Everyone Loses

In a sports contest, there is always a winner and a loser.    Some football games used to end in ties, but the rules now require the teams to keep playing until one team wins and the other loses.     In the political arena, it is not always clear who won and who lost when a controversial matter is finally resolved through the passage of legislation to deal with it.  In some cases, it may take years for the winners and losers to be determined.   In other cases, the water gets so muddy it will never be clear who won and who lost. 

Despite the uncertainties and ambiguities, members of the news media cannot resist the temptation to designate the winners and losers when Congress enacts a controversial piece of legislation.  After all, the members of the news media have appointed themselves to be the final judges when matters of public policy are being debated and decided by our politicians.  Today, it appears that most reporters and commentators are declaring that President Barak Obama achieved a major victory when Congress approved the American Recovery and Reinvestment Act, which is the pretty term for the $782,000,000,000 stimulus package promoted by Obama as the center piece of his plan for returning the nation’s economy to good health.    

In my view, everyone is a loser as a result of the newly approved stimulus package.   It is not a win-win package, as it should be, and it is not a win-lose package, with clear winners and clear losers.     It is a lose-lose package.    Everyone has lost something valuable and important to him or her. 

Although Obama got what he wanted, I think he is a loser for many reasons.    First, he based his campaign for President on the promise of bringing hope and change to the country he is now leading.    In order to get the stimulus package approved, he became a fear monger and a spokesman for a “gloom and doom” outlook for the country.   Second, Obama promised to govern in a bipartisan manner and to seek bipartisan support on all major issues.   Despite these promises, the stimulus legislation was railroaded through Congress and was approved almost exclusively by Democrats, with every single Republican in the House and all but three Republicans in the Senate voting against it.   Third, the process by which the stimulus legislation was developed and approved was downright ugly.  Obama promised openness and transparency.    Instead, the single most expensive and expansive piece of legislation ever enacted by Congress was rushed through the system in less than a month.   Although the bill contains 1,073 pages and weighs more than five pounds, it was not available until early in the morning on the same day it was approved by both the House and the Senate.  It is safe to say that not a single member of Congress read the bill before voting on it.   I am sure President Obama has not read the bill.   Provisions involving billions of dollars of taxpayer money were never discussed or debated.  For the next several weeks, we will be reading about provisions in the bill that even those who supported it did not know about.    Finally, it is inevitable that the stimulus bill will result in billions of dollars of wasted taxpayer money.    It will not be long before we will be hearing about inefficient government spending, new government contracts being awarded to those with the best political connections, and allegations of fraud on the part of government employees and contractors.   The stories of waste and fraud to come will tarnish the Obama Administration. 

The Republicans also must be classified as losers.    First, as the minority party, they were unable to have any significant influence over one of the most important pieces of legislation ever enacted by Congress.   The three moderate or liberal Republicans in the Senate who voted for the legislation may have received a few modest concessions, but overall the Republicans were powerless.    Second, the Republicans did not have any credibility as champions of fiscal conservatism after spending taxpayer money like drunken sailors when they controlled Congress.  They also did not have any credibility when they complained about the heavy-handed tactics of Speaker of the House Nancy Pelosi, who was simply following the example set by former Republican Speaker of the House Tom DeLay.   Finally, the Republicans now face the same dilemma the Democrats faced when they were out of control.    When President Bush was in office, many Republicans charged—correctly in my opinion—that the Democrats wanted bad things to happen to the country so they could regain power.   When Bush was President, it was very clear that many Democrats were thrilled when the War in Iraq was going badly, and they could not control their excitement when the economy went into the tank.   These developments, which were bad for the country, were good for the Democrats.    The tables are now turned.    The Republicans claimed the stimulus package would not work, and many of them will now be hoping it fails because failure will prove they were right and will pave the way for them to regain the power they have lost.   There is something wrong with a political system where the hopes and dreams of the minority party depend on developments that are bad for the country. 

