Obamanomics Has Failed Dismally – Larry Kudlow – Townhall Finance Conservative Columnists and Financial Commentary

Obamanomics Has Failed Dismally – Larry Kudlow – Townhall Finance Conservative Columnists and Financial Commentary.

About 30 years ago, Paul Volcker launched a monumental monetary effort to bring down inflation. As Fed chairman, he sold bonds, removed cash from the economy and cared not one wit about rising interest rates. And it worked. Gold plunged, King Dollar soared, and the drop-off in bank reserves and money extinguished high inflation — and actually launched a multi-decade period of very low inflation.

This week, current Fed chairman Ben Bernanke embarked on an absolute reversal of Volcker’s policy. He is launching a monumental effort to buy bonds and inject new money into the economy in order to reignite economic growth and job creation. It’s like history is repeating itself, but in reverse. Gold is soaring, the dollar is falling. Something’s wrong with this picture.

Bernanke’s QE3 is an unlimited Fed effort to buy mortgage bonds with new cash. The plan — which starts immediately — envisions $40 billion of bond purchases and money-creation per month, coming to $480 billion over the next year. And there are no limits to these purchases. These operations are open-ended. This could last for years — maybe in perpetuity — until job creation shoots way up and unemployment comes way down.

Nothing like this has ever been used by our nation’s central bank. The Fed’s balance sheet, which has ballooned from around $800 billion to $2.5 trillion under Bernanke, will go to $3 trillion, or $4 trillion, or who knows how high.

But here’s the rub: More money doesn’t necessarily mean more growth. More Fed money won’t increase after-tax rewards for risk, entrepreneurship, business hiring and hard work. Keeping more of what you earn after-tax is the true spark of economic growth. Not the Fed.

In the supply-side model, the combination of lower marginal tax rates, lighter regulation and a downsized government in relation to the economy is the growth-igniter. Money, on the other hand, determines the value of the dollar exchange rate and subsequently the overall inflation rate. A falling dollar (1970s) generates higher inflation; a rising dollar (1980s and beyond) generates lower inflation.

This is the supply-side model as advanced by Nobelist Robert Mundell and his colleague Arthur Laffer. In summary, easier taxes and tighter money are the optimal growth solution. But what we have now are higher taxes and easier money. A bad combination.

The Fed has created all this money in the last couple of years. But it hasn’t worked: $1.6 trillion of excess bank reserves are still sitting idle at the Fed. No use. No risk. Virtually no loans. And the Fed is enabling massive deficit spending by the White House and Treasury.

Now, one key political point is that Bernanke’s desperate money-pumping plan to rescue the economy is a very blunt admission that Obamanomics has completely failed. The president is asking voters to give him more time, which is a very weak argument. But his Fed chairman is essentially saying we are running out of time and have to embark on this massive monetary action. Mitt Romney should use the Bernanke argument, but not the Fed solution.

Some argue that Bernanke so desperately wants a victorious Obama to reappoint him that he’s printing money and driving up stock prices on the eve of the election. I prefer not to believe this cynical interpretation. As an old ex-Fed staffer, I would argue that it’s not a political agency. Although I have to admit, on the eve of the election, the question is going to be asked.

More to the point, the Achilles’ heel of the Bernanke plan is the collapse of King Dollar, the result of printing so many new ones for so long. That, in turn, will drive up commodity prices, especially energy and food, and will do great damage to the middle class, which is already suffering from income declines and rising living standards.

This is what happened in 2011, when QE2 did more harm than good to the economy. Middle-class savers and retirees will also get their heads handed to them because of rock-bottom interest rates. And bank lenders may withhold credit since the difference between short and longer rates is so narrow there’s no incentive to make loans.

So at the end of the day, Obama’s economic program of tax, spend and regulate has been a dismal failure. And now his Fed chairman is acting dramatically to bail him out. Guess what? It won’t work.

To find out more about Lawrence Kudlow and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.


Deliberately Destroying America – Tea Party Nation

Deliberately Destroying America – Tea Party Nation.

