Campaign 2010, Economics, Politics, War On Terror

All The Things I Missed…

I’ve been outside the world of politics for the past year, and what a year it has been! When I started my job, Obama’s approval ratings were still sky-high, and the Tea Party movement was just getting started. Now, we face a political dynamic that’s looking a lot more like 1994 than 2008. What a long, strange year it’s been!

The passage of the health care bill was a Pyrrhic victory for the Democrats. They sold their souls for a watered-down version of the single-payer European-style system they wanted and will likely lose the House as a result. The health care bill was the classic version of why laws and sausages are made in much the same way. It was an unholy mish-mash of bad ideas wrapped in false promises, and presented as though it were the greatest bill ever. It was a 2,700 page monstrosity that has already begun wreaking havoc with private employers. What the Democrats failed to realize is that many employers have their open-enrollment periods in November—which means that the immediate effects of the health care bill will be felt right around Election Day. When employees, who are already struggling, learn that their insurance premiums are going through the roof and their HSAs are less useful than before, that’s not exactly going to make them happy.

The economy is the albatross around the Democrats’ necks. Unemployment is stuck at 9.5%, and the real figure (counting unemployment, discouraged workers, and workers taking the only jobs they could get) is more like 20%. We’re facing a crisis of unemployment. And the reaction from the Democrats has been to do exactly the wrong things. More taxes, more regulations, more social experimentation. The results have been predictable: the level of joblessness is at crisis levels. We can’t have a functioning economy when we’ve got a developing underclass that are essentially shut out of employment. If this trend continues, the effects on both our economy and society will be dire.

As I write this, the last combat troops are leaving Baghdad. Remember when Sen. Harry Reid said that the war was “lost?” Thank heavens that we didn’t listen to him. We still have 50,000 troops left in Iraq, and we may have close to that number in the country for a very long time. The truth is that Iraq’s journey is just beginning. But what has happened in Iraq is something extraordinary: in 7 years Iraq has gone from the iron grip of tyranny to a failed state, to a developing nation that has the chance to prosper and flourish. The future of the Iraqi people is now in their hands, as it should be. We can and should help where asked, but now the main threat to the future of Iraq isn’t related to terrorism, but corruption. That may be a more dangerous enemy than al-Qaeda, but the Iraqi people have the ability to fight corruption and establish a better life for themselves. I cannot, nor can anyone else, say whether or not they will succeed in rebuilding their country. I hope and pray they will. But a chapter has been turned, and a battle has been won. Our military did an amazing job under intense pressure. We have never fought a war quite like this, and the conflicts of the future will be far less deadly because of the lesson’s we’re learned in Iraq.

Afghanistan is another story. I don’t know if we can “win” in Afghanistan. I’m not sure what the goal is—other than to keep the Taliban and al-Qaeda at bay. Can we rebuild a nation that’s never really been a nation in modern times? I’m not so sure that we can. Especially not when elements of the Pakistani government are working to destabilize Afghanistan. Yes, we need more troops and a better strategy to have any hope of success—but we also need to realize that Pakistan is part of the problem, and to find ways of ensuring that Pakistan is an ally rather than an enemy.

Finally, some site news. I’m planning on revamping the site in the next few days to have a new HTML 5 template that will look great on all sorts of devices from Droids to iPads. So forgive the dust as that transition gets underway.

Economics, Obama Administration, Politics

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.


We Need Real Jobs

Bob Herbert writes in The New York Times that that what America needs to recover from the recession are more jobs. On that point, he’s absolutely right. The problem is that the jobs he would choose to create won’t do anything to help the economy. Like a good Times columnist, his preferred solution is more government intervention:

What Americans need is new employment on a massive scale, and one of the most effective ways to get that started is to invest extraordinary amounts in the nation’s infrastructure, to rebuild America in a way that creates a world-class platform for a sustainable 21st-century economy.

President Obama’s stimulus package is just a first step in the government’s effort to stabilizing the hemorrhaging economy. It contains infrastructure spending, but nothing comparable to the vast amounts it will take to make the desperately needed improvements.

Funds spent on those improvements, which will have to be made sooner or later, are also cracker-jack investments in putting people to work. The idea that the government is spending trillions on wars, bank bailouts, tax cuts, and so on, while still neglecting its infrastructure needs — and at a time when Americans are desperate for jobs — is mind-boggling.

Here’s the problem with that line of argument. What we need is not a bunch of make work jobs. Exactly what would Mr. Herbert’s plan look like? Should we take an unemployed financial analyst from Manhattan, hand him a shovel and have him dig a ditch or fix potholes on I-95? Is that really an effective use of his skills? Of course it isn’t&madash;it’s a waste of human capital.

We do need to fix infrastructure, but don’t kid yourself that doing so will make a bit of difference in job growth. Unless we want to start building roadways to the moon, there’s just no reason for millions of people to pick up shovels for all those “shovel ready” projects. What stimulus infrastructure spending produces is very limited and not terrifically effective.

