Monday, September 17, 2012

Obama's Growing Credibility Gap

The Obama administration is losing credibility as the whole U.S. Middle East policy crashes around their heads. To add insult to injury is their wavering explanations for what happened in Egypt and Libya which they are now blaming totally on an obscure internet video produced by a Coptic Christian who is living in the U.S. This flies in the face of obvious facts that the attack in Libya was planned and carried out by a well armed assault force. It also is in conflict with the statements of the president of Libya and that of national security specialists. It is clear that while none of the regional governments were behind the attacks, it is also clear that they did less that they could prevent the attacks.

One need only recall how in 2008 the McCain campaign received a fatal blow with the economic crisis that started with the Lehman collapse. From the outset of that campaign such an event occurring before the election would constitute an “unknown unknown” in the risk analysis terminology which was popularized by Donald Rumsfeld. The current meltdown in U.S. Middle East policy and the growing Obama administration credibility gap may constitute a similar game changer in this year’s campaign. Obama’s claim to a foreign policy advantage has collapsed in an instant.

Of course another complication is the “known unknown” of the pending confrontation between Israel and Iran. This could provide yet another “sea change” with massive consequences that are unpredictable.

Wednesday, February 22, 2012

Where Is The AARP?

Where is the AARP? Weren’t they the “gray panthers” that would fight “tooth and claw” for the interests of senior citizens? So for over a year Democrats and Republicans have cutout 16% of the tax base that supports their member social security checks. But, not a peep from the vaunted AARP! Where is all that senior voting power that we have heard about for years? What about that “third rail of politics” that none dared touch?

It seems whatever the core motivations of the AARP, protecting the interests of the retired aren’t that high of a priority. We know that the payroll tax was the price that Republicans had to pay to preserve the top-end of the Bush tax cuts. The payroll cut was pushed primarily by President Obama. It seems re-electing Obama is more important to the AARP than the interests of seniors.

Monday, February 13, 2012

Obama's Catholic Issue

Obama so-called accommodation with the Catholic Church is totally disingenuous. It is premised on a plan to require the insurance companies to provide contraceptives and abortion pills as a work around to his original plan to require faith-based institutions to provide them. To the shallow thinker this might be an attempt at compromise. However, it isn’t.

What is left in doubt is exactly who will actually pay for these services. The only way that this would be a sign of good faith would be that religious institutions would be given a reduced rate for their insurance proportional to cost of contraceptives and morning after pills. In that case all of the other costumers of the insurance companies would have increased rates to cover the cost of providing services to the religious organizations. While this might well serve the purpose of freeing the Church’s conscience, it would constitute the government mandating the financial support of religion. This would seem to violate current court interpretations of the First Amendment.

On the other hand if the religious organizations were not given a reduce rate then they would be providing contraceptives and abortion pills. In that case the Obama Administration offer would be a total sham. Furthermore, many of these organizations self-insure so who will pay in those cases?

This controversy is going to easily be swept under the rug. Nothing short of a complete rescission the Administration’s directive is acceptable.

Sunday, July 31, 2011

Outline of a Debt Ceiling Deal

The four principles of a compromise on the Debt ceiling:

1) $2.5 Trillion deal (Democrat position)
2) No new taxes (Republican position)
3) No balanced budget amendment (Democrat position)
4) One dollar of budget plan savings for each dollar of debt increase (Republican position)

This plan will rely on pragmatists in the senate to pass and will require 30 or so Democrats in the house to pass. Expect more House Republicans to vote no than on the Boehner Bill vote.

If conservatives get this through they should be very pleased. Democrats should at least be happy that they won't face this issues until after the 2012 election. The balance budget amendment is a total showstopper to the Democrats and will not pass Congress. It is also a bad idea as well.

It is often pointed out that states live under such systems. However, the federal tax system relies to a much greater extent on income taxes on income than the state tax systems that rely on taxes on the poor and midde class to a greater extend. The problem with upper income taxes is that the revenue base is much more economically sensitive than middle class and poor spending patterns, propety values, and group average incomes. So if the federal government had an annual balance budget requirement its spending pattern would be in constant chaos and varying in a way to intensify the volitility in the economic cycles.

