Published in Economy

The war between U.S. Catholic bishops and the Obama administration over Obamacare's abortion, sterilization and contraceptive mandate has been well publicized and was to be expected. Democrats, including Catholic Democrats, have openly and notoriously held policy positions with regard to these sexual issues which run directly counter to Catholic social teaching. That the bishops believed Obama would exempt religious institutions from submission to such regulations exposed profound naivety, but the ideological tension and potential for conflict was apparent to all.

The bishops' recent stance against Rep. Paul Ryan's budget in the House likely took many by surprise. The Church would seem to a casual observer to fit hand in glove with the Republican Party platform - primarily because the media usually only highlights the Church's position on a single issue: abortion. But those more intimately aware of the Church's hierarchy will notice a plethora of self-identifying blue-collar, union-supporting Democrats among the nation's Catholic leaders. These are Joe Biden, Nancy Pelosi and John Kerry Catholics, absent the pro-choice stain. The social gospel, according to this large faction, fits squarely with liberal economic policies. And so, we have the present impasse over the Ryan budget.

And it's a wonderful thing.

The debate will largely be decided by the November elections and the weight of the mandate handed to the victorious party. Nevertheless, for the first time in recent history, America is witnessing a mature and principled political debate. Between the GOP and the Catholic Church, no mud is being thrown, no names are being called and both sides are showing respect to the ideas and persons of their rivals. Gently rebuking the Georgetown Ninety, Ryan reiterated that the financial crisis requires a "charitable conversation." This is the model of political bipartisanship which America demands and deserves.

Unfortunately, it only exists because one party decided to sit this one out.

• Small businesses care almost twice as much about licensing regulations as they do about tax rates when rating the business-friendliness of their state or local government.

• An important predictor of small business friendliness was whether small business owners are aware of their state or local government offering training programs for small businesses.

• Small business owners ranked Idaho and Texas as the most business-friendly states, with Oklahoma City and Dallas-Ft. Worth taking top honors among cities across the nation. Vermont and Rhode Island found themselves on the opposite end of the spectrum, joined in the bottom-five by New York and California. (Ohio finishes with a lousy D+ rating.) Every city and state has its own page with a visualization of the location's full results.
  

It may be no accident that most of the states in the top 20 are also right-to-work states, as labor force flexibility is highly sought after when a business seeks a location. Several economists, most notably Ohio State's Richard Vedder and Harvard's Robert Barro, have found that the economies in R-to-W areas grow faster than other states, have higher employment and attract more inward migration. Governor Scott Walker's battle with the unions in Wisconsin (See "Will Wisconsin Rise Again?"), a state that edged into the top 20 this year for this first time, demonstrates that the struggle for a pro-growth agenda can be contentious. As one Badger State business leader remarked, "Finally, Wisconsin is headed in the right direction."

The Lone Star State was given high marks foremost for its business-friendly tax and regulatory environment. But its workforce quality, second only to Utah's, is also highly regarded.

California's enduring place of perpetual decline continues in this year's ranking. Once the most attractive business environment, the Golden State appears to slip deeper into the ninth circle of business hell. The economy, which used to outperform the rest of the country, now substantially underperforms. And its status as the most ruinously contentious place to operate remains undisturbed in eight years. Its unemployment rate, at 10.9 percent, is higher than every other state except Nevada and Rhode Island. With 12 percent of America's population, California has one-third of the nation's welfare recipients. Each year, the evidence that businesses are leaving California or avoid locating there because of the high cost of doing business due to excessive state taxes and stringent regulations, grows. (See "Eastward Ho!") According to Spectrum Locations Consultants, 254 California companies moved some or all of their work and jobs out of state in 2011, an increase of 26 percent over the previous year and five times as many as in 2009.

The following is a representative sample of comments from participating CEOs:

• California is the worst! They are doing everything possible to drive a business out of their state. If it were not for the climate, they would have lost half their population

• California regulations, taxes and costs will leave only tech, life sciences and entertainment as viable. If you aren't an elitist, no room here for the middle or working classes.

• California treats business owners like criminals. California has different overtime policies for its own employees vs. private sector.

• California's labor regulation is a job killer. We will be moving our business out of the state, which will lose hundreds of jobs simply due to the poor regulatory environment.

• California should secede from the union--it is like doing business in a foreign country, it has its own exchange rate, and its regulation is crazy.

AEI's on-line magazine, The American, posits that "Middle America is a clear picture of how much the basics matter: Cost of living, job quality, schools, and opportunities to develop the right skills for the best jobs."

The Midwest's story is important because it serves in significant ways as a regional microcosm of how growth and opportunity should look in America today.

In a recent study we look at trends that upend the conventional wisdom about the Midwest. We find that it is neither doomed to a slow and dirty demise like an old house on an eroding slope, nor forced to reinvent itself Dubai-style in order to compete with Silicon Valley or Manhattan. The Midwest's future is rooted very much in its past--but with some important updates.

