Category: Politics

Obama’s Anti-Energy Policy

Robert Samuelson has a great piece on President Obama’s counterproductive bias against domestic oil and gas production in favor of unrealistic “green” jobs:

In 2007, wind and solar generated less than 1 percent of U.S. electricity. Even a tenfold expansion will leave their contribution small. By contrast, oil and natural gas now provide two-thirds of Americans’ energy. They will dominate consumption for decades. Any added oil produced here will mostly reduce imports; extra natural gas will mostly displace coal in electricity generation. Neither threatens any anti-global warming program that Congress might adopt.

Encouraging more U.S. production also aids economic recovery, because the promise of “green jobs” is wildly exaggerated. Consider. In 2008, the oil and gas industries employed 1.8 million people. Jobs in the solar and wind industries are reckoned (by their trade associations) to be 35,000 and 85,000, respectively. Now do the arithmetic: A 5 percent rise in oil jobs (90,000) approaches a doubling for wind and solar (120,000). Modest movements, up or down, in oil will swamp “green” jobs.

Samuelson assumes that the White House is interested in common sense—they’re not. What the White House cares about is what all politicians care about—catering to their constituencies. The reason why Obama does not favor more domestic energy is because there’s no political upside to it for him. Obama can’t afford to annoy the environmentalist lobby that plays to American’s worse environmental fears. If he did, he’d risk losing political support.

Even though domestic energy exploration makes sense in terms of energy policy, national security, economics, and even environmentally, none of that means anything. It won’t play well politically, so it is dead on arrival.

That’s the way our government works in the 21st Century. For all the talk about “hope” and “change” the Obama Administration is as nakedly political as any other, and a politically unpopular program will not be enacted no matter how beneficial the results, and a policy that is economically ruinous but politically popular will always win out. It’s Reding’s Second Law of Public Policy—the best policy will always lose out to the most politically popular policy.

President Obama could show real leadership by dramatically increasing domestic energy productions. But “drill baby drill” was the motto of the other side, and with the worldwide recession pushing oil prices down, there won’t be a serious political demand for more domestic energy until the next crisis hits and it’s far too late.

Winning on Principles

The New York Times has a look at the ideological battle within the Republican Party as the GOP deals with their drubbings in 2006 and 2008 and the Spector defection. Meanwhile, David Frum offers his own suggestions on rebuilding the party.

Everyone looks at the GOP’s problems through the lens of “conservatives” versus “moderates.” That is the wrong way to look at the issue: what this battle really is about is “principles” versus “politics.” The moderates want the GOP to play towards what they see as the political “center”—or the left. The principle-minded factions wants the GOP to stand on a bedrock of principle.

The moderates have a point. If you want to win as a party, you go where the votes are. It’s classic Anthony Downs, the voters fall along a bell curve and the party that can capture the most votes in the middle will win the election.

But the problem is that if the choice is between the Democrats and the Democrats-Lite, why not vote for the real thing? If Republicans start advocating for more government control, they lose the conservative and libertarian wings of the party and end up losing anyway.

There has to be room for both. The GOP cannot win by turning its back on its principles, but it has to be able to advocate for those principles. Being the best conservative in the world does absolutely nothing unless the GOP cannot get others to understand the importance of that stand.

That is the problem with the GOP today. They have no ability to connect with the average voter. They’ve lost the popular imagination, they’ve lost their political “brand” and there is no message coming from the GOP today. Even when they do have a point, they are so ham-handed in making it that they end up hurting each other.

All is not lost. Obama is a mule—a rare character that comes out of nowhere, establishes power, but leaves no lasting coattails. Obama is a rare individual, which makes him dangerous to the GOP, but the more the Democratic Party becomes a cult of personality, the worse off they are. Obama becomes largely irrelevant no later than 2016, and by then the sheen will be off. If the GOP hasn’t gotten their act together by then, they’ll have gone the way of the Whigs. Now is the time that the GOP needs to regroup and experiment.

