Government Largess Can't Keep Economic Blood From Spilling - Particularly With Petty Fascist Autocrats in Charge

The stock market, after dropping 35% from its all time high on February 19^th sits today up about 30% from its March 23 low.  Overall the S&P 500 is down a mere 14% from its apex.  Everything being equal, things must be pretty good…

Not so much.  Although the world is slowly thawing from its government imposed freeze, the truth is far less sanguine than the stock market might suggest, i.e. that this Coronavirus scare was just a minor speedbump on our economic march to prosperity and beyond…

The reality is far darker, and the only reason that’s not readily apparent is that the federal government and the fed have poured $10 trillion or so into our economy via direct payments, loans, bonds and guarantees and governments around the world have taken similar steps. 

The fact that 30 million Americans today find themselves out of work will not be quickly fixed.  Jobs are not the kinds of things you can simply switch on and off… at least not in a capitalist economy. Businesses create jobs by trying to meet market demands in hope of earning a profit.  The Coronavirus shutdown has obliterated that entire dynamic.   

Restaurants are possibly the best resource to look to in order to get a picture of what the future holds.  Why?  Because restaurants are among the most entrepreneurial aspects of the American economy and they employ fully 10% of American workers.  There are about 1,000,000 restaurants in the United States and 13,000 more open each year, while a similar number close annually.  Of those million restaurants, 70% are single unit operations, 90% employ fewer than 50 employees and 6 in 10 adults have worked in a restaurant.

So what do restaurants tell us about the future?  It doesn’t look good…

Imagine you own a restaurant.  Not a fast food chain restaurant where 70% or more of the business was drive thru even before Coronavirus hit, but a restaurant where patrons come in, look at a menu, give their orders to a waiter and then eat on the premises. 

You’ve been largely idled for much of the last two months.  You might have been able to retool a bit in order to serve some take out or delivery orders, but odds are you simply closed.

Over the years you’ve adjusted your floorplan, you’ve tweaked your menu and you’ve trained your employees to upsell everything from wine and add ons to desert and cappuccino.  All for a business that probably gives you a 3-5% net profit or twice that if you’re lucky. 

Now you’ve been closed for two months and you’re wondering where you go from here.  Even if you laid off your staff so they could collect unemployment, you were probably still paying (or trying to…) your rent, pest control, outstanding invoices and making payments on the debts you incurred to open the restaurant in the first place. If you didn’t make the payments, they didn’t just disappear; they accumulated and will be waiting to be paid once you open back up. 

Now you find yourself in a quandary.  The governor has said that you can reopen, but in doing so you must take into account social distancing, i.e. your restaurant can only operate with 25% or 50% of the customer capacity.  That means that other than less labor and food, your restaurant has to operate with outlays almost exactly where they were before the virus, but do so with only half or less of the customers and revenue, plus now there are added costs of masks, extensive cleaning operations and perhaps even disposable silverware!  For most restaurants, that’s a money losing proposition.  Even if to-go business were to pick up, there’s little chance that the additional revenue would make up for that lost business.

More important than the revenue, is the margin.  Dine in restaurants make big profits on alcohol, sodas, coffee and desserts, all things that take out customers are less likely to buy than dine in customers.

Adding to all of that, your employees, who are collecting state unemployment plus $600 a week from the federal government, are now earning twice what they earn while working for you, and may well do so for months to come.  Given the economics, many will decline the opportunity to return and lose half the income they’re currently making, which generates pressure on you to offer higher wages.  So now your formerly relatively robust 5% profit margin restaurant business has transformed into a money losing albatross. 

