Today’s passage, in the House, of the 90% tax on bonuses received by employees of companies receiving bailout money is economically foolish and quite possibly unconstitutional. It stands as another testament of the failure of our government to think rationally and unselfishly in order to help this economy. The Democratic s, and unfortunately about half of Congressional Republicans, are quickly adding to a long series of failed policies.
While I am no Constitutional expert, this bill seems highly likely to be unconstitutional. The bill essentially violates Article 1, Section 9 of the constitution that forbids the legislature from passing bills of attainder or ex post laws. In other words, Congress does not have the right to punish individuals or groups without trial. This law serves as a direct, and ex post, punishment of anyone who happens to work at a company that accepts bailout money.
Along this line, it is also fair to note that this bill is indiscriminate in that it equally punishes those who have done well and poorly. Many of the people that made ruinous mistakes are long gone. Their replacements should not be punished for the misdeeds of their predecessors. Likewise, these companies are large and complex. One division could have performed poorly, while another was stellar. Is it fair to punish a division within AIG that had strong profits this year? It is not the government’s but management’s place to make these decisions.
Constitutionality aside, the proposed law is economically insane. This policy will only serve to further America’s economic plight. First, if anything, the bill will induce a huge flight of talent and make retention next to impossible at any bailout company. When these companies are at their most needy, we want to design policies that entice the most talented people to work on fixing the problem. What talented manager will continue (or start) to work at a bailout company if they not only have the risk of being on a sinking ship, but now have severely reduced opportunities of compensation. They’ll just as easily move to a competitor who can pay them more.
Furthermore, the companies that recognize this and want to avoid such a flight of talent will naturally change their compensation structures. Simply, they could increase salaries to offset potential bonuses. This makes the legislation ineffective. Simultaneously, it serves to divert management’s focus from fixing their business to finding creative ways to compensate their employees. This is a huge waste of time and money that we cannot afford right now. In addition, if employees are more heavily compensated with salary, instead of bonuses, their incentives to work long and hard hours are reduced. Finally, companies take on much greater risk with fixed salaries, rather than flexible bonuses which can be tailored based on personal and company performance. This detracts from the ultimate goal of fixing the economy.
Secondly, this proposed law will reduce incentives for companies to accept bailout money. This policy is clearly counterproductive when coupled with the bailout. If the Democrats think a huge bailout program is necessary, there is no better way to thwart that than by un-incentivizing companies from accepting the money. It is like extending a leprous hand, knowing you may help someone stand but ultimately kill them from the disease.
Furthermore, the policy only serves to destroy market confidence. It reeks of nationalization and excessive government involvement. Who will invest in companies that, as pointed out above, have even more reasons to fail? It is unnerving to think that the pompous fools in Congress think that this is going to help our market confidence- one of the main things that is needed in this environment. Also, it’ll continue to undermine consumer confidence and spending, creating yet another downward pressure on individuals’ desires to purchase goods (or even pay their mortgages).
It is all too clear why such a bill gained such traction; why half the Congressional Republicans voted for it. It is simple, unbridled populism. It is far too expedient and politically beneficial for these legislators to stoke the anger in the people and then come to ‘save the day’. Unfortunately, saving the day is the last thing that will happen here. Rather, these congressmen and women are using the angry masses and these proposed policies for political expediency. Barney Frank and Nancy Pelosi know they can get Joe-Six-Pack into a furor by blaming his plight on Wall Street, and then look like a hero when they punish Wall Street. Not only does this negate Joe’s, Barney’s and Nancy’s culpability, but it doesn’t just punish Wall Street, it punishes all of America.
People may feel a bit angry at Wall Street- and possibly rightly so. But the channeled rage that the President and Congress are creating is not constructive, but destructive. We need to be focusing on fixing problems, not pointing fingers. This is especially true, because, as I pointed out elsewhere, there is not one group of people responsible. We cannot start drawing lines and finding scapegoats, but come together to find real, smart, economic solutions to this mess.
