a $1.2 trillion health-care reform? Phase One: scrounge around for about $60 billion in new "sin tax" revenue.
Actually, we can easily guess how Mr. Obama intends to make up the difference on this last item: To wit, by taxing health benefits. Taxes, subsidies funded by taxes, regulations and mandates will also fill in many (though not all) of the other blanks. Underpants gnomes: meet Phase Two. Say, what happened to profits?
from the Washington Times, 2009-Jul-6, by Mark Steyn:
Obama isn't cool -- the globe is
Europeans and Canadians are learning . . . we're notPresident Obama was supposed to be "cool." But he isn't. He's square. Not just mildly so, but embarrassingly square.
He's squaresville squared. It's as if you're having a party with your friends and he's the cringe-making middle-aged parent who wants to show he digs where the young people are at by grooving around in the middle of the dance floor all night long.
How do I know? I've been there, and I've been square. By "there," I mean I've been in places that have tried all the cool Obama dance moves and eventually wised up to what utter clunkers they are.
A week ago, the House of Representatives passed some gargantuan "cap-and-trade" bill designed to "save the environment." Paul Krugman, the Nobel Prize-winning economist, accused those Neanderthals who voted against the bill of committing "treason against the planet." By that standard, most of the planet is guilty of treason against the planet. I don't mean just in the sense that China, already the world's No. 1 carbon dioxide emitter, and India and other rising economic powers have absolutely no intention of doing what the Democrats have done, no way, no how -- because they don't see why they should stay poor just because New York Times columnists think it's good for them.
No, I mean most of the developed world already has gone down the paved road of good intentions and is frantically trying to pedal up out of it. New Zealand was one of the few Western nations to sign on to Kyoto and then attempt to abide by it -- until the New Zealanders realized they could only do so by destroying their economy. They introduced a Democratic-style cap-and-trade regime -- and last year they suspended it. In Australia, the Labor government postponed its emissions-reduction program until 2011, and the Aussie Senate may scuttle it. The Obama administration has gotten to the climate-change hop just as the glitter ball has stopped whirling and the band is packing up its instruments.
The congressional cap-and-trade shtick would be tired even if weren't the familiar boondoggle of tax increases, big-government micro-regulation, and pork-a-palooza payoffs to preferred clients of the Democratic Party.
Granted that carbon credits already were a dubious racket equivalent to the sale of "indulgences" in medieval Europe, the decision by congressional power brokers to give away credits to well-connected Democratic Party interests surely represents the environmental movement's formal jumping of the endangered great white shark.
Back at the New York Times, Thomas Friedman agreed the bill "stinks" and says "it's a mess" and he "detests" it but we nevertheless need to pass it because his "gut" tells him so.
Maybe his gut is really telling him the New York Times canteen's daily specials have been adversely affected by the company's collapsing share price. Who knows?
At any rate, for reasons not entirely obvious from his prose style, the eminent columnist believes himself to have a special influence on the youth of today and so directed the grand finale of his gut's analysis to them especially: "Attention all young Americans," he proclaimed. "You want to make a difference? Then get out of Facebook and into somebody's face. Get a million people on the Washington Mall calling for a price on carbon."
Perhaps it'll work. Getting into Mr. Friedman's face, I see the ruddy bloom of late middle age has not yet faded from it, so maybe, as his command of the lingo shows, he is hep to the scene. Maybe the kids will abandon their Tweet cred for street cred. Maybe they'll get outta MySpace and into Sen. Robert C. Byrd's parking space.
I don't know how Mr. Friedman defines "young," but let's be generous: If you're 29, there has been no global warming for your entire adult life. If you're graduating high school, there has been no global warming since you entered first grade. There has been no global warming this century. None.
Admittedly, the 21st century is only one century out of the many centuries of planetary existence, but it happens to be the one you're stuck living in. Alan Carlin, in a report for the Environmental Protection Racket -- whoops, Environmental Protection Agency -- that the agency attempted to suppress, says:
"Fossil fuel and cement emissions increased by 3.3 percent per year during 2000-2006, compared to 1.3 percent per year in the 1990s. Similarly, atmospheric C02 concentrations increased by 1.93 parts per million per year during 2000-2006, compared to 1.58 ppm in the 1990s. And yet, despite accelerating emission rates and concentrations, there's been no net warming in the 21st century, and more accurately, a decline."
The Obama administration is getting into the global-warming beads and kaftan just as everyone else is beginning to toss 'em into the recycling bin. Same with government automobiles: Been there, drove that -- from Eastern Europe to Northern Ireland.
There's something weirdly parochial about Mr. Obama, the supposed "citizen of the world." A recent piece of mine about "the Europeanization of America" prompted Randall Hoven of the American Thinker to respond that this was unfair ... to Europeans. He has a point. While the United States is going full throttle for Scandinavia-a-go-go, the Continentals have begun to discern to the limits of Europeanization. In 2007, government spending in Europe averaged 46.2 per cent of gross domestic product (GDP); in America it was 37.4 percent, of which 20 percent was federal.
A mere two years later, federal spending is up to 28.5 percent, so, even if state and local spending stand still, we're at 46 percent - the European average. But, as Mr. Hoven points out, the real story is that we're at 46 percent and climbing, the Continentals are at 46 percent and heading down.
In 1993, government spending averaged 52.2 percent in Europe, and 70.9 percent in Sweden. The Swedes have reduced government spending (as a fraction of GDP) by almost a third in the last 15 years. Their corporate tax rates are lower than ours. And that's before Mr. Obama raised them.
Last week, the donut chain Tim Hortons, which operates on both sides of the border but is incorporated in the state of Delaware, announced it was reorganizing itself as a Canadian corporation to take advantage of Canadian tax rates.
"To take advantage of Canadian tax rates"? What kind of cockamamie phrase is that? And who would have thought any columnist south of the border would ever have cause to type it?
The Europeans have figured out that you can be too European for your own good, and they are trying to reacquaint themselves with the real world. Not Mr. Obama. Damn the torpedoes! Full speed ahead! Male unemployment has hit 10 percent? The stimulus is a bust? It's stimulating nothing but non-jobs like executive stimulus coordinator for community organization stimulus assistance programs? Hey, let's spend even more, even faster, even less stimulatingly!
Mr. Obama, House Speaker Nancy Pelosi, Rep. Barney Frank and their chums are spending at a rate that threatens American stability. And, except for the scale and the dollar figure, it all has been tried before, and it all has failed before.
There's nothing cool about Mr. Obama. He's a nonstop square dance, swinging us around till we're dozy and he's got all the dough.
Mark Steyn is the author of the New York Times best-seller "America Alone."
from the Washington Post, 2009-Jul-11, by Lori Montgomery:
Democrats Agree on Tax Hike to Fund Health Care
House Democrats agreed yesterday to raise taxes on the wealthy to pay for a sweeping expansion of the nation's health-care system, proposing a surtax on the highest earners that could send the top federal tax rate toward 45 percent.
Beginning in 2011, the plan would target all income over $350,000 a year for families and $280,000 a year for individuals, Democratic sources said. The surtax would start at 1 percent, rise to around 1.5 percent for families earning more than $500,000, then step up again, to around 3 percent, for families earning more than $1 million, Democrats said.
That would raise about $550 billion over the next decade, Democrats said -- about half the cost of reforms that are expected to cost about $1 trillion. The surtax percentages could rise two years later, they added, if lawmakers think additional cash is needed to cover the cost of health-care reform.
The top federal tax rate currently stands at 35 percent, but Democrats have vowed to raise it to 39.6 percent next year, when cuts enacted during the Bush administration expire. Combined with other federal tax adjustments, the surtax could leave most taxpayers with annual incomes more than $350,000 facing top federal rates of at least 45 percent, said Robert Carroll, a senior fellow at the nonprofit Tax Foundation.
"One has to decide whether the health-care reform package they're talking about is worth imposing such high tax rates on the most productive members of society," Carroll said.
Republicans assailed the idea, saying the new tax would fall heavily on small-business owners, who tend to report business income on their personal tax returns.
"In the middle of a serious recession, with unemployment nearing double digits nationwide, the last thing we need is a tax increase on small businesses, which will cost the American economy even more jobs," said Michael Steel, spokesman for House Minority Leader John A. Boehner (Ohio).
Democrats said their decision was guided by President Obama's pledge to protect middle-class families from higher taxes. Though wealthier families would face larger tax bills, Rep. Allyson Y. Schwartz (D-Pa.) said health reform, "if this works right," should significantly lower their insurance premiums.
Schwartz said that Democrats on the House Ways and Means Committee, who had been haggling for days over how to pay for Obama's signature domestic initiative, are concerned about imposing such high taxes on income. She said Democrats hope eventually to rework the tax code, a task "we left for another day."
The agreement allows House leaders to move forward with plans to unveil health legislation Monday and bring it to a vote before the full body before the August break.
The schedule is less clear in the Senate, where the debate has been bogged down by a dispute over whether to tax for the first time the health benefits that millions of workers receive through employers.
Yesterday, one of the negotiators, Sen. Kent Conrad (D-N.D.), told Bloomberg TV that he does not expect a Senate vote until after the month-long August recess.
from the Wall Street Journal, 2009-May-18, p.A17, by Arthur Laffer and Stephen Moore:
Soak the Rich, Lose the Rich
Americans know how to use the moving van to escape high taxes.With states facing nearly $100 billion in combined budget deficits this year, we're seeing more governors than ever proposing the Barack Obama solution to balancing the budget: Soak the rich. Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% or 5% of their citizens. New Illinois Gov. Patrick Quinn wants a 50% increase in the income tax rate on the wealthy because this is the "fair" way to close his state's gaping deficit.
Mr. Quinn and other tax-raising governors have been emboldened by recent studies by left-wing groups like the Center for Budget and Policy Priorities that suggest that "tax increases, particularly tax increases on higher-income families, may be the best available option." A recent letter to New York Gov. David Paterson signed by 100 economists advises the Empire State to "raise tax rates for high income families right away."
Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.
And the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.
Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.
Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.
Martin Feldstein, Harvard economist and former president of the National Bureau of Economic Research, co-authored a famous study in 1998 called "Can State Taxes Redistribute Income?" This should be required reading for today's state legislators. It concludes: "Since individuals can avoid unfavorable taxes by migrating to jurisdictions that offer more favorable tax conditions, a relatively unfavorable tax will cause gross wages to adjust. . . . A more progressive tax thus induces firms to hire fewer high skilled employees and to hire more low skilled employees."
More recently, Barry W. Poulson of the University of Colorado last year examined many factors that explain why some states grew richer than others from 1964 to 2004 and found "a significant negative impact of higher marginal tax rates on state economic growth." In other words, soaking the rich doesn't work. To the contrary, middle-class workers end up taking the hit.
Finally, there is the issue of whether high-income people move away from states that have high income-tax rates. Examining IRS tax return data by state, E.J. McMahon, a fiscal expert at the Manhattan Institute, measured the impact of large income-tax rate increases on the rich ($200,000 income or more) in Connecticut, which raised its tax rate in 2003 to 5% from 4.5%; in New Jersey, which raised its rate in 2004 to 8.97% from 6.35%; and in New York, which raised its tax rate in 2003 to 7.7% from 6.85%. Over the period 2002-2005, in each of these states the "soak the rich" tax hike was followed by a significant reduction in the number of rich people paying taxes in these states relative to the national average. Amazingly, these three states ranked 46th, 49th and 50th among all states in the percentage increase in wealthy tax filers in the years after they tried to soak the rich.
This result was all the more remarkable given that these were years when the stock market boomed and Wall Street gains were in the trillions of dollars. Examining data from a 2008 Princeton study on the New Jersey tax hike on the wealthy, we found that there were 4,000 missing half-millionaires in New Jersey after that tax took effect. New Jersey now has one of the largest budget deficits in the nation.
We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.
Those who disapprove of tax competition complain that lower state taxes only create a zero-sum competition where states "race to the bottom" and cut services to the poor as taxes fall to zero. They say that tax cutting inevitably means lower quality schools and police protection as lower tax rates mean starvation of public services.
They're wrong, and New Hampshire is our favorite illustration. The Live Free or Die State has no income or sales tax, yet it has high-quality schools and excellent public services. Students in New Hampshire public schools achieve the fourth-highest test scores in the nation -- even though the state spends about $1,000 a year less per resident on state and local government than the average state and, incredibly, $5,000 less per person than New York. And on the other side of the ledger, California in 2007 had the highest-paid classroom teachers in the nation, and yet the Golden State had the second-lowest test scores.
Or consider the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation -- much worse than those in New Hampshire. Most of the massive infusion of tax dollars over the past 40 years has simply enriched the public-employee unions in the Garden State. People are fleeing the state in droves.
One last point: States aren't simply competing with each other. As Texas Gov. Rick Perry recently told us, "Our state is competing with Germany, France, Japan and China for business. We'd better have a pro-growth tax system or those American jobs will be out-sourced." Gov. Perry and Texas have the jobs and prosperity model exactly right. Texas created more new jobs in 2008 than all other 49 states combined. And Texas is the only state other than Georgia and North Dakota that is cutting taxes this year.
The Texas economic model makes a whole lot more sense than the New Jersey model, and we hope the politicians in California, Delaware, Illinois, Minnesota and New York realize this before it's too late.
Mr. Laffer is president of Laffer Associates. Mr. Moore is senior economics writer for the Wall Street Journal. They are co-authors of "Rich States, Poor States" (American Legislative Exchange Council, 2009).
from the Associated Press, 2009-May-22, by Juliet Williams, with Judy Lin, Tom Verdin and Samantha Young contributing:
California faces its day of fiscal reckoning
SACRAMENTO, Calif. — The day of reckoning that California has been warned about for years has arrived. The longest recession in generations and the defeat this week of a package of budget-balancing ballot measures are expected to lead to state spending cuts so deep and so painful that they could rewrite the social contract between California and its citizens. They could also force a fundamental rethinking of the proper role of government in the Golden State.
"The voters are getting what they asked for, but I'm not sure at the end of the day they're going to like what they asked for," said Jim Earp, executive director of the California Alliance for Jobs, which represents the hard-hit construction industry. "I think we've crossed a threshold in many ways."
California is looking at a budget deficit projected at more than $24 billion when the new fiscal year starts in July. That is more than one-quarter of the state's general fund.
This week, voters said they no longer want the Legislature to balance budgets with higher taxes, complicated transfer schemes or borrowing that pushes California's financial problems off into the distant future. In light of that, Republican Gov. Arnold Schwarzenegger has made it clear he intends to close the gap almost entirely through drastic spending cuts.
The governor's cutbacks could include ending the state's main welfare program for the poor, eliminating health coverage for about 1.5 million poor children, halting cash grants for about 77,000 college students, shortening the school year by seven days, laying off thousands of state workers and teachers, slashing money for state parks and releasing thousands of prisoners before their sentences are finished.
"I understand that these cuts are very painful and they affect real lives," Schwarzenegger said. "This is the harsh reality and the reality that we face. Sacramento is not Washington — we cannot print our own money. We can only spend what we have."
He also has advocated selling state assets to raise cash, including the Los Angeles Memorial Coliseum and San Quentin State Prison.
The Democrats who control the Legislature do not want major spending cuts, but so far they don't have a plan for closing the deficit. And if their solution is higher taxes and more borrowing, they will probably not have enough Republican votes to get the two-thirds approval needed for passage.
The crisis is a sort of political comeuppance for Schwarzenegger, who took over a state with a projected $16 billion gap in 2003 and promised to end California's "crazy deficit spending."
The gap has two primary causes: The state has been living beyond its means for years by spending generously on all sorts of programs that the voters, the politicians and the special interests wanted. And the recession has hammered California's economy.
Personal income declined this year for the first time since 1938 and unemployment is 11 percent, one of the highest rates in the nation. Nearly $13 billion in tax increases and $15 billion in cuts enacted earlier this year, as well as billions in federal stimulus money, have not been enough to make up for the drop-off in revenue.
"This is the year everything has fallen apart," said outgoing Assembly Minority Leader Mike Villines, a Republican from the Central Valley. "We don't have an alternative. We're literally at the day of reckoning and have to cut it all out."
The drastic cuts that appear to lie ahead will, by accident, accomplish the stark reduction in state government that many Republicans have long advocated.
"We should have been limiting the growth of government for years," Villines said.
The crisis also has prompted talk of a complete overhaul of the way California government operates.
A group of business leaders and good-government groups has begun the process of calling for a convention to rewrite the California Constitution.
A separate commission is expected to release a proposal to rework the state's tax structure, which is vulnerable to booms and busts in California's economy because it relies heavily on high-income earners. The state also has few limits on what state government can spend and a small rainy day fund that can easily be raided by the politicians.
Former Assembly Speaker Bob Hertzberg, a Democrat who has joined a group seeking to change the state's budget system, said too many services that used to be performed by local governments have been taken over by the state because of a landmark 1978 ballot measure that drastically limited property tax revenue. Hertzberg said the programs, and the money, need to be sent back to counties and cities.
"The real problem of California is that we need to bring government closer to the people, so that the role of the state is much narrower. We need to focus on big-picture stuff," he said.
In the near term, the huge cuts that are about to hit will probably affect nearly every one of the state's 38 million residents. Schwarzenegger's latest budget proposal, for example, would eliminate health care coverage for more than 2 million people, about 1.5 million of them children, said Anthony Wright, executive director of Health Access California.
"It would place their families in financial jeopardy for any ailment, injury," he said. "A child won't be able to see a dentist if they have a toothache or see a doctor if they don't have the ability to see the blackboard at school."
The state also faces a related problem: Every year, California borrows money on the bond market to cover its day-to-day expenses and pays it back when tax receipts flow in. But the tight credit market and questions about California's ability to repay its obligations could make borrowing difficult or extremely expensive this fall.
Schwarzenegger and some Democratic lawmakers have asked the Obama administration for a federal loan guarantee — or what some are calling a bailout. The move would be virtually unprecedented and would require the approval of a reluctant Congress.
from the Los Angeles Times, 2009-May-20, by Michael Finnegan:
California voters exercise their power -- and that's the problem
Residents relish their role in the lawmaking process, but they share the blame for the state's severe dysfunction.Californians are well known for periodic voter revolts, but on Tuesday they did more than just lash out at Gov. Arnold Schwarzenegger and the Legislature over the state's fiscal debacle.
By rejecting five budget measures, Californians also brought into stark relief the fact that they, too, share blame for the political dysfunction that has brought California to the brink of insolvency.
Rightly or wrongly, voters in the special election refused either to extend new tax hikes or to cap state spending. They also declined to unlock funds that they had voted in better financial times to set aside for special purposes.
Nearly a century after the Progressive-era birth of the state's ballot-measure system, it is clear that voters' fickle commands, one proposition at a time, are a top contributor to paralysis in Sacramento. And that, in turn, has helped cripple the capacity of the governor and Legislature to provide effective leadership to a state of more than 38 million people.
Clogged freeways, the decline of public schools, an outdated water system and a battered economy are just a few of the challenges demanding action by state leaders. Instead, they are consumed by yet another budget crisis, one that voters worsened Tuesday.
"No one's really stepping back and confronting the harsh realities that face our state in a critical sense, because of constraints put on our elected leaders," said Mark Baldassare, president of the Public Policy Institute of California. "We're unable to focus on the long term and the big picture at a time when we desperately need to do so."
The results Tuesday fit Californians' long-standing pattern of demanding what is ultimately irreconcilable, all the more so in an economic downturn: lower taxes and higher spending.
"We all want a free lunch, but unfortunately that doesn't exist," said former Gov. Gray Davis, whose 2003 recall stemmed largely from a budget crisis brought on by the dot-com bust. For decades, Davis said, Californians have been "papering over this fundamental reality that the state has been living beyond its means."
Davis and many other elected officials bear some responsibility for that. But so do voters.
In the Proposition 13 tax rebellion of 1978, Californians voted to require a two-thirds approval by the Legislature to raise taxes, a major obstacle to budget agreements. Over the last couple of decades, voters have also passed a patchwork of ballot measures directing billions of dollars to favorite causes, among them public schools and transportation projects.
On Tuesday, Californians showed they were unwilling to scale back their demands in tight times: Voters turned down propositions that would have freed up money that they set aside years ago for mental-health and children's programs.
"The irony is that the more the hands of the Legislature and governor are tied up, the more frustrated people are," said Tim Hodson, director of the Center for California Studies at Cal State Sacramento.
Together, voters' piecemeal decisions since the 1970s have effectively "emasculated the Legislature," said John Allswang, a retired Cal State L.A. history professor.
"They're looking for cheap answers -- throw the guys out of power and put somebody else in, or just blame the politicians and pretend you don't have to raise taxes when you need money," he said.
"This is what the public wants, and they deceive themselves constantly. They're not realistic."
The public's contradictory impulses were laid bare by a recent Field Poll. It found that voters oppose cutbacks in 10 of 12 major categories of state spending, including the biggest, education and healthcare. Yet most voters were unwilling to have their own taxes increased, and they overwhelmingly favored keeping the two-thirds requirement for tax hikes.
"They clearly want more in services than they're willing to pay for in taxes," said Ethan Rarick, director of the Robert T. Matsui Center for Politics and Public Service at UC Berkeley.
Also intensifying California's troubles is a surge in debt, often with voter consent at the ballot box, which makes future budgets harder and harder to balance. Under Davis, outstanding general-obligation debt jumped from $26 billion to $37 billion; it has soared to more than $70 billion under Schwarzenegger, according to the state treasurer's office.
Adding to the state's difficulties is the complexity of many ballot measures, no doubt a factor in the defeat of the main budget measures that lawmakers put before voters Tuesday.
"We pay the legislators to go to Sacramento and figure these things out," said Denise Spooner, a lecturer on California history at Cal State Fullerton.
As for the cumulative problems created by the last few decades of ballot-measure voting, she said, "I certainly don't think this is what the Progressives had in mind."
To John Hein, a veteran Sacramento campaign consultant, the absence of any master vision by voters appears to be a key flaw in the state's recent history with ballot measures.
"They kind of take each issue in a microcosm, rather than relate the decision to prior decisions, or future decisions that they might make," he said. "Voters don't think about the consequences of how one thing fits with another."
Others point to the term limits that voters imposed on state officials in 1990 as an enduring problem. Lawmakers who focus on quick career advancement tend to neglect California's long-term problems, they say.
Whatever the ups and downs of the proposition system, California's voters have seen themselves for a full century as "the arbiters of the future of the state," said social historian D.J. Waldie. To Waldie, the grim circumstances of Tuesday's election suggest that they are losing faith in any grand ambitions for public investment in California's future.
"I'm rather pessimistic at this point," he said. "We're reaching the point where Californians are throwing in the towel."
from the Washington Post, 2009-Apr-17, web-posted 2009-Apr-16, by Charles Krauthammer:
The Sting, In Four Parts
Franklin Roosevelt gave us the New Deal. John Kennedy gave us the New Frontier. In a major domestic policy address at Georgetown University this week, Barack Obama promised -- eight times -- a "New Foundation." For those too thick to have noticed this proclamation of a new era in American history, the White House Web site helpfully titled its speech excerpts "A New Foundation."
As it happens, Obama is not the first to try this slogan. President Jimmy Carter peppered his 1979 State of the Union address with five "New Foundations" (and eight more just naked "foundations"). Like most of Carter's endeavors, this one failed, perhaps because (as I recall it being said at the time) it sounded like the introduction of a new kind of undergarment.
Undaunted, Obama offered his New Foundation speech as the complete, contextual, canonical text for the domestic revolution he aims to enact. It had everything we have come to expect from Obama:
The Whopper: The boast that he had "identified $2 trillion in deficit reductions over the next decade." It takes audacity to repeat this after it had been so widely exposed as transparently phony. Most of this $2 trillion is conjured up by refraining from spending $180 billion a year for 10 more years of surges in Iraq. Hell, why not make the "deficit reductions" $10 trillion -- the extra $8 trillion coming from refraining from repeating the $787 billion stimulus package annually through 2019.
The Puzzler: He further boasted of his frugality by saying that his budget would reduce domestic discretionary spending as a share of GDP to the lowest level ever recorded. Amazing. Squeezing discretionary domestic spending at a time of hugely expanding budgets is merely the baleful residue of out-of-control entitlements and debt service, which will increase astronomically under Obama. To claim these as achievements in fiscal responsibility is testament not to Obama's frugality but to his brazenness.
The Non Sequitur: "To make sure such a crisis [as we have today] never happens again," Obama proposes his radical health-care, energy and education reforms, the central pillars of his social democratic agenda. But Obama's own words contradict this assertion. Notes The Post: "But as his admirable summation of recent history made clear, these pursuits have little to do with the economic crisis, and they are not the key to economic recovery." Obama rarely fails to repeat this false connection. A crisis -- and the public's resulting pliability to liberal social engineering -- is a terrible thing to waste.
The Swindle: The Obama administration is spending money like none other in peacetime history. Obama is smart. He knows this is fiscally unsustainable. He has let it be known privately and publicly that he intends to cure the imbalance with entitlement reform.
An excellent strategy. If it takes throwing nearly $1 trillion of "porky" (to quote Sen. Charles Schumer) stimulus spending to soften up a Democratic Congress and make it amenable to real entitlement reform, then fine. Reforming Social Security, Medicare and Medicaid would save tens of trillions of dollars, and make the current money-from-helicopters spending almost trivial by comparison.
In the New Foundation speech, Obama correctly (again) identifies the skyrocketing cost of Medicare and Medicaid as the key fiscal problem. But then he claims that Medicaid and Medicare reform is the same as his health-care reform, fatuously citing as his authority a one-day meeting of handpicked interested parties at his "Fiscal Responsibility Summit."
Here's the problem. The heart of Obama's health-care reform is universality. Covering more people costs more money. That is why Obama's budget sets aside an extra $634 billion in health-care spending, a down payment on an estimated additional spending of $1 trillion. How does the administration curtail the Medicare and Medicaid entitlement by adding yet another (now universal) health-care entitlement that its own estimate acknowledges increases costs by about $1 trillion?
Which is why in his March 24 news conference, Obama could not explain how -- when the near-term stimulative spending is over and his ambitious domestic priorities kick in, promising sustained prosperity and deficit reduction -- the deficits at the end of the coming decade are rising, not falling. The Congressional Budget Office has deficits increasing in the last seven years of the decade from an already unsustainable $672 billion annually to $1.2 trillion by 2019.
This is the sand on which the new foundation is constructed. Obama has the magic to make words mean almost anything. Numbers are more resistant to his charms.
from the Washington Post, 2009-Apr-24, by Charles Krauthammer:
Obama: The Grand Strategy
Unified theory of Obamaism, fifth (final?) installment:
In the service of his ultimate mission -- the leveling of social inequalities -- President Obama offers a tripartite social democratic agenda: nationalized health care, federalized education (ultimately guaranteed through college) and a cash-cow carbon tax (or its equivalent) to subsidize the other two.
Problem is, the math doesn't add up. Not even a carbon tax would pay for Obama's vastly expanded welfare state. Nor will Midwest Democrats stand for a tax that would devastate their already crumbling region.
What is obviously required is entitlement reform, meaning Social Security and Medicare/Medicaid. That's where the real money is -- trillions saved that could not only fund hugely expensive health and education programs but also restore budgetary balance.
Except that Obama has offered no real entitlement reform. His universal health-care proposal would increase costs by perhaps $1 trillion. Medicare/Medicaid reform is supposed to decrease costs.
Obama's own budget projections show staggering budget deficits going out to 2019. If he knows his social agenda is going to drown us in debt, what's he up to?
He has an idea. But he dare not speak of it yet. He has only hinted. When asked in his March 24 news conference about the huge debt he's incurring, Obama spoke vaguely of "additional adjustments" that will be unfolding in future budgets.
Rarely have two more anodyne words carried such import. "Additional adjustments" equals major cuts in Social Security and Medicare/Medicaid.
Social Security is relatively easy. A bipartisan commission (like the 1983 Alan Greenspan commission) recommends some combination of means testing for richer people, increasing the retirement age and a technical change in the inflation measure (indexing benefits to prices instead of wages). The proposal is brought to Congress for a no-amendment up-or-down vote. Done.
The hard part is Medicare and Medicaid. In an aging population, how do you keep them from blowing up the budget? There is only one answer: rationing.
Why do you think the stimulus package pours $1.1 billion into medical "comparative effectiveness research"? It is the perfect setup for rationing. Once you establish what is "best practice" for expensive operations, medical tests and aggressive therapies, you've laid the premise for funding some and denying others.
It is estimated that a third to a half of one's lifetime health costs are consumed in the last six months of life. Accordingly, Britain's National Health Service can deny treatments it deems not cost-effective -- and if you're old and infirm, the cost-effectiveness of treating you plummets. In Canada, they ration by queuing. You can wait forever for so-called elective procedures like hip replacements.
Rationing is not quite as alien to America as we think. We already ration kidneys and hearts for transplant according to survivability criteria as well as by queuing. A nationalized health insurance system would ration everything from MRIs to intensive care by myriad similar criteria.
The more acute thinkers on the left can see rationing coming, provoking Slate blogger Mickey Kaus to warn of the political danger. "Isn't it an epic mistake to try to sell Democratic health care reform on this basis? Possible sales pitch: 'Our plan will deny you unnecessary treatments!' . . . Is that really why the middle class will sign on to a revolutionary multitrillion-dollar shift in spending -- so the government can decide their life or health 'is not worth the price'?"
My own preference is for a highly competitive, privatized health insurance system with a government-subsidized transition to portability, breaking the absurd and ruinous link between health insurance and employment. But if you believe that health care is a public good to be guaranteed by the state, then a single-payer system is the next best alternative. Unfortunately, it is fiscally unsustainable without rationing.
Social Security used to be the third rail of American politics. Not anymore. Health-care rationing is taking its place -- which is why Obama, the consummate politician, knows to offer the candy (universality) today before serving the spinach (rationing) tomorrow.
Taken as a whole, Obama's social democratic agenda is breathtaking. And the rollout has thus far been brilliant. It follows Kaus's advice to "give pandering a chance" and adheres to the Democratic tradition of being the party that gives things away, while leaving the green-eyeshade stinginess to those heartless Republicans.
It will work for a while, but there is no escaping rationing. In the end, the spinach must be served.
from the Wall Street Journal, 2009-May-12, p.A16:
Signing On to an Obama 'Dream'
Health providers agree to Obama health plan's notion of cost savings.At a news conference yesterday, President Obama said, "I will not rest until the dream of health-care reform is achieved in the United States of America." Normally dreams cost you nothing, but Mr. Obama's determination not to rest until his becomes reality is likely to cost plenty. Yesterday a coalition of private health-system providers, seeing no exit from the administration's reform plans, signed on to the dream.
They agreed in principle to try to shave 1.5 percentage points off the growth rate of U.S. health-care costs over the next decade, about $2 trillion. This vague, probably illusory promise isn't much as a matter of policy, but it is a major political development in what is the Obama Presidency's No. 1 priority.
The private groups are calculating that they can better influence this year's bill if they're "partners" instead of villains. They've no doubt seen what happened to Wall Street and Chrysler bondholders. All the same, they must surely know they have made a Faustian bargain that in time will result in price controls and restrictions on care.
The Obama Administration, by contrast, is convinced that it is smart enough to engineer more efficient medical practices out of D.C. The dominant White House voice on health policy is Peter Orszag, the budget chief. He cites research out of Dartmouth that shows health-care spending varies wildly between regions, often with little or no correlation to health outcomes.
Mr. Orszag champions "comparative effectiveness research" -- studying the patterns of clinical practice to determine which drugs and treatments work best. The Administration thinks it can use such analysis to weed out wasteful or unnecessary care by paying more "if the treatment has been shown to be effective and a little less if not," as Mr. Orszag recently told the New Yorker.
The irony is that the history of post-1965 U.S. health care policy is littered with similar government attempts to control health spending, not least comparative effectiveness. The "managed care" movement of the 1990s grew directly out of the peer-review panels created by Congress in 1972 to monitor the quality and appropriateness of care for Medicare and Medicaid patients.
Under managed care, doctors and hospitals had to undergo prior "utilization review" by HMOs to reduce unnecessary hospitalizations, surgeries, tests, prescriptions and so on. This cost-effectiveness gatekeeping disciplined health spending. What happened next to this version of the dream is known to all.
Administrative hassles led to a consumer backlash, with patients feeling they were getting inferior care in return for insurer profits. The political class eventually forced the HMOs to dilute or end most of their cost-control strategies.
Democrats have now acknowledged that the managed care dream will work only if government is the one doing the managing. That is, we can only control costs with a new government entitlement. More is less.
But you can only allocate a scarce resource in two ways: market prices or brute force. In health care the brute force will come as price controls and waiting lines for rationed services. The implicit assumption in the providers' deal announced yesterday seems to be that the private companies will do the price controlling so the government won't have to do it for them.
But when the savings prove illusory, as in the past, the feds will step in and order them to do so. To win a false reprieve for themselves and give cost cover to the politicians, these private CEOs are offering to make themselves even more unpopular with patients. By that point, most patients will have no choice but to assent, since most of them will be in one government program or another.
Lest anyone remains in doubt about the ultimate goal here, Ralph Neas of the leftist National Coalition on Health Care got out a quick statement throwing ice water on the industry's concession. With perfect clarity Mr. Neas said: "Voluntary efforts -- without legislated requirements and enforcement -- have not worked well in the past."
The only benefit here is that it is now possible to see where this issue is headed: A new legislated entitlement for the middle class will ensure that the next great health-care argument to engulf the political system is going to be over how and when to ration care.
from the Wall Street Journal, 2009-May-11:
Republicans and the 'Public Option'
A case in which compromise means government health care.So Democrats have declared their willingness to use a parliamentary tactic to force a far-reaching restructuring of U.S. health care through Congress on a partisan vote. Imagine if Tom DeLay had tried to do that on, say, Social Security. Would Democrats have rolled over?
On the one hand, President Obama and his party say they're hoping to strike a good-faith compromise on health care. On the other, they're threatening this "budget reconciliation" maneuver to coerce Republicans into rubber-stamping liberal policy. And if the GOP won't oblige, Democrats say they'll add a new multitrillion-dollar liability to the federal fisc anyway, using a process that was designed to cut spending and reduce the deficit.
The political game here is that Democrats want to use this threat to peel off a handful of GOP Senators before the bill comes to the floor in June. That would short-circuit this year's health-care debate before it begins. Their targets include the likes of Chuck Grassley, Orrin Hatch, Susan Collins and Olympia Snowe, all of whom bowed to the Democrats in 2007 on expanding the state children's insurance program (Schip). But those were minor stakes compared to this year's battle, especially over the so-called public option for health insurance.
This new entitlement -- like Medicare but open to all ages and all incomes -- would quickly crowd out private insurance as people gravitated to heavily subsidized policies, eventually leading to a single-payer system. So Democrats are trying to seduce diffident Republicans with a Potemkin compromise. A "soft" public option would limit enrollment only to the uninsured or those employed by small businesses, or include promises that the plan will pay market rates. As recently proposed by Chuck Schumer, it would pay claims entirely with premiums and co-pays. But if the plan can't force down reimbursement rates through brute force, and doesn't get taxpayer dollars, why bother to "compete" with private plans?
The truth is Democrats know that any policy guardrails built this year can be dismantled once the basic public option architecture is in place. The White House strategy is to dilute it just enough to win over credulous Republicans. That is what has always happened with government health programs:
When Medicare was created in 1965, benefits were relatively limited and retirees paid a substantial percentage of the costs of their own care. But the clout of retirees has always led to expanding benefits for seniors while raising taxes on younger workers.
In 1965, Congressional actuaries expected Medicare to cost $3.1 billion by 1970. In 1969, that estimate was revised to $5 billion, and it actually came in at $6.8 billion. That same year, the Senate Finance Committee declared a Medicare cost emergency. In 1979, Jimmy Carter proposed limiting benefits, only to have the bill killed by fellow Democrats. Things have gotten worse since, and Medicare today costs $455 billion and rising.
Medicaid was intended as a last resort for the poor but now covers one-third of all long-term care expenses in the U.S. -- that is, it has become a middle-class subsidy for aging parents of the Baby Boomers. Its annual bill is $227 billion, and so far this fiscal year is rising by 17%.
Schip was pitched a decade ago as a safety net for poor kids, and some Republicans helped sell it as a free-market reform. But Schip is now open to families that earn up to 300% of the poverty level, or $63,081 for a family of four. In New York, you can qualify at 400% of poverty.
Any new federal health plan will inevitably follow the same trajectory, no matter how much Republican Senators might claim they've guaranteed otherwise. The Lewin Group consultants estimate that 119 million people who now have private insurance could potentially be captured by the government under the Obama public option. This is on top of the 90 million already in Medicare or Medicaid. This would guarantee a spending explosion that would over time lift federal outlays as a share of GDP into the upper 20% range or higher. Republicans would spend the rest of their days deciding whether to vote for tax increases to finance this, or stand accused of denying health care to the middle class.
This doesn't mean the die is cast. Democrats also know that durable reforms in America have typically passed with bipartisan majorities. They understand that a national health plan that passes on partisan lines could be pared back as unaffordable or unfair, the way the "catastrophic" health plan for seniors was repealed in 1989.
As New Hampshire Republican Judd Gregg recently told us, Democrats also don't want their swing-state Senators to have to defend such a partisan process in the 2010 election. That's why they're eager for even the veneer of bipartisanship that three or four GOP Senators would provide. And that's why they're willing to threaten a procedural bludgeon to intimidate Republicans to provide that veneer.
This health-care debate isn't like the "stimulus" bill, which was largely about short-term spending and deficits. This one is about whether to turn 17% of the U.S. economy entirely and permanently into the arms of the government. For Republicans, this is about whether they still stand for anything at all.
from the New York Times, 2009-May-11, by Jackie Calmes:
Change in Estate Tax Suggested to Pay for Health Care
WASHINGTON — Struggling to find ways to pay for the president’s signature health care overhaul, the administration on Monday proposed to raise nearly $60 billion more over 10 years mostly from tightening rules for inheritance taxes affecting the wealthiest estates.
The Treasury Department’s proposals, and several others affecting taxation of life insurance and some other financial products, are intended to fill a gap that has opened up in President Obama’s health care plans.
Revised estimates show that his main idea for financing the initiative — a 28 percent limit on deductions for Americans in the top two tax brackets — would raise $266.7 billion over a decade, not $318 billion as he had projected in his overall budget blueprint last February.
Filling that gap actually understates Mr. Obama’s problems in paying for reforming health care. The deductions limit has hit a wall of opposition in Congress, with the Democratic chairmen of the House and Senate tax-writing committees among others objecting that it could depress tax-deductible charitable contributions. The proposal accounts for half of Mr. Obama’s proposed $635 billion, 10-year reserve fund to introduce cost-saving changes into health care and to expand coverage to the uninsured; the other half would come from Medicare savings under the Obama budget.
The latest proposals to raise revenues are included in documents from the Treasury and the Office of Management and Budget that provide new details on the preliminary budget released in February, when the administration had been in office just a month.
More than $24 billion of the nearly $60 billion to be raised over 10 years would come from estate and gift taxes that would hit less than three-tenths of 1 percent of estates in any year, according to a senior Treasury official, who spoke to reporters on condition of anonymity.
from the Associated Press, 2009-May-12, by Stephen Ohlemacher:
Social Security, Medicare dwindling in recession
WASHINGTON — Social Security and Medicare are fading even faster under the weight of the recession, heading for insolvency years sooner than previously expected, the government warned Tuesday.
Medicare already is paying out more money than it receives, something that happened for the first time last year. And Social Security will be by 2016, a year sooner than had been projected, the trustees' annual report said.
Unless changes in Social Security are enacted, the retirement fund will be depleted in 2037, four years sooner than projected last year. The Medicare trust fund is in even worse shape. It is projected to become insolvent in 2017, two years earlier than expected.
More immediately, the trustees do not expect Social Security recipients to get cost-of-living increases in 2010 or 2011, something that hasn't happened since automatic adjustments were adopted in 1975. The Social Security Administration will set next year's cost-of-living adjustment in October, based on inflation over the previous year.
"We should neither be casual nor hysterical about the revised insolvency dates," Social Security Commissioner Michael Astrue said. "The Social Security system will weather this recession. However, the sooner we get on with the task of reforming the system, the easier it will be to make the tough choices."
The recession is hurting both funds, which are financed by payroll taxes. The U.S. has lost 5.7 million jobs since the recession began, meaning fewer payroll taxes are flowing into the funds. At the same time, aging baby boomers and rising health care costs are adding to expenditures.
The trust funds — which exist in paper form in a filing cabinet in Parkersburg, W.Va. — are bonds that are backed by the government's "full faith and credit" but not by any actual assets. That money has been spent over the years to fund other parts of government. To redeem the trust fund bonds, the government would have to borrow in public debt markets or raise taxes.
Treasury Secretary Timothy Geithner, the head of the trustees group, said reducing health care costs is the key to saving Medicare.
"The most effective entitlement reform measure will be a major health reform that helps bring down the growth rate of national health care spending," Geithner said.
President Barack Obama and Congress have been working to overhaul the health care system with the goal of increasing coverage and lowering costs. But there is no consensus on how to pay for it.
"This report underscores the urgency of action on comprehensive health care reform this year," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. "As costs continue to rise, the Medicare program so important to so many American families is put in jeopardy."
Republicans agreed that health care reform is urgent, but they warned against creating another government-run system.
"When we can't afford the public health plan we have already, does it make sense to add more?" asked Sen. Chuck Grassley of Iowa, the top Republican on the Finance Committee.
House Republican leader John Boehner said the trustees report "confirms what we already knew: Our nation cannot afford to continue this reckless borrowing and spending spree."
Geithner said the Obama administration plans to tackle Social Security once it health care is addressed. The options for fixing Social Security are simpler than for Medicare, though just as politically daunting: either raise revenues or cut benefits.
Workers fund Social Security by a paying 6.2 percent payroll tax on the first $106,800 of their earned income. Employers match the payment. Increasing revenues could be accomplished by increasing the tax rate or increasing the amount of earnings that are taxed.
Workers can currently retire with full benefits at age 66. The retirement age is scheduled to gradually rise to 67 for those born in 1960 or later. One option for cutting benefits would be to raise the retirement age even further.
"Social Security is really a math problem," said David Certner, director of legislative policy for the AARP. "Can you make sure that the money coming in is the same as the money going out?"
The trustees report projected that Social Security's annual surpluses would "fall sharply this year," then remain at a reduced level in 2010 and be lower in the following years than last year's projections. The report said that the Social Security annual surplus would be eliminated entirely in 2016, reflecting increased demands from the wave of 78 million baby boomers retiring.
That means Social Security will have to turn to its trust fund to make up the difference between Social Security taxes and the benefits being paid out beginning in 2016. After the fund is depleted in 2037, annual Social Security taxes collected would be enough to pay for three-fourths of current benefits through 2083.
from the Cato Institute and National Review Online, 2009-Mar-6, by Jim Powell:
Conrad Black in Fantasy Land
Yesterday on NRO, Conrad Black continued his crusade to redeem Franklin Delano Roosevelt from those who dare to ask embarrassing questions about the New Deal. Here's the most embarrassing question of all: Why, despite everything FDR tried, did high unemployment persist all through the 1930s?
In the first sentence of his piece, Black refers assumptively to the policies FDR used "to lead the country out of the Great Depression" -- as if FDR actually got the country out of the depression. No economist who has studied the question seriously suggests that he did; for decades, the principal New Deal discussion has been about why unemployment remained sky-high throughout FDR's first two terms and didn't come down until he began removing 12 million men from the labor force via military conscription for World War II. Even FDR's Treasury secretary, Henry Morgenthau, acknowledged frustration at the failure to resolve this problem.
Many economists, most recently Lee Ohanian and Harold Cole at UCLA, have shown that high unemployment persisted mainly because of New Deal policies that made it more expensive for employers to hire people. Other economists, like Robert Higgs, have pointed to FDR's denunciations of investors and his proliferation of soak-the-rich taxes that discouraged investment -- without which it was virtually impossible to create more private-sector jobs.
The private sector was brought down in the 1930s by Federal Reserve blunders, tax hikes, tariff hikes, unit banking laws (which ban large banks with multiple branches), labor-market restrictions, efforts to prop up wages and prices, and other misguided policies. The private sector had to be revived for the economy to prosper, but the New Deal hobbled the private sector while greatly inflating the public sector. Multiplying the number of people on relief rolls might have been a humanitarian thing to do, but it only delayed the private sector's recovery by increasing taxes, which tripled during the New Deal period.
I believe FDR's biggest mistake was failing to focus single-mindedly on the recovery of private-sector enterprise and employment. New Dealers were determined to push through their "reforms" even when they threw obstacles in the way of private-sector recovery. Syndicated columnist Walter Lippmann, a co-founder of The New Republic, observed that New Dealers didn't want recovery if it meant going back to the way business had operated in the Roaring Twenties (when unemployment fell to an all-time low of 1.8 percent). President Obama, listen up!
Black commits one of the most familiar fallacies by reciting a litany of New Deal projects -- libraries, schools, public works, and so forth -- as if their funding came out of thin air. But government doesn't have any money other than what it gets by (a) taxing people now, (b) borrowing money now and taxing people later, or (c) inflating the currency, which is another form of taxation. Every New Deal project on Black's list meant that less money was spent elsewhere because it was taxed away. New Deal economics basically involved robbing Peter to pay Paul, with added inefficiencies along the way and a net loss for everyone.
Remember, too, that the New Deal was mainly paid for by the middle class and the poor, because the biggest revenue generator for the federal government during the 1930s was an excise tax on cigarettes, beer, chewing gum, and other cheap pleasures enjoyed disproportionately by those two groups. Until 1936, the federal excise tax generated more revenue than the federal personal income tax and the federal corporate income tax combined. Not until 1942 did the personal income tax become the biggest source of federal revenue. You can look it up in Historical Statistics of the United States, Colonial Times to 1970, volume 2, page 1107.
Perhaps Black is suggesting that politicians have a special talent for spending other people's money in a way that will do more to stimulate the economy than if those people had spent it themselves. That proposition is laughable. All the available evidence verifies the common-sense truth that people are less careful with other people's money than they are with their own. That's true even when their intentions are good and their motives are pure -- which was rarely the case in the New Deal. FDR's spending programs stimulated a mad scramble among political bosses for control of the loot and the patronage. James T. Patterson documented much of this in his book The New Deal and the States.
Black might not be aware of the considerable empirical literature -- dozens of books and articles -- by economists who have reported their findings on the New Deal. They were the subject of my book FDR's Folly. I think it's shocking that in the 1,280 pages of Black's book Franklin Delano Roosevelt, Champion of Freedom, he didn't seem to consult the work of economists who wrote about the Great Depression -- the most important economic event in American history. Some of the work, like A Monetary History of the United States, by Milton Friedman and Anna Schwartz, was published 40 years before Black's book. A Monetary History is among the most widely cited economics books and has had an immense influence, yet apparently Black didn't think it merited a mention when discussing the Great Depression.
Instead, Black was committed to the traditional heroic New Deal narrative based on sources that are the stock-in-trade of biography and political history -- correspondence, diaries, speeches, memoirs, and so on. These sources are wholly inadequate to explain why New Deal spending was skewed away from the poorest people who lived in the South, how the National Industrial Recovery Act made it harder for employers to hire people, how the Wagner Act destroyed jobs, how the Social Security Act made it more expensive for employers to hire people, how New Deal anti-discounting laws made everything more expensive for people who desperately needed bargains, and so on.
I know of only one political historian who consulted any of the economists' findings in writing about the New Deal. "Whatever it was," Stanford's David M. Kennedy wrote in his Pulitzer Prize-winning Freedom from Fear: The American People in Depression and War, the New Deal "was not a recovery program, or at any rate not an effective one."
Jim Powell, a Senior Fellow at the Cato Institute, is the author of FDR's Folly, Bully Boy, and Greatest Emancipations
from the Cato Institute and Forbes, 2009-Feb-11, by Jim Powell:
The 'Old' New Deal Still Isn't Paid For
What are we to make of all the talk about a "New New Deal"--starting with the current stimulus package--when we haven't paid for the old New Deal?
During the 1930s, the old New Deal cost about $50 billion in federal expenditures from 1933 to 1940, excluding functions such as the U.S. Post Office and the State Department.
Today, the future cost of old New Deal programs still in effect is reckoned at more than $50 trillion. These programs include Social Security, Medicare (an amendment to Social Security), Aid to Families with Dependent Children (part of Social Security), Fannie Mae, the Tennessee Valley Authority, farm subsidies and large-scale government intervention intended to prop up troubled sectors of the economy.
We aren't paying down these obligations inherited from the old New Deal. On the contrary, the total tab keeps getting bigger every year. While the old New Deal involved unprecedented peacetime spending during the 1930s, its current escalating obligations dwarf that spending.
None of FDR's experts who promoted the old New Deal anticipated how costly these programs would become--despite experience with previous government programs that spun out of control. For instance, the Civil Service Retirement System was established in 1920 to provide retirement benefits for federal employees. It soon cost more than the experts predicted. Federal employees were supposed to pay for their future benefits, but their payments lagged behind benefits over the years. Political pressures eventually prevailed, resulting in taxpayers covering the deficits.
After Lyndon Johnson became president, he launched a succession of crusades, one of which was to amend Social Security with Medicare. Historian Doris Kearns Goodwin explains LBJ's approach, "The subjects might change, but the essentials remained the same: in the opening, an expression of dire need; in the middle, a vague proposal; in the end, a buoyant description of the anticipated benefits--all contained in an analysis presented in a manner that often failed to distinguish between expectations and established realities ... Pass the bill now, worry about its effects and implementation later--this was the White House strategy."
The 1965 debate about Medicare involved a great deal of discussion about future costs. Opponents warned that Medicare could become a huge burden on taxpayers, but LBJ persuaded most members of Congress that financing Medicare would be easy because of all the baby boomers entering the workforce. House Ways and Means Committee Chairman Wilbur Mills estimated that the annual cost of Medicare would be $500 million. Today, Medicare's annual outlays exceed $330 billion.
Jim Powell, a Senior Fellow at the Cato Institute, is the author of FDR's Folly, Bully Boy, and Greatest Emancipations
from the Wall Street Journal, 2009-Apr-12:
The End of Private Health Insurance
When government 'competes,' guess who always wins?Above every other health-care goal, Democrats this year want to institute a "public option" -- an insurance program financed by taxpayers, managed by government and open to everyone, much like Medicare. This new middle-class entitlement is the most important debate in Congress this year, because it really is the last stand for anything resembling private health insurance.
This public option will supposedly "compete" with private alternatives. As President Obama likes to put it, those who are happy with the insurance they have now can keep it -- and if they happen to prefer the government offering, well, gee whiz, that's the free market at work. The reality is far different. Not only will the new program become the default coverage for the uninsured, but Democrats intend to game the system to precipitate -- or if need be, coerce -- an exodus to government from private insurance. Soon enough, that will be the only "option" left.
A public program won't compete in a way that any normal business would recognize. As an entitlement, Congress's creation will enjoy potentially unlimited access to the Treasury, without incurring the risks or hedging against losses that private carriers do. As people gravitate to "free" or heavily subsidized care, the inevitably explosive costs will be covered in part with increased outlays to keep premiums artificially low or even offer extra benefits. Lacking such taxpayer cash, private insurance rates will escalate.
Much like Medicare, overall spending in the public option will be controlled over time by paying less for medical services, drugs and technology. With its monopsony purchasing power, below-market fees will be dictated on a take-it-or-leave-it basis -- an offer hospitals and physicians won't be able to refuse. Medicare's current reimbursement policies pay hospitals only 71% of private rates, and doctors 81%, according to the Lewin Group.
In a recent analysis, Lewin estimates that enrollment in the public option will reach 131 million people if it is open to everyone and pays Medicare rates. Fully 119 million people will shift out of -- or lose -- private coverage. Everything depends on the payment levels that Congress adopts, as well as the size of the eligible pool. But even if a public option available to all takes the highly improbable step of paying at some midpoint between private and Medicare rates, nearly 68 million people will still be crowded out of private insurance. The nearby table summarizes Lewin's eye-popping findings.
This public option would be the most radical change in the way American health care is financed -- and thus provided -- in at least 44 years, and maybe ever. About 170 million people currently have private insurance, which is already pressured by the price controls of Medicare and Medicaid. A significant share of government underpayments are simply transferred to the private sector, adding tens of billions of dollars every year to consumer health bills.
A 2006 study in the journal Health Affairs concludes that around 17 cents of every dollar in relative reductions in Medicare payments to private hospitals are shifted onto private patients -- and that such cost-shifting accounts for fully 12.3% of the total increase in private payer prices between 1997 and 2001.
This share would be far higher were government payment rates not limited to the elderly and the poor but imposed over the entire system. This will only hasten the flight to government. Meanwhile, employers small and large will have every incentive to dump their plans and transfer their workers to the public rolls. The result will inevitably be a cascade of failures or withdrawals from the market by commercial insurers, with the public option as the only option for the diaspora.
Congress will finish the job with regulatory changes. Under the aegis of a level playing field, all private plans will be forced to offer benefit packages similar to those in the public option. They will also be required to accept all comers, regardless of pre-existing conditions, and also be forced to offer similar rates to all enrollees, ending the ability to manage risk through underwriting. Any private plan will essentially become a public utility where government decides what products it must offer and how much it can charge.
Democrats couldn't be clearer on this point. House baron Pete Stark -- who thought HillaryCare was too moderate and has long favored Medicare for all -- said at a recent hearing that currently "We have no mechanism to directly push the private sector to do delivery system reform and address rising costs." But the public option, he added, would force private insurers to "modernize," which seems to be his term for industrial policy.
Under this model, the annual political warfare over Medicare payment policies would be imported to what is left of the private sector. Once government takes over the majority of U.S. health-care liabilities, it can either provide every service at huge and growing cost, or it can ration services. People who need an MRI or hip replacement or whatever will face waiting lines. Medical innovation will be at the mercy of the price controls hashed out in Washington.
Proponents of a public option point to the Federal Employees Health Benefits Program to dismiss such criticism, but that program is offered only to a discrete population. Mr. Obama's proposal would be open to everyone and necessitate a huge permanent increase in government spending as a share of the economy. Medicare and Medicaid alone account for 4% of GDP today and will rise to 9% by 2035, according to the Congressional Budget Office. CBO estimates that individual and corporate income tax rates would have to rise by about 90% to finance the projected increase in spending through 2050 -- without the new middle-class entitlement.
Proponents will say we are exaggerating, but the consequences we describe are inevitable when government bulldozes into a market. Democrats want to sell their "public option" as a modest and affordable reform that won't affect anyone's private insurance. It isn't true. Republicans, especially those in the Senate who want to cut a deal on health care, should understand that a public option is the beginning of the end of private health insurance.
from the New York Times, 2009-Apr-23, p.A19, web-posted 2009-Apr-22, by Robert Pear:
Democrats Consider Bypassing G.O.P. on Health Care Plan
WASHINGTON — With solid majorities in both houses of Congress, Democrats are tempted to use their political muscle to speed passage of health care legislation with minimal concessions to the Republican minority.
That approach may be the only way they can fulfill President Obama's campaign promises, but it carries high risks as well.
In the budget blueprint for the coming year, Democrats may resort to an obscure procedure known as reconciliation to clear the way for Senate passage of a comprehensive health bill with a 51-vote majority, rather than the 60 votes that would otherwise be needed.
“It may be a struggle to get to 60,” said Senator Jeff Bingaman, Democrat of New Mexico, who is working on the legislation.
Use of the expedited procedure, to prevent a Senate filibuster, could both help and hurt the Democrats. It would enable them to overcome Republican objections to a big increase in federal spending and in the role of government. On the other hand, it could fundamentally alter the political dynamic of the health care debate, detonating an explosive reaction among Republican senators who have been working with Democrats on the issue.
If Democrats use the fast-track procedure, it would be tantamount to “a declaration of war,” said Senator Michael B. Enzi of Wyoming, the senior Republican on the health committee.
Under the reconciliation process, the House and the Senate first agree on an overall budget blueprint and then pursue legislation — in this case, the health care overhaul — “reconciling” the blueprint with the needed policy changes. If enough Senate Democrats support the legislation, the White House would not need a single Republican vote.
The House adopted its version of the budget with the procedural shortcut. The Senate has been reluctant to authorize it, but may ultimately follow the House's lead as the two chambers try to work out their differences.
A health care bill written mainly or entirely by Democrats would almost surely create a new public health insurance program, to compete with private insurers. It would require employers to provide insurance to employees or contribute to its cost. Employers who already offer insurance could be required to provide more or different benefits, and Congress could limit the tax breaks now available for such employer-provided insurance.
“If Democrats push a health bill through the Senate using budget reconciliation procedures, the bill would lack Republican support and would lack the support of key constituencies — certainly the business community,” said E. Neil Trautwein, a vice president of the National Retail Federation, a trade group. “Health care reform would crater for this year.”
House Democrats say the Republican protests are overheated. The fast-track procedures have been used 19 times since 1980 to pass major legislation, including much of President Ronald Reagan's domestic policy agenda in 1981, welfare overhaul in 1996 and President George W. Bush's tax cuts in 2001 and 2003.
The committee chairmen writing the Senate health bill, Max Baucus of Montana and Edward M. Kennedy of Massachusetts, both Democrats, have been assiduously courting business groups and labor unions, consumer groups, doctors, hospital executives and other health care providers.
Those groups — eager for a seat at the table, eager to sound constructive — have been remarkably restrained so far. They have held back in their criticism of proposals being seriously considered by Congress and the White House. But the strains are beginning to show. Labor leaders have conveyed their concern about taxing health benefits to Mr. Baucus in the strongest possible terms. Employers have warned Congress against requiring them to provide any specific amount of insurance.
Steven Kreisberg, director of collective bargaining and health care policy at the American Federation of State, County and Municipal Employees, said: “We absolutely oppose a change in the tax treatment of employee health benefits. It would endanger the current employer-based health care system at a time when we are trying to sustain it.”
Helen Darling, president of the National Business Group on Health, said, “Most of our members are big employers, and they offer health benefits, but they do not like an employer mandate.” If the government specifies a minimum package of benefits, Ms. Darling said, it could quickly become more comprehensive, without any significant cost controls.
Many lawmakers have promised to give all Americans access to the same health insurance they have as members of Congress. But the package of benefits available to Congress and other federal employees is more generous and more costly than what many private employers offer.
Mr. Trautwein said Democrats “will have a big fight on their hands” if they insist on an employer mandate. Such a requirement could be “fatal to the prospects of health care reform,” as it was 15 years ago, he said.
Mr. Bingaman said that while he was not philosophically opposed to using the expedited procedures, “the rules are pretty arcane, and there are all sort of complications.” Under Senate rules, for example, efforts to regulate the insurance industry or to improve the quality of care could be challenged as “extraneous” if they did not produce a change in federal spending or revenue.
But Rahm Emanuel, the White House chief of staff, said Democrats needed to reserve the expedited procedures as a club, in case Republicans took an intransigent stance as the “party of no.”
from the Wall Street Journal, 2009-Apr-4, by Stuart Varney:
Obama Wants to Control the Banks
There's a reason he refuses to accept repayment of TARP money.I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn't much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street's black hole. So why no cheering as the cash comes back?
My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell 'em what to do. Control. Direct. Command.
It is not for nothing that rage has been turned on those wicked financiers. The banks are at the core of the administration's thrust: By managing the money, government can steer the whole economy even more firmly down the left fork in the road.
If the banks are forced to keep TARP cash -- which was often forced on them in the first place -- the Obama team can work its will on the financial system to unprecedented degree. That's what's happening right now.
Here's a true story first reported by my Fox News colleague Andrew Napolitano (with the names and some details obscured to prevent retaliation). Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons. It wanted to recapitalize the banks to halt a financial panic.
Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He's been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with "adverse" consequences if its chairman persists. That's politics talking, not economics.
Think about it: If Rick Wagoner can be fired and compact cars can be mandated, why can't a bank with a vault full of TARP money be told where to lend? And since politics drives this administration, why can't special loans and terms be offered to favored constituents, favored industries, or even favored regions? Our prosperity has never been based on the political allocation of credit -- until now.
Which brings me to the Pay for Performance Act, just passed by the House. This is an outstanding example of class warfare. I'm an Englishman. We invented class warfare, and I know it when I see it. This legislation allows the administration to dictate pay for anyone working in any company that takes a dime of TARP money. This is a whip with which to thrash the unpopular bankers, a tool to advance the Obama administration's goal of controlling the financial system.
After 35 years in America, I never thought I would see this. I still can't quite believe we will sit by as this crisis is used to hand control of our economy over to government. But here we are, on the brink. Clearly, I have been naive.
Mr. Varney is a host on the Fox Business Channel.
from Slate's Big Money, 2009-May-6, by Chadwick Matlin:
Bank of America's $34 Billion Distress Signal
When the stress tests were first announced, I suspected that they were a convenient back-door to nationalizing the country's banks. The Obama administration couldn't allow the banks to keep operating without government-supplied life jackets, safety nets, crash helmets, etc. And a piece-by-piece bailout of the banking sector was only harming the administration's standing with the public and economists. The media's echo chamber craves an all-or-nothing stance; start-and-stop bailouts occupy the unsatisfying middle ground. But lacking dramatic new data, the administration didn't have the political cover they needed to seize the banks themselves. So, what to do? Create new data.
That, as we now see, is exactly what the stress tests have done. And it's not just data that's been manufactured; it's opportunity. The tests have given the government an excuse to finally begin nationalizing the banks that most need to be nationalized. Whether it was all part of the plan or not, it amounts to a long con. The federal government has forced Bank of America--and maybe other banks--into forking over an ownership stake. And there's nothing Republicans can do about it.
After weeks of rumors and news leaks, we now have confirmation that Bank of America (BAC) needs about $34 billion more than it has. This is the same Bank of America to which the government has already given $45 billion of TARP money. B of A has one month to figure out how to raise that capital. In this market, one does not come across $34 billion easily. Bank of America will need help from the federal government.
And we won't be injecting new money into B of A. The feds will be taking the money they already gave them, and morphing it into a different kind of money. (Yes, when it's put that way, it sounds like magic. It may as well be.) What will likely happen: a conversion of the government's preferred shares into common stock. (To read about the preferred-common transformation, this piece on how it worked at Citi is a good, but dense, start.) As of now, the government doesn't quite own shares of B of A as you and I would if we bought its stock. It has given B of A $45 billion via loans and other fancy financial packages that are a sort-of placeholder for an ownership stake, if it ever wanted it. Essentially, it called fives on B of A stock. And now the time has come to cash in the placeholder coupons. It's forcing B of A to allow it to take partial control.
But, you say, isn't that effectively nationalizing the bank? Isn't that what the Obama administration said it didn't want to/couldn't do? Yes, but now it's not just doable; it's an imperative. Why? Because, thanks to the stress tests, we have new data. New data that justifies the path to nationalization.
And that data is inherently flawed and inherently arbitrary. Just as a teacher decides how to grade a test, the government was the one who decided how to test the banks. The Treasury still hasn't announced the rubric, but we know it involved something called "tangible common equity," the definition of which doesn't matter for our purposes. Each bank needed a certain amount of TCE to pass the test. That amount--rumored to be 4 percent--was higher than expected. The higher the amount, the tougher the test. The tougher the test, the more money the banks are going to need to raise.
Thus, the $34 billion number could be wildly wrong. Bank of America certainly thinks so. Its chief administrative officer told the New York Times, "We think it should be a bit less at the end of the day." But B of A has had its chance to lobby the government to change the number, and this is what appears to be the final answer.
So, armed with this $34 billion metric, the government will take a stake--it's unclear just how large of one--in Bank of America. Because there isn't new money being doled out to B of A, Congress won't be able to filibuster it. Because finding this $34 billion is a prerequisite for keeping the government funding B of A has already received--the logical circularity of which I'll leave you to ponder--the bank will be forced to convert the preferred shares to common stock. Because the stress tests said B of A needed government ownership, the government will be able to nationalize while taking cover behind its homemade shield.
It all amounts to a perfect long con. A good confidence man backs a victim into a corner without the victim realizing he's backpedaling. Once the poor soul has been sweet-talked into submission, he has no choice but to agree to go into business with the con-man. A good long con makes the victim think the scheme was his idea. Little does he realize, that was part of the con-man's game all along.
from the Associated Press, 2009-Apr-29, by Calvin Woodward with Kevin Freking and Jim Kuhnhenn contributing:
FACT CHECK: Obama disowns deficit he helped shape
WASHINGTON — "That wasn't me," President Barack Obama said on his 100th day in office, disclaiming responsibility for the huge budget deficit waiting for him on Day One.
It actually was him — and the other Democrats controlling Congress the previous two years — who shaped a budget so out of balance.
And as a presidential candidate and president-elect, he backed the twilight Bush-era stimulus plan that made the deficit deeper, all before he took over and promoted spending plans that have made it much deeper still.
Obama met citizens at an Arnold, Mo., high school Wednesday in advance of his prime-time news conference. Both forums were a platform to review his progress at the 100-day mark and look ahead.
At various times, he brought an air of certainty to ambitions that are far from cast in stone.
His assertion that his proposed budget "will cut the deficit in half by the end of my first term" is an eyeball-roller among many economists, given the uncharted terrain of trillion-dollar deficits and economic calamity that the government is negotiating.
He promised vast savings from increased spending on preventive health care in the face of doubts that such an effort, however laudable it might be for public welfare, can pay for itself, let alone yield huge savings.
