SebastianJer

Ground Control to President Obama

By Mark Steyn

Round about this time in the election cycle, a presidential challenger finds himself on the stump and posing a simple test to voters: “Ask yourself — are you better off now than you were four years ago?”

But, in fact, you don’t need to ask yourself, because the Federal Reserve Board’s Survey of Consumer Finances has done it for you. Between 2007 and 2010, Americans’ median net worth fell 38.8 percent — or from $126,400 per family to $77,300 per family. Oh, dear. As I mentioned a few months ago, when readers asked me to recommend countries they could flee to, most of the countries worth fleeing to Americans can no longer afford to live in.

Which means we’ll just have to fix things here. How likely is Barack Obama to do this? A few days ago he came to Cleveland, a city that is a byword for economic dynamism, fiscal prudence, and sound government. He gave a 54-minute address that tried the patience even of the most doting court eunuchs. “One of the worst speeches I’ve ever heard Barack Obama make,” pronounced MSNBC’s Jonathan Alter, as loyal Democrat attendees fled the arena to volunteer for the Obamacare death-panel pilot program. In fairness to the president, I wouldn’t say it was that much worse, or duller, or more listless and inert than previous Obama speeches. In fact, much of it was exactly the same guff he was peddling when Jonathan Alter’s pals were still hailing him as the world’s greatest orator. The problem is the ever widening gulf between the speech and the slough of despond all about.

Take, for example, the attempt at soaring rhetoric: “That’s how we built this country — together. We constructed railroads and highways, the Hoover Dam and the Golden Gate Bridge. We did those things together,” he said, in a passage that was presumably meant to be inspirational but was delivered with the faintly petulant air of a great man resentful at having to point out the obvious, yet again. “Together, we touched the surface of the moon, unlocked the mystery of the atom, connected the world through our own science and imagination. We haven’t done these things as Democrats or Republicans. We’ve done them as Americans.”

Beyond the cheap dissembling, there was a bleak, tragic quality to this paragraph. Does anyone really believe a second-term Obama administration is going to build anything? Yes, you, madam, the gullible sap at the back in the faded hope’n’change T-shirt. You seriously think your guy is going to put up another Hoover Dam? Let me quote one Deanna Archuleta, Obama’s deputy assistant secretary of the interior, in a speech to Democrat environmentalists in Nevada:

“You will never see another federal dam.”

Ever.

That seems pretty straightforward. America is out of the dam business. Just as the late Roman Empire no longer built aqueducts, so we no longer build dams. In fairness to the Romans, they left it to the barbarians to sweep in and destroy the existing aqueducts, whereas in America the government destroys the dams (some 200 this century) as an act of environmental virtue hailed by the deputy assistant secretary of the interior.

Obama can urge us all he wants to band together because when we dream big dreams there’s no limit to what Big Government can accomplish. But these days we can’t build a new Hoover Dam, only an attractive new corner office for the assistant deputy assistant deputy assistant secretary to the secretary of deputy assistants at the Department of Bureaucratic Sclerosis, and she’ll be happy to issue a compliance order that the Hoover Dam’s mandatory fish ladders are non-wheelchair-accessible, and so the whole joint needs to close. That we can do! If only we dare to dream Big Dreams!! Together!!!

As to “touching the surface of the moon,” I touch on this in my most recent book, whose title I will forbear to plug. Imagine if we hadn’t gone to the moon in the 1960s. Can you seriously picture Obama presiding over such an event today? Instead of the Apollo 11 guys taking up a portable cassette machine to play Sinatra and the Count Basie band’s recording of “Fly Me to the Moon,” the lads of Obamo 11 would take an iPod with Lady Gaga or Ke$ha or whatever. . . . Yet, even as you try to fill in the details, doesn’t the whole thing start to swim out of focus as something that increasingly belongs not only to another time but another place? In the Sixties, American ingenuity burst the bounds of the planet. Now our debt does, and “touching the surface of the moon” half-lingers in collective consciousness as a dimming memory of lost grandeur, in the way a date farmer in 19th-century Nasiriyah might be vaguely aware that the Great Ziggurat of Ur used to be around here.

But all he can see stretching to the horizon is sand.

So today our money-no-object government spends lots of money but to no great object. What are Big Government’s priorities now? Carpeting Catholic universities with IUDs. Regulating the maximum size of milk-coffee beverages. As Obama told us: “That’s how we built this country — together. We constructed railroads and highways. . . . Together, we touched the surface of the moon, unlocked the mystery of the atom.” And as we will one day tell our grandchildren: “Together, we touched the surface of the decaf caramel macchiato and deemed it to be more than 16 ounces. Together, we unlocked the mystery of 30-year-old college students’ womanhood. One small step to the Ikea futon for a lucky Georgetown Law freshwoman, one giant leap for womankind. Who will ever forget the day when the Union Pacific Board of Health Compliance and the Central Pacific Agency of Sustainable Growth Enhancement met at Promontory Community College, Utah, to hammer in the Golden Spike condom dispenser?”

