JANUARY 20, 2009

Reagan came into office in 1981 declaring the Government is the problem not the solution. Compare this Ronald Reagan: First Inaugural Address with this Text of President Barack Obama's inaugural address. They both entered office in troubled economic times but gave polar opposite messages. Different they are and we have gone a long way backward. Obama comes into office declaring, implicitly, that Government is the solution to our problems. Investors also get to vote. While markets learned nothing new today--except perhaps forecasts like Roubini's that the US Banking System alone will eventually report $3.5 trillion of losses (global losses equal about $ 1trillion so far) U.S. Banking System Insolvent, Another $2.5T of Losses--today's record inaugural market decline line does tell us what we presumably already know.

Dow	7,949.09	-332.13	-4.01%

That whatever it is we are in, there is no confidence that anyone has the answer to get us out. The implicit justification for big and bigger Government in President Obama's inauguration speech (by declaring "big" or "small" is not the issue when it comes to Government, but "does it work?") clearly did not raise hopes either. The time for unspecified hope and change has come and gone. We now know hope and change means we have come to look collectively toward Government for solutions. But Governments cannot provide solutions to the kinds of problems we have. A few hundred thousand Government employees spreading other peoples' money around through randomly generated spending programs cannot possibly accomplish anything (see below as well). Yet, beginning with Bush in September, we have mysteriously raised our desire for Government based action by an "order of magnitude".  That message was kept alive and well today by the strangely similar Obama. This new anti-Reagan message is: "I believe in free markets but..........". It is astonishing really. This expectation of giant federal bailouts and "stimulus spending to the rescue" causes investors, i.e., us, to "wait". "Wait" to invest; "wait" to take risks; "wait" to see what the Government will really do. We keep being promised massive and then even more massive action by the Feds. What makes it even worse, is nothing actually is done. So we wait, and wait some more. Waiting simply means that the problems will continue to get worse. Instead of tens of millions of people acting, we wait for these over hyped, over promised and undeliverable actions by Government. It cannot work. We have it exactly backwards. The incentives have to come from the bottom up, not from the top down. That is what Reagan meant. So he cut marginal taxes in half and supported Volker in his quest to stop inflation knowing it would temporarily deepen the recession. The Reagan message is so far gone from where we are today, it is almost impossible to discuss rationally. We have even conflated the good feeling of the first African American president with the reality of his policies. If somehow Obama pulls this economic recovery off, I will be happily shocked. But it will not happen given what he proposes. Unless he changes his proposals to a simpler more "tried and true" method, thus reversing the Bush travesty, he will be challenged in his own party as well as by a reemergant Conservative movement in 2012.

(posted at 4:30 pm by Mike Rulle)

Finally, its over. The waiting that is. Also having to read about the dual presidency day in and day out. To not have to read about all this dramatic anticipation will be a national relief. Just let Obama and the new administration get on with it. We will have one guy in charge and hopefully the other one can just go home and be forgotten. Although if Conyers and Pelosi are serious, which is truly hard to believe, we will not be forgetting about Bush and Cheney anytime soon House Speaker Pelosi wants Congress to investigate Bush. If Obama holds true to recent form, he will attempt to squash this. It is not clear yet, however, what the left wing of the Democratic party is going to get from the president. They have not yet even been tossed a bone. But do Pelosi and company really want to go down the investigation path to assuage the left?  My guess is they make a fake move in that direction and then it dies on the vine. The other good thing about the inauguration being behind us, is that "hope and change" can become "here and now". This seems to have been the longest anticipation period for a president in our lifetime.