A look at some of his claims Wednesday:
OBAMA: "Number one, we inherited a $1.3 trillion deficit.... That wasn't me. Number two, there is almost uniform consensus among economists that in the middle of the biggest crisis, financial crisis, since the Great Depression, we had to take extraordinary steps. So you've got a lot of Republican economists who agree that we had to do a stimulus package and we had to do something about the banks. Those are one-time charges, and they're big, and they'll make our deficits go up over the next two years." — in Missouri.
THE FACTS:
Congress controls the purse strings, not the president, and it was under Democratic control for Obama's last two years as Illinois senator. Obama supported the emergency bailout package in President George W. Bush's final months — a package Democratic leaders wanted to make bigger.
To be sure, Obama opposed the Iraq war, a drain on federal coffers for six years before he became president. But with one major exception, he voted in support of Iraq war spending.
The economy has worsened under Obama, though from forces surely in play before he became president, and he can credibly claim to have inherited a grim situation.
Still, his response to the crisis goes well beyond "one-time charges."
He's persuaded Congress to expand children's health insurance, education spending, health information technology and more. He's moving ahead on a variety of big-ticket items on health care, the environment, energy and transportation that, if achieved, will be more enduring than bank bailouts and aid for homeowners.
The nonpartisan Committee for a Responsible Federal Budget estimated his policy proposals would add a net $428 billion to the deficit over four years, even accounting for his spending reduction goals. Now, the deficit is nearly quadrupling to $1.75 trillion.
___
OBAMA: "I think one basic principle that we know is that the more we do on the (disease) prevention side, the more we can obtain serious savings down the road. ... If we're making those investments, we will save huge amounts of money in the long term." — in Missouri.
THE FACTS: It sounds believable that preventing illness should be cheaper than treating it, and indeed that's the case with steps like preventing smoking and improving diets and exercise. But during the 2008 campaign, when Obama and other presidential candidates were touting a focus on preventive care, the New England Journal of Medicine cautioned that "sweeping statements about the cost-saving potential of prevention, however, are overreaching." It said that "although some preventive measures do save money, the vast majority reviewed in the health economics literature do not."
And a study released in December by the Congressional Budget Office found that increasing preventive care "could improve people's health but would probably generate either modest reductions in the overall costs of health care or increases in such spending within a 10-year budgetary time frame."
___
OBAMA: "You could cut (Social Security) benefits. You could raise the tax on everybody so everybody's payroll tax goes up a little bit. Or you can do what I think is probably the best solution, which is you can raise the cap on the payroll tax." — in Missouri.
THE FACTS: Obama's proposal would reduce the Social Security trust fund's deficit by less than half, according to the nonpartisan Tax Policy Center.
That means he would still have to cut benefits, raise the payroll tax rate, raise the retirement age or some combination to deal with the program's long-term imbalance.
Workers currently pay 6.2 percent and their employers pay an equal rate — for a total of 12.4 percent — on annual wages of up to $106,800, after which no more payroll tax is collected.
Obama wants workers making more than $250,000 to pay payroll tax on their income over that amount. That would still protect workers making under $250,000 from an additional burden. But it would raise much less money than removing the cap completely.
___
OBAMA: "My hope is that working in a bipartisan fashion we are going to be able to get a health care reform bill on my desk before the end of the year that we'll start seeing in the kinds of investments that will make everybody healthier."
THE FACTS: Obama has indeed expressed hope for a health care plan that has support from Democrats and Republicans. But his Democratic allies in Congress have just made that harder. The budget plan written by the Democrats gives them the option of denying Republicans the normal right to block health care with a Senate filibuster. The filibuster tactic requires 60 votes to overcome, making it the GOP's main weapon to ensure a bipartisan outcome. The rules set by the budget mean that majority Democrats could potentially pass health care legislation without any Republican votes, sacrificing bipartisanship to achieve their goals.
from the Los Angeles Times, 2009-May-3, by Peter Nicholas:
It's all on Obama now
Political observers say that with the events of the last week, accountability for the nation and its current problems has clearly shifted from Bush.
Reporting from Washington — In the span of a single week -- from the day Arlen Specter turned Democratic to the moment Congress passed the White House's budget blueprint and on through the opening of a spot on the Supreme Court -- President Obama crossed a fateful line: From now on, it's his country.
Every president inherits a tangle of problems from his predecessor. War and recession, natural disaster and foreign crises. And for some undefined interval, new presidents argue that they should not be accountable for the troubles that arose on another's watch.
But inevitably, responsibility shifts. And for Obama, that time came last week, bringing both greater opportunities and greater risks.
On the economy, Obama won approval Wednesday of a $3.5-trillion budget plan that aims to help pull the country out of the worst recession in decades. It also smooths the way for one of the president's signature domestic priorities -- overhauling the nation's healthcare system.
At the same time, the budget projects a whopping $1.2-trillion deficit in 2010, undercutting Obama's ability to bemoan Bush-era red ink.
"It is now absolutely his economy," said Paul Light, a New York University professor who specializes in presidential transitions. "I don't think that the public will continue to believe that this was all George W. Bush's doing. And every day that goes by, it becomes more Obama's than Bush's."
Ever since his inauguration, Obama has nurtured the idea that responsibility for grim economic conditions rested with former President Bush. As recently as Wednesday, Obama sought that political cover when it was announced that the economy had shrunk by 6.1% in the first quarter of the year.
Speaking at a town hall meeting near St. Louis, he said: "Now, we've got a lot of work to do, because on our first day in office we found challenges of unprecedented size and scope."
But the events of the last week made Bush seem less relevant, presidential experts and political strategists said. As Obama's imprint on the economy grows, so does his ownership of the issue.
That ownership became almost literal as Obama moved more deeply into the banking and auto industry crises.
As the Treasury Department finished "stress tests" on 19 of the country's biggest banks, the administration became further enmeshed in the workings of the financial system.
And on Thursday, Obama announced he was pushing Chrysler into bankruptcy. He may take another corporate icon, General Motors, down the same path.
As a kind of shareholder in chief, the president now is responsible for guiding companies with thousands of union workers and investors -- firms that remain vital to the economies of states that stretch across the nation's industrial heartland, from Pennsylvania to Illinois and south into Kentucky and Tennessee.
Though the auto industry was in crisis before Obama reached the White House, his team has been in charge of the rescue effort for the last four months.
"The perception will be that Barack Obama owns this bankruptcy," said Neil Newhouse, a Republican pollster. "He owns this economy."
On the political front, the decision by Pennsylvania's senior senator to join the Democrats moved Obama to the brink of a 60-vote majority in the Senate, which could prevent Republicans from blocking his initiatives by filibuster. One of the people instrumental in persuading Specter to abandon the GOP was Vice President Joe Biden, reinforcing the appearance of White House influence on Capitol Hill.
All that raised expectations that Obama should be able to win congressional approval of his core agenda.
Yet Specter insisted he would not be a rubber stamp for the president. He promptly voted against the Obama budget. And although Democrats have a strong majority in the House, their control of the Senate is still far from absolute.
Democrat Al Franken, the apparent victor in the still-contested Minnesota Senate race, has yet to be seated.
In addition, Obama must work to get support from such relatively conservative Democratic senators as Ben Nelson of Nebraska.
"It's nice to say you have 60 votes. Having said that, there are going to be tensions within the Democratic caucus," said Harold M. Ickes, deputy chief of staff under President Clinton.
As for the Supreme Court, David H. Souter's announcement Friday that he was stepping down gives Obama a chance to start putting his mark on the court, one of the most lasting elements in a president's legacy.
Souter has been a reliably liberal vote on the court. But Obama, if he chose, could come up with a replacement even more progressive and more inclined to uphold his policies, should they face legal challenges.
Or, seeking to reinforce his moderate image and avoid a potentially bruising confirmation battle with Senate Republicans, the president could choose someone with a more centrist record.
No matter whom he chooses, Obama will be judged by the selection. And there is no guarantee that his pick will turn out as planned. Souter was chosen by Republican President George H.W. Bush, and in the end he disappointed the GOP base.
Throughout last week, Obama also had to cope with fears of a global swine flu pandemic. The president worked to calm Americans, urging people to take common-sense precautions such as washing their hands and covering their mouths when coughing. (The outbreak hit close to home when a member of the White House team that traveled to Mexico last month developed flu-like symptoms. There is no sign that Obama was infected.)
The public's reaction to Obama's assertive steps points up the potential gains and risks of being seen as clearly in charge.
Americans say they like the president. They also expect economic conditions to worsen, suggesting they're prepared to wait for the promised recovery.
But the activist government Obama has unleashed is increasingly worrisome to voters, polls show.
An NBC-Wall Street Journal poll showed that 47% of those surveyed believe "government should do more," compared with 46% who believe "government is doing too many things." In July, the gap between those who wanted government to do more and those who believed it was doing too much was 11 percentage points.
Seeming to recognize the danger of moving ever deeper into the affairs of the country, especially the private sector, Obama said at a news conference Wednesday that he wanted out of the auto business.
"I don't want to run auto companies," the president said. "I don't want to run banks. I've got two wars I've got to run already. I've got more than enough to do. So the sooner we can get out of that business, the better off we're going to be."
Inside the White House, aides seemed to sense that in the last week, a threshold was crossed.
"There are some occasions where a movie script would not do justice to the number of major events happening at one time," said Jen Psaki, a White House spokeswoman. "This week was one of those occasions."
from the Wall Street Journal's Political Diary, 2009-Apr-21, by Stephen Moore and Tyler Grimm:
The New Tax Fairness
A Gallup poll released last month asked Americans: "Do you consider the amount of federal income tax you have to pay as too high, about right, or too low?" Forty-six percent of respondents answered, "about right." The media seized upon this finding by saying: See, Americans like paying taxes now!
Not really. It turns out, according to new tax data just released from the Congressional Budget Office, that almost the same percentage who say their income taxes are about right also pay zero or very close to zero in income taxes. Almost 40% have a negative income tax -- meaning they get money back from the government. What a shocker that these tax filers don't think their income taxes are too high.
"We're getting closer everyday to a tax system where half don't pay any federal income tax," says Scott Hodge, president of the Tax Foundation. He calls this the "tipping point."
The Obama tax plan speeds up that process. Most of the people who will get a tax cut under the Democratic budget plan that passed last week are actually getting a subsidy check from Uncle Sam.
Middle class anger over taxes is still intense, however, notes Ryan Ellis, a tax expert at the Americans for Tax Reform. These folks get hit with a multitude of other fees, fines, assessments, and sales taxes imposed mostly at the state and local levels of government. As for President Obama's promise that 95% of taxpayers won't see a dime of tax increases, Mr. Ellis estimates that the cigarette tax hike will cost poor families with smokers hundreds of dollars a year. Now we hear reports the administration may consider extra taxes on salty or sweet foods. Meanwhile, the energy taxes in the cap-and-trade global warming bill could cost the average middle class family an extra $10,000 a year in higher electricity and gas prices once fully phased in.
So maybe this is what Mr. Obama means when he says he is going to restore tax fairness. Everyone gets soaked.
from the Wall Street Journal's Political Diary, 2009-Apr-21, by Kim Strassel:
Real (Little) Money
President Barack Obama convened his cabinet for the first time yesterday, where he dispensed the order that cabinet members should identify $100 million in budget cuts over the next 90 days. Along with the president's recent "Fiscal Responsibility Summit," the move was designed to convey to the public that an administration on track to run up a $1.2 trillion deficit does, in fact, cares about spending and waste.
For Republicans, the announcement was an opportunity to have a little fun. By mid-morning, conservative groups and Hill staffers were busy churning out press releases and notes designed to show just how paltry $100 million in savings is in the grand Obama scheme of the things. This list only kept getting more creative as the day went on.
Americans For Tax Reform, for instance, noted that $100 million equaled less than one day of interest payments on Congress's $787 billion "stimulus." ATR President Grover Norquist threw in that "this 'cut' is less than three-thousandths of one percent of the federal budget. Penny wise, trillion dollar stupid." Brad Dayspring, press secretary for House Republican Whip Eric Cantor, noted that Republicans had saved twice as much money by forcing the removal of a "stimulus" provision to refurbish the National Mall.
The Republican House Budget Committee staff pointed out that, according to the CBO, the Obama administration was on track to spend $4 trillion this year, or $100 million every 13 minutes. One wag noted that Mr. Obama's savings diktat wouldn't even cover the $150 million that Pennsylvania Democrat John Murtha, the House's champion earmarker, is diverting to just one airport in his district.
Senator Mitch McConnell summed up thinking on the GOP side. He said that while he could only applaud any effort by Team Obama to cut government waste, the administration's huge spending and debt levels "will only really be addressed through major, bipartisan, politically difficult reforms."
The White House was on the defensive by the end of the day, as even a friendly media mocked the significance of $100 million in spending cuts. On the back of the conservative "tea parties" across the country, Washington is now clearly on notice that more than token gestures will be required to restore the country's confidence in fiscal management.
from the Wall Street Journal, 2009-Apr-11:
The Tax Capital of the World
States are raising taxes despite the 'stimulus'; New York is No. 1.Like the old competition to have the world's tallest building, New York can't resist having the nation's highest taxes. So after California raised its top income tax rate to 10.55% last month, Albany's politicians leapt into action to reclaim high-tax honors. Maybe C-Span can make this tax competition a new reality TV series; Carla Bruni, the first lady of France, could host.
They can invite politicians from the at least 10 other states that are also considering major tax hikes, including Oregon, Illinois, Wisconsin, Washington, Arizona and New Jersey. One explicit argument for the $787 billion "stimulus" bill was to help states avoid these tax increases that even Keynesians understand are contractionary. Instead, the state politicians are pocketing the federal cash to maintain spending, and raising taxes anyway. Just another spend-and-tax bait and switch.
In New York, Assembly Speaker (and de facto Governor) Sheldon Silver and other Democrats will impose a two percentage point "millionaire tax" on New Yorkers who earn more than $200,000 a year ($300,000 for couples). This will lift the top state tax rate to 8.97% and the New York City rate to 12.62%. Since capital gains and dividends are taxed as ordinary income, New York will impose the nation's highest taxes on investment income -- at a time when Wall Street is in jeopardy of losing its status as the world's financial capital.
But who and where are all these millionaires to pluck? More than any other state, New York has been hurt by the financial meltdown, and its $132 billion budget is now $17.7 billion in deficit. The days of high-roller Wall Street bonuses that finance 20% of the New York budget are long gone. The richest 1% of New Yorkers already pay almost 40% of the income tax, and the top 0.5% pay 30%.
Mr. Silver thinks he can squeeze more from these folks without any economic harm, arguing that recent income tax hikes didn't hurt New Jersey. (Yes, the pols in New York actually hold up New Jersey, whose economy and budget are also in shambles, as their role model.) The tax hike lobby in Albany points to a paper by Princeton researchers reporting that the number of "half-millionaires," those with incomes above $500,000, increased by 60% from 2003-2006 after New Jersey taxes rose (the top rate is now 8.98%). But this was a boom time for the national economy, especially in the financial industry where many New Jerseyites work, or at least used to work.
The better comparison is how New Jersey compared to the rest of the nation. According to the study's own data, over the same period the U.S. saw an increase of 76% in half-millionaire households. E.J. McMahon, a budget expert at the Manhattan Institute, calculates that New Jersey lost more than 4,000 high-income taxpayers after the tax increase.
Mr. Silver says of the coming tax hikes: "We've done it before. There hasn't been a catastrophe." Oh, really? According to Census Bureau data, over the past decade 1.97 million New Yorkers left the state for greener pastures -- the biggest exodus of any state. New York City has lost more than 75,000 jobs since last August, and many industrial areas upstate are as rundown as Detroit. The American Legislative Exchange Council recently said New York had the worst economic outlook of all 50 states, including Michigan. And that analysis was done before these $4 billion in new taxes. How does Mr. Silver define "catastrophe"?
Oh, and it isn't just high earners who get smacked. The new budget raises another $2 billion or so on top of the $4 billion in income taxes with some 100 new taxes, fees, fines, surcharges and penalties to be paid by all New York residents. There are new charges for cell phone usage, fishing permits, health insurance (the "sick tax"), electric bills, and on bottled water, cigars, beer and wine. A New York Post analysis found that a typical family of four with an income below $100,000 would pay more than $800 a year in higher taxes and fees.
This is advertised as a plan of "shared sacrifice," but the group that is most responsible for New York's budget woes, the all-powerful public employee unions, somehow walk out of this with a 3% pay increase. The state is receiving an estimated $10 billion in federal stimulus money, and Democrats are spending every cent while raising the state budget by 9%. Then they insist with a straight face that taxes are the only way to close the budget deficit.
And so Albany is about to make a gigantic gamble on New York's economic future. The gamble is that the state with the highest cost of doing business can raise taxes on everyone who lives, works, breathes, eats or drinks in the state and not pay a heavy price for it. If they're wrong, New York will enhance its reputation as the Empire in Decline State.
from the Wall Street Journal, 2009-Apr-25, by Nicole Gelinas:
New York's Subway Woes Could Have Been Avoided
Get ready for a return to 1970s-style chaos.New York
Unless the state intervenes, in five weeks New Yorkers will face steep fare hikes on buses, subways and commuter rail lines. They'll also face deep cuts in train and bus service. Those who work late will suffer long waits in stations with no employee on duty, inviting unease, disorder and crime.
The state's Metropolitan Transportation Authority (MTA) is facing a $2 billion shortfall this year, with bigger deficits looming in the future. Its officials are planning a huge 30% fare hike while they await action from the political class. How city and state leaders respond will have far-reaching consequences. But the forecast does not look good: With shrinking tax revenues going toward outdated public-sector benefits and social spending rather than to core public services, New York appears to be on a path to ruin frighteningly similar to the 1970s.
The deterioration of the transportation's physical assets could begin in just a few months, capital-spending documents show. The MTA's aging infrastructure needs ceaseless investment -- about $4 billion a year -- just to maintain its current operations. The authority will get about $1.3 billion in federal stimulus money for capital projects, but that's simply not enough to stave off cuts for new rails, signals and the like.
The MTA has borrowed partly because labor has consumed cash. Politicians and MTA officials say that the authority's deficit is a direct result of unanticipated economic forces. But that's not the whole story.
True enough, the depression in New York's main industry, finance, is doing its damage. But it was an unanticipated bubble in that industry over the past five years that hid the MTA's problems. Thus, in 2007 alone, the authority raked in $1.6 billion in real-estate related taxes that, along with other levies, subsidize its fares. That was nearly double what the authority expected.
But the governor and the state legislature (which are responsible for the MTA's leadership) did not use this windfall for capital improvements. Instead, this money papered over labor and debt costs that were growing out of control. Now that bubble-related tax revenue has fallen off, we can see what was covered up. In 2004, for example, servicing the MTA's debt cost $848 million. Three years from now, it will hit $2.3 billion a year, even without much new construction.
That is just the tip of the iceberg. Five years ago, the MTA's labor costs were $5 billion. Now they are nearly $7 billion. The big drivers have been pension and health-care costs, up 42%.
MTA employees, even those who perform what might be called retail jobs, like station clerks, can retire as early as 55 with generous pension and health benefits. This is not compensation for a lifetime of low wages. Average pay for the MTA's union workers is more than $60,000.
The blunt truth is that New York City and state spent the good years giving its public employees generous raises, without asking for benefits concessions in return. City benefits costs, too, have piled up to an unsustainable $13 billion annually. That's a third of the city's tax revenue. Political leaders did nothing about it. When the transit union went on strike nearly four years ago to protect its pension benefits, Gov. George Pataki caved in and kept the status quo.
Gov. David Paterson and Gov. Pataki before him (let's just leave out the farce of Eliot Spitzer) didn't even need the unions' cooperation to reduce pensions costs for new workers. Lawmakers could have passed legislation that would have cut benefits and increased contributions without union input. They didn't.
Instead the state expanded its Medicaid program, which now costs the city $5.6 billion a year, up 44% over the past seven years. The city, under Mayor Michael Bloomberg, similarly ramped up education spending by 70% to nearly $21 billion. Education spending has shot up 42% faster than spending on the MTA, even though public-school enrollment shrank while MTA ridership soared.
So now we're stuck with the same subway system that we had when the financial bubble era started -- even though faster commutes to the outer boroughs are feasible and would improve people's lives.
The MTA is planning back-office cuts that will save it about $300 million a year by 2012. That's fine, but by then pension and health benefits will have increased by more than that amount. The service cuts the MTA has planned will save about $200 million or so annually. But cutting service will not stem out-of-control costs. If the MTA ceased all service, it would still have to pay all of its employees' pension obligations and service its massive debt.
City and state officials have tried to come up with a bailout plan. But what the governor wants is to impose $2 billion in new taxes and fees -- including a new payroll tax on all employers in the city's five boroughs, Long Island, and five upstate counties served by the MTA. It's hard to see how that will help create jobs in New York. Meanwhile, if the public infrastructure that supports the private sector decays, it will only be harder for private businesses to revive themselves and the metro area's economy.
A rate hike in some form is certain (and inflation-linked hikes are appropriate). But the real fix will only come if the state prioritizes the MTA in its budget by cutting spending elsewhere to free up transportation funding. City and state officials should stand together to demand labor reforms, including raising the retirement age and increasing pension contributions for new workers, and requiring all city and state employees to pay more for their health benefits.
Ms. Gelinas is a senior fellow at the Manhattan Institute, a CFA charterholder, and a contributing editor to the institute's City Journal.
from the New York Times, 2009-May-8, p.A26, by Benjamin Weiser:
Democratic Fund-Raiser Is Guilty in Ponzi Scheme
A former prominent Democratic fund-raiser, Norman Hsu, pleaded guilty on Thursday to 10 counts of mail and wire fraud in what the authorities said was a multimillion-dollar Ponzi scheme that had bilked investors nationwide.
Mr. Hsu still faces a trial next week on allegations of campaign finance fraud.
Speaking softly before a federal judge in Manhattan, Mr. Hsu admitted that he recruited victims for his scheme by falsely promising them high returns on investments, and then paid off early investors with money from later ones “so as to create the impression that the investment strategy was operating properly, when in fact it was not.”
“I knew what I was doing was illegal,” he told Judge Victor Marrero of Federal District Court.
Prosecutors have said that from 1997 through 2007, Mr. Hsu persuaded scores of victims to invest at least $60 million in his scheme, and that he ultimately defrauded victims of at least $20 million.
Mr. Hsu, who the authorities say is 57, faces up to 20 years in prison on each of the 10 counts, the judge told him.
But despite his guilty plea to the fraud scheme, Mr. Hsu was still contesting charges of campaign finance fraud, his lawyer, Alan Seidler, said after the hearing.
“He has always been adamant with me that he did not engage in illegal campaign activity,” Mr. Seidler said.
A federal indictment charges that Mr. Hsu pressed many victims to contribute thousands of dollars to various candidates for president and other federal offices, and in some cases reimbursed them from the proceeds of his scheme.
Although the indictment does not identify which candidates received those contributions, one was Hillary Rodham Clinton, then a Democratic senator from New York, whose presidential campaign later returned about $850,000 to more than 200 donors recruited or tapped by Mr. Hsu.
From 2005 to 2007, the authorities say, Mr. Hsu had “straw donors” contribute more than $25,000 a year to federal candidates, and then reimbursed them in violation of federal law.
Katherine A. Lemire, a federal prosecutor, told Judge Marrero that the contributions allowed Mr. Hsu to curry favor with a “wide array of political candidates,” which he used to impress potential investors.
“The defendant was basically showered with attention by political candidates,” Ms. Lemire said, “because of the amount of money that he was able to bring in through these straw donors.”
Some candidates left voice-mail messages thanking him, she said.
She added that one victim would testify that Mr. Hsu played one such message for her, “which bolstered her confidence in investing with him.”
Mr. Hsu's lawyer, Mr. Seidler, said after court that his client was “like a groupie — he likes the political process.”
He said Mr. Hsu “never asked anybody to make a contribution in their name when actually it was his contribution so as to circumvent the limitations on contributions.”
Mr. Seidler said that Mr. Hsu would probably testify at the campaign finance trial, adding, “He would be his own best witness on that issue.”
from the Wall Street Journal, 2009-Apr-7, by William McGurn:
How Democrats Make Millionaires
According to tax proposals, lots of us are 'rich.'Has your 401(k) lost half its value? Have you kissed goodbye to the bonus you were hoping to use to pay junior's college tuition? Do you lie awake at night, worrying there's a pink slip with your name on it?
Cheer up. Even in these hard economic times, Democrats across the nation are working on plans that will turn some of you into instant millionaires.
There's only one catch. You're not actually going to be bringing in a million-dollar income. But the tax man is going to treat you just as though you did.
That's the message coming out of Albany, N.Y., where a newly ascendant Democratic majority led by Assembly Speaker Sheldon Silver forced a deal with the Democratic governor to impose a new "millionaires' tax." The beauty is that to pay this tax, you won't have to make anywhere near a million dollars. If you make even $300,000 a year, the cash-strapped Empire State will consider you a millionaire.
E.J. McMahon of the Albany-based Empire Center for New York State Policy explains the politics. "You get people picturing some greedy Wall Street fat cat whose pockets are stuffed with TARP money, but you end up hitting the guy who owns the local hardware store whose income is also his working capital. By the time everyone realizes what just happened, it's too late to make adjustments without creating an even bigger budget hole -- which, of course, can always be solved with a bigger tax."
It's important to distinguish what New York is doing from the more traditional Democratic approaches to taxing millionaires. In California in 2004, for example, a Democratic assemblyman championed a successful ballot initiative that imposed a 1% surcharge on personal incomes over a million dollars, to pay for mental health programs. This year, another Democratic assemblyman has introduced a bill that would impose another 1% tax on million-dollar incomes, this time to help state colleges from having to raise their tuition and fees.
In a similar way, the Democratic governor of Maryland last year successfully established a new 6.25% tax bracket for million-dollar incomes. Likewise, Connecticut Democrats have just released a plan that would jack up taxes on millionaires by 60%. Say what you will about the merits of these millionaire taxes, they at least have the virtue of applying to people who in fact earn a million dollars a year.
Today such an approach seems positively démodé. The new fashion is to take advantage of hard times to target a class of people that few politicians are willing to defend -- and then expand that class. Like so many doubtful experiments in public finance, this one was pioneered by the People's Republic of New Jersey.
In 2004, then Gov. Jim McGreevey became the first Democrat to get through a millionaires' tax whose reach extended to nonmillionaires. The McGreevey "millionaires' tax" kicked in at $500,000. He justified it, moreover, by saying that any money collected would go toward funding property tax relief for the state's beleaguered homeowners.
Five years later, we can see how that's turning out. Not only is Democratic Gov. Jon Corzine targeting property tax relief for many Garden State citizens, he wants to impose a "temporary" surcharge on the existing McGreevey millionaires' tax. The result is a three-way race between New Jersey, New York and Connecticut to see which of these metropolitan states can impose the highest income taxes on its residents.
Other Democrats are taking note of the new progressivism. In the state of Washington, which has no income tax, Democratic state Sen. Lisa Brown raised the idea in her blog. "The New York Legislature is considering what I think is a fair and stable way of addressing their revenue challenges. Should we do something similar in Washington?" she asked. Not long after, one of her Democratic colleagues introduced a bill proposing a millionaires' tax that would kick in at $500,000.
For the moment, the effort to make new millionaires out of people making a great deal less has been confined to Democratic governors and Democratic state legislators. There appears, however, to be a sense that a much larger change they can believe in is now within grasp. In a recent article for an AOL business and finance Web site, Joseph Lazzaro put it this way:
"In the same way Gov. Al Smith's reform policies in New York State in the 1920s provided a blueprint for FDR's New Deal," he wrote, "hopefully New York State's example will serve as impetus for the U.S. Congress to make a similar tough decision after the economic recovery is in place and raise upper-income federal taxes, as well."
And why not? So long as Democrats are willing to rewrite the tax code, almost anyone can wake up one day to find himself a millionaire.
from the Wall Street Journal, 2009-Mar-31:
Night of the Living Death Tax
Obama's budget quietly resurrects it in 2010.Lawrence Summers, President Obama's chief economic adviser, declared recently that "Let's be very clear: There are no, no tax increases this year. There are no, no tax increases next year." Oh yes, yes, there are. The President's budget calls for the largest increase in the death tax in U.S. history in 2010.
The announcement of this tax increase is buried in footnote 1 on page 127 of the President's budget. That note reads: "The estate tax is maintained at its 2009 parameters." This means the death tax won't fall to zero next year as scheduled under current law, but estates will be taxed instead at up to 45%, with an exemption level of $3.5 million (or $7 million for a couple). Better not plan on dying next year after all.
This controversy dates back to George W. Bush's first tax cut in 2001 that phased down the estate tax from 55% to 45% this year and then to zero next year. Although that 10-year tax law was to expire in 2011, meaning that the death tax rate would go all the way back to 55%, the political expectation was that once the estate tax was gone for even one year, it would never return.
And that is no doubt why the Obama Administration wants to make sure it never hits zero. It doesn't seem to matter that the vast majority of the money in an estate was already taxed when the money was earned. Liberals counter that the estate tax is "fair" because it is only paid by the richest 2% of American families. This ignores that much of the long-term saving and small business investment in America is motivated by the ability to pass on wealth to the next generation.
The importance of intergenerational wealth transfers was first measured in a National Bureau of Economic Research study in 1980. That study looked at wealth and savings over the first three-quarters of the 20th century and found that "intergenerational transfers account for the vast majority of aggregate U.S. capital formation." The co-author of that study was . . . Lawrence Summers.
Many economists had previously believed in "the life-cycle theory" of savings, which postulates that workers are motivated to save with a goal of spending it down to zero in retirement. Mr. Summers and coauthor Laurence Kotlikoff showed that patterns of savings don't validate that model; they found that between 41% and 66% of capital stock was transferred either by bequests at death or through trusts and lifetime gifts. A major motivation for saving and building businesses is to pass assets on so children and grandchildren have a better life.
What all this means is that the higher the estate tax, the lower the incentive to reinvest in family businesses. Former Congressional Budget Office director Douglas Holtz-Eakin recently used the Summers study as a springboard to compare the economic cost of a 45% estate tax versus a zero rate. He finds that the long-term impact of eliminating the death tax would be to increase small business capital investment by $1.6 trillion. This additional investment would create 1.5 million new jobs.
In other words, by raising the estate tax in the name of fairness, Mr. Obama won't merely bring back from the dead one of the most despised of all federal taxes, and not merely splinter many family-owned enterprises. He will also forfeit half the jobs he hopes to gain from his $787 billion stimulus bill. Maybe that's why the news of this unwise tax increase was hidden in a footnote.
from the Washington Post, 2009-Mar-6, p.A15, by Charles Krauthammer:
The Great Non Sequitur
The Sleight of Hand Behind Obama's AgendaForget the pork. Forget the waste. Forget the 8,570 earmarks in a bill supported by a president who poses as the scourge of earmarks. Forget the "2 trillion dollars in savings" that "we have already identified," $1.6 trillion of which President Obama's budget director later admits is the "savings" of not continuing the surge in Iraq until 2019 -- 11 years after George Bush ended it, and eight years after even Bush would have had us out of Iraq completely.
Forget all of this. This is run-of-the-mill budget trickery. True, Obama's tricks come festooned with strings of zeros tacked onto the end. But that's a matter of scale, not principle.
All presidents do that. But few undertake the kind of brazen deception at the heart of Obama's radically transformative economic plan, a rhetorical sleight of hand so smoothly offered that few noticed.
The logic of Obama's address to Congress went like this:
"Our economy did not fall into decline overnight," he averred. Indeed, it all began before the housing crisis. What did we do wrong? We are paying for past sins in three principal areas: energy, health care and education -- importing too much oil and not finding new sources of energy (as in the Arctic National Wildlife Refuge and the Outer Continental Shelf?), not reforming health care, and tolerating too many bad schools.
The "day of reckoning" has arrived. And because "it is only by understanding how we arrived at this moment that we'll be able to lift ourselves out of this predicament," Obama has come to redeem us with his far-seeing program of universal, heavily nationalized health care; a cap-and-trade tax on energy; and a major federalization of education with universal access to college as the goal.
Amazing. As an explanation of our current economic difficulties, this is total fantasy. As a cure for rapidly growing joblessness, a massive destruction of wealth, a deepening worldwide recession, this is perhaps the greatest non sequitur ever foisted upon the American people.
At the very center of our economic near-depression is a credit bubble, a housing collapse and a systemic failure of the banking industry. One can come up with a host of causes: Fannie Mae and Freddie Mac pushed by Washington (and greed) into improvident loans, corrupted bond-ratings agencies, insufficient regulation of new and exotic debt instruments, the easy money policy of Alan Greenspan's Fed, irresponsible bankers pushing (and then unloading in packaged loan instruments) highly dubious mortgages, greedy house-flippers, deceitful home buyers.
The list is long. But the list of causes of the collapse of the financial system does not include the absence of universal health care, let alone of computerized medical records. Nor the absence of an industry-killing cap-and-trade carbon levy. Nor the lack of college graduates. Indeed, one could perversely make the case that, if anything, the proliferation of overeducated, Gucci-wearing, smart-ass MBAs inventing ever more sophisticated and opaque mathematical models and debt instruments helped get us into this credit catastrophe.
And yet with our financial house on fire, Obama makes clear both in his speech and his budget that the essence of his presidency will be the transformation of health care, education and energy. Four months after winning the election, six weeks after his swearing-in, Obama has yet to unveil a plan to deal with the banking crisis.
What's going on? "You never want a serious crisis to go to waste," said chief of staff Rahm Emanuel. "This crisis provides the opportunity for us to do things that you could not do before."
Things. Now we know what they are. The markets' recent precipitous decline is a reaction not just to the absence of any plausible bank rescue plan, but also to the suspicion that Obama sees the continuing financial crisis as usefully creating the psychological conditions -- the sense of crisis bordering on fear-itself panic -- for enacting his "Big Bang" agenda to federalize and/or socialize health care, education and energy, the commanding heights of post-industrial society.
Clever politics, but intellectually dishonest to the core. Health, education and energy -- worthy and weighty as they may be -- are not the cause of our financial collapse. And they are not the cure. The fraudulent claim that they are both cause and cure is the rhetorical device by which an ambitious president intends to enact the most radical agenda of social transformation seen in our lifetime.
from the Wall Street Journal, 2009-Mar-16, by Pete du Pont:
California or Delaware?
Obama emulates the wrong state.What do Delaware and California have in common? Not much: One is very small, one very large, but more important they have over time followed very different economic policies that explain the direction of the Obama administration' economic thinking.
Many years ago Delaware's economic policies were much like California's today. It had the highest personal income tax rate (19.8%), the second-highest unemployment rate, and the lowest credit rating. Government spending rose at triple the rate of inflation for four years, and the state budget had five deficits in seven years. Two governors of different political parties had presided over this decline, and so the state found itself sliding down the slippery slope toward depression.
The next administration took a different economic course. (Disclosure: That administration was mine; I was elected governor in 1976.) Spending was held nearly flat for eight consecutive years, the budget was balanced every year, and income tax rates were cut almost in half--from 19.8% to 10.3% in the top bracket. The next governor made further cuts, down to the current 5.95% for the top tax bracket. The result was real economic progress. Jobs increased substantially, income tax revenues increased by 200% over the next 20 years, and there were no budget deficits in any of those years.
The other side of the coin is modern California, which now has the country's highest income tax rate (10.4%) and lowest credit rating, has raised state spending about 7% a year for four years (twice the inflation rate of 3.5%), and has been prone to running deficits in many years
So which of these states' economic policies, Delaware's back then or California's now, has been the model for the new Obama government? That's easy: The federal government has been enacting policies similar to those of shaky California, not successful Delaware.
President Obama said earlier this month that he "doesn't believe in bigger government," but federal government is predicted to be up 32% in one year. Domestic discretionary spending will increase by 80% in fiscal 2009, from $378 billion to $680 billion, including a 45% increase for agriculture; 91% for labor, health and social services; 139% for transportation and housing; and 151 percent for energy and water.
Mr. Obama proposes to raise tax rates for the highest-income families (and is likely to do so on middle-income families, too), which would reduce consumer spending and economic growth. His proposed limitations on tax deductions for mortgage interest and charitable contributions would mean downward pressure on house values and less assistance to worthy causes.
Of course raising taxes in the midst of a recession hurts rather than helps the economy. But Mr. Obama's budget argues that doesn't matter, because tax rate reductions for successful people are a bad thing, "a legacy of irresponsibility and it is our duty to change it." Never mind that George W. Bush's 2003 tax cuts helped increase revenues by $785 billion.
The president's $3.6 trillion budget is more than just a budget, it is a redefinition of government's role in America. The national debt in dollars would double in the next six years. In 10 years it is projected to have risen from 41% to 67% of gross domestic product. This year's deficit will be the largest since World War II.
The budget proposes to cut defense spending as a percentage of GDP to pre-World War II levels while increasing nondefense spending (both in dollars and as a percentage of GDP) to the highest level in history.
Finally, the administration advocates destructive energy policies, from an expensive cap-and-trade policy that would substantially increase fuel prices (and maybe force some energy plants to shut down), to lack of enthusiasm for building nuclear power plants, and the intention of the liberal establishment, lead by NASA climatologist James E. Hansen, to shut down our country's existing coal-fired plants. President Obama insists that we must "break free from oil that's controlled by foreign dictators." That could be done, but not if we cannot drill for much of the 85 billion barrels of oil and 420 trillion cubic feet of natural gas that are on the Outer Continental Shelf, or the 10 billion barrels of oil that are in Alaska. But we can't, for the Obama administration is opposed to such a break-free opportunity.
With the president's spending increases, tax increases and increased government regulation of energy (not to mention health care and education), we will soon have a new America, or as National Journal's Stuart Taylor put it, "he may be deepening what looks more and more like a depression and may engineer so much spending, debt, and government control of the economy as to leave most Americans permanently less prosperous and less free."
That is not where we should end up. America needs more Delaware and less California public policy thinking.
from the Washington Examiner, 2009-Mar-18, by Michael Barone:
Obama's 21st century campaign stuck in a mid-20th century program
One set of the numbers that I keep coming back to in the 2008 exit poll: Voters under 30 voted for Barack Obama over John McCain by a margin of 66 to 32 percent. Voters 30 and over, in contrast, favored Obama by just 50 to 49 percent. Never since the onset of exit polling has there been such a difference between the young and the rest of us.
Since Republicans obviously can't raise the voting age to 35, they need a strategy going forward to win over a generation of voters who will be a larger share of the electorate as time goes on. I think that strategy can be found by exploiting what I believe is a tension between the Obama campaign's operations and the Obama administration's policies, between a 21st century campaign that not only allowed but encouraged interaction and individual initiative, and a mid-20th century program that aims toward standardization and centralized command and control.
There is widespread agreement that the Obama campaign used 21st century technology and tapped into a 21st century sensibility better than any other campaign — far better than Hillary Clinton's campaign, far better than anything the floundering Republicans were able to come up with. The Obama campaign used the Internet to raise vast sums of money and to allow Obama supporters to interconnect with one another, to create MyObama pages, and to enable like-minded people to work together for common purposes, with light and metric-minded supervision from the Obama headquarters. It was a very nimble 21st century organization.
Sometimes things got out of hand, as when an Obama office in Houston put a photo of Che Guevara on the wall. As soon as that appeared on the Web, I imagine that someone from Austin or Chicago got on the phone or sent an e-mail and explained, gingerly, that actually Che, even if he was almost as handsome as Obama, was a bloody murderer who helped set up a ruthless dictatorship that persecuted poets and homosexuals — and that it would be a good thing to get the poster off the wall, pronto. But overall the creativity unleashed and stimulated by the campaign's 21st century operations produced results that more than compensated for an occasional embarrassment.
Contrast that 21st century campaign with the mid-20th century program unveiled in the Obama budget.
Rather than give you choices in health care, Obama wants to slam you into a national health insurance program, one that, as the intended health czar Tom Daschle explained in his book, would save money by denying care. That would take us some distance toward the British system, under which, if you want a hip replacement at age 57, well, you're just too old. Or toward the old Soviet system, which saved money by placing its cardiac clinics in a fifth-floor walkup.
Rather than give you choices in your workplace, or allow the joint management-worker cooperative system that has enabled foreign auto companies to achieve better quality and productivity than the unionized domestic automakers, Obama wants to slam you into unions whenever organizers can muscle 50 percent of workers into signing cards and then, when employers resist union demands, let federal arbitrators set wages and working conditions that you'll have to live under whether you like it or not.
Rather than let you accumulate money for investments or self-improvement, Obama wants to tax high earnings at higher rates, and allow you to channel less of what you have made to charities and nonprofits where you can help determine how it's spent, and send more of it to government where centralized mandarins can use it as they want.
The Obama program would have been well suited to the mid-20th century America, where people were happy, after the success of World War II, to work as small cogs in giant organizations run by big government, big business and big labor. But it is not well suited to 21st century America, where people, especially young people, are used to making their own choices, setting up their own networks, taking their own initiatives. Republicans should stop channeling Ronald Reagan — a remote figure to the young — and start offering young Americans policies that are in line with our times.
from the Telegraph of London's web site, 2009-Mar-19, by Toby Harnden:
"Heckuva job, Timmy" - Barack Obama on Timothy Geithner
It's never good when a top politician is forced to say that he has "complete confidence" in a key lieutenant - indeed, it often comes just before the lieutenant resigns or is summarily booted out.
That's not likely to happen with Timothy Geithner any time soon because that would entail President Barack Obama admitting that rather than picking the only man in the world who could be an effective Treasury Secretary, he'd actually chosen a compltee dud. And that would reflect as badly on Obama himself as on Geithner.
But Obama's latest words about Geithner sound ominous and could eventually become a political epitaph on a par with President George W. Bush's "Brownie, you're doing a heckuva job" endorsement of the hapless FEMA chief Michael Brown in the wake of Hurricane Katrina.
"Well, I have complete confidence in Tim Geithner and my entire economic team," Obama said as he departed the White House for California yesterday. "Understand, as I said before, Tim Geithner didn't draft these contracts with AIG.
"There has never been a secretary of the Treasury, except maybe Alexander Hamilton, right after the Revolutionary War, who's had to deal with the multiplicity of issues that Secretary Geithner's having to deal with, all at the same time.
"And, you know, he is doing so with intelligence and diligence. Nobody's working harder than this guy. You know, he is making all the right moves in terms of playing a bad hand. And what we need to be doing is making sure that we are providing him the support that he needs in order to work through all these problems so that we're able to deal with them more effectively in the future."
Granted, that's a lot more fluent than Bush on Brownie but does it amount to much more in terms of substance?
The thing about "nobody's working harder than this guy" is a bit wet. Actually, I'm sure there are some single mothers in the mid-West working two jobs to make ends meet who are working harder. They probably pay all their taxes on time too.
It's not the first time that the Obama administration has pleaded that they're working "long hours". They even signaled it before they came into office - partly, of course, to draw a distinction with the early-to-bed and supposedly lazy Bush.
But Americans will never feel sorry for politicians or White House officials because of the hours they keep - let's face it, there are a few other perks to make up for it.
As Obama was expressing his confidence in Geithner, he was also pulling the rug from under his feet by ordering him to explore all legal avenues to stop the AIG bonuses being paid. That was because Obama had realised it was politically untenable for him to stick to the weekend line that Geithner had decided the bonuses could not be stopped.
Geithner's problems are stacking up. His tax issues meant that he only just squeaked through the Senate confirmation process 60-34. Then, after Obama said that "I'm going to make sure that Tim gets his moment in the sun tomorrow", Geithner stepped up the next day to deliver a thoroughly unconvincing and thin-on-details speech about the new bank rescue plan.
Now, people are rightly asking when and what Geithner knew about the AIG bonuses. After all, as president of the Federal Reserve Bank of New York, he was in on the original AIG rescue at the tail end of the Bush administration.
On AIG, he's in that impossible situation of seeming like a fool if he didn't know what was going on with the AIG bonuses and an incompetent (not to mention, er, a liar) if he did know and did nothing about it.
Of course, it's only fair to acknowledge that US Treasury Secretary must be one of the least enviable jobs in the world at the moment - perhaps it's impossible for anyone to make a success of it.
As Newsweek's Holly Bailey points out, there's a degree of goodwill towards Obama - and, to a lesser extent, towards Geithner by extension - but the "grace period won't last forever".
Toby Harnden is the Daily Telegraph's US Editor, based in Washington DC.
from the New York Daily News, 2009-Mar-15, by Michael Goodwin:
More than a bad day: Worries grow that Barack Obama & Co. have a competence problem
Not long ago, after a string of especially bad days for the Obama administration, a veteran Democratic pol approached me with a pained look on his face and asked, "Do you think they know what they're doing?"
The question caught me off guard because the man is a well-known Obama supporter. As we talked, I quickly realized his asking suggested his own considerable doubts.
Yes, it's early, but an eerily familiar feeling is spreading across party lines and seeping into the national conversation. It's a nagging doubt about the competency of the White House.
It was during George W. Bush's second term that the I-word - incompetence - became a routine broadside against him. The Democratic frenzy of Bush-bashing had not spent itself when a larger critique emerged, one not confined by partisan boundaries.
The charge of incompetence covered the mismanagement of Iraq, the response to Hurricane Katrina and the economic meltdown. By the time Bush left, the charge tipped the scales to where most of America, including many who had been supporters or just sympathetic, viewed him as a failed President.
The tag of incompetence is powerful precisely because it is a nondenominational rebuke, even when it yields a partisan result. It became the strongest argument against the GOP hammerlock on Washington and, over two elections, gave Democrats their turn at total control.
But already feelings of doubt are rising again. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid were never held in high regard, so doubts about their motives and abilities are not surprising.
What matters more is the growing concern about Obama and his team. The longest campaign in presidential history is being followed by a very short honeymoon.
Polls show that most people like Obama, but they increasingly don't like his policies. The vast spending hikes and plans for more are provoking the most concern, with 82% telling a Gallup survey they are worried about the deficit and 69% worried about the rapid growth of government under Obama. Most expect their own taxes will go up as a result, despite the President's promises to the contrary.
None other than Warren Buffet, an Obama supporter, has called the administration's message on the economy "muddled." Even China says it is worried about its investments in American Treasury bonds. Ouch.
Much of the blame falls on Treasury Secretary Tim Geithner, whose appalling tax problems softened the ground under him before he took office. After his initial fumbling presentations, he became a butt of jokes on "Saturday Night Live," not a sustainable image for the point man in a recession. And still the market waits for his answer to the banks' toxic assets.
It's also notable that four people lined up for top jobs under Geithner have withdrawn, leaving one British official to complain that there is nobody to talk to at the Treasury Department. Perhaps it was a bid to combat the Geithner blues that led Larry Summers, Obama's top economic adviser, to make an unusual appearance Friday in which he defended the spending plans everyone is so worried about.
Yet the doubts aren't all about Geithner, and they were reinforced by the bizarre nomination and withdrawal of Chas Freeman as a top intelligence official. It's hard to know which explanation is worse: that the White House didn't know of Freeman's intemperate criticism of Israel and his praise of China's massacre at Tiananmen Square, or that it didn't care. Good riddance to him. But what of those who picked him?
Which brings us to the heart of the matter: the doubts about Obama himself. His famous eloquence is wearing thin through daily exposure and because his actions are often disconnected from his words. His lack of administrative experience is showing.
His promises and policies contradict each other often enough that evidence of hypocrisy is ceasing to be news. Remember the pledges about bipartisanship and high ethics? They're so last year.
The beat goes on. Last week, Obama brazenly gave a speech about earmark reform just after he quietly signed a $410 billion spending bill that had about 9,000 earmarks in it. He denounced Bush's habit of disregarding pieces of laws he didn't like, so-called signing statements, then issued one himself.
And in an absolute jaw-dropper, he told business leaders, "I don't like the idea of spending more government money, nor am I interested in expanding government's role."
No wonder Americans are confused. Our President is, too.
from Politico.com, 2009-Mar-22, by Craig Gordon and Jonathan Martin:
Kroft to Obama: Are you punch-drunk?
President Barack Obama said he believes the global financial system remains at risk of implosion with the failure of Citigroup or AIG, which could touch off “an even more destructive recession and potentially depression.”
His remarks came in a“60 Minutes” interview in which he was pressed by Steve Kroft for laughing and chuckling several times while discussing the perilous state of the world's economy.
“You're sitting here. And you're— you are laughing. You are laughing about some of these problems. Are people going to look at this and say, `I mean, he's sitting there just making jokes about money—' How do you deal with— I mean: explain. . .” Kroft asked at one point.
“Are you punch-drunk?” Kroft said.
“No, no. There's gotta be a little gallows humor to get you through the day,” Obama said, with a laugh.
Obama tried to inject some optimistic notes into the interview, saying he sees “flickers of hope” that the economy is beginning to turn the corner.
And he seemed intent on cooling the populist anger rising in the country, particularly over AIG's $165 million in bonuses. He signaled that he would like to see changes in a House resolution that would tax the bonuses at 90 percent, saying “we can't govern out of anger.”
“Main Street has to understand, unless we get these banks moving again, then we can't get this economy to recover. And we don't want to cut off our nose to spite our face,” he said.
The interview captured the balancing act that Obama must strike on the economy. He gave a nod to public anger at Wall Street while saying it could not dictate his response.
He got in a few whacks of his own at Wall Street executives who contributed to the meltdown—referring to them ironically at one point as “the best and the brightest”—while being ever-mindful that he still needs their help to dig out of the crisis.
His talk of depression could be viewed as alarmist—but it also seemed aimed at bracing Congress and the public for the unpopular prospect of spending even more taxpayer dollars to prop up Wall Street. Treasury Secretary Timothy Geithner is set to roll out a plan Monday aimed at restoring the flow of credit that would back up private investments with government funds.
Even his awkward laughter highlighted an issue Obama has faced dating back to the campaign, a sense that he sometimes is too “cool” and detached to fully grasp the public anxiety over mounting job losses and economic worries.
Still, Obama made clear that he's afraid the nation hasn't seen the worst of the economic crisis. He said the recession deepened faster than he expected, particularly in terms of job losses.
“If we did nothing, you could still have some big problems. There are certain institutions that are so big that if they fail, they bring a lot of other financial institutions down with them. And if all those financial institutions fail all at the same time, then you could see an even more destructive recession and potentially depression,” Obama said.
“I'm optimistic about that not happening,” he quickly added, “because I think we did learn lessons from the Great Depression.”
Obama also cited Wall Street's high-risk, high-reward culture as a main cause of the economic meltdown. He took aim at traders and executives in personal terms—saying they need to leave New York for North Dakota or Iowa to appreciate how out-of-whack their pay looks to the average American.
“I mean there were a whole bunch of folks who, on paper, if you looked at quarterly reports, were wildly successful, selling derivatives that turned out to be. . .completely worthless,” Obama said, with a chuckle.
from the Wall Street Journal, 2009-Mar-6, by Michael J. Boskin:
Obama's Radicalism Is Killing the Dow
A financial crisis is the worst time to change the foundations of American capitalism.It's hard not to see the continued sell-off on Wall Street and the growing fear on Main Street as a product, at least in part, of the realization that our new president's policies are designed to radically re-engineer the market-based U.S. economy, not just mitigate the recession and financial crisis.
The illusion that Barack Obama will lead from the economic center has quickly come to an end. Instead of combining the best policies of past Democratic presidents -- John Kennedy on taxes, Bill Clinton on welfare reform and a balanced budget, for instance -- President Obama is returning to Jimmy Carter's higher taxes and Mr. Clinton's draconian defense drawdown.
Mr. Obama's $3.6 trillion budget blueprint, by his own admission, redefines the role of government in our economy and society. The budget more than doubles the national debt held by the public, adding more to the debt than all previous presidents -- from George Washington to George W. Bush -- combined. It reduces defense spending to a level not sustained since the dangerous days before World War II, while increasing nondefense spending (relative to GDP) to the highest level in U.S. history. And it would raise taxes to historically high levels (again, relative to GDP). And all of this before addressing the impending explosion in Social Security and Medicare costs.
To be fair, specific parts of the president's budget are admirable and deserve support: increased means-testing in agriculture and medical payments; permanent indexing of the alternative minimum tax and other tax reductions; recognizing the need for further financial rescue and likely losses thereon; and bringing spending into the budget that was previously in supplemental appropriations, such as funding for the wars in Iraq and Afghanistan.
The specific problems, however, far outweigh the positives. First are the quite optimistic forecasts, despite the higher taxes and government micromanagement that will harm the economy. The budget projects a much shallower recession and stronger recovery than private forecasters or the nonpartisan Congressional Budget Office are projecting. It implies a vast amount of additional spending and higher taxes, above and beyond even these record levels. For example, it calls for a down payment on universal health care, with the additional "resources" needed "TBD" (to be determined).
Mr. Obama has bravely said he will deal with the projected deficits in Medicare and Social Security. While reform of these programs is vital, the president has shown little interest in reining in the growth of real spending per beneficiary, and he has rejected increasing the retirement age. Instead, he's proposed additional taxes on earnings above the current payroll tax cap of $106,800 -- a bad policy that would raise marginal tax rates still further and barely dent the long-run deficit.
Increasing the top tax rates on earnings to 39.6% and on capital gains and dividends to 20% will reduce incentives for our most productive citizens and small businesses to work, save and invest -- with effective rates higher still because of restrictions on itemized deductions and raising the Social Security cap. As every economics student learns, high marginal rates distort economic decisions, the damage from which rises with the square of the rates (doubling the rates quadruples the harm). The president claims he is only hitting 2% of the population, but many more will at some point be in these brackets.
As for energy policy, the president's cap-and-trade plan for CO2 would ensnare a vast network of covered sources, opening up countless opportunities for political manipulation, bureaucracy, or worse. It would likely exacerbate volatility in energy prices, as permit prices soar in booms and collapse in busts. The European emissions trading system has been a dismal failure. A direct, transparent carbon tax would be far better.
Moreover, the president's energy proposals radically underestimate the time frame for bringing alternatives plausibly to scale. His own Energy Department estimates we will need a lot more oil and gas in the meantime, necessitating $11 trillion in capital investment to avoid permanently higher prices.
The president proposes a large defense drawdown to pay for exploding nondefense outlays -- similar to those of Presidents Carter and Clinton -- which were widely perceived by both Republicans and Democrats as having gone too far, leaving large holes in our military. We paid a high price for those mistakes and should not repeat them.
The president's proposed limitations on the value of itemized deductions for those in the top tax brackets would clobber itemized charitable contributions, half of which are by those at the top. This change effectively increases the cost to the donor by roughly 20% (to just over 72 cents from 60 cents per dollar donated). Estimates of the responsiveness of giving to after-tax prices range from a bit above to a little below proportionate, so reductions in giving will be large and permanent, even after the recession ends and the financial markets rebound.
A similar effect will exacerbate tax flight from states like California and New York, which rely on steeply progressive income taxes collecting a large fraction of revenue from a small fraction of their residents. This attack on decentralization permeates the budget -- e.g., killing the private fee-for-service Medicare option -- and will curtail the experimentation, innovation and competition that provide a road map to greater effectiveness.
The pervasive government subsidies and mandates -- in health, pharmaceuticals, energy and the like -- will do a poor job of picking winners and losers (ask the Japanese or Europeans) and will be difficult to unwind as recipients lobby for continuation and expansion. Expanding the scale and scope of government largess means that more and more of our best entrepreneurs, managers and workers will spend their time and talent chasing handouts subject to bureaucratic diktats, not the marketplace needs and wants of consumers.
Our competitors have lower corporate tax rates and tax only domestic earnings, yet the budget seeks to restrict deferral of taxes on overseas earnings, arguing it drives jobs overseas. But the academic research (most notably by Mihir Desai, C. Fritz Foley and James Hines Jr.) reveals the opposite: American firms' overseas investments strengthen their domestic operations and employee compensation.
New and expanded refundable tax credits would raise the fraction of taxpayers paying no income taxes to almost 50% from 38%. This is potentially the most pernicious feature of the president's budget, because it would cement a permanent voting majority with no stake in controlling the cost of general government.
From the poorly designed stimulus bill and vague new financial rescue plan, to the enormous expansion of government spending, taxes and debt somehow permanently strengthening economic growth, the assumptions underlying the president's economic program seem bereft of rigorous analysis and a careful reading of history.
Unfortunately, our history suggests new government programs, however noble the intent, more often wind up delivering less, more slowly, at far higher cost than projected, with potentially damaging unintended consequences. The most recent case, of course, was the government's meddling in the housing market to bring home ownership to low-income families, which became a prime cause of the current economic and financial disaster.
On the growth effects of a large expansion of government, the European social welfare states present a window on our potential future: standards of living permanently 30% lower than ours. Rounding off perceived rough edges of our economic system may well be called for, but a major, perhaps irreversible, step toward a European-style social welfare state with its concomitant long-run economic stagnation is not.
Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush.
from the Wall Street Journal, 2009-Mar-10:
The Charity Revolt
Liberals oppose a tax hike on rich donors.Among those shocked by President Obama's 2010 budget, the most surprising are the true-blue liberals who run most of America's nonprofits, universities and charities. How dare he limit tax deductions for charitable giving! They're afraid they'll get fewer donations, but they should be more concerned that Mr. Obama's policies will shove them aside in favor of the New Charity State.
What did these nonprofit liberals expect, anyway? Mr. Obama is proposing a vast expansion of the entitlement state, and he has to find some way to pay for it. So logically enough, one of his ideas for funding public welfare is to reduce the tax benefit for private charity. His budget proposes to raise the top personal income tax rate to 39.6% in 2011 from 35%, and the 33% rate to 36% while reducing the tax benefit from itemized deductions for the top two brackets to 28% from 35% and 33%, respectively. The White House estimates the deduction reduction will yield $318 billion in revenue over 10 years.
From the Ivy League to the United Jewish Appeal, petitions and manifestos are in the works. The Independent Sector, otherwise eager to praise the Obama budget, worries the tax change "could be a disincentive to some donors." According to the Center on Philanthropy at Indiana University, total itemized contributions from the highest income households would have dropped 4.8% -- or $3.87 billion -- in 2006 if the Obama policy had been in place. That year, Americans gave $186.6 billion to charity, more than 40% from those in the highest tax bracket. A back of the envelope calculation by the Tax Policy Center, a left-of-center think tank, estimates the Obama plan will reduce annual giving by 2%, or some $9 billion.
In defense, White House budget chief Peter Orszag wrote on his blog: "If you're a teacher making $50,000 a year and decide to donate $1,000 to the Red Cross or United Way, you enjoy a tax break of $150. If you are Warren Buffet or Bill Gates and you make that same donation, you get a $350 deduction -- more than twice the break as the teacher." This Administration wants to turn even philanthropy into a class issue.
Mr. Orszag revealed the real agenda at work when he pointed out that the money taken from the "rich" would be used to fund such Obama state-run charities as universal health care. The argument is that any potential declines in private gifts, whether to universities or foundations, will be balanced by increases in government grants paid with higher taxes -- redistribution by another means. This is how Europe's welfare state works: Taxes are so high that private citizens have come to believe it is only the state's duty to support cultural institutions and public welfare. The ambit for private giving shrinks.
America has always operated on a different philosophy, going back to Tocqueville's discovery of thousands of private associations that sustained communities without a commanding state. We doubt that a tax benefit is what drives most giving even today. The exception may be the confiscatory death tax that drives many of the superrich to form foundations to avoid the tax. But we suspect that without the death tax the wealthy would give even more of their income away.
Americans of all income levels have long given generously, notably in the 1980s as income tax rates fell and the economy boomed. Over the last five decades, American giving overall has hardly deviated from 2% of personal income, according to the Tax Foundation. In an ideal world, the U.S. would eliminate most tax deductions, including the one for charity, in return for a simpler, flatter tax that would help create more wealth to give away. With his many new income-limited tax credits and deduction phase-outs, however, Mr. Obama is sprinting in the opposite direction.
Meanwhile, the White House may have underestimated the power of the liberal nonprofit lobby. The charity deduction cut is the only one of the President's many tax increases that Democrats on Capitol Hill have publicly criticized. Politics hath no fury like a rich liberal scorned.
from the Wall Street Journal, 2009-Feb-26, by Daniel Henninger:
A Radical Presidency
When Barack Obama delivered his 44-minute acceptance speech in August among the majestic columns of Denver, it was apparent his would be an expansive presidency. Some wondered whether his solutions for a very long list of problems was too ambitious. On Tuesday, before Congress, he made clear across 52 minutes that the economic downturn would not deflect him from his Denver vision.
Franklin D. Roosevelt gives his Jan. 4, 1935, State of the Union speech, seeking authority to create jobs for persons then on relief.
Instead, the economic crisis, as it did for Franklin D. Roosevelt, will serve as a stepping stone to a radical shift in the relationship between the people and their government. It will bind Americans to their government in ways not experienced since the New Deal. This tectonic shift, if successful, will be equal to the forces of public authority set in motion by Lyndon Johnson's Great Society. The Obama presidency is going to be a radical presidency.
Barack Obama is proposing that the U.S. alter the relationship between the national government and private sector that was put in place by Ronald Reagan and largely continued by the presidencies of Bill Clinton and the Bushes. Then, the private sector led the economy. Now Washington will chart its course.
Mr. Obama was clear about his intention. "Our economy did not fall into this decline overnight," he said. Instead, an "era" has "failed" to think about the nation's long-term future. With the urgency of a prophet, he says the "day of reckoning has arrived." The president said his purpose is not to "only revive this economy."
In fact, people would probably coronate Mr. Obama if he merely revived the Dow Jones Industrial Average. The Dow's fall since the Sept. 14 collapse of Lehman Brothers and sale of Merrill Lynch to Bank of America has eviscerated the net wealth of Americans across all incomes. Many are in the most dispirited state in their lifetimes.
Yesterday, the post-Obama Dow lost another percentage point. No matter. In his worldview, "short-term gains were prized over long-term prosperity." His speech did include a plan to address the market crisis. It consists of a program to support consumer and small-business loans; a mortgage refinancing mechanism; and the "full force of the government" to restart bank lending. Mr. Obama delivered that last element with a rather crude pistol-whipping of the nation's bankers and CEOs, thousands of whom have been operating their companies in a responsible, productive way.
This was just the prelude. Notwithstanding the daily nightmares of the economic crisis, now is the time to "boldly" rebuild the nation's "foundation." The U.S. budget he released today isn't just a budget. "I see it as a vision for America -- as a blueprint for our future." With it, Mr. Obama becomes the economy's Architect-in-Chief.
This blueprint will reshape energy and health. With energy, it proposes a gradual tear-down of the existing energy sector and its replacement with renewables. This vision has foundered before on the price disadvantage of noncarbon energy. Mr. Obama says he will "make" renewable energy profitable. He'll do this with a cap-and-trade system for carbon. The goal here is to "make" renewables economic by driving up the price of carbon.
The once-private auto industry, now run by federal "car czar" Steve Rattner, a reformed investment banker, is about to be ordered to produce "more efficient cars and trucks." Americans, like it or not, will buy these government-designed vehicles with government-supported car loans.
Mr. Obama believes health-care costs cause a bankruptcy "every 30 seconds" and will drive 1.5 million Americans from their homes this year. Therefore, the budget's vision on health is "historic" and a "downpayment" toward comprehensive health insurance. This "will not wait another year," he said.
He announced "tax-free universal savings accounts" as a solution to Social Security's crisis. This is a savings plan supported by federal matching contributions automatically deposited in individual accounts.
Mr. Obama acknowledged that this spending -- which in the public sector's new vocabulary is always "investment" -- will be costly. His read-my-lips moment was that no family with an income under $250,000 will pay a "single dime" in new taxes to support the construction of this new federal skyscraper. If that's still true in 2015, Mr. Obama will be walking back and forth across the Potomac River.
He told Congress he does not believe in bigger government. I don't believe that. It's becoming clear that the private sector is going to be demoted into a secondary role in the U.S. system. This isn't socialism, but it is not the system we've had since the early 1980s. It would be a reordered economic system, its direction chosen and guided by Mr. Obama and his inner circle.
Gov. Bobby Jindal's postspeech reply did not come close to recognizing the gauntlet Mr. Obama has thrown down to the opposition. Unless the GOP can discover a radical message of its own to distinguish it from the president's, it should prepare to live under Mr. Obama's radicalism for at least a generation.
from the Wall Street Journal, 2009-Mar-3:
The Obama Economy
As the Dow keeps dropping, the President is running out of people to blame.As 2009 opened, three weeks before Barack Obama took office, the Dow Jones Industrial Average closed at 9034 on January 2, its highest level since the autumn panic. Yesterday the Dow fell another 4.24% to 6763, for an overall decline of 25% in two months and to its lowest level since 1997. The dismaying message here is that President Obama's policies have become part of the economy's problem.
Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it's become clear that Mr. Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence -- and thus a longer period of recession or subpar growth.
The Democrats who now run Washington don't want to hear this, because they benefit from blaming all bad economic news on President Bush. And Mr. Obama has inherited an unusual recession deepened by credit problems, both of which will take time to climb out of. But it's also true that the economy has fallen far enough, and long enough, that much of the excess that led to recession is being worked off. Already 15 months old, the current recession will soon match the average length -- and average job loss -- of the last three postwar downturns. What goes down will come up -- unless destructive policies interfere with the sources of potential recovery.
And those sources have been forming for some time. The price of oil and other commodities have fallen by two-thirds since their 2008 summer peak, which has the effect of a major tax cut. The world is awash in liquidity, thanks to monetary ease by the Federal Reserve and other central banks. Monetary policy operates with a lag, but last year's easing will eventually stir economic activity.
