La Dolce Vita

Italy has given much to the world over the centuries, from Cicero to Michelangelo to Lollobrigida, but in recent decades its chief contribution has been making other countries feel better about their own dysfunctional politics. The election in Italy today might be its most generous gift yet.

The results are still unknown, but it is hard to envision any happy outcome. On the ballot for Prime Minister is the usual mélange of neo-fascists, socialists, ultra-socialists, outright communists, and assorted crackpots, with four front-runners who represent only a slight improvement. Italy’s economy is moribund, its debt suffocating, its institutions corrupt, and each of the candidates are offering only different varieties of wishful thinking.

One is the incumbent, Mario Monti. A former Senator for Life who is invariably described as a “technocrat,” Monti is the favorite of the continent’s political establishment due to his policy of raising taxes, slashing spending, and otherwise adhering to the dictates of the country’s nervous European Union creditors. This what is President Barack Obama likes to call a “balanced approach” to deficit reduction, but it hasn’t done much to balance Italy’s budget. The taxes have had their predictable dampening effect on the already-reeling private sector, the cuts have inflicted the expected pain on a country that has become reliant on government spending, and the supposed blessing of continued EU membership only means that Italy can’t devalue its way to competitiveness. To his credit Monti has attempted to de-regulate the country’s straitjacketed labor market, but he has failed to persuade the country’s left-leaning legislators.

Another contender is the former Prime Minister, Sylvio Berlusconi. A super-rich media and sports magnate once considered something of a conservative by European standards, Berlusconi is promising tax cuts and rebates to go along with continued austerity, a plan likely to worsen the nation’s debt crises absent the sort of deregulation that the more politically adept Monti failed to achieve. The tax cuts are naturally popular with the voters, as is Berlusconi’s offer to pay off €4 billion of the nation’s debt with his money, but his campaign has been plagued by the sorts of scandals that would be fatal to any conservative American politician. In addition to countless bribery and abuse of power accusations, the 76-year-old Berlusconi is currently on trial for having sex with an underage prostitute during what Reuters calls a “bunga bunga” orgy at his Milan villa, and he’s even reported to have made suggestive remarks to a woman who shared a stage with him at a business event. Political corruption and sexual harassment are longstanding Italian traditions, but Berlusconi was nonetheless protested by a group of topless women who apparently believe that the proper punishment for a dirty old man is to wave bare breasts in his face.

The campaign’s dark horse is Beppe Grillo, a former television comedian. His newly-formed Five Star Movement party is promising lower taxes, a 20-hour work week, free internet and electronic tablets for all schoolchildren, and a “green economy” that will replace the gross domestic product with “gross domestic happiness.” None of this is intended as a joke, apparently, despite Grillo’s past occupation.

As we post this the betting favorite seems to be Pier Luigi Bersani, a longtime political leader of the center-left Democratic Party. Bersani’s prescription for the economy is higher taxes on the rich, a favored solution of center-left Democratic parties everywhere, but the idea hasn’t worked anywhere yet and is even more likely to fail in Italy. There’s a dwindling supply of rich Italians , and they will soon find that there are any number of more accommodating tax jurisdictions where they can spend their euros.

There is some comfort in knowing that there are still places that make America look relatively sane, but it is nonetheless sobering to contemplate how bad things might yet get. America has a staggering economy and skyrocketing debt of its own, and its political leadership is reduced to the same failed notions of “balance,” class resentments, and resistance to freeing the private sector from burdensome government control. We also have allegedly underage-prostitute-loving politicians of our own, too, along with cronyism, elected officials who are both literally and figuratively comedians, and a wishful-thinking public that seems bored rather than outraged by it all. It’s easy to sneer at the Italians, and quite fun, but they should serve as a warning.

— Bud Norman

In Quite a State

The state of the union, according to the president’s latest annual oration on the topic, is stronger. Presidents always say this sort thing in State of the Union addresses, regardless of the circumstances, so perhaps President Barack Obama can be forgiven for merely following form.

There isabundant evidence that the state of the union is not nearly so strong as it was when Obama gave his first address, however, and his arguments to the contrary were not convincing. He touted an end to a “decade of war” despite the growing dangers of the world, and boasted of a Fed-inflated stock market bubble. He argued that his massive new bureaucracies mean “consumers, patients, and homeowners enjoy stronger protections than ever,” presumably from those nasty corporations, but seemed unconcerned about what will protect them from the bureaucrats. He further claimed that “we have cleared away the rubble of crisis,” but left unmentioned that we have also piled up an additional $6 trillion or so of debt in the process.

