Sunday, February 26, 2012

Why Barack Obama doesn't care that you're paying $5 a gallon for gasoline.

Because he doesn't pay for gasoline of course. But that's not it.

Despite his protestations to the contrary, Barack Obama thinks you're stupid. Gasoline prices are 90% higher today than they were when he took office and he wants you to think he has nothing to do with it. At the same time however he wants you to give him credit for the fact that imports make up the lowest percentage of US energy usage in years.

The President reminds me of the “Magic Grits” scene from My Cousin Vinny; where perhaps the laws of economics cease to exist on Obama’s watch. Unfortunately for America, they don’t.

It is accurate that American energy imports are down and production is up since Obama took office. Contrary to the President’s spin however, it’s in spite of his actions, not because of them. Last year oil production on state and private land (where the feds have less influence) was up by 14% and 12% respectively. On federal lands, you know, the ones that President Obama controls… down 11%. At the same time, during the last quarter of 2011, permitting for drilling in the Gulf fell off a cliff. Then of course there is the languishing economy that reduces demand for oil in the first place. Not to mention a mild winter and a surge of natural gas production, that is, again, overwhelmingly on private land. Add those things up and you simply have less demand overall and a smaller need for foreign oil

Now to gas prices. The single biggest factor in the price of gasoline in the United States is the cost of oil. Oil is denominated in dollars which means that when you print lots more money – as the fed has been doing with Obama cheerleading – the price of stuff denominated in dollars tends to increase. Then there is the unrest in the Middle East, a Saudi production cut and the increasing (but ever more slowly) demand from China and India. Why do these things matter? Because all of these factors tend to drive up the price of crude oil, and crude makes up about 76% of the price of a gallon of gasoline today, up from a historic average closer to 65%.

So back to the President. It’s higher oil prices that translate into higher gasoline prices – as opposed to the price gouging by Big Oil which is what the President would have you believe. Enraged, the President tells us he’s been working to bring down gas prices. How? His answer is to reduce demand for gasoline by pouring billions of taxpayer dollars into green energy boondoggles while simultaneously putting the brakes on exploration and development on federal lands. Oddly that strategy hasn’t worked. Prices are the highest they’ve ever been at this time of the year. Is it possible that our 4th best president failed Econ 101 and that this is all just a terrible mistake? Actually no. Just listen to candidate Obama from January 2008: “Under my plan, electricity rates would necessarily skyrocket”. So, it turns out he actually does know what he’s doing, only right now he's doing it with gasoline. He'll have you driving an electric brick within five years if it's the last thing he does!

Five dollar a gallon gasoline is the result of Barack Obama’s desire to have the American people foot the bill for his gullibility in the face of the global warming hoax. That is a key element in his long term goal: To join the likes of Alexander the Great, Julius Caesar, Napoleon, George Washington and others in the pantheon of great men on the stage of history. Not sure? Remember this: “This was the moment when the rise of the oceans began to slow and our planet began to heal”?

Of course the price you pay for his grandiosity is found in much more than just gasoline. Oil and energy play a role in virtually every aspect of the economy, from food to transportation to chemicals and virtually everything else, like stuff packaged in plastic, products made out of metal, commodities that need to be excavated or buildings that need to be heated. It may not be easy to see, but the price of oil and gasoline impact everything in the economy. As a result, just when consumers need a little more money in their pocket to spend, inflation is inching back up. Believe it or not, that’s just fine with President Obama.

Why? Polls tell the story. Despite the fact that gas prices are up 90% on his watch; despite the fact that there are millions fewer Americans working than when he took office; despite the fact that he’s added $5 trillion to the national debt in a mere 3 years, President Obama leads whoever the flavor of the week GOP candidate is in virtually every poll.

Unfortunately the electoral math is pretty simple. Fifty percent of Americans pay no income taxes. There are 2.1 million federal employees who love the fact that they earn average salary and benefits of $123,000 per year, double the civilian workforce. There are 14 million state and local employees, half of whom are teachers and many of whom are in unions making more than their civilian counterparts. None of these constituencies are particularly interested in getting rid of Barack Obama and potentially destabilizing their gravy trains. Add to that the fact that blacks (who make up 12% of the population) tend to vote Democrat at a 9 to 1 or more ratio regardless of the consequences and the idea that $5 gasoline will somehow undo Barack Obama is pretty hard to imagine.

The reality is that Barack Obama doesn’t need to get rid of $5 gasoline to become reelected. He simply needs to use it as a foil with which to pillory his opponents and demagogue corporate profits. At the end of the day $5 gasoline is not a net negative for Barack Obama. It allows him to play the populist advocate who is seeking to break the stranglehold big business in general and Big Oil in particular have on the American people. Populist messages sell, particularly to those who are warm and comfy in the swaddling clothes of government largess and who don’t want to be forced to stand up and venture out in the world and actually take care of themselves.