How can one stay in business with numbers like that?  You can’t of course… And that’s the math quandary facing businesses across the country, and of course it’s not just restaurants.  It’s hair stylists and barber shops.  It’s nail salons and massage parlors.  It’s karate classes and dance instructors.  It’s accountants and business consultants.  Its gyms and movie theaters and many other businesses.   And don’t be surprised if schools, churches, hospitals, and government agencies don’t pile on.  Sure, those aren’t businesses, but they are all buy substantial goods and services from businesses…

All of this is particularly important for small businesses because unlike big businesses who often can tap into debt or equity markets, small businesses often face high hurdles when it comes to financing.  And, small businesses (as defined by the SBA as those with under 500 employees) are the lifeblood of the American economy.  They make up 99% of all businesses, employ half the workforce, and generate 70% of all new jobs.  And they are the ones most likely to have been sidelined by this lockdown and will have the most difficult time emerging. 

While government loans and guarantees are helpful, they can’t replace customers who are not there.  They can’t replace demand that has evaporated.  They can’t keep a business in business… and they can’t do any of that for any sustained period of time.  If printing money was the solution to this problem the Weimar Republic and Zimbabwe would be poster children for growth and prosperity.

Hence the divergence of the markets and main street.  Government largesse may work in the short run to keep the markets calm and the breadlines from forming, but it’s no recipe for prosperity or even economic growth.  Indeed, big businesses aren’t doing that badly under the current plan because they have legions of lobbyists who can ensure that they successfully navigate the restrictions and find the nuggets in the fine print of outlays, and Wall Street can see that.  But on Main Street, Adam Smith is coming, and he’s bringing Hell with him…

At the end of the day, all businesses depend on customers.  Customers spend money they’ve saved, earned or borrowed.  The first will eventually run out, the second can’t happen without a job and the third will soon be limited to those with pristine credit scores.  The Coronavirus lockdowns and government restrictions haven’t just killed the world's most prosperous economy since World War II, they have kneecapped the basic premise of free markets, that customers are free to buy what they want and sellers are free to sell their goods and services however they see fit.  True, we were hardly a free market before all of this, but now with government edicts about when you can open, what you can sell and how many customers you can have, we’re far closer to Karl Marx than Mr. Smith. 

There will be economic blood in the streets as America realizes that prosperity and economic growth can’t be dictated by government and that in most cases government action is a hindrance to both.  Prosperity requires entrepreneurs who are willing to risk their sweat and treasure to build something in pursuit of profit.  Economic growth requires markets that match consumer demands with businesses who can meet them.  Lockdowns and government edicts hinder both and the longer they go on and the more restrictive they are the more carnage there will be.  Business failures.  Bankruptcies.  Loan, mortgage and credit card defaults.  Tens of millions of Americans who can't find work.  And those are just the things you’ll see.  Imagine the new companies that won’t ever get out of the starting blocks.  The jobs that won’t be created.  The demand that’s simply not there…

Wall Street might imagine this Coronavirus disaster (the lockdowns, not the virus) is just a bump in the road, but it’s not.  It’s a cliff that we’ve been pushed off of, or more accurately, jumped off without much of a fight.  And it looks like the bottom below is littered with jagged rocks and glass.  Sadly we're not Road Runner in a cartoon where we can simply turn around in midair and run back onto solid ground.  It appears that we've become Wiley E. Coyote.  History will not look back favorably on the petty fascist autocrats and their delicate snowflake supporters who used a marginally dangerous virus in their march to undermine capitalism and decimate freedom and prosperity.  

Coronavirus may well become a disaster of historic proportions, but probably not in the way you imagine...

Today, on the 6^th of April, 2020 the national death toll from Coronavirus is sitting at approximately 10,500.  My guess is that we're probably less than a week away from the oft discussed apex of the curve and whenever the end of this virus pandemic is eventually declared, the country will have suffered fewer than 50,000 deaths, possibly far fewer.  I could be wrong on both counts of course, and perhaps by a lot… but we’ll have to wait and see.

