Federal Reservations

Okay, we made up the word. But in medicine, as any physician knows, a blastoma is a malignancy of so-called precursor cells called blasts.  Should such an anomaly go untreated…well, let’s not go there.  Anyway, we decided to refer to any chronic economic conditions that threaten the health of our economy as econoblatomas, because of the real risk that they are precursors to a potential economic crisis; that is, they can spread.   What follows are what we call the Seven (there are, of course, others) Warning Signs of Econoblastoma.

1. The Euro – A default by any other name:

Greece will default on its debt, probably within the next 60 days.  They’re working on a plan that will allow the EU leaders to call it something else, but whenever lenders get taken to the cleaners by a borrower there has generally been a default.  Greece’s lenders (bond holders) are soon to be taken to the cleaners (again) so we’re about to see the first default in a Euro Zone country.  Now this Econoblastoma has been under treatment for a long time with, we’re sorry to say, poor results.  The prognosis is dire.

The reader will recall that over a year ago, the private bondholders who loaned money to Greece (based on fabricated economic assurances by the Greek government) were informed they would have to take a 20% haircut in order for Greece to meet its obligations.  Then last July the bondholders were told that 20% just wouldn’t do it, and that a 50% haircut would be required.  Now the bondholders are being told,  “fifty percent?” well, “that was okay for starters,” but it’s not nearly enough to treat this particular Econoblastoma.

No, it seems the cure for years of Greek profligacy will require that the holders of about  $206 billion in Greek bonds will have to swap them for bonds that will pay, upon maturity, 60% less.

And, oh yes, that maturity date will have to be strung out somewhat longer too. And, did we mention, Greece wants the interest rate they will have to pay to be reduced to something under 4%, like maybe 3.5%.  Now, that’s within 375 basis points of what the United States of America pays for its long bonds.  And, to complicate matters more, the private creditors are insisting that if they have to take a 60% haircut (or more) than it is only fair that the public bondholders (think European Central Bank) take the same haircut. “It would be outrageous if the ECB doesn’t take part as keeping their Greek bonds to maturity would allow them to make a profit, while everybody else is taking 70 percent (losses) or even more,” one source close to the talks said.  To complicate matters even more the ECB is demanding greater austerity commitments by Greece, many of whose elected officials are facing elections in the spring.

Now, the real concern isn’t about the fate of Greece.  After all, Greece’s entire GDP is about the size of one major American city.  The reason Greece is creating such heartburn throughout Europe and, yes, here in the United States, is that if the coming default get’s sloppy, as we believe is likely, an entire gaggle of EU countries could see their cost of borrowing go through the roof as Portugal is experiencing as we write this essay.  That’s why the EU is cobbling together the biggest “firewall” it can.  What does all of this mean?  It means that the recession into which Europe has really already descended could rapidly deteriorate into an economic depression and that would have severe implications for America given the importance of Europe as the leading destination for American exports.

2. Declining Job Creation

This is the symptom we most want to avoid. Job creation ticked up nicely at year’s end and that’s good.  Net job creation is a far more important indicator of economic recovery, or lack thereof, than the monthly unemployment claim data on which the media tends to focus.  People taking poor jobs or multiple jobs just to make ends meet, or people who just throw in the towel and stop looking may lower the claims for unemployment compensation in a given month, but it doesn’t tell us much about the health of the economy.  Job creation data, however, do.  According to the Bureau of Labor statistics, 2011 ended with 200,000 new jobs created in the month of December.  That was encouraging, but whether it can be sustained month after month is questionable.

According to economist Nouriel Roubini of New York University’s Stern School of Business and Chairman of Roubini Global Economics, US job growth is still too mediocre to make a dent in the overall unemployment rate and on labor income. The US needs to create at least 150,000 jobs per month on a consistent basis just to stabilize the unemployment rate. More than 40 percent of the unemployed are now long-term unemployed, which reduces their chances of ever regaining a decent job. Roubini also notes that firms are still trying to find ways to slash labor costs in order to stay competitive and grow their companies.

While the trend has been in the right direction, the average seasonally adjusted number of jobs created per month last year was below Roubini’s estimate of what it takes just to break even.  Monthly Job creation is, perhaps, the most critical measure of the economic health of the country. We’ll closely watch this indicator.

3. A Decline In US Exports

Our exporting industries are vital to the American economy, accounting for somewhere around 11% to 12% of our entire GDP.  We are the world’s leading trading nation although we import considerably more than we export.  Our goal, of course, is to sell more (abroad) than we buy.  While that is a goal we rarely achieve, a sustained net decline in exports will most certainly have a negative impact on the American economy.   As 2011 came to a close the United States was experiencing a decline in new orders for durable goods and that was probably a pretty reliable sign that Europe’s slowdown has begun to affect the U.S. economy.  While, overall, exports dropped 0.9%, exports to Europe fell more sharply — nearly six per cent. We believe Europe is in major trouble and the odds are that things will only get worse in the short to medium term, which will cut demand for American-made goods. Europe accounts for about 20% of all U.S. exports, so the mess in Europe (Euroblastoma #1 above) is also a mess for us. A decline in exports translates to a decline in US economic growth. Less production at factories and weaker revenue for U.S. companies obviously means a weaker US economy.

