What Goes Down Must Come Up

After Wednesday’s brutal day on America’s major stock markets President Donald can no longer brag about their record highs, but if he wants to attempt a complicated and counter-intuitive argument he can claim some credit for the rosy economic conditions that have caused the recent swoon.

The markets tanked because the Federal Reserve Board now intends to slightly raise the artificially low interest rates that fueled the markets’ record run, which is because by now they’ve successfully brought the economy to below full employment and a potential 4 percent growth rate in the gross domestic product, and for now it’s more worried about an inflation rate that’s slightly outpacing the long-awaited wage increases that have lately occurred. According to the perverse logic of the stock markets, good news is bad news, just as back when high unemployment and low GDP growth were bringing interest rates down and raising the indices up bad news was good news.

All of this damnably good news started shortly after the big financial meltdown of ’08, which was caused by the subprime mortgage social engineering of President Bill Clinton’s administration but came to fruition in the final days of President George W. Bush’s administration. Bush and most of the Democrats and Republicans in Congress — including both both of the party’s presidential nominees — responded with a big bailout of some major banks that annoyed people on both the left and the right, and the Fed started printing money at a rate that alarmed any conservative old enough to remember the hyper-inflation of the ’70s. In retrospect, though, the center-left and center-right compromise seems to have more or less worked.

The economy was already officially out of recession by the time President Barack Obama was elected by a scared-to-death electorate and passed a pork-laden “stimulus package” through the overwhelming Democratic majorities in Congress, and after that a historically slow recovery slogged along on the easy money the Fed was printing. We’re still convinced that Obama’s anti-business regulatory and tax policies slowed the recovery, and that only the Fed’s foolhardy money-printing sustained it, but after a scared-to-death electorate elected a Republican majority in the House of Representatives in the “tea party” wave of ’10 there were no more “stimulus packages” or other major interferences and thus things improved slightly. As much as we still disdain Obama-nomics and hate to give the guy credit for anything, we have to admit that during the last two years of Obama’s presidency the economy was on a clearly upward path.

By the time a scared-to-death-of-something-or-another electorate gave an electoral majority to Trump, the unemployment rate was a respectable 4.8 percent and the GDP was growing at a not-great-but-not-bad 3 percentage points or so. As much as we disdain Trump’s trade wars and attempts to restore the coal-driven and low-tech economy of the ’50s, and as much as we hate to give the guy credit for anything, we also have to admit that economy has been on pretty much the same upward trajectory ever since Trump’s inaugural speech promise that “The American carnage ends right here, right now.” Trump’s exceedingly business-friendly regulatory and tax policies have no doubt helped, and his stupid trade wars and economic nostalgia haven’t yet hurt much, and by now the economy is rolling along at a rate we can’t blame the Fed for applying some slight pressure to the brakes.

Trump is already grousing about it, though, as he’d much rather be bragging about record stock market highs and new land speed records in economic growth and how nobody has ever seen anything like it. As much as we hate to give the guy credit for anything, we have to admit it’s another brilliant political ploy. If your stocks are down it’s because of that damned fellow who’s Chairman of the almighty Fed, that quintessentially quasi-governmental institution that actually runs everything according to all the leading “deep state” conspiracies since the days of President Andrew Jackson, and has nothing to do with Trump, who is surely an innocent bystander and fellow victim.

Trump did in fact appoint Jerome Powell as the chairman of the Fed, and Powell was confirmed by a Republican Senate, but so was Attorney General Jeff Sessions appointed by Trump and confirmed by a Republican Senate, and for now both are suspected conspirators in a “deep state” plots to overthrow Trump. Those smarty-pants know-it-alls at the Fed have a darned convincing case for raising the prime interest rate to a few notches lower than historical norms, tough, and if it keeps the economy chugging along at a optimal if not the-greatest-anyone’s -seen rate without inflation we’re sure Trump will be glad to claim the credit, and boast about how great it could have been if only he had been in charge. At this point the labor market is tight enough that further economic growth will require an increase in immigration, and Trump should also be grateful if the Fed spares him that dilemma.

