Economics
Why Liberalism Cannot Cure the American Economy
Liberal politicians in Washington, D.C. are very nervous about the upcoming elections. The American economy is stuck in the doldrums–if not headed for a double dip recession–and the people just might vent their wrath against those holding the reins of power.
In fact, President Obama’s team is so concerned that they’ve been meeting around the clock to try to come up with a solution. Should they enact another stimulus? Should they unleash a new set of tax credits or incentives? How should the government intervene to get the economy going?
We are told that the president will make a major speech this week about what they plan to do.
There’s just one problem. Liberal solutions to economic problems don’t work. They do not “reckon with reality,” so they are doomed to fail. Liberal politicians and their media cronies just don’t get it.
It’s freedom that we need. Not more government.
As Ronald Reagan once wisely stated: “Government is not the answer to our problems. Government is the problem.”
I recently read a book that opened my eyes to the blindness and bias that exists in both liberal political and media circles. Peter Goodman’s Past Due: The End of Easy Money and the Renewal of the American Economy, was given to me by a friend who wanted my opinion on it. Mr. Goodman is an economics writer for the New York Times who previously served for ten years as a Washington Post correspondent.
Reading books like Goodman’s is a healthy thing to do. It helps me understand what the other side is thinking and keeps me honest in my own beliefs. If you don’t read your philosophical opponents, then you must be unsure of your own principles or afraid to have them challenged. I am neither. As a pursuer of truth, I am open to find it wherever it may be found—sometimes in unusual places.
My friend thought I might be helped by a book from the bastion of liberal thought—the New York Times. I was sadly disappointed. Though Mr. Goodman is an engaging and thorough writer, I was amazed at the conclusions he drew from his analysis of where the American economy went wrong and what we must do to right it.
To be fair, Mr. Goodman rightly points out that many American institutions and individuals got hooked on easy money and credit over the past couple of decades. We spent beyond our means because we used the increasing equity in our homes as a cash cow to fund a debt-ridden lifestyle. He is right in this analysis. Americans got careless with debt during the Reagan-led boom that lasted from 1982 to 2007.
So far, so good.
Goodman weaves many personal stories into his narrative to prove his point. All of these people, from many walks of life, over spent, over borrowed and got shellacked when the mountain of debt became due. He discusses how the big banks and financial institutions did the same—apparently motivated by capitalism and greed. There are some elements of truth here as well.
But then the analysis reverts to the liberal bias. George Bush is consistently mocked throughout the book because he was a believer in unrestrained free enterprise. He also takes to task Bill Clinton’s reform of welfare, Robert Rubin’s and Larry Summer’s leadership during the Clinton years, de-regulation policies, and especially Alan Greenspan’s guidance of the Federal Reserve which was too laissez-faire.
The biggest culprit is what Goodman calls “faith based markets.” He says, “The intensity of the recession… was the direct result of a massive abdication of regulatory authority, one that enabled Wall Street and Madison Avenue to get rich by selling the dream of immediate wealth.” In other words—the government wasn’t involved enough. He calls this neglect “living in a fantasy world or Neverland.” He labels the free enterprise proponents as modern day Peter Pans.
Thus Mr. Goodman shares a fond affection for the Keynesian view of economics—that government must assume control of the economy and take the lead. He says, “The government must once again regulate the financial system to protect the economy from investment binges.” His desired direction is the government establishing “seed investments,” especially in bio-tech and renewable energy (he’s really big on wind and solar), and should finance health care through expanding Medicare and Medicaid and promote a “collective enterprise” between government and industry.
Let’s just say it as it is. Goodman is a socialist—or a fascist. They’re the same thing in his Liberal Neverland. He decries Wall Street and Main Street—but he a cheerleader for “State Street.” Goodman wants the government to control it all.
That’s why he is admiringly pro-Obama and his liberal economic ideas in the book. There is not one negative or cautionary word about the president’s policies. He lauds the fact that the president declared on inauguration day, “We must pick ourselves up, dust ourselves off, and begin the re-making America.”
