Friday, February 27, 2009

Well that worked ... I guess

Bloggers on the left are upset that I used a running joke with a friend to poke fun at the President while making a serious point. While I said I do not believe that Barak Obama is a "freakin' moron," I am concerned that his economic policy is incoherent.

He is at once engaging in an incredibly ill considered orgy of spending while promising to cut the deficit. He is blaming the economic meltdown on too much debt while heading straight to the Chinese for a gigantic advance. He wants to jump start the economy but his stimulus package is oddly backloaded and much given over to long deferred pet projects that seem neither temporary or targeted. He wants people to spend while raising the prospect of significant tax increases. (There is, no way to get where he wants to go by taxing only the rich and, like it or not, taxing the rich is tomorrow is unlikely to prompt them to invest today.) He wants people to feel confident about the future but, until his speech earlier this week, ran around the country predicting doom unless Congress immediately pass a bill that it had not read or deliberated.

At the same time that he wants to raise the deficit and cut the deficit (an unreconstructed Keynesian might believe in that), he has, as Charles Krauthammer points out, promised a fundamental change in the nature of the US economy, seeking to substantially shift resources from the public to the private sector.

Of course, he's not a freakin' moron. I know what it takes to make the Harvard Law Review. I don't even claim that he is acting like one. But the markets are unimpressed and its hard to see why they should be.

It's easy, of course, to blame Bush and his supposedly "conservative economic policies." But I am still waiting for a convincing statement of that case.

One can accuse Bush of fiscal irresponsibility (conservatives were doing that all along), but the Democrats have decided to see him on the spending front and go all in.

One can imagine regulations that might have prevented some of the stupidity in the housing market but those regulations would most definitely not been supported by the Democrats who, in fact, opposed belated Republican efforts to rein in Fannie and Freddie. Would Democrats have supported federally mandated tightening of lending standards?

Was the problem tax cuts for the rich? Why?

It does seem that Greenspan mismanaged monetary policy by overreacting to the bust of the Clinton era tech bubble and 9-11 and then overcorrecting too quickly. But overreaction seems to be the order of the day.

I, and others, have been accused of cheering the market declines. Hardly. I'm going to need that money some day.

At least I should be in the running for Jerk of the Week.

19 comments:

Anonymous said...

Conservative Republicans. . .always placing on blame on Clinton. Get a clue! Do you really think the "trickle down economics" worked?

Rick Esenberg said...

What did I blame on Clinton? Yes, I think that supply side economics worked extremely well over the past 25 years.

Anonymous said...

Were you on the Harvard Law Review, Ricky? Maybe there's a serious case of penis envy here.

apexcutter said...

"Bloggers on the left are upset that I used a running joke with a friend to poke fun at the President while making a serious point." -- and why would anyone care about bloggers on the left, or what they think, or what they say????

Rick Esenberg said...

Anon 7:06

Yes. Volumes 93 and 94.

Clutch said...

Provocative success
Child's pride at facial frowns
When he craps his pants

Anonymous said...

Clutch is channneling Rosie O'Donnell with his haikus.

Anonymous said...

It appears to me that the economy sank from fears of having democrats controlling everything and is falling even further because now they do.

It also appears that they (Obama) thinks we are all a bunch of morons that cannot see that he (they) are trying to sink this government beyond repair.

Anonymous said...

Haiku's form is this:
five syllables, seven, five
Please, Clutch, learn to count.

Clutch said...

Eager to instruct
Anon knows not an on
Nor English haiku forms

Anonymous said...

