White House Hopes for Economic Growth... But Won't Change It's Counterproductive Policies

Yeah, Well, Good Luck with that! The Irrational Policies coming from this administration couldn't be more wrong if they are truly attempting to promote an economic expansion, they would change them. The tried and true methods to promote economic growth don't include any of the following: tax hikes, a weak dollar, trade wars, additional regulatory burdens, increased energy costs or a takeover of the health-care industry.

Only a year ago Democrats were mouthing phrases denoting the sheer folly of raising taxes in a recession. Having passed their massive public spending free for all they called a stimulus, which I call the Mother of all things pork, and wasting a mountain of taxpayer dollars the results are in and are at best, unimpressive. It has resulted in the creation of a large number of bogus jobs but very few real ones, but has been fairly good at increasing the wages of public sector employees (people who are already employed)and building a few skate parks. Now their sensible tone along with any notion that fixing the economy was job one, is gone, having been thrown under the progressive bus, in favor of their standard class warfare vernacular, an ideology they are much more comfortable articulating. Once again they wrap themselves in the mantle of Public Savior, guarding the poor, the planet and the working men and women of America from evil capitalists and business owners everywhere. Righteous crusaders, who but for the lack of an extra trillion or so more tax dollars can make all of our wildest dreams come true.

It is the focus of their ire, Businesses and the rich whom I call capitalist (you know, the ones with capital)who will lead us out of this economic malaise or not. Whether the time is right for them to lead is dependent solely upon their own very rational assessment of the business climate going forward, and that outlook is not promising. The President and his advisers hope that brow beating bankers will lead to more business borrowing to expand output and create additional jobs. He acts as though CEO's will plow ahead, willy nilly, borrowing and investing no matter how many additional burdens he and his political allies on the hill ask them to bear.

As far as private sector job creation goes, the President has missed the point entirely, quite possibly because very few of his advisers know anything about the private sector, having never worked in it. So I'm going to let him in on the dirty little secret of job creation, one that those of us out here in the real world already know. Businesses borrow money only so that they can earn additional profits, jobs that are created are really incidental to their focus, which is to grow the bottom line. Many of the policies the President promotes serve only to diminish the ability of a business to earn a profit. No Profit! No Growth! No Jobs!

The Business world is totally different than the political world. Companies don't have to expand. Investors don't have to risk their capital. They only do so when the conditions in place enable them to forecast an increased profits. When CEO's look at projections showing a bottom line that is shrinking, their thoughts are not of expansion and job creation, but rather they work nonstop trying to rationalize their cost structures to insure profitability, enabling them to survive the downturn. Labor savings is at the top of the heap when it comes to cutting expenses.

The good news is that an accelerated recovery can get underway any time the administration wants, but it will require them to make that hard pivot they have been talking about. They need to turn away from raising taxes, encourage the production of our domestic energy resources and stabilize the value of the dollar.

Domestic drilling will directly create thousands of real jobs in US oil fields and have the added benefit of reducing energy prices, enabling a more robust economic recovery and the jobs that come along with it.The prospect of lower taxes and a stable dollar will renew the incentive for investors and their Capital who are clearly watching from the sidelines to get back into the game of providing the fuel for economic growth. The nightmare of a health care bill, which seeks to punish healthy people with higher premiums and younger folks with fines for being young needs, to be scrapped in order to promote an economic environment that is, if not Employer friendly, at least not hostile.

Obama's Golden Opportunities an Anchor for the Dollar A Parachute for Bernanke

President Obama has one opportunity born of this current economic crisis that he shouldn't waste; a crisis that could not have happened but for the mismanagement of monetary policy by the Fed and it's Chairman, Ben Bernanke. The President can right the fiasco that our modern day dalliance with a floating dollar has been. Now is the time to bring back the dollar's Golden anchor, and give Helicopter Ben his Golden Parachute.

