the truth is big business loves obama

"I'm generally supportive [of the financial reform bill]. To be sure, there are details of it that I think I'm less sure of, but I think, on the whole, financial reform is, absolutely is essential and I will say that last week, in New York, I listened to a speech by Barack Obama at Wall Street, and one of the points he made resonated with me because I’d said it myself. He said that the biggest beneficiaries of reform will be Wall Street itself.” 

- Lloyd Blankfein, CEO Goldman Sachs (Homeland Security & Government Affairs, Permanent Subcommittee On Investigations, U.S. Senate, Hearing, 4/27/10)

"We continue to believe that comprehensive health care reform will benefit patients and the future of America. That’s why we have been involved in this important public policy debate for more than a year and why we support action by the House to approve the Senate-passed bill along with the amendments found in the reconciliation legislation."

- Official Statement of the Pharmaceutical Researchers and Manufacturers of America (PhRMA), is the largest single-industry lobbying group in America on 3/21/10 regarding Obamacare.

"Climate legislation is one of the critical issues that will be considered this year on Capitol Hill.  The House passed the Waxman-Markey legislation, a comprehensive, economy-wide bill [that] represents a moderate approach that was supported by a wide range of major American companies who make up the US Climate Action Partnership – including companies with a strong Indiana presence such as AES, Duke Energy, Alcoa, Dow, DuPont, GM, Ford, and Chrysler . . . Exelon has been preparing for a low-carbon future for the last decade. [We have] [s]old or closed most of our inefficient fossil fuel plants, [i]nvested billions in our fleet of 17 zero-emission nuclear reactors. In summer 2008 [we] released Exelon 2020, our plan to reduce, offset, or displace 15 million metric tons of greenhouse gas emissions per year, equal to our 2001 carbon footprint, by 2020. We are one-third of the way to our goal, and have a plan to accomplish the rest."

- John Rowe, CEO Exelon Energy (Indiana Council on World AffairsMarten House Hotel, Indianapolis 1/20/2010)

So if you listen to any cable news network or read most any paper all you here is how Obama is "anti-business" and that it is for this reason that the economy is slowly recovering.  Well that is only a half truth in my opinion.  I don't think Mr. Obama is anti-business per se, although I do believe that he is anti-market, which is actually profoundly worse than being anti-business.  The three quotes listed above are all attributable to big business heavyweights: Blankfein is for financial reform, the PhARMA lobby was all for Obamacare and Exelon, one of the largest power producers in the midwest and mid-atlantic (the coal region), wants nothing more than a full cap and trade system.  Does any of this make sense?  Why would a financial giant like Goldman Sachs want more financial regulation?  Why would a power company that produces a majority of its power on fossil fuels want to have the price of those fuels increased dramatically?  The answer is easy of course: they see a future with less competition.

Take financial reform for instance.  Now I understand and agree that any sound financial system must have rules of the road.  However, I firmly believe that the rules should be clear and must be debated before they are enacted.  This is the opposite of what occurred in the Dodd-Frank Bill. There are no new clear cut leverage requirements, there are no new clear prohibitions on proprietary trading.  There are just directives.  These directives either require or authorize incompetent agencies like the SEC to issue rules it thinks are appropriate.  In total the U.S. Chamber of Commerce estimates that Dodd-Frank authorizes a total of 533 rules to be written over the next few years.  Are some of these rules probably necessary?  Of course, but instead of being written by the Congress in the full purview of the electorate they are going to be written in closed door meetings were you need to pay to play.  I bet Mr. Blankfein knows this and is happy about it.  Few firms have the regulatory, compliance and lobbying staff to compete with Goldman Sachs when the task becomes influencing the inept government agents writing these rules.  They will invariably benefit the biggest and most connected of the banks at the expense of their smaller competitors, hence their support for financial reform.  

The same can be said about Exelon's desire for cap and trade.  As Mr. Rowe mentions in his speech, Exelon has been moving away from carbon based energy for years now.  Exelon is a Illinois based power producer and was a major contributor to Barack Obama.  Now they want their reward.  Instead of having to compete on a level playing field where consumer demand requires energy companies to be as efficient and cost-effective as possible, Exelon wants the Obama administration to price its competition out of the market.  It's whole business model over the past few years is that it is trying to get into a position of strength by lowering its carbon footprint ahead of the U.S. legislation so that it could put its boot on its competitors once their costs were artificially higher because of diktats from Washington.  Now that cap and trade seems dead that are literally shitting their pants and demanding even more intervention from Washington on their behalf.  Notice how the other companies named in Mr. Rowe's comment are all major corporations with huge lobbying arms.  Their support is predicated on the belief that they will be able to influence who gets "free credits" and what parts of industry will be "exempt."  That sure is one way to compete effectively.