That is what the GOP ultimately needs to do. They can’t be afraid of failure. They’ve already failed, now is the time to be bold. Yes, the GOP needs to stand on its principles, but what they really need to do is win on those principles. That means trying everything they can to advocate for their values and seeing what sticks. As badly as Michael Steele’s first weeks on the job has been, at least someone is trying new tactics.

Politics is cyclical, and the Democrats are already sowing the seeds of their own downfall. They will grow complacent and arrogant (and have already), and the GOP will get their opening. Exploiting that weakness will take time and trial. But the Republican Party must learn to stand for something and be able to make that stand one that others will join. That is a tall order, but it is the way politics work in America. Politics is cyclical, and any claim of permanent Democratic majority status is as premature now as claims of a permanent Republican majority in 2002 were then.

Specter’s Pyrrhic Self-Preservation

Sen. Arlen Specter of Pennsylvania is now officially becoming a Democrat. There isn’t much of a shock to this—Specter has always been an erstwhile Republican, and he would have lost in the Pennsylvania GOP primary to Pat Toomey. Specter’s argument that somehow the GOP has moved too far to the right for his liking is really just political cover—this is all about his own political self-preservation.

The problem for Specter is that there’s a good chance that he won’t win the Democratic primary. As NRO’s Jim Geraghty notes, why would the Democrats want a former Republican with a lifetime ACU rating in the 40s who opposes the union-backed “Employee Free Choice Act” and has ties with President Bush? Pennsylvania Democrats don’t need Arlen Specter nearly as much as Arlen Specter needs Pennsylvania Democrats.

The GOP should have gotten rid of Specter in 2004 when they had the chance. Specter’s claim that the GOP has moved too far to the right is based largely on his vote on the stimulus bill—which is opposed by far more than just Republicans. The GOP needs to remake its image, and jettisoning the old guard is probably better in the long run. What is needed now is a party that is more self-confident in their ideology and in their policies. The GOP right now is at war with “moderates” who barely identify with Republican principles and hard-liners who have failed to identify with the American people. That’s not a good position for a party to be in, especially not with a Democratic Congress and a President who could be caught on national TV greedily consuming a mewling infant and still get a 60% approval rating.

The GOP needs to get its act together and fast. Doing so without excess baggage is probably better over the long term, even if it is a huge problem over the short term. Specter was not the sort of person who could motivate the GOP base or the American people. His party switch hurts the Republicans in the short term, to be sure. But it is quite possible than even this Hail Mary play won’t be enough for Specter to keep his political career afloat.

A Tortured Sense Of Priorites

In the Financial Times, Clive Crook wonders why President Obama is so keen on going after the Bush Administration on the “torture” issue:

Common sense may tell you waterboarding is torture, but the law is less clear-cut. Congress should make waterboarding a crime, for the reasons I have stated, and it has had many chances before and since 9/11 to do so. The fact is, it has chosen not to. Some of those in Congress now calling for prosecutions, including Nancy Pelosi, speaker of the House, were briefed about these methods in the panic-stricken aftermath of 9/11 and offered no objection.

Politically, what Obama is doing is pandering to the MoveOn.org left. Obama’s pragmatism is running against the blood lust on the left to get back at the Bush Administration any way they can. The left wants a kangaroo court to put on a nice show trial, then send the objects of their unbridled hatred to jail—or worse. The irrational hatred of the Bush Administration has not gone away with the left, even though the Bush Administration is gone.

Substantively, Obama is being foolish. For one, the idea that there was some kind of torture “regime” with tentacles spreading from GTMO to Abu Ghraib would never stand up to serious scrutiny, because their was no such regime. Prosecuting the Bush Administration for acts like waterboarding would be a blatantly unconstitutional ex post facto prosecution, as Congress had the opportunity to make the practices illegal but did not do so. Moreover, the majority of Americans don’t feel a great deal of outrage over waterboarding someone like Khalid Sheikh Mohammad—especially since there is likely strong, if not incontrovertible, evidence that doing so saved many American lives. In a country where a show like 24 is popular, the idea that people are going to give much care to the “civil rights” of one of the masterminds of the September 11 atrocity is not a very good bet.

