Greetings from the Left Coast, where we here at LeftCoastBlues do the heavy thinking for those who just can't be bothered.
The other day I was headed out to lunch with some business colleagues, and the subject turned to fuel prices. I was astounded when one of my colleagues went off on the "obscene profits" the oil companies were making. I was astounded because this person used to work for a consulting company that went into troubled businesses, analyzed their financial statements and business practices, and told them what they needed to do to fix things. Of all the people I know, he certainly understands - at least intellectually - that the percentage numbers are what matters, not the dollars. Yet he was joining in the chorus condemning Exxon Mobile for their Q1 profit number - the biggest ever, as we have repeatedly been told.
Now I understand that people are hurting, and they want someone to blame. Heck, I've got a pretty fuel-efficient car, and I live less than 10 miles from my office, and I'm still not crazy about paying nearly five bucks per gallon for gas. And the oil companies are an easy, obvious target, and it's all too easy for the people who are really to blame for this mess to shift our attention to the big, bad oil companies.
But can we have some perspective here, please?
Exxon Mobile is a publicly traded company. It is therefore required to make its financial statements public as well. You can go to their Web site and download their annual report, along with several other documents that they are required to publish.
In 2007, Exxon Mobile's net income was roughly 10.4% of sales. Of course, sales and other operating revenue totaled almost $400 Billion, so that 10.4% is a huge number. But the revenue number is also huge - almost mind-bogglingly huge - and the income number is only important as it relates to the revenue number. Now a net income of 10.4% is indeed good, solid performance. It's about on par with AT&T, whose net income was about 10%. It's a heck of a lot better than, say, Costco, whose net income in 2007 was only 1.7% of sales, or Fluor Corporation, with 3% of sales. On the other hand, the Boeing Company had net income of 12%. Do we need a windfall profits tax on the obscene profits of the aerospace industry? 3M had net profits of 16.7% - do we need a windfall profits tax there? How about the software industry? After all, Microsoft's 2007 net income was 27.5% of sales! Oracle's was 23.7% of sales! Time for a windfall profits tax on the software industry!
A publicly held corporation exists for one and only one reason: to deliver value to its shareholders. So who are the shareholders of Exxon Mobile? No corporate officer or board member owns more than 0.02% of the company's outstanding shares. We know that, because that's the kind of information a publicly held corporation has to publicize. The rest are owned by...well, by everyone from millionaire investors to the proverbial little old lady in tennis shoes. You may own some if you have money in a mutual fund, or a retirement or pension plan. And the corporate officers and board members have a fiduciary responsibility to the shareholders that can result in them going to jail if it is breached. Remember Kenneth Lay and Enron?
Congress doesn't have the power to repeal the law of supply and demand. If supply is constant or declining, and demand is rising, the price will go up. It's one of the most fundamental laws of economics. If you want to see lower prices in a free, global market - which the market for crude oil is, whether we like it or not - you must either increase supply or decrease demand. And if you control prices by artificially forcing them lower without increasing supply, you will have shortages. Anyone else out there remember the days of the Arab oil embargo and the long lines at the gas pumps back in the 1970s? Want to go back to that? Me neither. Right now gas is expensive, but it's available. That's a good thing. That's how free markets work, if they're allowed to function.
Can someone tell me, please, exactly how a windfall profits tax on the oil companies is going to make the price of crude oil or gasoline go down? Those of you who are in business, imagine a situation where you are told by the government: "Look, you're making too much money on this stuff you're producing and selling. So we're going to pass a special tax that will take away from you any money you make that's in excess of what we think you should make." Is that going to give you an incentive to make more of whatever it is that you produce, or less? Why should you try to make more of it if you aren't going to get to keep the fruits of your labors?
Next in line for blame seems to be "the speculators." Even the Saudis are now blaming "the speculators" for bidding up the price, and denying that the law of supply and demand is responsible. Of course they are. After all, they and their OPEC colleagues are guilty of artificially controlling supply to keep prices high. If you're looking for villians in this situation, OPEC certainly is worth of consideration. So naturally they want to deflect responsibility to someone else - even as they increase the amount they're pumping for fear that the price will go too high, people will seriously start turning to alternate sources of energy, and they'll be hurt in the long run.
