The Green Pied Piper From Chicago

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American Spectator:

The Green Pied Piper from Chicago
By Peter Ferrara on 6.16.10 @ 6:09AM

President Obama's June 2 speech at Carnegie Mellon University in Pittsburgh, reflected again in his Oval Office speech last night, provided a foundational statement for his economic policies, explaining how he thinks they have worked so far, and how they will bring back prosperity in the rest of his term. Both speeches reveal a man who quite expressly thinks economic growth and prosperity are created by more government spending, higher taxes, and more regulation, and who can't imagine how anyone else could think differently.

In Pittsburgh, President Obama expressly credited the TARP bailouts of the financial sector, the federal bailout of the auto industry, and his trillion dollars in so-called stimulus spending for ending the recession and restoring economic growth. But this column explained last week that what we are experiencing is a natural, cyclical economic recovery that has been delayed and stunted by Obama's outdated, counterproductive policies reaching back almost 100 years to the 1930s.

The average recession since World War II has been 10 months and the previously longest since then has been 16 months. But now, 30 months after the recession officially began in December 2007, unemployment remains stuck at nearly 10%, and the National Bureau of Economic Research, the official scorekeeper on the matter, says it can't yet determine that the recession is over. Economic growth is less than half what it should be coming out of a recession this steep, and now there is talk we may be peering down the roller coaster into a double-dip recession.

With federal deficits and borrowing sucking over $3 trillion out of the economy in President Obama's first two years, no wonder small and medium businesses can't get loans and capital to create jobs. On top of that, President Obama's regulatory tsunami and next year's tax supernova are creating capital flight out of the United States, creating jobs overseas in the newly emerging economies instead.

The Buck Stops with Bush

Illogically, President Obama both claims credit for his stimulus deficit spending in spawning recovery, yet blames Bush for the deficit. For the record, President Obama's budget projected a deficit of $1.6 trillion for this year, after a deficit of $1.4 trillion last year, while the deficit in Bush's last year totaled $459 billion. If President Obama didn't want his soaring, record shattering deficits, he should not have increased federal spending by 25%, and federal welfare spending by one-third, in just his first two years in office. This from the man who campaigned promising "a net spending cut."

President Obama said in Pittsburgh about the deficits during the years of Republican control, "I always find it interesting that the same people who participated in these decisions are the ones who now charge our administration with fiscal irresponsibility." The last budget adopted by a Republican-controlled Congress provided for a deficit of $161 billion in fiscal 2007. President Obama's budget for this year provided for a deficit ten times as large at $1.6 trillion. That is why Rep. Jeb Hensarling (R-TX) accurately told Obama earlier this year, "The annual deficits under the Republicans became the monthly deficits under the Democrats."

President Obama further demonstrates a disconnect from reality in discussing the causes of the financial crisis. He said in Pittsburgh, "We can't compete as a nation if the irresponsibility of a few folks on Wall Street can bring our entire economy to its knees." What brought the economy to its knees, actually, was the irresponsibility of a few folks in Washington.

Stanford University Economics Professor John Taylor carefully demonstrated in his book Getting Off Track that the root of the financial crisis was the wildly loose Fed monetary policies from 2001 to 2006, which actually kept real interest rates below zero for almost three years. The effect of that was to outright subsidize excessive risk taking and overleveraging, and wildly pump up the housing bubble. But that housing bubble actually started in the wild expansion of Jimmy Carter's Community Reinvestment Act under President Clinton into the subprime mortgage market, wildly pumped up by the financial terrorist organizations Fannie Mae and Freddie Mac.

Deregulation and Wall Street malfeasance had nothing to do with causing the financial crisis. Claims to the contrary are left-wing propaganda misdirection ploys trying to redirect the blame from the government to the private sector. Deregulation actually enabled some commercial banks to ease the crisis by rescuing failing investment banks that nearly collapsed due to the misdirection of the above government policies. Overregulation contributed to the crisis by bludgeoning banking institutions into making bad mortgage loans, granting monopoly powers to rating agencies that labeled ultimately toxic subprime mortgage securities as AAA investments, and then forcing financial institutions to write the value of those securities down to almost nothing under "mark to market" regulations.

But President Obama continued with his disconnect from reality in Pittsburgh, claiming that he had resolved the causes of the financial crisis because "we're on the verge of passing the most sweeping financial reform since the Great Depression. It's a reform that will prevent another AIG. It will end taxpayer funded bailouts." This is yet another Obama calculated deception, misdirection ploy, telling you the opposite of the truth. His financial reform bill actually institutionalizes taxpayer-funded bailouts, giving the government virtually a blank check to seize any financial institution in the country, not just banks.

Obama continued in Pittsburg regarding his financial reform bill, "From now on, instead of competing to see who can come up with the cleverest scheme to make a quick buck, financial institutions will compete to see who can make the better product and the better service." But transparently there is nothing in his financial reg reform bill to indicate that from now on no one on Wall Street will be interested in making a quick buck. There is also nothing in the bill regarding the Community Reinvestment Act, or Fannie Mae or Freddie Mac, not to mention essential, fundamental reforms of the Fed.

Which means there is nothing in President Obama's financial regulatory reform bill to address the causes of the financial crisis. What that bill will do is just accelerate capital flight from America.

Prosperity Through Soaring Taxes and Energy Costs

But the most glaring, even frightening disconnect from reality in President Obama's Pittsburgh speech, amplified even further in his speech last night, is his idea that he is going to "build a new and stronger foundation for growth and prosperity" through soaring tax increases and energy costs. President Obama said in Pittsburgh, "From China to India to Europe…[t]hey're making serious investments in technology and clean energy because they want to win the competition for those jobs…investments in research and technology, like clean energy, that can lead to new jobs and new exports and new industries." President Obama explained his strategy for doing this, "But the only way the transition to clean energy will ultimately succeed is if the private sector is fully invested in this future -- if capital comes off the sidelines and the ingenuity of our entrepreneurs is unleashed. And the only way to do that is by finally putting a price on carbon pollution."