Freedom Line Blog

By all accounts, American voters have regained sobriety and will deliver resounding victories for conservatives today.  This date in history, however, provides a cautionary tale for anyone even thinking of not voting because they assume that victory is in the bag.

Today in 1948, political pundits were so certain of a Thomas Dewey victory over Harry Truman that the Chicago Tribune prematurely published its infamous “Dewey Defeats Truman” headline.  Need another cautionary tale?  How about the 2008 Minnesota Senate race between Norm Coleman and Al Franken?  There, Franken and his election attorneys somehow contorted an election night deficit into a narrow recount victory, possibly with the help of felon voters.  Nobody’s laughing now that the chronically unfunny Franken routinely makes a mockery of his Senate seat.

So don’t take anything for granted.  Too many people have fought and died to protect your right to affect this nation’s course, and too many people have worked too hard to provide alternatives to the bland “same ol’, same ol'” choice.  You don’t want to be kicking yourself tomorrow.

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.

A nice jab from the folks over at Politizoid:

Nobody should cheer bad economic news, but neither should anyone deny reality or ignore the clear consequences of toxic public policy.

Some 19 months after Barack Obama signed a nearly $1 trillion “stimulus” bill into law, the Labor Department this morning announced that unemployment remains elevated at 9.6%, and the nation lost 95,000 jobs in September.  This following Obama’s and Joe Biden’s promises of a “recovery summer.” Obama and his apologists may trot out the teleprompters and once again claim that the private sector gain of 64,000 jobs (offset by losses in other sectors to arrive at the negative 95,000 total) shows that “we’re moving in the right direction.”

No, we’re not.  Even that paltry 64,000 is down almost 30,000 from the August private sector gain of 93,000, all at a time when his “stimulus” would supposedly have the economy accelerating, not decelerating.  Further, the Labor Department announcement stated that 15,000 more jobs were lost in July and August than previously estimated, along with a 366,000 downward revision in jobs during the 12 months through March.  The bottom line:  since Obama signed the “stimulus,” unemployment has steadily risen from 8.2% to 9.6%.

By way of comparison, in the 19 months following the arrival of Ronald Reagan’s tax cuts in January 1983, unemployment plummeted from 10.4% to 7.3%.  The facts speak for themselves.

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.

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.

Last month, we highlighted the obscene self-serving nature of big government’s growth.  In “Why We’re Boiling Over:  Federal Salaries Now Twice That of Private Sector,” we detailed how federal workers earn double their private sector counterparts, and how incomes fell throughout America last year except in cities with higher concentrations of federal jobs.

Now, a Wall Street Journal study entitled “Washington Firms Soak Up Stimulus” reports that President Obama’s failed $814 billion “stimulus” package has awarded nearly $2,000 dollars per every Washington, D.C. resident.  That’s three times the national average of $695.95 per person across the rest of the country.  It’s not by coincidence, then, that D.C.’s unemployment rate of 6.3% is over three percentage points lower than the nation’s overall 9.6% rate.

Why is the nation’s fed-up electorate boiling over?  The federal “stimulus” trough provides yet another reason.

The Los Angeles Times reports that after receiving $111 million in federal stimulus money the City of Angels has only created 55 jobs.  Officials counter that whenever they get around to spending taxpayers cash the total jobs created will be 264.

Yeesh.

With California losing citizens and jobs to other states in record numbers, why not allow cities like L.A. to give $1 million to any business that promises to move into city limits and employ a domestic workforce?  Better yet, give 111 businesses $1 million in tax breaks to set up shop and revive the local economy.

American taxpayers can’t afford to spend millions of dollars for dozens of jobs.  (And government jobs at that!)  Since we need a much higher return on investment to get the economy growing again, why not direct money and incentives to businesses?  After all, they – unlike bureaucracies – can create jobs without perpetual government handouts.

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?

Moments ago, the Department of Labor reported that the nation’s unemployment rate jumped again to 9.6%.

As we reference in today’s Liberty Update commentary, this means that unemployment has now risen from 8.2% to 9.6% since Obama signed his $1 trillion “stimulus” bill in February 2009 (with the promise that unemployment would not exceed 8% under his spending plan).  By contrast, unemployment plummeted from 10.4% to 7.2% during the same timespan following the Reagan tax cuts.

This reconfirms what works:  more individual freedom, lower taxes, lower spending, less government.  It also reconfirms what doesn’t work:  more government control, higher taxes, more spending and more regulation.

In CFIF’s Liberty Update last week, we highlighted how President Obama isn’t so much “pulling us out of the ditch,” but rather setting our nation’s car on fire.  Instead of spending his time claiming credit for our inevitable cyclical rebound, Obama should recognize that his policies of higher spending, taxation, regulation and debt are only subduing it. To illustrate, we contrast the remarkable gross domestic product (GDP) growth during the Reagan recovery delivered by tax cuts, reduced regulation and a stronger dollar versus our current stagnation and possible “double-dip” recession.

Comparing unemployment trends then versus now provides another vivid illustration of the toxic effect of the Obama-Pelosi-Reid economic agenda.  From December 1982 to June 1984 – the first 18 months of the Reagan recovery – U.S. unemployment plummeted rapidly from 10.8% to 7.2%.  In contrast, over 13 months since our current economic rebound commenced in July 2009, U.S. unemployment has stagnated from 9.4% to its current 9.5%.  Of course, it is theoretically possible that unemployment will plummet by three percentage points over the next five months to match the Reagan recovery, but not even Joe Biden is silly enough to predict that.

