President Obama: Worse President than George W. Bush? Or Worst President Ever?

Posted by PITHOCRATES - July 8th, 2011

Obama Rolling up his Sleeves and Wagging his Finger

President Obama has taken out his wagging finger.  And he has wagged it.  Scolding Republicans to grow up and be like his daughters.  It is interesting he referred his daughters for an example of responsible behavior.  And not himself.  Because his track record on acting responsibly hasn’t been all that good as Charles Krauthammer points out and lists some of his failings (see The Elmendorf Rule by Charles Krauthammer posted 7/8/2011 on The Washington Post).

• Ignored the debt problem for two years by kicking the can to a commission.

• Promptly ignored the commission’s December 2010 report.

• Delivered a State of the Union address in January that didn’t even mention the word “debt” until 35 minutes in.

• Delivered in February a budget so embarrassing — it actually increased the deficit — that the Democratic-controlled Senate rejected it 97 to 0.

• Took a budget mulligan with his April 13 debt-plan speech. Asked in Congress how this new “budget framework” would affect the actual federal budget, Congressional Budget Office Director Doug Elmendorf replied with a devastating “We don’t estimate speeches.” You can’t assign numbers to air.

Not even a modicum of responsibility there.  So he’s rather like the pot calling the kettle black.  He should perhaps have said “do as I say and not as I do even though I do not do as I say you should do but that’s okay because I’m smarter than you so there.  When will all of you finally get this?”

But the Republicans, insolent as they are, refuse to budge.  So Obama had to bring out the wagging finger to discipline these insolent children.  Advising them to be more like his own children.  Who do their homework in a timely manner.

My compliments. But the Republican House did do its homework. It’s called a budget. It passed the House on April 15. The Democratic Senate has produced no budget. Not just this year, but for two years running. As for the schoolmaster in chief, he produced two 2012 budget facsimiles: The first (February) was a farce and the second (April) was empty, dismissed by the CBO as nothing but words untethered to real numbers.

Obama has run disastrous annual deficits of around $1.5 trillion while insisting for months on a “clean” debt-ceiling increase, i.e., with no budget cuts at all. Yet suddenly he now rises to champion major long-term debt reduction, scorning any suggestions of a short-term debt-limit deal as can-kicking.

That’s right, neither the Democrats nor Obama has done any responsible fiscal legislating/governing for the past two years.  Looks like the responsible shoe is on the other foot.  And those deficits?  They’re records.  Over 5 times larger than those world-ending Reagan deficits.  Yet he has the audacity to wag that finger at the Republicans for not being responsible?  Perhaps he should be wagging that finger at himself. 

And what have been Obama’s own debt-reduction ideas? In last week’s news conference, he railed against the tax break for corporate jet owners — six times.

I did the math. If you collect that tax for the next 5,000 years — that is not a typo — it would equal the new debt Obama racked up last year alone. To put it another way, if we had levied this tax at the time of John the Baptist and collected it every year since — first in shekels, then in dollars — we would have 500 years to go before we could offset half of the debt added by Obama last year alone.

Obama’s other favorite debt-reduction refrain is canceling an oil-company tax break. Well, if you collect that oil tax and the corporate jet tax for the next 50 years — you will not yet have offset Obama’s deficit spending for February 2011.

It is clear the president is in reelection mode.  Because he’s stoking the fires of class warfare.  Rich people fly jets.  And own oil companies.  Rich people are getting sweetheart tax deals.  Saving them billions.  And he wants to put a stop to this unfairness.  And make it fair.  It won’t help to erase the deficit at all.  But it gives you something to campaign on.  Which he needs.  Because his policies have been an economic train wreck. 

The June Jobs Report is worse than May’s

How bad have those policies been?  The June jobs report is in.  And it’s worse than May’s (see June Jobs Report Lands With A Thud: Up Just 18,000 by Steve Schaefer posted 7/8/2011 on Forbes).