There are two questions that are resonating in my head about when this unprecedented overreaction is finally over.  The first is the economy.  How long will the economy take to rebound?  On the one hand, 60% of the economy is still functioning…  Supermarkets, hospitals, police stations, restaurants – of the take out or delivery variety – Facebook, Google, Amazon, Netflix, UPS, the military, gas stations, lawn maintenance, construction and many more pieces.  Nonetheless, a lot things are idled:  Gyms, movie theaters, schools, churches, dine in restaurants, countless small businesses, everything wedding related, the NBA, MLB, Golf, NASCAR and many other pieces.  Every one of those shuttered businesses, and many of those still functioning have a long list of suppliers - of both the service and goods variety - who have been impacted by this shutdown. Some of the businesses who have found themselves shuttered will never reopen.  Those that reopen will likely find challenges getting back on their game, not only from the perspective of the ramp up in demand from customers, but simple logistics and figuring out how to get their supplier pipelines moving as well. 

Whatever is the case, the economy will come back, and given the combination of government largesse and pent up demand, there could be a short term surge in many areas as people leap out of their homes and dash into coffee shops, restaurants and possibly stores.  The question is however, how long will it take to ramp back up to the point where we return to the trajectory we were on the end of 2019 and a $22 trillion economy, and what will that economy look like?

That last point brings me to the second of my questions… and the far more important one.  What will the economy and the country look like?  After Uncle Sam injects $2.2 trillion into the economy and the Fed greases the wheels to the tune of twice that, what will come of the free market?

Assuming that the economy doesn’t do a complete face plant, which I don’t expect but is a realistic possibility, Keynesians and progressives of all stripes are going to assert that if stimulus works during an emergency, we should use it – including guaranteed universal income – all the time.  Taxes could easily be raised on millionaires and billionaires to cover any outlays and the stimulated spending by the working class would help drive the economy.

Those faulty economics and their inflation and stagnation inducing polices are not even the biggest concern for the nation!  The real concern is that this staggering overreaction will have set a precedent.  Without a serious, demonstrated threat to the wellbeing of the nation as a whole, going only with models that predicted millions of dead, governments across the country have essentially quarantined more than 80% of the American population and 100% in the largest metro areas. 

Months or years from now, when history shows us that the Americans were basically quarantined, $10 trillion of stock market value was wiped out and trillions of dollars of economic activity evaporated almost overnight because of a virus that ended up taking fewer than 50,000 lives, what will politicians, activists and the media do for something like global warming, which we’re told for certain will cost the lives of tens of millions of people around the world?  Or how about the next Chinese virus?  I can hear the argument now:  “Covid 19 only killed 50,000 people BECAUSE of the lockdowns… This new XYZ virus is even more virulent and we need to do the same thing otherwise tens of millions of Americans will be dead within a month.”  Lockdown!  Shut down the economy.  Close schools, theaters and every other meeting place!  Churches too!  And churches that refuse refuse to comply with service cessation orders? Close them!  First Amendment be damned! 

Nor will it necessarily be a virus that causes the next lockdown(s).  How many times have we heard that the carnage from murder in cities like Baltimore or Chicago is an emergency or a crisis?  How much resistance would there be to mayors or governors deciding that they have the power to supersede the Constitution to deal with their “crisis”?  And pointing to the Covid 19 precedent as proof that they have the authority.  Second Amendment be damned! 

No longer will science have to prove that something is an actual threat to humanity or Americans or even a city or town in order for the government to mandate anything.  From forcing employers to hire certain workers, to compelling companies to make these or those products, from seizing assets to  coercing citizens to curtail activities protected by the Constitution… where does the line get drawn?  Make no mistake, precedent can be a bear, particularly in the hands of progressives who seek to use the power of government to undermine the individual rights of virtually every American, except of course, criminals.

Coronavirus may well turn out to be a disaster of epic proportions, but probably not in the way you imagine.  It very well may be the nose that allows the progressive camel of tyranny into the tent under which the American experiment flourished for so long.  And once the likes of Nancy Pelosi, Ralph Northam, Bill de Blasio and the rest of the progressive fascists on the left take control freedom as we understand it and the Constitution as a functioning document will be but mere memories.  “Constitution? Federalism? Individual liberty? Free markets?  Sorry, we’re temporarily suspending them… We’ve got a crisis to deal with!” 