This re-making included the massive federal stimulus bill which Goodman applauded because it “took the edge off the worst economic fears and raised hopes that the suffering would diminish. It would generate needed paychecks. It would provide relief to those laid off. It would spare jobs that otherwise would have been lost by sending aid to cash-strapped states.”
Talk about Fantasyland. The so-called stimulus was a trillion dollar failure. And normal Americans don’t agree with Goodman’s enthusiasm over the government takeover of health care. They reject it by nearly a sixty to forty margin.
Goodman–and the Obama administration–believe that Big Goverment with its massive income re-distribution priorities are the best masters of the free enterprise system. What they fail to realize is this: It is government intervention that is the problem. Centralized governments always grossly misallocate currency and capital resources that are better guided by individual market decisions. The choices of millions of consumers provide much better checks and balances than a few bureaucrats do.
Here’s what Goodman amazingly missed in his research. He says that banks and other greedy financial institutions lent money they shouldn’t have. They were careless, reckless, and this is why the housing bubble inflated. There was too much money floating around with people abusing it via their home equity loans and re-financing schemes to get rich. He says there wasn’t enough regulation (government control) of the money supply.
But where did they get the money? Private companies cannot print money. Only governments can. It was short-sighted government regulation, through Richard Nixon, in 1971, that removed American finance from the gold standard, allowing trillions of dollars to be printed in the last thirty years that are backed by nothing. In 1971, gold was at $35 an ounce and the dollar was “pegged” to it for stability and strength.
In 2010, gold is over $1200 an ounce and the dollar remains incredibly weak. Bad government regulation has “inflated” our financial institutions with too many dollars. They simply used what they were unwisely given.
You can’t blame the Monopoly players when bank (the Government) is at fault for circulating all the funny money. If the government had left the money supply pegged to gold, there would have been no inflated home prices and no crash. The central planners messed up the system.
Goodman and his liberal friends are also disingenuous about other government agencies that heavily contributed to the financial meltdown. In Past Due, Goodman discussed the giant mortage companies Fannie Mae and Freddie Mac. He calls them “private companies” and places no blame at their feet for the collapse of the housing market.
But they are not private entities. They are government subsidiaries that tried to regulate people into homes they couldn’t afford, breaking all the normal laws of wise lending practices. Freddie and Fannie are in bed with the liberals and contribute heavily to their campaigns.
Here’s the bottom line: The US government bears the major responsibility for screwing up the American economy by grossly inflating the money supply and then lending it to unqualified buyers. If the government had stayed out of the markets, they would have been far more stable and self-correcting.
They didn’t–and set us on a course that looks an awful lot like sinking Europe, depressed Japan, and the disgraced and fallen Soviet Union.
Peter Goodman and his ilk now want the Federal Government to lead the American renewal with what? More controls! This is not only dumb–it is suicidal.
Past Due: The End of Easy Money and the Renewal of the American Economy is a propaganda book with a ludicrous conclusion. I think it should be re-titled: Past Due: The End of Liberal Dis-Information About the Virtues of Big Government.
America’s economic engine runs on the fuel of faith and freedom–characteristics that liberal thinkers neither understand nor promote.
Fortunately, the American people are seeing the light and will be voting for freedom in November, not for more government regulations. They know that liberalism cannot cure the economy because it puts its faith in the wrong thing–the Almighty State–instead of Almighty God who dwells in the hearts and minds of a self-governing people.
Job Killers Vs. Job Creators
Since the number one household issue in the United States right now is jobs–the need for a free and robust economy–I thought it would be helpful to share with you the best article I’ve seen on the subject this year.
Newt Gingrich is certainly one of the clearest political thinkers in America today. He has also undergone a spiritual transformation in his life which shows in his writing and speaking. I encourage you to watch his new documentary, Nine Days that Changed the World, that shares the moral and spiritual backdrop of the fall of the Iron Curtain. It’s liberation was not accomplished by men–but by the power of God through faith and prayer.
