Why the Stimulus Failed to Stimulate

There are two ways to for the government to try to directly stimulate the economy. One way is to give money directly to people through tax cuts or a tax rebate. The other way is to ramp up government spending.

Proponents of this second way insist that giving money directly to the population means that a larger percentage will be "wasted". Instead of being spent, it will be used to pay down debt or simply put in the bank. These people say that the modest stimulus passed under President Bush in 2008 was an inefficient use of the money. That is why the stimulus bill passed in 2009 was structured completely differently. The promise was that it would be targeted so that all of the money would be spent which would cause a multiplier effect.

So what actually happened?

The stimulus bill was actually a combination of programs. One extended unemployment payments. Another was a bail-out for states. Neither of these produced any additional spending. They simply continued existing spending. By Keynesian standards, these portions were a failure. That is why the Obama administration uses the phrase "jobs created or saved." They figure that without this money, spending would have dried up even more than it did causing additional job losses. It should be mentioned that there is some evidence that long-term unemployment programs increase the unemployment rate. People with money coming in are less likely to settle for a lower-paying job.

Another large portion went into a tax cut known as the Making Work Pay Act. This reduced taxes on the weekly paycheck by a modest amount. The theory was that the amount would be so small that it would be spent without thought rather than being used for something specific like paying down debt. It is hard to say how successful this was since an extra $5-$10 a paycheck will not induce someone to buy a house or even a major appliance.

Out of the rest of the stimulus, the best known programs are the "shovel ready" construction jobs, the Cash for Clunkers, and the Green Energy initiatives. How have these fared?

Recently President Obama admitted that there is no such thing as a "shovel ready job." This is in contrast to statements he made in 2008 when he assured the country that the states had numerous jobs that were all set to go as soon as they received funding. What was he talking about and where did the money go?

Construction jobs take time to put together. You have to do estimate the cost, identify the funding source, put the work out for bid, and award the contracts. Only then can you break out the shovels. Notice that projects have to be funded before you get very far. A lot of the shovel ready projects were going to happen, anyway. The governments simply used federal funds to pay for the work and saved the money that had already been set aside. There is absolutely no stimulus effect for this money since it paid for work that would have happened anyway. Now, some of the money that was saved was spent on later projects. A city might have doubled the number of miles of roads that it repaved. That would result in some eventual stimulus. In other cases, the money was simply saved or used to prevent cuts elsewhere. In these cases there was no stimulus. Bottom line - the shovel ready jobs were no more likely to stimulate the economy than giving the money directly to the people.

Cash for Clunkers is an interesting case. It was far more successful that was planned. The original idea was to get some old, polluting cars off the road and replace them with newer, more efficient cars. This was actually environmental legislation buried in a jobs bill. At it turned out, the bill caused a massive, temporary spike in car sales. It was so successful that Congress had to add additional money into the program. So, does that make it a success? No. Remember that it was supposed to get old, inefficient cars off the road. As implemented, it was possible to use it on a car that only got marginally better millage. Figure in the energy needed to produce the new car and you may have made things worse. But it helped the automotive industry, right? Yes. It was particularly good for the Japanese car makers. GM and Ford saw some increase. Chrysler didn't get much of a bump at all. Plus, it mainly shifted sales. People planning on buying a car in late 2009 or 2010 bought one under Cash for Clunkers. And all of those "clunkers" were demolished, taking the used car supply with them. Worse, the government could probably have given out smaller incentives for the same increase in sales. To add insult to injury, the places that got the construction work had nothing to do with where unemployment was the highest (probably because areas with high unemployment did could not afford to have construction projects already in the pipeline).

Finally, we have the Green Energy initiatives. Wind farms have created tens of thousands of jobs. Except, many of those jobs are temporary construction jobs that came and went before the stimulus was passed. It turns out that the standards were written fairly loosely. It does not matter when the work was done, all that matters is when the last generator is put into production and the wind farm is declared "on line." So, there are dozens of wind farms that were built in 2008 and 2009, before the stimulus, that still received credits equal to a third of their construction costs and are being counted as jobs created or saved. No stimulus effect.

Considering all of the places that the stimulus leaked money without actually doing any stimulating, we would have been better off just writing a check to the American people. That would have amounted to more than $2,600 per person. Imagine the stimulus effects of amounts like that being spent at once by three hundred million people.

What Obama Should Do

President Obama is touring the swing states, trying to reignite the passion that voters felt two years ago. By all accounts, he is doing a poor job of it. Part of the problem is the enormous disconnect between the President and the country. Voters are angry about bailouts and deficits but Obama does not recognize this. Instead seeing voter anger as a rejection of his policies, he sees it as a product of irrationality.

Part of the reason that our politics seems so tough right now and facts and science and argument does not seem to be winning the day all the time is because we're hardwired not to always think clearly when we're scared. And the country's scared.

There are several problems with the President's explanation. The first one is that it leaves no room for political dissent. If you reject his policies then you must be irrational.

The second is that he got his science wrong. It is true that fear, real fear accompanied by an adrenaline rush, will cause the cool, rational part of your brain to shut down in favor of the older lizard reflexes. This can cause irrational behavior like running while on fire instead of dropping and rolling, but this condition is fleeting. It is gone as soon as the adrenaline rush fades. It does not cause long-term voter anger.

The President's third problem is that he does not recognize the many mistakes that he has made. The biggest mistake is that he did not make jobs and the economy his top priority.

So, what should he be doing? He is about to be firmly repudiated. He needs to take pro-active action on this. He needs to admit that the voters have reason to be angry with him personally. He needs to acknowledge that health care and the oil spill were major distractions and that he should have put the American people ahead of his Progressive agenda.

Right now he is trying to rally the troops by saying that the coming congressional losses will endanger his Progressive policies. Most of the country does not care. They want jobs more than they want cap-and-trade. They don't want health care reform if it is going to slow the economy. He needs to justify the "shovel-ready jobs" that he now says do not exist. Instead of talking about what great things he has done he needs to admit that he could have done better and promise that he will do better in the future.

The Republicans have already done this. They embraced the Tea Party and rejected some of the big-government members. This may cost them some elections but it shows that they are serious about reforming themselves. This is there answer to Obama's charge that voting for the Republicans will be returning to the same old solutions.

Probably nothing can save the Democrats from major losses but Obama could at least generate a little last-minute sympathy. This is not in his nature. He believes that he is a superior being who operates on a higher plane, untroubled by irrationality or fear. He sees the correct path and those who do not have been blinded by fear and other problems. that attitude is not going to win over a swing-voter who wants to hear what the President is going to do to fix the economy.

About That Foreign Money

For the last couple of weeks the Democrats have been telling us that foreign money is buying the election. The President on down plus the Democratic National Party and MoveOn are hammering the point home. The problem is that it is not valid. This has been fact-checked by all of the major news services plus network TV and the New York Times. They all say that foreign money is not a factor. In fact, even if the most frequent target, the US Chamber of Commerce, was using foreign money it would be inconsequential. Their foreign dues only amount to a few hundred thousand and they are spending millions. So, why are the Democrats still talking about foreign money?

The President first brought the subject up during his State of the Union address. He was referring to the Citizens United verdict which had nothing to do with foreign money. Cameras picked up one of the justices shaking his head and mouthing, "That isn't true." as Obama made his claim. Again, the fact-checkers ruled against the President.

So why is he still saying it? I can think of several reasons.

The obvious one is that he really believes it. This means that the President, a former lecturer on constitutional law, does not under stand the law and no one on his staff is willing to correct him. Instead they are following his lead. This does not reflect well on the White House but it is the most sympathetic reason I can think of but they get worse.

I have seen the suggestion that the White House is readying the party for a major setback. This theory says that they are already introducing a boogey-man who they will be able to blame in November. ("It wasn't us, it was all of that foreign money!") If we take this theory to its conclusion then the anti-foreign money ads that are playing are not meant to influence the election. They are aimed at the post-election.

Another theory is that the Democrats are trying to tie foreign money to outsourcing in an effort to paint the Republicans as anti-job. ("Those dirty foreigners are trying to buy the election so that the nasty Republicans will give American jobs to dirty, nasty foreigners.") This certainly ties in with all of the out-sourcing ads that the Democrats have run against Republicans. It isn't very pleasant to think of the party of toleration as being so blatantly anti-foreigner but that's how many of their ads sound.

The final theory is that this is a long-term strategy to cut the Republicans off from their support. In the 2008 election the amount that Barack Obama spent was matched by the amount that MoveOn and other special interest groups spent. The Citizens United case gave the Republicans a chance to level the playing field. It could be that the attack against foreign money is really a push to open up the donor list. A law to do this failed to pass earlier this year. Vice-President Biden has called for the Camber of Commerce to open its donor list to prove that no foreigners contributed.

Once the donor's names are known, they can be targeted. The Democrats have shown themselves willing to use the DOJ and the IRS against political enemies. This is in keeping with Chicago-style politics.

No matter which theory is correct, the Democrats are telling outright lies during an election campaign.