These days our only interest in the stock market is in the long run, and over that dreary amount of time it’s survived the Great Depression and Stagflation and the Dot.com and subprime bubbles, and it’s even survived Obama and we figure it will probably survive Trump. We give some of the credit to those smarty-pants know-it-alls at the Fed, but most of it to all those anonymous schmucks who get up every morning and go to some office or factory or shopping mall and make the decisions and do the work that keeps our still mostly-free economy slogging along through good times as well as bad times.

— Bud Norman

Hillary and the Dog That Didn’t Bark

Former First Lady and Senator and Secretary of State and presumptive First Woman President Hillary Clinton was barking like a dog on the campaign trail the other day, and lest you think that’s some sexist slur please understand that she was quite literally barking like a dog. The bit got a good laugh from her fans, who are so humorless they’ve kept a straight face through all her explanations about her e-mails and Benghazi and the numerous other Clinton family scandals, and it was approvingly noted by the liberal press, which is eager to show her lighter side, while the more conservative media made sport of it. Donald J. Trump, the foul-mouthed real-estate-and-gambling-and-professional-wrestling-and-reality-show carnival barker who is currently leading the Republican field, seemed to find it undignified.

We found the impression a failed but harmless attempt at humor, and hardly worth mentioning, but we wish more attention was paid to what she was barking about.

After recalling an ad that once ran on rural Arkansas radio featuring a dog that would bark whenever a candidate said something untrue, sounding very folksy as she related the story, Clinton said “I want to figure out how we can do that with Republicans. We need to get that dog to follow them around and every time they say things like ‘Oh, the great recession was caused by too much regulation, then ‘bark, bark, bark.'” The crowd roared its approval, of course, but they failed to realize the joke is on them.

Any competent lie-detecting dog would not be only barking furiously at the implied argument that the great recession was caused by too little regulation, it would be straining at its leash and salivating for blood, and Clinton surely knows this better than most. The last round of significant financial de-regulation was signed into law during the administration of her hound dog husband, former President Bill Clinton, and the subsequent Republican administration added the countless regulations of Sarbanes-Oxley and countless regulators to enforce them, and the banks didn’t make hundreds of billions of dollars of loans to people with little chance of paying them off because the Republicans had deviously repealed some rule against it but rather because Clinton’s husband’s administration coerced and cajoled and incentivized them to do so in the name of fairness. At first the policy fed a housing bubble that seemed to make the entire country richer, and those suckers with the subprime mortgages were able to stay afloat on the rising real estate tide, and Clinton successfully ran for the Senate bragging about it, but eventually it all came crashing down into a very well regulated pile.

The notion that greedy Wall Street bankers eager to get rich by making hundreds of billions of dollars of loans that were unlikely to ever be paid back were to blame, and that even more government coercion and cajoling and incentivizing were therefore required, quickly became the widely accepted story. Even Republican presidential nominee Sen. John McCain went along with it, and the dissenting voices with their facts and arguments and lack of any recognizable villains other than well-intentioned government servants were quickly drowned out in the boos. Now it’s just one of those things that every knows even though it’s not at all true, much like that “Bush lied, people died” theory of the Iraq War that even the current front-runner for the Republican presidential nomination is peddling, and at this point Clinton’s barking dog shtick will be very difficult to refute.

Still, we’d like to see someone in the Republican field make a stab at it, and not just by mocking the barking dog impersonation. Texas Sen. Ted Cruz is still defending the free market system, and he does some pretty convincing impersonations of characters from “The Princess Bride” and “The Simpsons,” so perhaps he’s up to the task. The boastful billionaire front-runner is more inclined to criticize Wall Street’s greed than the regulators’ good intentions, the rest of the field seems reluctant to champion that good old red-in-tooth-and-claw capitalism that doesn’t make bad loans even for fairness’ sake, and we certainly can’t expect the unfashionable truth from the self-described socialist who is currently the front-runner in the Democratic race.

