Manchurian Candidate’ Starts War on Business: Kevin Hassett

‘Manchurian Candidate’ Starts War on Business: Kevin Hassett

 

Commentary by Kevin Hassett

March 9 (Bloomberg) — Back in the 1960s, Lyndon Johnson gave us the War on Poverty. In the 1970s, Richard Nixon launched the War on Drugs. Now that we have seen President Barack Obama’s first-year legislative agenda, we know what kind of a war he intends to wage.

It is no wonder that markets are imploding around us. Obama is giving us the War on Business.

Imagine that some hypothetical enemy state spent years preparing a “Manchurian Candidate” to destroy the U.S. economy once elected. What policies might that leader pursue?

He might discourage private capital from entering the financial sector by instructing his Treasury secretary to repeatedly promise a brilliant rescue plan, but never actually have one. Private firms, spooked by the thought of what government might do, would shy away from transactions altogether. If the secretary were smooth and played rope-a-dope long enough, the whole financial sector would be gone before voters could demand action.

Another diabolical idea would be to significantly increase taxes on whatever firms are still standing. That would require subterfuge, since increasing tax rates would be too obvious. Our Manchurian Candidate would have plenty of sophisticated ideas on changing the rules to get more revenue without increasing rates, such as auctioning off “permits.”

These steps would create near-term distress. If our Manchurian Candidate leader really wanted to knock the country down for good, he would have to provide insurance against any long-run recovery.

There are two steps to accomplish that.

Discourage Innovation

First, one way the economy might finally take off is for some entrepreneur to invent an amazing new product that launches something on the scale of the dot-com boom. If you want to destroy an economy, you have to persuade those innovators not even to try.

Second, you need to initiate entitlement programs that are difficult to change once enacted. These programs should transfer assets away from productive areas of the economy as efficiently as possible. Ideally, the government will have no choice but to increase taxes sharply in the future to pay for new entitlements.

A leader who pulled off all that might be able to finish off the country.

Let’s see how Obama’s plan compares with our nightmare scenario.

Treasury Secretary Timothy Geithner has been so slow to act that even liberal economist and commentator Paul Krugman is criticizing the administration for “dithering.” It has gotten so bad that the Intrade prediction market now has a future on whether Geithner is gone by year’s end. It currently puts the chance of that at about 20 percent.

No More Deferral

On the tax hike, Obama’s proposed 2010 budget quite ominously signaled that he intends to end or significantly amend the U.S. practice of allowing U.S. multinationals to defer U.S. taxes on income that they earn abroad.

Currently, the U.S. has the second-highest corporate tax on Earth. U.S. firms can compete in Europe by opening a subsidiary in a low-tax country and locating the profits there. Since the high U.S. tax applies only when the money is mailed home, and firms can let the money sit abroad for as long as they want, the big disadvantage of the high rate is muted significantly.

End that deferral opportunity and U.S. firms will no longer be able to compete, given their huge tax disadvantage. With foreign tax rates so low now, it is even possible that the end of deferral could lead to the extinction of the U.S. corporation.

If any firms are to remain, they will be festooned with massive carbon-permit expenses because of Obama’s new cap-and- trade program.

Importing Drugs

Obama’s attack on intellectual property is evident in his aggressive stance against U.S. pharmaceutical companies in the budget. He would force drug companies to pay higher “rebate” fees to Medicaid, and he included wording that suggests Americans will soon be able to import drugs from foreign countries. The stock prices of drug companies, predictably, tanked when his budget plan was released.

Obama will allow cheap and potentially counterfeit substitutes into the country and will set the U.S. price for drugs equal to the lowest price that any foreign government is able to coerce from our drugmakers.

Given this, why would anyone invest money in a risky new cancer trial, or bother inventing some other new thing that the government could expropriate as soon as it decides to?