Nothing else in the speech offered much hope that thing the country will soon be strengthened in any noticeable way. Obama threw in some boilerplate language about encouraging free enterprise and rewarding individual initiative, but he seemed to rush through it on his way to calls for higher taxes, more government spending in areas of the economy that have traditionally been left to private enterprise, and an unmistakably collectivist ethic. All of this was couched in the language of “revenues,” “investments,” and “helping folks,” of course, but the point was still clear. He also argued that the government should become “smarter,” a worthy goal, but still seemed smitten with the alternative energy “investments” that have thus far been an expensive diversion from the potential traditional energy boom. Obama’s opponent in the past election was provably smart about investing, though, and Obama managed to convince a majority of voters of that the poor overly-rich fellow should be reviled for it.

The speech also stressed the need to “forge reasonable compromise” to make “some basic decisions about our budget” to avoid the so-called “sequestration” cuts, lamenting the government’s tendency to “drift from one manufactured crisis to the next” without mentioning that the sequestration cuts were his idea. Nor did he mention that the government hasn’t had a budget at all during his time office due to his party’s control of the Senate. He was slightly bi-partisan in noting that “both parties have worked together to reduce the deficit by more than $2.5 trillion, meaning that they agreed to not go yet another $2.5 trillion in debt, but it was still understood as a warning to the Republicans they should cave early in the upcoming budget negotiations.

More talk of reasonable compromises followed, with Obama generously agreeing to “modest reforms” of the entitlement system so long as they are accompanied by yet another round of “revenue increases.” The multi-trillion dollar shortfalls in the entitlement programs require only slight tweaking, apparently, and so long as those darned rich people pay more Obama seems willing to go along.

Obama added some talk of illegal immigrants and guns, threw in a subtle allusion to homosexuality, and finished with the usual tear-jerking shtick about the little people out there. We were to stunned to follow it after the part about Obamacare driving down health care costs, though, and we assume it was much the same as in past speeches. This was the fifth Obama State of the Union address and there only three to go, unless he decides that those pesky term limits are of more consequences than the rest of the Constitution, so we do feel slightly strengthened by that.

— Bud Norman

Inauguration Day

President Barack Obama took the oath of office for a second term on Sunday afternoon. According to the reports it was an uncharacteristically low-key affair, arranged solely to satisfy the requirements of that pesky constitution, but there is plenty of appropriately expensive hoopla planned for today.

At the risk of sounding insufficiently respectful of the office, we’ll be doing our best to ignore it all. Obama’s first term was marked by the sluggish economic growth, vigorous expansion of an ever more meddlesome government, and declining American power that we had expected at the time of his first inauguration, and we now expect that a nation which voted for four more years of the same will wind up getting far worse. This could have been the day America began putting its finances in order, returning government to its proper limited role, and resuming the country’s leadership role in the world, but an electoral majority of the people decided to put all that bother off in favor another 99 months of unemployment checks.

None of which puts us in a celebratory mood. At least the hype should be more easily avoided this time around, so in some ways this inauguration will be less troublesome than the first.

Four years ago the inaugural festivities were inescapable. After eight years of relentless Bush-bashing from all corners of the media Obama had been elected on vague promises of hope and change, and the inauguration was regarded with an unsettling worshipfulness by a public that had only the vaguest idea what sort of change it was hoping for. There was the added angle of America’s first black president, too, heaping an extra guilt-ridden helping of historical significance onto the occasion. Obama came in to office with the most adulatory press coverage any president had ever enjoyed, compliant majorities in both houses of Congress, and sky-high approval ratings, to the point that there simply weren’t enough stations on the radio to avoid the resulting giddiness.

This time around Obama comes in with a smaller percentage of the vote after a scorched-earth campaign of hysterical vitriol against his political opponents, with a Republican majority in the House that was elected on a promise to rein in his most ambitious legislative goals, and a mere 50 percent approval rating in the latest Gallup poll. What’s left of Newsweek is heralding the inauguration as a “Second Coming,” and similarly religious imagery pops up here and there, but for the most the part the press can’t seem to muster the same messianic enthusiasm it once had. The only person we’ve encountered lately who seemed unduly enthused about the second term was slightly drunk, and even he wound up admitting that the whole Benghazi thing was an utter fiasco and that the debt has been piling up too high and will probably continue to do so.