4.  More Quantitative Easing

Quantitative Easing is a euphemism for printing money in order to buy US debt, which, in turn, keeps the nation’s cost of borrowing down…at least temporarily.  When the Federal Reserve steps in and buys US debt at auction it creates what we think is pseudo demand for our debt.  Given the uncertainly about future demand for European sovereign debt, there may be no other place for bond holders to go, assuming they place a high priority on preservation of principle, so there may be no need for further Quantitative Easing.  There are three reasons to keep interest rates unrealistically low.  First, easy money generally stimulates an economy and our economy still needs plenty of stimulating (although not way the government chooses to stimulate the economy). Second, the government really can’t afford to pay higher interest rates on its debt and, finally, and somewhat cruelly, it forces almost everyone to take greater risks.  This causes generally conservative fixed income investors to turn to riskier equity investments, driving up the price of equities thereby generating an aura of wealth creation.  Unfortunately, our past experience with Quantitative Easing suggests that the price of commodities will also rise driving up the cost of many essentials.  Talk about Voodoo Economics.

5. Bond Vigilantes Turning the Tables On The Fed

The Fed doesn’t quite have the free hand many politicians think it has.  It is true that, so far, Quantitative Easing has created enough demand for our debt to keep down the government’s borrowing costs.  The ECB has been practicing it’s own version of Quantitative Easing in Europe and we’ve still seen great volatility in borrowing costs among troubled Euro Zone countries.  In other words, when bond purchasers dig in their collective heels and stay home when sovereign bond auctions take place, they send a sudden and drastic message.  They become bond vigilantes and they can and have forced up interest rates.

The United States has already had its debt downgraded by Standard & Poor’s, and should the bond vigilantes decide they deserve a greater return for the risk they take when lending to the United States the results could be catastrophic given the fragility of our economy.

For the time being, US Treasuries are a hot item with a $15 billion auction of Treasury Inflation-Protected Securities (TIPS) this month drawing the strongest demand in nearly a year even though yields on the notes average less than zero percent for the first time. Yields on all types of Treasuries are at or near record lows and, except for the 30-year bond, provide negative real returns net of the Consumer Price Index.  Given the paucity of fixed income alternatives, we do not see Bond Vigilantes lurking in the shadows, but it would be a very serious precursor of serious trouble ahead should they awaken from a long slumber.

6. A Decline in Consumer Spending

When all is said and done, if the American consumer won’t buy, the American economy won’t grow. The fourth quarter, which started out with a bang ended with a whimper, with December sales much weaker than expected.  The Wall Street Journal reported that sales all but stalled in December increasing only 0.1% from November.  December sales were driven by deep retailer discounts and the strong sales for the fourth quarter overall were a significant draw on consumer savings. Spending at retailers sagged each month as the quarter progressed.  It is expected that much of the first half of 2012 will see reduced spending as consumers replenish their savings.  A steep decline in consumer spending will be a severe blow to our recovery hopes, and the current politics of envy, whereby the Administration targets for tax increases the so-called 1.0% who happen to pay nearly 40% of all federal income taxes is, in our judgment, very ill-conceived.

7. Inflation

Conventional wisdom and generations of experience teaches that a surplus of money in the economy will, sooner or later, result in inflationary price increases.  Inflation, would, of course, torpedo any hope of economic recovery. Those on the left who advocate robust and muscular spending initiatives argue that we needn’t constrain government spending because the beast of inflation hasn’t raised its head.  That seems akin to a physician counseling a patient that there is no reason for him or her to stop smoking because there seems to be no evidence yet of lung cancer.  We would counsel such a patient to change doctors.

By Hal Gershowitz and Stephen Porter

Originally from Big Government

Just hours after winning the Florida primary, Mitt Romney let loose a potential gaffe that turned what should have been a rallying moment for Republican supporters into an uncomfortable position of having to defend the man that is likely to face Obama in the general election.

If taken out of context, which the media is very adept to doing, Romney’s comment, “I’m not concerned about the very poor” sounds heartless and indefensible. In fact, that is exactly how many conservative commentators reacted.

From a purely political position, the criticism is reasonable. Romney effectively handed Democrats a shiny set of brass-knuckles to use against, not only him, but the Republican Party in general as being out of touch with every day Americans. As NRO’s David Kahane put it, “In the Fight of the Century between the Apologetic Oligarch and the Tribune of the Folks, who do you think the fans will be rooting for?” In other words, Romney unwillingly played into the class-warfare meme that Obama has wrapped himself in.

