Tuesday, December 30, 2008

Republicans Hope to Hone Their Comback by Defeating Sen. Reid

Looks like if the Republicans play their cards right, Sen Harry Reid might be heading for a defeat in his 2010 re-election bid.

From the WSJ:

Sen. Reid, perhaps the most-vulnerable Democrat who will face re-election in a midterm race that is likely to favor his party once again, began interviewing campaign managers last week. The Senate majority leader also recently stepped up fund-raising.

A recent Research 2000 poll of likely voters put his approval rating at 38% and his disapproval rating at 54%, a possible reflection of voters' displeasure with gridlock and partisanship in Washington. And while Nevada broke for President-elect Barack Obama by 12 percentage points in November, the state voted for President George W. Bush in 2000 and 2004.

By taking out Reid, they will loose a crucial player in executing Obama's grand illusion.

Saturday, December 20, 2008

Rahm Emmauel & Blago - Two Peas In a Pod

It was bound to happen. The media blood hounds are sniffing around Rahm! From the AP.

CHICAGO – Gov. Rod Blagojevich is legendary in Illinois political circles for not picking up the phone or returning calls, even from important figures like the state's senior senator, Dick Durbin.

But there was always one call Blagojevich regularly took, say his aides, and that was from Rahm Emanuel — his congressman, his one-time campaign adviser and, more recently — and troubling for Emanuel — one of his contacts with President-elect Barack Obama's transition staff.

The friendly rapport Blagojevich and Emanuel shared over the years has suddenly become a troubling liability for Emanuel and the new president he will serve as chief of staff.

Emanuel and Obama have remained silent about what, if anything, Emanuel knew of the governor's alleged efforts to peddle Obama's vacant Senate seat to the highest bidder.

Emanuel did contact the governor's office about the appointment and left Blagojevich with the impression that he was pushing Valerie Jarrett, a close Obama friend, so he wouldn't have to compete with her in the White House for Obama's attention, said a person close to Blagojevich.

Friday, December 19, 2008

Why Tax Cuts are Better Than Spending in This Economy

Obama's economic team is taking a knee jerk reaction to deal with the current economic malaise. Spending our way is not going provide the solution. Enacting REAL tax cuts is far more effective.

According to Greg Mankiw.

Suppose, for example, that tax cuts are not lump-sum but instead take the form of cuts in payroll taxes (as suggested by Bils and Klenow). This tax cut would reduce the cost of labor and, if labor and capital are complements, increase the demand for capital goods. Thus, the tax cut stimulates demand not only by increasing disposable income and consumption spending (the textbook Keynesian channel) but also by incentivizing more investment spending. A similar result might obtain if the tax cut included, say, an investment tax credit.

Thursday, December 18, 2008

Obama Man of The Year? Come On, Really! Who in their right mind reads Time?

The editors at Time must be either asleep at the wheel or just plain, uninformed!

We have had the largest destruction of wealth, the most serious down turn in the economy since the great depression, the most home foreclosures, the collapse of the investment banking industry, etc, etc, etc and they chose Obama?

Obama's Government, Bigger, Badder. Just Nucking Futs!

From Greg Mankiw.

The most noteworthy feature of these data is the substantial growth of government from 1929 to 1945. It is easy to understand why the size of government grew so much during this period: The nation was responding to the crises of the Great Depression and, especially, World War II. But what is noteworthy is that while these crises were transitory, the increase in the scope of government was permanent.

This historical episode is one reason why advocates of limited government are rightly worried about the fiscal stimulus package that the incoming administration is going to propose. Rahm Emanuel, the new White House chief of staff, is reported to have said, "You don't ever want to let a crisis go to waste: It's an opportunity to do important things that you would otherwise avoid." It is not entirely clear what he meant by this. But one interpretation is that he wants to use a temporary crisis as an pretense to engineer a permanent increase in the size of government.

Monday, December 15, 2008

Look At Medicaid To See Why Obama's Healthcare Reform Will Fail to Meet Its Objectives


The nation’s flawed-but-free Medicaid program discourages most Americans from buying long-term health insurance that could provide better care and spare their life savings, a new study co-written by a University of Illinois professor

professor Jeffrey R. Brown says the study is the first to demonstrate how Medicaid stifles demand for private policies by creating financial disincentives that steer people toward the no-cost safety net, which covers nursing-home and other long-term care costs once their finances are exhausted.