But "speculators" are nothing more or less than investors who are trying to figure out whether the price of something is going to go up or down in the long run (no different in that respect from investors in the stock market), and they actually provide a stabilizing effect on long term commodities prices. Suppose you're General Mills, and you need a lot of corn for making corn flakes. It will really help your business planning process to know what you're going to have to pay for corn in the next 12 months or so - particularly when the Law of Unintended Consequences is pushing the price of corn through the roof because...wait for it...demand has gone up because people are now using corn to make ethanol. But I digress. Thanks to the commodities market, you can purchase a contract today for corn to be delivered at some point in the future at a price fixed by the contract. It helps General Mills, because it now knows what it's going to pay for corn. It helps the suppliers, because they now know what they're going to get for their corn.
Here's where you get to play. If you think the price of corn is going to go up, you can buy a contract for a million bushels of corn to be delivered, say, six months from now at today's contract price. You can buy that contract for a fraction of the actual value of the corn. Seeing as how you probably don't have a driveway big enough to hold a million bushels of corn, what you're counting on is that sometime in the next six months, you'll be able to sell your contract to someone (e.g., General Mills) who actually does need the corn. If the price goes up enough, you'll be able to make a profit, and the person who buys the contract from you will still pay less for the corn than if they had to buy the corn at the market price at that time. And the profit can be substantial, because the profit will be the difference in price on the whole million-bushel lot, whereas you only had to put up a fraction of that amount to buy the contract in the first place.
Sounds like a great deal, doesn't it? But if you guess wrong, and the price of corn goes down in the next six months, you're going to end up having to sell your contract for a loss - and it could be a really big loss, because, once again, the loss will be the difference in price on the whole million-bushel lot, meaning that you could lose a lot more money that you put up to buy the contract.
Conversely, if you believe that the price of corn is going to go down, you can sell a contract to deliver corn that you don't actually have yet, in the belief that, before that contract comes due, you'll be able to buy the corn at a lower price than the one you've contracted to sell it for. Once again, if you guess correctly, you can make a lot of money. If you guess wrong, you can lose a lot of money.
It certainly is possible for buyers and sellers in the commodities market to bid up the price of something in the short term, if a lot of people believe that the price is going to keep going up. But it is not possible for them to keep the price up by themselves. At some point, demand will begin to fall off, prices will stabilize or begin to decline, and if you're stuck with the wrong kind of futures contract, you will lose a lot of money.
We're already beginning to see this reduction in demand. Somewhere between $4 and $5 per gallon, gas hit a point where we began to change our behavior to use less of it. We started to drive less. Public transportation ridership is up. We've started buying smaller, more fuel-efficient cars. Hybrid sales are up. It's painful, but free market forces are working, and we are adjusting. Our politicians may not be noticing, but the Saudis are. Whatever you may think about them, they're not stupid, and they didn't decide to increase production by a half-million barrels per day out of the goodness of their hearts. They did it because they saw our behavior patterns starting to change, and they're afraid we will find a way to wean ourselves away from our oil dependence, which would, of course, reduce demand even further, which would at some point begin to hurt them financially.
So, if it isn't the oil companies, and it isn't the speculators, who is to blame? That, my friends, will be the subject of our next post - this one is already long enough.
Thanks for listening.
Saturday, June 28, 2008
Thursday, June 26, 2008
The Second Amendment Dodges a Bullet
Greetings from the Left Coast, where we here at LeftCoast Blues do the heavy thinking on behalf of those who just can't be bothered.
The big news of the day is that the Supreme Court decided that the Second Amendment to the Constitution actually says what it says. The even bigger news, in my opinion, is that four of the nine Supreme Court Justices believed that it didn't.
The issue in question was a 32-year-old ban on handgun ownership in Washington DC. This was, in a sense, an indirect ban: it's a crime in DC to carry an unregistered firearm, and the registration of handguns is prohibited. So there was no way to legally own one. Dick Heller, a DC special police officer, applied for a registration certificate for a handgun that he wanted to keep at home, and was turned down - so he sued.
The court struck down the ban, and also struck down the requirement that all firearms be equipped with trigger locks or kept disassembled.
Here's what the Second Amendment says: "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed." Those who oppose private gun ownership do so by claiming that this language only protects the right to possess and carry a firearm in connection with militia service. Justice Scalia, writing for the majority, points out that "the Constitution was written to be understood by the voters; its words and phrases were used in their normal and ordinary as distinguished from technical meaning." It "excludes secret or technical meanings that would not have been known to ordinary citizens in the founding generation."