Jonah Goldberg says there are risks with Romney because he has yet to show he has mastered the art of the “stump” even after close to decade of practice.

These are examples of criticism on the face of the issue. Other conservative commentators chose to hammer Romney on his acceptance of the welfare state, and no doubt relished at the opportunity to attack him before having to reluctantly support him in the general election. To this group, not only did Rommey make the mistake of choosing his words poorly, he also spoke of the welfare state as status-quo. Erick Erickson at Red State, and Mark Levin, are charging Romney of the same class-warfare tactics Obama and the Democrats use. Furthermore, from his choice of words Romney effectively endorsed poverty as a thing to be accepted instead of engineering ways for them to lift themselves up out of poverty. Alas, a New England, Rockefeller, Republican.

… Mitt Romney said he wasn’t concerned about the poor. The poor, after all, have food stamps and Medicaid. But don’t worry. If the safety net is broken, Patrician Mitt Romney will fix it so the poor can stay comfortably poor (E. Erickson).

In an environment such as politics, perception is key. After all, there is a saying that is usually applied to politicians “Once you learn to fake sincerity, the rest is easy.” So maybe Romney does have a sincerity problem. But if sincerity is faked, which it usually is, why bother to do it? After all we have a president totally comfortable faking sincerity, and one who took Rousseau’s thought “the more obscure and uncertain the cause, the greater the effect: the greater the number of idlers one could count in a family, the more illustrious it was held to be” and won the presidency with it.

Romney’s full comment was a little deeper than some of the reactions suggested.

I’m not concerned about the very poor. We have a safety net there. If it needs repair, I’ll fix it. I’m not concerned about the very rich. They’re doing just fine. I’m concerned about the very heart of America, the 90-95 percent of Americans who right now are struggling.

It isn’t my job or even my concern to defend Romney by putting a positive spin on his comments. However, his remark did not cause this conservative to react negatively. I heard what he was saying loud and clear. It isn’t the duty of a president, Congress, or state governments to pull people up out of poverty. In fact, one could argue convincingly when those things are tried, poverty increases and wealth declines. So what we do have in place is a safety net for those who are down. It isn’t a permanent residence, it’s an interim position. The focus should always be growth and capital. When the economy is well, so is America’s labor force.

The economy is the engine that drives mobility because as long as our economic system rewards success and punishes failure (such as life) no station in life is monolithic. There is nothing destined in America.

Mobility is not limited to the top-earning households. A study by economists at the Federal Reserve Bank of Minneapolis found that nearly half of the families in the lowest fifth of income earners in 2001 had moved up within six years. Over the same period, more than a third of those in the highest fifth of income-earners had moved down. Certainly, there are people such as Warren Buffett and Bill Gates who are ensconced in the top tier, but far more common are people who are rich for short periods.

Very well then, Romney’s concern shouldn’t be with the poor. His concern should be with those who help drive the economy. Those who buy and produce, start businesses, buy homes and cars and hire employees. With a growing economy comes a rising tide of activity. And it’s from this activity that allows the poor opportunities to pull themselves up out of poverty. For lack of better words, the horse really does come before the cart. Or better, a physician is only concerned with a patient insofar as he can help cure the aliment. That is Romney’s position. Conservatives would do well if they thought more and reacted less.

We can belly-ache and lash our faces from grief and despair over the plight of the poor, or we can actually do something about the conditions for which there are so many poor among us.

Originally from Big Government

On this day last year, I posted two charts that I developed using the Minneapolis Federal Reserve Bank’s interactive website.

Those two charts showed that the current recovery was very weak compared to the boom of the early 1980s.

But perhaps that was an unfair comparison. Maybe the Reagan recovery started strong and then hit a wall. Or maybe the Obama recovery was the economic equivalent of a late bloomer.

So let’s look at the same charts, but add an extra year of data. Does it make a difference?

Meh…not so much.

Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed.  Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.

Under Obama’s policies, by contrast, we’ve just barely gotten back to where we were when the recession began. Unlike past recessions, we haven’t enjoyed a strong bounce. And this means we haven’t recovered the output that was lost during the downturn.

This is a damning indictment of Obamanomics

Indeed, I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise Institute and the news pages of the Wall Street Journal.

Unfortunately, the jobs chart is probably even more discouraging. As you can see, employment is still far below where it started.

This is in stark contrast to the jobs boom during the Reagan years.

So what does this mean? How do we measure the human cost of the foregone growth and jobs that haven’t been created?

Writing in today’s Wall Street Journal, former Senator Phil Gramm and budgetary expert Mike Solon compare the current recovery to the post-war average as well as to what happened under Reagan.

If in this “recovery” our economy had grown and generated jobs at the average rate achieved following the 10 previous postwar recessions, GDP per person would be $4,528 higher and 13.7 million more Americans would be working today. …President Ronald Reagan’s policies ignited a recovery so powerful that if it were being repeated today, real per capita GDP would be $5,694 higher than it is now—an extra $22,776 for a family of four. Some 16.9 million more Americans would have jobs.

