Increasing Obama Negativity in Economist

The Economist continues to suffer disappointment in Obama after putting him on the cover twice late in the Presidential campaign and endorsing him. In the 14 - 20 March issue, it notes

At market close on March 11th, despite a rally this week, the Dow Jones Industrial Average was 16% below its level on the Friday before Mr Obama took office. At this point in Roosevelt's presidency, 54 days in, it was up 35%.

In truth, he had long promised to spend more on health care and alternative energy and to raise taxes on the rich, so little in the budget should have surprised investors.

A bigger dent to confidence comes from Mr Obama's style, not his substance. His many backers on Wall Street had taken his conciliatory manner and selection of centrist economic advisers as evidence that he would govern moderately despite, as a senator, having consistently voted on the left. They have been taken aback by his combative tone.

But the Obamabears' biggest fear is that Mr Obama's remedies are not up to the task of fixing America's deepening recession.

Mr. Geithner's own efficacy has been hamstrung by the fact he remains his department's only Senate-confirmed official: 17 other top Treasury jobs requiring Senate approval remain vacant. In 2007 the Treasury website listed 120-odd officials, from Hank Paulson, the then treasury secretary, down. The current version of the same webpage lists just one: Mr Geithner.

All this has left foreign officials and domestic bankers frustrated at the lack of consultation from the Treasury.

Whatever the cause, the strain on the Treasury is encouraging the view that Mr Obama's agenda is being driven by political advisers and Congressmen, both more attuned to voter's rage than to market confidence.

Clearly The Economist's confidence in Obama continues to erode, along with that of many others who supported him while believing he was someone very different than anyone with any wisdom would have understood him to be. They close with a quote from a former Bill Clinton aide who advised Obama to focus on the financial crisis or risk the loss of confidence Jimmy Carter suffered. Meanwhile, the market is still down 40% since it became fairly clear that Obama was going to win the presidential election in September 2008.

Stock Investors Have Gone John Galt

Obama does not care a fig for whether the stock market goes up or down. So he says. From his actions and given his hatred for the "investor class", one has to conclude that he actually likes seeing the stock market going down.

Clearly stock investors are leaving the stock market. They are buying gold and in some cases they are betting that the Obama pessimism will carry the market still lower. Today, the Dow Jones Industrial Average and Standard & Poor's Stock Index reached 12-year lows. The Dow closed at 6,594.44 and the S&P finished the day at 682.55, which is the lowest it has closed at since 19 Sep 96. The Nasdaq composite fell to 1,299.59, barely above its low in the last bear market on 12 Mar 03.

Many people soon to retire on the leading edge of the Baby Boomers generation are now without adequate income for their retirement since stocks now are worth only 50.2% of their 52-week high of 13,136.69. Obama does not care. Actually, Obama does not want anyone to have any more retirement income than that provided by Social Security. Obama is a very happy man.

So, investors see no reason to have confidence in the future of the American economy. They are showing this by "Going John Galt" in droves. There is no joy in Mudville, nor anywhere in America today. The Federal government does not protect property and it does not protect contracts. The failure to protect contracts is explicit in the abrogation of home mortgage contracts. The failure to protect property is explicit in talk establishing the means to take over a number of financial companies after years of pushing them to finance sub-prime mortgages and lending generally and saddling them with short-sighted mark-to-market rules under the Sarbanes-Oxley accounting law. Yes, many of these institutions bear substantial blame, but so does the government which now wants us to believe that it can manage many of these companies better than their management can.

For all the faults many of those companies managers can be held to account for, there is every reason to believe that government bureaucrats will be far, far less capable. Most of those bureaucrats are in government agencies either because they could not make it in private enterprise or because they hate the profit motive. In either case, the bureaucrat is hardly likely to do well in managing a company of the private sector. Indeed, it would be unseemly for a bureaucrat to actively seek to increase a company's profit in competition with other companies. There is a strong conflict of interest between his public duties and such a role.

Such a strong conflict of interest also exists between the government-employed educator and the operation of schools. This has not kept the government from almost monopolizing the schooling of America's children and it has emboldened them to substitute propaganda for larger government for a critical assessment of the moral scope of government power. One of the primary reasons children need an education is so they will be able to hold their own against the will of government to always expand its powers. It takes knowledge and intellectual confidence for the individual to stand firm against the demands of those wielding power through government. Government is the chief enemy of freedom and freedom always hangs in a delicate and precarious balance due to the threats of government. Only when many citizens are able to think for themselves and are cognizant of history and economics can they hold government in check.

Our government-run schools have seen to it that our children cannot see the threat of government, that they believe an additional government program is the answer to every problem, that they avoid conflict and hurt feelings at all costs, and that they are ignorant of the essential lessons of history. Government schools have long been designing our children to become patsies before the onslaught of evermore intrusive government. Our children are designed to become the feudal serfs of society. This is the only class of people that Obama likes. Our schools cannot hope to do the job of education due to the fundamental conflict of interest that a government has with respect education and the expansion of its own powers.

Similar conflicts of interest exist with all of the many functions which governments take on to expand their power. Recognition of this motivated the Framer's of the Constitution to strictly limit the powers of government. Government is always primarily about the use of force, not primarily about helping the people. Government is always dangerous. But government always poses as the solution to every problem. It poses as the solution to the problems in the economy, but in reality it is the biggest problem by far in the economy. Let us "go John Galt" on government!

Lambro: Recession fixation

Donald Lambro commented today in the Washington Times that Americans are deeply pessimistic about the future of the American economy, owing in large part to the Democrats media campaign that the economy is in recession. Let us look at the facts.

• GDP grew 0.9% in the first quarter of 2008. This is weak, but it is not recession.
• The unemployment rate is low and near 5%. People who want to work and who have some marginal skills are working.
• New home sales rose 3.3% in April. As earlier noted in this blog, home sales are really only in trouble in a few areas of the country, generally those where unrealistic increases in housing valuations occurred earlier.
• With the exclusion of transportation orders, factory orders increased 2.5%, the largest such increase in 9 months.
• We remain the world's largest economy, producing $14 trillion of goods and services each year.
• Exports grew 3% in the first quarter and we are selling $1.4 trillion of goods and services abroad.

This appears to be a relatively mild slowdown and we appear to be starting to come out of it. Noting that the stock market is forward-looking, I recently rearranged my retirement portfolio to weigh stocks more heavily in order to take advantage of the coming increase in growth rates in the economy. The American economy is very robustly minimizing the effects of the loss of housing values in some areas of the country, the problems with some types of credit, and the very high cost of oil. The only really worrisome future event is an economy-killing combination of Democrat tax increases and legislation to squash our use of energy in business favored by both Obama and McCain. Short of these disasters, I think the economy will soon be doing much better.