All in all, it’s enough to make us barking mad.

— Bud Norman

Badgering in the Badger State

President Barack Obama was warmly welcomed to Wisconsin by Gov. Scott Walker on Thursday, then let loose with another one of his characteristic petty partisan screeds, this one ridiculing his host. The characteristically petty partisan crowd roared its approval, of course, and the characteristically petty partisan press described it as part of a “victory lap” after a week of favorable legislation and Supreme Court rulings, of course, but not a word of it bears more skeptical scrutiny.

Speaking to an adoring throng in LaCrosse, Obama likened the entire Republican to a senile “Uncle Harry” making nonsensical statements at a family Thanksgiving dinner, adding that “You still love him. He’s still a member of your family. Right? But you’ve got to correct him. You don’t want to put him charge of stuff.” He also compared Wisconsin’s government under Walker to that of neighboring and more-Democratic Minnesota, noting that Minnesota had raised taxes on the wealthy, increased the minimum wage, expanded Medicaid, implemented all-day kindergarten, offered subsidies for college, and had a lower unemployment rate and higher median income. With the applause indicating that he had an audience willing to believe that higher taxes and higher labor costs and increased government spending is the obvious explanation for Minnesota’s relatively healthier economy, Obama then boasted of his own successes with this same formula, and contrasted his humane approach with the Republicans’ policy of giving tax breaks to the wealthy and letting everyone else fend for themselves. Such callous economics was the cause of the ’08 financial crisis, Obama told the crowd, anding that “Being an American is not about taking as much as you can from your neighbor before they take as much as they can from you. We are not a bunch of individuals out here on our own. We are a community, we are family. We are in this together.”

One hardly knows where to begin rebutting such hogwash, but it might as well be at the beginning with that crack about the crazy uncle. This comes from the World’s Greatest Orator, who was going to end the era of partisan division and facilitate a serious discussion about the nature’s future. It also comes from the leader of a party that features a crazy and foul-mouthed Uncle Joe and a creepy face-lifted Aunt Nancy and a perverted Cousin Anthony who keeps sending pictures of his underwear-clas private parts over his cell phone and a First Mom who insists that everyone eat their vegetables while she wolfs down what the fancy chefs who’ve been flown have created and a cackling evil stepmother Hillary who seems next in line to lead our very dysfunctional national family, and we can’t share the audience’s satisfaction that everything has worked out so well since they’ve been “put in charge of stuff.”

Walker does a fine enough job defending his controversial policies in an op-ed article at Real Clear Politics, graciously headlined “Welcome to Wisconsin, Mr. President,” noting the significant economic gains that have lately occurred in his state in spite of the sluggish national economy. He didn’t anticipate the part about Minnesota, so for his benefit we’ll add that the high tax rates on job-creators cannot possibly explain the state’s job creations, the minimum wage increase is less than a year old and hasn’t yet pushed up overall wages and has almost certainly eliminated many minimum-wage jobs, the Medicaid expansion wouldn’t have been necessary if the Minnesota economy were as robust as he represents it, and probably was made more necessary by the many Minnesotans who lost the suddenly more-expensive health plans they liked and were promised they could keep but were relegated to Medicaid by Obamacare, there’s no proof that all-day kindergarten does children much good, somebody’s still paying those ever-increasing college costs that always go up further with the subsidies, and a more telling basis for comparison would be the relative improvement of the Wisconsin and Minnesota economies over the past few years.