Supply side economics has not worked, our prosperity was a credit backed illusion. We will give keynesian style economics a true test and see. I am a LIBERAL and love Obama, I run a medical sales distribution company in Orthopedics and am starting an LLC to purchase foreclosed and tax-lien properties, and from one BUSINESSMAN to an attorney I will explain economics to you. I don't care what I am taxed at, I will produce and I will succeed and I am in the group that he will raise taxes on...that said, I don't believe the government can run anything better than the private sector can, look at public housing, but government should have not allowed banks to lend 30 dollars per every 1 dollar deposited. Our nation is creating a new bubble in the form of treasuries and that bubble will be bigger than housing or technology. Too many people are upside down on their homes, there are 1 of 7 homes vacant, thus too much supply, no jobs, people are going to max their credit in the short term to make ends meet so we will get worse before it stabilizes, t bills vs. corporate bond spreads are ridiculous. There really is too much bad news to digest and at least Obama is trying. All republicans do is criticize and block change and Obama needs to be honest and raise taxes to show foreigners (China) that we will repay the debt they are purchasing. As a conservative, would you have suggested that we allow the banks and insurers to fail, like Lehman, becauce Citi bank has TRILLIONS of dollars in liability and unknown counter-party risk...Bank of America is worse off with their purchase of Merrill Lynch and MBNA in peril, and not to mention AIG... those failures would make the depression look like a piece of cake. I hear conservatives criticize the plans, but TAX CUTS???? are you serious, that is about as sensible as Obama saying we will have 2.3 positive GDP growth and half the budget by 2011. We are in the bear of bear markets, you need to not worry about capital gain taxes at your age and buy gold ETF GLD and sell when gold maxes between $1050 to $1200 usd within 18 months and short treasuries through ETF TBT since there will be flight from treasuries. Also, longs in USB preffered VIII pays about a 10% dividend and is a very well managed company with a decent balance sheet as well as staples like General Mills or Coca Cola/Pepsi and Heinz, also petroleum is pretty attractive here as the economies emerge from this depression, demand will surge...we definietly overshot to $147 in petro and now are oversold anytime we get to the $30's. Prepare for a long unwinding in this economy, but don't blame Obama.

Anonymous said...

Even 4 years from now, libs will be blaming Bush. For everything. Dare blame Obama? You are racist.

That is beside the point. Where the heck are your Sunday musical
selections? one of your best features.

Super Id said...

Anon 12:18

"As a conservative, would you have suggested that we allow the banks and insurers to fail"

Yes!

Your an investor, take a look what Jim Rogers (George Soro's former partner in the Quantum fund) has been saying:

"What’s happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics.”

This stimulus package will only prolong the problem. Does anyone really think these companies are not going to go to the well multiple times?

AIG went back to the well again today, and indicated it might need a third bail out. The bail outs will not work, they never do. We are now following in the footsteps of Japan, with their zombie banks and companies.

Anonymous said...

Super ID, George Soros is shorting this market more than probably anyone,so of course he will be talking gloom and doom.

Anonymous said...

Super Id,

Last point, until there is partial nationalization where the US government can get voting rights, have access to the books of these companies, vote out the board of directors and executives and recapitalize these banks and insurers, we will have these lying sacks of feces returning and returning to the government for public funds. The American consumer is tapped out and needs to increase savings and reduce debt, and this will take time... you can throw as much money as you want at the banks but they will prudently lend it to individuals with good credit (which are few) because this bailout money needs to be paid back. Follow Warren Buffett, he may be down big now, but the market will work in his favor in the long term and all the while he can collect healthy and almost usuary interest rates from the companies he has lent money to. I have some buyers remorse for votingfor Obama, but he is doing something, Bush was scratching his ass the last year in office.

Anonymous said...

The problem with this president, as Rick points out, is that he seeks to shift resources from the productive class to the unproductive class -- from those that have to those that don't, via the mechanism of an expanded public sector. It is an inherent flaw in democracy, but the great unwashed want bread and circuses, and so the size of the public trough expands. First it was free public elementary and secondary education, then subsidized higher education. Now the Democrat policy, sneaking in through the mechanism of the "stimulus" bill, is an expansion of free health care programs, leading eventually to socialized medicine. Soon we'll all have to wait a year to see a doctor, as in Canada, and our life expectancy will decline to equal theirs. With every new social program provided for free to the mob, the incentives for enterprise and initiative are reduced, and the productive class is taxed more. "Progressive" taxation must end if our economy is to rebound. There has been too little discussion of it, but we should introduce a true flat tax, a capitation tax of the same dollar amount imposed on every American man, woman, and child. Then there would be an incentive to work: every marginal dollar would be tax-free to the worker!

