President Obama’s Domestic Triumphs on the Eve of Independence Day

A couple of days ago, I summed up the Obama administration’s foreign policy for you (6/30/10 “Obama’s Wars – and Not Wars”). That was the bright side. This is still a sunny summer. I am as lazy as the next guy but I am retired so, I have decided it’s my duty to sum up everything you need to know about President Obama’s domestic policies thus far. It won’t take long. Stop reading right here if you are hoping for good news.

It’s true that the President inherited a massive financial crisis that turned into a recession (economic shrinkage) plus steep job loss. Personally, he had nothing to do with it. His party created it though. As far as we can tell right now, the crisis of the fall 1908 is entirely traceable to his party’s insistence that people without verifiable income and no collaterals should be given mortgages. From what we know, at this point, again, this is it. I mean that had banks been allowed to act according to their traditional prudence, there would have been no crisis. Again, we may learn later that the causes of the crisis are more complicated but, right now, there is no rival explanation anywhere, not with the Democratic Party, not from left-wing economist Paul Krugman.

There were two broad ways to try to re-start the economic engine of this nation. One was to cut taxes. (Has to be done for a long time otherwise, taxpayers don’t respond). That’s the conservative way The other, the Keynesian response, consists in engaging in swift government spending, again, to stimulate the remainder of the economy. Personally, I think the evidence in support of the appropriateness of the Keynesian response is slim. My judgment may not matter much because what the Administration did is not a Keynesian response which is supposed to be a brief, temporary remedy. It’s supposed be be followed in short order by super growth in the general economy and shortly thereafter in growth creation by the private sector. Economic growth has been anemic as compared to the aftermath of all previous recessions. That’s true whether those were given government spending remedies or not.

The last quarter, the economy grew at 2.7%. That would be kind of OK in normal times. In fact, in normal times, France or Germany would kill for such a rate. It’s not good enough for better-than- normal times; it’s nor nearly good enough for a period following a recession. There is more. See below. Net job growth in the private sector has been essentially zero. (“Net job growth” = jobs created – jobs lost during a given period.) But many jobs have been created in the government sectors. Since both states and local governments have been cutting back, it seems to me that nation-wide, job creation has been almost entirely by the federal government. If someone has data that contradict this supposition, I would like to know to correct myself here.

After a year and half of Obama administration, with both houses of Congress submissive to his will, we seem to have plateau-ed to the main economy features of a sleepy European economy. I hope this is just a phase. I hope my pessimism is unfounded. I would love to be shown where I am wrong. If I am right, no, it’s not the end of the world. Europe is not dead, after all. Rather, it’s the beginning of a long period of mediocrity for you and your children.

In the process of not solving the economic crisis, the Obama administration approximately doubled our national debt. A child born today already owes about $45,000. That’s about equivalent to our Gross Domestic Product per capita (the total value of all that Americans produce in one year divided by the number of Americans. It’s a very rough measure of average income. If you want to learn more, activate the link on this blog: “Dr J’s List of Words that Make you Sound Smart.” Otherwise, don’t bitch!) The debt owed by the average newborn is also equivalent to about two years of production of the average American worker. This means the following: If the average child wanted to pay off his share of the national debt before bringing any money home, he would have to work for two years before his first paycheck.

Unlike many conservatives, I am not necessarily against government debt. How tolerant I am depends on two somewhat related considerations. First, I want government borrowing to be linked to greater production or to improved productivity. Roads, harbors, Internet expansion, subsidies for some research and for some of higher education qualify. (The federal government has no business at other levels of education.) Filling the Social Security deficit, expanding government ownership of unproductive productive enterprise (GM), giving away money to the idle and even to the invalid, don’t qualify. Second, as much history shows, including the aftermath of WWII, high government debt is no big deal if government revenue increases naturally. This is not complicated: Roughly if the economy grows at 5. 4% per year instead of 2.7% per year, the government rakes in twice more money without raising taxes.