In one of the clearest interpretations of the Second Amendment ever, Justice Scalia wrote: "The Second Amendment is naturally divided into two parts: its prefatory clause and its operative clause. The former does not limit the latter grammatically, but rather announces a purpose. The Amendment could be rephrased, 'Because a well regulated Militia is necessary to the security of a free State, the right of the people to keep and bear Arms shall not be infringed'...other legal documents of the founding era, particularly individual-rights provisions of state constitutions, commonly included a prefatory statement of purpose...a prefatory clause does not limit or expand the scope of the operative clause."
He goes on to observe that, "Three important founding-era legal scholars interpreted the Second Amendment in published writings. All three understood it to protect an individual right unconnected with militia service."
Justice Scalia points out that nothing in this opinion should cast doubt on "longstanding prohibitions on the possession of firearms by felons and the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings," and that the sorts of weapons protected by the Second Amendment are those "in common use," and that it is not unconstitutional to, for example, ban private ownership of fully automatic military weapons or bazookas.
However, "the inherent right of self-defense has been central to the Second Amendment right," and the DC law "amounts to a prohibition of an entire class of 'arms' that is overwhelmingly chosen by American society for that lawful purpose. The prohibition extends, moreover, to the home, where the need for defense of self, family, and property is most acute."
And here's the part I really love: "The very enumeration of the right takes out of the hands of government - even the Third Branch of Government - the power to decide on a case-by-case basis whether the right is really worth insisting upon. A constitutional guarantee subject to future judges' assessments of its usefulness is no constitutional guarantee at all. Constitutional rights are enshrined with the scope they were understood to have when the people adopted them, whether or not future legislatures or (yes) even future judges think that scope too broad...We are aware of the problem of handgun violence in this country...The Constitution leaves the District of Columbia a variety of tools for combating that problem...But the enshrinemen of constitutional rights necessarily takes certain policy choices off the table...it is not the role of this Court to pronounce the Second Amendment extinct."
The majority opinion is really quite brilliantly written, and I would encourage everyone to read it in its entirety. You can download it from http://www.scotusblog.com/wp/wp-content/uploads/2008/06/07-2901.pdf.
What is truly frightening is that four of the nine justices apparently felt that they could, in Scalia's words, "pronounce the Second Amendment extinct." In a dissenting opinion, Justice Stevens wrote that the majority opinion "would have us believe that over 200 years ago, the Framers made a choice to limit the tools available to elected officials wishing to regulate civilian uses of weapons."
Note to Justice Stevens: Yes! That's exactly what they did! The entire Bill of Rights has the express purpose of limiting what elected officials, or any other branch of the government, can do! These people came from nations where the government could, at a whim, make decisions that would abridge their individual rights, and they had had enough of that. They were rightly concerned about what a central government could and would do if there were not very clear limitations on its power. The Constitution specifies a process by which it can be amended. Existing amendments can be reversed through this process, if the people decide it's the right thing to do - after all, prohibition was reversed through exactly that process. But you, Justice Stevens, do not have the right to circumvent that process because you don't like what an existing amendment says. And the people of the United States should be very concerned that you, and your three dissenting colleagues, apparently believe that you do!
And to my conservative friends, I will say this: if you don't think there's any difference between the Presidential candidates this year, think about the fact that the next President is probably going to get to name at least one, if not two, Supreme Court Justices, and think about the fact that the Second Amendment to the Constitution survived, on June 26, 2008, by a single vote, 5 to 4. If that doesn't get you off your backsides and out to the polls, then I don't know what will. Because after all the votes are counted, the American people pretty much end up with the government they deserve.
Thanks for listening.
The big news of the day is that the Supreme Court decided that the Second Amendment to the Constitution actually says what it says. The even bigger news, in my opinion, is that four of the nine Supreme Court Justices believed that it didn't.
The issue in question was a 32-year-old ban on handgun ownership in Washington DC. This was, in a sense, an indirect ban: it's a crime in DC to carry an unregistered firearm, and the registration of handguns is prohibited. So there was no way to legally own one. Dick Heller, a DC special police officer, applied for a registration certificate for a handgun that he wanted to keep at home, and was turned down - so he sued.
The court struck down the ban, and also struck down the requirement that all firearms be equipped with trigger locks or kept disassembled.