The coming Armageddon - Donald Trump may be the match, but the GOP set the kindling...

Absent a political earthquake, Donald Trump will be the GOP’s nominee for President of the United States. It is possible that he won’t, but the odds are long. His nomination will set the nation on a disastrous course that is only partly – and a small part at that – of his making.

When Donald Trump wins the nomination the $2 billion of free media he has received thus far will turn against him. If Mittens Romney thought he was portrayed as a monster just wait until the lefty media gets done with the Dean of Trump University. It will be an unmitigated bloodbath. And, frankly, it doesn’t matter who shows up on the left. Whether it’s Hillary Clinton or, in the event she’s already been indicted, Bernie Sanders, it won’t matter. Left is left is left.

During the general campaign there will likely be riots across the country as socialists, Communists, anarchists and every other faction of the Democrat Party seek to eviscerate Donald Trump’s 1st Amendment rights. But unlike the 1968 riots which resulted in a decisive Nixon victory, 2016 will see the party of the rioters win, decisively. And they are likely to take the Senate with them and possibly the House.

From there things will go south… rapidly. Not only will there be no wall built, but the US southern border will basically disappear as the United States of America evolves into the United States of Latin America, just another failed state. The façade of budget restraint the GOP has been pretending to impose will be gone. Government spending will rocket beyond a quarter of GDP within a few years and keep growing beyond that. Taxes will become more complex as they rise precipitously. Regulation will strangle free markets. And China and Russia will assert themselves even more than they have against the obsequious Barack Obama. ISIS will thrive and will find greater success here at home. The American military will become a full blown social experiment and social program all rolled into one. And of course, political speech – at least the kind that utters anything against the regime or against global warming or for traditional marriage – will be essentially outlawed while political correctness will become the order of the day in schools, churches, offices and everywhere else, enforced by thugs empowered by an approving government…. And then to top it all off, regulations driven by the global warming hoax and socialist hubris will devastate the American economy, sending investment and jobs beyond our borders as government policies drag the world into a 2nd Great Depression, just as they did a century before.

And there won’t be a thing the GOP can do about it. Why? Because the party will be gone. Like a zombie its body may be around for a little while, but it will be gone. Conservatives, fed up with a quarter century of the GOP being nothing more than an extension of the Democrat party will bolt. The energy of the Tea Party from early on in the Obama presidency will rise like a Phoenix and will be far larger this time. Not only will it include conservatives, but it will include many – not all – of the Trump supporters who are angry and feel disenfranchised and marginalized by government and have been told their outsiders in their own county.

And make no mistake, as bad as things have gotten under an Obama with a supplicant GOP, they will only get worse under a Democrat president without even a faux opposition. And that means in every way… economically, militarily, culturally and perhaps most importantly, politically – in terms of how citizens deal with one another, particularly those with whom they disagree with.

It will take years for the Tea Party / marginalized citizen party to find its footing and make its mark as it will have to fight the GOP zombies who won’t have yet realized their party is dead. The question is, by the time the new entity finds its legs will the county have become Venezuela? Will there be an actual revolution between those who see that a bloated, unrestrained, rapacious government has become an enemy of freedom against those who see the redistributive and regulatory happy government as the central element of their lives? Or will it be possible to recover Benjamin Franklin’s Republic through Constitutional means? That’s a good question, because a Constitution is only as strong as the character of the citizens sworn to protect and defend it, and with Barack Obama we’ve only begun to see exactly what can happen when a man of the left – read anti-American – is given that duty.

The Cult of Liberalism

Religions are largely kept together by the faith of the followers as opposed to proof. Whether it’s Christianity, Judaism, Islam or any other religion, it’s not science or empirical evidence that keeps millions or billions of people believing, it’s faith. Indeed, religions are full of claims that our current scientific knowledge would say are impossible, but nonetheless, faith persists. Given horrific events that seem to fly in the face of what one would expect from a compassionate or just God, faith still persists. Believers believe, and they interpret events in their lives and the world in a way that comports with their religion. At the end of the day, religion is about faith, period.

