Flash: The Great Recession Is Over!

Greetings from the Left Coast!

Well, it's official: the Great Recession is over! In fact, according to the National Bureau of Economic Research, it's been over for more than a year - the economy has been expanding since June, 2009! Don't you feel better now? You don't? Hmmmm. Maybe that's because, although we may have been expanding since June, 2009, it's been at a snail's pace. And when unemployment is still hovering around 10%, and you're upside down on your home mortgage, it sure doesn't feel like a recovery. Economists estimate that the economy needs to grow at twice the rate that's expected for this year in order to reduce the unemployment rate by a single percentage point.

But let's talk a little about this thing called an economic recession. If you've been in the work force for less than 10 years, this recession probably came as a real shock to you, because you had never seen anything but prosperity. In fact, throughout our nation's history, long periods of economic expansion have been the exception, not the rule. Until the early 1960s, it seemed like a recession came along every 2 to 4 years. (See http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States for details.) The nearly 9 years of sustained economic growth from February, 1961, to December, 1969, was the longest uninterrupted period of growth ever up to that point in time.

And the last 30 years or so have really been remarkable. Between the recession that ended in November, 1982, and the one that started in December, 2007 - a span of just over 25 years, the economy was in recession a total of only 16 months. And had it not been for the September 11 terrorist attacks, we might have avoided the 2001 recession altogether (provided you weren't in the high-tech sector, which suffered the double-whammy of the dot-bomb bust and the inevitable dropoff in corporate technology spending that followed the Y2K spending spree).

The fact is that good times never last forever. Economic contractions happen. Honest men differ over what causes the contractions - whether they're caused by outside "shocks" to the economic system, or whether they're simply an inevitable part of economic growth and adjustment. But recessions happen. They happen when Republicans are in the White House. They happen when Democrats are in the White House. It's a safe bet that no one will ever completely eliminate them. And despite what you hear from politicians on either side, it's seldom the "fault" of the person in the Oval Office - he's just the most convenient target. Which is not to say that government policies can't make things worse. Obviously, they can, and we're living through that right now.

The burning question of the moment is what, if anything, government should do when a recession hits, to mitigate the effects as much as possible and encourage a return to growth. Again, honest men differ. The current administration obviously adheres to the Keynesian theory that the right thing to do is to spend massive amounts of money to get things moving again. Unfortunately for President Obama and his fellow Democrats, it doesn't seem to be working any better this time than it's worked in the past.

Obama sees himself as a modern-day Franklin Roosevelt. Unfortunately, he's taking all the wrong pages from FDR's playbook. FDR was a brilliant public speaker who lifted everyone's expectations with his promises of how great the New Deal was going to be. He blamed his predecessor, Herbert Hoover, for being the "greatest spender in history." He promised to reduce the federal budget by 25%, and work toward a balanced budget. Yet, by the time his first term ended, federal spending had doubled. In May, 1939, Treasury Secretary Henry Morgenthau told a congressional committee: "We are spending more money than we have ever spent before and it does not work... We have never made good on our promises...I say after eight years of this Administration we have just as much unemployment as when we started...and an enormous debt to boot."

Does any of this sound familiar? (For more on the parallels between Obama and FDR, I'd recommend an excellent article on thenewamerican.com written by William P. Hoar back in February, 2009, when Obama had barely taken office.)

An objective look at history will tell you two things:

1. First, when people are allowed to keep more of their own money, consumer spending will generally increase. And when wealthy people are allowed to keep more of their own money, they will tend to invest it in ways that create jobs. Yes, that means that we need to stop playing this stupid class-warfare game that crys about "tax cuts for the wealthy." As we've written here before, the wealthy already pay a disproportionate share of all income taxes. It would therefore be impossible to craft a meaningful tax cut that wouldn't disproportionately benefit the wealthy.
2. The one thing business hates more than anything else is uncertainty. Whether it's the small business down on the corner trying to decide whether they can afford to add one employee, or a large business trying to decide whether to invest in a new factory, new equipment, or a branch office, not having a predictable business climate will delay or kill those plans. And right now nothing is certain. The current administration's behavior can only be interpreted in one of two ways - either they're totally clueless about how the private sector operates, or they're hostile toward it. Business people don't know whether they're going to be the next group demonized by the Obama administration. They don't know what kind of tax is going to hit them next. They don't know what's going to happen to their energy costs. They don't know what their health care costs are going to be. And until that changes, you're not going to see substantial growth in the private sector.