This Economics 101 lesson is the bottom line of the fall elections. It’s interesting to me that Speaker Gingrich uses the terms “Killers” vs. “Creators.” Isn’t the real battle in the world between Lucifer, a killer of men’s souls and livelihoods, and God, our magnificent Creator and Sustainer? RB
July 21, 2010 – Job Killers vs. Job Creators
By Newt Gingrich, former Speaker of the House
The campaign this fall can be boiled down to a simple choice: job-killers versus job-creators.
With so many Americans out of work, candidates will win decisive victories if they can show their opponent’s policies will kill jobs and their policies will create jobs.
Governing is about having the right principles, policies, processes and people.
Successful leaders hold principles that work in the real world, and these principles lead them to the right policies. And because they are determined to measure results, they develop processes that work. Finally, with the right principles, policies, and processes, they look for people who are driven, practical, and experienced to get the right things done the right way.
Unfortunately, under the Pelosi-Reid Congress and the Obama presidency, government has become a job-killing system thanks to a set of principles, policies, processes and people that are completely disconnected from reality.
I describe this alien ideology in my book To Save America: Stopping Obama’s Secular-Socialist Machine. It is a fundamentally anti-work, anti-investment, anti-entrepreneurial ideology that has led to economic stagnation and spiritual decay wherever it has been tried.
We can already see the results of this radical ideology in America.
The American work ethic is being replaced with a mindset that favors “gaming” the system to get away with working as little as possible.
American productivity is being replaced with a set of union work rules and bureaucracy that makes us too slow, too expensive and too cumbersome.
The historic American commitment to local representation and local control is being replaced by an emphasis on federal concentration of power and rule by bureaucrats and judges that is stripping Americans of their rights and responsibilities.
A commitment to religious freedom and God-given rights is being replaced by a secular oppression that increasingly resembles the government-imposed atheism of Soviet totalitarianism. (I encourage you to watch the documentary Nine Days that Changed the World, which Callista and I host and produced, to learn about the plight of the Polish people under Communism and the brave moral leadership of Pope John Paul II that helped topple the Soviet Union.)
The secular-socialist machine of the left has made the recession worse by suppressing the natural resiliency of the American economy and setting the stage for even worse economic challenges in the future.
For President Obama, the years he spent studying and teaching the radicalism of Saul Alinsky laid the foundation for a job-killing, anti-business attitude.
If you believe business is bad, you will convince it to go away.
If you are determined to tax small business owners, entrepreneurs, successful corporate leaders, investors, and innovators they will either avoid taxable behavior or leave the country entirely.
If you impose absurd regulatory controls totally out of touch with reality, you will kill jobs.
The Obama Administration’s moratorium on offshore drilling has already sent high-paying good jobs and tax-paying, profitable companies out of the United States. Obama has been good for jobs in Egypt and the Congo (where the first two oil rigs have gone) but he has killed jobs in Louisiana.
The President’s proposed energy taxes will kill jobs in America but they will create jobs in China (which this year passed America as the world’s largest user of energy).
The recently passed government control of the financial system will be good for jobs in London, Tokyo, Frankfurt, Shanghai and other foreign financial centers but it will kill jobs and profits in the United States.
We have seen job killers implement job-killing policies before.
President Carter had a whole series of job-killing policies from 1977 to 1980 and they worked. They killed a lot of jobs.
Politicians in Detroit have been killing jobs for two decades. Only with Mayor Dave Bing’s new job-oriented approach has there been any hope of rebuilding Detroit’s economy.
We have all seen the state governments of New York and California adopt policies that kill jobs and drive businesses and successful individuals out of their states.
On the other side, we have seen a job creator like Gov. Rick Perry implement policies which in 2008 led Texas to create as many jobs as the other 49 states combined.