What do we mean? For starters, this means capitalizing on Americans' desire to reside where the cost of living and doing business is favorable. As the last Census showed, Americans move in droves to regions where the cost of living is low, businesses face fewer obstacles, and workers have choices. As Wendell Cox and Joel Kotkin have shown, this goes for 25- to 35-year-olds as well as 55- to 65-year-olds. People want options and a good quality of life at a price they can afford.

In the Midwest, these trends have favored placed like Columbus, Ohio . . . .

Noting that 83% of manufacturers nationwide complain of "a moderate or severe shortage of skilled production workers," the authors suggest that the Midwest is on the verge of a "new industrial paradigm," which will be "characterized by a blend of heavy manufacturing, new technology, a more highly educated industrial labor base, and lighter labor restrictions." That last factor is a reference to labor law reforms such as the recent movement to quell labor unions and establish "right-to-work" states.

When you add to all of this the new energy sources discovered in some parts of the Midwest--such as new finds in Utica shale in Ohio--a new industrial paradigm in the region could end up being a large source of new wealth creation in the coming generation.

Let us hope that Ohio may provide the model by which to lead America from economic malaise. But to do so, those who are opposed to labor reform and who wish to suppress natural gas production will have to be defeated. Unions and environmentalists - that is, Democrats - continue to prioritize self-interest and disfavored ideologies above economic recovery. One hopes that these factors will influence voters in Ohio, the Midwest and throughout America in November.

National Review has an editorial up on President Obama's "Buffett tax" gambit. As they note it won't generate much income for the government, and most people with $1 million or more in income already pay a roughly 30% tax rate.

If the President really wants to tax Buffett, and if Buffett really thinks he's undertaxed, there's a much better way to go.  Mr. Buffett claims roughly $40 million in income. He has a net worth of roughly $50 billion. That means his return on investment is less than 1%, for officially purposes at least. Why so low?  Buffett pays no dividend in his holding company, and does not take the kind of salary that most people who run large companies take. 

If we really want to raise taxes on Mr. Buffett, we should pay attention to the reason why his income is so low.  Mr. Buffett's refusal to pay a dividend deprives we the people of a greater share of his true income.  And if the failure to buy an item can be taxable--the argument that he supporters of Obamacare make--surely it is also reasonable to force Buffett to pay an "idle capital" penalty. So long as he conspires against the people, and deprives us of tax revenue, by refusing to pay a dividend, he should pay a penalty.

Alberto Mingardi directs the Italian free-market think tank [yes, there are a few] Istituto Bruno Leoni. In the WSJ, he channels Friedrich Hayek to critique of the European Union.

Centralized welfare systems are necessarily run by a bureaucratic leadership that cannot master the knowledge needed to manage a complex society.

As Mingardi notes, "Hayek is often associated with his critique of socialist systems."

There is, in society, a "knowledge problem": Economic life requires the coordination of individual planning. The relevant knowledge for economic planning is dispersed rather than concentrated in society. If this makes coordination challenging enough in a market system, it also makes coordination a virtual impossibility under central planning: The planner can never secure and process all the necessary information to provide detailed guidance to any given development in society.

Mingardi applies Hayek's critique to "hard-core socialism" and "the soft-core version widely adopted by European democracies," arguing that the bureaucratic leadership of centralized welfare systems simply cannot micro-manage a complex society. The result is inevitably inefficiency and waster - but the temptation to be the party of welfare is clear:

These inefficiencies and this waste, of course, become rents for those that live off them and return the favor with their political support.

Mingardi effectively compares market and social models of democracy in light of the realities of European bankruptcies. The entire article is worth a read.

Allow me to follow up on my post on the Volt and its $250,000 / car taxpayer-funded subsidies by citing John Hinderaker's Power line post on ExxonMobile's good citizenship. He notes:

The Obama administration has devoted more energy to demonizing the oil and gas industry than just about anything else over the last three years. It has done this partly to deflect blame for its own lousy performance on the economy in general and energy costs in particular, and partly to justify transferring wealth from taxpayers to its cronies and supporters in the "green" energy sector.

But the bit I'd like to highlight follows:

Currently, the administration is campaigning to eliminate oil and gas "subsidies." The first question is what this means; when liberals talk about "subsidies" in this context, they usually mean the same routine tax deductions that are available to businesses generally. To the extent that there may be any actual subsidies, they are extremely minor. So, by all means, let's do away with them, along with subsidies for all other types of energy. Let's allow energy technologies to compete in the marketplace on their own merits. What would the effect of eliminating all energy subsidies be? Not, I am afraid, what the Obama administration has in mind. This is a slide from my Cronyism 101 presentation:

The administration demonizes disfavored American citizens, companies and industries as a tactic to increase its own political power, and slide money to its cronies and supporters. In the long term, this may be the most destructive legacy of the Obama administration.

The Chevy Volt is apparently going the way of the Dodo. GM has temporarily suspended production of the electric car. No surprises there - electric cars are about as efficient as windmills and the rest of the renewable-energy scam. But if you've not been paying attention to the electric car debacle, you may be surprised to learn that, in the wake of the Volt's utter failure, Ford and Toyota are preparing to reveal their own electric cars.

