Obama’s Chilling Effect on Capitalism

By Howie Rich
The tombstone for General Motors really should have read 1908-2008.

That’s because December 2008 is when the bell finally tolled for GM – when the marketplace determined that a combination of poor management decisions, union pressures and a slumping economy had made the automotive giant’s continued existence mathematically impossible.

Of course, that was also precisely when the administration of former President George W. Bush stepped in with a $17.4 billion bailout for GM and Chrysler, with further funds contingent on the two companies creating a “path to profitability…”

Obama’s Chilling Effect on Capitalism

Merkel’s Moxie

From Investor’s Business Daily:

Stimulus: British Prime Minister Gordon Brown’s idea for a “global stimulus plan” has met with resolute opposition from Germany’s leader, Angela Merkel. Good to see that common sense isn’t dead, at least in Europe.

Brown, who’ll be hosting the leaders of the G-20 nations later this week as they seek a way out of the global financial crisis, has pushed what he calls a “global New Deal” of up to $2 trillion in added spending.

But he’s had trouble selling his idea to others — to put it mildly. Czech Prime Minister and EU President Mirek Topolanek called it “a way to hell.” Even Bank of England Governor Mervyn King trashed the idea.

Now comes Merkel, who, as head of the world’s third-largest economy, has probably killed Brown’s big idea.

“I will not let anyone tell me that we must spend more money,” she said over the weekend. “We must look at the causes of this crisis. It happened because we were living beyond our means. . . . We cannot repeat this mistake.”

Precisely the point. The idea that global bureaucrats and politicians can direct $2 trillion in spending and tax shifts to the most productive sectors of the economy is a sick fantasy that only a socialist could love.

History has repeatedly shown that uncontrolled government spending is wasteful and fails to stimulate anything.

The EU has already dedicated some 4% of the region’s GDP to “stimulus,” yet nothing is stimulated. With EU budgets tight and rules requiring countries to limit their deficits to 3% of GDP, more spending simply isn’t possible now. Nor would it be wise.

The U.S., for its part, has been hoping that Brown’s plan would prevail. After all, we’ve already committed more than 8% of our GDP to stimulus, with more to come.

Merkel’s opposition to this is key. She has a perspective we don’t because of Germany’s tragic history in the 20th century.

After World War I, Germany tried to spend its way out of a recession brought on in large part by the onerous war reparations.

As Weimar Germany printed money, inflation soared (in 1918, $1 bought 4.2 German marks but by 1923, $1 fetched 4.2 trillion marks) and unemployment surged. In that fertile ground for mass economic discontent, Hitler’s Nazis were able to plant their seed.

We’re not saying we’re living through a reprise of Weimar. But the “stimulus” amounts now being bandied about are alarming.

World leaders would be wise to go back to what really works: Lower taxes, less spending, fewer regulations, freer trade.

Meet The New Boss

From Investor’s Business Daily:

Industrial Policy: The U.S. government dictating a major corporation’s merger partner and who its CEO should be was unimaginable a year ago. Has industry sold America’s free-market soul for bailout money?

A president of the United States orders the chief executive officer of General Motors to resign. The same president is further ordering Chrysler to merge with Fiat, the Italian firm specializing in flimsy cardboard boxes on wheels.

This new reality should send a chill down the spines of all Americans. The federal government has begun to run U.S. companies.

President Obama said Monday, “my team will be working closely with GM to produce a better business plan.”

To that confident assertion he added these stern sentiments:

“They must ask themselves: Have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets, or are they still saddled with so much debt that they can’t make future investments? Above all, have they created a credible model for how not only to survive, but to succeed in this competitive global market?”

Who is in a better position to know the answers to these questions? Rick Wagoner, the GM CEO for nine years and former GM chief financial officer who has been with the automaker since the late 1970s, even running one of its foreign affiliates in Brazil, and who holds a Harvard Business School MBA?

Or President Obama, a former community activist from the south side of Chicago with a great rhetorical gift?

The president answered that question this week by ordering Wagoner’s firing.

Imagine if it were not GM, but your own small business employing a handful of people.

How would you like the country’s highest-ranking elected officeholder telling you that he and “my team” know better than you about cleaning up your balance sheets and competing against your rivals? How would you like being ordered by the government to fire the person you hired as manager of your company?