In the recession of 2001, the Bush Administration and Congress acted quickly to cut taxes, and reassure businesses. Despite the threat of terrorism, and the fear of where the terrorists might strike next, the recession lasted only 8 months, GDP (Gross Domestic Product) contracted by only 0.3%, and unemployment topped out at 6.3%.

In early 2008, hampered by a hostile Democrat-controlled Congress that cared more about winning back the White House than anything else, there were limits to what the Bush Administration could do. Still, if we are to believe the National Bureau of Economic Research, the decline in GDP bottomed out in June of 2009 - far too soon for any of Obama's actions to have had any material effect on it - but jobs continued to be lost at an alarming rate even while the economy was, technically, beginning its anemic growth. In July, 2010 (a year after the recession supposedly ended), the unemployment rate of people who were seeking full-time employment stood at 10.2%. The "U6" rate - which also counts "discouraged workers" who have given up looking for work, "marginally attached" workers who "would like" to work but have not looked for work recently, and the underemployed who are working part time but would like to work full time if they only could - was at 16.7% last month (August).

The inescapable truth is that just about every economic move the Obama Administration has made has made things worse, not better, yet their only response is to want to do more of it. We need to, first, take Congress away from the Democrats so there will at least be some check on Obama's blind ambition. Then, in 2012, we need to turn him into former President Obama. If he still wants to push hope and change, maybe he can team up with former President Carter and help build houses for some of the people who have lost theirs to foreclosure while historians argue over which of them was the worst President since World War II.

Thanks for listening.

The Summer of Recovery Draws To a Close

Greetings from the Left Coast!

As the "Summer of Recovery" draws to a close, we have the chance to reflect on what an amazing summer it was. The Democrat juggernaught that looked unstoppable only a few months ago is coming apart at the seams, as the American public begins to realize that, in a brief spasm of credulity, they have managed to put the fox in charge of the chicken-house. President Obama's approval ratings have fallen through the floor: as of today, according to Rasmussen's Daily Presidential Tracking Poll, 44% of the nation's voters "strongly disapprove" of his performance, with only 27% strongly approving - an "approval index" of -17. In fact, President Obama has more people in the "Strongly Disapprove" column than George W. Bush did in his last full month in office - President Bush was only at 43%!

Why? Because the American people have discovered that nearly everything he claimed to be, he is not:

• He was supposed to be the post-racial candidate, yet he and his supporters are the ones who pull out the "race card" regularly and predictably. Apparently it is not possible for anyone to be opposed to President Obama's policies, any opposition to his agenda must be racism.
• He was supposed to be the great uniter - the one who would reach across the aisle and bring us all back together. Put an end to the partisan bickering. But his actual approach to bipartisanship, once his party actually controlled both houses of Congress, amounted to, "I won, you lost. So either fall in line, or sit down and shut up."
• His adminstration was to have been a paragon of openness. Yet we have seen multi-thousand-page bills crafted entirely by Democrats behind closed doors, and rammed through with not only no opportunity for Republicans to participate in the process, but without even the opportunity for the rest of the country to know what the bills actually said.
• His health care bill is now being exposed as the debacle that it is. Health insurance premiums are going up substantially across the board as insurance companies are being forced to comply with all of the new requirements. And that's just the beginning - there's not enough room in this post to do justice to the subject.

And, in the minds of many voters, it has become obvious that his administration has absolutely no clue how to actually make the economy better. All they've done is to spend money like proverbial drunken sailors, and distort every market they touch:

• State and local governments across the country have been spending beyond their means for years. Obama's stimulus package allowed them to dodge taking responsibility for their irresponsibility by pouring billions of tax dollars into preserving public sector jobs...for a while. Now the money is spent, and those state and local government budgets are still upside down, because it's the private sector economy that has to pay for those public sector jobs, and the private sector is still on its lips.
• The "Cash for Clunkers" program did indeed boost new automobile purchases...until the money ran out. Then automobile sales dropped through the floor again. Moreover, the used car market was hurt, and the auto repair business was hurt, because of regulations that required that cars traded in had to be junked. And the engines had to be deliberately ruined by replacing its engine oil with a sodium silicate solution and running it for a while - which meant that engine blocks and parts like pistons couldn't be sold by automobile recyclers. (The Law of Unintended Consequences strikes again.)
• Subsidies for new home purchases boosted home sales for a while...until the program ended. New home sales in May dropped off 32.7% compared to April, and were 18.3% below the May 2009 figure.