The three policy issues that concern me most under a Obama administration are; 1) the deficit spending proposals; 2) the latent energy proposals that have been mostly under the radar, and; 3) Universal Health Care. Deficit "stimulus" spending theory comes from John Maynard Keynes. It is embedded in every text about Macroeconomics and its validity had gone almost unquestioned for years. But there is no consensus on what deficit spending accomplishes. Greg Mankiw has performed a public service on this question. His website recently has been almost completely devoted to the scientific and non-scientific opinions surrounding this issue. He is easy to read and I recommend it.The bottom line is there really is no evidence to support the efficacy of "stimulus" spending. Yet we borrow aggressively from our young to......what?  My second concern is policies to address "climate change" (see below). This will have the effect of raising the cost of everything we do---for no good purpose. McCain and Obama both supported CO2 restrictions during the campaign but Obama has been silent on this since election day. "Universal Health Care" is also a disturbing possibility. What is meant by that is Government mandated health care. In every country that has tried this we get rationing. The reason is obvious. When you artificially lower the cost to buy something, you get more demand for it. When you simultaneously lower the price one can charge for something, you get less supply of it. Since these are both features of "Universal Health Care", the result is rationing. Rationing means someone else is determining how you treat yourself medically--the Government. 

Obama is likely to maintain Bush's foreign policy. Any dreams of the left on this will be shattered. But this should be apparent to anyone who has looked at the behavior of past presidents. Wilson and FDR were both "peace" candidates but war presidents. It is the nature of the job.

(posted at 10:21 am by Mike Rulle)

  

It is hard to believe the public is really as excited about Obama's inauguration as the media pretends it is 67% - Plan to Watch the Inauguration. I have never watched an inauguration ceremony before. Its not that I am against pomp and ceremony. In fact, it is very important we treat the transfer of power in this manner. Nor does the spending for the party concern me, although its exaggerated celebrity focus is distasteful. But the tradition of a celebration as we inaugurate a president is a good thing for our society. This was why I found the NY Times finger pointing at Bush back in 2005 so disgraceful The New York Times--For Inauguration in Wartime. Still, I have never been interested enough to watch one. Apart from the aforementioned pomp, it is just another political speech. Additionally, the inevitable repetitive, cloying, cheesy, cornball coverage this time around, instead of the dreary drab barely concealed scolding of 2005, will be too much to take.

(posted at 9:34 am by Mike Rulle)

  

Henry Paulson's unprecedented forced equity purchases was the single most radical domestic policy ever initiated by a US administration not in a war. It far outstrips Nixon's wage and price controls and even the delinking of gold with the dollar. It initiated an anything goes mentality for the federal government. We now have the new administration almost promising record deficits (in absolute and percentage terms) and the public some how gives it an 80% approval rating. The "intelligentsia" should at least know the facts, even if the public does not. We all know that trying to spend an extra $1 trillion per year is like forcing a snake to eat its food fast. It just will not happen Much in Obama stimulus bill won't hit economy soon. As also mentioned on this site before, there is no empirical evidence that stimulus spending "works". The little evidence that exists in Macroeconomics is that it does not work. But stimulus spending is like Global Warming. No lack of evidence can dissuade its adherents from pursuing the most extreme implementation.

(posted at 9:13 am by Mike Rulle)

  

The NY Times runs a creepy survey asking people what their "hopes and dreams" are for the Obama administration I Hope So Too. The answers, which you can hear spoken, are remarkably similar to their editorial page opinions. The respondents sound desperate to me, as if their one shot at having a god like figure in the White House will go unfulfilled. They remind me of the old Twilight Zone episode of Aliens coming to "serve" man YouTube - "Twilight Zone" promo for "To Serve Man. The public was in worshipful mode until they found out the Aliens' special book on "serving" man was really a cook book. Let's hope it does not get to that extreme before the media drops this cult fetish.

(posted at 8:34 am by Mike Rulle)

  

NASA's James Hansen: Man of Science, surely the kookiest of all Anthropogenic Global Warming advocates, claims we have 4 years to begin reducing CO2 emissions or we are doomed President Obama 'has four years to save Earth'. I have addressed AGW in detail before "Red Flags" Fly as Gore Raises Stakes so I won't repeat any of those points. While some of us cannot wait until this inauguration adulation is over, it does bring out interesting information. The NY Times did an open ended informal survey of the public's "hopes and dreams" for the Obama administration I Hope So Too. They categorized responses into 29 groups, and "Environment" was rated  second. This is a dangerous combination, popularity mixed with mystic voo doo, and calling itself "science".

(posted at 8:03 am by Mike Rulle)