There was one other anniversary that I forgot to mention yesterday. Sixty-four years ago, Franklin Roosevelt breathed his last, and with his departure from this world, so ended his war on the free market, and the economic depression that he had so nurtured for a dozen long years. It was not mere coincidence that the post-war economic growth was so large — there was no FDR to continue to hinder it with his whimsical and arbitrary tinkering. RIP to both.
Category Archives: Business
What The Tea Parties Are About
This is both an interesting, and scary graph. The most important thing to me is not just the sheer magnitude of the Obama deficits, but the respective trends of both administrations.
Note that the Bush deficit was decreasing every year until 2008, when it got hammered by the TARP (at least I’m assuming that’s the cause, though it could also be a result of the slowing economy throughout the year, not to mention Congressional spending increases under the Democrats starting in late 2007). Note also that this was happening despite the evil Bush “tax cuts” (which obviously weren’t really tax cuts — they were just tax rate cuts that actually were reducing the deficit, despite the out-of-control spending by the Republican Congress).
In contrast note that the Obama plan is ever-increasing deficits after 2012, whether you believe administration or CBO projections. And though they decrease in the near term, they never get as low as the worst Bush deficit before they start to sky rocket in the teens. This, simply put, is fiscal insanity. And increasing taxes on “the rich” (as they’d surely love to do if they could get away with it) isn’t an option. There simply isn’t enough money there, and if there were, it would tank the economy even more, with even larger deficits from reduced tax receipts and automatic increases in non-discretionary wealth transfers. Also, estimate the integral under the curve. That’s an accumulating debt, with an ever-increasing proportion of the deficit going to interest, particularly when people become reluctant to loan money to a budding Weimar at low rates.
People who will be protesting on Wednesday won’t be protesting against a party. They’ll be protesting against a government completely out of control. But unfortunately for the Democrats and the left, they will be seen as the much larger part of the problem, because the Republicans are now at least giving lip service to reduced spending and reduced government. But they’re going to have to work very hard to live down their spending spree of the “compassionate conservative” (read, “progressive lite”) Bush years.
[Evening update]
“Liberal doughboys afraid of tea parties.”
Liberal bloggers and media groups can’t get the Tea Party phenomenon out of their heads. It wasn’t supposed to be this way, to them. Ordinary people getting together to protest against the liberal establishment. There is a cognitive disconnect. There must be a plot; the vast right-wing conspiracy at work.
So true to form, Media Matters sounded the horn that this was not a real protest, it’s a Fox News segment. Kind of a made for T.V. reality show, with a cast of tens of thousands. Think Progress joined in with “Spontaneous Uprising? Corporate Lobbyists Helping To Orchestrate Radical Anti-Obama Tea Party Protests.”
And the netroot blogosphere heard the call. FireDogLake proprietor Jane Hamsher posted “What Part of ‘FNC TAX DAY TEA PARTIES’ Don’t You Understand?” Hamsher also promoted “citizen-organized protests” which were unlike the “Fox-organized” Tea Parties; I guess she didn’t catch the irony of promoting counter-protests to protest other people promoting protests. Anyway, almost no one showed up for the counter-protests.
Gee, I think I have one of those in comments.
[Monday morning update]
More tea-party panic:
What’s the big deal? ACORN, MoveOn, and Soros get to pull puppet strings year after year, and that’s ok. But God forbid Fox News puts so much as its imprimatur on Tea Parties! No way! That’s too sinister, too insidious; and makes the whole movement illegitimate and inauthentic. Whatever…
Jane Hamsher and Oliver Willis are probably asking “Who the hell are this Tea Party bunch? Where did they come from?” I’ll tell you who they are, Jane and Oliver. They’re your worst nightmare: they’re small-governmenters first and party-loyalists second.
And we’re not laughing with you, Jane and Oliver. We’re laughing at you.
[Bumped]
[Update a few minutes later]
More on Crazy Jane and the other panicked and paranoid leftists (like my commenter):
She’s implying because freedomworks listed the Texas Tea parties and Dick Armey is part of freedomworks that the Tea Parties, Houston in particular, are being organized by “Corporate lobbyists”. Houston Tea Party has never spoken with Freedomworks or Dick Armey, though we do know that Freedomworks has offered legal advice to different Tea parties, we’ve not sought it. None of that should imply they are running the show unless you go to the point of just making stuff up.