In fact, the main effects of the automobile and home purchase experiments were to prove - if it needed proving - that if you offered free money, a lot of people would take it (gee, who would have guessed that?), and to distort the markets by artificially boosting demand for a short period of time, followed by a drop off in demand to a lower level than it was in the beginning.

The one thing that apparently has never occurred to them is that letting people actually keep more of the money they earned might be a good thing. If they got to keep more of it, they just might spend more of it. And if the people who had money to invest - you know, those evil "rich people" - got to keep more of their money, they might invest more of it in ways that created private sector jobs. But, as John Kerry famously said last year, there's no guarantee that, left to our own devices, we would invest in the right things - which is why government has to do it for us.

And that's proven to be the last straw. The American people are just plain tired of having things rammed down their throats by the federal government that they don't want, and being told in the process that it's for their own good and they're just too stupid to realize it. We're tired of being called names like "racist," "hater," "islamophobe," or all of the above, ever time we disagree with something.

This whole American experiment in self government got started nearly 250 years ago over the issue of taxation without representation. And the Democrats are about to discover that there is no better way to feel the wrath of the American voter than to ignore the fact that they work for the people, not the other way around. Many of them are already trying to run from the tsunami of voter disapproval that's coming. In the next couple of months, you're going to hear more and more Democrats start sounding like Republicans. They're going to continue to try to distance themselves from Obama's policies. They're going to start talking about how unwise it would be to raise taxes on anybody while we're still mired in recession. Don't you believe it. If they somehow manage to hold onto power, they'll be right back to their old ways in a heartbeat.

If you want to change the direction the country is headed in, you must change who is in control of Congress this November. It's just that simple.

Thanks for listening.

A Message to that Lucky 47 Percent

Greetings from the Left Coast, where we here at Left Coast Blues do the heavy thinking for those who just can't be bothered.

NEWS FLASH: The Associated Press has apparently just discovered that nearly half of all Americans will pay no federal income tax this year! And that almost 40% will actually get money from the government! And that 73% of all federal income tax collected comes from only 10% of the population! Wow! Who knew?

Well, you did, if you've been following this blog, because we've written about this before. But, now that it's actually being reported by the national press, I'd like to point out a few things that should be intuitively obvious:

• First of all, it's obviously unfair (and if you've been listening to Obama and the rest of the Democrat leadership, you know they care deeply about fairness) that 73% of the tax burden should be paid by only 10% of the people, and that nearly half of the population should pay nothing toward services that benefit everyone.


• Second, this should, once and for all, settle the issue of whether or not the government is advocating the redistribution of income. If a small portion of the population is shouldering a disproportionate share of the tax burden, and a large portion of the population is being given (not refunded) money that they didn't pay into the system, that is redistribution of income. End of story.


• Third, we are getting uncomfortably close to the point where a majority of the electorate has nothing to lose by voting for higher taxes and spending, because (they will think) the tax burden is going to be paid by somebody else (the "rich").

But here's where it all falls down. The federal budget deficit is now so unimaginably huge that you could tax "the rich" at a rate of 100% and still not cover it. Even liberal Democrats are now saying that it is unsustainable and must be brought under control. This, of course, would be laughable if it wasn't so tragic for the nation, since they are largely the ones who created it. And, of course, their solution isn't to bring it under control by reducing federal spending...they want to raise your taxes - hence the recent trial balloon regarding a "value-added tax."

So, just for a moment, let me talk directly to the 47% of my fellow Americans who aren't paying any federal income tax. You should know that federal income taxes account for only about half of the government's revenue. You're paying a big chunk of that other half in ways you never see - like Social Security taxes that are not going into some kind of "trust fund," but in fact are being used to run one of the biggest Ponzi schemes ever perpetrated. Oh, I know you see the portion of Social Security taxes that are taken out of your paycheck, but you never see the matching amount that your employer pays (unless you're self-employed, in which case you get to pay both halves). That's money your employer doesn't have available to give you a raise, or some other kind of benefit, because it's going to the government. You're also impacted by other kinds of taxes levied on businesses, who ultimately pass the costs along to you when you buy their products.

Here's an example everyone should be able to understand: Let's say that a loaf of bread costs $2.00, and you've got $4.00 in your pocket. You can buy two loaves of bread. If the federal government directly levies a $2.00 tax on you, you can now buy only one loaf of bread. That's easy to understand - everybody gets that. But if the federal government, through some other policy decision, causes the price of bread to rise to $4.00 per loaf, that also results in your being able to buy only one loaf of bread. So there is no difference in terms of the effect it has on your life.

