Category archives: Economics

Washington’s Omie o kiru

by Family Research Council

March 17, 2009

A U.S. Senator talks of honorable suicide for well-heeled executives who have received company bonuses and then benefited from bailout money from the taxpayers. Armed guards are posted outside the insurance giant AIG to protect its employees from an angry public. The President declares himself outraged at corporate excess. Larry Summers, the Obama Administration’s top economic adviser, says the same. Thus our national economy is fast transforming into a giant kabuki play, or more precisely a sewa-mono, a domestic drama in which theft and suicide are classic themes.

What is becoming of this nation if it is not the puppeteering of what should be an economy of risk and reward where, with reasonable regulation for health, consumer disclosure, and mitigation of monopolies, the government steps back and allows customers and investors to act on opportunity and react to failure? The greed of some private sector actors is real enough, but the umbrage of many political actors rings hollow. Can we recover the bonuses paid to executives who could not keep their businesses profitable? Why, government has made unprofitability the test of whether certain businesses, like certain mortgagees, get aid.

Here is a simpler idea: anyone who receives government bailout aid, direct or indirect, or benefits from a no-bid government contract of any kind, forfeits their right as individuals to donate to federal political campaigns for a period of five years. That would have some genuine impact on this Kabuki cycle

That Curious Phrase: The Commanding Heights

by Robert Morrison

March 17, 2009

Watching Chris Wallace interviewing President Obama’s economics advisor, Austan Goolsbee, yesterday, I was struck by a curious phrase Goolsbee used: “the commanding heights of our economy.” Gosh, that phrase sounded familiar. Goolsbee was responding to Wallace’s question about the President’s 2010 budget message. That document is grandly titled: “An Era of Responsibility.” Actually, “an era” is too modest for this President. His budget proposals will impose crushing debts not simply on the living, but on millions yet unborn, on generations yet to come, if they come. We should be thinking at least in terms of epoch, even perhaps an Obaman Age.

Wallace quoted from the President’s budget message. “While middle class families have been playing by the rules…those at the commanding heights have not…” Goolsbee defended the use of that term: “The President is saying those at the commanding heights have not played by the rules.” Clear enough. Rep. Barney Frank was next up. “I would go back to your conversation with Mr. Goolsbee,” the chairman of the Financial Services Committee replied as Wallace pressed him for specifics. “This is an example of people at the commanding heights of the economy misbehaving, abusing the system,” Frank said.

There it was again. I knew I’d heard that phrase before. Fortunately, we have Google so I didn’t have to go rummaging through my cluttered basement—talk about torture—among my old Russian history books.


The commanding heights” is a phrase first used by Lenin. He used it in 1922. It’s when he introduced his NEP—the New Economic Policy—in the newborn and struggling Soviet Union. Under that policy, the severity of Communism’s seizure of the land was relaxed somewhat. Lenin had little choice. “Collectivizing” the land had brought massive famine. Millions were dying.

But Lenin reassured worried Marxists all over the world that he would not betray the world’s first successful Communist revolution. His Bolshevik regime retained control over the commanding heights of the economy—the big industries.

Does this suggest some dark, secretive, Leninist plot by the new Obama administration?

No, that’s not what I’m suggesting. I do say that we are now governed by a group that is not itself fully aware of the source of their ideas.

In a free economy, there really are no commanding heights. Businesses and economic sectors rise and fall with the vicissitudes of the market. Railroads, once dominant, give way to highway trucking (and perhaps back again). An information economy supersedes smokestack industries—and the cleanup of our rivers, lakes, and skies offers testimony to the changes.

Now we are entering a period in which the majority in government view themselves-consciously or not—as occupying the commanding heights of the economy. It’s an experiment that is bound to fail. It has failed wherever it has been tried.

One simple way I tell friends to judge whether Russia is moving toward or away from liberty is to note whether they are seriously discussing burying the mostly paraffin mortal remains of Vladimir Illyich Lenin. For a time in the 1990s, removing Lenin’s body from the mausoleum in Red Square was high on the freedom agenda in the newly liberated Russian Republic. Since our current Vladimir—Putin—took power, however, Lenin’s body is firmly anchored and ritually honored in the heart of Moscow.