The “Corporate lobbyist” line is a laugh. Felicia is a local Mother of two who worked with some local grassroots groups like Raging Elephants. I was someone who was trying to be apolitical the past 4 years until I took a good look at was going on, and I was laid off last week and currently unemployed. There are other organizers and volunteers with us. None of them come close to the description “Corporate Lobbyist”.
And no, this woman is nuts, Fox News is not organizing the Tea Parties, they’re just jumping on board (like a lot of people are trying to). But she’s seeing Dick Armey and Fox News as the boogeymen in the closet…
So… I’ve had my LMAO moment for the day. How about you? 🙂
Edit: More on this silliness:
If we’re being organized by “corporate lobbyists” then where the heck is my check?
Yeah, me too. How do I get in on this hot “corporate lobbyist” action?
The President’s Distractions
Thoughts from Mark Steyn:
Only a week ago, the North Korean missile test was an “annoying distraction” from Barack Obama’s call for a world without nuclear weapons and his pledge that America would lead the way in disarming. And only a couple of days earlier the president insisted Iraq was a “distraction” — from what, I forget: The cooing press coverage of Michelle’s wardrobe? No doubt when the Iranians nuke Israel, that, too, will be an unwelcome distraction from the administration’s plans for federally subsidized daycare, just as Pearl Harbor was an annoying distraction from the New Deal, and the First World War was an annoying distraction from the Archduke Franz Ferdinand’s dinner plans.
…Er, okay. So the North Korean test is a “distraction,” the Iranian nuclear program is a “distraction,” and the seizure of a U.S.-flagged vessel in international waters is a “distraction.” Maybe it would be easier just to have the official State Department maps reprinted with the Rest of the World relabeled “Distractions.” Oh, to be sure, you could still have occasional oases of presidential photo-opportunities — Buckingham Palace, that square in Prague — but with the land beyond the edge of the Queen’s gardens ominously marked “Here be distractions . . . ”
As it happens, Somali piracy is not a distraction, but a glimpse of the world the day after tomorrow. In my book America Alone, I quote Robert D. Kaplan referring to the lawless fringes of the map as “Indian Territory.” It’s a droll jest but a misleading one, since the very phrase presumes that the badlands will one day be brought within the bounds of the ordered world. In fact, a lot of today’s badlands were relatively ordered not so long ago, and many of them are getting badder and badder by the day.
As I’ve noted in the past, the main thing that finally saved the economy from Roosevelt’s tinkering was the “distraction” of World War II, and then his death. It recovered nicely after the war, once the economic sage of Hyde Park could no longer prevent it. I hope that the current president finds lots of distractions from his own plans for the economy.
The Universal Mistake
The case against universal health coverage.
A New Nominee For Car Czar
Iowahawk nominates himself:
As such, I realize the industry is not suffering from a lack of law professors — it is suffering from a lack of imagination. They gave us cup holders and electric seat warmers when we wanted angel fur and bubble tops. They pushed micro-clown cars and hybrids when the market was rife for chromed 8-deuce Chrysler Hemis. Well, Bucko, all that outmoded thinking is going to end during the reign of Czar Dave. Saving the American auto industry is going to be a big job, but I won’t be doing it alone. I have already appointed my own shadow Council of Automotive Advisors, a select group of successful auto manufacturers whose qualifications appear after the jump. Many are close personal friends of mine, and I can attest to their patriotism, integrity, ingenuity, and wonderful lack of law degrees.
Why not? We could do worse. And almost certainly will.
And as you can see, his advisory council is without peer. I particularly like the discreet tasteful town car to get him to important meetings in our nation’s capital.
Arrogance
More projection from a leftist:
Just a few days ago in a meeting with American CEOs of American banks, President Obama’s tone and attitude were rife with the arrogance, dismissiveness, and derision he had just criticized in Europe. A participant in the meeting told Politico that when the CEOs tried to explain that the nature, complexities, and competition of the finance and banking industries required that they continue retention bonuses for their employees, the president became impatient. He interrupted them and said, “Be careful how you make those statements, gentlemen. The public isn’t buying that. My administration is the only thing between you and the pitchforks.”