There are many ways for this to happen. One is to simply keep up that deficit spending until inflation kicks back in. And, if we stay on the path we're on, it will - with a vengeance. Another is to pass laws that cause the cost of energy to go up - thereby increasing the cost of plowing, planting, and harvesting the wheat, transporting it to market, milling it into flour, baking it into bread, and delivering the bread to your local grocer. In fact anything the government does that increases the cost of doing business is ultimately going to get passed along to you, the consumer, in the form of higher prices. What's the difference between seeing your purchasing power erode because of higher prices, and seeing your purchasing power erode because you're paying more taxes? None. Either way, your standard of living goes down.

It has been said that, while capitalism may be the unequal distribution of wealth, socialism is the equal distribution of misery. We are already on that slope, and it's slippery as hell. We have to elect leaders who will reverse course, before it's too late, or our grandchildren and great-grandchildren will look back and curse us for being so selfish and short-sighted.

Thanks for listening.

You Go, Rob!

Greetings from the Left Coast, where we here at Left Coast Blues do the heavy thinking for those who just can't be bothered.

Today, Washington State Attorney General Rob McKenna announced that he would be joining a law suit against the Democrat's health care reform bill. Governor Christine Gregoire wasted no time attacking him for that decision. Fortunately, it is his decision to make, not hers. The Attorney General represents the State of Washington and its citizens, not the governor.

In fact, he has a sworn duty to defend the interests of the State of Washington when, in his judgment, its rights have been infringed. And only blind partisanship could claim that they have not been infringed by the health care bill.

We have this annoying document called the Bill of Rights. Some of you may remember it. It consists of the first ten amendments to the Constitution. The tenth amendment states quite clearly that any powers not explicitly granted to the federal government by the Constitution are reserved to the states and to the people.

Nowhere in the Constitution is the federal government given the power to mandate that the citizens of the United States must purchase a specific product. Yet the health care bill attempts just such a mandate by requiring that everyone must purchase a health insurance policy, or be punished for not doing so.

This is, as we stated back in early November, the first step on a very slippery slope. This is a very dangerous precedent to set. There is no telling where this will end. Why, you might end up being told that you had to buy florescent bulbs for your lights instead of incandescent ones! (Oh, wait - I guess we started down this slippery slope quite some time ago, didn't we?)

The loss of individual freedom has been likened to the "frog in the pot" phenomenon: if you try to drop a frog into boiling water, he'll fight like the dickens to get out of it. But if you put him into cool water and gradually turn up the heat, he'll sit there and die before he realizes that he's in danger.

Maybe people are finally waking up and deciding it's gone too far. I just hope that Rob McKenna and the other state attorneys general can get us out of the pot before it's too late.

Thanks for listening.

Why the Party Is Important

Greetings from the Left Coast, where we here at Left Coast Blues do the heavy thinking for those who just can’t be bothered.

If the last several months have taught us anything, it should have taught us about the importance of political parties, and laid to rest the old fallacy that “voting for the candidate, not the party” is somehow a noble or virtuous approach to elections.

My father, God rest his soul, was proud of the fact that he didn’t belong to any political party, and was a firm believer in voting for the person he believed was the best candidate, regardless of party affiliation. Since that’s the way I was raised, that was the philosophy I took with me into the voting booth, starting way back in 1970 when I voted for the first time, and for a long time after that.

No more. I can state unequivocally that there are no circumstances that I can imagine that would ever cause me to vote for a Democrat again. It has become painfully obvious that when it comes down to crunch time, in the majority of cases, politicians vote their party affiliation regardless of whether it’s in the best interests of the American people in general or their constituents in particular. Nowhere has this been more obvious than in the debate over the health insurance legislation, which has now been rammed down the throats of the American people despite the fact that a large majority of the people didn’t want it.

When a particular party holds a majority in either the House or the Senate (and, of course, the Democrats currently hold majorities in both), that means that all of the committees are chaired by that party. It also means that the majority party will compose a majority of the members of each committee (with the sole exception of the Senate Ethics Committee, which was explicitly created as a committee with equal party representation). Since Congressional committees ultimately control what legislation does and does not make it to the floor of the House or Senate for a vote, the majority party pretty much controls the legislative process, if they can hold their members together.

The only real check on this kind of power is the fact that, in most cases, it takes a “supermajority” in the Senate to agree to end debate on a bill and call for an up or down vote. If that supermajority doesn’t exist, then debate can theoretically continue indefinitely, with the bill never coming to a vote. That’s called a filibuster.