Most of us don’t want a new Hoover Dam. We would like our homes to be less underwater, but there’s no danger of that anytime soon. Most of us don’t want America to go to the moon. We would like a few less craters on the economic wasteland down here. Soaring rhetoric at a time of earthbound problems — jobs, debt — risks making the president sound ridiculous. Granted, there’s a lot of it about this time of year — commencement speakers assuring kids who can’t manage middle-school math that you can be anything you want to be as long as you dream your dreams. But Obama offers an even more absurd evolution of this grim trope: “I can be anything I want to be as long as you chumps dream your dreams.”

Self-pity is never an attractive quality, and in an elected head of state even less so. Obama whines that his opponents say it’s all his fault. One can argue about whose fault it is, but not, as my colleagues at National Review pointed out, whose responsibility it is: It’s his. He’s the only president we have. And he made things worse. He increased the national debt by some 70 percent, and what do we have to show for it? No dams, no railroads, no moon shots. Just government, and bureaucracy, and regulation, unto national bankruptcy.

“Fly me to the moon / Let me play among the stars . . . ” Who needs another moon shot? Obama’s already up there, soaring ever more unmoored from reality. Pity us mere mortals back on Planet Earth, living in the land he made.

Well it is nice to know (I guess) that we are not alone in our insanity. Of course anyone that pays attention knows that Europe is the model for our own leftist insanity.



Debt is the problem, not the solution

By Daniel Hannan

So we're going to 'inject £140 billion into the economy,' are we? Wow. Who knew it was that easy? Why not inject £280 billion and be twice as rich? Why not a trillion?

I can't believe I keep having to write this, but we got into this mess in the first place because there was too much debt: too much private debt, too much corporate debt and too much government debt (don't click on this link unless you want to be depressed). For a decade and a half, the Bank of England, in common with other central banks, kept interest rates artificially low, blowing up a credit bubble that was bound to burst sooner or later.

Since that burst came, four years ago, Mervyn King has been frantically working the bellows to reinflate the bubble. Interest rates have been slashed even lower and repeated spasms of quantitative easing have created new money equivalent to a fifth of our GDP. Having screamed at banks for lending too wantonly, ministers now scream at them for not lending wantonly enough. Yesterday, the Bank of England announced that it would simply give banks money to lend.

Thus do we penalise thrift and reward debt – precisely the approach that brought us to this wretched condition. Working people, savers and pensioners are hit by the double whammy of zero interest rates and high inflation so that the bloated state can help itself to their assets.

Mervyn King described the policy yesterday as a 'textbook' response to the gathering storm. The trouble is, his textbook is 80 years out of date. Like Keynesians the world over, he persists in seeing demand as a cause, rather than a consequence, of economic growth. But you can't keep boosting consumption without commensurate increases in production. Most of us grasp this truth easily enough – we apply, after all, it in our own lives.

Isn't it a good thing that, as ministers remind us, Britain can borrow as cheaply as Germany despite a deficit the size of Greece's? No. To repeat, it was debt that got us into this mess. The way to deal with the deficit is to cut spending, not to magic up hundreds of billions of pounds in counterfeit money, give it to the banks, and tell them to buy government debt with it. When Gordon Brown took this course, Tories called it 'slash and burn' and accused him of wrecking Britain's long-term prospects so as to put off the worst of the crash until after polling day.

What's the alternative? Actual, rather than presumptive, spending cuts; radical deregulation of the employment market; a willingness to wind down failed banks; targeted tax-cuts; and, in the medium term, turning away from the collapsing EU and embracing the parts of the world which are still growing. Or, to put it another way, capitalism.

Obama's Economic Fictions Are Unraveling

By Robert Tracinski

President Obama's statement that "the private sector is doing fine" is not just gaffe. It is a lesson in bad economics and an explanation of the failure of Obamanomics.

The specific premise behind that statement is that the cause of persistent unemployment is not the weakness of the private sector but rather a decrease in employment by state and local governments.

The Heritage Foundation provides the graph that refutes this on a purely factual level. It shows employment levels in the private sector versus state, local, and federal government since the beginning of the recession. Private-sector employment crashed by 7.6% during the depth of the recession and has only crept back up slowly. It is now about 4% below its pre-recession level, which means that it's still not quite halfway to a full recovery. That's not exactly "doing fine."