By the above measure, liberalism is a religion. How else would it be possible that in the face of a history of demonstrable failure that there are those who continue to believe? Liberalism, in the form of outright Communism failed miserably everywhere from the Soviet Union to Cuba and a multitude of places in between. Yet the faith remains. Liberalism in the form of socialism has failed miserably across Europe as practically the entire continent is floundering in mounting debt, double digit unemployment and depressingly low growth rates. Yet the faith remains. Liberalism in the form of Democrat party policies have destroyed wide swaths of America’s landscape, from cities like Detroit, Chicago and Philadelphia to black families that suffer from unprecedented rates of unemployment, unwed motherhood and tragically high rates of crime. Yet the faith remains.

Add willfully blind faith to presence of an anointed one among us and you get a cult. Which is exactly what liberalism and the virtual worship of Barack Obama has become:

Obamacare: Every day seems to bring new information that only adds to the understanding that Obamacare is a disaster of epic proportions. Yet faith remains.

Economic Growth: Barack Obama’s “recovery” has been the worst since the Great Depression and incomes have fallen over $4,000 per household since he took office. Yet the faith remains.

Welfare: Welfare has become so generous that in 35 states, it’s actually more profitable to sit at home and collect welfare benefits than it is to go out and find a job. In Hawaii the pretax wage equivalent of welfare benefits is $60,590 per year. In Washington DC it’s $50,820 while in Massachusetts it’s $50,540. Those are dollars that have to be paid for by taxes on those working. Yet the faith remains.

Race: In less than 50 years from the day Martin Luther King Jr. spoke on the steps of the Lincoln Memorial the United States elected a black man as president, twice! Yet race relations in the United States are worse than they have been in decades. Yet the faith remains.

On virtually every single empirically measurable measure, from education to economic growth as well as simple observable measures such as regulation and freedom, liberalism has been a failure in general and particularly so under Barack Obama. Yet, despite the fact that the consequences of this failure hurts the very people it's supposed to help, the faith remains.  

While the 1st Amendment enshrines the notion of freedom of religion, today the United States is being governed by the cult of liberalism, which seems more like a religion than many of the mainstream religions in the world.

It demands subservience to its policies and is willing to use the police power of the state to impose them while nonbelieving infidels must be marginalized. Speak critically of the Messiah and you are a racist. Disagree with gay marriage you’re a homophobe. Suggest that its culture and unwed motherhood that are ravaging black families and again you’re a racist. Advocate for limited government or state’s rights and you’re an extremist. Promote school choice and you don’t care about children. Advocate for lower taxes and you’re greedy. Champion free markets and you’re a selfish capitalist. Question man made global warming and you’re anti-science. Disagree and you must be discredited and vilified.

Liberals often champion a wall of separation between church and state. This may be the one time they might actually be right about something. However it isn’t Christianity that the country needs to be saved from, it’s the secular religion of Liberalism with Barack Obama as its messiah.

A very basic primer on deciding between Romney and Obama in November

In business there is something called “sunk costs” which refers to funds that have been spent and are unrecoverable. At any given point sunk costs are irrelevant to the decisions going forward. An example of this would be a company that has spent a billion dollars building a plant and now has to choose whether or not to spend another billion dollars hiring staff and actually operating the plant. At the point of the decision the only thing that should be relevant to the decision makers is what makes best sense for the firm going forward. Does the company make more money by staffing and operating the plant or by selling it? The decision should be based solely on what’s best going forward, with no sentimental attachment to the billion dollars already spent building the plant.

The key element of sunk costs is recognizing that you can’t change or undo anything that has already happened and therefore the focus of your attention should be what you can do today to impact tomorrow.

The last three years should be looked at as sunk costs… or simply unalterable history. The November election cannot turn back the clock. It can only look at a course for the future.