[Just a note -I could care less if the management at AIG received bonuses. That isn’t the point. The point is that the government should not be getting involved in such issues. If the government deems it appropriate to give taxpayer dollars to companies than it has to accept that the money will be spent by the companies. The bigger the role it plays it deciding how a company spends this money the closer we slide down the slope of nationalization and state control- a place no one [hopefully] wants to go.]
Thursday, March 19, 2009
Wednesday, March 18, 2009
Obama = Change?
There was a phenomenal op-ed in today’s Wall Street Journal. (http://online.wsj.com/article/SB123734209584965205.html#mod=djemEditorialPage). It really speaks to the divergence between Obama’s rhetoric and action; and to the blind, mob-like naïveté of the masses who elected Obama in the first place.
It is common knowledge that Obama ran and won on an anti-Bush campaign. “Change” was his moniker, and change was presumably what America wanted. But as many supporters of McCain knew, change was artificial. Not only was making any substantial changes going to be difficult, but more importantly it was just downright poor policy. Many of the Bush era policies were well thought-out, necessary and appropriate. Obama, however, knew that an anti-Bush campaign was a ticket to the White House. He therefore campaigned by using language that disparaged Bush’s policy. This was apparently done in contrast to Obama’s knowledge that such policies were beneficial. [It is possible that he didn’t know at the time that these policies were worthwhile and is only learning now. It is a much scarier thought; however, that the man did not have a basic understanding of how things worked when running for the office of President.]
While I must say that the supposed failure to change the enemy combatant policy, as the WSJ points out, is something that I am pleased with; however, the author’s point that Obama gets far less criticism than Bush for the very same policy is a bit scary. This speaks to a couple phenomena that are disheartening: 1) that Obama is willing to distort his message and use slogans and rhetoric in order to achieve his political goals; and 2) the fact that anti-Bushism (which has often been extended to anti-Republicanism) combined with the godlike aurora that surrounds Obama has blinded so much of America into giving Obama nearly free rein.
The bottom line is that Obama sold America an image, not substance, and unfortunately America bought it. He is quite easily proving this with his horrible management of the economy, as well as with his inability or unwillingness to make the changes he promised (of course often with much positive benefit for America). The scary thing is that America could be bought so easily.
It is common knowledge that Obama ran and won on an anti-Bush campaign. “Change” was his moniker, and change was presumably what America wanted. But as many supporters of McCain knew, change was artificial. Not only was making any substantial changes going to be difficult, but more importantly it was just downright poor policy. Many of the Bush era policies were well thought-out, necessary and appropriate. Obama, however, knew that an anti-Bush campaign was a ticket to the White House. He therefore campaigned by using language that disparaged Bush’s policy. This was apparently done in contrast to Obama’s knowledge that such policies were beneficial. [It is possible that he didn’t know at the time that these policies were worthwhile and is only learning now. It is a much scarier thought; however, that the man did not have a basic understanding of how things worked when running for the office of President.]
While I must say that the supposed failure to change the enemy combatant policy, as the WSJ points out, is something that I am pleased with; however, the author’s point that Obama gets far less criticism than Bush for the very same policy is a bit scary. This speaks to a couple phenomena that are disheartening: 1) that Obama is willing to distort his message and use slogans and rhetoric in order to achieve his political goals; and 2) the fact that anti-Bushism (which has often been extended to anti-Republicanism) combined with the godlike aurora that surrounds Obama has blinded so much of America into giving Obama nearly free rein.
The bottom line is that Obama sold America an image, not substance, and unfortunately America bought it. He is quite easily proving this with his horrible management of the economy, as well as with his inability or unwillingness to make the changes he promised (of course often with much positive benefit for America). The scary thing is that America could be bought so easily.
Monday, March 16, 2009
The Fundamentals are Sound
Obama’s use of the recession for political expediency is despicable. Recently, Obama’s advisor stated that the ‘fundamentals of the economy are sound’ (see http://www.msnbc.msn.com/id/29706224) . This stands in stark contrast to Obama’s criticism of McCain’s identical statements during the election. Obama (successfully) criticized McCain’s comments, painting McCain as out of touch. McCain was correct all along, yet lost the election because Obama sowed fear by using the struggling economy to link a correct ideology to the unpopular (and perceived ‘out-of-touch) Bush era Republican policies.