It should be obvious that by demanding a balanced budget amendment Republicans are demanding the unconditional surrender of the Democrats. This isn't going to happen or at least not this year. My suggestion is the Congress and the President do their jobs and bring spending under control. There are many things to cut but it takes throughful and careful work to do it the right way. Just about eveny politician says they will do this when campaigning but fail to do so when taking office. It is time that they keep this promise.

Friday, December 24, 2010

Goodbye to the 111th Congress

At last the 111th Congress is history! While various media sources are attempting to give Pres. Obama a political makeover in reality conservatives won on the big issues. Of course there has to be a caveat with that, but we'll get to that later. The most important issue was extending the Bush tax cuts accomplished through the compromise with the President. The second most important issue was the defeat of the Omnibus spending Bill and its replacement with a short-term continuing resolution. These two wins empower the Republicans to set the economic agenda for the next two years. Finally, the defeat of the so-called Dream Act was a major victory for the conservative movement.

The caveat is of course the repeal of Don't Ask Don't Tell and Start Treaty ratification. However in the case of the first it was likely the Supreme Court would eventually overturned Don't Ask Don't Tell anyway given Justice Kennedy's historic support of gay rights issues. The Start Treaty vote does reveal a shocking lack of unity in the Senate Republican Caucus. But also reveals a fundamental flaw in US strategic thinking is affected both parties since the fall of the Soviet Empire. As such it is an issue that was not addressed by the 2010 political campaign and so the ultimate result is not surprising.

While many strong conservatives have bemoaned the tax compromise, given the weakness that was displayed by Senate Republicans during the lame-duck session they instead should congratulate Sen. McConnell on his achievement. It's unclear whether a strategy to block everything to the end of the session would've been successful or instead would've resulted in a RINO rebellion that would've resulted in a complete Democrat victory. It is certainly clear that Republicans need to work for better party discipline if they are going to be effective.

One key thing that has been accomplished is to deny funding for the implementation of Obamacare. The budget victory also gives the Republicans in the House a chance to reduce spending in the 2011 budget. While we can expect the House Republicans to vote the repeal of Obama care as a symbolic gesture, such a measure has no chance the Senate and of course would face Pres. Obama’s certain veto if it were to arrive on his desk. However, by breaking the elements of the Omnibus spending Bill into separate departmental elements (the way it is supposed by done) the Republicans can attach incremental changes to Obamacare forcing the President to veto one bill after another or to accept some changes. The success of such an approach will also be affected by the outcomes of several court challenges that are currently working their way to the Supreme Court.

While the prospects for significant modifications to the so-called health reform bill are problematic, the process will force Senate Democrats who are up for reelection in 2012 to take a stand on various elements of the bill in isolation which may be even less popular than the bill in its entirety. This incremental approach will also have the advantage of not challenging those elements of Obamacare which are popular. It will also maximize the number of presidential vetoes casting him as an obstructionist while avoiding a total government shutdown media circus.

So in conclusion, don’t expect the trend the last few days of the 111th Congress to be indicative of what to expect in the 112th.

Sunday, August 1, 2010

Myths of the Clinton Economy and Tax Policy

If you take what Democrat politicians and spokespeople say literally you would believe that the Clinton Administration inherited a bad economy and by the magic of raising taxes on upper income people he turned the economy around. Nearly eight years of prosperity emanated from that brilliant policy. It even results in some amazing years of balanced budgets. So by this reasoning higher tax rates lead to prosperity.

This stands against the evidence of four other administrations: Kennedy, Reagan, Bush I and Bush II. Three of these made significant tax cuts and the economy prospered. One of them, i.e. Bush I, raised taxes and the economy was very sluggish leading to conditions for the Clinton victory.