Nor does the broader American economy seem to justify such arrogance. The labor participation rate is at a low unseen since Jimmy Carter’s presidency, wages remain stagnant, the Gross Domestic Product contracted the first quarter of this year and the most optimistic predictions having it growing at around 2 percent or a fraction over the full year, such meager advances have added more than $8 trillion to the national debt during the Obama presidency, and no one who isn’t within clapping distance of the presidents anticipates that happy days will soon be here again. We’re not heartened by the rest of the president’s great week, either. The Supreme Court ruled that the Obamacare law doesn’t say what it says on the written 2,000-plus, but that instead it means whatever five justice of the Supreme Court would prefer it said, and then on the big same-sex marriage decision it pretty much concluded the same thing about the Constitution, and whatever political benefits might redound to the president neither development is likely to do much good for the rule of law and Constitutional restraints on the federal government. A lot of Republicans and a few cowed Democrats also gave the president “fast track” authority to negotiate a top-secret free-trade deal with numerous Asian nations, and although we’re generally free traders we don’t like the top-secret and remain worried that it will allow him to pull some immigration and environmental shenanigans.

Most annoying, though, were his descriptions of capitalism and socialism. The natural rights of individuals to voluntarily trade and contract with another in a free market, an arrangement that has produced greater wealth and one more to advance civilization than any cockamamie bureaucratic regulatory scheme, is explained in terms of “taking as much as you can from your neighbor before they take as much as they can from you.” Any individual who has become self-sufficient by voluntarily trading and contract with another individual in a free market should be grievously offended by this, and we daresay their neighbors should be as well. But then again, we’re “not a bunch of individuals” in Obama’s America, we are a “family.” Obama is presumably the father, although regrettably not the absent sort of father figure he grew up without, and as that cheering throng of hipsters in LaCrosse would probably tell you, with all their progressive sophistication, father knows best.

On second thought, the very most annoying part of Obama’s speech was that line about how the unregulated avarice of that ruthless capitalist system that leaves everyone to fend for themselves was the cause of the ’08 financial crisis. The lie is so oft-repeated that it goes almost unnoticed and almost entirely unquestioned, but the pesky fact remains that it wasn’t caused by lack of regulations that prevented greedy bankers from making home loans to people who clearly could never repay them, but rather because of presumably well-intentioned government interventions in the free market, which encouraged and cajoled and eventually coerced the bankers to make those loans in the cause of affordable housing and civil rights and fairness and all sorts of focus-group tested themes. Obama surely knows this, as he did pro bono work for some subprime borrowers that forced Citibank to write them mortgage, and was a member of the Congressional Black Caucus was it was screaming racism at the regulatory “watchdogs” who were warning of the coming collapse and successfully resisting George W. Bush’s efforts to stop it, and he surely knows that as a result of his efforts housing became less affordable and black Americans wound up disproportionately poorer, as they remain today, and that in the end it was disastrously unfair to all the more credit-worthy homeowners and their creditors as well as just about everyone else.

Obama’s at least a deft enough orator to leave that part out.. We’re looking forward to Walker’s announcement that he’ll be running for president, and expect much better from him, and although he seems a nice and Wisconsin sort of fellow who won’t resort to petty partisanship and sneering ridicule we hope he will bluntly talk back to such hogwash.

— Bud Norman

The Series Finale of That ’70s Show

Rep. Henry Waxman of California has announced he is at long last leaving Congress, and one can only hope that America will at long last begin to leave behind the 1970s.

In recent years Waxman has been best known as one of Washington’s wackier liberals and perhaps the least handsome man ever to make a living in politics, both of which are notable distinctions, but it is also worth noting that he first arrived on the political scene as a member of the class of ’74. The estimable psephologist Michael Barone has reminded us that with Waxman and fellow Rep. George Miller of California both declining to seek re-election, Sen. Tom Harkin of Iowa making the same decision, and Sen. Max Baucus of Montana opting for an even cushier job as ambassador to China, the infamous freshman class will finally have almost fully graduated to private life after decades of legislative mischief. Two lone hold-outs will remain in the Senate after this fall’s mid-term elections, but it is almost the end of an error.

