Thursday, February 26, 2009

Illinois' New Gov. Pat Quinn Interviewed -- On Burris, Blagojevich, Budget, Tax Hikes, and Education Vouchers

New Illinois Democrat Governor Patrick Quinn was a guest this evening on WGN Radio's Extension 720 interview show (link), hosted for decades by the incomparable Milt Rosenberg, a sociology professor at the University of Chicago. Quinn is from Hinsdale in suburban Chicago and is a graduate of Fenwick High School in Oak Park, Georgetown, and Northwestern Law School.

He came across as engaging, intelligent, and studied. He quoted or referenced, among others, Abraham Lincoln, both Roosevelts, Marquette & Joliet, former Governors Altgeld and Horner, Mark Twain, and Winston Churchill. He has politically been seen as a populist, a maverick to some, who in his career has stressed ethics and fiscal responsibility.

Quinn and Rosenberg related how Quinn first appeared on the show in the 1970s when he was a leader of an effort to prevent Illinois legislators from drawing a year's salary in advance on the first day of a session. Appearing in the gallery of the Legislature shortly after that reform was enacted, Quinn described receiving a standing "boo-vation" from angry legislators.

Many topics were discussed in brief, and there was the inevitable inane question or two from callers.

On taxes: Rosenberg read a long statement and question from John Tillman and others of the free-market Illinois Policy Institute (link) which recited Illinois' low ranking on a number of indicators of state economic well-being (e.g.: 47th in job creation since 1977; since 1988, spending per capita is up 45% inflation-adjusted, but population has grown only 4%; 44th in GDP growth over the past 10 years); the Institute asked "will you take any and all tax increases off the table" and "focus on the spending side to stop the economic decline?" Quinn acknowledged Illinois' enormous budget deficit ("Illinois has $9 billion in unpaid bills") and in so many words said that in his opinion this requires a tax hike. He then said that he feels regressive taxes are unfair, that taxes should in some way be proportional to ability to pay. Since the Illinois state income tax is a flat tax, i.e., not progressive, as is the sales tax, I'm not sure what that all means for a Quinn approach on tax increases. I can't imagine a corporate tax hike. He said he is studying all options now and will announce his plan in a few weeks. Although the Democrats have large majorities in both state legislative houses, in light of the recession and the incomprehensible Democrat federal spending plans I cannot see state Democrats trying to abandon the flat income tax system to switch to a progressive one.

Rosenberg asked Quinn for his explanation of the dismal state indicators cited by the Illinois Policy Institute. Quinn's response was "jobs follow brain power" and that we need more focus on education and a "culture of lifelong learning." He didn't mention long-standing political corruption, corporate tax burden, and heavy unionization.

On the subject of education, Rosenberg criticized the "sinking" public schools [implicitly speaking mostly of city schools] and the deleterious effect of the teachers' unions, and endorsed support for vouchers that would provide a private alternative for lower income students. Although acknowledging that he and his children were educated in private schools, Quinn avoided any agreement with any criticism of teachers' unions and stated that he does not support vouchers because he believes in "strong public schools for everyone." Of course teachers are one of the largest, if not the largest, constituency of the Democrat party, and Quinn will not cross that line.

Quinn reiterated his call for Senator Burris to resign and his support for a special election for the seat. In discussing the Blagojevich scandal, he bemoaned the self-service motivation of some and said politicians must be motivated only by public service, saying "service to others is the rent we pay for our place on God's earth."

Quinn has always had an image of frugality, not a bad thing in a politician with the power to spend our money. For business cards, he is using up those that say "Lieutenant Governor" -- he just crosses out the word 'Lieutenant", a practice which he jokingly referred to as "the ultimate in recyclability and sustainability."

As engaging and refreshing as Quinn is, it is very disappointing to hear him talk of tax increases rather than the budget cuts and corporate tax cuts that would really stimulate long term job growth and economic revitalization.

J Greco

Tuesday, February 24, 2009

Ancient Assyria & the Transience of Economic Strength


The Lamassu, From the Palace of the Assyrian king Sargon II
At the Museum of the Oriental Institute of Chicago

The extraordinary American economic crisis and the incomprehensible amount of borrowing and spending by government in response brings to mind the precarious nature of economic strength and power. From ancient Egypt and Rome to the British Empire, strength has been gained but later squandered, self-confidence has been built but then nerve lost.

