Saturday, May 23, 2009

Where's the Beef?

Four months ago, Barack Obama was sworn in as the 44th President of the United States. In an historic inauguration, he became the first African-American, or indeed any ethnic minority, to become President. After eight years of the unpopular Bush administration, the changing of the guard was welcome to most Americans. The fresh face elected to the highest office in the land not only looked different, but promised something different. Barack Obama was coming to the White House to bring, "Change We Can Believe In." The disastrous policies of the Bush administration will be undone as a new day dawns in America....

But those of us who observe politics closely can only note that in almost every election, the "out party" complains about the excesses of the "in party," rides the abuses of the "in party" to victory and then becomes the new "in party," and proceeds to continue to exercise the power it previously complained about, but for which the previous government set precedent. Such behaviour is as old as the republic itself (consider Jefferson's Second Revolution in 1800, in which he rode the issue of the Alien and Sedition Acts to power, abolished them, and then proceeded to use state sedition laws to prosecute those that disagreed with his government) and perhaps as old as democracy itself. President Obama is no exception. For all his talk about change, the President has remained committed to continuing and fulfilling the policies of his predecessor, George W. Bush.

To the careful observer, it is not surprising that the policies of the Obama administration are similar to the Bush 43 administration. After all, Barack Obama campaigned as a liberal and the Bush administration was the most leftist administration in four decades. My recent open letter to President Bush describes the left-wing policies of his administration in detail (, but the highlights included a new federal health care entitlement, an increased role of federal government in education, massive domestic spending, socialization of financial industry, and a proposal for a federal "car czar" to give government control of the auto industry. While I know of no specific education proposal from the Obama administration, his White House has made an even larger and more unaffordable health care entitlement a priority. His administration has continued to socialize the financial industry by bailing out and buying large shares in more and more banks, and his car "politburo" now essentially runs GM and Chrysler and the President himself canned the GM CEO. Massive government spending continues. Candidate Obama took issue with one major Bush administration domestic policy - the tax cuts. President Obama, however, is quite content to let them continue and has no plans to repeal them (they will, however, expire if not renewed by Congress, in 2011).

In foreign policy and national security, President Obama has pursued a similar course to President Bush as well. Although rhetoric has changed, policy has not. President Obama announced the closing of Gitmo, but has no real plan to do so. Furthermore, he has promised not to release any enemy combatants that cannot be tried but are still a danger (presumably he decides whether they are dangerous or not). Therefore, open ended detentions will continue whether at Gitmo or not. After promising due process and a right to a trial to those detained, President Obama has decided to return to the military tribunals established by his predecessor. The surprising insurgent candidacy of Senator Obama owed its success, in part, to his opposition to the war in Iraq, his opposition to the surge strategy in Iraq, and his promise to end that war. President Obama views the Bush exit strategy for Iraq as adequate and has made no effort to modify the status of forces agreement President Bush negotiated with the Iraqi government in order to hasten our withdrawal. Besides, those troops aren't coming home, signaling and end to our foreign adventurism, when they leave Iraq they will be deployed in Afghanistan. But, the most chilling Bush administration security policy was its illegal eavesdropping on mobile phone calls made overseas. Yet, in the late stages of the campaign, Senator Obama voted for the bill that essentially retroactively endorsed that policy, gutted the authority of the FISA court and gave the federal government a longer time limit to eavesdrop on someone without a warrant. Now his administration happily uses this authority to "keep us safe." Senator Obama said he would not support the bill if it granted immunity for telecom companies that assisted the Bush administration in their illegal eavesdropping. The bill did grant such immunity and Senator Obama still voted for it (see the following article for a nice discussion of the new FISA law: ).

The Bush 43 administration was a serious threat to the liberty of American citizens. It grew the size and scope of government at an alarming rate, it usurped the authority of state governments, it amassed debt that our descendants will never be able to repay, it made a mockery of private ownership when it bought large portions of the financial sector, it went to war without a declaration from congress and defined the war in open-ended way to seize war powers indefinitely, it detained people without charges, and it illegally eavesdropped. In November 2006 and November 2008, the American people said, "enough," and ousted Republicans from both the legislative and executive branches of government. Presumably these voters wanted, "change." Presumably these voters wanted Bush policies to end. Presumably these voters did not want a President who would essentially represent a "Bush third term." The irony is, a Bush third term is exactly what the voters got. Under President Obama, questionable detentions and increased government eavesdropping will continue, foreign adventurism will continue, new health care entitlements will be created, runaway spending will continue, socialization of the financial industry will continue. In no substantial way are the policies of the Obama administration different from those of the Bush administration (oh, except for a few federal dollars for embryonic stem cell research, hurray change!). I am reminded of Walter Mondale's reference to a popular TV commercial of the mid 1980's when he challenged the lack of substance to Gary Hart's, "new ideas." For all the President Obama's talk about change we can believe in, "where's the beef?"

