Freedom Line Blog

Today, the U.S. Commerce Department reported disappointing 2.0% gross domestic product (GDP) growth for the third quarter of 2010.  Not only is that number below the expected 2.2% rate, it’s also below the rate needed to substantively reduce our 9.6% unemployment rate.  This now means that GDP growth rates for the five quarters of our current “recovery” have been 1.6%, 5.0%, 3.7%, 1.7% and now 2.0%.

Here’s how that compares to the Reagan recovery, which focused instead on cutting taxes and reducing government regulation.  In the five quarters following implementation of the Reagan tax cuts in January 1983, we posted remarkable growth rates of 5.1%, 9.3%, 8.1%, 8.5% and 8.0%.

So remind us again:  Who is the one blinded to “facts and science,” Mr. President?

Consistent with his vision of himself as point guard directing the entire universe, Barack Obama has repeatedly scolded his German counterpart Angela Merkel to pursue more of the Keynesian “stimulus” he prefers.

Today, however, employment data provided the latest vindication of Germany’s rejection of Obamanomics.  Despite the worldwide economic malaise, German unemployment has now fallen to its lowest level in almost 20 years.  Its unemployment rate is now 7.5%, and its total number of jobless fell below the 3 million threshold for the first time since 1992.  Here in the U.S., meanwhile, we’ve now seen the unemployment rate rise from 8.2% when Obama signed his $814 billion “stimulus” in February 2009 to 9.6% today.

Obama loves to lecture campaign crowds that those opposing his agenda are blind to “facts and science,” but this latest data once again proves that he’s the one refusing to acknowledge hard reality.

Dwight M. Jaffee, professor of finance and real estate at the University of California, Berkeley, points out in The Wall Street Journal that “Today 90% of the $14 trillion in outstanding residential mortgages is controlled by the Federal Housing Administration (FHA), the Department of Veterans Affairs, or Fannie Mae and Freddie Mac – with the latter two under government conservatorship.”

Ninety percent?  Wait a minute…  Doesn’t every dizzy big-government leftist from Barack Obama to Paul Krugman tell us that “deregulation” of the housing sector caused our economic difficulties?  The fact is that the housing finance market is one of the most regulated, not least regulated, sectors of the entire economy.  Thanks to Professor Jaffee, we are reminded of the sheer scale of that regulation, as well as the left’s efforts that fed the housing bubble.

The Wall Street Journal‘s Daniel Heninger explains why the New York State Comptroller race is the most important race no one has heard of:

In another fascinating article from Reason Magazine, three policy experts explain how governments in Canada, New Zealand and post-WWII America slashed government spending and spurred economic growth.  Each expert highlights the strategies used to achieve the respective financial miracles, but one from Canada deserves special mention:

In assembling these cuts, (Canadian Finance Minister) Paul Martin didn’t follow the usual pattern of consulting interest groups one by one. Instead, he held four televised regional consultations in which various lobbyists, experts, and ordinary citizens contended with one another. Martin also spoke directly to the public about what was needed to turn Canada’s budget around. In October 1994, his Department of Finance published a report, A New Framework for Economic Policy, showing that in order to keep the ratio of debt to GDP from rising, government had to run a substantial surplus on its program budget—that is, have revenues significantly exceeding state expenditures.

Public debates used to be a spectator sport in the civilized world.  (Remember reading about the Lincoln-Douglas debates?)  If Republicans win back control of at least one house of Congress, it would behoove their leadership to find ways to nationalize spending issues with public debates.  And, if members of Congress are too afraid to step forward and defend principles, they should consider sponsoring debates featuring lobbyists, policy wonks and activists.

We all know who votes for whom.  Let’s get them in the same room, on camera and hear their pitch.

In a refreshing victory today for individual freedom, the concept of federalism and Constitutional principles, a federal judge in Florida rejected the Obama Justice Department’s request to dismiss the challenge by 20 states against ObamaCare’s unconstitutional provisions.

Among other things, Judge Roger Vinson ruled that the states can proceed in their argument that ObamaCare’s individual mandate, which forces citizens to engage in involuntary commercial transactions by purchasing insurance, violates the Constitution.  The Obama Administration, which couldn’t seem to decide whether ObamaCare passed Constitutional muster as a “tax” or under some other convenient authority, contended that the challenge should be thrown out in its entirety.  With this preliminary legal victory, the case can now proceed toward trial.

Earlier, CFIF profiled Eric Singer of Congressional Effect Management as the foremost proponent of avoiding political risk by investing in the stock market only when Congress it out of session.  In his own commentary, Singer blasts Speaker Nancy Pelosi’s (D-CA) do-nothing-right caucus for failing to address the budget crisis they created:

As the nation watches in horror as its debt begins to grow beyond the point of no return, the Congressional Budget Office continues statically scoring all legislation.