I have been thinking of a Chicago colleague of years ago who was Assyrian, and would wax poetic about the long-lost wonders and glories of the ancient Assyrian Empire. The Assyrians in northern Mesopotamia spoke Akkadian, related to other Semitic languages such as Aramaic, Hebrew, and Arabic. I read that the metal trade, especially the tin necessary for bronze, was an important factor in their economic rise -- Colin McEvedy writes that the source of tin was in Caucasia, and "the opening of traffic with the north coincides neatly with the first stirring of Assyria," which controlled the trade routes. The Assyrians used their economic strength to embrace the newest game-changing military innovation -- the chariot, and developed the science of military logistics. They created the first large, ethnically diverse empire that at its height around the time of Sargon II stretched from Mesopotamia to southern Anatolia and Egypt. It was Sargon II who, among other things, is credited with deporting and dispersing the 10 "lost" northern tribes of the Hebrew state. But economic expansion leads to "imperial overstretch" and eventual decline (link), and the Assyrians were themselves eventually eclipsed by the next great power. Most later became Christian (now known as Syriac or Chaldean Christians) and many still live in northern Mesopotamia to this day. They have suffered much under Islamic rule, and many more have themselves dispersed, with a large number eventually settling in Chicago.

The story of the fleeting nature of nations and civilizations is on display in the remarkable Museum of the Oriental Institute (link) of the University of Chicago. The most spectacular objects (which is saying a lot) in the entire collection are from the palace of the aforementioned Assyrian king Sargon II, who ruled from 721-705 B.C. And the most impressive object of all is the 16 foot tall sculpture of a human-headed winged bull, called a Lamassu, which guarded the throne. In 1929, the fragments were painstakingly excavated, transported, and reassembled by Institute scholars. I should note that the Institute's interest in things Near Eastern is not limited to clay and stone -- through most of the last century and the early part of this one it worked on its now famous Assyrian Dictionary (link), a project known throughout the University when I was a student there, worthwhile in its own right but also as the archetypal U of C pursuit of knowledge however obscure or uncommercial. As a student at the University I would very occasionally drop in for a desultory stroll through the Institute's exhibits. If only I lived so close now.



Richard Balsamo

Saturday, February 21, 2009

On the Financial Crisis -- Can Obama & His Team Play This Game?

Despite over a year of discussion and debate, we seem no closer to resolving the defacto insolvency of some of our largest banks due to their mortgage-backed securities of dubious and questionable value. This seems to be the root of the financial crisis. Obama and his team have had more than sufficient time to design a plan of attack, but now that the time for action has arrived they have no clear plan, and the markets have tanked. If this were the Bush team, the press would be merciless; instead, most of them have switched sides and are now cheerleaders.

The recently passed "stimulus" spending bill is still generating heat. But it's the third "leg" of the Obama solution that went white-hot late this week. Obama's just-announced plan to give free money to people unable to meet their mortgage payments has caused a ruckus. The Obama plan takes money from the everyone responsibly paying their mortgages and other debts and gives it to the 5-7% of people living in homes they cannot afford. What's so bad if those people need to move to houses they can afford?

CNBC's Chicago-based bond market reporter Rick Santelli has become an overnight hero for his impassioned critique of the mortgage plan (link; link), calling for a Chicago Tea Party. Quickly someone started a Chicago Tea Party blog (link). Then yesterday, Obama's press secretary Gibbs, who makes GW Bush's Scott McClellan look like a bright bulb, decided to respond to this specific criticism and said Santelli "doesn't know what he's talking about." If Gibbs were a Republican some Democrats would call him a moron, a favorite word for politicians they dislike.

Obama continues to talk down the economy and the stock market, partly to bring things very low very fast so that for the rest of his term there's no place to go but up, and partly because he only knows campaigning, not governing. His spending plan is a reckless abomination, designed to bring the US closer to European-style democratic socialism. His mortgage plan penalizes responsible financial behavior and, if anything, will serve to partly re-inflate the housing bubble that needs to stay deflated. And on the most important issue of all, the banking crisis caused by toxic mortgage-backed securities, he and his team are lost in the woods.

UPDATE: January 23, 2009

The Editorial Board of the Wall Street Journal (link) and I have been reminded of the same team of years past: "[A]fter five weeks of watching the repeated muffs of the Obama financial team, we're inclined to recall Casey Stengel's famous crack about the 1962 New York Mets: "Can't anyone here play this game?"