Congress should not be so quick to want either prosecutions or a “Truth Commission”—Congressional leaders knew exactly what was being done, and they signed off on it. Speaker Pelosi knew what was being done, and said nothing. The outrage from Congress is nothing less than pure hypocrisy and political payback.

In the end, this is about politics and nothing but. Obama had taken a reasonable and pragmatic response to this issue. Now, the radical left is pushing him further and further towards a politically unsustainable course. Playing politics with national security does not play well outside of the Beltway, especially when this country faces very real and much more immediate crises. Obama should, to borrow a term, move on. What was done in the aftermath of September 11 was done to protect this country and was approved be the same members of Congress who now want to seek a kangaroo court to prosecute crimes they failed to make crimes when they had the chance. Obama has exercised his prerogative to prevent it from happening again under his watch. If the left wants to regard those actions with shame, let them. But this country deserves better than to have do deal with a political circus when there is work to be done. The Democrats will have to lead rather than try to enact their partisan vengeance, and Obama should make it clear that his concern is on the future rather than the past. Let history pass judgment, not partisans.

Some People Just Don’t Get It

Bill Maher flaunts his ignorance once again over the issue of the Tea Party protests. Like many who live in a comfortable cocoon of left-wing orthodoxy, Maher fails to understand that the reaction to the Obama Administration is about matters of substance. Maher rants:

t’s been a week now, and I still don’t know what those “tea bag” protests were about. I saw signs protesting abortion, illegal immigrants, the bank bailout and that gay guy who’s going to win “American Idol.” But it wasn’t tax day that made them crazy; it was election day. Because that’s when Republicans became what they fear most: a minority.

The conservative base is absolutely apoplectic because, because … well, nobody knows. They’re mad as hell, and they’re not going to take it anymore. Even though they’re not quite sure what “it” is. But they know they’re fed up with “it,” and that “it” has got to stop.

Here are the big issues for normal people: the war, the economy, the environment, mending fences with our enemies and allies, and the rule of law.

Mr. Maher, here is what “it” is, in a way that even you can understand:

obamadebt.jpg

This is what President Obama is doing to this country. Former President Bush was fiscally irresponsible enough, but what Obama is doing is sheer madness. Trying to use government to fix the economy will not work. The bailouts are failing. The housing market is still in the toilet. Lenders are still holding back. If that isn’t a reason to be worried about the future, then it is time to pull your head out of the sand and look at the numbers.

When it was politically convenient, liberals pretended to care about the effect of massive deficits on the future of America. Now that Obama is in office, who cares about a few trillion here or there?

The Tea Party movement is not a partisan movement. There is great anger at the GOP for not leading on the issues of our time and allowing government to grow out of control during their tenure in office. This is a protest based on principles: in fact, it is a protest based on the classically republican principles that the United States should have a limited federal government of enumerated powers.

Maher, like many, think that just because Obama won an election, that means his policies are 1) popular and 2) right for the country. Neither are true. Winning an election doesn’t vindicate your policy prescriptions now any more than it did in 2004. Obama’s ham-handed handling of the economy, his Quixotic campaign against the Bush Administration on torture, and his constant prostrations before America’s enemies from Iran to Venezuela all demonstrate how radical he truly is. His popularity is being supported by a fawning media and a public that is hardly paying attention. Obama’s gotten the same honeymoon that most new Presidents get. But in time, his star will fade, as all Presidents do.

When that happens, the arrogance of Mr. Maher may come back to bite him. Politics in America is cyclical, and given the radical course that President Obama has set for this country, it may well be the Tea Parties that get the last laugh.

The United Socialist States Of America

The United States of America is now a de facto socialist nation.

That may seem like hyperbole, but there’s more than enough evidence to suggest that it’s true. Look at the definition of socialism from that font of all knowledge: Wikipedia:

Socialism refers to a broad set of economic theories of social organization advocating public or state ownership and administration of the means of production and distribution of goods, and a society characterized by equality for all individuals, with a fair or egalitarian method of compensation.

