Ah, but a man's reach should exceed his grasp, Or what's a heaven for?
Robert Browning
Meet the Press: A Rant on 10/30/11: Part 3
PLOUFFE: We have to win this race, you know, we--if we don't win the clean energy race in terms of technology, innovation, and jobs, and cede it to other countries, we're not going to have the century--we need this.The progressive Democrats are absolutely clueless here. What drove development of the Internet was not some policy wonk in the Clinton Administration (including Al Gore) but the private sector. In fact, the Obama Administration has been counterproductive by attempting to implement so-called "net neutrality". The last thing the business world needs is some government bureaucracy gone wild, pushing regulation for its own sake.
From the supply side of the economy, virtually everything the Obama Administration has done (or not done) has been counterproductive. Regulatory expansion during the Bush Administration was bad enough. Tthis doesn't follow the progressive Democratic script, because they want to blame the real estate bust as the result on greedy bankers, which they interpret as the absence of regulation. The fact is there was more than enough blame to go around, including the nature and extent of government guarantees, counterproductive progressive policies encouraging high-risk mortgage applicants, and reactive versus proactive (and/or dubiously competent) bank regulators on federal and state levels. Regulatory compliance is a very real cost to companies; businesses have to hire specialists or related services. These costs get passed along to consumers. The Obama Administration has qualitatively increased the burden on the private sector with misguided, ineffectual, counterproductive, pushing-on-a-string policies in housing (nearly 95% of mortgages?), health care, the financial sector, and the environment. It is interfering with business attempts to become more scalable to meet the challenges of global competitors (e.g., the proposed AT&T/T-Mobile merger). The Obama Administration has been slow to open up new markets for American goods and services, only recently pushing for trade pacts with South Korea, Colombia and Panama, originally negotiated by the Bush Administration long before President Bush left office. It still has not addressed having the highest business tax rate among major world economies (Japan used to have the title but lowered theirs several months ago.)
Some other evidence of the adverse impact of Obama Administration policies? Although the World Bank ranks us #4 overall for doing business (behind Hong Kong, Singapore, and New Zealand), we rank #13 in terms of starting a business (even Rwanda outranks us!), #16-17 in basic site preparation, #20 in trading across borders, and a whopping #72 in taxes.
The 2011 Index of Economic Freedom shows us rated at #9 overall (behind Denmark, Ireland, Canada, Australia , and others):
"The United States’ economic freedom score is 77.8, making its economy the 9th freest in the 2011 Index. Its score is 0.2 point lower than last year, reflecting deteriorating business freedom, trade freedom, government spending, and monetary freedom."The US remains the world's largest manufacturer (despite the fact that 70% of jobs are in the service sector). Do I trust politicians to pick winners and losers in the marketplace as Obama and Plouffe clearly want, i.e., industrial policy? Absolutely not. Take, for instance, solar energy. The industry is decades old, and product sales have hardly attracted the kinds of margins we see in other industries. Yet those savvy investors and businessmen in the Obama Administration now are having to cover multi-million dollar loans by bankrupt green energy firms, the first being the infamous Solyndra and more recently (a $43M loan) Beacon Power.
You know, progressives go on with propaganda claims of companies (e.g., banks), privatizing gains while socializing losses, but in these cases, we are seeing the government being even worse judges of risk than the private sector. Didn't the Democrats learn anything from their pumping up the GSE's, only to have a lot of unconventional mortgages bought by them start failing at the expense of the American taxpayer? Now the American taxpayer is having to cover progressive Democratic bets on solar power plays that go bust?
Even assuming Obama has some basic knowledge of key industries and knows something professional analysts and investors don't know about margins and industrial sectors, the fact is that leaders can be transitory, and a loser or non-participant in one product generation can win the next. For example, AOL was a dominant ISP just a few years back; Nokia was a major cellphone vendor; Lotus 1-2-3 was the undisputed leader in PC spreadsheets. The solar energy industry leadership has shifted among multiple economies over the past 4 decades. American leadership in the industry did not dissuade Germany or Asian competitors from investing; they didn't think, the Americans have already beaten us; the game is lost; why bother. Even if China wins a generation, our scientists and engineers could develop a next generation approach which radically undercuts Chinese costs. (Ask me whether I think Chinese Communist leaders are any more prescient than Obama when it comes to business and industrial policy.)