Bernanke, like his predecessor at the FED Alan Greenspan, conducts monetary policy by feel and not according to any predictable standard. A “keep them guessing” approach to monetary policy, with it's gyrations in the FED funds rate and the swings it has produced in the dollars value, has been the cause of much of the economic misery that Americans have suffered over the nearly 40 years since Richard Nixon took the US off the gold standard in 1971. The latest fiasco, the housing market blow up and bust, could not have happened on a gold standard, nor would the future inflation that is already baked in the economic cake be a cause for concern.

The dollar's value hasn't always been an ethereal notion. The dollar was defined by Alexander Hamilton as a specific weight of gold in 1792. One ounce of gold was worth $20.67 from the time he initiated this standard until President Roosevelt's devaluation of the dollar in 1931, which changed its value to $35 dollars per ounce, a measurement which held until Nixon took the US off the gold standard in 1971. This protracted period of stable money, and the low interest rate environment it produced in combination with the other economic freedoms enshrined by the founders in our Constitution, are what enabled the US to become the world's economic Superpower.

With the loss of it's golden definition, the value of the dollar has plummeted. The $35 dollars that would have bought you an ounce of gold or a good men's suit in 1971 won't buy you a decent tie today. Today you would need to exchange nearly 1100 dollars for that same ounce of gold. One is hard pressed to see the benefits of our floating dollar!

Mr. Bernanke, who is proclaimed as the world's greatest student of the Great Depression, has taken all the wrong lessons from it. He, like most other Keynesian economists, believe a deflationary monetary policy was the cause of the Great Depression. As a result, he is pursuing a monetary policy designed to avoid a deflation at all cost. There is one very conspicuous problem with his approach. It is a misdiagnosis of both the cause of the Great Depression and our current recession, neither of which are deflationary contractions.

An email exchange that I've have read between Jude Wanniski and Bernanke from 2004 that has been made public clearly demonstrates Bernanke's complete lack of understanding of the stable money a gold standard produces. It is not feasible that he could lead the country back to the hard money policies that played a key part in making the US a safe haven for investors around the globe, enabling us to outpace the world in economic growth and the jobs that come along with it.

The folks who praise Bernanke for getting us past this financial meltdown miss the point that it was his mismanagement of the dollar that was at the very heart of the problem. By giving him the boot and restoring the dollar's golden link, the President will have removed the man who made this financial debacle possible and restored focus to the Fed whose primary mission is to maintain a stable dollar. Relieved of this impossibly conflicting mission of guarding the Dollar's value and keeping unemployment low, the Fed will once again be back to doing what it is supposed to do. Congress can then get busy providing sound fiscal policy and low tax rates, which in combination with the stable dollar, are the surest path to a robust economic expansion and the jobs it will create for Americans and the rest of the world.

Airline Security A Very Dangerous Oxymorn

All this talk about profiling is just a right-wing knee jerk reaction to the failure of one terrorist who tried to blow up his fellow passengers and couldn't pull it off. Had he accomplished his mission we would now all be celebrating with an Alah Akbarh shout out. Wait one minute, that's right, I'm not actually a terrorist, I'm just treated like one every time I fly. Pardon my confusion while I cancel the celebration.

The first problem with our passenger screening process is that it is run by a one size fits all Politically Correct to the bone government agency, which requires that no one get special treatment, and everyone get the same treatment, lest it offend some special interest group. Islamic Terrorists are threatening our lives, and the recent spectacle in Detroit has made it blatantly apparent that the government's real concern is being Politically Correct. How pathetic is that? Thoroughly searching everyone is not possible, and randomly picking people for enhanced security measures isn't working. That's why grandma gets frisked, but not the terrorist. The TSA is just busy going through the motions.

For an administration that is enamored with law enforcement, and apparently thinks that the Panty Bomber was a criminal (why else would you arrest him on criminal charges?) they should take a tip from the NYPD, who when summoned to the scene of a homicide don't question the dead guy. There is simply no need, he has been excluded because he doesn't fit the profile of the killer. He can't,because he's dead, and as such doesn't have much to say anyway. What the police will do is ask people questions to rule them out as suspects, something I've never been subjected to at the airport. The TSA employees that I've encountered do their best not to talk to you, other than to scold you for not putting your shampoo in a clear zip lock bag, or not emptying your pockets completely. Perhaps this is some kind of an advanced terrorist counter measure and I'm just not aware of it.