The fact of the matter is that the fundamentals of the economy are absolutely sound. The ideals and mechanisms that drive the American capitalist system and ideology are in complete working order. There are certainly issues that need to be addressed, mistakes that were made, and gaps in the system; but this does not negate the fact that the fundamentals are sound. McCain knew it; Obama knew it- he just did not state it- so he could win an election.
Unfortunately, Obama’s behaviors were malicious and detrimental to the economy. Obama continues to paint a bleak picture and pass blame. While he struggles to try and right the economy, he is only shooting himself, and America, in the foot with his negativity. His consistent criticisms of Wall Street only serve to undermine market confidence. Obama’s attempt at appealing to Main Street is divisive and unhelpful. He speaks with the populist air that wrongly puts all the blame on Wall Street and lets the foolhardy behavior of Main Street off the hook. He angers America by throwing large chunks of money in a wasteful bailout plan and then criticizes the recipients. He is repeatedly drawing lines in the sand and trying way too hard to find a scapegoat.
The fact of the matter is, is that the economic failure was caused by a myriad of factors. No one party is uniquely culpable. In fact, nearly all are at fault. Homeowners and consumers were foolish to spend far beyond their means- taking out loans to buy houses and consumer goods that could never possibly afford. A Ponzi scheme at its worst- consumers took out massive amounts of debt to buy widescreen TVs and McMansions, betting on a refinancing down the line to make interest payments. Lenders and investment bankers offered loans to people they knew could not afford to pay them back, because they would just be able to pass the risk on to someone else. Everyone messed up. The truth is that when you build up a ton of debt and do not increase the real production you are putting a lot at risk. Ultimately, it will come crashing down.
Obama’s failure to make this point is furthering fear and the downward spiral of the economy. It is frighteningly convenient that Obama is using this fear to further expand the so-called economic stimulus packages to include mounds of pork and special interest projects. America is unfortunately giving Obama far too much leeway to spend. Much of Obama’s plan fails to address the problems with the economy. Rather it serves to create a giant spending bill aimed at pushing through Democratic policies that would be far too difficult to pass without a crisis. (And as for the bailout of Wall Street and Detroit- this is just short sighted, a pure dump of tax-payers’ money right down the drain).
The fact of the matter is that the fundamentals of the economy are absolutely sound. The ideals and mechanisms that drive the American capitalist system and ideology are in complete working order. There are certainly issues that need to be addressed, mistakes that were made, and gaps in the system; but this does not negate the fact that the fundamentals are sound. McCain knew it; Obama knew it- he just did not state it- so he could win an election.
Unfortunately, Obama’s behaviors were malicious and detrimental to the economy. Obama continues to paint a bleak picture and pass blame. While he struggles to try and right the economy, he is only shooting himself, and America, in the foot with his negativity. His consistent criticisms of Wall Street only serve to undermine market confidence. Obama’s attempt at appealing to Main Street is divisive and unhelpful. He speaks with the populist air that wrongly puts all the blame on Wall Street and lets the foolhardy behavior of Main Street off the hook. He angers America by throwing large chunks of money in a wasteful bailout plan and then criticizes the recipients. He is repeatedly drawing lines in the sand and trying way too hard to find a scapegoat.
The fact of the matter is, is that the economic failure was caused by a myriad of factors. No one party is uniquely culpable. In fact, nearly all are at fault. Homeowners and consumers were foolish to spend far beyond their means- taking out loans to buy houses and consumer goods that could never possibly afford. A Ponzi scheme at its worst- consumers took out massive amounts of debt to buy widescreen TVs and McMansions, betting on a refinancing down the line to make interest payments. Lenders and investment bankers offered loans to people they knew could not afford to pay them back, because they would just be able to pass the risk on to someone else. Everyone messed up. The truth is that when you build up a ton of debt and do not increase the real production you are putting a lot at risk. Ultimately, it will come crashing down.