Housing prices have fallen 27% from their Case-Shiller peak, or some two-thirds of the way back to their historical trend. While still high, credit spreads are far from their peaks during the panic, and corporate borrowers are again able to tap the credit markets. As equities were signaling with their late 2008 rally and January top, growth should under normal circumstances begin to appear in the second half of this year.
So what has happened in the last two months? The economy has received no great new outside shock. Exchange rates and other prices have been stable, and there are no security crises of note. The reality of a sharp recession has been known and built into stock prices since last year's fourth quarter.
What is new is the unveiling of Mr. Obama's agenda and his approach to governance. Every new President has a finite stock of capital -- financial and political -- to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his "stimulus" spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest.
His Treasury has been making a similar mistake with its financial bailout plans. The banking system needs to work through its losses, and one necessary use of public capital is to assist in burning down those bad assets as fast as possible. Yet most of Team Obama's ministrations so far have gone toward triage and life support, rather than repair and recovery.
AIG yesterday received its fourth "rescue," including $70 billion in Troubled Asset Relief Program cash, without any clear business direction. Citigroup's restructuring last week added not a dollar of new capital, and also no clear direction. Perhaps the imminent Treasury "stress tests" will clear the decks, but until they do the banks are all living in fear of becoming the next AIG. All of this squanders public money that could better go toward burning down bank debt.
The market has notably plunged since Mr. Obama introduced his budget last week, and that should be no surprise. The document was a declaration of hostility toward capitalists across the economy. Health-care stocks have dived on fears of new government mandates and price controls. Private lenders to students have been told they're no longer wanted. Anyone who uses carbon energy has been warned to expect a huge tax increase from cap and trade. And every risk-taker and investor now knows that another tax increase will slam the economy in 2011, unless Mr. Obama lets Speaker Nancy Pelosi impose one even earlier.
Meanwhile, Congress demands more bank lending even as it assails lenders and threatens to let judges rewrite mortgage contracts. The powers in Congress -- unrebuked by Mr. Obama -- are ridiculing and punishing the very capitalists who are essential to a sustainable recovery. The result has been a capital strike, and the return of the fear from last year that we could face a far deeper downturn. This is no way to nurture a wounded economy back to health.
Listening to Mr. Obama and his chief of staff, Rahm Emanuel, on the weekend, we couldn't help but wonder if they appreciate any of this. They seem preoccupied with going to the barricades against Republicans who wield little power, or picking a fight with Rush Limbaugh, as if this is the kind of economic leadership Americans want.
Perhaps they're reading the polls and figure they have two or three years before voters stop blaming Republicans and Mr. Bush for the economy. Even if that's right in the long run, in the meantime their assault on business and investors is delaying a recovery and ensuring that the expansion will be weaker than it should be when it finally does arrive.
from the Wall Street Journal, 2009-Feb-27:
The Obama Revolution
Paid for by the people.In the closing weeks of last year's election campaign, we wrote that Democrats had in mind the most sweeping expansion of government in decades. Liberals clucked, but it turns out even we've been outbid. With yesterday's fiscal 2010 budget proposal, President Obama is attempting not merely to expand the role of the federal government but to put it in such a dominant position that its power can never be rolled back.
The first point to understand is the sheer magnitude of federal spending built into this proposal. As the nearby chart shows, federal outlays will soar in fiscal 2009 to $4 trillion, or 27.7% of GDP, from $3 trillion or 21% of GDP in 2008, and 20% in 2007. This is higher as a share of the economy than any year since 1945, when the country was still mobilized for World War II. It is more spending by far than during the Vietnam War, or during the recessions of 1974-75 or 1981-82.
But let's assume, for the sake of argument, that Mr. Obama is right that this spending is needed now to "jump-start" an economic recovery. Though the budget predicts that the economy will recover in 2010, spending will still be 24.1% of GDP that year, and the budget proposes that spending will remain higher than 22% for the entire next decade even as the defense budget steadily declines. All Presidential budgets predict spending will decline in the "out years," if only to give the illusion of spending restraint. Mr. Obama tries the same trick, but he is proposing so many new and expanded nondefense programs that his budgeteers can't get anywhere close even to Jimmy Carter spending levels.
These columns focus on spending, rather than deficits, because Milton Friedman taught us that spending represents the real future burden on taxpayers. Nonetheless, the 2009 budget deficit is estimated to be an eye-popping 12.7% of GDP, which once again dwarfs anything we've seen in the postwar era. The White House blueprint predicts that this will fall back down to 3.5% as soon as 2012, but this is based on assumptions about Washington that aren't going to happen.
For example, Mr. Obama's budget assumes that nearly all of the new stimulus spending will be temporary -- a fantasy. He also proposes to eliminate farm subsidies for those with annual sales of more than $500,000. This is a great idea, and long overdue. But has the President checked with Senators Kent Conrad (North Dakota) or Chuck Grassley (Iowa)? We hope we're wrong, but a White House that showed no interest in restraining Congress during the recent stimulus bacchanal isn't likely to stand athwart history to stop the agribusiness lobby.
The falling deficit also assumes the largest tax increase in U.S. history, starting in 2011 with the repeal of the Bush tax rates on incomes higher than $200,000 for individuals and $250,000 for couples. The White House says this will yield upwards of $1 trillion, if you choose to believe that tax rates don't affect taxpayer behavior.
In the real world, two of every three tax filers who fall into this income category are small business owners or investors, who are certainly capable of finding ways to invest that allow them to declare less taxable income. The real impact of this looming tax increase will be to cast further uncertainty over economic decisions and either slow or postpone the recovery. Ditto for the estimated $646 billion from a new cap-and-trade tax, which no one wants to call a tax but would give the political class vast new leverage over the private economy.
Then there is Mr. Obama's plan for national health care. The White House has put a $634 billion place holder in the budget to pay for covering tens of millions of uninsured Americans with government subsidized coverage. But even advocates of this government plan say the cost will be closer to $1 trillion over 10 years, and probably much more. Meanwhile, the President is promising to reform entitlements, but his budget proposes a net increase of about $1 trillion in Medicare, Medicaid and other entitlements.
The biggest illusion in this budget may be its optimistic economic forecast. The White House assumes that the economy will decline by only 1.2% this year, before growing by 3.2% next year. This assumes the recovery will begin later this year and gather steam quickly to return to normal levels of growth. By 2010 to 2013, the budget adds, the economy will be cooking by an average of 4% a year -- which is also how it conjures up magical deficit reduction.
This growth is a lovely thought, but how? The only impetus for growth in this budget comes from the government spending more money that it is taking out of the job-producing private economy. With $1 trillion of new entitlements, $1.4 trillion in new taxes, and $5 trillion in new debt, America's entrepreneurs aren't getting any help soon from Washington.
Democrats will want to rush all of this into law this year while Mr. Obama retains his honeymoon aura and they can blame the recession on George W. Bush. But Americans are only beginning to understand the magnitude of Mr. Obama's ambitions, and how much of their own income will be required to fulfill them. Republicans have an obligation to insist on a long and considerable debate on all of this, lest Americans discover in a year or two that they live in a very different country.
Here Obama and his henchmen play the victim, for a problem largely of their own making and entirely so in predisposition, after effectively snubbing the leader of America's most important ally:
from the Telegraph of London, 2009-Mar-7, by Tim Shipman:
Barack Obama 'too tired' to give proper welcome to Gordon Brown
Barack Obama's offhand approach to Gordon Brown's Washington visit last week came about because the president was facing exhaustion over America's economic crisis and is unable to focus on foreign affairs, the Sunday Telegraph has been told.
Washington -- Sources close to the White House say Mr Obama and his staff have been "overwhelmed" by the economic meltdown and have voiced concerns that the new president is not getting enough rest.
British officials, meanwhile, admit that the White House and US State Department staff were utterly bemused by complaints that the Prime Minister should have been granted full-blown press conference and a formal dinner, as has been customary. They concede that Obama aides seemed unfamiliar with the expectations that surround a major visit by a British prime minister.
But Washington figures with access to Mr Obama's inner circle explained the slight by saying that those high up in the administration have had little time to deal with international matters, let alone the diplomatic niceties of the special relationship.
Allies of Mr Obama say his weary appearance in the Oval Office with Mr Brown illustrates the strain he is now under, and the president's surprise at the sheer volume of business that crosses his desk.
A well-connected Washington figure, who is close to members of Mr Obama's inner circle, expressed concern that Mr Obama had failed so far to "even fake an interest in foreign policy".
A British official conceded that the furore surrounding the apparent snub to Mr Brown had come as a shock to the White House. "I think it's right to say that their focus is elsewhere, on domestic affairs. A number of our US interlocutors said they couldn't quite understand the British concerns and didn't get what that was all about."
The American source said: "Obama is overwhelmed. There is a zero sum tension between his ability to attend to the economic issues and his ability to be a proactive sculptor of the national security agenda.
"That was the gamble these guys made at the front end of this presidency and I think they're finding it a hard thing to do everything."
British diplomats insist the visit was a success, with officials getting the chance to develop closer links with Mr Obama's aides. They point out that the president has agreed to meet the prime minister for further one-to-one talks in London later this month, ahead of the G20 summit on April 2.
But they concede that the mood music of the event was at times strained. Mr Brown handed over carefully selected gifts, including a pen holder made from the wood of a warship that helped stamp out the slave trade - a sister ship of the vessel from which timbers were taken to build Mr Obama's Oval Office desk. Mr Obama's gift in return, a collection of Hollywood film DVDs that could have been bought from any high street store, looked like the kind of thing the White House might hand out to the visiting head of a minor African state.
Mr Obama rang Mr Brown as he flew home, in what many suspected was an attempt to make amends.
The real views of many in Obama administration were laid bare by a State Department official involved in planning the Brown visit, who reacted with fury when questioned by The Sunday Telegraph about why the event was so low-key.
The official dismissed any notion of the special relationship, saying: "There's nothing special about Britain. You're just the same as the other 190 countries in the world. You shouldn't expect special treatment." The apparent lack of attention to detail by the Obama administration is indicative of what many believe to be Mr Obama's determination to do too much too quickly.
In addition to passing the largest stimulus package and the largest budget in US history, Mr Obama is battling a plummeting stock market, the possible bankruptcy of General Motors, and rising unemployment. He has also begun historic efforts to achieve universal healthcare, overhaul education and begin a green energy revolution all in his first 50 days in office.
The Sunday Telegraph understands that one of Mr Obama's most prominent African American backers, whose endorsement he spent two years cultivating, has told friends that he detects a weakness in Mr Obama's character.
"The one real serious flaw I see in Barack Obama is that he thinks he can manage all this," the well-known figure told a Washington official, who spoke to this newspaper. "He's underestimating the flood of things that will hit his desk." A Democratic strategist, who is friends with several senior White House aides, revealed that the president has regularly appeared worn out and drawn during evening work sessions with senior staff in the West Wing and has been forced to make decisions more quickly than he is comfortable.
He said that on several occasions the president has had to hurry back from eating dinner with his family in the residence and then tucking his daughters in to bed, to conduct urgent government business. Matters are not helped by the pledge to give up smoking.
"People say he looks tired more often than they're used to," the strategist said. "He's still calm, but there have been flashes of irritation when he thinks he's being pushed to make a decision sooner than he wants to make it. He looks like he needs a cigarette."
Mr Obama was teased by the New York Times on Thursday in a front page story which claimed to have detected a greater prevalence of grey hairs since he entered the White House.
The Democratic strategist stressed that Mr Obama's plight was nothing new. "He knew it was going to be tough; he said as much throughout the campaign. But there's a difference between knowing it is going to be tough and facing the sheer relentless pressure of it all."
from the Daily Mail of London, 2009-Mar-11, by Ian Drury:
Special relationship? Obama's people won't even answer the phone, whines Downing Street
He has a reputation for being the archetypal senior civil servant professional, unflappable, and, above all, discreet.
But Sir Gus O'Donnell risked sparking a transatlantic tiff today with an imprudent remark about Downing Street's relations with the White House.
The head of the civil service, Sir Gus said the handover to President Barack Obama's administration was severely hindering preparations for next month's G20 summit.
In an extraordinary blunder, the usually-guarded Sir Gus said no-one in the U.S. Treasury department was answering telephone calls.
He said it meant the Government was finding it 'unbelievably difficult' to hold discussions ahead of the meeting of world leaders in London.
Even though the world was in the grip of the worst economic crisis in decades - top of the G20 agenda - Number 10 was having trouble getting in touch with key personnel, said the Cabinet Secretary.
'There is nobody there,' he told a civil service conference in Gateshead.
'You cannot believe how difficult it is.'
The comments will certain anger Sir Gus's paymasters in Downing Street, as well as raising eyebrows in irritation in the White House.
Gordon Brown has been careful to cement his relationship with President Obama.
Last week he became the first European leader to visit Washington since the Democrats re-took office.
Sir Gus's remarks were quickly removed from the Whitehall & Westminster World website, whose publisher Dods organised the conference.
He also faced a private rebuke for the injudicious comments, although the Prime Minister's official spokesman was at pains to make clear the words had been taken 'out of context'.
Nevertheless, it risked opening a spat with Washington. Downing Street aides had already been left frustrated by the White House's handling of arrangements for the Prime Minister visit to the States last week, where he addressed both Houses of Congress.
British officials had to refute claims Mr Brown had been 'snubbed' after a press conference with President Obama was downgraded to a few questions in the Oval Office.
In his speech, Sir Gus criticised the U.S. system of each new administrations appointing their own senior civil servants.
It would be 'absolute madness' to introduce similar measures in the UK because it was hamper the progress of ongoing projects such as the Olympics.
'You get to a certain point, and you can't go any further,' said Sir Gus.
'If there's a change of administration, you're out, and a whole new bunch of people come in who probably haven't been in government before.'
President Obama has been criticised in the U.S. for taking so long to fill key positions in the Treasury.
Every key position in the department with the exception of the Treasury Secretary - equivalent to the British Chancellor - remained vacant.
The Prime Minister's official spokesman said: 'You have to put Gus O'Donnell's remarks in their proper context.
'He was speaking at a public services conference. His remarks were taken out of context. He was explaining the benefit of having the British system of a permanent civil service.
'We have very good relations with the Obama administration on G20 and other issues, as was shown by the very substantive discussions we had with President Obama and his team last week.'
This administration is, plainly, functionally incompetent, but that's what one should expect from the party of anti-meritocracy:
from BBC News online, 2009-Mar-7:
Button gaffe embarrasses Clinton
US Secretary of State Hillary Clinton presents Foreign Minister Sergei Lavrov with a mock reset buttonRussian media have been poking fun at the US secretary of state over a translation error on a gift she presented to her Russian counterpart.
Hillary Clinton gave Sergei Lavrov a mock "reset" button, symbolising US hopes to mend frayed ties with Moscow.
But he said the word the Americans chose, "peregruzka", meant "overloaded" or "overcharged", rather than "reset".
Daily newspaper Kommersant declared on its front page: "Sergei Lavrov and Hillary Clinton push the wrong button."
Relations between Washington and Moscow have cooled in recent years over Russia's role in the war in Georgia, US support for the entry of Georgia and Ukraine to Nato, and the planned US missile shield based in central Europe.
'Was it right?'
Efforts to heal the rift got off to an awkward start on Friday as the two sides met in Geneva, when Mrs Clinton presented Foreign Minister Lavrov with a green box tied in green ribbon.
As reporters watched, the US secretary of state assured her Russian opposite number her staff had "worked hard" to ensure it was accurate.
"Was it right?" she inquired with a smile.
"You got it wrong," Mr Lavrov responded, also smiling, before pointing out the mistake.
Despite the embarrassment, the two made light of the moment in front of the cameras and pushed the button together to signify a shared hope for better relations.
At a joint news conference after two hours of talks, both joked about the error.
"We reached an agreement on how 'reset' is spelled in both Russian and English - we have no differences between us any more," Mr Lavrov said through an interpreter.
Mrs Clinton put it this way: "The minister corrected our word choice. But in a way, the word that was on the button turns out to be also true.
"We are resetting, and because we are resetting, the minister and I have an 'overload' of work."
The gift was a light-hearted reference to US Vice-President Joe Biden's recent remark that the new US administration wanted to reset ties with Russia after years of friction.
from the Los Angeles Times, 2009-Mar-6, by Mike Dorning with Tom Hamburger in Washington and Bruce Japsen of the Chicago Tribune contributing:
Sanjay Gupta withdraws as surgeon general candidate
CNN and the Obama administration cite personal reasons. The medical correspondent's views and activities had come under fire from some quarters.
Reporting from Washington -- CNN medical correspondent Dr. Sanjay Gupta withdrew Thursday from consideration to be the next surgeon general, with the network and Obama administration officials attributing his decision to professional and family reasons amid a campaign by some liberal interest groups to block his selection.
CNN reported that Gupta, a neurosurgeon, decided to withdraw so that he could continue to practice medicine, work as a journalist and spend more time with his family.
Administration officials cited the same reasons.
"Sanjay Gupta was under serious consideration for the job of surgeon general. He has removed himself from consideration to focus more on his medical career and his family," said an Obama administration official who was not authorized to discuss the matter publicly and spoke on condition of anonymity.
Obama officials disclosed two months ago that the well-known broadcaster was the president's top choice for a job that is in many ways the public face of medicine in the United States.
Gupta's selection quickly aroused opposition.
Some groups cited his critical reporting on government-run healthcare systems.
Some liberal physicians raised the possibility of conflict of interest because Gupta had participated in television programming on a health channel for doctor's offices. The programming was partly underwritten by drug companies.
Gupta's withdrawal was the latest in a series of unexpected problems the administration has encountered in filling senior positions -- problems that have consumed time, energy and political capital.
Some of the problems have involved such issues as failure to pay taxes or meet other legal obligations.
Others have centered on political infighting among interest groups that supported Obama in his bid for the White House.
This nomination fell into the latter category: Just days after Gupta's name was disclosed as a possible choice for surgeon general, House Judiciary Chairman John Conyers Jr. (D-Mich.), a supporter of universal healthcare, mounted a public campaign to mobilize opposition in Congress.
Conyers argued that Gupta's past criticism of government-centered healthcare meant Gupta would not be vigorous enough in advocating for the poor and disadvantaged.
For several years, Gupta has been co-anchor of a CNN- produced healthcare show distributed monthly via flat-screen TVs provided free to doctor's offices.
The show is sponsored by healthcare, consumer and pharmaceutical companies that want to get their message directly to patients, according to the website of AccentHealth, a privately held company that distributes the programs and sells them to advertisers.
Dr. Quentin Young -- who heads Physicians for a National Health Program, a group that advocates for single-payer, Canadian-style national health insurance and other changes in the present system -- and other critics cited occasions when Gupta favorably mentioned sponsors' brand-name drugs.
"His record is not a good one here," Young said.
CNN's director of public relations, Jennifer Dargan, said that Gupta's on-air comments had always been under the editorial control of CNN and unrelated to any advertising contracts, which are handled by a separate company.
"Dr. Gupta has no relationship with the advertisers of the program -- monetarily, editorially or otherwise," she said.
Others on the left complained about Gupta's treatment of Michael Moore's film "Sicko." They complained that his on-air "fact-check" of Moore's movie was inaccurate; Gupta eventually apologized for an error.
On the other side, some thought it was a brilliant stroke for Obama to install a familiar television personality in a position some call "the nation's physician."
Gupta "understands medicine, and he's a compassionate physician with integrity," said Joycelyn Elders, a surgeon general during the Clinton administration. "One of the most important jobs as surgeon general is to be able to communicate. I think he certainly can do that."
Gupta's withdrawal keeps the door open for another neurosurgeon who has been mentioned as a possible surgeon general: Dr. Gail Rosseau of Chicago, an early supporter of Obama's.
One of only 300 female neurosurgeons nationwide, Rosseau, 52, is chief of surgery at the Neurologic and Orthopedic Institute of Chicago and an assistant professor of neurosurgery at Rush University Medical Center, a Chicago teaching hospital.
Rosseau went through a preliminary vetting process late last year, including interviews by key senators and members of Congress on various health committees.
She was teaching at a neurosurgery conference in Egypt on Thursday and could not be reached for comment.
from the Wall Street Journal, 2009-Feb-27:
An Inconvenient Tax
Cap and trade yields 'climate revenues.' But don't call it a t--.That didn't take long. The same week that President Obama promised (again) that "95% of working families" would not see their taxes rise by "a single dime," his own budget reveals that taxes will rise for 100% of everyone for the sake of global warming. Ahem.
You don't even have to burrow into yesterday's budget fine print to discover the "climate revenues" section, where the White House discloses that it expects $78.7 billion in new tax revenue in 2012 from its cap-and-trade program. The pot of cash grows to $237 billion through 2014, and at least $646 billion through 2019. If this isn't tax revenue, what is it? Manna from heaven? The offset from Al Gore's carbon footprint?
If it brings in revenue that the government then spends, it's a tax, and politicians should start referring to it as such. The Administration in fact projects that these "climate revenues" will become the sixth largest source of federal receipts by 2019, outpaced only by individual and corporate income taxes, payroll taxes for Social Security and Medicare and (barely) excise taxes. We're supposed to be living in a new era of fiscal honesty, so let's start with cap and trade.
Of course it's easy to see why Democrats don't want the public to think of cap and trade as a tax. Tax increases aren't popular, as Mr. Gore learned when he and Bill Clinton tried to impose a BTU tax in 1993. The complex cap-and-trade tax would ripple throughout the energy chain and ultimately the entire economy. All consumers, not just "the rich," would pay more for goods and services that use carbon energy -- though some would pay more than others. A majority of those "95% of working families" probably lives in the middle of the country that relies far more on manufacturing and coal-fired power than do the better-off coastal regions.
Mr. Obama's Energy Secretary Steven Chu was refreshingly candid on this point with the New York Times earlier this month. Given that higher prices are supposed to motivate the changes necessary to reduce carbon energy use, Mr. Chu said he was worried that climate taxes may drive jobs to countries where costs are cheaper. "The concern about cap and trade in today's economic climate," he said, "is that a lot of money might flow to developing countries in a way that might not be completely politically sellable." You are correct, sir.
Meanwhile, the political class loves a cap-and-trade tax because it gives them new economic and political power. Congress would create a new property right to expend CO2, setting a price per ton on carbon output, and then Congress would also get to determine the distribution of allowances. The Administration wants all of them to be auctioned off, which is what creates the giant revenue windfall. The politicians would then decide how to spend all of that new "climate revenue."
Mr. Obama's budget proposes to spend this windfall on two items: $15 billion a year in more subsidies for alternative fuels, and $65 billion or so a year to finance tax subsidies for workers, many of whom don't pay income taxes. In other words, once this cap-and-trade tax is on the books, the revenue stream will create political constituencies that depend on it.
No new pot of gold goes uncontested, however, so you can assume that Mr. Obama's priorities will not go unchallenged. Already on Capitol Hill, Charlie Rangel's tax committee and Henry Waxman's energy clan are feuding about who gets to divvy up the spoils. Not to mention who gets the political control that will become a source of tens of millions in new campaign contributions from thousands of affected businesses.
By the way, the Congressional Budget Office estimates that cap-and-trade taxes would actually throw off as much as $300 billion every year -- not merely $78.7 billion -- and in a footnote the Obama budget implicitly acknowledges that its $645.7 billion estimate is a lowball: "All additional net proceeds will be used to further compensate the public." No doubt.
from the Wall Street Journal, 2009-Feb-25:
Obama Unbridled
The President has only begun to expand the government.Anyone who thought the recession and financial market turmoil would moderate President Obama's policy ambitions discovered the opposite last night. Far from suggesting limits on Congress or federal spending, the new President made clear in his first State of the Union address that he believes in government power as the answer to our current difficulties, and he intends to use it.
We suspect many Americans will respond well to his clear determination, tied as it was to optimism about the future. Americans are looking for leadership, and last night Mr. Obama dropped his recent riff about looming "catastrophe" and pointed to a brighter day beyond today's trouble. Americans want Mr. Obama's policies to succeed because they rightly understand that all of us will pay a price if they fail. This helps to explain Mr. Obama's high poll ratings, despite struggling financial markets and the partisan divide over the stimulus bill. Americans won't easily or quickly concede that another President isn't making the grade.
The political divide is over means, not ends, and on that score Mr. Obama is slowly revealing himself as a President who meant what he said going back to the primaries. He believes in the power of the state to drive prosperity, to reform the financial system and health care, and even to transform the entire energy economy. Mr. Obama said at one point that he didn't believe in government for its own sake, but his policy emphasis showed otherwise.
We were especially struck by his determination to pass a carbon "cap and trade" regime, despite the costs it would impose on the economy amid a recession. Only last year Midwest Democrats rebelled against those costs when the Senate debated cap and trade. But in the past week Mr. Obama's green advisers have declared that the Administration will soon formally declare that carbon must be regulated like any pollutant under the Clean Air Act. This will unleash a flood of new regulatory controls across the economy, and perhaps Mr. Obama believes this imperative will drive Congress to act, almost as a kind of relief. But the economic uncertainty alone will further retard business risk-taking just when we need such daring for the economy to recover.
Likewise, even many Democrats have argued that the political system can't accommodate both a cap and trade debate and health care reform in the same year. Mr. Obama declared otherwise last night. He urged Congress to pass a new universal health-care entitlement "this year," a request that was met with ecstatic applause among the Democrats who now run Congress. No one seriously believes that kind of commitment would cost anything less than $220 billion a year, which is real money even in today's Washington.
Mr. Obama suggested he could finance all of this with a combination of a budget scrubbing plus a tax increase on a mere 2% of American taxpayers. The President said his staff has already found $2 trillion in spending savings, and we look forward to those details. As for those 2%, they are a lot poorer than they used to be and in any case there aren't enough of them to come close to paying for Mr. Obama's plans. Despite the President's protests, the American middle class will eventually be asked to pay far more than they do now.
Mr. Obama made a valiant attempt to explain the importance of unclogging the financial system, and that's no easy task considering the anger toward our financial elites across the country. But he also played to that anger himself when he declared that "This time, CEOs won't be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet." This only encourages the phony, but still damaging, populism in Congress that will also slow the revival of animal spirits.
Mr. Obama clearly believes the recession has created a political moment when Americans are frightened enough to be open to a new era of expanded government. The question is whether his vast ambitions will allow the private economy to grow enough even to begin to pay for it all.
from the Wall Street Journal, 2009-Mar-21:
Vindicating McCain
The worst-kept secret on Capitol Hill is that Democrats have always planned to tax health benefits to pay for their "universal" health-care plans. Now White House aides are whispering that they're also open to the idea. Maybe they will all now apologize to John McCain for trashing his proposal to do the same thing in the Presidential campaign.
Democrats are desperately searching for the $1.2 trillion and more they'll need to subsidize middle-class health coverage. With deficits already at epic levels, more spending is politically a harder sell. So they're now circling the tax deduction that employers receive to offer insurance to their workers for the same reason that Willie Sutton robbed banks, because that's where the money is.
Most likely, Democrats will cap the exclusion by income or cost of the health plan, so that those with the most gold-plated benefits pay more for the privilege. The Congressional Budget Office estimates that a ceiling at the 75th percentile of current levels would generate $452 billion over 10 years.
But hold on. John McCain also wanted to reform this tax break, which goes only to business. Individuals don't get the same tax break if they buy insurance themselves. Mr. McCain proposed to gradually replace the workplace deduction with a refundable tax credit available to all Americans, regardless of where they acquired their coverage. Mr. Obama attacked him ruthlessly for it.
"And this is your plan, John," he said at one debate. "For the first time in history, you will be taxing people's health-care benefits." Mr. Obama added that the McCain proposal was "radical," "the biggest middle-class tax increase in history," "out of line with our basic values" and that "the choice you'll have is having your employer no longer provide you health care." Combined with heavy advertising and Mr. McCain's inability to defend his own ideas, these distortions were highly effective.
In a deeply cynical turnabout, the White House now says a tax on employer benefits is acceptable as long as someone else proposes it. We suppose anyone would be embarrassed to endorse a fundamental insight that he once claimed was vile and destructive.
The reality is that the employer-based tax deduction is the original sin of our health-care system. Particularly indefensible is the coverage gap it creates between those who receive it from their employers and those who pay (or can't afford to pay) for their own policies with after-tax dollars. A universal deduction or credit would restore tax parity -- and gradually stimulate the demand for new, less expensive insurance where consumers, not their bosses, are in charge.
This relic of the World War II era has also left us with a health-care financing "system" that only a central planner could love, with neither a functional price mechanism nor the capacity to recognize value. The employer-exclusive deduction has created what is essentially a giant money laundering operation, an endless cycle of third parties lacking any direct stake in controlling costs elsewhere -- when they're not profiting from the waste.
Capping the open-ended tax exclusion is a perfectly sensible idea, which would discipline the excess health insurance that contributes to rising health spending. The problem is that reducing the exclusion means withdrawing a benefit, which is easy to demagogue, as Mr. Obama showed in 2008. It is also unpopular among unions, which have often secured Cadillac health plans in labor contracts. But we suspect the unions will come around if they get the taxpayers to pay for health care instead.
The deeper problem is that Democrats don't want to create a new private market for individual health insurance. Their goal in reducing the employer tax deduction is to apply the revenue to finance a new "public option," a subsidized program modeled after Medicare and open to the middle class that would crowd out private insurers. Another idea is to provide the tax subsidy only to businesses that comply with a new federally mandated benefits package.
The almost certain long-run outcome of these efforts is the total nationalization of health care. Anyone who believed Mr. Obama when he said that under his plan "you can keep your health insurance, keep your choice of doctor, keep your plan" should think twice. Everything else he said during his campaign is obviously subject to change, as John McCain can attest.
from the Wall Street Journal, 2009-Apr-1, by Karl Rove:
The President Is 'Keeping Score'
Chicago politics has moved into the White House."Don't think we're not keeping score, brother." That's what President Barack Obama said to Rep. Peter DeFazio in a closed-door meeting of the House Democratic Caucus last week, according to the Associated Press.
A few weeks ago, Mr. DeFazio voted against the administration's stimulus bill. The comment from Mr. Obama was a presidential rebuke and part of a new, hard-nosed push by the White House to pressure Congress to adopt the president's budget. He has mobilized outside groups and enlisted forces still in place from the Obama campaign.
Senior presidential adviser Valerie Jarrett and her chief of staff, Michael Strautmanis, are in regular contact with MoveOn.Org, Americans United for Change and other liberal interest groups. Deputy Chief of Staff Jim Messina has collaborated with Americans United for Change on strategy and even ad copy. Ms. Jarrett invited leaders of the liberal interest groups to a White House social event with the president and first lady to kick off the lobbying campaign.
Its targets were initially Republicans, as team Obama ran ads depicting the GOP as the "party of no." But now the fire is being trained on Democrats worried about runaway spending.
Americans United is going after Democrats who are skeptical of Mr. Obama's plans to double the national debt in five years and nearly triple it in 10. The White House is taking aim at lawmakers in 12 states, including Democratic Sens. Kent Conrad, Ben Nelson, Mary Landrieu, Blanche Lincoln and Mark Pryor. MoveOn.Org is running ads aimed at 10 moderate Senate and House Democrats. And robocalls are urging voters in key districts to pressure their congressman to get in line.
Team Obama is also ginning up the Democratic National Committee. A special group at the DNC has been created called "Organizing for America." It is headed by Mr. Obama's campaign manager, David Plouffe, and is lobbying for the administration's spending proposals.
Organizing for America's first effort has not been terribly effective. It emailed 13 million Obama election workers, recruited 1,200 neighborhood canvassers, and, after a couple of weeks and more email pleas to the Obama list, produced 642,000 signatures. Having less than 5% of your own activists sign a petition is unimpressive and perhaps evidence that adding $9.3 trillion to the deficit alarms even some of Mr. Obama's most fervent supporters.
Every White House is faced with finding ways to nudge Congress without antagonizing it. But this overt campaign could infuriate members who won't appreciate being targeted by a president of their own party. They could react by becoming recalcitrant. Should that happen, team Obama will have to recalculate its efforts, especially as the public sours on big spending plans.
In March, a Gallup Poll found that positive impressions of the Obama budget dropped five points. Only 39% now harbor supportive views of it. A CNN/Opinion Research Poll in mid-March found that support for the stimulus bill Mr. Obama signed into law shifted 11-points against the bill in five weeks, with 66% of Americans opposed to a second stimulus bill.
Support continues to decline for the proposition that a big boost in government spending will lead America to prosperity. A NBC News/Wall Street Journal Poll early last month found that 61% of Americans were concerned that "the federal government will spend too much money" (up 12 points from December), and only 29% were concerned "it will spend too little money to try to boost the economy."
This growing skepticism will not be assuaged by White House Budget Director Peter Orszag's bewildering response when asked by a reporter last week about increasing federal debt. He said, "I don't know what spiraling debt you're referring to."
Members of Congress should also worry about how Mr. Obama is "keeping score." He is steeped in the ways of Chicago politics and has not forgotten his training in the methods once used by Saul Alinsky, the radical Chicago community organizer.
Alinsky's 1971 book, "Rules for Radicals," is a favorite of the Obamas. Michele Obama quoted it at the Democratic Convention. One Alinsky tactic is to "Pick the target, freeze it, personalize it, and polarize it." That's what the White House did in targeting Rush Limbaugh, Rick Santelli and Jim Cramer. (The president's press secretary, Robert Gibbs, went so far as to lash all three from the White House press podium.) It may also explain Mr. Obama's comments to Mr. DeFazio.
After all, Alinsky's first rule of "power tactics" is "power is not only what you have but what the enemy thinks you have." Team Obama wants to remind its adversaries it has plenty of power, and it does. The question is whether the White House will wield it responsibly. The jury is still out, but certain clues are beginning to emerge. "Don't think we're not keeping score, brother," even if said with a wink and a smile, isn't quite the "new politics" we were told to expect.
Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.
from the Wall Street Journal, 2009-Mar-18, by Karl Rove:
Obama Gives the GOP an Opening
President Barack Obama and his West Wing lieutenants are playing on the world's largest stage, yet act as if no one is watching them when they contradict their campaign promises. That behavior is unwittingly giving the Republicans an opening.
For example, Team Obama thinks the president, having spent a good portion of the campaign decrying the $2.9 trillion in deficits during the Bush years, can now double the national debt held by the public in 10 years. Having condemned earmarks during the campaign, the Obama administration now believes it can wave through 8,500 of them in the omnibus-spending bill, part of the biggest spending increase since World War II.
With the Dow at 7,486 and unemployment at 8.1%, Mr. Obama says the economy is fundamentally sound. Does he suppose the nation won't recall him attacking John McCain last September for saying the same thing -- when the Dow was at 11,000 and unemployment at 6.2%?
Candidate Obama vowed to end "the same partisanship and pettiness and immaturity that has poisoned our politics." Yet his administration geared up MoveOn.org to lead a left-wing coalition to pressure Republicans and centrist Democrats, organized a daily conference call to coordinate liberal attack dogs, and strategized with Americans United for Change on ads depicting the GOP as the party of "no."
Rather than working with Republicans on the budget, the administration attacked them as mindless obstructionists. Yet the administration's policies are not nearly as popular as one might suppose.
For example, the liberal Center for American Progress recently found that 61% of Americans say government spending is almost always wasteful and inefficient, and 57% think free market solutions are better than government at creating jobs and economic growth. A late February poll by NBC News/Wall Street Journal found that 61% were concerned "the federal government will spend too much money" and "drive up the budget deficit" versus 29% concerned the government "will spend too little."
These general attitudes translate into opposition to specific policy initiatives. For example, CBS found support for the stimulus bill falling to 51% in February from 63% in January. Meanwhile, opposition to more money to bail out banks rose to 53% in March from 44% in February.
This, in turn, is affecting Mr. Obama's job approval ratings, already just average for a new president. Last week's Pew poll showed Mr. Obama's approval at 59% with 26% disapproval, down from February's 64% approval and 17% disapproval. His standing on the economy is also falling: Newsweek found in January that 71% were confident Mr. Obama would be able to turn around the economy, while 26% were not. By March, his ratings had fallen to 65% confident, 33% not.
Republicans sense the opportunity. The House GOP leadership deputized the top Budget Committee Republican, Paul Ryan of Wisconsin, to prepare an alternative budget. The GOP budget won't raise taxes, gets spending and debt under control, and will result in a stronger economy with more jobs. House Republicans plan a major selling effort back home during the coming recess. Minority Leader John Boehner is already up on YouTube extolling the plan.
Senate Republicans will not prepare a complete alternative, but they will offer a robust package of amendments, with a wave of proposals for each of the three weeks the upper chamber will devote to the budget. Senate Minority Leader Mitch McConnell and Republican Conference Chairman Lamar Alexander foreshadowed the GOP's theme by saying the Democratic budget taxes, spends and borrows too much.
Sen. Alexander is also working with Sen. Judd Gregg, the ranking Budget Committee Republican, on a statement of budget principles that sharpens the contrast between the two parties' approaches to America's economic future.
The GOP's challenge is winning attention for its vision. True, its megaphone isn't nearly as big as those of the White House and the Congressional Democratic majorities, and Mr. Obama still has the upper hand. Yet by discarding so much of what people found appealing in him, Mr. Obama may change that.
Every president eventually depletes his political capital. Some have done so advancing great, difficult causes. Others squander it because of missteps, and what the public views as breaches of faith. Having been president for all of eight weeks, Mr. Obama retains much residual goodwill and could still change course on the budget to reach across the aisle. But his current strategy has made him weaker than he was and weaker than he needs to be. It's turning into a costly two months for America's 44th president.
Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.
from the Wall Street Journal, 2009-Mar-12, by Karl Rove:
The White House Misfires on Limbaugh
Presidents throughout history have kept lists of political foes. But the Obama White House is the first I am aware of to pick targets based on polls. Even Richard Nixon didn't focus-group his enemies list.
Team Obama -- aided by Clintonistas Paul Begala, James Carville and Stanley Greenberg -- decided to attack Rush Limbaugh after poring over opinion research. White House senior adviser David Axelrod explicitly authorized the assault. Chief of Staff Rahm Emanuel assigned a White House official to coordinate the push. And Press Secretary Robert Gibbs gleefully punched the launch button at his podium, suckering the White House press corps into dropping what they were doing to get Mr. Limbaugh.
Was it smart politics and good policy? No. For one thing, it gave the lie to Barack Obama's talk about ending "the political strategy that's been all about division" and "the score-keeping and the name-calling." The West Wing looked populated by petulant teenagers intent on taking down a popular rival. Such talk also shortens the president's honeymoon by making him look like a street-fighting Chicago pol instead of an inspirational, unifying figure. The upward spike in ratings for Rush and other conservative radio commentators shows how the White House's attempt at a smackdown instead energized the opposition.
Did it do any good with voters not strongly tied to either party? I suspect not. With stock markets down, unemployment growing, banks tottering, consumers anxious, business leaders nervous, and the economy shrinking, the Obama administration's attacks on a radio talk show host made it seem concerned with the trivial.
Why did the White House do it? It was a diversionary tactic. Clues might be found in the revelation that senior White House staff meet for two hours each Wednesday evening to digest their latest polling and focus-group research. I would bet a steak dinner at Morton's in Chicago these Wednesday Night Meetings discussed growing public opposition to spending, omnibus pork, more bailout money for banks and car companies, and new taxes on energy, work and capital.
What better way to divert public attention from these more consequential if problematic issues than to start a fight with a celebrity conservative? Cable TV, newspapers and newsweeklies would find the conflict irresistible. Something has to be set aside to provide more space and time to the War on Rush; why not the bad economic news?
Here's the problem: Misdirection never lasts long. Team Obama can at best only temporarily distract the public; within days, attention will return to issues that clearly should worry the White House.
Not even Team Obama can forestall unpleasant reality. And among those America now faces is Mr. Obama adding $3.2 trillion to the national debt in his first 20 months and 11 days in office, eclipsing the $2.9 trillion added during the Bush presidency's entire eight years.
Another reality is that Mr. Obama's fiscal house is built on gimmicks. For example, it assumes the cost of the surge in Iraq will extend for a decade. This brazenly dishonest trick was done to create phony savings down the line.
Mr. Obama's budget downplays some programs' true cost. For example, his vaunted new college access program is funded for five years and then disappears (on paper); the children's health insurance program drops (on paper) from $12.4 billion in 2013 to $700 million the next year. Neither will happen; the costs of both will be much higher and so will the deficits.
Mr. Obama's budget also assumes the economy declines 41% less this year and grows 52% more next year and 38% more the year after than is estimated by the Blue Chip consensus (a collection of estimates by leading economists traditionally used by federal budget crunchers). If Mr. Obama used the consensus forecasts for growth rather than his own rosy scenarios, his budget would be $758 billion more in the red over the next five years.
Then there's discretionary domestic spending, which grows over the next two years by $238 billion, the fastest increase ever recorded. Mr. Obama pledges it will then be cut in real terms for the next nine years. That's simply not credible.
Then there's his omnibus spending bill to fund the government for the next six months, laden with 8,500 earmarks and tens of billions in additional spending above the current budget. What happened to pledges for earmark reform and making "meaningful cuts?"
In the face of our enormous economic challenges, top White House aides decided to pee on Mr. Limbaugh's leg. This is a political luxury the country cannot afford, and which Mr. Obama would be wise to forbid. Or did he not mean it when he ran promising to "turn the page" on the "old" politics?
Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.
from the Wall Street Journal, 2009-Mar-4, by Karl Rove:
Presidential Bait-and-Switch
What Obama once promised, and what he's delivering.Barack Obama won the presidency in large measure because he presented himself as a demarcation point. The old politics, he said, was based on "spin," misleading arguments, and an absence of candor. He'd "turn the page" on that style of politics.
Last week's presentation of his budget shows that hope was a mirage.
For example, Mr. Obama didn't run promising larger deficits -- but now is offering record-setting ones. He'll add $4.9 trillion before his term ends and $7.4 trillion if given a second, doubling the national debt in five years and tripling it in 10. Mr. Obama's deficits will be much larger than he admits because he relies on rosy economic assumptions and gimmicks that mask spending and debt (like assuming popular new programs he supports won't be renewed).
Nor did Mr. Obama run promising more earmarks. Instead, he said he'd reform the earmark culture and "scour the federal budget, line by line, and make meaningful cuts." Now he wants to wave through a $410 billion omnibus spending bill with about 8,500 earmarks. This is on top of the $787 billion stimulus bill signed into law two weeks ago.
His justification comes to us from the White House's budget director, Peter Orszag, who recently called the omnibus spending bill "last year's business." But it will fund the federal government for the next six months. Mr. Obama could veto the legislation or push congressional Democrats to ditch the earmarks. But he has given little indication that he will do either.
Nor is it credible to claim that the spending spree on Mr. Obama's watch is someone else's responsibility, as Mr. Orszag did by saying the president had "inherited" these deficits.
Mr. Obama ceded authority to congressional appropriators, who wrote the stimulus bill that is history's largest spending increase. Then Mr. Obama got behind the pork-laden omnibus-spending bill. And Mr. Obama has also proposed $4 trillion in outlays this fiscal year and $3.6 trillion next fiscal year.
Mr. Obama cannot dismiss critics by pointing to President George W. Bush's decision to run $2.9 trillion in deficits while fighting two wars and dealing with 9/11 and Katrina. Mr. Obama will surpass Mr. Bush's eight-year total in his first 20 months and 11 days in office, adding $3.2 trillion to the national debt. If America "cannot and will not sustain" deficits like Mr. Bush's, as Mr. Obama said during the campaign, how can Mr. Obama sustain the geometrically larger ones he's flogging?
There is more. Mr. Obama pledged "no tax hikes on any families earning less than a quarter million dollars." What he didn't draw attention to was $600 billion in higher energy taxes he wants to impose through a cap-and-trade system on carbon emissions. These taxes will hit everyone who drives, flips a light switch, or buys anything manufactured, grown or shipped.
Mr. Obama devoted four times as much space in his campaign stump speech to cutting taxes as he did to talking about raising taxes on the wealthy. In the election's most widely watched speech, his Denver Convention address, he didn't even mention raising taxes, instead stressing he'd "cut taxes -- cut taxes -- for 95% of all working families." Yet higher taxes are what every American is going to get.
Today's White House health-care summit should also remind us of one of Mr. Obama's most popular ads, which declared, "On health care reform -- two extremes. On one end, government-run health care, higher taxes. On the other, insurance companies without rules, denying coverage. Barack Obama says both extremes are wrong."
Mr. Obama's plan will lead us to the extreme of government-run health care. And in an effort to reach that goal, Mr. Obama's budget proposes, as a starting point, a $630 billion fund to expand government-run health care. And that $630 billion comes not from reduced spending, but higher taxes.
Mr. Obama's personal popularity remains higher than support for his proposals. A raft of opinion surveys show Americans take the conservative side on issues ranging from the efficacy of government spending, to nationalization of banks, to bailouts for auto companies, to whether tax cuts or government spending will create more jobs. Packaging Mr. Obama's proposals is easier than rigorously defending them. Team Obama will find this out as the details of their budget and other plans are scrutinized.
Barack Obama has been president for a little more than five weeks. During his speech to a joint session of Congress last week, he showed what a skilled speaker he is and how persuasive he can be. But words delivered from a teleprompter, while important, have to line up with actions. Promises have to be met. And a president who promised to be one thing cannot be another. At some point, the gap between good feelings and results, between perception and reality, closes.
Eloquent words and "spin" work better in a campaign than they do while governing. And as Mr. Obama is discovering, the laws of economics won't change, even for him.
Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.
from the Wall Street Journal, 2009-Feb-25, by Karl Rove:
Obama's Straw Men
Why does he routinely ascribe to opponents views they don't espouse?President Barack Obama reveres Abraham Lincoln. But among the glaring differences between the two men is that Lincoln offered careful, rigorous, sustained arguments to advance his aims and, when disagreeing with political opponents, rarely relied on the lazy rhetorical device of "straw men." Mr. Obama, on the other hand, routinely ascribes to others views they don't espouse and says opposition to his policies is grounded in views no one really advocates.
On Tuesday night, Mr. Obama told Congress and the nation, "I reject the view that . . . says government has no role in laying the foundation for our common prosperity." Who exactly has that view? Certainly not congressional Republicans, who believe that through reasonable tax cuts, fiscal restraint, and prudent monetary policies government contributes to prosperity.
Mr. Obama also said that America's economic difficulties resulted when "regulations were gutted for the sake of a quick profit at the expense of a healthy market." Who gutted which regulations?
Perhaps it was President Bill Clinton who, along with then Treasury Secretary Larry Summers, removed restrictions on banks owning insurance companies in 1999. If so, were Mr. Clinton and Mr. Summers (now an Obama adviser) motivated by quick profit, or by the belief that the reform was necessary to modernize our financial industry?
Perhaps Mr. Obama was talking about George W. Bush. But Mr. Bush spent five years pushing to further regulate Fannie Mae and Freddie Mac. He was blocked by Democratic Sen. Chris Dodd and Rep. Barney Frank. Arriving in the Senate in 2005, Mr. Obama backed up Mr. Dodd's threat to filibuster Mr. Bush's needed reforms.
Even in an ostensibly nonpartisan speech marking Lincoln's 200th birthday, Mr. Obama used a straw-man argument, decrying "a philosophy that says every problem can be solved if only government would step out of the way; that if government were just dismantled, divvied up into tax breaks, and handed out to the wealthiest among us, it would somehow benefit us all. Such knee-jerk disdain for government -- this constant rejection of any common endeavor -- cannot rebuild our levees or our roads or our bridges."
Whose philosophy is this? Many Americans justifiably believe that government is too big and often acts in counterproductive ways. But that's a far cry from believing that in "every" case government is the problem or that government should be "dismantled" root and branch. Who -- other than an anarchist -- "constantly rejects any common endeavor" like building levees, roads or bridges?
During his news conference on Feb. 9, Mr. Obama decried an unnamed faction in the congressional stimulus debate as "a set of folks who -- I don't doubt their sincerity -- who just believe that we should do nothing."
Who were these sincere do-nothings? Every House Republican voted for an alternative stimulus plan, evidence that they wanted to do something. Every Senate Republican -- with the exception of Judd Gregg, who'd just withdrawn his nomination to be Mr. Obama's Commerce secretary and therefore voted "present" -- voted for alternative stimulus proposals.
Then there's Mr. Obama's description of the Bush-era tax cuts. "A surplus became an excuse to transfer wealth to the wealthy," he explained in his Tuesday speech, after earlier saying, "tax cuts alone can't solve all of our economic problems -- especially tax cuts that are targeted to the wealthiest few."
The Bush tax cuts were not targeted to "the wealthiest few." Everyone who paid federal income taxes received a tax cut, with the largest percentage of reductions going to those at the bottom. Last year, a family of four making $40,000 saved an average of $2,053 because of the Bush tax cuts. The tax code became more progressive as the share paid by the top 10% increased to 46.4% from 46% -- and the nation experienced 52 straight months of job growth after the cuts took effect. And since when is giving back some of what people pay in taxes "transferring wealth?"
In his inaugural address -- which was generally graceful toward the opposition -- Mr. Obama proclaimed, "We have chosen hope over fear, unity of purpose over conflict and discord." Which Republican ran against him on fear, conflict and discord?
Mr. Obama portrays himself as a nonideological, bipartisan voice of reason. Everyone resorts to straw men occasionally, but Mr. Obama's persistent use of the device is troubling. Continually characterizing those who disagree with you in a fundamentally dishonest way can be the sign of a person who lacks confidence in the merits of his ideas.
It was said that Lincoln crafted his arguments in "resonant words that enriched the political dialogue of his age." Mr. Obama's straw men aren't enriching the dialogue of our age. They are cheapening it. Mr. Obama should stop employing them.
Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.
from the Wall Street Journal, 2009-Feb-26, by Kim Strassel:
Obama: The CliffsNotes
Decoding the president.Any high-school kid with a set of CliffsNotes knows Moby Dick is so much more than just a whale. Any American watching the new administration might wish for a similar study guide.
Thirty-nine days, one press conference, one congressional address, and one budget into this presidency, Barack Obama is finding his groove. Out of the early chaos has emerged an administration with a set of talking points. The president is now honing these explanations of what went wrong, and how he will make it right.
Yet, as with any complex character, what Mr. Obama says isn't always what he means. (Even Melville would've found Washington a bit deep.) So here's a handy guide to the larger meaning beneath Mr. Obama's more frequent lines. Hang it on the fridge for easy reference.
- "We are not going to get relief by turning back to the very same policies that for the last eight years doubled the national debt and threw our economy into a tailspin." Translation: Blame Republicans, and tax cuts.
Mr. Obama inherited a deficit, though it wasn't caused by letting Americans keep more of their paychecks. It was caused by a need to rebuild the military to fight two wars (at least one of which he supported), and by that worn-out old idea known as spending, which lost the GOP its majority, and which Mr. Obama is now touting as economic elixir.
He also inherited a recession, though no economist with an IQ above 60 would suggest tax cuts caused the housing bubble. That came courtesy of easy money and loose lending standards, the latter of which Congress encouraged. Presumably, if tax cuts were responsible for the deficit and the recession, Mr. Obama wouldn't be constantly boasting that he wants tax cuts for 95% of Americans.
The wider goal is to vaguely link everything conservative with everything gone wrong, the better to present liberal ideas as a cure. Besides, it's useful to have a GOP to keep blaming, if the cure doesn't work.
- It's time to "make hard choices to bring our deficit down." Translation: Hello, higher taxes.
The thing about cutting deficits is that there are only two choices, one hard for politicians, the other hard for Americans. Government can reduce spending, or government can raise taxes. Mr. Obama made clear with yesterday's budget he has no intention of cutting back. So the hard part now falls to Americans, who are being told they have a patriotic duty to their children to pay more, and cover Washington's costs.
- "The only way to fully restore America's economic strength is to make the long-term investments that will lead to new jobs, new industries, and a renewed ability to compete with the rest of the world." Translation: Big government. President Obama loves the word "invest." (He used a form of it 11 times in his congressional address on Tuesday.) It sounds so modern and free market, and, most important, not like what it really is -- "spending." The administration is aware that the deficit is now the story. Thus Mr. Obama's suggestion that blowing out hundreds of billions for health care, energy and education somehow isn't Washington as usual -- but will instead yield American riches down the road.
Of course, no country has ever made good on such a promise. Washington, D.C.'s return on investment for investing $14,000 a year per student is a 40% high-school dropout rate. Government can create industries, though only those, like corn ethanol, that can't cut it without perpetual government aid. We're still waiting for Medicare to turn a profit. Nevertheless, investment is a catchy term. House Speaker Nancy Pelosi recently described her giant $410 billion 2009 omnibus spending bill as a similar "investment." Never mind that it contains 8,500 earmarks and the largest increase in discretionary spending since Jimmy Carter.
- "We need to make clean, renewable energy the profitable kind of energy." Translation: Your utility bills are going up.
Electricity from solar power costs, about, 15 cents per kilowatt hour. Electricity from natural gas costs, about, four cents. The only way to make solar power "profitable" is to further subsidize it down to the price of natural gas, or to make natural gas as expensive as solar. Mr. Obama's cap-and-trade plan does the latter, placing a tax on fossil fuels, which companies pass along to consumers. Sen. Jim Inhofe (R., Okla.) reminded Congress on Wednesday that its most recent climate bill, Lieberman-Warner, would have cost Americans $6.7 trillion. Fortunately for the president, he will not have to include that sum in his new, more transparent, budget.
- "If your family earns less than $250,000 a year, you will not see your taxes increased a single dime." Translation: For now. [And: When your income plummets, so do your income taxes. -AMPP Ed.]
The president's budget proves he intends to tax the top 2% of earners at effective rates much higher than under Bill Clinton. Still, even if he taxed 100% of this group's income, it wouldn't come close to covering his budget costs. Nor will winding down Iraq. If Mr. Obama is committed to his agenda, much less his deficit reduction, the middle class will have to give it up.
At least he didn't say "read my lips."
from the Wall Street Journal, 2009-Feb-25:
Secretary of Golf
John Kerry's latest crusade.As if Treasury Secretary Tim Geithner didn't have enough to worry about. Now Senator John Kerry wants to make him national arbiter of the corporate golf junket. This week Mr. Kerry is angry at Northern Trust -- a bank that accepted $1.6 billion in TARP funds last year despite being well-capitalized and profitable. Northern Trust last week sponsored, for the second time, the Northern Trust Open, a PGA Tour event. As part of its sponsorship, it wined and dined clients and employees at swanky Los Angeles locales -- all paid for, to hear Mr. Kerry tell it, with TARP money.
Senator Kerry's solution to this "idiotic" decision is to outlaw fun. "Kerry's TARP Taxpayer Protection and Corporate Responsibility Act," the Senator's press release announced, "would prevent any recipient of TARP funds from hosting, sponsoring, or paying for conferences, holiday parties and entertainment events." Penalties would include fines and forced reimbursement of TARP funds. A bank could still throw a party for customers, provided it gets a "waiver" from the Treasury Secretary, who has 30 days to issue his golf and chardonnay diktat.
We'd be the first to agree that taxpayer money should be spent wisely. But Northern Trust makes money. It could probably pay back the TARP funds tomorrow if the terms of that investment didn't make it onerous to do so before three years have elapsed.
A Treasury Secretary has better things to do than to police every conference, holiday party and entertainment event. If there's a silver lining in this inane proposal, it's that it reinforces the need to let well-run banks get out from under the TARP as soon as they are able. On the other hand, perhaps Mr. Kerry will soon be proposing a bailout for all the events that are going to lose their corporate sponsors, along with the businesses that cater to them.
from the Times of London, 2009-Feb-14, by Tony Allen-Mills:
Obama warned over `welfare spendathon'
The new administration's economic stimulus plan may undo reforms that cut the dole queues, critics warnRONALD REAGAN started it, Bill Clinton finished it and last week Barack Obama was accused of engineering its destruction. One of the few undisputed triumphs of American government of the past 20 years – the sweeping welfare reform programme that sent millions of dole claimants back to work – has been plunged into jeopardy by billions of dollars in state handouts included in the president's controversial economic stimulus package.
As Obama celebrated Valentine's Day yesterday with a return to his Chicago home for a private weekend with family and friends, his success in piloting a $785 billion (£546 billion) stimulus package through Congress was being overshadowed by warnings that an unprecedented increase in welfare spending would undermine two decades of bipartisan attempts to reduce dependency on government handouts.
Robert Rector, a prominent welfare researcher who was one of the architects of Clinton's 1996 reform bill, warned last week that Obama's stimulus plan was a “welfare spendathon” that would amount to the largest one-year increase in government handouts in American history.
Douglas Besharov, author of a big study on welfare reform, said the stimulus bill passed by Congress and the Senate in separate votes on Friday would “unravel” most of the 1996 reforms that led to a 65% reduction in welfare caseloads and prompted the British and several other governments to consider similar measures.
Though some researchers have questioned the true impact of Clinton's “workfare” reforms, they were wildly popular with millions of US taxpayers tired of subsidising what many saw as a generation of slackers.
Despite dire warnings that reduced benefits for single mothers and deadlines on entitlement would create a social calamity – one liberal senator warned at the time that children would be “sleeping on grates” – the 1996 reforms cut welfare rolls from more than 5m families in 1995 to below 2m a decade later without a discernible increase in hardship.
In the American political lexicon, welfare has since become a dirty word – often referred to as the W word – and nothing arouses US tabloid ire more than the hint that taxpayers' money is being wasted.
When it emerged that Nadya Suleman, the mother of octuplets born in Los Angeles last month, was a “single mom” with six children already and was relying on welfare assistance, she was transformed overnight from fertility goddess to the target of death threats.
Obama argued last week that his bill was essential for reviving the US economy and protecting victims of the credit crunch. Yet his Republican rivals have seized on the billions lavished on new welfare spending to stir the conservative faithful from their postelection misery and reunite the opposition.
“If you like government dependence, you will love the plan they are jamming through Congress,” declared Michael Steele, the new chairman of the Republican National Committee.
Rector, a senior scholar at the conservative Heritage Foundation, argued that Obama's spending proposals in effect encouraged individual states to add more families to their welfare rolls; the more Americans sign on to the dole, the more state budgets will benefit from US Treasury payouts.
“They have completely overturned the fiscal and policy foundations of welfare reform,” Rector complained.
Supporters of the bill argue that the current crisis is so grave that intellectual quibbling about the nature of welfare has to take second place to the upheaval transforming millions of American lives.
“How can you tell someone who has lost his income to look for another job if there aren't any more jobs?” asked one Obama backer.
While some scholars are beginning to suspect that Clinton's welfare reforms were fatally flawed – or at least viable only during an economic boom – Republicans are not alone in fearing that Obama's hastily concocted package is the first step towards the creation of a quasi-socialist welfare state.
Even Mickey Kaus, a prominent liberal blogger, has denounced what he describes as the “get more people on welfare” provisions of Obama's bill. Writing at Slate, the political website, Kaus said: “Lack of jobs isn't a reason to loosen work requirements . . . Have the Dems never heard of `workfare'?
“Give recipients useful community service work, and if they do the work, then they get the [welfare] cash.”
Returning to Chicago for the first time since his inauguration last month, there were other pressing matters on Obama's mind – not to mention the minds of millions of Americans still enthralled by his every move. Where would he take his wife Michelle for a romantic Valentine's dinner? How much time would he spend in the gym? Would he fit in a game of basketball?
Opinion polls last week showed that for all his administration's errors in his first three weeks in office, the new president has lost little of his personal appeal. He continues to enjoy an average 64% approval rating.
Yet after another fracas over the withdrawal of the Republican senator Judd Gregg as Obama's choice for commerce secretary – the second time a nominee has given up the post – Obama's chief of staff, Rahm Emanuel, was obliged to insist that it was not “amateur hour” at the White House.
Obama also stumbled over a curious claim that his stimulus plan would enable Caterpillar, one of America's leading manufacturers of heavy earth-moving equipment, to start rehiring workers. He was promptly contradicted by the company's chief executive, who said he had no such intention and was planning more lay-offs.
The dangers are beginning to pile up for the novice president and his struggling economic crew. Tim Geithner, his treasury secretary, tripped up with opaque attempts to explain how the administration would fix the banking crisis, while from every corner of the country there were alarming indications that increased government intervention in the lives of ordinary Americans could prove an invitation to waste.
In Wisconsin, the state that forged a pioneering path in welfare reforms in the 1990s, residents were astonished by a newspaper investigation that disclosed that a $340m (£236m) programme offering taxpayer-financed child care to low-income working parents was riddled with fraud and expensive loopholes.
In one case, a family of four sisters who had 17 children between them put all of them together, took it in turns to babysit them and over the past three years claimed $540,000 (£374,000) in perfectly legal state childcare subsidies.
Examples like that fuel American suspicion that so-called “big government” invariably turns out to be inefficient, expensive and easily exploitable. And there has been no bigger government action in the US than the stimulus package presented by Obama.
Few dispute the need for some kind of stimulus, but has Obama got the details right? The Republicans do not think so and, led by Gregg, they are already shunning the president's bipartisan overtures.
Perhaps more worrying for the president is that some of his natural liberal supporters are not feeling all that confident either. In a telling commentary last week, Paul Krugman, the 2008 Nobel prize-winning economist, declared that Obama's stimulus victory “feels more than a bit like defeat”.
Krugman added: “I've got a sick feeling in the pit of my stomach – a feeling that America just isn't rising to the greatest economic challenge in 70 years.”
from the Los Angeles Times, 2009-Feb-14, by Peter Nicholas:
Missing from Congress' stimulus negotiations: transparency
President Obama has indicated he wants Congress to conduct its work in the open. But in this first test case, 'he's pleased with the process and the product,' a spokesman says.
Reporting from Washington -- Upending Washington's entrenched ways of doing business is proving tougher than President Obama may have assumed.
The nearly $800-billion stimulus bill served as a test case.
During the campaign, Obama released a position paper stating his commitment to open government. As president, he said, he would not only insist on transparency in his own administration, he would press Congress to revamp its practices as well.
Obama has no constitutional authority to set rules for Congress, but he suggested he would use his influence to see to it that Congress doesn't conduct its work "in the dead of night and behind closed doors."
In the first major piece of legislation pushed by Obama, transparency was missing.
Important negotiating sessions devoted to the stimulus took place in congressional offices, outside public view. Rep. Henry A. Waxman (D-Beverly Hills) said he was in a meeting about the stimulus plan Tuesday night in the office of House Speaker Nancy Pelosi (D-San Francisco). Among the participants was White House Chief of Staff Rahm Emanuel.
"We had to do some hard bargaining," Waxman said.
The abundance of private deliberations made for some comical moments.
Rep. Dave Camp (R-Mich.) was walking through the Capitol on Wednesday on his way to a public meeting in which senators and House members were supposed to hash out differences over the stimulus. As he passed the Rotunda, Camp spotted Senate Majority Leader Harry Reid (D-Nev.) holding a news conference announcing that a deal had already been struck.
"This is the largest spending bill in the history of the United States, and I believe the public business should be done in public," said Camp, who had been appointed to the 10-member conference committee created to reconcile differences between the two chambers.
"President Obama made that commitment repeatedly in his campaign," he said.
Obama aides say that the president is still committed to transparency in government.
He reiterated the pledge during the transition, posting a promise on his website to "restore the American people's trust in their government by making government more open and transparent," and cited closed conference committee sessions as a practice ripe for overhaul.
But the White House isn't apologizing for how the stimulus bill was handled. Given the dismal economic climate, White House aides said, the country needed a stimulus bill -- fast.
Press Secretary Robert Gibbs, asked about the private negotiations, said that Obama wasn't troubled.
"He's pleased with the process and the product that has come out," Gibbs said while briefing reporters Friday. "I think when the process is done, the American people will be proud of the product that we believe and we hope will begin to stimulate the economy."
Democratic leaders said the bill was handled according to procedures and customs that have been in place for years, including when Republicans controlled Congress.
Waxman said Congress' treatment of the bill was fairly standard. Could Congress have demanded that all negotiations play out in public? Waxman said that would have been impractical.
"There are too many moving parts in this bill," Waxman said. "We would be sitting in an open conference committee meeting for weeks, if not a whole month, to process all the amendments that would have been offered."
from the Wall Street Journal, 2009-Feb-13:
1,073 Pages
A stimulus bill that's anything but transparent.In his closing remarks on the stimulus bill yesterday, House Appropriations Chairman David Obey called it "the largest change in domestic policy since the 1930s." We'd say more like the 1960s, which is bad enough, but his point about the bill's magnitude is right. The 1,073-page monstrosity includes the biggest spending increase since World War II, but more important is the fine print expanding the role of the federal government across the breadth of American business, health care, energy and welfare policy.
Given those stakes, you might think Congress would get more than a few hours to debate it. But, no, yesterday's roll call votes came less than 24 hours after House-Senate conferees had agreed to their deal. Democrats rushed the bill to the floor before Members could even read it, much less have time to broadcast the details so the public could offer its verdict.
So much for Democratic promises of a new era of transparency. Only this Tuesday the House unanimously approved a resolution promising 48-hour public notice before holding a roll call. Even better, the bill could have been posted on the Internet, as candidate Barack Obama suggested during the campaign. Let voters see what they're getting for all this money. Not a chance.
This high-handed endgame follows the pattern of this bill from the start, with Republicans all but ignored until Democrats let three GOP Senators nibble around the edges to prevent a filibuster. With their huge majorities, Mr. Obey and Democrats got their epic victory. But far from a new, transparent way of governing, this bill represents the kind of old-fashioned partisan politics that Tom DeLay would have admired.
from the Weekly Standard, 2009-Feb-23, web-posted 2009-Feb-13, by William Kristol:
Obama Levitates
But the train goes off the rails.One of many highlights of the stimulus bill the Democrats just rammed through Congress is $8 billion for high-speed rail. What makes this appropriation special is that there was no money for high-speed rail in the original House legislation. The Senate bill had $2 billion. The legislation coming out of conference "compromised" on $8 billion.