Readers of a certain age will readily remember the fall of ’74 with a shudder and a grimace, but for the youngsters among you it is hard to describe the horrors of that leisure-suited era. The Watergate scandal, the desultory end of America’s involvement in the Vietnam War, and the coinage of the word “stagflation” had brought the Republican party to unprecedented disrepute, a newly triumphant baby boomer counter-culture and the corporate clout of the only three channels on television had given the Democrats a overpowering fashionableness, and the country consequently elected one of the most liberal groups of lawmakers in the history of the republic. Things got so bad that even in here in reliably Republican Kansas the party stalwart Bob Dole had to resort to some prototypical abortion politics to survive a challenge from an allegedly moderate Democrat, and in less sensible sections of the country the likes of Henry Waxman won office.

There had been liberal eras before, from Woodrow Wilson to Franklin Roosevelt to Lyndon Johnson and their congressional enablers, but the class of ’74 marked the most liberal yet. Despite brief pauses during the Harding-Coolidge and Eisenhower years the country had already gone so far left by the early ‘70s that such a putative Republican as President Richard Nixon had created the Environmental Protection Agency, instituted the federal government’s first quota programs, proclaimed that “We are all Keynesians now,” normalized relations with Red China, sought an accommodationist détente with the Russians, and generally racked up the sort of record that would latter allow President Barack Obama to claim with a straight face that “In a lot of ways Richard Nixon was more liberal than I was,” and yet the freshmen of ’74 regarded both Nixon and his even more moderate successor Gerald Ford as knuckle-dragging paleo-conservatives. That Congress blocked military aid funding that might have saved Vietnam from communism, started spending like money as if it could simply be printed up, went on a binge of regulation and social engineering, and then went even further after Democrat Jimmy Carter was elected president.

The damage done was so severe that the country reacted in 1980 by sending the impeccably conservative Republican Ronald Reagan to the White House, even if the Democrats retained the decades-long hold on the Congress, and the result was victory in the Cold War, the longest and strongest economic expansion in the country’s history, and a renewal of America’s cultural confidence. Reaganism proved only another brief interregnum, however, and the seeds planted in ’74 would bear their most bitter fruit decades later. Among the other accomplishments of the mid- to late-‘70s government were the Community Reinvestment Act that provided the legal authority for the disastrous subprime lending policies of the Clinton and Bush administrations and the subsequent economic crash of ’08 that has still defied full recovery, as well as the Church Committee reforms that so constrained America’s intelligence gathering capabilities that the Sept. 11, 2001 terror attacks were made possible. The two greatest tragedies thus far in America’s 21st Century began in the late ‘70s of the 20th Century, and were voted for by Democrats who stuck around long enough to see President Barack Obama capitulate to the Russians and Chinese on everything, spend money as if it could simply be printed up, write up regulations and social engineering projects on a scale that make the ‘70s seem sober, and pass an Obamacare law that will ultimately do more economic damage than even the subprime schemes he is hoping to revive.

Conventional wisdom holds that Waxman and his fellow surviving members of the class of ’74 are declining another term because they expect the Democrats to take another drubbing in the upcoming mid-term elections, and it can be hoped that their well-honed instincts are correct. The next elections should not only be a repudiation of the past six years but also most of the past of the 40, and with luck we can finally put and end to the dismal ‘70s and maybe even embark on another roaring ‘80s.

— Bud Norman

Of History and Housing

Much has been said lately about President Barack Obama’s unreliable knowledge of history. Some have chided him for his recent suggestion that mass-murdering Vietnamese dictator Ho Chi Minh was a Jeffersonian democrat, others for his apparent belief that every advancement in the history of the American economy was a government creation. These errors can easily be attributed to his relative youth and naïve faith in Howard Zinn’s oft-assigned “A People’s History of the United States,” but there’s no explaining how he can get the recent financial meltdown so very wrong.