What these examples show is that government intervention in the economy always produces winners and losers.  For the most part the interventions most favored by Mr. Obama undoubtedly favor the largest and most connected businesses in the industries affected.  Be it the hundreds of new rules in Dodd-Frank that have yet to be written or the onerous requirement that all business entities must now file a 1099 for every supplier with whom they purchase over $600 per year in goods (courtesy one of the many unread provisions in Obamacare), red tape and government regulation most favors the largest firms with large legal departments and the funds to spend on lobbying.  Small businesses, the real economic and job growth engines in our society, have neither of those advantages.  They are forced to play by the rules negotiated by their larger competitors.  Usually this is to their disadvantage.  These same small businesses are not hiring for this exact reason.  

There are three costs that almost all small businesses face regardless of their type of business: the must pay for energy, they must pay for credit, and they pay for health care for many of their workers.  Under Mr. Obama's polices the price for all three is going up.  Throw in the fact that tens, if not hundreds, of thousands of these small business owners, who are often organized into partnerships, limited liability companies or Subchapter S Corporations, are about to see their taxes increased at the end of the year, it is completely logical that they are not hiring or expanding.  The best thing Mr. Obama could do to help the businesses is to be "anti-business" and instead be "pro-market."  Let them compete effectively with their larger competitors and stop disadvantaging them by enacting "reforms" that put these competitors in a position to write the rules of the game.  These businesses don't want handouts and special privileges, just the opportunity to compete fairly and let the market decide who has the best product.

doublethink is alive and well

Prior to his election in 2008, the most common compliment bestowed on Barack Obama by the mainstream media was that he was an extremely skilled orator capable or persuading almost anyone of his point of view.  Swept up in the media storm that was Obama, he was constantly praised as the best speaker, even better than Reagan, of the last half century.  Obviously Chris Mathews is a full fledged Obama supporter, but just look at what he said a year and a half ago.



A simple youtube search will show numerous other examples of similar comments.  However, since becoming President Obama has not made nearly as many public speeches, and now that he is in a policy making position he has been a little more hesitant to expouse specific views on a variety issues.  Even the left has criticized him for failing to take the lead on issues ranging from healthcare to energy. However, I have notice an interesting trend when Obama does speak, and it is eerily familiar to a type of propaganda described by George Orwell over half a century ago.  Doublethink, the term penned by Orwell in his masterpiece Nineteen Eighty-four, was described by him as follows:

To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them, to use logic against logic, to repudiate morality while laying claim to it, to believe that democracy was impossible and that the Party was the guardian of democracy, to forget, whatever it was necessary to forget, then to draw it back into memory again at the moment when it was needed, and then promptly to forget it again, and above all, to apply the same process to the process itself -- that was the ultimate subtlety; consciously to induce unconsciousness, and then, once again, to become unconscious of the act of hypnosis you had just performed. Even to understand the word 'doublethink' involved the use of doublethink..

 Now obviously Obama's rhetoric has not quite reached that of "the Party," but he is slowly inching his way in that direction.  The more common terms, doubletalk and doublespeak, both derived their meaning based on Orwell's concept of doublethink, and they may be more apt terms for Obama's current rhetoric.  Defined as any language that deliberately disguises, distorts, or reverses the meaning of a statement, resulting in a communication bypass, doublespeak has been employed by governments throughout history in order to enact unpopular policies or to hide those policies true costs.  Let's take a look at a couple of things Obama has said of the past year.