Here’s where the standard argument about government jobs comes in: “but you’ve built a road!” they exclaim. Great, you have a road. Does that mean anyone will use that road? Sure, that road would be nice for all the trucks that aren’t going anywhere to take all the goods that aren’t being produced, but here in the real world just building a road produces a strip of concrete that may or may not get used. “If you build it, they will come” is a line from a movie, it’s not a theory of economics.

So, what do we really need? We really do need jobs, and we really do need infrastructure fixes. But those are two different problem with two different solutions.

If we want to get out of this mess, we need to tear down walls rather than build them up. The first bill that President Obama signed into law was an act that dramatically expanded liability for employers. You want to create jobs? Try not hobbling the people who create them.

Instead, Congress continues to punish American small businesses at every turn with higher taxes, more regulation, and expanded liability. If you’re a small business owner, now is the last time that you’re thinking about expanding your business. Yet now is also the time when we most need new job creation. Congress and the President continue to put policies in place that harm job creation, then they wonder why the economy is swirling the tubes. Then their solution to the problem is to punish the creators more with even more regulation while lavishing more and more money on the irresponsible.

If job creation is the goal, then Congress should start making it easier for small businesses to start and become big businesses. There are a number of ways to do this. For one, President Obama could sign an Executive Order today that nullifies regulations that harm small businesses—it wouldn’t solve all the problems caused by over-regulation, but it would certainly help. He could then push Congress to pass regulation that would shield small businesses from the biggest liability-increasing laws like the Lily Ledbetter Act. If you’re going to punish business for their excesses, at least punish the people with the deep pockets rather than tilting the playing field more and more against the little guy.

The next step is an across-the-board cut to the corporate tax rate to 25%. The U.S. has the highest corporate tax rates in the developed world—even Sweden has a lower corporate tax rate. Alternately, small businesses (with 25 or fewer employees) should not pay corporate taxes at all. While small businesses can elect to become Subchapter S corporations that make their income exempt from federal taxes, that rule puts more hurdles in their way. Why bother making small businesses jump through the hoops of a Subchapter S election rather than simply getting rid of all the headaches? Small businesses should not be punished with either double taxation or having to elect to go Subchapter S—the process should be as simple as possible.

Forget bailing out the Big Three auto companies. They’re dinosaurs. It’s like giving a bailout to the horse-drawn carriage industry in 1920. Somewhere in a garage an American inventor is coming up with the next revolution in transportation, free of the restraints of conventional thinking. I’d rather throw a few hundred grand to a hundred garage labs than a few billion to the dinosaurs. If just one of those innovators pans out, a new industry is born. HP, Apple, Microsoft, and even Google started not as the product of giant government R&D programs, but in garages and college campuses. You want the most bang for your stimulus dollar? Then give it to the little guys with the big ideas, not the big guys who are too constrained by their own bureaucratic inertia to revolutionize American industry.

We’re not going to fix America’s problem by repairing bridges and digging ditches. Most of our infrastructure problem should be solved by just shifting our priorities. Yes, it’s nice to have millions for the arts. But we also have to fix bridges, and we have to start making rational choices about how we spend our money. If we want to repair American infrastructure, we should do that, but it should be done in as apolitical a way as possible. That means saying that we are not going to spend millions on bike path or “community centers” that only help a small number of people. Instead, we’re going to fix the big problems like failing airports, falling bridges, and chemical plants that might as well have a “BOMB ME” sign painted on them. That means insulating these decisions from Congress, who have every incentive to put the needs of their campaign contributors above the public good.

If we want to fix the economy, we can’t follow Herbert’s single-minded focus on government as the solution to every problem. The reason why things are so bad is that our private-sector is failing. Neglecting the real engine of growth—private-sector, small-business jobs—is only going to make this recession turn into a full-blown depression.

This is the 21st Century. We can’t play with the handbook of the 1930s. If we want a 21st Century economy, we have to look beyond the top-down centralized approach and start looking at the economy in the same way we look at the Internet. Instead of a “central server” in Washington, we need a “cloud” economy that spurs innovation. Centralized networks are slow, inefficient, insecure, and costly. Distributed networks are fast, resilient, efficient, and effective. Our economy is the same way. If we’re to build a better future for ourselves and our children, we have to concentrate not on centralizing economic power, but putting it back into the hands of the people who create jobs that last.

Culture, Economics

A Case Study In Why Higher Taxes Hurt People

Minesota has the second-highest business property tax rate in the United States. In a time when the retail sector is already taking a pounding, this additional burden is forcing retailers to abandon the state. World Market, one of my favorite stores, is one of the retailers pulling out of the state entirely.

I’m sure all the wonderful “government services” purchased with those tax dollars will help. Myself, I’d rather that business stay open and those people who work there have their jobs.

The central reason I’m not a liberal is because the idiocy of taxing businesses to death to expand the government dole is so transparent. We need jobs, not handouts, and right now our government is strangling us to death in red tape and drowning us in a sea of debt.