On Libertarianism, Part 2

Pragmaticus argues for more federal regulation of the economy because, he concludes, people are too irresponsible to self-regulate. He gives Barry Madoff, predatory lenders, people who borrowed beyond their means, and CEOs with golden parachutes as examples. Publius responds:

As far as regulation goes, I have never argued that there shouldn't be any. In fact, I have been quite clear that government has an important regulatory role to play and I was quite specific about what I thought it should be ( Madoff violated EXISTING laws and regulations, did he not? In the housing crisis, federal regulators BLOCKED state efforts to curtail subprime lending ( The Fed was irresponsibly slashing interest rates to below the inflation rate. So you can put faith in regulators, but quis custodiet ipsos custodes? (who will guard the guards? or in this case, who will regulate the regulators?). I agree that people will act irrationally, but the way markets work is that people who make irrational or unwise decisions pay a price and learn and the markets correct. Most of the time, just the individuals involved pay the price - but when government acts irresponsibly, as Fannie, Freddie, and the Fed did; we all pay the price. What you can't do, if markets are going to work, is remove what is called moral hazard (or as Newt Gingrich said, you can't have capitalism on the way up and socialism on way down). Yet, what are we doing? All these people did act irresponsibly - some at the prodding of the feds, many others not - and we are bailing them out! How can a market self-regulate if no one pays the price for their bad decisions? It can't, it's the loss that corrects the market. What will these bailouts accomplish? Not much other than delay a market correction that still has to happen eventually.

Finally, I can't believe any rational person would look at the behaviour of Wall Street, and the bankers, and the house poor borrowers and conclude that the solution to irresponsible financial behaviour is regulation by a government that acts even MORE irresponsibly. It is laughable to call Madoff the biggest Ponzi scheme of all time. The United States Federal Government is the biggest Ponzi scheme of all time. Since World War II, with a a few anomalous years under Nixon and Clinton (interestingly both times when control of government was divided between the two parties), our government has done nothing but spend, and spend, and spend, and amass debt that it never intends to repay (and probably never can). Yet, investors, particularly foreign ones, continue to finance it by buying our bonds - why? Because the government has a continually renewing source of revenue - the annual income tax - which brings in the new money each year to pay the interest on those bonds, making them still a good investment even though the principle cannot be repaid. That is exactly how Ponzi schemes work - the revenue collected from new investors is used to pay the profits of the old ones and it can continue ad infinitum as long as their is a stream of new investors. Madoff got caught because no one wanted to invest anymore when the economy went south. Well, when you have taxpayers instead of investors it can and will go on and on until it finally reaches the day of reckoning - when interest on the debt commands such large share of the federal budget that the tax revenue can no longer pay it and all the entitlement spending we have committed ourselves to (Medicare, Social Security, Medicare Rx, and soon national health care). You think the solution to Madoffs in the marketplace is these Ubermadoffs in Washington? This new irresponsibility knows no partisanship - both parties do it - and the current administration seems poised to do it bigger and grander than anyone. It simply has to stop. Our long term survival as the most prosperous country on the planet depends on it. I am not sure government can get smaller, but it at the very least NEEDS to stop growing. The irresponsible in the private sector are a fraction of the population (albeit probably a majority). The irresponsible in Washington are everyone - except Ron Paul, and sometimes John McCain.

What about the federal government gives you such confidence? The stellar way it manages Amtrak (which is far more expensive than flying, which the feds don't manage)? The stellar way it delivers the mail (which Fed Ex, DHL, and UPS do better but are prevented by law from delivering letters and may only deliver packages)? The stellar success of the ethanol industry - a government created, subsidized, and protected industry that continues to lose money? The fantastic job the government has done managing the war in Iraq or the aftermath of Katrina? The way the Fed devalued the dollar with low interest rates? In what way has the federal government inspired your confidence that increasing it's control over business and industry would be successful, or even better? Its success rate when it has tried is abysmal.