It assumes that if tax rates are raised, taxes received by the Treasury will go up proportionately. It disregards the impact of the extra 10 billion hours it now takes to figure out our taxes.

It ignores the fact that in the face of 1,400 new regulations from health care and financial overhauls (Sarbanes-Oxley had only 16), virtually all businesses will slow down and hoard cash as they try to understand what the new rules might be.

Static scoring assumes that the uncertainty created by the presence of new laws and new regulations does not affect behavior or taxes collected. Static scoring assumes some sucker will always be available to buy our debt no matter how much we waste. Worst of all, it assumes no one will change behavior to reduce taxes.

Every assumption of the static scoring model is demonstrably false. Higher tax rates usually result in lower revenues as people change their actions to reduce their tax burden. This will certainly happen if some or all of the Bush tax cuts expire and the economy continues to sag as a result. The time, cost and restraints of new regulations can choke businesses.

The kind of rampant uncertainty caused by the explosion in federal regulations will continue to slow America’s economic recovery.  Riffing on Singer, maybe after passing CFIF’s ‘One More Vote’ initiative, the country can pass a constitutional amendment to limit the amount of congressional work days.

H/T: Investor’s Business Daily

How’s this for drive-by media bias?  Today’s Washington Post runs the deceptive headline “Report Gives Stimulus Package High Marks.” Hmmm.  That sounds like a counterintuitive “Man Bites Dog” story worth reading.  So who issued the report?  The Post’s first paragraph admits that it comes from White House itself.  Worse, it was overseen by that respected rock of good judgment and common sense, Vice President Joe Biden.

Even with that baked-in bias, the White House report doesn’t seem to focus on how the $814 billion “stimulus” supposedly succeeded.  Rather, it emphasizes how the effort has already distributed 70% of the allocated funds, and managed to avoid “the fraud charges that plague more routine government spending programs.”  That’s it?  That’s the best that even Joe Biden can claim?  That should actually come as discouraging news, not encouraging news, to “stimulus” proponents.  After all, if 70% of its funds have already been spent, but we still haven’t experienced its promised results, what remains other than $814 billion added to our nation’s debt?  The White House promised that unemployment would top out twelve months ago at 8% if the bill passed, but we remain stuck at 9.6%.  Instead of igniting our economic furnace, it has merely clouded growth and undermined the business and hiring climate.

The White House and its apologists speculatively claim that the “stimulus” averted another great depression, but today’s Wall Street Journal carries an analysis by former Senator Phil Gramm devastating that assertion.  Gramm compares U.S. growth and employment figures to other developed countries that didn’t engage in the irresponsible “stimulus” profligacy we did, and shows that we lag far behind.  As the Post story notes, Obama’s “stimulus” was “the largest effort in U.S. history to counteract the effects of a recession.”  All it has done is prove once again that government doesn’t create jobs or growth, but economic uncertainty and debt.

Conservative reaction to the House Republicans’ “Pledge to America” varies.  Whatever one’s views toward the plan, however, it did omit an item high on conservatives’ agenda:  a proposed Constitutional balanced budget amendment.  Enter CFIF’s “One More Vote,” which refers to the fact that Congress fell just one vote short in the 1990s of passing a balanced budget amendment and sending it to the states for ratification.  Our “One More Vote” initiative, which readers are urged to sign, would not only require a balanced budget, but prevent that from becoming a convenient excuse to raise taxes by requiring a 60% supermajority to create or increase taxes, or to raise the nation’s debt ceiling.

Party change won’t be enough this time around.  With “One More Vote,” we can collectively create something more lasting for America’s future generations.

Happy semi-anniversary, ObamaCare!  Just six months ago, your proud papa proclaimed you the vehicle for lasting American voter compliance, errrr, contentment.  Your Uncle Joe Biden elegantly pronounced that you were “a big f***ing deal.” Don’t let the fact that you’re now sinking their party’s majority get you down, though.  To celebrate, why don’t we go out and deny private health insurers the requested premium increases that they’ll need to accommodate their collective new costs of feeding your voracious appetite?  Making them run their businesses at a loss will be great for celebratory laughs!

Over and over again, President Obama and other defenders of trickle-up stimulus labeled 2009’s “Cash for Clunkers” a positive example of federal spending and market manipulation.  Obama himself eagerly called it an “overwhelming success,” and Nancy Pelosi curiously professed that it “has been successful beyond our wildest dreams.”

Economists’ verdict?  Not so much.