John M Greco

Friday, February 20, 2009

Eric Holder Really Stepped In It With His Off-Base Comments About Race

The incredibly obtuse and offensive remarks on race of Obama’s new Attorney General Eric Holder, on which I commented the other day (link), have drawn a great deal of scorn.

A DC Examiner Editorial titled “The Chilling and Cowardly Words of Eric Holder” (link) includes:

Not only were Holder’s comments morally bankrupt, demonstrably untrue, and compelling proof of his own outlandish hubris; they also carried distinctly chilling undertones of government coercion. It is not the province of law enforcement chiefs to be judges and chief scolds of what their countrymen discuss. The current generation of Americans have spent half a century grappling with – and transcending – deeply rooted racial problems more extensively than any other nation in the world. President Barack Obama’s administration, with Holder its attorney general, is itself proof that Americans have more than discussed racial issues, they have voted their convictions. The glaring hubris of a man who would deem himself fit to pronounce such moral judgments on his fellow citizens is astonishing.

The context of Holder’s remarks, meanwhile, was chilling. He spoke on Wednesday not in some philosophical setting like a college graduation but in his official capacity as attorney general, to the employees at the Department of Justice. He talked of using DoJ to “creat[e] … artificial opportunities to engage one another” in conversations about race. Yet Holder also seeks to define what sorts of “conversations about the racial matters that continue to divide us” are acceptable. For instance, regarding affirmative action, he castigated those who, according to his own Olympian discernment, are “on the extremes [and] who … advance nothing more than their own, narrow self interest.”

Bizarrely, Holder criticized “the alternative [which] is to allow to continue the polite, restrained mixing that now passes as meaningful interaction.” Who is he to decide what private interactions should be “allowed”?
Peter Wehner writes (link) in Contentions blog in a comment titled "Holder’s Shame":
[T]he notion that we are reluctant to talk about race is ludicrous. It is talked about almost all the time, virtually everywhere, even when it has almost nothing to do with the issue at hand.... And it should be said that there are also people (like the noxious figures Jesse Jackson and Al Sharpton) who play the race card to advance their own political agenda, in a way that ends up causing division rather than reconciliation….
Linda Chavez writes (link) at Contentions :

The elephant in the room in discussions of race isn’t white prejudice; it’s the breakdown of the black family and all the attendant social pathologies that emanate from it. When 7-out-of-10 black babies are born to single women and more than half of black children spend most of their childhood without a father at home, there are consequences: lower academic performance, more juvenile delinquency and adult crime, more dependence on government assistance, and a greater likelihood to repeat the cycle again by having more children born out of wedlock to the next generation. Yet virtually no one in the black community in any position of authority and responsibility is willing to talk about this issue.

President Obama, whose own African father abandoned him, has talked about it fleetingly, choosing instead to focus mostly on the virtues of the single mom and grandparents who raised him. In his book, The Audacity of Hope, he has a few lines about “the casualness toward sex and child rearing that renders black children more vulnerable — and for which there is simply no excuse.” But he has never made ending black illegitimacy or restoring the importance of marriage in the black community part of his policy agenda. So it’s no surprise his appointees avoid the subject as well.

Instead of lecturing us on cowardice, Eric Holder could have talked about the relationship between family breakdown and crime. He could have talked about why it is that young black men aged 14-24 represent only 1 percent of the U.S. population but committed almost 28 percent of the nation’s homicides in 2005, according to his own department’s statistics. He could have talked about what it means to have fatherless teenage boys grow up in neighborhoods where your chances of being killed are greater than they were on the streets of Baghdad at the height of the insurgency. He could have talked about why it is that schools systems presided over by black superintendents in cities governed by black elected officials produce black high-school graduates who read at the eighth-grade level. He could have talked about why it is that illegal Mexican immigrants with a sixth grade education are more likely to be employed in a steady job than young black men with a high-school education.

Now that would have taken some courage.

Here’s Victor Davis Hanson writing (link) at NRO’s ‘The Corner” weblog:

[Holder] obviously hasn't paid much attention to college campuses, where the obsession with race permeates departments, curricula, hiring, faculty profile, student events, funding, etc. Bumper-sticker identification and hair-trigger readiness to accuse someone of racism to further a particular ideological or even personal agenda are now 30 years old and institutionalized in higher education.