Let’s assume that definition is roughly accurate. Does the U.S. fall under that definition?

Well, we now have a system in which the government has a controlling interest in several major sectors of the U.S. economy. Whether the banking system is officially nationalized or not is largely irrelevant—it has already been de facto nationalized. The U.S. government now has effective control over all of AIGs operations, right up to the the amount that it may pay its workers. At least for a huge swath of the financial sector, the government has effective control.

Now, President Obama has set his sights on the auto industry, essentially firing GM’s president. The fact that the President just ordered an official of a private company to step down should be deeply troubling to all. What if President Bush had demanded that the Democratic president of a major arms manufacturer resign? The left would have been in an uproar. Regardless of Wagoner’s competency, to have the President of the United States order a private company to fire an employee should not happen in our system. The government is now calling the shots at GM. This isn’t forced nationalization, but like AIG, GM and Chrysler are now de facto state-run enterprises.

The government now controls the means of production in two huge swaths of two major industries. Even if we have not arrived at full-scale socialism yet, we are at the very least perilously close.

Economist Arnold Kling calls the current state of affairs “Progressive Socialism“—although it is really another version of state socialism. Socialism doesn’t require the government to own all the means of production (as does Communism), but merely to have effective control over the economy. Right now, the Obama Administration is effectively in the driver’s seat of the U.S. economy. Looking at the markets, it’s quite clear that the aimless direction that Obama is taking us is destroying trillions of dollars of actual value.

The Fall of Capitalism, The End of Freedom

Why should we care? The reason why the advent of American state socialism is such a problem is because political freedom and economic freedom are really two sides to the the same coin. As Janet Daley notes in The Telegraph an attack on capitalism is ultimately an attack on human freedom itself:

When we make the case for capitalism, we are defending the political principle of freedom, not arguing for one kind of rigid economic organisation over another. The debate is being hopelessly muddied by those late converts to free enterprise – politicians like Mr Brown who believe that markets should only survive if they can be made to serve Left-wing purposes.

Capitalism is premised on individual agency. Socialism is premised on the power of the state. The second we give government—which has the legal ability to use force—all of our economic power, what do we really have left? In essence, socialism is really a more “enlightened” form of feudalism in which the serfs trade their freedom for the protection of the elites.

The United State should not fall into the trap of socialism. Socialism is not a workable economic model. The larger and more diverse the nation, the more quickly socialism fails. Industrious and homogenous Sweden can ride out the problems of strong government control longer than could the large and diverse United States. If we continue down this road, our economic collapse will only get worse.

The United States has become a de facto socialist state, and the crisis on Wall Street is a reaction to this untenable and unsustainable trend. If we want to preserve our quality of life, we cannot have our economy being run by the same Washington apparatchiks who have caused this crisis in the first place. Obama’s shift of the U.S. economy to a more centralized and socialized one will lead this country ever closer to disaster.

You Can’t Squeeze Blood From A Turnip

E.J. Dionne does what Democrats love to do, except when running for public office: call for a massive increase in American taxes. Again, he demonstrates the fundamental flaws in the Democratic understanding of basic economics:

He’s right that a large share of any increase should hit those who enjoyed the biggest income gains over the last decade. But in the end, no politician (with the possible exception of libertarian Ron Paul) is willing to cut the budget enough to contain the deficit without a general tax increase down the road.

Every budget analyst knows this, and every politician knows that it’s far easier to bemoan deficits in the abstract than to risk spending cuts or tax increases that hurt sizeable groups of voters. “There are no more low-hanging fruit,” says Tom Kahn, the staff director for the House Budget Committee. “The low-hanging fruit have already been picked. Any tax increase or spending cut is going to trigger opposition from somewhere.”

In an ideal world, Obama would come right out and say we’ll need broad-based tax increases. But that would be suicidal right now. Witness the reaction to his effort to put a 28 percent ceiling on deductions. His proposal would affect only 1.2 percent of taxpayers, yet even that idea is about to die in Congress.