How did this happen? Well, some of that $8 billion, as the Washington Post reported Friday, seems intended for "a controversial proposal for a magnetic-levitation rail line between Disneyland, in California, and Las Vegas, a project favored by Senate Majority Leader Harry M. Reid (D-Nev.). The 311-mph train could make the trip from Sin City to Tomorrowland in less than two hours, according to backers." Reid of course played a major role in putting together the final bill.
That's the kind of policymaking the new Obama administration has embraced in its signature legislative proposal: a congressional process as unseemly as ever; an emergency bill that barely addresses the emergency; a "stimulus" bill short on stimulus (is that magnetic-levitation rail line "shovel-ready"?).
What accounts for this debacle? You could start with a lack of presidential leadership. Who would have thought the missing player in the first month of the administration would be Barack Obama? He let his signature economic legislation, the stimulus, be shaped by congressional Democrats. He let internal disputes over the difficult question of how to save the banking system result in a disastrous non-announcement of a non-plan by Treasury Secretary Timothy Geithner last week. Before that, he let Geithner become Treasury secretary after cheating on his income taxes, and waived his own ethics rules to appoint a lobbyist as deputy secretary of defense--undercutting his promises to clean up Washington. He allowed Rahm Emanuel to politicize the Census Bureau, losing as a result his commerce secretary-designee, Judd Gregg, an ornament of his professed hope for bipartisanship.
In foreign policy, Obama has exerted no more control. He allowed both Super-Special Pooh-bah Richard Holbrooke and National Security Adviser Jim Jones to give interviews to the New York Times and the Washington Post, respectively, touting their own importance and presenting the president as a distant player in the formulation of foreign policy. Meanwhile, turf wars in the State Department and the National Security Council are even more bitterly fought than usual. The tale of Holbrooke shouting at Undersecretary of State Bill Burns that he'll keep Burns waiting as long as he wants, since he (allegedly) outranks Burns, makes the Rumsfeld-Powell drama look tame.
And where is Obama amid all this turmoil? Well, he's not amid it--and he's apparently not curbing or directing it. He seems to be magnetically levitating at least a few inches above the ground, doing campaign events in swing states and in his home state of Illinois, revving up the crowds to . . . do what? To encourage congressional Democrats to support their own package? He allowed the aforementioned Jim Jones--who has a lot on his plate--to spend many hours at an international gabfest in Munich at which Vice President Joe Biden, Deputy Secretary of State James Steinberg, and Holbrooke were already over-representing the United States. Reveling in the fond attentions of the Europeans and occasionally dozing off from jet lag, Jones allowed the delegation to send dangerously ambiguous signals about the U.S. commitment in Afghanistan.
Politically, Republicans are relieved by Obama's weak start. A well-crafted stimulus could have split Hill Republicans. It could also have exposed intellectual disarray on the right over the financial crisis. But Obama allowed the GOP to dodge that bullet and begin the term with a reinvigorating series of intellectually successful assaults on the stimulus bill. A strong message on Afghanistan from the administration would have won the support of Republican hawks--and might have caused other Republicans foolishly to move in a semi-isolationist direction, provoking another internal GOP dispute. Withdrawing Geithner's nomination would have elevated the new president above the last eight years of Republican-dominated Washington business as usual.
So Republicans have some reason to cheer. But not much. The country needs a president capable of exercising leadership at home and abroad. Barack Obama has had a charmed career. He's been the magnetic-levitation train of recent American politics, skimming over the surface at great speed without having to slog through the mud that slows down and climb over the boulders that trip up normal politicians. But now he's president. The charm is wearing off. It's time for him to stoop to govern.
from the Associated Press, 2009-Apr-4:
Obama adviser paid millions as hedge fund director
WASHINGTON — Lawrence Summers, President Barack Obama's top economic adviser, earned millions over the past year as managing director of the hedge fund D.E. Shaw Group and through speaking fees, some from financial institutions now at the center of the government's rescue program.
Financial disclosure reports released by the White House show that Summers received $5.2 million from D.E. Shaw. He also reported payments for appearances before institutions such as J.P. Morgan, Citigroup, Goldman Sachs and Lehman Brothers.
Overall, Summers was paid $2.7 million for more than 40 appearances before different organizations and companies, including financial institutions.
"Given that Dr. Summers is widely recognized as one of the country's most distinguished economists and formerly served as treasury Secretary, there was considerable interest in hearing his economic insights from companies across various industries," White House spokesman Ben LaBolt said.
Obama has enacted strict rules against hiring lobbyists for administration positions that would have influence over their former clients. A White House official said Summers will not work on issues specifically related to D.E. Shaw for two years. The official noted that Summers was not an adviser or an employee of the firms that paid him to give speeches.
Another top White House aide, senior adviser David Axelrod, disclosed that he sold his share of two campaign and media strategy businesses last year for $3 million. The money will be paid to him in annual installments over the next five years, beginning Dec. 31. Axelrod also reported income of more than $1 million last year from the two companies, David Axelrod & Associates and ASK Public Strategies.
Summers began as managing director at D.E. Shaw Group in October 2006. A company press release at the time said Summers would be involved part time to offer advice on strategic initiatives, provide high-level research and advise the executive committee. His income from the firm included deferred compensation from 2007 and 2008 that he was paid this year.
D.E. Shaw is a global investment and technology development firm with about $36 billion in investment capital.
LaBolt said the administration has worked to tighten accountability over banks and altered conditions for the receipt of government financial bailout funds "so that taxpayers can see how their money is being spent, the influence of lobbyists is curbed, executive compensation is reined in, and firms are required to show how they will preserve or expand lending using government funds."
He said Summers "has been at the forefront of this administrations work to shore up our nations financial system and to put in place a regulatory framework that will strengthen the financial system and its oversight — all in an effort to help the families across America who have paid a very steep price for risky decisions made by Wall Street executives."
Note of 2008-Nov-19: Barack Obama has tapped Eric H. Holder Jr. as Attorney General, and Holder has accepted the offer, and will serve Mr. Obama pending Senate confirmation. Holder penned an editorial for the Washington Post that ran on 2001-Oct-25, titled “Keeping Guns Away From Terrorists”, and calling for a permanent central registry of gun buyers and their guns at the Bureau of Alcohol, Tobacco, and Firearms, saying it would help law enforcement “protect our communities from violence and terrorism”. As Deputy Attorney General under Janet Reno, Holder was directly involved in many of the Clinton Administration's episodes of controversy. He helped shield Ira Magaziner, who with Hillary Clinton led the “Task Force to Reform Health Care” that aspired to spur instituting of national socialist health care in the US. In the saga of Elián Gonzalez, the Cuban child whose mother died emigrating to join relatives in Florida, Holder was an ardent advocate for the child's repatriation, and expressly advocated forcible intervention to seize the child from his relatives. Holder exercised advisory influence to encourage controversial pardons granted by President Clinton. He tepidly advised Clinton to pardon fugitive financier Marc Rich, who had engaged in profitable business with Iran during the 1979-1981 hostage crisis, and who would go on to enter a similarly profitable arrangement with Saddam Hussein under the infamously corrupt UN Oil-for-Food regime. Clinton pardoned Rich on the former's last day in office. Holder coached members of Congress ("Records Show Puerto Ricans Got U.S. Help With Clemency", by Neil A. Lewis, New York Times, 1999-Oct-21) on how best to secure pardons for several Marxist-Leninist Puerto Rican separatists associated with the terrorist group FALN, sixteen of whom were indeed granted Presidential clemency on 1999-Aug-11. In the same last-minute round of pardons that benefited Marc Rich, also pardoned were Susan Rosenberg and Linda Sue Evans, footsoldiers of Bill Ayers's and Bernadine Dohrn's Weather Underground revolutionary communist terrorist group. Rosenberg was the getaway driver in the 1981 Brinks armored car robbery where her coconspirators murdered three, and Evans ran a network of safehouses for Weather Underground militants engaged in terroristic bombings, and funded these operations through fraud and other crime. Lanny Davis, a friend of Holder's and another Clinton Administration alumnus, says specifically that Holder had no role at all in the Rosenberg and Evans pardon decisions. Whether Holder lied to Davis on the matter may be lost to history.
from the Washington Post, 2009-Feb-3, p.A2, web-posted 2009-Feb-2, by Carrie Johnson:
Holder Confirmed As the First Black Attorney General
Nominee Overcame Objections in GOPThe Senate confirmed Eric H. Holder Jr. as the nation's first African American attorney general by a vote of 75 to 21 yesterday, opening a new chapter for a Justice Department that had suffered under allegations of improper political influence and policy disputes over wiretapping and harsh interrogation practices.
Holder, 58, will arrive at the Justice Department headquarters in Washington today for a swearing in ceremony and to greet some of the department's 110,000 employees.
"The need for new leadership at the Department of Justice is as critical today as it's ever been," said Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.). "This confirmation is going to do a great deal to restore the morale and the purpose throughout the department."
The Senate vote occurred four days after Holder overcame concerns by a small but vocal group of GOP lawmakers over his position on national security and gun rights, as well as his recommendations in two controversial clemency decisions by President Bill Clinton.
Holder's advocates marshaled critical support from a broad base of federal and state law enforcement groups as well as a bipartisan coalition of former Justice Department leaders, including onetime deputy attorney general James B. Comey, former FBI director Louis J. Freeh and President George W. Bush's terrorism and homeland security adviser Frances Fragos Townsend.
By all accounts, Holder is among the most credentialed lawyers ever to become attorney general. He began his career as a public corruption prosecutor before serving as U.S. attorney in the District and as a Superior Court judge. Holder later operated as second in command at the Justice Department during the later years of the Clinton administration.
But his service in the Clinton years invited criticism from GOP lawmakers, who also questioned his approach to hot-button terrorism policies.
At a grueling, seven-hour hearing last month, flanked by his wife and three young children, Holder labeled as "torture" the simulated drowning technique called waterboarding and vowed to make national security his top priority.
Holder also said that he would look askance at efforts to "criminalize policy differences" but did not conclusively rule out prosecution of Bush administration officials for their involvement in detainee questioning and warrantless surveillance operations. That issue emerged as a pivot point for conservatives such as Sen. John Cornyn (R-Tex.), who voted in opposition to Holder.
Another nay vote came from Sen. Tom Coburn (R-Okla.). Coburn concluded that Holder's recommendation of "neutral leaning toward favorable" in the last-minute 2001 pardon of fugitive financier Marc Rich "should disqualify him from higher office."
A significant number of Republicans disagreed and, along with all of the Democrats, cast their votes with the nominee.
From Day One, Holder will have a full plate of work. President Obama already has put the attorney general in charge of a task force deliberating where to send nearly 250 terrorism suspects detained at the U.S. military base at Guantanamo Bay, Cuba. Obama last month instructed officials to close the prison within one year.
Holder also will play a critical role in developing legal guidelines for interrogation practices and in deciding whether the Obama administration will adopt broad claims of executive power in court cases over warrantless eavesdropping and the firings of nine prosecutors during the Bush years.
Holder vowed to revitalize the department's civil rights division, which is supposed to enforce voting and employment laws for minorities. The Justice Department inspector general in January issued a report detailing hiring abuses and racial epithets that proliferated among some former officials there.
from the American Spectator, 2009-Jan-29, by Ben Stein:
A Bleak Day
I love this. The new kind of politics of hope. Eight hours of debate in the HR to pass a bill spending $820 billion, or roughly $102 billion per hour of debate.
Only ten per cent of the "stimulus" to be spent on 2009.
Close to half goes to entities that sponsor or employ or both members of the Service Employees International Union, federal, state, and municipal employee unions, or other Democrat-controlled unions.
This bill is sent to Congress after Obama has been in office for seven days. It is 680 pages long. According to my calculations, not one member of Congress read the entire bill before this vote. Obviously, it would have been impossible, given his schedule, for President Obama to have read the entire bill.
For the amount spent we could have given every unemployed person in the United States roughly $75,000.
We could give every person who had lost a job and is now passing through long-term unemployment of six months or longer roughly $300,000.
There has been pork barrel politics since there has been politics. The scale of this pork is beyond what had ever been imagined before -- and no one can be sure it will actually do much stimulation.
Further, no one can be sure that we are not already at the trough/inflection point of the recession such that this money will be spent mostly after the recovery is well under way.
How long until the debt incurred under this program is so immense that it causes a downgrade in the sovereign debt of the USA? What happens to us then?
This has been a punch in the solar plexus to the kind of responsible, far-seeing, mature government processes that are needed to protect America. This is more than the pork barrel. This is a coup for the constituencies of the party in power and against the idea of a responsible government itself. A bleak day.
Unfortunately, it is only the latest in a long series of such days stretching across decades of rule by both parties, to the point where truly responsible government is only a distant echo of our forgotten ancestors.
Ben Stein is a writer, actor, economist, and lawyer living in Beverly Hills and Malibu. He writes "Ben Stein's Diary" for every issue of The American Spectator.
from the Wall Street Journal, 2009-Jan-16, by Peter Wehner and Paul Ryan:
Beware of the Big-Government Tipping Point
Socialized health care fundamentally changes the relationship between citizens and state.For most of our nation's history, our approach to economics has favored enterprise, self-reliance and the free market. While the American economy has never been entirely laissez-faire, we have historically cared more about equality of opportunity than equality of results. And while Americans have embraced elements of the New Deal, the Great Society and progressive taxation, we have traditionally viewed welfare as a way to help those in dire need, not as a way of life for the middle class. We have grasped, perhaps more than any other nation, that there is a long-run cost to dependency on the state, including an aversion to risk that eventually enervates the entrepreneurial spirit necessary for innovation and prosperity.
This outlook, once assumed, is now under attack due to a recent series of political and economic events.
The first is the unprecedented intervention by the federal government, in the form of a $700 billion relief package intended for our financial institutions after the credit crisis last September. This was followed by extending billions of dollars of federal assistance to America's auto makers in order to prevent their imminent bankruptcy -- the first emergency bailout that went to companies outside the financial sector. We understand why the federal government did this, and even supported legislation that, while hardly perfect, prevented an economic meltdown.
Nonetheless, the consequences of this undertaking are enormous. Not only has the size of the expenditures been staggering -- there is talk of another stimulus package worth an estimated $825 billion -- but we are witnessing a fundamental transformation of government's relationship with the polity and the economy.
The last several months are a foreshadowing of a new era of government activism, rather than an unfortunate but necessary (and anomalous) emergency action. We will soon shift from a market-based economy to a political one in which the government picks winners and losers and extends its reach and power in unprecedented ways.
This shift is exemplified by the desire of President-elect Barack Obama and the Democratic Congress to push us toward government-run health care.
For all his talk of allowing consumers to select their own health-care coverage, Mr. Obama's proposal, as he laid it out in his campaign, will provide strong financial incentives for employers and individuals to sign up with a new, Medicare-style government plan for working-age people and their families. This plan will almost certainly use a price-control system similar to the one in place for Medicare, allowing it to charge artificially low premiums by paying fees well below private rates. These low premiums will serve as a magnet for enrollment and will devastate the private companies trying to compete in the health-insurance market. The result will be the nationalization of the health-care sector, which today accounts for 16% of U.S. gross domestic product.
Nationalizing health care will be profoundly detrimental to the quality of American medicine. In the name of cost control, the government would make private investment in medical innovation far riskier, and thus delay the development of potentially lifesaving treatments.
It will also put America on a glide path toward European-style socialism. We need only look to Great Britain and elsewhere to see the effects of socialized health care on the broader economy. Once a large number of citizens get their health care from the state, it dramatically alters their attachment to government. Every time a tax cut is proposed, the guardians of the new medical-welfare state will argue that tax cuts would come at the expense of health care -- an argument that would resonate with middle-class families entirely dependent on the government for access to doctors and hospitals.
Of course, this health-care plan is occurring against our particular fiscal backdrop: Without major reform, our federal entitlement programs will soon double the size of government. The result will be a crushing burden of debt and taxes.
In short, we may be approaching a tipping point for democratic capitalism.
While the scope of the challenge should not be underestimated, those of us worried about this fundamental reorientation of politics and economics have several things working in our favor. Among them is that a public accustomed to iTunes, Facebook, Google, eBay, Amazon and WebMD is not clamoring for centralized, bureaucratic government. The strong American instinct for individual initiative and entrepreneurship remains intact.
In addition, confidence in government -- from Congress to those responsible for oversight of the financial system -- is quite low.
Our sense is that at the moment, the public is not thinking in terms of "big government" or "small government." Instead, Americans want efficient government -- one that is modern, responsive and adaptive. People want government to act as a fair referee, providing guardrails that allow individuals to rise without intrusively dictating individual decisions.
If conservatives hope to win converts to our cause, we need to understand this new moment and put forward an agenda that reforms key institutions in a way that advances individual freedom, without creating an unacceptable level of insecurity.
This is no easy task, and it must begin with providing a compelling alternative to what contemporary liberalism and Mr. Obama are about to offer. This especially includes health care, where we must start by recalling that our current health-insurance system was designed to meet the needs of a 20th century economy and World War II-era employment laws. It is hopelessly outdated, yet the Obama plan would make the system even more sclerotic.
The core of our message needs to be a commitment to creating a health-care plan that meets the demands of the modern economy. We need to convince concerned citizens that we can help the uninsured find coverage in the private sector and use market incentives to contain costs. The result will be a system that makes it possible for everyone to afford health insurance, including those with pre-existing conditions.
Tax credits, high-risk pools, insurance choice and regulatory reform can form the basis of a transformation from today's enormously costly and inefficient third-party system into one driven by ownership, choice and competition. And at the nucleus of this redesigned system will be the patient-doctor relationship.
If we hope to succeed in making our case, it will require a concerted education campaign that relies on hard data and facts, rigorous and accessible public arguments, and persuasive public advocates.
This is quite a tall order. But if we do not succeed in resisting greater state involvement in the economy -- and health care is meant to be the beachhead of this effort -- we will move from a limited welfare state into a full-blown one. This will reshape, in deep and enduring ways, our nation's historic sensibilities. It will lead here, as it has elsewhere, to passivity and dependence on the state. Such habits, once acquired, are hard to shake.
Between now and the end of this decade may be one of those rare moments in which among other things will turn decisively one way or the other. The stakes could hardly be higher for our way of life.
Mr. Wehner, a former deputy assistant to President George W. Bush, is a senior fellow at the Ethics and Public Policy Center. Mr. Ryan, a Republican congressman from Wisconsin, is a member of the Budget Committee and the Ways and Means Committee.
from the Wall Street Journal's Best of the Web blog, 2009-Feb-2, by James Taranto:
Marion Barry for Drug Czar
Democrats love taxes. Paying them, not so much.If a certain sort of conservative tends to be moralistic about sex, liberals tend to be moralistic about money. That makes Tom Daschle the equivalent of a televangelist caught in a sex scandal.
Daschle, now President Obama's nominee for secretary of health and human services, was first elected to Congress in 1978 as a Democrat from South Dakota. In 2004, in the final throes of the Bush majority, voters ousted him from the Senate.
Forced into the private sector, he returned to Aberdeen, S.D., and eked out a living growing wheat on the Daschle family farm. As if! Actually, he stayed in Washington, joined a lobbying firm--albeit as a "special policy adviser," since as a former senator he was prohibited by law from "lobbying"--and raked in the bucks. The prairie populist became a plutocrat, as the Washington Post reports:
Without becoming a registered lobbyist, he made millions of dollars giving public speeches and private counsel to insurers, hospitals, realtors, farmers, energy firms and telecommunications companies with complex regulatory and legislative interests in Washington.Daschle's expertise and insights, gleaned over 26 years in Congress, earned him more than $5 million over the past two years, including $220,000 from the health-care industry, and perks such as a chauffeured Cadillac, according to the documents.We thought of a catchy term for people who claim to be tribunes of the poor while getting driven around by a chauffeur. We're going to call them "limousine liberals."
Anyway, there was one little "glitch," as the Washington Post calls it. Daschle, who in 1998 said, "Make no mistake, tax cheaters cheat us all, and the IRS should enforce our laws to the letter" (hat tip: National Review Online), did not pay all the taxes he owed. In particular, he did not pay taxes on the use of the limo, saying he regarded it as merely a "generous offer from a friend."
He finally coughed up the money last month, after Obama nominated him. An earlier story on the Post Web site puts the sum in question at $101,943, which covered three years. That's just the tax (plus interest) on his limo, suggesting that its actual value was somewhere on the order of $100,000 a year. In 2007, the median income for a South Dakota family of four was $66,451.
Bloomberg notes that Daschle also failed to report some income, so that his total additional tax bill came to $128,203 plus $11,964 in interest. And it turns out that even this was an underpayment:
The former senator has agreed that he will have to adjust again his 2005, 2006 and 2007 tax returns because he didn't pay Medicare taxes on the additional taxable income he incurred with the use of the car, the Finance Committee staff reported.As Health and Human Services secretary, Daschle would oversee Medicare, the insurance program for the elderly and disabled.Last week Timothy Geithner was confirmed as Treasury secretary even though he "forgot" to pay Social Security and Medicare taxes for four years while he worked for the International Monetary Fund. One begins to detect a theme.
Over the weekend, meanwhile, we noticed this story in the Washington Post:
D.C. Council member Marion Barry (D-Ward 8) has again failed to file his tax returns.The former District mayor has not submitted federal or city tax forms for 2007--the second instance in which he has not filed required returns while on probation for tax offenses, said two sources familiar with the situation.Two years ago, federal prosecutors failed to convince a federal judge that Barry should be jailed for violating the terms of his probation, which was ordered in 2006, because he did not file 2005 tax returns.Like everyone else, we immediately thought that Barry must be angling for a position in the administration. McClatchy Newspapers report that the president "has yet to nominate a new head of the White House Office of National Drug Control Policy." Coincidence?
Questioning the Obama Administration's Patriotism
"Biden Calls Paying Higher Taxes a Patriotic Act"--headline, MSNBC.com, Sept. 18, 2008
from the Guardian-Observer of London, 2009-Jan-25, by Paul Harris:
Obama tells US of his radical new agenda
President uses his first weekly address to unveil bold plans for economy and the environmentWashington -- The delivery of Barack Obama's first weekly presidential address to the nation yesterday was hi-tech, but his message was distinctly resonant of the 1930s.
With a calm voice and serious expression, Obama laid out the details of a massive economic plan aimed at rescuing the US economy, creating millions of jobs and "greening" the country's infrastructure.
In a clear echo of Franklin Roosevelt's New Deal, Obama urged popular support for the plan and published fresh ideas covering billions of dollars of investment in alternative energy and huge construction projects.
Speaking to the nation - in a YouTube version of Roosevelt's fireside chats on radio - Obama told Americans that the nation faced disaster on an almost unprecedented scale. He said the economy could end up $1 trillion short of its capacity, translating into a disastrous $12,000 loss for an average family. "We could lose a generation of potential, as more young Americans are forced to forgo college dreams or the chance to train for the jobs of the future," Obama said in the five-minute address. "In short, if we do not act boldly and swiftly, a bad situation could become dramatically worse."
The economic crisis has dominated the first days of Obama's administration, and his team has rapidly got down to business. His plan is aimed at boosting the economy by huge investments in modernisation projects. There are plans to build 3,000 miles of new power lines and revamp 10,000 schools.
There will be funding for state-level infrastructure projects and healthcare coverage will be given to some 8.5 million Americans. Four million students will also get college grants. Obama's vow to "green" the economy will be made good - the president said he would double the amount of electricity generated from alternative sources such as solar power and wind within three years. More than 2.5m homes will also be converted to cut heating bills. Obama said his scheme would spend some $600bn within 18 months and create up to 4m jobs.
"There are millions of Americans trying to find work even as, all around the country, there's so much work to be done," he said.
There is no doubt the task facing Obama is huge. The already battered stockmarket has been sliding further. Manufacturing is now at a 28-year low and the headline unemployment rate is ticking up towards a predicted peak of 10%. A staggering one in 10 homeowners is facing the risk of repossession and 2008 saw 2.6m jobs lost, the highest number since the second world war. Perhaps it was not surprising that Obama used his address to also warn Americans that recovery would be neither easy nor quick. "No one policy or programme will solve the challenges we face right now, nor will this crisis recede in a short period of time," he said.
Obama published the plan on the revamped White House website, which, together with his YouTube address, marks a bold new media strategy to pitch ideas directly to the American people. During his election campaign the Obama team honed its methods for interacting directly with the public, bypassing the traditional routes of news coverage.
from FOXNews.com, 2009-Jan-27:
Republicans Object to Stimulus Dollars for ACORN
Republicans say voter registration and community groups like ACORN could be eligible for funding under the Democrats' economic stimulus bill.
Republican lawmakers are raising concerns that ACORN, the low-income advocacy group under investigation for voter registration fraud, could be eligible for billions in aid from the economic stimulus proposal working its way through the House.
House Republican Leader John Boehner issued a statement over the weekend noting that the stimulus bill wending its way through Congress provides $4.19 billion for "neighborhood stabilization activities."
He said the money was previously limited to state and local governments, but that Democrats now want part of it to be available to non-profit entities. That means groups like ACORN would be eligible for a portion of the funds.
Sen. David Vitter, R-La., told FOX News Tuesday that the money could be seen as "payoff" for groups' political activities in the last election. ACORN generally supports Democratic candidates and actively backed President Obama last year.
But he said the funding is just one example of frivolous spending items in the $825 billion package.
"It's just a long list of spending items. Not a real economic stimulus job creation bill," Vitter said. "It's line after line after line of favorite liberal spending programs, and it amounts to a big government bill -- not a job creation bill."
Democratic leaders in the House have already dropped federal funding from the bill for new contraceptive services and ongoing programs to stop sexually transmitted diseases after Obama told them that it did not fit in with the job-creating objectives of the package.
Obama plans to meet with Republican leaders on Capitol Hill Tuesday to hear some their input on the package. White House Press Secretary Robert Gibbs said Obama is open to suggestions.
"If there are good ideas -- and I think he assumes there will be -- we will look at those ideas," he said Monday.
from the Washington Post, 2009-Feb-28, p.A1, by Rob Stein:
Health Workers' 'Conscience' Rule Set to Be Voided
The Obama administration's move to rescind broad new job protections for health workers who refuse to provide care they find objectionable triggered an immediate political storm yesterday, underscoring the difficulties the president faces in his effort to find common ground on anything related to the explosive issue of abortion.
The administration's plans, revealed quietly with a terse posting on a federal Web site, unleashed a flood of heated reaction, with supporters praising the proposal as a crucial victory for women's health and reproductive rights, and opponents condemning it as a devastating setback for freedom of religion.
Perhaps most tellingly, the move drew deep disappointment from some conservatives who have been hopeful about working with the administration to try to defuse the debate on abortion, long one of the most divisive political issues.
"This is going to be a political hit for the administration," said Joel Hunter, senior pastor of the Northland Church in Longwood, Fla., whom Obama recently named to his Advisory Council on Faith-Based and Neighborhood Partnerships. "This will be one of those things that kind of says, 'I knew it. They talk about common ground, but really what they want is their own way.' "
Administration officials stressed that the proposal will be subject to 30 days of public comment, which could result in a compromise. They said they remain committed to seeking a middle ground but acknowledged that will not always be possible.
"We recognize we are not going to be able to agree on every issue," said an administration official, who spoke on the condition of anonymity because the process has just begun. "But there remains a substantive area of common ground, and we continue to believe we can make progress and will make progress."
The announcement capped a week when anger among conservatives was already running high because of the ambitious progressive agenda outlined in the administration's proposed $3.6 trillion budget.
The debate centers on a Bush administration regulation, enacted in December, that cuts off federal funding for thousands of state and local governments, hospitals, health plans, clinics and other entities if they do not accommodate doctors, nurses, pharmacists or other employees who refuse to participate in care they feel violates their personal, moral or religious beliefs.
The rule was sought by conservative groups that argued that workers were increasingly being fired, disciplined or penalized in other ways for trying to exercise their "right of conscience."
Women's health advocates, family-planning proponents, abortion rights activists and others condemned the regulation, saying it created a major obstacle to providing many health services, including family planning and infertility treatment, and possibly a wide range of scientific research. After reviewing the regulation, newly appointed officials at the Health and Human Services Department agreed.
"We've been concerned that the way the Bush rule is written, it could make it harder for women to get the care they need," said an HHS official who spoke on the condition of anonymity for the same reason. "It is worded so vaguely that some have argued it could limit family-planning counseling and even potentially blood transfusions and end-of-life care."
An array of family-planning groups and others praised the move.
"The Obama administration is taking the right step forward to rescind this misguided rule," said Rep. Diana DeGette (D-Colo.), who has introduced legislation to overturn the regulation.
But the Family Research Council, the U.S. Conference of Catholic Bishops and others condemned it.
"It is open season to again discriminate against health-care professionals," said David Stevens, head of the Christian Medical & Dental Associations. "Our Founding Fathers, who bled and died to guarantee our religious freedom, are turning over in their graves."
The announcement -- which follows an administration decision to lift restrictions on federal funding of international family-planning groups that perform abortions or provide abortion information -- was also disappointing to some who have been working more closely with the administration on reducing the number of abortions.
"I think what was in place was as good as one could find in terms of seeking and securing common ground," said the Rev. Frank Page, the immediate past president of the Southern Baptist Convention and another member of Obama's faith council. "It's a matter of respect. I felt like what was in place was that middle ground of common respect."
Administration officials stressed that the president remains committed to protecting the rights of health-care workers who do not want to participate in abortions; such rights have been guaranteed for decades by several federal laws.
"We recognize and understand that some providers have objections to providing abortions. We want to ensure that current law protects them," the HHS official said. "But the Bush rule goes beyond current law and seems to have upset the balance."
The administration is open to a new rule that would be more focused on abortion, the official said, adding, "We believe that this is a complex issue that requires a thoughtful process where all voices are heard."
Some predicted that the administration will produce a narrower regulation that protects workers who object to abortion but ensures access to other types of care.
"If the president kept in place the conscience clause in regard to abortion but reversed it in regard to birth control, most Americans would agree that's common ground," said Rachel Laser of the group Third Way, which is working to find compromise approaches to a number of contentious issues.
But Page noted that some health-care workers consider certain forms of birth control, such as the morning-after emergency contraception pill, to be the moral equivalent of abortion.
"If they choose not to be part of the distribution of that, that should be their conscience and their right," Page said.
While some family-planning groups acknowledged privately that they might consider a compromise, others said they are doubtful that any regulation is needed.
"Our general feeling is this was an area that does not cry out for further clarification," said Marcia D. Greenberger, co-president of the National Women's Law Center. "I would be skeptical."
from Time.com, 2009-Jan-23, by Amy Sullivan:
Shhh. Obama Repeals the Abortion Gag Rule, Very Quietly
Washington -- On the day after the 36th anniversary of the landmark Roe v. Wade Supreme Court decision, President Barack Obama repealed a Reagan-era policy that prohibited foreign nongovernmental family-planning groups from receiving U.S. funds if they provided abortions or even lobbied for abortion rights in their country. It is an action his abortion-rights supporters have waited eight years for and one they had encouraged him to waste no time taking. But by first issuing a statement urging support for common-ground efforts to reduce abortion rates and then waiting to sign the Executive Order late on a Friday afternoon — a time traditionally reserved for the release of information an Administration would like to bury — Obama sent a clear signal that he wants to turn down the heat on an issue that has defined and divided American politics for more than three decades. (See pictures behind the scenes at the Inauguration.)
The Mexico City policy, as it is known, has been one of the most visible differences between the two major political parties on the issue of abortion, in part because incoming Presidents have taken action on it within days of entering the White House. Bill Clinton repealed the policy on Jan. 22, 1993, citing his concern that the ban prevented women and children from receiving health services. Eight years later, George W. Bush reinstated the policy on Jan. 22, 2001. "It is my conviction," Bush said, "that taxpayer funds should not be used to pay for abortions or advocate or actively promote abortion, either here or abroad." (View new fronts in the abortion battle.)
Bush's statement is one being echoed by supporters of the policy today. But in fact, since 1973, federal law has banned the use of U.S. taxpayer funds for abortions in other countries. What the Mexico City policy did was take that prohibition several steps further. Under the policy, NGOs that applied for family-planning funds from the U.S. Agency on International Development (USAID) had to refrain from using any of their own funds to provide abortion (with exceptions for cases of rape or incest or to save the life of the mother). The organizations also were not eligible if they lobbied to make or keep abortion legal in their own country or if they provided abortion referrals — a requirement that led many opponents of the policy to dub it a "global gag rule."
As a result of the policy — which is named for the city in which the Reagan Administration first announced it at the 1984 United Nations International Conference on Population — some groups, including Planned Parenthood organizations in Romania and Colombia, altered their activities in order to qualify and continued to receive funding. But at least 16 developing nations in Africa, Asia and the Middle East have been affected, with all NGOs in those countries denied U.S. funding to help provide contraceptives and other much needed services.
See who's who in Barack Obama's White House.
See pictures of the civil rights movement from Emmett Till to Barack Obama.
Planned Parenthood of Zambia, for example, has lost nearly a quarter of its funding and almost 40% of its staff because of the policy. The group still provides abortions, but the activities that have been affected by the loss of that aid are more diverse: pre- and postnatal care, early child immunizations, malaria screenings and tests for cervical cancer. The lack of funding for contraception in some African countries actually became such an obstacle to preventing the transmission of HIV/AIDS that Bush exempted PEPFAR, his global AIDS initiative, from the Mexico City restrictions. Opponents of the policy also argue that it actually increases abortion rates because the rate of unintended pregnancy rises when access to contraception is limited.
By choosing to take action on the Mexico City policy just two days into their first Administrations, both Clinton and Bush ended up igniting culture wars before they'd even had a chance to find their way around the office. Clinton entered the White House having tempered the skepticism of many pro-life voters with his insistence that abortion should be "safe, legal and rare." But his decision to repeal the Mexico City ban as one of his first acts in office led many to wonder if the slogan was just empty words. With Bush, his reinstatement of the ban and accompanying explanation signaled from the get-go that "compassionate conservatism" was still very much conservative. (Read "McCain and Obama on Abortion.")
Obama sought to avoid creating such political theater by waiting to issue his repeal of the policy until the annual face-off between pro-life and pro-choice advocates on Jan. 22 was over and by doing it out of sight of the cameras. He observed the anniversary of Roe v. Wade by issuing a statement reaffirming his support for a woman's right to choose but also appealing — as he did throughout the presidential campaign — for common-ground approaches to abortion policy: "We are united in our determination to prevent unintended pregnancies, reduce the need for abortion, and support women and families in the choices they make." (Read "The Grass-Roots Abortion War.")
But the President who so carefully cultivates a postpartisan image will not be able to entirely avoid pressure from allies to demonstrate a concrete commitment to changing the cycle of whipsaw abortion policy that takes place whenever a new President occupies the White House. Already he has been lobbied by pro-life religious progressives who urged him to wait a few weeks before issuing the Executive Order. The progressive group Catholics United participated in Thursday's March for Life, carrying a banner that read "Congress Reduce Abortion Now." The shifting ground in the abortion debates means he has more allies willing to work with him on abortion-reduction strategies such as efforts to expand access to contraceptives and provide economic supports for pregnant women. But it also means he has more supporters who expect their pro-life views to be heard. They'll have to decide if what they saw today was a mixed message — or a step toward common ground.
from the Orlando Sentinel's blogs.OrlandoSentinel.com, 2009-Jan-28, by Mark Matthews:
Grayson puts anti-war spin on stimulus package
WASHINGTON -- U.S. Rep. Alan Grayson campaigned for Congress on an anti-war platform built on his work combating war profiteering. True to form, the freshman Democrat from Orlando today said his party's economic stimulus package succeeds because it gets away from military spending.
"This bill is a change in priorities," Grayson said. "It spends 75 times as much money on education and health care as it does military spending … In short, what this bill does is meet human needs.
"It helps us look forward to the day when we beat our swords into plowshares and our spears into pruning hooks, when nation does not lift up sword against nation and we need not learn war anymore."
from McClatchy Newspapers via kentucky.com, 2009-Jan-28, by David Lightman:
House passes stimulus plan, but with no Republican votes
WASHINGTON — After a sharply partisan debate on Wednesday, the House of Representatives passed an $819 billion economic stimulus package designed to create millions of jobs quickly and give consumers more money to spend.
The vote was 244 to 188. None of the House's 178 Republican members voted yes.
Despite a fresh plea for cooperation from President Barack Obama, who insisted that "we don't have a moment to spare," Republicans spurned the Democratic bill.
The White House tried hard to soften the partisan edges. Chief of Staff Rahm Emanuel met privately on Tuesday night with a small group of GOP moderates, but the effort was futile.
"The bill is extremely expensive for what you get out of it," said Rep. Michael Castle, R-Del.
The measure, which now goes to the Senate — where it's likely to be changed considerably — has $544 billion in spending and $275 billion in tax cuts. Highlights include a $79 billion State Fiscal Stabilization Fund, which would help state governments with education and other expenses, while $30 billion more would be targeted for highway and bridge construction projects.
The bill also gives most taxpayers breaks of $500 each on their payroll taxes and increases tax breaks for college tuition, first-time homebuyers and child care.
The bill originally was estimated to cost $825 billion, but a more precise calculation by the Congressional Budget Office put it at $819 billion.
Democrats hailed the measure as immediate and necessary relief, as well as the first big triumph of Obama's eight-day-old presidency.
"Today we are passing historic legislation that honors the promises our new president made from the steps of the Capitol," said House Speaker Nancy Pelosi, D-Calif.
She estimated that the bill would help create and save 3 million to 4 million jobs during the next two years.
Democrats backed up their claims with a report from the nonpartisan Congressional Budget Office, which said that 64 percent of the funds would be pumped into the economy by Sept. 30, 2010.
The package, said House Appropriations Committee Chairman David Obey, D-Wis., "is probably smaller than it ought to be, but it's well worth doing."
Republicans said that the spending would trickle out too slowly and the tax cuts weren't generous enough.
"Most Republicans will oppose this bill for one reason: It won't work," said Rep. Mike Pence, R-Ind., the chairman of the House Republican Conference, which helps promote party policies.
Republicans cited CBO estimates that the stimulus would cause the federal deficit, already estimated to reach $1.2 trillion this year, to be at $170 billion more this year and $819 billion more through 2019.
"We're using our economic woes to grow government spending to epic and historic proportions," charged Rep. Ken Calvert, R-Calif.
Some of the spending will be "wasteful," said House Minority Leader John Boehner, R-Ohio. A plan to provide funds to help consumers convert to digital television "looks like a slush fund to me," he said.
House Republicans proposed an alternative plan that included lower income tax rates for middle and lower income workers, tax credits for home buyers and other tax provisions. It was easily defeated on a party-line vote.
"What good is a tax cut when you don't have a job?" asked House Majority Whip James Clyburn, D-S.C.
Freshmen Democrats said that the bill would bring instant help to their beleaguered districts.
"What this bill does is it meets human needs. It does what a just society does; it feeds the hungry, it shelters the homeless and it heals the sick," said Rep. Alan Grayson, D-Fla.
Underlying the debate was some often angry partisanship. Obama tried to set a new tone on Tuesday when he visited separately with House and then Senate Republicans. On Wednesday, after meeting with business executives at the White House, he again urged cooperation and civility.
"I know that some are skeptical about the size and scale of this recovery plan," he said. "I understand that skepticism, which is why this recovery plan will include unprecedented measures that will allow the American people to hold my administration accountable."
That didn't stop the partisan bickering.
"We welcome the criticism of our Republican friends," said House Majority Leader Steny Hoyer, D-Md. "But let's put that criticism in some context. Republicans have been consistently wrong on economics."
Republicans vigorously contested his views.
The bill "won't create many jobs, but it will create plenty of programs and projects through slow-moving government spending," Boehner said.
Because House rules make it difficult for the minority party to have much influence, and Democrats control 255 seats — 37 more than needed to pass a bill — there was little motivation to cooperate.
Republicans will have more clout in the 100-member Senate: It takes 60 votes to stop a filibuster, and the GOP controls 41 seats. Already, the Senate bill includes $70 billion to help 24 million taxpayers who who'd be subject to the alternative minimum tax this year.
Senate Republicans have signaled that they will try to add other tax cuts, provide more incentives for housing and cut spending.
Among their initiatives is likely to be a plan for the federal government to guarantee the first year or two of 4 percent, 30-year mortgages for new and refinancing homeowners.
"Housing is what got us into this problem in the first place. We should do more to fix housing," said Nevada Sen. John Ensign, the Republican Senate Policy Committee chairman.
Senate consideration of the bill is likely to take all of next week and perhaps beyond. Once a bill is passed, negotiators from both houses will work out a compromise, hoping to craft a final version that can be sent to Obama by mid-February.
House Republicans wouldn't rule out backing a compromise.
"A lot of us would consider voting for the final version," Delaware's Castle said.
from NewsMax.com, 2009-Jan-29, by David A. Patten:
The Stimulus Shopping List: $1.17 Trillion in Pork Goodies
The $1.17 trillion stimulus bill passed by House Democrats on Wednesday bears little resemblance to the bill originally proposed by President Obama, with less than 5 percent of the funds now going to repair America's deteriorating infrastructure.
GOP critics point out the bill is loaded with tens of billions for items ranging from Amtrak subsidies to sexually transmitted diseases to the National Endowment for the Arts -- much of which won't actually flow into the economy until long after economists expect the current economic crisis to subside.
In late November, Obama promised: “It will be a two-year, nationwide effort to jumpstart job creation in America, and lay the foundation for a strong and growing economy. We'll put people back to work rebuilding our crumbling roads and bridges,” modernizing schools and stimulating development of alternative forms of energy.
Even some Democrats are now objecting that the measure contains too few highway and mass transit projects. Moreover Mark Zandi, chief economist for Moody's Economy.com, says most of the infrastructure spending in the plan won't occur until 2010 or later.
Provisions of the bill that many legislators are questioning:
• $1 billion for Amtrak, which hasn't earned a profit in four decades.
• $2 billion to help subsidize child care.
• $400 million for research into global warming.
• $2.4 billion for projects to demonstrate how carbon greenhouse gas can be safely removed from the atmosphere.
• $650 million for coupons to help consumers convert their TV sets from analog to digital, part of the digital TV conversion.
• $600 million to buy a new fleet of cars for federal employees and government departments.
• $75 million to fund programs to help people quit smoking.
• $21 million to re-sod the National Mall, which suffered heavy use during the Inauguration.
• $2.25 billion for national parks. This item has sparked calls for an investigation, because the chief lobbyist of the National Parks Association is the son of Rep. David R. Obey, D-Wisc. The $2,25 billion is about equal to the National Park Service's entire annual budget. The Washington Times reports it is a threefold increase over what was originally proposed for parks in the stimulus bill. Obey is chairman of the House Appropriations Committee.
• $335 million for treatment and prevention of sexually transmitted diseases.
• $50 million for the National Endowment for the Arts.
• $4.19 billion to stave off foreclosures via the Neighborhood Stabilization Program. The bill allows nonprofits to compete with cities and states for $3.44 billion of the money, which means a substantial amount of it will be captured by ACORN, the controversial activist group currently under federal investigation for vote fraud. Another $750 million would be exclusively reserved for nonprofits such as ACORN – meaning cities and states are barred from receiving that money. Sen. David Vitter, R-La., charges the money could appear to be a “payoff” for the partisan political activities community groups in the last election cycle.
• $44 million to renovate the headquarters building of the Agriculture Department.
• $32 billion for a “smart electricity grid to minimize waste.
• $87 billion of Medicaid funds, to aid states.
• $53.4 billion for science facilities, high speed Internet, and miscellaneous energy and environmental programs.
• $13 billion to repair and weatherize public housing, help the homeless, repair foreclosed homes.
• $20 billion for quicker depreciation and write-offs for equipment.
• $10.3 billion for tax credits to help families defray the cost of college tuition.
• $20 billion over five years for an expanded food stamp program.
Republican leaders say the stimulus package will add 32 new government programs at a cost of $136 billion. They object that many of the programs, once established, are likely to continue indefinitely.
Most media outlets are reporting the cost of the package at $819 billion. As Newsmax revealed yesterday, however, the Congressional Budget Office calculates that the interest on the debt generated by the bill's spending will cost another $347.1 billion, making the total cost approximately $1.17 trillion.
Of course, the measure contains hundreds of billions in tax cuts and infrastructure projects that conservatives will find palatable. But as House Minority whip Eric Cantor, R-Va., told the media Wednesday, “This was not a stimulus bill. It was a spending bill.”
from the Wall Street Journal, 2009-Jan-21:
The Latest Entitlement
Federal health care at 300% of poverty.The House made its first down payment on President Obama's health-care plans last week, passing 289-139 a major expansion of the State Children's Health Insurance Program. The Senate is scheduled to take it up soon and pass it easily as well. These days tens of billions in new spending is a mere pittance, but Schip is also the Democratic model for a quantum jump in government health care down the line.
The bill became a liberal Pequot after President Bush repeatedly vetoed it in 2007 (while supporting a modest expansion). The GOP has no hope of stopping it now, so Schip will more than double in size with $73.3 billion in new spending over the next decade -- not counting a budget gimmick that hides the true cost. The program is supposed to help children from working-poor families who earn too much to qualify for Medicaid, but since it was created in 1997 Democrats have used it as a ratchet to grow the federal taxpayer share of health-care coverage.
With the new bill, Schip will be open to everyone up to 300% of the federal poverty level, or $63,081 for a family of four. In other words, a program supposedly targeted at low-income families has an eligibility ceiling higher than the U.S. median household income, which according to the Census Bureau is $50,233. Even the 300% figure isn't really a ceiling, given that states can get a government waiver to go even higher. Tom Daschle's folks at Health and Human Services will barely read the state paperwork before rubberstamping these expansions.
The political purpose behind Schip has always been to capture the middle class. Every time the program grows, it displaces private insurance. Even before Democrats struck down rules limiting crowd out, research indicated that for every 100 children signed up -- now more than 7.1 million -- there is a reduction in private coverage for 25 to 50 kids. Exactly the same thing will happen if Messrs. Obama and Daschle end up introducing a "public option," a government insurance program modeled after Medicare but open to anyone of any income. As with Schip, any net increase in insurance coverage will come by having taxpayers gradually supplant the private system.
Schip money is delivered as a block grant, which states are supposed to match, though national taxpayers end up paying 65% to 83% of the total cost. When states make health-care promises they can't afford -- such as New York, which expanded the program to 400% of poverty -- the feds always step in with, yes, a bailout. The House bill creates a "contingency fund" precisely for that purpose, and also allots bonus payments to states that boost Schip enrollment, so Governors will be further rewarded for overspending. All this is propped up by a permanent increase in the tobacco tax, which will rise to $1 a pack from the current 39 cents -- thus financing a permanent and growing entitlement with a declining corps of smokers.
Lately Mr. Obama has been making noises about the necessity of entitlement reform. This is no way to start.
from the Washington Times, 2009-Jan-20, by Donald Lambro:
Infrastructure spending to be used sparingly
CBO reports 9% for this yearOnly a small fraction of President Obama's proposed $274 billion in infrastructure spending to boost the economy will be spent by this fall and the balance won't be fully disbursed until 2010 or later, according to an analysis by congressional economists.
About $26 billion, just 9 percent, of Mr. Obama's massive spending plan to create jobs by rebuilding the nation's roads, bridges, school buildings and other crumbling infrastructure will be spent by Sept. 30, the end of fiscal 2009, according to the Congressional Budget Office, a nonpartisan agency that analyzes tax and spending proposals for Congress.
CBO's report, which was released to some members of Congress but has not been made public, said that less than half of the $30 billion in highway construction spending sought by House Democrats would get into the nation's spending pipeline in the next four years, the Associated Press reported Tuesday.
Only about $4 billion in highway funds would get into the economy by September 2010, and about one in seven dollars in the stimulus plan's $18.5 billion investment in renewable energy resources and energy efficiency programs would be spent by the summer of 2010, the CBO analysis said.
The report's conclusions were released on the day that Mr. Obama was sworn into office promising in his inaugural address that these and other infrastructure spending will "not only create new jobs," but also "lay a new foundation for growth."
CBO's findings reinforced those of other economists and policy analysts, including some among Mr. Obama's own economic advisers, who cautioned that the public works spending to stimulate the economy and create jobs takes a long time - and often is just getting started when the economy is coming out of its recession.
Infrastructure spending was one of the "less-effective options" for breathing new life into the economy, Jason Furman, one of Mr. Obama's chief economic advisers, wrote in a paper in January 2008.
Big infrastructure spending "might provide an important boost to long-term growth," he said, but he doubted that it "would generate significant short-term stimulus," because all too often in the past the money was not spent "until after the economy had recovered."
Other critics said there were many examples where public works spending was used to jump-start an economy but without success.
"During the 1930s, New Deal lawmakers doubled federal spending - and unemployment remained above 20 percent until World War II. More recently, Japan responded to a 1990 recession by passing 10 'stimulus' bills over eight years ... and their economy remained stagnant," Heritage economic analyst Brian Riedl said in an analysis of Mr. Obama's spending plans.
"Why do lawmakers believe the same failed approach will succeed for the U.S. today?" Mr. Riedl said.
Many economists are forecasting that the economy should be turning upward by the end of the year, but CBO's analysis projects that much, if not most, of the infrastructure spending won't be spent by that time.
Republicans, who are pushing income tax cuts for workers and businesses, also have attacked Mr. Obama's plan as too costly. They say his overall $825 billion spending and tax cut plans to preserve or create 3 million jobs would cost taxpayers $275,000 per job.
Obama adviser David Axelrod defended Mr. Obama's economic stimulus proposals Sunday on ABC's "This Week."
"I think preventing this country from sliding into as deep an economic emergency as we've seen since the Great Depression, preventing double-digit unemployment and laying the groundwork for the future in these areas ... is a worthy thing to do," Mr. Axelrod said.
from the Wall Street Journal, 2009-Jan-9, by John Fund:
Pelosi Turns Back the Clock on House Reform
Moderate Democrats will be frozen out.Every two years the leadership of the U.S. House of Representatives introduces a new set of rules to govern the body. Normally, this event passes with barely a yawn from the public. But the changes pushed through on Tuesday by Democrats will have real-world consequences for fiscal conservatives of both parties.
Gone are term limits for committee chairmen, a big comeback for seniority over merit. Cost containment measures on Medicare, one of the fastest growing programs, are simply suspended for this Congress.
Tax increases now will be easier to pass, because opponents will not be allowed to offer a simple motion to strike any increase without making up for the "lost revenue." In addition, tax cuts are made more difficult, because they cannot be offset with spending cuts. The new rules will mean that the only way to push for a tax cut will be to propose a tax increase elsewhere.
Democratic leaders said these changes were needed to make the legislative train run faster. "Congress has to accomplish things," said Massachusetts Rep. Jim McGovern of the Rules Committee. "This is designed to help us do just that."
To further grease the wheels, Democrats have also emasculated the "motion to recommit" -- a procedural safeguard first given to the minority a century ago after a rebellion against tyrannical GOP Speaker Joe Cannon. It has been used by both parties to offer motions to "recommit" or send back bills on the floor to the relevant committees.
Republicans used the tactic 50 times in the last Congress, primarily to block tax increases buried in larger bills. Sometimes they also used the device to tack on a popular amendment to a bill -- such as an amendment in 2007 ending Washington, D.C.'s, then-existing gun ban, which was added to a bill on voting rights for D.C. residents. That made the overall bill political poison, forcing an infuriated Speaker Nancy Pelosi to pull the bill off the floor.
Her new rules package severely limits the use of motions to recommit. Dismissing GOP complaints about this change, Massachusetts Rep. Barney Frank said the minority was only "interested in game playing."
Mrs. Pelosi used to see things differently. Back in 2004, she unveiled a proposed "Bill of Rights" to protect House minority interests. It called on Republicans to allow more meaningful substitutes to bills, give members enough time to read bills before final votes, and stop holding roll-call votes past the normal 15 minutes. She had a point. In late 2003, Republican leaders held open a roll-call vote on the Medicare drug entitlement for three hours until they bullied enough wavering members into voting aye.
Mrs. Pelosi warned in 2004 that "When we [Democrats] are shut out, they are shutting out the great diversity of America." We want a higher standard." In 2006, just before becoming speaker, Mrs. Pelosi reiterated her plans to promote "bipartisanship" and "to ensure the rights of the minority."
That was then. This month, she even suggested passing a huge new stimulus package before Barack Obama is sworn in on Jan. 20.
Term limits on committee chairs -- part of the 1994 GOP "Contract With America" -- modified a seniority system that entrenched power in a handful of members. Overall, it has helped inject new ideas and merit into Congress. But Democratic bulls wanted their old power back, so now longevity will once again determine who runs the show. Can this really be the "change" that voters wanted last November? Wags are already joking that Democrats are really delivering "senility you can believe in."
Ironically, some of the biggest losers from the Pelosi rules changes will be fiscally conservative Blue Dog Democrats. The "pay-go" rules they fought so hard for two years ago -- to require new spending proposals be balanced with additional revenue or cuts elsewhere -- have been gutted. And no term limits will mean they will have to stand in line for a taste of real power.
"All those nice pro-life, gun-owning young Democrats recruited to run by Rahm Emanuel will never have any real influence now," says Grover Norquist, head of Americans for Tax Reform. "They were useful in getting Democrats a majority but now they'll be in the back of the bus."
Barack Obama ran for president pledging to end needless partisanship and to create "a new politics." He is at least making a stab at that by appointing a couple of cabinet members with Republican ties and consulting with GOP Congressional leaders. It's unsettling that his fellow Democrats on Capitol Hill seem intent on marching in a completely opposite direction.
from the Wall Street Journal, 2008-Dec-19, by Richard A. Epstein:
The Employee Free Choice Act Is Unconstitutional
Free speech and the takings clause are at stake.A top priority of the incoming Democratic Congress and Obama administration is the misnamed Employee Free Choice Act. The EFCA, as is well known, introduces a card-check procedure that allows a union to gain recognition without an election by secret ballot. Thereafter a government arbitration panel can impose, without judicial review, all the terms of an initial two-year collective "agreement" if the parties cannot negotiate an agreement within 130 days.
It is commonly supposed that economic regulation is immune to constitutional challenge since the New Deal. That's not the case with this labor law.
Consider card check and the First Amendment. Under the National Labor Relations Act (NLRA) today, an employer can insist upon a secret ballot after 30% of workers indicate by card checks their interest in a union. The campaign that follows lets the employer air his views about the downsides of unionization before the vote takes place.
To be sure, the employer's free-speech rights are limited under the NLRA. He cannot threaten to move or shut down if workers vote for the union. Nor can he promise higher wages if they don't. But he can make predictions of what will happen if his firm is unionized, and he can point to the reversal of worker fortunes in other unionized firms.
The Supreme Court (unfortunately, in my view) has held that the peculiar labor-law environment justified these abridgements of ordinary speech rights. But it hardly follows that if the government can curtail speech rights, the EFCA can eliminate them. There is simply no legitimate government interest in promoting unionization that justifies a clandestine organizing campaign which denies all speech rights to the unions' adversaries.
The mandatory arbitration provisions of the EFCA are also constitutionally suspect. True, the takings clause of the Fifth Amendment today is quite lax when the state just restricts how an owner can use his property. But it imposes a firm duty to compensate someone whose property is occupied pursuant to a government decree. The Supreme Court also has established that any company subject to rate regulation (such as in telecommunications, transportation, insurance, etc.) may raise a judicial challenge to secure a reasonable rate of return on invested capital.
These Fifth Amendment protections apply to labor markets. The NLRA strips employers of basic common law rights, including the right to refuse to deal with the union. It imposes on employers (and unions) a duty to bargain in good faith toward a contract. But this duty does not force agreement. Either side is free to walk away from any deal it does not like. Unions can strike, and firms can lock out workers. Today's law, accordingly, restricts arbitration to interpreting existing agreements, not to making agreements from whole cloth.
The EFCA takes away the employer's right to walk. Now the successful union, backed by direct government power -- i.e., mandatory arbitration -- can force itself on the firm. Yet the proposed law does not let any court block the deal or ensure that the mandated terms offer a reasonable return on its invested capital. (Even modern rent control statutes require that much.)
The government-chosen panel could well impose terms that might cripple the firm competitively. Consider that the takings clause surely prevents the government from forcing any person to buy real estate for twice its market value from a seller. That same principle applies to this labor law: No government should be able to force a firm to hire labor at $50 per hour when the company is not willing to pay half that much.
Worse, the EFCA also permits the government arbitrator to strip the employer of all its standard management prerogatives on everything from subcontracting out to promotion policy. By flatly denying the employer any option to walk away, mandatory arbitration under the EFCA runs smack into the takings clause.
Let's hope that the Democratic Congress will moot this analysis -- by refusing to jump head first into a labor-law abyss that promises to wreck labor markets in times of acute national economic distress. The Employee Free Choice Act should not be passed, and it should be struck down by the Supreme Court if it is.
Mr. Epstein is a professor of law at the University of Chicago, a senior fellow at the Hoover Institution, and a visiting professor at NYU. He has consulted on EFCA with employer groups.
from the Washington Times, 2009-Jan-12, by Stephen Dinan:
Obama climate czar has socialist ties
Group sees 'global governance' as solutionUntil last week, Carol M. Browner, President-elect Barack Obama's pick as global warming czar, was listed as one of 14 leaders of a socialist group's Commission for a Sustainable World Society, which calls for "global governance" and says rich countries must shrink their economies to address climate change.
By Thursday, Mrs. Browner's name and biography had been removed from Socialist International's Web page, though a photo of her speaking June 30 to the group's congress in Greece was still available.
Socialist International, an umbrella group for many of the world's social democratic political parties such as Britain's Labor Party, says it supports socialism and is harshly critical of U.S. policies.
The group's Commission for a Sustainable World Society, the organization's action arm on climate change, says the developed world must reduce consumption and commit to binding and punitive limits on greenhouse gas emissions.
Mr. Obama, who has said action on climate change would be a priority in his administration, tapped Mrs. Browner last month to fill a new position as White House coordinator of climate and energy policies. The appointment does not need Senate confirmation.
Mr. Obama's transition team said Mrs. Browner's membership in the organization is not a problem and that it brings experience in U.S. policymaking to her new role.
"The Commission for a Sustainable World Society includes world leaders from a variety of political parties, including British Prime Minister Gordon Brown, who succeeded Tony Blair, in serving as vice president of the convening organization," Obama transition spokesman Nick Shapiro said.
"Carol Browner was chosen to help the president-elect coordinate energy and climate policy because she understands that our efforts to create jobs, achieve energy security and combat climate change demand integration among different agencies; cooperation between federal, state and local governments; and partnership with the private sector," Mr. Shapiro said in an e-mail.
Mrs. Browner ran the Environmental Protection Agency under President Clinton. Until she was tapped for the Obama administration, she was on the board of directors for the National Audubon Society, the League of Conservation Voters, the Center for American Progress and former Vice President Al Gore's Alliance for Climate Protection.
Her name has been removed from the Gore organization's Web site list of directors, and the Audubon Society issued a press release about her departure from that organization.
from the Wall Street Journal, 2009-Jan-17, by Jerry Bowyer:
Sports Mania Is a Poor Substitute for Economic Success
There's a reason so many Steeler fans have left Pittsburgh.Pittsburgh
Tomorrow the Pittsburgh Steelers square off against the Baltimore Ravens, and the Philadelphia Eagles square off against the Arizona Cardinals. The winners will go head to head on Feb. 1 in Super Bowl XLIII.
If there ever was a time to crow about the wonders of rebuilding a city around a professional sports team, this would be it. Three of the four teams remaining in the play-offs hail from cities -- Baltimore, Philadelphia and Pittsburgh -- that in recent years spent billions rebuilding their downtowns around pro sports facilities and other community "anchors."
Except that there's a problem. The teams might be competitive, but the cities definitely are not. All three continue to shrink in population, and have stagnant job markets and crumbling public schools.
Baltimore, Philadelphia and Pittsburgh were prototypes of the economic development fad of the 1990s: government-financed "investments" in economic development. They all practiced what was called "tin cup urbanism" -- the belief that the rest of society owed large taxpayer transfers to the urban cores from which most of us have fled. They all supped from the same cup: center city stadia, aquaria and subsidized retailia.
Philadelphia practiced "the core, the core, the core" as a development strategy while perfecting the art of the tin cup under the guidance of then Mayor (now Gov.) Ed Rendell in the late 1990s. The feeling in Philadelphia was that the city was being crushed by economic forces outside of its control, and that the country owes cities, owes them big, and should pay up.
We did pay up, although Philadelphia's population declined 4.3% in the 1990s. And we will likely pay much more under Barack Obama's "stimulus" plan to spend hundreds of billions on new infrastructure. But based on experience, we won't see much renewal.
Baltimore's Inner Harbor development was the leader. Huge sums of government money poured into a very small patch of territory. Especially notable was a pricey public aquarium. Development officials claimed that by reviving the urban "core," economic health would return to the region. It didn't. The dawning of the Age of Aquarium has yet to appear.
On my last trip to Baltimore, it didn't take more than a three minute drive from the Inner Harbor before I could see burned-out neighborhoods. When I stopped for gas, I was aggressively panhandled by a man with a gold tooth in which a black ace was etched. Didn't see that guy in the development prospectus.
Pittsburgh followed the pattern, explicitly basing its development model partly on Baltimore and partly on Cleveland (from which Baltimore's football team had fled). The promises -- of "Renaissance III," "turning Pittsburgh back into a major league town again," and "creating a world class city" -- were grandiose. When city officials put the plan -- to spend taxpayer money on rebuilding downtown and subsidizing a stadium -- on the ballot, it got sacked. The referendum was rejected in all 11 counties in the metro area. It was a complete shut-out. Pittsburgh might be a drinking town with a football problem, as they say, but voters said no anyway on that one.
It didn't matter. Despite the referendum results, the city built it all anyway with public money. Then Mayor Tom Murphy and other city officials, as well as state legislators, went ahead. By 2003, two years after the project's completion, Pittsburgh faced bankruptcy.
A U.S. Census report just out shows that Pittsburgh's population has just been surpassed by Toledo, Ohio. Mayor Luke Ravenstahl, 28, the Burg's wunderkind without the wunder, responded this week to the news. He isn't interested in repealing the special tax breaks for favored businesses the city uses to tamp down calls for pro-growth tax cuts, or in demanding more accountability from a school system that spends $18,000 per-child every year. And he isn't talking about repealing a steep parking tax that socks commuters. He wants a recount from the Census Bureau.
But Pittsburgh has lost half of its population since the 1950s, the decade in which the city imposed its first individual income tax. That was the peak. Since then, each new tax designed to fund public works to "keep our young people here" spurs more and more people to call for a moving van.
Maybe America should take a look at Baltimore, Philadelphia and Pittsburgh before getting behind Mr. Obama's plan to use public-works projects to lead us out of economic morass.
In some ways, the sports mania in these towns is a substitute for genuine economic achievement. Sure the middle class is disappearing. But, hey, how 'bout them Steelers? Football triumphalism is a kind of civic cocaine, creating a sense of accomplishment where the reality is otherwise. (Maybe that's what's behind Western Europe's soccer fanaticism.)
When the Steelers were in the Super Bowl in 2006 I was the host of a radio show in Pittsburgh. I argued that the franchise was an exercise in leadership excellence in a city whose politicians were anything but. Numerous callers hammered me. They said there are a lot of "Steelers" bars across the country, and that proved the city still had some national respect. Indeed, there are hundreds of watering holes dispersed across America loaded with fanatical devotes of the Pittsburgh Steelers. "Where are the Seahawks bars?" the callers asked.
In Seattle, of course. That city has gained population while Pittsburgh lost it. Steelers bars are the visible cultural artifact of a kind of economic diaspora. People in those bars are the refugees who looked at high taxes, union dominance and lousy schools and voted with their feet. They can still root for their favorite team -- from Raleigh, North Carolina. You go South or West to get your bread. The circuses can be watched on cable.
Mr. Bowyer is the chairman of Bowyer Media, a Pennsylvania-based radio and television production company.
from the Wall Street Journal, 2008-Dec-31:
Dynasty
The Democratic Party's Senate soap opera.For those who thought the new era of Democratic governance would be dull, we present this year's Senate replacement follies. Illinois Governor Rod Blagojevich kept the entertainment going yesterday by defying just about everyone and nominating former state Attorney General Roland Burris to the seat being vacated by President-elect Obama.
Recall that federal prosecutors had gone public with their criminal complaint against Mr. Blagojevich earlier this month expressly to deter him from making such an appointment. Mr. Obama had then declared that the Governor should not make an appointment, and Senate Democrats had said they wouldn't seat anyone Mr. Blagojevich did appoint. Majority Leader Harry Reid repeated that pledge yesterday regarding Mr. Burris, who lost to the Governor in a primary in 2002 but then was vice chairman of his transition team.
Democrats who run the state assembly are still trying to impeach Mr. Blagojevich, but meantime they've stepped back from allowing a special election for the seat. Democrats hope to dump the Governor and then have his replacement appoint a different Democrat. No doubt they're afraid Republicans might win given this exquisite display of competent, honest Democratic government.