Here's what the Second Amendment says: "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed." Those who oppose private gun ownership do so by claiming that this language only protects the right to possess and carry a firearm in connection with militia service. Justice Scalia, writing for the majority, points out that "the Constitution was written to be understood by the voters; its words and phrases were used in their normal and ordinary as distinguished from technical meaning." It "excludes secret or technical meanings that would not have been known to ordinary citizens in the founding generation."
In one of the clearest interpretations of the Second Amendment ever, Justice Scalia wrote: "The Second Amendment is naturally divided into two parts: its prefatory clause and its operative clause. The former does not limit the latter grammatically, but rather announces a purpose. The Amendment could be rephrased, 'Because a well regulated Militia is necessary to the security of a free State, the right of the people to keep and bear Arms shall not be infringed'...other legal documents of the founding era, particularly individual-rights provisions of state constitutions, commonly included a prefatory statement of purpose...a prefatory clause does not limit or expand the scope of the operative clause."
He goes on to observe that, "Three important founding-era legal scholars interpreted the Second Amendment in published writings. All three understood it to protect an individual right unconnected with militia service."
Justice Scalia points out that nothing in this opinion should cast doubt on "longstanding prohibitions on the possession of firearms by felons and the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings," and that the sorts of weapons protected by the Second Amendment are those "in common use," and that it is not unconstitutional to, for example, ban private ownership of fully automatic military weapons or bazookas.
However, "the inherent right of self-defense has been central to the Second Amendment right," and the DC law "amounts to a prohibition of an entire class of 'arms' that is overwhelmingly chosen by American society for that lawful purpose. The prohibition extends, moreover, to the home, where the need for defense of self, family, and property is most acute."
And here's the part I really love: "The very enumeration of the right takes out of the hands of government - even the Third Branch of Government - the power to decide on a case-by-case basis whether the right is really worth insisting upon. A constitutional guarantee subject to future judges' assessments of its usefulness is no constitutional guarantee at all. Constitutional rights are enshrined with the scope they were understood to have when the people adopted them, whether or not future legislatures or (yes) even future judges think that scope too broad...We are aware of the problem of handgun violence in this country...The Constitution leaves the District of Columbia a variety of tools for combating that problem...But the enshrinemen of constitutional rights necessarily takes certain policy choices off the table...it is not the role of this Court to pronounce the Second Amendment extinct."
The majority opinion is really quite brilliantly written, and I would encourage everyone to read it in its entirety. You can download it from http://www.scotusblog.com/wp/wp-content/uploads/2008/06/07-2901.pdf.
What is truly frightening is that four of the nine justices apparently felt that they could, in Scalia's words, "pronounce the Second Amendment extinct." In a dissenting opinion, Justice Stevens wrote that the majority opinion "would have us believe that over 200 years ago, the Framers made a choice to limit the tools available to elected officials wishing to regulate civilian uses of weapons."
Note to Justice Stevens: Yes! That's exactly what they did! The entire Bill of Rights has the express purpose of limiting what elected officials, or any other branch of the government, can do! These people came from nations where the government could, at a whim, make decisions that would abridge their individual rights, and they had had enough of that. They were rightly concerned about what a central government could and would do if there were not very clear limitations on its power. The Constitution specifies a process by which it can be amended. Existing amendments can be reversed through this process, if the people decide it's the right thing to do - after all, prohibition was reversed through exactly that process. But you, Justice Stevens, do not have the right to circumvent that process because you don't like what an existing amendment says. And the people of the United States should be very concerned that you, and your three dissenting colleagues, apparently believe that you do!
And to my conservative friends, I will say this: if you don't think there's any difference between the Presidential candidates this year, think about the fact that the next President is probably going to get to name at least one, if not two, Supreme Court Justices, and think about the fact that the Second Amendment to the Constitution survived, on June 26, 2008, by a single vote, 5 to 4. If that doesn't get you off your backsides and out to the polls, then I don't know what will. Because after all the votes are counted, the American people pretty much end up with the government they deserve.
Thanks for listening.
Wednesday, June 25, 2008
Can We Have Some Perspective, Please?
Greetings from the Left Coast, where we here at LeftCoastBlues do the heavy thinking for those who just can't be bothered.
Wow, I didn't realize my sabbatical has lasted this long! And there's so much to catch up on! I've been busy doing some rather tedious research on your behalf that I will be sharing with you over the coming weeks. But first things first.