In a stark reminder that the U.S. economy has been mired in slow growth, the Labor Department reported Friday that nonfarm payrolls added just 18,000 jobs in June and unemployment came in at 9.2%…

The stunning lack of improvement in June’s report – April’s payrolls figure was revised to 217,000 from 232,000 and May’s cut by more than half to 25,000 from 54,000 – rocked Wall Street Friday morning, as index futures sharply reversed after indicating small opening gains earlier. The Dow Jones industrial average, S&P 500 and Nasdaq were all signaling a red start to the trading session after solid gains Thursday.

And as bad as the May report was, the current report revises the May numbers down.  Fewer jobs were added than originally reported.  April’s, too.  It’s a trend.  Both a downward trend in job creation.  And the revising of previous reports.  Which means the anemic 18,000 jobs reported in June will likely be revised down in the July report.  There’s no good economic news out there.  The stimulus spending failed in a big way.  Which is why Obama is resorting to class warfare.  Because economically he has been an utter and absolute failure.

The June Jobs Report is even worse than it Says

And as bad as the June report was, it’s worse (see Without Dropouts, Jobless Rate Would Be Over 11% by Phil Izzo posted 7/8/2011 on The Wall Street Journal).

The share of the population in the jobs market, called the labor-force participation rate, fell to 64.1% last month — the lowest level since 1984 when women were still just beginning to enter in full force… The participation rate was 66% at the start of the recession and 65.7% when the recovery started in June 2009. If the participation rate were still at that level, the unemployment rate would be more than 11% right now…

There’s also a problem of underemployment. A comprehensive gauge of labor underutilization, known as the “U-6″ for its data classification by the Labor Department, accounts for people who have stopped looking for work or who can’t find full-time jobs. That number shot up in June to 16.2% from 15.8% a month earlier.

If we count the people who have given up looking for a job the actual unemployment rate would be as a high as 11%.  If you add in all those only working part-time because they can’t find a full-time job the unemployment rate jumps up to 16.2%.  These are horrible numbers.  How horrible?  These are more Great Depression numbers than George W. Bush numbers.

The Green Energy Bubble

America became the world’s largest economy thanks to the innovation of the private sector.  Great entrepreneurs like Andrew Carnegie, John D. Rockefeller and Henry Ford took risks.  The government didn’t have to tell them how to make steel better, more plentiful and cheaper.  Or how to make gasoline better, more plentiful and cheaper.  Or how to make automobiles better, more plentiful and cheaper.  That’s capitalism in the free market.  The private sector takes risks in pursuit of profits.  And when it does it makes things better, more plentiful and cheaper.  When people like Carnegie, Rockefeller and Ford are left alone to do what they know how to do best.  Create wealth.  And jobs.

Obama, on the other hand, believes he knows best.  That he’s smarter than these entrepreneurs.  And that he can direct the private sector to do his bidding.  Which, of course, in his Ivy League world, should result with economic activity.  And jobs.  Even if you’re telling people to build stuff the market doesn’t want (see The Coming Clean Tech Crash by Devon Swezey posted 7/7/2011 on Forbes).

The global clean energy industry is set for a major crash. The reason is simple. Clean energy is still much more expensive and less reliable than coal or gas, and in an era of heightened budget austerity the subsidies required to make clean energy artificially cheaper are becoming unsustainable.

Clean tech crashes are nothing new. The U.S. wind energy industry has collapsed three times before, first in the mid 1990s and most recently in 2002 and 2004 when Congress failed to extend the tax credit that made it profitable. But the impact and magnitude of the coming clean tech crash will far outstrip those of past years.

After one of the worst housing bubbles in U.S. history we now have a green energy bubble.  That’s about to pop.  And you know what happens when a bubble pops?  You get a recession.  To correct for all that malinvestment (to borrow a little Austrian School vernacular).  Which is pretty bad considering we’re still trying to recover from the first bubble.  And may very well still be in a recession despite all the massaging of economic data to say otherwise.  So if we’re still in a recession perhaps the pop of this bubble will push us into depression.  If we’re not in one already.  Based on those god-awful employment numbers.