Finally, here’s a reader responding (link) to a post by Jonah Goldberg also at “The Corner”:

Mr. Holder’s statement is shockingly ignorant of the legal (read “liability”)landscape in which race relations exist. As an attorney who represents employers facing workplace discrimination charges, I can tell you that wisdom dictates that the workplace be as free of race-related discussions as possible if an employer is to avoid administratively and/or judicially imposed liability or, more importantly, the potentially enormous cost of defending against a charge of race discrimination. Believe me, whenever an employer terminates an employee in a protected class, there is a better than even chance that that employee will at least file a discrim-ination charge with the EEOC or a similar state agency.... [T]he EEOC and its state-run subsidiaries typically help disgruntled employees comb some basis for a Title VII (or ADA, or ADEA, of FMLA) claim from their particular facts, many, many of them are frivolous.... Mr. Holder’s apparent ignorance of this government supported racial grievance generating machinery is appalling for any attorney. It is unthinkable in the U.S. Attorney General.

Meanwhile, in support of Holder's desire to promote frank talk about race, here’s today’s “Republicans are Racists” Charge of the Day, this one by a black congressman charging that any refusal by Republican governors to accept stimulus money, even in order to avoid all of the controlling strings attached, is, what else, racist (link):

The highest-ranking black congressman said Thursday that opposition to the federal stimulus package by southern GOP governors is "a slap in the face of African-Americans."

U.S. Rep. James Clyburn, D-S.C., said he was insulted when the governors of Texas, Louisiana, Mississippi and his home state, which have large black populations, said they might not accept some of the money from the $787 billion stimulus package.

Clyburn began his remarks to reporters Thursday by talking about the Juneteenth celebration, which marks when slaves in Texas finally learned they had been freed by the Emancipation Proclamation more than a year after it happened. "Knowing my history and knowing Texas history, all of this, it was a slap in the face of African-Americans," Clyburn said.

J Greco

Funniest Movie Performances

In recognition of the upcoming Academy Awards presentations, I hereby announce my list of my favorite performances by an actress in a comedy, roughly in order:

1. Josephine Hull, Harvey (and Arsenic and Old Lace)
2. Alice Brady, My Man Godfrey (and The Gay Divorcee)
3. Jean Arthur, The Talk of the Town
4. Katherine Hepburn, Bringing Up Baby
5. Beatrice Arthur, Lovers and Other Strangers (which also features Cloris Leachman)
6. Cloris Leachman, Young Frankenstein
7. Eve Arden, Grease

And, here's my list of my favorite performances by an actor in a comedy, roughly in order:

1. Edward Everett Horton, any film (especially Top Hat; Gay Divorcee; Arsenic & Old Lace; Holiday; Springtime in the Rockies)
2. Cary Grant, Arsenic and Old Lace (and Bringing Up Baby, among others)
3. Jimmy Stewart, Harvey
4. Jimmy Cagney, One, Two, Three
5. Peter Sellers, Dr. Strangelove
6. Zero Mostel, The Producers
7. Gene Wilder, Young Frankenstein (and The Producers, among others)
8. Gig Young, Lovers and Other Strangers
9. Jim Belushi, Return To Me (yes, a very idiosyncratic choice, but he steals the show)
10. Barry Fitzgerald, The Quiet Man

R. Balsamo

Thursday, February 19, 2009

The Day the SEC Killed Wall Street

The Kudlow show on CNBC tonight discussed that now infamous decision by the SEC in 2004 that allowed investment banks to increase their leverage to previously unheard of levels, a move that soon proved fatal to them. Letting investment banks do this was one of the factors that precipitated the financial meltdown of 2008. The trigger for the discussion today was an article published at the Real Clear Markets web site yesterday by Vanessa Drucker titled “The SEC Killed Wall Street On April 28, 2004. She wrote (link):

In the long run, when we are all dead [a humorous nod to Keynes’s most famous quip], historians will be debating the root causes behind the global financial meltdown of 2008…. Among the precipitating factors, toxic mortgage debt securities grossly inflated banks’ balance sheets and investors’ portfolios. Credit rating agencies blessed those assets’ illusory values. Real estate tumbled in a vicious downward spiral, while steep oil prices helped reverse the business cycle. Inadequate regulation, in America and elsewhere, clearly exacerbated all the other drivers. Specifically, when regulators permitted major American investment banks to take on more leverage, they “made the dollar amounts larger and the margin of safety less”…. While regulatory frameworks often take decades to build, in this unusual case, one particular afternoon, on April 28, 2004, drastically changed the equation. The SEC [chaired by William Donaldson] agreed to allow the five major American investment banks to compute their capital adequacy requirements according to a revised methodology, hugely increasing their leverage. In consequence, those five giants no longer exist in their former incarnations.

