Did Obama Cross the Line Yesterday?
I am starting to wonder if Barack Obama crossed the thin red line between traditional American liberalism and socialism yesterday. Traditionally, liberals in the US have taken pains to generally argue that the rich need to pay for their programs because theyare most able to pay. This differs a bit from socialists, who would argue that the rich should pay because they are guilty. For a libertarian like myself, it tends to be a pretty subtle difference, but I think it is important -- are taxes on the rich enforced charity, or are they reparations?
I woke up this morning profoundly depressed, which is unusual for me. I have a good friend who is having some personal problems, so it is hard for me to separate effects in my mind, but I really feel like Obama stepped over a line yesterday. TARP pissed me off, but we have bailed out companies before (though not for this much). The stimulus bill absolutely offended me, but we have seen stupid pork spending insanities before (though not for this much). But Obama's plan to remake tax law and the budget began with this paragraph:
This crisis is neither the result of a normal turn of the business cycle nor an accident of history, we arrived at this point as a result of an era of profound irresponsibility that engulfed both private and public institutions from some of our largest companies' executive suites to the seats of power in Washington, D.C.
From the rest of the rhetoric in this document, and that of Obama and his supporters, the overriding message is that "the rich are being taxed more because they have sinned. This is pennance." This is all the more amazing to me because Obama (and to be fair, his predecesors in the Bush administration) have gone out of their way to interrupt the normal market processes that punish failed behavior. Normally, if you take out a mortgage you can't afford, you default and lose your home, and are hopefully wiser the next time. If you lend to someone who can't pay, you lose your principal. If you make products no one wants to buy, you go bankrupt.
But every one of these market mechanisms are being interrupted. Its as if Obama and the feds not only want to hand out penance, they want to have a monopoly on the process. No longer will the market dictate winners and losers -- we in Washington will. It's thoroughly depressing.
Postscript: I guess I am the last person in America to believe it, but I DO believe that this is "a normal turn of the business cycle," or at least that it started out that way until everyone from Paulson to Obama worked to convince folks otherwise. It is clear that there was an international over-exuberance of lending that goes far beyond just CDO's as the culprit, or even mortgages in general. And such bubbles do occur from time to time.
PPS: It will be interesting to see which race is tighter -- Obama's race to spend money so he can take credit for a third quarter recovery which is going to happen anyway, or Obama's race to put in CO2 limits in time to take credit for the global cooling cycle many solar observers are starting to predict.
PPPS: I really didn't want to open global warming discussions in general with the last bit of snark. I have a whole website for that. I have a subtle enough understanding of the issue to know both that 1) CO2 is causing some warming 2) warming estimates are likely way overblown, for a variety of reasons that include feedback assumptions and 3) behaviors of temperatures over decade-long periods are not necesarily indicative on long-term trends. If we want to talk about climate modeling and model accuracy vs. current trends, see this post or this post.
Dave:
Can you provide some links regarding the "global cooling cycle" you make reference to? I have never heard that phrase before.
Thanks.
February 27, 2009, 10:39 amcolson:
I don't disagree with you at all in terms of this being a "normal" turn of the business cycle. While we can say it was "manipulated" (in small segments), markets correct for this as information becomes dispersed to a wider audience.
People fear not being in control of the world around them. Government gives the semblance of control. I would liken it to liberal creationism at its worst. People seem to develop this god complex and assume that they are above, and not just a small cog in the wheel of, nature.
The best of man's achievements work in tandem with nature, not in an attempt to coerce it to his idealistic will.
February 27, 2009, 10:58 amA Stoner:
Impossible to take credit for the global cooling that is coming for anyone. CO2 will continue to be produced in ever growing amounts and there is no way you can take a corelation from slightly less growth in CO2 output and cooling climate, because CO2 will continue to be emmited, just in a different country.
February 27, 2009, 11:03 amBryan:
@Dave
What he's refering to is that solar cycle 24 has started off late and weak. This weak cycle may cause some cooling over the next few years.
Expert opinions and predictions diverge wildly when it comes to the impact of sun cycles on climate. Opinions range from "the sun has negligable impact on climate" to "the sun is the only signifigant driver of climate."
You can find some of Warren's thoughts over on his other site. Here's the last post that he made that focused on the sun
http://www.climate-skeptic.com/2008/12/more-on-the-sun.html
If you take a look at the more recent posts, I advise that you skip the comments section because the site is infected with a particularly nasty troll at the moment.