The second problem is that they are searching luggage and not screening people to determine if they are terrorists. Those in charge say that they must search everyone because finding the one terrorist among all of the passengers boarding planes each day is like searching for a needle in a haystack. I concede that it is a difficult task, one made more difficult by their lack of profiling, but if you are looking at every piece of hay in the stack you are never going to find the needle. You need to focus on the needle. Unless you are just trying to look busy, in which case a lot of people going through the motions will do the trick.

Necessitating that everyone be subjected to the same level of screening is ridiculous. A simple profile would eliminate as suspected terrorist 90% of the flying public, making a thorough screening of the remaining 10% no longer a daunting task, but a small chore. The reason profiling works is that when you put together an accurate threat assessment profile it tends to make the actions of the people you are looking for stand out from the rest of the crowd. You profile to eliminate suspects, greatly reducing the number of people that need to be searched. It's got nothing to do with racism. There, I said it. As a matter of fact, a blind man could have successfully profiled Omar.

These people never learn, which is why, after taking into account what had happened that day, the TSA implemented new rules to prevent further attacks. One of the new rules is that no one can leave their seat for the last hour of the flight. It's a good thing they had not instituted that rule until after the Flying Dutchman had thwarted the Isolated Jihadist on flight 253, or our hero might have waited patiently in his seat on his way to meeting his maker.

The Panty Bomber....Place Your Knickers on the Conveyor and Step away from the Machine

Even a hungover, nearsighted, cross-eyed, Spanish Fighting Bull could have seen this guy coming a mile away. Umar the Islamic Jihadist Terrorist, whose actions should have raised more red flags than even the Russian Army owns, tried to blow up a commercial flight to Detroit with a Panty Bomb. The myriad of red flags, any one of which would have been enough to have prevented you or me from ever boarding our flight, didn't even slow him down as he flew from Nigeria to Amsterdam and then on to Detroit .

Why is it that Umar Farouk Abdulmutallab, a last minute, cash paying customer on an international flight, whose only carry on luggage was his Panty Bomb, was not subject to the same level of scrutiny that I received when I flew from Tampa to Newark NJ to attend my uncle's funeral? This, even though his father had called the US Consulate and warned them that his son was dangerous; a phone call that landed Umar on a terror watch list. I, on the other hand checked an overnight bag, wasn't on the terrorist watch list, wore only a pair of gym shorts, a t-shirt and flip flops, ( Where I might ask was I going to hide a bomb in this outfit?) and carried only my wallet and a cell phone. Still it was deemed necessary that I undergo enhanced security measures. The reason? I booked the trip late. So what were Umar's excuses? Oh yeah, that's right, he wanted to blow up the plane!

The Obama Administration's Home Land Security Chief, Janet Napolitano, appearing on a Sunday morning news show looked tough in her leather jacket, but acted like a real wimp, suggesting that the government's watch list of over 500,000 names, one of which is Umar Farouk Abdulmutallab, was just too large to search in an attempt to prevent a terrorist bent on killing all the other passengers on the plane from boarding. Where do they keep this watch list, and why is it so hard to search? Is it written in crayon, perhaps in poor penmanship on index cards and stored in the bottom of a draw of a desk in a little used basement office of an annex at homeland security ? I typed the word terrorist into the Google search engine as I wrote this piece, and it came back with about 37 million entries. How long did it take to perform this search? It took 0.12 seconds . It's not that the list is too long , it's that no one is watching the Watch List. So why do they call it a watch list if they don't watch who is on it?

Our politically correct system of airline screening is a Giant Joke, inconveniencing everyone, yet protecting no one. How can I tell? It's easy. I can't carry sunscreen in my suitcase when I go to Miami, but an Islamic Jihadist from Nigeria on the government's terrorist watch list, a person who's actions should have set off all kinds of alarms, can carry a bomb onto a plane and all they want to know is if he wants the chicken or the vegetarian dinner.

