Consider the outrage from the left at such a notion.

That’s the thinking that got us into this mess in the first place,” the President and his lock-step liberal legions will rush to remind us.

Well, no, it isn’t.  The Bush Administration’s general lack of interest in proper regulation, the somnambulistic SEC’s furlough from responsibility during the Bush years and the federal bank examiners refusal to really examine the banks for which they were accountable while a succession of administrations, both Republican and Democrat, committed to the fantasy that credit history didn’t really matter when assessing mortgage risk are not examples of government getting out of the way of a private, market-driven, economy.  These are simply examples of a gross absence of leadership, common sense and the failure to enforce the longstanding oversight rules already in place.

Just as abandoning highway speed and safety laws would cause carnage on our highways as irresponsible and reckless risk takers took to the roads, so did government’s failure to enforce its own rules and regulations attract irresponsible and reckless risk takers into the marketplace.  Had the rules and regulations that were in place been properly enforced, and had the House and Senate financial oversight committees taken their jobs seriously, and had the business and financial press (with a few noteworthy exceptions) earned their subscribers’ fees, the mess we’ve been exposed to for the last three years would (not couldwould) have been avoided.

Economists will debate ad nauseam for many years (and never reach a consensus) whether the Obama stimulus stimulated anything other than massive debt.  We have strong doubts about the efficacy of incurring a trillion dollar debt to improve the economy along with a plethora of new policies and regulations that will add tens of thousands of new bureaucrats (literally) and thousands of new regulations (and the massive taxes needed to fund this circus) on to the backs of businesses and all other taxpayers in the cause of stimulating growth.  Individuals and businesses in the marketplace are what stimulate growth, and, by any measure, the marketplace is ready to grow if government would just allow it properly to operate.

Many American businessmen are, today, at the controls of well-oiled and well-fueled industrial machines, but they don’t know whether to, metaphorically, depress the brake or the accelerator of those machines. And who can blame them. Everything the government is doing portends uncertainty and, indeed, danger ahead.  Bare teeth determination to raise taxes on capital, on dividends on high-quality corporate insurance programs on corporations deemed too successful (that would be all small businesses earning over $250,000) and on the most productive income earners in our society is the order of the day emanating from the White House.  This, while the greatest feeding frenzy of new regulatory rule making has been simultaneously unleashed in Washington. And our new ruling class cluelessly laments the hesitancy that permeates our economy.

The tragedy is that the economy is poised to accelerate.  Consumer confidence is abysmally low because the consumer is focused on government that it sees as amateurish, increasingly radical, and outrageously disingenuous.  After dubbing this the Recovery Summer, and all but celebrating how the stimulus is working miracles creating (or, as they like to say, “saving”) millions of jobs, economic data is released that tell us things have gotten worse not better, that GDP has fallen not risen, that jobless claims have increased not decreased and that housing sales dropped to the lowest levels in fifteen years.  And what does the White House then say?  “Oh, that’s just what we were expecting.”

“Recovery Summer” was the Obama Administration’s absurd stab at “Mission Accomplished.”  Bush was simply mistaken with his foray into the Mission Accomplished imbroglio of 2003.  Obama, however, has been deceitful. He is using the financial meltdown as an excuse to reweave the fabric of American society.  To “transform America” as he put it in the final run up to his election. The result has been a nation with sinking confidence in both the leadership and the future of the country and a business community with a very understandable reluctance to invest the enormous reserve of capital it has accumulated by running lean and replenishing the slowly diminishing inventories of retailers, wholesalers and distributors throughout the country.

