Obama’s Economic Reality, “The Presidential Corollary” (Part I)

Given the current economic realities, with real unemployment at 14.9% and reported unemployment at 8.2% (the 41st consecutive month over 8%); a $5,000,000,000,000 increase in US debt in 3 years (more than all US Presidents in history combined, nearly $20,000 for every man, woman and child in the US); approximately $16,000,000,000,000 in stated US debt (100+% of our economy or Gross Domestic Product, and over $51,000 for every man, woman and child in the US), nearly $60,000,000,000,000 in total US debt (including entitlement liabilities, or nearly $200,000 for every man, woman and child in the US); gas prices having doubled since 2008 to $3.80 per gallon, home foreclosures having risen to historical heights, the US is in a world of hurt, and in spite of Obama’s continued proffering, the trends are not favorable!.

That said, Mr. Obama has done a tremendous job blaming George W. Bush, and everyone and everything else, for all things economic since his ascendency to the Presidency of the United States. If you say something long enough or if your public relations machine is sufficiently myopic in their message before long the distortions become reality in the minds of the electorate - as evidenced in recent polling. Apparently, the Obama message of blame and distortion seems to have taken hold in America where a majority still blame Bush or believe the President cannot really affect jobs and the economy. Even so, it is time for a reality check that needs to be shouted from every rooftop! Mr. Obama owns this economy as it should have turned long ago, and he cannot expect to turn this economy with his latest ObamaCare Tax.

The economic realities can be viewed through an historical lens. During the Carter Era the US suffered its greatest economic stress since the Great Depression. All economic metrics were at historical highs. Ronald Reagan was elected President amid great economic and global tumult, and within his first term had turned the tide. Below is a brief of why with respect to the economy. As to global tumult, Reagan turned the tide with strength and decisiveness - restoring America to its divine exceptional role of advocating for freedom and liberty!

Stephen Moore of the Cato Institute stated that “no act in the last quarter century had a more profound impact on the US economy of the eighties and nineties than the Reagan tax cut of 1981.” He claims that Reagan’s tax cuts, combined with an emphasis on federal monetary policy, deregulation, and expansion of free trade created a sustained economic expansion creating America’s greatest sustained wave of prosperity ever. He also claims that the American economy grew by more than a third in size, producing a $15 trillion increase in American wealth. Consumer and investor confidence soared. Cutting federal income taxes, cutting the US government spending budget, cutting useless programs, scaling down the government work force, maintaining low interest rates, and keeping a watchful inflation hedge on the monetary supply was Ronald Reagan’s formula for a successful economic turnaround.

In a speech by Milton Friedman to the Cato Institute:[52], Friedman states that “Reaganomics had four simple principles: lower marginal tax rates, less regulation, restrained government spending, noninflationary monetary policy. Though Reagan did not achieve all of his goals, he made good progress.” This is why entrepreneurs flourished under Reaganomics: lower tax rates and inflation coupled with less regulation favored improved environments for market-based funding, risk-taking, access to labor (leading to greater employment), and a more level playing field between these entrepreneurs and large corporations. Illustrating this, the Heritage Foundation:[53] states that this is why “the U.S. government must allow the entrepreneur to enjoy the rewards of success. If taxes take away most profit, then the entrepreneur will have less incentive to take a risk. If there are great restrictions on how the entrepreneur can use his profit, then there is little reason for the entrepreneur to take a risk. The entrepreneur’s courage to take a risk is what leads to new American discoveries and what drives the U.S. economy forward. Reaganomics knows this. It is one of the reasons why Ronald Reagan has reduced American taxes dramatically”*

*quotes gathered from Wikipedia.

Since taking office Barack Obama has done the exact opposite of Ronald Reagan and we are experiencing the results of his failed economic policies. Barack Obama has no one to blame but himself. Barack Obama owns this economy!

Proven in the policies of Ronald Reagan, the POTUS can positively or negatively have a profound affect on the US economy. Leadership matters; policies matter, and President Obama has through his failed policies severely and negatively affected the US economy. Obama’s spending, borrowing, tax and regulatory policies, energy policy, government overreach, and Obamacare have had their intended effect - to create a more dependent American society; we are becoming a ‘purchased society,’ and as such, we are losing our freedoms and liberties with each passing day. November counts and so does change!

What is Romney’s Plan? See Part II.

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Obama the Clueless! Doing Fine?

If you’re sick of a President who is out of touch with the real economy and are ready for a President who understands the private sector, donate to the campaign today.

Having just listened to President Obama’s press conference on economics, I am distressed beyond measure. Whereas I thought he just failed to understand certain basics of economics 101, I now believe he is absolutely clueless and blind to any comprehension of how the economy works. Obama chided and scolded Congress for failing to act on his ‘jobs’ act, placing blame again at someone else’s feet; and then pontificating in long drawn out diatribes, seeking to arrogantly tutor the press about how things work in an economy. Really? He doesn’t get it, and I mean HE DOESN’T GET IT! He believes that the solution rests with government, failing to recognize that government just needs to step aside and let the private and free markets thrive as they have throughout history.

***UPDATED***

A few key points to consider -
1) Obama wants to give small business tax incentives for hiring employees - The reality is that small businesses are not motivated to hire employees with economic uncertainty no matter how big a tax break they get. What would they hire the employees to do if there are little business drivers in an uncertain and flailing economy? Businesses hire people because market and economic drivers demand it, not because the government provides a tax break. Hiring for the sake of hiring is how the government works, not how business works.

