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Deconstructing Barack Obama, Part II

August 8, 2013 in Economics

By Daniel J. Mitchell

Daniel J. Mitchell

Yesterday, Part I of this series looked at what motivates Barack Obama. We reviewed a Kevin Williamson column that made a strong case that Obama is an ends-justifies-the-means statist.

Today, we’re going to look at the President’s approach to economic policy and we’ll focus on an article by my former debating partner, the great Richard Epstein.

And since Epstein and Obama were colleagues at the University of Chicago Law School, he has some insight into the President’s mind.

In a nutshell, Professor Epstein says “Obama’s Middle Class Malaise” is the predictable result of bad policy. And the bad policy exists because the President has no clue about economic policy.

…the president is using the bully pulpit to argue for redistributive, pro-regulatory, pro-union policies that he claims will serve the middle class. …The President, who has never worked a day in the private sector, has no systematic view of the way in which businesses operate or economies grow. He never starts a discussion by asking how the basic laws of supply and demand operate, and shows no faith that markets are the best mechanism for bringing these two forces into equilibrium. Because he does not understand rudimentary economics, he relies on anecdotes to make his argument.

I’m not sure whether I fully agree. I suspect Obama doesn’t understand anything about economics, but it’s possible that he does understand, but simply doesn’t care.

Epstein then makes an elementary point about the harmful impact of government intervention.

Unfortunately, our President rules out deregulation or lower taxes as a way to unleash productive forces in the country. Indeed, he is unable to grasp the simple point that the only engine of economic prosperity is an active market in which all parties benefit from voluntary exchange. Both taxes and regulation disrupt those exchanges, causing fewer exchanges to take place—and those which do occur have generated smaller gains than they should. The two-fold attraction of markets is that they foster better incentives for production as they lower administrative costs. Their comparative flexibility means that they have a capacity for self-correction that is lacking in a top-down regulatory framework that limits wages, prices, and the other conditions of voluntary exchange.

I particularly like his point about self-correction. I frequently explain in speeches that markets are filled with mistakes, but that at least there’s a big incentive to learn from those mistakes. With government, by contrast, mistakes get …read more

Source: OP-EDS

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No to War As an Entitlement in Syria — or Anywhere Else

August 8, 2013 in Economics

By Doug Bandow

Doug Bandow

Obama administration policy toward Syria is a slow train wreck. Unremitting pressure from war-minded elites is pushing President Barack Obama closer to military intervention in the bloody civil war. Yet getting involved would be a fool’s errand.

Nevertheless, America’s putative allies appear to believe that they are entitled to U.S. support. The president should disabuse them of this dangerous notion.

War should be a matter of necessity, not choice. Of course, the Sirens’ call of intervention usually promises quick and humane results. Alas, Americans seem to be constantly rediscovering that military operations rarely go as planned and the costs of conflict usually are far higher than expected.

When the much maligned “Vietnam Syndrome” ended in the 1980s, U.S. presidents again began marching off to war. But Ronald Reagan’s meddling in Lebanon’s civil war, Bill Clinton’s misadventures in Somalia and the Balkans, and George W. Bush’s invasion of Iraq and occupation of Afghanistan offer bloody reminders that war is not just another policy option.

There is no reason to believe that Syria would be any different. Indeed, that nation is distinctly unpromising for nation-building: a messy civil war with a weakened family dictatorship attempting to retain control of an artificial nation increasingly fractured along ethnic and sectarian lines. Even direct action to oust President Bashar al-Assad likely would not stop the killing. As in Iraq, the end of formal hostilities would only trigger the next round.

Yet Syrian insurgents and their supporters not only hope for Western aid. They expect it and are angry when Washington fails to act. Last August, reported the Washington Post, America “increasingly is being viewed with suspicion and resentment for its failure to offer little more than verbal encouragement to the revolutionaries.” One rebel spokesman said: “America will pay a price for this. America is going to lose the friendship of Syrians, and no one will trust them anymore. Already we don’t trust them at all.”

Individual rebels complained that the U.S. could have aided their cause and prevented battlefield victories by the government. Analysts warned that Washington was losing its opportunity to promote the emergence of a democratic and secular Syria.

Only limited humanitarian assistance followed, to the great frustration of the insurgents. In February the administration promised additional non-military aid. Secretary of State John Kerry called this “a significant steeping-up of the policy.” The insurgents did not agree.

Opposition leader Adib Shishakly complained to the Post that “We expected more, but hopefully this is …read more

Source: OP-EDS

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Obama Ignores Pernicious Effect of Fed Policies

August 8, 2013 in Economics

By James A. Dorn

James A. Dorn

When President Obama gave his recent address at Knox College, he lamented the dismal state of middle-income families, whose real incomes have been stagnant or falling. He promised new policies that would restore upward mobility and improve prospects for growth and employment.

However, he ignored the negative effects of the Federal Reserve’s unconventional monetary policies.

The Fed’s decision to hold its target interest rate near zero until at least mid-2015, and to continue quantitative easing until inflation reaches 2.5% and unemployment falls to 6.5%, is meant to stimulate investment and consumption.

According to Fed Chairman Ben Bernanke, “Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy.”

Current U.S. fiscal and monetary policies are myopic.”