Monday, February 20, 2012

Rule of Man vs. Rule of Law - President Obama is a free man’s worst nightmare

The United States Constitution is a unique document. It is the foundation for how the federal government is structured and sets the basis for the relationship between the federal government, states and citizens. In what might be a surprise to most Americans, the Constitution does not confer rights on them. Their rights are bestowed by the Creator as detailed in the Declaration of Independence, the document that established the United States of America in the first place:
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed…
What the Constitution does is prohibits the government from infringing upon those rights. Nor does the Constitution articulate all of the rights that citizens have. The 9th Amendment of the Bill of Rights states as much very clearly:
The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.
What made the Constitution of the United States unique was the fact that for the first time in human history there was a written constitution that clearly defined the powers the national government had, and most importantly, clearly articulated the limits to that power.

Implicit in that Constitution is the concept called the Rule of Law. The 10th Amendment makes clear that the powers of the federal government are limited to those delegated in the document:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
And therein lies the problem. The United States is supposed to be a nation ruled by laws, not by men. As Hayek explains in The Road to Serfdom:
“Nothing distinguishes more clearly conditions in a free country from those in a country under arbitrary government than the observance in the former of the great principle know as the Rule of Law. Stripped of all technicalities, this means that government in all its actions is bound by rules fixed and announced beforehand — rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of this knowledge”
In other words, for a free country to exist, men’s actions must be taken in the presence of previously established, well defined and clearly articulated laws. Otherwise his every move will be taken under the threat of potential illegality, arbitrarily imposed at the whim of those who have accumulated the most power.

I cover this basic Constitutional information simply to contrast it with actual actions of the current occupant of the White House. Our Constitutional Professor in Chief is either ignorant of the Constitution or simply feels like it does not apply to him. Regardless of the cause, today in the United States we are very much moving towards a Rule of Man and away from the Rule of Law.

Really? Some examples please…

There is the takeover of Chrysler. In a typical bankruptcy the secured debtholders get first dibs on the company’s assets. That is the way the law is written and that is the basis upon which secured lending takes place. President Obama threw out the rule of law and coerced Chrysler’s secured debtholders into accepting $.29 on the dollar while paying his friends at the UAW $.40 on the dollar for their unsecured obligations, eventually giving them 55% of the company.

No doubt lenders will henceforth think twice about committing their resources to borrowers given the fact that government can come in and arbitrarily adjust their contracts.

Then there is the National Labor Relations Board. The NLRB made news last year by illegally seeking to decide for Boeing where it could invest its money. The lawlessness of the board didn’t fall far from the tree... This January, President Obama, seeking to circumvent the Senate’s advise and consent role appointed 4 people to the NLRB via recess appointments despite the Senate being in pro-forma session. Pro-forma session? Certainly that must mean that the Senate was not really in session so no actual business could be done, right? Actually… Not according to the President. Just the previous week he was so sure the pro-forma session was real that he signed into law the payroll tax extension bill that was passed during such as session. Either pro-forma sessions are in session, or not, but they can’t be both. It’s like being pregnant, one either is or isn’t, you can’t be both. This is a perfect example of Rule of Man vs. Rule of Law. Unfortunately for the United States the Rule of Obama supersedes the Constitution in that battle.

There are many others of course but the most egregious is of course Obamacare. The Constitution clearly does not give the federal government the right to force consumers to purchase anything; not healthcare not Twinkies, not tooth paste, not even green cars. Despite that, Obama and his Reid / Pelosi led Congress decided to pass a law that does just that – purchase health insurance. If Uncle Sam has the right to force you to purchase health insurance under the threat of jail, then the Constitution becomes nothing but a relic of a once great nation that was once governed by the Rule of Law.

President Obama is a free man’s worst nightmare. Even for those foolish enough to support his statist, redistributionist, green policies. Why? Because he is the epitome of the Rule of Man. Rule of Man simply means that the person in control of the mechanism of government can do whatever he wants to do, and while it’s exercised by your guy that’s great, but what about when someone you disagree with gets into the position of power? Without the Rule of Law to guide and constrain government actions, a nation will quickly devolve into a tyranny of men. Not sure about that? At the Constitution’s bicentennial a quarter century ago could you have imagined that the government could dictate what you must feed your kids for lunch, could require you to buy anything at all simply because you're alive or force churches to provide contraception or abortion benefits? I don’t think so.

Welcome to the Rule of Man. We’ve seen this play itself out before, where someone comes to power legitimately and then manipulates the rules to give themselves virtually unlimited power. That’s how Hitler did it. That’s how Chavez did it. That’s how Putin’s doing it again. Can you imagine a Barack Obama unfettered by the concerns of seeking a second term? One shudders to think…

Monday, February 6, 2012

An uninspiring Mitt Romney will impale the GOP and give Barack Obama 4 more years...

What is Mitt Romney doing in the Republican Party? (Although a better question might by why has the Republican Party strayed so far to the left that a guy like Mitt Romney could be its standard bearer…)

Everyone knows the story of Mitt Romney. He ran Bain Capital and financed a number of new businesses and helped rescue others. True, he and Bain failed a few times, but Bain Capital did what it was supposed to do, which is make money for its shareholders. At the end of the day Bain Capital was a net plus in that it actually produced prosperity (and jobs) for a significant number of people, and that accomplishment cannot be obviated simply because they could not rescue every firm they took a position in.