We can still strike a blow for liberty over here: Let’s bury Lenin’s language. Let’s bury all of Lenin’s talk of “the commanding heights.” And let’s resist those like Barney Frank who would ascend those heights the better to command the rest of us.

The Daily Show with Tomas de Torquemada

by Michael Fragoso

March 13, 2009

Jim Cramer went on The Daily Show last night to be grilled by Jon Stewart. Liberals everywhere are singing the praises of Stewart, who went in loaded for bear. (See video here-Stewart’s language is saucy: you’ve been warned.) Stewart deftly illustrated the multitudes contained within Cramer-both a loudmouth performer, and a cool, savvy Wall Street operator-and excoriated CNBC, Cramer, and market capitalism in his characteristically self-righteous and crypto-Marxist way (“When are we going to realize in this country that our wealth is work? That we’re workers…”). Apparently finance is serious business and Cramer’s goofy “Mad Money” persona makes Stewart mad. Mad enough that he felt the need to embarrass Cramer for 3 segments in front of his audience of clapping New York sycophants.

And yet, Cramer has been at this for years (I recall watching Mad Money with my friends in college because Cramer’s histrionics and questionable stock advice could be quite entertaining). Why did Jon Stewart decide to take Cramer to the woodshed on March 12, 2009? Why not a month ago-or six months ago, or a year ago, or four years ago? It turns out that Cramer and Stewart have been feuding ever since Stewart began taking shots at Rick Santelli for his “Chicago Tea Party” outburst. This feud, like Stewart’s previous one with Tucker Carlson, is predicated on his infuriating bait-and-switch routine: 1.) Sanctimoniously deliver a sucker punch about a serious political or cultural matter in which there is substantive disagreement; 2.) Respond to counter attack by saying “I’m just a comedian, don’t hold me to high standards! I make jokes! I’m no expert!” 3.) Behave like a smug expert and deliver more substantive criticism. 4.) Respond to next counter attack by saying “I’m just a clown! Watch me make funny faces!” 5.) Repeat until plaudits pour in from Gawker, Huffington Post, and other snark-mongers.

The fact is that Cramer’s shtick has not changed, and yet it is now that Stewart decides to declare Sicilian vendetta. Since Mad Money premiered, and in many ways going back to his stint on Kudlow & Cramer, Cramer has been a clown for the masses and a savant for the privileged-and Whitman-like in his ability to embrace the contradiction. What has changed is this: Cramer, like Santelli before him, went after the “wealth-destroyer,” President Obama. When the self-described liberal Jim Cramer was jumping around, biting the heads off toy bulls, yelling, “BUY! BUY! BUY!” and supporting Barack Obama, Stewart was nowhere to be found. When the self-described liberal Jim Cramer does all the same things but now dares to criticize the patently horrendous fiscal policies of the new President, that’s when Jon Stewart gets mad. Stewart insists it’s “not political,” and yet the timing is anything but.

Perhaps this explains why Obama tolerates the constant bumbling of Robert Gibbs: who needs a Press Secretary when your cult of personality is enough to turn a late-night comedy show into a camera stellata?

The Pro-Obama Attack Machine Rolls On

by Chris Gacek

March 11, 2009

The New York Times jumped into the fray on Monday to help rescue President Obama’s economic policy-making reputation.  This was done in the guise of an analysis piece on the cable business channel, CNBC, that also served as a shot across the bow.  The story by Brian Stelter and Tim Arango entitled, “CNBC Thrives as Hosts Deliver News with Attitude,” lets the cat out of the bag when it intones: “CNBC is now a place for politics…. making the line between reporter and commentator almost indistinguishable at times.”

            What follows is a grab-bag of faux concern for CNBC’s brand and its reputation for journalistic integrity.  Some anonymous back-biting by three CNBC employees is added for good measure.  Blah, blah, blah.  But the rub comes down to this:  “In recent weeks some have perceived the network to be leading the campaign against President Obama’s economic agenda.”  BINGO.