On healthcare: "We agree on reforms that will finally reduce the costs of health care," Obama said. "Families will save on their premiums; businesses that will see their costs rise if we do nothing will save money now and in the future. This plan will strengthen Medicare and extend the life of that program. And because it gets rid of the waste and inefficiencies in our health care system, this will be the largest deficit reduction plan in over a decade."  This was one of the main ways Obama was able to sell reform: he claimed premiums would go down for current insurance holders, that he would strengthen Medicare and total government spending would decrease.  All this while giving over 33 million more Americans coverage.  This is the essence of doublethink. Claiming that we can dramatically increase the total number of services while paying less for it!  However, in May the CBO released a new estimate saying that the cost of the bill would be $130 billion more than originally estimated over the first decade, effectively eliminating any "savings."  And this estimate uses ten years of revenue to pay for only 6 years of benefits.  Just look at Medicare as an example.  The program now costs almost ten times what the original estimate said it would be when it was passed.  First year economics tell you when you drastically increase demand for a service (by adding 30 million new people seeking care) while instituting a number of new mandates (accept everyone with preexisting conditions, covering dependents until age 26, etc.) that the price will rise - in this case premiums.  A great example of what happens when government tries to take over the healthcare system is in Massachusetts, and the current debacle up there has been documented thoroughly in today's Wall Street Journal.

On Energy: "Each of us has a part to play in a new future that will benefit all of us. As we recover from this recession, the transition to clean energy has the potential to grow our economy and create millions of jobs – but only if we accelerate that transition. Only if we seize the moment. And only if we rally together and act as one nation – workers and entrepreneurs; scientists and citizens; the public and private sectors." - Barack Obama, June 15, 2010, from whitehouse.gov
Obviously this quote refers to the notorious cap and trade bill.  In his oval office speech on the oil spill, President Obama tried to make the case the economics alone justify getting away from fossil fuels. In the speech he did not mention the phrase "climate change" even once, instead claiming that job growth and prevention of oil spills were the main impetus behind a cap and trade bill.  Once again the contradictions in such a statement are apparent.  Raising the cost of carbon will make energy more expensive.  This will put businesses in a precarious position: either devote more of their limited resources to paying for energy, or buy less of it and produce less as a result.  This will leave all types of industries with less money to spend on new investments or hire workers.  Will there be more workers in subsidized industries like wind and solar?  Yes, probably.  But these will be far outweighed by the losses in traditional industries.  You simply cannot pay more for energy as a whole, decreasing the capital available for investment, and expect the total amount of prosperity to increase.  Regardless of how pressing an issue climate change may or may not be, trying to sell cap and trade as a jobs bill is contradictory.

healthcare, copenhagen and the epa

Well now that I am done with finals, I am hoping to update this thing a little more often. A lot has happened since my last post, and obviously my prediction that Penn State would play in the Fiesta Bowl did not pan out, but more about that later. Additionally, the Eagles are playing great right now, and I am going to devote an entire post to playoff scenarios later this week. For now, I want to focus on the two big political issues right now: healthcare "reform" and climate change.

At 1 AM ET last night, the Senate voted 60-40 to end debate on a healthcare bill, setting up a vote to pass the bill on Christmas Eve. The bill itself has become extremely unpopular with the public (a recent CNN poll released today showed 56% of people say they oppose it while only 42% support it), but that won't stop the Democrats from forcing it through in the middle of night. The whole process has been laughable and completely at odds with President Obama's promise of a "new era of transparency" that he promised during his campaign. The 2000+ page bill was written by 10 hand picked democrats behind closed doors, and the bill wasn't released to the public, or in that case the other Senators who had to vote on it, until just a few hours before the vote for cloture was invoked.

In short, this bill sucks, and I think that even the Democrats realize it. The major goal of the legislation was to provide every American with health insurance and do it without breaking the bank. Guess what? Neither goal will be accomplished under the Senate bill. First, although the legislation includes a new mandate that requires individuals to buy health insurance or face a stiff fine, even the Congressional Budget Office estimates that over 25 million Americans will fail to be covered even after the bill. Although Democrats were able to include several provisions that limited the insurance companies from denying coverage based on preexisting conditions and the such, they obviously have to be disappointed they had to abandon the public option, which many saw as a stepping stone to a single payer system.