What explains this madness? Liberal radicalism? Environmental extremism? Democratic sycophancy?

Try sensible profit motive. If that seems ludicrous, consider:

Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it - a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

As Ed Morrisey concludes:

Now, why would two auto manufacturers jump into a market with almost no demand and a high failure rate?  Could it be because they're looking for the same kind of subsidies that gives them somewhere around $250,000 per vehicle before the car is ever sold?

The Obama administration has no regard whatsoever for taxpayer hardships or economic sustainability. He is motivated by the purely ideological goals of environmentalism and social democracy - goals which stand in direct opposition to economic recovery and individual rights. Obama is wantonly wasting money on liberal pet-projects in the midst of a debt crisis. He has neither understanding nor concern for the plight of struggling American (would-be) workers and has obviously prioritized his radical green agenda above American prosperity. One hopes that voters will not reward him for this inverted ethic.   

I think of all the couples with advanced degrees who have remarkably successful children, and I wonder how other kids can enjoy such success.  Charles Murray has long made this a theme of his. The full account can be found in The New Criterion.  "Many [in the new elite] have never worked at a job that caused a body part to hurt at the end of the day, never had a conversation with an evangelical Christian, never seen a factory floor, never had a friend who didn't have a college degree, never hunted or fished." Here is the excerpt from today's WSJ:

The members of America's new upper class tend not to watch the same movies and television shows that the rest of America watches, don't go to kinds of restaurants the rest of America frequents, tend to buy different kinds of automobiles, and have passions for being green, maintaining the proper degree of body fat, and supporting gay marriage that most Americans don't share. Their child-raising practices are distinctive, and they typically take care to enroll their children in schools dominated by the offspring of the upper middle class--or, better yet, of the new upper class. They take their vacations in different kinds of places than other Americans go and are often indifferent to the professional sports that are so popular among other Americans. Few have served in the military, and few of their children either.

Worst of all, a growing proportion of the people who run the institutions of our country have never known any other culture. They are the children of upper-middle-class parents, have always lived in upper-middle-class neighborhoods and gone to upper-middle-class schools. Many have never worked at a job that caused a body part to hurt at the end of the day, never had a conversation with an evangelical Christian, never seen a factory floor, never had a friend who didn't have a college degree, never hunted or fished. They are likely to know that Garrison Keillor's monologue on Prairie Home Companion is the source of the phrase "all of the children are above average," but they have never walked on a prairie and never known someone well whose IQ actually was below average.

From the full article, his conclusion:

The upper middle class in general, and the new upper class in particular, will continue to do well. But they will no longer be living any resemblance of what used to be called the American Way of Life. They will be the class on top in the same way that all complex societies have had a class on top, with nothing exceptional about it. We are perilously close to being in that world already....

The Czech and Slovak Republics offer an interesting perspective on the European monetary union. Slovakia adopted the euro in 2009, whereas Czech's plans to exchange the Ceska Koruna (Czech Crown) for the euro has been delayed indefinitely. The amicably divorced partners of the former Czechoslovakia thus allow for an interesting comparison.

Slovakia's decision to join the continental currency was deeply lamented when the poorer Slovakia was forced to pay into the Greek bailout fund - a payment for which Czech was not obliged. The Czech prime minister noted: "We can all see how the monetary union is turning into a transfer union or even a debt union."

But this incident simply added insult to injury. The fiscal limitations of a transnational currency have adversely affected Slovakia's economy, whereas the relative flexibility of the crown has allowed Czech to adapt with greater ease and efficiency. This is a condition writ large across Europe. While ostensibly favoring inclusion in the EU, former Warsaw nations regard adoption of the euro as a suicide pact. Writing primarily of Poland's avoidance of the economic pains in Europe, Gordon Fairclough notes in today's WSJ:

Across Central and Eastern Europe, the story is much the same. Governments from Hungary to Bulgaria that once clamored to join the euro club are putting plans on hold and reassessing the costs and benefits of something that used to seem inevitable. The spread of the euro was seen as part of Europe's manifest destiny, and the countries that emerged from behind the Iron Curtain saw the adoption of the currency as a potent sign of success, both political and economic.

The change of heart is an ominous portent for the decades-long process of increasing European economic integration. The common currency is the centerpiece and the leading symbol of that integration. If enthusiasm wanes for the euro, boosters fear, this could spell trouble for other efforts to knit the nations of the Continent together.

Moreover, economies like Poland's and the Czech Republic's are the kind that euro-zone leaders want to bring into their currency union--competitive, with low debt and strong growth prospects.

Czechs believe that a second reason for the diminished economic crisis in central Europe is cultural. Unlike Italians, Greeks and the like, they (and their governments) did not spend lavishly, incur unsustainable debt and expect that rainy days would never arrive. They regard the euro fund as terminally undisciplined and cherish their national economic autonomy.

I have long argued that the New Europe will soon shift the center of gravity away from western powers. But whether this New Europe will remain a union is being decided now by those western powers. Continued fiscal imprudence threatens not only Europe's economic integrity, but its political cohesion.