            Well, the folks in the mainstream media (MSM) are clearly irritated because CNBC is now the most important news organization driving the political-economic debate.  The MSM is beginning to realize that it cannot control a news network populated by the brightest reporters on TV and accomplished guests who focus on the hard logic of the markets, interest rates, stock prices, currencies, etc.

            After Rick Santelli, a CNBC reporter from Chicago’s mercantile exchange, blasted the Obama Administration’s mortgage rescue plan he was attacked by NBC’s Matt Lauer on the Today Show.  Similarly, Jim Cramer was dragged to the Today Show for a hazing by Lauer who had to be assisted by CNBC’s Erin Burnett.  Even she couldn’t make it a fair fight.  Cramer just brushed them off.

            Unfortunately for the MSM the news broadcasts on CBS, NBC, ABC, PBS, CNN, and MSNBC are populated with reporters who know relatively little about economics and finance compared to their counter-parts at CNBC, Bloomberg, and Fox Business Channel.  So, when someone like Lauer tries to slime Santelli or Cramer he is totally mismatched.

            This means that serious interviews on the economy now have to be conducted on CNBC.  Yesterday’s interview of Warren Buffet by CNBC’s Becky Quick is a case in point.  Aside from the two-hour length, that interview would not have been possible on the MSM networks.  There are no broadcast TV analogs to Ms. Quick, Joe Kernen, and Carl Quintanilla who are all very, very bright and industry savvy.

            This is not to say that CNBC is perfect.  It has its flaws.  Big Deal.  However, between the network’s excellent morning (“Squawk Box”) and evening shows (“The Kudlow Report” hosted by Larry Kudlow) one becomes engaged in an ongoing conversation about our nation’s political-economic-financial situation.  The point isn’t that CNBC hosts and guests don’t make mistakes or erroneous predictions.  Who hasn’t in this market?

            The point is that CNBC presents its viewers with a window into an ongoing high-level conversation between many of the best minds on “Wall Street” as they try to diagnose and solve the enormous problems we face.  It has been fascinating to watch many themes developed and analyzed over an extended period of time on CNBC.

            This is all to say, that the MSM is incapable of presenting the public with this type of sophisticated, repetitive “longitudinal” analysis that makes it possible to think through the various problems the markets face.  And, with all due respect to the snooty journalism professors who love the Times, this is great journalism.

            Finally, regarding the charges of being political, as Larry Kudlow said Tuesday night to Charlie Gasparino (another CNBC reporter under attack) - (paraphrasing) “I learned a long time ago that if the liberal pundits are coming after you, you must be doing something right.”  Amen, Brother Larry.  Praise the Lord and pass the ammunition.

An Open Letter to Larry Kudlow, the Nation’s Irreplaceable CNBC Host

by Chris Gacek

March 5, 2009

Dear Larry:

The Politico reported yesterday “it’s rumored that [Senator Christopher Dodd (D-CT)] could face a challenge [in his 2010 Senate re-election race] from CNBC host Larry Kudlow, an opponent who would focus the coming election squarely on the economy.”

Say it ain’t so, Kudlow.

For those not familiar with you, Larry, I provide two links with some fair and balanced info: CNBC, Wikipedia. In short, you are a supply-side economist who served in the Federal Reserve Bank of New York, the Reagan Administration’s Treasury Department, and various Wall Street firms with distinction. You are a happy guy; an optimist. You are a conservative, and, as I have observed over the years, a much-needed media friend of the pro-life cause - something we at FRC appreciate greatly. And, since the financial meltdown you have been hosting a M-F 7:00 p.m. hour-long market analysis program on CNBC - now called The Kudlow Report.

In my opinion, The Kudlow Report has become the most important news program in America since the financial crash hit in September 2008. Given the deep recession we are experiencing it is understandable that an economy-focused program would reach such prominence. However, I am sure your ratings do not come close to measuring your impact on American politics, but I believe that I am correct.

