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Obama = Failure?

(Written on April 6th, 2009)

Today the Congress with sure verbosity and fanfare passed the president’s budget proposal (55-43 in the Senate). Many politicians, as all too often, are patting themselves on their backs while claiming they’ve backed true solutions for the economy.

Yes, as many entitlement programs sink the governmental budget further into a fiscal abyss while threatening fiscal disaster for the United States, there is an exigency to address and reform these programs as addressed in the budget. Yet, the direction the Obama administration desires to take these programs, like health care, will only escalate budgetary misallocations and inefficiency much to the citizen’s detriment: ex. one cartel of employer-dominated healthcare will be traded for another government-dominated one mired by special interests. Still, the politicians claim that they have the solution.

I was not able to pay that much attention to this last week’s budget debates in Congress as I’ve been quite busy with the first week of classes and flying to NYC for an intimate, lunch event with Giuliani and Steele (still need to write on this); however, I heard from a friend who works in the House Budget Committee yesterday morning. It seems that many of Obama’s key budget programs from the “Making Work Pay” tax cut, to health care reform, to initiatives to combat global warming did not find their way in the details of both the House and Senate versions of the budget. This could be from congressional Democrats taking a more reserved approach to the budget in order to have greater liberty in crafting future legislation relevant to the budget and not being confined to any quantifiable limits. It could also be from congressional Democrats taking a more reserved approach to the budget out of political prudence allowing them to not bind themselves politically to a difficult vote that could be held over their head.

Polls from CBS, to Newsweek, to Pew have shed light that many Americans are beginning to become more jaded by some of Obama’s recent policies as well as skeptical at any future bailouts and so-called “stimulus” plans. So let us hold to an “audacity of hope” that more and more fellow Americans will (as many are daily) become aware of the emptiness and fiscal irresponsibility in government’s claims. Let us demand a “change we can believe in” that makes government accountable for all its failed claims. Such seems quite improbable now as, even still, the finger-pointing onto Wall Street by politicians and the claims of necessary beneficial intervention persist.

For the last couple months, Obama has been uttering the singer Shaggy’s infamous line of ignorant culpability: “wasn’t me”. We get it. The last administration was an utter failure with so many of its fiscal policies (as well as others); yet, condemning past governmental errancies in wasteful spending and devastating deficits to justify your obviously exponential errors of the former seems quite far-fetched to me. When the administration and Democrats aren’t able to point the finger at the pernicious policies of the prior administration, the old stand-by of Wall Street for vilification serves its purpose.

As millions in taxpayers’ dollars found its way in the pockets of AIG executives who had run the company in the ground, Obama called such bonuses “shameful” and Congressional Democrats preached against the iniquities of corporate greed. Obviously none of the onus could stem from the government crafting a stimulus plan laden with back-door deals for corporate, special interests or from the government overseeing a botched intervention due to its prior failures to adequately supervise AIG. Instead of those behind such legislative lacking coming forward with their “Jimmy Swaggart” moment of culpability, they proposed even more legislation (H.R. 1586 – see my analysis here) to pat themselves on the back and claim they solved the errors of others, while actually omitting to mention the apparent loopholes that again favored special interests or the nondisclosure regarding where the stimulus money was actually going.

As executives from the Big 3 came squabbling to Congress for a bailout that would end up costing taxpayers billions, Democrats came to the pulpit waving their hypocritical fingers at the executives for daring to take private jets to Washington. Now, the Big 3 (particularly GM) clearly carried out business in counter-productive manners not in respect of market demand and capabilities; clearly, the executives mismanaged their companies in various ways. But obviously, none of the onus could stem from the over 70 years of governmental manipulation and intervention in limiting the cost effectiveness and managerial capabilities of companies like GM with various initiatives and programs from the 1935 Wagner Act to the 1975 implementation of fuel economy laws bringing about the “two fleets” curse. Since then, the UAW has held GM captive by forcing the company to produce its cheaper, smaller cars (the more fuel efficient ones) in high-wage, domestic UAW factories. Thus, though the government claimed such was to maintain a fuel-economy standard, the main purpose (to ensure the continual UAW monopoly inside Detroit irrespective of necessary reforms) is obviously the driving factor causing substantially higher costs for the company (and the consumer), inhibiting greater production of actual fuel-efficient vehicles, and stifling cost-effective, managerial innovations.