I am against raising taxes for three reasons. The first is related to what I just said; Raising taxes usually undermines economic growth. This, in turn, makes more of the government debt unsustainable. You don’t have to subscribe to the two others reasons to object on the ground of the first reason alone. Here are those two others reason. Every increase in taxation as a percentage of the total pie, corresponds to an increase in the importance of government relative to citizens and civil society (“Civil society” is that which we do organizationally on our own, without government framework.)  The larger the government’s slice of the pie, the greater the potential for tyranny big and small. My third reason is a purely moral one: Even in a constitutional system such as ours so far, ultimately, taxes are income taken from citizens by government under threat of violence. Legal extortion by one carrying a gun is still extortion.

I could ad a fourth reason but I don’t want to be taken too far afield. Here it is, FYI: By and large, the federal government does a bad job of spending my money. A recent scandal in the newspapers shows that the federal government does not know enough to bury the right body under the right name plate at Arlington National Cemetery. Not much gets as incompetent as this!

When presented with an environmental crisis made to order for this supposedly green administration, it failed monumentally. I am not referring to the gas spill itself. It’s possible to argue that it inherited bad supervisory apparatus from previous administrations (plural). I am talking about the clean-up endeavor. The Obama administration did little that was effective. If it did, the New York Times for example, or MSNBC, would be describing the Obama measures in loving details. After dumping bitterly on President Bush for his alleged passivity after Katrina, Democrats are reduced to looking for excuses for Obama’s much longer-lasting inaction. I said at the time, and I am saying now, that it’s not obvious the federal government should be dealing at all with disasters that are not of a military nature. Here are the differences with the Katrina precedent though: The Gulf oil spill is now an inter-state problem. The Commerce Clause of the Constitution has been used much more frivolously before to justify federal intervention. Second, the Bush administration never interfered with the application of solutions to the Katrina problems by states, local governments, and private organizations. Evidence accumulates that the Obama administration has interfered massively with such, actively and passively. I mean by “ passively’ such omissions as failing to suspend the Jones Act that prevented us from accepting help from the much experienced Netherlands.

The summary of this summary is this: The Obama administration is a complete domestic failure except in one area: It has vastly expanded the scope of the federal government. If that’s you wanted, you may count yourself a partial winner. If you don’t like this success, you lost, utterly.

Come November, citizens who don’t like an on-going catastrophe have to make sure we gain enough seats to paralyze this government fiscally, to defund it. That would be a moderate response. In 1776, Americans took up guns for much less. Read the second part of the Declaration of Independence. It will make you smile. You will have a hard time finding in it denunciations of abuses worse than what we have been suffering for a year and a half.

In the meantime, here is the first part of the Declaration of Independence:

When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

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, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

President Obama Is Not a Criminal

The President always reminded me a little of a small boy who has put on his father suit to play grown-up. My impression was right on the dot. He proved it in his press conference on the Gulf oil spillage yesterday (6/15/10). Barack Obama keeps pretending he is President but he is hardly fooling anyone anymore, not even himself. I am not referring to the manner of his accession to power. I have no doubt it was fair and square. Thus, I disapprove of Rush Limbaugh’s practice of referring to the “Obama regime.” The word “regime” implies a lack of legitimacy, from an administration’s origins, and a ruling clique. I wish it were so (and more on this below).

The President has ordered BP to place a large amount of money in an escrow account to compensate the victims of the spillage. Sounds manly as hell, an explosion of decisiveness, on the 57^th day of the environmental crisis!

Mind you, the President of the United States does not have any such power and for good reasons. I am not even sure Hugo Chavez would have the power to do it. The reasons why Mr Obama does not have that kind of authority is simple: We are a nation of laws. The laws decide who gets compensated and in what order if there is not enough to go around. If the laws are not sufficiently clear, which I doubt, we have powerful courts able to make fair decisions and to implement them.

This is a moot point anyway and the President’s show was just that, a show for the innocent and for the gullible. First, as I have pointed out before, BP has declared unambiguously from the beginning that it’s civilly responsible. It’s not playing any games. It has said repeatedly, that it will pay. Second, and give me your attention, this is subtle:BP immediately jumped on the President’s offer. If I were advising BP, I would have told its CEO: Go along, dress in sackcloth and walk barefoot to the President with your ash-smeared head bowed and carrying a strong noosed rope in both hands. Let him mock-force you to establish an escrow account for the victims. First, right now, BP’s rep is so low, public repentance sounds like a public relations coup. Second, this may be the best strategy to avoid the full financial consequences of your technical incompetence. The escrow account will take the responsibility of compensation out of our hands. It will enable us to state truthfully: The job of paying up the victims fairly and promptly was taken from us. This short administration already has a long history of helping the guilty and punishing the innocent. Counting on its doing it again on our behalf is not a wild bet.