Meanwhile, Democrats in New York are fighting over Caroline Kennedy's campaign to be appointed to the Senate seat being vacated by Secretary of State nominee Hillary Clinton. Former Democrat and former Republican and now independent Mayor Mike Bloomberg is all for the idea, as reportedly is Mr. Obama, whom the daughter of JFK and niece of Senator Ted Kennedy endorsed at a crucial moment during the Presidential primaries. Not so happy is New York Attorney General Andrew Cuomo, the son of a former three-term Governor, who would like the seat himself and was once married to a Kennedy.
Caught in the middle is Democrat David Paterson, who will appoint a new Senator but is Governor himself only because Eliot Spitzer flamed out with a prostitute. Ms. Kennedy hasn't helped herself with a recent spate of interviews showing she doesn't know very much about many public issues. But then how much worse could she be than the professional politicians who populate Albany or represent New York in Washington? Democrats will outnumber Republicans in New York's House delegation next year, 26-3, and it speaks volumes about their abilities that Mr. Paterson might choose a dynastic neophyte over any of them.
Lest it be overlooked, there's also the spectacle in Delaware, where the soon-to-depart Joe Biden has arranged to have a crony appointed to take his Senate seat of 36 years. Edward "Ted" Kaufman, a former aide to Mr. Biden, is expected to keep the seat away from a more ambitious Democrat for two years, until Joe's son Beau Biden, the state attorney general, can return from his National Guard tour in Iraq and run in 2010 to maintain the family business.
And don't forget Colorado, where a mooted Senate replacement for Secretary of Interior nominee Ken Salazar is his brother, Congressman John Salazar. Democratic Governor Bill Ritter, who has benefited from the money and organization of the Salazar political machine, will make that appointment.
So to recap all of this change you can believe in: A Kennedy and Cuomo are competing to succeed a Clinton in New York; the skids are greased for a Biden to replace a Biden in Delaware; one Salazar might replace another in Colorado; and a Governor charged with political corruption in Illinois wants one of his cronies to succeed the President-elect. Let's just say we're looking forward to 2009.
from the Wall Street Journal Environmental Capital blog, 2008-Dec-19, by Keith Johnson:
Team Obama: Change You Want, Change You Get
President-elect Barack Obama's initial Cabinet choices mollifed conservatives and disappointed liberals because of their centrist credentials—not to say outright continuity with the Bush administration.
But all the change Sen. Obama promised on the campaign trail has been packed into his nominations for his energy and environment team, which marks a massive break with the current administration.
In the last week, the president-elect has named a prospective new energy secretary; Environmental Protection Agency head; White House climate czar; interior secretary; and a green-jobs promoting labor secretary. The latest names to surface: Harvard professor John Holdren for presidential science adviser and Oregon State marine biologist Jane Lubchenco to head the National Oceanic and Atmospheric Administration.
Representing a collective pushback against the Bush administrations environmental and energy record—especially when it comes to global warming—the resume-laden roster finally has progressives popping their holiday Champagne several days early.
Matt Yglesias, noting the new names, figures the new roster will bring the brain power to drive big and lasting change: “These two plus [DOE nominee] Steven Chu creates a very impressive Team of Scientists who hopefully will be listened to when pushes start coming to shove.”
Take Dr. Holdren, tapped to be the presidential science adviser. An outspoken advocate of tough action to fight climate change, Dr. Holdren promises to make climate change a much bigger White House priority than it's been so far. He recently described U.S. policy on global warming as akin to “being in a car with bad brakes driving toward a cliff in the fog.”
Calling Dr. Holdren another terrific choice, Joe Romm is smiling as well: “[P]utting Holdren in charge of the ‘bully pulpit of science’ is just what the nation and the planet need if we are to have any chance of avoiding catastrophic warming.”
The latest nominations, coming on the heels of the previous picks, together spell an administration determined to regulate greenhouse-gas emissions and push for alternative sources of energy, even as a source of job creation.
A different question altogether is whether Team Obama's energy and climate posse will be enough to overcome all the hurdles facing a wholescale reinvention of the energy mix of a coal-dependent nation that’s now smack in the middle of a recession.
from the Wall Street Journal, 2008-Dec-30, by Sally C. Pipes:
Obama Will Ration Your Health Care
Think of his health plan as a federal HMO.People are policy. And now that President-elect Barack Obama has fielded his team of Tom Daschle as secretary of Health and Human Services and Melody Barnes as director of the White House Domestic Policy Council, we can predict both the strategy and substance of the new administration's health-care reform.
The prognosis is not good for patients, physicians or taxpayers. If Mr. Daschle meant what he wrote in his book "Critical: What We Can Do About the Health-Care Crisis," Americans can expect a quick, hard push to build more federal bureaucracy, impose price controls, restrict medicines and technology, boost taxes, mandate the purchase of health insurance, and expand government health care.
In his book, Mr. Daschle proposes a National Health Board to regulate the way health care is provided. This board would have vast powers in regulating the massive federal health-care system -- a system that includes Medicare, Medicaid, and other programs. Under Mr. Obama, it is likely that that system will be expanded and that new government insurance for the nonelderly, nonpoor will be created.
Given the opportunity, Mr. Daschle would likely charge the board with determining which treatments and drugs are cost effective and therefore permissible to use for patients covered by the government. And because the government is such a big player in the health-care market (46% of health-care spending comes from the government), the board would effectively set parameters for private insurers.
It is nearly certain that the process of determining which drugs and which treatments would be approved for use would be quickly politicized. The details of health-care policy may not be kitchen table conversation, but the fact that a Washington committee can deny grandma a hip replacement due to her age, or your sister a new and expensive drug, is. Health care is personal and voters will pressure lawmakers on access to care.
Liberal experts, Mr. Daschle included, believe that America needs to ration new technology and drugs. In his book, Mr. Daschle complains about overuse of new technology and praises the United Kingdom's National Institute for Health and Clinical Excellence (NICE), a rationing system that controls government costs. NICE's denial of care is legendary -- from the arthritis drug Abatacept to the lung cancer drug Tarceva. These drugs are effective. It's just that the bureaucrats don't consider them cost effective.
Americans will not put up with such limits, nor will our elected representatives. Mr. Daschle himself proves this. He punts the hard decisions about rationing to an unelected board. Yet his main proposals are not only about expanding subsidized programs to cover more people but about adding the massively expensive benefit categories of mental health, which has a strong lobby behind it, and long-term care, which is important to the broad middle class.
One of the great myths in health care is that the uninsured are responsible for driving up private premiums by shifting costs. Uncompensated care certainly shifts some costs to private payers. Yet these costs are actually quite manageable in the aggregate, akin to what retailers lose due to shoplifting. The major cost shift is from government programs -- Medicare and Medicaid -- to private plans. The government pays doctors to treat Medicare and Medicaid patients. But the rates it pays, on average, are less than the cost for providing care to these patients. This is why Medicaid patients, and increasingly Medicare patients, struggle to find doctors. Putting more people on these programs will destabilize the remaining private system and create a coalition for price and wage controls.
Americans will never tolerate this. Remember our managed-care experiment in the 1990s. It succeeded in its main goal of controlling costs without an aggregate reduction in health quality. But in asking Americans to limit their choices, it prompted a bipartisan act of Congress to provide patients with a Bill of Rights. Now Mr. Daschle proposes nothing less than a giant HMO with a federal bureaucracy setting the benefit plan.
Mr. Daschle's model is Massachusetts. But Massachusetts's plan is an unfolding disaster and demonstrates how Mr. Daschle's private/public model is merely a stalking horse for government-dominated health care.
The headline claim is that the program has signed up 442,000 more people for health insurance. The reality is that 80,000 of these were simply put on Medicaid and 176,000 more on the taxpayer-subsidized plans. Costs have exploded, requiring additional tax hikes and the entire system is only possible due to sizable transfers from the federal government. The plans are so unaffordable that in 2007, 62,000 people were exempted from the individual mandate. So much for universal coverage.
The only way the Massachusetts plan will survive is with continued and increasing federal subsidies -- that is, tax revenue from the residents of other states. The only way Mr. Daschle's proposed plan would survive is with massive deficit spending -- that is, with taxpayer money from future Americans, many of whom are not yet born.
Mr. Daschle and the Democrats have spent years developing both the policy and political strategy to make the final push for taxpayer-financed universal health insurance. They have the players on the field, a crisis providing a sense of urgency, and a playbook filled with lessons learned from years of health policy reform disasters -- most recently that of HillaryCare in 1994.
The big questions for believers in private medicine are at this point political and strategic. With employers and most insurers reportedly on board with the new administration's desire for radical overhaul, who will step in to ask the tough questions? Will these issues get raised in time to provoke a meaningful, fact-based debate? Americans could easily find that Mr. Obama's 100-day honeymoon ends with a whole new health-care regime they hadn't quite bargained for.
Ms. Pipes, president and CEO of the Pacific Research Institute, is the author of "The Top Ten Myths of American Health Care: A Citizen's Guide" (Pacific Research Institute, 2008).
from the Wall Street Journal, 2008-Dec-13:
Mitch McConnell's Finest Hour
The same can't be said for President Bush on the auto bailout.In the Senate's Thursday night automobile showdown, the United Auto Workers said "No thanks" to a bailout with strings attached. Most Senate Republicans took them at their word and voted to block the bill. But within hours, President Bush blinked and Treasury is now scrambling to use money from the Troubled Asset Relief Program, or TARP. Who'd have thought Mr. Bush would want to join the long line of Detroit executives in caving to the UAW?
Senate Republicans had more gumption. Led by Tennessee Senator Bob Corker, they asked the auto workers to show they were serious about making Detroit competitive again. In exchange for a lifeline from Washington, Mr. Corker wanted the union to set a "date certain" in 2009 for lowering the Detroit Three's hourly labor costs to the average of foreign-owned auto makers in the U.S. He also wanted creditors to bring down Detroit's total debt by two-thirds through an equity swap, making sure debtholders share the cost of restructuring.
The union's counteroffer was that it would bring down labor costs in 2011, when its current contracts run out. Maybe we missed something, but we thought GM and Chrysler were facing bankruptcy now, not in three years. As Minority Leader Mitch McConnell said on the Senate floor, that sounds like "taxpayer money today for reforms that may or may not come tomorrow."
Thursday's showdown marked an important political moment for the Republican Party. By refusing to write a blank check to Detroit, Senate Republicans have started to reclaim some credibility on fiscal policy and the role of government in the economy. They did so standing up to a Republican President who doesn't want any more bad headlines, as well as to Democrats who will blame the GOP if the auto makers collapse.
They also stood up for the right reasons. No bailout will ever restore the car companies to profitability without a restructuring. Yet an explicit UAW goal is to use the bailout to avoid any such thing. The union and their Democratic protectors want to avoid the discipline that a bankruptcy could impose under Chapter 11. A government-directed salvation would also give environmentalists huge leverage over the cars Detroit builds, a power they and Democrats have wanted for decades.
Sorry to say, within hours Friday morning the White House was saying that it would be "irresponsible" to let the companies fail. If the Administration believes that, it would be equally irresponsible not to insist on the same commitments that Mr. Corker couldn't get. If the Treasury gives GM and Chrysler bridge loans without strict conditions, Democrats will pocket that precedent and avoid any serious changes when they work out a long-term deal in January.
The TARP wasn't designed and was never intended to bail out industrial firms. The moral hazard inherent in TARP was substantial even when it was limited to financial companies. If it becomes a pot of gold for any industry needing a hand, it will become a real monster. Treasury has already run through the TARP's first $335 billion, with just $15 billion left before he has to seek further authorization from Congress. That $15 billion might tide GM and Chrysler over until the new Congress convenes, but it will leave him with little running room to help out the banking system. As the recession deepens, more banks are likely to fail, and preventing a systemic financial collapse was the justification for giving Treasury the authority it enjoys under the TARP.
The bailout's backers argue that a GM bankruptcy would hold as much systemic risk for the real economy as a huge bank failure, but those risks are overstated. Chapter 11 is a well-established tool for financial restructuring. It is not tantamount to collapse or liquidation. If White House economist Ed Lazear is worried that no one will accept a car warranty from a bankrupt company, then Congress can address that specific problem rather than write an open-ended check. Chapter 11 could well offer a speedier resolution to the auto makers' plight than a slow-motion, politically infected catastrophe that could easily cost $125 billion or more.
President Bush is on a valedictory tour talking up his accomplishments, but he'd do more for his legacy if he refused to offer Detroit, Democrats, unions and the greens a taxpayer E-Z pass. At least the rest of his party has figured out what's really going on.
from the Wall Street Journal, 2008-Dec-9:
The Obama Health-Care Express
What Democrats learned from the fall of HillaryCare.A charismatic Democratic President takes office promising to extend health insurance to all Americans. His party enjoys majorities in Congress, and the GOP is at sea. The press corps finds policy a bore and instead files stories that draw facile analogies to the heyday of FDR.
Yes, all that will be true next year -- but it was also true in January 1993. Fewer than two years later, the grand health-care ambitions of Bill and Hillary Clinton were reduced to tatters. No one is more attuned to this memory than today's Democrats, who aren't about to let history repeat itself. And since the lessons they learned from the HillaryCare fiasco are political, and not substantive, they are already moving full-speed ahead.
This mentality is nicely captured by Tom Daschle, the former Senate Majority Leader who Barack Obama has tapped to run Health and Human Services. "I think that ideological differences and disputes over policy weren't really to blame," he writes of 1994 in his book "Critical," published earlier this year. Despite "a general agreement on basic reform principles," the Clintons botched the political timing by focusing on the budget, trade and other priorities before HillaryCare.
President-elect Obama will not make the same mistake. Congressional Democrats are already deep into the legislative weeds, while Mr. Daschle is organizing the interest groups and a grassroots lobbying effort. Mr. Obama may be gesturing at a more centrist direction in economics and national security, but health care is where he seems bent on pleasing the political left.
According to Mr. Daschle, because of the Clintons' hesitation, "reform opponents succeeded in confusing and even frightening Americans about what change might mean," and this time the Democrats mean to define the debate. Consider the December 2 letter to us from Senator Max Baucus, who is upset that a recent editorial on his health-care plan did not use his favorite terms of art (his style being surrealism). "It will require affordability, but premiums will not be set," he writes. So the government will merely determine "affordability" -- which might as well be the same thing.
Much as Mrs. Clinton insisted that her health bureaucracies were "alliances," Mr. Baucus says his new entitlement "will not be 'managed by the government,' but by an independent council of Presidentially appointed health-care experts." The Senate Finance Chairman wants us to believe that a government commission to determine benefits and subsidies will somehow be above politics.
Shrewder moves are being made to co-opt should-be opponents. The Clintons decided to go to war with "proponents of the status quo," as Mrs. Clinton put it in a bare-knuckled speech in May 1993. This meant vilifying business, especially insurance companies guilty of "unconscionable profiteering" and even drug makers like Merck, which Mr. Clinton had courted during his campaign. This time, Democrats are trying to seduce business with subsidies and other bribes.
They may succeed, which is no surprise given that many corporations would be only too happy to dump their health liabilities on the government. The "Divided We Fail" coalition, which advocates "universal" coverage, includes not only usual suspects like unions and AARP but also the Business Roundtable and the National Federation of Independent Business, the small-business lobby that led the charge against HillaryCare.
America's Health Insurance Plans, the industry trade group, recently said its members would accept all comers regardless of health status or previous illness -- i.e., guaranteed issue -- but only if the government requires everyone to buy insurance. The individual mandate will expand their business in the short term, but it won't be long before Congress is also regulating premiums, cost-sharing and administrative expenses. Dr. Faustus, call your internist.
Another opening for Democrats is the new director of the Congressional Budget Office, a post vacated when Peter Orszag joined the Obama Administration. CBO totes up the official cost of legislation and thus is one of those obscure Beltway outfits that frames the political argument. A "score" that is too costly make a bill harder to pass.
In the 1990s, CBO director Robert Reischauer knee-capped HillaryCare by pointing out its true costs and giving little credit to claims it would generate savings. With good reason: Putative cost "offsets" never seem to materialize when Congress tries to plan the insurance markets. Now Democrats will try to install a CBO director who can be more easily rolled.
Most disturbingly, Democrats are talking up "budget reconciliation" to pass a health overhaul. This process was created in 1974 and allows legislation dealing with government finances to be whisked through Congress on a simple majority after 20 hours of debate. In other words, it cuts out the minority by precluding a filibuster. Mr. Daschle writes that reform "is too important to be stalled by Senate protocol," and Mr. Baucus has said he's open to the option.
Any taxpayer commitment this large ought to require a social consensus reflected in large majorities, but Democrats are determined to plow ahead anyway. They know that a health-care entitlement for the middle class will never be removed once it is in place; and that government will then dominate American health-care choices for decades to come. That's all the more reason for the recumbent GOP to get its act together.
from the Wall Street Journal, 2008-Dec-9:
Bush and Detroit
A bailout that won't enhance the Republican's legacy.It's easy to see why Congressional Democrats and an Obama Administration would be eager to bail out Detroit auto makers in exchange for an equity stake and a chance to dictate business decisions. Democrats want Detroit to stop making big cars that run on gasoline, and they hope to protect their friends at the United Auto Workers. The mystery is why President Bush would go along for this ride.
This is all the more puzzling given that the President was once a principled opponent of precisely the kind of taxpayer bailout he now seems prepared to accept. Asked by the Journal about a possible Detroit bailout in an Oval Office interview in January 2006, Mr. Bush said General Motors and Ford might instead try to produce "a product that's relevant." For good measure, he added that "I think it's very important for the market to function."
Nobody can argue that this was a case in which the market didn't function. Ford, GM and Chrysler were in obvious trouble long before the current credit panic. The companies were bleeding cash and piling up liabilities when the rest of the U.S. economy was posting solid quarterly gains. They were losing market share as their foreign competitors -- building cars in the U.S., with American workers -- were gaining. Yes, they were hampered by fuel-efficiency standards that forced them to build cars, at U.S. plants with UAW contracts, that they couldn't sell. But those fuel standards also applied to Honda, and in any case won't be eased under the terms of this bailout.
Nor can it be argued that a rescue for Detroit is of a piece with the financial services bailout. Without credit, no market can function, as millions of Americans looking for loans are now discovering. The provision of public capital to the banking system through the Troubled Asset Relief Program was unfortunate but necessary as a way to prevent a larger, global financial collapse.
Last we checked, consumers had options other than a Buick, Mercury or Chrysler Sebring if they needed a new car. Bankruptcy for any of the Big Three would exacerbate the recession and mean pain for laid-off workers and their families, but it poses no systemic risk to the U.S. economy. It also offers the companies the legal protection to modify labor and other contracts, or to sell their businesses in some economically rational way, rather than postpone the day of reckoning for another few years, at huge taxpayer expense.
No wonder, then, that polls show Americans opposing a Detroit bailout by 61% to 36%, according to a CNN survey last week. That margin is probably higher among the voters who twice put Mr. Bush in office and might expect him to govern according to some discernible conservative principle. When Harry Truman seized steel mills in 1952, at least he had the excuse of having the Korean War to prosecute. In the current bailout debate, the Administration hasn't even been able to bargain for passage of a Colombian or Korean free-trade agreement.
Mr. Bush is holding out for terms, and some kind of "master" or "czar," that could prod the companies to restructure. The White House also wants to remove the demand in the draft Democratic bill that the companies not challenge "state" (read: California) fuel-efficiency rules that would doom the companies to pursue the same loss-making strategies that got them to their current pass. That's certainly helpful as far as it goes. But the problem with this bailout is its premise as well as its details.
Bailing out companies because they claim to be uniquely American sets a precedent for every other poorly managed and politically connected U.S. industry. As for a car-industry "czar," note how quickly House Speaker Nancy Pelosi rejected the idea of former General Electric CEO Jack Welch for the job. She wants a "public sector" type who will impose the decisions that Congress wants. A bankruptcy judge would have a much more independent hand.
It's also becoming increasingly clear that the real goal of Democrats isn't to save jobs per se, but to tell Detroit what cars to make and how to make them. The goal is to turn GM and the rest into Big Green Machines that will stop making SUVs and trucks and start making small cars that run on something other than carbon fuel. If consumers don't want to drive them, well, the next step will be to impose subsidies or penalties and taxes to coerce them to do so. Giving the federal government an equity stake could also lead to protectionism, as the politicians attempt to shield Detroit's mismanaged assets from competition by citing the interests of the UAW, the environment, or some other "social" good that has nothing to do with making cars Americans will want to drive.
None of these measures will save Detroit in any real commercial sense. For precedents, consult the history of France's Renault, S.A., or perhaps of Jawaharlal Nehru's industrial policies in postwar socialist India. But a bailout will harm consumers, harm the auto industry as a whole, put taxpayers on the hook indefinitely, and bring the U.S. commitment to market principles further into doubt.
If this is how Barack Obama wants to begin his Presidency, so be it. But Mr. Bush will not enhance his legacy by helping Congress and the Sierra Club nationalize Detroit.
from the New York Times, 2008-Dec-15, by Monica Davey:
Two Sides of a Troubled Governor, Sinking Deeper
CHICAGO — Gov. Rod R. Blagojevich is a polished speaker who can win over elderly women at luncheons in southern Illinois with his earnest attention and eloquently recite historical anecdotes from the lives of the leaders he says he most admires — Theodore Roosevelt, Abraham Lincoln, Robert F. Kennedy, Alexander Hamilton, Ronald Reagan.
And yet, Mr. Blagojevich, 52, rarely turns up for work at his official state office in Chicago, former employees say, is unapologetically late to almost everything, and can treat employees with disdain, cursing and erupting in fury for failings as mundane as neglecting to have at hand at all times his preferred black Paul Mitchell hairbrush. He calls the brush “the football,” an allusion to the “nuclear football,” or the bomb codes never to be out of reach of a president.
In 1996, John Fritchey, a Democrat who shared a campaign office with Mr. Blagojevich, was told that his stepfather had suffered a serious stroke. He walked over to Mr. Blagojevich, who was making fund-raising calls, and shared the news.
“He proceeded to tell me that he was sorry, and then, in the next breath, he asked me if I could talk to my family about contributing money to his campaign,” recalled Mr. Fritchey, now a state representative and a critic of the governor. “To do that, and in such a nonchalant manner, didn't strike me as something a normal person would do.”
Yet even political figures like Mr. Fritchey say they were stunned by his arrest last week on charges of conspiracy and soliciting bribes.
Many who know the governor well say that as Mr. Blagojevich's famed fund-raising capability seemed to have shrunk in recent months and as his legal bills mounted after years of federal investigation, he appeared to have evolved from what Mr. Fritchey considered callous into something closer to panicked or delusional.
“It's hard to imagine what could have been going through his head for this to reach such a brazen point,” Mr. Fritchey said. “The irony is, had he simply delivered on the promises on which he campaigned rather than pursuing his belief that success would come through an abundance of fund-raising, his path might look like he wanted it to.”
Now, officials at all levels are calling for his resignation or impeachment. And the public image he had cultivated as an agent of change in Illinois has been subsumed by the stories about his conduct in private. Today, he barely has an ally in sight.
Long before this, he disagreed over a casino with Mayor Richard M. Daley of Chicago; he irked Michael Madigan, the powerful Democratic state speaker, over the budget; and he infuriated just about every legislator by staying put in Chicago (rather than moving his family to the Governor's Mansion in Springfield). His penchant for promoting his headline-grabbing proposals — like those for universal preschool and cheaper drugs from Canada — on television, rather than in the quieter halls of Springfield, also won him no friends.
“Rod reveled in fighting with members of the General Assembly,” said Representative Tom Cross, the state Republican leader. “He came out of the box fighting: He was the populist, and we were the big, bad General Assembly. He didn't seem interested in policy, the budget was in disarray, and he was never there.”
Neither Mr. Blagojevich's spokesman nor his lawyer, who has said that Mr. Blagojevich feels that he is innocent of the charges against him, would consent to be interviewed.
Whatever else may have come apart within Mr. Blagojevich in recent months, one quality, unabashed ambition, has been a constant, his colleagues and his critics say. Even with approval ratings that had sunk to 13 percent as details of the federal investigation into his administration had seeped out over the past three years, Mr. Blagojevich, incredulous prosecutors say, still spoke in his recorded conversations in the past six weeks of the possibility of remaking his political future and running for president, perhaps in 2016.
That aspiration was nothing new.
At points in early 2004, Mr. Blagojevich appeared with Senator John Kerry, the Democratic presidential candidate, at a community center in Evanston and a junior high school in Quincy. Mr. Blagojevich seemed confident, said two former employees, who refused to be named out of concern that their comments could jeopardize their current work, that he would soon be selected as Mr. Kerry's running mate. (An aide to Mr. Kerry's campaign says he was never under consideration.) At the time, there seemed only one problem: Mr. Blagojevich was uncertain he wanted to be a No. 2.
Mr. Blagojevich rose to power from unlikely roots. His father was a steelworker from Serbia and his mother collected tickets for the Chicago Transit Authority.
Mr. Blagojevich graduated from Northwestern University, and received his law degree from Pepperdine University, working to help pay for it.
Back in Chicago, he worked briefly as an assistant prosecutor under Mr. Daley, who was then the Cook County state's attorney.
But Mr. Blagojevich's political career may have been sealed the day he met his future wife, Patti Mell, at a fund-raiser in 1988 for her father, Richard Mell, a ward chief on the Northwest Side and a powerful alderman for more than three decades. Three years later, he was doing precinct work for Mr. Mell, and not long after, Mr. Mell suggested that he run for state representative — with the help of Mr. Mell's vast ward operation.
Mr. Blagojevich spent four years in the State House, six years in the United States House of Representatives, and then, in 2002, he ran for governor.
The moment could not have been more welcoming for a Democrat. Gov. George Ryan, a Republican who was by then engulfed in a corruption scandal, did not run for re-election, and the Republican who did had a long record of public service but an unfortunate last name: Ryan.
Mr. Blagojevich focused his campaign on pledges of reform and clean government, and won. Once in office, even amid accusations of campaign donations being exchanged for state jobs, Mr. Blagojevich continued to promote himself as a lonely fighter against the gargantuan pressures of lobbyists and lawmakers — pressing for tougher ethics laws, appointing inspectors general and sending state employees to “ethics training.”
Before the cameras, Mr. Blagojevich was a cheery presence — the No. 1 Cubs fan, an Elvis buff, an avid runner who jogged through the annual twilight parade before the State Fair, darting back and forth to shake as many hands as he could find.
Behind the scenes, though, members of Mr. Blagojevich's staff saw a different man: one who was deeply concerned about his appearance (particularly his signature black hair, which he ignored suggestions to change) and who usually worked from his home or his North Side campaign office and could often be seen, mid- or late-morning, making a six-mile run trailed by his security team.
“God forbid you make a mistake,” said one longtime former employee. In December 2003, the employee recalled, Mr. Blagojevich flew into a rage because he thought he was late for a holiday tree-lighting ceremony in Springfield, and his two young daughters — who were visiting with Santa Claus in the parlor of the Governor's Mansion — did not have their shoes on yet. “You're trying to sabotage my career!” the employee recalled Mr. Blagojevich screaming at staff members, as he charged into the parlor. “You're the worst!”
At Christmastime in 2004, a nasty spat cropped up between Mr. Blagojevich and Mr. Mell and the fallout stretched well beyond the family, offering some of the clearest public hints of Mr. Blagojevich's coming troubles.
Mr. Blagojevich shut down a landfill operated by a relative of Mr. Mell, saying it was taking types of waste it was not licensed to accept. Mr. Mell accused Mr. Blagojevich of shutting the facility as a personal vendetta against him, and then accused his top fund-raiser of trading appointments to state commissions and boards for campaign donations, just the image Mr. Blagojevich had been trying to avoid.
Though Mr. Mell (who is said to still be estranged from the Blagojevich family) later recanted his comments, state officials said they were investigating, and, in 2006, a letter between federal and state prosecutors became public, revealing that Patrick J. Fitzgerald, the federal prosecutor, was already investigating claims of “endemic hiring fraud” in the Blagojevich administration.
Mr. Blagojevich said that he welcomed “each and every agency” that was seeking the truth. But, with the passing months, lawmakers and other colleagues said the pressure of the investigation seemed to weigh on the governor.
Knowledge of the investigation was widespread when Mr. Blagojevich ran for re-election in 2006, and he still won 50 percent of the vote. Some political experts thought Judy Baar Topinka, then the Republican state treasurer, was weak opposition to Mr. Blagojevich's one-on-one charm. And Mr. Blagojevich spent $27 million, nearly three times what Ms. Topinka spent.
“We couldn't compete on the money angle of it, and maybe now we know why,” Ms. Topinka said last week, adding that she had long been told by lobbyists that they had to “drop a $10,000 entry fee” to work with Mr. Blagojevich. “Anything that didn't move was sold,” she asserted.
Still, as time went on, colleagues said fund-raising seemed to grow increasingly difficult even for Mr. Blagojevich, who had always been seen as a master at it.
Legal bills, meanwhile, began to mount: his campaign records show he had paid more than $1 million to a law firm, Winston and Strawn (which no longer represents him), and a report as of June 30 this year revealed that the campaign owed $750,000 more to the firm.
Other politicians began to avoid public appearances with him and speaking invitations dropped. Mr. Blagojevich, who had once seemed to bask in news coverage, found himself answering questions about the corruption investigations at nearly every event. After his arrest on Tuesday, Mr. Blagojevich met with almost no one, other than lawyers and ministers.
Not long after his spat with his father-in-law was made public in early 2005, setting off more corruption investigations, Mr. Blagojevich reflected on his work, and said it had changed him in a way.
“What I've discovered since I've been governor is that there's a certain loneliness to this job,” he said in an interview. “There's a loneliness and a certain sadness because you have to isolate yourself to some extent. There are so many people who want so many different things from you.”
from the New York Post, 2008-Nov-24, by Kirsten Powers:
Left at the Altar
Libs Bemoan O's Centrist PicksWHILE most of Democratic America is basking in the Obama victory glow, one contingent despairs: liberal bloggers and activists.
Shocked that the man who ran as a post-partisan candidate seeking the middle ground is being post-partisan and seeking middle ground, these people are blasting Barack Obama's early, centrist decisions.
For his economic team, Obama is expected to appoint a phalanx of free-trading ex-Clintonites. The foreign-policy team is populated with hawks and initial Iraq war supporters.
For attorney general, Obama will likely tap Eric Holder - who has opposed applying the Geneva Conventions to detainees and was on the legal team that worked for reauthorization of the Patriot Act. Defense Secretary Robert Gates - a Bush appointee! - is expected to stay on.
And then there is Joe Lieberman, the bete noir of lefty bloggers. Obsessed with dethroning him as head of the Homeland Security Committee, they were enraged by Obama's decision to intervene and ensure Lieberman kept his perch. One top blogger commented: "No matter what Joe Lieberman does, the people who are protecting him hate you much more than they hate him."
They aren't much for subtlety.
So far, Obama doesn't seem interested in walking into the trap Bill Clinton did in 1992 when he tried to be all things to all people.
Rattled by attacks from the left demanding he repay it for its support, Clinton made decisions that came to haunt him. As reporter John Harris recalled in "The Survivor," it was a question from NBC's Andrea Mitchell at a news conference a week after the election that led to the first major Clinton misstep.
Did Clinton plan to implement his pledge to allow homosexuals to serve openly in the military? Clinton's answer of "yes" - leaving no wiggle room - sparked a culture war that served as a disastrous distraction during the transition and early presidency. In the end, he wasn't even able to deliver on the promise.
Contrast that with how Obama is handling demands from the left. The National Organization for Women complained when it leaked that Larry Summers was being considered for an administration post. They are still smarting at his remark that women may be at a genetic disadvantage when it comes to doing math. Yet Summers is still on track to become the head of the National Economic Council.
But we put Obama in office! the left complains. Nonsense - it was moderates who took him to the White House.
The media must abandon the fantasy that the netroots are responsible for the Obama win. In reality, they were cool to him early in the Democratic contest - because of all his talk of bipartisanship and civility. They traffic in political conflict the way al Qaeda traffics in anti-Americanism. Obama's civility is bad for business.
Obama became their default choice, dictated by Hillary-hatred, only as the field narrowed. (Remember their support for Mark Warner and John Edwards?) Even after Obama garnered the nomination, they frequently found fault with his accommodating mien.
The one group that can lay claim to boosting Obama is anti-war voters, who threw in early with him as the only pure candidate. But their griping now is premature. There is no real reason to believe that Obama will not honor his commitment to getting the United States out of Iraq.
Yes, Obama has selected hawkish Dems. But they have either recanted their support of the war, or expressed a desire to get out of Iraq. Punishing them for a decision made in the now-distant past achieves nothing.
I know what it's like to feel disappointed in this situation. In 1993, as a political appointee in the Clinton administration, I fussed and fumed over Clinton's backtracking on gays in the military, feeling betrayed and let down.
Later, I grew up and realized that the country doesn't necessarily share all my views, that a president has to work with all sides to achieve his goals. I saw this time and time again in the Clinton years. So my (no doubt unwanted) advice to those despairing now: Take a deep breath and grow up.
from the Wall Street Journal, 2008-Nov-22, by John Fund:
Secret-Ballot Hypocrisies
The Democrats believe in one man, one vote, one time.This week's 137 to 122 vote of House Democrats to replace John Dingell with liberal Henry Waxman at the energy and commerce committee would likely not have happened but for the secret ballot. Even Rep. Louise Slaughter, chairwoman of the House Rules Committee, told Congressional Quarterly she was relieved the vote would be a private one: "It's a secret ballot. . . . Thank the Lord."
After all, the fearsome Mr. Dingell, who will become history's longest-serving House member next year, has been known to hold grudges.
Yet the obvious irony is that Democrats now will try to deprive workers of the same privacy privilege in workplace unionization battles. So-called "card check" legislation would require an employer to sign a union contract as long as a simple majority of workers sign a form authorizing a union to represent them -- a move that necessarily makes workers more vulnerable to coercion and intimidation than if they are voting by secret ballot.
And the ironies keep piling up. The leading House sponsor of card check is Rep. George Miller, who also served as campaign manager of Mr. Waxman's race against Mr. Dingell, settled by secret ballot. What's more, along with 10 House Democrats, Mr. Miller wrote a 2001 letter to Mexican government officials encouraging the "use of secret ballots in all union recognition elections." The letter states: "We feel that the secret ballot is absolutely necessary in order to ensure that workers are not intimidated into voting for a union they might not otherwise choose."
Rep. Miller and the other signers now say their demand was for secret ballot votes only when "workers seek to replace one union with another union. " Funny. Their letter made no mention of that specific situation and instead referred to "all union recognition elections."
A better explanation is that Democrats' principled support for a secret ballot flies out the window when it comes to union organizing efforts sponsored by the special interests who helped them win control of Congress.
from the New York Post, 2008-Nov-17, by Amity Shlaes:
Crisis Lets Dems Push Old Agendas
THE trouble with new financial crises is that they provide pretexts for implementing old social agendas. As the president-elect's new chief of staff, Rahm Emanuel, said recently, "never allow a crisis to go to waste."
Consider President Franklin Roosevelt's New Deal, which President-elect Barack Obama invokes when he talks of "a defining moment." Like Obama today, FDR was inaugurated into trouble. He wisely addressed the financial crisis through the steps that we learned about in school. He signed deposit insurance into law, reassuring savers. He created the Securities and Exchange Commission, making the stock market more transparent and consistent. He soothed our grandparents via his radio Fireside Chats. This was the FDR we love.
But FDR also used the crisis mood to push through an unprecedented program of reforms that progressives had been hoping to put in place for years. Sen. George Norris of Nebraska, for example, had for decades argued that utilities should be in the public, not the private, sector. As far back as the early '20s, Norris wanted to build a big power project on Tennessee River. He wanted the government - and not the Ford Motor Company, which was drawing up such plans - to be in charge. FDR made Norris' progressive dream a reality by creating the publicly owned Tennessee Valley Authority. Washington won out, but it wasn't clear its power served the South down the decades.
Members of FDR's party and those to his left itched to enact other old plans: Subsidize agriculture like crazy. Institute a national minimum wage. Create strong unions to drive wages up, even when businesses couldn't afford it. The progressives and farmers wanted to end the gold standard.
None of these ideas got far in the prosperous '20s, but the financial crisis gave the progressives their chance. Suddenly, they had their Katrina, the telltale situation in which capitalism looked broken for all the world. They built a giant institution, the National Recovery Administration, to reorganize the industrial economy.
The NRA imposed a series of regulations on businesses - a minimum wage, shop-floor safety rules, price rules - codes that made certain infractions crimes. In a case that went all the way to the Supreme Court, the feds prosecuted a family of Brooklyn chicken butchers, the Schechters, on the absurd charge of setting prices too low. The court stood by the Schechters and, two long years after the New Deal began, ruled the NRA unconstitutional. But it was too late for the economy, which was hurt by this singularly perverse institution.
The Obama administration isn't likely to advocate a new NRA. But President-elect Obama may go along with Democrats in Congress as they push other old social agendas. They, like the early-'30s Democrats, now have the ugly snapshot of capitalism for which they longed.
Foremost on their reform agenda, as in 1993, will be health insurance. Indeed, we are practically guaranteed a "healthcarization" of our financial crisis, even though health care and mortgage-backed securities have little to do with one another. "Nationalization" used to be a scare word. But the easy nationalization of the giant AIG makes the nationalization of private health care suddenly seem possible.
A Democratic Washington also will likely legislate the fondest wish of private-sector unions - the famous "card-check" legislation that will deprive workers of the chance to cast an anonymous vote on shop unionization. This, in turn, will put upward pressure on wages that workplaces can't afford.
The greater danger is that the public-sector unions, with support of Democrats, will push up their own pay aggressively. Behind the GM crisis is the crisis of state and city budgets - which the demands of AFSCME, the public-sector union, will only exacerbate.
President-elect Obama creates an opening for such demands when he says, as he did recently, that everything about the last four years was wrong. Everything? Sure, the financial crisis needs addressing. But government health care and card check don't have much to do with mortgage crises.
So remember what's really be going on: Voters want change - Obama's campaign message. But the Democratic Party is widening the definition of change by the hour. And the crisis? It's just a pretext.
Amity Shlaes, senior fellow in economic history at the Council on Foreign Relations, is author of "The Forgotten Man: A New History of the Great Depression" (Harper Perennial).
from the Wall Street Journal, 2008-Nov-24, by Pete du Pont:
A Worrying Prognosis
Socialized medicine may be coming to America.One thing we can count on from our newly elected president is fresh ideas, some that were campaigned on and others that will be at the top of the president's list on Jan. 20.
First on the agenda will likely be a reworked version of Hillary Clinton's 1990s health-care plan: a more nationalized system that was introduced two weeks ago by Sen. Max Baucus of Montana to put government, as opposed to the individual, more in charge of health care decisions.
The Baucus plan would add between $200 billion and $300 billion to the $2.3 trillion we spend each year on health care, and it would intrude into our medical decisions since the government would decide what policies many of us could buy and what health care provisions they would have to contain.
The Baucus plan contains five essential elements. First, under the proposed new law every individual must have a health insurance policy. Some 250 million of us have one today, so there would have to be more than some 50 million new ones. And under the Baucus bill our compliance with this mandate could be "enforced possibly by the U.S. tax system," so the IRS may play a role in our health care.
Second, a new national Health Insurance Exchange would be created--a government marketplace from which all of us could choose to purchase insurance, either from the government or from among a group of government-regulated private policies.
Third, most private insurance companies that provide health care policies would not be able to deny coverage to any individual based on pre-existing conditions and would have to offer policies to all people at an equal price regardless of their health condition. The plan says rules that "have to do with how an insurer can determine a policyholder's premium based on various criteria such as age, tobacco use, previous illness, or factors that encourage healthy lifestyles--will be specified in statute," so the government's control would increase significantly.
Fourth, companies that employ people would be given a choice: create a health care plan meeting certain government standards, or pay a percentage of company payroll (perhaps 6% or 7%) to the government so that it can provide coverage for the employees. Since about 57% of companies with fewer than 50 employees do not offer them health insurance today, this would create very difficult economic choices for them.
Fifth and most important, a federal Independent Health Care Council would be established to regulate health insurance policies. The president's nominees for council members would be confirmed by the Senate, and it would be given "oversight" in all medical matters. The council would determine "affordable" premiums that people should be expected to pay based not on cost but on "the reasonable percent of income to be spent on health care coverage," and it envisions a government subsidy for a portion of the premiums above this affordable amount. It would also "define key terms," like what "coverage" is and what "affordability" means, and "ensure that coverage will be affordable" and "protect enrollees against high health care expenses." In other words, a new government organization would significantly regulate the content of individual health care policies, influence their price, and define what must or may not be included in the policies people wish to purchase.
Another Baucus bill change is the significant expansion of government health care. Today Medicare sets the standards for 8,000 medical procedures and services at a 2007 cost of some $425 billion for people 65 or older, or about $10,000 per person. But under the Baucus bill the age limit would be lowered: 55- to 64-year-olds could decide to join Medicare. So a health-care system that today serves 44 million people would make 32 million more (four million of whom don't now have health insurance) eligible to join it, costing the government billions more.
Then Medicaid would be expanded to cover every American living in poverty, rather than just the 61 million people it serves today, which could push seven million people into the government program and add billions of dollars to its cost.
Finally, the State Children's Health Insurance Program, or Schip, would be expanded to cover all children with family incomes less than 250% of the poverty level--families with incomes up to $53,000 for a family of four. That would add millions more people to Schip, which today costs $5 billion a year to cover 6.5 million children.
Put all this together and existing health care programs--Medicare, Medicaid, and Schip--would be expanded, new health-care regulation for business and individual policies would be established, and America would have a vast new health-care program, run for and largely paid for by the government. Government, with little input from you or your doctors, would run it, regulate it, supervise its performance, mandate how companies must participate in it, and somehow come up with more than several hundred billion dollars each year to pay for it all.
The Baucus plan says in its opening paragraphs that the U.S. "is the only developed country that does not guarantee health coverage for all its citizens," and that there are 46 million uninsured people and some 25 million more underinsured. Giving those people the funding through tax credits or subsidies to purchase their own health insurance is a good idea. Europeanizing American health care so that government rather than individuals make health care decisions is not.
But like it or not, when our new government takes office in January, socialized medicine may well be on its way into America.
from the Wall Street Journal, 2008-Nov-19, by Holman W. Jenkins, Jr.:
Obama Hears a Giant Sucking Sound
His legacy is spent before he gets his hands on it.His friends advise Barack Obama to launch a "New" New Deal. Maybe that's because the old New Deal is sinking fast.
Mr. Obama's one deeply false note during the campaign was his harping on "deregulation" as if that were the source of current troubles. His real problem is the crack-up of the world FDR built.
Fannie Mae was a New Deal creation, subsidizing the securitization of mortgage debt. FDR's successors piled on the subsidies for housing debt and incentives directed at low-income borrowers. Kaboom.
Then there's the UAW, born in 1935. For decades the UAW steadily traded away domestic auto market-share to imports and transplants to keep its aging membership toiling away toward their golden pensions and collecting wages and benefits twice those of their competitors. It worked for a while . . .
Mr. Obama must be looking around and beginning to suspect he will be pouring his political capital, along with considerable taxpayer capital, down bottomless holes for the next four years. He won't be building a legacy as the new FDR, but cleaning up after the last one.
Fannie and its twin, Freddie Mac, have already come back for a second helping of taxpayer money as their once-profitable business model devolves into a politically directed subsidy machine for propping up home prices and delaying foreclosures. Their next meltdown, in government hands, is all but written in the cards.
AIG, an otherwise healthy insurance company that went bust betting on housing debt, has already consumed taxpayer loans and capital injections nearly as big as AIG's $200 billion market cap when it was one of the world's most admired firms. AIG still has a valuable insurance business, but ignoramuses in Congress and the press are busy destroying it. The company sells many of its products through busy independent agents. It uses lush "seminars" to encourage them to sit still for pitches about why AIG should still be trusted despite AIG's purgatory in the headlines. But these seminars only produce more outraged grandstanding from the political commentariat.
It will take years for the government to get AIG off its hands, and there likely won't be much value left for taxpayers when it finally does.
But the really giant sucking sound is the auto sector, getting ready to gobble up whatever hopes Mr. Obama might have had for an ambitious, forward-looking presidency.
He and Nancy Pelosi naturally insist that any "bailout" must hit multiple bogies. They want UAW jobs to be preserved. They want the shibboleth of energy independence advanced. They want "green" cars to please the Tom Friedmans of the world. They want to tell taxpayers they're getting more for their money than just a bailout of Detroit.
All this makes sense to a politician, but not to any practical person, who knows that multiple bogies are bound to be conflicting bogies. You could just barely envision a bailout that wouldn't necessarily be a disastrous waste of money, one that would help Detroit create a competitive cost structure in pursuit of building products that are competitive in the marketplace. But this is just the opposite of what Mr. Obama and his Democrats have in mind.
Prepare to witness, then, the awesome capacity of an unreformed Detroit to consume taxpayer billions with nothing to show for it.
That Mr. Obama had been sent by history to assuage the insecurities of the middle class with a "New" New Deal was always a tad detached from reality anyway. The reason is those giant legacies of existing New Dealism known as Social Security and Medicare, about which he was careful to say nothing intelligible during the campaign. These programs worked for a while too, but now their expected revenues are (in present value) about $99.2 trillion short of the expected outlays required to assure present and future workers their promised comfort in retirement.
Then again, Mr. Obama did say something in his campaign about tax rebates for all these payroll taxpayers. He also said something about government matching contributions to incentivize today's low- and middle-income workers to save for their own retirement.
Voilà, personal accounts funded by payroll-tax givebacks -- strangely similar to the solution our current president promoted to help workers escape the impending insolvency of the government retirement programs. Mr. Obama envisioned himself extending FDR's work. He may end up finishing George Bush's.
from the Washington Post, 2008-Nov-16, p.B7, by George F. Will:
'Socialism'? It's Already Here.
Conservatism's current intellectual chaos reverberated in the Republican ticket's end-of-campaign crescendo of surreal warnings that big government -- verily, "socialism" -- would impend were Democrats elected. John McCain and Sarah Palin experienced this epiphany when Barack Obama told a Toledo plumber that he would "spread the wealth around."
America can't have that, exclaimed the Republican ticket while Republicans -- whose prescription drug entitlement is the largest expansion of the welfare state since President Lyndon Johnson's Great Society gave birth to Medicare in 1965; and a majority of whom in Congress supported a lavish farm bill at a time of record profits for the less than 2 percent of the American people-cum-corporations who farm -- and their administration were partially nationalizing the banking system, putting Detroit on the dole and looking around to see if some bit of what is smilingly called "the private sector" has been inadvertently left off the ever-expanding list of entities eligible for a bailout from the $1 trillion or so that is to be "spread around."
The seepage of government into everywhere is, we are assured, to be temporary and nonpolitical. Well.
Probably as temporary as New York City's rent controls, which were born as emergency responses to the Second World War and are still distorting the city's housing market. The Depression, which FDR failed to end but which Japan's attack on Pearl Harbor did end, was the excuse for agriculture subsidies that have lived past three score years and 10.
The distribution of a trillion dollars by a political institution -- the federal government -- will be nonpolitical? How could it be? Either markets allocate resources, or government -- meaning politics -- allocates them. Now that distrust of markets is high, Americans are supposed to believe that the institution they trust least -- Congress -- will pony up $1 trillion and then passively recede, never putting its 10 thumbs, like a manic Jack Horner, into the pie? Surely Congress will direct the executive branch to show compassion for this, that and the other industry. And it will mandate "socially responsible" spending -- an infinitely elastic term -- by the favored companies.
Detroit has not yet started spending the $25 billion that Congress has approved but already is, like Oliver Twist, holding out its porridge bowl and saying, "Please, sir, I want some more."
McCain and Palin, plucky foes of spreading the wealth, must have known that such spreading is most of what Washington does. Here, the Constitution is an afterthought; the supreme law of the land is the principle of concentrated benefits and dispersed costs. Sugar import quotas cost the American people approximately $2 billion a year, but that sum is siphoned from 300 million consumers in small, hidden increments that are not noticed. The few thousand sugar producers on whom billions are thereby conferred do notice and are grateful to the government that bilks the many for the enrichment of the few.
Conservatives rightly think, or once did, that much, indeed most, government spreading of wealth is economically destructive and morally dubious -- destructive because, by directing capital to suboptimum uses, it slows wealth creation; morally dubious because the wealth being spread belongs to those who created it, not government. But if conservatives call all such spreading by government "socialism," that becomes a classification that no longer classifies: It includes almost everything, including the refundable tax credit on which McCain's health-care plan depended.
Hyperbole is not harmless; careless language bewitches the speaker's intelligence. And falsely shouting "socialism!" in a crowded theater such as Washington causes an epidemic of yawning. This is the only major industrial society that has never had a large socialist party ideologically, meaning candidly, committed to redistribution of wealth. This is partly because Americans are an aspirational, not an envious, people. It is also because the socialism we do have is the surreptitious socialism of the strong, e.g., sugar producers represented by their Washington hirelings.
In America, socialism is un-American. Instead, Americans merely do rent-seeking -- bending government for the benefit of private factions. The difference is in degree, including the degree of candor. The rehabilitation of conservatism cannot begin until conservatives are candid about their complicity in what government has become.
As for the president-elect, he promises to change Washington. He will, by making matters worse. He will intensify rent-seeking by finding new ways -- this will not be easy -- to expand, even more than the current administration has, government's influence on spreading the wealth around.
As noted above, here is the Obama Agenda presentation in its entirety, as posted on change.gov the day before “Obama-Biden Transition Project” removed it on 2008-Nov-8.
from the Washington Times, 2008-Nov-11, by Stephen Dinan:
EXCLUSIVE: Agenda disappears from Obama Web site
Over the weekend President-elect Barack Obama scrubbed Change.gov, his transition Web site, deleting most of what had been a massive agenda copied directly from his campaign Web site.
Gone are the promises on how an Obama administration would handle 25 different agenda items - everything from Iraq and immigration to taxes and urban policy - all items laid out on his campaign Web site, www.BarackObama.com.
Instead, the official agenda on Change.gov has been boiled down to one vague paragraph proclaiming a plan “to revive the economy, to fix our health care, education, and social security systems, to define a clear path to energy independence, to end the war in Iraq responsibly and finish our mission in Afghanistan, and to work with our allies to prevent Iran from developing a nuclear weapon, among many other domestic and foreign policy objectives.”
“We are currently retooling the Web site,” said Obama spokesman Nick Shapiro.
The site went active on Wednesday and was available to the public Thursday. The agenda items, which were active for at least part of the weekend, appear to have been deleted by late Saturday.
The site still contains pages about how to apply for jobs in the Obama administration, biographies of top transition team members and a call for Americans to serve in volunteer jobs and for students to do 50 hours of community service. The site also has press releases and a transition blog.
The 25 agenda items are still available on Mr. Obama's campaign site.
from the Wall Street Journal, 2008-Nov-6, by Daniel Henninger:
Obama's Dour Vision
How much change do we really need?Barack Obama's victory speech Tuesday night had grace notes. He wants to pull away from the "partisanship and pettiness and immaturity that has poisoned our politics for so long." Well past due on that one.
He praised a party of Abraham Lincoln "founded on the values of self-reliance, individual liberty and national unity. Those are values we all share." And the way such values are kept alive is by a victor's thoughtful mention of them. His remarkable win was truly "not hatched in the halls of Washington," a fact that contributed much to his support from an electorate disillusioned with the federal institutions at both ends of Washington.
That said, it might be useful to ask at this early stage what, precisely, is President-elect Obama's understanding of the American idea? What I take away from the victory speech is that his vision of America is fairly depressing, a lot more dour than my sense of America in 2008.
Throughout the campaign, Barack Obama ran against the "failed" presidency of George Bush -- his "failed" economic policies, his "failed" war in Iraq and so on. In his victory speech, though, Mr. Obama appears to be describing a generalized failure of America itself.
It emerged in the first sentence: "If there is anyone out there who still doubts that America is a place where all things are possible; who still wonders if the dream of our founders is alive in our time; who still questions the power of our democracy, tonight is your answer."
He presumably is referring to the election of the first African-American president, an achievement. Is it true to say, though, that this alone proves that "the dream of our founders is still alive in our time?"
Many phrases and passages in the speech suggest an America in a kind of collapse. "It's been a long time coming." "The road ahead will be long. Our climb will be steep." He believes his campaign volunteers "proved that more than two centuries later, a government of the people by the people and for the people has not perished from this Earth. This is your victory."
A benign explanation would be that either Mr. Obama's friend Ted Sorensen or his talented young speech writer needs a tutorial in the perils of over-writing. This untethered rhetoric is Sorensian overkill.
Harder to account for is the persistence of Mr. Obama's grim vision of where we stand now. This was nowhere more evident than in the speech's passages with "Yes we can," which he now equates with the "American creed." "Yes we can" was appropriate as a campaign punch line. Here, however, it punctuated points in U.S. history that Mr. Obama clearly sees as analogous to our current status and challenge: the "despair in the dust bowl and depression across the land," the bombing of Pearl Harbor, the Montgomery bus boycott, and the day "a preacher from Atlanta" delivered his We Shall Overcome speech.
The overwhelming reason Barack Obama won this election is because voters, in their pedestrian way, want him to restart the stalled, damaged economy, which for all the "Depression" talk is nowhere near the 20% unemployment rates and low living standards then. The election came his way the night of Sunday Sept. 14, when the financial crisis exploded. Before that, he and Sen. McCain were in a virtual tie, and the Democratic nominee should have been well ahead of a candidate tied to the out-of-favor Republicans. Doubts among undecideds were holding down Mr. Obama's numbers. The markets' disintegration and loss of confidence in the nation's economic stewards gave him his win.
In what way is this a mandate for "change" similar to the vast economic restructurings of the dust-bowl years and social legislation of the mid-1960s? Yet again in the speech: "I will ask you join in the work of remaking this nation the only way it's been done in America for two-hundred and twenty-one years -- block by block, brick by brick, calloused hand by calloused hand."
This takes us well past George W. Bush and Dick Cheney. Remake this nation? Calloused hand by calloused hand?
Any nation is a work in progress, with problems worthy of public attention. None in the U.S. -- none -- tops the collapse of the urban public-school system. It is a little insulting, though, to imply that the America of people and institutions -- private enterprise and public officials -- who've worked the past 40 years to move the nation's living standards forward somehow don't measure up to "the founders' dream."
When in this context he asserts, "Our union can be perfected," one pauses. Efforts to achieve the abstraction of national perfectibility can prove a dicey proposition.
An alternative explanation for all this would be that Barack Obama is given to grandiosity such as the famous Greek columns in a Denver stadium. Among the Obama supporters who made his case to me the past year, I doubt many would say this level of grandiosity was what they had in mind amid constant assurance that he is a moderate, pragmatic man.
Mr. Obama's messianism may be setting him up for a fall. It might make sense between now and his Inaugural Address for the president-elect to lower his flight path. Among the images evoked by Greek columns is the myth of Icarus. The Founding Fathers' idea of "change" was in fact more modest than Mr. Obama's, a reality worth pondering lest he take his followers on a ride toward the sun.
Here's Obama's internationalist Jimmy Carter vision, centered on the energy economy:
from CNN.com, 2008-May-17:
Aired May 17, 2008 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[...]
BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: Is a huge opportunity but we've got have leadership from Washington, the same way we had leadership when Kennedy said we're going to the moon, we want to invest what we need to make it happen and there are all sorts of spin offs benefits from that. So that's what we want to do on global warming [There is no global warming. The world has been cooling for years, possibly since 1998. See here. -AMPP Ed.] here in the United States.
We are also, though, going have to negotiate with other countries. China, India, in particular Brazil. They are growing so fast that they are consuming more and more energy, and pretty soon, if their carpet [sic, really “carbon” -AMPP Ed] footprint even approaches ours [China's carbon emissions have exceeded the US's since the start of 2008. -AMPP Ed.], we're goners. That's part of the reason why we've got to make the investment; we've got to lead by example. If we lead by example -- if we lead by example, then we can actually export and license technology [So he expects to impose an energy tax (license fees) on rival economies in rival jurisdictions, for technologies that give producers no economic benefit. How? -AMPP Ed.] that have been invented here to help them deal with their growth pain. But keep in mind, you're right. We can't tell them, don't grow. We can't -- drive our SUVs and you know, eat as much as we want and keep our homes on you know, 72 degrees at all times, and whether we're living in the desert or we're living in the tundra, and then just expect that every other country's going say OK. [What is this? Is it that Americans are only permitted conduct that is endorsed by other, rival and hostile, countries? Or that Americans have to commit economic suicide first, to set an example for her rivals and enemies? Or that Americans are to abandon the trappings of civilization and surrender to hunger and the elements? Any of these are the sentiments of a fool or an enemy of America. -AMPP Ed.]
You guys [He's calling Americans “you guys” — he effortlessly takes a point of view as a critical outsider, a non-American. -AMPP Ed.] go ahead and keep on using 25 percent of the world's energy. Even though you only account for 3 percent of the population, and we'll be fine. [The US is responsible for 25% of the world's GDP. China, with greater carbon emissions than the US, is responsible for 6% of the world's GDP. Any questions? -AMPP Ed.] Don't worry about us. That's not -- that's not leadership. That's not going to happen. [Why? Because you, Mr. Obama, will see to it that the US economy is destroyed? Could that be it? -AMPP Ed.] And that's, by the way, why, for example, I had this big argument with Senator Clinton and McCain about the gas tax, holiday. Which was an example. That's how Washington works. It's not thinking long term. It's thinking, how do we get through the next election?
And, you know, John McCain, for him to come to Oregon as an environmental president, but his big strategy is to do more drilling and to have a gas tax holiday for three months, that's a phony solution. You know, you can't -- John McCain has consistently been opposed to fuel efficiency standards, raising fuel efficiency standards on cars. How is he going to meet any of these targets? Maybe he's imagining it the way he did imaging getting out of the war in Iraq. [Obama himself has since conceded that McCain's surge strategy has proved “successful” -AMPP Ed.] You know? We -- we need somebody with a plan. And who is willing to talk to the American people about these difficulties and how we're going to get through these challenges together. All right? OK. All right. OK. Over here.
[...]
from the Wall Street Journal's Political Diary, 2008-Nov-18, by John Fund:
Sandinista Makes Good
When reports surfaced that Gregory Craig was to be named White House counsel to the incoming Obama administration, most journalists focused on the fact that a former staunch ally of the Clinton family (he led President Clinton's impeachment defense) was joining Team Obama.
But Cuban-Americans and moderate Hispanics worry about the other legal clients Mr. Craig has collected over the years. "It looks like there will be a clear change in policy towards Castro's Cuba given that someone like Craig will be in the White House," Miguel Perez, a journalism professor and former New York Daily News columnist, told me.
Mr. Perez pointed out that in 2000, Mr. Craig served as the lawyer for Elian Gonzalez's father in his attempts to have his son returned to Cuba after the boy was found floating in the ocean near Miami after a failed escape attempt that had killed his mother. Conservative and moderate Latinos say Mr. Craig was effectively acting as an agent for the repressive Castro regime.
That's not their only beef with him. The Weekly Standard reports on other bizarre Craig clients south of our border: "He has represented foreign officials accused of war crimes such as former Bolivian Defense Minister Carlos Sanchez-Berzain and Pedro Miguel Gonzalez, the president of Panama's legislature, who is under federal indictment for the murder of U.S. Army Sgt. Zak Hernandez Laporte."
In 1984, as a Senate aide, Mr. Craig was the impresario for a hearing conducted by Ted Kennedy into alleged abuses committed by the Contra rebels fighting the Marxist Sandinista regime in Nicaragua. It was later found that the key witnesses -- three Miskito Indians -- were participating in the hearing at the behest of the Sandinistas. Another witness, an American priest working inside Nicaragua, was found to have been photographed by a U.S. newspaper with a Soviet-made rifle in his hands while offering up the following quote: "To me it was a day of grace the day the Sandinistas took over, and I really mean it."
John Miller, a reporter for National Review, reports that Mr. Craig has had a colorful cast of domestic clients over the years apart from his work for foreign leftists. He once represented John Hinckley, the disturbed man who shot President Reagan and three other people outside the Washington Hilton in 1981. Mr. Craig directly assisted in preparing the insanity defense that led to Hinckley's acquittal and commitment to a mental hospital. In the early 1990s, Mr. Craig also provided legal advice for William Kennedy Smith, Sen. Ted Kennedy's nephew, who was prosecuted for rape in a famous Palm Beach, Florida case.
Every lawyer is free to represent anyone he wishes, and every accused person deserves a legal defense. But even so, Mr. Craig's motley collection of clients indicates a clear ideological bent. One hopes he sticks to the traditional role of a White House counsel and doesn't become involved in U.S. foreign policy.
from National Review, 2000-May-22, reposted 2008-Nov-17, by John J. Miller:
The `Innocent'
Greg Craig, lawyer of the Left.Editor’s note: It has been reported that Gregory Craig will serve as Barack Obama’s White House counsel. This profile of Craig appeared in the May 22, 2000, issue of National Review.
‘Elian is in an atmosphere that is psychologically abusive. . . . He is in imminent danger to his physical as well as emotional and mental health,” declared Gregory Craig, the lawyer for Elian Gonzalez’s father, during a Nightline appearance on April 19. A little more than two days later, Elian really was in imminent danger: Federal agents smashed in the door of his house and stuck a gun in his six-year-old face.
Within hours of the event, a credulous Craig was telling reporters that Elian wasn’t “in any way terrorized, frightened, traumatized, or otherwise troubled” by the experience. What a remarkable transformation — from horrific abuse to utter serenity. In fact, said Craig, the wee lad was “a strong boy.” It seems that he could withstand a nighttime raid of his home, but not the affections of his cousin, Marisleysis. (Craig is apparently laying the legal groundwork for lawsuits against the Miami family.)
Elian even took part in a tender scene with federal agents, said Craig. In a post-seizure CNN interview, the lawyer described a “very warm moment” between the boy and Janet Reno’s big lugs: “I must say, there was a very touching moment in the room when the INS agents — the six- foot-two guys came in, 250 pounds came in. . . . And they were saying goodbye, and they [were] saying how proud they had been to be able to reunite this family. And that’s something. I mean, these are non-emotional, non-sentimental people.” (Unlike, of course, those hysterical Cuban Americans.)
Greg Craig is many things — a high-powered D.C. lawyer, a Clinton intimate who led the president’s impeachment defense, a silver-haired golden boy. But there’s one thing he wants people to know above all: He’s an innocent. In 1998, Craig slipped to the Washington Post a copy of a recommendation written for him as a part of his Harvard application. “This young man is Adam before the Fall,” remarked his Exeter history teacher. Craig, reported the Post, acknowledged the description “with a chuckle.” He commented about himself: “Still wide-eyed, still idealistic, still innocent.”
Wide-eyed, idealistic, and innocent. That’s roughly what GOP Senate staffers thought of Craig in the 1980s, when he was an aide to Ted Kennedy. And they didn’t mean it as a compliment. In fact, they thought he was a dupe.
Craig orchestrated a 1984 hearing for Kennedy on alleged human-rights abuses committed by Nicaragua’s rebels, the Contras. He worked with groups closely tied to the Sandinista regime to find witnesses for the forum, which led to a round of anti-contra news coverage in the U.S. Soon afterward, however, Joshua Muravchik, currently of the American Enterprise Institute, exposed a fraud: The most compelling witnesses — three Miskito Indians — had been served up by the Sandinistas.
And a fourth participant, Father Alfredo Gundrum, an American priest living in Nicaragua, had been asked to play the role of honest broker — to place the testimony “into some kind of perspective,” as Kennedy put it. Gundrum, described as “totally apolitical” in background material distributed by Kennedy’s staff, told of how the Contras launched vicious raids on Indian villages “almost every day.” Yet Gundrum had been the subject of a San Francisco newspaper article just one month before the hearing. He was photographed standing before his church with a Soviet-made rifle in his hands and quoted as saying, “To me it was a day of grace the day the Sandinistas took over, and I really mean it.”
After Muravchik’s report ran in The New Republic, Craig gave the author a call. “He was very embarrassed by the whole thing,” says Muravchik. “I was persuaded that he didn’t know this was a put-up job.”
And then came repentance, of a sort. Craig flew to Nicaragua on a bipartisan fact-finding mission that included an investigation into some of the claims made at the hearing he had staged. “He was shocked by some of what he saw-shallow graves and torture chambers run by the Sandinistas,” says Joel Lisker, a Republican Senate staffer on the trip. Craig wound up contributing to a report that acknowledged the Sandinistas’ “insensitive and inhumane” treatment of Nicaraguan Indians.
The 55-year-old Craig first made a name for himself as an antiwar protester at Harvard, where his statements frequently made their way into the press. Later, at Yale Law School, he got to know a woman named Hillary Rodham, and then her boyfriend, Bill Clinton. They weren’t close, but when Craig graduated he turned over his apartment to the future First Couple, who lived together before marrying. “If you had asked our classmates which of us would become president, most of them would have picked Greg before Clinton,” says Michael Medved, who was a pal of Craig’s at Yale.
Craig did have an early brush with the presidency, albeit a creepy one. In the early 1980s, he was an attorney for John Hinckley, the man who shot President Reagan and three others. Craig helped put together an insanity defense that led to Hinckley’s acquittal. Nine years later, he advised Ted Kennedy in the Palm Beach rape case involving the senator and his nephew, William Kennedy Smith.
But Craig’s real moment in the sun, before Elian, came in 1998, when Clinton tapped him to fend off impeachment. “It is shocking, and it’s terribly wrong what he did,” Craig said of Clinton. But the president certainly wasn’t a perjurer. After the Senate refused to boot Clinton, Craig won plenty of credit as savior.