A commenter at Power Line writes astutely on the myth of a Wall Street bailout, noting that Wall Street banks were not the target of TARP and illustrating the vast differences between TARP and, say, the auto bailout. By way of introduction, John Hinderaker writes:

I used to think that revisionist history could be written only after lots of people who know better have died. Over the years, however, I have realized that this isn't true. It is common to see history rewritten before our eyes. Still, even in that context, the myth of the Wall Street bailout is remarkable.

Today's quotes of the day are from Paul Krugman, and provided to us by James Taranto.  From Krugman's Economics:

"There's obviously a relationship between tax rates and revenue. That relationship is not, however, one-for-one. In general, doubling the excise tax rate on a good or service won't double the amount of revenue collected, because the tax increase will reduce the quantity of the good or service transacted. And the relationship between the level of the tax and the amount of revenue collected may not even be positive: in some cases raising the tax rate actually reduces the amount of revenue the government collects."

Contrast that with a recent Krugman column:

In Democrat-world, up is up and down is down. Raising taxes increases revenue. . . . But in Republican-world, down is up. The way to increase revenue is to cut taxes on corporations and the wealthy.

More evidence, as if any were necessary, that Krugman does not regard his column as an intellectually serious endeavor. His job as a columnist is to dish our red meat to the Lefty horde/ use his well deserves credentials in economics to suport his prefered policy presceiptions with whatever means he can find at hand.

The Department of Agriculture is instituting a $.15 tax on Christmas trees--which are actually called that and not some PC holiday shrub or greenery. 

In the Federal Register of November 8, 2011, Acting Administrator of Agricultural Marketing David R. Shipman announced that the Secretary of Agriculture will appoint a Christmas Tree Promotion Board....And the program of "information" is to include efforts to "enhance the image of Christmas trees and the Christmas tree industry in the United States" (7 CFR 1214.10).

To pay for the new Federal Christmas tree image improvement and marketing program, the Department of Agriculture imposed a 15-cent fee on all sales of fresh Christmas trees by sellers of more than 500 trees per year (7 CFR 1214.52).  

May a government board promote Christmas?  Are we on our way to a state religion?  Or does the taxing of Christmas trees foretell the taxing of churches?  For a look at the founders' view of such matters (here noting the civil piety of Thanksgiving), see this additional commentary by Jefferson and this one by Washington.

UPDATE:  Rush reports that the board's fee (not a tax) has been withdrawn.  The fee is gathered from sellers so the board can come up with ways to help sellers market their product.

Previously, it was relatively easy to explain: Greece is bankrupt and we don't know what to do about it. But then we bailed Greece out and it's still not over. Now it's something along the lines of: Greece is bankrupt, but then French and German banks own Greek debt, so they might be bankrupt too. Then Italy has lots of its own debt, which Germany would like it to pay off, just in case that markets start worrying that Italy is bankrupt too.

And that's before we even get into the the proposed solution (mostly it seems to be that Germany should throw money at everything, which the Germans understandably aren't too keen on). How big does the bailout fund need to be? Who pays for it? Who do we (well, the Germans) bail out: the Greeks, or the banks? Should the European Central Bank be allowed to buy government bonds? No one is sure of any of this. Not even the people whose job it is to understand it.

But is there any chance he can deliver?

Perry just hit the WSJ op-ed page with an all-things-to-all-conservatives economic plan. "Cut, Balance and Grow," promises "to scrap the current tax code, lower and simplify tax rates, cut spending and balance the federal budget, reform entitlements, and grow jobs and economic opportunity."

Well that should be easy enough.

Perry is pointing high into center field (or, in this particular simile, right field). Here are a few details:

Taxes

• Individuals: Optional 20% flat tax rate or keep current tax rate (with $12,500 standard deduction). No death tax. No tax on Social Security benefits. No dividend or capital gains tax.
• Corporations: 20% tax rate (down from 35%). 5.25% tax rate for repatriation. "Territorial tax system" which only taxes in-country income.

Spending

• Balance the budget by 2020. Pass Balanced Budget Amendment. Cap federal spending at 18% of GDP. Freezes federal civilian hiring and salaries. Repeal ObamaCare, Dodd-Frank and Section 404 of Sarbanes-Oxley. Allowing personal retirement accounts.

Perry is, of course, vying for the right-pole position, with it's spectacular view of the Tea Party Express. He needs energy and is diving to the right (although all of his suggestions are entirely sensible - and perhaps entirely necessary). Whether they are at all plausible absent a miracle in the Senate is another matter altogether - and a question Perry should be asked by the press. In the inevitable failure to pass so ambitious a package, where would he focus? 

For the actual liberal media response, read the NY Times' Q&A with Perry. It reveals the liberal obsession with "tax cuts for the rich," or "income inequality." Watch for the media to make their class-warfare obsession the principal talking point against the GOP candidate.

