Commentary Magazine


Posts For: April 5, 2009

The Banks Are Probably Healthier Than a Lot of People Think

It’s interesting that, to a lot of people in the non-specialist press, the key question respecting the banking system is the “N” word: whether or not we should nationalize troubled large banks. There’s quite a lot more to the story.

It’s true that we have a lot of large financial institutions at or near the fuzzy edge of insolvency, given the losses they’ve experienced on mortgage-backed assets. It’s also true that we’re having a recession characterized by a sharp decline in the amount of credit available to consumers and smaller businesses.

So it seems pretty simple: fix the first problem, and you automatically fix the second, right? Not so fast.

Most of the discussion centers on what it might take to open up the balance sheets of the largest banks. They’re holding vast portfolios of assets that have declined sharply in value on a current market basis, but have declined only moderately in terms of their stable long-term value.

What does that mean? It means that if you sell a mortgage-backed security today, you’ll receive a fire-sale price. But if you hold it to maturity, you’ll realize almost the entire value of the asset.

(Part of the calculus here is that Congress and the FDIC have deemed it politically unacceptable for people to default on mortgages. So there’s an arbitrage between the real default risk of a typical mortgage, which is reflected in its current market value, and the realizable value in the long term. The government won’t let these assets lose value.)

So on a hold-to-maturity basis, most of the large banks are not likely to fail. (Citigroup is an exception because it’s half bank and half broker/dealer. Arguably, Citi is functionally insolvent now, absent massive government support.)

So why would we want to even consider nationalizing these entities? Because they’re at the edge of their asset-carrying capacity now, and can’t raise new capital. That translates into little or no net new credit for economy. The nationalization idea (and neither-fish-nor-fowl ideas like Tim Geithner’s toxic-asset rescue plan) contemplates recapitalizing the banks with public money.

You could argue against this on free-market grounds, but free markets seem like a gauzy memory now anyway.

What’s more important is that the loss of new bank credit isn’t what’s driving the credit crunch in the first place.

Up until 2007, banks provided perhaps one-third of the credit in the United States. The rest came from the asset-securitization markets (the so-called “shadow banking system”), which has now come to a near-complete halt. We should be asking what it will take to bring securitization back.

Let’s say we follow through on one of the various plans to finance the huge wad of overpriced mortgages that are currently in force with public money. And let’s assume just for fun that we can print or borrow enough money to do that without consuming too much of the world’s private capital.

Does that mean we’re going to encourage companies like Bank of America and JP Morgan Chase to start expanding powerfully, into the gap left by the retreat of securitization? Weren’t we already concerned that they were too big to fail?

And in any case, shadow-banking finance depended greatly on the use of extremely high leverage ratios, once available to hedge funds and Wall Street firms, but never available to banks for on-balance sheet assets, and certainly not today. That financing model won’t be coming back either.

Bottom line, nationalization isn’t going to do much harm, or much good either. What we really need to do is prepare for a world in which capital is scarce and expensive, compared to the recent past.

It’s interesting that, to a lot of people in the non-specialist press, the key question respecting the banking system is the “N” word: whether or not we should nationalize troubled large banks. There’s quite a lot more to the story.

It’s true that we have a lot of large financial institutions at or near the fuzzy edge of insolvency, given the losses they’ve experienced on mortgage-backed assets. It’s also true that we’re having a recession characterized by a sharp decline in the amount of credit available to consumers and smaller businesses.

So it seems pretty simple: fix the first problem, and you automatically fix the second, right? Not so fast.

Most of the discussion centers on what it might take to open up the balance sheets of the largest banks. They’re holding vast portfolios of assets that have declined sharply in value on a current market basis, but have declined only moderately in terms of their stable long-term value.

What does that mean? It means that if you sell a mortgage-backed security today, you’ll receive a fire-sale price. But if you hold it to maturity, you’ll realize almost the entire value of the asset.

(Part of the calculus here is that Congress and the FDIC have deemed it politically unacceptable for people to default on mortgages. So there’s an arbitrage between the real default risk of a typical mortgage, which is reflected in its current market value, and the realizable value in the long term. The government won’t let these assets lose value.)

So on a hold-to-maturity basis, most of the large banks are not likely to fail. (Citigroup is an exception because it’s half bank and half broker/dealer. Arguably, Citi is functionally insolvent now, absent massive government support.)