“By modeling the lifetime financial implications of the insurance decision, we discovered that it is rational for most people to not buy private policies, even though Medicaid is actually pretty lousy insurance because it forces you to impoverish yourself first,” he said.

A core problem is that private policies require paying for much of the same coverage that comes free under Medicaid once nest eggs dip, said Brown, recently nominated by President Bush to serve on the board of trustees for the nation’s Medicare and Social Security programs.

So while private insurance offers broader coverage and protects personal assets, the net benefits amount to just 20 to 40 cents on every dollar of premiums after taking into account what Medicaid would have covered at no charge, according to the study, which will appear in The American Economic Review.

“You have this low quality public insurance program crowding out potentially better private insurance policies. And yet because the bad one is free to the consumer, it is still in the consumer’s best interest to take the free bad one rather than buy the expensive good one,” Brown said.

As a result, Medicaid – intended as a payer of last resort for the poor – now covers a third of long-term care expenses in the U.S., a problem Brown says will only worsen with medical expenses rising and nearly 80 million baby boomers nearing their retirement years.

Obama may have good intentions like his liberal predecessors, but the private markets are better at allocating scarce resources than arrogant bureaucrats, like Obama.

Saturday, December 13, 2008

Bush Should Do the Right Thing - Don't Do Anything for the Auto Industry

It seems like Bush does not want to leave the Presidency with the potential of the auto makers going into bankruptcy. His legacy has already been written into history and any last minute acts to save the auto industry will be destructive to the US economy.

By providing funding from the TARP he sets a dangerous precedent and give his successor some ammo to bail out other industries.

The problem is that if he bails out the auto industry there are going to be other industries from retail, airlines, insurance and on and on that is going to look for handouts.

Obama will use this precedent to enrich his favorite industries, especially with those with high union membership.

Just say no and let the auto makers go into a pre-packaged bankruptcy. Let them emerge as more leaner and more competitive entities. Chapter 11 bankruptcy was designed to allow entities and individuals to get a fresh start and that is what the auto makers need now.

Let them do this before the Obama admin comes in and nationalizes the automakers by taking equity stakes in them. Why would a car czar know more than the auto makers? It is idotic to think that micro managing these entities will get them out of their current mess. They need to do with the help of the bankruptcy court not the government.

Friday, December 12, 2008

Senate Republicans Call The Democrat's Bluff on Auto Industry Bailout

Harry Reid made the threat that there is not second round of voting for the bailout.

Simple game theory analysis shows that he and the Democrats are making a non credible threat.

The Democrats have everything to loose and the country is on the Republican's side. Knowing this the Republicans can defeat the bill and expect the Democrats to come back with another bill on the Republican's terms.

The Republicans in the Senate have stuck to their principles and I believe have indicated how they will deal with the new administration and their agenda.

The Democrats in the Senate are politically impotent while the Republicans have new found vigor.

Wednesday, December 10, 2008

Obama's Appointment of Stephen Chu is A Smart Move

From WSJ:

Chu shared the 1997 Nobel Prize in physics and is a former chairman of the physics department at Stanford University in California and head of the electronics research laboratory at Bell Labs.

The Lawrence Berkeley website said Chu was an early advocate for finding scientific solutions to climate change and had guided the laboratory on a new mission to become the world leader in alternative and renewable energy research, particularly the development of carbon-neutral sources of energy.

This isn't a big government approach. Lawerence Livermore is an innovation engine for US government and it will allow us to develop technologies useful for the government and eventually disperse the technology to the commercial arena.

Time for Obama to Get Rid of Axelrod and Emmanuel

It is time for Obama to show that he really meant that he was a different type of politician by letting go of Emmauel and Axelrod.

These two (and probably Obama) have close ties to the corrupt practices of Blagojevich.