In 1984 George Orwell's O'Brien declared, "If you want a vision of the future, imagine a boot stomping on a human face--forever."  That's the way I felt when I heard the participants in the Anita Hill lovefest, "Sex, Power, and Speaking Truth."    His narrow confirmation to the Court allowed him to revive American constitutionalism.  We must ever keep in mind this victory in our cultural wars.

Meanwhile, further south in Manhattan, the OWS mobs continue to flourish.  Comparing them to the Tea Party misses the heart of these true descendants of the American Founding:  They stand for the restraints, protections, and procedures of constitutional government. 

If you needed a perfect analogy to the fatal fiscal fantasies enrapturing Europe, Greek Prime Minister George Papandreou has provided it. He recently echoed Barack Obama in a speech before a German audience.

Is there any hope? Will we ultimately succeed? My answer is yes, we can!

Papandreou was speaking of the feasibility of Greek reforms on the heels of a German vote to expand the already massive bail-out fund for Greece. Clemins Wergin, writing in The Telegraph, asserts that "the question for Germany is still unanswered."

Are Germans right to continue, grudgingly, to help their southern European cousins out of the mess that their bad habits have got them into? Or are we simply pouring good money after bad?

Ring familiar? Perhaps Merkel could call her latest bail-out a stimulus bill, and chant a refrain of "Pass the bill." After all, she's already adopted Obama's stimulus tactics.

First, threaten doomsday if your latest spending bill isn't passed - even if there is no evidence whatsoever that this spending spree will prove any more effective than the last (several) spending sprees.

Germans realise that they are throwing their money at a mess that nobody seems able to control, and their anger at having to bail out the wrongdoers is checked only by doom-laden warnings about the consequences of the eurozone's failure. "If the euro falls, Europe falls," is one of Angela Merkel's oft-repeated slogans.

Second, demonize opposition - even if that opposition arises from the very people you are supposed to represent: 

And the reaction of Germany's political and media elites nurtures this notion of a conspiracy. Anyone who opposes the bail-out is labelled as anti-European. And although polls show that an overwhelming majority of people oppose giving more money to insolvent countries, no political force is taking up that case.

Spending addictions apparently exists equally among "social democracy" advocates both here and abroad. One might have hoped that Europe would learn from the mistakes of America, or vice versa. But continuing riots among radicals in opposition to necessary reform, as well as stubborn disregard for objective economic realities and popular opinion among politicians, clearly indicate that reconsideration of failed policies are not in the cards.

At least America has a Tea Party movement and the hope of economic restraint. Are there any indications that Europe has even the beginnings of such a bulwark to pending fiscal disaster? One wonders how far Europe and America must fall before the people finally say, "No, you can't!"

Ford's new commercial might represent a cultural milestone.

"Chris," the character in the commercial, does not want to buy a car from a company that the government has bailed out.  Moreover, Chris attacks the basic idea of the entitlement state when he says "that's what America's about."  We try our best. "When you fail, you've got to pick yourself up, and go back to work." 

Behind the veil of ignorance, an American wants the opportunity to succeed or fail on his own merits.  That implies that failure has real consequences.  Hence the strictures against bailouts.

Since the 1960s, when commercials touched political themes they have tended to reflect Lefty themes, since, as a rule, Progressivism has had chic cachet.  That has not always been the case, but it has been the general rule.  But this commercial goes after the bailout state.

Some people are saying that we really don't know how to make the economy grow.  I'm sympathetic to the idea, but I also suspect that some, specific steps would help.  In particular, how about a regularory holiday?

Amity Shlaes suggest suspending the Wagner Act for two years.  What I didn't realize until reading her post is that a majority of Americans, including a majority of union members, support Right to Work legislation. (Update: here's more polling data on this subject). 

How about suspending many restrictions on drilling for oil off our coasts, and in Alaska?

Would dropping the minimum wage to $5.00 for people under 25 help lower unemployment? (And should it be 26, in honor of Obamacare?)

Suspending part of the Americans with Disabilities act, or simply restricting its application to people who suffer from serious physical disabilities, would probably help corporate America focus on business rather than lawsuit avoidance.

I bet there are many other regulations the absense of which would help the economy grow.  And I haven't even mentioned market friendly health reforms, like allowing people to buy health insurance across state lines.

From a certain perspective, many of our regulations are luxury items. Only a very rich nation can afford them. Thanks to globalization, that might be changing.

Update. Let's not forget the business impact of California's tendency to favor animals over people:

Now, largely at the behest of greens, California agriculture is being systematically cut down by regulation. In an attempt to protect a small fish called the Delta smelt, upward of 200,000 acres of prime farmland have been idled, according to the state's Department of Conservation. Even in the current "wet" cycle, California's agricultural industry, which exports roughly $14 billion annually, is slowly being decimated. Unemployment in some Central Valley towns tops 30 percent, and in cases even 40 percent.

Apparently, I overstated Obama's compromise on economically-destructive EPA standards. He hasn't withdrawn them, as originally reported by the media, but merely postponed them until January 2013 - that is, until just after the election.

I'd say this posturing certifies the compromise as a purely political stunt - meaning that Obama hasn't learned anything and is still as determined as ever to wreck the economy on behalf of ridiculous liberal policies.