On Kudlow’s show, Ms. Drucker commented further:

It’s very remarkable that in such a short time the seeds were sown for bringing down the big five [investment] banks. It essentially came down to changing the rules for leverage. Up until 2004, the [investment] banks were very restricted as to the amount of leverage that they could use. They could only go to 15%. What the SEC agreed to on that fateful afternoon was to really take away the ceiling so they [the investment banks] could lever up as far as they wanted, and they did. So you saw Bear Sterns, for example, going to 33% and you saw Merrill Lynch going to 40%. And what did the leverage do? It essentially amplified whatever was going on. KUDLOW: They [the SEC] basically took away the supervision of Wall Street. DRUCKER: Yes. It was a kind of deregulation.

Critics of the Bush administration, as Drucker seems to be in her article, lay part of the blame for the financial meltdown on inadequate regulatory supervision of Wall Street. Yes, that seems to have been a factor. In her article, though, Drucker omits some major drivers of the crisis like Democrat-led government pressure on banks to loan money to high-risk borrowers. All of this notwithstanding, I think that the root cause of this part of the mess occurred not too many years earlier when the large investment banks went public. No longer partnerships which took risks with their own money, the new public companies were filled with rich senior bosses who played with other people’s money. That was the first and fateful step. As partnerships they needed little regulation because they were naturally very cautious and conservative when the partners were risking their own money. But once public companies, the multimillionaire bosses of the investment banks could well decide to gamble with other people’s money, figuring if the risky bets went north they would become billionaires, but if they went south the public companies would fail, but they, the bosses, would still have their own millions socked away. The investment banking firms lasted a hundred years as partnerships, but as public companies they soon took unprecedented, reckless risks, to the great detriment of shareholders, yes, but much much more importantly, to the great detriment of our economy. That’s the real lesson here. With no real skin in the game, the already multi-millionaire bosses of the investment banks took insane risks with “other people’s money” that went south. And now while the former bosses lie comfortably ensconced in their estates and on their yachts, the rest of us lie gravely wounded.

Richard R Balsamo

Wednesday, February 18, 2009

Holder Says U.S. a "Nation of Cowards" about Race; Let's Start With a Moratorium on Democrats Calling Republicans Racist

Democrat Obama's controversial new Historic First Black Attorney General Eric Holder has opened his mouth.

The Associated Press today reports (link) that "[i]n a speech to Justice Department employees marking Black History Month, Holder said 'Though this nation has proudly thought of itself as an ethnic melting pot, in things racial we have always been and I believe continue to be, in too many ways, essentially a nation of cowards.'"

We've seen so many Democrats, black and white, time and time again shout "racist" at anyone who disagrees with them or offends them, whether it's about illegal immigration, welfare reform, teenage unmarried mothers, crime rates among young black men, the federal budget, rational mortgage lending standards, educational standards reform, school vouchers, seeing a co-worker with a book about the evils of the KKK that happens to mention the KKK in its title, under-representation of blacks in sports (other than in those sports where blacks are overrepresented), etc., etc., etc.