But regardless of all that, there is one reason I find this bill reprehensible: Obama and the Democrats are STRAIGHT UP LYING about how much this bill will cost both in the short and long term. They are claiming that this bill is fiscally responsible based on the estimates made by the Congressional Budget Office. According to the CBO, the bill will only "cost" $781 billion over the next decade and will actually reduce the deficit by $132 billion over that time period. Really? Really? Does anyone actually believe that this bill is going to save money? Can you say that with a straight face? It simply does not make sense. They are claiming the quality will increase and costs will be lower. That's right! Democrats have finally figured out what most people couldn't: how to defy the laws of economics and make a system even better while making it cheaper in the process! Do you know why the CBO thinks this bill is going to save money? Because the tax increases to pay for the bill are going to start immediately, but over 98% of the costs do not start to accrue until 2014. So basically the CBO estimate uses 10 years of tax increases and only 5 years of entitlement benefits and then claims that it is a true estimate of the cost of the bill. This is the same type of accounting that has given us a Social Security/Medicare system that is set to bankrupt the country. Currently those programs have a total unfunded liability of over $50 trillion. That's trillion with a t. So what's the best way to address this coming financial crisis? Expand the program to include millions more. The whole entitlement state is nothing more than a Berni Madoff ponzi scheme on steroids, and if the accounting used by the CBO were used by a private company, the officers and accounts would be in jail for fraud (literally they would be).

Unfortunately, this health care bill isn't even the most destructive bill being considered by the Congress. The end of the world that is global warming must be stopped, and if we do not act... well, most people really aren't talking about what actually will happen if global warming continues. We are told horror stories about melting glaciers and rising sea levels, but I am not sold that any of these things will cause costs that are higher than those that would be imposed by cap and trade legislation. First, none of these supposed problems are going to occur in the near future or quickly. It will be a slow process and no one can predict exactly what is going to happen. By the time we start seeing any of these problems, we will be much more advanced as a society. Even under the most grave of predictions, it is impossible for anyone to say with accuracy what its effects on the human population will be. That is because humans are an unbelievably adaptable creature. We are the only mammal that can be found everywhere from North of the Arctic circle to the tropics around the equator. We will be ok.

Let's say the doomsdayers like Al Gore are correct. If we do nothing the Earth will warm two degrees over the next century. So what would be the actual effect on the human population? First, we will have advanced tremendously as a society by the time 2100 roles along. Technology has increased at an exponential rate since the advent of capitalism in the mid-sixteenth century. One hundred years ago, Howard Taft assumed the presidency, Einar Dessau made the first short-wave radio broadcast, and the first flight across the English Channel was completed. Today, instead of relying on radio we have the internet, so every individual has access to unlimited information, and we have planes that can fly without human pilots. Just imagine what life will be like one hundred years from now. I have full confidence that humans will adapt to a warmer climate, especially one that occurs slowly over decades. And do you know what the catalyst for change will be? Not a command and control economic push as desired by Obama and the other socialists, but the price mechanism. As global warming begins to impose actual costs in our society, the prices of the goods and services that are adversely affected by the climate will rise, encouraging innovation and alternative investments. Things like rising sea levels will be addressed by technological innovation. Consider this fact: 27% of the area and over 60% of the population of the Netherlands is below sea level. Using crude dikes and polders, the dutch have been able to keep the sea from destroying their homeland for hundreds of years. Imagine the innovation that would ensue if billions people faced a threat from a rising sea level, creating a large market in protecting against flooding.

And what about the positive effects of global warming? If the Earth does warm that will mean that more Northern regions will experience a longer growing season, allowing for the areas to grow crops that could traditionally only be grown in warmer climates. Critics say that the rise in global temperatures will lead to an increase in petulance and disease. Well why don't we address these problems directly rather than some indirect and causally suspect basis like global warming. If malaria will increase in tropical regions, we should invest in more mosquito nets, safe indoor DDT sprays and more education. No one can argue that stopping global warming would help protect poor populations from increased occurrence of disease more than this direct aid would. Additionally, the global warming alarmists insist that natural disasters will increase in both frequency and intensity. Even if this is true, which no once can actually prove, they are simply speculating, I think we will soon have the technology to address such concerns. Both researchers in the U.S. and especially in China are currently pursuing technology to control the weather. It sounds like science fiction, but so did a device that allowed you to not only to speak to anyone else on the globe from practically anywhere but also allows you look up any fact with the push of a button, to an observer 100 years or even 25 years ago (For those unsure, that last poorly worded sentence was my attempt to describe the iphone). For a few ideas about weather manipulation and where the technology is headed, check out this wikipedia article on weather control. Again, if the problem from increased storms is nearly as large a problem as the alarmists expect, one would expect research in this area to skyrocket.