Iain Murray has a precise summary at NRO.

I mentioned below that Obama is setting the stage for his jobs speech by lowering expectations and burying substantive analysis. I forgot to mention the third leg of his preparation: blaming others.

Obama is launching a series of lawsuits against big banks for their role in causing the recession. Whether these banks misrepresented the quality of bundled mortgage securities is a fair question, but Obama's purpose is certainly to frame a scapegoat toward which he can attempt to deflect criticism. Watch for it in his speech. It's not his unprecedented spending, lack of economic proficiency or anti-business regulations which are to blame for the continuing recession - it's the fault of the big, bad banks. (See if he is also able to subtly and indirectly blame the whole thing on Bush.)

Obama has set the stage for a truly meritless campaign speech.

So much for the "recovery summer." The White House now expects unemployment to remain above 9% throughout the election cycle. "Unemployment will not return to the 5 percent range until 2017," according to the WH budget office.

This is not news in the substance, but rather in the willingness of the White House to belatedly admit the obvious. By their continuing coverage of economic conditions as "surprising," "unexpected" and "worse than predicted," the media still haven't grasped reality.

All of this is pre-text for Obama's "jobs speech" later this week. Obama is trying to lower expectations. There should be no doubt that the speech will contain little to no substance. If it were otherwise, the White House wouldn't have dumped its Midsession Budget Review on a Friday afternoon. The MBR is a by-the-numbers forecast of the President's economic policy effects over the next few years. That is, it isn't a rhetorical campaign speech - so it isn't useful to Obama, who has no ideas to help the economy. This is the sense of the Senate Budget Committee, which clearly and concisely summarizes the President's MBR.

Obama has lost the initiative, and his speech will produce more scorn than relief. The GOP - particularly the candidates - need to step up and seize the moment. There is a vacuum of leadership in Washington waiting to be filled.

Today's major headline is that, for the first time since World War II, the economy had "precisely net zero jobs created for a month." And, following on the heels of this economic woe, is breaking news that Obama ordered the EPA to withdraw an environmental regulation that "would cost up to $1 trillion per year and kill thousands of jobs."

It's tempting to hope that Obama has finally learned a lesson, finally become aware of the real harm done to real people by job-killing, economically-ruinous regulations - which, while ostensibly related to environmentalism, are more precisely intended as fines and taxes on "evil" corporations. But, I suspect that Obama has simply been reading the tea leaves and has shrewdly begun "compromising" in order to compete for re-election.

This is the novel sign of practical political savvy from Obama, following years of ideological recklessness with public opinion. That is to say, Candidate Obama has re-emerged. He has finally taken a simple and obvious action intended to create (or, to use his own more exact language, "save") jobs. (These jobs, of course, are being saved from his own regulations, but let that pass....)

Too little, too late? Time will tell.

Huntsman seems not to have noticed that he has missed the boat. He's not a contender and - unlike other non-contenders such as Paul, Gingrich and Trump - adds nothing to the conversation.

His latest attempt to appeal to ... someone (I'm not exactly sure who) is a promise to strip the tax code of loopholes and deductions (which sounds a bit like Obama's promise to save entitlements and reduce debt by eliminating "government waste"). Of course, this alone is a promise to raise taxes. So Huntsman adds that he would adopt a simplified three-tier tax structure.

But the devil's in the details. I fear a "moderate" Huntsman tax compromise would cut deductions but do little in the way of lowering the overall tax rate - thereby effectively handing democrats a tax (increase) "compromise" victory. Huntsman's does not dissuade me of this uncertainty by the use of progressive rhetoric, identifying "special-interest" as the beneficiary of tax "carve-outs" and denouncing that liberal boogey-man, "corporate welfare."

The research interests of Obama's pick to chair his Council of Economic Advisers (with highlights):

[Princeton economist Alan] Krueger has done leading research on why a minimum wage does not increase joblessness and why job growth can lag during otherwise prosperous economic time. [uncertainty?]  He served as chief economist in the Treasury Department from March 2009 until November 2010 ....

During his time at Treasury, Krueger advocates a number of key administration measures designed to stimulate the economy, including a tax cut for businesses that hire new workers, the "cash for clunkers" auto trade-in program, and "Build America Bonds" that allowed states and localities to raise funds for building roads and other construction projects.

BTW, I don't know why the Senate has to confirm the President's advisers.  But the hearings could be amusing.

Libertarian Richard Epstein asks in the Hoover Institution's Defining Ideas Journal, How is Warren Buffet Like the Pope? Epstein answers, "they are both dead wrong on economic policy," and spends much of the article criticizing Pope Benedict XVI for his supposed socialist sympathies.

Epstein begins well enough:

A successful and sustainable political order requires stable legal and economic policies that reward innovation, spur growth, and maximize the ability of rich and poor alike to enter into voluntary arrangements. Limited government, low rates of taxation, and strong property rights are the guiding principles.