I popped up my browser a few days ago only to see the following headline: "US jobless rate takes biggest jump since '86!" OMG! The sky is falling! One more piece of evidence that things are terrible! I clicked through to the article to find that the national unemployment rate had soared - soared - from 5% to 5.5%!
Now certainly that's not good news, particularly if you're one of the unemployed. But, as is so often the case, all of the news articles seem to lack historical perspective here.
The fact is that the unemployment rate has never been, and will never be, zero. There are a lot of reasons for this. But economists talk about something they call the "Non-Accelerating Inflation Rate of Unemployment," often abbreviated "NAIRU." The theory goes that there is a threshold of unemployment where, if governments try to push the unemployment rate any lower, the inflation rate tends to accelerate. Economists being economists, there is no agreement on exactly what the NAIRU is, and it may in fact be a different number at different points in history, but it is generally agreed to be somewhere between 4.3% and 7.3%.
So...is an increase from 5% to 5.5% a reason for caution? Yes, it probably is. Is it a reason for breathless, "the sky is falling," reportage? No. Particularly when the cost of energy has gone sky high over the last couple of years. It is, I believe, at testament to the incredible robustness of our economy in recent years that we have been able to absorb the spike in energy prices without having the economy go totally into the toilet long before now.
The fact is that over the last 50 years, the national unemployment rate has seldom been under 4%, and has spent most of its time between 4% and 6%. (See http://en.wikipedia.org/wiki/Image:Us_unemployment_rates_1950_2005.png) My younger readers may be interested to know the following: Inflation was just over 8% in 1975 - the second highest peak in the last 50 years. It was already starting to fall when Jimmy Carter was elected in 1976, dipped briefly below 6% in 1978 - his second year in office - then climbed steadily back up through the remainder of his presidency. When Ronald Reagan was elected in 1980, it was already nearly back to 8%.
The popular wisdom, reinforced by most of our media outlets at every opportunity, is that "Reaganomics" - the concept that cutting taxes would actually lead to greater tax revenues through the economic growth that would result from letting people keep more of their own money - didn't work and should therefore never be tried again. But the reality is that after peaking at almost 10% in 1982 (the highest rate in the last 50 years), Reagan's policies took hold, and the unemployment rate fell steadily thoughout the rest of his presidency, and stood at about 5.75% when he left office.
Nothing lasts forever, though, and the economy always has, and always will be, cyclical. President Bush the Elder had the misfortune to take office just as the cycle was turning. During his presidency, the unemployment rate rose from just over 5% to just over 7.5% - leading to the legendary "It's the economy, stupid!" theme of Bill Clinton's successful campaign in 1992. Unemployment was already falling when President Clinton took office in 1993, and, regardless of his other shortcomings, he did manage to not screw up the economy for most of his presidency. In this, he was helped considerably by the fact that the Republicans took control of Congress in 1994 and prevented the enactment of flagrant new government spending programs, e.g., "HillaryCare."
In the year 2000, the dot-bombs started going off, and the economy started to turn again. After hitting a low of roughly 4% in 2000, it jumped to 5% in 2001. President Bush the Younger was of course blamed for this, although he had little or nothing to do with it. (See my earlier post on the phenomonon of "hysteresis.") Of course, we all know what happened in 2001. The terrorist attacks just greased the slope that the economy was already on. Fortunately, the much-maligned "Bush Tax Cuts" were enacted, and, despite what you may have been told, they worked. After peaking at just over 6% in 2003, the unemployment rate started falling steadily again.
So what should we take away from this history lesson?
Thanks for listening.
Wow, I didn't realize my sabbatical has lasted this long! And there's so much to catch up on! I've been busy doing some rather tedious research on your behalf that I will be sharing with you over the coming weeks. But first things first.
I popped up my browser a few days ago only to see the following headline: "US jobless rate takes biggest jump since '86!" OMG! The sky is falling! One more piece of evidence that things are terrible! I clicked through to the article to find that the national unemployment rate had soared - soared - from 5% to 5.5%!
Now certainly that's not good news, particularly if you're one of the unemployed. But, as is so often the case, all of the news articles seem to lack historical perspective here.
The fact is that the unemployment rate has never been, and will never be, zero. There are a lot of reasons for this. But economists talk about something they call the "Non-Accelerating Inflation Rate of Unemployment," often abbreviated "NAIRU." The theory goes that there is a threshold of unemployment where, if governments try to push the unemployment rate any lower, the inflation rate tends to accelerate. Economists being economists, there is no agreement on exactly what the NAIRU is, and it may in fact be a different number at different points in history, but it is generally agreed to be somewhere between 4.3% and 7.3%.