State and local employment, by contrast, continued to rise during the first year or so of the recession and only began to creep down in later years, declining 1.3% and 2.8% respectively, still much better than the private sector. And then there is the federal government, where hiring shot up during the first three years of the recession. You've got to have a lot of extra bureaucrats to cut all of those bailout checks and to figure out what's in Obamacare after Congress passes it. So even after a slight recent decline, federal employment is still up 11.6% since the beginning of the recession. So yes, the public sector is doing just fine.

These figures are all in percentages. Look at it in terms of absolute numbers, as this graph does, and the picture becomes even clearer. There are about ten times as many state and local employees as there are federal employees, so the big increase in federal hiring during the recession does not entirely compensate for the small drop-off on the state and local level. But there are five times as many private-sector employees as there are public-sector employees, so the weakness in private hiring is far more significant than the minor decline in public employment. Public-sector jobs are down by a couple of hundred thousand. Private-sector employment is down by four and a half million.

So how do Obama's apologists back up their claims? First, they don't mention the surge in federal hiring, as if that isn't part of the "public sector." Second, they simply cut off the beginning part of the graph and show only the changes in employment since the beginning of the recovery, not since the beginning of the recession. So what you see in their version is private-sector employment marching slowly but steadily upward while state and local employment slide slowly downward. It's easy to change the story if you just leave out the first half, the part where private-sector employees got laid off by the millions while public employees all kept their jobs.

Show the whole story, as in the two graphs I linked to above, and it is visually obvious what is really happening: public employment was flat or rising during the entire downturn, with only a minor downward slide in the last year or two—compared to a deep crash for the private economy, followed by a weak, inadequate, unfinished recovery. It is clear that the real story here is the private economy's failure to rebound.

Yet the fiction created by Obama's advocates is worth examining, because its assumptions are revealing.

Paul Krugman declared, "By this point in Obama's presidency, if we had normal public sector job growth, we would have around 800,000 more people. Firefighters, schoolteachers, police officers. Instead, we've got 600,000 fewer. So right there, it's like 1.4 million jobs that we should have had in the public sector."

Notice the new standard created here. Krugman's baseline is "normal public sector job growth" at pre-recession rates. This is what allows him to take a job decrease that he counts as 600,000 (again, not counting federal employment) and inflate it to 1.4 million, by counting 800,000 non-created phantom jobs as "lost."

Note that he does not apply the same standard to the private sector. He makes no attempt to project how much more private employment would have been created if we had continued to enjoy "normal private sector job growth." It is only the public sector that is entitled to be immune from recession. The underlying assumption is that it is "normal" for the government to blithely keep expanding, regardless of the ability of the private economy to pay for it.

So how is the government supposed to keep expanding in a recession? The New Republic's Jonathan Cohn makes it a little more explicit.

"Stabilizing the public-sector workforce or, better still, increasing it would be among the very easiest things for the federal government to do: It can simply write checks to state and local government, as it did with the Recovery Act and has traditionally done during times of economic distress."

If you are in personal financial stress because of the recession, take heart! Expanding your spending is the easiest thing to do. Simply write checks.

Of course, this would be a disaster if a private individual tried it. So why do we think it will work if the government tries it?

Economist Josh Bivens gives us the last piece of the puzzle. We can keep borrowing to pay for government stimulus, he says, "Because there is no discernible upward pressure on interest rates."

True enough. There is no upward pressure on interest rates—at the moment. By the time upward pressure comes, however, nations tend to have built up such a vast, unserviceable debt that they end up in an "interest rate death spiral." When interest rates finally rise, governments have to make huge payments just to cover the interest on their debt. If they try to get the extra money by raising taxes and cutting government spending, they plunge their economies into recession, which decreases their revenues and increases their costs further. That makes them even less solvent and causes lenders to raise their interest rates yet again. It is a vicious cycle that usually ends in default and national catastrophe.

Aren't we all watching this happen in Europe right now? In countries like Greece and Italy they implemented the policies of our sage American economists to the letter. Following the advice of Mr. Krugman, they propped up their economies by maintaining a "normal" rate of growth of government employment and the welfare state. Following the advice of Mr. Cohn, they paid for it all by simply writing checks. And following the advice of Mr. Bivens, they didn't worry about their ever-increasing debt because there was no upward pressure on interest rates. Until, suddenly, there was.

Years ago, the great free-market economist Henry Hazlitt wrote a book called Economics in One Lesson. The "one lesson" is: "The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." If Krugman and his ilk followed this rule, they might ask such questions as: why can't we continue to increase the government payroll indefinitely? Why can't we simply go on writing checks? Why can't we assume that interest rates will flop around near zero forever?

If they asked, they might find a specific answer.