In 1994 Romney sought to unseat Ted Kennedy from the US Senate but lost as Kennedy pilloried him for lacking core (political) convictions. The fact that he had difficulty establishing a coherent message didn’t help. He lost badly. In 2002 he headed west to manage the Winter Olympics in Salt Lake City. By all accounts he did a tremendous job and accomplished the financial equivalent of a perfect game, making the Olympics profitable for the host city.

Then of course there was his stint as governor of one of the bluest states in the union, Massachusetts. Like Scott Brown, a Republican in Teddy Kennedy’s neighborhood can be expected to be a RINO, and Romney certainly fit the bill. On a variety of issues both social and economic Romney was… shall we say purple in his approach. But at the end of the day he was more conservative than his predecessor in one of America’s most liberal states.

Add to that the fact that he’s a good looking guy with a great family and he seems like a poster child for putting Barack Obama in the unemployment line. It’s claimed he’s the Republican who can deliver Massachusetts and other key states like as Pennsylvania, Florida and probably Ohio and Nevada.

The problem is, he won’t.

When conservatives stand by conservative ideals, when conservatives clearly and coherently articulate the conservative principles of limited government, fiscal restraint and low taxes, they win. Not sure? In the three Reagan elections (counting Bush-41 in ’88 as an extension of Reagan’s policies) the GOP garnered 54% of the popular vote and beat the Democrats by an average of 11.9%. Contrast that with the elections since Reagan, beginning with Bush 41’s second run. Over the course of those five elections, the GOP has garnered an average of 44.4% of the vote while the Democrats earned an average of 48.3%. The GOP went from an average of 11.9% ahead to an average deficit of 4.4%. That is a 15 point swing in the wrong direction. What’s the difference? Solid conservative vs. milquetoast moderate. Unfortunately Mittens Romney is an extension of that milquetoast strategy.

Ominously, while 2012 may be the most important American election in a century, the two candidates seeking the White House are not going to be particularly distinguishable to voters – if we assume Mittens gets the nomination. Everyone knows that Barack Obama is a statist with socialist & populist instincts. Romney, in slight contrast, may be a capitalist, but on government policy he’s not enormously different. He supported the government’s TARP bailouts of the banks, he regularly plays the populist card of middle class tax cuts while arguing for increasing taxes on the rich, and of course there is RomneyCare, his signature achievement in Massachusetts that was literally the blueprint for the thing he rails against at every whistle-stop event: ObamaCare. Then there is his 59 point tax plan which does little to streamline the tax code and of course penalizes those earning over $200,000 a year. Finally there is his bizarre suggestion last week that the minimum wage should be indexed to inflation, something even our Socialist in Chief has not suggested. (Is it possible that the financial genius Mitt has no clue about how actual economics work?)

At this critical time when the United States is so clearly heading down the road to perdition what the country needs is someone to stand up on the biggest soapbox he can find and sing the praises of the capitalist system and make a clear and articulate argument for small, constitutional, limited government. We need someone to inspire and challenge the American people to throw off the yoke of the nanny state and pick themselves up by their bootstraps and in doing so become the economic vanguard of the world once again. Unfortunately, what we get instead is a GOP candidate who is in many respects largely indistinguishable from his statist, redistributionist opponent.

There is an old saying that you can’t fight something with nothing. In the case of Mitt Romney the GOP is hoping to fight the omnipresent government type Obama with the slightly less onerous, big government type Romney. Conservatives despise Barack Obama and they would likely turn out to vote if the GOP were to trot out Mickey Mouse to run against him. They won’t require the GOP to light a fire under them to get them to the polls. The middle sea of “moderates” on the other hand won’t respond to nothing. If the mass of largely disengaged Americans who are not political junkies finds that there is little or nothing to distinguish the candidates from one another then they will likely remain on the sidelines and not bother to vote. In a tight race intensity is the key to success. As such, Romney is a losing candidate. As can be seen by the fervency of the not-Romney elements of the GOP, the anemic turnout in Florida and Romney’s canned speeches and uninspiring debate performances, Mitt Romney is incapable of stirring the animal spirits of the base, never mind the general public.

Barack Obama is salivating at the prospect of facing off against Mittens. Knowing that Romney is incapable of articulating or defending strong conservative principals or even inspiring his own party – never mind the muddling middle – Obama can do what he does best: demagogue Republicans (up and down the ticket) and inspire his base with populist platitudes that are like blood in the water to the left. The result will not only be another four years of Barack Obama, but it will likely mean something of a bloodbath in the down ticket races as well, from the House to the neighborhood dog catcher.

Mitt Romney may be the candidate who finally puts an end to a Republican Party that has outlived its usefulness and ushers in a truly conservative Tea Party driven party. One might wish that GOP good riddance. The only question is however, will the United States as we know it survive another four years of Barack Obama so that there’s something left for the Tea Party cavalry to come to the rescue of?