So...is an increase from 5% to 5.5% a reason for caution? Yes, it probably is. Is it a reason for breathless, "the sky is falling," reportage? No. Particularly when the cost of energy has gone sky high over the last couple of years. It is, I believe, at testament to the incredible robustness of our economy in recent years that we have been able to absorb the spike in energy prices without having the economy go totally into the toilet long before now.
The fact is that over the last 50 years, the national unemployment rate has seldom been under 4%, and has spent most of its time between 4% and 6%. (See http://en.wikipedia.org/wiki/Image:Us_unemployment_rates_1950_2005.png) My younger readers may be interested to know the following: Inflation was just over 8% in 1975 - the second highest peak in the last 50 years. It was already starting to fall when Jimmy Carter was elected in 1976, dipped briefly below 6% in 1978 - his second year in office - then climbed steadily back up through the remainder of his presidency. When Ronald Reagan was elected in 1980, it was already nearly back to 8%.
The popular wisdom, reinforced by most of our media outlets at every opportunity, is that "Reaganomics" - the concept that cutting taxes would actually lead to greater tax revenues through the economic growth that would result from letting people keep more of their own money - didn't work and should therefore never be tried again. But the reality is that after peaking at almost 10% in 1982 (the highest rate in the last 50 years), Reagan's policies took hold, and the unemployment rate fell steadily thoughout the rest of his presidency, and stood at about 5.75% when he left office.
Nothing lasts forever, though, and the economy always has, and always will be, cyclical. President Bush the Elder had the misfortune to take office just as the cycle was turning. During his presidency, the unemployment rate rose from just over 5% to just over 7.5% - leading to the legendary "It's the economy, stupid!" theme of Bill Clinton's successful campaign in 1992. Unemployment was already falling when President Clinton took office in 1993, and, regardless of his other shortcomings, he did manage to not screw up the economy for most of his presidency. In this, he was helped considerably by the fact that the Republicans took control of Congress in 1994 and prevented the enactment of flagrant new government spending programs, e.g., "HillaryCare."
In the year 2000, the dot-bombs started going off, and the economy started to turn again. After hitting a low of roughly 4% in 2000, it jumped to 5% in 2001. President Bush the Younger was of course blamed for this, although he had little or nothing to do with it. (See my earlier post on the phenomonon of "hysteresis.") Of course, we all know what happened in 2001. The terrorist attacks just greased the slope that the economy was already on. Fortunately, the much-maligned "Bush Tax Cuts" were enacted, and, despite what you may have been told, they worked. After peaking at just over 6% in 2003, the unemployment rate started falling steadily again.
So what should we take away from this history lesson?
- The economy is cyclical. It will always have its ups and downs, and it doesn't turn on a dime. It takes a while before the results of any particular economic action will actually show up. This is, in fact, a cause for some concern, because it is entirely possible that the run-up in fuel prices simply hasn't had time to ripple through the entire system yet - we just don't know for sure.
- At the moment, however, the sky is not falling. The 5.5% rate of unemployment is still pretty darned good by historical standards, and is well within the generally accepted range of the NAIRU - although, again, that's not to minimize the hardship if you're part of that 5.5%.
- The historical evidence of the last 25 years shows that "supply side economics" actually does work, and tax cuts actually do spur economic growth, and do increase tax revenues as a result. That should cause at least a momentary pause for thought when you hear the Democrats promising that if they are elected this year they (1) will not increase taxes, but (2) will allow the "Bush Tax Cuts" to expire. This is disingenuous at best, and downright dishonest at worst, because allowing the tax cuts to expire would actually result in a HUGE tax increase, which is NOT what you want to happen at a time when the economy is hitting a rough spot in the road.
- If the economic cycle is indeed turning, then whomever takes office in January of 2009 is going to face a delicate balancing act to avoid a recession. If the Democrats get their way, and taxes do in fact go up, the next four years probably won't be pretty, and, since most of the electorate apparently doesn't grasp the principle of hysteresis, President Obama would get the blame. The Senator from Illinois should be careful of what he wishes for, because I don't think that would be the kind of "change" the American people are looking for.
Thanks for listening.
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