Conversation abounds as to the chances that we are moving out of the recession and on our way to a robust recovery. But the downer in these discussions is the continuing increase in unemployment rates and absence of any evidence of growth in job creation. No surprises here. As Robert Barro and Charles Redick remind us in their recent research, which tracks the GDP and job growth effects of stimulus inputs over the past century, there is no evidence of a so-called Keynesian “multiplier effect” from government spending stimuli, but plenty of evidence for the enhancement of growth from tax rate reductions. In fact, the available empirical evidence shows that government spending stimuli will likely increase GDP by less than the increase in the spending itself.
What else is new? Jean Baptiste Say illustrated the validity of this theory centuries ago, and the late Jude Wanniski elaborated on his supply-side laws thirty years ago in his writings which helped inspire the Reagan tax cuts. But the problem is not limited to high tax rates; it also involves other types of what Wanniski called “wedges”, which can include such things as increased regulation, property taxes, health care mandates, and other penalties on capital that constitute impediments to innovation and risk-taking. These wedges have a particular dampening impact on small business, which is primarily responsible for the innovation and entrepreneurship that produce the large majority of our job creation. And with the probability of a rollback of the Bush income tax rate cuts next year, this wedge phenomenon could get worse.
It is for this reason that we run the risk of a long, slow recovery with the probability of increased inflation and without robust growth. We have taken Federal Reserve monetary policy as far as it can go in stimulation; we had better wake up to the need for fiscal restraint and tax reduction to spur meaningful incentives to growth.
I have been harping on the misguided weak dollar policy of both the Bush and Obama administrations for well over a year, but I was struck by a recent article by David Malpass with this stunning revelation: “Measured in Euros, U. S. real per capita GDP is down 25% since 2000, while Germany’s is up 4%….” Likewise in Euro terms, the S&P index peaked at 1700 in 2000 and is now at 700.
If this doesn’t begin to get our attention, what will it take? This is simply stupid; current policy is undermining our competitiveness and destroying wealth while providing international holders of dollar-denominated assets every incentive to seek another alternative as the world’s reserve currency. It is also immoral. The height of fraud that can be perpetrated on a nation’s people is to debauch the currency. Yet this is clearly at work as we continue to monetize our debt, flood the market with dollars, undermine free trade, protect big labor union interests, and defraud our bondholders.
While we’re loading the Federal Reserve with all manner of additional responsibilities for policing “systemic risk” in the financial markets, let’s not forget that the primary job of the Fed is to maintain a strong and stable dollar–all else is secondary. In all of our “re-regulating”, we need a renewed Bretton Woods-type agreement among the G-20 nations that returns the tie of the dollar to gold backing.
“This is not a war of choice; this is a war of necessity. Those who attacked America on 9-11 are plotting to do so again…………..So this is not only a war worth fighting; this is fundamental to the defense of our people.”–President Barack Obama, speech to the Veterans of Foreign Wars, August 17, 2009.
Well, that was then. Now it appears that we are rethinking that bold commitment and conviction. For almost eight years, Afghanistan has been the “good war”, particularly for the left, and was used by Democrats as the abused policy stepchild for continuing criticism of Bush’s Iraq venture, even after the surge in Iraq turned defeat into victory. I’m not cynical by nature, but forgive me if it now appears that this “good war” rhetoric was never anything more than a facade for the true passion of the left to avoid any assertion of American military power. Now we hear that a re-evaluation of the strategy announced last March is being conducted before responding to the commanding general’s request for additional resources, including troops, to complete the mission. And what is the mission? I can’t remember hearing a clear answer from the Obama administration, particularly one that includes the word victory.
Professor Fouad Ajami reminds us that it was not Afghans who struck America on 9-11. It was Arabs, and their terrorism was informed by the pathologies of Arab and Muslim political life. Therefore, it was important to take the war into the Arab world. George W. Bush did this, not without a number of mistakes, but also with a number of important victories, and the key thing to remember is that this is a war with many fronts that must be waged over a protracted period of time with persistence, a trait not exactly one of America’s great virtues since the Vietnam experience.
President Obama is on the eve of a watershed policy decision. Success is absolutely necessary, but will require a sustained commitment of many more years, the implementation of which will require the best of his exquisite skills of eloquence in articulation in the face of a political base that will be a very difficult sale at best. He was correct in his August remarks to the VFW–any bets that he will reconfirm those convictions on the ground in the war zone?
No victory, no peace.
This bailout was of a different kind, and potentially much more serious. In meeting with Iran President Mahmoud Ahmadinejad’s representatives in Geneva, the U. S. and other major powers allowed his regime a legitimacy and rehabilitation that no amount of imagination could have perceived following the fraudulent June elections. President Obama characterized the talks as a “constructive beginning”. A beginning to what? And to what end? We’ve been talking to this regime for thirty years to no avail under conditions tantamount to a state of war perpetrated by them. This regime has no credibility, zip, nada, no grounds for trust in any form.