By Alan Caruba

It has taken three and a half years into Barack Obama’s presidency for most Americans to realize that he has been deliberately destroying America by driving up the nation’s debt and deficit, reducing privately held wealth, forcing millions onto the public dole, undermining its moral structure, and weakening the nation’s reputation internationally..

His latest lie is that “the private sector is doing just fine”, but the numbers tell the whole story and one can find them on an excellent blog, Economic Collapse, that offers seventy examples:

— The official U.S. unemployment rate has been above eight percent (8%) for 40 months in a row. Unofficially, it is estimated to be closer to fifteen percent (15%).

— In 2007, about ten percent (10%) of all unemployed Americans had been out of work for 52 weeks or longer. Today that number is above thirty percent (30%).

— An astounding forty-nine percent (49%) of all Americans live in a home where at least one member is receiving government benefits.

— The middle class is shrinking. Ninety-five percent (95%) of the jobs lost during the current recession were middle class jobs.

— Instead of cutting spending to reduce debt, the Federal Reserve is “monetizing” much of the U.S. debt. It purchased “approximately sixty-one percent (61%) of all government debt issued by the U.S. Treasury in 2011.

— Perhaps the most frightening statistic cited was a survey that found that sixty-three percent (63%) of Americans “believe that the U.S. economic model is broken.”

It is not broken. The economic model that propelled America into a superpower would continue to provide prosperity if the nation’s “entitlement” programs were reformed, if the obscene government spending and production of regulations were reduced, if government housing finance entitles such as Fannie Mae and Freddie Mac were eliminated, if the federal government’s purchase of the nation’s land mass was ended, if environmental laws without any basis in science were struck from the books, and if government control over the exploration and extracting of its vast energy reserves was greatly reduced.

It’s a tall order and it would require cleaning out a Congress that has imposed unsustainable burdens, including the highest corporate income tax in the world, and a level of taxation that requires those still holding jobs to annually work 107 days to earn enough money to pay local, state, and federal taxes.

If you check out the Progressive Caucus website, you will find nearly seventy members of the House are members and there is one from the Senate, the Socialist Bernie Sanders. In the 1950s they would have correctly been identified as Communists.

When Liberals and liberalism became unpopular, they began using the term Progressives. They are the descendents of every Democrat that voted for the New Deal, the War on Poverty, the creation of Fannie Mae and Freddie Mac, and the creation of the Departments of Energy, Education, and the Environmental Protection Agency. These are the people who in the early years of the last century imposed the income tax and engineered the creation of the Federal Reserve, a banking cartel that controls the economy.

At this point most conservatives have heard of Saul Alinksy’s 1972 book, “Rules for Radicals”, a guide to bringing about the destruction of the nation’s capitalist economic system and replace it with the kind of government that Barack Obama has tried to impose with the help of the many Communists and liberals in Congress.

Lesser known is the roadmap spelled out in 1988 by Columbia University sociologists, Richard Andrew Cloward and his wife Frances Fox Piven, both members of the Democratic Socialists of America.

The “Cloward-Piven Strategy” advocated a “massive drive to recruit the poor onto the welfare rolls” in order to sabotage it and bring about “a political and financial crisis.” As it turned out, it was the collapse of the housing market that brought about the financial crisis they wanted, but following the Bush administration emergency bail-out of the banking system, the Obama administration with its Democrat-controlled Congress set about imposing historic debt through its $821 billion “stimulus.” Present debt exceeds the entire annual Gross Domestic Product.

It followed that with an unnecessary and wasteful bail-out of General Motors and Chrysler (instead of permitting a normal bankruptcy that would diminish the power of the unions that brought it about), and massive “investments” in failed solar and other alternative energy companies. The EPA was set free to try to impose regulations that would shut down a major portion of the nation’s producers of electricity.

Even though voters returned majority power to Republicans in the House of Representatives in 2010 the trail of destruction has continued and the bills they have passed to end our present financial troubles have been locked up in a Democrat-controlled Senate that has not passed a budget in the last three years.

