The foundations of our national policy will be laid in the pure and immutable principles of private morality, and the preeminence of free government be exemplified by all the attributes which can win the affections of its citizens, and command the respect of the world.
George Washington
Don't Pass the Stimulus v. 2 Bill:
The President's Press Conference : Part 3
I decided to write a multi-part series for once detailing an Obama press conference, in part because I was tired of ineffective responses by the mainstream and even conservative media outlets whom have failed to challenge Obama's constant political spin, and unspoken, unchallenged ideological assumptions/assertions, and his constant uncivil, hypocritical, polemical, divisive rhetoric and tone. Friday's part is available here, and yesterday's is here. This is the final segment of the series. Note that there are some questions I'm not addressing here (e.g., foreign policy--Pakistan, etc.).
Solyndra -- this is a loan guarantee program that predates me that historically has had support from Democrats and Republicans as well...And part of what's happening is China and Europe, other countries, are putting enormous subsidies into these companies and giving them incentives to move offshore. Even if the technology was developed in the United States, they end up going to China because the Chinese government will say, we're going to help you get started. We'll help you scale up...And so we're going to have to keep on pushing hard to make sure that manufacturing is located here, new businesses are located here, and new technologies are developed here. And there are going to be times where it doesn't work out, but I'm not going to cave to the competition when they are heavily subsidizing all these industries.Notice here how Obama consciously attempts to shift blame from himself: he tries to co-opt the GOP. The fact of the matter is that the same person whom has been railing at banks socializing losses is suddenly explaining away Solyndra, pointing out all loans have a degree of risk, etc. That really doesn't wash, Mr. President: it's not just that we conservatives have an instinctive distrust of industrial policy, but you seem remarkably uninformed about a decades-old industry you are pushing for purely political purposes. Consider the following facts admitted by an industry proponent:
A reality check on the nature of industry margins — bluntly, for most of its ~40 year history, technology manufacturing has operated on negative margins. Traditionally, solar has been a buyer's market.The PV industry still [depends on] incentives and subsidies...The promise of ever-lower prices ignores the cost of hiring and supporting a highly trained staff, the cost of continuing R&D, and often ignores any discussion of margins...True believers can be blind to market and technological realities: the daunting task ahead is to develop a technology that will operate efficiently for at least 25 years in the sun (meaning, sometimes very hot sun and very bad weather), and cheaper to manufacture... Currently a number of factors are holding prices down: high capacity, high levels of inventory, softer demand, a myriad of module assemblers, and aggressive pricing.There are a number of points here, but a very key point behind Obama's progressive empire-building has been primarily focused towards building a morally-hazardous foothold, a stealth takeover of the private-sector economy by inevitable government scope creep. I don't see many conservative commentators focusing on what I consider to be an obvious pattern of behavior: we've been seeing this for years: there's a reason why Ted Kennedy enthusiastically embraced George W. Bush's decision to expand federal intervention in the public education system, No Child Left Behind. And notice the fact that even as Bush sharply escalated federal spending, Ted Kennedy was embittered, grumbling it was not nearly enough. SCHIP (the subsidized child health care program) expanded eligibility into the middle class. The Democrats like to bash Bush for the unfunded prescription drug program, but took credit for filling the doughnut hole (i.e., the portion of prescriptions which required policyholders to cover a certain amount of drug costs using their own resources). ObamaCare also greatly expands eligibility in Medicaid, the government's subsidized health care program for poor people. I recently pointed out how Democrats have gone from doubling unemployment compensation eligibility from one year to two, and now Obama is proposing to expand it to three; Obama wants to expand this year's payroll tax holiday from 2 points to 3 points.
Obama decided to in-source college student loans, because he argues that the federal government can operate it more cheaply. [Who can challenge this assumption, given the spectacular success of proactive federal and state regulators of mortgage lending practices. After all, just like Internet speculators in the late 1990's convinced us we were in a new economy where profits didn't matter--well, mortgage lenders in the 2000's somehow decided we were in a new housing market, where you didn't have to run employment and credit checks on prospective homeowners or require collateral, so they were vested in the decision. Where were Greenspan and Bernanke noting that the emperor was wearing no clothes?] You see, the federal government has core competencies in lending; it has learned its lessons so well from the S&L crisis and the recent economic tsunami. Does anyone seriously doubt that progressives may soon discover the government (which can't balance its own checkbook) has special banking competencies elsewhere? There's that evil profit motive, of course. Never mind, of course, that the federal government has such a good track record being frugal with the taxpayer buck; just consider its adept management of the US Post Office...
Obama has been pushing high-speed rail projects, based on this schoolyard-type taunt of meeting what Chinese is doing (i.e., losing money in high speed rail), KNOWING that in recent years Amtrak lost money on at least 41 of 44 routes and has required ongoing massive subsidies. In business we call this a loss leader, e.g., a cellphone service gives you a "free" cellphone--provided you agree to a long-term contract. Obama can talk a good game about bridges falling apart--but nobody asks him why he wasn't targeting their repair versus spending money on high speed rail traffic which will require an indefinite stream of government subsidies.
