Economy & Budget

Look around. American banks are failing because of a lack of capital. Our biggest financial institutions are selling pieces of their equity — and their souls — to sovereign wealth funds to raise cash. The debt pyramid constructed by Fannie Mae and Freddie Mac is tottering. All because of a lack of invested capital. After all, why should anyone invest in American stocks? The market is dropping, the dollar is weakening, and interest rates are the lowest in the world.

Now Obama pledges to double the capital gains tax. This misguided policy will drive capital offshore and turn a flow into a torrent. The financial problems of American banks will be amplified. McCain should pounce on this issue and correlate the current crisis with Obama's position on capital gains. It would be a big winner.

As Fannie Mae and Freddie Mac flounder around on the verge of collapse, who do they turn to as the lender of last resort?

Why, the American taxpayer, of course.

At the beginning of his administration, President Bush made it clear that the government would not provide guarantees against the risk associated with these companies’ activities. The firms’ leaders balked as this because, after all, they had the sweetest of sweetheart deals going. They would share in millions of dollars in executive options and bonuses if things went well, while shouldering none of the risk if things went badly. After all, the government would never let the nation’s largest mortgage lenders fail. Read more...

Arnold Schwarzenegger, on the George Stephanopoulos show this past Sunday, said that if Barack Obama called and asked him to be “energy czar,” he would take his call. The governor of California would be an asset to either party’s presidential Cabinet. He is of the rare and endangered species of politician with the ability to see and to act on what he sees as well.

“The federal government doesn’t believe in global warming,” he said a few years back. “We do.” End of story, as he says.

Schwarzenegger has taken California forward on environmental issues even in defiance of the federal government, establishing his own treaties with Canadian provinces in opposition to established constitutional lore and mores since 1865. One of his initiatives is to begin to define a north/south continental “hydrogen highway” which requires special filling stations for hydrogen cars, from San Diego to Vancouver. Read more...

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. Read more...

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. Read more...

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. Read more...

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. Read more...

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. Read more...

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 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. Read more...