Busted! - Obama Sabotages Economy!

When evaluating Obama on economics, we don’t need to get into his more debatable decisions or construct complex counter arguments because we have enough issues where anyone can see that Obama is creating incentives that are the opposite of those he should be creating.

If housing prices were to stop falling and start rising, and if everyone were confident that this would happen, then that would pretty much fix the economy overnight. Therefore, I have previously explained How to Fix the Economy – Fast by the President or Congress announcing that homeowners will be able to deduct their entire mortgage payment and not just the interest. Of course, this would not be a remedy for all crashes, but it happens to be a remedy for this particular crash.

If one were inclined to further damage the economy, then one could reduce the mortgage deduction rather than increasing it.

So which did Obama do?

President has Obama announced plans to reduce the amount of mortgage interest that wealthy people (over $200,000) can deduct.

Busted!

Herbert Hoover raised taxes during a recession, thus helping to turn a recession into The Great Depression. Barack Obama is the first President since Hoover to schedule a tax increase during a recession. Just knowing the tax increase is coming will cause people and businesses to feel like they will have less money in the future, which will cause them to save more and spend less, thus prolonging the recession.

Busted!

On October 15^th, 2008, after the market had crashed and after Obama had already spent a year prophesying doom and saying that we were in a depression, he bashed Bush for having a deficit of a little over a half trillion dollars. Obama was thus saying that in a bad economy, it was especially harmful to have deficits of a little over a half trillion dollars. Then after only five weeks in office, and given a slightly worsened economy, Obama tripled the deficit to 1.7 trillion dollars. By his own logic, he was causing immense harm to the economy – much more than Bush.

Busted!

If Obama wanted to restore some of the lost value in our retirement accounts, he could increase the incentive for people to buy stocks by announcing plans to decrease the capital gains tax. Instead, Obama has announced plans to increase the capital gains tax.

Busted!

Global profits, growth, supply, demand, need, confidence, and production were all fine until September 2008. As of March 2009, supply, production, and need still exist, but in September 2008, confidence, which had been gradually declining, fell off a cliff, and thereby turned what could have been a minor recession into a major and deepening recession.

If Obama wanted to improve the economy, he would do everything he can to increase confidence; however, starting in the primaries in 2007, Obama has done everything he can to destroy confidence in the current and future economy with his words and his actions.

Busted!

To be fair, these examples may not have a huge impact individually, but together they can prolong the recovery. Also, why are there so many of these bad economic ideas from Obama, and why are they so obviously bad, and why does he have so few good ideas (like an $8,000 tax credit for first time home buyers), and why are the good ideas so weak (why only $8,000, and why only first time buyers)?

Then again, a wise friend of mine always says, “Never blame on malice, what can be explained by stupidity.”

Hmm … Although he quit smoking several times in the last year, Obama has been a smoker for about 30 years after all, which sounds pretty stupid to me. Then, he recently referred to the ubiquitous economics term "price to earnings ratio" as the "profit and earnings ratio", which sounds like a Bushism. Also, while in Europe in early April, he told the Europeans that Austrians speak “Austrian”, when in fact they speak German – sounds like another Bushism. On 4/13, I watched him declare in very careful and measured speech that he wants to halt the “rise in privacy” on the high seas – another Bushism. You may recall that he walked into a window at the White House because he thought it was a door – didn’t Bush do the same thing? In fact, Obama uses a teleprompter more than any previous president including Bush. Of course, you will never see any of Obama’s failings lampooned on Saturday Night Live, but let’s not get sidetracked.

Given that Obama seems to have the self discipline of Bill Clinton and the intelligence of George Bush, and given that he has no training or self study in economics, maybe we shouldn’t find it so hard to believe that Obama could just be really incompetent on economics.

On February 9^th I witnessed Obama create high expectations by saying that Tim Geithner would present an impressive and detailed plan the next day. Then on the following day, I watched as Geithner basically said that he had no details and didn’t know exactly what to do. The stock market plummeted in response to their incompetence.

Obama frequently makes the weasely statement that he will create or save 3.5 million jobs. However, we cannot hold him accountable for this claim because the economy could lose 20 million more jobs, and Obama could claim that it would have lost 23.5 million jobs if he had not saved 3.5 million. If Obama knew what he was doing, then he would make statements for which we can hold him accountable.

