Wednesday, January 25, 2012

The Command Economy

According to his State of the Union speech, here is what President Obama would like to accomplish. He wants to redesign the American economy:

Tonight, I want to speak about how we move forward, and lay out a blueprint for an economy that's built to last — an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.

Three years ago he was going to rebuild the economy based on education, health care, and green jobs. It's tough to rebuild an economy when you change its basis every two or three years.

It sounds great to say that manufacturing jobs are coming back to America but is it true? Steve Jobs didn't think so a year ago when he told Obama that the jobs are not coming back to America. One reason is that the supply chain has moved off-shore. Another reason can be found in the story of the iPhone production line. Apple's workers live in dormitories at the plant. Steve Jobs changed the design of the iPhone at the last minute, substituting a glass screen instead of the planned plastic one. That meant that the first glass screens started arriving around midnight. Apple's managers woke the workers, handed them a cup of tea and a biscuit and sent them to work assembling phones. Not only couldn't you find American workers who would be willing to take a job with these conditions but Obama's government would close them down if they tried.

Obama made several proposals for changing corporate tax codes. He wants to do away with the mythical tax break for moving workers overseas and establish some sort of minimum corporate tax. One ray of light - he also proposed reducing the corporate tax rate. All of this seems needlessly complicated. Just lower the tax rate and eliminate most of the deductions.

Obama wants a better-trained work force. That is a noble goal although it is at odds with his previous goal of sending everyone to college. An educated workforce needs a lot of people who have been trained in trades and specialties that colleges would never touch.

Obama suggests simplifying the current programs for retraining workers. This sounds like a good idea. We will see if he can flesh it out. Otherwise it may just add another level of bureaucracy.

When talking about classrooms, Obama hit one of the teacher union sore points - teaching to the test. He thinks that doing away with standardized testing will help teachers. The reason that most states established tests in the first place was that too many teachers were simply warehousing students and passing them on to the next grade without teaching them anything. Teaching to the test was seen as an alternative to not teaching anything.

Obama did threaten colleges to keep tuition down or face cuts in government grants. This is probably an empty threat.

Back to jobs, this time small businesses:

Tear down regulations that prevent aspiring entrepreneurs from getting the financing to grow.  Expand tax relief to small businesses that are raising wages and creating good jobs.

So much for eliminating tax loopholes. We're only part-way through the speech and he proposed some new loopholes.

Obama gives lots of credit to government funding. He mentions the computer chip in the same breath as federally funded research but Intel created this without federal funding. He also give the government credit for discovering fracking (without using that term). Strangely he fails to mention the role of federal funding in extracting oil from tar sands - possibly because he just killed a pipeline that would have brought this into the US from Canada.

On to Obama's real passion - green energy. He never quite comes out and says it but he wants to promote clean energy by imposing higher government standards on efficiency and clean air.

This part is laughable:

In the next few weeks, I will sign an Executive Order clearing away the red tape that slows down too many construction projects.  But you need to fund these projects.  Take the money we're no longer spending at war, use half of it to pay down our debt, and use the rest to do some nation-building right here at home.

Ok, we are out of Iraq. But a lot of those resources moved to Afghanistan so there isn't much savings. And we can't use the savings to pay down the debt because we still have a huge deficit. We are borrowing $0.40 out of every dollar we spend. So, is the President is proposing that we pay down the debt with borrowed money? And saying that we cut back on deficit spending in one place does not mean that we can borrow and spend elsewhere.

Obama wants to allow people to refinance at lower rates. Fine. But then he mentions a new fee on the largest financial institutions. Again, he is picking winners and losers. What will he do if this breaks Bank of America? Another bailout? He says that he isn't going to do that any more.

He also insists that banks sold people loans that they could not afford. He mentions it multiple times. There is no acknowledgement that the person taking the loan was also at fault. Instead he is going to create a new set of enforcers to hunt down the bankers.

And tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans. 

How about some penalties for the people who lied on their mortgage application? Don't you think that they might have contributed to the problem, just a bit?

We are well into the speech but he chose this time to announce his immediate priority - continuing to gut Social Security by continuing the Social Security tax holiday.

He also made a dig at the Bush tax cuts, but only the part that affected the rich and a push for raising the capitol gains tax which has turned into a special subsidy. The fact-checkers have examined the claims about billionaires paying cut-rates and found that it is rare. There are some people, like Governor Romney, whose income mainly comes from capitol gains but it is a very small percentage while the President would have you believe that it is the rule.

Here's another amazing statement:

Finally, none of these reforms can happen unless we also lower the temperature in this town.  We need to end the notion that the two parties must be locked in a perpetual campaign of mutual destruction; that politics is about clinging to rigid ideologies instead of building consensus around common sense ideas. 

This from the man blew off Republican concerns about the stimulus and used parliamentary slight of hand to pass health care against strong Republican opposition. Ironically, Rep. Giffords was sitting in the audience. Just a year ago Republicans were being blamed, without any proof, for her shooting, Obama has made it clear since August that he was more interested in scoring political points against the Republicans than actually governing.

An even ore amazing statement:

The renewal of American leadership can be felt across the globe.  Our oldest alliances in Europe and Asia are stronger than ever.  Our ties to the Americas are deeper.  Our iron-clad commitment to Israel's security has meant the closest military cooperation between our two countries in history.

Obama has spent the last three years snubbing Great Britain. Just last week he snubbed Canada by rejecting the tar oil pipeline. His record on Israel has been the least-supportive since that country was founded.

Maybe the President hopes that we aren't paying attention or, that by saying something he can make it happen. Or maybe he really believes what his teleprompter says. He has bragged before about what a friend he is to Israel.

He closed by reminding us that he got bin Lauden.

One of my proudest possessions is the flag that the SEAL Team took with them on the mission to get bin Laden.

We are lucky that he didn't bring it along to wave.

The mission that killed bin Laden is symbolic of Obama's view of the world. He ordered it to happen and it did. There were a few disasters along the way - a top secret helicopter crashed and stripped and international law violated - and his involvement was minimal but he still sees it as his victory.

Obama sees that economy as something that can only operate with heavy government influence. He wants to decide the winners and losers. He wants to help the poor and punish the rich. And he has no conception of the limits of government or his own ability to manage the economy.

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