No, crony capitalism and industrial policy are not the answer; the private sector and the government serve different purposes. Government costs businesses in many ways: it intervenes in things like business startups, mergers, and operations, employment policies, workplace ecology, and product approvals, screens and sales; it is a competitor for resources: investment dollars, personnel, etc. Globally uncompetitive taxes make it more expensive to manufacture in the US. Government policies can obfuscate individual and business decision making and influence costs of imported materials or components or the prospects of international sales. Steve Jobs reportedly advised Obama how much easier it was to set up operations in China.
Obama has done little to streamline various approval processes (e.g., natural resource (oil & gas) development, drug approvals and intellectual property laws.) On the latter point, I'm aware of the recent passed America Invents Act, but, speaking as an IT professional, the Act doesn't address a major issue of software patents vs. copyrights. (The bottom line is that software patents can have a chilling effect on software development in smaller companies; inadvertent patent infringement, say zealously pursued by big companies with legal staffs, may result in expensive litigation that could put the smaller companies out of business.) But the bottom line is that Obama has paid little, if any, attention to lessening the impact of government on business, e.g., by reducing taxes, streamlining regulations (i.e., need to have vs. want to have regulation), providing a single point of contact (e.g., an ombudsman type function), and demonstrating marginal utility relative to costs for any and all future regulations.
MR. GREGORY: Should government be playing venture capitalist to try to prop these interest--industries up?
PLOUFFE: By the way, it was a program that was supported by President Bush, so there's been support in both parties. Many of the members of Congress who--who've offered criticism themselves were lobbying for funds for, for companies like this. So I think in order--listen, you see what's happening in other countries, you know, huge investments in this clean energy sector.David Gregory: good question, and the only legitimate answer is NO! As for Plouffe's EXCUSES (whatever happened to that rhetoric that Obama was going to hold his administration to a higher standard?) that other politicians supported or approved similar things (and let me point out that the Bush Administration passed on the Solyndra loan--which to me would have been an immediate red flag: the Obama Administration should have, simply as a matter of prudence, subjected the company to a higher standard of scrutiny) and that other countries also engage in industrial policy and/or protectionist tactics are not acceptable reasons, worthy of the world's largest free economy.
PLOUFFE: The president has doubled fuel efficiency standards... it's going to make sure that our automotive industry, which the president saved at a tough political time, is going to continue to innovate and lead the world.I would have normally just rolled my eyes at this nonsense, but I'm sufficiently annoyed at disingenuous rhetoric. First, let's review why Detroit abandoned small, more fuel efficient cars in the first place: slim margins and union contracts. Let me quote some examples from a Fortune story in 2007:
According to the latest calculations, the gap between Japanese and American carmakers' profits average out to about $2900 per vehicle [in favor of Japan]...A big reason is the cost of labor. Health care is the biggest chunk. GM (Charts), for instance spends $1,635 per vehicle on health care for active and retired workers in the U.S. Toyota (Charts) pays nothing for retired workers - it has very few - and only $215 for active ones. Contract issues like work rules, line relief and holiday pay amount to $630 per vehicle - costs that the Japanese don't have. And paying UAW members for not working when plants are shut costs another $350 per vehicle.Here's an interesting note on Japanese health care from NPR:
It has the longest healthy life expectancy on Earth and spends half as much on health care as the United States...Everyone in Japan is required to get a health insurance policy [the poor are subsidized]...it's definitely not "socialized medicine." Eighty percent of Japan's hospitals are privately owned — more than in the United States — and almost every doctor's office is a private business....The Japanese go to the doctor about three times as often as Americans. premiums to around $280 a month for the average Japanese family. And Japan's employers pick up at least half of that. If you lose your job, you keep your health insurance.The Japanese generally have a healthier lifestyle, which makes a difference. The last thing I want to endorse is the Japanese focus on price controls; the article notes that doctors supplement their income with extras like vending machine profits and paid parking at the clinics, and hospitals can barely keep afloat with $10/night room charges. Let me point out here that I believe that the best way forward is not a top-heavy federal bureaucracy, but increased transparency of prices, mark-ups and resource sharing, improved pipelines for health care professionals and more delegation to first-tier medical assistance (e.g., nurses). I might also suggest things like subsidizing educational costs for in-demand doctors (family practice) whom pay off their obligation by servicing a certain percentage of Medicare/Medicaid patients.