The American public also lost.   Ed Feulner, President of the Heritage Foundation, said the stimulus legislation will result in a “massive expansion of the federal government’s reach into the day-to-day life of virtually every citizen, business and civic organization in the nation.”   As examples, Mr. Fuelner said the bill among other things (1) “reverses the bipartisan and highly successful welfare reforms of 1996 and drastically expands the welfare state,”  (2) “does extreme violence to the concept of federalism—bailing out states that have spent irresponsibly at the expense of taxpayers in states that have been fiscally prudent,” (3) “greatly shifts the responsibility and power over health care delivery and decision making from individuals to government” and “creates a new federal health board to decide which medical services are ‘effective’ in America, paving the way for government effectively to overrule the clinical decisions of private physicians,” and (4) “deliberately censors religious speech and worship on school campuses by prohibiting any ‘stimulus’ funds for facilities that are used for sectarian instruction, religious worship, or a school of divinity.”    According to Mr. Fuelner, all of this was accomplished through legislation “cloaked in secrecy” and “withdrawn from open public exposure and honest debate.” 

Perhaps the biggest losers were the shrinking number of Americans who pay federal income taxes.     According to the U.S. National Debt Clock, the current federal debt is $10,765,538,572,361 as of today, February 14, 2008.   The federal debt has been increasing at a rate of approximately $3.48 billion per day since September 28, 2007.   These numbers do not include the new debt to be incurred by the federal government to pay for the stimulus package.    As a result of the stimulus package, the federal deficit this year will easily exceed $1,000,000,000,000 and will probably approach $2,000,000,000,000, which will be added to the federal debt.   On top of all of this, the government has massive unfunded future liabilities under entitlement programs such as Social Security and Medicare.    There is no free lunch.    All of this money eventually will have to be repaid, and the burden of repayment will fall on those who pay taxes rather than on the politicians who have created this mess by freely and recklessly spending other people’s money.  

Will the stimulus package work and get the economy moving again?    The truth is that no one will ever know.    The economy eventually would have recovered even without the stimulus package.   The stimulus package may expedite the recovery, or it may delay it.   There are so many factors affecting the economy that it will be difficult to assign credit or blame to a single factor, even a factor as large as the stimulus package.  Regardless of what happens, all politicians, Democrats and Republicans alike, will make the arguments that are necessary to advance their interests. 

There are several reasons why I believe it is highly likely the economy will improve between now and the next election.   First, psychology plays an extremely important part in the economy.    Now that the stimulus package has been passed, Obama will have an incentive to talk positively rather than negatively about the economy.   He will highlight every positive development.    The members of the news media love Obama, and they will accommodate him by emphasizing positive news about the economy just as they emphasized negative news prior to the election and prior to the passage of the stimulus package.   Second, recessions don’t last forever, and the current recession won’t last forever.    History shows that periods of negative economic growth and high unemployment are generally followed by periods of high growth and job creation.   Finally, the stock market is likely to recover from its dismal performance in 2008 and early 2009, and this recovery will boost confidence in the overall economy.    According to a report issued by Goldman Sachs, 2008 was one of the three worst years in the stock market since 1825.    The other two years were 1931, when the market was down between 40% and 50%, and 1937, when the market was down between 30% and 40%.   The market’s dismal performance in 1931 was followed by a loss of between 0% and 10% in 1932 and a gain of 50% to 60% in 1933.    The market’s 1937 performance was followed by a gain of 30% to 40% in 1938.   

Obama bet the farm on the stimulus package, and he paid a heavy price to get it passed.   He violated almost every principle on which he based his campaign for President.    In the short term, his bet will probably pay off because the economy will improve and he will be able to take credit for it.   In the long run, the stimulus package, in my opinion, will have an extremely detrimental effect on the future of the country because the government will be more involved in almost every aspect of our lives and because the government debt, which was already huge, is now totally out of control.    In the long run, you can look forward to the higher interest rates and higher inflation that will inevitably result from our huge government debt.             

A Rocky Start

President Barak Obama has been in office for less than three weeks, and he is off to a rocky start.    Very few things have gone his way since his inauguration.    So far, most of Obama’s problems have been self-inflicted or have been caused by his friends—his fellow Democrats—rather than by the minority party—the Republicans.  

Obama is facing problems on a number of fronts, including his failure to instill confidence rather than fear, his unwillingness to govern in a bipartisan manner as he promised to do, the nature of the stimulus package he is promoting, the numerous tax and other problems involving his nominees for high-level positions, his repeated waivers of his own highly publicized ethics policy, and his public retreat from Bush Administration policies designed to protect the country from terrorist attacks.     For a new President who has been in office for less than three weeks, Obama has managed through his own actions or through bad luck to turn what should have been his honeymoon period into a rocky road full of potholes. 