It’s no mystery how to unleash America’s economic vigor and bring recovery:  less government and more economic freedom.  It’s just a matter of electing leaders who will actually pursue it.

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.

Already navigating a turbulent economic sea, Americans are bracing for the single largest tax increase in history this January 1.

Democrats fighting for their political lives believe they have a winner soaking “the rich,” but we’ve noted the destructive effect that raising taxes on the top bracket will have on the struggling economy.  Not only will they hit small businesses (which create most new jobs in America) particularly hard, but individuals in that bracket carry a disproportionate burden of consumer spending, which makes up 70% of our overall economy.   In this video clip from CNBC, even often left-leaning Don Peebles considers tax increases for the highest income bracket a destructive idea:

If we spend more money paying taxes, then we will have less money to invest, less money to employ workers…  We can’t take a bad situation and make it worse by taxing people more at a difficult time.”

Liberals cannot win this debate on the substance, so they instead hope to win on the rhetoric by framing the issue as “the Bush tax cuts.”  But Bush will have been gone from the White House for two full years by the time the tax increases hit.  We’re not debating new tax cuts, and Bush is long gone.  Rather, what we’re talking about are looming tax increases.  Namely, Obama’s tax increases.

Is there any periphery bounding the absurdity of the desperate political left?

The Obama Administration’s 2009 “stimulus” continues to prove itself a failure.  It promised that unemployment would peak in October 2009 at 8%, and would be down to 7.3% by now.  Instead, we remain mired near 10%.  Further, second quarter gross domestic product (GDP) was revised downward just last week to 2.4%, a slowdown from 3.7% in the first quarter and 5.0% from the fourth quarter of 2009.  Meanwhile, we’re $1 trillion deeper in debt, and the administration admitted last month that its second year deficit will reach an astounding $1.5 trillion, exceeding even its first deficit of $1.4 trillion.

Yet according to former Secretary of Labor Robert Reich, “the administration’s original sin was not spending enough.”  Commenting in today’s Wall Street Journal, Reich bizarrely adds that the Democrats’ 2009 filibuster-proof Senate supermajority somehow constituted “a fragile 60 votes” constraining Obama’s ambitions, and says that the problem with ObamaCare was that it was “not nearly large or bold enough.”  Not large enough?  Take a look at this ObamaCare flow chart, which looks more intricate than a nuclear reactor.

So how much would have been enough to satisfy Reich, anyway?  Two trillion?  Three trillion?  Ten?  It all recalls the popular bumper sticker – “Don’t Tell Obama What Comes After ‘Trillion.'”

Seems like someone at the Associated Press read our commentary “Raising Taxes on ‘The Rich’ Will Harm the Economy” from last week’s Liberty Update.  Either way, we couldn’t help but note an AP headline “Economy Weakens as Wealthy Spend Less” released today.

The AP story begins, “Wealthy Americans aren’t spending so freely anymore.  And the rest of us are feeling the sqeeze.”  The story goes on to lament that the economy appears to be slowing as “the rich” spend less:

Think of the wealthy as the main engine of the economy:  When they buy more, the economy hums.  When they cut back, it sputters.  The rest of us mainly go along for the ride.”

Noting that the Obama Administration seeks to increase tax rates on that critical income segment, the AP report states ominously that, “the wealthy may be keeping some money on the sidelines due to uncertainty over whether or not they will soon face higher taxes.”

The good news is that there’s still time for the Obama Administration to wake up and smell the same coffee the AP is smelling.

Earlier this month, we noted the sad irony that leaders from welfare states like Germany now lecture President Obama about fiscal discipline.  At the recent G-20 summit in Toronto, Obama attempted to strongarm other industrialized nations into more of the deficit-inflating “stimulus” spending that has failed here, but to no avail. Germany has actually announced budget cuts, whereas Obama admitted that this year’s $1.5 trillion deficit will exceed even last year’s $1.4 trillion pit.

Yesterday, German labor market data provided additional evidence that they were right, and Obama was wrong.  For the thirteenth consecutive month, German unemployment fell, and Germany has now recovered its jobs lost during the recession.  Meanwhile, U.S. unemployment remains near its recessionary high at 9.5%, compared to Germany’s 7.6%.  Obama continues to employ his mindless “jobs saved or created” talking point, but Germany suggests that fiscal discipline and spending restraint are the better course.

Perhaps Obama can go on the German version of “The View” and explain to them why his agenda works better despite the stark evidence.

The Obama Administration now acknowledges that this year’s budget deficit will exceed last year’s.  Their 2010 $1.5 trillion deficit constitutes 10% of gross domestic product (GDP), up from 9.9% last year.   The administration also raised its 2011 deficit forecast to $1.4 trillion, up from its previous $1.267 trillion projection.

Barack Obama repeatedly – and falsely – seeks to escape blame by scapegoating his predecessor for last year’s $1.4 trillion deficit.  He promised as a candidate to address the deficit, but instead more than tripled it in his first year with such things as his failed $1 trillion “stimulus.”  So what will be his alibi for this year’s deficit?  And for 2011’s?

Is there no expiration date on “Blame Bush?”

Another falsehood that Obama advances is that he and Congressional Democrats were simply handed this deficit on January 20, 2009.  The truth, however, is that Nancy Pelosi, Harry Reid and Democrats recaptured Congress (which controls spending under the Constitution) in November 2006, when the deficit was merely $248 billion.  In just four years, they’ve managed to multiply that number by six.