So why would we want to even consider nationalizing these entities? Because they’re at the edge of their asset-carrying capacity now, and can’t raise new capital. That translates into little or no net new credit for economy. The nationalization idea (and neither-fish-nor-fowl ideas like Tim Geithner’s toxic-asset rescue plan) contemplates recapitalizing the banks with public money.

You could argue against this on free-market grounds, but free markets seem like a gauzy memory now anyway.

What’s more important is that the loss of new bank credit isn’t what’s driving the credit crunch in the first place.

Up until 2007, banks provided perhaps one-third of the credit in the United States. The rest came from the asset-securitization markets (the so-called “shadow banking system”), which has now come to a near-complete halt. We should be asking what it will take to bring securitization back.

Let’s say we follow through on one of the various plans to finance the huge wad of overpriced mortgages that are currently in force with public money. And let’s assume just for fun that we can print or borrow enough money to do that without consuming too much of the world’s private capital.

Does that mean we’re going to encourage companies like Bank of America and JP Morgan Chase to start expanding powerfully, into the gap left by the retreat of securitization? Weren’t we already concerned that they were too big to fail?

And in any case, shadow-banking finance depended greatly on the use of extremely high leverage ratios, once available to hedge funds and Wall Street firms, but never available to banks for on-balance sheet assets, and certainly not today. That financing model won’t be coming back either.

Bottom line, nationalization isn’t going to do much harm, or much good either. What we really need to do is prepare for a world in which capital is scarce and expensive, compared to the recent past.

Read Less

Re: The Very Softest of Powers

Abe, even Mara Liasson has figured our what’s going on here:

The humble part was supposed to get us more cooperation from our allies. He’s got the humble part down great. I think he gets 100 — you know, A-plus for that. He hasn’t gotten anything back.

But perhaps the humble routine is not merely ineffective, but counterproductive. Whether rightly or wrongly the Iranians, North Koreans, and Russians don’t admire humility. And they may perceive all this bowing (literally) and scraping as subservience and weakness.

Robert Gibbs went to rather ludicrous lengths to ignore the implications of the timing of the North Korean test, calling it a “coincidence” that it occurred on the occasion of the president’s dreamy non-proliferation speech. In fact it was a direct rebuff, a testing of his mettle – to quote Joe Biden. The North Koreans clearly think they can act with impunity. And they may be right. Perhaps fewer apologies and more robust projection of American determination and strength would be in order about now.

But the Obama administration is doing what, exactly? Going to the UN of course. That’ll have the North Koreans shaking, right? Former UN Ambassador John Bolton explains:

What is the next step for the Obama administration? It appears to be simply to return to the six-party talks. If that’s all there is, that tells the North Koreans a) we got away with this launch;  b) we can probably do it again; and it has implications for Iran and other would-be proliferators as well.

It seems, alas, there are those who cannot be charmed or persuaded by reason — those for whom there are no town halls. When it comes to them, the Obama administration is stumped. They might try, when they have exhausted all other alternatives, sticking with our missile defense programs.

Abe, even Mara Liasson has figured our what’s going on here:

The humble part was supposed to get us more cooperation from our allies. He’s got the humble part down great. I think he gets 100 — you know, A-plus for that. He hasn’t gotten anything back.

But perhaps the humble routine is not merely ineffective, but counterproductive. Whether rightly or wrongly the Iranians, North Koreans, and Russians don’t admire humility. And they may perceive all this bowing (literally) and scraping as subservience and weakness.

Robert Gibbs went to rather ludicrous lengths to ignore the implications of the timing of the North Korean test, calling it a “coincidence” that it occurred on the occasion of the president’s dreamy non-proliferation speech. In fact it was a direct rebuff, a testing of his mettle – to quote Joe Biden. The North Koreans clearly think they can act with impunity. And they may be right. Perhaps fewer apologies and more robust projection of American determination and strength would be in order about now.

But the Obama administration is doing what, exactly? Going to the UN of course. That’ll have the North Koreans shaking, right? Former UN Ambassador John Bolton explains:

What is the next step for the Obama administration? It appears to be simply to return to the six-party talks. If that’s all there is, that tells the North Koreans a) we got away with this launch;  b) we can probably do it again; and it has implications for Iran and other would-be proliferators as well.