Global Warming and the Corruption of Science

A distinguished scientist fired off some stinging accusations about Global Warming, calling it "the greatest and most successful pseudoscientific fraud I have seen in my long life as a physicist." Harold Lewis (emeritus prof at the University of California and former chair of the American Physical Society (APS) believes that the scientific community has stifled debate about Global Warming. Why? Because of the corruption influence of money. In his resignation from the APS, Professor Lewis writes,

The giants no longer walk the earth, and the money flood has become the raison d'être of much physics research, the vital sustenance of much more, and it provides the support for untold numbers of professional jobs. For reasons that will soon become clear my former pride at being an APS Fellow all these years has been turned into shame, and I am forced, with no pleasure at all, to offer you my resignation from the Society.

It is of course, the global warming scam, with the (literally) trillions of dollars driving it, that has corrupted so many scientists, and has carried APS before it like a rogue wave. It is the greatest and most successful pseudoscientific fraud I have seen in my long life as a physicist. Anyone who has the faintest doubt that this is so should force himself to read the ClimateGate documents, which lay it bare. (Montford's book organizes the facts very well.) I don't believe that any real physicist, nay scientist, can read that stuff without revulsion. I would almost make that revulsion a definition of the word scientist.

But what about the investigations into the ClimateGate letters, the ones that exonerated the writers?

When Penn State absolved Mike Mann of wrongdoing, and the University of East Anglia did the same for Phil Jones, they cannot have been unaware of the financial penalty for doing otherwise. As the old saying goes, you don't have to be a weatherman to know which way the wind is blowing. Since I am no philosopher, I'm not going to explore at just which point enlightened self-interest crosses the line into corruption, but a careful reading of the ClimateGate releases makes it clear that this is not an academic question.

What really set off Professor Lewis was the Society's censorship of any internal dissent about Global Warming. He collected 200 signatures in order to create a Topical Group within the Society. Rather than create the group as required by its constitution, the APS put out a vague survey.

Professor Lewis's point about money is important. When the theory of Global Warming was first advanced, some grants were handed out to evaluate it. The results were, "We're not sure. Give us more money to study it further." Now, more than 20 years later, entire institutions exist for the express purpose of studying and projecting Global Warming. Thousands of scientists and others depend on Global Warming for their livelihood. More recently, major corporations have gotten into the act in the form of Cap and Trade. This will decide winners and losers. The corporations are employing lobbyists to ensure that they are the winners. All of this will come crashing down if Global Warming turns out to be natural and harmless (or, God forbid, beneficial). So just how hard are any of these people going to go in questioning the base assumptions?

Remember this when you read about Global Warming being settled science.

Steampunk Comes to Primetime

Last night the TV detective show Castle involved steampunk.

The show started with a dead, naked body. It eventually turned out that the victim had been wearing a Victorian outfit (which had been stolen by a local homeless man) and was shot with a 200-year old bullet.

The detectives followed the victim's associations through Wild West reenactors to a steampunk hang-out. The title character even tried out a steampunk outfit.

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It eventually turned out that two members had fought a duel with antique pistols. But, the main characters tested the guns and were not able to hit a silhouette. From that they deduced that there was an additional shooter who used a better weapon. They eventually tracked it down to a someone who "modified a modern shotgun to fire antique pistol balls."

The steampunk parts were great. They brought in some people with really nice props as well as costumes from the Steampunk Emporium.

The parts about the dueling pistols was stupid. Dueling pistols were smoothbore which meant that they were not as accurate as a modern pistol but they are certainly better than what was shown. I've hit three out of three body shots in a competition. You would think that a trained police detective who has to qualify regularly with pistols would be able to do at least as well. But the plot said that the pistols wouldn't work so they didn't.

The other point is the shotgun. The show didn't give the slightest indication about how you modify a shotgun to shoot a lead ball. Not much modification would be needed. You could custom load a shell with black powder and a ball. The only trace would be if you loaded more than one shell so that there was one for the police to find. Outside of that, you could pull the slug from a modern shell and insert the ball along with some wadding. I doubt that either of these would be more accurate than a pistol. You would be shooting a fairly small ball out of a big barrel so there would be little to guide the ball.

Obviously the script writers made the physics fit the solution.

Now if they had just had some airship pirates.

Presidential Whine

"They treat me like a dog." "If I said that the sky was blue they would say no." "If I said fish live in the sea, they'd say no."

President Obama has spent the last few weeks complaining about the lack of cooperation he has gotten from the Republicans.

An unbiased observer would point out that Obama is pushing the most progressive agenda in generations (he said this himself in his Rolling Stone interview) which is anathema to the Republicans. In addition, with large majorities in both houses, the Democrats have not needed to resort to bipartisan compromise so that has been little outreach to the Republicans. Finally, the Republican electorate has made it clear that any Republican members of Congress who vote for Obama's agenda will be voted out of office. Given all of this, the Republicans have nothing to gain and everything to lose by supporting the President.

So why is the President complaining so much? He sounds somewhere between whining and kvetching. There is more to this.

First, there is the President's own biography. According to his autobiography, when he was in college he hung out exclusively with Marxists and feminists. He spent most of his adult life in the political monoculture of Chicago. He just isn't used to people having different opinions.

There is an additional element - Obama is a Progressive. The Progressive movement's answer to everything is additional government programs and regulation. When someone points out that their ideas have never worked before, their answer is either that the prior programs just didn't go far enough or that it wasn't implemented properly before but this time they will get it right (because this time, they will be in charge). I have often observed that Progressives think that they are the smartest people who ever lived because they think that they can solve age-old problems.

This is the real source of the President's constant complaints. As far as he is concerned, his course is crystal clear. Things are so obvious to his advanced intellect that he cannot believe that anyone could honestly hold a different opinion. When he does recognize that someone has a different opinion, he explains it in condescending terms. Remember his explanation about the bitter, clinging people in rural Pennsylvania?

So, when Republicans oppose him, Obama does not see principled opposition, he sees a plot to ruin his presidency. He sees it as a personal rejection.

According to all projections Obama will lose his big majorities in Congress. At that point he will have a choice - he can continue to whine and see his presidency go down in flames or he can learn to deal with dissenting views.

Fiscal Sanity

Have you ever watched the cost of a public project rise and wondered what the people in charge were thinking? The biggest example is Boston's Big Dig which ballooned from a $2.7 billion project to one that cost $22 billion (including $7 billion in interest). Even Barney Frank joked that it would have been "cheaper to raise the city than to depress the artery."

A couple of miles from where I sit in a smaller example - a bridge. Had the bridge been built similarly to a nearby one that was completed in 1992, it would have cost $10 million. Instead the mayor chose a slanted arch bridge that was estimated to cost $20 million. Estimates quickly rose to $40 million and the final cost was $60 million.

New Jersey was faced with a similar cost jump. A project to double the size of a railway tunnel between New Jersey and New York City went from $8.7 billion to $11 billion or possibly even $14 billion. Governor Christie canceled the project saying that he did not know how the state could pay for the additional cost.

Naturally the left is up in arms, complaining about the number of jobs (paid for by the government) were lost. Paul Krugman wrote an entire column on it with out mentioning the increasing costs.

So last year the project began. Of the $8.7 billion in planned funding, less than a third was to come from the State of New Jersey; the rest would come, in roughly equal amounts, from the independent Port Authority of New York and New Jersey and from the federal government. Even if costs were to rise substantially, as they often do on big projects, it was a very good deal for the state.

Notice that he only gave the original cost, not the increases. At what point does it stop being a good deal for the state? How far should government officials allow projects to go before pulling the plug? Given historic cost creep, the final cost could have been much higher than $14 billion.

Krugman is only one example of the reaction. Most of the news coverage has focused on lost (government) jobs, not on how the State of New Jersey is supposed to pay for these increases during the Great Recession.

Cost overruns happen on big projects so often that one is tempted to suspect that they are built into the system. You give a low estimate for a project knowing that once it is underway there will be substantial political pressure to continue it regardless of the cost. In fact, the higher costs mean more (union) jobs so some people see cost overruns as a good thing. The rest of us see them as a poor use of public funds.

The Enthusiasm Gap

It has been well-publicized that there is an enthusiasm gap between the Republicans and the Democrats. Republicans are fired up and ready to vote. Democrats are tired. There are various explanations being advanced by the left for their lack of spirit. Many people think that Team Obama simply needs to talk more about their accomplishments. Wile it is true that the have passed some major legislation, I don't think that most of it is the sort of thing that drives people to the polls. Look at what got the Democrats fired up in 2006 and 2008 - Bush.

Back then, the Democrats were united in their hatred of George W. Bush. When Barack Obama promised "Change that you can believe in," the understood this to be code for "undo Bush's foreign policy." How has that worked out so far?

We still have tens of thousands of troops in Iraq with no real end in sight. In the early primaries, Obama promised to have all of the troops out by the end of 2009. He has additional tens of thousands of troops in Afghanistan. Some of them are supposed to start pulling out next year but this is still an open-ended commitment. As long as we appear to be losing, Obama will have to choose between the support of the Democrats and the rest of the country. Granted, Obama promised to increase troop strength in Afghanistan but many Democrats thought that he was only saying this to get elected and would change his mind as soon as he got in the White House.