Dionne is correct in one aspect: just raising taxes on the “top 5 percent” isn’t going to do anything. President Obama could raise the top marginal tax rate to 99% and still never get nearly enough money to pay for his additional proposed spending, no less the entire federal deficit. The idea that raising the top marginal tax rate from 36% to 39% will be anything more than a tiny drop in the bucket compared to Obama’s radical spending plans is ridiculous. Even combining that with removing payroll tax caps, limiting deductions, etc., won’t nearly be enough.

So, is a broad tax increase the answer? Dionne suggests yes. But that answer is self-evidently incorrect. Exactly what is going to be accomplished by adding to the tax burden of the American people in the middle of a recession that is precipitously close to becoming a depression? Where is the average American member of the middle class going to get the extra money to pay off Uncle Sam’s never-ending appetites? People are already cutting back on their spending—raising taxes would cause them to cut back even more. When the economy is already having problems with paradox of thrift, why would policymakers try for a plan that would reduce consumer activity even more?

The root of this whole problem was bad policy. We let everyone get over-leveraged, homeowners, banks, and even the government. Now, instead of tightening their belts, our “leaders” in Washington D.C. are trying to find every inventive new way they can to spend even more money. Dionne is also right in that just nibbling away at the margin will not do it—we have to re-evaluate the massive and virtually uncontrolled growth of government.

Raising taxes and having government “invest” that money will not work. Government is subject to the political process, which virtually guarantees waste. If anyone thinks that Congress will rationally allocate money based on the national interest, then they have a fundamentally irrational faith in government unjustified by facts or common sense.

Raising taxes is simply not the answer. In a time when the American people are cutting back, losing their jobs, and losing their homes, it is grotesquely irresponsible for government to demand even more of their hard-earned money—they don’t have the money to give. The argument that somehow the government will spend its way out of this recession is completely unjustified. Those who think that we should follow the example of FDR had better hope the Europeans start slaughtering each other so we can bomb them to rubble and then help them rebuild—it was World War II and not the New Deal that finally ended the Great Depression. We do not have the ability to spend our way out of this—and all Dionne would have us do is feed the beast more.

What needs to be done? For one, we need to re-evaluate our view of what government does. Nearly all of our current problems can be traced to government intervention. Fannie Mae and Freddie Mac could cook their books because they (and everyone else) knew that they were “too big to fail” and if anything went wrong, Uncle Sam would bail them out. For all the talk about how it was deregulation that caused this mess, the reality is that the less heavily regulated industries are doing better than the most heavily regulated ones. The idea that banks were living in some kind of libertarian paradise and government wasn’t watching everything they did is completely wrong. The banking industry was, and is, heavily regulated. The problem was that the big players (Countrywide, for example) could “buy” Congress and get them to pass laws and rules favorable to them.

The answer is to make sure that this kind of capture can’t happen again. The best way to do that is to make sure that Congress can’t rewrite the rules to line their own pockets. That means not only tougher ethics reform in Congress, but also preventing Congress from being able to screw around with the nation’s economy. Everyone treats this as a demand problem—but it’s really a supply problem. If Congress could only do so much to regulate the industry, there would be no incentive for companies to spend billions on influence peddling. There would be no point to doing so—even if they wanted to, Congress couldn’t stack the deck in their favor.

That means restricting the power of government, except in making sure that companies act transparently. The government does have some need to interfere with the market, but what we are seeing now is when government substitutes the “wisdom” of someone like Tim Geithner for the judgment of the market—quite literally making Geithner the one who gets to make all the rules. Even if Geithner were an unqualified genius, this sort of concentration of power is dangerous.

What we need is less government, not more. What we need is the development of the private sector, not more reliance on government employment. What we need is less of a tax burden, not more. We need a government that does a few things and does them well, not a government that tries to do everything and ends up failing more often than not.

Dionne is wrong at the core of his argument—the level of government spending is unsustainable, and we can never raise taxes enough to cover the difference—and if we tried it would further depress the economy. We cannot keep hoping that the same top-down solutions will work. We cannot just assume that substantive entitlement reform is off the table.