The imagery behind Obama’s threat couldn’t be more obvious: comply with my demands or I will make sure you are harassed, intimidated, and run out of town on a rail. He made them an offer they couldn’t refuse. Don Corleone couldn’t have said it better.
We can not forget, however, that it was Barack Obama himself along with his fellow Democrats who agitated this mob-like frenzy about the banks, the CEOs, and the bonuses. It was Obama who said the bonuses were an “outrage” and a “violation of our fundamental values.” Democrat Barney Frank hauled AIG’s CEO in front of the House Financial Services Committee and interrogated him, demanding to know why he approved the hundreds of millions of dollars of bonuses. Conveniently, Congressman Frank failed to mention that the approval was inside the very stimulus bill Obama championed and the Democrats overwhelmingly voted for.
Funny, that.
The Road To Suborbit
Henry Spencer is describing the technical issues of the realm between low suborbit and orbit. His bottom line (which which I agree): there’s not a lot of market to justify investment for mid-range performance, including ballistic trajectories, because they need almost as much performance as orbit.
Thinks that there may be a role for suborbitals as a first stage for nanosats, and it may be possible to make some money on it, but they’re not going to be willing to pay a lot for a launch, particularly considering that piggybacking on orbital launches isn’t that expensive. Not a lot of utility to cubesats to date, most of them “solar arrays with radios.”
[Update a while later]
Sorry, there was a whole lot of other discussion, but it wasn’t completely jointed, and I was distracted. I saw Clark Lindsey taking notes, though, so I’ll bet he’ll have something posted later this evening.
Sure enough, here it is. He also has some notes from the later afternoon sessions.
How We Got Here
A useful talk on the cause of the financial crisis:
Before talking about how we did get here, let me say a quick word about what didn’t cause this mess. Those who wish to blame greed for the crisis need to explain how and why it is that greed seems to causes crises only at specific times, despite the fact that it is omnipresent as a feature of human nature and market economies. As the economist Larry White has noted, if we saw a bunch of planes crash all on the same day, we wouldn’t blame gravity. It’s always there. Something else must be at work. I would argue that the key is the set of institutions through which greed or self-interest is channeled. That is, good institutions can cause self-interest to generate desirable unintended consequences, and bad ones can cause undesirable ones. So perhaps we should be looking at institutions and policy.
Those who wish to blame deregulation or the supposed “laissez-faire” philosophy of the Bush Administration are going to have to identify the deregulation in question, which will be a challenge given that the last deregulatory legislation in the financial industry was in 1999 under Clinton. These folks will also have to explain how the enormous growth in the Federal Register and domestic spending over Bush’s two terms reconciles with his supposed belief in laissez-faire. Answer: it doesn’t.
The two key causes of this crisis are expansionary monetary policy on the part of the Fed and a series of regulatory and institutional interventions that channeled that excess credit into the housing market, creating a bubble that eventually had to burst. In other words, the boom (and the inevitable bust) are the product of misguided government policy, not unbridled capitalism.
The Fed drove up the money supply and drove down interest rates very consistently since 9/11. When central banks do so, they make long-term investments relatively cheaper than short-term ones, thus the excess funds flow toward such goods. Historically, these were producer goods in capital industries, but in this particular case, a set of other government interventions and policies pushed those funds toward housing.
A state-sponsored push for more affordable housing has been a staple of several prior administrations. Fannie Mae and Freddie Mac are key players here. Although they did not orginate the questionable mortgages, they did develop a number of the low down-payment instruments that came into vogue during the boom. More important, they were primarily responsible for the secondary mortgage market as they promoted the mortgage-backed securities that became the investment vehicle du jour during the boom. Both Fannie and Freddie are, we must remember, not “free-market” firms. They are “government-sponsored entities,” at one time nominally privately owned, but granted a number of government privileges, in addition to carrying an implicit promise of government support should they ever get into trouble. With such a promise in place, the market for mortgage-backed securities was able to tolerate a level of risk that truly free markets would not. As we now know, that turned out to be a big problem.