The Republicans are failing because we have not been true to our principle. Tax cuts for the rich? We have not been brave enough! If my idea of a capitation tax is too extreme for the moment, at least let us return to the low marginal tax rates that prevailed in the halcyon days of yore, when Ike was in the White House, and the postwar economy grew by leaps and bounds.

We must have the courage of our convictions. We have not gone far enough. Tax cuts for the productive: now there's an idea that will heal our sick economy and put America back to work. We need incentives for initiative if we are to restore a Republican regime.

Super Id said...

"Super ID, George Soros is shorting this market more than probably anyone,so of course he will be talking gloom and doom."

I was talking about Jim Rogers not Soros, they parted ways in 1980.

Rogers then "retired" and took a motorcycle trip around the world and wrote a book about his travels called "Adventure capitalist." Philosophically Rogers and Soros are differnt. Rogers is a free market guy and Soros is into regulation.

But both of them have been Bearish on the U.S. As have I. (I went to 100% Cash in my 401k in December 2007.)

"Last point, until there is partial nationalization where the US government can get voting rights, have access to the books of these companies, vote out the board of directors and executives and recapitalize these banks and insurers, we will have these lying sacks of feces returning and returning to the government for public funds."

I don't know about you, but I can think of better uses for the tax payer money than to buying voting rights in failing companies.

I agree Bush was an idiot. But with this economic stimulus package. Obama will be following in Bush's footsteps.

Anonymous said...

Well said Super ID. I just don't get the liberal mind set on economics. Supporting Obamananomics now is virtually the same as supporting Bush policies over the last 8 years. You might say that you are a Keynesian economics believer and Bush did not spend enough, but that means you agree with his basic high deficit spending plan, he just didn't spend enough. No, the liberal mindset is that all Bush policies were bad and his deficit spending was atrociously horrible... Then why/how is it the solution now? If it 'got us in to this mess' and is bad, how can it get us out of this mess and now be good. There is apropos alliteration in liberal lemming.

The irony is not lost on me that Democrats have been the big Government spenders and pro large centralized Government party of the recent past, and for the last 8 years they have had their cake and ate it too. Government has grown, Bush took more power for the executive office, everybody got to spend lots of credit, and the Democrats got to complain about it with full media support. Now they step in and ramp up spending further and the majority supports it. it makes as much sense as calling Bush a conservative.
Tuerqas

Super Id said...

It takes a socialist to fix a socialist country.

They'll either be able to improve the situation in the existing frame work, or they'll mess up so badly that the entire framework is rejected.

Anon 9:34:

Good point about Bush not being a fiscal conservative. The problem is that Bush claimed that he was (kind of like Koschnick claiming to be a judicial conservative). So the uniformed masses beleived that it was the small government (i.e. anti-regulation) idea that caused this credit crisis.

But I have little doubt that the same actions would have been undertaken under a McCain presidency. After all, he was the one that came up with the foreclosure plan at the debate. At that point, I decided to vote for Obama. Either Obama will fix the economy (unlikely) or his big government ideas will be blamed for the failure (very likely).

"Progressive" taxation must end if our economy is to rebound. There has been too little discussion of it, but we should introduce a true flat tax, a capitation tax of the same dollar amount imposed on every American man, woman, and child. Then there would be an incentive to work: every marginal dollar would be tax-free to the worker!"

I actually disagree here. We need to increase taxes on everyone. We are running deficits, which should be paid off before any tax cuts are even considered.

As citizens we are owners of this country. When you own a company that is in the red you don't give raises--you cut back. Obama's plan cuts the wages of upper management to give raises to middle management. But that's just reallocating the pain and thus, not enough people will learn.

IMO, The only way the U.S. will ever return to financial security is if it becomes so painful to everyone that we refuse to let the government run these types of deficits again. It's better to have millions lose their jobs now when there are safety nets still in place (i.e. welfare, unemployment) than to let the problem get so big that 10s of millions lose their jobs and the safety nets are broke as well.