By the way, the Gramm-Solon column also addresses the argument that this recovery is anemic because the downturn was caused by a financial crisis. That’s certainly a reasonable argument, but they point out that Reagan had to deal with the damage caused by high inflation, which certainly wreaked havoc with parts of the financial system. They also compare today’s weak recovery to the boom that followed the financial crisis of 1907.

But I want to make a different point. As I’ve written before, Obama is not responsible for the current downturn. Yes, he was a Senator and he was part of the bipartisan consensus for easy money, Fannie/Freddie subsidies, bailout-fueled moral hazard, and a playing field tilted in favor of debt, but his share of the blame wouldn’t even merit an asterisk.

My problem with Obama is that he hasn’t fixed any of the problems. Instead, he has kept in place all of the bad policies – and in some cases made them worse. Indeed, I challenge anyone to identify a meaningful difference between the economic policy of Obama and the economic policy of Bush.

• Bush increased government spending. Obama has been increasing government spending.
• Bush adopted Keynesian “stimulus” policies. Obama adopted Keynesian “stimulus” policies.
• Bush bailed out politically connected companies. Obama has been bailing out politically connected companies.
• Bush supported the Fed’s easy-money policy. Obama has been supporting the Fed’s easy-money policy.
• Bush created a new healthcare entitlement. Obama created a new healthcare entitlement.
• Bush imposed costly new regulations on the financial sector. Obama imposed costly new regulations on the financial sector.

I could continue, but you probably get the  point. On economic issues, the only real difference is that Bush cut taxes and Obama is in favor of higher taxes. Though even that difference is somewhat overblown since Obama’s tax policies – up to this point – haven’t had a big impact on the overall tax burden (though that could change if his plans for higher tax rates ever go into effect).

This is why I always tell people not to pay attention to party labels. Bigger government doesn’t work, regardless of whether a politician is a Republican or Democrat. The problem isn’t Obamanomics, it’s Bushobamanomics. But since that’s a bit awkward, let’s just call it statism.

Originally from Big Government

Download Podcast | iTunes | Podcast Feed

On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the Fed’s interest rate announcement, the divided cultural experiences of America’s upper and lower class, and whether or not “the American way of life” still exists.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

U.S. Stocks Cheer Fed’s Rate Pledge
The New American Divide
Quiz: How Thick Is Your Bubble?

Follow Brad on Twitter
Follow Ben on Twitter
Follow Francis on Twitter

Subscribe to The Transom

The hosts and guests of Coffee and Markets speak only for ourselves, not any clients or employers.

Originally from Big Government

I’ve already bragged that the Cato Institute is America’s best think tank, highlighting the fact that we took the lead in battling against Obama’s faux stimulus at a time when many were dispirited and reluctant to fight big government.

I’m biased, of course, so I’ll understand if you discount what I say. But I hope you’ll agree that my colleagues have put together an excellent video response to the President’s state-of-the-union speech.

As part of my contribution to the video, beginning around 6:35, I debunk the President’s class-warfare tax agenda by citing IRS data from the 1980s to explain that higher tax rates don’t necessarily mean higher tax revenue.

After a night’s sleep, here are a few additional observations on the President’s remarks.

• I was disappointed, but not surprised, that he repeated the economically foolish assertion that Warren Buffett pays a lower tax rate than his secretary.
• I also was not surprised that he didn’t say much about jobs and the economy. These four charts show he doesn’t have much to brag about.
• It was also noteworthy that he didn’t spend much time talking about Obamacare, which suggests that White House pollsters understand that government-run healthcare isn’t very popular.
• It was equally revealing that he didn’t spend much time on the so-called income inequality issue. Redistribution was implicit in what he said, to be sure, but the Occupy-Wall-Street crowd is probably disappointed that he didn’t explicitly embrace their agenda. More evidence that the pollsters played a big role in this speech.
• I’m definitely not surprised that he talked about eliminating Osama bin Laden. Kudos to the Commander-in-Chief.
• I was amazed that he had the gall to say “no bailouts,” particularly given his support for TARP, the Dodd-Frank bailout bill, and the giveaway to GM and the auto unions. And if the GM bailout is supposed to be a success, I’d hate to see his definition of failure.
• And I was stunned that he could talk about the housing meltdown and mortgage crisis without mentioning the Federal Reserve, Fannie Mae, or Freddie Mac. Sort of like analyzing World War II and pretending Germany and Japan didn’t exist.

Since most of the previous observation are critical, I want to stress that I’m not being partisan. I also was disappointed in the Republican response. Was the GOP smart to showcase a governor who was part of the big-spending Bush Administration? Especially one who has said nice things about the value-added tax?