As a conservative moderator you have exposed the Bush (bad) and the Obama (failing) economic responses to the financial crash to systematic analysis by many of the best thinkers on Wall Street. You provide this invaluable service on a daily basis with great intellectual rigor. What is crucial here is that a supply-side (non-Keynesian) supporter of free markets has this prominent role on America’s foremost business channel. As long as the current economic recession remains unabated, The Kudlow Report will remain the most important source of news on the economy.

This brings me to the alarming rumors of your potential Senate race. I write to urge you to reject any attempts to entice you to run for the Senate in Connecticut.

First, let’s assume that you run and defeat Senator Dodd. Under that scenario, it is fair to say that as a junior senator from Connecticut - in the minority (the GOP cannot take back the Senate in 2010) - you would have no chance of attaining the level of influence you now enjoy on CNBC. Being well down the pecking order in a body of 100, you may be able to get a seat on the banking committee, and you would be able to accomplish some good in the Senate: perhaps an amendment here and there; some oversight questions on TV. Not much to compare with being able to teach the nation about core conservative economic principles every evening while assessing the events of the day and interviewing newsmakers.

Second, the chances are not great that you will defeat Senator Dodd. Yes, he has some vulnerabilities on housing and mortgage policies. That said, he is in his fifth term, and his father was a two-term U.S. Senator from Connecticut. The state is very liberal. Connecticut is unlikely to elect someone who would now have difficulty winning a seat in New Hampshire. In sum, you will most likely lose the race, but the costs would be greater than those associated with a failed campaign - lost time, treasure, and effort.

The greatest cost would come from your absence from CNBC. This would be a heavy price to pay because the nation needs daily access to someone guided by sound doctrine analyzing economic and financial developments. This is the job for which your lifetime of work and training has prepared you - not sitting in the Senate. It is no small responsibility to provide accurate economic news to the people of the United States in the worst recession since the 1930s. Unless you stay focused on the task at hand there is little chance that the American people will receive via cable or television the high-quality analysis of Obama Administration policies that they deserve for 2010 and 2012.

Best wishes,

Chris Gacek
Family Research Council

Been in D.C. Too Long?

by Chris Gacek

February 24, 2009

How do you know that you know way too much about Washington bureaucracies and how they “work”? Here’s how. When you hear CNBC’s Rick Santelli calling for a Chicago Tea Party tax protest this summer, you immediately start to wonder whether he’ll need to get permits from some government entity like the Environmental Protection Agency. And then you wonder whether Illinois permits will be needed also. Well, I plead guilty to having had such thoughts last Thursday.

Fortunately, I am not alone and not nearly as bad off as Scott Ott of the D.C. Examiner appears to be. Ott has written a brilliant, hilarious piece entitled, EPA Arrests Rick Santelli, ‘Chicago Tea Party’ Cancelled.” (See Feb. 24, 2009 ed., p. 14.) The satirical article contains the following slam from President Obama’s press secretary, Robert Gibbs, commenting on Santelli’s arrest for threatening to pollute Lake Michigan: “I don’t know where Mr. Santelli lives, but apparently, like most conservative critics, he has a callous disregard for the lives of the waterfowl, sturgeon and fresh-water mollusks that inhabit the Lake Michigan watershed.”

That’s funny, but I wouldn’t be surprised if Santelli really could be arrested for dumping tea or “derivative securities” (paper) into the Great Lakes. Well done, Mr. Ott.

Andie Coller of The Politico observed today that Gibbs “dismissed [Santelli] as a know-nothing derivatives trader out of touch with Main Street.” Coller then noted that “[a] Rasmussen poll released Monday found that 55 percent of those surveyed thought federal mortgage subsidies to those most at risk of losing their homes would be ‘rewarding bad behavior.’” If I were the White House I would be very careful about trying to roll out a campaign of intimidation and bullying against journalists, in general, and a journalist, in particular, who is very much attuned to public sentiment, is an expert in the numerous cross-cutting markets traded in Chicago, and is the most popular figure on America’s #1 financial news network.

Steering the Elephant

by Robert Morrison

February 20, 2009

Some governors might reject funds,” blared the headline in USAToday. The story detailed the fact that about $144 billion of the huge $787 billion “stimulus” package President Obama signed this week will go to the states.