Obama frequently says he wants to cut taxes for 95% of Americans, but he will raise the cost of energy. Perhaps Obama doesn’t know that 100% of Americans use energy. He also raised the tax on tobacco 156%. Perhaps he thinks that only the wealthiest 5% of Americans use tobacco.

On February 5^th, Obama complained that his critics argue, “This is not a stimulus bill, this is a spending bill.” To which Obama replied, “Well what do you think a stimulus bill is? That’s the whole point!” Perhaps Obama doesn’t know that tax cuts and deregulation can also stimulate the economy. Perhaps Obama doesn’t know that some spending stimulates more than other spending.

Obama assumes his hyper-spending will help the economy, but apparently he doesn’t understand that he will have to offer higher interest rates to tempt China and others to loan him that much money, and that higher interest rates will do significant damage to the economy.

Obama has decided to change the rules and cheat General Motors bond holders (people who loaned money to GM). Instead of upholding the law that has been in existence for the last one or two hundred years, Obama has decided that the unions will get money legally owed to the bond holders. Apparently Obama doesn’t know that this hurts pension plans that owned GM bonds. Even worse is the effect on all businesses in America in the future. Suppose a company wants to sell bonds to raise money to build a new factory. Apparently Obama doesn’t understand that this company will now have to pay a higher interest rate to entice buyers who will be afraid that the government might cheat them too in the future. Now suppose this company is Ford, which is another car company and another company with unions. Apparently Obama doesn’t know that he just destroyed Ford’s ability to compete.

Obama argues that if you pay for other peoples’ health care, then your sacrifice pays for itself because they miss fewer work days. If Obama would think for himself, he might understand that:

• An entire 40 year minimum wage career would not generate enough wealth to equal the cost of a lifetime of top quality health care.
• You personally would get less than 1% of the benefit for your sacrifice because the benefit would be received almost entirely by the individual you were forced to help, by the health care industry, and by China.
• A minimum wage worker uses about as much energy and produces about as much waste as a successful person.
• A minimum wage worker is less likely to exercise and eat right, and more likely to smoke and drink.
• Free health care reduces the incentive for a minimum wage worker to become more successful.
• Giving citizenship and thus free health care to millions of illegal immigrants would magnify his mistake.

Obama has increased the mileage requirements for American car manufacturers, which he claims will save money on fuel and materials, but apparently Obama does not understand that these smaller cars may actually cost more because of less safety, which causes more frequent injuries and more severe injuries. On a related note, Obama says that the smaller cars will be safe because they will use better safety features. Perhaps Obama does not understand that these same safety features could be used in larger cars, which would make them even safer than the new small cars. Obama also points out that some small cars have the highest safety ratings, and are thus even safer than some large cars with lower safety ratings. Perhaps Obama does not understand that government crash tests only rate cars against other cars that are the same size.

Obama wants to raise taxes on businesses. Apparently Obama doesn't understand that he would be creating an disincentive for anyone to start a new business and that existing businesses would have a powerful new incentive to raise prices, lay off employees to cut costs, or move overseas. Maybe Obama does understand these things. Maybe what Obama doesn’t understand is that 100% of Americans buy stuff from businesses and almost as many are employed by businesses.

Obama has said that he will cut 100 million dollars from White House budget. He claims that 100 million is a significant amount; whereas, earlier he claimed that 8 billion dollars of pork was miniscule. Perhaps Obama doesn't understand that 8 billion is way bigger than 100 million.

I’ll bet that millions of Americans could figure out how to generate more jobs than Obama while spending less money.

Argument from Authority

When evaluating Obama on economics, we have seen that we don’t need to get into his more debatable decisions or construct complex counter arguments because we have enough issues that are self evident and where the facts speak for themselves. However, it seems like many Obama fans don’t think the facts speak for themselves, and they don’t trust their own ability to think. I say this because they seem to only believe the experts, authorities, the New York Times, etc. For these folks, let’s also look at some expert conclusions.

I know that relying solely on the experts is an argument from authority, which is a classic logical fallacy, but the left seems to place all their faith in authority. For example, consider that you must be a climatologist for the left to agree that you might have anything worth saying about global warming. Ironically, such elitist and conformist groupthink is anti-liberal, but let’s not get sidetracked.