The folks in this administration, whose plan to combat terrorism amounts to a policy of talking nicely to terrorists so they like us, need to wake up and smell the PETN before hundreds more people die needlessly. The PC Crowd in charge, who this year can already take credit for the 13 deaths at FT Hood, narrowly missed another several hundred notches on their belt. If I've got this straight, it's okay to keep the list as long as you don't refer to it. That might be profiling and that is not politically correct. So, instead of targeting the few terrorists for enhanced screening, we are subjecting everyone who flies to an inadequate level of screening, inconveniencing everyone while protecting no one. Not a very bright thing to do, but a very PC approach and that's what counts. Right?

News Flash: that's not what counts. What counts is getting the job done, and the government is failing to provide the flying public the safety they promise . The Last Nut Job Islamic Jihadist who tried to use this type of explosive to blow up an airplane bound for the US had it hidden in his shoes, which is why everyone who now boards a plane is commanded to take off their shoes. Won't flying be fun when the folks at TSA start checking out Grandma's Knickers because of the Panty Bomber! What's next? Body cavity searches?

A Return to Slavery ... One Progressive Step at a Time

Let's just call it what it is, as one of my favorite Economists Walter E.Williams writes in a recent Town Hall column:

"There is absolutely no moral case, much less constitutional case, for Congress forcibly using one American to serve the purposes of another American, a practice that differs only in degree from slavery, which we all should find morally offensive."

If you strip the health-care debate of it's sugar coated political buzz words such as mandate and public option, aren't we really talking about just another case where the government has decided to force you to labor for the benefit of someone else? At the rate we are going, how long will it be before you'll be spending more of your time working for others rather than yourself. Isn't that so very altruistic of you!

If the Health Care Police ( HCP), I assume they would be the ones in charge of enforcing the governments health care mandate, knocked on your door every other Monday morning and forced your college educated 22 year old daughter to work all day picking up trash on the side of the highway you'd be horrified. You'd want some answers! What dastardly criminal act could she have committed to deserve such a punishment, keeping her out of work all day and thereby depriving her of 10% of her income?

They don't do that in America, you say.Well, not quite yet anyway, but they will soon if the Democrats have their way with health care. She will be forced by the government to spend an equivalent amount of her earnings to purchase something she had decided not to. Is this not also a practice that differs only in degrees?

As a parent, wouldn't you want to talk to the prosecutor to know what crime your daughter had committed that merited she be fined upwards of 10% of her income? Shouldn't there be some kind of a trial to find her guilty before punishment is meted out, even if it is only a show trial like the one KSM is entitled to? Won't you be mortified to learn she has committed the most heinous of acts imaginable in our new Progressive Society? That's righ,t she is Guilty of working for an employer who does not provide health insurance, and has failed to purchase a government approved insurance policy on her own. Oh, the shame of it!

Your representatives in Congress are spinning a yarn that goes like this: legions of hospitalized young adults without medical insurance are the cause of the explosion in health insurance premiums. This in an attempt to justify a morally bankrupt and unconstitutional taking of private property. Their remedy? Mandate ( a pretty word that means to force) that all citizens must buy health insurance. That's what they would like you to believe , but that is not what the facts tell us.

The fact is that they are bullying healthy young people into to subsidizing health care premiums for those in poor health who have medical insurance, those with preexisting conditions who have been denied health insurance coverage and those who are not financially able to purchase health insurance . The Progressive Bullies in Congress always pick on the politically weak in society, in this case it happens to be young people, it's not like they are reliable voters anyway, and their perennial favorites, "The Rich"who will pay the freight to provide an insurance subsidy for the politically favored classes.

Will health insurance reform really be the rallying cry Progressives use to justify re-instituting a modern day version of Slavery in America ?

The Presidents Economic Recovery Board... Are they Smarter than a Fifth Grader?

You wouldn't think so if you read the transcript from the November 2 meeting of the President's Economic Recovery Advisory Board (PERAB), the group responsible for presenting ideas to promote economic recovery to the President. It was a free for all of Government Interventionists and Central planners who would have made Joe Stalin proud. Fittingly, it was held in the Roosevelt Room, perhaps in honor of that other great believer in free markets, I mean central planning, F.D.R.