I even was a bit disappointed in Governor Daniels’ remarks. He focused a lot on means-testing for entitlements, but that’s the wrong way of reforming the programs. Such policies impose higher implicit marginal tax rates on people who save and invest during their working years.

If we’re going to reform entitlements, do it the right way.

Originally from Big Government

As I wrote in a post for Big Government this past Sunday, January 22, the Arizona’s legislature has decided once more to do the job the feds won’t do, and has launched its own investigation into Fast and Furious. And during an appearance on FOX NEWS this morning, Arizona House Speaker Andy Tobin explained why they’ve taken this step. He said that constituents were flooding their offices with questions about the gun-running operation, and he said one recurring question was, “You’re not waiting for the feds [to do something] are you?” He then said the answer to that question was “No.”

Said Tobin:

This is an incident that occurred on Arizona soil, with Arizona business owners, [where we lost] an Arizona agent (Border Patrol Agent Brian Terry), and quite frankly we felt it needed a lot more attention. We felt our citizens needed a place to go to share their stories. Maybe there’s more there. This was a failed program right from the start and I think the idea is to put more light on it.

Tobin explained that as he’s watched this story unfold, and learned about the tactics used in Fast and Furious, it just hasn’t made sense: “I’m from the family of a law enforcement officer and I don’t think that the process by which they were going was the direction in which we fight back on border security and drug infiltration.”

He went on to explain that the Arizona House has been disappointed in the way Eric Holder has handled things up till now, and added:

It doesn’t appear he had a grasp on it right from the beginning when the inquiries started coming in. And forgive me for being concerned when I hear that the federal government’s here and they’re here to help. [We’re] the state that had to pass S.B. 1070 so we could help secure our borders, and the fed sued us…we’ve lost millions of acres of forest land [to fires] because the feds won’t let us clean them, we’ve got a Navajo power plant that the EPA may close…I meant the list goes on and on.

Without ambiguity Tobin added:

The public deserves some answers and we can’t wait for the fed to give us some of those answers. So let’s put some light on it, let’s have some transparency in government. Let’s go ahead and bring some Arizona citizens in to testify and see where this leads us.

I’m all for what Tobin and the rest of his colleagues in the Arizona legislature are doing. It’s time to put some heat on the feds and see if Holder changes his story (again).

Originally from Big Government

A lot of attention has been drawn to the official White memo authored by economist Larry Summers that shows the Obama administration purposely hid costs of Obama’s healthcare legislation and his overall agenda. Ryan Lizza at The New Yorker released the full document.

Many have waded through the document and came to an obvious conclusion.

James Pethokoukis | The Enterprise Blog (see the analysis for each point).

1. The stimulus was about implementing the Obama agenda.

2. Team Obama knows these deficits are dangerous (although it has offered no long-term plan to deal with them).

3. Obamanomics was pricier than advertised.

4. Even Washington can only spend so much money so fast.

5. Liberals can complain about the stimulus having too many tax cuts, but even Team Obama thought more spending was unrealistic.

6. Team Obama wanted to use courts to force massive mortgage principal writedowns.

7. Team Obama thought a stimulus plan of more than $1 trillion would spook financial markets and send interest rates climbing.

8. Greg Mankiw, economic adviser to Mitt Romney, was dubious about the stimulus.

9. But the Fed was a stimulus enabler.

10. IPAB was there at the very beginning.

11. The financial crisis wasn’t just Wall Street’s fault.

The Politico

The president prided himself on honesty in his first budget proposal, including the real estimated costs of spending, but Obama later shifted his stance and approved the use of budget gimmickry, according to The New Yorker.

When his aides suggested in late 2009 that he should abandon the honest approach on estimated spending on disaster aid, for example, the president signed off, The New Yorker’s Ryan Lizza reports. Obama also approved of fanciful budget numbers on his signature health care legislation.

Pirate’s Cove follows Pethokoukis’s line of thinking in seeing that the economic stimulus was only partly orchestrated for the purpose of stimulating the economy. The rest was rewarding campaign contributors, cementing Obama’s progressive agenda while emboldening its advocates, and showed without a doubt that his administration was anything but “post-partisan.”

Originally from Big Government

As the Republican presidential hopefuls slug it out debate after debate, and sound bite after sound bite, and President Obama endlessly drones on from the sidelines with his mantra that the wealthy must pay their fair share (according to CBO and IRS data, the top 10% of households pay more than 70% of all federal income taxes and nearly 50% pay none) we are reminded of Sir Winston Churchill’s assessment of Democracy.  “It is,” he said, “the worst system there is except for all the others that have been tried.”

We believe the 2012 presidential election season, which really began last summer, is, as Sir Winston opined, the worst, but, we would hasten to add, also the best given the clear choices in direction the President on the left and the candidates on the right provide.  These are not the run-of-the-mill choices with which Americans are always presented at election time.  We are faced with truly transformative choices; choices that only a vibrant democracy could possibly provide.