Other major complaints include the Patriot Act and Gitmo. Democrats had every reason to expect the Patriot Act to be repealed and Gitmo closed by now. Instead, the Patriot Act was extended and Gitmo's closing in "in the works."

Bush planned to use military tribunals to try the prisoners at Gitmo. Democrats expected Obama to either try them in the US courts or to release them, possibly with an apology (many on the left were convinced that everyone at Gitmo was innocent).

These are the issues that drove the Democratic Party and the Netroots and none of it has turned out as they expected. Most of Obama's foreign policy has been a continuation of Bush's.

There there is Bush himself and his administration. The far left really wanted Bush impeached and members of his administration tried for war crimes. It is too late for impeachment but they still wanted Congressional hearings on war crimes. None have been forthcoming.

Bush hatred is a thing of the past. Obama's chance to electrify his base has passed and, in truth, it would have been bad for the country. Compared to expectations, the Democrats' actual accomplishments have been pretty minor. Yes, they finally passed health care but it was not the bill that the Democratic base wanted and the process revolted most people. The rest of their accomplishments might be notable but let's be honest - people didn't turn out to vote in record numbers because of finance reform. That just doesn't leave much to fire up the base.

Reduce Your Carbon Emissions Or Else

The British Green movement got nasty. Look at the video here - or don't look if you are squeamish. To summarize - different groups of people including school children are asked to reduce their carbon emissions by 10%. Those who do not agree are blown up in gory detail.

UPDATE: How could any group produce a video like this and expect it to convert anyone? I'm sure that they didn't. I would bet that some hard-core greenies got together and one said, "Hey, wouldn't it be funny to just blow up anyone who won't reduce their carbon?" Everyone else in the room thought that this would be the funniest video ever.

In their echo chamber, no one ever stopped to question if blowing up school kids was an image they really wanted to be associated with.

Did the Stimulus Work?

A set of political ads in current circulation says that the stimulus did not create any jobs. Fact checking sites have ruled this false. Who is right and how successful was the stimulus?

By the White House's own standard the stimulus was a failure. We were promised that it would keep unemployment below 8%. Instead it topped 10%. The answer for that is that the economy was much worse than the White House financial team projected and the unemployment rate would have been even worse without it. This means that we do not have any usable projections on the economy with and without the stimulus. It gets even more complicated because the White House uses "jobs created or saved."

The fact checking sites are relying on the Congressional Budget Office (CBO) which in turn is relying on formulas that say that X amount of spending will create Y jobs. (The actual formula says that X amount of spending will create between Y and Z jobs and the White House used the Z figure.) An early effort to track actual jobs created was abandoned after it failed to match expectations.

I have a little personal experience with this. We received a large grant - millions - to spend on WiFi. This will only create two direct jobs and we did not want to report that so we decided to use one of these formulas on the idea that anytime millions are spent, someone is going to get a job out of it somewhere.

In order to get a better idea of how the stimulus worked we will have to look into its parts. A large portion of the stimulus consisted of an extension to unemployment benefits. A second part amounted to a bailout of states and cities that were left cash-starved by the drop in tax revenue. This did not create any new spending so, at best, these portions saved jobs but did not create any. Even figuring a multiplier effect we are only talking about a multiplier of jobs saved.

Another part was the "Making Work Pay" act. This combined two aspects of the Obama administration - a tax cut for the poor (it started phasing out for people making more than $75,000/year) and social engineering. It amounted to a $400/year tax credit to be spread across the year. The idea was that the amount people actually saw would be too small to bother saving so they would spend it. This did not work. No one has been able to correlate an increase in consumer spending with Making work Pay. Since so many people now use direct deposit it is likely that extra money stays in the account increasing the savings rate instead of the spending rate - just the opposite of what was planned.

Cash for Clunkers is often billed as the big success story of the stimulus. This gave people tax credits for trading their current car in on a new one with better millage. While it caused a big spike in car sales during the Summer of 2009, the big picture tells a different story. Most of these car sales were to people who would have bought a new car within the next year, anyway. This did not create sales, it just moved them forward. No net job creation. Granted, some people got employment scrapping the "clunkers" but the effect of taking so many cars out of the used car market was an average price increase of $1,800 on the remaining cars. This has to have depressed the used car market.

The most visible portion of the stimulus was "shovel-ready" construction jobs. There were problems with that, also. Most construction jobs take years to plan. The work the Stimulus paid for was either jobs that were already planned that were accelerated or simple, quick jobs like repaving. The big jobs would have been done anyway. The little jobs were so short-term that they would not be likely to affect long-term consumer spending (i.e. Will a two-week job spreading asphalt make you buy a new car or will you simply pay down existing debt?).

The final portion of the stimulus went for pet projects like green energy. This may have created jobs but they are jobs that can only continue with government subsidies.

So, where does that leave us? Some of the money was wasted outright. Some of it may have been counter-productive. While it is true that amounts of that size must have created some jobs, somewhere, it is also a stretch to say that this made the difference between a recession and a depression. The whole point of the stimulus was to provide more bang for the buck than we got with Bush's tax rebate. By that measure then the stimulus must be judged a failure.

An Inexperienced Campaigner

After reading about President Obama castigating his followers for not being motivated enough I remembered just how inexperienced he is as running a national campaign. If it was not for some major miscalculations, Hillary Clinton would be president today.

Obama caught a break in his first campaign for national office. He did not face serious competition for his Senate seat. He was given a big boost by being the keynote speaker for the 2004 Democratic convention. He gave a great speech, so great that there was talk of him running for president before the applause ended.

Going into the 2008 campaign, Clinton was the favorite with Obama the underdog. He did surprisingly well in the first set of caucuses while Hillary carried the primaries.

The Clinton strategy was to wrap up the nomination by Super Tuesday. Hillary didn't even have staff in states with primaries or caucuses after Super Tuesday. She spent all of her campaign funds.

When the dust settled, Obama was still in the race and Hillary's campaign was broke. It took several agonizing weeks and a personal loan to her campaign to get things moving again. In the meantime, Obama ran almost unopposed in several small primaries. He did not win every one of them but he won at least one every Tuesday for more than a month.

Once the Clinton campaign got organized again, Hillary proved that she could win nearly any large state that she was able to seriously run in. It wasn't enough. Obama was still winning small states where Hillary was not competing.

If that wasn't bad enough, Texas runs dual primaries. Hillary won the vote but it was a Pyrrhic victory. The Texas caucuses gave Obama more delegates than the vote gave Hillary.

The primaries ended without a clear victor. Obama was ahead but there were enough super delegates to give Hillary the nomination. Her case was that she ran better than Obama in the big states, the ones that a Democrat had to carry to win.

Obama got the nomination on the basis of the long list of states that he had won, the sense of inevitability surrounding his campaign, and the fact that he had more delegates.

That leaves the Democrats with a man at the top who has always had problems with tight races and who has trouble connecting with rural voters. None of those weaknesses have gone away. Obama would still rather psychoanalyze the voters than connect with them.

Two years ago Obama didn't have to break a sweat to fire up the voters. The presence of a black man at the head of the ticket fired up a significant portion of the electorate. The fact that he promised to be the anti-Bush fired up the rest. Now the novelty has worn off and Bush is a distant memory. Left to his own devices, Obama is having trouble firing up the voters.

Running Against the Man

Today's Democrats have no salable platform and they know it. They have an impressive list of accomplishments but most of these are unpopular. The stimulus is generally judged to have been a failure. The country remains deeply suspicious of the health care reform bill that was passed. The steps that they say were needed to save the economy from another great depression look like bailouts for the rich to a vast swath of the population. President Obama whose coattails they rode on two years ago now has an approval rating below 50%.

With nothing to offer, their strategy is to tear down their opponents. This means going through the opponent's background with a microscope looking for anything that might be turned into a negative. Christine O'Donnell is the most prominent example of this.

It is harder to fund juicy quotes from most candidate's past. When this fails, the Democrats are taking things out of context and blowing them up. Ads running against Steve Stivers claim that he wants to eliminate the income tax and replace it with a 28% sales tax on everything. Stivers never said any such thing but he did check "yes" on a questionnaire asking if he would support replacing the  income tax with a value added tax (VAT). He did not elaborate and the specifics came from an unrelated proposal from a few years ago.

An ad against Rand Paul claims that he is for decriminalizing theft, drugs, prostitution, and burglary. This came from an interview where he was talking about things like motor cycle helmets. He felt that the government intruded too far into people's lives and said that anything non-violent should be legal. Within the context it was obvious that he was talking about areas of personal responsibility and not suggesting repeal of whole sections of laws. This was also an isolated statement and he has since clarified what he meant. Regardless, his opponent is still running the ads.

Alan Grayson of Florida has taken this to a whole new level - that of outright lying. In one ad he accuses his opponent, Daniel Webster, of being a draft dodger. In fact, Webster was given deferments for being in high school and college then declared medically unfit because of foot problems. As a follow-up, Grayson ran an ad comparing Webster to the Taliban. This features clips of Grayson saying that women should submit to their husbands. The clips came from examples that Webster gave of the bible verses that husbands should not use, even though they are in the bible.