It seems, alas, there are those who cannot be charmed or persuaded by reason — those for whom there are no town halls. When it comes to them, the Obama administration is stumped. They might try, when they have exhausted all other alternatives, sticking with our missile defense programs.

Read Less

The NBA’s “Green” Phoniness

A broad-based movement for promoting environmental cleanliness and decreasing our dependence on foreign oil is long overdue.  For some companies, however, “going green” is more useful as a marketing ploy than as a way of doing business — leading to campaigns that are “green” only in the greenback sense.

Take the National Basketball Association’s current “Green Week.”  Of course, the NBA is claiming that its primary aim is to “generate awareness and funding to protect the environment.”  It has therefore released a list of tips for “living” and “working” environmentally, as well as encouraged some NBA stars to speak on “green” issues.

But before The Huffington Post gets all excited (too late), perhaps it’s worth noting that the primary thrust of “Green Week” is a blatant merchandizing blitz.  First, the NBA has outfitted all thirty teams with organic cotton warm-up shirts, with the NBA’s special “Green Week” logo front and center.   (In case you had any doubts, these shirts are already available for $24.99 in men’s and women’s sizes, complete with a massive Adidas logo on the left sleeve.)  Second, the NBA has issued special “Green Week” basketballs (this product is also, naturally, available for purchase).  Third, at least three teams — the Denver Nuggets, Charlotte Bobcats, and Chicago Bulls — are marking the occasion by wearing — you guessed it — green uniforms, with some players matching these one-time get-ups with green sneakers and sweatbands.

Of course, the NBA isn’t the first sports league to engage in this sort of cynical “green” campaign.  Back in February, the Pittsburgh Steelers’ Super Bowl Championship t-shirts carried an obnoxious sticker, with the NFL pretending as though it was saving the environment by producing tons of useless merchandise (h/t UniWatch).  Still, insofar as the NFL always issues commemorative t-shirts to celebrate its champions, perhaps it can be credited with finding an environmentally preferable way to waste resources that were going to be wasted anyway.

The NBA, on the other hand, has wasted new resources.  Indeed, rather than making special warm-up shirts for “Green Week,” wouldn’t it have been more eco-friendly for teams to just reuse their normal shooting shirts?  Or, rather than manufacturing special basketballs with the word “recycle” emblazoned on them in green, why didn’t the socially-conscious NBA simply recycle game-balls from previous nights?  The green uniform gimmick is particularly wasteful: since the green-wearing teams naturally donned their special jerseys at home (how else could they market these jerseys to their hometown fans?), their opponents were forced to pack their white jerseys – in addition to the dark uniforms that they would ordinarily wear on the road – for their entire road trips!  How much jet fuel was wasted lugging around this unnecessary double baggage?

My advice: if the NBA really wants to “go green,” it should start by mandating a sharp reduction in the number of costume changes – and therefore laundry cycles – for the dance ensembles that barely entertain fans during time-outs.  It should also prevent teams from signing Stephon Marbury during the coming off-season.  Talk about a waste of jet fuel.

A broad-based movement for promoting environmental cleanliness and decreasing our dependence on foreign oil is long overdue.  For some companies, however, “going green” is more useful as a marketing ploy than as a way of doing business — leading to campaigns that are “green” only in the greenback sense.

Take the National Basketball Association’s current “Green Week.”  Of course, the NBA is claiming that its primary aim is to “generate awareness and funding to protect the environment.”  It has therefore released a list of tips for “living” and “working” environmentally, as well as encouraged some NBA stars to speak on “green” issues.

But before The Huffington Post gets all excited (too late), perhaps it’s worth noting that the primary thrust of “Green Week” is a blatant merchandizing blitz.  First, the NBA has outfitted all thirty teams with organic cotton warm-up shirts, with the NBA’s special “Green Week” logo front and center.   (In case you had any doubts, these shirts are already available for $24.99 in men’s and women’s sizes, complete with a massive Adidas logo on the left sleeve.)  Second, the NBA has issued special “Green Week” basketballs (this product is also, naturally, available for purchase).  Third, at least three teams — the Denver Nuggets, Charlotte Bobcats, and Chicago Bulls — are marking the occasion by wearing — you guessed it — green uniforms, with some players matching these one-time get-ups with green sneakers and sweatbands.

