Monday, July 6, 2009

Crap and Trade

While most of America had and has its gaze fixed on the late King of Pop, a bill has been passed in Congress that will make Americans into paupers. The Cap and Trade Bill is the evil twin of the terrible enough Stimulus Bill. The speed and severity with which President Obama is imposing his brand of big city, spoils style politics is astonishing. It is understood my many that politics is going to contain elements of quid pro quo, so it is not stunning that President Obama is giving a degree of government largess to those who gave him votes, campaign funds and those with whom he agrees in an ideological sense. What is so appalling is the degree to which he is doing so and the cost entailed therein.

On the campaign trail then candidate Obama said that "we cannot afford four more years of the same." In many ways he was right but in a fiscal sense it is his style of governing that is undeniably unaffordable. The problem is that he runs things like the mayor of big city would but when this is done on a Federal level it is devastating. Mayors and other local officials can impose a tax of penny or so on every dollar of sales in their city and impose minimum wages and other things that do hurt growth and slow the level of wealth creation but when it comes to cities, their jurisdiction is relatively easy to escape. With national boundaries it is not the case. When Los Angeles fleeced and harassed hotels, the hotel moved to Burbank, when San Francisco imposes a huge sales tax you can shop in Oakland or Marin County, when a city or county does something ill advised it is easy to dodge its bad effects. With President Obama being the Mayor of the US, we have no where else to go and as he gets his way, policy wise, the entire county will start to have the problems usually confined to big cities.

Every single domestic policy initiated by the President is something that makes the cost of living higher or makes something scarcer, in short, he is pulling down standards of living. This is not confined to taxes either,which will clearly not be confined to the "rich" as it is turning out, he is making the cost of consumer credit, housing, cars, electricity, gasoline and all products, whose production costs are based on them, increase. His saving grace is that he has not yet moved on his anti-trade rhetoric but if he does that will make the cost of everything become even greater because imported imported raw materials and other resources will all be taxed or restricted with quotas. To complete the trifecta, he is not making the US a place that is good for investment and the future growth that it facilitates. His illegal and arbitrary wiping out of the Chrysler bond holders shows his disregard for the rule of law and property rights and their direct connections to enticing others to lend money, borrow money, innovate, take risk and grow an economy.

Directly and and indirectly, this administration is firmly on pace to be the most costly administration in history. Some say that he inherited a bad economy and the bailouts from President Bush. That is true and that is why Obama's not turning around the economy and restoring full employment within six months is not something for which I have criticized the president. He inherited a lot of malinvestment and a business cycle in a trough. What matters how he responds and he is compounding the errors of the past administration, imposing policies to prolong and intensify the recession and worst of all, he is placing burdens on our economy that will lower our standards of living that future economic boom times will be as miserable as this current economic morass.