Finally, Obama has set aside $634 billion to establish a health-reform reserve fund, a major first step in creating a universal health-care system. If you want to have health care for everyone, you have to give it to many people for free. Once we start doing that, we will never stop, at least until the government runs out of money.

It’s clear that President Obama wants the best for our country. That makes it all the more puzzling that he would legislate like a Manchurian Candidate.

(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He was an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election. The opinions expressed are his own.)

To contact the writer of this column: Kevin Hassett at khassett@aei.org

Last Updated: March 9, 2009 00:01 EDT

Obama Just Doesn’t Get It

Obama Just Doesn’t Get It

Posted By Jennifer Rubin On March 8, 2009 @ 12:03 am In . Column1 05, . Positioning, Politics | 78 Comments

George W. Bush, his critics said, was isolated and unaware of how badly things were going in Iraq. He was caught up in a messianic vision to bring democracy to the Middle East. Meanwhile, he stubbornly clung to grandiose domestic policy proposals (e.g., social security reform and immigration reform) when the timing was simply not right. Some of that has been disproved by subsequent events (e.g., we did bring democracy to Iraq) or revelations about his own intimate involvement in reworking a failing Iraq strategy. But the image remained of an isolated and out-of-touch president.

As queasy as it might make us feel, we might consider that we have gone from the frying pan into the fire. Obama does not perceive things are substantially worse or that his “strategy” is failing. He also seems to have the timing terribly off as he discusses an onslaught of taxes and regulation while the economy is staggering. And to make matters worse we have no General Petraeus to help guide us back from the brink of ruin. We have instead Tim Geithner.

In a [1] brilliant posting, small business owner Jim Prevor makes clear that the president is frightfully oblivious to the real world impact of the stock market crash on the lives of ordinary Americans (and hence on our prospects for recovery). Prevor explains:

Every stock market investor quickly learns that the math of markets is forbidding. After all, if stock prices go down by 50 percent, they have to rally by 100 percent to get one back to even.

Yet this doesn’t begin to explain the problem. In political polling, all’s well that ends well. But this is most decidedly not true in the stock market.

If a family needs $25,000 to pay tuition and it sells stocks to raise the money, that money is not available to benefit from any future upswing in market values. So even if Obama orchestrates a miraculous rebound, countless millions of people will have been permanently hurt.

And for individuals and businesses who tried to use prudent margin, Obama seems oblivious to people sitting at their desks desperately trying to navigate not only margin calls but announcements that their brokerage firm has decided the maintenance requirement on certain stocks has been raised and, suddenly, people have to sell anything of quality because they need to raise cash. They get stuck with illiquid portfolios and the selling pressure on anything of quality is immense.

These people and businesses are wiped out, whatever the long term effect of the President’s policies.

And yet the president flicks away the real world news, while his supporters point to poll numbers. That’s right — we have 8.1% unemployment and a stock market crash; they take refuge in a popularity poll more than three and half years before the president would again face the voters. (To its credit the Bush team never boasted about polls numbers or showed much concern when their fortunes changed.) And in their spare time they devise a juvenille plot to attack a radio talk show host.

Rather than ruminating on the worsening economy, Obama is cheered by polls and fixated on redesigning America. The cratering economy doesn’t give him pause. Instead it encourages him to speed up before the voters catch up with him.

And he seems intent on running “victory laps” over the stimulus bill passed weeks ago. Surely [2] campaign-style events touting his handiwork don’t do much to improve the economic outlook going forward. And his cheesy [3] recovery logo only reinforces the sense that he is obsessed with garnering credit, keeping his poll numbers high and reinforcing awareness of government’s growing presence in citizens’ lives. None of this has much to do with improving the climate for job development, economic growth, and private sector confidence.