Read all. It also points out the ways that this mess is the debris of the New Deal and the depression.
And yet the lies that got Obama elected — that this was caused by “greed,” “deregulation,” and “tax cuts” continue, and continue to be used to justify running up the national debt to insane levels and nationalizing vast swathes of the economy.
[Update at 9 PM Pacific]
…we take [failing enterprises] away from bankruptcy judges, who are experts, and give them to a collection of congressional individuals who are charitably called clowns. When you bring commercial decisions to Congress they become politicized, and politicized decisions become destructive decisions.
Charitably indeed.
Who Controls The Means Of Production?
We now see the consequences of government bailouts and “too big to fail”:
I think anyone who owns auto-sector debt (whether directly or through a pension or life insurance policy) should be very concerned — they can only find their interests made subject to the political interests of organized labor. Further the American people should probably also be concerned, as we will continue to support with tax dollars a company that has simply proven itself incapable of competing in a free market for the last several decades.
Secondly, we should all be very, very concerned that the White House had decided that it is within its writ to decide who the captains of industry are. The CEO of any company should be chosen by its Board, as elected by its shareholders. The shareholders of GM have just been disenfranchised by a Presidential phone call.
Chief Executives being chosen by politicos is probably common in China or Russia, but those are not countries we want to be emulating. I do not like this at all.
Neither do I. And there’s a word for it.
It starts with “f.”
[Update a few minutes later]
Kaus: Obama’s Diem?
And Lileks twitters: “Maybe I’m old-school, but ‘President fires CEO’ looks as wrong as ‘Pope fires Missile.’ Does not compute.”
[Noon update]
More on why this is such a bad idea:
GM is now Obama’s company. If it closes, it will be on his say-so. But Obama is a politician, not a CEO. So his first concern is to avoid bad political fallout, which means he will prop up the company for as long as it takes, regardless of what makes economic sense. This, in turn, will likely make the company either less economically sound or, it will rebound — but only by getting special breaks other companies won’t get. Either way, bad practices will be rewarded and/or good practices will be punished. More firms will see that gaming Washington pays off and the cycle will continue.
Of course, the good news is that being a law professor and community organizer totally prepares you to run huge white elephant multinational corporations.
The country’s in the very best of hands.
[Another a couple minutes later]
The first quid pro quo for the government giving you money (or “investing”, as President Obama and David Brooks say) is that it gets to regulate your behavior. Not just who sits on your board or (see Sarkozy last week) where your factory has to be. When the government “pays” for your health care, it reserves the right to deny (as in parts of Britain) heart disease treatment for smokers or hip replacement for the obese. Why be surprised? When the state’s “paying” for your health, your lifestyle directly impacts its “investment.”
The next stage is that, having gotten you used to having your behavior regulated, the state advances to approving not just what you do but what you’re allowed to read, see, hear, think: See the “Canadian Content” regulations up north, and the enforcers of the “human rights” commissions. Or Britain’s recent criminalization of “homophobic jokes.”
You’d be surprised how painlessly and smoothly once-free peoples slip from government “investing” to government control.
There is such a thing as American exceptionalism, but the current regime is doing everything possible to obliterate it as quickly as possible. Don’t think it can’t happen here. It can, if we let it.
[Update a few minutes later]
OK, one more — the fascist bargain:
The fascist bargain goes something like this. The state says to the industrialist, “You may stay in business and own your factories. In the spirit of cooperation and unity, we will even guarantee you profits and a lack of serious competition. In exchange, we expect you to agree with—and help implement—our political agenda.” The moral and economic content of the agenda depends on the nature of the regime. The left looked at German business’s support for the Nazi war machine and leaped to the conclusion that business always supports war. They did the same with American business after World War I, arguing that because arms manufacturers benefited from the war, the armaments industry was therefore responsible for it.