Does an entity that is itself $11 trillion (and climbing) in debt have any right to criticize a private business for owing tens of billions, let alone to claim it can do better running that business?

The same arrogance was heard regarding Chrysler. The president announced that, “we’ve determined, after careful review, that Chrysler needs a partner to remain viable.” Why was Fiat picked? Because the Italian firm “after working closely with my team, has committed to building new fuel-efficient cars and engines right here in the United States.”

In other words, its politics are right.

The merger will operate under a deadline with Washington holding a gun to Chrysler’s head: “We’ll give Chrysler and Fiat 30 days to . . . reach a final agreement,” the president said. “But if they and their stakeholders are unable to reach such an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollars to keep Chrysler in business.”

It should now be clear: Federal bailout funds are a corporate narcotic. Once a company starts taking them, a chemicallike dependence develops. The addict does whatever will bring in more of the drug. Ultimately, like heroin, the short-term euphoria gives way to decreased function for the recipient, even destruction.

More importantly for the American people, letting Uncle Sam become a corporate drug dealer — with taxpayer money the addictive poison being peddled — also places Washington in a position of dictatorial control over the private sector.

Dr. Peter Leeson Discussing the Recession and His New Book

From NetRight Nation:

Dr. Peter Leeson Discussing the Recession and His New Book

Control Freaks

This is a great editorial from Inverstors Business Daily

Reform: Treasury Secretary Tim Geithner’s proposed sweeping reform of our nation’s financial system puts the nation’s banks, insurers and hedge funds under direct government control — where they least need to be.

Geithner said Thursday that President Obama’s administration needs to impose “not modest repairs at the margin, but new rules of the game” for America’s banks, finance companies, insurers and hedge funds.

The only problem is, the old rules of the game were set by the very people in Congress who will set the new ones. This means the new rules likely won’t be much of an improvement — if any.

The irony of this, of course, was pointed out by political scientist Michael Barone, who notes the bank bailout plan unveiled by Geithner earlier this week actually relies heavily on mostly unregulated companies to bail out regulated ones.

Now, Geithner wants control of even those unregulated companies, though they’re guilty of nothing other than being successful.

Recall how the first President Bush was ridiculed for seeking a “new world order”? Well, what the Treasury now proposes constitutes nothing less than a “new economic order,” one that will take away much of the autonomy of our extraordinarily successful free-market economy and smother it with new rules.

Nor is this the only power grab by government of late. President Obama, for example, wants to force what he calls a “major restructuring” on troubled U.S. carmakers GM and Chrysler, pushing them ultimately to make green-friendly cars central to their businesses — no matter what consumers might want.

Meanwhile, the Federal Reserve wants sweeping new powers to regulate, punish and oversee the financial industry, and to intervene if it thinks it needs to. And of course, in the middle of all this sits Congress itself, which will write the new laws and regulations.

Yet, with all these plans to exert ever more control over the economy, few people are asking the appropriate question: Do those in government have the knowledge and ability to run our economy?

The answer, put bluntly, is no. This could be seen in Postmaster General John Potter’s trip to Congress Wednesday, begging for more money for the ailing postal service. “We are facing losses of historic proportion,” he said. “Our situation is critical.”

This from the head of a government-run company that has a virtual monopoly in its business — the delivery of first-class mail — and still can’t make a profit. Losses last year totaled $2.8 billion.

Two other major government enterprises — Fannie Mae and Freddie Mac — were largely responsible for the mess we’re in now. Managed mostly by former Democratic politicians, they too had a virtual monopoly, holding $5.4 trillion of the total $12 trillion in U.S. mortgages, and still went bust.

Such managerial acumen hardly inspires confidence. Who’s going to make the decisions, anyway? Some Treasury functionary? President Obama, whose private-sector experience is virtually nil? How about his top aide, Rahm Emanuel, who served a stint on Freddie’s board during its period of greatest excess?

Economist Friedrich Hayek noted in his 1945 classic “The Use of Knowledge in Society” how ill-equipped governments are to collect, organize and act upon the millions and millions of market signals sent each day by private markets.

The result, inevitably, is economic chaos, confusion, misallocation of resources and enormous waste — as in the old USSR.