As such, voters should evaluate Barack Obama and Mitt Romney as a board of directors would if they were seeking to hire a president or CEO to run their organization.

The first thing you’d do is take a cursory look at their resumes. Obama earned an undergraduate degree from Columbia while Romney earned his from BYU. Both men earned graduate degrees at Harvard. On that score you’d have to say that the men were very similar. As for their success as students it is not currently possible to compare the two. Romney graduated in the top 5% of his class at Harvard while Obama has refused to release any of his school transcripts.

The next thing you might look at their relevant work experience.

Obama worked as a community organizer in Chicago, taught Constitutional law at Columbia, was elected to the Illinois Senate and then the US Senate. His most important work experience comes from his three years as President of the United States.

Romney worked as a business consultant, founded a private equity firm, managed the 2002 Winter Olympics in Salt Lake City and served as Governor of Massachusetts for four years.

Finally you might look at their family situations and personal life as you wouldn’t want your new leader embarrassing your organization. Obama is a nondenominational Christian and is by all measures a devoted husband and dedicated father of two little girls. Romney is Mormon, has been married to his wife for 43 years and the couple has raised five boys.

On first blush both men seem to have the basic qualifications necessary to be President. But one needs to look at the experience a bit deeper now.

Barack Obama’s career was fairly unremarkable prior to entering the White House. As such, his best case can be made when looking at his time in office. He was presented with a difficult situation of the American economy in 2009. What has he done? The most obvious thing is that he’s borrowed and spent a great deal of money. Results? Higher unemployment than when he took over. Fewer people are actually working than when he became President. Inflation is 3% higher although the economy is experiencing stagnant, albeit positive, growth; the slowest recovery since the Great Depression. He passed ObamaCare and was subsequently sued by 27 states and the law is in front of the Supreme Court. Osama Bin Laden is dead. American troops are out of Iraq.

Romney’s work experience is far more telling: While at Bain Capital he earned his shareholders billions of dollars via his rescuing and restructuring companies – although not all such attempts were successful. In Olympic host city Salt Lake, he took a Winter Games that what was on course to lose hundreds of millions of dollars (which is the norm for host cities) and turned it into a money maker – to the tune of $100 million – and a successful Olympics to boot. So too as Governor of Massachusetts, where he left the state with a surplus after having entered office with an expected $3 billion shortfall.

Romney’s tenure as Governor was anything but spectacular however. Although he helped the city of Boston climb out of its Big Dig disaster, he left with a 34% approval rating and budget deficits returned once he left office. He also implemented the blueprint for ObamaCare in Massachusetts during his tenure.

As a member of the nation’s board of directors tasked with choosing a new leader you might want a viable third candidate, but you don’t have one. As such, the question is who will do a better job of running the country for the next four years. The answer is actually crystal clear. While Mitt Romney’s tenure as Governor of Massachusetts was less than spectacular, his business career was everything including spectacular. In addition, at the Olympics he had to deal with a plethora of international organizations, federal, state and local governments and everything was under klieg lights unlike any other event around the world. And he performed that job flawlessly.

Barack Obama on the other hand has made an absolute mess of the US economy, he has divided the country and has accumulated more debt in three years than any person in human history. At the same time he has discouraged millions of Americans from looking for work while dramatically increasing the number of people on the government dole. At the same time he has promised to put the United States on the socialist path of Europe, just as that continent is disintegrating.

American success was built on the backs of entrepreneurs, innovators, inventors, capitalists and workers seeking their own piece of the American Dream. Unleashing the power of that lineup to help the country emerge from the never-ending economic quagmire we find ourselves in is going to take someone who has a basic understanding of what it takes to incentivize those players to not only want to get back into the game of productivity and profitability, but more importantly, understand what keeps them from doing so… i.e. how organizations function or don’t. The organization in this case is the United States and the thing that keeps it from functioning properly is government regulations and interference.

