Monthly Archives: October 2011

Obamatalk on the Global Stage

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Iran has perpetrated a deliberate, calculated act of war against the United States with the just publicized plot to murder the Saudi Ambassador to the United States, and subsequent action to blow up the Saudi Arabian and Israeli embassies, all on American soil (an attack magnified in its perfidy by being attacks on diplomats, who everywhere but in barbarism are proof against assault, as diplomats are the only way nations have to speak with each other aside from open war).

I wrote here about the laughing stock our President has made of himself on the world stage.  This is the latest example of the dangers to which Obama’s—what: foolishness? repugnant timidity?—have exposed our country.  Other examples include the Christmas bomber (AKA underwear bomber), whose attempt at terrorism only failed due to his own incompetence; the New York subway bombing attempt, which was foiled by skilled FBI agents; the New York Times Square parked car bombing attempt, which was foiled only by a couple of alert street vendors; the list goes on.  All of these have occurred in the last three years.  All of these garnered an Obama response of threats, finger-shaking, and efforts to “isolate” of Iran.

And this week, in the aftermath of a highly laudable and successful attack on the terrorist Anwar al-Awlaki, he’s actually apologizing, in all seriousness, to the family of another terrorist who was killed along with al-Awlaki for our misdeed in having killed that additional terrorist—a…man who, by his own words, is “proud to be a traitor to America.”

In the seven years between 9/11 and the beginning of the Obama administration, there were no further attempts against our country that weren’t preempted, or blocked, far from our borders.  One difference between then and now is that the prior administration took positive action against the terrorists associated with the destruction of the World Trade Center, the attack on the Pentagon, and the apparent attack on the White House, and against terrorism generally.

What is Obama’s response to Iran’s act of war?  Here it is, in his own words, as provided by Powerline:

So with respect to how we respond, our first step is to make sure that we prosecute those individuals that have been named in the indictment. And I will leave to the Attorney General the task of describing how that will proceed.

The second thing that we’re going to continue to do is to apply the toughest sanctions and continue to mobilize the international community to make sure that Iran is further and further isolated and that it pays a price for this kind of behavior.

and

…what you can expect is that we will continue to apply the sorts of pressure that will have a direct impact on the Iranian government until it makes a better choice….

His rationale for thinking this might actually be effective?  Again, his own words:

…we’ve been able to unify the international community in naming Iran’s misbehavior and saying that it’s got to stop and there are going to be consequences to its actions.

But, what consequences, for example; and, when, exactly?  This is just Obamatalk—empty threats and firm finger-shaking, with no intention of actually doing anything.

To be meaningful, consequences have to be capable of altering the target’s behavior in a direction favorable to us, not merely make us feel good.  Obama’s words have no deterrent capacity whatsoever; the terrorists and their sponsors know that all we’ll do in response—all the United States, the most powerful nation on Earth, on paper—has the courage to do, is bark and growl like an old dog.

Idle chit-chat, empty threats only alter the target’s behavior in this way: they fill the target with contempt for us, and they encourage the target to continue and to escalate.  Any street hood from Chicago knows this.  Surely, a community organizer from Chicago knows this, too.

Fair Share and Economic Mobility

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Much has been made, in the last few years, of an apparent increasing concentration of wealth in the hands of a few, while the poor get poorer.  One result of this has been a demand that the rich should pay more taxes; they should pay “their fair share.”  Another result has been a general objection to the increasing wealth of those who are already wealthy; there should be a general redistribution of their wealth to the poor.

In addition to attempting to define what “their fair share” should be, it’s also useful to explore whether the wealth disparity in the US is really all that bad.

Let’s look first at the question of “fair share.”  I’ve written elsewhere that in 1999, the top 10% of Americans, by income, paid 66% of the total income taxes collected by the Federal government, while the bottom 50% paid 4% of the total; in 2008—after the Bush tax cuts that so favored the rich—the top 10% of Americans’ share had increased to 70% of the total income taxes, while the bottom 50%’s share had decreased to 3% of that total.  With the richest Americans’ share of the tax burden increasing, already, what is their “fair share?”