Here's an example, just from today (link). John Hinderaker at PowerLine reports:
Today's silliest controversy relates to this cartoon in today's New York Post, in which Sean Delonas uses the bizarre case of the crazed chimpanzee who attacked a woman and had to be shot to comment harshly on the Democrats' "stimulus" package. Readers of the Huffington Post and--who else?--Al Sharpton construe the cartoon as a possibly racist attack on President Obama. Civil rights activist Al Sharpton called the cartoon "troubling at best given the historic racist attacks of African-Americans as being synonymous with monkeys." ... A story about the cartoon on the liberal-leaning Huffington Post Web site drew hundreds of reader responses, many calling the cartoon racist and insensitive. Sam Stein, a columnist for the site, wrote that "at its most benign, the cartoon suggests that the stimulus bill was so bad, monkeys may as well have written it. Most provocatively, it compares the president to a rabid chimp. Either way, the incorporation of violence and (on a darker level) race into politics is bound to be controversial." There are several problems with this critique. Most obviously, Obama didn't write the "stimulus" bill. If anyone is being called a chimp, it is Nancy Pelosi and Harry Reid. Beyond that, one can only marvel at the Democrats' new concern for civility in political discourse. After all, while this cartoon had nothing to do with Obama, we do have a lot of experience with people referring to a President of the United States as a "chimp." That was President Bush, of course, for whom "chimp" was one of the liberals' favorite epithets…. Graphic depictions of President Bush as a chimpanzee were legion….
Yes, by all means, we should speak frankly, honestly, and fairly on all issues, including those that might touch on race. But Holder, apparently, thinks all this "racist" invective has nothing at all to do with a reluctance he might sense in some white peoples' speech. Holder thinks he has the moral high-ground, but this is same Holder, of course, who, among other things, orchestrated the disgraceful, detestable Clinton pardons of terrorists for political gain among Puerto Rican voters. What an ass.

John M Greco

Sunday, February 15, 2009

Depression-Era Comedies -- Time for Another Run?

Channel flipping of late, I've caught parts of a number of depression-era comedies -- something to do with "Oscar" season. But at the rate we're going with this Great Recession and the suffocating debt we've now been signed up for, we may be in for another round of production. No way, though, that any new films could top the masterpieces of the past -- back then, writers really wrote. The old films helped people get through the last time, why not again?

Though often cartoonish in plot and characterizations, they're some of the funiest movies ever made. The super-rich figure prominently, of course, and the common character, the leitmotif in the genre, is the bad businessman. As left-wing as Hollywood seems today, it may not be much different from the 30s -- the big difference is the old movies are actually funny.

Businessmen are aloof and insensitive (Holiday), aloof and vindictive (The Devil and Miss Jones), rapacious and overstressed (You Can't Take It With You), or repressed and long-suffering (My Man Godfey). They have ulcers (The Devil and Miss Jones; You Can't Take It With You) and are often nincompoops (Topper; Top Hat). But there's hope -- they often see the light and realize the errors of their businessman ways.

The heroes are care-free, though often independently wealthy -- so who couldn't be care-free if filthy rich (The Philadelphia story; Topper)? The films are full of some of the very best comedic actors of all time, with leads like Cary Grant, Jean Arthur, and Katherine Hepburn, and marvelous supporting actors such as Edward Everett Horton, Alan Mowbray, and Alice Brady.

Today evil bankers are back in vogue, if they ever left. I've recently seen previews for a new film, a thriller, with Clive Owen featuring evil masterminds that must be defeated surely to save Western civilization, or at least our banking system. Who are they? -- Muslims? Russians? Chinese? Nope -- bankers. White male bankers no doubt -- the ultimate in evil. Same as before in Hollywood, only then the movies were funny.

R. Balsamo

Saturday, February 14, 2009

Movies Lines Men Should Not Recite on St. Valentine's Day

Two movie lines men should not recite on St. Valentine's Day:

* As for me morals, I’ve lived a man’s life, and I’m not ashamed of it. And I can assure you, no woman’s ever been the worse for knowing me (Captain Gregg in The Ghost and Mrs. Muir, played by Rex Harrison)

* Women sense my power, and they seek the life essence; I do not avoid women, by I do deny them my essence (General Jack D. Ripper in Dr. Strangelove, played by Sterling Hayden, pictured)

J. Greco

Tuesday, February 10, 2009

Obama Administration Votes “Present” on Its Financial Plan; Market Thinks It Laid an Egg

Today the long-awaited moment finally arrived -- the unveiling of Obama’s plan to stabilize and repair our financial system. Expectations were high. Obama pulled together a team of the brightest minds from all the best places, so the media told us, and this team has had months to prepare a plan. From mid-September until the November election, Obama led in the polls. He has been President-elect or President for over three months. The whole TARP debate was going on in the last two months of the election campaign. His team certainly spent scores of hours discussing and debating what they would do once in power. And last night, finally, Obama himself said that today Treasury Secretary Geithner would reveal “clear and specific plans” to address the financial crisis.