The Democrats are desperate to hold onto power but they are unwilling to make their case based on how they have governed. In creating a national strategy based on personal destruction rather than issues they have violated numerous promises about elevating the campaigns and have effectively conceded that their time in office is not worthy of continuing.

Moving the Center

This is the standard line from the left - "The country hasn't moved, it's the Republicans who moved to the right." It is part of this year's campaign Democratic election strategy. It is an attempt to capitalize on the Tea Party movement. Today's liberals want a return to the moderates of the Bush years. The funny thing is that they had the same complaint during the Bush years. The only difference was that back then it was the social conservatives who moved the party.

This complaint was typified by Christine Todd Whitman, former governor of New Jersey and head of the EPA for several years under George W. Bush. In 2006, she wrote a book, It's My Party Too: The Battle for the Heart of the GOP and the Future of America. Publisher's Weekly says,

It's her party and she'll cry if she wants to. Former EPA Chief and New Jersey governor Whitman laments the rightward shift in the Republican party, concerned that it "will now move so far to the right that it ends up alienating centrist voters and marginalizing itself." In her view, the aggressive tactics of the "social fundamentalists," to whom "the concept of choice...is anathema," are to blame. Only if centrists transform themselves into "radical moderates-people ready to fight for what they believe even if it makes waves in the party," can the party restore its equilibrium. Whitman explores her own GOP heritage and her adventures and misadventures with hot button issues like abortion, stem cell research, race, the environment and women's rights, reinforcing the party's distinguished record. For example, she points out that Republicans ensured passage of the Civil Rights Act and created the Clean Air Act. If moderates would only stand up for themselves, she contends, the party platform could return to the essential issues-"fiscal restraint, reasonable and open discussion of social issues, environmental policies that promote a balanced approach to environmental protection, and a foreign policy that is engaged with the rest of the world." While the writing is straightforward and the anecdotes interesting, the account drifts from its core theme, culminating in a plea to visit a grassroots Web site and a generic suggestion for "issues-oriented campaigns." Nowhere does Whitman identify who these social fundamentalists are, what they want or why they have proven so powerful in today's electoral environment despite being outnumbered. Though this book succeeds as an overview of the Republican party's accomplishments, it's a less than adequate battle plan for moderate Republications looking to attain their past glory.

Much of what Whitman prescribed has happened with the Tea Parties. The new emphasis is on limited government and fiscal restraint. No one is talking much about stem cells or abortion. So, what was described as a move to the center in 2006 is now a shift to the far right.

During the 2008 campaign, Democrats were open, at least in private, about political shifts. They wanted to shift the country so far to the left that the Republicans would either have to follow or be marginalized. It worked on the short-term. John McCain was the party's most liberal candidate since Nixon. He had his own proposals for health care and cap and trade. He made it clear that he would govern to the right of Obama but to the left of Bush.

In the meantime, if you look at what the Democrats passed during the last two years compared to what they did when they held Congress and the White House from 2001-2003, there can be no doubt that they are far more radical than 20 years ago.

It didn't take long before a significant portion of the country objected to this shift. A few bail-outs and several trillion dollars in new spending had people protesting in the street. Most of these protesters would be satisfied with a return to the days of Clinton's second term.

Krugman: The US is Broke

Paul Krugman recently wrote a column that tried to refute the Republican Pledge to America. Ironically, when you combine what he said and a fact that he must know but didn't say then you have a great argument for cutting spending. Here's what he said:

[...] In other words, Social Security, Medicare and the defense budget are off-limits.

So what's left? Howard Gleckman of the nonpartisan Tax Policy Center has done the math. As he points out, the only way to balance the budget by 2020, while simultaneously (a) making the Bush tax cuts permanent and (b) protecting all the programs Republicans say they won't cut, is to completely abolish the rest of the federal government: "No more national parks, no more Small Business Administration loans, no more export subsidies, no more N.I.H. No more Medicaid (one-third of its budget pays for long-term care for our parents and others with disabilities). No more child health or child nutrition programs. No more highway construction. No more homeland security. Oh, and no more Congress."

Did you get that? Our taxes aren't covering most of what we think of as government.

Now for the part that Krugman didn't mention - interest on the national debt. Interest was the fourth largest single budgeted disbursement category, after defense, Social Security, and Medicare. If we weren't paying that then there would be enough money to cover all of those other functions. The Government Accountability Office says that the current level of debt is fiscally unsustainable.

The $70 billion a year that it would cost to continue the Bush tax cuts for everyone is a drop in the bucket. The current deficit is $1.4 trillion. That makes the "Bush tax cuts for the rich" look like a rounding error.

Raising taxes is not a viable option. A tax increase during an economic downturn (remember, the recession ended last year) would be disastrous. That's why Keynesians, led by Krugman, increased the deficit. But we can't keep spending money that we don't have. Eventually interest on the national debt will grow so large that nothing is left for anything. That's what fiscally unsustainable means.

This doesn't matter to Krugman. He advocates even-increasing deficits on the idea that they will eventually stimulate the economy. He recently threw out the figure of $30 trillion (the current national deficit is $13.4 trillion). This is sometimes called the drink yourself sober school of economics.

What is needed is a real reassessment of the role of government. Politicians have over-promised and left it to future generations to pay the bills. The only way out is to start cutting. The longer we wait the harder it will be and the worse the consequences if we do not.

Obama loses his mojo

A couple of days ago President Obama held a town hall meeting on CNBC. It didn't go well. This is a metaphor for the president's last several weeks. What happened to his popularity?

An important thing to remember is that his enormous popularity when he took office was as a symbol. A man with dark skin and an African name became the post powerful man in the world proving once and for all that anyone can grow up to be president. A lot of people had no idea where he stood on issues and didn't care.

Once people got used to having a black man in the White House, he lost his first achiever luster and started to be judged on his accomplishments.

Then there is the curse of the super-majority. The entire time Obama has been in the White House, Congress has had 59 or 60 Senators and a comfortable margin of Representatives. This hurt the Democrats in general and Obama in particular in several ways. With such a majority, the Democrats did not feel any need for bipartisan compromise. This helped the Republicans keep their solid voting block. Why would any of them break ranks when the Democrats were not offering them anything? But this meant that they needed every vote from the Democrat Caucus to break filibusters. That gave each senator more bargaining power. The moderate senators took advantage of this. The result was messy legislation. The far left was upset because they couldn't get the more radical parts of their agenda through. Everyone else felt trampled. If the Democrats had a couple more or a couple fewer senators then they either could have ignored the moderates or they would have had to compromise. Along the way, the President outsourced the writing of his signature legislation to the back rooms of Congress.

Obama also had the curse of his promises. He made twice as many promises as most presidential candidates do. That's a lot to live up to. But it gets worse. Many people expected him to live up to promises he never made. He came out against same-sex marriage but his supporters assumed that he was lying in order to get elected. A repeal of Don't Ask/Don't Tell has been low on his priorities. Other groups feel similarly slighted.

His handling of the economy has hurt him more than anything. Originally his team forecast a strong recovery starting late last year. A year ago his economic team was talking about "green shoots". The was supposed to be the "Recovery Summer" when the jobs from the stimulus kicked in and the Great Recession finally ended. Just this week it was announced that the recession actually ended in June of last year. This leaves the White House looking clueless. Obama needs the financial sector, what he calls "Wall Street" but he doesn't like them. In fact, he is, at best, apathetic about employers in general and his focus on health care made it appear that he does not care about the millions of unemployed.

President Obama's favorite quip about the Republicans and the economy goes, "They drove us into this ditch and now that we are almost out they want the keys back." This is a great applause line but it underscores two hard truths - the crash may have happened under the Republicans but the Democrats managed the recovery and it has been a flop. After hearing the President say this you wonder if he really believes that things are nearly back to normal?

On his CNBC appearance one of his supporters told him that he needs to come out and tell us if this is a temporary downturn or the new normal. as always, he passed. To the Obama administration, recovery is just around the corner. His economic team probably told him early on that recovery would be slow but he kept this secret for political reasons (if they didn't tell him that there would be a slow recovery then the remaining ones should be sacked). Had Obama told the country early in his administration that this would be a long, slow recovery he could have shifted the blame. Instead he used the recession as an excuse to pass the mother of all pork barrel bills. Once the stimulus was passed, the recovery was his problem, not Bush's. In addition, the stimulus and a home-owner bailout gave rise to the Tea Party.

Finally there is the war in Afghanistan. Between 2004 and 2008, the Democrats insisted that this was the good war and that the war in Iraq was the bad war. They would abandon the bad war and use the resources to win the good war. Many Democrats were lying. They wanted out of both wars but they didn't want to seem weak on defense. They are outraged that Obama followed through on his promise to try to win the war. So far things do not look good. It looks all the worse because President Bush was able to get Iraq under control. Even the war's supporters are getting tired of it. But if Obama loses Afghanistan then he will hurt the Democrats for a generation. They are still living down the loss of Viet Nam. A second loss would permanently mark them as surrender monkeys.