Absent from the speech were a small number of questions the President and his entourage must have judged non-essential, politically, environmentally, and economically:

Why refused help from a foreign experts when you have a clear majority in Congress able to change laws that might constitute obstacles nearly overnight?

Why wait 57 days to do the unpleasant but obviously effective: Parts of petroleum are volatile and can be ignited fairly easily? (Saddam Hussein demonstrated that.)

Why not rush the permission and the funds requested by the Governor of Louisiana weeks ago to construct artificial barriers to protect the wetlands? The monies involved are pennies to your grand spending schemes. For once, you would have received broad bi-partisan support for a government expenditure.

In this connection also, either the National Guard can be useful in containment and cleaning up or it cannot. If it is useful, it would already have been useful a long time ago. The President has the power to nationalize the Guard almost overnight. What happened?

As I have said before, I am saddened by the plight of the Gulf fishermen and of the many businesses that are being destroyed by the reality of he crisis (and even more so by associated impressions of unprecedented tragedy). Why not use the Small Business Administration, a federal agency, to begin making zero-interest loans from day one? Could be done for both businesses and individuals. It’s commonly done in situations of natural disasters with consequences similar to those of this non-natural disaster. This practice often stems the disappearance of small employers that are unlikely to return, the crisis once past. It’s not just about income loss, Mr President, it’s about job loss. Didn’t anyone tell you the difference? Second, SBA easy loans would have the legal merit of positioning the Federal Government as a real civil plaintiff against BP, independent of its bullying power.

Also not mentioned is the question of why anyone is drilling down several thousands of feet near our shores rather than a couple of hundreds in Alaska and yes, in California, near where I live. It seems less difficult and if accidents happen at shallow depth, I am pretty sure they are easier to remedy.

Present in the President’s virile speech: the ever-present frivolous, futile call for reliance on solar energy instead of petroleum.

No one has done more to discredit this otherwise attractive technology than Barack Obama.

None of the President’s erring logic, none of this tin ear amounts to a crime. We must resist the temptation to discern criminality where only gross incompetence is present: If I found myself somehow at the commands of a 747 and I crashed the plane on landing, would it make me a criminal, I ask?

I also wonder if I, a retired university professor with a good scholarly record, would have done better than that former university professor with no record at all. The response I give is mixed: I would probably have done a little better because I am more inclined to seek and take advice than Prof. Obama seems to be. Also, I am a much better judge of other people’s competence than Mr Obama is. But then, most adults are, I suspect. The other part of the answer is that I, unlike Barack Obama, have had the wisdom never to run for an important office, never confused playing at being President with actually being President. Even as a little kid playing doctor with my female cousins, I knew I wasn’t a doctor.

Someone with some executive experience would have addressed some of the questions I raised above and acted accordingly. I mean, someone like John McCain, or better, like Governor Sarah Palin.

I know this level of incompetence may tempt one into elaborating conspiracy perspectives: If the President’s clique were preparing to try again and impose its silly environmental agenda, the President would not act all so differently maybe. It’s not a conspiracy; this is too clumsy, too absurd (although the administration may try later to recycle the present crisis for this purpose). None of this is surprising. The President is a man who has never accomplished anything in his life. He is acting the President as he acted the US Senator before, and the state legislator before that, and before that, the “community organizer.” His last best part may well have been that of a law review “Editor” without a single publication to his name. Earlier in life, he acted well the part of the bright-eyed, intelligent-looking minority student that stopped questions about affirmative action dead in their tracks. To this, day is college grades are under lock and key. That’s probably the reason.

And remember, this is not an illegitimate “regime” coming to power God knows how. America deserves President Obama as the Gaza strip deserves Hamas. (See my: “Israel Attack,…,” posted 6/2/10) We chose him carefully, from a large field of candidates. We did so over a long period giving us plenty of opportunities to come to our senses. We did it because we are a great people that often suffers from temporary blindness.