In reality, the Fed’s ultra-low interest rate policy and QE have underpriced risk, distorted capital markets and had little impact on increasing economic growth and employment.

Bernanke’s “portfolio-balance approach” designed to boost asset prices and spending has worked for some, as seen by the rising stock market.

However, he has underestimated the negative effects, and President Obama has been silent. By holding the federal funds target rate at near zero since Dec. 16, 2008, and suppressing yields on U.S. government securities, the Fed has helped finance the large fiscal deficits while engaging in financial repression — that is, holding nominal interest rates so low that real after-tax interest rates turn negative.

In so doing, the Fed has hurt middle-class families and retirees who have saved for the future. They get virtually nothing on their lifetime savings while the Fed induces people to buy riskier junk bonds, stocks and commodities.

People may also decide to consume more, save less and borrow more for cars, homes and other goods.

By purchasing mortgage-backed securities (MBS) and allocating credit to the politically favored housing sector, the Fed is engaging in credit policy.

Moreover, by paying interest on excess reserves, the Fed has sterilized most of the massive increase in the monetary base (currency held by the public plus bank reserves).

Meanwhile, low interest rates have made banks less willing to make loans, especially to small businesses.

In a normal economy, under conventional monetary policy, increases in base money would be lent out and lead to a multiple increase in the monetary aggregates, boasting nominal income.

That has not happened under Bernanke’s unconventional policies.

The Fed’s biggest mistake has been to downplay the adverse consequences of its zero interest rate policy and …read more

Source: OP-EDS

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Books and Politics: The Zach Foster Interview

August 8, 2013 in Blogs

By Political Zach Foster

Before being interviewed on David Welch’s Blog Talk Radio show “Books and Politics,” Mr. Welch sat me down for a written interview (reprinted here with permission).

You can download the mp3 of the full interview It took nearly six months but I’ve finally booked a first ‘political commentator’ on my blog radio show. On the August 5th Books and Politics show I will interview Zach Foster who writes the popular and informative “Zach Foster Rants” blog and who is a highly respected political operative and commentator. The live interview is nearly a month away and I just couldn’t wait to find out what Zach has to say on some important issues so I persuaded him to do a ‘written interview’ in advance of his more comprehensive live interview on August 5th.

After reviewing his answers to my questions I’m glad I did and I’m quite sure everyone who reads the following will be thrilled to have a bit of advance notice of what to expect on the Books and Politics Show the first week of August. I hope you will all listen in the evening of August 5th at 7 p.m. California time for what will be a really great interview. And I hope you will be ready to call in with questions for a bright and uniquely experienced young man. The address for the Books and Politics Show is Don’t miss it! Meanwhile please enjoy the following interview:
1. Zach, you are the first ‘political commentator’ I’ve had an opportunity to interview so could you tell the listeners a little about yourself, your background, and what you’ve done to qualify as a political commentator?
My political experience started when I was very young. I was a “guerrilla activist” supporting my local Congressman, David Dreier, and through volunteering for him later I got my first taste of campaigning. I’ve worked on numerous campaigns—from city council-level to the federal level—and am involved with several political organizations. My greatest privilege was working in the Ron Paul 2012 campaign. I’ve also majored in Political Science at Cal Poly Pomona and Social Sciences at Citrus College. Between my education and field …read more


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Newsmax Op-Ed: Hold Obama Accountable for Benghazi Cover-up

August 8, 2013 in Politics & Elections

Did Hillary Clinton tell the truth? She appeared before the Senate Foreign Relations Committee in January and testified that she had no knowledge of a CIA gun-running operation in Benghazi. Clinton’s exact words were, ‘You’ll have to direct that question to the agency that ran the annex,’ and then she claimed that she did not know whether a gun-running operation was taking place.In March, The New York Times reported that the CIA has been involved with secret shipments of weapons to Syria for over a year: ‘The airlift, which began on a small scale in early 2012 and continued intermittently through last fall, expanded into a steady and much heavier flow late last year, the data shows. It has grown to include more than 160 military cargo flights by Jordanian, Saudi, and Qatari military-style cargo planes landing at Esenboga Airport near Ankara, and, to a lesser degree, at other Turkish and Jordanian airports.’ CNN now reports that at least 35 American agents were in Benghazi and the CIA is doing everything possible to prevent them from testifying to Congress.Did Clinton lie because the CIA program was classified? Is it OK to lie to Congress about classified programs?President Obama’s national intelligence director, James Clapper, lied to the Senate in March of this year when he testified that no American records were being collected by the NSA. He tried to explain his prevarication by saying that he responded in the least untruthful way he knew how because the program was classified.It is a felony to lie to Congress. Individuals who lie to Congress can receive five to 10 years in prison. I know of no exception for lying about classified programs.Clapper’s lie has seriously damaged the credibility of the intelligence community. The NSA initially claimed that terrorist plots were stymied by the suspicionless searches of phone records. However, on closer questioning, it admits that each of the foiled plots really began with other intelligence, not from information unique to searching American phone records.Even more important than the details of the spying scandal is whether or not officials from the executive branch will be allowed to lie to Congress without repercussions.Much has been made of the altered talking points in the aftermath of the Benghazi assassinations, but I think almost everyone has fallen for the president’s misdirection campaign. The altered talking points were never about trying to get anyone to believe that the …read more