When the American people walk into the voting booths in November and decide which lever to pull, they should imagine themselves pulling the lever for the candidate who is going to help not just them, but the employer who pays their salary or the customer who buys their products or the employee who works for them. Or if they don’t’ have a job, who can create an economic foundation for enough to be created for them to have a choice as to which one to take. They should then open their eyes and pull the lever for Mitt Romney.

If Obama can claim credit for killing bin Laden a year ago, why can't he take credit for the economy today?

As President Obama and his administration are constantly telling us, the horrible economy is not his fault because he inherited the “Worst recession since the Great Depression”. One can certainly make that argument. You just can’t get it to stick.

If you could however, what you’d basically be saying is that that 3 ½ years after taking office the President of the United States is essentially helpless to impact the economy. “No, no, no!” his supporters would no doubt respond: “That’s not what we mean! The entire economy, nay the entire world’s economic system would have collapsed if President Obama had not saved us.” That’s simply a 2012 version of the absurd and decidedly non-empirical “Jobs created or saved” measure the administration proffered when it became obvious that their stimulus was a failure.

If the President is not responsible for the economy after three years in office, what are we to make of his taking credit for the killing of Osama bin Laden after just two? The financial meltdown began in 2007 and by 2009 we were officially out of the recession. Yet key pieces of intelligence that led to the CIA eventually locating bin Laden were discovered even earlier, in 2005 and 2007. In addition, critical to the success of the intelligence gathering process was information garnered from Khalid Shaikh Mohammed using the very “enhanced interrogation” techniques candidate Obama objected to.

As Obama seeks a second term so that he can begin to fix the economy, Vice President Biden is there to tell voters the only things they really need to know about the President’s first term: “bin Laden is dead and General Motors is alive”. The President apparently wants to take “credit” for GM as well, despite the fact that the ill advised rescue of the UAW… er… of GM began under President Bush also. But the bottom line is that General Motors is alive, has paid back its loans, and is profitable. Alive, like so many things with this administration, is a relative thing. Yes, GM did pay back its government loans, but the money used to do so came from… other government loans. And yes, the company is currently profitable, but that is in no small part because it received $45 billion in special tax benefits not typically available to companies emerging from bankruptcy. (I’d venture to guess that even the hapless Solyndra might eke out a “profit” if given tens of billions in loans and a $45 billion write off.) The lesson for America from GM and the administration is that it’s OK if a company doesn’t pay taxes so long as its union members get paid.

As we look forward to an exciting run up to the November election, the question is, how is it that a President seeking a second four year term isn’t responsible for the economy 3 ½ years after taking office, but somehow is supposed to be given credit for killing bin Laden a year earlier? Has the Presidency been reduced to a cafeteria plan where the man sitting in the Oval Office gets to pick and choose the issues for which he wants to be held responsible? Does the fact that he takes credit for something mean that we have to agree with his assessment? What about the things he demurs to take credit for? Are we forced to blame them on President Bush or can we pick any scapegoat?

Harry Truman famously had a sign that sat at the edge of his desk in the Oval Office that read “The Buck Stops Here”, in reference to which he once told Naval War College audience: “The President--whoever he is--has to decide. He can't pass the buck to anybody. No one else can do the deciding for him. That's his job.” I’m not sure what kind of a sign is sitting on Barack Obama’s desk, but I wouldn’t be surprised if it weren’t similar to that contemptuous sign you find posted on desks and doors of bureaucrats all across the country: “A lack of planning on your part doesn’t constitute an emergency on my part.” Only in President Obama’s case it reads: “A lack of economic opportunity on your part doesn’t constitute failure on my part.”

The Democrat's "middle class tax cut" is a populist red herring

I want to make my priorities clear from the start. One: middle class families need permanent tax relief. And two: I believe we can’t afford to borrow and spend another $700 billion on permanent tax cuts for millionaires and billionaires.