Of course, the NBA isn’t the first sports league to engage in this sort of cynical “green” campaign.  Back in February, the Pittsburgh Steelers’ Super Bowl Championship t-shirts carried an obnoxious sticker, with the NFL pretending as though it was saving the environment by producing tons of useless merchandise (h/t UniWatch).  Still, insofar as the NFL always issues commemorative t-shirts to celebrate its champions, perhaps it can be credited with finding an environmentally preferable way to waste resources that were going to be wasted anyway.

The NBA, on the other hand, has wasted new resources.  Indeed, rather than making special warm-up shirts for “Green Week,” wouldn’t it have been more eco-friendly for teams to just reuse their normal shooting shirts?  Or, rather than manufacturing special basketballs with the word “recycle” emblazoned on them in green, why didn’t the socially-conscious NBA simply recycle game-balls from previous nights?  The green uniform gimmick is particularly wasteful: since the green-wearing teams naturally donned their special jerseys at home (how else could they market these jerseys to their hometown fans?), their opponents were forced to pack their white jerseys – in addition to the dark uniforms that they would ordinarily wear on the road – for their entire road trips!  How much jet fuel was wasted lugging around this unnecessary double baggage?

My advice: if the NBA really wants to “go green,” it should start by mandating a sharp reduction in the number of costume changes – and therefore laundry cycles – for the dance ensembles that barely entertain fans during time-outs.  It should also prevent teams from signing Stephon Marbury during the coming off-season.  Talk about a waste of jet fuel.

Read Less

A Compromise with No Rationale

Salena Zito reviews the lay of the land on card check, acknowledging that it has no chance of passing with the defection of Arlen Specter, not to mention a number of Democratic senators. And she notes that right now neither side is much interested in the Costco/Whole Foods/Starbucks compromise peddled by Lanny Davis. She concludes:

But keep an eye on Republicans and business, who want to kill card-check totally now and redouble their uphill efforts for 2010. They may – and this is a big “may” – want to try to secure some reasonable compromise while they still have some leverage.

But what sort of compromise could ever be reached that says Big Labor won’t immediate push for card check once they have those 60 votes? A “compromise” to provide face-saving goodies to Big Labor does not make much sense for the anti-card check forces. They already have card check beat, and the compromise brings them no future protection. To the contrary, their interests reside in playing along with the “card check is alive” line that Big Labor is spinning. That allows them to flog Red state Democrats and make mischief for the opposition party.

But there is something more fundamental at stake. This is legislation for and by a  special interest group. There is no popular groundswell or demonstrable need for it. We don’t have tales of woe from employees unable to organize. We don’t hear about frustrated employees who, but for the secret ballot, would have union representation. Some may have a visceral reaction to losing the secret ballot or feel badly about the “plight of workers.” But they are not clammoring for any change in the law.

Salena Zito reviews the lay of the land on card check, acknowledging that it has no chance of passing with the defection of Arlen Specter, not to mention a number of Democratic senators. And she notes that right now neither side is much interested in the Costco/Whole Foods/Starbucks compromise peddled by Lanny Davis. She concludes:

But keep an eye on Republicans and business, who want to kill card-check totally now and redouble their uphill efforts for 2010. They may – and this is a big “may” – want to try to secure some reasonable compromise while they still have some leverage.

But what sort of compromise could ever be reached that says Big Labor won’t immediate push for card check once they have those 60 votes? A “compromise” to provide face-saving goodies to Big Labor does not make much sense for the anti-card check forces. They already have card check beat, and the compromise brings them no future protection. To the contrary, their interests reside in playing along with the “card check is alive” line that Big Labor is spinning. That allows them to flog Red state Democrats and make mischief for the opposition party.

But there is something more fundamental at stake. This is legislation for and by a  special interest group. There is no popular groundswell or demonstrable need for it. We don’t have tales of woe from employees unable to organize. We don’t hear about frustrated employees who, but for the secret ballot, would have union representation. Some may have a visceral reaction to losing the secret ballot or feel badly about the “plight of workers.” But they are not clammoring for any change in the law.

Read Less

The Very Softest of Powers

Today’s rocket launch by North Korea capped off what has been a remarkably successful first quarter for the world’s most toxic regimes and troublesome bad actors.

