Tuesday, September 22, 2009

Why Stimulus Did Not Work: Economic Advisers

First, I must say a few words about the current recession as the president's programs are directly related.

This recession was caused by the US Congress. There no doubt about that fact. It was a multistage, multi-year bipartisan effort. They refused to alter any of the Fannie Mae and Freddie Mac legislation that was propping up an unrealistic boom in real estate sales and was the underlying cause of overpriced properties. Also, it was the US Congress that overreacted during a previous economic scandal: Enron. This resulted in the mark to market rule that arbitrarily forced financial institutions report their asset loses without regard to the effect. Along with congress, the FTC, SEC, and DoJ, failed to provide proper oversight of the mortgage securities exchange market. Of course, since this president was a member of congress, he did not inherit anything. He helped create it.

As an aside, I do not let President Bush off the hook for his part in this. While his administration attempted several times to influence congress to change the mortgage rules, they did not stress the problem enough nor did they take their concerns to the American people in any memorable way. President Obama wants his version of health care to become law, so he has made speeches to the American people more than 30 times. (This should be a lesson to politicians everywhere)

What made the president go along with this form of "economic stimulus" after promising to cut "pork" and earmarks and cut the deficit?

The answer has two parts:

1. The President has no personal knowledge of the capitalist system.

2. His advisers told him it would work, and his advisers have no practical knowledge or experience in the capitalist system.

When you look at the president's White House biography, you learn that he has no experience working for or managing any private sector enterprise. None. He has never created jobs nor held one in the private sector. You learn that he has always worked in "jobs" that rely on the generosity of others. He "worked his way through collage" on someone else's dime, did community work for some churches, was handed the job of President of the Harvard Law Review, went to Chicago to work as a community organizer registering voters, taught in Chicago school system, then state senator followed by US senator for a short period. That led to being President of the United States of America. Oh, I forgot, but does being hired as a lawyer for ACORN count as a private sector job?

No private sector work and no paying his own way. It is only natural that he would embrace a public policy that grabs money from those who earn it and ensure his own future by handed it off to his supporters. You know, "spreading the wealth".

So, knowing nothing about capitalism, how does arrive at his decisions to nationalize health care, authorize an economic stimulus package and tout his vague plans to help create jobs in America? How does he run a one year deficit 4 times his predecessor's worst fiscal year? And then, say he's not finished yet, he wants to add another $1 -2 trillion dollars to the deficit. Trillions he and the country do not have. He either doesn't know what he's doing or is trying to deepen the economic crisis to make Americans dependent on him. After all, it worked for FDR with 3 terms.

President Obama and the legacy media always refer to the Stimulus package as if the president sat down and wrote it. We know that is not correct as his "recovery and reinvestment" plan was put together by the US Congress. His involvement was limited to assuring them he would sign it. I'm of the opinion that to this day, he does not know what is in it.

The Obama stimulus package has proven to be exactly what its opponents warned of; An 8000 part pork package that is the envy of leftists in governments everywhere. It is a conglomeration of old and new lobbyist's "gimmes" pulled out of the drawer and patched together by unwitting Democrat staffers and lobbyists as payback for political support. In this respect, it is very similar to the Wall Street and autoworker bailouts. Additionally, no one has been able to identify any significant help that it has or will provide in any quantifiable way.

For a few months, the White House and their sycophants have been saying that the stimulus "brought the economy back from the precipice".

The fact is it has not.

We can know this as nothing has changed. Well, there is the exception of the White House/sycophant talking points; that has changed, but the economy has not. The White House predicted a maximum unemployment rate of 8% when selling Stimulus and it is now, a short 6 months later, approaching 10% (9.7%).

While they claimed it would save jobs, it has actually prolonged the pain as millions of Americans continue to lose their jobs, closely followed by losing their homes and their American dream. Not to mention the continued decimation of millions of retirement accounts. All of which was unnecessary.

The White House's surrogates and the president were touting last week's employment numbers; bragging that the 150 union employees that went back to work is a positive sign of recovery and that we are losing jobs at a slower rate. In the case of union employees, common sense might tell us that the Obama administration just spent $4 billion on their "Cash for Clunkers" (CfC) program which artificially spiked vehicle sales for about 2 weeks. As it is now, the car sales markets are even more depressed than they were before CfC.

Other clues into his lack of knowledge include the president's remarks in Elkhart, Indiana, on February 9th, 2009, when he said,
"We have inherited an economic crisis as deep and as dire as any since the Great Depression."
The fact is in February our recession was the worst economic crisis since the Carter administration 1979. If it were as bad as the Great Depression, unemployment would be at 12%-19%, not 8%.

