Obama: Rush to Judgment

Talk show host and conservative icon Rush Limbaugh recently ignited a firestorm of criticism for expressing his desire that Barack Obama should fail. Democrats, and even some Republicans, suggested that he had put aside his patriotism to wish for an economic collapse that would result in political advantage for conservatives. However, if you believe as I, and apparently Rush, that Obama's plans will prevent recovery, then wishing that they fail to become actual policy is the right thing to do. The problem is that since Mr. Limbaugh has a history of partisanship, and since he did not forcefully criticize the Bush Administration for similar (if slightly more modest) plans, many cannot see past the messenger to recognize the truth in the message.

I am certain that if Obama and the Pelosi/Reed Congress succeed in fully implementing their agenda, there is no chance the U.S economy will recover its position as world's leading economy. Instead, America will start down the road that has condemned so many nations to economic mediocrity. By continuing and magnifying the Bush stimulus and bail-out policies, the economic rebalancing that is so vital to a sustainable recovery cannot occur.

Limbaugh merely said what members of the loyal opposition would say if they were true to their supposed philosophy. But since so many Republicans supported the Bush bailouts and stimulus packages, it would be too blatantly hypocritical to reverse course now. In truth, for all his talk of change Obama has merely continued and expanded the failed policies of Bush.

The one aspect of Obama's agenda that has galvanized Republican criticism is higher taxes on the rich. While I also abhor tax increases, the spending increases supported by both parties are far more damaging to the economy. In fact, I actually support Obama's decision to eliminate the “carried interest” tax advantages that had so unequally benefitted hedge fund managers. If I had my way the income tax would be abolished completely, but as long as we have one it is not fair for hedge fund managers to pay lower marginal taxes than the guys who shine their thousand dollar shoes.

The arguments that higher tax rates will discourage hard work and initiative are true across the entire income spectrum. It makes no sense politically to single out the mega-wealthy for special treatment. The sad truth is that Republicans are spending their dwindling political capital on a non-issue. Most hedge funds relied on leveraged borrowing to produce oversized returns. Now that the debt markets are essentially closed, there is not much “carried interest” income left to tax.

The bigger issue is that few Republicans are making any serious effort to oppose the staggering deficits that will guarantee huge future tax increases and runaway inflation for everyone, rich and poor. By simply clinging to tax cuts as their single economic miracle cure, Republicans risk further marginalization.

The president claims that his constituency is Main Street, not Wall Street. But for all the scorn heaped on the “fat cats,” we must remember that it took two to tango. Sure, Wall Street loaned out too much money, but it was Main Street that borrowed it. Average Americans used the windfall for the biggest shopping binge in world history. As a result our entire economy has been transformed from one based on savings and production to one based on borrowing and consumption.

Now that this false paradigm has been exposed, the transition back to economic viability will be painful. Jobs must be lost in the service sector so that labor can be reallocated towards goods production. Asset prices, for both stocks and real estate, must decline to levels appropriate for current circumstances. In addition, the dollar's exchange rate must fall to reflect our weakened competitive position. However, by postponing these adjustments we merely assure an even more painful transition in the future, especially for the average Americans whose interests our new president claims to champion. But by then Obama will have his coveted second term. Rush is right on this one: Obama's agenda must fail now, lest we wander too long down the road to destitution.

Comments

[jksisco:]

Ding. I agree 100%. I vote for people to legislate based on actual needs, not wants. We need infrastructure, trade agreements, a standing Army, etc. Decoupling the taxing mechanisms that are used to curry favor, are in our long term interests. All this cradle -to-the-grave stuff is counter-productive and breeds a 'failure to launch' mentality. There is a reason that this is all happening right now, in ways that aren't readily apparent, but are necessary and will produce many positive outcomes in the future.

Mar 10 02:47 PM

[Barry Sotoero:]

The greatest investor of all time Warren Buffet thinks Obama's policies are bad for the economoy. He likes the guy just not the policies. I think he is smarter than everyone on this site so start listening to the oracle and not your political beliefs. Might I add Cramer said it was the greatest destruction of wealth ever. He is a flaming Liberal as well!
How can government grow without taxes increasing?

Mar 10 04:09 PM

[nefidar:]

Barry ---- the "Oracle's" investments performed UNDER what you could have received in a plain old INDEX FUND. And if he is such an "Oracle" how come he didn't get out of the market before the collapse? Compare his performance since 1981 to present against indexes and tell me what you see. So just how "smart" is he?

Anyone that thinks this is not going to end up resulting in riots, hungry people and a completely new (and draconian) political environment is a fool.

Mar 10 04:39 PM

[fireball:]

barry
what about those of us who believe government should shrink? let it starve so it can't afford to bother us. put it back in its' constitutional cage and destroy the key.

Mar 10 04:45 PM

[svosavvy:]

Barry- Is that thing about Buffet disagreeing with Obama documented somewhere. I would like to read that, maybe it was on the show last night I didn't get a chance to watch it.