Defenders of the president dismiss the notion that Obama’s policies and rhetoric are in any way responsible for our current plight. It happened on Bush’s watch! Of course it did.  But they misstate their opponents’ criticism — another straw man in a growing army of them. The question is not whether Obama caused the recession, but whether he is making it worse. Even the [4] AP spots the fallacy of the Obama administration’s defense: “Although the administration likes to say it ‘inherited’ the recession and trillion-dollar deficits, the economic wreckage has worsened on Obama’s still-young watch.”  And it is simply folly to deny that the devastation of wealth in the stock market has made things worse and further unnerved Americans. The stock market crash is the greatest anti-stimulus development of his presidency. Obviously, consumers and homeowners feel even less financially secure than they did when the Dow was 3,000 points higher.

[5] Donald Luskin writes:

What will our world look like when President Obama “reforms” health care by nationalizing it given that it represents about one sixth of U.S. economic activity (and the part that’s still working)? What will happen to the cost and availability of electricity when he puts in place a “cap-and-trade” tax on carbon emissions? What will happen to Wall Street when taxes are raised on hedge fund and private-equity managers? What will happen to all of us when all our taxes go up and our deductions go down?

I have a pretty decent idea that none of that will lead to anything good at least not economically. You may disagree. But can’t we at least agree that President Obama is stirring the pot by ramming all these things through now, at a time when he ought to be calming things down so we can all catch our breath and the economy can get back on its feet?

Perhaps if the Treasury Department was fully staffed or if Paul Volker was not apparently banished to an undisclosed location, the president might have a better grip on why his anti-business, anti-wealth-creating policies and rhetoric have sent the markets skidding. Maybe if the national press were less invested in his New Deal II vision, he would confront daily criticisms and aggressive questioning about his schemes. And if he spent more time talking to agitated wealth creators, investors, retirees, and middle-class parents and less time at photo-ops and campaign-style rallies with handpicked fans, he might internalize what it means to lose half or more of your retirement or college fund.

But on he strides, into the Brave New World of a government-directed economy. (Incidentally, if Tim Geithner is not the best advertisement for limited government I don’t know what is.) And the scariest part of the first six weeks of this administration? The realization that, contrary to his defensive remark in his joint address to Congress, he really doesn’t “get it.”


Article printed from Pajamas Media: http://pajamasmedia.com

The $900 million US gift to Hamas

The $900 million US gift to Hamas

Mladen Andrijasevic

Could someone please pinch the US officials who attended the Gaza Reconstruction Conference?

Daniel Pipes
quotes U.S. Rep. Mark Kirk (Republican of Illinois): “To route $900 million to this area, and let’s say Hamas was only able to steal 10 percent of that, we would still become Hamas’ second-largest funder after Iran.”
In other words, the Grad rockets that will fall on my head in Be’er Sheva when next time Hamas attacks Israeli civilians will have come from the taxes paid by my fellow compatriots.  Is this what Americans want?  Is this what America stands for?
The few questions about the donors’ conference in Gaza that I would like to ask are not what this will do to us in Israel, but what it has already done to American officials, to the US itself, and to our whole civilization. What Mark Kirk said is just logical, yet the people in the Administration who came with this plan do not seem to realize how absurd what they are doing is. How can it be?
How can it be that the US Administration is giving millions to a genocidal organization whose Article 7 of the Hamas Charter reads “O Muslim! there is a Jew hiding behind me, come on and kill him’?
At what point did US officials start behaving like Soviet ones – saying things that they and everyone else, know are lies and yet they continue to do so?  How on Earth can these officials reconcile it with their own conscience?  But even assuming that they find a rationale, do they really believe that helping Hamas attack Israel is in the US interest?
At what point have these officials stopped been challenged by the press?  Will anyone of the reporters ask Secretary of State Hillary Clinton how can she reconcile her beliefs with giving money to an organization so it can deliberately target civilians in Israeli cities?
Where is the uproar? Where are the protests?
At what point has America changed?
Can someone please pinch these officials and remind them what the US used to stand for?

Page Printed from: http://www.americanthinker.com/blog/2009/03/the_900_million_us_gift_to_ham.html at March 09, 2009 – 10:02:59 AM EDT

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