In January, Barack Obama gave his first presidential interview to Al Arabiya television, during which he praised Saudi Arabia’s King Abdullah for his “great courage.” Obama has since fully embraced the Saudi peace initiative for the Middle East. (Among the initiative’s non-negotiable details is the Palestinian “right of return,” which would overwhelm the Jewish State with millions of “claimants.”) A week ago, the UN Human Rights Council passed a Saudi-backed “defamation of religion” resolution. The resolution internationalizes Islamic blasphemy laws to give cover to human rights and other abuses in Muslim countries. In England last week, Obama bowed before King Abdullah.

In February, a Taliban group secured a permanent peace treaty with Pakistan’s government, allowing the repressive Islamists to take control of Swat Valley, a mere 150 miles from Islamabad. After publicly renouncing the deal, American officials in Pakistan gave it their private backing.

Around the same time, Secretary of State Hillary Clinton told Chinese leaders that American concern over human rights abuses in China would take a backseat to discussion of the world economic crisis and issues of national security. For this burst of  “smart power” China rewarded the U.S. by proposing to replace the dollar as a form of international currency. China, North Korea’s only unabashed ally, is also certain to veto any proposed UN Security Council condemnation of today’s launch. So much for economics and national security.
Read More

Today’s rocket launch by North Korea capped off what has been a remarkably successful first quarter for the world’s most toxic regimes and troublesome bad actors.

In January, Barack Obama gave his first presidential interview to Al Arabiya television, during which he praised Saudi Arabia’s King Abdullah for his “great courage.” Obama has since fully embraced the Saudi peace initiative for the Middle East. (Among the initiative’s non-negotiable details is the Palestinian “right of return,” which would overwhelm the Jewish State with millions of “claimants.”) A week ago, the UN Human Rights Council passed a Saudi-backed “defamation of religion” resolution. The resolution internationalizes Islamic blasphemy laws to give cover to human rights and other abuses in Muslim countries. In England last week, Obama bowed before King Abdullah.

In February, a Taliban group secured a permanent peace treaty with Pakistan’s government, allowing the repressive Islamists to take control of Swat Valley, a mere 150 miles from Islamabad. After publicly renouncing the deal, American officials in Pakistan gave it their private backing.

Around the same time, Secretary of State Hillary Clinton told Chinese leaders that American concern over human rights abuses in China would take a backseat to discussion of the world economic crisis and issues of national security. For this burst of  “smart power” China rewarded the U.S. by proposing to replace the dollar as a form of international currency. China, North Korea’s only unabashed ally, is also certain to veto any proposed UN Security Council condemnation of today’s launch. So much for economics and national security.

In March, Moscow revealed Barack Obama’s failed attempt to trade away an American missile shield in Eastern Europe for Russia’s help in halting Iran’s nuclear program. The rebuff strengthened Russia’s hand regionally, emboldened the Russia-Iran partnership, and made the American administration appear feckless.  None of which prevented Obama from engaging cordially with Medvedev last week in England, a further abasement that found Medvedev describing the American president as his “comrade.”

Also in March, Barack Obama offered a video greeting to Iran’s leaders on their Persian New Year. In the video, he took Iranian regime change off the table; spoke of approaching the Iranian leadership with respect; and vowed to pursue diplomacy instead of threats. In response, Ayatollah Ali Khamenei publicly lashed into America’s “unconditional support for the Zionist regime,” “oppressive sanctions,” and “accusations against the great Iranian nation.” Khamenei’s words were greeted with chants of “Death to America!”

Here’s how the Obama administration plans to deal with today’s rocket launch: “Stephen W. Bosworth, Mr. Obama’s special envoy on North Korea, said that while the United States would seek to punish the North for the test, it was also prepared to resume six-nation talks with North Korea to persuade it to give up its nuclear weapons program.”

There will be no punishment because any UN declarations will be vetoed by China.

President Obama said that he wants the U.S. to lead not by force, but by example. However no one is following (not in these matters and not in the economic realm either). This means that there is, at this time, no world leader among nations. There is no unipolarity, but there is also no multipolarity. Declinists who thought American influence would be challenged (or augmented) by “emerging Asian superpowers” have been made irrelevant by the global economic crisis. Those countries are suffering as service economies and export economies, and don’t have the time-tested maritime-order institutions to weather the storm.