Today Geithner announced essentially the intent to develop a plan and proffered an outline of a few bullet points punctuated with a few big numbers. In reaction, Larry Kudlow, on his CNBC show, displayed on screen the dictionary definition of the word “plan” that bears little resemblance to Geithner’s comments, since the word “specific” appears in it. One guest of his said “we got an outline with a lot of room for audibles.” Another Kudlow guest James Pethokoukis said “Geithner, the indispensable man has become the incomprehensible man in the span of an afternoon.” Kudlow wondered if Obama and his team really have a detailed plan at all – that if you pulled back the curtain, is there only a fat bald guy with no power. But liberal Steve Liesman, CNBC economist and Obama guy going way back, carried water today for his man and threw in the requisite Bush bash, opining that Geithner at least did better than the last administration; he suggested cutting Obama a lot of slack, sympathetically quoting an Obama official as saying “we’ve only been in office two weeks.”

Well, Obama ran for office for over a year, all the while during this brewing financial crisis, won the election three months ago, and days after that showed up on stage with economic advisers. Yet he still doesn’t have a plan with details? Obama and his team have been talking economic doom and gloom for a while, including last night, and exclaiming the need for urgent action, yet they still don’t have a plan with details.

Kudlow's critique at his weblog Kudlow's Money Politics includes this (link):
Geithner had no real plan to deal with the problem of unmarketable toxic assets on bank balance sheets. He offered no new architectural structure, no good way to remove the toxic assets, no clear pricing or funding proposals, and no meat on the bones.
Geithner’s announcement of his plan to develop a plan disappointed the stock market, which fell almost 5%. Tim Paradis of the Associated Press writes (link):
Investors are frustrated with the government's latest bank bailout plan …. what they saw as a lack of specifics from Treasury Secretary Timothy Geithner on how the government will direct more than $1 trillion in public and private support to the financial system…. "The good news is they are going to spend a trillion dollars, the bad news is they don't know how," said James Cox, managing partner at Harris Financial Group…. Geithner's speech "basically puts a spotlight on the fact that the government has no idea how to fix the problem," said Jeff Buetow, senior portfolio manager at Portfolio Management Consultants.
James Pethokoukis writes (link) at his Capital Commerce weblog at US News & World Report:
Treasury Secretary Timothy Geithner has gone from being the Indispensable Man to Indecipherable Man. With global financial community watching closely, Geithner laid out a confusing rescue plan for the U.S. banking system that did little to stem the ongoing dissipation of investor confidence. The reaction from Wall Street was withering. "The bottom line from the Geithner speech is that it was too general, and it lacked the specifics needed to it to be credible," opined economist Brian Bethune of IHS Global Insight…. Little wonder why stocks plunged and investors rushed to buy safe U.S. Treasuries. This might have been the clincher as far as investors are concerned: "We are exploring a range of different structures for this program, and will seek input from market participants and the public as we design it." In other words, "We have a concrete and highly detailed plan to develop a concrete and highly detailed plan. We'll get back to you."
After months of deep thought, this is the best Obama and his Brain Trust could come up with.


John M Greco

Monday, February 9, 2009

Democrats Try to Seduce Citizens with Free Money Ostensibly To Cure Recession

Watching the news today has left me with a creeping sense of foreboding and dismay. It's not so much today's spectacle of Obama's rambling comments before an obsequious press on his massive spending plan he calls a "stimulus"; his tactics are to be expected -- painting the choice between either a gazillion jobs created or saved by the Democrat plan versus catastrophe with the Republican plan, which he implied is to do nothing.

Well, there's a serious argument to be made that doing nothing right now is the best thing we can do, allowing all of the previous interventions sufficient time to work. A sick patient given a medicine rarely gets well overnight -- medicine takes time to work. Changing treatment plans every day and starting and stopping therapeutics can make the patient much sicker and prolong recovery, and could even kill the patient. That's no way to practice medicine, and should be no way to practice macroeconomics. But politically, something must be done, action must be taken. So if we must do something more, make it tax cuts that can actually induce people to be more productive and help American companies to be more competitive. Government spending to cure a recession to me is an unproven remedy, always a questionable intervention and ever more so now given its indiscriminate, unfocused nature and the massive TARP spending we're only part-way through. But Obama offers the public the false choice -- his plan or catastrophe.