A great leader could recover from these setbacks but Obama has gone from being an electrifying candidate to a boring president. Instead of fainting in his presence, his supporters now complain that they are exhausted. His failures, the economy and the war, are dragging him down and his wins, health care and the stimulus, are so muddied by back-room dealing that they cannot provide a counterbalance.

All told, it is no wonder that things look so bad for the Democrats going into the mid-term election.

Trashing Conservative Women

Since winning the Delaware primary, Christine O'Donnell has become the nation's best-known candidate. That's not a good thing, not when things you did in high school and views you had in your early 20s suddenly become part of late-night comedy routines. Granted the right has piled onto some of the Obama administration but these have been political appointees and it is their political statements that have been the subject of controversy (Van Jones).

Over a decade ago O'Donnell said that masturbation was the same as adultery. Back in 1976, Nobel-prize-winner and former president Jimmy Carter said that he had committed adultery many times by simply looking at a woman with lust in his heart.

At the age that O'Donnell was denouncing self-love, her opponent wrote about becoming a "Bearded Marxist". As far as I know neither Leno nor Stewart has picked up on that.

The national attack on O'Donnell reminds me a lot of the attack two years ago on Sarah Palin. Both are fairly young and attractive and both hold values that are radically different from the hard left. In both cases the left has used the "politics of personal destruction" to attack the person instead of the platform. Compared with the attacks on Palin, the attacks on O'Donnell have been fairly light. At least no one has accused her of faking a pregnancy.

Still, there is a message there for Republican women - if the Democrats think that they can benefit from it then they will savage you mercilessly from coast to coast. Does anyone else find this creepy?

Karl Rove and the Tea Party

Right now we have what amounts to three parties representing three political poles. One axis is social going from conservative to liberal. This covers things like gay marriage, the Pledge of Allegiance and the place of religion in society. The other axis is the power of government. Right now the mainstream Republicans and Democrats are at the high end of government power and mainly differ over social values. The Tea Party is somewhere between neutral and conservative on the social axis and has the low end of government power to itself. There used to be a less-government wing of the liberals but it atrophied a long time ago and is not worth mentioning.

The mainstream Republicans and the Tea Party are fighting it out for control of the Republican Party and Karl Rove is in the thick of it. While he sounds reasonable when he says that it is better to run a big-government Republican who can get elected he has a conflict of interest - he is the architect of this split.

Rove's maxim has always been that there is no constituency for small government. On the face of it, this can be argued. Ross Perot won 19% of the 1992 national vote on a platform of fiscal responsibility even though he ran as an independent. Limited-government also attracts some influential single-issue voters like the gun lobby.

Rove means something completely different when he talks about constituency. Whenever government exercises its power, it chooses winners and losers. This means that every issue has deep-pocketed lobbyists.

This is how the Republicans operated during the Bush administration. There was no question of shrinking government. Bush was a supporter of big-government. The question was how the government would be run. Election campaigns often turned on the question of who you trusted to runt he government. That is why Bush handily beat Kerry. Bush came off as a regular guy who you could trust to do the right thing while Kerry came across as clueless.

The hallmark of the Bush administration was a huge increase in domestic spending and an accompanying increase in earmarks.

Rove's strategy for a permanent Republican majority was to appeal to regular voters while filling the campaign coffers with lobbyist cash which was rewarded with earmarks. He somehow assumed that no one would notice how corrupt that system was.

Of course, the Democrats did notice and successfully ran against spending, earmarks, and lobbyists in 2006 and 2008. They failed to deliver on their promised reforms which gave rise to the Tea Party.

All of this is why Rove would rather see a Democrat elected than a Tea Party Republican. If the Tea Party takes over then his vision for the future has been repudiated and his influence is ended.

The Tea Party and the Republican Establishment

I have lived in the same congressional district for over 30 years. In all of those years, there has never been a primary challenger. When I first moved in my representative was Chalmers Wylie who had been in office so long he probably remembered Lincoln. He finally retired after some of the Congressional scandals in the early 1990s. He was replaced by Deborah Pryce who retired in 2008. Even though I usually vote Republican, neither of these candidates represented me very well. Pryce, in particular, provided the margin of victory for some of President Clinton's early legislation that I did not agree with. She was also a consistent anti-gun vote. I would have loved to have traded her in for a more conservative candidate. But it never came up.

Ohio has a long history of suppressing primary challengers. They claim that it is to save the public money that would be spent on elections. The result has been a long line of establishment candidates - people who were moderates and who where known to work with the party. This has not always worked out.

For years Ken Blackwell wanted to run for governor. In 1998 he was the state Attorney Treasurer and the establishment candidate was secretary of State Robert Taft. The reasoning was that a) it was Taft's "turn", that he would work with the party establishment better than Blackwell and that c) the party owed the Taft family. After much negotiation, Blackwell agreed to run for Secretary of State and wait his turn. Few people said it in public but people who were familiar with Taft's job as Secretary of State felt that he was incompetent (I knew people who worked for him who echoed that assessment).

Taft ended up being a disaster. His administration was plagued with scandals that dragged down the entire Ohio Republican party and hurt the national party. By the time Blackwell got to run in 2006 the well had been poisoned and no Republican could win. While I do not agree with all of Blackwell's positions (gay marriage), I still think that he would have been a better governor.

The point to this is that the establishment candidate is not always the best candidate nor the one who best represents the districts views. Instead the candidate is the one who is best-connected to the central committee. The Democrats are no better. They do the same back-room deals.

I can't help but think of this when I see Karl Rove arguing that the Tea Party is nominating unelectable candidates. A decade ago Rove felt that there was no constituency for limited government candidates and engineered the ejection of the libertarian wing of the party in favor of big-spending Republicans. George W. Bush called them Compassionate Conservatives.

The Republicans need a new image, different from Bush and big government. The Tea Party is providing that and tapping into a national mood but it threatens the establishment' stranglehold on power. An ugly side has been revealed where the establishment would rather lose to a Democrat than to a conservative Republican. This is self-serving and self-destructive. It also becomes a self-fulfilling prophecy when they refuse to support a candidate because he is "unelectable".

Figuring Out Obama

President Obama continues to be a mystery to many, maybe most, Americans. Attempts to categorize him quickly fail. He is all over the political map on various issues. The latest effort comes from Dinesh D'Souza and suggests that we look as Barrack Husein Obama, jr as an extension of Barrack Husein Obama, sr., an anti-colonialist who is trying to make up for America's colonial influence over the world. Others including Glenn Beck have said this all along but this time it has caught the attention of prominent conservatives such as Newt Gingrinch. Others are piling on. Liberal sites such as Huffington and Slate have pronounced this as stupid or even a variation of Birtherism. Even moderate conservatives such as Kathleen Parker reject the idea.

So, is there anything to it? D'Souza's main source is impeccable - Obama's own book, Dreams from my Father.

In his own writings Obama stresses the centrality of his father not only to his beliefs and values but to his very identity. He calls his memoir "the record of a personal, interior journey--a boy's search for his father and through that search a workable meaning for his life as a black American." And again, "It was into my father's image, the black man, son of Africa, that I'd packed all the attributes I sought in myself." Even though his father was absent for virtually all his life, Obama writes, "My father's voice had nevertheless remained untainted, inspiring, rebuking, granting or withholding approval. You do not work hard enough, Barry. You must help in your people's struggle. Wake up, black man!"

The climax of Obama's narrative is when he goes to Kenya and weeps at his father's grave. It is riveting: "When my tears were finally spent," he writes, "I felt a calmness wash over me. I felt the circle finally close. I realized that who I was, what I cared about, was no longer just a matter of intellect or obligation, no longer a construct of words. I saw that my life in America--the black life, the white life, the sense of abandonment I'd felt as a boy, the frustration and hope I'd witnessed in Chicago--all of it was connected with this small piece of earth an ocean away, connected by more than the accident of a name or the color of my skin. The pain that I felt was my father's pain."

In an eerie conclusion, Obama writes that "I sat at my father's grave and spoke to him through Africa's red soil." In a sense, through the earth itself, he communes with his father and receives his father's spirit. Obama takes on his father's struggle, not by recovering his body but by embracing his cause. He decides that where Obama Sr. failed, he will succeed. Obama Sr.'s hatred of the colonial system becomes Obama Jr.'s hatred; his botched attempt to set the world right defines his son's objective. Through a kind of sacramental rite at the family tomb, the father's struggle becomes the son's birthright.

D'Souza also adds his own experiences growing up in post-colonial India and shows how anti-colonial attitudes match up with Obama's actions.

Obama's attitude toward the UK and Europe in general only make sense if you believe that he still carries some of his father's resentments. In his first state visit to Obama, them-Prime Minister Gordon Brown brought special one-of-a-kind gifts. In return, he was given a DVD set that will not play in Europe and some junk from the White House gift shop. It is hard to imagine a clearer snub.