His economic wunderkinds put the children at B. Bernice Young Elementary in New Jersey to shame with their own tune whose chorus, “We need a price on carbon, mmm mmm mm, and then we need a cap “ was music to the President's ears. This gathering of mercantile songbirds was less a forum on serious economic ideas, than it was a murder of crows squawking praise of two mutually exclusive economic propositions: increasing manufacturing jobs by making energy green and expensive. This song doesn't work!! It's like singing the words to "Silent Night" to the tune of "No Sleep Till Brooklyn." Artificially raising the price of energy causes recessions and job losses in manufacturing. It doesn't promote economic recovery.

The President's solo first verse was sung while he patted himself and the others in attendance on the back, crooning, " We have pulled the economy back from the brink." No matter how many times I hear him sing this one, it just never gets old!

Jeffrey Imelt of GE recited a self-serving little ditty that only through greater exports will we be prosperous once again. Evidently GE is looking for additional government help in the export markets. A loyal green believer, he then added to this musical round with a verse from that old clean energy standard, Higher Energy Prices are an Economic Stimulus. This guy has pipes!

Songbird and publisher of the Spanish -Language newspaper La Opinion, Monica Lazano treated us with a spicy Latin hit called The Lazano Multiplier. It went like this: "One taxpayer dollar spent to support small business export assistance creates $500 in taxpayer gains." What this song lacks in economic reality it makes up for in it's fascinating rhythm.

John Doerr, Al Gore's dance partner in green deception and Kleiner Perkins added his voice to the chorus: “We agree the most important thing we could do to have America lead in this industry and generate a lot of jobs fast is to put a price on carbon; a price and a cap on carbon.” It's a beautiful little tune of government intervention sung in the key of Green. He implored our leader that by raising up the cost of all forms of carbon-based energy, "... we could create hundreds of thousands, even a million jobs in a year, in a permanent new industry -- high-wage jobs, that are not going to be outsourced." I was spellbound as I waited to hear the next verse in this lovely song of hope and change. What hi-tech cutting edge industry would blossom in this new bright green era? What a letdown; he reached for a note and fell flat with that ridiculous dirge, "Cash for Caulkers," an earthy ballad of a million American workers caulking their way across this great land.

Could Mark Gallogy, investment banker extraordinaire and member of the President's Transition team, rescue this tune? After a hopeful start explaining that there has been little growth in US demand for electricity, he belted out his verse. Expecting a song of setting the free markets loose, I was crushed to hear the same sad sack melody called Put a Price on Carbon.

Paul Volker chirped in with a classic tune from years gone by, reminding Imelt and the rest that we need a more competitive business environment not just subsidies for exports. Ultimately, he too disappoints when he forgets his lines about how that can be done.

The longer it went on, the worse this song kept getting. Richard Trumka's version of God Bless the Recovery Act was worse than anything you could imagine. The balance of the meeting was dominated by Big Labor, whose song, We are the Champions looks good only on paper. Their real life track record in creating new jobs is outdone only by their ability to cripple every manufacturing industry they represent.

After getting to the end of the transcript, I'm convinced that the President would be better off with an advisory team of fifth graders. Why? Because with about a half hour's worth of economics 101 they would understand that the keys to our nation's continued economic success are low taxes, a stable dollar, and less government interference in the private sector. A concept that has eluded the President and his advisers!

A Lesson for Congress: The Only thing Worse than Your Constituents Pink Slip Is Your Own!

With more than 10% of the workforce now Unemployed, and a greater number underemployed it's seems very odd to me that the Majority party has spent the last 10 months promulgating policies to reform nearly every aspect of the economy with the exception of those that would bolster economic growth and create jobs. Included in their "REFORM" of health care are the very tax policies that will stifle economic growth and Job creation. There is No Bigger Job Killer that I can think of , than their proposal to raise the capital gains tax rate.