Obama’s failure to make this point is furthering fear and the downward spiral of the economy. It is frighteningly convenient that Obama is using this fear to further expand the so-called economic stimulus packages to include mounds of pork and special interest projects. America is unfortunately giving Obama far too much leeway to spend. Much of Obama’s plan fails to address the problems with the economy. Rather it serves to create a giant spending bill aimed at pushing through Democratic policies that would be far too difficult to pass without a crisis. (And as for the bailout of Wall Street and Detroit- this is just short sighted, a pure dump of tax-payers’ money right down the drain).
Tuesday, January 27, 2009
Pursuit of Happiness- Part II
To follow-up on the previous blog entry here is a quote from President Andrew Jackson, the founder of the modern Democratic Party;
“Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth cannot be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy and virtue, every man is equally entitled to protection by law; …. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing.”
This quote comes from Jackson’s veto of the re-charter of the Second Bank of the US. While it was intended as a direct criticism of elitism and special interests in America, Jackson’s philosophy, as given here, clearly is supportive of the limited role of government as discussed in the prior post. At some point, in the past 200 years the Democratic Party has strayed far from its founding principles.
“Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth cannot be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy and virtue, every man is equally entitled to protection by law; …. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing.”
This quote comes from Jackson’s veto of the re-charter of the Second Bank of the US. While it was intended as a direct criticism of elitism and special interests in America, Jackson’s philosophy, as given here, clearly is supportive of the limited role of government as discussed in the prior post. At some point, in the past 200 years the Democratic Party has strayed far from its founding principles.
Monday, January 26, 2009
Pursuit of Happiness
“Life, liberty, and the pursuit of happiness” – so states the Declaration of Independence. One of the interesting facts of this statement is that it is not ‘Life, liberty, and happiness’. The seven letters that make up the word ‘pursuit’ change the meaning of this founding statement of our country in a way that has been profoundly missed by Democrats (and some Republicans) for decades.
The fact that ‘pursuit of happiness’ was used, rather than simply ‘happiness’ is a clear indication that it is not the government’s job to provide happiness to all citizens, but to structure the system in such a fashion that allows individuals to freely operate and pursue their own happiness. It means that certain individuals may gain happiness while others may not (however happiness may be defined).
In his inaugural address, Obama outlined a philosophy that stands in stark contrast to this. He stated, “The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end.” This statement directly misinterprets the purpose and role of government in a profound and troubling way.
Obama’s call is for a government that provides happiness, rather than one that establishes ground rules to allow every individual to pursue their happiness. While the adjectives he chose to use could be broadly interpreted- after all a ‘dignified’ retirement can be understood in many ways; it is relatively clear from his party’s general stance that these words imply that the government should provide a fair amount of material goods to it's citizens in order for them to be happy. I see little reason to doubt that a dignified retirement in Obama’s eyes consists of a nice TV, and iPod, and other so called ‘necessities’ on the taxpayers’ dollar.
The issues of retirement and social security are far more complex than I am making them out to be here. I only draw on the issue to make the point that such rhetoric and associated policies attempt to blur the governments’ rightful task of providing an unimpeded right to pursue happiness into the illegitimate task of providing happiness. [This is, in no fashion, a claim that the government should not provide a bare minimum, but that the government’s role is to smooth the interchange between free agents in society, not GIVE anything to anyone.]
It is far better, from a societal and individual perspective, to educate citizens how to appropriately account for risks, and in this instance to plan for their retirement, rather than simply giving handouts. This can directly be understood in terms of the ‘pursuit of happiness’. An uneducated individual (in say, the ways of retirement planning) is at a severe informational disadvantage and thus is, in some ways, precluded from exercising his full right to pursue happiness. The solution is to educate him or provide means to education accordingly. This allows the government the ability to play referee in the societal marketplace, allowing everyone to play on the same field using the same rules.
In contrast, the philosophy proffered by Obama and his Democratic cohorts, attempts to find the most ‘fair’ system by adding and subtracting points from the score. This intuitively diffuses any incentives to play the game. After all, if we know the score will be tied in the end, why bother breaking a sweat.