It is reliably estimated that American corporations are holding about $2 trillion in cash; the lion’s share of which would ordinarily be earmarked for investment (that is how a business funds its growth), or dividend distribution to millions of shareholders.  The fuel for growth (retained earnings) is available and at record levels. Businesses racked up an unprecedented $1.2 trillion in profits in just the second quarter of the year.  Companies have no reason to just sit on those funds.  Their shareholders don’t want them to do that, their suppliers don’t want them to do that, the marketplace doesn’t want them to do that, and, because low investment will translate to low growth, their employees don’t want them to do that. The raison d’être of any business is to grow by increasing the market for its services.  A government, sitting in Washington, salivating at the opportunity that this crisis has created to raise taxes, write new regulations, create new agencies is exactly what the economy doesn’t need right now…unless, of course, the government wants to be that economy.  It is no coincidence that so many of the tea party gatherings all over the country consist of middle income, small businessmen and women.  They get it.  It is their elected representatives in Washington and their President who don’t.

The biggest stumbling block to growth is, sadly, government.  The economy would be picking up steam more briskly if government wasn’t looming in the background busily concocting new taxes and volumes of new regulations.  Government should be encouraging dividend distributions, especially by more mature companies, but, instead, the Administration intends to levy new taxes on dividends, nearly tripling the tax rate on dividends for some taxpayers.

Then there is the proposed Obama tax on capital gains, dampening economic activity and most certainly, thereby, reducing tax revenues that would otherwise flow from those transactions that involve the sale of appreciated assets.

Every indication is that the economy wants to grow.  Businesses and households aren’t looking over their proverbial shoulders to see what the Wall Street bogeymen are about to do to them.  They are looking over their shoulders to see what their government is going to do to them.

So far, they don’t like what they see. A trillion dollars spent so far from which few people in the private sector have benefited. The wasted razzle-dazzle of billions spent on cash for clunkers, temporary tax credits for home purchases (which ultimately produced the largest decline in home purchases in fifteen years once the government interference (Washington called it stimulus) was lifted, money shoveled into all those shovel-ready projects most of which were not shovel ready and the no-strings attached largess that flowed to bloated local and state governments who were able to kick the day of reckoning down the road far enough for our children to pay the tab, and what do we have to show for all of this is, mostly, massive new indebtedness to the Chinese and heaven only knows who else.

So, what to do?  The answer is, in our opinion, not all that complicated. Government should just let the private sector operate with some sense of certainty. Government officials should stop berating the business sector with claims that business people are motivated merely by greed, which was the president’s outrageous claim when GM bondholders wanted simply to maintain the priority, ahead of unsecured creditors (e.g. organized labor) to which they are entitled by law.

Government should listen, for a change, to what the country is telling it. The people can’t wait until November to send a message the only way they can in a republic such as ours.  The government should recognize that now is the time to leave as much of the nation’s capital and financial resources with the people and stop moving to vacuum those same resources into federal coffers for redistribution as they see fit.  That means easing up on marginal tax rates for all enterprises engaging in productive commerce, and on all incomes whether individual, C-corporations, S-corporations or investors willing to take risks on American business. As Kevin Hassert, director of economic policy at the American Enterprise Institute and AEI resident scholar Alan Viard wrote in last Friday’s Wall Street Journal (September 3, 2010), “according to IRS data, fully 48% of the net income of sole proprietorships, partnerships and S corporations reported on tax returns went to households with incomes above $200,000 in 2007. This is the real impact of the Obama tax plan on small business, not the disingenuous 3% to which the administration dismissively refers.

Perhaps as the Journal points out, Tony Blair provides the greatest clarity on the subject in the final chapter of his recently released book, “A Journey.”  Blair writes, “First, the market did not fail.  One part of one sector did.”  He goes on to write,” Government also failed.  Regulators failed. Politicians failed. Monetary policy failed. Debt became way too cheap…the failure was one of understanding.  We didn’t spot it…it wasn’t that we were powerless to prevent it even if we had seen it coming; it wasn’t a failure of regulation in the sense that we lacked the power to intervene.  Had regulators said to the leaders that a huge crisis was about to break we wouldn’t have said” There’s nothing we can do about it until we get more regulation through.  We would have acted.” And so the message for America really seems to be to just enforce the sound and healthy regulations that have been there all along to assure a fair and even playing field and then just plain get out of the way.