Consider that Obama is raising taxes, but a 2007 paper by economist Christina Romer, who is now chair of Obama's Council of Economic Advisers, analyzed tax changes since World War II and concluded that a "tax increase of one percent of GDP lowers real GDP by about three percent" and by at least 2.2 percent. Now that Romer is part of the Obama administration, she says that a tax increase of one percent of GDP would only lower real GDP by one percent instead of three percent. Why would any competent economist have been off by a factor of three, and why would any President want to lower the GDP at all?

On 3/9 Obama supporter and former GE chairman Jack Welch said that Obama is focusing primarily on political initiatives like health care and energy when he should be focusing on the economy but that if you say anything about it, you instantly become a pariah in New York Society. In his own words, “This guy is locked in another world. And he’s throwing all these initiatives into this game in the middle of a crisis. Focus on the crisis! Focus on the economy!” Asked whether Obama’s initiatives like health care and energy are inter-related with the economy, Welch said, “Get out of here! They’re not related at all! … I mean it’s, it’s crazy!”

Welch then elaborated on pressure to conform whenever he discusses Obama, “I had cocktail parties this weekend; I stayed in New York. If you even bring up the name Barack Obama and start to go down this [road to criticism] — I love the guy. I think he’s great. I think he has a beautiful family. I think he’s a good man. But these – you bring up a comment about him, and all of a sudden you’re a pariah! You’re not American! You’re a bad guy. If you even bring his name up. My two trust-fund daughters – if I bring his name up in anything other than a glorifying way – they don’t have any critical thinking about it – at all!”

On 3/9, long time Obama supporter Warren Buffet made statements on CNBC that were widely underreported:

• “Joe, it--if you're in a war, and we really are on an economic war, there's a obligation to the majority to behave in ways that don't go around inflaming the minority. If on December 8th when--maybe it's December 7th, when Roosevelt convened Congress to have a vote on the war, he didn't say, `I'm throwing in about 10 of my pet projects.”
• “I think--I think a lot of things should be--job one is to win the war, job--the economic war, job two is to win the economic war, and job three. And you can't expect people to unite behind you if you're trying to jam a whole bunch of things down their throat. So I would--I would absolutely say for the--for the interim, till we get this one solved, I would not be pushing a lot of things that are--you know are contentious, and I also--I also would do no finger-pointing whatsoever.”
• “It's just a mistake, I think, when you've got one overriding objective, to try and muddle it up with a bunch of other things.”

On 3/11 The Wall Street Journal reported that a survey of 49 economists gave Obama a grade of “F” on the economy. They gave Obama a score of 59%. They gave Geithner a score of 51%, and they gave Bernanke a score of 71%.

On 3/13 The Wall Street Journal reported that Chinese Premier Wen Jiabao has warned that he has been closely watching the policies of Barack Obama and he is concerned about the safety of money China has loaned to the US.

Obama supporter, entertainer, and financial expert Jim Cramer has identified several flaws with the policies of Obama and Geithner, and offered many good alternative ideas on his CNBC show Mad Money. On 3/3 Cramer summarized his criticism on the Today show by saying that Obama’s budget was a “radical agenda,” and that, “This is the greatest wealth destruction I’ve seen by a President.” Rick Santelli of CNBC also has become famous for bashing Obama about forcing us to pay for our neighbors’ mortgages. Others on CNBC frequently disagree with Obama, but in less spectacular ways. Also, CNBC is where Obama supporter Warren Buffet criticized Obama on 3/9.

Media Bias Sidetrack: The White House and the Daily Show have thus begun an unprecedented smear campaign against Jim Cramer, Rick Santelli, and CNBC. The Daily show tries to claim a plausible justification (without mentioning Obama) for their sudden, nasty, and unprecedented smear campaign, but as a viewer of both shows, I see through their BS. Jon Stewart even admitted that he was going after CNBC, and not just Cramer. The only reason the Obama network (a.k.a. MSNBC) has held back is because CNBC is also part of NBC; therefore, Jeffrey Zucker, head of NBC, and Jeff Immelt, CEO of its parent company (GE), worked behind the scenes and held a meeting with the people at CNBC in which they ordered CNBC to stop criticizing Obama. As of 3/13, Cramer is responding by backing down and contriving praise for Obama. I guess he wants to retain his ability to be a star when he visits college campuses, and he wants to remain welcome at cocktail parties in NYC. Given the purge of CNBC, I guess independent thinkers will have to start watching Fox Business News.