As part of its effort to combat the economic recession, the federal government pumped nearly $80 billion in direct investment and tax credits into the clean energy sector, catalyzing an unprecedented industry expansion. Solar energy, for example, grew 67% in the United States in 2010. The U.S. wind energy industry also experienced unprecedented growth as a result of the generous Section 1603 clean energy stimulus program. The industry grew by 40% and added 10 GW of new turbines in 2009. Yet many of the federal subsidies that have driven such rapid growth are set to expire in the next few years, and clean energy remains unable to compete without them.

The crash won’t be limited to the United States. In many European countries, clean energy subsidies have become budget casualties as governments attempt to curb mounting deficits. Spain, Germany, France, Italy and the Czech Republic have all announced cuts to clean energy subsidies.

Can’t compete without them?  So what was the point in giving them all of those subsidies in the first place?  Were we forever going to pay for a more costly energy while less costly energy (i.e., fossil fuel) was available?  Apparently so.   Being that the life-blood of an economy is energy that would have just raised the cost of all businesses.  And the price of all consumer goods.  Less disposable income means less demand.  Less demand means fewer jobs.  Not a good plan, really.  Unless your goal is to put the country into a depression.

And the problem is global.  So the coming economic crisis will be global.  As if the European Union didn’t have enough financial crises on their hands already.  This could even hurt those emerging markets of China, India and Brazil.  Who depend on these export markets.  As we depend on them.  To buy our debt.

The U.S. has tried this clean energy before.  And all of these attempts ended in failure.  For the reasons already noted.  But if we’ve tried this so many times before, why haven’t we figured out how to do it right?  To find that innovation that makes it cost-competitive with fossil fuels?

Why is the United States still locked in this self-perpetuating boom-bust cycle in clean energy? The problem, according to a new essay by energy experts David Victor and Kassia Yanosek in this week’s Foreign Affairs, is that our system of clean energy subsidization is jury-rigged to support the deployment of only the least-risky and most mature clean energy technologies, while lacking clear incentives for continual innovation that could make clean energy competitive on cost with conventional energy sources. Rather, we should “invest in more innovative technologies that stand a better chance of competing with conventional energy sources over the long haul.” According to Victor and Yanosek, nearly seven-eighths of global clean energy investment goes toward deploying existing technologies that aren’t competitive without subsidy, while only a small share goes to encouraging innovation in existing technologies or developing new ones.

Oh, that’s why.  Because the government is in the business of picking winners and losers when it comes to the lottery of free government money.  Which is par for the course.  For government spending is about political cronyism.  That money is spent based on political forces.  Not market forces.  Which is a shame.  Because spending that money isn’t necessary.  Because there is an incentive to create cost-competitive green energy.  Unfortunately, that incentive is being distorted by the government subsidies.

It is clear that the current budgetary environment in the United States presents challenges to the viability of the fast-growing clean energy industry. But it also presents an opportunity. By repurposing existing clean energy policies and investing in clean energy innovation, the United States can be the first country to make clean energy cheap and reliable, a distinction that is sure to bring major economic benefits in a multi-trillion dollar energy market.

Get rid of all that malinvestment and that multi-trillion dollar energy market will provide the necessary incentive for the private sector to solve the green energy problem. Making it cost competitive with fossil fuels.  For whoever cracks that nut will be the next Carnegie.  The next Rockefeller.  The next Ford. 

You want to create a green energy market?  Okay, I’ll tell you how to do it.  Step one, get government the hell out of the way.  Step two, eliminate the capital gains tax.  That will motivate people to spend money on solving the problem because if they’re successful they’ll be richer than the Kennedys.  Step three, enjoy your green energy.