Getting back to the main point, the obvious point is: why did Detroit move towards higher margin vehicles, like trucks, SUV's and luxury automobiles? Clearly it was the only way it could be profitable; these vehicles, of course, were larger and less fuel efficient. There is no doubt in my mind that if Detroit finds it can't hit 56 mpg, Washington will do what it always has: it will either change the standard or make loopholes, because the Democrats are not going to stand up to UAW when it comes to layoffs.
As for Obama "saving" Detroit, nothing could be further from the truth: Obama delayed the decision to go to bankruptcy, thereby continuing to subsidize, at taxpayer expense, a failing business model. Bankruptcy would have allowed management to shed the unsustainable union contracts. The last thing we needed, while arguing whether any bank should be too big to fail, the ultimate form of crony capitalism, Obama decided to argue an entire industry sector was too big to fail. This is unconscionable: the real story, of course, is much of his political support is from the unions, and he can't afford to let his political constituents down. There is no validity of his self-proclaimed "the auto industry is too big to fail"; it has no authenticity beyond his own opinion. It is morally hazardous policy; it's a precedent that should never have been set. Obama's biggest problem continues to be that he fundamentally doesn't believe in the free market system.
"Saved at a politically tough time?" You can't be serious. Obama had the strongest hand in Congress in recent history at the time of the auto bailout. Maybe it had an effect on the mid-term elections.
PLOUFFE: He promised change, and that's exactly what he's delivered. Change is ending the Iraq war. Change is making sure you can serve this country no matter who you love by ending "Don't Ask, Don't Tell." Change is passing, after 100 years of failure, healthcare reform. Change is having economic and tax policies focused on the middle class. Change is restoring our place in the world, taking the fight to al-Qaeda, you know, eliminating Osama bin Laden, and so many of the terrorists.What didn't change: unsustainable spending; a jobless recovery; a failure to address an increasingly insolvent entitlement system. What did change? The US debt being downgraded for the first time in its history. The national debt for the first time in history exceeding the size of the economy. The first 3 trillion-dollar deficits in the history of the country.
Let's address Plouffe's points. First of all, it was President Bush, not Obama, whom came to an agreement to end our Iraq involvement at the end of 2011. Second, the demise of DADT was mostly window-dressing: gays have served in the military even before DADT; the only issue was being discreet in discussing their sex lives, which has nothing to do with being a professional soldier. If you go back to my older posts, you'll find that I supported the repeal, but I have little respect for soldiers whom knew the policy before going public. ObamaCare was unpopular at the time it passed (in fact, it barely passed the House where the Democrats had a huge majority--and many Democrats defected), and there have been a couple of strong court decisions suggesting that certain core features (e.g., the mandate) are constitutionally questionable. Middle-class tax reform was a core part of the Reagan and George W. Bush tax cut agendas; what has changed is a counterproductive attack on the economically successful. "Restoring our place in the world"? Obama has mostly followed Bush's framework in Iraq and Afghanistan; certainly many Democrats thought that change meant our cutting and running from Iraq and Afghanistan. The operation to take out UBL caused issues with a longtime American ally, Pakistan. And let's not forget that 9/11 mastermind KSM was captured during the Bush Presidency, and the basic information leading to the demise of UBL had been developed during the Bush terms. If Plouffe is attempting to suggest that Bush was soft on Al Qaeda or wouldn't have taken UBL out if he knew where he was, Plouffe is out of touch with reality.