We are now five months from an election to remove Obama from power and electing conservative lawmakers to office. It’s a start in restoring America to its former prosperity.

© Alan Caruba, 2012

One of the best explanations I’ve seen

One of the best explanations I’ve seen. This rather brilliantly cuts thru all the political doublespeak we get and puts it into a much better perspective and is the same for many countries in Europe…Why the U.S. was downgraded:* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let’s now remove 8 zeros and pretend it’s a household budget:

* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts: $385

Got It?????

OK now Lesson # 2:
Here’s another way to look at the Debt Ceiling:

Let’s say, You come home from work and find there has been a sewer
backup in your neighborhood….and your home has sewage all the way up
to your ceilings.

What do you think you should do ……

Raise the ceilings,

or pump out the crap?

Your choice is coming Nov. 2012

WOLF: Prosperity starts with Americans, not Uncle Sam – Washington Times

WOLF: Prosperity starts with Americans, not Uncle Sam – Washington Times.

5 trillion reasons why another government stimulus is not the answer

By Dr. Milton R. Wolf – The Washington Times

Never before in history has such overwhelming evidence failed to convince the smart-set governing class of the obvious: Government cannot create wealth. Instead, our rulers bitterly cling to the notion that the government can spend your money more wisely than you can.

It’s easy to blame President Obama for our economic quagmire, but that’s only part of the story. Sure, Obamanomics has become the science of downward-sloping graphs – with the notable exceptions of spending, borrowing and taxing – but Mr. Obama did not invent the big-government annexation of our economy – he only accelerated it.

Let’s not forget that former President George W. Bush also worshipped the false idol of “stimulus” economics. His 2008 $168 billion “booster shot” was straight out of the Keynesian pump-priming playbook, and despite Mr. Bush’s claim that it was “large enough to have an impact,” it didn’t. In retrospect, MSNBC’s analysis is as comical now as it was prophetic then: “Economic analysts generally believe the $168 billion package Mr. Bush signed will help prevent the current downturn from ballooning into a crisis. But if the rebates don’t spur a consumer spending spree strong enough to cure what ails the economy, Congress is ready to throw more money at the problem.”

And how! If there’s one thing we can count on Congress to do, it’s throw more money at problems. Eight months later, Congress wrote the $700 billion Troubled Asset Relief Program (TARP) check and President Bush signed it – with Sen. Barack Obama’s endorsement – promising that it would prevent economic Armageddon. It didn’t. In fact, TARP head Neil Barofsky later acknowledged to taxpayers: “You were robbed.”

Parenthetically, when the Obama administration claimed TARP was “remarkably effective by any objective measure,” it’s unclear if it specifically meant the successful fleecing of Americans.

Just four months later, with the economy still in a downward spiral despite so much “stimulus” and so many empty promises, Mr. Obama signed his $862 billion American Recovery and Reinvestment Act into law with still more grand promises that it would “create or save” millions of jobs and unemployment would stay below 8 percent.

Mr. Obama’s wild stimulus spending spree didn’t stop there. His administration has claimed straight-faced that food stamps and jobless benefits are really – wait for it – job stimulus programs. With 1 out of 7 Americans on food stamps and 400,000 new jobless claims each week, it’s a stimulus bonanza. Add in the gimmicks like “Cash for Clunkers” and “Cash for Caulkers,” and don’t forget that former House Speaker Nancy Pelosi billed Obamacare as a jobs stimulus program, too: “It’s about jobs. In its life, [the health bill] will create 4 million jobs – 400,000 jobs almost immediately.” Never before in human history has an economy been so thoroughly marinated in government stimulus.

All told, our governing class – Republicans and Democrats – has spent on the order of $5 trillion we don’t have on jobs that never materialized, in some cases in zip codes that don’t even exist. We mortgaged our children’s and grandchildren’s futures, and what exactly did we get in return?