The Capital Gains tax is a Success tax, and is only levied on economic actors who have risked their capital and succeeded. There is no federal tax on the loss of capital. The folks from whom these taxes are extracted are the people who have built or enabled others to build successful enterprises by providing the necessary capital. I like to call them the Job Enablers. They enable entrepreneurs to create wealth by creating jobs, a commodity that is in rather short supply lately.

Politicians like to pretend that the damage done by the Success Tax is limited only to the small number of people who actually pay the tax, but it is not. There are three other groups who pay an even greater price as the result of an increase in the Capital Gains tax and they are the very groups Congress pretends to champion. The first are the unemployed who will remain so. Their numbers are rising monthly and are easy to see. The second group are the Entrepreneurs who run small businesses and would provide the additional jobs needed except for the lack of available capital.They are not as noticeable, but are critical in relieving the problems of the first group. At his upcoming "Jobs Summit" the President would do well to understand this fact. It would give him another one of those teachable moments he's so fond of. Perhaps with his formidable skills behind the teleprompter he could persuade his democratic colleagues who are itching to raise this and other tax rates not to deploy this job killer of a tax.

Raising the tax on capital reduces it's supply, increasing the cost and availability of capital at the margin. It really is as simple as that. If there are five red balls on the table representing the total capital available to fund businesses and the jobs that go hand in hand with economic expansion and if the government confiscates two of them through increased taxation, it is clear to everyone that there are fewer red balls left to fund economic growth. Which brave politician wants to step up to the mike and make the argument that another dog park, or retrofitting a government building with green technology is more important than the real economic growth provided by this country's entrepreneurial class? When capital is made scarce through increased taxation it is the small and newer businesses, the country's job creation machines, who are left without capital as the government crowds them out of the market, not the politically well connected GE's and GM's of the country.

In their attempt to support a return to higher tax rates of the past, the Democrats frequently point to the boom years of the Clinton Administration as proof that higher tax rates promote economic growth. That they can make this argument with a straight face indicates how truly ignorant of economics and human behavior they are. It also reveals them to have an advanced degree of selective memory syndrome.

The Clinton Tax hikes came in 1993, and the boom years which they credit to those increased taxes didn't begin until 1997. Why was there a four year lag? If increased taxes are such a potent economic stimulus why didn't the boom years start in '93 or '94 or '95? Why was there only tepid economic growth? Their claim doesn't pass the smell test, especially when you consider the economy was coming out of a recession when growth typically is more pronounced. And Why did the more robust growth of the 90's come at what would normally have been the tail end of an economic expansion, which is usually when growth is more subdued? Finally, if as they claim tax increases are so good for economic growth, why wasn't that their first agenda item? Why wait to let the Bush era tax cuts expire in 2010?

What the few Democrats who understand economics, and apparently there aren't many of them, conveniently forget to mention in their "taxes are good for the economic growth" argument is that it was the significant reduction in the Capital Gains tax rate, from 28% to 20%, that was passed in 1996 and became law in 1997 that was responsible for the boom, not as they like to claim their 1993 tax hike. The last two times the Capital Gains tax was increased it was followed by sub par economic growth. The first increase was in 1969, which along with an inflationary dollar helped usher in the stagflation of the 70's, which is where we seem to be heading now. The second time the rate was increased was as a part of the 1986 Tax Act , which subjected Capital gains to the same tax rates as ordinary income.

Why limit the ability of successful investors to grow the economy by confiscating the capital needed to do so? There are some folks who defend the capital gain tax as a measure of fairness. What's fair about eliminating jobs? These are the people who fund expansions, and you want to slow them down? We can never know how many Microsoft- type enterprises, along with the jobs they produce, died in the lobbies of Venture Capitalist in the 1970's and late 80's, never making it to the board room and the decision makers as a result of dramatic increases in the capital gains tax.

Who is the third group that get's mauled when Capital and the jobs it creates are scarce? Just have a look in the mirror Mr. Congressman. Come next November when a sub par recovery has not produced the needed jobs, it might well be your turn to stand in the unemployment line. Good Luck with that, we'll see you next Fall!