2) Obama mentioned that state and local governments have seen over 450,000 leave their workforce - let’s put them back to work. Obama’s answer to economic stimulus rests in government hiring, not private enterprise hiring - just look at the latest job numbers and real unemployment. The current federal workforce has grown by nearly 270,000 people under Obama amid an economic recession of historical magnitude. How is that possible and why? To what end? Obama’s skyrocketing deficits and debt dependency have created a ‘purchased society’ that every day becomes more and more dependent on Washington - such is his agenda.

3) Obama states that the housing market continues to improve - on what planet? How out of touch can he be, or what bubble is he living in? We know that the only place in the United States where housing prices have gone up is in Washington DC. When the federal workforce has increased so dramatically in Washington, people have to live somewhere, and consequentially they drive up prices. Washington DC is not the real world. The middle class and poor have born the burdens of Washington DC’s consumption and have suffered intolerably. Have you tried to purchase a house lately? The irony rests in an abundance of capital amid historically tight credit. Banks are not lending because they are capital constrained, but because of economic and regulatory uncertainty - see further commentary below.

4) Obama lectured reporters this morning as if he had a clue, addressing the economic dynamics of Europe. Really? Has he not looked in his own backyard? He spoke of Greece’s burdening debt that exceeds their GDP, and yet he has added over $5 trillion to our debt. He spoke of Spain’s needed restructuring and their need to build and strengthen government intervention, affirming his philosophical ideology that the solution is in growing greater government dependency.

Economic recoveries are led, not by government, but by private enterprise and free markets. Ronald Reagan proved the point when inspiring a recovery after the abominable Carter years. Government policies can enable or destroy markets. Reagan unleashed the markets whereas Obama has set policies and legislation in place that have not only stifled economic growth, but turned us in a downward spiral. Gary Shapiro adds insight in the American Spectator here with further commentary and reference here.

The only way we will see an economic recovery in the US is if we free the markets and capital from oppressive policies, regulation, taxation and out of control government spending/deficits.

Consider some very critical points -
1) We will not see a sustainable recovery without real job creation. Real job creation comes through the private sector, and most notably, small business. Presently small businesses are liquidity constrained and in decline because of market uncertainties, declines in discretionary spending and the consequential impact of oppressive government intervention.

2) We will not see a sustainable recovery until we free up the credit markets. Bank lending is foundational to any economic recovery, and presently it is absent. Of course, in an Obama administration, the banks are the ‘bad’ guys. Parenthetically, we not only have class warfare being waged among our society, we have seen stark divisions and conflicts develop between free enterprise and government. The government has become the lender of choice, not our banks. Obama and his advocates (Nancy Pelosi, Harry Reid, Barney Frank and Chris Dodd, among others) have effectively ‘nationalized’ our banking system in the first three years of Obama’s Presidency through Dodd-Frank and other legislative acts. What many fail to realize is that our banking regulators not only regulate, but have now been empowered to write policy thus creating a climate of uncertainty. Effectively, bank regulators are no longer simply overseeing our banking enterprises, but de facto, running them. Regulators are resident in our banks dictating to whom the banks can lend, how much and when, and in some cases approving new executive hires and acquisitions. They have set an untenable standard of arbitrary and capricious governance that have led the banks to hunker down and wait things out rather than conduct business in the ordinary course. Our US banks, for the most part, have become relegated to the ‘situational standards’ of their regulators, and consequentially they don’t know how their loans might be interpreted; thus they choose only to make loans at the ‘gold standard’. This constraint of capital is impinging on any recovery that we might have.

For example: have you tried to purchase a house lately? First of all, the home appraisers, who are now regulated set the price of your home. Our son who recently sold his home was stressed not because he didn’t have buyers (he had three at the full asking price), but because he wasn’t sure if the appraisal would come in on target in spite of three full price offers. Secondly, the buyers who were securing a loan for the property had to meet bank lending standards, a FICO score in the mid-to high 700′s, 30% of the purchase price in the bank and an income well in excess of their debt service requirements. Of course then there were the limitations imposed by FNMA as to the amount that could be financed if it were to be a conventional loan. Anything outside of FNMA’s convention would be classified as a ‘jumbo’ loan where lending rates and costs are significantly higher. Bottom line, credit is not only tight in the housing market, but every market. Small business cannot access bank lending easily and unless they defer to the government’s SBA programs are left without.

Consider also our student loan programs. Historically, student loans were available through our banking system, with government lending support. Credit could be obtained, but with conventional underwriting standards applied. Under Obama the programs have ceased through our banks and are now only available through the government. Underwriting standards are anything but conventional and little discipline is applied to a student’s ability to repay the loan. Student loans are, in aggregate, approximating $1 trillion and far outpacing the growth of general consumer debt in the US.

3) We will not see a sustainable recovery until we return to fundamental economic principles and sources. Our banks are flush with liquidity and our large national and multi-national corporations are sitting on trillions of dollars. Are we tapping into these traditional resources to lift our economic woes? NO; instead we are deferring to the government. We need to empower capital not constrain it; we need to open markets to free enterprise not close them; we need a President that gets it, whose agenda is to empower our economy and not seek for government to own it.

We need to hang in just a little bit longer. November is on the horizon and the nation will then choose our course for the future; a President who is clueless, or an experienced leader with proven capacity that clearly understands how economy’s work.

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