No, what's troubling is how many people seem so snookered. They just want money. Today we see the mayor of an Indiana town, on TV, effusive about all his town could do with all that federal money. He seems so foolish. If the Democrat massive spending plan doesn't create new jobs, or if it creates new jobs paying $50,000 at the cost of $250,000 a year each in money borrowed at 4% from the Chinese and Arabs, will his townspeople be better off in the long run? Will they be better off even if the US goes broke? Where does he think the money will come from? Well, it's coming from him and the rest of us, one way or another, sooner or later. At least that's what I think. But maybe I'm the fool. Maybe he figures his town will take in more in handouts than it will pay in dollars sucked out locally, now and in the future, to pay for all this. Maybe he figures his town somehow will be a net gainer. But if he's right, other Americans are net losers, so he and his neighbors turn into slackers living off someone else. The bottom line is that this mayor is anxious to go on the dole. All over America, mayors and governors are crying for federal handouts that they hope will be free money from someone else.

Here in the early stage of withdrawal from a destructive binge of spending borrowed money, many of us can't stand the symptoms and want the drugs back, and the Democrats are only too happy to oblige -- after all, creating ever more dependency on big government is in their game plan. This "stimulus" spending bill is a Trojan Horse for the Democrat agenda. But spending money we borrow from foreigners will not work as a path to prosperity, and indeed that's why we're in the current mess. No, for this mayor tax cuts and patience are too conceptually abstract -- he'll just take the money now, and the hell with tomorrow, thank you very much. How many Americans are just like this man, anxious for seemingly free government money, and lots of it?

The ever creeping reach of the welfare state mentality has enfeebled much of our citizenry. After four years of complete Democrat control of the federal government, when we might expect over half of all tax form filers to pay no taxes (where even some will actually be sent money), we may pass a tipping point, on our way to the real goal of the ultra-liberal elite of the Democrat party -- a European-type social welfare state, ostensibly but only minimally democratic, ruled by unelected technocrat elites.

John M Greco

Thursday, February 5, 2009

The So-Called “Stimulus” Is “About Politics and Power, Not Sound Economics”

For the liberal elite, their economics is a means to an end rather than empiricism buttressed with logic and common sense. They value, above all else, forced economic equality for the masses (but not of course for themselves – they want their dachas); they embrace the collectivism, the central control to achieve this end. Their economics must serve this creed; it must prove up the necessity for pervasive command and control by an ever enlarging federal government. Their economics serves their politics, rather than their politics deriving from those economic principles that have led to our economic prosperity and individual liberty.

Dick Armey, a former economics professor and former Republican majority leader of the House of Representatives, writes in yesterday’s Wall Street Journal (link):
"In the long run, we are all dead," John Maynard Keynes once quipped. An influential British economist, Keynes used the line to dodge the problematic long-term implications of his policy proposals…. President Barack Obama and congressional Democrats … have dug up the dead economist's convenient justification for deficit spending in defense of their bloated stimulus legislation. But none ask the most important question: Was Keynes right?

Keynes argued that government should intervene in the economy to maintain aggregate demand and full employment, with the goal of smoothing out business cycles. During recessions, he asserted, government should borrow money and spend it…. Nobel laureate James Buchanan, argues that the great flaw in Keynesianism is that it ignores the obvious, self-interested incentives of government actors implementing fiscal policy and creates intellectual cover for what would otherwise be viewed as self-serving and irresponsible behavior by politicians [i.e., enlarging the size and scope of the central government]. It is also very difficult to turn off the spigot in better economic times, and Keynes blithely ignored the long-term effects of financing an expanded deficit.

It's clear why Keynes's popularity endures in Congress. Intellectual cover for a spending spree will always be appreciated there…. The problem with government attempts to manipulate the economy through fiscal policy -- spending that takes resources away from those who are productive and redistributes it to politically favored interests -- is that it is audacious. It assumes that government knows better how to spend and invest than individuals acting in their families' best interest…. The charade of the current stimulus package, chockablock with earmarks to favored pet constituencies and virtually devoid of national policy considerations, is the logical consequence of Keynesianism in action. It is about politics and power, not sound economics….
Economics professor N. Gregory Mankiw wrote last month in the New York Times (link):
All these questions [about the validity of Keynesian economic theory] should give Congress pause as it considers whether to increase spending to stimulate the economy. But don’t expect such qualms to stop the juggernaut. The prevailing orthodoxy among the nation’s elite holds that increased government spending is the right medicine for what ails the economy. [Economist Paul] Samuelson once said, “I don’t care who writes a nation’s laws or crafts its advanced treaties, if I can write its economics textbooks.”

John M Greco