Now we have sold out the Czechs and the Poles on our commitment to a missile-defense security agreement in order to appease Russia and entice them to help put pressure on Iran. Result? Nyet! No less a hawk than French President Sarkozy was even shocked that Obama could be so naive, not to mention being insulted that he was forced to scratch his remarks before the UN Security Council on the revelation of an illegal uranium enrichment facility in Iran so that Obama could release the news the next day to the G-20 in Pittsburg and not have it serve as a “distraction” in his later remarks at the UN . You can’t make this stuff up.
This administration is obviously reconciled to the conclusion that a nuclear armed Iran is inevitable and can be contained much in the manner that the Soviet Union was contained during the Cold War. How utterly naive and misguided. How can Obama possibly not realize that he is pushing Israel into a direct strike on nuclear facilities in Iran? And does he believe that the U. S. would not be held almost entirely responsible for such a strike? How can he not realize that the asymmetrical threat posed by Iran is of a nature totally different from the symmetrical threat represented by the Soviet regime?
Israeli Prime Minister Netanyahu has made it clear that, for him, it is “1938″, and that there will be no second Holocaust on his watch. Methinks that he is dead serious and that there is not much time left to perform our duties as the world’s only superpower.
It’s pretty hard to grasp the massive cultural chasm between the Hollywood elites of the left and normal Americans as manifest in their respective reactions to the recent arrest and possible extradition of Roman Polanski to finally face his punishment for rape, sodomy, and other sexual abuse of a 13-year old in 1977. First, it’s unfathomable that there could be any debate at all about the propriety of returning him to face justice. You don’t even have to imagine the different standard that would apply to a Republican or conservative celebrity, not to mention a Catholic priest, the outrage about which would be off the charts. Just imagine Joe the plumber–it’s a no-brainer. But for the Neverland of fruits and nuts, the entire notion of holding one of their superstar creative icons to account for “a case of morals” and a “so-called crime” is beneath them. For, after all, according to film producer Harvey Weinstein, “Hollywood has the best moral compass because it has compassion.” A petition demanding Polanski’s release was signed by about one hundred of Hollywood’s best and brightest, many of the primary manufacturers of what passes as the world’s dominant cultural product. Can there be any wonder why we are so engulfed in a culture war?
A number of years ago I had the privilege of introducing Irving Kristol at a conference and spending some time with him discussing the issues of the day. He was one of my favorite essayists and intellectuals and I was a subscriber to his The Public Interest magazine until it ceased publication several years ago. He was, of course, a founding neo-conservative and the father of William Kristol, and received the Presidential Medal of Freedom from President George W. Bush in 2002.
Shortly after his death a couple of weeks ago, David Brooks captured some of his best thought as follows: “In responding to Dostoyevsky’s Antichrist who flaunted a banner that read ‘first make people prosperous, and then ask of them virtue’, Kristol argued that this sentiment was the great seduction of modern politics–to believe that problems that were essentially moral and civic could be solved by economic means. They can’t. Political problems, even many economic problems, are, at heart, ethical and cultural problems.” This thinking may be more relevant now than ever. RIP
Since she has retired from the world stage, I occasionally enjoy digging up some of my favorite nuggets from Margaret Thatcher, one of my heroes. This is from a 1981 speech:
For me, pragmatism is not enough. Nor is that fashionable word “consensus”. To me, consensus seems to be the process of abandoning all beliefs, principles, values and policies in search of something in which no one believes, but to which no one objects–the process of avoiding the very issues that have to be solved, merely because you cannot get agreement on the way ahead. What great cause would have been fought and won under the banner ‘I stand for consensus’?
The Nobel Peace Prize was announced shortly after the October edition of The Texas Pilgrim went to press, and a response simply could not wait until the next edition.
The Nobel Prize has now reached a new level of irrelevance in selecting Barack Obama, someone who has accomplished absolutely nothing to advance world peace, except, as Hillary Clinton reminded us several times during her campaign last year, “give a speech”. Of course, to the left, good intentions are all that ever matter in terms of human accomplishment, but the notion that expectations and hope should be added to the criteria for such an award makes it a complete joke. And from the response so far, even from several liberals, that is exactly how it is being received in many quarters.
The liberal internationalists who vote for such awards obviously have their own criteria for success in world affairs and, as evidenced by recent awardees–Arafat, Carter, Gore, et al–they clearly have little to do with leadership for the policies that will truly advance peace, properly understood. A candidate can also score points with this crowd by discrediting the priority of American interests and particularly the concept of American exceptionalism, while favoring endless dialogue with our enemies (preferably under UN supervision), serial arms control treaties, and other progressive priorities.
I share the view of commentator Juan Williams who said that the best reason he can surmise for the decision of the Nobel committee is that Europeans want further repudiation of the Bush presidency and its foreign policy, a sentiment that might also be applied to the Carter and Gore selections which occurred during the Bush administration.
What a sham, and a shame for a formerly venerable institution.