Obama went out of his way to improve relations with anti-colonialists such as Hugo Chavez and Iran and has snubbed India and most of Europe. Either he has a bias against countries that he sees as colonial powers (which is ironic when applied to India) or he is trying to punish countries that were friendly to the Bush administration and court countries that were hostile to Bush. Neither makes for a rational foreign policy. You can decide which explanation you are more comfortable with. I have not seen any others advanced.

Obama's domestic policies have also been hard to figure out. He actively dislikes business but he passed on chances to nationalize important industries such as banks and automobile makers. He prefers strict government control while leaving businesses in private hands (with the exception of college loans). To Glenn Beck, this looks like Fascism (the Italian kind, not the German kind). To D'Souza it looks like anti-colonialism. Both have their roots as a "lite" version of socialism so it is hard to trace exactly where he came by this instinct.

Barrack, Sr came to a new country to study then returned, abandoning his wife and child. He made some impact on the new, post-colonial government but ended up a drunken outsider. Being abandoned as a child had a strong affect on Barrack, Jr as shown by his quest to uncover his father's roots. Doubtless one of his motivations is the hope of gaining his father's posthumous approval but that was only one influence. Obama's mother was also anti-capitalist. At one point she refused to attend a business party with her second husband because the Americans there weren't "her people." They were capitalists. In high school hung out with a retired communist who he did not name. In college he hung out with the Marxists and feminists and later spent years as a follower of socialist Saul Alinsky. While his father's attitudes must be part of the forces that motivate Obama, there have been too many other influences to simply classify him as an anti-colonial socialist.

The mystery of Barrack Obama, Jr, continues.

Myths from the Left

There are a number of propositions being tossed around regularly by the left as justification fro proposed action. I considered being cruel and calling this post "Lies from the Left" but that would be unfair. Lying implies that the source knows that he is not telling the truth. The left believes all or most of what they are saying but they are wrong, anyway. These have reached mythic status because they are constantly repeated. They are also dangerous because they are setting a basis for government action.

The deficit is caused by the Bush tax cuts (for the rich). This is two myths in one. Currently the left cannot resist adding those last three words. It gives the impression that Bush's tax cuts were limited to the rich. Actually, the tax cuts were pretty much a 5% rate cut across all margins. Regardless, the cost of the Bush tax cuts over a decade was estimated to be less than the current one-year deficit and the deficit for 2007 which included the tax cuts was a fraction of the current deficit. The deficit is caused by a combination of decreased revenue caused by high unemployment and underemployment combined with increased government spending.

This myth is being used to set the groundwork for rolling back the Bush tax cuts on people making more than $250,000. That will not make a meaningful change to the deficit. If anything, it will take the pressure to cut spending off of lawmakers.

President Bush took a budget surplus and turned it into a deficit. This is often combined with the first myth about the Bush tax cuts. It is true that the budget went from surplus to deficit under Bush but there is more to the story. Budget projections when Bush took office were based on uninterrupted economic growth. That did not happen. The country had slipped into a mild recession by the time Bush took office. The economic hit caused by the September 11 terrorist attack also affected the budget. In addition, the economy under Clinton was influenced by the dot-com bubble which was unsustainable. The truth is that the surplus would have vanished regardless of who was elected.

Originally this myth was being used in campaigns to justify electing Democrats. The understanding was that once the Democrats were in charge they would rein in the deficits. Obviously that did not happen. It still surfaces as a reason to keep Democrats in office, even though they have not shown any interest in fiscal restraint.

The Gap between the rich and poor is growing because of the Reagan tax cuts. This is an example of a questionable cause. Just because one thing happened after the other does not mean that one caused the other. Yes, the rich have gotten richer but the tax cuts are not the sole reason. Slate did a piece on this recently and concluded that the Reagan tax cuts were not big enough to have caused the shift in wealth. Other explanations have been suggested but the truth is that no one is positive. This myth takes the one about Bush's tax cuts and does it one better, laying the foundation for a return to redistributive tax rate.

The rich "waste" their income by saving it. Robert Reich, Secretary of Labor under Clinton, uses this one constantly. This is rooted in Keynesian economics which holds that recessions are caused by a slowdown in the velocity of money. The multiplier effect comes when I pay you a dollar and you use part of it to buy something else. If I pay you a dollar and you either save it or use it to pay down a debt then there is no multiplier and the economic benefit is "wasted".

Originally this was used as an excuse for excluding the rich from the stimulus. Now it is being used as an excuse for raising taxes on the rich.

The audacity of this myth is breathtaking. It presumes to dictate how money should be used i.e. to the benefit of society in general instead of for the individual. It assumes that the rich already have more money than they can use and will just stick the extra someplace. It also seems to assume that the rich stick their money in a mattress or, at best, a savings account. What Reich calls "saving", everyone else would call investing. The money might go into the stock market or the bond market or straight into a business. All of these are essential for the proper functioning of our economy. To call any of these "wasted" is to totally misunderstand how the economy works.

If taken to its logical conclusion then this myth turns outright scary. The logical extension of this is that the government should confiscate wealth above a specific amount since it is being wasted, anyway.

We can end the recession if we just spend enough in stimulus. It is an accepted fact that World War II ended the Great Depression. Nobel Prize-winning economist Paul Krugman simplifies this relationship, claiming that massive government spending ended the Depression. He goes on to suggest that we can end the current recession if we just spend comparable amounts. He recently suggested $30 trillion or $100,000 for every man, woman, and child in the country. The current national debt is $17 trillion so he would nearly triple it.

This shows that wining a Nobel Prize for work in micro-economics does not make you competent to comment on macro-economics. The only way that Krugman's stimulus would work would be if we spent the $30 trillion waging war on the rest of the world with the goal of destroying their industrial capacity.

No stimulus has ever ended a recession. Krugman's answer that no stimulus has never been big enough remains unprovable because the ruinous amount of debt that a government would have to take on to try it.

Bush and the Republicans caused the recession because of deregulation of the financial sector. The left hates Bush and it hates deregulation so the two must be linked and have caused the recession. Things are a lot more complicated.

First, the financial instruments that caused so much damage in the financial sector were so new that they had never been regulated. Second, the parts of the mortgage industry that were under federal regulation were under heavy government pressure to behave in an unwise manner. Banks were told to increase minority home-ownership. In order to do that, they had to drop long-standing loan standards. There were many fingerprints on this including prominent congressional Democrats.

They got away with this for years because the new standards caused a housing bubble. As long as prices rose, someone could default on a loan and still come out ahead y selling the property for a profit.

This led to a general credit-bubble. Consumer debt rose from 90% of annual income to 130%. None of the rules put in place by FDR or since covered this in any way. Likewise, the creation of Too Big to Fail institutions had nothing to do with Bush. This started in the mid-1980s when state legislatures began relaxing rules about interstate banking and was capped by the Riegle-Neal Interstate Banking and Branching Efficiency Act which was signed into law by Bill Clinton.

All told, these myths form a justification for the biggest expansion of government power in decades. They are being repeated constantly in opinion pieces and in interviews. They are harmful and must be countered.

Is it 1982 or 1978?

Reportedly the White House has accepted that the Democrats will have major losses in 2010 but are comparing this year to 1982. At that point, Ronald Reagan was half-way through his first term and the economy was still doing badly - the country was in a double-dip recession and unemployment was the worst since the Great Depression. The Republicans suffered major losses in Congress and in state government across the country.

In 1983 the economy picked up, starting a boom that would last nearly 30 years. In 1980 Reagan won the election on the question, "Are you better today than you were four years ago?". By 1984 he could campaign on the same question. Both inflation and unemployment were lower than in 1980. The economy was booming. The only real question was if Reagan could win in all 50 states (he carried 49).

So, can President Obama start writing his 2013 inaugural address? I doubt it.

President Obama is no Ronald Reagan. Reagan came across as a warm, likable father-figure. There was argument about his economic theories but no one could say that he was ignoring the economy. In contrast, Obama comes across as a cool, aloof professor. Obama spent most of his first 18 months concentrating on health care with the economy a distant third or fourth on his priorities.

Reagan was also elected because President Carter seemed impotent after the government of Iran seized the American embassy staff and held them hostage. Reagan made America feel strong again. Obama was supposed to have made us feel loved but has failed to deliver.

Presidents live and die by the economy. A president who runs during an economic boom tends to win by a landslide. A downturn means defeat.

In order to believe that the economy will rebound as it did in 1983, you have to believe that the president's economic policies have no effect. Reagan cut taxes and spending. Obama has a mixed record on taxes, he raised some and lowered others. There is no question about his spending - he raised spending across the board. The success of Reaganomics makes Obamanomics look risky.

In fact, the current debate is not when the recovery will begin, it is if the recovery will fail. There is no chance of the economy suddenly picking up. The current problems are rooted in years of binge spending and bubble real estate values. What recovery we have had to date has produced few jobs. Reagan's policies encouraged investment and spending. Obama's policies cause anxiety.

At this point in his term, Obama looks more like Jimmy Carter or even Gerald Ford - a president who came into office with a great deal of public good will but who seems overwhelmed by the economic problems that he faces. Obama's prospects are closer to 1978 than 1982.