This nation is at a crossroads. We can either continue to spend our way into bankruptcy or we can start looking at alternatives. Raising taxes only makes things worse. We cannot blindly put our faith in government, but must look back to the basics of what makes our economy strong: hard work, a government that promotes opportunity, and a government that is small but effective. The more we stray from those basics, the harder things will be in the future.

Serious Times Call For More Serious Analysis

Foreign Policy has two perspectives on Fareed Zakaria’s latest piece in Newsweek. Both are interesting critiques of both Zakaria and the Obama foreign policy.

First, Christian Brose finds Zakaria’s thinking too reflective of the “Washington establishment”:

We’ve been hearing a lot about the Obama administration’s plans to talk to adversaries — Iran, Russia, Syria, the Taliban, etc. But we’ve heard preciously little about how the administration intends to create conditions of strength that are the requirement for diplomatic success. Everyone knows Obama is willing to talk. The question is what new leverage he will bring to bear to make that talk effective. Will we use the military forces we are withdrawing from Iraq to exert greater pressure on Iran? Are we asking our European allies to take any bold new steps on financial coercion? What exactly is Russia willing and able to do to change Iran’s decision-making? So far, answers to questions like these have not exactly been forthcoming, and in their absence, it’s not at all off-base to think that talking without leverage could harm U.S. interests. (And all of this is assuming that Iran hasn’t just said, screw it, we’re getting the bomb, and damn the torpedoes, which opens up a whole new world of problems.)

Second, Peter Feaver argues that Zakaria doesn’t have a serious critique of American foreign policy:

A more balanced perspective on Bush — some positive, some negative — would pave the way for Fareed to offer a more balanced perspective on Obama. I agree with Fareed that some of the critiques of Obama have been exaggerated, almost as exaggerated as, well, the conventional wisdom on Bush. But surely in a column calling for a reasonable perspective on Obama’s foreign policy performance, Fareed could have found space to at least discuss some of the missteps and rookie mistakes: perhaps a mention of the ham-handed personnel decisions (like this one or this one) or the needless insults to allies (such as this one or this one). If these are dismissed as minor peccadilloes, how about a candid admission that, as Fareed himself recommended, Obama has more often than not continued Bush’s foreign policies while claiming to make bold dramatic changes?

In the end, I don’t think that the Obama Administration cares all that much about foreign policy. Obama is not a foreign-policy oriented President. He’s much more concerned with the U.S. economy, which is (rightly or wrongly) popularly conceived as much more important than what’s going on abroad. Obama’s view of American power is not fully formed. He had almost no foreign policy experience when he took office, and he’s displayed little interest in foreign policy now—other than largely staying the course from the Bush Administration.

Obama’s idea is that if somehow everyone gets together and talks somehow everyone will come to a consensus. That model barely works in faculty meetings, and it won’t work in international diplomacy. Iran will not give up their pursuit of nuclear weapons. Why should they? The US can talk all they want, but there’s nothing we can offer that will give Iran a reasonable incentive to stop. The Iranians are doing what a rational state would do in their shoes: develop a nuclear deterrent to Israel. That they may be insane enough to use that deterrent is a problem, but even if the Iranian regime were perfectly rational, they’d still be developing nuclear weapons.

There’s no “consensus” there. Iran wants nuclear weapons, we want to deny them the opportunity. There’s no amount of carrots that can dissuade them otherwise, and the Iranians know damned well that Barack Obama does not have the political will to stop them. They have no fear of President Obama, and there’s no reason they should fear him. That is a problem for us.

On the other hand, I suspect that Tehran is frightened of Binyamin Netanyahu. He will not tolerate a nuclear Iran, and he’s the only world leader who would do something to stop them. But even that seems a less than likely circumstance.

What should Obama do? He has to face facts: the world is not a peaceable place. If he chooses to negotiate it must be with the full understanding that negotiation may be pointless. That means understanding that players like Russia, China, Iran, and Venezuela may not have any interest in so much as throwing us a bone. That means being willing to be both smart and tough. All the tough rhetoric in the world is worthless. Nobody fears Vladimir Putin because he talks tough, they fear Putin because he’s perfectly capable of killing dissidents, invading countries, and playing hardball to get what he wants.