In every measurable way, not much. In fact, worse than not much. Absent any actual economic success stories, the governing class has been reduced to claiming that things would have been worse without its wild orgy of spending. Really? Unemployment shot to nearly 10 percent, with underemployment almost double that and the average length of unemployment at an all-time high. Consumer confidence is approaching an all-time low. Food-stamp dependence is at an all-time high. Homeowners have lost a decade of equity, and foreclosures continue unabated. The debt has ballooned to $14.6 trillion. And for the first time in history, the United States of America has suffered the self-inflicted humiliation of having its credit rating downgraded.

The Keynesian pump-priming of Mr. Bush and the pump-flooding of Mr. Obama have been unmitigated disasters. The inescapable reality is that the government cannot create wealth and every dollar it spends must be taken from the private sector, which can. As Ayn Rand wrote, “You can avoid reality, but you cannot avoid the consequences of avoiding reality.”

Martha’s Vineyard is a great place to avoid reality, but our president is well-rested now and ready to try his luck once more with a big-government stimulus program. This from the man who famously said, “We’ve got a big hole that we’re digging ourselves out of.” Please, just stop digging. Instead, give Americans themselves a chance to stimulate our economy.

Entrepreneurs will create the jobs and reignite the economy if the government will create a predictable business climate and then just get out of the way. Start by eliminating every chokehold the government has on the economy. Make the Bush tax cuts permanent (until fair flat-tax reform can be enacted). Repeal Dodd-Frank. Suspend Sarbanes-Oxley until it can be reformed. Repeal Obamacare. Institute an immediate moratorium on new government regulations and take a machete (not a scalpel) to the current Federal Register. And finally, stow the destructive and divisive class-warfare language that is unbecoming of an American president.

In short, allow Americans to be Americans once more.

Dr. Milton R. Wolf, a Washington Times columnist, is a cousin of President Obama’s. He blogs at MiltonWolf.com.

EDITORIAL: Paying your neighbor’s mortgage – Washington Times

Obamanomics at Work

Image by wstera2 via Flickr

EDITORIAL: Paying your neighbor’s mortgage – Washington Times.

White House says ‘eat your peas’ to float the sinking housing market

Today’s glut of unwanted homes on the market, with unending foreclosures in some parts of the country, is a serious drag holding back any chance of economic recovery. Instead of eating our peas – as President Obama lectured Americans to do – and letting the market find its equilibrium, the administration is looking for an easy, temporary way out of the problem through modified mortgages for underwater homeowners. It won’t work.

The Obama administration wants to let millions of homeowners with government-backed mortgages refinance their loans at current low rates, which are about 4 percent. A very large percentage of those loans are underwater, and the homeowners couldn’t get lower rates without government intervention. The White House is acting as if forced refinancing is a free lunch. It’s not. Reducing the interest rate that Fannie Mae and Freddie Mac get paid on these loans will cost the government-sponsored enterprises tens of billions of dollars a year.

The reality is that Fannie and Freddie are effectively part of the government, and they hold $730 billion and $680 billion worth of mortgage securities respectively. The Federal Reserve System has $900 billion worth of securities insured by Fannie and Freddie. The Treasury held about $80 billion of those securities in July. What all this means is that taxpayers are investors in mortgage-backed securities whether they want to be or not. Don’t believe the Obama administration’s populist rhetoric that it wants to reduce the costs of borrowing for homeowners at the expense of big investors in mortgage-backed securities. In this case, what Democrats really are trying to do is redistribute wealth from all taxpayers to underwater homeowners, not from fat cats to the starving homeless.

This is a Hail Mary pass that won’t work. There is little evidence that lowering payments reduces the risk of default and foreclosure. If that were indeed the case, private lenders would have an incentive to modify mortgages, which they aren’t doing on a massive scale. It’s also not clear why irresponsible people who bought larger houses than they could afford should be rewarded with cheaper mortgages than the market is willing to provide. Once again, the thrifty will be asked to bail out the profligate. The moral hazard and perverse incentives created by such a system are symbolic of an Obama economy that inhibits smart investment and growth.