Influence is now in the hands of bad actors that see the Free World’s reluctance to take a stand. They and their enablers within international bodies are setting the global agenda. Everyone else is reacting. In three months, the Obama administration has not failed one foreign policy test but six, by this reckoning. The only national security areas in which the president has acted soundly are in Iraq and Afghanistan. And those have been matters of continuing or expanding Bush policies. There are still nine months left in the year.

Read Less

Did Someone Forget the Jobs?

Democrats have always fancied themselves as the politicians most concerned with jobs. They authored the Humphrey-Hawkins Full Employment Act. In every recession, they chide Republicans when economic growth initially outstrips improved employment and they inveigh against “jobless” recoveries. From city councilmen to presidents, they have repeated the mantra that they would “create good jobs.” But in President Obama’s mind-numbingly complex scheme for economic recovery the one element overlooked is, ironically, jobs.

Unemployment is 8.5% and rising. Even Thomas Friedman recognizes that all the other bailouts and economic stabilization efforts falter if more and more people are out of work:

Because unemployment is still rising — ensuring that the initial spate of mortgage defaults, which came from loans to people who could never repay, will be followed by another spate of defaults from those who could repay but now can’t because the deteriorating economy has stripped them of their jobs, their businesses or their credit lines.

The best they could come up with to fight unemployment was a pork-laden “stimulus” plan. That did precious little — nothing, actually — for job creation outside of temporary government boondoggles, many of which don’t kick in for some time and which won’t last unless the pork is refunded year after year.

Part of the reason for this, as Francis pointed out, is an inappropriate and unwise hostility toward private industry, which is where the jobs are. If you are mainly interested in supplanting private industry you don’t spend much time thinking about ways to allow it to flourish, invest, and grow.

So several months into his administration, Obama faces both a policy and political problem. He has already cast his lot and launched the ship of state in the direction of governmental growth, higher taxation, and private industry displacement. Can he now turn on a dime and suggest what we really need is job-promoting assistance for the private sector? The money has been sent and the rhetoric has been unleashed, so it is difficult if not impossible to reverse course and suggest, for example, payroll tax cuts to promote private sector hiring. And then there are Obama’s Democratic colleagues in Congress who simply are not willing to reduce taxes for anyone or lighten the mandates on private industry. To the contrary, Nancy Pelosi et al. are fighting hard for cap-and-trade and some form of mandated healthcare.

Many financial gurus in this and the preceding administration convinced themselves that the root of the crisis was a financial meltdown and credit freeze. But the recovery won’t happen without private sector job growth and the bump in consumer spending it will bring. You can take over GM and mandate all the green cars you want, but if unemployment goes to 10% fewer people are buying cars — and paying their mortgages on time. Perhaps the party of good jobs should think harder about how businesses create them — and what the administration can do to help.

Democrats have always fancied themselves as the politicians most concerned with jobs. They authored the Humphrey-Hawkins Full Employment Act. In every recession, they chide Republicans when economic growth initially outstrips improved employment and they inveigh against “jobless” recoveries. From city councilmen to presidents, they have repeated the mantra that they would “create good jobs.” But in President Obama’s mind-numbingly complex scheme for economic recovery the one element overlooked is, ironically, jobs.

Unemployment is 8.5% and rising. Even Thomas Friedman recognizes that all the other bailouts and economic stabilization efforts falter if more and more people are out of work:

Because unemployment is still rising — ensuring that the initial spate of mortgage defaults, which came from loans to people who could never repay, will be followed by another spate of defaults from those who could repay but now can’t because the deteriorating economy has stripped them of their jobs, their businesses or their credit lines.

The best they could come up with to fight unemployment was a pork-laden “stimulus” plan. That did precious little — nothing, actually — for job creation outside of temporary government boondoggles, many of which don’t kick in for some time and which won’t last unless the pork is refunded year after year.

Part of the reason for this, as Francis pointed out, is an inappropriate and unwise hostility toward private industry, which is where the jobs are. If you are mainly interested in supplanting private industry you don’t spend much time thinking about ways to allow it to flourish, invest, and grow.