The issue is relatively clear, when explained in such a fashion. Yet, the contrasting rhetoric, such as Obama's statements, is so easily slipped into the political dialogue that it is easy to miss. This language can also SOUND nice. After all, who doesn’t want their new president, especially in bad economic times, to tell them what they will be given [the American automakers and their ilk are, by the way, no different in this regard].
The fact of the matter is, whether the parties involved are retirees, insurance companies, minorities, Wall Street firms, special interests, etc. etc. the role of the government is NOT to give them anything, but to simply make sure they can achieve what they can via their own ambition and initiative on a equal playing field with everyone else. Obama fails to make this distinction; a failure that will have disastrous effects on America’s future.
The fact that ‘pursuit of happiness’ was used, rather than simply ‘happiness’ is a clear indication that it is not the government’s job to provide happiness to all citizens, but to structure the system in such a fashion that allows individuals to freely operate and pursue their own happiness. It means that certain individuals may gain happiness while others may not (however happiness may be defined).
In his inaugural address, Obama outlined a philosophy that stands in stark contrast to this. He stated, “The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end.” This statement directly misinterprets the purpose and role of government in a profound and troubling way.
Obama’s call is for a government that provides happiness, rather than one that establishes ground rules to allow every individual to pursue their happiness. While the adjectives he chose to use could be broadly interpreted- after all a ‘dignified’ retirement can be understood in many ways; it is relatively clear from his party’s general stance that these words imply that the government should provide a fair amount of material goods to it's citizens in order for them to be happy. I see little reason to doubt that a dignified retirement in Obama’s eyes consists of a nice TV, and iPod, and other so called ‘necessities’ on the taxpayers’ dollar.
The issues of retirement and social security are far more complex than I am making them out to be here. I only draw on the issue to make the point that such rhetoric and associated policies attempt to blur the governments’ rightful task of providing an unimpeded right to pursue happiness into the illegitimate task of providing happiness. [This is, in no fashion, a claim that the government should not provide a bare minimum, but that the government’s role is to smooth the interchange between free agents in society, not GIVE anything to anyone.]
It is far better, from a societal and individual perspective, to educate citizens how to appropriately account for risks, and in this instance to plan for their retirement, rather than simply giving handouts. This can directly be understood in terms of the ‘pursuit of happiness’. An uneducated individual (in say, the ways of retirement planning) is at a severe informational disadvantage and thus is, in some ways, precluded from exercising his full right to pursue happiness. The solution is to educate him or provide means to education accordingly. This allows the government the ability to play referee in the societal marketplace, allowing everyone to play on the same field using the same rules.
In contrast, the philosophy proffered by Obama and his Democratic cohorts, attempts to find the most ‘fair’ system by adding and subtracting points from the score. This intuitively diffuses any incentives to play the game. After all, if we know the score will be tied in the end, why bother breaking a sweat.
The issue is relatively clear, when explained in such a fashion. Yet, the contrasting rhetoric, such as Obama's statements, is so easily slipped into the political dialogue that it is easy to miss. This language can also SOUND nice. After all, who doesn’t want their new president, especially in bad economic times, to tell them what they will be given [the American automakers and their ilk are, by the way, no different in this regard].
The fact of the matter is, whether the parties involved are retirees, insurance companies, minorities, Wall Street firms, special interests, etc. etc. the role of the government is NOT to give them anything, but to simply make sure they can achieve what they can via their own ambition and initiative on a equal playing field with everyone else. Obama fails to make this distinction; a failure that will have disastrous effects on America’s future.
Tuesday, January 20, 2009
Not a God
The near god-like portrayal and demagoguery of Obama is frightening to say the least. Through brilliant campaigning and careful cultivation of his image, Obama has successfully created a very powerful persona (some credit is of course due to Bush-hatred). For this he has to be commended and studied. There is much to learn from his rise to the top.
The frightening aspect is that the masses have rallied in support of this image, in support of a man that is not a god. Far too many have bought into his persona, putting him to power not so much on his merits and policies, but on this cultivated image and a supposed repudiation of the past eight years. This imparts an unprecedented power on the man- who, if he was not hamstrung by the economy, would have the freedom to march forward with a sweeping agenda.