President Obama represents a textbook example of one side of the Liberal/ Conservative divide. That is, collective equality versus individual liberty.  Domestically, President Obama is a strong proponent of a centrally managed, distributive economy and a muscular government forcefully asserting its regulatory authority over a wide swath of American business activity and personal life, greatly expanding its entitlement agenda and aggressively taxing (1) earned income (middle and upper), (2) capital and (3) returns on investment (dividends).  Perhaps, that’s the America to which a majority of Americans aspire.  We don’t think so.

As the nation watches and listens to the spectacle, which constitutes the race for the Republican nomination many spectators, especially among the Democratic left, are, we believe, misreading the edginess and the stridency of the on-going Republican free-for-all as a reflection of uniquely Republican temperament.  We beg to differ.

Recent polling data indicates that 87% of all Americans believe we will fall into another recession within the next two years, and nearly 75% of all Americans believe we are headed in the wrong direction.  Only six percent of the people approve of the job their national legislature is doing. These polls tell us that the electorate has a collective bad feeling about the economic outlook for the country, and that they feel that neither the Administration nor our Congress is taking us in the right direction.  Even more disturbing, a recent Gallup Poll finds that 50% of Americans believe that government has gotten too big and now represents an immediate threat to individual liberty. Gallup also finds that Americans, on average, believe that 51 cents of every dollar the government spends is wasted.

While the Republican debates are providing an impressive, indeed an exhaustive, array of positions and opinions that, at first blush, might seem a colossal free-for-all in the marketplace of ideas, Republicans are not the only voters watching and listening.  Independents and, not a few, disappointed Democrats are part of the surprisingly large viewing audiences these debates are attracting.  Some, no doubt, tune in to scoff at the verbal give and take of what is, essentially, political theater. Others representing that strong swath of voters described by the polling data referenced above tune in to ponder the conflicting messages to determine if they find greater comfort or confidence in what they hear from any of the these candidates compared to what they have been hearing and experiencing from Washington.

Among the Republicans, we have an array of candidates each of whom stresses his or her conservative credentials (they want to promote economic growth at home, reduce taxes on all Americans, and support our allies abroad) while also offering interesting and significant variations on the conservative agenda.  Their message is largely informed by the pervasive discomfiture poll after poll has begun to detect within the American body politic.

Mitt Romney is touted as the most electable of the Republican candidates.  Romney is clearly a man of substance (although he could have been sent into the fray from central casting). He has an impressive record of business success as CEO of Bain Capital, and has demonstrated substantial leadership skills.  He was drafted to rescue the failing and scandal-ridden Salt Lake City Olympics and swiftly and successfully turned around the mess the original organizers had left.  He was a successful Republican governor of one of the nation’s most liberal states.  His signature accomplishment, RomneyCare is also his biggest headache (no pun intended). While it can be argued that ObamaCare largely apes RomneyCare, Romney’s retort is that because it made sense for Massachusetts, doesn’t mean it should be imposed nationally.  He is pledged to repeal ObamaCare immediately upon entering the oval office.   The art of compromise was essential if he was to govern the democratically controlled Bay State, and his willingness to compromise and his skill at working a legislature made up largely of the political opposition has become an albatross he must carry as he fights for his party’s nomination.  Correctly or incorrectly, Romney (and Huntsman) are viewed as the most centrist of the Republican candidates, which may be a major plus in the general election, but which is a distinct negative in the fight to become their Party’s standard bearer.

Rick Santorum, whose campaign momentum has soared after fighting from single digits to a virtual draw with Romney in Iowa, has the wind at his back. He has been articulate and unequivocal on a wide range of issues.  He is an orthodox conservative, socially, fiscally (earmarks aside) and politically.  While all of the Republican candidates give the obligatory nod to being pro life, Santorum goes a step further. No exceptions! A zygote resulting from forcible rape must be allowed to develop to term.   It is the rapist who should be punished, he says, not the egg the rapist fertilized. Well, no one can argue over his pro-life bonafidies.

Ron Paul, a libertarian, who most liberals consider the archconservative among the Republican candidates is a crusader for individual liberty, as he believes the founding fathers intended when they crafted our Constitution.  He has, however, articulated a stand on a number of issues that would have made Abbie Hoffman stand up and cheer. Opium, cocaine, heroin, marijuana?  He explains that we got along for over 100 years without federal anti-drug laws, and nothing good has been accomplished since the feds stepped in. The feds should step out, he tells us.  Prostitution?  If it’s okay with the states, well, then, its okay.  Gay marriage? Why is that any of the Feds business? Don’t Ask, Don’t Tell? If a homosexual in the military is doing his or her job and not disrupting others, leave him or her alone. Abortion? Ron Paul strongly opposes abortion, but believes the issue is totally misplaced at the federal level.  He believes it is up to the individual states to allow or to abolish abortion.   He is a hard-money fiscal conservative who believes that paper money isn’t worth more than the paper on which it is printed if it isn’t backed by gold.  The supply of gold is, of course, fixed which places unrealistic limits on economic growth, accumulation of wealth and the funding of emergencies such as war and natural disasters.  Paul espouses not only a less expansive foreign policy, but also a policy tantamount to a retreat from history.