Obama could hope to repeat 1994 when Clinton lost control of both houses of Congress but went on to reelection after moving to the right of his party. This will be difficult for Obama. Both he and his party have moved significantly to the left since 1994. Also, Clinton had a better economy to run on. The country came out of a mild recession as he took office and the beginnings of the dot-com bubble gave him a good economy to run on in 1996. Moreover, members of his party are anticipating a shift to the right and will resist it.

None of this guarantees a Republican win in 2012. They will still have to run a good candidate. I doubt if any of the top-tier candidates from 2008 qualify and I have real doubts about the electability of Sarah Palin. That leaves a big hole for the Republicans to fill in the next 16 months.

Executive Pay

The current line for the Left is that executive pay is too high and something needs to be done about it. That's not how they phrase it. They toss around terms like "Wall Street" and "the Rich" but that's what they mean. Executive pay has changed several times over the last few decades, almost always in response to government policies.

From the Great Depression through the early 1980s, most executives worried about tax shelters. They worried a lot. Tax rates were confiscatory. JFK lowered them some but even in the 1960s and 1970s, it was a national passion trying to keep a hold of your money. Since the alternative was to have over half of your income taxed away, there was a significant return on doing this.

During this period tax-free benefits increased greatly. Expense accounts were lavish. I knew one man who owned a trucking company and had his Mercedes and his private plane listed as company vehicles.

In the early 1980s, Congress under Reagan make some major tax cuts. After that, taxes were low enough that people moved their money to investments that were taxable but paid higher returns. Over time, pay was changed to eliminate the tax shelters and go to direct pay.

When Clinton took office in 1993, his Secretary of Labor, Robert Reich, felt that executives were being paid too much and that their pay did not reflect their performance. He wanted their pay directly tied to company earnings. His solution was to replace pay with stock options. He used the power of the government to convince most corporations to switch.

This had a few unintended consequences. One was that it fueled the Dot-Com bubble. The other was the charge that executives were more interested in manipulating stock market prices than in making the best long-term decisions for the company. Again, this was seen as a crisis that the government had to involve itself in.

The new solution was to tie pay to profits as an annual bonus. These would be based on an individual's business unit, not company performance in general.

Which brings us to today. When your employer makes billions, it only takes a small percentage to get a seven-figure bonus. Moreover, it is quite possible for your unit to have been profitable even when the business in general lost money.

So the immoral bonuses that bank executives were getting last year came about directly because of government influence on how companies are paid.

The newest line is that the rich control too much wealth and that the government needs to redistribute it. That is why President Obama announced that he will support extending the Bush tax cuts, but only on people making less than $200,000 ($250,000 for families). Others are not so generous. Les Leopold of Huffington calls for a return of steep progressive taxes in order to pay for a new, larger stimulus.

This was tried at the beginning of the Great Depression. In fact, many economists believe that this is why there was a Great Depression in the first place. Trying to redistribute income can wreck an economy.

The Meaning of the First Amendment

First Amendment are suddenly an issue. Consider:

A group wants to build a mosque near Ground Zero.
Other groups are protesting the mosque.
A small church plans to hold "burn a Koran day".

The reaction to these:

Many on the left are insisting that the mosque will be a monument to tolerance and diversity.
Many on the left insist that protesters have no right to protest.
Many on the left condemn the Koran-burning. The Secretary of State has said that it is un-American.

The First Amendment issues get complex from here. Yes, the Muslims have a right to build a mosque, even if it offends people. Similarly, the First Amendment gives people the right to object to the mosque. People who are in favor of the mosque seem to forget that their opponents also have a right to be heard.

This is the issue at the heart of the Koran-burning. Freedom of religion means just that. You can say that your religion is the only true one. You can give examples of why other religions are wrong. You can publish a book on why all religions are wrong. And you can burn holy books from other religions. That much is a First Amendment right.

Which does not mean that burning a pile of Korans is not offensive. Here is where it gets interesting. Building the mosque is also offensive to millions of people but the people condemning the Koran-burning are supporting the mosque.

This is further complicated by international politics. When a claim was published that a Koran had been flushed down a toilet, it became an international incident. It also turned out to be a fabrication. A few drops of water touched a Koran and the story grew in the telling. By the time the story ran itself out, people had died in international rioting.

Burning several Korans is bound to provoke international outrage. Gen. David Petraeushas compared it to Abu Ghraib. Several top US officials have asked the church to cancel the event.

So where does that leave us? Are we going to put an asterisk on the First Amendment saying "* Not valid in cases of foreign outrage"? Our leadership has made it clear that they care more about international pressure than First Amendment rights. To be fair, the burning will make it more difficult to conduct the war in Afghanistan but it would be nice to hear someone in the administration acknowledge that the book burning is a constitutional right and part of our cultural heritage. It would also be nice for someone to point out the number of US flags that are burned abroad.

Obviously, offending millions of Americans with a mosque is ok but offending millions of Muslims is not. Is this because they know that Americans may stage orderly demonstrations instead of deadly riots?

Finally, Secretary of State Clinton asked that the press stop covering the story. There is a measure of wisdom in this. The coverage is all out of proportion to the size of the congregation. But freedom of the press is another of those First Amendment freedoms.

Out of Touch

The Democrats have a real problem this Fall. Led by the White House, they are completely out of touch with the country. There are many instances of this but the worst was the "Recovery Summer" pitch. Unemployment has not moved significantly. House and automotive sales are down. Economists are worried about a double-dip recession. For the President and Vice-President to be touring the country talking about a recovery is so out-of-touch as to seem cruel.

This is nothing new. Democrats spent the early months of 2010 pushing the White House to start doing something about the economy. Instead, Obama and Congress seemed fixated on health care reform.

Which brings us to their second problem. They were convinced that, once passed, health care would quickly become popular. Some pundits on the left predicted that this was the path to a permanent Democratic majority - that the public would be so grateful to the Democrats for health care and so worried about Republicans taking it away that Republicans would be reduced to a permanent minority status. The expected rise in popularity has not happened yet. In fact, health care is likely to become less popular over the next few years because the taxes that will support it kick in years before most of the benefits. I'm not sure why the Democrats thought that people would be grateful for measures that they will not see for years but that is part of the whole Democrat disconnect. The message that voters will take home is that the Democrats are more concerned about their agenda than the economy.

Obama suddenly announced a new job program rebuilding the nation's infrastructure. Coming so close to the election, it looks like what it is - a last-minute attempt to woo voters. The stimulus was supposed to rebuild the infrastructure but degenerated into repaving projects in the name of "shovel-ready". Now Obama is proposing a new infrastructure program. Will this be any more successful?

Social Security represents the Democrats' best chance at minimizing their losses but this requires a disconnect from actuarial realities. I'm not sure how many Democrats believe their line about the program being secure until 2034 and how many know better but are using this as a wedge issue. Regardless, this will have to be addressed eventually and the sooner it is done the less painful it will be. An increasing number of people are worried about the status quo so this will eventually backfire as a wedge issue.

President Obama himself is hopelessly out of touch with the American people and always has been. In the 2008 primaries, he had trouble winning rural states. Even in the election, most of his votes came from the cities. He looks down on rural Americans (remember the "clinging to guns, religion, etc." slip). He was raised overseas and in Hawaii and has spent most of his life since then in academia. On divisive issues (Arizona immigration, Ground Zero Mosque, etc.), he usually comes down on the minority side. He talks about "arugula" and drinks imported beer.

Obama also has a tin ear for appearances. As the nation worried about unemployment and the economy, he spent vacations at exclusive New England resorts (not to mention his wife and one daughter going to the Spanish Riviera). George W. Bush figured out pretty fast that it looks bad for a war-time president to be seen playing golf. Obama still has not learned that lesson.

He is easily offended and takes criticism personally. He recently complained that he is treated like a dog. Presidents need a thick skin. They cannot please everyone and much of the opposition is honest and principled. Obama does not grant the other side the right to disagree. To him, they are either lying for political reasons or because big-moneyed interests have bought them. Even the Supreme Court has come in for criticism from the President.

Obama should think back just a few years to how President Bush was treated and the things that Obama himself said. So far his treatment has been mild compared to what both Bushes, Clinton, and Reagan had to put up with.

Instead he lashes out, accusing dissenting Republicans of being stooges of Rush Limbaugh or Glenn Beck and threatening to remove Fox News's press rights. This further isolates the Obama White House.

All of this could be forgiven if Obama was better at selling his programs. He is not. During the campaign he talked about vague goals of hope and change against backgrounds borrowed from communist and fascist symbols. As president, he does not persuade, he gives boring lectures.

Obama and the Democrats' final problem is that they are out of touch with their base - the Progressive Left. They were the ones who initially supported him over Hillary because of Bill Clinton's moderation. These people were expecting really big changes. When Obama delivered big changes they announced that it was all or nothing and any compromise was equivalent to nothing. They were also disappointed when Obama outsources his economic policy to two insiders. Obama failed to make his case to them and they will probably stay home for the next election cycle or two.