He then returned to his old perch at Williams & Connolly, the well-heeled Washington law firm. When Cuba’s allies started casting around for a lawyer to represent Elian’s father, Democratic senator Patrick Leahy of Vermont urged Joan Brown Campbell, formerly of the National Council of Churches, to pick Craig. Leahy not only saw Craig in action at Clinton’s Senate trial, but also knew his father, who once ran for governor of Vermont.
The deal was done. An arm of the United Methodist Church says it’s about halfway to raising $100,000 for Craig’s fees. That’s probably money well spent, from the Left’s perspective. Accounts of pre-raid negotiations between Elian’s Miami relatives and the Justice Depart ment suggest that Reno wasn’t trying to bring peace to the warring Gonzalez family so much as taking orders straight from Craig. It appears that the Miami Gonzalezes had agreed to transfer custody of Elian to his father, as long as they could live with the boy and his father in an environment free of U.S. and Cuban officials. These negotiations dragged on through Good Friday and into the next morning, with Craig reviewing documents in his office past 2:00 A.M. — and ultimately vetoing the proposed settlement.
For weeks he’d been saying that the government should grab Elian from his relatives “immediately.” That night, Craig got his wish. He would later tell the New York Times, “We were, as far as I can tell, never close to an agreement.” That’s an odd claim following a sleepless night of negotiations. The Justice Department was on the phone to the Gonzalez house in Miami at the very moment its agents burst in.
Since then, Craig has been all smiles. But throughout his public life — Harvard antiwar protester, Hinckley defender, Sandinista collaborator, Palm Beach rape-trial adviser, anti-impeachment ringmaster, and now counsel to Fidel Castro — there’s one thing Craig has never been: innocent.
from the Wall Street Journal, 2008-Nov-20, by Laura Meckler and Jonathan Weisman:
Experience Reigns, Not 'Change'
Obama Draws Heavily on Clinton Era and Congress for Appointees; Daschle Gets HHSWASHINGTON -- President-elect Barack Obama campaigned on the slogan of "change." But his early appointees, including two top choices that emerged Wednesday, show that experience is one of his main criteria.
His choice for secretary of Health and Human Services, officials said, is former Senate Majority Leader Tom Daschle, who has a long Washington résumé. Jacob Lew, one of President Bill Clinton's budget directors, is favored to direct the National Economic Council.
The latest transition news highlighted the three personnel pools supplying Mr. Obama with his picks. Most prominent are Clinton administration veterans -- including, possibly, former first lady Hillary Clinton for secretary of state. Some high-profile appointments are also long-serving members and staff from Capitol Hill. Then there are the influential Chicagoans -- a group that seems smaller than the hometown crowd that usually accompanies a new president to Washington.
President-elect Barack Obama is looking to fill his administration with longtime Washington hands. Above, Rahm Emanuel, the chief of staff.
Linking them all is Chief of Staff Rahm Emanuel, who has played prominent roles in each group.
Each day brings news of more Clinton veterans at the helm, which is perhaps natural, given that many Democrats with the experience necessary for a top job worked in that administration at some point.
On Wednesday, the transition office announced that the working groups reviewing agency issues would include Carol Browner, Mr. Clinton's longtime Environmental Protection Agency administrator, and Dan Tarullo, a Clinton assistant secretary of state and deputy White House assistant for economic policy.
The two leaders of the national-security working group are James Steinberg, a Clinton deputy national security adviser, and Susan Rice, a Clinton assistant secretary of state. Ron Klain, a top aide to Vice President Al Gore, will be Vice President-elect Joe Biden's chief of staff.
In addition, the transition office officially announced Wednesday that Gregory B. Craig, Mr. Clinton's impeachment lawyer, would be White House counsel. The newly announced White House staff secretary, Lisa Brown, was Mr. Gore's counsel.
On top of that, Clinton veterans have been picked or are under consideration for at least three top cabinet posts. Transition officials say Eric Holder, deputy attorney general at the Justice Department under Mr. Clinton, will be named to the top Justice post. In addition to Mrs. Clinton at State, Lawrence Summers is under consideration for a second tour as Treasury secretary.
"Bringing change to Washington means more than what's on a résumé," said transition spokeswoman Stephanie Cutter. "It means putting the most qualified and experienced team in place to implement the policies that President-elect Obama has outlined that will change the country."
Other picks are coming from Capitol Hill, building a bridge to the lawmakers whom Mr. Obama will need to pass his agenda.
Mr. Daschle is the most prominent example. Atop HHS, he is expected to play an important role in moving Mr. Obama's ambitious health-care agenda through Congress. He was an early backer of Mr. Obama during the primaries, and served as a key adviser though the campaign.
As a veteran of Washington and of Capitol Hill, Mr. Daschle brings knowledge about how to move legislation through Congress. He has a particular interest in health care and is co-author of a book published this year, "Critical: What We Can Do About the Health-Care Crisis." The former South Dakota senator left the Senate after losing a race for a fourth term in 2004.
Mr. Daschle's chief of staff from his days as Senate majority leader, Pete Rouse, will also be in the White House as a senior counsel. Phil Schiliro, a longtime aide to Rep. Henry Waxman with deep respect in Congress, will lead outreach efforts to the Hill.
The Chicago circle bears little resemblance to the teams that Presidents George W. Bush brought in from Texas, Bill Clinton from Arkansas and Jimmy Carter from Georgia. Those presidents were former governors, and had large cadres of state-level aides to draw from. Mr. Obama, by contrast, has just a handful of key political advisers.
David Axelrod, a Chicago political consultant and the Obama campaign's message meister, will be a senior White House adviser, the transition officially announced Wednesday. Valerie Jarrett, a Chicago businesswoman and close friend of Mr. Obama and future first lady Michelle Obama, will be another senior adviser.
Grumbling over the lack of "change" is coming from the left and the right. Conservative blogger Michelle Malkin has posted mocking pictures of the Clintonites populating the Obama White House and transition team. Writer and filmmaker Lee Stranahan, writing on the liberal Huffington Post, was moved Wednesday to defend Mr. Obama for his peace overtures to the Clintons. "Some of my fellow progressives," he wrote, "may find it ironic that Hillary Clinton -- who wrote most of the script for the McCain attacks on Barack Obama -- might end up as secretary of State if she decides to."
from the New York Times, 2008-Nov-8, by Eric Lichtblau:
The New Team
Jamie S. GorelickAs he prepares to take office, President-elect Barack Obama is relying on a small team of advisers who will lead his transition operation and help choose the members of a new Obama administration. Following is part of a series of profiles of potential members of the administration.
Name: Jamie S. Gorelick
Being considered for: Attorney general
Would bring to the job: A wide-ranging Washington résumé that spans corporate, legal and national security affairs. Ms. Gorelick (pronounced Guh-REH-lick) was the No. 2 official at the Justice Department in the Clinton administration, from 1994 to 1997, and if chosen would be the second woman to be named attorney general, following her former boss, Janet Reno. Ms. Gorelick would also bring corporate experience to an Obama administration at a time of financial crisis.
Is linked to Mr. Obama by: Deep contacts in Democratic circles and a background in civil rights. But Ms. Gorelick backed Senator Hillary Rodham Clinton in the Democratic primaries and contributed early on to her campaign, which could work against her as a contender. She contributed $10,000 to Mr. Obama’s presidential political action committee in August, after his nomination was all but assured.
In her own words: “You know someone respected you if they called you ‘sir,’ ” Ms. Gorelick said, alluding to the glass ceiling at the Pentagon, where she worked as general counsel in the 1990s. “ ‘Ma’am’ is what you call your mom.”
Used to work as: Vice chairwoman at Fannie Mae, the giant mortgage lender, where she was paid a reported $25.6 million in salary and other compensation from 1998 to 2003. She went on to join the Washington law firm Wilmer, Cutler, Pickering, Hale & Dorr as a partner, where she has represented a range of clients, including Duke University in defending claims brought against it by some of its lacrosse players in a highly publicized rape investigation. She was a Democratic appointee on the 10-member commission that investigated the Sept. 11 attacks.
Carries as baggage: Her work at Fannie Mae, which had to be bailed out by the government in September as part of a $200 billion deal. Ms. Gorelick left the company just as it was coming under attack for huge accounting failures. She has also drawn criticism for her role at the Justice Department, in which she allegedly created an intelligence “wall” that hindered counterterrorism agents in the years before the Sept. 11 attacks. Conservatives called for her removal from the Sept. 11 commission, but her fellow members rallied around her and said critics were distorting her record. The criticism grew so heated that the F.B.I. investigated a death threat against her family, and President Bush had to intervene personally to stop the Justice Department from releasing sealed reports involving her. Some conservative bloggers have already begun trying to derail Ms. Gorelick’s possible nomination as attorney general, pointing to her experiences at both Fannie Mae and the Sept. 11 commission.
Résumé includes: Born May 6, 1950, in New York City and raised on Long Island in Great Neck. Graduated from Harvard and Harvard Law School. Active in the bar association in Washington, D.C., and on women’s legal issues. Named by Legal Times as one of the “greatest Washington lawyers” of the last 30 years. Married with two children.
from Bloomberg, 2008-Nov-10, by Catherine Dodge and Kristin Jensen:
Obama, Candidate of Change, Looks to Old Hands From Clinton Era
Barack Obama, elected president as an agent of change, is building his new team with old hands from the Clinton administration.
His first appointment, chief of staff, went to Rahm Emanuel, an Illinois representative and veteran of the last Democratic White House. Leading Obama's transition team is John Podesta, who was President Bill Clinton's chief of staff.
Obama's most dramatic step would be to name New York Senator Hillary Clinton, his defeated rival for the Democratic presidential nomination, as secretary of state. Two Obama advisers confirm the idea has been discussed, though they say they don't know how seriously the president-elect is considering it or whether Clinton would accept it.
Faced from day one with an economic crisis and two wars, Obama's campaign theme of changing the way Washington works is about to be overtaken by getting to work in Washington. For that, experience helps.
``Once you become president-elect, the rubber hits the road, and you're going to want to put people in positions of power who have a proven track record,'' says Chris Lehane, who was a special assistant counsel to Clinton.
The presence of Clinton-era advisers has drawn fire on blogs: from liberals who viewed the Clinton administration as too centrist and conservatives for whom the former president remains a favorite target.
The other risk for Obama is that his administration ``can quickly look like the Clinton administration, now defined, by his campaign, as the status quo,'' says Julian Zelizer, a history and public-affairs professor at Princeton University in New Jersey.
New and Old
From his transition team to his economic advisers, Obama, 47, has surrounded himself with both loyalists new to government and a group of familiar Democratic Party figures who formed something of an administration in exile during Republican President George W. Bush's administration. Some of those who have advised Obama reach back to Jimmy Carter's administration, such as Paul Volcker, 81, the former Federal Reserve chairman.
The pattern is familiar, even for presidents who ran for office as outsiders.
Bush, who came to office with little Washington experience, relied on many advisers from past Republican administrations, including former Secretary of State Colin Powell and former Defense Secretary Donald Rumsfeld. His first chief of staff, Andrew Card, was transportation secretary in the administration of his father, former President George H.W. Bush.
Campaign slogans aside, when it comes to the reality of governing and finding the best people to carry out a vision, Obama needs people with Washington experience if he wants to succeed, say political analysts and historians.
Experienced Hands
``Change from President Bush was an important theme in the election,'' says Karlyn Bowman, a senior fellow at the American Enterprise Institute in Washington. ``Americans will want to see some new faces in the Cabinet, but they also know that you need experienced hands to run the ship in Washington.''
Republicans, looking ahead to potential battles after Obama takes office on Jan. 20, were quick to highlight his appointment of Emanuel, who is known for his sharp partisanship in the Clinton administration and as the No. 4 ranking Democrat in the House of Representatives.
House Republican leader John Boehner called Emanuel, 48, ``an ironic choice for a president-elect who has promised to change Washington.''
But Fred Greenstein, a presidential historian at Princeton, says voters largely aren't interested in such inside-the-Beltway maneuvering.
``Obama may get insider criticism for using retreads,'' but he ``is drawing on people who served well in the Clinton presidency.''
Reaching Out
Obama spent time during the campaign reaching out to Clinton's economic advisers, including former Treasury Secretaries Robert Rubin and Lawrence Summers. Summers, 53, is often mentioned as a possibility to resume his post at the Treasury Department under Obama. Rubin, 70, has told Obama he isn't interested in returning to government service but would consider taking on special projects.
``The real issues on this score will crop up after Jan. 20,'' says Rogan Kersh, a public-service professor at New York University. ``Will there be a Clinton-loyalists versus Obama- faithful dynamic in the White House? That could be a hindrance to the swift, smooth start the new administration dearly needs.''
Advisory Board An advisory board that will help with transition planning includes former Clinton administration officials Carol Browner, who was the former president's Environmental Protection Agency administrator; William Daley, who served as his commerce secretary; and Federico Pena, former transportation secretary.
Other Clinton officials who have been reported to be candidates for possible posts in an Obama White House include Richard Holbrooke, former United Nations ambassador, as secretary of state and Eric Holder, who was part of Obama's vice-presidential selection committee and deputy attorney general for Clinton, as attorney general.
``What you're going to see with Obama is a mixture of wise men and young Turks,'' says Democratic consultant Peter Fenn.
While Obama may endure criticism for calling on some ``usual suspects,'' he'd be in more trouble if his picks proved unqualified, Fenn says.
``You don't want the head of the Arabian Horse Association as your FEMA director,'' says Fenn, referring to Michael Brown, Bush's choice to run the Federal Emergency Management Agency, who was ousted after the botched government response to Hurricane Katrina.
Still Beloved
Clinton, 62, is still beloved by many in the Democratic Party, and his support and approval of Obama's policies might well boost the new president's efforts. When Clinton made his first campaign appearance for Obama in Orlando, Florida, on Oct. 1, he veered from prepared remarks to offer special praise for the way Obama was handling the financial crisis.
``He got his advisers on the phone, then he called all of mine, then he called some more,'' Clinton said. ``And you know what he said? Tell me what the problem is and how to fix it and don't bother me with the politics. Let's do the right thing, and we'll sell it to America.''
Presidential historian Robert Dallek, a biographer of John F. Kennedy and Lyndon Johnson, says Clinton veterans can be agents of change.
``They will be under Obama's command,'' he says. ``It's not as if they are going to say we've got to go back to what Bill Clinton was thinking 10 years ago.''
from the Herald Tribune of Sarasota, 2008-Oct-27, by Billy Cox:
GOP's last hope -- Podesta?
With John McCain's campaign losing altitude and clipping the treetops in battleground states, there's still a last-gasp card he can play to try to convince voters that Barack Obama has surrounded himself with space cadets — John Podesta.
Podesta, the Clinton White House chief of staff who went on to establish the Center for American Progress think tank in Washington, is now the director of the Obama transition team. This matters because Podesta — who celebrated his 50th birthday with an “X-Files” party — held press conferences in 2002 and 2003 calling for the federal declassification of UFO data (at http://www.youtube.com/watch?v=R2Sz-MgoFos).
And, as he later told the Las Vegas Journal, "I think it's time to open the books on questions that have remained in the dark on the question of government investigations of UFOs."
Although Podesta has yet to return De Void's phone calls for clarification, he clearly remains engaged by this issue. Last year, after journalist Leslie Kean won a U.S. District Court victory to force NASA to review and declassify documents relating to the so-called Kecksburg Incident in 1965, Podesta applauded the ruling:
“The time to pull the curtain back on this incident is long overdue. Leslie Kean's victory is a triumph for opent government and the spirit of inquiry.”
McCain's staffers can nose around for more UFO slag on Podesta at http://www.presidentialufo.com/john_podesta.htm. That's where they can glean insights from the likes of former Clinton press secretary Mike McCurry, who told The Washington Post: "John can get totally maniacal and phobic on certain subjects. He's been known to pick up the phone and call the Air Force and ask them what's going on in Area 51."
If the McCain-Palin team can accuse Obama of “palling around with terrorists,” then charging the Illinois senator with “putting a UFO conspiracy nut in the White House” seems a logical extension. Nevermind that McCain also harbors an interest in UFOs (http://video.google.com/videoplay?docid=-4686586251683588658); what voters don't know won't hurt `em.
With a week to go before the election, McCain has nothing to lose. When your back's up against the wall, you toss whatever you can get your hands on at it. You never know what'll stick.
from the New York Daily News, 2008-Nov-9, by Kenneth R. Bazinet:
Obama says he'll tax the rich, roll back Bush cuts and aid middle class
CHICAGO - For the rich, the party is over - as promised.
Despite speculation to the contrary, President-elect Barack Obama will act on his campaign promise and roll back the Bush administration's tax cuts for the wealthiest Americans, an Obama senior adviser told The Daily News.
The Obama camp rejected the overnight analysis by some pundits who speculated the language at his first news conference Friday suggested the President-elect was backing away from his tax plans.
"No change to the tax plan - at all," the aide said.
Obama plans to raise taxes on the wealthy by asking the Democratic-controlled Congress to allow President Bush's tax cuts to expire at the end of 2010. When they expire, it could pump in about $72 billion a year toward balancing the budget, according to the Urban-Brookings Tax Policy Center. [In fairytale land -- in reality, it will pulverize the economy and reduce federal tax revenues by hundreds of billions of dollars relative to revenue at status quo rates. -AMPP Ed.]
The President-elect also will move quickly with his promised middle-class tax cut [These are payments to the 40% of filers with zero income tax liability, rationalized as refunds of payroll taxes, but this transforms Social Security into a prima facie redistributive dole. -AMPP Ed.], even before the taxes on the rich expire, top Obama and congressional aides confirmed Saturday.
"In the campaign, Barack Obama proposed tax cuts for middle-class families as part of an overall plan that is a pro-growth, pro-jobs net tax cut," Obama senior adviser Stephanie Cutter told The News. "His views on how to get the economy growing have not changed."
And House Speaker Nancy Pelosi (D-Calif.) plans to get the permanent middle-class tax cuts passed and in Obama's hands in early 2009, Pelosi spokesman Brendan Daly confirmed.
Obama promised yesterday in a weekly radio address "to hit the ground running" to tackle the nation's economic woes. In the interim, he is urging President Bush to extend unemployment benefits, increase food stamps and approve a construction jobs bill to stimulate the economy.
Meanwhile, Obama Saturday spoke to Russian President Dmitry Medvedev and to Polish President Lech Kaczynski.
A Kremlin statement said the two leaders believe an "early bilateral meeting" should be arranged.
A Bush administration plan for setting up a missile shield in Poland has been a sore point with the Kremlin and has served as another dent in Russia's battered relationship with the U.S.
Obama foreign policy adviser Denis McDonough said yesterday that Obama had "a good conversation" with Kaczynski about the American-Polish alliance but that Obama had made no commitment on the missile shield plan.
"His position is as it was throughout the campaign: that he supports deploying a missile defense system when the technology is proved to be workable," McDonough said.
from the Associated Press, 2008-Nov-9, by Stephen Ohlemacher:
Obama to use executive orders for immediate impact
Washingtona — President-elect Obama plans to use his executive powers to make an immediate impact when he takes office, perhaps reversing Bush administration policies on stem cell research and domestic drilling for oil and natural gas.
John Podesta, Obama's transition chief, said Sunday Obama is reviewing President Bush's executive orders on those issues and others as he works to undo policies enacted during eight years of Republican rule. He said the president can use such orders to move quickly on his own.
"There's a lot that the president can do using his executive authority without waiting for congressional action, and I think we'll see the president do that," Podesta said. "I think that he feels like he has a real mandate for change. We need to get off the course that the Bush administration has set."
Podesta also said Obama is working to build a diverse Cabinet. That includes reaching out to Republicans and independents — part of the broad coalition that supported Obama during the race against Republican John McCain. Defense Secretary Robert Gates has been mentioned as a possible holdover.
"He's not even a Republican," Senate Majority Leader Harry Reid of Nevada said. "Why wouldn't we want to keep him? He's never been a registered Republican."
Obama was elected on a promise of change, but the nature of the job makes it difficult for presidents to do much that has an immediate impact on the lives of average people. Congress plans to take up a second economic aid plan before year's end — an effort Obama supports. But it could be months or longer before taxpayers see the effect.
Obama could use his executive powers to at least signal that Washington is changing.
"Obama's advantage of course is he'll have the House and the Senate working with him, and that makes it easier," said Carl Tobias, a law professor at the University of Richmond. "But even then, having an immediate impact is very difficult to do because the machinery of government doesn't move that quickly."
Presidents long have used executive orders to impose policy and set priorities. One of Bush's first acts was to reinstate full abortion restrictions on U.S. overseas aid. The restrictions were first ordered by President Reagan and the first President Bush followed suit. President Clinton lifted them soon after he occupied the Oval Office and it wouldn't be surprising if Obama did the same.
Executive orders "have the power of law and they can cover just about anything," Tobias said in a telephone interview.
Bush used his executive power to limit federal spending on embryonic stem cell research, a position championed by opponents of abortion rights who argue that destroying embryos is akin to killing a fetus. Obama has supported the research in an effort to find cures for diseases such as Alzheimer's. Many moderate Republicans also support the research, giving it the stamp of bipartisanship.
On drilling, the federal Bureau of Land Management is opening about 360,000 acres of public land in Utah to oil and gas drilling. Bush administration officials argue that the drilling will not harm sensitive areas; environmentalists oppose it.
"They want to have oil and gas drilling in some of the most sensitive, fragile lands in Utah," Podesta said. "I think that's a mistake."
Two top House Republicans said there is a willingness to try to work with Obama to get things done. But they said to expect Republicans to serve as a check against the power held by Obama and Democratic leaders in Congress.
"It's going to be a cheerful opposition," said Rep. Mike Pence, R-Ind. "We're going to carry those timeless principles of limited government, a strong defense, traditional values, to the American people."
Pence, of Indiana, is expected to take over the No. 3 leadership post among House Republicans.
In other transition matters, Obama's new chief of staff, Rahm Emanuel, would not say whether Obama would return to the Senate for votes during the postelection session this month. Obama's presence would be extraordinary, given his position as president-elect, especially if Congress takes up a much-anticipated economic stimulus plan.
"I think that the basic approach has been he's going to be here in Chicago, setting up his economic, not only his economic team, but the policies he wants to outline for the country as soon as he gets sworn in, so we hit the ground running," Emanuel said.
Also, Emanuel would not commit to a Democratic proposal to help the auto industry with some of the $700 billion approved by Congress to for the financial bailout.
Reid and House Speaker Nancy Pelosi, D-Calif., said in a letter Saturday to Treasury Secretary Henry Paulson that the administration should consider expanding the bailout to include car companies.
Podesta appeared on "Fox News Sunday," as did Pence, and CNN's "Late Edition," where Reid also was interviewed. Emanuel spoke on ABC's "This Week" and CBS' "Face the Nation."
from the Chicago Tribune, 2008-Jan-20, by Rahm Emanuel:
A New Deal for a New Economy
These days, middle-class families across America are understandably concerned about the new economy and the prospect that globalization will send their jobs overseas or change their way of life. As they confront these new challenges we need a plan – a New Deal for the New Economy – that will address working Americans' concerns and prepare them for the future.
Crafting this plan starts with asking a simple question: If globalization has done such great things for the American economy, why are Americans so sour about something that is so successful? By most measures, globalization has ushered in an era of tremendous economic growth. The size of the U.S. economy has doubled in the past 20 years, and we have seen unprecedented economic integration around the world. But Americans overwhelmingly oppose globalization.
The question is not difficult to answer. Globalization comes with growing pains, families are feeling squeezed in the new economy and belief in the promise and potential of trade and global competition has become a thing of the past. In the minds of most Americans, globalization has more costs than opportunities. [I.e., Emanuel alleges that people believe either that America cannot compete in the global marketplace, which is preposterous, or that they believe that to compete in the global marketplace, real wages and quality of life will fall, as the market addresses the disparities between American labor cost-production ratio and that of developing economies. With enough socialism, enough of a New Deal, America can indeed be made uncompetitive. As for the disparities between American and developing economy wages, there is also a disparity in productivity, quality, and innovation, in America's favor. -AMPP Ed.]
However, changes in the global economy are irreversible. The forces of globalization cannot be halted entirely, nor should they be. But we cannot and should not ignore Americans' deeply held concerns about the economy.
That is why I believe we need a New Deal for the New Economy – a plan that helps address Americans' economic anxieties and, more important, prepares workers for the future and helps them compete and win in the new economy. Such a plan should address four issues that fundamentally impact the American family's standard of living: health care, energy, savings and education.
Currently, 47 million Americans are without health insurance. [This number includes illegal immigrants. -AMPP Ed.] For Americans lucky enough [It's not luck, it's earned and chosen. -AMPP Ed.] to have health insurance, costs are skyrocketing [due to spectacular inefficiencies induced by heavy-handed regulation, by an unhinged tort legal system, and by a disconnect between paying party and consumer -AMPP Ed.]. Businesses that do the right thing and provide health insurance to their employees [this is not the right thing -- this is the principal disconnect between paying party and consumer -AMPP Ed.] are finding it difficult to afford its ever-increasing cost.
Washington needs to take action. [Washington needs to stop. -AMPP Ed.] Our ultimate goal should be a plan that provides universal health care. [This retains and exacerbates the inefficiencies of heavy-handed regulation and the disconnect between paying party and consumer, and replaces the burden of an unhinged tort legal system with the leaden hand of monopoly, the unaccountability of sovereign immunity, and the inevitability of shortages, rationing, deteriorating quality, and cessation of innovation. -AMPP Ed.] If that's not possible, we should begin with universal coverage for children and early retirees. Expanding health care to more children through the State Children's Health Insurance program and allowing early retirees to buy into Medicare would give millions of children and retirees the affordable care they need at little to no additional cost to taxpayers. [And for my next trick, I'll make the Statue of Liberty disappear!... -AMPP Ed.]
Second, we must address our nation's energy needs. With gas and fuel prices rising, the typical family is paying $2,000 more for energy this year than in 2000. Congress has already taken action to address this problem by passing the first increase in fuel economy standards in 32 years [Such measures have virtually no salutary effect on household budgets. For example, the price of a Toyota Prius (base, before options, fees, and taxes) will buy gasoline at $4/gallon that will drive a 1988 Chevy Nova 137,500 miles. Or a Prius with no gas, shipped around the world, built in an energy intensive process from components and materials that were also shipped over great distances. -AMPP Ed.], but we can do more.
Our government must invest in new technologies and alternative energy sources that will make our nation more energy efficient and save money for consumers and businesses [Businesses save lots of money when they go out of business, as many are sure to when carbon caps make them non-competitive with developing world rivals, destroying their business models. This in turn will save consumers the trouble of figuring out how to spend or invest their paychecks, as they will have lost their jobs. -AMPP Ed.]. New investments in energy technologies could also create new industries that will create new jobs and contribute to or even redefine the way we do business [Even with massive subsidies and mandates, VeraSun and other ethanol producers went bankrupt in 2008. -AMPP Ed.]. I believe that new energy technologies, the use of new sources of energy and improved conservation efforts have similar economic potential to do what the Internet and the computer did for our economy over the last 20 years. [This is all code for the effective prohibition (“bankrupting”, to use Obama's term) of old sources of energy, particularly coal, the only energy source for which the US is self-sufficient, holding 27% of world reserves, a higher proportion than any other country. -AMPP Ed.]
The third plank of the New Deal is savings. In the past two years, America's personal savings rate reached its lowest level since the Great Depression, and fewer Americans can look forward to receiving a guaranteed pension when they retire.
I think we can increase savings and improve retirement security by creating Universal Savings Accounts. Like 401(k) plans, the account would supplement, not supplant, Social Security. Employers and employees would contribute 1 percent of paychecks [this is just another imposed income tax by which the government will fund payments to present day constituents -- today's young workers will never see the upside. -AMPP Ed.] on a tax-deductible basis and workers could make additional contributions if they chose to do so. These accounts would encourage savings, give workers more control over their economic future [“1+1=3” -AMPP Ed.] and provide more peace of mind when it comes to their own retirement.
Finally, the New Deal for the New Economy would not be complete if we fail to give the next generation of workers the training and education they need to compete. In an era in which you earn what you learn, America has failed to open the doors of colleges and universities to more students. Instead, the cost of a college education has skyrocketed. [The K12 public education system, a government operated entitlement program, is now so dysfunctional that many graduates are functionally illiterate. The solution to this is not to burden universities with remedial education to engender functional literacy in the regular people who prefer and will go on to follow non-intellectual careers, it is to repair the K12 education system, with competition (vouchers) and accountability (uniform periodic achievement testing). -AMPP Ed.]
To succeed, we must reverse this trend and fundamentally alter public education in our nation. Job No. 1 is making college more affordable. In 2007, Congress passed the College Cost Reduction and Access Act, which included the largest expansion of student aid since the GI Bill of Rights. [Increasing the supply of money available to pay for education increases the cost of education, according to the law of supply and demand. -AMPP Ed.]
Additionally, with new jobs demanding more specialized skills, we should not allow any American's education to stop with high school.
Instead, one year of post-high school training – be it in community college, technical school or a university – should be required [emphasis mine -AMPP Ed.], affordable and available to everyone.
I'm no cockeyed optimist; I know that achieving all of these goals will not come easily. Furthermore, I know we must address the current economic downturn and give families the relief they deserve. But that shouldn't stop us from taking a hard look at globalization and concentrate on building an economy that works for every American and makes us all stronger.
Rahm Emanuel represents the 5th Congressional District in Illinois and ischairman of the Democratic Caucus.
[Mr. Emanuel is now (2008-Nov-7) President Elect Obama's designee for White House Chief of Staff. -AMPP Ed.]
from the Business & Media Institute, 2008-Oct-28, by Paul Detrick:
UCLA Economists: Government Intervention Prolonged Great Depression
2004 study found FDR's 'misguided policies' delayed recovery.Those who ignore history are doomed to repeat it.
In 2004, economists at the University of California, Los Angeles (UCLA), studied the policies of President Franklin Roosevelt’s New Deal and determined his policies prolonged the Depression by seven years.
Harold L. Cole and Lee E. Ohanian blamed anti-free market measures for the slow recovery in an article published in the August 2004 issue of the Journal of Political Economy.
Cole and Ohanian asserted that Roosevelt thought excessive business competition led to low prices and wages, adding to the severity of the Depression.
“[Roosevelt] came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies," Cole said in a press release dated Aug. 10, 2004.
The professors paid particular attention to the National Industrial Recovery Act (NIRA) and the effect it had on competition. Passed in June 1933, the NIRA required companies to write industry-wide fair competition codes that fixed prices and wages, established production quotas, and imposed restrictions on companies if they wanted to enter into alliances, according to OurDocuments.gov.
The Supreme Court declared the NIRA unconstitutional two years after it was passed, but Cole and Ohanian said that the act caused enough damage during those two years leading to even more regulation.
Roosevelt pushed on after the NIRA was declared unconstitutional with the 1935 National Relations Act (NRA), which sought to regulate private sector labor and management practices, according to the National Labor Relations Board.
The NRA swelled the strength of Labor unions in 1936 and 1937 and as a result Cole and Ohanian estimated that there were 14 million strike days in 1936 and 28 million in 1937.
But the negative influence of FDR’s policies on the economic crisis of his day has been virtually ignored by the news media – despite hundreds of comparisons to the Great Depression in 2008.
A recent Business & Media Institute report, “The Great Media Depression,” revealed the media compared current economic conditions to the Great Depression more than 70 times in the first six months of 2008. An additional tally found at least 157 more comparisons since July 1, 2008.
from the Wall Street Journal, 2008-Nov-4, by Andrew B. Wilson:
Five Myths About the Great Depression
Herbert Hoover was no proponent of laissez-faire.The current financial crisis has revived powerful misconceptions about the Great Depression. Those who misinterpret the past are all too likely to repeat the exact same mistakes that made the Great Depression so deep and devastating.
Here are five interrelated and durable myths about the 1929-39 Depression:
- Herbert Hoover, elected president in 1928, was a doctrinaire, laissez-faire, look-the-other way Republican who clung to the idea that markets were basically self-correcting. The truth is more illuminating. Far from a free-market idealist, Hoover was an ardent believer in government intervention to support incomes and employment. This is critical to understanding the origins of the Great Depression. Franklin Roosevelt didn't reverse course upon moving into the White House in 1933; he went further down the path that Hoover had blazed over the previous four years. That was the path to disaster.
Hoover, a one-time business whiz and a would-be all-purpose social problem-solver in the Lee Iacocca mold, was a bowling ball looking for pins to scatter. He was a government activist fixated on the idea of running the country as an energetic CEO might run a giant corporation. It was Hoover, not Roosevelt, who initiated the practice of piling up big deficits to support huge public-works projects. After declining or holding steady through most of the 1920s, federal spending soared between 1929 and 1932 -- increasing by more than 50%, the biggest increase in federal spending ever recorded during peacetime.
Public projects undertaken by Hoover included the San Francisco Bay Bridge, the Los Angeles Aqueduct, and Hoover Dam. The Republican president won plaudits from the American Federation of Labor for his industrial policy, which included jawboning business leaders to refrain from cutting wages as the economy fell. Referring to counteracting the business cycle and propping up wages, Hoover said: "No president before has ever believed that there was a government responsibility in such cases . . . we had to pioneer a new field." Though he did not coin the phrase, Hoover championed many of the basic ideas -- such as central planning and control of the economy -- that came to be known as the New Deal.
- The stock market crash in October 1929 precipitated the Great Depression. What the crash mainly precipitated was a raft of wrongheaded policies that did major damage to the economy -- beginning with the disastrous retreat into protectionism marked by the passage of the Smoot-Hawley tariff, which passed the House in May 1929 and the Senate in March 1930, and was signed into law by Hoover in June 1930. As prices fell, Smoot-Hawley doubled the effective tariff duties on a wide range of manufactures and agricultural products. It triggered the beggar-thy-neighbor policies of countervailing tariffs that caused the international economy to collapse. Some have argued that the increasing likelihood that the Smoot-Hawley tariff would pass was a major contributing factor to the stock-market collapse in the fall of 1929.
- Where the market had failed, the government stepped in to protect ordinary people. Hoover's disastrous agricultural policies involved the know-it-all Hoover acting as his own agriculture secretary and in fact writing the original Agricultural Marketing Act that evolved into Smoot-Hawley. While exports accounted for 7% of U.S. GDP in 1929, trade accounted for about one-third of U.S. farm income. The loss of export markets caused by Smoot-Hawley devastated the agricultural sector. Following in Hoover's footsteps, FDR concentrated on trying to raise farm income by such tactics as setting quotas on production and paying farmers to remove acreage from production -- even though this meant higher prices for hard-pressed consumers and had the effect of both lowering productivity and driving farmers off their land.
- Greed caused the stock market to overshoot and then crash. The real culprit here -- as in the housing bubble in our own time -- is the one identified by the economic historian Charles Kindleberger in the classic book "Manias, Panics, and Crashes": a speculative fever induced by excessively easy credit and broken by the inevitable return to more realistic valuations.
In the late 1920s, cheap and easy money fueled a tremendous increase in margin trading and a proliferation of "investment trusts" that offered little in the way of dividends or demonstrable earnings per share, but still promised phenomenal capital gains. "Speculation," as Kindleberger neatly defined it, "involves buying for resale rather than use in the case of commodities, and for resale rather than income in the case of financial assets."
The last thing Hoover wanted to do upon coming to office was to rein in the stock market boom by allowing interest rates to rise to a more normal level. The key to prosperity, in his view, lay not in sound money and rising productivity, but in letting the good times roll -- through government action aimed at maintaining high wages and high stock market valuations.
- Enlightened government pulled the nation out of the worst downturn in its history and came to the rescue of capitalism through rigorous regulation and government oversight. To the contrary, the Hoover and Roosevelt administrations -- in disregarding market signals at every turn -- were jointly responsible for turning a panic into the worst depression of modern times. As late as 1938, after almost a decade of governmental "pump priming," almost one out of five workers remained unemployed. What the government gave with one hand, through increased spending, it took away with the other, through increased taxation. But that was not an even trade-off. As the root cause of a great deal of mismanagement and inefficiency, government was responsible for a lost decade of economic growth.
Hoover was destined to fill the role of the left's designated scapegoat. Despite that, the one place where he and FDR truly "triumphed" was in enlisting the support of leading writers and intellectuals for government planning and intervention. This had a lasting effect on the way that generations of people think about the Great Depression. The antienterprise spirit among thought leaders of this time (and later) extended to top business publications. "Do you still believe in Lazy-Fairies?" Business Week asked derisively in 1931. "To plan or not to plan is no longer the question. The real question is who is to do it?"
In his economic policies and his incessant governmental activism, Hoover differed far more sharply with his Republican predecessor than he did with his Democratic successor. Calvin Coolidge, president from 1923 to 1929, made no secret of his disdain for Hoover, who served as his secretary of commerce and won praise from such highly regarded liberals as John Maynard Keynes and Jean Monnet. "That man has offered me unsolicited advice for six years, all of it bad," Coolidge said. He mockingly referred to Hoover as "Wonder Boy."
With the vitality of U.S. and world economies at stake, it is essential that the decisions of the coming months are shaped by the right lessons -- not the myths -- of the Great Depression.
Mr. Wilson, a former Business Week bureau chief, is a writer based in St. Louis.
from RealClearPolitics.com, 2008-Oct-29, by Michael Barone:
Obama's New Deal No Better Than Old One
With victory in sight, Barack Obama's supporters are predicting that he will give us a new New Deal. To see what that might mean, let's look back on the original New Deal.
The purpose of New Deal legislation was not, as commonly thought, to restore economic growth but rather to freeze the economy in place at a time when it seemed locked in a downward spiral. Its central program, the National Recovery Administration (NRA), created 700 industry councils for firms and unions to set minimum prices and wages. The Agricultural Adjustment Act (AAA), the ancestor of our farm bills, limited production to hold up prices. Unionization, encouraged by NRA and the 1935 Wagner Act, was meant to keep workers in jobs that the unemployed would have taken at lower pay.
These policies did break the downward spiral. But, as Amity Shlaes points out in "The Forgotten Man," they failed to restore growth.
Double-digit unemployment continued throughout the 1930s; despite population growth, the economy failed to rebound to 1920s production levels. High taxes on high earners (a Herbert Hoover as well as Franklin Roosevelt policy) financed welfare payments ("spread the wealth around") but reduced investment and growth.
The political verdict was negative. New Dealers were whalloped in the 1938 off-year elections. Polls show that Democrats would have lost the White House in 1940 if that election had been decided on domestic issues. But war loomed. France fell in June 1940, just before America's two national party conventions, and Adolf Hitler and his then-ally Joseph Stalin controlled most of the landmass of Eurasia. Republicans did not have an experienced leader in this world crisis -- Democrats did: Franklin Roosevelt, who cynically engineered his nomination for a third term and then swept to victory on foreign policy.
Roosevelt had thought that economic expansion was a thing of the past. But World War II stimulated huge growth in the American economy. New Deal welfare programs like the Civilian Conservation Corps and the Works Progress Administration (WPA) arts program were terminated. Wartime domestic policies were growth stimulators. Veterans Administration home mortgage loans, building on the FHA mortgage program, encouraged home-buying and after the war converted a nation of renters to a nation of homeowners. The G.I. Bill of Rights subsidized higher education for millions of veterans.
These programs stimulated growth partly because they required real effort -- down payments, military service -- from beneficiaries before they received aid.
The postwar Republican Congress elected in 1946 dismantled some New Deal anti-growth policies. Labor unions' powers to strike were sharply restricted. Tax rates were lowered, and wage and price controls were dismantled. Many hold-the-economy-in-place policies were retained until the deregulation of the 1970s and 1980s. But the New Deal was transformed sufficiently to permit buoyant economic growth for two decades after the war.
Obama seems determined to follow policies better suited to freezing the economy in place than to promoting economic growth. Higher taxes on high earners, for one. He told Charlie Gibson he would raise capital gains taxes even if that reduced revenue: less wealth to spread around, but at least the rich wouldn't have it -- reminiscent of the Puritan sumptuary laws that prohibited the wearing of silk. Moves toward protectionism like Hoover's (Roosevelt had the good sense to promote free trade). National health insurance that threatens to lead to rationing and to stifle innovation. Promoting unionization by abolishing secret ballot union elections.
The impulse to social engineering is unmistakable. Government officials will allocate resources, redistribute income, and ration good and services. Use government stakes in banks, insurance companies and Detroit auto manufacturers to maintain the position of those already in place, at the cost of preventing the emergence of new enterprises that might have been spawned by the capital being allocated.
Social engineering of course is far easier when you are dealing with an economy that is frozen in place. It's harder when you have to deal with the creative destruction, the emergence of new firms and businesses, and the decline of old ones, which as Joseph Schumpeter taught is the inevitable consequence of economic growth.
Roosevelt in the 1930s had some extremely competent social engineers, like Harry Hopkins, Harold Ickes and Fiorello LaGuardia, who could enroll 750,000 people on welfare in three weeks and build an airport in less than a year. But even they could not spur the economic growth produced by utterly unknown and unconnected people, as Warren Buffett and Bill Gates were in 1970.
When financial crisis looms, there is an impulse to freeze everything in place and accept what is as the best there can ever be: Barack Obama's new New Deal. The history of the old New Deal suggests this is not a sustainable approach in the long run.
from the Wall Street Journal, 2008-Nov-6:
Obama's Real Opposition
Presidents come and go; Congressional barons are forever.Now that Barack Obama has vanquished John McCain, he faces a much greater foe: Democrats on Capitol Hill. They've humbled the last two Democratic Presidents -- and with their enhanced majorities next year, they'll be out to do it again.
Mr. Obama may appreciate the threat, because yesterday he offered Clinton White House veteran Rahm Emanuel a job as his chief of staff. But even that savvy, relatively sane liberal will have difficulties grappling with the fearsome committee chairmen and liberal interest groups that did so much to sabotage Bill Clinton and Jimmy Carter. Meet the President-elect's real opposition:
David Obey. The Appropriations Chairman wants to slash defense spending as a money grab for more social programs and entitlements. Fellow spender Barney Frank recently added that a military budget cut of 25% was about right. A military crash diet wouldn't leave the funds for the surge in Afghanistan that Mr. Obama advocates, and it's a sure way to hand the national security issue back to the GOP.
Chuck Schumer. The Senate Democrat and his friends are already threatening banks if they don't lend more money instantly under the Troubled Asset Relief Program. Other political masters want to use Tarp to nationalize large swaths of U.S. industry such as the Detroit auto makers or to bail out states like New York that are in debt. If Mr. Obama doesn't want to have to pass a Tarp II, he'll have to say no.
George Miller. Some Democrats are starting to target the tax subsidies for 401(k)s and other private retirement options. Mr. Miller, who heads the House Education and Labor Committee, calls them "a big failure" and recently held a hearing to ponder alternatives, including nationalizing pensions and replacing them with special bonds administered by Social Security. The proposal has also caught the eye of Jim McDermott, who chairs the relevant Ways and Means subcommittee. Mr. Obama won big with his promise of tax cuts for the middle class, which doesn't square with attacks on middle-class nest eggs.
John Conyers. The man running House Judiciary is cheerleading the Europeans who want to indict Bush officials for war crimes. Other Democrats are thinking about hearings and other show trials. This is far from the postpartisan reconciliation that Mr. Obama preaches.
Henry Waxman. With President Bush soon to be out of office, the Californian's team of Inspector Clouseaus at House Oversight won't have any "scandals" left to pursue. The word in Washington is that Mr. Waxman is looking to unseat John Dingell as Chairman of Energy and Commerce, in order to shove aside a global warming moderate. That could pave the way for huge new energy taxes. Voters will punish Mr. Obama if they get hammered every time they fill up the gas tank or buy groceries.
Pete Stark. The Chairman of a crucial House subcommittee dealing with health care doesn't think Mr. Obama's proposal to significantly federalize the insurance market goes far enough. He wants a single-payer system like Canada's. Mr. Obama may want to strike a deal with Senate Republicans on health care, but Mr. Stark will be pulling him left at every turn.
All of these feudal lords -- and many others -- also come with their own private armies: the interest groups that compose the money and manpower of today's Democratic Party. The American Civil Liberties Union, Human Rights Watch and others on the anti-antiterror left want Mr. Obama to limit the surveillance and other tools that have prevented another terrorist attack on U.S. soil. The Natural Resources Defense Council and Environmental Defense will insist on onerous caps -- that is, taxes -- on coal and other carbon energy. Those won't help Mr. Obama carry Ohio and Indiana again in four years.
The trial bar wants an end to arbitration in disputes in return on its Senate investment, while the National Education Association will try to gut No Child Left Behind accountability standards. And organized labor will insist on a major push to pass "card check," which would end secret-ballot elections for unions. If Mr. Obama wants to mobilize the business community against him while squeezing moderate Democrats, he'll go along with that right from the start.
While many voters may think they've voted for "change" in Mr. Obama, they also handed power to the oldest forces in the Old Democratic Party. Jimmy Carter campaigned as a moderate and outsider, but Congressional liberals quickly ran his budget director, the economic centrist Bert Lance, out of town. Then they overrode Mr. Carter's veto of a pork-barrel water bill. Mr. Carter referred to the tax committees as "ravenous wolves" after they transformed his tax reform into a special-interest bouquet. Next came Reagan.
Bill Clinton also campaigned as a moderate, but in his first two years he was unable to govern as Congress pursued liberal priorities, including a big boost in taxes and spending. Recall Roberta Achtenberg as the scourge of the Boy Scouts and Joycelyn Elders calling for the legalization of drugs? Mr. Clinton chose -- or was forced -- to take up gun control and HillaryCare before welfare reform. Next came Newt Gingrich.
Maybe Mr. Obama has absorbed these lessons, but even if he has he'll have to be tough. The Great Society liberals who dominate Congress are old men in a hurry, and they'll run over the 47-year-old neophyte if he lets them.
from the Wall Street Journal, 2008-Nov-7, by Dick Armey:
'Compassionate' Conservatism Was a Mistake
The liberal pundits who embraced the candidacy of Barack Obama are also eager to issue a death certificate for free market capitalism. They're wrong, and they remind me of what the great Willie Nelson once said: "I'm ragged but I'm right."
To be sure, the American people have handed power over to the Democrats. But today there is a categorical difference between what Republicans stand for and the principles of individual freedom. Parties are all about getting people elected to political office; and the practice of politics too often takes the form of professional juvenile delinquency: short-sighted and self-centered.
This was certainly true of the Bush presidency. Too often the policy agenda was determined by short-sighted political considerations and an abiding fear that the public simply would not understand limited government and expanded individual freedoms. How else do we explain "compassionate conservatism," No Child Left Behind, the Medicare drug benefit and the most dramatic growth in federal spending since LBJ's Great Society?
John McCain has long suffered from philosophical confusions about free markets, and his presidential campaign reflected as much. Most striking was his inability to explain his own health-care proposal, or to defend his tax cuts and tax reform. Ultimately, it took a plumber from Ohio to identify the real nature of Barack Obama's plan to "spread the wealth."
Mr. McCain did find his message on taxes in the last few weeks, but it was too late. A Rasmussen poll of Oct. 30 reported that 31% of likely voters believed that "taxes will go down" under an Obama administration versus just 11% under a McCain administration. Shockingly, 19% of self-described conservatives believed Mr. Obama would cut taxes; only 12% thought Mr. McCain would.
The response by Mr. McCain to the financial crisis on Wall Street was the defining moment of the campaign. In what looked like a tailor-made opportunity to "clean up Washington," the Republican nominee could have challenged the increasingly politicized nature of Federal Reserve policies, and the inherently corrupt relationships between Fannie Mae, Freddie Mac and various Democratic committee chairmen. Instead, his reaction was visceral and insecure: He "suspended" his campaign and promised "to put an end to the reckless conduct, corruption, and unbridled greed that have caused a crisis on Wall Street."
In the process, he squandered his political standing with the investor class, a core Republican voting bloc. An October 26-30 Reuters/C-Span/Zogby poll of likely voters showed Mr. McCain barely beating the Democratic nominee among self-identified "investors," 50.4% to 43.8% -- a dramatic drop from the 15-point lead he held in a similar poll a month earlier.
The modern Republican Party has risen above its insecurities to achieve political success. Ronald Reagan, for example, held an unshakably positive vision of American capitalism. He didn't feel a need to qualify the meaning of his conservatism. He understood that big government was cruel and uncaring of individual aspirations. Small government conservatism was, by definition, compassionate -- offering every American a way up to self-determination and economic prosperity.
Republicans lost control of Congress in 2006 because voters no longer saw Republicans as the party of limited government. They have since rejected virtually every opportunity to recapture this identity. But their failure to do so must not be misconstrued as a rejection of principles of individual liberty by the American people. The evidence suggests we are still a nation of pocketbook conservatives most happy when government has enough respect to leave us alone and to mind its own business. The worrisome question is whether either political party understands this.
What will be the fate of free market capitalism in America? Will the 2008 election look more like 1932 -- or 1992?
On both occasions, Republican presidents had abandoned their party's principles for bigger government policies that exacerbated difficult economic times. On both occasions, Democrats took control, largely hijacking the small-government, fiscally responsible rhetoric of their opponents. Of course, FDR's election ushered in the New Deal, the most dramatic expansion of government power in American history, together with policy changes and economic uncertainty that inhibited investment and growth and locked in massive unemployment for nearly a generation.
The official agenda of the incoming administration is not so different from FDR's. Whatever doubts remain about Mr. Obama's governing principles can be cleared up by looking at the governing philosophy of the Democrats in Congress he will be crafting legislation with or the liberal constituencies he is indebted to support. Democrats will not be ambiguous. They have every right to be energized, and will attempt sweeping changes to our economy and the very nature of the relationship between individual American citizens and the federal government.
Their wish list is long. Charlie Rangel, chairman of the House Ways and Means Committee, has said he would like to redistribute a trillion dollars through the tax code, including massive tax hikes on capital accumulation and individual entrepreneurship. Labor unions want to take away the right of a worker to a secret ballot in organizing elections. Radical environmentalists demand strict curbs on energy production and use. Hillary Clinton may have lost the primary, but expect Democrats to push her favorite idea: government-run heath care.
Will Democratic overreach give the small-government movement the opportunity to reassert itself in the GOP? Former Congressman Dick Gephardt has warned President-elect Obama and the new Democratic majorities to be humble and measured. But with a legislative agenda driven by Nancy Pelosi, George Miller and Mr. Rangel, the temptations may be too great.
In 1992, Republican backbenchers including Newt Gingrich, myself, Bob Walker and John Boehner rose up to challenge the Clinton administration's agenda on taxes, spending and government-run health care. But before we could beat the Democrats, we had to beat the old bulls of our own party who had forgotten their principles and had become very comfortable as a complacent minority. We captured control of Congress in 1994 because we had confidence in our principles, and in the American people's willingness to understand and reward a national vision based on lower taxes, less government and more freedom.
That can happen again today -- but it will require a new generation of leadership, the sooner the better. Rest assured that the American people will show up for the fight.
Mr. Armey, U.S. House majority leader from 1995 to 2002, is chairman of FreedomWorks Foundation.
from ABC News, 2008-Oct-31, by Jake Tapper:
Obama's New Attack on Those Who Don't Want Higher Taxes: `Selfishness'
On the stump this week, Sen. Barack Obama, D-Ill., has pushed back against Sen. John McCain's description of his tax policies.
"The reason that we want to do this, change our tax code, is not because I have anything against the rich," Obama said in Sarasota, Fla., yesterday. "I love rich people! I want all of you to be rich. Go for it. That's the American dream, that's the American way, that's terrific.
"The point is, though, that -- and it's not just charity, it's not just that I want to help the middle class and working people who are trying to get in the middle class -- it's that when we actually make sure that everybody's got a shot – when young people can all go to college, when everybody's got decent health care, when everybody's got a little more money at the end of the month – then guess what? Everybody starts spending that money, they decide maybe I can afford a new car, maybe I can afford a computer for my child. They can buy the products and services that businesses are selling and everybody is better off. All boats rise. That's what happened in the 1990s, that's what we need to restore. And that's what I'm gonna do as president of the United States of America.
"John McCain and Sarah Palin they call this socialistic," Obama continued. "You know I don't know when, when they decided they wanted to make a virtue out of selfishness."
It's unclear if this was a nod to the Ayn Rand book "The Virtue of Selfishness," with all that the invocation of Rand implies.
It would seem to be, given the themes of Rand's work, what happens when independent achievers are demonized.
Which would fit with this description of those who want to keep their hard-earned tax dollars as "selfish."
Atlas may not be shrugging, but Obama is.
from the Wall Street Journal, 2008-Oct-25, by Brian M. Carney:
The Election Choice: Taxes
The difference between candidates is the widest it's been in over two decades.When it comes to taxes, the difference between Barack Obama and John McCain is arguably as wide as it's been in a presidential race since Ronald Reagan and Walter Mondale battled in 1984. Sen. Obama is proposing to raise taxes more than any recent candidate, while Sen. McCain wants to cut them substantially. Most of the campaign debate has been over whose taxes would be raised, and whose cut.
Here are the facts:
Dueling Tax Plans Current law McCain Obama Highest income tax rate 35% 35% 41% Capital gains 15 15 20 Dividends 15 15 20 Income and payroll tax combined 35 35 43-45 Estate tax* 45 15 45 Corporate tax 35 25 35 *Under current law the estate tax goes to zero in 2010 and rises to 55% in 2011. Source: Candidate Web sites Mr. Obama would roll back the 2001 and 2003 tax cuts for taxpayers in the top two brackets, raising the top two marginal rates of income tax to 36% and 39.6% from 33% and 35%. The 33% rate begins to hit this year at incomes of $164,550 for an individual and $200,300 for joint filers. Mr. Obama claims no "working families" earning less than $250,000 would pay more in taxes, but that's because he defines income more broadly than the taxable income line on the IRS form. If you're an individual with taxable income of $164,550, you will pay more taxes.
The Democrat would also reinstate the phaseout of the personal exemptions and itemized deductions for married couples making more than $250,000 a year. Those phaseouts would raise the top marginal tax rate for millions of taxpayers by another 1.5 percentage points.
Capital gains and dividend taxes would increase to 20% from 15% for those making more than $250,000, although capital-gains taxes on investments in "start-ups" would be eliminated.
Mr. Obama's most dramatic departure from current tax policy is his promise to lift the cap on income on which the Social Security payroll tax is applied. Currently, the employer and employee each pay 6.2% up to $102,000, a level that is raised for inflation each year. The Obama campaign says he'd raise the payroll tax rate on incomes above $250,000 by as much as two to four percentage points -- though it's unclear if that higher rate would apply to the employee, the employer, or both.
In any case, lifting the cap would change the nature of Social Security from an insurance program -- which pays out based on how much you paid in -- into a wealth-transfer program that is far more progressive.
Taken together, these add up to about a 10-percentage-point hike in marginal tax rates for those making more than $250,000 a year, including millions of small businesses that pay taxes at individual rates. The "marginal" rate refers to the rate paid on the next dollar of income, and it has an especially strong influence on decisions to work and invest.
Meanwhile, House Ways and Means Chairman Charlie Rangel has proposed an additional 4% "surtax" on incomes above $200,000. This would further increase the top marginal federal income tax rate to close to 50% -- or slightly above that, depending on the rate of the new Social Security tax -- when combined with Mr. Obama's hikes.
Mr. Obama is also famously promising that 95% of all Americans will get a tax cut. However, he would not reduce tax rates. His tax cuts come in the form of tax credits, most of which are also "refundable." In tax jargon, "refundable" means that you get the credit even if you owe no income taxes at all -- which means the government cuts you a check. These credits include:
- a credit of $500 to offset the payroll tax on the first $8,100 in earnings;
- a 10% mortgage-interest credit for those who don't itemize their deductions and so don't currently benefit from the mortgage-interest deduction;
- an expansion of the earned-income tax credit that would raise the income eligibility, reduce the EITC "marriage penalty," and increase payouts for families with three or more children;
- an increase of the college tuition tax credit to $4,000, from $1,800;
- a 50% "savers" credit of up to $500.
- The child-care credit would be made fully refundable and the credit increased to 50% of child-care costs, from 20%-35% now.
According to the Tax Policy Center, Mr. Obama's tax credits would increase the share of Americans who pay no income tax to 48% from an estimated 38% this year.
On corporate taxes, the Obama campaign has proposed to eliminate "loopholes" for oil and gas companies and rewrite the rules for how multinational corporations are taxed. In particular, he has proposed to treat foreign-source income the same as income earned domestically -- which means subjecting all income earned by American companies around the world to the 35% U.S. corporate rate, which is the world's second-highest. He is also promising a "windfall profits" tax on oil companies.
As for Mr. McCain, the central plank of his personal income-tax proposals is to make permanent almost all of the 2001 and 2003 tax cuts. This would leave the top marginal rate at 35%. The one exception is the death or estate tax, which expires for one year in 2010. Mr. McCain wants a 15% death tax on estates larger than $5 million. Mr. Obama wants a 45% rate on estates larger than $3.5 million.
Mr. McCain would also increase the dependent exemption by two-thirds -- to $6,000 per dependent from $3,500.
Mr. McCain would lower the corporate income-tax rate to 25% from 35% today, and allow full expensing, temporarily, of some investments in plant and equipment. Like Mr. Obama, Mr. McCain has said he would "close loopholes" on oil and gas companies and reconfigure the tax regime for multinationals.
The Republican's most dramatic proposal is to introduce an optional simplified tax system with only two rates and larger standard deductions and exemptions. Although Sen. McCain first put forward this proposal months ago, the details of it remain sketchy. In rough outline, taxpayers would be able to choose to pay under the current tax code or file under the optional semiflat tax.
Both candidates have said they would permanently index the Alternative Minimum Tax to inflation. In reality, both would have to do far more to change the AMT, which hits more middle-class taxpayers each year, and which members of Congress have many proposals to alter or repeal.
In sum, Mr. Obama is proposing to use the tax code to substantially redistribute income -- raising tax rates on a minority of taxpayers to finance tax credits and direct income supplements to millions of others. How much revenue his higher rates would raise depends on how much less those high-earners would work, or how much they would change their practices to shelter their income from those higher rates.
By contrast, Mr. McCain is proposing some kind of tax reduction for most Americans who pay taxes. He says he would finance those cuts by reducing the rate of growth in federal spending.
from TownHall.com, 2008-Nov-2, by Terry Paulson:
Democracies Die When Liberty Gives Way to Dependence
McCain has Joe the Plummer. Obama has Peggy Joseph. Interviewed after an Obama campaign event in Sarasota, Florida, Peggy emotionally summarized what it means to her for Barack Obama to be president: "It was the most memorable time of my life. It was a touching moment, because I never thought this day would happen. I won't have to worry about putting gas in my car. I won't have to worry about paying my mortgage. You know, if I, if I help him [Barack], he's gonna help me!"
If that doesn't send fears down your spine, ponder the words of the Scottish jurist and historian, Sir Alexander Fraser Tytler. Over 200 years ago, he provided a chilling observation on the fall of the Athenian Republic. America has been a beacon of liberty and hope for our citizens and the world for over 230 years. But Tytler warned of the natural rise and fall of every democracy:
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over a loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been two hundred years. These nations have progressed through this sequence; from bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to complacency; from complacency to apathy; from apathy to dependence; from dependency back again into bondage."
Our next president will set America's course for the next decade. We're running deficits in Washington and most of our major states. The growing costs for Medicare, employee pensions, and social security are out of control, and there's no political consensus or will to deal with these runaway entitlements. We vote to approve bonds that don't raise taxes now but pass more debt on to future generations.
In America today, it's hard to win elections by talking about cutting government spending—saying "no" to anything or anyone at election time is a sure way of losing votes. As a result, too many Americans are becoming addicted to government saving them from their own failure to live within their means. Democrats play the enabler! Capitalizing on that addiction, Democrats promise more if Americans just give them full control in Washington.
Starting during President Johnson's term, our country tried spending our way to becoming a very compassionate country. Over three decades, our government invested 5.4 trillion dollars in welfare payments in our "War on Poverty." The investment would have been worth it, if it had worked, but it didn't eliminate poverty.
In fact, the results of this type of government-run compassion have been devastating, creating a debilitating dependence on the very programs that were designed to help. Ronald Reagan said it well: "Welfare's purpose should be to eliminate, as far as possible, the need for its own existence."
Compassion should be measured by how many people no longer need government programs instead of by how many are served by them. We need a safety net, not a hammock. As our first Republican President Abraham Lincoln said, "The worst thing you can do for those you love is the thing they could and should do for themselves."
We've gone from protecting the unfortunate to supporting the irresponsible. In fact, many liberal politicians seem to want to keep citizens dependent on government. They hate poverty so much that they reward it!
Unfortunately, whatever you reward you get more of! So if my response to your entry-level job is to raise your minimum wage beyond its market value, you're more likely to stay in that dead-end job. Why go to college or learn a new skill if you can get enough money settling for a job with minimum skills?
Republicans support economic tough love that challenges all citizens to better themselves. A free-market economy rewards achievement and not anything less. Is that mean-spirited? We loved our son enough to teach him early that in a competitive world you don't get everything you want just because you want it. We showed him our love, but we also let him know that he would experience the consequences for his own choices. If he didn't save his money, he wouldn't have money to spend. If he got in trouble in school, he'd be accountable not excused.
In America, all citizens are guaranteed "the pursuit of happiness," not happiness given to them by a controlling government. Democrats would have you believe that every American is entitled to full healthcare, welfare, and high wages whether they've earned it or not. And, of course, who is supposed to pay for all these entitlements, those greedy, "wealthy" Americans who already pay most of the taxes! Will Rogers said it years ago, "I remember back when a liberal was someone who was generous with his own money."
Gerald Ford summed it up well, "A government big enough to give you everything you want is a government big enough to take from you everything you have." Socialism is not new. It's failed wherever it has been tried. It won't help you achieve your dreams; it will only punish and stifle your success! Obama believes you can't live the American Dream without taking your neighbor's money to give you another entitlement. That's not the American Dream; that's a nightmare.
Terry Paulson, PhD is a psychologist, award-winning professional speaker, author of The Dinner: The Political Conversation Your Mother Told You Never to Have, and long-time columnist for the Ventura County Star.
from the Wall Street Journal, 2008-Oct-21, by Paul H. Rubin:
Get Ready for the New New Deal
Obama is much more dangerous to economic freedom than FDR.In 1932, Democrat Franklin Delano Roosevelt was elected president as the nation was heading into a severe recession. The stock market had crashed in 1929, the world's economy was slowing down, and all economic indicators in the U.S. showed signs of trouble.
The new president's response was to restructure the economy with the New Deal -- an expansion of the role of government once unimaginable in America. We now know that FDR's policies likely prolonged the Great Depression because the economy never fully recovered in the 1930s, and actually got worse in the latter half of the decade. And we know that FDR got away with it (winning election four times) by blaming his predecessor, Herbert Hoover, for crashing the economy in the first place.
Today, the U.S. is in better shape than in 1932. But it faces similar circumstances. The stock market has been in a tail spin, credit markets have locked up, and a surging Democratic presidential candidate is running on expanding the role of government, laying the blame for the economic turmoil on the current occupant of the White House and his party's economic policies.
Barack Obama is one of the most liberal members of the Senate. His reaction to the financial crisis is to blame deregulation. He even leverages fear of deregulation onto other issues. For example, Sen. John McCain wants to allow consumers to buy health insurance across state lines. Mr. Obama likens this to the financial deregulation that he alleges got us into the current mess.
But a President Obama would also enjoy large Democratic majorities in Congress. His party might even win a 60-seat, filibuster-proof majority in the Senate, giving him more power than any president has had in decades to push a liberal agenda. And given the opportunity, Mr. Obama will likely radically increase government interference in the economy.
Until now, this election has been fought on the margins, over marginal issues. But it is important to understand how much a presidential candidate wants to move the needle on taxes, trade and other issues. Usually there isn't a chance for wholesale change. Now, however, it appears that this election will make more than a marginal difference. It might fundamentally change America.
Unlike FDR, Mr. Obama will not have to create the mechanisms government uses to interfere with the economy before imposing his policies. FDR had to get the Supreme Court to overturn a century's worth of precedents limiting the power of government before he could use the Constitution's commerce clause, among other things, to increase government control of the economy. Mr. Obama will have no such problem.
FDR also had to create agencies to implement regulations. Today, the Securities and Exchange Commission and the National Labor Relations Board (both created in the 1930s) as well as the Environmental Protection Agency and others created later are in place. Increasing their power will be easier than creating them from scratch.
Even before the current crisis, there was a great demand for increased government regulation to limit global warming. That gives the next president a ready-made box in which to place more regulation, and a legion of supports eager for it.
But if the coming wave of new regulation from an Obama administration is harmful to the economy, Mr. Obama will take a page from FDR's playbook. He'll blame Republicans for having caused the market crash in the first place, and so escape blame for the consequences of his policies. It worked for FDR and, so far in this campaign, blaming Republicans and George W. Bush has worked for Mr. Obama.
Democrats draw their political power from trial lawyers, unions, government bureaucrats, environmentalists, and, perhaps, my liberal colleagues in academia. All of these voting blocs seem to favor a larger, more intrusive government. If things proceed as they now appear likely to, we can expect major changes in policies that benefit these groups.
If those of us who favor free markets for the freedom and prosperity they bring are right, the political system may soon put our economy on track for a catastrophe.