We can already see where these investments are going: we can't stop "investing" in green energy now, even though solar and wind power are hardly competitive in cost, do not have viable storage technologies, and are notoriously unreliable.
The wider point, of course, is that knowing the industry has been largely unprofitable through its history, any reasonable lender would have prudent. There was a reason the Bush Administration had dragged its feet on Solyndra. There is a price that the Obama Administration has paid for being ideologically the most anti-business administration in American history. It simply did not have the right experienced managers in place to tell Obama that the emperor is wearing no clothes. One would have thought that an intelligent Obama would have been wise enough to realize that he was taking a risk in promoting Solyndra as the poster child for his green energy agenda. If Obama knows anything, it's symbolism, and Solyndra has now become a poster child for Obama's crony capitalism; what has become of his moral authority to judge banks (particularly the ones astute enough to realize that Solyndra had a business model that just didn't work)?
Now, the frustrating thing that we have right now is that you've got folks over in Congress, Republicans, who have said that they see their role as eliminating any prohibitions on any practices for financial companies. And I think that's part of the frustration that the American people feel, because they've just gone through a period in which they were seeing a bunch of hidden fees, rate hikes that they didn't know about, fine print that they could not understand. That's true for credit cards. That's true for mortgages.First of all, here's yet another example of Obama raising a straw man of the Republicans. It's intellectually lazy and reflects badly on his leadership, character, and personal integrity. One could argue that philosophically a conservative would oppose any change from the status quo--including existing regulations. There are a number of pushing-on-a-string financial reform regulations, which I have termed 'Dodd N Frankenstein'. Certainly if the government is insuring deposits, I expect that banks lending on those assets are engaging in prudent lending practices (say, unlike mortgage lenders ignoring creditworthiness of an applicant). However, what we conservatives learned from the economic tsunami is that many parties contributed to the problem--mortgage lenders were only part of the problem: we had problems with regulators, politicians, accountants, credit bureaus, etc.
The issue that I and other conservatives have is that what we saw was largely due to incompetent regulators and dysfunctional government, which implicitly guaranteed loans of overpriced assets, particularly those held by GSE's. These bureaucrats lacked the knowledge and expertise to handle their existing mandate. These progressive Democrats in the 111st session of Congress engaged in greatly expanding the bureaucrats' footprint over financial services, like bad episodes of Bureaucrats Gone Wild. Talk about scope creep and regulatory empire building, none of which solves a single problem so long as the government hires incompetent or poor-performing regulators. Under what context to the 2008 economic tsunami did we run into a crisis over debit card fees? New regulations do not come without costs--oversight, compliance, and unintended consequences, particularly as financial institutions have to pass along relevant costs. Just to cite an example from health care: Democrats are quick to trumpet "free" annual checkups, etc., as if laws are no-cost mechanisms. Doctors, nurses, etc., beyond limited donated services, do not work for free; they pass along the costs of their services elsewhere
But I have to smile at Obama's blind hypocrisy: let me markup something Obama said: "And I think that's part of the frustration that the American people feel, because they've just gone through a period in which they were seeing a bunch of hidden taxes (regulations, mandates, inflation), tax hikes that they didn't know about, fine print in 2000-page bills that they could not understand."
if we don't prepare now, if we don't invest now, if we don't get on top of technologies now...other countries are subsidizing these industries much more aggressively than we are -- hundreds of billions of dollars the Chinese government is pouring into the clean energy sector...We are not going to be duplicating the kind of system that they have in China where they are basically state-run banks giving money to state-run companies, and ignoring losses and ignoring bad management.This was one of the more interesting excerpts from the news conference. Obama is making a point I myself would make about the Chinese government. It essentially controls the banks, key companies or whole industries; it establishes a number of protectionist barriers to market access. I strongly suspect the Chinese government has more than its fair share of Solyndra stories (across its economy), and I seriously doubt that the same type accounting and disclosures are in effect. The fact that the solar market is growing is not surprising given the supply and demand curves and the general down cost trend.
If you do a casual Internet search, however, you'll see the same kind of groupthink fear-mongering fretting about a Chinese surge in subsidizing alternative energy sources. Several New York Times pieces fret about the intrinsic inability of the dynamic American economy to compete in an industry where state planning acts more astutely and rapidly. We've seen the same kind of anxieties in the past--about the Soviet Union, Japan, etc. When I was earning my MBA, a large number of American schools were teaching the Japanese language and there was an anxiety that we couldn't compete. We now know that Japan hit its peak in the late 1980's and has been struggling ever since. Tell me, do you believe that a government is capable of dealing flexibly and rapidly within the context of a dynamic global economy? I will simply point out others have debunked the case for industrial policy, and even in the solar energy industry, leadership has swapped several times over the past 2 decades.