The President and the Congress have a very short time left to do something that makes sense to virtually everyone except those that are committed to centralized planning and control of the economy.  President Obama, it seems, wants to be remembered as a sort of knight in shining armor, who rescued a people that didn’t need rescuing.  Instead, it would appear that he will be remembered more as the knight of the woeful countenance, a Don Quixote of American politics.

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The Perversion of American Democracy: Death by a Thousand Cuts

by Hal Gershowitz and Stephen Porter on August 16, 2010

Our nation is in trouble and it goes far deeper than the current economic crisis of the past few years.  Nor, despite all the rancor and the loud shouting back and forth, is the problem attributable to any single controversial issue . . . albeit the important issues that are dividing us are clearly a symptom of our woes.

Since we are a nation of immigrants, there have always been tensions within our vibrant democracy from divisions along obvious fault lines:  race, religion, class, geography, national origin and even age.  But what has, from the beginning, distinguished our collective ethnic citizenry and made America wonderfully unique among the nations of the world was that, unlike virtually all of the countries from which we came, once we attained citizenship we were accepted, truly accepted, as Americans.   We have overcome many crises because, with the obvious exception of the stain of slavery, our constitutional system of division of power between the states and the federal government and the separation of federal authority among these distinct branches of government, has depended on, indeed even demanded, political compromise to advance policies with any semblance of shared goals.  But over the last two decades the notion of shared goals and the ability to fashion compromises have all but disappeared, widening the fault lines and leaving the nation polarized and government often paralyzed.

There is irony in this increased polarization given our preoccupation, sometimes to the point of absurdity, with political correctness.  Either we have become unbelievably thin-skinned as a people or our preoccupation with political correctness has led to a process of balkanization as each ethnic group sees the “national pie” as a zero sum game:  “we win, you lose.” This comes at the expense of putting America first.  The price has been high.

When our president feels that apologies are necessary to improve our relationships with long- time allies and to reset our relationships with others, including those who have, for many years, been hostile to the United States; when an American ambassador, by his mere presence, implies an American apology for the awful devastation visited upon the victims at Hiroshima, without any acknowledgement by the Japanese government, after more than 60 years, that it was an imperialist Japanese government that was responsible for bringing war to the Pacific with their unprovoked attack on Pearl Harbor, we diminish the noble cause for which over one-half million Americans gave their lives. The Japanese are certainly entitled to convene in memory of those who lost their lives at Hiroshima and Nagasaki, but it is their national day of remembrance. Our presence was neither called for nor appropriate. They and we have gotten past that dark and deadly time.  We are, today close allies and trade partners.  The last war-related joint ceremony in which we participated with the Japanese was in 1945 on the deck of the US Missouri in Tokyo Bay.   We should have left it there.

Now, in place of the heroes of that and other devastating wars, and the citizenry who lived during that era and its immediate aftermath, we have a whole new generation who are not only unaware of, but eschew the concept of American exceptionalism.  This leads to our inability to consider the need for national consensus and the concomitant politicization of almost every political subject.  Instead of invoking the memories of those past heroes, and warning Americans of new threats to our very national existence, our president steadfastly clings to the absurdity of banishing from his Administration’s vocabulary the reality of the greatest danger facing us:  fanatical Islamic terrorism.

The President who, using his bully pulpit to roll back executive compensation he considered excessive, or to squeeze funds from a company like BP beyond its legal responsibility has decided to use that same bully pulpit to support an Islamic organization’s plans to, of all things, build an Islamic center very close to ground zero. His rationale is that one of the pillars of our democracy is religious freedom; as though religious freedom has anything to do with the national exasperation over this ill-advised project. No one is questioning the right or the religious freedom Americans have to build such a facility. This isn’t about rights.  It is about the abysmal judgment and insensitivity of its sponsors to select this spot to build an Islamic cultural center and Mosque so near to the site of the mass murder of nearly 3000 Americans at the hands of Islamic extremists.