And where is Al Gore now that his buddy and ally is allowing an evil oil company to burn thousands of gallons of crude oil daily? He and Tipper had described their divorce as amiable, almost a tea party. It can’t be what’s keeping him from making stentorian declarations about the end of the Planet, just around the corner. Fate gave him the Gulf oil disaster on a silver platter. Why the deafening silence?Does his cult have even more to hide than we thought? Is the Nobel Peace Prize winner simply ashamed of his profitable traffic in pollution credits? I wish I understood better the religiously inclined.

Tell me what you think.

In Defense of President Obama

I never believed that Barack Obama would eventually walk on water. I don’t believe now that he can dive a thousand feet and plug a hole in a gushing oil well, aquatic Superman-like. There is not much he can do about the environmental problem caused in some small part by the ineptness of an obscure federal bureaucracy hidden inside the Bureau of Land Management, besides firing its head. (He did.) I hope he resists the temptation to try something. Any federal intervention is liable to make things worse. The guilty party, BP is doing what it can. It’s in its interest to do so because there is not question it will pay for all the damage. That’s unless the President, abetted by the unspeakable Congress, decides BP is too big to fail. I hope the President will let the market and Nature take their course.

Speaking of damage, the plight of Gulf fishermen tears at my heart. Yet, any allegation that BP is not facing up to its responsibilities is malicious. Its hapless CEO has declared on national television that his company will do whatever needs to be done with respect to those injured private parties. I don’t see what else he could have done. If BP tried to eschew its responsibility in this area, if would fail. There are thousands of lawyers armed to the teeth with specialized laptops and carts full of dossiers ready to pounce on BP with civil suits. They are salivating at the thought of digging into one of the deepest pockets ever. The lawyers are probably more numerous than all the Gulf fishermen and all their dependents put together. Our tort system works well to the benefit of plaintiffs. The only prospect of the fishermen going poorly compensated arises again if the federal government becomes involved. If compensations of victims and repairs to damage must bankrupt BP, let it be! There are plenty of other oil companies to take up the slack. That’s the way capitalism works if you will let it.

By the way, I know I sound heartless and insensitive but television is still recycling the same dozen oil-soiled pelicans. There are more celebrities involved in the washing, I think, than pelicans. I hope they don’t come to blow, the celebrities, I mean. I mind less and less being called insensitive because it often means that I am being offensively rational. I like rationality more than I like being considered sensitive. Choices, choices!

Now a few words about the brouhaha, the President caused by talking about “kicking ass” in public. First, it was almost certainly scripted. He was accused for so long of being unseemly impassive that his handlers must have decided to do something decisive, like say “ass.” Second, the phony indignation distracted us from the moral inanity of the substance of his utterance: He was asking the fishermen, the victims, about whom to punish?

Here is what I think about the distraction any public discussion of the President’s unusually vigorous speech inflicts upon us:

Don’t fucking waste my time!

Incidentally, don’t you think that the reliably profane Chris Rock would make a better black president than Barack Obama? Now that I have raised the question, you won’t be able to get it out of your mind.

The Gulf Spill and the Hidden Vice of Capitalism

Here is one aspect of the Gulf spill no one seems to be talking about. It concerns the same thing that conservatives commentators, libertarian journals, and economists seldom take into consideration: Persons in the upper management of large corporations are not necessarily very intelligent and few are well-educated. That is the hidden vice of capitalism. For once, I am speaking as an expert. (Go ahead, check my vita linked to this blog and then, re-check the facts on Google. Make my day!)

The BP-caused oil spill – going on for more of a month as I write – is also a public relations disaster for the corporation. As I said earlier ( “The Louisiana Oil Disaster? Posted 5/21/10), we are still missing the moving photographs of thousands of dead, soiled aquatic birds. There is in and around Plaquemines parish a group of stake-holders that is becoming increasingly vocal: The fishermen. I heard some on NPR on 5/25/10 complaining that BP has mostly ignored their wishes to “volunteer” to help. It sounded true and it sounded incredible to me.