The biggest problem facing our country today is a lack of confidence.   The public has lost confidence in both government and business.   We will not be able to solve our economic crisis until confidence is restored.    So far, President Obama has not made the transition from being a candidate seeking office to being President of the United States.   In order to attract votes, political candidates frequently paint a “gloom and doom” scenario for the country.    The President of the United States, on the other hand, has a different role.   The President needs to project confidence and optimism and to be reassuring.    In an effort to support an ill-conceived and pork-laden stimulus package, President Obama said last week the country faces a “catastrophe” if the package is not adopted immediately and without further debate.  Obama’s comment fails to recognize the importance of psychology to the country’s economic recovery.  If people expect conditions to get worse, they will take action that causes them to get worse.   If people expect conditions to improve, they will take action that causes them to improve.    We don’t need the President of the United States predicting a “catastrophe.”  

Obama won the Presidential election in large part because he promised to end the bitter partisanship that has poisoned the political atmosphere in Washington.    His first major goal as President was to pass a stimulus package in an effort to boost the economy.   He completely failed, however, to approach the preparation of the stimulus package in a bipartisan manner.    Instead, based on every news report I have read, Obama delegated the preparation of the stimulus package to Nancy Pelosi, the Speaker of the House of Representatives and one of the most liberal and partisan politicians in Washington, and to some of her equally liberal colleagues in the House.   The product produced by Speaker Pelosi included billions of dollars of old-fashioned pork-barrel spending and special interest tax breaks as well as a Christmas list of new programs long favored by liberals.   The initial stimulus package was so bad that every single Republican in the House voted against it, and they were joined by a number of moderate Democrats who could not support the package.     I provided a link to the House version of the stimulus package in my last post on this blog.    Many of the absurd provisions contained in the package have been well publicized, and there is no need for me to repeat them here.   For more information about the stimulus package, click on the following link to find an article from National Review Online entitled “50 De-Stimulating Facts”: 

http://article.nationalreview.com/?q=YjcyODIyZGM2MGU1ZDdkNDgxZDc3OTNjYjM4ZDY1ODI= 

After its passage in the House, the stimulus package moved to the U.S. Senate where at least some efforts were made to gain more Republican support.    It now appears that enough changes have been made in the package that a few liberal Republicans have agreed to support it.    The final package, however, will in all likelihood closely resemble the original House version in size and scope.    The final package will represent the largest single expansion of government in my lifetime—and perhaps in the history of the United States—and it will have been adopted during a period of approximately one month with little or no debate about many individual components involving billions of dollars in cost to the country’s shrinking number of taxpayers.   Senator Lindsay Graham, a moderate Republican who has a history of working with Democrats in a bipartisan manner, said this week the stimulus bill “stinks” and the process by which it was developed “stinks.” 

Instead of approaching the stimulus legislation in a bipartisan manner, Obama has reminded the Republicans on several occasions that he won the election, that the Democrats control Congress, and that they can do whatever they please.   What he has said is true.   It’s reality.    Elections have consequences.    But Obama’s comments and conduct represent “business as usual” in Washington rather than the bipartisanship he promised to bring to the political arena.   Despite the way the stimulus package was developed and the many questionable expenditures contained in it, Obama has further said it would be “inexcusable” for anyone to vote against it or to delay its passage.   In my view, Obama has squandered a great opportunity to pass a very important and necessary piece of legislation with broad bipartisan support.   

The stimulus package has not been Obama’s only problem during his short time in office.   He also has had problems with no less than five of his nominations for a Cabinet or other high-level position.   Almost every new President runs into problems with at least one of his nominations, but Obama has had a string of problems, at least four of which have involved nominees who failed to pay their taxes.   To make matters worse, Obama continued his public support for at least two of the nominees after their tax delinquencies were disclosed. 