Brett-The cost of doing nothing l'aissez faire free market would be riots and starvation. Hopefully we can avoid some of it by doing something. I would classify draconian as the fear mongering of the last 8 years. I will be curious to see the price tag (we'll never really know)of our war in Iraq. Honestly, how do you drive an economy into the ground during a war with all that spending.

Mar 10 05:16 PM

[svosavvy:]

I should add that as in all things the middle ground or the "compromise" is the foundation on which societal structure is built. I am not an ultra liberal, but, I would say that the hat I wear now is that of a keynesian pragmatist vis mildly liberal.

Mar 10 05:23 PM

[Roman_Fiddler:]

Me too.

And I wish there were more than 2 parties too - this silly swinging from side to side politically, combined with the 8 year limit on a presidency (good or bad) is rather unfortunate. Backlash after backlash, playing catch-up only to be out in 8 years and have policies reversed, and never knowing if your successor will reap the rewards of any positive change you actually made (or vice versa).

There is so much confusion over whether we are going in the right direction, how bad things really are, and if we are doing the right thing, that I'd say it would be a huge miracle if Obama actually did succeed.

I think all that Obama can really do is slow things down, and have the realisation hit people in a way that might minimise the amount of civil unrest, which will surely be nasty. Too many people these days are used to having things given to them on a platter by government - they assume the govt will look after them. The only way the govt can placate these people is to keep handing them money in one way or another, which has to lead to hyperinflation. I can't see it ending any other way at the moment, though I try to stay hopeful.


On Mar 10 08:43 AM Groneil wrote:

> I too think we're heading down the wrong path. The difference is
> that I hope I'm wrong.
>
> Hoping for the current plan to fail is tantamount to hoping for the
> continued suffering for millions of Americans.
>

Mar 10 06:00 PM

[nova:]

I think we are too emotional.

There is a natural development process: countries (and empires for this matter) are born, go through development phase, reach their pick, go through a declining phase, and eventually disintegrate.

Some time, this natural process goes for many centuries. Sometimes, it is much faster.

The Roman empire has come and has gone. It lasted many centuries. It collapse has been felt for many centuries when the human race went through the barbaric Middle ages.

British empire was born two and a half centuries ago. By the middle of the last century, British empire disintegrated very quickly following the WWIII. Although, England is still there, however, it has pasted its "golden age" a long time ago and it is just England.

American empire was born following the WWII.
Now, due to reckless policies of Bush administration and the Congress, the USA are in a decline.
Unfortunately, Obama administration together with the Congress are trying to accelerate and multiply the terrible damage they inherited from the previous administration and Congress.

Are there any hope to reverse the situation? The answer is yes, unless a deterioration process will continue at a "leisurely pace". So, people will become used to a substantial & slow decline of their standards of livings and "buy" the Democratic BS that it will take decades to see any improvements.

IMO, Obama and his gang together with the Congress are too incompetent and too reckless. Consequently, a climax will take place in the next 2-3 years.

Mar 10 10:05 PM

[terryg8:]

Do we start callinmg each other comrade then or does that come later?


On Mar 10 08:21 AM z28rgr8 wrote:

> You and Rush are indeed two peas in a pod - both mis-guided fools..
> The policies you put forth are exactly those which have resulted
> in the economic collapse Bush and the Republican party have led this
> nation to. We cannot recover with the same mis-guided thinking that
> has gotten us here. The plan Obama has laid out will lead to a recovery,
> but be mindful it will take years, if not a decade, to recover from
> the Bush presidency.

Mar 10 10:47 PM

[Nik Kondrat...:]

If Obama has the interests of Main street over Wall Street, then how come the guy he chose to lead the Treasury had his career groomed by Goldman Sachs? And how come the guy he chose to sit on his economic advisory board is an unapologetic supporter of unregulated CDS markets who also earned his stripes at Goldman?

The policies of this administration are not going to solve this crisis, they will only forestall and amplify the catastrophe that awaits when no one will buy our T-bills and unemployment (U6 measurements) are at depression levels--they're already north of 15%!

More insanity.

Mar 10 11:20 PM

[Michael_Cohen:]

What amazes me about this situation is how complex the banking system has become and the unpredictable twists and turns this credit crisis takes.

While it's difficult to fully understand what is going on with the banks or make guesses about the near-term, it is really is not that difficult to understand the policy decisions we have made as a country over the past decades and especially now. Borrow a lot of money, waste it on government spending. Increase taxes to cover some of the deficit. This playbook has been done over a dozen times by foreign countries.

Soon, our taxes will just be as high (if not higher) than our European counterparts and our debt/GDP will be even higher.

If there's one correlation to prosperity above all else, it is economic freedom. Our level of economic freedom, which used to be clearly #1, will soon be more on par with European socialism and Japan, so our standard of living will be as well. Here comes a 30% or so drop in standard of living. How that drop in standard of living takes place, whether through inflation or recession or a combination, are just the details.