Whatever happens, BP is going to be on the hook for hundreds of millions of dollars, possibly for more than a billion dollars. The fishermen whose livelihood and whose future appears to be threatened by BP’s negligence number in the hundreds. I doubt that there are a thousand of them altogether. At the risk of sounding cynical, I will say that they are the only easily identifiable group of human victims who tug at ordinary Americans’ hearts. It’s easy to imagine that most Louisiana fishermen don’t have a doctorate in solar energy science, for instance; it’s easy to recognize that few can readily switch to another occupation. That they may want to transmit their legacy to their children is also understandable from an emotional standpoint. Finally, the tens of millions of American who fish recreationally will have no trouble grasping that the Louisiana fishermen may love their occupation and the lifestyle that goes with it. I am skeptical myself about the extensiveness of the damage. I don’t hope it will become Obama’s Katrina. Yet my heart goes out to those unknown fishermen deprived of both livelihood and, it seems right now, of a future.

That’s why I find it incomprehensible that BP has not taken the following simple measures: Gather everyone who claims to be a fisherman and is in a boat that moves under its own power. Give $100 a day to very crewman, $150 to every captain, and another $200 for the boat. I think the total cost would be under $200,000 a day or six million dollars for a month. And yes, there would be graft and cheating.

BP could simply tell the fishermen that they are “on call,” to be deployed at four hours’ notice as needed. Almost all would cooperate because the urge to do something in a crisis is irresistible. The shirkers would not be missed and they would be shunned by their neighbors. Tempers would subside. The locals would be turned from louder and louder claimants enjoying the world’s sympathy into allies of BP.

Why does not BP do anything so simple, you wonder? Back to my opening comments. The upper levels of big corporations are replete with people with mediocre minds. That this is not well-known is the fault of ignorant journalists and of devious business schools. (Disclosure: I taught in a business school for more than twenty years.) In fact, the evidence that CEOs of big corporations, for example, do anything that is both useful and important is slim and ill-founded. I mean by the latter that the empirical evidence in support does not begin to reach the level of rigor expected in the social sciences in general. The quality of the evidence does not even come close to what one expect routinely in the social sciences that concern themselves with business specifically. I know this because I refereed for such journals and submitted my own research to them for thirty years. ( There is a column on the technical topic of scholarly refereeing somewhere on this blog.) Warning: I stopped taking interest in that kind of research about three years ago. If some great, well-executed study has appeared on the topic since then, I might not know of it. If you know of one such, please, let me know that I may correct my ignorance. In summary” The myth of the god-like captain of industry prevails. It prevails without much successful challenge because it’s a myth, precisely, the founding myth of capitalism.

How can such a disturbing, dismal view of corporate governance be correct? There are two, explanations; they are not mutually exclusive; in fact, they overlap. First, academics in general don’t receive well innovations that may undermine scholarly reputations built over a life-time. There is some good in this because many innovations are, in fact, frivolous, the products of passing fads. Yet, scholarly innovations with impeccable credentials, the very credentials the fortress defenders claim to respect, also have difficulty gaining a foothold. Frequently, when they do gain a foothold, they are restricted to a ghetto for a generation or more. Evidence in favor of the idea that CEOs are omniscient and omnipotent need not exist. Any evidence that they are not is guilty until it proves itself innocent, over and over again.

The second explanation is crass: Most or all business schools derive a significant fraction of their revenue from private donations and endowments. Donations, other than bequeaths by the dead, are always decided on or reviewed by CEOs or by their creatures. The unspoken consensus in business schools is that there is no need to bite the hand that feeds you, even if it feeds you only dessert. Why antagonize the people with wallets in hand with research and publications that minimize their importance and suggest they may not be all that bright? This state of mind does not result from any conspiracy. It needs not be expressed. It’s part of the culture of business schools. In support of this thesis is the well-known fact that the richest business schools turn out the most iconoclastic research Stanford University comes to mind where the mindset goes like this: You want to bequeath us what? Thank you, we are busy right now. If you can call tomorrow, we will try to find you a spot in the line of donors.

Its’ chic nowadays to downplay the relevance of academia and academia has done much to earn this contempt. The fact however is that business schools teach vast numbers of undergraduates, and only slightly smaller numbers of MBA students. They instruct ordinary people, journalists, teachers and teaches of teachers. Almost anything anyone in America knows about business come from or is heavily influenced by this teaching. What business schools teach matters in the long run although in diffuse ways.

While it might be used that way, this short essay is not an argument for government intervention or supervision. The perception that government bureaucrats know anything at all is even more questionable. After all, they have been running the US Post Office for 230 years!