Newt Gingrich, after a somewhat poorly organized and sloppy beginning was catapulted to frontrunner status following a series of very impressive debate appearances. He has pledged to make firing Fed Chairman Ben Bernanke his first order of business upon assuming office, notwithstanding that the President has no authority to fire the Chairman of the Fed.  He is probably the best “idea man” in politics today, but has clearly been hobbled by an excess of overweight baggage.

Rick Perry presents a mixed message.  He has an impressive record as Governor of Texas.  Texas leads the nation in jobs creation, low taxes and strong economic growth.   He has shown a less conservative orthodoxy on immigration, offering in-state tuition to illegal immigrants, a practice frontrunner Romney refers to as providing a magnet that attracts illegal immigration. Perry also issued an executive directive (later withdrawn) making vaccinations for HPV mandatory for girls entering their teenage years.  He is smarter than his debate appearances would suggest, but he suffers from one too many “oops” moments.

Jon Huntsman, who has staked everything on a yet to materialize strong showing in New Hampshire, pledged in a recent debate, not to sign any “silly pledges”, a not-so-veiled, but risky rebuff to the anti-tax Norquist Pledge not to support any measure that raises any taxes.  His credentials as a successful business executive, a popular two-term governor and as a Chinese-speaking diplomat are impressive.  His ability, thus far, to inspire any sustained following or to gain any traction among Republican voters has, however, been less impressive.

Given the proportional allocation of delegates in the GOP nominating process, a decision on who will lead the Party seems a long way off.  That’s both a positive and a negative for the Republicans.  The seemingly endless energy, time and money the candidates are spending to diminish one another does little to advance the conservative cause.  The sooner the candidate cannibalization phase of the Republican selection process ends and the campaigns gets back to attacking the policies that have lavished trillions on programs and initiatives that have produced shamefully few, if any, positive results, the sooner the electorate can focus on the alternatives available to them through the 2012 election.  For the sake of the nation, the sooner, the better.

By Hal Gershowitz and Stephen Porter

Originally from Big Government

Forty-four of 46 Republican Senators vowed they would not approve “any consumer financial bureau director unless the agency was put under a five-member outside board, had its work checked periodically by bank examiners and had its budget approved by Congress rather than the Federal Reserve.”

So when Republicans refused to confirm the President’s nominee, Richard Cordray, to head the Consumer Financial Protection Bureau, America’s number one duffer shouldn’t have been surprised.

Senate Republicans maintained that voting down the nomination of Cordray had everything to do with the Dodd-Frank financial reform agency lacking oversight, and nothing to do with the candidate Obama chose to head it up. In other words, Republicans wanted to take consumer protection a step further than the President was willing to go, vowing that they’d agree to confirm a director, but not before additional consumer safeguards and supervision are put in place.

As for Obama’s nominee Richard Cordray, besides being the former Attorney General of the state of Ohio and acting as chief enforcement officer at the Consumer Financial Protection Bureau for the last year, Cordray is a five-time undefeated Jeopardy champion. Which may be why, when chiding Republicans for blocking his appointment, the President kept mentioning game playing.

According to Barack Obama, champion Jeopardy player Cordray has the expertise to “protect American families from being taken advantage of by mortgage lenders, payday lenders and debt collectors.”

After his pick was rejected, posing a few questions of his own, an irritated Barack Obama wanted to know if “Republicans in Congress think our financial crisis was caused by too much oversight of mortgage lenders or debt collectors?”

Apparently not, because “What was the attempt by the Bush administration to set up an overhaul agency within the Treasury Department to supervise Fannie Mae and Freddie Mac?” would have been one of the correct responses for the Jeopardy answer “Busting the housing bubble.”

At the time, a report by outside investigators “concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae [did] not adequately hedge against rising interest rates.”

Minor details like those do not stop President Obama from continuing to attribute three-plus years of his own economic failure to GW Bush, a man who saw it coming and sincerely attempted to head it off, but was thwarted by Barack Obama’s Democrats.

In response to the GOP filibustering Cordray’s nomination, leaving him “7 shy of the 60 votes needed to get a final confirmation vote,” the President indignantly defended his pick, saying, “Financial institutions have plenty of high-powered lawyers and lobbyists looking out for them. It’s time consumers had someone on their side.”

‘Potent Potables’ aside, is Obama referring to consumer protection watchdogs such as Maxine Waters (D-CA) who, when referring to Fannie Mae, claimed Bush was trying to “fix something that wasn’t broke,” or push-for-homeownership Democrats like Barney Frank (D-MA), who promised that we wouldn’t “see the collapse that you see when people talk about a bubble?”