For the past two years, we’ve been living with a “perfect storm” that gave the Democrats nearly absolute power: they held a majority in the House, they held a supermajority in the Senate, and they held the White House. We’ve now seen the abuse of power that results when the traditional checks and balances of government aren’t functioning.

Thanks to Scott Brown’s victory in Massachusetts, the Democrats no longer hold a supermajority in the Senate. That’s why it was crucially important to the party leaders that the Senate version of the legislation should be passed unaltered by the House – because any changes they House made would have to go back to the Senate for approval, and approval could no longer be guaranteed.

Don’t be misled. The “House Reconciliation Bill” that was passed at the same time the House passed the Senate bill is a long ways from being law – and the Representatives that voted for it are well aware that they may never see any actual changes in the Senate bill. The reconciliation bill must now go to the Senate. It’s debatable, by they way, whether it even falls under the Senate’s “reconciliation” rules. The Democrats are going to try to shove it through that way, because it would therefore be exempt from the supermajority requirement. But the Senate’s own rules state that the substance of any provisions in a reconciliation bill must be substantially weighted to the budget, and not to policy.

Violating this rule will set a precedent that is sure to lead to more and greater abuse in the future. Senator Barak Obama was strongly opposed to this sort of thing back when the Republicans were considering it. Funny how things change, isn’t it?

By the way, if the Senate makes any changes to the reconciliation bill, it has to go back to the House again. So we could see a protracted game of ping-pong with this reconciliation bill, while the original bill the Senate passed gets signed into law by President Obama. And you’ve got to ask yourself what motivation exists for the Senate to approve a bunch of changes that the House wants to make to their bill, when at this point all they need to do is to do nothing, and their own version becomes law. But, amazingly, Nancy Pelosi said, “Trust me,” and apparently 218 of her fellow Democrats did. Which brings me back to my original assertion: it’s stupid to vote for the person and not for the party – because when the chips are down, odds are that the person you elected is going to vote for the party and not for you.

So what can we do? Not much between now and November other than to give our money to the opponents of the people who voted for this monstrosity. Then, when November rolls around, vote them out of office. Every single one, if possible. And I sincerely hope that the voters in Louisiana’s 2nd Congressional District have a better Republican candidate this fall than Representative Anh Cao, who was the single Republican to vote in favor of this bill.

And what of the 39 Democrats that voted against it? Well, I appreciate their courage in breaking from their leadership. But please go back and re-read the section above where I discuss the implications of a given party holding a majority in the House or the Senate. The fact is that as long as there is a “D” after their names, they affect that balance of power and, in my opinion, must be targeted for defeat.

Thanks for listening.

Giving Credit Where Credit Is Due

Greetings from the Left Coast, where we here at Left Coast Blues do the heavy thinking for those who just can't be bothered.

On Wednesday, I was pleased to see an editorial in my morning Everett Herald that brought some much needed honesty and perspective to the coverage of Sen. Jim Bunning. Sen. Bunning, you may recall, was the Senator who was allegedly blocking the $10 Billion package that would extend unemployment benefits, health insurance subsidies for the jobless, highway programs, and Medicare payments to doctors.

Most of the news coverage portrayed Sen. Bunning as the callous, heartless guy who, indifferent to the suffering he was inflicting on countless fellow Americans, was unreasonably standing in the way of a compassionate piece of legislation just because he could. In fact, what he was saying was that, instead of just continuing to give lip service to how concerned we all are about our unsustainable deficit spending, maybe we should tap into the more than $500 Billion in unspent stimulus money to pay for the legislation instead of going another $10 Billion into debt.

That, as the Herald editorial pointed out, hardly seemed unreasonable. But it was rejected by Senate Majority Leader Harry Reid.

Moreover, Sen. Reid could have moved the legislation forward at any time by simply holding a "roll call" vote. But, no, Senate Democrats wanted a "voice vote," where the "ayes" and "nays" are said as a group, and the presiding leader gets to decide which was the largest group. One can only conclude that this was because a roll call vote would have involved having each individual Senator go on the record with his or her vote, which might have led to some actual accountability to the public for how they voted. Why risk that - especially when they saw an opportunity to further demonize the evil, obstructionist Republicans with the all-too-willing help of their friends in the media?

So, kudos to the Herald editorial staff for having the courage to break with the accepted media template. And to all the others who collaborated in this charade, including Washington's own Sen. Patty Murray: Shame on you!

Thanks for listening.