Further, when we look at actual income vs. taxes, we see this in 2008—again, after those Bush tax cuts “for the rich;” the disparity is even more startling.  The top 1% by income, who earned 20% of the total income in the US, paid nearly 40% of the total taxes paid by Americans.  That bottom 50%, who paid those 3%, actually earned nearly 13% of the nation’s total income.  Again, what is the “fair share” of the rich?  I suggest it’s already been met, and more.

Still, were the concentration of wealth and the associated wealth disparity static, there might be a valid beef, if only from the practical standpoint that such stationarity would contribute to stagnation in our economy, at the cost of continued improvement in well-being for us all.  But when we look at income mobility, we see no such stationarity.

When we look at minimum wage earners, for instance, we find that adults who earned at minimum wage levels over the period 1998 through 2006 did so only relatively briefly.  Then, rather than losing their income altogether, they moved on to better paying jobs.

We can look at this another way, too.  According to the Treasury Department’s “Income Mobility in the US from 1996 to 2005” report, the children of today’s poverty-level family are part of the next generation’s middle class families.  Today’s poor young man is tomorrow’s middle-aged middle class man.  Indeed, “80 percent of taxpayers had incomes in quintiles as high or higher in 2005 than they did in 1996, and 45 percent of taxpayers not in the highest income quintile moved up at least one quintile.” Further, the median incomes of those in the lower quintiles increased more than did the median incomes of the higher quintiles.  Not only are today’s poor a different group of people than yesterday’s, today’s poor are better off in absolute terms than were yesterday’s poor.

The movement runs both ways, as it must: relative movements are a zero-sum game.  Not only is yesterday’s poor man not today’s poor man, because yesterday’s poor man has gotten better off, relatively as well as absolutely, yesterday’s rich man is not today’s rich man: he’s lost ground relatively as well as absolutely.  “Among those with the very highest incomes in 1996—the top 1/100th of 1%—only 25% remained in this group in 2005….  [T]he real median income of these taxpayers declined over this period.”  It’s broader than that, too: 30% of those in the top quintile in income in 1996 had fallen to the next lower quintile by 2005, and nearly 3% had fallen all the way to the bottom quintile.

It seems that demands for the rich to pay “their fair share” are redundant; they already are.  It’s that bottom 50% that seems to be underpaying their “fair share.”  Further, demands for the class warfare of wealth redistribution would seem to be aimed at a moving target.  Our free market economy already is redistributing wealth, as Americans earn their way out of poverty, or lower middle class, or middle class, and enter those better off groups.  Demands to take wealth away from the rich are demands to take property away from those who’ve only just earned it with a lifetime of hard work and sweat.  And they are demands to deny that property to the children of these only newly successful.

The Progressive and the Law

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The law be damned.  Constitution-schmonstitution.

We can’t have our way through democratic procedure, so we’ll just blow up democracy and rule by fiat.  Because We Know Better.

That’s Rep Jesse Jackson, Jr’s (Dem, IL) attitude, as reported in The Daily Caller yesterday.  He was holding forth on the virtues of Obama’s Stimulus Lite, that $500 billion “jobs” bill that failed a cloture vote in the Senate a couple of days ago.  But let’s let the good Representative speak for himself, with my commentary interspersed.

I hope the president continues to exercise extraordinary constitutional means, based on the history of Congresses that have been in rebellion in the past.  He’s looking administratively for ways to advance the causes of the American people, because this Congress is completely dysfunctional.

I’m not aware of any Congresses that have been in rebellion in the past.  I must have slept through that part of my junior high Civics.  But what about that alleged dysfunction?  The “dysfunction” stems from Congressmen actually have the gall to honor their commitment to their constituents to work to hold down government spending (this “jobs” bill wanted to spend $175 billion we don’t have and to continue to pay people for not working, rather than stimulating job growth) and to hold down taxes (the bill wants to “pay for” those $175 billion by adding a surtax of 5.6% on “millionaires,” the Progressives’ more new taxes mantra).  And this elides objections to the Progressives’  class war, which they’re using as justification for the taxes.