February 27, 2009, 11:04 ammorganovich:
here's another indication of where he wants to head:
not 2 days after saying that "everyone should go to college" obama cancels federal subsidies for student loans. now i am not a supporter of government subsidies, but if i were going to pick one to support, it would be student loans. education is a good investment, and because it is a loan and not a grant, people will spend the money on something that seems likely to provide a return. this is precisely why microlending works in developing countries, but aid enforces a poverty trap.
so, not only will this curtailment hurt the middle class, but it won't even save the government any money. the funds are being redirected to grants for low income families.
from the WSJ:
"Under a plan unveiled in the administration's budget, subsidies to private lenders would be eliminated, and the government would use the savings estimated at $47.5 billion over the next decade to help bolster the Pell grant program for low-income students."
so we take a working program with a good allocation mechanism and replace it with block grants to people who already have access to a wide variety of scholarships and eliminate any incentive for the recipients to get a return on the investment.
this was the last educational sop the middle class had given spiraling college costs which are largely driven by scholarships - my high school (boarding school) was $15k/year in 1990. now it's $35k, and the increase in expense has been driven 80% by additional scholarships. am i the only one who sees how stupid this is? only the rich and the poor get to go. it's causing a weird barbelling of the student body. many of my old teachers talk about it.
this new educational policy will just make it worse. it will also allow people to get expensive degrees in "semiotics of lesbian Buddhist poetry" and other such terribly useful fields that yield no employment benefit.
remove the need to pay money back, and it will be spent badly.
February 27, 2009, 11:04 amBryan:
@Dave
The cooling cycle that Warren is talking about is Solar Cycle 24. The past few solar cycles have been very active, but #24 has started off late and weak. Experts disagree about what if anything this means, but it is possible that this cycle (the next 12 years or so) will show a global drop in temperatures.
For some of Warren's thoughts on the sun see
http://www.climate-skeptic.com/2008/12/more-on-the-sun.html
Note: If you check out any of the more recent posts, I would advise skipping the comments as the site has been infested with a particularly nasty troll.
February 27, 2009, 11:34 amJ.T.:
Punishment due to market forces is passive. Shaming is active and much more satisfying to the Democrats. And it gives them more control.
February 27, 2009, 11:47 ambbartlog:
but I DO believe that this is “a normal turn of the business cycle,â€
In the sense that similar things happened before, in 1929 and 1873, I guess this is accurate. But using 'normal' to describe an event that most people will only see once in a lifetime seems like stretching the definition. There are long and short business cycles. This is the bad part of the long one.
February 27, 2009, 11:51 amOut of curiousity, do you think that Obama and Paulson talked the nations of Eastern Europe into their current slump? Did Chinese electrical consumption of Q4 2008 fall because of their jawboning? I think it's faintly ridiculous to assign so much power to their words. Indeed if I did that I'd have to give them credit for economic benefits that resulted from suitable confidence-inspiring words, and that I am not inclined to do.
Captain Obviousness:
I agree that in some sense this is a normal turn of the business cycle, i.e. we had a boom and now it's time for a bust. But I think this is a much longer range business cycle event than you do. The boom started in the early 80's and has been artificially inflated with easy money every time it was about to go bust. Perhaps we can reinflate the bubble a few more times, but I think we are getting to the point were a bust to correct for the somewhat phony boom of the last 30 years is inevitable.
Ron Paul hit the nail on the head in his opening remarks to Bernanke the other day. Credit is not capital. We cannot be capitalists without capital, and capital cannot be created out of thin air by the Fed or deficit spending. At some point don't we have to suffer consequences from increasingly basing our economy on credit rather than capital for the last 30 years?
February 27, 2009, 12:22 pmEvilRedScandi:
I agree wholeheartedly with Captain Obviousness above - there may be an interim recovery, but the government's been writing a lot of checks it's body (politic) can't cash.
If I'm allowed a snark (and even if I'm not), I'm guessing the line Obama crossed was a powdery one on the Oval Office bathroom counter.
February 27, 2009, 12:49 pmMHodak:
If it's any consolation, a recovery in the 3rd quarter is becoming increasingly unlikely. The Democrats are counting on it, as you suggest, but they are also working overtime to delay it.
February 27, 2009, 1:15 pmMike:
Just for the record, Warren, you're not the last one who believes this is the end of another business cycle. However, the FUD factor - actively stoked by the President - has led many to believe this is unprecedented. And, of course, that Nanny Obama will make everything fine again.
February 27, 2009, 1:39 pmLink:
Coyote, I feel your pain.
I'm not a right wing nut, and I'm not normally paranoid. As evidence, although I voted for him in 2000, in my opinion George W Bush was the worst president of my 51 years. I'm a small "l" libertarian who feels betrayed by the Republican party.
But I have come to believe that Obama is dangerous -- he has a radical plan to remake America. He and Axelrod are red-diaper babies with an agenda. Obama has gotten away with so much, he thinks he can get away with anything. His fiscal and tax plans are designed not to deal with the current crisis, but to exploit the crisis. My suspicions have been confirmed in the details of the Stimulus Bill and his proposed budget.
The near term political answer is to put enough pressure on swing Democrats in the Senate, so that Obama can't run by fiat. The Pelosi-led House is hopeless.