So several months into his administration, Obama faces both a policy and political problem. He has already cast his lot and launched the ship of state in the direction of governmental growth, higher taxation, and private industry displacement. Can he now turn on a dime and suggest what we really need is job-promoting assistance for the private sector? The money has been sent and the rhetoric has been unleashed, so it is difficult if not impossible to reverse course and suggest, for example, payroll tax cuts to promote private sector hiring. And then there are Obama’s Democratic colleagues in Congress who simply are not willing to reduce taxes for anyone or lighten the mandates on private industry. To the contrary, Nancy Pelosi et al. are fighting hard for cap-and-trade and some form of mandated healthcare.

Many financial gurus in this and the preceding administration convinced themselves that the root of the crisis was a financial meltdown and credit freeze. But the recovery won’t happen without private sector job growth and the bump in consumer spending it will bring. You can take over GM and mandate all the green cars you want, but if unemployment goes to 10% fewer people are buying cars — and paying their mortgages on time. Perhaps the party of good jobs should think harder about how businesses create them — and what the administration can do to help.

Read Less

Flotsam and Jetsam

The Democratic gubernatorial candidates in Virginia continue to bob and weave on card check. You have to wonder about Terry McAuliffe’s technique: rebuking a businessman who had the temerity to ask about it, “Let’s not try to marginalize your effectiveness. I want to work with you to create jobs.” (Translation: Hush up.) I’m not sure they can keep this up through November.

The Washington Post is clearly obsessed with the “Virginia Republicans In Turmoil!” storyline despite an overwhelming majority (57-18) voting to dump their controversial and inept state chairman, a move which plainly cheers the GOP gubernatorial candidate. But when you have a storyline to push, facts don’t really matter.

Matt Continetti dissects Obama’s vision: “When Obama says his budget heralds ‘a new era of responsibility,’ he’s not talking about individual responsibility, or the responsibility of families to raise the next generation. Nor does he mean government’s responsibility to provide for a decent measure of social and national security, and a legal and regulatory framework that allows civil society and the free market to flourish. No, Obama is talking about the responsibilities government is going to impose on us in the form of higher taxes. The upshot is more government, and still more debt. Not to mention a dependent citizenry.”

From Andrew Malcolm: “Oops, it seems that many on President Obama’s team, including those seeking to save the American automobile industry, do not actually drive vehicles from the American automobile industry. . . Lawrence Summers, head of the president’s National Economic Council, drives a Mazda. Budget Director Peter Orszag drives a Honda and a Volvo. Economic advisor Austan Goolsbee drives a Toyota. VP Joe Biden’s economic advisor Jared Bernstein prefers a Honda.” Really, who can blame them or the millions and millions of Americans who made similar choices?

Sounds like a joke: the administration is so fiscally irresponsible that the Republicans and the French are on the same side of the budget argument.

Sometimes you wish there really could be more change: “With protesters raging outside, NATO leaders on Saturday gave a tepid troop commitment to President Obama’s escalating campaign in Afghanistan, mostly committing soldiers only to a temporary security duty.”

Or as the teleprompter put it: “Over the past month, Secretary of State Dick Holbrooke and his assistant, Hillary, have been working through NATO and individual countries on getting commitments for Afghan deployment that Big Guy could get credit for today in the U.S. press. And boy, did Dick and Hill come through. The Brits are sending a few troops; Belgium offered 35 military trainers and Spain offered 12. That’s it. The U.S. is sending thousands. Big Guy wanted to know what Holbrooke and Hillary had been doing with their time that would lead to this kind of embarrassing set of offers.”

Maureen Dowd is dimmer than I thought if she thinks Dmitri Medvedev calling Obama his “new comrade” is indicative of progress on fundamental international disputes. Her literary world may be confined to psychoanalytic gossip but that simply isn’t how the real world operates.

A helpful description of the differences between the budgets of the President, the House and the Senate is here. Maybe Nancy Pelosi will slip reconciliation instructions back in for cap-and-trade and healthcare (allowing Democrats to jam in huge policy shifts without fear of filibuster). But one thing is for sure: we are going to spend a ton and take on trillions more debt without a realistic plan for ever paying off our obligations. How do you like the “era of responsibility” so far?

Okay the Obama team didn’t count on ads this lame when it decided to take over GM.

Chris Dodd has a primary challenger. The Republicans will root for Dodd.