PLOUFFE: So in the middle of this, we were teetering on a great depression, he made some tough calls to make sure that we didn't go in that direction and began to climb.What a load of cow pies! What "tough calls" did he make? The end of the recession was June 2009, which means we bottomed out less than 5 months into the Obama Presidency. Only a trickle of the massive stimulus bill funds had been disbursed by that time. The tough decisions involved the passage of TARP--months before Obama became President. It should be noted that at a point after 9/11 under George Bush, there was some concern about a possible global deflation. What was "tough" that Obama did? Pursue auto bankruptcy after nagging earlier that no one would buy a car from a bankrupt car company? The guy had some of the largest partisan edges in both chambers of Congress in decades.
PLOUFFE: But the key thing is, David, no matter who we run against, they're offering the same economic policies that led to the great recession, that led to destruction of middle-class security in incomes.Well, granted, the tax reforms by Reagan and George W. Bush resulted in some of the longest strings of net employment gains monthly over the past few decades which Obama has not matched. From the standpoint of most people, that's a good thing. Bush's policies did not result in the great recession; Bush had pushed for GSE reforms in 2005. It was the Democrats whom raised taxpayer exposure by growing the GSE market share to nearly half the mortgage markets; it was the Democrats whom pushed for lending to high-risk applicants. I may address this point more substantively in a future post, but MJ Perry of Carpe Diem has cited a number of relevant studies addressing income mobility, e.g., among income group quintiles.
PLOUFFE: One is [Romney] has no core...So you, you look at--issue after issue after issue, he's moved all over the place. And I can tell you one thing, working a few steps down from the president, what you need in that office is conviction, you need to have a true compass, and you've got to be willing to make tough calls.This is rich coming from President Obama's adviser; after all, what about all of the reversals that Obama has made since becoming President? He was a staunch critic of Petraeus' surge strategy--and then in power, he implements a surge policy in Afghanistan run by--Petraeus, now his CIA chief. Obama wanted to close Gitmo and wanted terrorists to go through civilian courts instead of military trials; guess what happened to KSM's trial in NYC? Obama ran on achieving a class warfare tax hike; he signed an agreement last December to extend all the Bush tax cuts for 2 years. He ran against a health insurance mandate during the Presidential campaign, and it's now a key point in ObamaCare. He voted against raising the debt limit as a senator, but lobbied for it as President. I could play this game all day, Plouffe; when a person thinks of clear, decisive leadership, it's NOT lead-from-behind Obama.
I do not work for the Romney campaign, but let me make the following observations: unlike Obama, Romney was able to work with an opposition-controlled legislature and passed a reasonably popular health care law. As for climate change legislation--which, by the way, Obama failed to pass even with lopsided majorities, there was a little scandal maybe Mr. Plouffee didn't hear about called ClimateGate. There is more than sufficient reason to question the science after the scandal broke. As for social issues, first of all, the President doesn't really deal with these, other than indirectly in the selection of judicial candidates. But Romney's positions are nuanced, which Plouffe disingenuously ignores. For example, on abortion, Ted Kennedy argued during their Senate election campaign that Romney was really pro-life. Romney said at the time that he didn't agree with abortion, but didn't think banning abortion was good public policy. He then shifted his political view to conform with his personal views. It's an entirely coherent explanation. For example, I oppose recreational drugs in all forms, but I think current drug policies are counterproductive. Similarly, I rarely drink alcoholic beverages, but I oppose Prohibition. You have to look at the context of the position.
This is the end of my discussion of Plouffe's comments, but I might write another post on other comments made during MTP, especially the former governor of Michigan.
Political Humor
More than 3 million people from Maine to Maryland lost power because of the snowstorms over the weekend. In New York, the Occupy Wall Street protesters are thinking of changing the name to “I'm freezing my beard off.” - Jimmy Kimmel
[Former Speaker of the House Nancy Pelosi was heard grumbling, "Being out of power since this weekend? Try being out of power since January!"]
President Obama invited trick-or-treaters to the White House Saturday night and they had a very scary party. They sat in a circle, turned off all the lights and the kids read the president his poll numbers. - Jay Leno
[Not only that, but his 2008 campaign promises have come back to haunt him...]
Musical Interlude: My Favorite Groups
Foreigner, "Long, Long Way From Home"