President Obama tends to idealize—and rightfully so—Abraham Lincoln, who looked at states in rebellion and he made a judgment that the government of the United States, while the states are in rebellion, still had an obligation to function….  On several occasions now, we’ve seen…the Congress is in rebellion, determined…to wreck or ruin at all costs.

The Progressive is accusing the Congress, for doing its duty with its power of the purse, of committing Treason (the Constitution’s definition (Art III, Sect 3)) by being in open rebellion against the President of the United States—how, exactly?  The Congress isn’t rolling over and giving the President everything he’s demanding is the treasonous, rebellious behavior.

Listen to the video, too; it’s highly instructive.  We have, for instance, this from Rep Jackson:

The President had an opportunity to exercise Section 4 of the 14th Amendment; he chose not to.

This is what the 14th Amendment actually says:

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Notice that there is nothing authorizing the President to create new or to increase existing debt by Executive fiat.

Rep Jackson’s entire performance is a breathtaking, Ezra Klein-esque ignorance of the Constitution (which is understandable; it is, after all, so old).

On the other hand, Rep Jackson insists that the Congress “is in rebellion;” how can any debt that it creates or increases be valid at all?  Hmm….

The Campaign and My Choice

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With this post, I conclude my short series consisting of my analyses of the Republican candidates for the nomination for President.  To recap, I limited my discussions to three candidates: Mitt Romney, Herman Cain, and Rick Perry.  The structure of this series consisted of a collection of posts concerning what I didn’t like about the candidates and then a series of what I did like about them.  This is my endorsement of a single candidate.

None of the candidates have adequately addressed the matter of illegal immigration and of illegal aliens.  Some have taken a hard line toward sealing and controlling our borders, and this is entirely appropriate.  However, controlled borders are only half the problem.  The vast majority of the illegal aliens are present in the United States because they want a chance to participate in the American dream, to avail themselves of the benefits of America’s exceptional culture.  They would be highly productive and valuable citizens were they given the chance.  Yet we throw up roadblocks after barriers after obstacles to impede them.  It can take a couple of months to get a non-immigrant visa; B-1 visas can take a month, H-1B visas as long as six months, and the H-1Bs have very low annual quotas. It shouldn’t be that hard to enter the United States legally.  There should be border crossing stations every mile along our border (which, just incidentally, would put the human traffickers—the mules, and worse—immediately out of business).  Visa approval should occur in days, not months (in today’s computerized world, it shouldn’t take months to run a background check), and there should be no quotas.  With none of the candidates addressing this aspect of illegal immigration, their handling of immigration generally is, in this context, I think a wash.

Perry: Perry’s attack ad campaign is tactically foolish and so calls in to question his judgment.  The Republican candidates should be running against Obama and touting their own superior qualities for that task; they should not be attacking each other and giving the Progressives ammunition for the Presidential campaign.

When asked, in Tuesday’s Dartmouth University debate, to be specific about his economic plan, Perry repeatedly said he’d unroll his plan “over the next three days.”  When Romney asked him directly, he responded that Romney had been developing his plan over the last five years, whereas Perry had been developing his only over the last 6 weeks.  This was pretty weak and smacked of excuse-making, especially since Perry has been governor of the second largest state for the last 11 years (and he’s not yet passed up a chance to remind us all of that), and so he has considerable experience at developing economic plans.

Finally, Perry doesn’t communicate well in a fluid environment.  A man who can’t think on his feet isn’t Presidential material.  A Texan who can’t is disappointing.

Romney: Romney’s responses concerning Romneycare and Obamacare in the Dartmouth debate increased my confidence both in his willingness and his ability to repeal Obamacare were he to be elected President, and it showed an ability to respond to Democrats’ attempts at assimilation of Romneycare into Obamacare.