When Obama and the Democrats came into office they must have realized that they had two possible choices. They could dash off a quick stimulus bill and move onto their real agenda, hoping that the economy would improve on its own and they could take credit or they could concentrate on the economy and possibly miss their chance at passing heath care. Obviously they went with the first choice, obsessing on passing it to the exclusion of everything else. The economy is now a last-minute fix-up proposal.

The Republicans could not possibly have damaged the Democrats as much as they damaged themselves. To use Obama's favorite metaphor, the Republicans may have driven the economy into the ditch but at least they kept their eyes on the road. The Democrats have kep ttheir hands off the wheel and their eyes off of the road.

The 1970s and Paul Krugman

Economics seemed so simple in the 1960s. There was a strong relationship between inflation and unemployment. If unemployment got too high then all that government had to do was crank up inflation and it would automatically drop. Similarly, a rise in unemployment meant that inflation would automatically fall. The trick for government was finding the balance point where both inflation and unemployment were low enough that voters were satisfied.

Then the 1970s came and economists were presented with a new phenomenon - stagflation. This meant a stagnant economy with high unemployment accompanied by high inflation. A lot of economics texts had to be tossed in the trash after that and new economic theories formed.

Apparently Paul Krugman held on to his old books. A recent column makes this statement:

What about inflation? Amid the inflation hysteria of early 2009, the inadequate-stimulus critics pointed out that inflation always falls during sustained periods of high unemployment, and that this time should be no different.

I suppose that he would explain this away saying that inflation did eventually drop in the early 1980s. The whole argument is strange. He is arguing that future inflation will not happen because of current unemployment and his proof is that high unemployment in the past has caused high inflation to drop.

The Fed has also bought into the idea that rising inflation will reduce unemployment. Most of their moves should have been inflationary but instead fell flat.

Krugman is laying the groundwork for more stimulus. He insists that what was already spent was insufficient, even though it was greater than the cost of the seven years we spent in Iraq. This is nothing new. He has insisted all along that the government needed to spend trillions on stimulus.

This call for additional stimulus is based on a simplified version of Keynesian economics but the Progressives are not really Keynesians. They are merely using Keynes as an excuse. If they were real Keynesians they would would never consider a tax increase during a recession but they have already passed a few tax increases with more being proposed. Most Progressives want to close the deficit by raising taxes on the rich - something Keynes would never agree to in the current economic climate.

The quote about never letting a crisis go to waste has been overused but it certainly applies here. In the name of stimulating the economy, the Obama administration focused on long-term goals rather than actual stimulus. The Progressives are beginning to admit this and wonder if that was why the stimulus didn't stimulate.

Germany has taken the opposite route and embarked on a policy of fiscal restraint. It's economy seems to have responded. Krugman scoffs at this pointing out that most of the austerity is in the future. He promises that a future fueled by extravagant sending will be brighter but refuses to recognize that this policy leads to crushing debt and austerity.

More on the Obama/Muslim Rumor

In the wake of a poll showing that a quarter of the country thinks that President Obama might secretly be a Muslim, the press has been looking for causes. In many ways they are adding to the controversy. Just by reporting on it, they are spreading the idea to people who might not have heard it in the first place.

A frequent target of blame is the Republican Party. The quote, "I take the president at his word" by Senate Minority Leader Mitch McConnell, is often cited as a secret code. What is totally overlooked is the role that Secretary of State Hillary Clinton played in this. Back when she was running against Obama, 60 Minutes had this exchange:

STEVE KROFT: You don't believe that Senator Obama's a Muslim?

HILLARY CLINTON: Of course not. I mean that's, you know, that, there is no basis for that. You know, I take him on the basis of what he says, and, you know, there isn't any reason to doubt that.

KROFT: You said you take Sen. Obama at his word that he's not a Muslim...

CLINTON: Right, right..

KROFT: …you don't believe that he's a Muslim.

CLINTON: No! No! Why would I? There's nothing to base that on. As far as I know.

Note the similarities with McConnell's statement. Obama supporters were outraged at the time but that seems to have been forgotten.

More important, the Clinton campaign was likely the originator of the entire secret Muslim theory in the first place. They likely sent this email out in December of 2007.

"Obama's parents met at the University of Hawaii . When Obama was two years old, his parents divorced. His father returned to Kenya . His mother then married Lolo Soetoro, a RADICAL Muslim from Indonesia . When Obama was 6 years old, the family relocated to Indonesia . Obama attended a MUSLIM school in Jakarta."

[...]

"Since it is politically expedient to be a CHRISTIAN when seeking major public office in the United States , Barack Hussein Obama has joined the United Church of Christ in an attempt to downplay his Muslim background."

Somehow the press has completely forgotten that the secret Muslim smears originated within Obama's own party, not the Republicans or the talk shows.

For the record, Lolo Soetoro was a moderate, and the Muslim equivalent of a "Christmas and Easter Christian" and he attended a public school in Jakarta although he was registered as a Muslim. This leads to another way that the press stokes the controversy. Most of the people writing about it are Obama supporters and know that he is not a secret Muslim. They are trying to convince people that there is nothing to the story so they scrub the details. Look at this article from Newsweek by Sharon Begley and note how it takes McConnell to task:

Somehow McConnell couldn't bring himself to state the truth that the guy went to a Christian church in Chicago, was married in a Christian ceremony, is raising his daughters as Christians, and is a practicing Christian.

Somehow Begley cannot bring herself to mention that Obama was raised by Atheists and Muslims. People know this. When the press hides details it gives the impression that they are covering something up. That just feeds the rumor-mill.

Blaming the Republicans for a rumor started by the Democrats alienates them for no good reason (except to demonize the opposition).

Reforming the IPCC

The Intergovernmental Panel on Climate Change (IPCC) was created in 1988 to review the scientific literature on climate change and answer two basic questions - is the world getting hotter and, if so, is it because of human activity. The first assessment report said basically, 1) Yes, slightly, and 2) No way to tell. The report was condensed into a summary for policy makers which was the most commonly quoted version. It changed the answers to 1) Yes, 2) Yes.

By the time the fourth assessment report was issued in 2007, the IPCC had changed. The summary for policy makers was released before the actual report. The report included projections of ways that warming would harm the environment and included confidence levels of how likely different scenarios would happen. The IPCC shared the Nobel Peace Prize with Al Gore for warning the world about the dangers of global warming.

Critics complained that there were numerous fundamental problems in the report. The criticism gained ground over the last winter when it was found that some of the most drastic predictions were poorly sourced. In response to the resulting outcry, the InterAcadeny Council (IAC) did an assessment of the IPCC. The report is quite polite but, reading between the lines you can see some strong criticism.

One of their findings is that the chair of the IPCC should be a full-time position and limited to a single six-year term. Currently it is a part-time position with two six-year terms. The report does not mention is that the current chair, Rajendra K. Pachauri, has made a tidy sum doing consulting on ice loss in the Himalayas. He was retained for this because the 2007 assessment predicted that the Himalayan ice will be totally gone by 2020. This was one of the controversies. This date came from an off-hand comment during a phone conversation, not from a peer-reviewed study and was provided to the IPCC by an advocacy group. Pachauri defended the claim for some time, impugning the motives of anyone who questioned it. This represented a huge conflict on interest where he had a financial stake in the outcome.

The IAC also took issue with the use of material from advocates.

The use of so-called gray literature from unpublished or non-peer-reviewed sources has been controversial, although often such sources of information and data are relevant and appropriate for inclusion in the assessment reports. Problems occur because authors do not follow IPCC's guidelines for evaluating such sources and because the guidelines themselves are too vague, the committee said. It recommended that these guidelines be made more specific — including adding guidelines on what types of literature are unacceptable — and strictly enforced to ensure that unpublished and non-peer-reviewed literature is appropriately flagged.

As the Fourth Assesment was being produced, the IPCC was under pressure to make the findings sound more urgent. Responding to this, the report switched from giving percentage ranges to confidence levels. The IAC's findings on this:

The Working Group II report, for example, contains some statements that were assigned high confidence but for which there is little evidence. In future assessments, all Working Groups should qualify their understanding of a topic by describing the amount of evidence available and the degree of agreement among experts; this is known as the level of understanding scale. And all Working Groups should use a probability scale to quantify the likelihood of a particular event occurring, but only when there is sufficient evidence to do so.

In other words, if you are going to assign a confidence level then you have to document your reasoning. If you can't do that then you cannot give a confidence level.

Members of the IPCC complained that dissenting opinions were ignored. The IAC agrees.

The biggest by critics of the IPCC is that it has become a lobbying organization and cooks the data in order to match preconceived results. The IAC acknowledges this in their final recommendation.

IPCC's slow and inadequate response to revelations of errors in the last assessment, as well as complaints that its leaders have gone beyond IPCC's mandate to be "policy relevant, not policy prescriptive" in their public comments, have made communications a critical issue.

I wonder what the fourth assessment report would have looked like had these reforms been in place all along? In all probability they would not have won a Nobel Peace Prize.