February 27, 2009, 1:40 pmLink:
Larry Kudlow has a piece today that's on point for this topic:
Obama Declares War on Investors, Entrepreneurs, Businesses, And More
http://www.cnbc.com/id/29434104
His point is that Obama's programs don't fit the crisis at hand, and that we'll regret them as they play out over time. This isn't news for some of us, but it's at least a sign that some in MSM are also saying that Obama has crossed a line.
February 27, 2009, 4:45 pmMethinks:
Well said, Link.
February 27, 2009, 4:55 pmMesa Econoguy:
This crisis is neither the result of a normal turn of the business cycle nor an accident of history, we arrived at this point as a result of an era of profound irresponsibility that engulfed both private and public institutions from some of our largest companies’ executive suites to the seats of power in Washington, D.C.
That statement is absolute bullshit, and is flashing-neon-sign-with-300-billion-candlepower-searchlights tip-off that this guy has absolutely no clue about 1) incentives, and 2) how we got here.
This is all the more amazing to me because Obama (and to be fair, his predecesors in the Bush administration) have gone out of their way to interrupt the normal market processes that punish failed behavior.
Exactamundo, chief. AND, they are also the ones (particularly Democrats) who brought you the incentives that caused much of this mess.
So, now we have an economically clueless, probably dangerous, asshole from the same band of morons who set most of this in motion, and he thinks he can fix this via installation of a failed economic system, by effectively disincentivizing the most productive segment of economic society.
Absolute bullshit.
February 27, 2009, 5:01 pmSteve:
It may not be exactly NORMAL, but the current crisis was initiated by market forces, correcting an abnormal condition. I say not normal because the overpriced derivatives were made possible by legislation enacted over the last 30 years that short-circuited the normal lending process.
I do not say "crisis" because the market correction would have precipitated a crisis without government interference. The crisis exists now because the government has removed approximately 2.2 trillion dollars from the economy, and plans to remove more.
The liberals who control or influence government created the initial mortgage default wave, and they have turned a depressing month on Wall Street into a depression that could last for a decade, or longer. And make no mistake. These people are not stupid. They know exactly what they are doing.
February 27, 2009, 8:44 pmSteve:
Oops. I meant to say that the market correction would NOT have precipitated a crisis without government interference.
Sorry.
February 27, 2009, 8:46 pmDave:
Thanks for the cooling cycle links.
I've added climate-skeptic.com to my RSS reader.
February 28, 2009, 8:06 amMercy Vetsel:
Coke and Pepsi, right?
What I find most depressing about this situation is it's utter predictability. The voting records of Obama, the Democrats and Republicans have been on display for all to seem but no, no one cared.
Instead, a lot of smart people adopted the facile "on his watch" approach and decided this battle just wasn't worth fighting, that it made no difference.
It's almost like an observer watching two armies clashing conclude that since the front line isn't moving much, it doesn't matter which side wins.
-Mercy
February 28, 2009, 9:05 amMercy Vetsel:
Okay, I know this type of "I told you so" is obnoxious and ingratiating, but I don't know how else to express my frustration with libertarians and fiscal conservatives who don't see the difference between Democrats and Republicans.
Here's my response to a post on this blog back in April of 2008. If anyone has any doubt as to why the current political disaster is so predictable, just look at the LiberPlot link, please.
-Mercy
https://coyoteblog.com/coyote_blog/2008/04/what-we-learn-a.html
#
Mr. Mercy Vetsel:
This griping about Coke & Pepsi is irrational and childish.
The two party system has nothing to do with the fact that most Americans are addicted to handouts and don’t want the rest of us to have the freedom that the founders established.
Sure both parties are way more statist than the 5% of us who are about as libertarian as the founding fathers, but that doesn’t mean that there aren’t serious differences between the parties.
When you actually look at voting records (rather than the leftist media), it’s VERY clear that the libertarians are all Republican. I should keep the following graph on speed dial because it demonstrates so succinctly captures the difference between the parties.
http://www.republicanliberty.org/libdex/liberplots.htm
The upper right triangle is the libertarian triangle and there are NO Democrats there in any year and NO Republicans in the lower-left authoritarian corner. Some years there is almost no overlap.
80 years ago the Socialists figured out that blathering on about how far they were from the Pepsi and Coke parties wouldn’t get them anywhere, so they cast their lots with the Dems.
Unfortunately, capital L Libertarians aren’t as smart and so they’ve spent the last 30 years kicking themselves in the arse. The net effect of the Libertarian party and the related self-indulgent claim to be apart from the fray has moved this country to the left, that is away from personal and economic freedom.