Mar 11 01:58 AM

[wavelength:]

Sometimes quantitative differences and qualitative differences are the same. Yes, Bush over-spent and his tax regime was irrational. However, the difference between billions and trillions is not insignificant. Also, spending billions on the War on Terror, against a real and deadly threat can be differentiated from spending billions on the climate change fairy tale. Liberals embrace the precautionary principle on green issues based on junk science, yet reject it in the face of real, staggeringly tragic events such as 9/11. Be all that as it may, there really is nothing to argue about. We saw what Michael Foote in the UK and Gough Whitlam in Australia did with agendas like Obama's way back in the 1970s. Peter's article is spot on - red and blue both need to stop spending and have the nerve to hand out some tough love to voters - and WE need to grow up and swallow the medicine. We need a massive national 12 step program to return us to financial sobriety - and not one funded through socialized medicine but run on a shoe string in church basements.

Mar 11 03:53 PM

[optionswriter:]

Name calling has always struck me as the last vestige of he who has no factual argument.

On Mar 10 08:21 AM z28rgr8 wrote:

> You and Rush are indeed two peas in a pod - both mis-guided fools..
> The policies you put forth are exactly those which have resulted
> in the economic collapse Bush and the Republican party have led this
> nation to. We cannot recover with the same mis-guided thinking that
> has gotten us here. The plan Obama has laid out will lead to a recovery,
> but be mindful it will take years, if not a decade, to recover from
> the Bush presidency.

Mar 11 08:00 PM

[Stone Fox C...:]

Schiff and Rush on the same team. Something just doesn't seem right about that. Our only hope is that Republicans take back numerous seast in Congress in order to block Obamas socialist plans. The market will soar under that scenario like it did under Clinton.

Mar 11 11:59 PM

[The grey ghost:]

Very interesting that you would blame President Bush when the housing market crash was caused by the irresponsible legislation of the left. President Clinton signed the order to open subprime loans. This is typical Liberal rhetoric. No wonder There aren't any liberals dominating radio and T.V..


On Mar 10 08:21 AM z28rgr8 wrote:

> You and Rush are indeed two peas in a pod - both mis-guided fools..
> The policies you put forth are exactly those which have resulted
> in the economic collapse Bush and the Republican party have led this
> nation to. We cannot recover with the same mis-guided thinking that
> has gotten us here. The plan Obama has laid out will lead to a recovery,
> but be mindful it will take years, if not a decade, to recover from
> the Bush presidency.

Mar 12 02:16 AM

[FE812:]

I can understand your sentiment here "Groneil", it's easy to view it under that guise. What must be seen is the fact that Obama's economic policies represent the suffering you're hoping to avoid, no matter the time frame.

Government's hand in the private sector under ANY administration will create inefficiencies. These alterations to free-market economics in the name of fairness or social responsibility are swollowing our economy whole right now.


On Mar 10 08:43 AM Groneil wrote:

> I too think we're heading down the wrong path. The difference is
> that I hope I'm wrong.
> Hoping for the current plan to fail is tantamount to hoping for the
> continued suffering for millions of Americans.

Mar 13 10:17 AM

[Long Silver...:]

Pelosi's next bailout bill does contain some efficiency standards: rather than have the Fed print more money, it allows each citizen to print their own money on their home computer. We'll be okay, as long as the toner holds out!

Mar 13 12:00 PM

[ebschor:]

"A government that is big enough to give you all you want is big enough to take it all away."

-Barry Goldwater

The nine most terrifying words in the English language are:
"I'm from the government and I'm here to help."

-Ronald Reagan

Mar 13 05:58 PM

[Alphameister:]

I would love to see a viable, competitive Libertarian party emerge from the chaos produced by incompetence on both sides of the aisle.

If Rush claims to be primarily an entertainer, he is being much too modest. His understanding of fundamental economic principles vastly exceeds anything to be found in either the Obama or Bush administrations.

I think the original quote is from Jefferson, ebschor. "A government big enough to give you everything you want is a government big enough to take everything you have."

Mar 15 01:21 PM

[FE812:]

I wish I could applaud you somehow ...

Your last sentence is as true a statement as any I've read on here in a month.


On Mar 10 02:00 PM ding wrote:

> Division between red and blue voters is counter productive, and solves
> nothing.
>
> Serving one's self interest is not a red or a blue thing; it is a
> human thing. It doesn't matter which party is in power. There will
> always be some who will use these systems as political rewards and
> punishments.
>
> We the People need to remove these temptations, or at least minimize
> them. We can do this by simplifying our taxation systems (income,
> carbon, etc). This will effectively limit our elected officials use
> these systems for their own political gain.
>
> If we remove the revenue side from politicalization, we can more
> effectively monitor the spending side. We must divide and conquer.
> Party does not matter. There are only two sides; government and people.
>
>
> Respectfully,
> ding
>

Mar 19 01:32 PM