Massachusetts Gov. Deval Patrick (D) was not one of those governors, most of them Republicans, who were leery of the gift horse Washington was promising their states.

Still, Gov. Patrick said the $9 billion slated for the Bay State would “not be a panacea.”

Not a panacea, but maybe a Pandora’s Box. South Carolina’s Gov. Mark Sanford is head of the Republican Governors Association. He warns about the impact of programs funded by this sudden windfall from Washington. “You get this huge slug of money. It funds programs for a couple of years, and then what? You get it started, you get a constituency established, and then we’re supposed to yank the rug out from under people when the federal money runs out?” Alaska Gov. Sarah Palin (R) echoed Sanford’s concerns: “It’s not fair to Alaskans,” she said, “to create programs that won’t be sustainable.”

Texas Gov. Rick Perry (R) pointed to the “mile long strings” attached to the federal funds. Those strings may prove to be chains in the long run. Some of the funds will go for bridges, roads, tunnels, and other important and lasting parts of the infra-structure. Too much of it will for wasteful projects. The “stimulus” has been likened by columnist George Will to “drowning by fire hose.”

One part of the federal funding jumps out at pro-lifers: Medicaid funding. In seventeen of our states, tragically, taxpayers are forced to pay for abortions. Will this new wave of federal funding result in more money for abortion in the states? How terrible it would be if this attempt to “jump start” economic recovery were to help kill America’s future generations.

Even as we fight to preserve the Hyde Amendment that bans federal funding for abortion, the fact remains that monies are fungible. Americans recognize that if some Wall Street fat cats are being bailed out by taxpayers, it won’t do to say that their executive retreats to some posh watering holes were paid for by corporate funds, not taxpayer dollars. Americans understand how the executives simply take the money from one overstuffed pocket and jam it into the other. The same is true for state-mandated abortion funding. If the feds don’t fund abortions directly, they free up money in state budgets for this misuse of funds.

The other danger of these strings attached is that the states will lose their proper relationship to the federal government. James Madison and the other Framers gave us a system of checks and balances. Powers were separated at the federal level-legislative, executive, and judicial-but they were also divided between federal and state governments. This recovery package threatens seriously to uncheck those checks and unbalance those balances.

I vividly recall when I reported for duty at the U.S. Department of Education under the Reagan administration. I was assigned to a career civil servant for orientation. Dr. Ed was a highly intelligent, highly motivated, and thoroughly liberal bureaucrat. Dr. Ed took me to each of ten offices at USED. At each, he underscored his points by telling me that he and his fellow “educrats” could not possibly be responsible for all the nonsense in the nation’s classrooms that conservatives complained about. “We only provide seven percent of all education funding,” Dr. Ed told me over and over, “just seven percent!”

I followed Dr. Ed like a lamb for that first week. But when orientation was over, I told him a lesson my dad had taught me. “Pop” was in the Merchant Marine and had sailed off to India. There, he saw how the mahouts train their elephants. The mahout is a little fellow who weighs just seven percent of what the elephant weights, but he has a stick with which he prods the elephant behind the ears. With that stick, the elephant soon learns to go where the little mahout sends him.

That’s the way it is with federal funding. Except that now, our federal mahout has a much bigger stick with which to prod our fifty state elephants.

No Deal on This New Deal

by Tony Perkins

February 19, 2009

In a cedar chest at my home is a woolen thermal shirt. This is not just any thermal shirt; it is a part of history and a reminder. The shirt was a government issue, given to my grandfather. As a young man during the Great Depression, he worked with the Civilian Conservation Corps planting trees, building parks, and working on other public conservation projects. My grandfather earned a dollar a day.

The debate still continues among economists as to whether or not those vast public works projects that President Roosevelt launched through the CCC and the Works Progress Administration (WPA) along with other government spending helped end the nation’s worst economic crisis.

Regardless, FDR’s New Deal and the opportunities that it offered were significant to the many struggling families who were unemployed during a time when unemployment stood at almost 25%. Between 1935-1943 over 8 million Americans were on the payroll of the WPA alone.