Hayek’s insights, which eventually won him a Nobel Prize, are as relevant today as then. Letting bureaucrats and politicians direct our economy isn’t the end to our troubles. It’s only the beginning.

Watching The Trillions Pile Up

By: Howard Rich Chairman of Americans for Limited Government

With another $2 trillion in federal interventionism announced within the last week alone, the price tag for America’s economic “recovery” continues to soar to stratospheric, scarcely-comprehensible heights.

First we had hundreds of billions for troubled – now “toxic” – assets.

Then we had President Barack Obama’s $787 billion bureaucratic bailout – an unprecedented expansion of programmatic, status quo spending that will create the “Mother of All Annualizations” for dozens of cash-strapped state governments that even now still refuse to live within their means.

Next there was “quantitative easing,” which is another way of saying our federal government started printing money so that it could purchase more of its own debt.

All told, the feds have pledged $13 trillion to deal with the current recession – or trillions more than our existing national debt.

Think about that for a moment – $13 trillion.

Watching The Trillions Pile Up

Tax code escalates as Dems’ tool

From the Washington Times:

For the Obama administration and its Democratic allies in Congress, the power to tax is increasingly becoming the power to get their way on policy matters big and small.

Corrected: From reforming the nation’s health care system to helping victims of Wall Street fraud mastermind Bernard Madoff, the White House and Congress have turned to the tax code to push their policy priorities. With Congress gearing up to tackle President Obama’s proposed $3.6 trillion budget for fiscal 2010, the tax battles are certain to intensify.

Using the tax code to push a presidential agenda is nothing new. But with a budget that proposes expensive and far-reaching reforms in health care, energy and education, Mr. Obama has taken the tactic to a new level.

See related story: Obama cool to high tax on bonuses

“Speaking very broadly, it’s pretty common,” said J.D. Foster, a tax policy analyst at the conservative Heritage Foundation. “The tax code, from bow to stern, is full of policies that are proposed by the president and congressmen that are intended to manipulate the economy or social structures and social behavior.”

What is unusual about Mr. Obama’s agenda, he said, is that “he is trying to redesign our nation in such broad strokes, covering so many areas at once.”

Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities, praised the thrust of the Obama budget.

“All the tax increases either affect only people earning more than $250,000 or close tax loopholes that should not have been there in the first place,” he said, adding that the Obama budget would peel back the $120,000 average tax cut on those making more than $1 million, while the “vast majority” of small-business owners would benefit from the president’s health care reform.

The administration looked to the tax code when trying to help victims of Madoff’s Ponzi scheme. The 20-year fraud, uncovered in December, took in charities, hedge funds, universities and celebrities. The personal savings of many small investors were wiped out.

The Internal Revenue Service announced last week that the tax agency had issued two rulings intended to soften the losses for the thousands of individual and institutional investors taken in by financial scams, such as the $64 billion scheme operated by Madoff.

The new guidelines clarify rules letting victims of Ponzi schemes claim “investment theft losses” on their tax returns, allowing for greater deductions than could be claimed under other types of capital losses.

Congressional Democrats turned to the tax code again for a quick fix in the furor surrounding bonuses paid to executives of insurance giant American International Group Inc. The bonuses were paid after the company had accepted more than $170 billion in taxpayer aid to avoid bankruptcy.

The House of Representatives, after just a couple of hours of debate, passed a bill Thursday to tax 90 percent of the bonuses granted to top earners at AIG and any other company that received more than $5 billion in taxpayer bailout funds. The Senate may take up its own confiscatory tax bill targeting AIG as early as this week.

“By any measure, you are disgraced professional losers,” Rep. Earl Pomeroy, North Dakota Democrat, said during the brief House debate. “And by the way, give us our money back.”

Mr. Obama has not said whether he would sign the measure if it reaches his desk.

“What he has said is that he’s going to look at any legislation. And I’m sure he will do that,” Christina Romer, chairman of the White House Council of Economic Advisers, said on “Fox News Sunday.”

Jared Bernstein, economic adviser to Vice President Joseph R. Biden Jr., called the bill “a dangerous way to go.”

“I think the president would be concerned that this bill may have some problems in going too far – the House bill may go too far in terms of some – some legal issues, constitutional validity, using the tax code to surgically punish a small group,” he said Sunday on ABC’s “This Week.”

