Economy & Budget

A Gramm of Truth

Could it be that Americans have brought this economy to the brink of recession simply by thinking it? Could it be that our nation’s leaders have failed to repudiate the assumption of economic failure even though they knew it to be false? Could it be that Phil Gramm is right — have we become a nation of whiners?

Last week, Gramm was denounced for commenting that our country is not suffering an economic recession, but a mental one. The fact of the matter is, he’s on the mark. Did his candor lack compassion? Perhaps. But any basic Econ 101 student could tell you America is not in a recession. By definition, a recession is when an economy shrinks two quarters in a row. In reality, the United States grew 0.6 percent each of the past two quarters, according to the Bureau of Economic Analysis. Now, 0.6 percent is nothing to write home about, but it’s growth; and that means the “recession” definition need not apply.

Born in the USA, Sold to Foreign Buyers

America is being sold at a discount to foreign buyers at bargain basement prices and it is time for a serious discussion about why.

The Chrysler Building, large pieces of America's major banks and investment houses, Anheuser-Busch. What will be next? Will we sell the Lincoln Memorial to Saudi Arabian sovereign wealth funds?

America is now dependent on Chinese capital to buy our bonds to finance our debt. We are dependent on Middle Eastern oil to fuel our economy. This massive export of capital to foreign nations is used by them to buy our assets, often at dollar-store prices.

Fractional Reserve Disaster

There is no question that the financial markets are facing a liquidity crisis of unimaginable proportions. But the federal government seems to be sending a clear message: It will only save some of these institutions on the condition that stringent new regulatory oversight rules are passed.

Normally, laissez-faire business types decry such government intervention, claiming that it interferes with a free market. But sadly, none of them seems to have a problem accepting a handout from the government when they find they can't back the risky plays they called.

No Time for Obama’s Smooth-Talking

Here's the problem, Sen. Obama: Your sly efforts to scale back and gently reassure skittish voters that you won't bring radical change come at a time when our country desperately needs radical change.

While, of course, you represent the possibility of historic racial progress, your campaign was based on an ideal even more fundamental.

You have convinced restless millions that the time has come for our country to go in different directions … REALLY different directions. All you accomplish by glossing over what we have to do is play into the hands of those who don't want to do anything.

Economic Anxiety and Healthcare Reform

I am reading a very interesting book by Peter Gosselin titled High Wire: The Precarious Financial Lives of American Families that analyzes the current economic situation of many in this country.

Gosselin’s thesis is that the new economy is a bad deal for many American families, because while they may have access to the possibilities of more economic success, they also have a greater chance of taking a great fall from which they may never recover.

He profiles several people who seemed to have it going all their way, until a minor slip puts them in an economic abyss from which they never recover.

The Democrats Are At It Again!

This morning the Democratic Congressional Campaign Committee (DCCC) charged Michigan Rep. Tim Walberg (R) with seeking to raise gasoline taxes by 23 percent. When I read this, I couldn’t figure out why a conservative Republican like Walberg would make such a proposal, though it’s always possible that he, like anyone who lives and works in the District of Columbia, might have finally simply slipped his moorings.

When I looked into the matter, however, I found that our Democratic friends weren’t quite telling it like it is. The DCCC bases its charge on Walberg’s sponsorship of legislation described in the committee press release only as “HR 25.” I assumed this must be the Republican Tax the Drivers Act of 2008 until I pulled it up.

In fact, of course, HR 25 is the legislative embodiment of the “Fair Tax” under which the federal income tax would be replaced by a consumption tax. The legislation would do away with the IRS and the income tax and has the support of a good many people in and out of Congress.

None of this appeared in the DCCC release, which simply declared that Walberg would “impose a 23 percent tax on all goods and services purchased in the United States in 2009, including gas.” The impression conveyed, of course, is that he’s a tax raiser and, indeed, that he likes taxes even more than someone like, say, Sen. Barack Obama (D-Ill.). Those who simply read the release can, I think, be excused for concluding — as I almost did — that the poor fellow from Michigan had gone bonkers.

Actually, I’m no fan of the Fair Tax. I’ll leave arguing its merits to the Mike Huckabees of the world, but it represents a serious attempt to reform our tax system, and those who support it deserve better than this.

As it turns out, however, the DCCC release is little more than another sign that the 2008 campaign is under way and that rational men and women should beware.

Keene is chairman of The American Conservative Union, whose website can be accessed here.

The Joke's on You

The back and forth between John McCain and Barack Obama over VP vetter Jim Johnson's mortgages is pretty funny — maybe the two candidates could actually trade Charlie Black and Jim Johnson and declare a truce.

But has the McCain campaign noticed the new economic policy adviser just hired? Jason Furman, who at 37 years old is an expert in fiscal policy, has such an impressive resume that you have to wonder if he started college at age 6. Furman has served as staff economist in the White House Council of Economic Advisers under Clinton, was senior director for the National Economic Council, has worked at the World Bank, earned a Ph.D. at Harvard University and was an economic adviser to John Kerry in 2004. And according to the New York Sun Furman is a Wal-Mart defender. In 2005 he published a paper titled "Wal-Mart: A Progressive Success Story," heralding the consumer savings delivered by the chain that is considered a corporate bogeyman to many Democrats.

Mr. Change and the Same-Old Same-Old

As I sat in the Bloomberg studio, listening to Barack Obama’s stem-winder of a speech, listening to his lilting promises of spending more money on education, on healthcare, on programs for the poor and programs for the middle class, on foreign aid, on program after program, I wondered where he was going to get the money. And then it dawned on me. He is going to get it from me, and from hundreds of thousands of people like me.

His spending plans are ambitious, as are his plans for tax increases, while his reform plans are, shall we say, a bit thin. OK, let’s not kid ourselves. His idea of reform is to bring one-party Democratic government back to Washington. His agenda is good for traditional Democratic constituencies like labor, government bureaucrats and trial lawyers, but not very good for anybody else.

Bernanke Gets a Clue

According to The Wall Street Journal, “Federal Reserve Chairman Ben Bernanke on Tuesday put the U.S. dollar squarely on the Fed's radar screen, saying its slide against other currencies has led to an ‘unwelcome’ rise in U.S. inflation and may be a factor in inflation expectations. Bernanke also suggested that the Fed is unlikely to lower official interest rates further, though his remarks suggested that — barring a further rise in inflation expectations — the Fed probably won't contemplate higher rates until there is more stabilization in home prices.”

Well, thank God somebody has started to talk about fixing the precipitous decline in the dollar.

Best to Lead America

Armstrong Williams questions if any of the presidential hopefuls will be able to bring our country back to prosperity.