But Epstein quickly derails, lambasting the Pope for criticizing those who put "profits before people." The Pope's sentiment seems not only reasonable but mundane. Yet Epstein hysterically calls this worldview "a wickedly deformed foundation for social policy." The article continues as a tirade against socialism as Epstein foolishly identifies the Pope's position as hoping for "a world without profits." This straw-man routine wickedly deforms Catholic social teaching.

The offensive language which causes Epstein such palpitations was the Pope's response to a question while en route to Madrid for World Youth Day:

Q: Europe and the Western world are going through a profound economic crisis, which also shows signs of a great social and moral crisis, of great uncertainty for the future, particularly painful for young people. What messages can the Church offer to give hope and encouragement to the young people of the world?

Benedict XVI: [We see] confirmed in the present economic crisis what has already been seen in the great preceding crisis: that an ethical dimension is not something exterior to economic problems, but an interior and fundamental dimension. The economy does not function with mercantile self-regulation alone, but it has need of an ethical reason to function for man. This can be seen in what was already said in John Paul II's first social encyclical: Man must be at the center of the economy and the economy must not be measured according to greatest profit, but according to the good of all.

The full text is worth reading and quickly reveals that only a distorted reading, reducing the Pope's comments to a pre-determined absurdity, can interpret his remarks as proposing that the common good includes neither consideration of individual man nor the practical effects of poverty. Catholic hospitals and missions care for the sick and poor of the world who suffer privation due to poverty - not Epstein's colleagues at NYU Law or the annual libertarian association conference.

While the Church teaches that "blessed are the poor" and elevates many virtues and goals above the perils of wealth, it is most certainly not adverse to profitable national economic systems. In fact, the Church has consistently - since the present Pope was a schoolboy in Germany - condemned exactly the sort of socialist ideology which Epstein falsely claims as its own. These conclusions are obvious from Pope Leo XIII's 1891 encyclical, Rerum Novarum, and Pope John Paul II's encyclical on the 100 year anniversary of the former letter, Centessimus Annus.

Leftists and libertarians alike have long felt wronged that the Holy See's refuses to adopt their economic dogma, but Church doctrine clearly repudiates economic socialism. Yet it also cautions that free-markets should always serve the common good - a common good well-understood, which Epstein willfully fails to appreciate. 

Epstein's multi-front attack on Buffett and the Pope is simply a desperate plea for libertarianism. Buffett's recent statements on the economy have been heavily criticized by the right over the past few days, and the left never grows weary of slandering the Pope, so Epstein saw an opportunity to employ a tired refrain of libertarian politics: left/right, liberal/conservative, Democrat/Republican - they're all the same; only libertarians are truly special.

Of course, the inability to recognize differences between these comparables is either the result of woeful ignorance or political extremism. Anarchist - to whom libertarians are often compared - see everyone else as a clone from their perch so far off the accepted political spectrum. So it is with libertarians - they just wear better suits. 

Epstein's amoral and dehumanized libertarianism is the only "wickedly deformed foundation for social policy" revealed in his article. 

"And as far as I'm concerned, the tea party can go straight to hell."

- Rep. Maxine Waters (D - CA), August 20, 2011

Just pile it on to the growing list of slurs, such as "terrorist" and "hostage-takers," aimed at the Tea Party by Democrats in the New Age of Civility.

Do you think Ms. Waters has any clue that the Tea Party is synonymous with mainstream America, that the Tea Party's fiscal policy is the overwhelming preference of American economists and that her vulgar disparagement is actually an insult to the majority of American citizens? Even California isn't so insular an echo chamber that Waters is incapable of recognizing that her views, not those of the Tea Party, are "outside the mainstream." That's why Democrats like Waters use coded language when explaining their ideas: tax hikes = revenue; spending = infrastructure; redistribution = equality; abortion = choice; censorship = fairness. If Democrats had the courage of their convictions - or really believed the American people shared their views - they would speak as clearly and honestly as the Tea Party.

The Reuters headline says it all: Apple is worth as much as all euro zone banks.

One U.S. Company. All EU banks combined. That's a hint of the power of America's private industry, which someone on the right who would like to be president might think of trumpeting as a clue to our economic recovery.

William F. Buckley famously quipped:

I am obliged to confess I should sooner live in a society governed by the first two thousand names in the Boston telephone directory than in a society governed by the two thousand faculty members of Harvard University.

I'm not an advocate of corpocracy, but does anyone seriously doubt that Steve Jobs and a handful of folks from Apple Inc. could create more jobs and grow the U.S. economy faster than Barack Obama and the Democrats? Apple and its CEO are far more faithful to promises made to shareholders than is our government and President to promises made to citizens.

Perhaps the authority to regulate interstate commerce should have been omitted from the powers vested in Congress. America's Second Estate, private industry, might have proved a more trustworthy custodian. 

Given the present state of affairs, however, is there any way to convince Apple to begin operating banks in Europe...?

What's the craziest thing Obama could suggest in the present Tea Party-dominated moment of economic hardship?

How about a tax hike at the pump to make gas even more expensive?