So what are we to conclude? Why was the Clinton economic policy so different? The mystery is actually fairly easy to understand when one looks at the broader economic conditions in the Clinton years. First of all there is way too much credit and blame given to presidents concerning the economy. Presidents can’t abolish the business cycle. The Bush I recession was a correction to the economic boom of the middle to late Reagan years. One key element of this aftermath was the savings and loan crisis. Bush the elder had the thankless task of cleaning up this mess. He then compounded his problem by agreeing to a tax increase that was poorly thought out. By the time Bush the elder was voted out office, the economy was growing nicely but there hadn’t been time to have the improving GDP result in more jobs.

So Clinton came into office with an economy that was destined to be good even without new initiatives. However, Clinton slapped the economy with a tax rate increase that was that was three times as high as Bush I’s. So why didn’t this kill the recovery that Clinton inherited? The key fact at that time was rather high “real” interest rate, i.e. interest rate minus inflation. What saved the Clinton economy was a cleaver deal the administration made with then Fed Chairman Alan Greenspan. The Fed would hold down short term interest rates which are those which it can most affect and the Treasury Department would refinance the national debt with shorter term notes rather than long-term bonds. By removing the U.S. government from the long-term debt market interest rates came down in that sector as well. So this monetary policy counter balanced the high tax policy allowing the recovery to continue.

It often said that it is “better to be lucky than good” and so it was with President Clinton. The other part of “good Clinton economy” was due to a revolution in microprocessor technology that was coincident with his term of office but had nothing to do with any of his policy initiatives. This increase in cheap computing technology resulted in a complementary explosion in software development and the internet. Wave after wave of new companies were started to exploit these new technologies. Initial Public Offerings raised massive amounts of capital. The stock market soared and the massive increase in short term capital gains, bonuses, and increased salaries brought hundreds of billions into the Treasury. With spending held in check by a Republican Congress, the government started running surpluses.

So the Clinton experience gives little support for the concept that high tax rates are good for growth. It only shows that if conditions are just right they aren’t necessarily a show stopper. President Obama doesn’t have the luck of President Clinton. He can’t use reduced interest rates to counter balance the tax increases that will come in 2011 unless the current tax rates are continued. To address the dilemmas of the current economic situations we must address the end of the Clinton era and the Bush II years to set the stage. I plan to address this in a subsequent posting.

Saturday, February 13, 2010

Obama's Bad News for U.S. Space Leadership

Newt has gone fuzzy again as when he endorsed anthropogenic global warming. The new Obama space initiative is like the little book offered to John in the Book of tastes sweet in the mouth and is sour in the stomach. It offers the vision of advance space technology to space advocates and free enterprise in space to conservatives. In reality it is unlikely to produce either. On top of that is the gratuitous cancellation of every element of NASA's manned space program. Now we start over with new efforts which will at best give us a reduced range of capabilities. On paper every new alternative can seem lower cost but so did the programs that Obama suggests ending.

It would make more sense to continue with the Orion spacecraft and the Ares I launcher to maintain our space presence. Critics have made exaggerated claims of problems with Ares I. It is clear that a management shake up may well be in order but to simply throw out $9 billion in investment is wrong. Saving these elements of Constellation would allow us to continue ISS operations without long-term dependence on the Russians and use these elements to support a more robust effort later, i.e. Moon or beyond.

NASA chief Charles Bolden speaks of the need to develop a heavy lift rocket but it is unclear that a practical/affordable rocket better than Constellation's Ares V is possible in the foreseeable future. On one hand Bolden complains that Ares V is behind schedule and then proposes an alternative that does the same thing that will arrive at even a latter date. This makes little sense. Furthermore without the Orion spacecraft what is it intended to launch?

I'm very much for advanced space technologies but of what use will they be if there is not commitment to a stable space program that can take advantage of them. Furthermore the most promising of them such as Dr. Chang-Diaz's plasma thrusters don't require massive budgets in the next few years and development can be expanded with modest budgets for many years to come. It is my primary concern is that the Obama plan is a step to the end of U.S. human space flight. In fiscal 2011 all existing NASA human space vehicles are cancelled in favor of commercial investments. Then problems with these new programs and budget pressure slowly squeeze them out of the out-year budgets as well. The end of our space program is then a fait accompli.