He also has a 160 page Economic Plan, with 59 policy proposals in it.  However, it isn’t that hard to fix our economy and government’s interference with it by limiting spending to less than revenues.  This isn’t rocket science.  This is a Technocrat is overcomplexifying things.

His evasive generalities in response to other economic questions, though (Cain: “can you name some points in your 59-point complex economic plan?”  Romney: <mumble>), indicate to me that he still hasn’t very many specifics fully developed.  And he doesn’t seem willing to get specific; would he take a stand on specifics in dealing with Congress?  Yeah, yeah, I said he’d take a stand here, but his Dartmouth performance makes me wonder about his constancy.  His campaign has been one of avoiding mistakes rather than of advancing concrete ideas.

Finally, at a campaign stop the day before the Dartmouth debate, The Daily Caller asked Romney whether current AG Eric Holder should resign over his performance with DoJ’s Fast and Furious.  Romney’s answer was lengthy and evasive—it took him 35 seconds to say he wasn’t going to say.  When the question was repeated later to Romney’s aide, Eric Ferhnstrom, the aide said Romney “prefers [press] availabilities like this, where his thinking is more organized, as opposed…answering questions on the fly. He doesn’t think that’s conducive to a good conversation.”  See my remarks above about thinking on one’s feet.

Romney is no Eric Cantor, or Paul Ryan.  Or Newt Gingrich.

Cain: Cain’s up from the ranks experience in small businesses and large are a serious plus: in a free market, the entrepreneurs, small businesses, and large businesses are in a positive feedback loop, and that’s a strong economy with a plethora of opportunity.  Cain understands the limits to government effectiveness in that environment, and he understands the necessary fixes, simple fixes.

I like his view of making every section of government justify its budget in detail.  That’s not zero-based budgeting, but it’s close enough, and it’ll work well if not done too often.  He’ll never pull it off, but the threat of it will have its own benefit.

In the Dartmouth debate, he faced serious criticism for the first time: now he’s one of the front-runners, and so a target.  His ability to keep his humor, while providing specifics (he was subject to an “insider” cheap shot when he refused to violate a confidence concerning a couple of possible nominees for his administration) rather than evasion or generalities was refreshing.  And he was able to defend those specifics.  On the other hand, he wasn’t often seriously challenged: “turn 9-9-9 upside down; the Devil is in the details?”  How cute.

His consumption tax is a serious problem, but that can be worked.  Overall, his tax proposal represents a lower set of rates for individuals and businesses, and that’s all to the good: the more of our money left in our hands, under our judgment, the better off our country will be.

In the end, my preference is Herman Cain.  He has the best ideas, and he does, if not the best job, at least a very solid job of presenting and selling them.  And, crassly, it’ll be difficult for the Progressives to keep playing their race card on anyone who disagrees with Obama.  Although we might hear mutterings of Uncle Tom, or Oreo.

Rational Expectations and Jobs and Progressives

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Rational Expectations is the economic theory that people act rationally, by and large and in their aggregate, in their decisions in the market place.  That is, even in the face of incomplete information, people generally form logical predictions about their future, and they act in a logical manner within the framework of their predictions.  Of course, information used in those logical predictions includes government’s actions in the market and people’s own view of what those actions will produce, independently of what government officials might aver.  And of course, in the face of incomplete information, mistakes are inevitable, both individually and across the economy.

The Progressives in government, despite the empirical evidence to the contrary from FDR’s failed Keynesian spending and Obama’s Keynesian Stimulus Act in 2009, instead insist that government spending is stimulative in and of itself, and government taxing is irrelevant to Americans: we will make no predictions from government spending, and we’ll simply accept the taxes as part of our environment; we’ll form no rational expectations of the future from these actions.