-Mercy
February 28, 2009, 9:14 amApril 16, 2008, 8:13 pm
Bart Hall (Kansas, USA):
Obama is at least partially correct about the irresponsibility -- he simply misplaces it. The irresponsible behaviour has most clearly been that of the Federal Reserve in
a) dropping interest rates far too low and keeping them there far too long, and
February 28, 2009, 1:47 pmb) pouring astronomical amounts of liquidity into the system, while
c) persisting in the same approach in spite of profoundly changed circumstances ... like a couple of dogs spending hours digging after a bunny under the front of the shed even though said rabbit has long since departed by another route.
rsm:
You're not the only depressed one. I've been looking at moving my family and me back to the states, and I'm now loathe to do so. I don't so much mind irresponsible idiots in charge (Bush) because they can't deliberately fuck it up completely, just very badly. However, this administration seems to be anti-economy/economists in the same way the previous administration was anti-science. And it will have more of a profound effect, because money can and will flow elsewhere if it can.
This combined with a level lack of checks on the authoritarian sections of the gov't (courts (prosecutors), law enforcement), because there are dumbass law and order dems, is making me extremely hesitant to even consider moving back. I prefer to live in a country with an incompetent political elite to one with a competent, but pig headed, idealistic and certainly harmful one.
March 1, 2009, 4:37 amTXJim:
Pardon my picking at nits here....
"Bubbles" are used to describe too many economic events. It blurs the distinctions of root cause and is often times a placeholder for things that don't fit an easy explanation for a person's point of view. Greenspan, Milton Friedman (a hero of mine btw) et al have used the term with particular frequency describing events that otherwise would force them to deal with why something happened they said could not happen.
March 1, 2009, 9:03 amfoxmarks:
The budget proposal is a declaration of war.
Porkulus was ordinary leftyism, or ordinary politics, taken to the next level. I estimate the productive elements of the US economy could have paid for it. Remember, we do get some value out of the $787B. The money is not all set on fire, just put to less productive use.
It struck me last night that I misread the title of the budget. I thought, after the non-SOTU, “A New Era of Responsibility†meant fiscal responsibility. In some post-modern truth-free sense. It took it as a pile of ludicrous steps aimed at actually increasing economic output. Nope.
What Barry means by “A New Era of Responsibility†is we are now our brother's keeper. The so-called rich are guilty for hoarding wealth while so many poor struggle to survive with just one car and only two TVs. Now, when I see photos of the budget document, the title appears as To Serve Man.
I despise Barry and Congress for stealing the country. And for making me sound even more like a wingnut than I used to.
March 1, 2009, 11:09 amRoy Lofquist:
These guys are good. They've got everybody speaking about the merits of the proposed solutions whilst they loot the treasury. Looters should be shot on sight. Unless, of course, they're the ones with the guns.
Herewith a Democrat training video:
http://video.google.com/videoplay?docid=-7554865090799900529
March 1, 2009, 12:32 pmtomw:
These people are not stupid. They know exactly what they are doing.
February 27, 2009, 8:44 pm
I disagree. They *think* they can control the amount of CO2 in the atmosphere, and thus the temperature of the earth. They *think* they can control the economy closely enough to avoid depressions, recessions and corrections.
So far, they have not been proven wrong, but to believe that they can finely tune what will happen in both areas is spectacular hubris. Beyond belief hubris.
They are stupid. And ignorant, though they choose that adjective freely.
"You can lead a horse to water
but you cannot make them drink.
You can explain the facts to a Democrat
but you cannot make them think."
Feelings, not facts. Try to remember. After all, Ms Pelosi is certain the Catholic Church has been debating the value of abortion for the past 2000 years. Mhhhmm hmmm. Not.
March 1, 2009, 12:43 pmAnd our President is out to protect the weakest of all of us. Not. See: Pelosi & abortion.
Charmful empty Hawaiian shirt, but with certainty of conviction beyond reason.
Ugh.
tom
jerry:
Warren,
In your PPS you comment
"or Obama’s race to put in CO2 limits in time to take credit for the global cooling cycle many solar observers are starting to predict."
That one would be easy to discredit since that assumes when temperature goes down CO2 will go down. The temperature will go down but CO2 won't so that will be an obvious indication that the cause and effect relationship will be weak.
March 1, 2009, 3:10 pmRick:
Anyone who thinks the current financial mess is the result of irresponsibility is severely diminished intellectually.
Political irresponsibility? Yes, that I'd agree with. Yet we voted in the crew who are being even more irresponsible.
It's amazing to me that we can have a president who says to his Democratic cohorts that doubling the debt in 8 years got us here - but feels compelled to double the debt in 20 days to "fix" the problem debt caused. Does anyone else follow the logic?
March 1, 2009, 6:35 pmWayne:
I've added a link and quoted your article on Obama's Seeds of Socialism
March 2, 2009, 2:09 pmmichigan man:
The way he is going Obama will see energy prices wipe out the recovery just in time to give the pubs another chance not that they really deserve it.
March 5, 2009, 11:11 am