Instead of reminding the American people about the sheer decency and compassion of our own country and the sacrifices we have made for the good of the world, the president seems consumed by the need to convince the world that we are a good and decent people.  If the “rest of the world” doesn’t know that by now, his apologies for saving the European continent from despotism three times in the 20th century are totally irrelevant and an insult to the memories of those who sacrificed, and precisely the wrong message to send to today’s generation who think freedom comes without cost.

Similarly, on substantive political issues, the current Administration has virtually ignored the value — indeed the imperative — of finding commonality of purpose, which, in a democracy, requires both compromise and consensus.  The Obama Administration, has confused a large Congressional majority for a license to cram down our collective throats, legislation that a substantial majority of the people do not want . . . and, when the White House can’t get its programs passed notwithstanding their bloated majorities, they have resorted to government by fiat, causing an unprecedented loss of respect for the federal government, and forcing individual states to attempt to enact their own policies on what are assuredly national issues.  This is a prescription for serious trouble and the further fraying of the ties that bind us as a people.

Item:  Senate Majority Leader Reid recently pulled from the floor the Cap and Tax legislation regulating carbon emissions.  He knew there was neither a majority nor even a semblance of consensus, for this bill, which would likely cause a major dislocation of the American economy.  So what did the Administration do?  It used the EPA to issue a finding that carbon emissions threaten human health, and thereby arrogated to an unelected administrative agency, a huge expansion of authority without the kind of democratic consensus necessary to support such a profound change to our economy.

Item:  The president and his acolytes in Congress used deception and political bribery to pass health care legislation, which a majority of the American people opposed, and which will bring about the most profound and expensive change to the delivery of health care in America since Medicare.  Moreover this massive piece of legislation is grounded in an unprecedented expansive interpretation of the Commerce Clause of the Constitution, which is now being challenged in the courts by the attorneys general of 20 states.

Item:  Notwithstanding that BP might well have deserved it, the President, without even a scintilla of legal authority, strong-armed BP to create a $20 billion escrow fund, even though existing law (wrongly) sets a much lower liability limit. There is little doubt in our minds that BP would have, more than likely, agreed to such a request or that such an escrow requirement could have sailed through Congress, but the President made a show in his oval-office speech of demanding the $20 billion escrow fund hours before the meeting with BP.  We certainly have no tears to shed for BP, but nor do we have any cheers for this oval office theater.

Item:  In the bailout of General Motors, the Administration used raw federal power to subordinate the priority rights of bondholders (those who loaned money to GM) in order to give a huge equity stake to the United Auto Workers.  “Greedy bondholders” the president called them.  What this might portend for the capital markets and the trust they have in making investments in our economy is not yet known, but it is hard to distinguish this confiscatory action from those taken by the likes of the governments of Venezuela and Argentina.  We carry no brief to bail out creditors who made loans to a failing enterprise since that was the risk they voluntarily took, but those creditors were uniformly denied their priority rights in what amounted to a total corruption of the nation’s bankruptcy laws. Perhaps many feel that the ends justified the means, but we either are, or are not, a nation of laws.

To be sure, when the Republicans controlled the presidency and both houses of Congress, they did, essentially, nothing to promote compromise and consensus.

It is time to consider the obvious:  democratic government is more than mere number counting.  Often, when it involves transformative policies, it requires more than a simple majority, something more akin to a national consensus is called for.  This requires honest and open debate and the practice of persuasion, not legislative bullying, trickery, deceit and backroom deals.  A president needs to be in touch with the feelings of the people if he is to govern effectively.  He needs more than intelligence, charm and a gift of gab.  He needs to be intuitive, to have a fingertip feel for the sentiments of the body politic; kind of like political Braille.