Against this backdrop, what are we to make of the Obama Jobs Bill just defeated in the Senate?  Here are the essential components of the Obama proposal:

  • $175 billion in new spending,
  • included in this was $44 billion to cover an extension of unemployment insurance even beyond the present 99 weeks of paying people for not working,
  • a further reduction in the employee’s payroll tax, a parallel reduction in the payroll tax of employers whose payrolls are $5 million per year or less, with this payroll tax reduction set to expire in 15 months, and
  • a permanent surtax of 5.6% on millionaires.

In the Progressive fantasy economics world, employers were to rush right out and hire workers, knowing that just having them on the payroll 15 months from now, their payroll tax cost of these new employees will double.  Never mind that it takes that long in a modern economy for an employer to begin to recoup the hiring and training costs of a new employee and for the employee to become productive.

Also in this world, the new employees in their temporary jobs, and existing employees with their temporary increase in take-home pay, will run right out and spend that money on everything they’ve ever wanted, and the stimulus is carried through.

Finally, in this fantasy world, the millionaires will simply not respond to their new tax: they’ll keep right on doing whatever it is they so nefariously do with their ill-gotten gains.

Here’s what rational expectations says Americans will do, and what we already did, for instance, with Stimulus I in 2009 and with the prior temporary payroll tax reduction (and the one time payments from the Economic Recovery Payment program and the Making Work Pay tax credit).  The fourteen people nationwide who actually got jobs out of Stimulus I did increase their spending, but not by much: they used as much of their windfall as they could to cut into their debts, which had increased sharply as they tried to cover necessary expenses while having no income.  We didn’t spend those payroll tax reductions, knowing they were impermanent—knowing, even, how short-lived they were.  We didn’t spend those one-time payments, either.  Instead, we saved them against future needs, trying to rebuild our savings, or we paid down our debt.  Employers didn’t hire, accurately predicting into the future that those temporary reductions would expire and their costs would expand suddenly and sharply.

The 99 weeks of unemployment payments already have led to a level of extended unemployment duration unmatched in decades: nearly 45% of those currently out of work have been in that state for more than 6 months.  As any freshman Econ student understands, when government subsidizes a thing, government gets more of that thing.  And so it would have been with the proposed extension in unemployment insurance beyond those 99 weeks.

And those millionaires with their shiny, new tax?  They were going to do what any rational human being does: adjust their incomes and investments so as to mitigate the effect of that tax: these job producers, these owners of businesses, were going to reduce their exposures—and not hire more workers in the process.  Those would have been permanent adjustments to their permanent new tax.

These rational responses to temporary government actions were such a complete shock to the Progressives since Stimulus I and those one-time “stimulative” payments that they simply denied the responses occurred.  This is why the Obama jobs bill, thankfully defeated in yesterday’s vote, was proposed in the first place, and why it was structured as nothing more than Stimulus I Reduced.

This Progressive move is part and parcel with their attitude toward the intelligence of the workaday American: we’re just too stupid to think for ourselves.  We’re not capable of behaving rationally.  This is also demonstrated by their mantra that our problem, the reason we don’t just blithely follow them over the cliff, is that we’re too stupid to understand their message.  They must keep adjusting how they communicate with us because we just didn’t get it the first time.  Or the second.  Or the umpteenth.  And so, since we’re too dumb to form rational expectations, their interminable Keynesian spending is perfectly sound economics.

Progressives actually argue, with a straight face, that their programs have saved or created millions of jobs.  Here’s one example of how well that’s actually worked, in the Progressives’ precious “green jobs” milieu, and how honestly their accounting has been done.

Finally, no Progressive (or modern Conservative, come to that) has been able to show that the “recovery” currently in “progress” is due to the “stimulus” bill passed in 2009, or due to the stupendous Federal spending and even more stupendous Federal borrowing, generally, or to some combination of these.  They cannot offer any evidence that whatever anemic recovery might be in progress is due, instead, to an ordinary, normal business cycle recovery.  A recovery that has, in fact, been held back by all of that spending and borrowing, just as the nascent economic recovery in 1937 died shortly after birth from the Federal spending and borrowing and free market interference of FDR.