O.K, who was it that said to 'look to those who he surrounds himself with if you want to know about them?' Oh that's right, the president said it in one of his campaign speeches.

His economic advisers must have advised him that all the pork would be a good thing. The problem that his advisers are real-world-clueless as well.

The president's economic advisers would be the Council of Economic Advisers and the National Economic Council (along with his political advisers). These are folks who also have little or no actual experience in the private sector.

They study, analyze, teach and advise. But actually doing it? It never happened.

The evidence is clear. Simply look to the White House web site the president's economic advisers:

National Economic Council (from the White House)
"The National Economic Council (NEC) was established in 1993 to advise the President on U.S. and global economic policy. It resides within the Office of Policy Development and is part of the Executive Office of the President. By Executive Order, the NEC has four principal functions: to coordinate policy-making for domestic and international economic issues, to coordinate economic policy advice for the President, to ensure that policy decisions and programs are consistent with the President's economic goals, and to monitor implementation of the President's economic policy agenda."
"Lawrence H. Summers is the Director of the National Economic Council and was appointed by President Barack H. Obama on November 24, 2008."

White House biography about Lawrence H. Summers
"Until January, he was the Charles W. Eliot University Professor at Harvard University. He served as the 27th president of Harvard University from July 2001 until June 2006. From 1999 to 2001, he served as the 71st United States Secretary of the Treasury following his earlier service as Deputy and Under Secretary of the Treasury and as Chief Economist of the World Bank. Summers has taught economics at Harvard and MIT. His research contributions were recognized when he received the John Bates Clark Medal, given every two years to the outstanding American economist under the age of 40, and when he was the first social scientist to receive the National Science Foundation’s Alan T. Waterman Award for outstanding scientific achievement. He is a member of the National Academy of Science and has written extensively on economic analysis and policy publishing over 150 articles in professional economic journals. Lawrence Summers received his B.S. from MIT and his Ph.D. in economics from Harvard. He and his wife Elisa New, a professor of English at Harvard, have six children."

Council of Economic Advisers (from the White House)
"The Council of Economic Advisers (CEA) is a group of three respected economists who advise the President of the United States on economic policy.[1] It is a part of the Executive Office of the President of the United States, and provides much of the economic policy of the White House. The council prepares the annual Economic Report of the President."
President Obama's CEA:

The current Chair of the CEA is Christina Romer, the two other current members of the CEA are Austan Goolsbee and Cecilia Rouse. The two nominees were confirmed on March 10, 2009

White House biography for Christina Romer
"Romer was the Class of 1957-Garff B. Wilson Professor of Economics at the University of California Berkeley. Before teaching at Berkeley, she taught economics and public affairs at Princeton University from 1985-1988.

Until her nomination, she was co-director of the Program in Monetary Economics at the National Bureau of Economic Research and served as Vice President of the American Economic Association, where she was also a member of the executive committee."more...

White House biography for Austan Goolsbee
"Goolsbee was the Robert P. Gwinn Professor of Economics at the University of Chicago Booth School of Business. He was an economic adviser to Barack Obama’s 2004 Senate race before becoming a senior economic adviser to Senator Obama’s 2008 Presidential campaign." more...
White House biography for Cecilia Rouse
"Rouse is currently on leave from Princeton University, where she is the Theodore A. Wells '29 Professor of Economics and Public Affairs. She has been a senior editor of The Future of Children and the Journal of Labor Economics" more...
Zero real world experience

It appears that there is approximately zero real world experience at working with and understanding the American version of capitalism and forces effecting free markets in this administration. And because of that fact, the rest of us who are not well connected, such as Wall Street executives, powerful lobbyists, or any object of this administration's favor, will be picking up the tab.

Anyone who has even a passing notion of the economic history of this country (and some others) would know that excessive spending will do nothing to help the economy grow, and most likely holds it down. They would also know that the way government can stimulate the economy is to lower the cost of doing business. Lowering taxes worked for Presidents JFK, Ronald Reagan, Bill Clinton and George W. Bush.

But, no, the economic advisers, the US Congress and the President himself, have no plans to lower taxes or fees on any American. Instead, he imposes a 35% tariff on imported tires from China, raises excise taxes, and threatens to raise taxes (2.5%) on middle/lower income Americans, and even more on those who actually produce the jobs (while lowering their charitable deductions. This is nearly exactly what President Hoover did to "help" American workers in 1930. He added tariffs on imports and increased taxes on anyone with an income during The Great Depression.

Hmmm. Maybe it wasn't intended to improve the economy?

With any luck the president will fail to enact any more of his that-sounds-good policies.

Move it Right

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