It’s fine to say that incestuous relationships between corporations and governments are fascistic. The problem comes when you claim that such arrangements are inherently right-wing. If the collusion of big business and government is right-wing, then FDR was a rightwinger. If corporatism and propagandistic militarism are fascist, then Woodrow Wilson was a fascist and so were the New Dealers. If you understand the right-wing or conservative position to be that of those who argue for free markets, competition, property rights, and the other political values inscribed in the original intent of the American founding fathers, then big business in Fascist Italy, Nazi Germany, and New Deal America was not right-wing; it was left-wing, and it was fascistic. What’s more, it still is.
What’s amazing is how blind they are to it.
[Update after noon]
I feel much better now:
…starting today, the United States government will stand behind your warrantee [sic].
Yes, because, you know, that’s the proper role of the federal government under the Constitution. To stand behind GM owners’ warranties. To provide for the care-free pursuit of car ownership.
[Late afternoon update]
Regulatory Overreach
Why we shouldn’t allow the federal government to accumulate any more power over the financial industry (and why in fact it already has too much):
… the case for broadening regulators’ oversight to include investment banks and other financial institutions is based on three flawed assumptions.
The first is that the same factors that justify expansive powers to close banks and take control of their assets are equally applicable to investment banks and other financial institutions. But the FDIC’s interest in commercial banks is unique — because it guarantees deposits up to $250,000, the FDIC is a bank’s most important creditor and has a stake in its health as the representative of American taxpayers. The government’s stake and the need to assure that depositors do not lose access to their deposits, even temporarily, arguably justify the FDIC’s extraordinary powers. Those factors are not present with investment banks or other financial institutions.
The second flawed assumption is that our bankruptcy laws are not adequate for handling defaults by investment banks or other financial institutions. …
Contrary to the widespread myth that bankruptcy is time-consuming and ineffectual, Lehman sold its major brokerage assets to Barclays less than a week after filing for bankruptcy. It is now in the process of selling its tens of billions of dollars of less time-sensitive assets at a more deliberate pace. …
The third flawed assumption is that financial firms flirting with distress are somehow worse decision makers than federal regulators. But the opposite is likely true. If the Treasury, FDIC and Fed had authority over investment bank failures, troubled banks would have a strong incentive to negotiate for rescue loans, and their pleas would be heard by regulators influenced as much by political as financial factors. The involvement of three different regulators (and mandatory consultation with the president) would magnify this risk. With bankruptcy, in contrast, the decision of whether and when to file is made by an institution’s managers and creditors, who have the best information and their own money on the line.
[Via Professor Bainbridge], who has more thoughts.
Much of the risk taking occurring in these institutions was caused by the moral hazard of knowing (or at least being willing to bet) that the government would step in and bail them out. Particularly since many in the government were on their payroll, either through campaign contributions, sweetheart mortgage deals, or simply the incestuous revolving door between the federal bureaucracy and the institutions. Fannie Mae and Freddie Mac both seem to have been a cushy retirement home for former Democrat operatives (e.g., Franklin Raines).
And in the “gee, ya think?” category — “Dodd’s Troubles Open Debate On Congress’ Ties With Special Interests“:
Dodd has become the poster boy for critics who say the inevitable ties between long-time members of Congress and special interests are undermining efforts to revive the economy.
“He literally thinks he’s going to play a critical role from saving us from ourselves,” Christopher Healy, the Republican Party chairman in Connecticut, said of the Democratic senator.
“It’s like putting the arsonist in charge of the volunteer fire department. He knows where the fire is because he set it. But beyond that, he can’t offer much help.”
Such a debate (assuming it actually occurs) is long overdue. It should have occurred during the election campaign.
We have to break up this megatrust.
I wish that I could make Human Action and The Road To Serfdom mandatory reading on the Hill, but it would probably be beyond the IQ of many, indeed most of them.
[Late afternoon update]
Thoughts on progressive corporatism:
At this point, I think that the relevant political divide is not between the two parties. It is between the forces of Progressive Corporatism and the (much smaller) forces of The Resistance.
Or, as Virginia Postrel has noted, between dynamism and stasis. That’s the real point. Despite all the rhetoric, these people don’t want change. They are defenders of the status quo. Everything they’re doing is to prevent change. They don’t want housing values to change, they don’t want bank stock values to change, they don’t want UAW workers’ salaries to change, and (most of all) they don’t want any change in their level of power over the rest of us.