From WSJ:
'The matter also highlights ties between the disgraced Democratic governor and some members of Mr. Obama's inner circle. His top campaign strategist, David Axelrod -- who will move to the White House for a senior adviser's job -- lists Mr. Blagojevich on his firm's Web site as one of his clients, when the politician was a candidate for Congress.

he Republican National Committee, however, circulated some of Mr. Obama's statements to the press on Tuesday, including a 2006 report indicating Mr. Obama said he would be happy to work for Mr. Blagojevich's 2006 re-election campaign, even though the Illinois governor was under investigation. "If the governor asks me to work on his behalf, I'll be happy to do it," a suburban Chicago newspaper quoted Mr. Obama as saying.

How can we be sure that Axelrod and Emmanuel won't bring their dirty ties to the White House and sully the new administration?

Blago, Axelrod, Obama - Oh My!

From the Politico. Obama is closer to Blago than most people think.

“The democratic process is often messy,” Axelrod wrote in the op-ed. “Diverse constituencies fight fiercely for their priorities. Their elected representatives use the influence they have to meet those needs, including sometimes the exchange of favors – consideration for jobs being just one.

Barack Obama’s message man David Axelrod once staked out a much more nuanced position on Fitzgerald’s anti-corruption crusade.

In a 2005 op-ed, Axelrod argued, in effect, that trading political favors – including jobs – is part of the grease that makes government work.

He ripped Fitzgerald at the time for trying “to use the criminal code to enforce (his) vision” of “entirely remov(ing) politics from government.”

Sunday, December 07, 2008

Obama's Stimulus Plan Is Short Term Oriented

From Michael Porter the Harvard Biz School Prof and a guru in competitive strategy.

Porter wrote that the U.S. economy has historically benefited from several great assets: an unparalleled environment for entrepreneurialism, a tremendous infrastructure for scientific research, the world’s best universities, a strong commitment to competition and free markets, decentralized regional economies, and efficient capital markets.

But, Porter continued, these advantages are starting to erode. The U.S. has an inadequate rate of reinvestment in science and technology. America’s confidence in free markets is waning. Lack of regulatory oversight has undermined capital markets. Universities have not sufficiently increased graduation rates. American workers do not have a credible safety net. Regulations and litigation have inflated the cost of business. Most important, there is no long-term economic strategy to organize responses to these problems.

Porter’s basic message was that President-elect Barack Obama should do nothing in the short term that doesn’t serve a long-term goal.

Saturday, December 06, 2008

Obama's Economic Team Will Fall Apart

There is a high probability that Obama's current economic team will not last for four years. There are philosophical differences and pragmatic tactics that they disagree with.

From Greg Mankiw:

What would you call a group of economists who are skeptical of regulating mortgage markets, who think unemployment insurance and unions increase unemployment, who say that tax hikes retard economic growth, and who believe that the recovery from the Great Depression was a monetary phenomenon rather than the result of New Deal fiscal policy?

No, it is not a right-wing cabal. It's Team Obama.

Friday, December 05, 2008

Problem with Obama's Infrastructure Spending

It is not effective and the opportunity costs are high.

From Greg Mankiw:

First, since most infrastructure is used locally, the proper level of spending is best determined by state and local governments rather than by the federal government. Earlier, I suggested that fiscal stimulus could be decentralized. Each state governor could be allowed to determine whether to take federal money as state aid or have it paid directly to his or her state's citizens as tax relief. I still think that makes sense.

Second, more public projects would pass a cost-benefit test if we repealed the Davis-Bacon Act. This law requires contractors on these public projects to pay "prevailing wages," which are typically union wages well in excess of what would occur in a free market. If the government paid market-determined wages for infrastructure projects, we could have both more infrastructure and less government debt. Without doubt, that legacy would benefit future generations.

Thursday, December 04, 2008

The Likes of Sen Shelby Will Hold the Line for Republicans

If Republicans can fall in line and challenge the democrats in the Senate, they will have a differentiating message for 2010.

By challenging government intervention and deficit spending they can prove to the electorate that they are the party of economic progress that is sustainable and will revive America's competitive stature in the world economy.

Sen Shelby had done a great job questioning the CEOs of the big three as to why the government should offer them a bridge loan.