That doesn’t mean that Obama should emulate Putin, but that does mean that he needs to learn to play hardball. That means being willing to engage Central Asian states on the same terms that Russia does: and they’ve become far better than us at offering tasty carrots and brutal sticks. We can’t pretend that Tashkent works the same way as Washington D.C. It doesn’t, and we have to learn to play by the regions rules.

Obama has shown some promise—he has been less radical in foreign policy than some had predicted. But he still has a long way to go. He can’t keep alienating allies like he did with his shameful performance with Gordon Brown. He has to face the realities of a harsh and unforgiving world. Obama has the benefit of being intelligent and articulate, which counts for a lot. But it will never be enough, and unless the world fears him just a little, America will never truly be respected.

Weapon Of Mass Wealth Destruction

Bloomberg has a deeply critical piece written by Kevin Hassett arguing that Obama has declared “war” on American business. This may seem like hyperbole, but the evidence bears it out:

Imagine that some hypothetical enemy state spent years preparing a “Manchurian Candidate” to destroy the U.S. economy once elected. What policies might that leader pursue?

He might discourage private capital from entering the financial sector by instructing his Treasury secretary to repeatedly promise a brilliant rescue plan, but never actually have one. Private firms, spooked by the thought of what government might do, would shy away from transactions altogether. If the secretary were smooth and played rope-a-dope long enough, the whole financial sector would be gone before voters could demand action.

Another diabolical idea would be to significantly increase taxes on whatever firms are still standing. That would require subterfuge, since increasing tax rates would be too obvious. Our Manchurian Candidate would have plenty of sophisticated ideas on changing the rules to get more revenue without increasing rates, such as auctioning off “permits.”

Now, Obama is no “Manchurian Candidate”, but he is doing everything he can to bring the economy into depression. His policy goals will continue the already unprecedented destruction of American wealth that has resulted since his elections. The markets, looking ahead to the Obama Administration, have reacted with panic. They see the future wealth-destroying effects of higher taxes, more government intrusion into the markets, a socialized system of health care, and a reckless “cap and trade” system that will push energy prices sky-high.

The markets are seeing Obama clearly for what he is: a weapon of mass wealth destruction.

If Obama wants to restore the economy, he would restore the engine of American prosperity: American business. Yet through higher taxes and more unnecessary and unneeded regulations, the Obama Administration has already put itself out as strongly anti-business. Small business owners are already trying to do whatever they can to get through the next four years, and that means continuing to stockpile rather than sell and cutting as many jobs as we can.

I have always said that liberalism will always fail because its premises are wrong. Obama has barely started to enact his agenda, and already the results speak for themselves. Into Year Two of the Obama Recession, it’s going to be very hard for the left to blame the previous President for the bad economy—not that they won’t. But the reality will be that Obama’s policies will not create wealth, they will destroy it. We will all suffer due to this reckless experimentation. What we are seeing in the markets is a clear-headed response to Obama’s policies—and the markets will continue to sink unless this nation changes its current, disastrous course.

Getting To A Real Stimulus

Carl J. Schramm has a great piece on why the real focus on stimulating the economy should be on growing the entrepreneurial class:

Only private enterprise — in particular high-growth start-ups — will create the jobs and the wealth to right America’s listing economy. That is, if we let them.

What our economy most needs is another outbreak of entrepreneurial energy. It is waiting to happen all around us. As people face layoffs, many take with them wonderful ideas for entirely new products and services. Layoffs are tough, but they need not spell doom. The average age of those who found high-tech companies in this country is 39. In fact, twice as many founders are older than 50 as are younger than 25. The end of one career can be the beginning of another.

Some people getting pink slips might have ideas that could become entire new industries. Indeed, some of America’s largest and most successful firms were started in recessions or bear markets or both — including General Electric (founded in the wake of the Panic of 1873), IBM (started in the last year of the recession that followed the Panic of 1893), United Technologies (same year as the 1929 crash), Microsoft (1975 depth of “stagflation”) and Guess (1981, worst post-World War II recession to date).