The Democratic gubernatorial candidates in Virginia continue to bob and weave on card check. You have to wonder about Terry McAuliffe’s technique: rebuking a businessman who had the temerity to ask about it, “Let’s not try to marginalize your effectiveness. I want to work with you to create jobs.” (Translation: Hush up.) I’m not sure they can keep this up through November.

The Washington Post is clearly obsessed with the “Virginia Republicans In Turmoil!” storyline despite an overwhelming majority (57-18) voting to dump their controversial and inept state chairman, a move which plainly cheers the GOP gubernatorial candidate. But when you have a storyline to push, facts don’t really matter.

Matt Continetti dissects Obama’s vision: “When Obama says his budget heralds ‘a new era of responsibility,’ he’s not talking about individual responsibility, or the responsibility of families to raise the next generation. Nor does he mean government’s responsibility to provide for a decent measure of social and national security, and a legal and regulatory framework that allows civil society and the free market to flourish. No, Obama is talking about the responsibilities government is going to impose on us in the form of higher taxes. The upshot is more government, and still more debt. Not to mention a dependent citizenry.”

From Andrew Malcolm: “Oops, it seems that many on President Obama’s team, including those seeking to save the American automobile industry, do not actually drive vehicles from the American automobile industry. . . Lawrence Summers, head of the president’s National Economic Council, drives a Mazda. Budget Director Peter Orszag drives a Honda and a Volvo. Economic advisor Austan Goolsbee drives a Toyota. VP Joe Biden’s economic advisor Jared Bernstein prefers a Honda.” Really, who can blame them or the millions and millions of Americans who made similar choices?

Sounds like a joke: the administration is so fiscally irresponsible that the Republicans and the French are on the same side of the budget argument.

Sometimes you wish there really could be more change: “With protesters raging outside, NATO leaders on Saturday gave a tepid troop commitment to President Obama’s escalating campaign in Afghanistan, mostly committing soldiers only to a temporary security duty.”

Or as the teleprompter put it: “Over the past month, Secretary of State Dick Holbrooke and his assistant, Hillary, have been working through NATO and individual countries on getting commitments for Afghan deployment that Big Guy could get credit for today in the U.S. press. And boy, did Dick and Hill come through. The Brits are sending a few troops; Belgium offered 35 military trainers and Spain offered 12. That’s it. The U.S. is sending thousands. Big Guy wanted to know what Holbrooke and Hillary had been doing with their time that would lead to this kind of embarrassing set of offers.”

Maureen Dowd is dimmer than I thought if she thinks Dmitri Medvedev calling Obama his “new comrade” is indicative of progress on fundamental international disputes. Her literary world may be confined to psychoanalytic gossip but that simply isn’t how the real world operates.

A helpful description of the differences between the budgets of the President, the House and the Senate is here. Maybe Nancy Pelosi will slip reconciliation instructions back in for cap-and-trade and healthcare (allowing Democrats to jam in huge policy shifts without fear of filibuster). But one thing is for sure: we are going to spend a ton and take on trillions more debt without a realistic plan for ever paying off our obligations. How do you like the “era of responsibility” so far?

Okay the Obama team didn’t count on ads this lame when it decided to take over GM.

Chris Dodd has a primary challenger. The Republicans will root for Dodd.

Read Less




Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor to our site, you are allowed 8 free articles this month.
This is your first of 8 free articles.

If you are already a digital subscriber, log in here »

Print subscriber? For free access to the website and iPad, register here »

To subscribe, click here to see our subscription offers »

Please note this is an advertisement skip this ad
Clearly, you have a passion for ideas.
Subscribe today for unlimited digital access to the publication that shapes the minds of the people who shape our world.
Get for just
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor, you are allowed 8 free articles.
This is your first article.
You have read of 8 free articles this month.
YOU HAVE READ 8 OF 8
FREE ARTICLES THIS MONTH.
for full access to
CommentaryMagazine.com
INCLUDES FULL ACCESS TO:
Digital subscriber?
Print subscriber? Get free access »
Call to subscribe: 1-800-829-6270
You can also subscribe
on your computer at
CommentaryMagazine.com.
LOG IN WITH YOUR
COMMENTARY MAGAZINE ID
Don't have a CommentaryMagazine.com log in?
CREATE A COMMENTARY
LOG IN ID
Enter you email address and password below. A confirmation email will be sent to the email address that you provide.