American manufacturing remains far more robust than most people realize; Dr. Mark J. Perry of the excellent Carpe Diem blog seems to publish posts on that topic at least once every few days; over the weekend he published a post focusing on a recent WSJ column suggesting not to expect Apple-like innovations (following the recent passing of Steve Jobs) out of China. What would really make a difference in terms of alternative energy development in the US is not the US government throwing strings-attached money it doesn't have at alternative energy, but a smaller government footprint.
But that's exactly what the loan guarantee program was designed by Congress to do, was to take bets on these areas where we need to make sure that we're maintaining our lead.The government needs to get out of the loan guarantee business; have we learned NOTHING from the GSE debacle during the economic tsunami in 2008? It creates moral hazard; companies always do a better job when their own resources are at stake. If anything, the knowledge that losses can be socialized can result in riskier loans. Obama seems to believe it's the federal government's role to pick winners and losers in the economy. This is a big inconsistency within his politics: he preaches on one hand that lobbyists are unacceptable, but I strongly suspect when it comes down to simplifying taxes and eliminating corporate loopholes, Obama will look for exceptions in order to protect our solar energy companies.
I am ready, eager, to work with [Republicans]. They say, we've got this great idea for putting teachers back in the classroom; it's a little different than what you've proposed in the jobs bill. I'm ready, eager, to work with them. But that's not what we're hearing right now. What we're hearing is that their big ideas, the ones that make sense, are ones we're already doing.The reason I'm citing this here is because it captures the essence of Obama's idea of "bipartisanship". He is utterly clueless: I absolutely reject that the federal government should be underwriting the costs of state or local public employees. Over the past decade or two, progressives have been hiring more and more money at hiring teachers to reduce class size, even though we know other countries have higher ratios and yet their students outperform ours. If this is important to state or local governments, let them raise the revenues. But I absolutely reject that we should be engaging in the morally hazardous policies of bailing out state or local governments. It sets a bad precedent. Let's face it: this is not a substantive policy of Obama's--this is a campaign statement. He's running a disingenuous populist campaign: he's telling constituents that unlike the Republicans, he "cares" about education, teachers, and students. It's a load of cow pies. But can anyone guess what really annoys me out of the quote, besides Obama's progressive policies as usual? "the (ideas) that make sense". First of all, note that Obama is implicitly making himself the arbiter of what constitutes "ideas that make sense".
The real meaning of Obama's rhetoric: as long as I get the main courses I want on the table, I'll let the Republicans garnish the plate however they please. That's not negotiation: that's capitulation. Genuine negotiation means that Obama doesn't get everything he wants on the plate, and the Republicans get some things they want and he doesn't.
I mean, here is a good question, here's a little homework assignment for folks: Go ask the Republicans what their jobs plan is if they're opposed to the American Jobs Act, and have it scored, have it assessed by the same independent economists that have assessed our jobs plan.Obama gets more and more annoying here. What conservatives want is not throwing out grandchildren's money down the leaky bucket of progressive priorities: that's INSANE. We don't believe in Keynesian economics--get that, buddy? We don't believe in the broken window fallacy. We believe in getting the most bang from a tax dollar. No reputable economist believes that Stimulus v. 2.0 is a growth agenda. Republicans want a growth agenda. This means doing things like simplifying and reducing tax rates, especially for global competition. It means things like putting new regulations on hold indefinitely. It means things like slashing spending so government is not crowding out private sector investment. I don't want activist government. We've already seen these ideas before; none of them really worked--and for good reason.
But I'm also dealing with a Republican Majority Leader who said that his number-one goal was to beat me -- not put Americans back to work, not grow the economy, not help small businesses expand, but to defeat me. And he's been saying that now for a couple of years.This is deliberately misleading; I completely agree with Senator McConnell--whom, by the way, is not the Senate Majority Leader (Harry Reid), but the Minority Leader. This is NOT personal: it's business. It's extremely difficult to do the people's business when you have a President whom is hyper-political, incompetent, inexperienced, leads from behind, and fails to negotiate in good faith. And the GOP agenda differs from Obama's: conservatives, unlike Obama suggests, ARE focused on economic growth, but not Obama. Obama's class warfare tax hikes will lower the tax base, not increase it.
The indisputable fact is that Obama is the most partisan "leader" in American history. He rammed three major bills (stimulus, financial reform, ObamaCare) down the throats of the Republicans, never seriously negotiating with him because he had the numbers to push the legislation through. It's totally understandable why McConnell wants Obama out of office: what else do you do when Obama blocks serious spending cuts and refuses to touch entitlement spending, in fact didn't back his own bipartisan deficit reduction commission funding.
Musical Interlude: My Favorite Groups
Moody Blues, "Ride My See-Saw"