With Obama’s full support, the Senate confirmed his nomination of Timothy Geithner as Secretary of the Treasury despite Geithner’s failure to pay more than $34,000 in self-employment taxes on compensation he received from the International Monetary Fund.   The result is we now have a Treasury Secretary who is in charge of the Internal Revenue Service and who failed to pay all of the taxes he owed to the IRS until he was forced to do so.   Geithner described his failure as an inadvertent oversight, but he reportedly had been told he had to pay self-employment taxes on his salary, and he asked for an extra allowance to cover the tax liability.   Moreover, virtually everyone with a modest amount of knowledge about the tax code would realize the taxes were owed.   Geithner got a pass because of the Senate’s goodwill toward Obama and because he was confirmed before similar tax problems with other Obama nominees became public knowledge.  

Two other Obama nominees “voluntarily” withdrew their nominations after disclosures they also had failed to pay taxes that were due.   Former Senate Majority Leader Tom Daschle withdrew his nomination as Secretary of Health and Human Services after disclosures that he failed to pay more than $128,000 in taxes for consulting income and the use of a car and driver.    Daschle, who worked for a major law firm, claimed he didn’t know he owed taxes on the use of the car and driver.   Again, any amateur would know better.   Amazingly, Obama voiced his continued support for Daschle after the tax problem was disclosed and a mere two days before Daschle withdrew his nomination.  At about the same time, Nancy Killefer, a former U.S. Treasury official, withdrew her nomination as the government’s chief performance officer after disclosures she failed to pay unemployment taxes for a household employee.  It doesn’t end there.   U.S. Representative Hilda Solis, Obama’s nominee as Secretary of Labor, also has tax problems.   Apparently, her husband recently paid $6,400 to settle tax liens against his business.   Rep. Solis and her husband filed joint tax returns, which means she is equally responsible with her husband for any tax liabilities, but she insists the problem belongs to her husband and should not be attributed to her. 

The tax problems involving four Obama nominees arose after another nominee, New Mexico Gov. Bill Richardson, withdrew from consideration as Secretary of Commerce because of a grand jury investigation over whether contributions to Richardson’s political action committee were related to state contracts awarded to the donor’s business. 

When Obama was not being distracted by the tax problems facing his nominees, he was busy granting waivers to his own ethics policy, which he adopted with great fanfare on his first full day in office.    Obama said he was imposing the “most sweeping ethics reform in history.”    Under the new policy, Obama said he would not allow government officials to work on issues on which they had worked as a lobbyist in recent years.   In less than three weeks since the policy was adopted, Obama has granted several waivers to individuals who had previously worked as lobbyists and who Obama wanted to place in various government positions.    It would appear, therefore, that the only purpose of the new policy was to make a good impression on the evening news shows.   In a further mockery of the new policy, if Tom Daschle had been confirmed as Secretary of Health and Human Services, he presumably would not have needed a waiver because he was not registered as a lobbyist.  The facts are, however, that Daschle has been employed and paid handsomely by a large law firm even though he does not have a law degree.   He was not a lawyer, and he was not a lobbyist.    He was simply a consultant.    Apparently, the ethics policy does not apply to consultants. 

Obama also has created a problem for himself by moving quickly to rescind some of the policies adopted by President Bush to keep the country safe from terrorists.    For example, he announced that he is closing the terrorist detention facility in Guantanamo Bay, but he has no idea what he is going to do with the terrorists who are located there.   After Obama’s announcement, there have been news reports that some of the prisoners who have already been released from the Guantanamo facility have rejoined their terrorist organizations.   Obama also proudly announced to the world, including the world of terrorists, that intelligence agencies would no longer torture terrorist suspects, as if this had been the policy in the past, which is not the case.   Moreover, Obama’s announcement contained a sufficient number of exceptions that his liberal friends were not happy.     

Despite his rough start, Obama still has a good chance to be a great President.   It’s still very early in the game.    He has a long way to go, and he still enjoys very high public approval ratings, as he should as our new President.   Obama, to his credit, has refreshingly admitted that he “screwed up” with some of his nominations to high-level positions.   If Obama is ultimately successful, these early stumbles will be forgotten.   I did not vote for Obama because he is too liberal and too inexperienced for my taste.   Nevertheless, he is now my President.  I want him to be successful, and I need him to be successful.  More importantly, the country desperately needs for him to be successful.   I can only hope he learns from these early mistakes and does not repeat them in the future.