We are witnessing a usurpation of power, an unlawful exercise of power, by the executive branch, of those powers clearly delegated by the Constitution to Congress or the states.  This, over time, can become the proverbial death of a thousand cuts to the Federalism created by the founders. How different in result is this from the heavy handed actions of the thugocracies we deplore when democratic values are sliced away like salami to the point where the will of the people is reduced to irrelevance.  As the November elections approach, early indications are that the American public is in revolt (thankfully peacefully) at the excessive intrusion by government in our lives. There is a fear that a Pied Piper is leading us into financial extremis, and a general, but ever-growing concern that the current Administration is abdicating its most important job, keeping us safe so they can “reset” relations with those who wish us ill. Tyranny or authoritarianism doesn’t necessarily have to arrive by violent Soviet-style revolution  or mimic Mubarak’s Egypt, Castro’s Cuba or Chavez’s Venezuela.  At the end of the day, if democracy is eroded away does it matter whether we lose it through a coup or the accumulation of self inflicted wounds?

We will not be wriiting our weekly essay the next 2 weeks and will return on September 7.

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Just Pay Separate Processing and Handling

August 9, 2010

Sound familiar? Most everyone has heard it time and time again. It’s the way many TV sales pitches end after seeming to give the viewing audience something for nothing.  It’s a sucker’s pitch. It usually works like this: you are offered the gadget of the moment for the bargain price (typically) of $19.95, and you [...]

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Failure to Prevent A Nuclear North Korea: Does It Foreshadow a Nuclear-Armed Iran?

August 2, 2010

Last week the North Korean government (officially, the Democratic Peoples’ Republic of Korea, a misuse of the word “democratic” if ever there was one), threatened a massive nuclear strike if the United States and South Korea carried out their annual “war games” in international waters.  This set of war games is being conducted to demonstrate [...]

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“Dos-a-Do and Around You Go” — Doing the Obama Spin

July 26, 2010

Our apologies for the liberties we are taking with the old Virginia Reel square dance call in this week’s essay.  Those of us who had to square dance in grade school remember the caller commanding us to do the dos-a-do which was a spin move in one direction and then another.  That spin, however, doesn’t [...]

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Lessons from the Stimulus Plan: There’s A Better Way

July 19, 2010

The near collapse of our financial institutions and the overall economy and the misguided notion that a few trillion dollars of additional federal spending would return us to prosperity moved us in early 2009 to suggest an alternate approach.  We proposed in an essay published in The American, the on-line journal of the American Enterprise [...]

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Three Cheers for American Exceptionalism…Pass It On!

July 11, 2010

Far-left ideologues and self-styled intellectual illuminati have, for years, labored overtime to highjack the notion of American Exceptionalism by equating it with their own notion of American arrogance.  Let us put an end to this calumny. Let us recall and, indeed, praise the American Exceptionalism at which Alexis de Tocqueville marveled when, during his travels [...]

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The Fourth of July: What We Should Be Celebrating

July 2, 2010

Once again, this weekend, Americans will gather with their families to “celebrate” the 4th of July.  What are we celebrating? What stirs us on this day? How much time will be spent reflecting upon its relevance to our way of life? Is it, as it should be, a celebration of the founding of this Republic, [...]

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Obama’s Dilemma: Heavy Leadership Responsibility – Light Leadership Aptitude

June 28, 2010

The president’s recent disappointing oval-office speech elicited a chorus of criticism from across the political spectrum.  For some reason the speech seems to have put a spotlight on the president as a leader, whereas other misjudgments in which he was directly involved in making policy had not.  The oil spill, which was certainly no fault [...]

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Bait & Switch: Raising the National Deficit by Stealth

June 21, 2010

Like a relentlessly advancing cancer, the news about the US fiscal deficit and the accumulated debt, which is its result, keeps getting worse.  Every week the press discloses some supposedly “new” information about either the federal budget, economic failure, projections of economic growth, the effects of the so-called “doc fix” (about which we have written [...]

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