FDR’s actions were controversial as he took the counterintuitive approach  promoted by English economist John Maynard Keynes to increase government spending during hard economic times. They called it “priming the pump.” FDR’s efforts led to a radical and lasting expansion of the power and reach of the federal government.

Parallels have been drawn between the New Deal and the present government response to the financial crisis - but there are vast differences. The stimulus measure signed by President Obama this week, which according to estimates by the Congressional Budget Office will cost about $1.3 trillion, will, according to the President, preserve or create 3-4 million jobs. Keep in mind that adjusted for inflation this stimulus measure will probably cost 3 times what the New Deal cost.

The overall cost of government spending designed to revive the economy will go even higher as the President announced a mortgage bailout this week that could cost up to another $250 billion dollars.

There is a vast difference between spending government money to create short-lived public works jobs and expanding the size and scope of federal agencies and directly bailing out bad mortgages. It may sound simplistic, but a government inspired hand up is much different than a government handout, and the implications will be lasting and far reaching, not only on the size of government but also on the American ethic.

The effect of FDR’s economic philosophy was so pronounced that 30 years later in 1971, President Richard Nixon said “We’re all Keynesians now.” The impact of this present economic approach is even more powerful — so much so that before it has even been implemented, a recent cover story of Newsweek declared: “We are all Socialists Now.”

MUST SEE TV: CNBC’s “House of Cards”

by Chris Gacek

February 14, 2009

Keep an eye out for an amazing documentary on CNBC called “House of Cards.”  (It will be showing numerous times this weekend.)  David Faber narrates a two-hour program on the current financial-economic recession and its origins in mortgages, securitized debt instruments, the dishonest or incompetent rating of those instruments, and governmental incompetence.  Greed, fraud, stupidity, and recklessness are all on display.  It is an excellent program that is a nice introduction to what happened to our economy.

To me one person stood out above all the rest: “The Maestro,” Alan Greenspan, former U.S. Federal Reserve Chairman.  Watching Greenspan make excuses for his non-stop money printing in the early 2000s makes it clear that this guy had no business being in that job.  He essentially admits that he made no effort to control the Fed’s credit expansion because it wasn’t what the political powers in Washington wanted.  This is the problem with having a politician, like Greenspan, as Fed Chief.  The Fed was designed to be insulated from political decision-making; his job was to make the tough choices and control credit.  Instead, he threw up his hands and cranked up the presses.  Disgraceful.

Economists from the Austrian School knew Greenspan’s policies were dangerous.  Read this before-the-crash assessment of his Fed tenure by Stefan Karlsson from the Ludwig von Mises Institute website.  Greenspan’s philosophy was not deregulatory.  No group of economists is more deregulatory than the Austrian School, but they are also committed to price stability and tight money.  Don’t be fooled if someone tells you Greenspan was a conservative; he wasn’t.

Stimulus” Update

by Family Research Council

February 13, 2009

The House passed the Stimulus bill with all Republicans and 7 Democrats voting against it (except for two Republican absences who would have been NO and one Democrat, Rep. Lipinski, (D-Mich.) who voted PRESENT)

The Democrats voting yes (or switching from the last vote):

5 switched NO to YES: Reps. Boyd (D-Fla.), Cooper (D-Tenn.), Ellsworth (D-Ind.), Kanjorski (D-PA) and Kratovil (D-Md.)

6 stayed NO: Rep. Bright (D-Ala.), Griffith (D-Ala.), Minnick (D-Id.), Peterson (D-Minn.), Shuler (D-N.C.) and Taylor D-Miss.)

1 switched YES to NO: DeFazio (D-Or.)

Representative Boehner gave an impassioned speech (no crying though) on the House floor, you can watch it here

Senate update:

The Senate will vote at 5:30 pm tonight on the Stimulus Conference Report. The vote will be on a motion to waive the budget point of order (must achieve 60 votes) and under the order the vote on the motion to waive will count as final passage of the conference report.

Keep in mind this vote will be held open for a bit in order for all Members to have a chance to record their vote.