Obama was still coughing out bong hits with the Choom Gang when Jimmy Carter planted the seeds of the crisis by signing the Community Reinvestment Act way back in the ‘70s, but he was already playing his own small role in the debacle as a bank-suing lawyer when Bill Clinton got the subprime mortgage industry going in earnest and he was there to vote “present” as a Senator when it all came crashing down. He should know as well as anyone that the government employed a variety of both sticks and carrots to induce America’s banks to lower their credit standards and make the hundreds of billion dollars worth of loans to subprime borrowers which inflated a housing bubble whose popping brought down the international financial system. During a speech Tuesday in Phoenix, however, Obama blamed the whole affair on “recklessness on the part of lenders who sold loans to people who couldn’t afford them, and buyers who knew they couldn’t afford them.”

The speech was full of similar howlers. He boasted of a robust recovery creating jobs without mentioning that most of them are part-time and low-paying, touted investments in new energy technologies without mentioning the resulting bankruptcies, talked about a boom in natural gas production as if he had anything to do with it, and repeated his complaint about “phony scandals” as the incompetence and lies of the Benghazi debacle and the Internal Revenue Service’s targeting of his political opponents were matters of no importance. More nonsense came in the form of a five-point plan that he believes would simultaneously increase property values and make housing more affordable.

Step one is for Congress to pass “a good, bipartisan idea” that would allow every homeowner to finance his mortgage at today’s rates. He did not mention which government regulations are preventing homeowners from doing so, if there are any, so we assume that the banks have some reason of their own for denying re-financing to certain customers. Perhaps it is the same capitalist greed that prevented them from loaning to unqualified borrowers until the government intervened, but it might also be the same sensible desire for self-preservation.

Step two is to “make it easier for qualified buyers to buy home they can” by simplifying regulations and cutting “red tape.” This is a surprising suggestion, regulations and red tape being Obama’s preferred solutions to most problems, but his complaining about “responsible families” who “keep getting rejected by banks” makes it sound a lot like the old policy of imposing the government’s notion of a good loan on lenders.

Step three is the Senate’s immigration reform bill. Apparently a massive influx of uneducated and unskilled workers with no assets and limited incomes is the fix for a sluggish housing market.

Step four is to “put construction workers back to work repairing rundown homes and tearing down vacant properties.” Obama didn’t mention who would do this, so we assume he meant the government. We’ve been procrastinating on a need repair to our garage, so if he wants send over some federal employees to attend to that he is welcome to do so.

Step five is the one that’s been getting most of the attention from the media, which has been somewhat limited given that the address was advertised as yet another of his “major” ones. Obama proposed that the government begin “winding down” the New Deal-era Fannie Mae and Freddie Mac programs, an idea that was laughed at as a “gaffe” back when Sarah Palin proposed it in ’08, and denounced as racist when the agency’s finances came under congressional scrutiny, then declared that the private sector should play a leading role in providing financing for home ownership. With typical presidential snarkiness Obama added that “I know that must sound confusing to the folks who call me a raging socialist every day,” but he also added that the government should play a “limited role” that would be “just like the health care law that set clear rules for insurance companies and make it more affordable for millions to buy coverage on the private market.” The folks who call Obama a raging socialist every day will not be reassured.

Although Obama sounded almost Hayekian in his denunciations of the old regulatory regime and his praise for private enterprise as the “backbone” of the housing market, and sternly warned against any bail-outs of the sort that he had earlier boasted of providing to the auto industry, it was nonetheless clear that he intends for the government to resume its role of ensuring loans for anyone who might vote Democrat. Fannie Mae and Freddie Mac would at long last go away, but the government would continue to secure loans and provide a secondary mortgage market. The names will change, just as liberals now call themselves “progressives,” but the policies and their unhappy effects will remain the same.

Those who cannot remember the past are condemned to repeat it, as George Santayana famously warned, and those who remember it incorrectly are likely to make things even worse.

— Bud Norman