Writing for the National Bureau of Economic Research, economists Amir Sufi from the University of Chicago and Atif Mian of the University of California Berkeley report that Cash for Clunkers had no substantive net positive effect:

A key rationale for fiscal stimulus is to boost consumption when aggregate demand is perceived to be inefficiently low. We examine the ability of the government to increase consumption by evaluating the impact of the 2009 “Cash for Clunkers” program on short and medium run auto purchases. Our empirical strategy exploits variation across U.S. cities in ex-ante exposure to the program as measured by the number of “clunkers” in the city as of the summer of 2008. We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.”

This is Obamanomics and “stimulus” policy in a nutshell:  Billions in spending, but no positive effect.  Future generations forced to pay for it will not be retrospectively amused.

Interesting reading from MSNBC.com explains that 46 states, plus the District of Columbia, already have internet sales taxes on the books.  However, most businesses with an online presence either don’t know or don’t pay.  In many circumstances the sales tax (as it’s called when the seller collects and reports the tax) is turned into a use tax (i.e. shifting collection and reporting to the buyer.)

The State of Alabama is apparently sending out notices for residents to pay up – for purchases over the last three years.

Here’s a list of states considering more direct legislation in order to recoup the estimated $8.6 billion in lost “revenue.”

‘Amazon laws’

States that are currently considering requiring out-of-state retailers to collect sales taxes on online transactions:

• California
• Connecticut
• Illinois
• Iowa
• Maryland
• Minnesota
• New Mexico
• South Carolina
• Tennessee
• Vermont
• Virginia
• Wisconsin

Oh, joy.

Wall Street Journal columnist Peggy Noonan gives one of the best descriptions of the motivation behind the Tea Party movement to date.

For conservatives on the ground, it has often felt as if Democrats (and moderate Republicans) were always saying, “We should spend a trillion dollars,” and the Republican Party would respond, “No, too costly. How about $700 billion?” Conservatives on the ground are thinking, “How about nothing? How about we don’t spend more money but finally start cutting.”

That laser-like focus, to Noonan, is what connects all Tea Party-backed candidates this election cycle:

That is the context. Local tea parties seem—so far—not to be falling in love with the particular talents or background of their candidates. It’s more detached than that. They don’t say their candidates will be reflective, skilled in negotiations, a great senator, a Paul Douglas or Pat Moynihan or a sturdy Scoop Jackson. These qualities are not what they think are urgently needed. What they want is someone who will walk in, put her foot on the conservative end of the yardstick, and make everything slip down in that direction.

A vast swath of the American people understand the danger our country’s finances – and by extension, our experiment in self-rule – face.  The Tea Party movement is an important element in righting the ship of state before it’s too late.  Hopefully, congressional members owing the movement their election victories will display the fortitude necessary to say no to more spending.

In his weekly Wonder Land column entitled “It’s the Spending, Stupid,” The Wall Street Journal’s Daniel Henninger describes how “concern” over out-of-control federal spending has reached the boiling point:

They, the voters, are not ‘concerned’ about Uncle Sam’s spending floating toward the moon.  They are enraged, furious, crazed and desperate.”

Heninger rightfully points out that it won’t be enough for voters to simply return Republicans to House and Senate majorities this November.  Rather, something more lasting, tangible, and assuring is needed:

If voters give control of the House to the GOP, the party desperately needs to establish credibility on spending.  Absent that, little else is possible.  Independent voters now know that the national Democratic Party, hopelessly joined to the public-sector unions, will never stabilize public outlays.  In a sense, the GOP’s impending victory is meaningless, a win by default.  If the Republican rookies entering Congress next year don’t do something identifiably real to stop the federal spending balloon, voters two years from now will start throwing the GOP under the bus.”

Enter CFIF’s new “One More Vote” citizen activist campaign.  “One More Vote” refers to the fact that Congress fell just one vote short in the 1990s of passing a constitutional amendment requiring a balanced budget, and sending it to the states for ratification.  Echoing Daniel Henninger’s commentary this week, the “One More Vote” homepage states that, “Currently, there are several worthy ideas proposed in Congress.  But we need more than ideas.  We need a solution.”  Accordingly, “One More Vote” proposes a Constitutional amendment requiring (1) a federal balanced budget annually, (2) a 60% majority of both houses of Congress to raise the debt ceiling, and (3) a 60% vote of both houses of Congress to increase or create new taxes.

It’s precisely the type of real, lasting and tangible change that enraged American voters described by Henninger demand.  Click on “One More Vote” now, and join the movement.  This time, let’s make sure the change is real.