But don’t worry…the Obama administration claims they have the intention to oversee a “quick and surgical” reforming of GM through bankruptcy. Don’t worry…after wasting billions of taxpayers dollars and after weeks of prudent, conservative recommendations to allow for bankruptcy, suddenly Obama has claimed the bankruptcy option as his. Just with other governmental claims, there should be no reason for skepticism, right? It’s not like the UAW plays a key role in Democratic electoral politics and clearly will not be abandoned by the Party. It’s not like the Democrats, who inserted themselves into GM’s corporate governance to order the resignation of a CEO, won’t defer to the prescribed legality of a bankruptcy judge to rewrite GM’s business relationships. It’s not like President Obama has replaced Rick Wagoner with a corporate suit more in cahoots with the UAW than before. It’s not like the government’s buy-in of GM provides the UAW cartel greater shareholder domination in a reogranized GM. It’s not like President Obama advocated for and worked to ensure the continual permanence of “two fleets” in affirmation to his UAW backers while in the Senate.

The President came into office claiming “to spend wisely, reform bad habits, and do our business in the light of day”. Yet we find the bad habits of “politics as usual” lie at the core of and find the greatest example in Obama’s budget proposal.

• Like the one who came before him, President Obama has chosen to hide the extent of the nation’s debt under his presented policies by formulating a 5-year budget versus the preferred (though rarely done) 10-year budget.

• Like the one who came before him, President Obama has decided to consider “budget reconciliation” as a way to carry out some of his budget proposals while forgoing democratic debate, shutting out Republican input, and ignoring moderate Democrats – Senators Max Baucus (D-Mont.) and Kent Conrad (D-N.D.) have outspokenly urged the president against “reconciliation”.

There are some key measures in Obama’s budget that truly should be seriously debated and executed. It would be ignorantly short-sided for Republicans to wish “failure” at all on these proposed policies:

• The already noted recognition and acknowledgment for entitlement reform (question is how).

• Means-tested Medicare part D premiums.

• Budgets for AMT Reform.

However – like the one who came before him and others who’ve opted for substantial, fiscal tinkering – still greatly overriding these couple budget pluses is a lesson in politics, the number game, and half-truths. President Obama has dramatically and deliberately distorted his budget and deficit numbers:

• Obama’s budget already increases federal spending by 34% over the budget adopted for the previous year under Bush with an expenditure tag of $4 trillion this year alone – enough to tower over a quantifiable quarter of our nation’s economy. Obama’s plan would result in an exploding deficit, a doubling of the nation’s debt in five years, and an increase of that debt to more than 82% of our nation’s GDP by the last year of the budget resulting in currency debasement and reductions in standards of living.

• Numerous other programs like the resurrection of the “death tax”, a $1.5 trillion tax increase that will directly burden small businessmen and investors, and a dramatic increase in energy costs for families due to “cap-and-tax”. Though some may nobly defend all of these expenditures, even the manner in which Obama attempts to sale his budget is disturbing along with being downright dishonest.

• The president has repeatedly claimed his intention to reduce the deficit from 12.3% of GDP to a mere 3% within the next four years. Using claims that the total value of U.S. economic output will increase by a quarter over the next four years, Obama omits telling the citizenry how GDP, as determined in year-to-year growth as a function of real growth and inflation, will magically be inflated down the road due to the Fed’s policies thus making the deficit as a percentage of GDP appear less.

• With its purchasing of $300 billion in long-end Treasurys and $1250 billion in its direct purchase program of mortgage-backed securities, the Fed has lost all semblance of independence as it is openly monetizing U.S. debt and providing the balance sheet to back Obama’s budget and Congressional spending…much to the inevitable detriment of the voter down the road.

• Coupled with the White House’s evidently exaggerated GDP claims as countless, reliable forecasts (ex. see Blue Chip Consensus or adjacent graphic from the WSJ) affirm GDP estimates almost $800 billion below Obama’s, it becomes apparent that, if anything, inflation will drive GDP and skew the numbers allowing the White House to spew their claims still.

More and more citizens are recognizing each day the shortcomings of all of these governmental claims as evident in recent polls, in the skepticism of many politicians (including Democrats) to support Obama’s proposed policies, and in the emergence of an impassioned “tea party” movement of concerned citizens and grassroots efforts.

We can only hope this political awakening across America spreads to individuals from all backgrounds and ideologies as we demand true accountability from Washington in its implementation of policy and its handling of our tax dollars.

The time for mere claims must end. The time for real change must begin.

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