Is that the kind of protection the president hopes to establish on behalf of the American consumer?

Either way, Barack Obama vowed he would not back down on Jeopardy champ Cordray’s appointment, and prior to Christmas Obama simply refused to “take ‘no’ for an answer.” Just as he did on immigration reform, the President let it be known that he’d be open to “bypass Congress and change things on [his] own” and “circumvent Congress and seat Cordray as a recess appointment.”

If nothing else, Barack Obama is really proving to be a man of his word, because that is exactly what he did. He used recess appointment powers to install Cordray as head the Consumer Financial Protection Bureau.  One small problem: the “recess appointment” was made when the Senate was still in session.

Senate Minority Leader Mitch McConnell (R- KY) said that “Although the Senate is not in recess, President Obama, in an unprecedented move, has arrogantly circumvented the American people.”

For the White House, this is not a problem, and it continues to soldier on, arguing that “Republican senators have been stonewalling his nominees for so long that Mr. Obama had no choice but to circumvent them.”  President Obama called the “Senate Republicans’ ongoing blockade of his nomination ‘inexcusable.’”

Prior to leaving for Oahu, right before Congress agreed to a temporary payroll tax extension contingent upon a “Republican-written provision compelling [Obama] to make a speedy decision on whether to build the [Keystone] pipeline,” the President said that what goes on in the game of politics “cannot be about who wins and loses in Washington.”

Yet to prove how much he wants to be the one seated in the ‘Winner’s Circle,’ one day after returning from Hawaii to DC, against the wishes of Republican lawmakers and in opposition to his own Justice Department, Obama flagrantly cheated at the game he was just talking about prior to going to Hawaii by appointing Mr. Cordray to oversee consumer concerns.

In the run-up to the 2012 election, champion game-player Barack Obama is attempting to send a message to America that he cannot be stymied by an unreasonable Congress, and that any “inexcusable” attempt on his part to outwit the balance of power and neuter the American Constitution is purely a concerned President working on behalf of the American people.

By flouting established precedent in what House Speaker John A. Boehner (R-OH) called an “unconstitutional power grab,” once again Barack Obama is the one who has put the nation in jeopardy with another renegade decision that, according to Boehner, could have a “devastating effect on the checks and balances that are enshrined in our Constitution.”

Originally from Big Government

Senate Republicans have been holding up the confirmation of Richard Cordray to head the new Consumer Financial Protection Bureau until changes to the agency’s structure are made to provide oversight and accountability at the agency. But sources from inside the Capitol tell Capitol Confidential that a recess appointment of Richard Cordray to head the unconstitutional CFPB could come as early as tomorrow.

“We have been hearing consistently from the Senate offices that the President is considering a recess appointment of Richard Cordray along with a slew of other controversial nominees in the brief period between the two sessions of Congress,” a key Senate source said. “Now we are hearing from Senior Democrat staffers that something big is coming tomorrow [Jan 4].”

Article II, Section 2 of the Constitution provides the president with the power to “fill up all Vacancies that may happen during the Recess of the Senate.” The problem for the president and his liberal allies is that the Senate has not recessed and technically remains in session. However, liberal groups are pressing the White House to invoke the “Roosevelt Option” to stack key government positions with radicals ready to carry out an anti-business, pro-big labor regulatory agenda. The Roosevelt Option is coined from the actions of Teddy Roosevelt who in 1903, in a split-second between two congressional sessions of Congress, made more than 100 recess appointments. In 2012, Congress will need to move from the First Session of this current Congress to the Second Session. Liberals claim the fraction of a second between the sessions is enough to trigger presidential power.

Others are more brazenly calling for the president to invoke presidential powers never before contemplated. Some have even suggested the president declare the Congress in recess, like a tinhorn dictator from a Third World country.

But even invoking the so-called “Roosevelt Option” may not solve the liberals’ conundrum. Sources tell Capitol Confidential that the statute creating the CFPB demands that the director be confirmed by the Senate—not installed via recess appointment—to trigger the agency’s shift from Treasury to the Fed and empower the Director.

But none of the legal or constitutional arguments may matter much. Liberals and the Obama administration appear poised to forge ahead with an outrageous and unconstitutional power grab. And by the time the courts work it out, so much damage will already be done.

So, let’s be clear about what is happening here: The President of the United States is planning to use an obscure precedent to claim that a split second in time empowers him to go around Congress to appoint a director to an agency that has broad unchecked, almost dictatorial powers to regulate business in America with little or no oversight from the peoples’ representatives in Congress.

Such actions by the president would be an open declaration of war on constitutional principles and completely undermine our system of checks and balances. These kinds of power grabs are exactly how Banana Republics are born.

Originally from Big Government