This week, the Congressional Budget Office announced that the nation’s budget deficit has already reached $1.3 trillion, with another month to go in the 2010 fiscal year.  At 9.1% of gross domestic product (GDP), that makes it the second-largest deficit outside the World War II years, second only to last year’s deficit that reached 9.9% of GDP (mainly because GDP was lower in 2009 than 2010).  In a generous act of understatement, the CBO attributed this mind-boggling amount to lower revenues and “elevated spending associated with the economic downturn and the policies implemented in response to it.”  Another round of “stimulus,” anyone?

To put that in perspective, take a look at this straightforward bar graph.  President Bush’s final deficit was approximately $450 billion, which Obama tripled in his first year alone.  Now, Obama’s second deficit continues that unbearable amount.  Furthermore, efforts to scapegoat Bush for Obama’s first deficit fail, because such things as the $800 billion “stimulus” was Obama’s initiative, not Bush’s.

So President Obama brought us a crippling $814 billion “stimulus,” and now his promised “Summer of Recovery” has come and passed.

Undeterred, he nevertheless instructs us that what America needs is another $50 billion, or 1/16th the original stimulus amount, in new highway, airport runway and rail construction.  Obama proclaims that “this will not only create jobs now, but will make our economy run better over the long haul.”  So let us get this straight.  Obama turned the $450 billion deficit that he inherited into consecutive $1.4 trillion and $1.3 trillion deficits for his first two years in office, commenced a regulatory onslaught against the private sector, threatened growth-killing regulations like “Net Neutrality” and union card-check, demonized the business community that creates jobs, signed stifling new burdens like ObamaCare into law and appears ready to oversee the largest tax increase in history this January 1.

But according to him, the basis of our economic malaise is…  lack of pavement?

It’s hard to appreciate the consequences of government policies when you’ve never had to make a payroll.  Noting that the Obama Administration has no person in senior management with business experience, AOL contributor Marty Robins says the most troubling deficit in Washington, D.C. is a lack of ideas from people who’ve actually had to work in a free market economy.

What we need more of in Washington are those who combine a broad understanding of the nuances and “macro” implications of public policy with an appreciation of what makes the private sector tick on a “micro” level, and what constitutes good and bad assistance and incentives.

We need those who have successfully built or built up businesses and been personally invested — in a financial and an emotional sense — in such efforts, so that they can appreciate what government can and cannot do.

Ohhhh, so ~now~ they tell us?  White House allies are instructing operatives to abandon the claim that ObamaCare will reduce healthcare costs and the deficit.  Instead, they now seek to persuade the electorate that we can “improve it.”

According to Politico, the messaging conference call and PowerPoint presentation acknowledges the failure of the promises shamelessly fed to the public by ObamaCare advocates:

The presentation’s final page of ‘Don’ts’ counsels against claiming ‘the law will reduce costs and the deficit.’  The presentation advises, instead, sales pitches that play on personal narratives and promises to change the legislation.”

If this doesn’t make you angry and ready to line up at dawn to vote this November, have your pulse checked.

The Tea Party movement is going viral.  As reported earlier, the City of Bell, CA is now Exhibit A in corrupt government.  Thousands of the majority Hispanic population in Bell protested outside city hall after it was revealed that the city council raised local property taxes 50% beyond the legal limit.

Here’s a spot-on analysis of how the Tea Party movement’s call for limited – and constitutional – government is starting to bubble up in a growing number of communities.

When people wonder why the Tea Party and other grassroots political movements start, this is a great example.  Government at any level that grows haughty, insular, and corrupt generates a reaction towards accountability and more modest models of governance.  I’m certain that the protesters in Bell don’t see themselves as part of the Tea Party movement, but the two have more similarities than differences.  They’re angry at the local model of big government arrogance and at having their pockets picked — especially considering the relatively low average household income in this Southern California community, at just under $30,000.

H/T: Hot Air Blog

The latest survey of 53 economists by The Wall Street Journal offers a clear message.  Namely, no more government “stimulus,” and extend the soon-to-expire Bush-era tax cuts for everyone, not just those earning under $250,000 annually.

Of 48 polled economists, 30 flatly rejected calls for any form of additional fiscal or monetary “stimulus.”  Only 6 economists encouraged more Obama-Reid-Pelosi style fiscal stimulus, only 5 suggested additional monetary stimulus from the Federal Reserve and just 7 suggested both.  On the issue of taxes, fully 32 of the polled economists called for extending all of the current lower tax rates, in a sharp rebuke to Obamanomics.  Only 3 economists supported an end to the Bush-era tax cuts, and only 11 agreed with Obama and Timothy Geithner in their campaign to raise taxes on those individuals and small businesses reporting income over $250,000.  Unlike Obama and Geithner, economists recognize the destructive effect that raising taxes on individuals and small businesses in the top income segments will have.

As Stephen Stanley of Pierpoint Securities summarized, “the economy needs government to get out of the way.”  Well said.