That's the suggestion offered to Obama by the New York Times, which is desperate to preserve (and actually increase) the federal gas tax set to expire next month. One has to hand it to the Grey Lady - she's standing up for principle against the obvious will of the people. This is likely the impetus for the editorial - the Times hopes to prepare the battlefield by firing the first salvo, before Republicans raise their voices in opposition to extending the tax.

And that is exactly what Republicans should do. Republicans should ensure that the "gas tax repeal" is the next headline-capturing battle in Washington. Republicans would be on record seeking to lower gas prices (in light of Obama's refusal to do anything on that front - since gas is a form of energy, and skyrocketing costs are just part of the plan). And they would have an opportunity not only to oppose tax increases, but to actually cut existing taxes. Since the taxes expire in the absence of congressional action, the tax cut is immune to a presidential veto and is possible to acheive with only one house of Congress.

If Obama comes out against the GOP, he is on record in favor of higher gas prices. More prudent would be a capitulation by Obama, allowing the tax to expire. This would be viewed as a Tea Party victory, but Obama would share in the victory and have a bi-partisan talking-point. Further, lower gas prices can only help his re-election chances.

Either way, the GOP have a win-win situation. The public will support their position, so Obama either alienates the public and further proves himself addicted to taxes, or the GOP score a victory for the middle-class by lowering taxes.

The only way the GOP lose is if they do nothing. If Democrats preserve the gas tax without a peep of protest from the Republicans, they quietly maintain the tax and gas-price status quo with no repercussions - and the Republicans lose yet another opportunity to stand on their convictions.

I kind of like the goats, especially those on the Sage of Mt. Airy's farm, where I blog from today.  The Sage dissects  Dr. Charles Krauthammer (a former Hubert Humphrey speechwriter, btw) on the debt deal. 

To begin, removing "loopholes" has only lately, and conveniently, become a demand of the American Left.  The fact is, various loopholes, alongside a progressive income tax scheme with multiple and increasing marginal rates have historically been the bedrock of liberal tax policy....

With all due respect to Dr. Krauthammer, the only sure solution to the debt crisis is the very real prospect of electoral defeat by the Democrats, not contracting clever deals with them.

RTWT.  And scroll down to read the Sage beating up on many conservatives who caved to liberals and shunned the Tea Party on the debt negotiations.

Remember the Spotted Owl? Apparently, not only are our efforts to save it failing miserably, . . .  (subscriber link only):

The truth is that no one fully understands why the spotted owl continues to decline. The rise of the barred owl poses an unexpected, but not surprising, complication. If the natural world would just remain static, species preservation and ecological management would be far simpler. But Mother Nature relishes competition, and the barred owl is a fierce competitor. Are we really prepared to send armed federal agents into Northwest forests in search of barred owls?

But also, those failed effofts also cost many many jobs?

In the 1980s, before the owl was listed as threatened, nearly 200 sawmills dotted the state of Oregon, churning out eight billion board feet of federal timber a year. Today fewer than 80 mills process only 600 million board feet of federal timber. In Douglas County, for example, several mills dependent on federal timber have closed. Real unemployment in many Oregon counties exceeds 20%, double the national average.

Your tax dollars hard at work.

More evidence that a regulatory holiday would be a good way to get the economy moving.

I don't think anyone on NLT has yet mentioned the Commerce Dept.'s economic report from Friday. The highlights:

• The economy slowed more than expected. GDP rose 1.3% (economists expected 1.8%). 
• Consumer spending increased by 0.1%, the weakest performance in two years.
• Last quarter's growth was revised down from 1.9% to an anemic 0.4%.
• The 2007-2009 recession was deeper, and the recovery weaker, than originally estimated.

Suffice it to say, the report is disastrous. Aside from the appalling numbers, it's also noteworthy that economists and news agencies continue to be surprised by "unexpected" downturns in the economy under Obama's fiscal policies. I don't recall these same news reports confessing surprise whenever the economy dipped under George W. Bush - in fact, one of my favorite headlines, following a quarterly boom in response to Bush's media-lampooned tax breaks, read (more or less): Unreliable Economy has Experts Worried. Worried for Democrats' talking-points, perhaps.

Getting back to the numbers, the New York Times concludes its news alert with a warning:

The news comes as Congress is debating how to put the nation on a more sustainable fiscal path, with measures that some economists worry could further slow the recovery and even throw the economy back into recession.

One wonders which measures the Times believes threaten a double-dip recession. I don't think there's any chance that Obama and the Democrats received this week's economic report as an indication of the failure of their economic policies. They are true-believers in their economic world-view, as Richard Adams notes below. It is dogma that higher taxes and increased government spending equals greater social good. Facts to the contrary are the result of capitalist (i.e., conservative) corruption in the system. As conservatives believe otherwise (to an equally dogmatic degree within the Tea Party Caucus), compromise is unlikely - hence the unresolved debt-ceiling debate.

One hopes for the best possible solution to the current stalemate, but the economic debate (which reflects a difference in political philosophy) will continue to be resolved through elections. Conservatives should press that point in 2012.

Read the whole thing.