Mr. Rubin is a professor of economics and law at Emory University. He held several senior economic positions in the Reagan administration, and is an unpaid adviser to the McCain campaign.
from TownHall.com, 2008-Oct-19, by Michael Medved:
For Conservatives, Obama's Changes Would Be Permanent and Devastating
Some conservative activists, despairing (prematurely) about the chances for victory on November 4th, argue that an Obama win could be a blessing in disguise. According to this logic, The One would occupy the White House for only One term and whatever big government, liberal programs he managed to enact could be swiftly repealed by some future "true conservative" champion.
Yes, it's true that some changes by liberal presidents can be erased by future conservatives – for instance, George W. Bush cut the top marginal tax rate to 35%, after it had risen to 39.6% under Clinton (it's sure to go back up to the Clinton rate – or higher – under Obama). Yes, the President and Congress tinker endlessly with details of the tax system or the levels of appropriation or regulation so that the growth in government and spending under President Obama could be adjusted after his departure, if not reversed.
But conservatives need to face the fact that Barack Obama has promised profound systemic changes that will be irreversible—absolutely permanent alterations of our economy and government where there is no chance at all that Republican office-holders of the future could in any way repair the damage.
For instance, consider two sweeping new entitlements that Obama plans to offer for all Americans – universal (but, he insists, “voluntary”) federally-funded pre-school for all children starting at age three, and a low-cost, heavily subsidized federal health insurance plan for every low or middle income American who wants it.
A President Obama would no doubt promote such proposals in his first year in office and a compliant, heavily-Democratic Congress would approve them promptly—perhaps making the benefits even more generous. This means that before the next election, tens of millions (probably hundreds of millions) of American families will take advantage of “free” pre-kindergarten education (and day care), as well as cheap, subsidized (to the tune of at least $160 billion per year) health insurance. The chances of ever taking away such goodies are nil --- Presidents may come and go, but entitlements are forever. New government give-aways may accomplish nothing constructive but they're all but impossible to eliminate once they're up and running.
Consider Jimmy Carter's horribly misguided establishment of two vast new cabinet level departments --- the Department of Education and the Department of Energy. When the indignant public swept out of office the worst president of modern times, Reagan took the White House with talk of eliminating one or both of these two wasteful bureaucracies. Even the Great Gipper failed in this endeavor, and the Departments of Energy and Education continue to soak up hundreds of billions of tax dollars and to employ tens of thousands, despite their abject failure at improving either public education or our energy supplies.
Obama's new entitlements will similarly survive all attempts to eliminate them. If he becomes President we'll be permanently stuck not just with federal pre-school and a subsidized health insurance guarantee (Obama described it as a “right” in the last debate), but with a $4,000 annual check (a so-called “refundable tax credit”) to all “non-wealthy” college students, a doubling of the Peace Corps, vast increases in AmeriCorps, new billions for “National Service,” a tripling of the foreign aid budget (a specific Obama promise) and much, much more. For those who believe it's easy to reduce or erase such spending in future administrations, consider the example of Bill Clinton's cherished “service program” AmeriCorps (which pays its “volunteers” close to $30,000 a year). Gingrich, George W. Bush and countless other conservatives recognize that this is a wasteful, crooked, outrageous effort to use taxpayer money to fund leftist activism, but even when the GOP controlled all levers of government they made no progress in slaughtering the monster.
Or think about Lyndon Johnson's federal initiative for a “National Endowment for the Arts” in 1967. By now, this appalling program has wasted many billions of taxpayer dollars to fund the ugliest and most puerile sorts of artistic expression. No one can make a serious case that the NEA has accomplished anything worthwhile in uplifting or enriching our culture (in which more than 98% of all cultural spending comes from private sources--- donations, opera tickets, sales of paintings, museum admissions, or corporate grants, rather than government initiatives at the federal, state or local level). Despite the endlessly demonstrated uselessness and insipidity of the National Endowment, it continues to flourish – and even won increased appropriations in recent years.
Aside from the ongoing growth of government and the waste of public money, other changes brought about by President Obama will prove to be unalterable and devastating: in his first year, he will authorize gays serving openly in the military, and hasten the national imposition of homosexual marriage (he's pledged to repeal the Defense of Marriage Act).
He will also get the chance to appoint at least two, and perhaps as many as four new justices to the Supreme Court of the United States. All legal observers expect Obama's nominees to embrace an even more activist, leftist view of the Constitution and legal system than Clinton's appointees, Breyer and Ginzburg. The damage from the remaking of the court could prove incalculable. There is also no chancesof impeaching any Supreme Court Justice (short of a credible murder or rape charge) even if Republicans re-take control in some future Congress. The GOP (led by Jerry Ford as House Minority Leader) tried to gain traction for impeachment efforts to counteract the wildly destructive excesses of the Warren Court but got absolutely nowhere and managed, mostly, to embarrass themselves.
Finally, and perhaps most fatally, a President Obama will radically revamp our already broken immigration system and permanently remake the country, politically and demographically.
Most conservatives passionately opposed the sweeping immigration reform promoted in 2007 by President Bush, Senator McCain (and, it must be noted, a majority of Republican members of the US Senate) because it granted a complicated path to legalization for some of the millions of illegal immigrants who are already here. Those concerned citizens who celebrated “victory” last year with the collapse of the immigration compromise should prepare themselves for a much more liberal, forgiving reform under Obama (and his supportive Congress) that will make legalization far easier, and will include far more of the illegals as future voters and citizens.
Of course the Democrats will push such changes, knowing that they can thereby claim sole “credit” for welcoming millions of new citizens to the voting roles, and with the expectation that such freshly minted Americans will vote Democratic for the rest of their lives. The Democrats will also cut back immediately on the workplace immigration raids and enhanced border security that has enabled the Bush administration to sharply cut back on illegal entries in the last year --- Obama has specifically condemned these efforts and might even halt or slow ongoing work on the border fence.
In any event, we've been down this road before: the Republicans claimed credit for the restrictive Immigration Act of 1924, all but eliminating the flow of humanity from Eastern and Southern Europe, and as a result vast numbers of ethnic voters (Italians, Poles, Jews, Greeks and more) became loyal Democrats for a generation or more.
This shift in immigrant voters played a huge role in the establishment of the New Deal Coalition that won five Presidential elections in a row (1932 through 1948) and totally dominated Congress for an appalling fifty years (1930-1980).
As Amity Shlaes shows in her necessary new book “The Forgotten Man,” FDR failed miserably at turning around the US economy (the Depression lingered until the beginning of World War II) but succeeded brilliantly in achieving long-term power for the Democratic Party. The innumerable government programs launched by the New Deal may have done nothing to advance the overall interests of the nation of the economic system, but they performed magnificently at creating dependent interest groups who voted reliably Democratic for decades. If the government hands out goodies to various constituencies, those segments of the population will continue to support the idea of enriching themselves with other people's money.
That's the biggest threat of an Obama presidency: the creation of vast new groups of dependent Americans who will comprise an unassailable new coalition that will enjoy iron control of our politics for a generation or more. If you start with newly legalized immigrant voters (with as many as 10 million new Democrats totally beholden to Obama and company) and then add the beneficiaries of government pre-school, the new nursery school teachers, the recipients and administrators of federal health insurance, federal college grants, the businesses who'll enjoy the $150 billion in promised subsidies for “alternative energy,” the companies and employees of the vast increases in “infra-structure” spending (lots more bridges to nowhere), the non-tax payers who will suddenly receive a $1,000 per household check (under the guise of “refundable tax credit,” and many, many more.
In his first years in office, a President Obama could easily succeed in buying so many interest groups and constituencies with expensive new governmental favors, that conservative dreams of rebuilding a small government majority will go absolutely nowhere.
The conservative movement, and the survival of a viable small-government faction in American politics, depends upon a McCain victory in November. A triumph for Barack Obama, combined with Democratic gains in both House and Senate, could easily usher in a dark new era with decades of corrupt, welfare-state, bureaucratic leftist rule.
from the Wall Street Journal, 2008-Oct-30, by Dan Henninger:
The True Meaning of 'Historic Vote'
Shifting America's animating idea from creation to protection.The most basic explanation for why Barack Obama may win next Tuesday is that voters want economic deliverance. The standard fix for this in politics everywhere is to crowbar the old party out and patch in the other one. It is true as well that the historic nature of the nation's first African-American candidacy would play a big role.
Push past the historic candidacy, however, and one sees something even larger at stake in this vote. One sees what Joe (The Plumber) Wurzelbacher saw. The real "change" being put to a vote for the American people in 2008 is not simply a break from the economic policies of "the past eight years" but with the American economic philosophy of the past 200 years. This election is about a long-term change in America's idea of itself.
I don't agree with the argument that an Obama-Pelosi-Reid government is a one-off, that good old nonideological American pragmatism will temper their ambitions. Not true. With this election, the U.S. is at a philosophical tipping point.
The goal of Sen. Obama and the modern, "progressive" Democratic Party is to move the U.S. in the direction of Western Europe, the so-called German model and its "social market economy." Under this notion, business is highly regulated, as it would be in the next Congress under Democratic House committee chairmen Markey, Frank and Waxman. Business is allowed to create "wealth" so long as its utility is not primarily to create new jobs or economic growth but to support a deep welfare system.
The political planets are aligned to make this achievable. In the aftermath of the financial crisis, prominent Democrats, European leaders in France and Germany and more U.S. newspaper articles than one can count have said that the crisis proves the need to permanently tame the American "free-market" model. P.O.W. Alan Greenspan is broadcasting confessions. The question is: Are the American people of a mind to throw in the towel on the system that got them here?
This would be a historic shift, one post-Vietnam Democrats have been trying to achieve since their failed fight with Ronald Reagan's "Cowboy Capitalism."
Of course Cowboy Capitalism built the country. More than any previous nation in history, the United States made its way forward on a 200-year wave of upwardly mobile, profit-seeking merchants, tradesmen, craftsmen and workers. They blew out of New England and New York, rolled across the wildernesses of the Central States, pushed across a tough Western frontier and banged into San Francisco and Los Angeles, leaving in their path city after city of vast wealth.
The U.S. emerged a superpower, and the tool of that ascent was simple -- the pursuit of economic growth. Now China, India and Brazil, embracing high-growth Cowboy Capitalism, are doing what we did, only their cities are bigger.
Now comes Barack Obama, standing at the head of a progressive Democratic Party, his right hand rising to say, "Mothers, don't let your babies grow up to be for-profit cowboys. It's time to spread the wealth around."
What this implies, undeniably, is that the United States would move away from running with the high GDP, high-growth nations rising today as economic and political powers and move over to retire with the low-growth economies we displaced -- old Europe.
As noted in a 2006 World Bank report, spending in Europe on social-protection programs averages 19% of GDP (85% of it on social insurance programs), compared to 9% of GDP in the U.S. The Obama proposals send the U.S. inexorably and permanently toward European levels of social protection. This isn't an "agenda." It's a final temptation.
In partial detail:
Obama's federalized medical insurance system starts the transition away from private medical care and toward Obama's endlessly promised "universal health care." This has always been the sine qua non of planting a true, managed-market economy in the U.S.
Obama's refundable tax credits are direct cash transfers from the federal government. This would place some 48% of Americans, nearly half, out of the income tax system. More than a tax proposal, this is a deep philosophical shift, an American version of being "on the dole."
His stated intent to renegotiate free-trade agreements such as Nafta is a philosophical shift. It abandons the tradition of a hyper-competitive America dating back to the Industrial Revolution, toward a protected, domestic workforce, as in Western Europe. The Democratic proposal to eliminate private union votes -- "card check" -- ensures the spread of a static, Euro-style workforce.
Eliminating the ceiling on payroll taxes changes Social Security from an insurance to a welfare program. Obama's tax credits requires performing government-identified activities, the essence of a "directed economy."
All this would transform the animating American idea -- away from creation and toward protection.
Many voters -- progressive Democrats, the asset-safe rich, academics and college students -- regard this as where America should go. They explicitly want America's great natural energies transferred away from unwieldy economic competition and toward social construction. They want the U.S. to reduce its "footprint" in the world. Monies saved by stepping down from superpower status can be reprogrammed into "investments" (a favorite Obama word) in a vast Euro-style hammock of social protection programs.
One wishes John McCain had been better able to make clear what the truly "historic" meaning of Tuesday's vote is. Once it's done, it's done.
from RealClearPolitics.com, 2008-Nov-2, by Thomas Sowell:
Ego and Mouth
After the big gamble on subprime mortgages that led to the current financial crisis, is there going to be an even bigger gamble, by putting the fate of a nation in the hands of a man whose only qualifications are ego and mouth?
Barack Obama has the kind of cocksure confidence that can only be achieved by not achieving anything else.
Anyone who has actually had to take responsibility for consequences by running any kind of enterprise-- whether economic or academic, or even just managing a sports team-- is likely at some point to be chastened by either the setbacks brought on by his own mistakes or by seeing his successes followed by negative consequences that he never anticipated.
The kind of self-righteous self-confidence that has become Obama's trademark is usually found in sophomores in Ivy League colleges-- very bright and articulate students, utterly untempered by experience in real world.
The signs of Barack Obama's self-centered immaturity are painfully obvious, though ignored by true believers who have poured their hopes into him, and by the media who just want the symbolism and the ideology that Obama represents.
The triumphal tour of world capitals and photo-op meetings with world leaders by someone who, after all, was still merely a candidate, is just one sign of this self-centered immaturity.
"This is our time!" he proclaimed. And "I will change the world." But ultimately this election is not about him, but about the fate of this nation, at a time of both domestic and international peril, with a major financial crisis still unresolved and a nuclear Iran looming on the horizon.
For someone who has actually accomplished nothing to blithely talk about taking away what has been earned by those who have accomplished something, and give it to whomever he chooses in the name of "spreading the wealth," is the kind of casual arrogance that has led to many economic catastrophes in many countries.
The equally casual ease with which Barack Obama has talked about appointing judges on the basis of their empathies with various segments of the population makes a mockery of the very concept of law.
After this man has wrecked the economy and destroyed constitutional law with his judicial appointments, what can he do for an encore? He can cripple the military and gamble America's future on his ability to sit down with enemy nations and talk them out of causing trouble.
Senator Obama's running mate, Senator Joe Biden, has for years shown the same easy-way-out mindset. Senator Biden has for decades opposed strengthening our military forces. In 1991, Biden urged relying on sanctions to get Saddam Hussein's troops out of Kuwait, instead of military force, despite the demonstrated futility of sanctions as a means of undoing an invasion.
People who think Governor Sarah Palin didn't handle some "gotcha" questions well in a couple of interviews show no interest in how she compares to the Democrats' Vice Presidential candidate, Senator Biden.
Joe Biden is much more of the kind of politician the mainstream media like. Not only is he a liberal's liberal, he answers questions far more glibly than Governor Palin-- grossly inaccurately in many cases, but glibly.
Moreover, this is a long-standing pattern with Biden. When he was running for the Democratic Party's presidential nomination back in 1987, someone in the audience asked him what law school he attended and how well he did.
Flashing his special phony smile, Biden said, "I think I have a much higher IQ than you do." He added, "I went to law school on a full academic scholarship" and "ended up in the top half" of the class.
But Biden did not have a full academic scholarship. Newsweek reported: "He went on a half scholarship based on need. He didn't finish in the 'top half' of his class. He was 76th out of 85."
Add to Obama and Biden House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, and you have all the ingredients for a historic meltdown.
from PowerLine Blog, 2008-Oct-15, by Scott Johnson:
Spread your own wealth around
When Barack Obama responded to the Ohio plumber who didn't want his taxes raised that Obama wanted to "spread the wealth around," I wanted to tell him to spread his own wealth around. It was in any event a rare moment of candor on the part of Senator Obama.
Obama all but told the plumber that his wealth should be seized in the name of equity. The encounter played out one of the old themes of democratic politics: the appeal to the many to take from the few. It's traditionally an easy sell in democratic regimes.
Despite Obama's implication to the contrary, however, It doesn't represent much in the way of change. According to the most recent (2006) data released by the IRS, the top 1 percent of filers paid nearly 40 percent of all income taxes; the top 5 percent paid 60 percent of all income taxes. The bottom 50 percent paid virtually no income taxes (3 percent of all income taxes paid).
The personal income tax, the federal government's main source of revenue, is collected overwhelmingly from a relative handful of Americans. The large majority of all Americans pay little or no income tax.
Given that poorer citizens always outnumber the rich, political philosophers have long worried that government based on majority rule could lead to organized theft from the wealthy by the democratic masses. "If the majority distributes among itself the things of a minority, it is evident that it will destroy the city," warns Aristotle.
The founders of the United States were deep students of politics and history, and they shared Aristotle's worry. Up through their time, history had shown all known democracies to be "incompatible with personal security or the rights of property." James Madison and others therefore made it a "first object of government" to protect personal property from unjust confiscation. Numerous provisions were included in the Constitution and Bill of Rights to protect the property rights of citizens.
Given that one of the causes of the American Revolution was a tax, the founders understood very well that taxation could become a way for one group to prey on another. So while the Constitution empowered the federal government to levy taxes, it limited this power mostly to indirect taxes like tariffs, duties, and excise taxes. For much of American history the federal government subsisted solely on those fees.
The Constitution did grant the federal government the power to levy "direct" taxes on a "per head" basis, but required that all money raised this way must be given to the states according to their population. The aim here was to preserve a decentralized federal system of rule, and to make it "difficult to place a direct tax on capital, the most destructive tax in terms of economic growth and economic initiative," according to Professor Edward Erler.
Until the Civil War, the idea of a tax on individual incomes would have seemed preposterous to most Americans. Only as an emergency wartime measure did Congress adopt an income tax in the 1860s, and the measure was allowed to lapse with little fanfare in 1872. Estimates vary regarding the percentage of citizens affected by the income tax of this era, but none places it at more than 10 percent.
The modern income tax begins with the Progressive era in American politics. In an influential 1889 article entitled "The Owners of the United States," crusading attorney Thomas Shearman argued that the lion's share of the country's wealth was in a limited number of hands. If an income tax was not adopted, he warned, within 30 years "the United States of America will be substantially owned" by 50,000 people.
This marked the beginning of a never-ending campaign. Many activists since have characterized America as a permanent plutocracy. And their prescription has generally been more and higher taxes.
Shearman's advocacy of an income tax found a receptive audience in populist politician William Jennings Bryan. Exploiting the dire economic circumstances created by the depression of 1893, Bryan avidly promoted the adoption of an income tax. His proposal succeeded when Congress passed a 2 percent flat tax on incomes over $4,000 in 1894. The following year, however, the Supreme Court held the tax to be unconstitutional.
In response, Progressives condemned the Constitution as an instrument crafted by the rich to protect their selfish interests (Allen Smith), and a document rendered obsolete by intellectual progress in the century since its drafting (Woodrow Wilson).
The Progessive condemnation of the Constitution climaxed in 1913 with the publication of An Economic Interpretation of the United States Constitution by Columbia history professor Charles Beard. Beard purported to expose the Constitution as the handiwork of a propertied elite serving its own interests to the exclusion of the majority.
Few works of American history have been more erroneous than Beard's, as later shown by debunking historians like Robert Brown and Forrest McDonald. But by the time scholarship caught up with Beard's book, a lot of damage had been done. Frenzied attacks on "the rich" and "the wealthy" culminated in the ratification of the Sixteenth Amendment in 1913, authorizing federal taxation of income from all sources without limit.
So why hasn't the majority in America helped itself to more of the minority's wealth, as Aristotle and our founders feared? Partly because the protections for individual property erected by the founders have worked. Partly, too, because many Americans' political convictions are (thankfully) based on principle rather than immediate economic self-interest. And partly because the fraction of Americans who think of themselves as rich, or likely to become rich in the future, is quite large, undercutting the incentive for bashing the rich.
Obama's appeal for higher taxes to "spread the wealth around" nevertheless harks back to an old theme in political philosophy and American politics. You can believe in it, but it's not exactly change, and it is more to be worried about than hoped for.
from Pajamas Media, 2008-Oct-17, by Claudia Rosette:
First They Came for Joe the Plumber…
Joe’s question about taxes threw a wrench into Barack Obama’s campaign pitch. So, oh what a background check Joe got. Within days, reports were all over the news that Joe owes back taxes, he doesn’t have an Ohio plumber’s license, his real name is Samuel, and he is — shock and horror — a registered Republican. Within days, Obama and Biden were holding up Joe to public ridicule, and by implication mocking any American working stiff who might have the audacity to want to earn more than $250,000 per year.
Obama may be full of talk about delivering the American dream, but he apparently has enormous disdain for Americans who actually sweat to earn it for themselves. He wants to take Joe’s money and spread it around in the name of helping others get ahead — but if anyone gets ahead more than Obama deems fitting, watch out.
It seems that Joe’s sins are less than the litany would make them. He may not have a plumber’s license, but he works for someone who does. He owes back taxes, but less than $1,200. And at least to date, it is not a crime in America to use a nickname or be a registered Republican.
But to squabble over Joe’s record is to miss the real point. Obama is the one running for public office, aspiring to the country’s highest position of power and public trust. Joe is not. He’s a private citizen, who had every right to ask a very good question. He wanted to know why he was being taxed “more and more for fulfilling the American dream?”
What he got from the well-heeled Senators Obama and Biden was mockery and contempt.
Most disturbing is this: If that’s how Joe the Plumber gets dealt with while Obama is still stumping for votes, then what happens to Joe, or anyone else who dares question Obama’s plans, should Obama win the White House?
Should we expect that that the answer will be targeted investigations, a public display of whatever can be dug up in the way of private laundry, and sneers from the Oval Office?
In the interest of having an informed electorate, it would be far more valuable were the media teams working less frantically to dig up dirt on Joe, and a lot harder on filling in the gaps in the record of candidate Obama. Why won’t Obama release his Columbia transcripts? What exactly was he doing during those gaps in the bio?
How are we supposed to square the lavish praise of Obama’s intellectual powers and refined sensitivities with his professed failure during years of intimate acquaintance to notice the hate-speech of Rev. Wright? What is the real story with the ties to Bill Ayers, to Tony Rezko? What does that say about his judgment in choosing friends and advisers and associates?
Would Obama appoint similar pals to high office in Washington? Would he bring similarly blinkered perceptions to the job of making policy? Would his critics receive the kind of savaging just dished out to Joe? If there’s any chance that the answer is yes, then the drubbing of Joe the Plumber is a warning to us all.
from the Wall Street Journal, 2008-Oct-23:
An Obamanomics Preview
Tax and spend, but not in that order."I think at this point there needs to be a focus on an immediate increase in spending and I think this is a time when deficit fear has to take a second seat . . . I believe later on there should be tax increases. Speaking personally, I think there are a lot of very rich people out there whom we can tax at a point down the road and recover some of the money."
-- Barney Frank, October 20, 2008The election is still two weeks away, but we are already living in the world of Obamanomics. In fact, on fiscal policy we've been living in that world at least since February when the Bush Administration conceded to the Congressional priority of Keynesian fiscal "stimulus." That didn't work very well, but no matter. Spurred on by Barack Obama, Democrats in Congress are preparing Round Two, this time in the form of $150 billion to $300 billion in new spending. [Review & Outlook] AP
If we may borrow a phrase, this is the triumph of hope over experience. The one thing Washington hasn't failed to do in recent years is spend, yet the economy doesn't seem to have improved on the event. Brian Riedl, a budget expert at the Heritage Foundation, has calculated that in 2008 Congress enacted $332 billion of "emergency" supplemental spending bills, only half of which was for the Iraq war. Do you feel stimulated?
The nearby chart shows the arc of tax policy and economic growth across the Bush years. After the dot-com bust, President Bush compromised with Senate Democrats and delayed his marginal-rate income tax cuts in return for immediate tax rebates. The rebates goosed spending for a while but provided no increase in incentives to invest. Only after 2003, when the marginal-rate cuts took effect immediately, combined with cuts in dividend and capital gains rates, did robust growth return. The expansion was healthy until it was overtaken by the housing bust and even resisted recession into this year. Mr. Bush and Congress returned to the rebate formula in February, but a blip in second-quarter growth has now ended as the economy heads into recession. The Dow plunged again yesterday with a 514-point drop.
The latest plan is even worse than the spring round of $100 billion or so in tax rebate checks. At least rebates allowed taxpayers to spend their own money. Under this stimulus the government will tax or borrow $150 billion to $300 billion in order to spend the money on social and pork-barrel programs. The latest draft would direct dollars to food stamps, another expansion in unemployment insurance, home heating subsidies, more aid to states and cities, and "infrastructure" like roads, bridges and public transit. Because of Davis-Bacon wage requirements on these brick and mortar projects, a portion of the dollars would coincidentally flow to the Democrats' biggest campaign contributors: unions. Call it a political "rebate" check.
On Tuesday Senator Obama said this spending would create millions of new jobs by closing a federal "investment deficit." Over the past eight years the federal budget has exploded by more than $1.1 trillion, much of it for the very programs that Democrats want to spend more on. Let's start with infrastructure. Three years ago Congress passed a transportation bill of more than $286 billion. The transportation budget is up 22% after inflation in the past eight years. Roads and bridges can help economic growth if they increase productivity by more than the amount they cost in higher taxes or borrowing. But not if they are bridges to nowhere as so many of these projects are.
How about aid to local communities? That spending has soared by 91% after inflation in eight years. The education budget is up 57%. Welfare programs are up 30%. Only two years ago Democrats were calling the Tom DeLay Republicans spendthrift. Now they say there's an "investment deficit."
Federal budget deficits are not something we obsess about, but eventually this new spending has to be paid for, and Barney Frank's comments only underscore that big tax increases are coming. The prospect of these tax increases is now hanging over the economy like a pall, as investors and businesses wonder where and how heavily an Obama Administration and Congress would strike. The pall is likely to continue well into 2009, as millions of Americans delay their investment decisions until they know how much their after-tax returns are likely to fall.
If Mr. Obama really wants a "stimulus," he'll announce that given the condition of the economy he won't raise taxes at all. Meanwhile, all of us are getting a preview of Obamanomics in action.
from the Wall Street Journal, 2008-Oct-21, by William McGurn:
Obama Talks Nonsense on Tax Cuts
Revenues will inevitably be diverted from Social Security.Now we know: 95% of Americans will get a "tax cut" under Barack Obama after all. Those on the receiving end of a check will include the estimated 44% of Americans who will owe no federal income taxes under his plan.
In most parts of America, getting money back on taxes you haven't paid sounds a lot like welfare. Ah, say the Obama people, you forget: Even those who pay no income taxes pay payroll taxes for Social Security. Under the Obama plan, they say, these Americans would get an income tax credit up to $500 based on what they are paying into Social Security.
Just two little questions: If people are going to get a tax refund based on what they pay into Social Security, then we're not really talking about income tax relief, are we? And if what we're really talking about is payroll tax relief, doesn't that mean billions of dollars in lost revenue for a Social Security trust fund that is already badly underfinanced?
Austan Goolsbee, the University of Chicago economic professor who serves as one of Sen. Obama's top advisers, discussed these issues during a recent appearance on Fox News. There he stated that the answer to the first question is that these Americans are getting an income tax rebate. And the answer to the second is that the money would not actually come out of Social Security.
"You can't just cut the payroll tax because that's what funds Social Security," Mr. Goolsbee told Fox's Shepard Smith. "So if you tried to do that, you would undermine the Social Security Trust Fund."
Now, if you have been following this so far, you have learned that people who pay no income tax will get an income tax refund. You have also learned that this check will represent relief for the payroll taxes these people do pay. And you have been assured that this rebate check won't actually come out of payroll taxes, lest we harm Social Security.
You have to admire the audacity. With one touch of the Obama magic, what otherwise would be described as taking money from Peter to pay Paul is now transformed into Paul's tax relief. Where a tax cut for payroll taxes paid will not in fact come from payroll taxes. And where all these plans come together under the rhetorical umbrella of "Making Work Pay."
Not everyone is persuaded. Andrew Biggs is a scholar at the American Enterprise Institute and a former Social Security Administration official who has written a great deal about Mr. Obama's plans on his blog (AndrewBiggs.blogspot.com). He notes that to understand the unintended consequences, it helps to remember that while people at the bottom pay a higher percentage of their income in payroll taxes, they are accruing benefits in excess of what they pay in.
"It's interesting that Mr. Obama calls his plan 'Making Work Pay,'" says Mr. Biggs, "because the incentives are just the opposite. By expanding benefits for people whose benefits exceed their taxes, you're increasing their disincentive for work. And you're doing the same at the top of the income scale, where you are raising their taxes so you can distribute the revenue to others."
Even more interesting is what Mr. Obama's "tax cuts" do to Social Security financing. As Mr. Biggs notes, had Mr. Obama proposed to pay for payroll tax relief out of, well, payroll taxes, his plan would never have a chance in Congress. Most members would look at a plan that defunded a trust fund that seniors are counting on for their retirement as political suicide.
And that leads us to the heart of this problem. If the government is going to give tax cuts to 44% of American based on their Social Security taxes -- without actually refunding to them the money they are paying into Social Security -- Mr. Obama will have to get the funds elsewhere. And this is where "general revenues" turns out to be a more agreeable way of saying "Other People's Money."
When asked about his priorities during the second presidential debate, Mr. Obama said that reform of programs like Social Security would have to go on the back burner for two years or so. "We're not going to solve Social Security and Medicare unless we understand the rest of our tax policies," he said.
The senator is right. But you have to read the fine print of his tax cuts to know why.
from the San Diego Union-Tribune, 2008-Oct-19:
The new Democratic Party
The party's wealthy elites no longer represent the working classWhat happened to the Democratic Party? Just a few generations ago, the party of Franklin Roosevelt went to bat for the little guy, the common man, the everyday Joe the plumber.
Not anymore. Now, the wealthy elites who run the Democratic Party have declared war on working-class Americans while pretending to defend them against greedy and heartless Republicans.
Those would be the same Republicans whose vice presidential nominee, Sarah Palin, doesn't just talk about working-class people but actually embodies one and yet has been savaged by liberals.
And those would be the same Republicans who have devised a tax plan that might just appeal to “Joe the Plumber” Wurzelbacher, the Ohio resident who dared to confront Barack Obama over the unfairness of his tax plan.
In a candid moment that could well lose him some votes, Obama acknowledged to Wurzelbacher that he intended, if elected president, to take the wealth of those making more than 250,000 per year and “spread it around” to others making less. That wasn't very smart, and the Obama campaign knows it.
So they're trying to change the subject by making Joe the Plumber the issue. They're doing so, with a little help from their friends in the news media and labor unions, by digging into Joe's background in search of something embarrassing. Already, the pro-Obama forces have found that Joe Wurzelbacher owes back taxes, doesn't have a plumbing license, and may not be registered to vote. And there may be more to come.
That will teach Joe to keep quiet. Let's hope the country learns a lesson as well – about what the Democratic Party used to be and what it has become.
from Seeking Alpha, 2008-Oct-28, by Jason Schwarz:
Market turmoil gets Barack Obama elected. He knows this and more importantly, so do his supporters. A survey released by Prince and Associates, shows that 75% of voters worth $1 million to $10 million are favoring John McCain, but of those voters worth more than $30 million, two-thirds support Obama. It's no secret that the majority of uber rich individuals despise the current administration and are willing to do whatever they can to get new blood into the White House; even if it comes under conditions of an economic collapse.
These Obama billionaires, led by famed market manipulator George Soros, would love to kill two birds with one stone. If they can get their man into the White House and buy back into the stock market at a once-in-a-generation low on November 5th they will be able to declare a double victory.
While the billionaire's club lacks the actual resources to completely move the broad market, they definitely have the resources to start a snowball effect. In 2005, George Soros convened with his group of 70 super-rich liberal donors in Phoenix to evaluate why their efforts to defeat President Bush had failed. They came away from that meeting with a plan to push even harder for a victory in 2008. The recent overreaction in equity prices has been attributed to the hedge fund/mutual fund redemption crisis that caused record amounts of money to exit the market during the first half of October. Could it be that the big money had something to do with the panic?
October 3rd was an especially vulnerable moment for the market, it was the day that the $700 billion bailout bill was passed. As the market looked for direction on that pivotal day, the Dow rose to 10,844 but was pushed down in the last hour of trading to 10,325. The downhill market snowball had begun even though a solution to the financial crisis had been passed. We haven’t seen Dow 10,000 since. But we have seen a lot of manipulation occur during the last ten minutes of trading on multiple days since October 3rd.
The media went wild with predictions of another Black Monday mixed in with a feeling of doom and gloom like we haven’t seen since the Great Depression. What for? The government had just taken the systematic threat of bank failure off the table. Conditions were vastly improved but the market still panicked and Obama slowly assured himself of a November 4th victory.
Perhaps the most clear indication of market manipulation has been the price of gold. If the market truly believed all of the doom and gloom that the media is preaching, that the Great Depression is upon us, gold would have quickly eclipsed its 52-week high of $1028. Remarkably it has gone down; yesterday it closed at $742. This price action indicates that the wild volatility we have experienced in the broad market may have been started from a small minority of wealthy players.
So how should investors play this underlying market tussle? You’ll want to own the ‘babies that have been thrown out with the bath water’. There is a select group of stocks with pristine balance sheets and solid growth prospects who have been beaten down for no good reason. I will be averaging into many of these stocks after the (unknown and usually incorrect) initial GDP report is released on October 30th in anticipation that big money will be getting back into the market post election.
1-Apple (AAPL) $25 billion cash, 0 debt2-Automatic Data Processing (ADP): $1.5 billion cash, $66 million debt3-China Mobile (CHL): $31 billion cash, $4.96 billion debt4-Cisco (CSCO): $26.3 billion cash, $6.89 billion debt5-Ebay (EBAY): $3.64 billion cash, 0 debt6-Exxon Mobil (XOM): $40 billion cash, $9.64 billion debt7-Garmin (GRMN) $660 million cash, 0 debt8-Geron (GERN): $185 million cash, 0 debt9-Google (GOOG): $14 billion cash, 0 debt10-Gushan Environmental (GU): $168 million cash, 0 debt11-Intuitive Surgical (ISRG): $408 million cash, 0 debt12-Lululemon Athletica (LULU): $43 million cash, 0 debt13-NVIDIA (NVDA): $1.66 billion cash, 0 debt14-Stryker (SYK): $2.6 billion cash, 0 debt15-Yahoo (YHOO): $3 billion cash, 0 debtThis list of 15 stocks has been beaten down with the rest of the market and they will be the early leaders once sentiment changes; I expect substantial support to arrive in US equities once Obama is elected. When the mood improves, those record amounts of cash sitting on the sidelines will jump in for fear of being left behind. What will all that cash be buying, cash of course.
from the New York Post, 2008-Oct-15:
Obama Tells the Tax Truth
An unscripted moment with an Ohio plumber produced a startling confession from Barack Obama Sunday: The Democrat's "middle-class tax cut" is in fact a scheme to "spread the wealth around."
Obama dropped the mask long enough to tell the truth to Toledo plumber Joe Wurzelbacher - who had asked the Democratic nominee why he wanted to jack up his taxes just for "fulfilling the American dream."
"I'm getting ready to buy a company that makes $250,000 to $280,000 a year," Wurzelbacher had told Obama. "Your new tax plan is going to tax me more, isn't it?"
"It's not that I want to punish your success," Obama replied. "I just want to make sure that everybody who is behind you, that they've got a chance for success, too . . . When you spread the wealth around, it's good for everybody."
At last! The truth outs!
Obama's plan isn't about sinking hooks into Wall Street CEOs and other fat cats, as he usually says. Fact is, there's not enough of them to raise the cash necessary to finance his other grand plans.
No, to do that, he'll have to go after ambitious working-class guys like Wurzelbacher - who's been a plumber for 15 years and is looking to better himself and his family while just maybe creating a few jobs.
The American Dream?
Wurzelbacher personifies it - but Barack Obama seems determined to tax it to death and be done with it, period.
That's been the case all along, of course. What's different is that the Democrat finally said so.
Heretofore, Obama has sought to paint himself as a tax-cutter - claiming he'll slash taxes for 95 percent of Americans.
As we noted yesterday, that's a flat-out lie - not least because nearly half of all tax filers pay no income tax at all. So how can he "cut" their taxes if they don't pay any to begin with?
Answer: tax "credits."
To wit, in part:
* A $1,000 "make work pay" credit.
* A $4,000 college-tuition credit.
* A $6,000 child-care credit.
* A $1,100 bump in the earned-income tax credit.
These aren't to be income-tax deductions - which would be worthless to those who pay no income taxes.
These are to be checks from Washington - with the subsidies expected to grow to more than $1 trillion in 10 years.
That's a massive transfer of wealth.
How does Obama justify it?
"Fairness," he says.
But that's an absurdly radical view of what's "fair."
Remember, Obama's tax hikes target folks who already bear the brunt of the burden: The top 20 percent of earners already pay 69 percent of all federal taxes - and 88 percent of income taxes.
(Contrast that with John McCain's call yesterday for real tax cuts - halving the capital-gains levy, scrapping taxes on unemployment benefits altogether - designed to prime the economic pump.)
Monday, Obama promised a tax policy that would restore "a sense of fairness and balance that will give every American a fair shot at the American dream."
But just a day before, he told Joe Wurzelbacher the truth: No American dream for you, buddy!
Nor anybody else, it seems.
from Investor's Business Daily, 2008-Oct-10:
Investors' Real Fear: A Socialist Tsunami
The Crash: "Why has the market dropped so much?" everyone asks. What is it about the specter of our first socialist president and the end of capitalism as we know it that they don't understand?
The freeze-up of the financial system — and government's seeming inability to thaw it out — are a main concern, no doubt. But more people are also starting to look across the valley, as they say, at what's in store once this crisis passes.
And right now it looks like the U.S., which built the mightiest, most prosperous economy the world has ever known, is about to turn its back on the free-enterprise system that made it all possible.
It isn't only that the most anti-capitalist politician ever nominated by a major party is favored to take the White House. It's that he'll also have a filibuster-proof Congress led by politicians who are almost as liberal.
Throw in a media establishment dedicated to the implementation of a liberal agenda, and the smothering of dissent wherever it arises, and it's no wonder panic has set in.
What is that agenda? It starts with a tax system right out of Marx: A massive redistribution of income — from each according to his ability, to each according to his need — all in the name of "neighborliness," "patriotism," "fairness" and "justice."
It continues with a call for a new world order that turns its back on free trade, has no problem with government controlling the means of production, imposes global taxes to support continents where our interests are negligible, signs on to climate treaties that will sap billions more in U.S. productivity and wealth, and institutes an authoritarian health care system that will strip Americans' freedoms and run up costs.
All the while, it ensures that nothing — absolutely nothing — will be done to secure a sufficient, terror-proof supply of our economic lifeblood — oil — a resource we'll need much more of in the years ahead.
The businesses that create jobs and generate wealth are already discounting the future based on what they know about Obama's plans to raise income, capital gains, dividend and payroll taxes, and his various other economy-crippling policies. Which helps explain why world stock markets have been so topsy-turvy.
But don't take our word for it. One hundred economists, five Nobel winners among them, have signed a letter noting just that:
"The prospect of such tax-rate increases in 2010 is already a drag on the economy," they wrote, noting that the potential of higher taxes in the next year or two is reducing hiring and investment.
It was "misguided tax hikes and protectionism, enacted when the U.S. economy was weak in the early 1930s," the economists remind us, that "greatly increased the severity of the Great Depression."
We can't afford to repeat these grave errors.
Yet much of the electorate is determined to vote for the candidate most likely to make them. If he wins, what we consider to be a crisis in today's economy will be a routine affair in tomorrow's.
from McCain-Palin 2008, 2008-Oct-8 :
Economists Statement on Barack Obama's Risky Economic Proposals
100 Economists Warn That With Current Weak Financial Conditions Barack Obama's Proposals Run A High Risk Of Throwing The US Into A Deep RecessionARLINGTON, VA -- Today, McCain-Palin 2008 released the following statement signed by 100 distinguished and experienced economists at major American universities and research organizations, including five Nobel Prize winners Gary Becker, James Buchanan, Robert Mundell, Edward Prescott, and Vernon Smith. The economists explain why Barack Obama's proposals, including "misguided tax hikes," would "decrease the number of jobs in America." The prospects of such tax rate increases under Barack Obama are already harming the economy. The economists conclude that "Barack Obama's economic proposals are wrong for the American economy." The proposals "defy both economic reason and economic experience."
The full economists' statement on Barack Obama's economic proposals and a complete list of economists who support it follows:
Barack Obama argues that his proposals to raise tax rates and halt international trade agreements would benefit the American economy. They would do nothing of the sort. Economic analysis and historical experience show that they would do the opposite. They would reduce economic growth and decrease the number of jobs in America. Moreover, with the credit crunch, the housing slump, and high energy prices weakening the U.S. economy, his proposals run a high risk of throwing the economy into a deep recession. It was exactly such misguided tax hikes and protectionism, enacted when the U.S. economy was weak in the early 1930s, that greatly increased the severity of the Great Depression.
We are very concerned with Barack Obama's opposition to trade agreements such as the pending one with Colombia, the new one with Central America, or the established one with Canada and Mexico. Exports from the United States to other countries create jobs for Americans. Imports make goods available to Americans at lower prices and are a particular benefit to families and individuals with low incomes. International trade is also a powerful source of strength in a weak economy. In the second quarter of this year, for example, increased international trade did far more to stimulate the U.S. economy than the federal government's "stimulus" package.
Ironically, rather than supporting international trade, Barack Obama is now proposing yet another so-called stimulus package, which would do very little to grow the economy. And his proposal to finance the package with higher taxes on oil would raise oil prices directly and by reducing exploration and production.
We are equally concerned with his proposals to increase tax rates on labor income and investment. His dividend and capital gains tax increases would reduce investment and cut into the savings of millions of Americans. His proposals to increase income and payroll tax rates would discourage the formation and expansion of small businesses and reduce employment and take-home pay, as would his mandates on firms to provide expensive health insurance.
After hearing such economic criticism of his proposals, Barack Obama has apparently suggested to some people that he might postpone his tax increases, perhaps to 2010. But it is a mistake to think that postponing such tax increases would prevent their harmful effect on the economy today. The prospect of such tax rate increases in 2010 is already a drag on the economy. Businesses considering whether to hire workers today and expand their operations have time horizons longer than a year or two, so the prospect of higher taxes starting in 2009 or 2010 reduces hiring and investment in 2008.
In sum, Barack Obama's economic proposals are wrong for the American economy. They defy both economic reason and economic experience.
Robert Barro, Harvard University
Gary Becker, University of Chicago
Sanjai Bhagat, University of Colorado
Michael Block, University of Arizona
Brock Blomberg, Claremont-McKenna University
Michael Bordo, Rutgers University
Michael Boskin, Stanford University
Ike Brannon, McCain-Palin 2008
James Buchanan, George Mason University
Todd Buchholtz, Two Oceans Fund
Charles Calomiris, Columbia University
Jim Carter, Vienna VA
Barry Chiswick, University of Illinois at Chicago
John Cogan, Hoover Institution
Kathleen Cooper, Southern Methodist University
Ted Covey, McLean VA
Dan Crippen, former CBO Director
Mario Crucini, Vanderbilt
Steve Davis, University of Chicago
Christopher DeMuth, American Enterprise Institute
William Dewald, Ohio State University
Frank Diebold, University of Pennsylvania
Isaac Ehrlich, State University of New York at Buffalo
Paul Evans, Ohio State University
Dan Feenberg, NBER
Martin Feldstein, Harvard University
Eric Fisher, California Polytechnic State University
Kristin Forbes, MIT
Timothy Fuerst, Bowling Green State University
Diana Furchtgott-Roth, Hudson Institute
Paul Gregory, University of Houston
Earl Grinols, Baylor University
Rik Hafer, Southern Illinois University Edwardsville
Gary Hansen, UCLA
Eric Hanushek, Hoover Institutions
Kevin Hassett, American Enterprise Institute
Arlene Holen, Technology Policy Institute
Douglas Holtz-Eakin, McCain-Palin 2008
Glenn Hubbard, Columbia University
Owen Irvine, Michigan State University
Mike Jensen, Harvard University
Steven Kaplan, University of Chicago
Robert King, Boston University
Meir Kohn, Dartmouth
Marvin Kosters, American Enterprise InstituteAnne Krueger, Johns Hopkins University
Phil Levy, American Enterprise Institute
Larry Lindsey, The Lindsey Group
Paul W. MacAvoy. Yale University
John Makin, American Enterprise Institute
Burton Malkiel, Princeton University
Bennett McCallum, Carnegie-Mellon University
Paul McCracken, University of Michigan
Will Melick, Kenyon College
Allan Meltzer, Carnegie-Mellon University
Enrique Mendoza, University of Maryland
Jim Miller, George Mason University
Michael Moore, George Washington University
Robert Mundell, Columbia University
Tim Muris, George Mason University
Kevin Murphy, University of Chicago
Richard Muth, Emory University
Charles Nelson, University of Washington
Bill Niskanen, Cato Institute
June O'Neill, Baruch College, CUNY
Lydia Ortega, San Jose State University
Steve Parente, University of Minnesota
William Poole, University of Delaware
Michael Porter, Harvard University
Barry Poulson, University of Colorado, Boulder
Edward Prescott, Arizona State University
Kenneth Rogoff, Harvard University
Richard Roll, UCLA
Harvey Rosen, Princeton University
Robert Rossana, Wayne State University
Mark Rush, University of Florida
Tom Saving, Texas A&M University
Anna Schwartz, NBER
George Shultz, Stanford University
Chester Spatt, Carnegie-Mellon University
David Spencer, Brigham Young University
Beryl Sprinkle, Former Chair Council of Economic Advisers
Houston Stokes, University of Illinois in Chicago
Robert Tamura, Clemson University
Jack Tatum, Indiana State University
John Taylor, Stanford University
Richard Vedder, Ohio University
William B. Walstad, University of Nebraska
Murray Weidenbaum, Washington University in St. Louis
Arnold Zellner, University of Chicagofrom the Wall Street Journal, 2008-Oct-13:
Obama's 95% Illusion
It depends on what the meaning of 'tax cut' is.One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.
It's a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he's also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of "tax cut."
For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase "tax credit." Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals:
- A $500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple.
- A $4,000 tax credit for college tuition.
- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).
- A "savings" tax credit of 50% up to $1,000.
- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.
- A child care credit of 50% up to $6,000 of expenses a year.
- A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles.
Here's the political catch. All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.
The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.
The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.
The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.
It is also true that John McCain proposes a refundable tax credit -- his $5,000 to help individuals buy health insurance. We've written before that we prefer a tax deduction for individual health care, rather than a credit. But the big difference with Mr. Obama is that Mr. McCain's proposal replaces the tax subsidy for employer-sponsored health insurance that individuals don't now receive if they buy on their own. It merely changes the nature of the tax subsidy; it doesn't create a new one.
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.
from the Wall Street Journal, 2008-Oct-17:
A Liberal Supermajority
Get ready for 'change' we haven't seen since 1965, or 1933.If the current polls hold, Barack Obama will win the White House on November 4 and Democrats will consolidate their Congressional majorities, probably with a filibuster-proof Senate or very close to it. Without the ability to filibuster, the Senate would become like the House, able to pass whatever the majority wants.
Though we doubt most Americans realize it, this would be one of the most profound political and ideological shifts in U.S. history. Liberals would dominate the entire government in a way they haven't since 1965, or 1933. In other words, the election would mark the restoration of the activist government that fell out of public favor in the 1970s. If the U.S. really is entering a period of unchecked left-wing ascendancy, Americans at least ought to understand what they will be getting, especially with the media cheering it all on.
The nearby table shows the major bills that passed the House this year or last before being stopped by the Senate minority. Keep in mind that the most important power of the filibuster is to shape legislation, not merely to block it. The threat of 41 committed Senators can cause the House to modify its desires even before legislation comes to a vote. Without that restraining power, all of the following have very good chances of becoming law in 2009 or 2010.
Saved by the Filibuster
Bills that passed the House in the 110th Congress but were blocked in the Senate
Prescription drug price controls
Union card check
Representation for District of Columbia
Renegotiate mortgage contracts in bankruptcy
Eliminate statute of limitations on workplace discrimination suits
Bar funding for Iraq war
Windfall profits tax on oil companies
Source: Senate minority leader- Medicare for all. When HillaryCare cratered in 1994, the Democrats concluded they had overreached, so they carved up the old agenda into smaller incremental steps, such as Schip for children. A strongly Democratic Congress is now likely to lay the final flagstones on the path to government-run health insurance from cradle to grave.
Mr. Obama wants to build a public insurance program, modeled after Medicare and open to everyone of any income. According to the Lewin Group, the gold standard of health policy analysis, the Obama plan would shift between 32 million and 52 million from private coverage to the huge new entitlement. Like Medicare or the Canadian system, this would never be repealed.
The commitments would start slow, so as not to cause immediate alarm. But as U.S. health-care spending flowed into the default government options, taxes would have to rise or services would be rationed, or both. Single payer is the inevitable next step, as Mr. Obama has already said is his ultimate ideal.
- The business climate. "We have some harsh decisions to make," Speaker Nancy Pelosi warned recently, speaking about retribution for the financial panic. Look for a replay of the Pecora hearings of the 1930s, with Henry Waxman, John Conyers and Ed Markey sponsoring ritual hangings to further their agenda to control more of the private economy. The financial industry will get an overhaul in any case, but telecom, biotech and drug makers, among many others, can expect to be investigated and face new, more onerous rules. See the "Issues and Legislation" tab on Mr. Waxman's Web site for a not-so-brief target list.
The danger is that Democrats could cause the economic downturn to last longer than it otherwise will by enacting regulatory overkill like Sarbanes-Oxley. Something more punitive is likely as well, for instance a windfall profits tax on oil, and maybe other industries.
- Union supremacy. One program certain to be given right of way is "card check." Unions have been in decline for decades, now claiming only 7.4% of the private-sector work force, so Big Labor wants to trash the secret-ballot elections that have been in place since the 1930s. The "Employee Free Choice Act" would convert workplaces into union shops merely by gathering signatures from a majority of employees, which means organizers could strongarm those who opposed such a petition.
The bill also imposes a compulsory arbitration regime that results in an automatic two-year union "contract" after 130 days of failed negotiation. The point is to force businesses to recognize a union whether the workers support it or not. This would be the biggest pro-union shift in the balance of labor-management power since the Wagner Act of 1935.
- Taxes. Taxes will rise substantially, the only question being how high. Mr. Obama would raise the top income, dividend and capital-gains rates for "the rich," substantially increasing the cost of new investment in the U.S. More radically, he wants to lift or eliminate the cap on income subject to payroll taxes that fund Medicare and Social Security. This would convert what was meant to be a pension insurance program into an overt income redistribution program. It would also impose a probably unrepealable increase in marginal tax rates, and a permanent shift upward in the federal tax share of GDP.
- The green revolution. A tax-and-regulation scheme in the name of climate change is a top left-wing priority. Cap and trade would hand Congress trillions of dollars in new spending from the auction of carbon credits, which it would use to pick winners and losers in the energy business and across the economy. Huge chunks of GDP and millions of jobs would be at the mercy of Congress and a vast new global-warming bureaucracy. Without the GOP votes to help stage a filibuster, Senators from carbon-intensive states would have less ability to temper coastal liberals who answer to the green elites.
- Free speech and voting rights. A liberal supermajority would move quickly to impose procedural advantages that could cement Democratic rule for years to come. One early effort would be national, election-day voter registration. This is a long-time goal of Acorn and others on the "community organizer" left and would make it far easier to stack the voter rolls. The District of Columbia would also get votes in Congress -- Democratic, naturally.
Felons may also get the right to vote nationwide, while the Fairness Doctrine is likely to be reimposed either by Congress or the Obama FCC. A major goal of the supermajority left would be to shut down talk radio and other voices of political opposition.
- Special-interest potpourri. Look for the watering down of No Child Left Behind testing standards, as a favor to the National Education Association. The tort bar's ship would also come in, including limits on arbitration to settle disputes and watering down the 1995 law limiting strike suits. New causes of legal action would be sprinkled throughout most legislation. The anti-antiterror lobby would be rewarded with the end of Guantanamo and military commissions, which probably means trying terrorists in civilian courts. Google and MoveOn.org would get "net neutrality" rules, subjecting the Internet to intrusive regulation for the first time.
* * *
It's always possible that events -- such as a recession -- would temper some of these ambitions. Republicans also feared the worst in 1993 when Democrats ran the entire government, but it didn't turn out that way. On the other hand, Bob Dole then had 43 GOP Senators to support a filibuster, and the entire Democratic Party has since moved sharply to the left. Mr. Obama's agenda is far more liberal than Bill Clinton's was in 1992, and the Southern Democrats who killed Al Gore's BTU tax and modified liberal ambitions are long gone.
In both 1933 and 1965, liberal majorities imposed vast expansions of government that have never been repealed, and the current financial panic may give today's left another pretext to return to those heydays of welfare-state liberalism. Americans voting for "change" should know they may get far more than they ever imagined.
from the Wall Street Journal, 2008-Oct-20, by Mary Anastasia O'Grady:
Obama Is Wrong About Colombia
Labor unions are much safer under Uribe.After the final debate between John McCain and Barack Obama last week, the media lost no time digging for dirt on Joe the Plumber. Too bad a similar level of scrutiny was not applied to the slanderous remarks Mr. Obama made against Colombia.
Joe, in case you've been hiding under a rock, is the working-class, well, Joe, from Toledo, Ohio, who last week delivered a neat summation of the Obama economic plan: Increase taxes on successful risk-takers and use the money to expand the welfare rolls.
Joe was practicing what I call the audacity of veracity. He made the Harvard-trained candidate look bad. For that the media decided he needed to be taken down a notch. Meanwhile, the fourth estate walked away from any serious discussion of Mr. Obama's slander of the finest U.S. ally in Latin America.
To be fair, Mr. Obama probably did not set out on Wednesday night to insult millions of Colombians and revive the notion many U.S. neighbors have of the Ugly Gringo. But when Mr. McCain pointed out that opposing the U.S.-Colombia Free Trade Agreement doesn't make sense -- because the U.S. is already open to imports from Colombia and because the agreement will open new markets for U.S. exporters during rough economic times -- Mr. Obama was caught flat-footed.
He reached into his memory bank for whatever he had been told to say about Colombia. He seems to have found his hard drive loaded with Big Labor talking points. Here's what it spit out: "The history in Colombia right now," he said, "is that labor leaders have been targeted for assassination, on a fairly consistent basis, and there have not been prosecutions."
Mr. McCain should have blown the whistle right there because bearing false witness against your neighbor, who also happens to be a friend, is a foul. Labor killings in Colombia have gone down sharply in the past five years and convictions have gone up. Mr. Obama was wrong. Moreover, Mr. McCain missed an opportunity to ask Mr. Obama how he squares his antagonism toward Colombia -- whose president has an 80% approval rating -- with his promise to boost America's image abroad.
An American politician ought to know better than to deliver a morality lecture to Colombia. American demand for cocaine, which funds Colombia's worst criminality -- including the bloodthirsty Revolutionary Armed Forces of Colombia (FARC) -- has nearly wrecked that beautiful country. Colombians, who have bravely cooperated with the hapless U.S. "war on drugs," have paid a steep price.
By the time President Alvaro Uribe took office in August 2002, Colombia was almost a failed state. That year there were 28,837 homicides nationwide, making it one of the most dangerous places on planet Earth.
There were also 196 union members killed that year. Their deaths were not unrelated to the political violence sweeping the country. The dominant public-sector unions have their roots in a revolutionary ideology that they share with the FARC. This has put them on the left side of Colombia's violent politics for decades. On the other side have been those who took up arms to oppose guerrilla aggression.
Mr. Uribe has worked to restore peace by strengthening the state. This has been bad for both sides. But as the rebels have been pushed back, FARC sympathizers have run to Washington to discredit Mr. Uribe. Democrats have welcomed them. Meanwhile the death toll has dropped dramatically, and union members have especially benefited from improved security.
As a Journal editorial on Friday explained, from 2002 to 2007 the number of murdered Colombian union members dropped by almost 87%. By any fair standard that is progress, especially considering the pattern Mr. Uribe inherited. In 2000, 155 unionists were murdered and in 2001, 205 died. The numbers only started to come down when he took the helm.
In October 2006, the president created a special investigative unit inside the attorney general's office to handle union murders. The unit began operations in February 2007, and it says that as of this August "some 855 cases have open investigations" and that "179 security preventive detention measures have been issued, 61 cases are ready to be referred to court for trial, and 115 suspects have been convicted in 75 sentences."
It is far safer to be a union member today in Colombia than to be a member of the general population. This is a fact, and it would be interesting to know why Mr. Obama has repeatedly refused to acknowledge it.
Is it because of his heavy reliance on campaign contributions from the antitrade AFL-CIO? Or perhaps, like House Speaker Nancy Pelosi, Mr. Obama has an ideological bias in favor of Colombia's hard left. If it's the latter, then it is worth asking whether an Obama presidency would change U.S. foreign policy to look more favorably on insurgents of the FARC variety.
from the Wall Street Journal, 2008-Oct-20:
Nafta-Plus
Canada looks to Europe in anticipation of Obama protectionism.Barack Obama's promise to unilaterally rewrite the North American Free Trade Agreement if Canada and Mexico won't go along with his ideas on labor and the environment has not gone unnoticed in Ottawa. If Canadians are going to have a tougher time selling their goods and services south of the border, who can blame them for looking east -- across the Atlantic to Europe.
Prime Minister Stephen Harper and President Nicolas Sarkozy of France signed an agreement Friday to begin negotiations for a free trade pact between Canada and the European Union. A Canada-EU study released last week outlines the joint economic benefits of such a partnership, with two-way trade estimated to increase 22.9% by 2014.
The proposed partnership goes a lot further than Nafta. In addition to allowing free trade in goods and services, it would harmonize regulations, open up the air-travel market, and boost opportunities in government-procurement. Most important, it would free the labor market so that skilled workers could move easily back and forth across the Atlantic.
The free-labor point is key. As recently as half a century ago, Canadians and Americans were pretty much free to work in either country without the visa restrictions that apply today. Under the proposed Canada-EU agreement, a computer geek from, say, the University of Waterloo -- one of whose alumni developed the BlackBerry -- would be able to take a job in Hamburg or Dublin if he wished; forget about Silicon Valley.
At a news conference on Friday, Mr. Harper said, "We must stand against protectionism and work to lower and eliminate barriers." If Canada and the EU are successful in liberating their economic relationship, we have a question: Can the U.S. join too?
from Investor's Business Daily, 2008-Oct-13:
An Obama 'Rescue' Plan That Doesn't
Election '08: On the eve of a final debate, Barack Obama unveiled an emergency "rescue" of the middle class from capitalism. The details show it to be all hype and no help.
Democratic presidential nominee Barack Obama's announcement in Toledo, Ohio, of a "middle-class rescue plan" is reminiscent of Groucho Marx's means of rescuing the drowning damsel who double-crossed him in the film "Horse Feathers."
"Throw me a lifesaver!" she shouted.
Groucho's character, buffoonish college president Quincy Adams Wagstaff, promptly produced from his pocket a roll of peppermint Lifesavers and tossed her one.
Obama's idea of letting people deplete 15% of their 401(k) investment holdings is indicative of the candidate we have come to know, who wants ordinary people to look to the government for money — and not, as has been the trend in recent years, to their investment portfolios. Encourage novice investors to get out and stay out of the stock market right after a historic decline? Only a socialist mind-set would exploit the financial crisis in such a way.
Obama's campaign likes to call the middle class "the economic engine of America." But that engine's fuel is private-sector investment, most of which, naturally, comes from those with higher incomes. This community organizer from Chicago's South Side, whose career was launched with the help of unrepentant Weather Underground terrorists Bill Ayers and Bernadine Dohrn, will not accept that.
The Illinois senator might be one of the shrewdest presidential candidates ever, but he does slip. For instance, he promises to end capital gains taxes on investments for small businesses and start-ups.
But on a campaign stop in Toledo, he couldn't assure self-employed 34-year-old plumber Joe Wurzelbacher to his face that he would get a tax cut. Poised to buy a $250,000-a-year firm, the working-class plumber of 15 years confronted Obama.
"Your new tax plan is going to tax me more, isn't it?" he asked.
Obama responded with the promise of a 50% tax credit for health care, but the senator conceded that Wurzelbacher's income taxes would indeed rise.
"It's not that I want to punish your success," Obama told him. "I just want to make sure that everybody who is behind you — that they've got a chance at success too."
Wurzelbacher, who would shoulder all the responsibility and risk of such an investment, did not look impressed. Obama then let the cat out of the bag, saying:
"I think when you spread the wealth around, it's good for everybody."
He certainly does, and his unguarded statement to a voter in a key swing state is socialist economics distilled to its simplest terms.
Eliminating small business capital gains taxes — whatever the details would be (and you can bet it would be a fraction of total private investment) — will not rescue the middle class from the job losses of a high-tax Obama administration planning to spend an extra $293 billion annually. It does, however, cunningly deaden charges that Obama is camouflaging a socialist agenda.
The other components of his so-called rescue, lovingly described by the New York Times as "proposals to spur new jobs, to give Americans penalty-free access to retirement savings to help them through the downturn, to urge a 90-day moratorium on home foreclosures and to lend money to strapped local and state governments" are worded to sound equally innocuous. But a close look tells another story.
His $3,000 income-tax credit for each new full-time employee hired by businesses is an obvious anti-outsourcing incentive likely to increase business costs, of which we can expect plenty more — of a directly punitive nature — in an Obama administration. He would replace the judgment of banks with that of the federal government regarding when or if to foreclose. And he wants the Federal Reserve and the Treasury to bail out spendthrift state and local governments.
John McCain is reportedly considering a broad, simple capital gains tax cut. An across-the-board cut would be a real middle-class rescue, focused on generating new private sector employment — the proven way of "spreading the wealth around," a concept which Obama, with his deftly disguised socialism, cannot grasp.
from RealClearPolitics, 2008-Oct-8, by Steven Malanga:
The Bailout and the Vanishing Taxpayer
We have heard much in the press lately about the American taxpayer being forced to rescue the sharpies on Wall Street from their own greed and irresponsibility. Anti-bailout sentiment cuts “across class lines” on Main Street because “the taxpayers are on the hook for the bad judgment of others,” as the Washington Post put it.
Now for a reality check. Many Americans probably won't pay a cent of the cost of this bailout. That's because a rapidly increasing percentage of U.S. households legally pay no income taxes, and many others pay so little in taxes that they already get back more from the federal government in services than they send to Washington. The number of taxpayers who generate a surplus for the federal government—that is, pay more in taxes than they receive in services—is small and shrinking, which is why the only way that the folks on Main Street will pay for this bailout will be if Main Street is where the mansions are in your town.
The declining portion of households who pay taxes is a direct result of policies pursued by both Republicans and Democrats over the last 15 years or so. While deductions and credits have always served to eliminate the tax bill for some low and lower-middle income workers, from 1950 through roughly 1990, the percentage of households with no income tax burden stood constant at slightly more than one-fifth of all filers, according to the Tax Foundation. But since 1990, Washington has added all sorts of tax credits—subsidizing everything from “lifetime learning” to adoption expenses--that have further reduced the tax tab, and in the process raised the proportion of households with no federal tax liability to 33 percent.
A big culprit in this evolution is the current Bush administration and its tax packages. Although the 2001 and 2003 tax cuts are often criticized as having favored the rich, in fact they were also laden with tax credits benefiting low and middle income families, and as a result, under Bush, the percent of families not paying taxes increased more than under any other president during the last 50 years.
Both presidential candidates would vastly accelerate the trend. Barack Obama's tax cut proposals, if enacted, would boost the proportion of those paying no income tax by one-third to a whopping 44 percent of all households, according to the Tax Foundation. John McCain's proposal is not much different in that regard. Under his plan, 43 percent of households would pay no federal income taxes.
But even among those who still pay an income tax, only a small percent would likely be on the hook for the additional costs of the bailout. By one estimate, the federal government already spends more than $20,000 per household in direct services or services that are considered part of the `general good' of the nation (like national defense). That's a big number, that $20,000. A married couple filing jointly wouldn't pay $20,000 in income taxes until they earned about $110,000 in taxable income--that's income after deductions.
Of course, we pay for Washington government in more ways than simply through our personal income tax. A report by the Congressional Budget Office, Historical Effective Tax Rates, looks at our total contribution in federal taxes, including payroll and Medicare taxes, excise taxes and the share of corporate taxes that individuals pay (because we all individually bear the burden of business taxes). That study suggests that we hit the $20,000 in federal taxes mark somewhere around $95,000 in taxable income—still a big number. Of the 138 million households who file tax returns, only about 16 million, or 11 percent, earn enough to pay more to the feds in taxes than they get back in services.
The largest differences are generational, because younger and older households have less income and use more in government services than those headed by adults in their peak earning years. Thus, households consisting of adults 34-and-under and those of adults 65-and-over are a net cost to the government, while families headed by people ages 45-to-54 are the biggest net contributors, paying $1 in taxes for every 73 cents in services. It's a good bet that middle and upper income families in that age bracket will foot a big part of this bailout bill.
On the other hand, federal legislators could decide that in light of the massive government commitment to the bailout we need to cut federal spending, which might shift some of the burden for the bailout to those who benefit from whichever programs are reduced. And the next president could determine that the country can't afford his tax plans, and not pursue them. That might spare high-income earners from paying an even bigger part of the tab. But nothing that I've heard emanating from Washington suggests either likelihood.