In other ways, though, this time around feels even worse. It was bad enough to see the country fall for all that hope and change nonsense of ’08 race, and embrace a creepy cult of personality that is entirely unsuited to a free nation, but even more dispiriting to see it re-elect Obama without even the pretense of such optimistic delusions. The only rationale for Obama’s re-election was an obstinate unwillingness to face up to the country’s harrowing fiscal reality, along with a resultant willingness to believe the worst about anyone who might make the hard choices that are still available, and it looks as though the second term will be marked by the same cynical attacks on anyone who dares try to slow the nation’s headlong rush toward to financial insolvency.

The president used the last press conference of his first term to charge that the Republicans wish to see old people starving in the streets, or at least that they are “suspicious” of his heroic efforts to prevent that calamity, and while most of the media have abandoned the implausible claim that Obama is the messiah they’re still willing to echo the message that his opposition is the devil. One can still hope the House will still restrain Obama’s spending, or merely limit its increases to a level that will allow the country to forestall catastrophe long enough to get a more responsible president, and the mass protests against his gun-grabbing proclivities have already begun, but at best it will be a bitter fight with the sort of divisiveness that the president seems to relish.

By strange coincidence this inauguration day falls on what we are told is the most depressing day of every day, the “Blue Monday” when the holiday cheerfulness has entirely dissipated and the reality of a cold and dark winter settles in on the human psyche. Perhaps it’s just this calendar and the climate, but this is a bluer Monday than most.

— Bud Norman

Bad News in Two Directions

We take a back seat to no one when it comes to gloominess and doomsaying, but the number-crunching folks at the Congressional Budget Office are almost our equal in that regard.

The putatively non-partisan agency released an update to its “Budget and Economic Outlook” this week, and it can be quickly summarized by saying that the outlook is bleak. There are two forecasts included in the report, and both are quite glum, so the CBO’s outlook could actually be said to be doubly bleak.

After starting off with the sobering statistic that the federal budget deficit for the year will total $1.1 trillion, bringing the federal debt held by the public to 73 percent of the nation’s gross domestic product, the CBO assures policy-makers that all of that stimulus has at least ensured that the “economic recovery” will “continue at a modest pace for the remainder of the calendar year 2012.” This modest achievement will doubtless suffice as vindication for Obama’s more stalwart supporters, but after that the CBO sees trouble in either direction it looks.

The CBO has prepared a “baseline projection” based on the assumption that current laws will continue, meaning that in January all of the Bush era tax cuts will expire, the extension of unemployment benefits and the 2 percent reduction in the Social Security payroll tax also disappear, and a number of mandatory budget cuts go into effect. Under this scenario, the CBO expects that the unemployment rate will climb to 9.2 percent, the gross domestic product will shrink by 2.9 percent, and the situation “will probably be considered a recession.” They add the cheery note that the deficit would likely shrink to 4 percent of the gross domestic product, which could delay the day of fiscal reckoning by a few weeks or so, but it is not clear if that is based on assumption that all the tax hikes won’t actually result in less government revenue and more social spending as a result of all the economic carnage.

It is still possible that the government will act to extend all of the Bush era tax cuts — although the president seems ruthlessly determined to raise taxes on the higher earners, and quite confident that the public will blame the Republicans if everyone’s taxes get raised as a result — so the CBO has prepared an “alternative fiscal scenario” that envisions such an action as well as ignoring the mandatory spending cuts. Under this scenario the country goes another $1 trillion in debt for yet another year, but the economy grows by an unimpressive 1.7 percent and the unemployment rates stays stuck at around 8 percent.

All of which leaves one hoping for some possible third scenario. Ideally it would avoid tax increases and the resulting drag on economic activity, allowing the private sector to spend the available capital more productively than the various “czars” has done the past four years, with the ensuing growth and some well-chosen spending cuts whittling down the debt to manageable levels. The CBO does not speculate about such a course, but we suspect it would lead to a happier future.

— Bud Norman