He’s absolutely right—in a normal recession, the way to rebuild is through what Joseph Schumpeter called the process of “creative destruction”. Basically, the old system that had failed is replaced at the grass roots with a new system—new businesses, new ways of doing things, new technologies. Those new businesses form the basis for not only an economic recovery, but a stronger economy.

That is, so long as government doesn’t try to prop up the old, unsustainable system.

Schramm is right: what we so desperately need now is not more bailouts, but more creative destruction. The seeds for our economic renewal are being planted all around us. The future is not with General Motors, it’s with Tesla Motors and Aptera Motors. There are a million garage inventors out there who right now are creating advances that will fundamentally change our world.

34 years ago on this date, a group of these inventors met in Menlo Park, California. This was deep in another recession. They were visionaries and dreamers who didn’t have the backing of government research programs or big corporations. They were the Homebrew Computer Club, and if that meeting had never happened, your iPod, iPhone, and probably even your PC would likely never had existed.

Now, imagine an alternate reality in which the government, concerned about the very real environmental impact of all these people working with heavy metals and dangerous components, decided to heavily regulate or even ban their use. The only way to build a computer would be to get a government license and go through an elaborate set of “safeguards” to prevent any potentially hazardous materials from being introduced into the environment. There would, of course, be major fines for violating these rules. If a young Steve Wozniak’s first Apple I prototype fizzled, it would cost him $25,000 to properly dispose of it.

Would Wozniak and Jobs have gone on to found Apple? Would the Mac I’m using to write this post have existed? Almost certainly not. Our world would have no iPods, no iPhones, and the Internet would remain a military communications network accessible only be a handful of tightly controlled machines. The microcomputer revolution would have been strangled in its crib.

The hypothetical government regulations weren’t all that unreasonable—early computers were filled with all sorts of dangerous contaminants, from lead to PCBs. One could have made a perfectly reasonable case for doing exactly what the government did in that hypothetical—and people do much the same all the time.

Yet the results would have been a much weaker economy and a much less prosperous world. Without the Homebrew Computer Club, there would have been no Apple Computers—and Apple employs tens of thousands of Americans today.

That is why we need entrepreneurs in this country. That is why a top-down program will never work. When government picks winners and losers, they will inevitably pick some of them wrong. In fact, they are quite likely to get all of them wrong. The “winners” in a top-down system will be the firms with the most political clout. Such a system rewards the ones with the most lobbyists, not the best ideas.

Right now businesses are scaling back. It’s not just Obama’s promise to increase the highest marginal tax rates, it’s also his promise to raise the cap on FICA and reduce the phase-outs on crucial deductions. Add to that an increasing state and local tax burden, and the very class of people most likely to give us those future jobs are hurting and expecting to hurt even more.

A real stimulus would be to get government as far out of the way as possible. That means government should promote innovation from the bottom up rather than the top down. We need more tax credits for American small businesses—the employers of half of the American workforce. We need fewer painful regulations that that end up hurting entire industries. We need to ensure that people like those visionaries who met in Menlo Park 34 years ago have a chance to bring their dreams to fruition.

Scramm goes further with even more substantive ideas for beating this recession: a payroll tax holiday, exempting new business owners from capital gains, cross-state purchasing of health plans, and other very strong and very achievable ideas for rebuilding this economy. These are ideas that should take precedence over yet another top-down bailout of industries that have already failed.

Creative destruction is really just creative reconstruction. America needs to look forward, not try to prop up a system that just isn’t working. Government is the friend of big business, and efforts to regulate benefit those with the biggest lobbyists who can influence the rules and grease the right palms. If we want a better future, it will come not from the top down, but from the bottom up. Schramm is right: entrepreneurs are the key to getting out of this mess. If we’re not going to give them the opportunity to succeed, then we are potentially losing the chance for the next Apple, Microsoft, or even General Electric to transform our future for the better.