Such power is disquieting. While from the current perspective it seems unlikely that Obama will abuse his position; and that for all intents and purposes he is well intentioned, however misguided, it is nevertheless alarming to have a relatively thoughtless, impassioned rabble behind him. There are far too many people out there that support Obama based solely on this image- and not on policy.
Fortunately, he will have to disappoint- at least some. His approval ratings will surely fall as he is forced to renege on campaign promises, due to the reality on the ground. Obama is far too smart to not realize that many of his pledges are untenable- not only politically but due to the poor state of the economy. Passing many of his sweeping pledges will be difficult to say the least- a thankful notion to those who do not want to see a complete desecration of our health care systems and the like.
His backsliding (understandably) has already begun, as he tries to prepare the nation for the reality of what a president- any president- would have to do in such conditions. The disappointing fact is that the rhetoric spun during his campaign was far from what needs to be done (and what, it is relatively safe to say, he knew needed to be done). While McCain generally spoke honestly about the future to come- for instance the inevitable loss of jobs in Detroit; Obama painted a picture of change which he will not be able to fulfill. To his credit, Obama has so far done an amazing job in the beginning of his retreat.
However, he will not be able to maintain the aurora forever. Certainly, some will fail to ever see Obama as a man, but will be enthralled by what he represents. These are the most frightening of Americans- driven by base emotion and passions. Others will hopefully judge the President on the merits of his programs- seeing the folly and infeasibility of many of his ideas.
This is the attack that is most essential to take. Going after Obama’s image and his persona is a surefire way to galvanize support around him. ‘Obamanics’ will look at any attack on his facade as an attack on him. Rather, Republicans must challenge the very fundamentals and ideas of his proposed policies. Educate America to see and to understand the reasons why certain policies- although possibly superficially appealing – will ultimately do more harm than good. That is the path back to the White House- through thought out policies and ideas.
The frightening aspect is that the masses have rallied in support of this image, in support of a man that is not a god. Far too many have bought into his persona, putting him to power not so much on his merits and policies, but on this cultivated image and a supposed repudiation of the past eight years. This imparts an unprecedented power on the man- who, if he was not hamstrung by the economy, would have the freedom to march forward with a sweeping agenda.
Such power is disquieting. While from the current perspective it seems unlikely that Obama will abuse his position; and that for all intents and purposes he is well intentioned, however misguided, it is nevertheless alarming to have a relatively thoughtless, impassioned rabble behind him. There are far too many people out there that support Obama based solely on this image- and not on policy.
Fortunately, he will have to disappoint- at least some. His approval ratings will surely fall as he is forced to renege on campaign promises, due to the reality on the ground. Obama is far too smart to not realize that many of his pledges are untenable- not only politically but due to the poor state of the economy. Passing many of his sweeping pledges will be difficult to say the least- a thankful notion to those who do not want to see a complete desecration of our health care systems and the like.
His backsliding (understandably) has already begun, as he tries to prepare the nation for the reality of what a president- any president- would have to do in such conditions. The disappointing fact is that the rhetoric spun during his campaign was far from what needs to be done (and what, it is relatively safe to say, he knew needed to be done). While McCain generally spoke honestly about the future to come- for instance the inevitable loss of jobs in Detroit; Obama painted a picture of change which he will not be able to fulfill. To his credit, Obama has so far done an amazing job in the beginning of his retreat.
However, he will not be able to maintain the aurora forever. Certainly, some will fail to ever see Obama as a man, but will be enthralled by what he represents. These are the most frightening of Americans- driven by base emotion and passions. Others will hopefully judge the President on the merits of his programs- seeing the folly and infeasibility of many of his ideas.
This is the attack that is most essential to take. Going after Obama’s image and his persona is a surefire way to galvanize support around him. ‘Obamanics’ will look at any attack on his facade as an attack on him. Rather, Republicans must challenge the very fundamentals and ideas of his proposed policies. Educate America to see and to understand the reasons why certain policies- although possibly superficially appealing – will ultimately do more harm than good. That is the path back to the White House- through thought out policies and ideas.
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