The bottom line is, unemployment has a far greater impact on default risk than monkeying with mortgages. If millions of jobless Americans had work, they wouldn’t be defaulting on their loans. To create jobs, government needs to cut spending and red tape so the private sector has the confidence to invest in new hires. Washington bureaucrats won’t outsmart the market. Instead, they need to let the housing market find its bottom, which is when recovery can begin. Anything else simply prolongs the pain – and this Great Recession.

More Obama Spending Won’t Do It – Larry Kudlow – Townhall Finance

More Obama Spending Won’t Do It – Larry Kudlow – Townhall Finance.

There he goes again.

Out on the campaign trail, President Obama is proposing more federal spending as his answer to sluggish growth and jobs. That won’t do it, Mr. President.

He wants more infrastructure spending, undoubtedly in the form of an infrastructure bank. That’s a terrible idea. It’s borrowed from Latin America, where bloated and corrupt bureaucratic construction agencies have helped bankrupt any number of countries in the past.

He wants to lengthen 99-week unemployment insurance, although numerous studies have shown that continuous unemployment benefits are associated with higher unemployment.

And he wants to extend the temporary payroll tax credit, which is not a permanent reduction in marginal tax rates, has no incentive effect, has not worked so far, and is really a form of federal spending — not real tax relief.

Earlier this week, when he signed the debt-ceiling bill, the president ranted on about the need to raise tax rates on successful earners, investors, and small businesses. He’s trying to bring back tax hikes as part of the phase-two special committee seeking additional deficit reduction, even though his own party rebuffed him on this in the late stages of the debt talks.

All this is a prescription to grow government, not the economy. 

What the economy needs, Mr. President, is a strong dose of new incentives, with pro-growth tax reform that flattens marginal rates and broadens the base for individuals and businesses. This includes moving to territorial taxation that ends the double tax on foreign earnings of U.S. companies. Plus, we desperately need a complete moratorium on federal regulations. As Sen. Barrasso recently noted, the government put out 379 new rules on business in July alone, amounting to $9.5 billion in additional costs.

None of these pro-growth reforms are in sight. So the stock market is going through a nasty 10 percent correction over fears of another recession (and European debt default).

But at least we got some good news on jobs. The July jobs report came in stronger than expected. It’s not great. But at least nonfarm payrolls increased 117,000 — as the prior two months were revised upward by 56,000 — while private payrolls gained 154,000.

That’s definitely not a recession reading. But neither is it a strong performance. If the economy were really rebounding, we would be creating 300,000 new jobs a month.

In the report, the unemployment rate slipped to 9.1 percent from 9.2 percent. But that’s mostly because nearly 200,000 workers left the civilian labor force. Another negative is the household employment survey, which fell 38,000 in July after dropping nearly half a million in June. That survey measures job creation among small owner-operated businesses or the lack thereof.

Yet when looking at the new jobs report, along with reasonable gains in chain-store sales and car sales, plus the ISM Purchasing Managers reports (which stayed above the 50 percent line), I repeat my thought that we are not headed for a double-dip recession.

Over two years of so-called economic recovery, growth has averaged about 2.5 percent. It fell to less than 1 percent in the first half of this year, largely from a commodity-price shock that included oil-, gasoline-, and food-price spikes. That price shock resulted mainly from the Fed’s QE2 depreciation of the dollar — a big mistake. It eroded real consumer incomes and spending.

Lately, the dollar has stabilized and energy prices have come down quite a bit. That will reduce inflation and support better consumer spending. Businesses are already highly profitable and cash-rich. They are investing some of that, but not nearly enough to create sufficient new jobs. Who would, with all these Washington policies?

Finally, the Fed remains ultra-easy with excess liquidity and a zero interest rate.

So it looks to me like we will return to the sub-par 2.5 percent growth trend rather than dip back into recession. However, at this pace, unemployment may hover around 9 percent right up to election time next year.

More spending won’t do it Mr. President. Tax and regulatory incentives will.