In the end, how we actually pay for the bailout is just part of the issue. The larger point is that if McCain or Obama follow through with their tax plans, we'll continue a trend that makes us look more and more like some European social welfare state, where many people have a stake in growing government entitlements, which fewer and fewer taxpayers finance. At some point along that road, change becomes impossible because too many citizens benefit from the system in place, while those who pay the freight for this system try whatever they can, including starting businesses elsewhere, or reducing their output, to avoid the disproportionate tax bite. That's a prescription for a static economy largely bereft of opportunity. On the other hand, we probably won't have to worry about volatile markets in such a world. Steven Malanga is an editor for RealClearMarkets and a senior fellow at the Manhattan Institute
from the Wall Street Journal, 2008-Nov-3, by Bari Weiss:
Are Obama's Friends Fair Game?
Prof. Khalidi thinks your associates matter.It's not every presidential election that American voters are introduced to characters like former domestic terrorist Bill Ayers or Middle East historian Rashid Khalidi -- both of whom, we have learned, Barack Obama worked and socialized with in Chicago.
To the Obama campaign, these men are unimportant, except as products of the McCain campaign's desperate willingness to deploy tactics of guilt-by-association. But faced with Mr. Obama's short record, pundits and voters are looking for clues about Mr. Obama's character, and thus at friends like Messrs. Ayers and Khalidi.
I took a class with Mr. Khalidi at Columbia University. He designed the course, a survey of Modern Middle East history, on his 2004 book, "Resurrecting Empire: Western Footprints and America's Perilous Path in the Middle East." The book, inspired by the work of the late Edward Said, is a polemic against the use of American power in the Middle East. Said is quoted, prophesying: "We are in for many more years of turmoil and misery in the Middle East, where one of the main problems is, to put it as plainly as possible, American power."
For the final exam, we were asked to respond to the following: "The United States has been an unmitigated force for good in the world." No one doubted the professor's view on the matter.
Disdain for American power and a muscular foreign policy are the standard at Columbia. But in rereading "Resurrecting Empire" this past week, I took new note of the book's dedication: to Said, and to Mr. Ayers. Mr. Khalidi writes: "First, chronologically and in other ways, comes Bill Ayers. He persuaded me a little over a year ago that I should write this book . . . Bill was particularly generous in letting me use his family's dining room table to do some of the writing for this project." Mr. Khalidi also thanks Mr. Ayers's notorious wife: "Bernardine Dohrn continually encouraged me to keep working on the book when I was traveling and at home."
This dedication is an insight into Mr. Obama's social milieu in Chicago. In April, Mr. Obama dismissed Mr. Ayers simply as "a guy who lives in my neighborhood" -- omitting that the two men had worked together for years at a multimillion dollar foundation. Other notable parts of the record: Mr. Obama held an early meeting of his campaign for Illinois State Senate in Mr. Ayers's living room; Mr. Obama blurbed a 1997 book of Mr. Ayers as "searing and timely"; and Mr. Obama toasted Mr. Khalidi at a 2003 farewell dinner for the professor who was moving from the University of Chicago to Columbia.
Is it fair for voters to judge Mr. Obama by some of the company he has kept? Mr. Khalidi implied last week that he thinks not. The controversy over his connection to Mr. Obama was "an idiot wind," he said. But Mr. Khalidi is not shy about judging others by their associations. In explaining the 2003 American invasion of Iraq, Mr. Khalidi pointed to a favorite target of left-wing academics, neoconservative government policy makers and their connections to Israel. He wrote:
"The idea that the neocons and [the Israeli right-wing party] Likud are joined at the hip is reinforced by a revealing piece of intellectual affinity: University of Chicago professor Leo Strauss, the revered mentor of [Deputy Defense Secretary] Paul Wolfowitz, his deputy in the Pentagon Avram Shulsky, and many other neocon leading lights, was a great admirer of Vladimir Jabotinsky, founder of the extreme ultranationalist Revisionist branch of Zionism from which Likud has grown."
So on the one hand, Mr. Khalidi charges that American voters today would be caught in an "idiot wind" if they worry about Mr. Obama's connections to radical intellectuals. Yet Mr. Khalidi and many of his colleagues write volumes about how a group of intellectuals supposedly hijacked American foreign policy during this decade. It's not only the right that argues that friendships -- particularly when they are animated by political questions -- should be taken into account.
Ms. Weiss is a writer living in New York.
from Forbes online, 2008-Oct-21, by Richard A. Epstein:
The Obama I (Don't) Know
Chicago - My Obama number is one. I know him through our association at the University of Chicago Law School and through mutual friends in the neighborhood. We have had one or two serious substantive discussions, and when I sent him e-mails from time to time in the early days of his Senate term, he always answered in a sensible and thoughtful fashion. And yet, for assessing the course of his likely presidency, I don't know him at all.
It should come as no surprise that the traditionally liberal Hyde Park community is a veritable hotbed of support for Obama. So my manifest reluctance on his candidacy raises more than a single eyebrow: Loyalty for the home team counts.
The odd point is how his many learned and thoughtful supporters couch their endorsement. Almost without exception, they praise the man, not the program. Their claim is that Obama has proved himself to be a consummate politician who understands that the first principle of holding high office is to get reelected. His natural moderation in tone and demeanor, therefore, translate into getting advisers who know their substantive areas, and listening to them before making any rash moves. The dominant trope is that he will be a pragmatic president who will move in small increments toward the center, not in bold steps toward the left.
But is it all true? The short answer is that nobody knows. Virtually everyone who knows him recognizes that he plays his cards close to the vest, so that you can make your case to him without knowing whether it has registered. At this point, my fear is that the change in office will not lead to a change in his liberal voting record, as reinforced by a hyperactive Democratic platform. My great fear is that a landslide victory will give him solid majorities in both Houses of Congress, so that no stalling tactics by Republicans can slow down his legislative victory procession. At that point his innate pragmatism will line up with his strong left-of-center beliefs on issues that have thus far been muted during the campaign.
Put otherwise, Obama's vague calls for change that "you can believe in" are, to my thinking, wholly retrograde in their implications. At heart, he is an unreconstructed New Dealer who can see, and articulate, both sides on every question--but only as a prelude to championing the old corporatist agenda with a vengeance.
That program has three key components, which, taken together, can convert a shaky financial situation into a global depression. The first of these is his anti-free trade attitude that loomed so large in the primaries. But even Obama cannot repeal the principle of comparative advantage. Any efforts to scuttle NAFTA, deny fast-track approval to other agreements, or limit outsourcing will not be as dramatic as the Smoot-Hawley tariff. But combined, they would act as a depressant on general economic growth. Everyone would suffer.
Second, Obama is committed to strengthening unions by his endorsement of the Employer Free Choice Act, a misnamed statute that forces union recognition without elections and employment contracts through mandatory arbitration thereafter. That one-two punch could tie up the very small businesses that Obama seems determined to help. Tax relief won't work for firms that won't get formed because a labor fight is not in their initial budget.
And third, he is in favor of progressive individual taxes and high corporate taxes. It is as though the U.S. does not have to compete for labor and capital in global markets. My fear is that with his strong egalitarian bent, he has not internalized the lesson that high rates do not offset declining revenues.
Thus, even before we get to the added bells and whistles of the modern welfare state--windfall profits taxes, ethanol subsidies, health care--an Obama administration could lock us into a downward spiral by ignoring the simple fundamentals of sound governance. Boy, does this stalwart libertarian ever hope that his friends are right and his gloomy prediction is wrong!
Richard Epstein writes a weekly column for Forbes.com. He is a senior fellow at Stanford's Hoover Institution and a professor of law at the University of Chicago, visiting this fall at the New York University School of Law.
from Commentary Magazine online, 2008-Oct-14, by Peter Wehner:
A Question of Character
At a time when many people are saying Barack Obama's past associations with radical figures doesn't matter — and even that it shouldn't matter - it's worth considering the opposite argument.
From the ancient Greeks to the founding fathers, many of our best political minds believed character in our leaders matters. It doesn't matter more than anything else, and character is itself a complicated thing. People can have strong character in some respects and weak character in others. People can demonstrate battlefield valor, for example, yet show cruelty to those over whom they have power. They can speak unpleasant truths when there is a high cost to doing so and betray their spouses. Individuals can demonstrate admirable loyalty to their friends and still lie to the public, or work for peace and yet violate the laws of our land.
Still, in our wiser moments, we have always understood that character, broadly defined, is important to possess for those in high public office, in part because it tells us whether our leaders warrant our trust, whether their word is dependable, and whether they are responsible. And one of the best indicators of character is the people with whom you associate. This is basic, elementary-school level common sense. The odds are your parents wanted you to hang around with the “right” crowd instead of the wrong crowd because if you hung around with the latter it meant its members would be a bad influence on you, it would reflect poorly on you, and you'd probably end up getting into trouble.
What applies to 10-year-olds also applies to presidential candidates.
Over the years, Barack Obama hung around with some pretty disturbing characters, and what we're talking about aren't isolated incidents. It has happened with a slew of people on a range of issues. He has connected himself with domestic terrorists (William Ayers and Bernadine Dohrn), with an anti-American and racist minister (Jeremiah Wright), and with corrupt people (Antoin “Tony” Rezko) and organizations (ACORN). What we see, then, is a pattern.
Will it be something that will manifest itself if Obama is elected President? It's impossible to know for sure, and we can hope it wouldn't be the case. But it might.
The concern is not that Obama will invite domestic terrorists to the White House for signing ceremonies or private lunches; rather, it is that we know enough about Obama to say that his enormous personal ambition has clouded his judgment over the years. He looks to be a man who will do disquieting things in order to climb the ladder of political success; when he was in Hyde Park, the rungs on that ladder included Mr. Ayers and the Reverend Wright. This kind of trait — soaring ambition trumping sound judgment — can manifest itself in very problematic ways, especially when you occupy the most powerful office in the world.
For those who say that these associations don't matter, that they're “distractions” from the more urgent problems of our time and an example of “Swift-boating,” consider this: if John McCain had sat in the pew of a pastor who was a white supremacist and launched his political career at the home of, and developed a working relationship with, a man who bombed abortion clinics or black churches and, for good measure, was unrepentant about it, McCain's political career would be (rightly) over, and he would be (rightly) ostracized.
A political reference point may be helpful here. Senator Trent Lott was hounded out of his post as Majority Leader because of a few inappropriate comments — made in bad taste but in jest — at Strom Thurmond's 100th birthday party. Much of the media and the political class were outraged. Yet we have a case in which Obama has had close, intimate relations with some really unsavory folks, and we're told it doesn't matter one bit.
It's true enough that the McCain campaign has never explained in a sustained, adequate way why these radical associations matter; that McCain, for reasons that are hard to fathom, has declared the Reverend Jeremiah Wright is off limits; and that the MSM is so deeply wed to Obama's victory that they have done all they can to turn the issue of Obama's radical associations into a problem for John McCain rather than Barack Obama. And so it's quite possible that raising Obama's radical associations in the last 20 days won't be politically effective and may even be politically counterproductive, given the economic crisis we're facing and the ham-handed way it's been handled so far. Many Americans certainly seems to be of the mind that Obama's associations with Ayers and Wright and all the rest don't matter.
I get all that. But some of us believe there is a responsibility to make this case in a calm, responsible, factual way. We believe it's important to explain why Obama's radical associations bear on the question of his character, and why Obama's character bears on the question of electing our next President. This issue shouldn't, by itself, be dispositive. Nor should it be the only, or even the most important, issue in the campaign. Nor is it fair to say that Obama's character can be understood only through the prism of his associations. But to evoke eye-rolling, dismissive reactions in response to simply raising the issue is an effort to sideline a legitimate topic.
The time-honored truth is that character matters in leaders. Sometimes people forget that lesson - and when they do, it's appropriate to remind them. And whether the country understands it or not, and whether voters think it's a big deal or not, integrity and associations matter.
If Barack Obama is elected President, sooner or later people will realize this applies to him as well. It's only right to ask the relevant questions in advance of this election — and despite the ridicule being dished out by the acolytes and cheerleaders of Senator Obama, it's not too much to ask Obama to explain his relationship over the years with people who have a disturbing history of violence, hatred for America, and corruption.
from NewsMax.com, 2008-Nov-1, by Kenneth R. Timmerman:
Obama-Farrakhan Ties Are Close, Ex-Farrakhan Aide Says
A former top deputy to Nation of Islam leader Louis Farrakhan tells Newsmax that Barack Obama's ties to the black nationalist movement in Chicago run deep, and that for many years the two men have had “an open line between them” to discuss policy and strategy, either directly or through intermediaries.
“Remember that for years, if you were a politician in Chicago, you had to have some type of relationship with Louis Farrakhan. You had to. If you didn't, you would be ostracized out of black Chicago,” said Dr. Vibert White Jr., who spent most of his adult life as a member and ultimately top officer of the Nation of Islam.
White broke with the group in 1995 and is now a professor of African-American history at the University of Central Florida in Orlando.
White said Obama was “part of the Chicago scene” where Farrakhan, Jesse Jackson, the Rev. Jeremiah Wright Jr. and radicals would go to each other's events and support each other's causes.
“Even though Chicago is the third-largest city in the country, within the black community, the political and militant nationalist community is very small. So it wouldn't be uncommon for [Obama and Farrakhan] to show up at events together, or at least be there and communicate with each other,” White told Newsmax.
The Anti-Defamation League has denounced Farrakhan and his Nation of Islam as a “hate group.”
Farrakhan has called Jews “bloodsuckers,” “satanic” and accused them of running the slave trade. He has labeled gays as “degenerates.” In a 2006 speech, the ADL again condemned Farrakhan when he said: “These false Jews promote the filth of Hollywood that is seeding the American people and the people of the world and bringing you down in moral strength. … It's the wicked Jews the false Jews that are promoting lesbianism, homosexuality. It's wicked Jews, false Jews that make it a crime for you to preach the word of God, then they call you homophobic!"
Obama was careful to “denounce” Farrakhan's comments – but not the man -- during the Democratic primary season earlier this year, but only after Hillary Clinton called him out for benefiting from Farrakhan's support.
Farrakhan endorsed Obama in a videotaped speech to his followers at Mosque Miryam in Chicago in February. “You are the instruments that God is gonna use to bring about universal change, and that is why Barack has captured the youth,” Farrakhan said.
He told the crowd that Obama was the new “messiah.” See Video: Farrakhan Endorses Obama, Calls Him Messiah.
Once the news media and the Clinton campaign got hold of those comments from Farrakhan, demands mounted from all sides that Obama “renounce” Farrakhan.
But as he has done repeatedly throughout this campaign, Obama was careful to parse his words.
“You know, I have been very clear in my denunciation of Minister Farrakhan's anti-Semitic comments,” he said during one appearance on “Meet the Press.” “I think that they are unacceptable and reprehensible.”
Obama hastened to point out that Farrakhan had been praising him as “an African-American who seems to be bringing the country together. I obviously can't censor him, but it is not support that I sought. And we're not doing anything, I assure you, formally or informally with Minister Farrakhan.”
But Obama, once again, was less than candid.
In 1995, according to a profile of Obama that appeared in the Chicago Reader newspaper, Obama “took time off from attending campaign coffees to attend October's Million Man March in Washington, D.C.”
At the time, Obama was running for the Illinois Senate from Chicago's South Side, a seat he won after getting surrogates to challenge the signatures on nominating petitions for his chief rival, the incumbent Alice Palmer.
The march, which fell far short of attracting the million men it advertised, was organized by Farrakhan and by Obama's then-pastor, the anti-white black nationalist Wright.
Obama spoke at length with the Chicago Reader upon his return from the Million Man March. “What I saw was a powerful demonstration of an impulse and need for African-American men to come together to recognize each other and affirm our rightful place in the society," he said.
“These are mean, cruel times, exemplified by a `lock 'em up, take no prisoners' mentality that dominates the Republican-led Congress,” Obama said.
“Historically, African-Americans have turned inward and towards black nationalism whenever they have a sense, as we do now, that the mainstream has rebuffed us, and that white Americans couldn't care less about the profound problems African-Americans are facing."
“Black nationalism” is a current of thought and political action in the African-American community that has been championed by the likes of Farrakhan, Wright, Malcolm X, the Black Panthers and Khalid al-Mansour. Obama discussed his attraction to black nationalism at length in his 1995 memoir “Dreams of My Father.”
Obama further parsed his words in a Feb. 25, 2008, presentation to a Jewish community meeting in Cleveland, Ohio, where he insisted that Wright “does not have a close relationship with Louis Farrakhan.”
And yet, just months earlier, Wright's Trumpet magazine gave Farrakhan its Lifetime Achievement Dr. Jeremiah A. Wright Jr. Trumpeter Award, saying that Farrakhan “truly epitomized greatness.”
That award was the fruit of a long and deep relationship between the two men, White told Newsmax. In 1984, Wright accompanied Farrakhan on his much-criticized trip to meet Libyan leader Moammar Gadhafi, at a time when Gadhafi was considered an enemy of the United States.
Wright also accompanied Farrakhan and Jackson to Syria in 1986, where they successfully negotiated with Syrian strongman for the release of downed American pilot Robert O. Goodman.
Obama's Speaking Style
In addition to the ideological affinity Obama expressed for the black nationalist movement, White believes that Obama owes much of his success as a public orator to speaking techniques that Farrakhan developed over the years, and exploited for years to great success.
“If you listen to the rhetoric and you take away Obama's political jargon, you hear a religious tenor to it that is very much Nation of Islam-like. I don't know if anyone has ever touched on it, but Obama's speaking style is very Malcolm-like, very Farrakhan-like,” White said.
Any American who has listened to early radio or television interviews of Obama can hear how dramatically Obama's speaking style has changed since he became a United States senator.
In clips dating from 2001 and even early 2004, Obama speaks haltingly and in long, rambling sentences packed with legalese and dense pseudo-academic rhetoric. But not today.
“As a former minister of the Nation of Islam, I know how they speak,” White told Newsmax. “I don't know who was training Obama. But that style is not a ministerial style like in the Christian church. It's a Nation of Islam style.”
White began in the late 1970s as a foot soldier in the Fruit of Islam, the military branch of Farrakhan's Black Muslim group, then rose to become a minister of the Nation of Islam and a top deputy to Farrakhan himself.
Known initially as Brother Vibert L.X., and later as Minister V.L. Muhammad, he parted ways with Farrakhan not long after the Million Man March, after nearly 25 years within the organization.
White's 2002 book “Inside the Nation of Islam” prompted death threats by Farrakhan loyalists, so he left Illinois and moved to Florida to teach at the University of Central Florida.
He told Newsmax that Obama's remarkable speaking style, even his manner of standing at a podium to appear larger than life, is directly copied from Farrakhan.
“If the Nation of Islam can't do anything else, it can train people how to speak. And nobody can outspeak a Muslim minister,” he said.
Earlier this year, a pro-Clinton blog run by former CIA officer Larry Johnson unearthed a 2004 photograph showing Michelle Obama and Farrakahn's wife, Mother Khadijah Farrakhan, at an event hosted by Jackson's Citizenship Education Foundation.
Newsmax queried Obama's U.S. Senate office, his Chicago office and his campaign press office about his ties to Farrakhan, but did not receive a reply.
Ever since he appeared before the annual policy conference of the American-Israel Public Affairs Committee in June, Obama has attempted to convince the Jewish community that he is pro-Israel.
But his longstanding ties to Farrakhan, Wright and Palestinian activist Rashid Khalidi, among others, have disturbed many Jewish community leaders.
Sen. John McCain publicly chastised The Los Angeles Times on Thursday for not releasing a videotape the newspaper said it possessed of a 2003 dinner for Khalidi, where Obama reportedly accused Israel of carrying out a “genocide” against the Palestinians.
from WorldNetDaily, 2008-Oct-31:
Ayers dedicated book to Sirhan Sirhan
Obama's colleague saw Robert Kennedy's assassin as 'political prisoner'Bill Ayers, the man with whom Democratic presidential nominee Barack Obama worked on Chicago projects, published his own manifesto during his years as an active terrorist and dedicated it to a list of people including Sirhan Sirhan, the assassin of Democratic presidential candidate Robert F. Kennedy.
According to Fox News, Ayers – the Weather Underground terrorist who bombed the U.S. Capitol and the Pentagon, and stated recently he wished he could have done more – used his book, "Prairie Fire," to announce his intention to "attack from the inside" and "disrupt the empire, to incapacitate it, to put pressure on the cracks, to make it hard to carry out its bloody functioning against the people of the world."
When confronted in a debate, Obama described Ayers as "just a guy who lives in my neighborhood." But the campaign of Republican nominee John McCain has made much of of the fact that Ayers hired Obama to work on the Annenberg Challenge in Chicago and shared duties with him on the board of the Woods Fund, charities that distributed millions of dollars to leftist causes.
The weblog Dakota Voice cited a passage from the book:
We are a guerrilla organization. We are communist women and men, underground in the United States for more than four years. We are deeply affected by the historic events of our time in the struggle against U.S. imperialism.
Our intention is to disrupt the empire, to incapacitate it, to put pressure on the cracks, to make it hard to carry out its bloody functioning against the people of the world, to join the world struggle, to attack from the inside.
Our intention is to engage the enemy, to wear away at him, to harass him, to isolate him, to expose every weakness, to pounce, to reveal his vulnerability.
Our intention is to encourage the people, to provoke leaps in confidence and consciousness, to stir the imagination, to popularize power, to agitate, to organize, to join in every way possible the people's day-to-day struggles.
Our intention is to forge an underground, a clandestine political organization engaged in every form of struggle, protected from the eyes and weapons of the state, a base against repression, to accumulate lessons, experience and constant practice, a base from which to attack.
"This book contains terrorist, Marxist, anti-American writings that should make the blood of any red-blooded American boil," Dakota Voice said. "Stop and consider for a moment that Barack Obama allowed this America-hating terrorist help launch his political career in his living room. That Barack Obama worked with this man on the board of the Annenberg Challenge and the Woods Fund. That they sat together on panels like the one over juvenile justice.
"How can we possibly consider electing someone with this wretched judgment (and possibly questionable sympathies) to the presidency?" the Voice said.
The publication said Democrats should be upset, because Robert Kennedy has been a hero to the party. Sirhan was convicted of shooting Kennedy June 5, 1968, at the Ambassador Hotel in Los Angeles, where the candidate had just finished a campaign appearance.
According to several online biographies, Sirhan, who remains imprisoned in California, was an Arab who had emigrated to the U.S. and reportedly was disturbed by Kennedy's pro-Israel positions.
"Hannity & Colmes" co-host Sean Hannity said the book, which Ayers co-wrote with his wife, Bernardine Dohrn, in 1974, includes about 100 or so names described as "political prisoners in the U.S." on the dedication page.
Among those is Sirhan.
"That's right," Hannity said. "This college professor, who is just a guy from the neighborhood who never meant to hurt anybody, who bombed the Pentagon, the Capitol, New York City police headquarters, dedicated his book to the man who assassinated Robert F. Kennedy."
from Fox News, 2008-Oct-27, by John R. Lott Jr.:
The Barack Obama We Hardly Know
Is Barack Obama a socialist? A Marxist? It is hard to believe that question could even be seriously asked of a major party political candidate.
Nevertheless, there have been a few times that voters have gotten a glimpse of Obama in unguarded moments. Glimmers that remind me of the left-wing academic whom I ran into a number of times while we were both at the University of Chicago Law School.
— When Charlie Gibson asked Obama in April why he supported higher capital gains taxes, even if that meant less government revenue and thus less money to give to those Obama wants to help, Obama didn’t challenge Gibson’s claim. Instead he said: “I would look at raising the capital gains tax for purposes of fairness.”
— In the middle of October, when speaking to “Joe the Plumber,” Obama justified higher taxes this way:
"It is not that I want to punish your success. I just want to make sure that everyone who is behind you, that they have a chance for success too. I think that when you spread the wealth around, it is good for everyone.”
— A bombshell was released this weekend when a copy of an interview by Obama on WBEZ-FM, Chicago Public Radio, from 2001 was found (bold italics added):
"The Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society ... and one of the, I think, tragedies of the civil rights movement was, um, because the civil rights movement became so court focused, I think there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalition of powers through which you bring about redistributive change. In some ways we still suffer from that. ... I think that you can craft legal theoretical justifications for it legally, any three of us here could come up with a rational for bringing about economic change through the courts."
Class warfare rhetoric is one thing. But as Obama’s comments to Charlie Gibson indicate, Obama disapproves of the very notion that people should be successful. Why is making the wealthy poorer “fairness,” even when the poor also get less money? The goal is not to help the poor, it's to keep the wealthy from getting too much. It is apparently better that everyone be poorer than it is to have everyone have more money but a greater dispersion of income.
How is simply giving people money a way to make sure that they “have a chance for success too”? Obama might end up giving people who currently aren’t paying taxes even more money than they currently get from the Earned Income Tax Credit. But he will be doing so at a real cost: he is creating a high effective marginal tax rate that will keep them poor and keep them dependent on the government largess.
Obama’s tax credits are phased out as people earn higher incomes — that is, the government takes money away from you as your income goes up. Someone earning an extra dollar at $40,000 will find that income taxes alone will take 40 cents from that dollar.
Obama’s old comments from WBEZ seem impossible to ignore. Put aside that Obama obviously doesn’t believe that affirmative action represents redistributive justice. Saying that the Supreme Court “never ventured” into “redistribution of wealth” rules that out.
Obama’s constant theme is of transferring wealth, to “spread it around.”
There is so much else beyond his statements. Obama surrounded himself with people who were socialists and communists. Obama’s minister of 20 years, the Rev. Jeremiah Wright with his black liberation theology, a religion described as turning “Jesus into a black Marxist rebel.” Father Michael Pfleger, another Obama spiritual adviser, is also quite leftist. And his associate William Ayers apparently told an author, who was writing a book on 1960s radicals shortly before the foundation was set up in 1995, that “I’m a radical, leftist, small ‘c’ communist.”
In April Obama was caught on tape telling San Francisco donors, in a meeting that was closed to the press, that “it’s not surprising then they get bitter, [small town Pennsylvanians] cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.” It was a very elitist left-wing statement. But the despising of people turning to religion is certainly something held in common by those on the far left.
During the presidential campaign Obama’s past positions have generally been ignored. Why wasn’t there one single question during the debates as to why Obama has so radically changed his positions on so many issues within just a few months?
Who is Obama going to put on the Supreme Court? With Democrats controlling a filibuster-proof Senate, will we be seeing the most extreme left-wing academics in law schools fill up the courts?
from the Washington Post, 2008-Oct-10, by Charles Krauthammer:
Obama & Friends: Judge Not?
WASHINGTON -- Convicted felon Tony Rezko. Unrepentant terrorist Bill Ayers. And the race-baiting Rev. Jeremiah Wright. It is hard to think of any presidential candidate before Barack Obama sporting associations with three more execrable characters. Yet let the McCain campaign raise the issue, and the mainstream media begin fulminating about dirty campaigning tinged with racism and McCarthyite guilt by association.
But associations are important. They provide a significant insight into character. They are particularly relevant in relation to a potential president as new, unknown, opaque and self-contained as Obama. With the economy overshadowing everything, it may be too late politically to be raising this issue. But that does not make it, as conventional wisdom holds, in any way illegitimate.
McCain has only himself to blame for the bad timing. He should months ago have begun challenging Obama's associations, before the economic meltdown allowed the Obama campaign (and the mainstream media, which is to say the same thing) to dismiss the charges as an act of desperation by the trailing candidate.
McCain had his chance back in April when the North Carolina Republican Party ran a gubernatorial campaign ad that included the linking of Obama with Jeremiah Wright. The ad was duly denounced by The New York Times and other deep thinkers as racist.
This was patently absurd. Racism is treating people differently and invidiously on the basis of race. Had any white presidential candidate had a close 20-year association with a white preacher overtly spreading race hatred from the pulpit, that candidate would have been not just universally denounced and deemed unfit for office but written out of polite society entirely.
Nonetheless, John McCain in his infinite wisdom, and with his overflowing sense of personal rectitude, joined the braying mob in denouncing that perfectly legitimate ad, saying it had no place in any campaign. In doing so, McCain unilaterally disarmed himself, rendering off-limits Obama's associations, an issue that even Hillary Clinton addressed more than once.
Obama's political career was launched with Ayers giving him a fundraiser in his living room. If a Republican candidate had launched his political career at the home of an abortion-clinic bomber -- even a repentant one -- he would not have been able to run for dogcatcher in Podunk. And Ayers shows no remorse. His only regret is that he "didn't do enough."
Why are these associations important? Do I think Obama is as corrupt as Rezko? Or shares Wright's angry racism or Ayers' unreconstructed 1960s radicalism?
No. But that does not make these associations irrelevant. They tell us two important things about Obama.
First, his cynicism and ruthlessness. He found these men useful, and use them he did. Would you attend a church whose pastor was spreading racial animosity from the pulpit? Would you even shake hands with -- let alone serve on two boards with -- an unrepentant terrorist, whether he bombed U.S. military installations or abortion clinics?
Most Americans would not, on the grounds of sheer indecency. Yet Obama did, if not out of conviction then out of expediency. He was a young man on the make, an unknown outsider working his way into Chicago politics. He played the game with everyone, without qualms and with obvious success.
Obama is not the first politician to rise through a corrupt political machine. But he is one of the rare few to then have the audacity to present himself as a transcendent healer, hovering above and bringing redemption to the "old politics" -- of the kind he had enthusiastically embraced in Chicago in the service of his own ambition.
Second, and even more disturbing than the cynicism, is the window these associations give on Obama's core beliefs. He doesn't share Rev. Wright's poisonous views of race nor Ayers' views, past and present, about the evil that is American society. But Obama clearly did not consider these views beyond the pale. For many years he swam easily and without protest in that fetid pond.
Until now. Today, on the threshold of the presidency, Obama concedes the odiousness of these associations, which is why he has severed them. But for the years in which he sat in Wright's pews and shared common purpose on boards with Ayers, Obama considered them a legitimate, indeed unremarkable, part of social discourse.
Do you? Obama is a man of first-class intellect and first-class temperament. But his character remains highly suspect. There is a difference between temperament and character. Equanimity is a virtue. Tolerance of the obscene is not.
from the Institute for Social Justice's Social Policy Magazine via Capital Research Center, 2004-Oct-10:
Case Study: Chicago-The Barack Obama Campaign
[...]
The March primary was not particularly important for the presidential race, as Kerry was just in the process of clinching ihe Dem presidential nomination. But it was critical in the U.S. Senate race. On March 16th, State Senator Barack Obama won the right to represent the Democratic Party in the U.S. Senate campaign. Jack Ryan won the Republican nomination that day, but went on to self-destruct over sex club tevelations in his divorce papers. Sen. Obama went on to keynote the Democratic Convention in July and was catapulted to the national stage. As Sen. Obama puts it, how did a skinny kid with a funny name become the Democratic candidate tbr the U.S. Senate, with 53% of the statewide Democratic vote in a seven-person field?
Obama started building the base years before. For instance, ACORN noticed him when he was organizing on the far south side of the city with the Developing Communities Project. He was a very good organizer. When he returned from law school, we asked him to help us with a lawsuit to challenge the state of Illinois' refusal to abide by the National Voting Rights Act, also known as motor voter. Allied only with the state of Mississippi, Illinois had been refusing to allow mass-based voter registration according to the new law. Obama look the case, known as ACORN vs. Edgar (the name of ihe Republican governor at the time) and we won. Obama then went on to run a voter registration project with Project VOTE in 1992 that made it possible for Carol Moseley Braun to win the Senate that year. Project VOTE delivered 50,000 newly registered voters in that campaign (ACORN delivered about 3000 of them).
Since then, we have invited Obama to our leadership training sessions lo run the session on power every year, and, as a result, many of our newly developing leaders got to know him before he ever ran for office. Thus, it was natural for many of us to be active volunteers in his lirst campaign tor State Senate and then his failed bid for U.S. Congress in 1996. By the time he ran for U.S. Senate, we were old friends. [...]
[Read "Case Study: Chicago-The Barack Obama Campaign" in its entirety as originally published. Note that access for it was briefly denied on ACORN/ISJ's own web site, though it is now (2008-Oct-13) restored. -AMPP Ed.]
from National Review Online, 2008-Oct-22, by Andrew C. McCarthy:
Another Communist in Obama's Orb
Meet Michael Klonsky, Obama's "social justice" education expert.The mainstream press steadfastly refuses to delve into Barack Obama’s radicalism, his Leftist revolutionary collaboration with self-identified communists from Frank Marshall Davis to Bill Ayers. The McCain campaign, moreover, has contributed mightily to the whitewash by ineptly seizing on the issue’s least important aspect: Obama’s abject dishonesty about the depth of his relationships with committed Leftists — e.g., the portrayal of Ayers as just “a guy who lives in my neighborhood.”
(Petrified of being smeared as a racist, McCain has never mentioned Davis, whom Obama identifies only as “Frank” in his memoir. And, of course, utterance of Jeremiah Wright’s name is verboten in McCain circles, notwithstanding that his Trinity Church, where Obama was a 20-year member, is a font of Marxist Black Liberation Theology and thus critical to our understanding of Obama’s invocations of “change” and “spreading the wealth.”)
With what little media oxygen there has been sucked out by the largely uninformative discussion of Ayers (and his wife and Weather Underground ally, Bernadine Dohrn) — in which the mantra “unrepentant terrorist” has been a pale substitute for the critical matter of the Ayers’s ideology that Obama plainly shares — much has been missed. Significantly, that includes another key Obama contact, Mike Klonsky.
Here’s what you need to know. Klonsky is an unabashed communist whose current mission is to spread Marxist ideology in the American classroom. Obama funded him to the tune of nearly $2 million. Obama, moreover, gave Klonsky a broad platform to broadcast his ideas: a “social justice” blog on the official Obama campaign website.
To be clear, as it seems always necessary to repeat when Obamaniacs, in their best Saul Alinsky tradition, shout down the opposition: This is not about guilt by association. The issue is not that Obama knows Klonsky … or Ayers … or Dohrn … or Wright … or Rashid Khalidi …
The issue is that Obama promoted and collaborated with these anti-American radicals. The issue is that he shared their ideology.
Klonsky’s communist pedigree could not be clearer. His father, Robert Klonsky, was an American communist who was convicted in the mid-Fifties for advocating the forcible overthrow of the United States government — a violation of the Smith Act, anti-communist legislation ultimately gutted by the Supreme Court. In the Sixties, Klonsky the younger teamed with Ayers, Dohrn, and other young radicals to form the Students for a Democratic Society. It was out of the SDS that Ayers and Dohrn helped found the Weatherman terrorist group.
Klonsky took a different path, albeit one that led inexorably to a new partnership with Ayers, which Obama mightily helped underwrite. Upon splitting off from the SDS, Klonsky formed a Maoist organization, first known as the “October League,” which ultimately became the “Communist Party (Marxist Leninist).”
Klonsky was CP(ML)’s chairman. He was so highly thought of by Mao’s regime that he was among the first Americans invited to visit Communist China. When he was feted there in 1977, a year after Mao’s death, the communist leadership hailed Klonsky’s party as “reflecting the aspirations of the proletariat and working people.”
Klonsky was a regular guest of the Chicoms until 1981, when the relationship soured over the post-Mao leadership’s free-market reforms. (Yes, Klonsky is apparently more committed to communism than China’s own Communist Party.) So what was a Leftist radical without platform to do? Why, what else? He became an American college professor specializing in education.
After getting his doctorate, Klonsky eventually made his way to Chicago and hooked up with his old SDS comrade (and self-professed “small ‘c’ communist”) Bill Ayers. Together, they co-founded the Small Schools Workshop in 1991. The goal — as Ayers has repeatedly made clear, most prominently in a 2006 speech before Hugo Chavez at an education forum in Caracas — is to bring the same Leftist revolution that has always galvanized them into the classroom.
The concept may be called small schools, but Klonsky and Ayers uniquely grasp the force-multiplier effect. In a small class, the teacher preaching the “social justice” gospel that American capitalism is a racist, materialist, imperialist cauldron of injustice can have greater impact on the students he seeks to mold into his conception of the “good citizen” — and on the teachers he is teaching to be preachers. Writing trenchantly about how this system of “critical pedagogy” short-changes the basic education needs of disadvantaged children, the City Journal’s Sol Stern observes that theorists like Klonsky and Ayers:
nurse a rancorous view of an America in which it is always two minutes to midnight and a knock on the door by the thought police is imminent. The education professors feel themselves anointed to use the nation’s K-12 classrooms to resist this oppressive system. Thus … teachers [are urged] not to mince words with children about the evils of the existing social order. They should portray “homelessness as a consequence of the private dealings of landlords, an arms buildup as a consequence of corporate decisions, racial exclusion as a consequence of a private property-holder’s choice.” In other words, they should turn the little ones into young socialists and critical theorists.
Klonsky himself confirms that this is precisely the goal (italics mine):
[S]uccessful social justice education ensures that teachers strike a balance between debating sociopolitical problems that affect children’s lives and teaching them academic basics on which they will be tested. A science teacher can plant an urban garden, allowing students to learn about plant biology, the imbalance in how fresh produce is distributed and how that affects the health of community residents. An English teacher can explore misogyny or materialism in American culture through the lens of hip-hop lyrics. Or as Rico Gutstein, a professor of mathematics education at the University of Illinois, Chicago, suggests, a math teacher can run probability simulations using real data to understand the dynamics behind income inequality or racial profiling. These are “examples of lessons where you can really learn the math basics,” he says, “but the purpose of learning the math actually becomes an entree into, and a deeper understanding of, the political ramifications of the issue.”
When Obama and Ayers collaborated together on the Chicago Annenberg Challenge (CAC) education-reform project, with Obama chairing the board that oversaw funding decisions, CAC underwrote the Klonsky/Ayers Small Schools Workshop with a whopping $1,056,162. And that’s not all. Nearly another million dollars was steered to the Small Schools Workshop by the Joyce and Woods Funds when Obama sat on their boards. The grand total comes to $1,968,718.
Furthermore, as education remains one of Obama’s core areas of concern — a fact that should frighten you — he gave Klonsky a microphone during the campaign. On the Obama campaign’s official website, Klonsky ran a blog for the candidate, as Klonsky put it, on “education politics and teaching for social justice.” He ran it, that is, until blogger Steve Diamond called attention to it back in June. A that point, the campaign scrubbed the site of all Klonsky traces — a fitting Stalinesque purge, described by Diamond here (and reminiscent of similar efforts to erase the campaign’s false claims about Obama’s relationship with ACORN).
Of course, “What has been will be again, what has been done will be done again; there is nothing new under the sun.” John Stuart Mill called conservatives “the stupid party.” For countless American intellectuals, including many eventual giants of the Right, disdain for bourgeois values led to a ruinous infatuation with the Soviet Union — the audacity of their hope for perfecting mankind blinding them to the unremitting misery wrought by communist ideology.
In 1951, the legendary liberal Supreme Court Justice William O. Douglas insisted that, though communism might be a threat abroad, the movement in this country was a mere “bogeyman” that had been “thoroughly exposed” and “crippled as a political force.” We now know that even as he wrote those words, communists had covertly infiltrated the U.S. government at high levels and that, as a political force, the movement was just getting started. The Klonskys and Ayers were still on the horizon.
Now today’s elites, including some prominent conservative intellectuals, thumb their noses once again at the stupid party. They look longingly at the putatively cerebral Obama, a fit more to their liking even if his politics are, they hope, just a tad wayward. But the Leftist revolutionaries are under no such illusions. In Obama, they see the fulfillment of their dreams to remake America. As Klonsky has explained, “My own support for Obama is … a recognition that the Obama campaign has become a rallying point for young activists and offers hope for rebuilding the civil rights and antiwar coalitions that have potential to become a real critical force in society.”
So get ready for Klonsky’s “social justice.” It’s what Barack Obama calls “change.”
— National Review’s Andrew C. McCarthy chairs the Foundation for the Defense of Democracies’s Center for Law & Counterterrorism and is the author of Willful Blindness: A Memoir of the Jihad (Encounter Books 2008).
from WorldNetDaily, 2008-Oct-30, by Aaron Klein:
Another day, another terror tie for Obama
Professor friend has long history with Arafat's PLOJERUSALEM – Anti-Israel professor Rashid Khalidi, who has been closely tied to Sen. Barack Obama, is currently a top director for an organization that has a long and intertwined history with the Palestine Liberation Organization, including while the PLO was one of the world's foremost terrorist organizations, WND has learned.
Well-known former PLO leaders still sit on the board of Khalidi's organization. The former PLO leaders work for the Palestinian government but now identify themselves as members of the Palestinian Authority largely because the PLO has negative connotations.
Much has been made in recent months about the anti-Israel sentiments of Khalidi, currently a professor at Columbia University. During documented speeches and public events, Khalidi has called Israel an "apartheid system in creation" and a destructive "racist" state. In May, he wrote an opinion piece in The Nation magazine in which he argues Western powers backed Israel's establishment in 1948 due to guilt of the Holocaust and asserts Israel should be dissolved.
Some have also pointed out that in the 1980s, when the PLO was based in Beirut and was carrying out scores of terror attacks and assaults on Lebanese Christians, Khalidi, a local professor, several times used the word "we" when speaking to the media regarding the PLO. He also was quoted in several major newspaper pieces as a professor close to PLO leader Yasser Arafat.
Khalidi has denied serving as a PLO spokesman.
But Khalidi's relationship with the PLO can be seen in his involvement, closely probed by WND, with the Institute for Palestine Studies, a think tank established in Beirut in 1963 that stresses on its website it is an "independent, non-profit Arab institute unaffiliated with any political organization or government."
Khalidi started writing articles in the late 1970s for the institute's Journal of Palestine Studies. He currently serves as the general secretary of the institute and is considered one of its main leaders.
Although it claims to be independent, the institute functioned as the clear intellectual arm of the PLO from its foundation until the early 90s. Many of its board members and featured authors were some of the early pioneers of PLO ideology.
Israeli security officials say the institute was indirectly funded by the PLO through affiliate organizations.
Current and recent board members of Khalidi's institute are well known PLO leaders. Leila Shahid, an institute trustee, was the official PLO representative to Paris in the 1990s and now works for the PA. Hanan Ashrawi, another current institute trustee, served as the PLO's minister of higher education and research and was briefly chief of the PLO's Political Committee before becoming a spokeswoman for Arafat. Her father, Daoud Mikhail, was one of the main founders of the PLO.
Palestinian activist and author Mahmoud Darwish served on the board of Khalidi's institute until his death earlier this year. He was elected to the PLO's Executive Committee in 1987 but resigned in 1993 in protest of peace negotiations with Israel.
Khalidi himself dedicated his 1986 book, "Under Siege," to "those who gave their lives ... in defense of the cause of Palestine and independence of Lebanon" – a clear ode to the PLO. Critics assailed the book as excusing Palestinian terrorism.
In a June 11, 1979, New York Times report, Khalidi was identified as "a professor of political science who is close to [Arafat's faction] Fatah," which was essentially interchangeable with the PLO
A Jan. 6, 1981, Christian Science Monitor piece quoted Khalidi as a professor of political science "with good access to the PLO leadership." In the article, he apparently referred to the PLO as "we" several times.
In an April 26, 1982, piece by New York Times writer Thomas Friedman, Khalidi was again quoted discussing PLO strategy and referred to his relationship to the terror organization as "we."
He told the Times: "If we break the cease-fire now it would not only play into Israel's hands but would also divert world attention away from the popular uprising on the West Bank, which is equally important to the PLO's long-term objectives."
In a second Times piece by Friedman, Khalidi was introduced as "a director of the Palestinian press agency, Wafa." Khalidi's wife Mona reportedly served as a WAFA director.
WAFA was the official news organization of the PLO.
Speaking to WND, the former primary analyst of Palestinian communications for the NSA explained that WAFA had an active role in terrorist activities and that some WAFA employees were involved in terrorism.
"In addition to being a propaganda medium for the PLO, it also broadcast, at the end of its regular programming, coded messages which were very difficult to make sense and were messages to PLO operatives," the former NSA analyst said.
"Often the messages could only be understood after some action had taken place," he said.
Close ties
According to a professor at the University of Chicago who said he has known Obama for 12 years, the Democratic presidential hopeful first befriended Khalidi when the two worked together at the university. The professor spoke on condition of anonymity. Khalidi lectured at the University of Chicago until 2003, while Obama taught law there from 1993 until his election to the Senate in 2004.
Khalidi in 2000 held what was described as a successful fundraiser for Obama's failed bid for a seat in the U.S. House of Representatives, a fact not denied by Khalidi.
Amid multiple anti-Israel speeches, Obama offered a glowing testimonial in praise of Khalidi at a 2003 farewell dinner, marking the professor's departure from his post at the University of Chicago for a new teaching position at Columbia University. Obama spoke about his many talks with Khalidi.
An article in April in the Los Angeles Times documents how at the Khalidi farewell dinner one young Palestinian American recited a poem in Obama's presence that accused the Israeli government of terrorism in its treatment of Palestinians and sharply criticized U.S. support of Israel.
Another speaker, who reportedly talked while Obama was present, compared "Zionist settlers on the West Bank" to Osama bin Laden, the Times reported.
Obama himself said his talks with the Khalidis served as "consistent reminders to me of my own blind spots and my own biases. … It's for that reason that I'm hoping that, for many years to come, we continue that conversation – a conversation that is necessary not just around Mona and Rashid's dinner table," but around "this entire world."
While Obama served alongside Weathermen radical William Ayers on the board of Woods Fund, a liberal Chicago nonprofit, the group in 2001 provided a $40,000 grant to the Arab American Action Network, or AAAN, for which Khalidi's wife, Mona, serves as president. The Fund provided a second grant to the AAAN for $35,000 in 2002.
The AAAN, headquartered in the heart of Chicago's Palestinian immigrant community, describes itself as working to "empower Chicago-area Arab immigrants and Arab Americans through the combined strategies of community organizing, advocacy, education and social services, leadership development, and forging productive relationships with other communities."
The AAAN has sponsored several anti-Israel events, such as a Palestinian art exhibit, titled "The Subject of Palestine," that featured works related to what some Palestinians call the "Nakba" or "catastrophe" of Israel's founding in 1948.
Another AAAN initiative, titled, "Al Nakba 1948 as experienced by Chicago Palestinians," seeks documents related to the "catastrophe" of Israel's founding.
A post on the AAAN site asked users: "Do you have photos, letters or other memories you could share about Al-Nakba-1948?"
In a possible link, in May, WND noted Obama termed the Israeli-Palestinian conflict a "constant sore" in an interview just five days after Khalidi wrote an anti-Israel opinion piece in the Nation magazine in which he called the "Palestinian question" a "running sore."
Khalidi did not return WND e-mails and phone calls seeking comment for this article.
Speaking in February in a joint interview with WND and the John Batchelor radio show, Khalidi was asked about his 2000 fundraiser for Obama.
"I was just doing my duties as a Chicago resident to help my local politician," Khalidi stated.
Khalidi said he supports Obama for president, "because he is the only candidate who has expressed sympathy for the Palestinian cause."
Khalidi also lauded Obama for "saying he supports talks with Iran. If the U.S. can talk with the Soviet Union during the Cold War, there is no reason it can't talk with the Iranians."
To interview Aaron Klein, contact M. Sliwa Public Relations by e-mail, or call 973-272-2861 or 212-202-4453.
from the American Spectator, 2008-Sep-29, by Matthew Vadum:
Financial Affirmative Action
When the history of the Great Economic Meltdown of 2008 is written, in-your-face shakedown groups like the Greenlining Institute will be held to account.
Greenlining, headquartered in Berkeley, California (where else?), is a left-wing pressure group that threatens nasty public relations campaigns against lenders that refuse to kneel before its radical economic agenda. Its principal goal is to push politicians and the business community to facilitate "community reinvestment" in low-income and minority neighborhoods.
The Greenlining name is a play on the unlawful practice of "redlining." That's when financial institutions designate areas, typically those with a high concentration of racial minorities, as bad risks for home and commercial loans. The Institute wants banks to give a green light to loans in these areas instead.
Recently profiled by John Gizzi, Greenlining uses carrot-and-stick tactics to blackmail public agencies, banks, and philanthropists to achieve its objectives. The Institute brags it has threatened banks into making more than $2.4 trillion in loans in low-income communities.
Was this a good idea?
Not according to University of Texas economist Stanley Liebowitz. He wrote that the current mortgage market debacle is "a direct result of an intentional loosening of underwriting standards -- done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults."
Liebowitz isn't alone is pointing out that U.S. financial markets are now being asphyxiated by a terrible credit crunch that might have been avoided if lenders had refrained from doling out loans they ought to have known were doomed to default.
Activist groups were encouraged to agitate by the Carter-era Community Reinvestment Act, which enshrined in law a kind of lending protection racket. Banking regulators were given the power to make trouble for banks that failed to lend enough money to so-called underserved communities. Banks that paid enough -- whatever that means -- got left alone, but banks that didn't, got their legs broken.
How much money is enough to satisfy the law? Even the Federal Reserve Board can't say for sure. From the Fed's online summary of the Act:
The CRA requires that each depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution's application for deposit facilities.
Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution's individual circumstances.
One can almost imagine a CRA commissar saying, "It'd be a real shame if something happened to that nice bank of yours." When in doubt about potential CRA liability, don't risk committing a crime against diversity: make the loan. Or else.
After CRA came into effect, Saul Alinsky-inspired "community organizer" groups such as Greenlining, ACORN, and National Council of La Raza got into the shakedown business. They preach the hateful class-warfare rhetoric of their fellow community organizers Jeremiah Wright, Jesse Jackson, Al Sharpton, and Michael Pfleger.
They rage against capitalism and demand crushing taxes and aggressive wealth-redistribution programs. They demand more government spending on social programs, a higher minimum wage, and gun control. Depending which way the economic wind is blowing, they demand more subprime lending, or curbs on subprime lending, which through the magic of dysphemism, is linguistically transformed into "predatory lending."
La Raza ("The Race," in Spanish), which has lobbied to strengthen CRA, performed an amazing sleight of hand last year. After decades of demanding more loans for racial minorities, the group performed a dramatic about-face, suddenly warning that lenders, realtors, and investors who bought up subprime loans could be sued under a federal law that forbids housing discrimination.
It was the lenders' responsibility to "match families to the sustainable loans that they should have gotten in the first place," said Janet Murguia, La Raza's president. Pointing to 2005 data that show subprime loans with high interest rates comprised more than 50% of all mortgages taken by African-Americans and 40% of Latino borrowers, compared to 19% of white borrowers, she raised the specter of racism. Murguia failed to mention that without a subprime market many members of racial minority groups would have remained renters, unable to buy a home.
And the Greenlining Institute played rough with Rabobank, an international Netherlands-based "megabank" (assets: $740 billion) that was expanding its U.S. operations.
Even though Rabobank had received an "Outstanding" rating in its most recent CRA performance evaluation by the Federal Reserve Bank of San Francisco, that wasn't enough for Greenlining.
The group targeted Rabobank, demanding that it shell out $7.5 billion for loan programs to help farmworkers buy their own farms. When the bank balked, Greenlining launched a campaign last year against its proposed acquisition of another bank.
Activists noisily picketed Rabobank until it caved.
"Congratulations to everyone," "Rabobank is totally afraid of you," Greenlining's top legal dude Robert Gnaizda yelled in offering congratulations to at demonstrators through a bullhorn. "Rabobank is totally afraid of you." Earlier this year, Greenlining proudly unveiled what it called a "unique agreement" with Rabobank "to turn San Joaquin farmworkers into farmowners."
This is the kind of political activism that drove banks to make irresponsible decisions, and that now threatens to put taxpayers on the hook for bank bailout packages costing potentially trillions of dollars.
Even though the left's pathological preoccupation with economic egalitarianism never takes a vacation, the left isn't entirely to blame for Wall Street's current troubles.
The Federal Reserve Board encouraged bad behavior by keeping interest rates artificially low for far too long after the 9/11 attacks. Since money was cheap, bankers went overboard with exotic mortgage products, and investors kept inflating the housing bubble, sending home prices into the stratosphere.
But no one can deny the fateful role that these liberal financial activist groups played in making a bad situation much worse.
Matthew Vadum is a senior editor at Capital Research Center, a Washington, D.C. think tank that studies the politics of philanthropy.
from National Review Online, 2008-Oct-7, by Stanley Kurtz:
Planting Seeds of Disaster
ACORN, Barack Obama, and the Democratic party.“You’ve got only a couple thousand bucks in the bank. Your job pays you dog-food wages. Your credit history has been bent, stapled, and mutilated. You declared bankruptcy in 1989. Don’t despair: You can still buy a house.” So began an April 1995 article in the Chicago Sun-Times that went on to direct prospective home-buyers fitting this profile to a group of far-left “community organizers” called ACORN, for assistance. In retrospect, of course, encouraging customers like this to buy homes seems little short of madness.
Militant ACORN
At the time, however, that 1995 Chicago newspaper article represented something of a triumph for Barack Obama. That same year, as a director at Chicago’s Woods Fund, Obama was successfully pushing for a major expansion of assistance to ACORN, and sending still more money ACORN’s way from his post as board chair of the Chicago Annenberg Challenge. Through both funding and personal-leadership training, Obama supported ACORN. And ACORN, far more than we’ve recognized up to now, had a major role in precipitating the subprime crisis.
I’ve already told the story of Obama’s close ties to ACORN leader Madeline Talbott, who personally led Chicago ACORN’s campaign to intimidate banks into making high-risk loans to low-credit customers. Using provisions of a 1977 law called the Community Reinvestment Act (CRA), Chicago ACORN was able to delay and halt the efforts of banks to merge or expand until they had agreed to lower their credit standards — and to fill ACORN’s coffers to finance “counseling” operations like the one touted in that Sun-Times article. This much we’ve known. Yet these local, CRA-based pressure-campaigns fit into a broader, more disturbing, and still under-appreciated national picture. Far more than we’ve recognized, ACORN’s local, CRA-enabled pressure tactics served to entangle the financial system as a whole in the subprime mess. ACORN was no side-show. On the contrary, using CRA and ties to sympathetic congressional Democrats, ACORN succeeded in drawing Fannie Mae and Freddie Mac into the very policies that led to the current disaster.
In one of the first book-length scholarly studies of ACORN, Organizing Urban America, Rutgers University political scientist Heidi Swarts describes this group, so dear to Barack Obama, as “oppositional outlaws.” Swarts, a strong supporter of ACORN, has no qualms about stating that its members think of themselves as “militants unafraid to confront the powers that be.” “This identity as a uniquely militant organization,” says Swarts, “is reinforced by contentious action.” ACORN protesters will break into private offices, show up at a banker’s home to intimidate his family, or pour protesters into bank lobbies to scare away customers, all in an effort to force a lowering of credit standards for poor and minority customers. According to Swarts, long-term ACORN organizers “tend to see the organization as a solitary vanguard of principled leftists...the only truly radical community organization.”
ACORN’s Inside Strategy
Yet ACORN’s entirely deserved reputation for militance is balanced by its less-well-known “inside strategy.” ACORN has long employed Washington-based lobbyists who understand very well how the legislative game is played. ACORN’s national lobbyists may encourage and benefit from the militant tactics of their base, but in the halls of congress they play the game with smooth sophistication. The untold story of ACORN’s central role in the financial meltdown is about the one-two punch to the banking system administered by this outside/inside strategy.
Critics of the notion that CRA had a major impact on the subprime crisis ask how a law passed in 1977 could have caused a crisis in 2008? The answer has a lot to do with ACORN — and the critical years of 1990-1995. While the 1977 Community Reinvestment Act did call on banks to increase lending in poor and minority neighborhoods, its exact requirements were vague, and therefore open to a good deal of regulatory interpretation. Banks merger or expansion plans were rarely held up under CRA until the late 1980s, when ACORN perfected its technique of filing CRA complaints in tandem with the sort of intimidation tactics perfected by that original “community organizer” (and Obama idol), Saul Alinsky.
At first, ACORN’s anti-bank actions were relatively few in number. However, under a provision of the 1989 savings and loan bailout pushed by liberal Democratic legislators, like Massachusetts Congressman Joseph P. Kennedy, lenders were required to compile public records of mortgage applicants by race, gender, and income. Although the statistics produced by these studies were presented in highly misleading ways, groups like ACORN were able to use them to embarrass banks into lowering credit standards. At the same time, a wave of banking mergers in the early 1990's provided an opening for ACORN to use CRA to force lending changes. Any merger could be blocked under CRA, and once ACORN began systematically filing protests over minority lending, a formerly toothless set of regulations began to bite.
ACORN’s efforts to undermine credit standards in the late 1980s taught it a valuable lesson. However much pressure ACORN put on banks to lower credit standards, tough requirements in the “secondary market” run by Fannie Mae and Freddie Mac served as a barrier to change. Fannie Mae and Freddie Mac buy up mortgages en masse, bundle them, and sell them to investors on the world market. Back then, Fannie and Freddie refused to buy loans that failed to meet high credit standards. If, for example, a local bank buckled to ACORN pressure and agreed to offer poor or minority applicants a 5-percent down-payment rate, instead of the normal 10-20 percent, Fannie and Freddie would refuse to buy up those mortgages. That would leave all the risk of these shaky loans with the local bank. So again and again, local banks would tell ACORN that, because of standards imposed by Fannie and Freddie, they could lower their credit standards by only a little.
So the eighties taught ACORN that a high-pressure, Alinskyite outside strategy wouldn’t be enough. Their Washington lobbyists would have to bring inside pressure on the government to undercut credit standards at Fannie Mae and Freddie Mac. Only then would local banks consider making loans available to customers with bad credit histories, low wages, virtually nothing in the bank, and even bankruptcies on record.
Democrats and ACORN
As early as 1987, ACORN began pressuring Fannie and Freddie to review their standards, with modest results. By 1989, ACORN had lured Fannie Mae into the first of many “pilot projects” designed to help local banks lower credit standards. But it was all small potatoes until the serious pressure began in early 1991. At that point, Democratic Senator Allan Dixon convened a Senate subcommittee hearing at which an ACORN representative gave key testimony. It’s probably not a coincidence that Dixon, like Obama, was an Illinois Democrat, since Chicago has long been a stronghold of ACORN influence.
Dixon gave credibility to ACORN’s accusations of loan bias, although these claims of racism were disputed by Missouri Republican, Christopher Bond. ACORN’s spokesman strenuously complained that his organization’s efforts to relax local credit standards were being blocked by requirements set by the secondary market. Dixon responded by pressing Fannie and Freddie to do more to relax those standards — and by promising to introduce legislation that would ensure it. At this early stage, Fannie and Freddie walked a fine line between promising to do more, while protesting any wholesale reduction of credit requirements.
By July of 1991, ACORN’s legislative campaign began to bear fruit. As the Chicago Tribune put it, “Housing activists have been pushing hard to improve housing for the poor by extracting greater financial support from the country’s two highly profitable secondary mortgage-market companies. Thanks to the help of sympathetic lawmakers, it appeared...that they may succeed.” The Tribune went on to explain that House Democrat Henry Gonzales had announced that Fannie and Freddie had agreed to commit $3.5 billion to low-income housing in 1992 and 1993, in addition to a just-announced $10 billion “affordable housing loan program” by Fannie Mae. The article emphasizes ACORN pressure and notes that Fannie and Freddie had been fighting against the plan as recently as a week before agreement was reached. Fannie and Freddie gave in only to stave off even more restrictive legislation floated by congressional Democrats.
A mere month later, ACORN Housing Corporation president, George Butts made news by complaining to a House Banking subcommittee that ACORN’s efforts to pressure banks using CRA were still being hamstrung by Fannie and Freddie. Butts also demanded still more data on the race, gender, and income of loan applicants. Many news reports over the ensuing months point to ACORN as the key source of pressure on congress for a further reduction of credit standards at Fannie Mae and Freddie Mac. As a result of this pressure, ACORN was eventually permitted to redraft many of Fannie Mae and Freddie Mac’s loan guideline.
Clinton and ACORN
ACORN’s progress through 1992 depended on its Democratic allies. Whatever ACORN managed to squeeze out of the George H. W. Bush administration came under congressional pressure. With the advent of the Clinton administration, however, ACORN’s fortunes took a positive turn. Clinton Housing Secretary Henry Cisnersos pledged to meet monthly with ACORN representatives. For ACORN, those meetings bore fruit.
Another factor working in ACORN’s favor was that its increasing success with local banks turned those banks into allies in the battle with Fannie and Freddie. Precisely because ACORN’s local pressure tactics were working, banks themselves now wanted Fannie and Freddie to loosen their standards still further, so as to buy up still more of the high-risk loans they’d made at ACORN’s insistence. So by the 1993, a grand alliance of ACORN, national Democrats, and local bankers looking for someone to lessen the risks imposed on them by CRA and ACORN were uniting to pressure Fannie and Freddie to loosen credit standards still further.
At this point, both ACORN and the Clinton administration were working together to impose large numerical targets or “set asides” (really a sort of poor and minority loan quota system) on Fannie and Freddie. ACORN called for at least half of Fannie and Freddie loans to go to low-income customers. At first the Clinton administration offered a set-aside of 30 percent. But eventually ACORN got what it wanted. In early 1994, the Clinton administration floated plans for committing $1 trillion in loans to low- and moderate-income home-buyers, which would amount to about half of Fannie Mae’s business by the end of the decade. Wall Street Analysts attributed Fannie Mae’s willingness to go along with the change to the need to protect itself against still more severe “congressional attack.” News reports also highlighted praise for the change from ACORN’s head lobbyist, Deepak Bhargava.
This sweeping debasement of credit standards was touted by Fannie Mae’s chairman, chief executive officer, and now prominent Obama adviser James A. Johnson. This is also the period when Fannie Mae ramped up its pilot programs and local partnerships with ACORN, all of which became precedents and models for the pattern of risky subprime mortgages at the root of today’s crisis. During these years, Obama’s Chicago ACORN ally, Madeline Talbott, was at the forefront of participation in those pilot programs, and her activities were consistently supported by Obama through both foundation funding and personal leadership training for her top organizers.
Finally, in June of 1995, President Clinton, Vice President Gore, and Secretary Cisneros announced the administration’s comprehensive new strategy for raising home-ownership in America to an all-time high. Representatives from ACORN were guests of honor at the ceremony. In his remarks, Clinton emphasized that: “Out homeownership strategy will not cost the taxpayers one extra cent. It will not require legislation.” Clinton meant that informal partnerships between Fannie and Freddie and groups like ACORN would make mortgages available to customers “who have historically been excluded from homeownership.”
Disaster
In the end of course, Clinton’s plan cost taxpayers an almost unimaginable amount of money. And it was just around the time of his 1995 announcement that the Chicago papers started encouraging bad-credit customers with “dog-food” wages, little money in the bank, and even histories of bankruptcy to apply for home loans with the help of ACORN. At both the local and national levels, then, ACORN served as the critical catalyst, levering pressure created by the Community Reinvestment Act and pull with Democratic politicians to force Fannie Mae and Freddie Mac into a pattern of high-risk loans.
Up to now, conventional wisdom on the financial meltdown has relegated ACORN and the CRA to bit parts. The real problem, we’ve been told, lay with Fannie Mae and Freddie Mac. In fact, however, ACORN is at the base of the whole mess. ACORN used CRA and Democratic sympathizers to entangle Fannie and Freddie and the entire financial system in a disastrous disregard of the most basic financial standards. And Barack Obama cut his teeth as an organizer and politician backing up ACORN’s economic madness every step of the way.
Stanley Kurtz is a senior fellow at the Ethics and Public Policy Institute.
from the Chicago Tribune, 2008-Oct-11, by John Kass:
Daley reins in radicals — the Chicago Way
Turn on the TV news when John McCain is picking up undecided voters by invoking Barack Obama's relationship with unrepentant American terrorist William Ayers and, invariably, some liberal talking head will sniff in disgust and say Ayers is no big deal where Obama comes from.
Unfortunately, that's true. Ayers is a terrorist. But this is Chicago.
Obama and Ayers are neighbors and they worked together on school issues with the same foundation. Obama's political coming-out party was held in Ayers' living room when Obama was running for his first political office.
And the boss of Chicago is Mayor Richard Daley. Mayor Shortshanks has thrown his protective embrace around both men. These are facts.
But the reason Ayers is not a big deal in Chicago has to do with the Chicago Way, and the left fork of that road that has been bought and paid for by the Daley machine, subsidized by taxpayers who foot the bill for public relations contracts from City Hall.
The new Daley machine is much more sophisticated than his father's. And the stereotype of knuckle-draggers and wiseguys—they're still around, and there are jobs on the city payroll for those who work the precincts.
Yet what's often ignored is that their university-educated cousins get city contracts to spin the news and shape the symbolism and tell out-of-town reporters that Ayers is no big deal. They won't bite the hand that feeds them. For an examination of the Daley spin machine—and its cost to taxpayers—please see Tribune reporter Dan Mihalopoulos' story in the Sunday editions.
One friend of Obama and Ayers is former '60s radical Marilyn Katz, now an Obama fundraiser, strategist and public relations maven. She's often a go-to quote for reporters to knock down the Ayers-Obama story.
"What Bill Ayers and [former Black Panther, now U.S. Rep.] Bobby Rush . . . did 40 years ago has nothing to do with [the presidential campaign]," Katz was quoted as saying in the Chicago Sun-Times in April. "[Ayers] has a national reputation. He lectures at Harvard [University] and Vassar [College]."
What that story and many other pro-Obama articles gloss over is that during the violent protests of the 1968 Democratic National Convention here, Katz was the security chief for the radical Students for a Democratic Society. She once advocated throwing studded nails in front of police cars, back in the SDS days when the group was alleged to have thrown cellophane bags full of human excrement at cops and cans of urine and golf balls impaled with nails.
How things change.
Under this Daley, her firm, MK Communications, has many city deals, and one involves public relations for the Chicago Police Department's community policing program. From n