Barack Obama and his Keynesian Economics have Failed

President Obama has no chance of reelection if he has to run on his economic record.  Because his economic record may prove to be the worst of all time.  And he knows it.  Hence the finger wagging.  And the class warfare.  He has spent more than any other president.  And not just a little more.  A lot more.  Before him the worst post-war federal deficits were around $200-400 billion.  Since Obama they’re around $1.5 trillion.  And yet he scolds Republicans for being irresponsible because they refuse to raise the debt limit without getting real spending cuts.  As if the Republicans spent all of that money.  Not him.  Or his Democrats.  If he was so worried about defaulting on American debt obligations he shouldn’t have spent money his administration didn’t have.  But he did.  And now he’s wagging his finger at Republicans.

And what did we get for all that spending?  Further proof that he and his administration are economically incompetent.  Government spending doesn’t create jobs.  And government doesn’t know better than the private sector.  He can talk with all the righteous indignation and all-knowing condescension he wants but it doesn’t change that fact.  America’s greatest economic achievements and innovation was done without Government butting into the private sector.

Barack Obama and his Keynesian economics have failed.  Time to try something new.

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FUNDAMENTAL TRUTH #20: “It is never a consumer that complains about ‘predatory’ pricing.” -Old Pithy

Posted by PITHOCRATES - June 29th, 2010

LOW PRICES.  GOD help me, I do hate them so.  I hate them with every fiber of my body.

Who says this?  Do you?  I don’t.  Of all the times I’ve spent shopping, I have never heard anyone bitch about low prices.  I’ve heard people bitch about high prices.  But never about low prices.  When gas approached $3/gallon, people bitched about that being too high and drove 10 miles to find ‘cheap’ gas to save a few pennies per gallon.  Let it approach $4/gallon and they’ll want Congress to take action.  To attack Big Oil.  To seize their oil and their profits and give us cheap gasoline in return.  But when gas was cheap, no one ever bitched about it being ‘too’ cheap.  It just doesn’t happen that way.  People bitch about high prices.  Not low prices.

So who bitches about low prices?  Competitors.  There’s a saying that competition makes everything better.  And it does.  It lowers prices.  And raises quality.  And who is looking for lower prices and higher quality?  Consumers.  Who isn’t?  Competitors.  Especially competitors with political connections.

WHEN THE BIG 3 were putting out crap in the 1970s, they did so because they could.  I mean, who else were you going to buy a car from?  So what if your car breaks down and the fenders and quarter panels rust away?  That just means you gotta buy another car sooner rather than later.  A pretty sweet deal.  Especially when there are only three places to go to buy a car.  And each of the Big 3 is selling the same crap.

Then the Japanese had to go and ruin a good thing.  They started selling cars in America.  These cars were smaller than your typical American car.  But there were other differences.  They didn’t rust like the American cars.  They didn’t break down as much.  And the imports were cheaper than the American cars.  Lower price and higher quality.  More bang for the buck.  Exactly what consumers were demanding.

So what was the response of the Big 3?  Did they rise to the level of their new competitors and deliver what the consumer wanted?  No.  They ran to government for help.  For protection.  And they got it.  Voluntary Export Restraints (VER).  The government negotiated with the Japanese to ‘voluntarily’ limit the number of cars they exported to the United States.  Or else.  So they did.  To avoid worse protectionist policies.  Problem solved.  Competition was limited.  And the Big 3 were very profitable in the short run.  Everyone lived happily ever after.  Until the Japanese refused to play nice.

The problem was what the Big 3 did with those profits.  Or, rather, what they didn’t do with them.  They didn’t reinvest them to raise themselves up to the level of the Japanese.  Protected, they saw no incentive to change.  Not when you have Big Government on your side.  And how did that work for them?  Not good. 

So look, the Japanese said, the Americans like our cars.  If the American manufacturers won’t give them what they want, we will.  While honoring the VER.  We won’t export more cars.  We’ll just build bigger and better cars to export.  And they did.  The Big 3 were no longer up against inexpensive, higher quality subcompacts on the fringe of their market share.  Now their mid-size and large-size cars had competition.  And this wasn’t on the fringe of their market share.  This was their bread and butter.  What to do?  Build better cars and give Americans more bang for their buck?  Or run to government again?  What do you think?

