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Tuesday, January 20, 2009

Obama Speaks, Government Grows, Hope Flies South

Make no mistake. President Obama has just inherited his own recession and plans to use it for all its worth.

HOW WE GOT HERE

Democrats have controlled Congress for two years. When they took the reigns of government, unemployment was 4.4%, the deficit was on a steady fall at $248 billion, and the DOW was climbing past 12,500. After two years of Democrats promising more taxes and lower profits, unemployment rose to 7.2%, the deficit sored past $400 billion (and may now exceed $1 trillion), and the DOW sank below 8,000.

The message from the Democrat Congress and Democrat presidential candidates has been clear. If you own, run, or invest in a business, government will take more of your profits. Your income taxes will rise, your capital gains taxes will rise, your corporate taxes will rise, and if your profits are still "too large" government will find a way to take them too.

For those who are attracted to this politics of envy, for those who think such taxes only affect the rich, think again. Taking their profits discourages further investment. Plans to upgrade business facilities (such as with new computer systems), plans to branch out with new stores, and plans for hire more people come to a screeching halt. Here is where the downward economic spiral begins. Those who would have provided the new computers and built the new stores start losing business. Ultimately, they are forced to cut staff and scale back operations. Their suppliers then suffer a similar fate. And so on, and so on, and so on.

If you want a raise or a new job, don't ask government to take more of your employer's money!!

Democrats then stifled energy production by promising to keep the world's richest oil deposits off limits to American energy suppliers. As a result, $4 gas became reality further increasing the cost of doing business across the nation and further depleting company profits.

If that wasn't enough, this oil policy cost the American auto makers billions in revenues, and potentially their very existence.

Then came Fannie Mae and Freddie Mac. When Democrats took control of Congress in 2007, they blocked every effort to reign in Fannie and Freddie's risky lending policy and Enron-like bookkeeping that made future Obama advisers James Johnson, Franklin Raines, Jamie Gorelick, and Rahm Emanuel obscenely rich (see here and here).

Fannie and Freddie is a Democrat scandal that demonstrates the danger of government intervention into private sector enterprise. Not only is a government backed entity destined to fiscal abuse and failure, but the industry in which they do business suffers as well. Because Fannie and Freddie were able to lobby lawmakers to look the other way, the housing market was artificially inflated and its crash reached far beyond those who couldn't afford their mortgages.

NOTHING LEARNED

In his inaugural speech, President Obama either doesn't get – or doesn't want you to:

...this crisis has reminded us that without a watchful eye, the market can spin out of control - and that a nation cannot prosper long when it favors only the prosperous...
The market didn't need the watchful eye, government did. Fannie and Freddie are NOT free market enterprises. They are Government-Sponsored Enterprises backed with tax payer dollars.

President Bush and Senator McCain tried to train that watchful eye on Fannie and Freddie, but Obama and fellow Democrats chose blinders instead. Those who prospered most where those who successfully lobbied for greater government intervention into private enterprise. And now, President Obama promises to increase such intervention by building roads and bridges (that will no doubt become rails and trails), increasing its control of health care providers, and choosing the politically correct energy suppliers over the efficiency and economy of good old crude.

Have you lost a good paying tech job in the private sector? Not to fear, the government will soon give you a shovel and ditch to dig.

But, if you're a cynic like myself, the President has a few choice words:

What the cynics fail to understand is that the ground has shifted beneath them - that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works - whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public's dollars will be held to account - to spend wisely, reform bad habits, and do our business in the light of day - because only then can we restore the vital trust between a people and their government.
Like Al Gore in an ice storm declaring that the global warming sky is falling, saying it doesn't make it so. Government intervention into private sector business never helps the private citizen. It only benefits those in the bureaucracy who consume billions in tax revenues to dole out loose change to recipients. It benefits the politician who gains power through promising more freebies and it benefits the government endorsed businesses who grease the wheels of Congress. There is no nation on earth that lead its people to prosperity through greater government control of private enterprise.

Perhaps I'm cynical because a few short weeks ago, Obama's Chief of Staff, Rahm Emanuel punctuated remarks about Obama's economic policy with the message "You never want a serious crisis to go to waste ... This crisis provides the opportunity for us to do things that you could not do before". In today's address, Obama seems poised to exploit this crisis to create greater dependence upon government programs and solidify Democrat power for decades to come.

ABOUT THAT HOPE

President Obama speaks eloquently of the promise of hope, but fails to inspire it. In 1981, President Reagan inspired the private sector into action with the knowledge that government will get out of their way. In contrast, Obama's message to private business is to guard your wallet, and to the rest it's wait for government to save you. There is no call to action and no promise of reward for hard work.

The DOW is a good indicator of hope among private investment. If you think that growth and prosperity may be down the road, you are more likely to risk investing today.

During the week preceding the Election, the DOW rose with news of McCain's increasing poll numbers. In eight days, with the gap steadily narrowing, the DOW rose over 1,400 points. The day following Obama's election (and with his failure to squelch talk of tax hikes), the DOW fell 486 points. It has continued to fall and additional 858 points. After his Inaugural Address, the DOW fell another 332 points. Are you keeping track? Since giving his Election Night acceptance speech, the DOW has fallen 1,676 points.

It appears that hope flew out of Washington today, maybe landing somewhere in Texas.

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2 Comments:

Anonymous Duke Powell said...

This is an excellent posting. I'll have to steal parts of it.

1/24/2009 4:43 PM  
Blogger G-Man said...

Be my guest. (And, thank you!)

1/27/2009 6:59 PM  

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