Lastly, I just want to comment quickly on the EPA's recent "endangerment finding" that carbon dioxide is a "dangerous pollutant" and can be regulated accordingly under the clean air act. In order to make such a finding, they had to show that carbon dioxide threatens the public health and welfare. They based this finding on the "scientific consensus" that global warming will hurt "air quality," increase air born, climate-sensitive diseases, and increase the frequency and severity of natural disasters. Regardless of the fact that the clean air act was designed in 1970 to regulate pollutants like Sulfur dioxide that cause direct harms to human health through inhalation and the like, the fact that they found that emissions of greenhouse gases caused not only global warming but also the harms associated with it is disturbing. Traditionally, causation is a legal concept that has two parts: cause-in-fact and proximate causation. In order for a prior event to be considered a cause, both of these tests must be satisfied. For something to be a cause-in-fact, the second event would not have occurred but for the occurrence of the first. For something to be a proximate cause, an act from which an injury results as a natural, direct, uninterrupted consequence and without which the injury would not have occurred. Regardless, I see no way that someone can say that emitting carbon dioxide will cause the adverse effects of global warming. There are so many other contributing factors that contribute to these events other than U.S. emissions (the only emissions the EPA is allowed to consider in their endangerment finding) that it is impossible to say that they will not occur anyway even if the U.S. stopped emitting carbon dioxide immediately. Complex weather patterns, international emissions, and shirts in solar weather patterns are all potential intermediary actors that affect the potential harm. In order to be considered a cause in the legal sense, the event must have a direct and foreseeable impact on a harm that will not occur independently if the event is removed. Although they are strong arguments that warming is being caused by increased carbon levels, that link is too tenuous to be a legal cause under the clean air act, and any government intervention must derive its authority from new legislation, not some bullshit and speculative argument that misapplies a law that was designed to regulate pollutants that actually do directly hurt individuals because of things like toxicity.

Quickie on Cap and Trade

I just wanted to quickly comment on a few aspects of President Obama's cap and trade program. Regardless of how you feel regarding global warming, cap and trade may be the most backhanded way redistributing income in America since the sixteenth amendment. What perplexes me the most is that the true effect of cap and trade will be that the poorest Americans will be hurt the most by its effects. Today's Wall Street Journal had an excellent editorial today entitled Who Pays for Cap and Trade? which outlined many of the costs that would be associated with such a program, and include a statistical analysis of how that cost would be distributed based on both income level and geographical region of the country. I highly suggest you read the article, and I don't want to repeat it all here, but I do want to emphasize a few of its key points.

First, and probably most importantly, cap and trade is in effect a regressive tax. Everyone admits that the goal of the program is to drive up energy prices that are fossil fuel based. However, poor Americans spend a higher percentage of their income on energy than do the more affluent, so they will see a larger portion of their income go towards the costs of financing cap and trade than will rich Americans. President Obama should begin qualifying his promise that 95% of Americans will not see a tax increase with the phrase "UNLESS YOU USE ENERGY."

Secondly, certain regions of the country will face a much larger burden than others. Coal rich areas like the Midwest, South and Mid-Atlantic will see their costs rise the most. For example, in my home state of Pennsylvania, over 50% of the electrical energy produced comes from coal. Many states in the Midwest such as Indiana generate over 90% of the energy from coal. The poorest people in these regions could see up to 10% of their annual after tax income go strictly towards electricity costs.

Where will this money go? Well President Obama will be auctioning off the permits, so the federal government will be getting it. The President has stated that he wants to use some of the money to re-invest in "green" energy sources. If this is the case, it will probably end up in the hands of Wall Street investors with the right connections who are financing new "green" initiatives and other special interest types. Hopefully a few democratic senators from states like Wyoming, the Dakotas and the rest of the midwest will stand up to President Obama and not allow their constituencies to bear the brunt of these self righteous policies. I knew President Obama would be in favor of a redistribution of wealth in America, I just never guessed that he would be taking money away from the poorest Americans under the guise of saving the environment. Isn't it ironic that the goal of ending global warming is designed to benefit all of human kind, but the policies proposed to reach that goal could end up up impoverishing the lower classes and lower the standard of living of the vast majority of the public?