The Big 3 assaulted the Japanese under the guise of ‘fair trade’.  The cry went out that unless the Japanese opened up their markets to American imports (in particular auto parts), we should restrict Japanese imports.  To protect American jobs.  To protect the American worker.  To protect the children.  This was code for please make the Japanese cars more unattractive to purchasers so they will settle for the more costly and lower quality cars we’re making.  (Let’s not forget the reason Americans were buying the Japanese cars in the first place).

The Japanese response?  They took it up a notch.  They entered the luxury markets.  They launched Acura, Lexus and Infiniti.  They competed against Cadillac and Lincoln.  And well.  The quality was so good they even affected the European luxury imports.  More attacks followed.  Americans were losing their jobs.  Soon there would be no more American manufacturing left in the country.  So the Japanese built plants in America.  And Americans were now building the Japanese cars.  The Japanese actually created American jobs.

SON OF A BITCH!  So much for the loss of American jobs.  The Japanese threw a wrench in that argument.  So now the argument became about the loss of ‘high paying’ American jobs.  For the Japanese plants were non-union.  Didn’t matter that their workers were making better pay and benefits than many in their region.  No.  What mattered was that they were building a better product.  And they didn’t want THESE jobs in America.  But if they couldn’t get rid of these new workers, they should at least unionize them so their cars cost more.  To make them a little less appealing to the American consumer.  So far they have been unsuccessful in this endeavor.  The workers are happy as they are.

Well, these cars just weren’t going away.  So the Americans surrendered car manufacturing to the Japanese.  They couldn’t beat them.  (Of course, it’s hard to do that when you don’t even try).  They, instead, focused on the higher profit truck and SUV markets.  Then the Japanese entered those markets.  And at every level they competed with the Americans, the Japanese gave more bang for the buck.  And the consumers responded.  With their hard-earned wages.  It just wasn’t fair.  The Japanese kept giving the American consumer a better product.  No matter what political action the Big 3 took or demanded.

And there’s the problem.  They sought their answers from government.  Instead of making a better car.  They wanted to stop the Japanese from giving the American consumer what they wanted so they could force Americans to pay more for less.  All the while the economy was forcing the majority of consumers to get by on less (the majority of consumers do not have the wage and benefit package the ‘select’ few had in the Big 3). 

Fast forward to 2008 and we see the ultimate consequence of their actions.  Bankruptcy.  GM and Chrysler had to grovel for a federal bailout and in the process become Washington’s bitch.  Ford survived on her own.  As did the Japanese.  You can bitch all you want about costs, but if you have the revenue you can pay your costs.  And the Americans just couldn’t sell enough cars to maintain the revenue they needed for their cost structure.  By refusing to address the core problem (they weren’t making cars Americans wanted to buy), they only made their competition stronger and more entrenched in the U.S. market.

IT’S ALL POLITICS.  Political cronyism.  And crony capitalism.  It all comes down to political spoils and patronage.  That’s what happens when politics enter capitalism.  Big Business partners with Big Government and they enter into relationships.  You scratch my back and I’ll scratch your back.  But when government protects a business for political expediency, the industry suffers in the long run.  As the U.S. automobile industry has.  Ditto for the U.S. textile industry.  And the U.S. steel industry.

So what goes wrong?  When you protect an industry you insulate it from market forces.  You can build crap.  The problem is, consumers don’t buy crap.  So, for awhile, politics intervene and makes the crap more favorable.  Whether it’s predatory pricing, monopolistic pricing or collusion, business can’t win.  Big Government is there.  If your prices are too low, government will intervene.  If prices are too high, government will intervene.  If prices are too similar, government will intervene.  To make things ‘fair’.  And by fair they mean to reward those who play the game and to punish those who don’t.  And the spoils go to those large voting blocs they need.  And in return for their votes, they can count on patronage.  Government jobs.  Political positions.  Favorable legislation and regulation.  If you got the vote out, you were rewarded quite nicely. 

And consumers be damned. .

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