But the resort to highly targeted taxes – even against such an unpopular target as AIG – has left others uneasy. “People have to understand that using the tax code for punishment is a horrible, disastrous precedent,” said Rep. John Campbell, California Republican.

“It’s ‘everybody grab the pitchforks,’ ” said Sen. Judd Gregg, New Hampshire Republican and one of several lawmakers who warned that the AIG tax increase was unconstitutional.

As the administration searches for money to fund its biggest campaign promises, Mr. Obama has backed away from some proposed tax increases in the face of popular opposition.

The administration hastily dropped a proposal to require some disabled veterans to pay for medical treatments through their private insurance companies, heeding a chorus of outrage from veterans groups and Capitol Hill lawmakers who said the idea was immoral, unconscionable and un-American.

The White House scrapped the plan after meeting with a contingent of veterans and military advocacy groups last week.

Conservative critics say one of the most far-reaching tax changes in Mr. Obama’s budget involves greatly expanding the practice of giving tax refunds to low-income people who owe no taxes – “refundable tax credits.”

“Obama’s basic ethos that he ran on was that he wanted to spread the wealth, to take money from people that he perceived to have too much money and give it to people he perceived did not have enough money,” said Ryan Ellis, tax policy director at Americans for Tax Reform, which pushes for lower taxes. “He’s very consciously using refundable credits a lot in order to give money to people that aren’t taxpayers, which is a big deal.”

The difference between a tax credit and a refundable tax credit is that a normal tax credit reduces liability down to zero. For example, if the refundable credit is $500 and a taxpayer owes $300, the taxpayer receives a $200 check from the government.

Mr. Obama “wants to take existing credits in the code, bulk them up, and them make them refundable,” Mr. Ellis said. “This is the way he’s spreading the wealth, doing his social engineering.”

• David M. Dickson contributed to this report.

Cap-and-Trade Promises Disaster

The Washington Times was a great read today the post before this was and editorial and this is a commentary written by: R. Emmett Tyrrell

Cap-and-Trade Promises Disaster

Thank God winter is almost over. It has been another cold one. I hope Al Gore wore his hat and brought along his galoshes whenever he made an appearance against global warming. Better yet, I hope he scheduled his jeremiads in warmer climes, say, Miami Beach or Antigua.

As I reported a while back, scientists have not been able to measure any increase in global warming since the end of 1998. That, despite their lunkheaded computers forecasting the opposite. Over the last two years temperatures have actually dropped by more than 0.5 degrees Celsius. Button up!

I mention all this because (1) it is always amusing to kid Mr. Gore and (2) the price tag for Prophet Obama’s climate plan has just jumped to $2 trillion. That is 3 times the White House’s initial estimate for its cap-and-trade monstrosity. It is also a huge tax on corporations and consumers at a time when both are in recession.

Only government thrives. Given the fact it is increasingly unclear there is such a thing as global warming and the fact that cap-and-trade is an expensive and dubious remedy for it might not the Prophet Obama hold back. He has plenty else to do.

ACORN to Count Heads for Census

From the Washington Times:

ACORN to Count Heads for Census

First it was President Obama trying to break all precedent and run the 2010 census from within the White House. While the administration finally backed down from that politicization of the census, it clearly hasn’t learned its lesson. Now it is having ACORN officially “partner” with the Census to help count the number of Americans in the country. It’s like Santa trusting a child to tell him how many times he or she has been good in the past year.

We could write a book on the false voter registrations submitted by ACORN. There are bizarre stories, such as one from Cleveland, where ACORN employees reregistered the same individual 77 times, even though the individual kept on telling the ACORN workers that he was already registered. But ACORN’s people kept offering to bribe him with cigarettes or money to get him to fill out another form. Similar examples from across the United States are too numerous to count.

Pelosi’s Double Standard

Along with President Barack Obama, House Speaker Nancy Pelosi was at the forefront of a group of Washington politicians bashing the executives of American International Group this week.

Bolstered by $170 billion in federal bailout funds (for which the government received an 80% stake in the company) – AIG announced plans to award $165 million in executive bonuses to its employees.

“Unconscionable,” Pelosi said of the bonuses.

“I call upon the executives at AIG to right the wrong they have done to American taxpayers…”

Pelosi’s Double Standard