That is a line from President Obama’s weekly radio address last week. He’s referring to the coming tax hikes as the Bush Tax Cuts are due to sunset on December 31st. Interestingly, the reason the sunset provision is there in the first place is because Tom Daschle, (the then Democrat leader in the Senate) threatened a filibuster without it. That phrase tells you everything you need to know about President Obama’s sincerity when he talks about putting jobs and the economy first.

On Friday the unemployment numbers came out and the rate had crept back up to 9.8% as employers added a mere 39,000 jobs in October. At the same time President Obama and the Democrats are seeking to extend unemployment benefits beyond the already unprecedented 99 week limit. Ninety-nine weeks! That is two years of receiving a government check for doing nothing. (That doesn’t’ mean that unemployed people are literally doing nothing, but by definition they are not working.) I’m not sure how long it takes to develop a bad habit, but two years is probably a pretty good start. That causes one to wonder what is the bad habit forming effect of a government check on someone who has been receiving welfare for years…

Back to the Democrat red herring. As President Obama’s words demonstrate, the Democrats are seeking to manipulate the conversation using populist rhetoric to demonize the rich. At the core of their “solution” to our financial problems is their effort to raise taxes on the “millionaires and billionaires” while giving the middle class a tax cut. Republicans are fighting this effort, suggesting that doing so will harm job growth. The GOP position is based on the fact that small businesses are the engine of the American economy and create three out of every four new jobs in the country. That’s relevant because most small businesses owners file their taxes using personal income tax returns… and those are where the taxes are going to go up. Here are the numbers for the top two tax brackets:

For those in the second highest bracket – families with income between $171,851 and $373,650 – their tax bill is going to increase by ten percent as the rate moves from 33% to 36%. For those in the highest tax bracket – families with income above $373,650 – they will see their tax bill rise by 13% as the rate jumps from 35% to 39.6%.

Democrats are quick to point out that only 3% of small business filers are subject to the two highest tax brackets. That is true. Most small businesses are sole proprietorships where the business in question is a side venture to supplement income. Think of someone who sells comic books on eBay, dabbles as a real estate agent or designs websites on the side. What is far more important however is that while only 3% of small businesses are subject to the highest tax rates, the businesses that make up that 3% represent 44% of all small business income. Let’s do a little math problem:

IF: Small business represents over 75% of all net new job creation in the Unite States;
AND IF: 3% of small businesses generate 44% of all small business income and a similar number of jobs;
AND IF: Democrats want to raise taxes on the small businesses that fall in that 3%;
THEN: Democrats want to raise taxes on companies that are expected to be responsible for 33% of all new jobs.

That simple problem tells you everything you need to know about President Obama and the Democrats. Despite their rhetoric about wanting to put people back to work, they simply don’t care about actually creating jobs and growing the American economy. If you need even more proof, consider the coming tax hike on dividends. Dividends are currently taxed at 15%. On January 1st the dividend tax rate will skyrocket to 39.6%. (Oh, and don't forget the ObamaCare 1099 fiasco that will hammer small businesses) So, not only do we have Democrats seeking a direct tax increase on the small businesses who are supposed to create one third of all new jobs, at the same time they are discouraging investment in companies that are successful enough to be able to pay dividends at all… many of whom probably have and hire employees.

President Obama and the Democrats, in using the red herring of “middle class tax cuts” to pander to their progressive base are willing to sacrifice jobs and job creation so they can further cripple capitalism and push even more Americans into the fold of government dependency. As the economy slows and jobs evaporate expect Democrats to seek to extend unemployment benefits to 129 weeks then perhaps 159 weeks and then maybe be made permanent. At the end of the day that is exactly what Democrats want… they want to take everything the rich have stolen from the poor and the middle class and simply redistribute it. That of course is a house of cards as the rich have options about where they invest their money and even where they live or start their businesses. At some point when everyone becomes a ward of the state there is no one left on the other side from whom the state can take everything to support itself that house of cards will eventually come crashing down. Hopefully 2012 will usher in some new homebuilders.