Governors Mitch Daniels in Indiana, Tim Pawlenty in Minnesota, Haley Barbour in Mississippi, Sonny Perdue in Georgia, and Bobby Jindal in Louisiana are all examples of principled job creators whose policies work.
We are in the worst economy since the Great Depression.
The only recent improvements in unemployment numbers have come about because people have quit looking for work and so are no longer counted as unemployed.
Under this model, if President Obama could convince every unemployed American to quit looking for work, we would have zero percent unemployment.
The number would be great but the reality would be horrible.
The Last Year of Freedom?
“Oh say does that star-spangled banner yet wave over the land of the free and the home of the brave?”
This year our church had the vision to hold a Fourth of July outdoor service down on the waterfront of our picturesque town. Hundreds of people showed up at Marina Park in Port Orchard at 11am where a praise band (that included our son Ryan) played over twenty tunes of Christian and patriotic music.
I had the privilege of leading the group in the Call2Fall application–a time of repentance and prayer on our knees before the God of heaven. We were joining thousands of others across the nation who were also on their knees confessing their sins and asking God for a desperately needed national revival.
First Christian Church pastor Kevin Hestead, gave the morning message as the sun broke through the clouds. He discussed the idea of freedom–and what a precious gift it is.
His remarks reminded me of the famous encounter that Ben Franklin had with an older women who’d come to hear about the results of the Constitutional Convention in the 1787. Upon seeing Mr. Franklin leave the meetings, the woman innocently asked him, “What have you given us, Dr. Franklin?”
His reply was one for the ages: “We have given you a a republic, madame–if you can keep it.”
If you can keep it.
I first pondered those words in 1976 while reading Rus Walton’s classic book One Nation Under God. They struck me as wise, prophetic–and a warning.
Liberty can be lost in one generation. It can be here one year and gone the next.
As I listened to the sermon on Sunday, July 4, 2010, a disturbing thought came to my mind:
“Could this be the last year of liberty?”
At first glance that thought seems rather foolish. America has known an unprecedented degree of freedom as a nation for two hundred and thirty-four years. The Statue of Liberty in New York harbor speaks to the nation and world of our love of liberty. For over a hundred years we have been the freest and most prosperous nation on earth–with only 6% of the world’s population producing over fifty percent of the world’s goods and services.
But this year, for the first time, we dropped from our lofty pedestal as the world’s champion of freedom. As I pointed out in an earlier blog, the United States is no longer the pre-eminent beacon of liberty in the world. That ranking goes to Hong Kong (part of a Communist nation) and Singapore where much investment capital is headed. The Index of Economic Freedom has the US plummeting to eighth in the world in economic freedom and sinking fast.
Due to the staggering Obama administration deficits, the Congressional Budget Office now predicts that the US debt load will reach 62% of GDP by the end of the year–far above the normal level which has averaged between 36%-40% for decades.
Debt is slavery–not freedom. “The borrower becomes the lender’s slave” (Proverbs 22:7) is the true axiom from Scripture. But there are other considerations in liberty versus bondage.
Human freedom actually has a number of dimensions–and they work in a general order.
The first is spiritual freedom–what my pastor shared on Sunday. Jesus Himself said, “If you abide in my word then you are truly my disciples and you will know the truth, and the truth will set you free” (John 8:32). The beginning of liberty in a human being is being set free from the power and penalty of sin through faith in Jesus Christ. Being “born again” is a description of the spiritual freedom that comes through submission to God and casting off of “self.” It is the first step of human liberation.
The second is moral freedom which is the result of Christ’s work in our hearts. When we are reconciled to God, the Holy Spirit begins to empower us to make the right moral choices and become the kind of person we can never be in a self-centered, unredeemed state. Faith gives birth to morality in free peoples.
Moral freedom leads to economic freedom and prosperity, including increased creativity and a strong personal work ethic. It is faith, morality, and hard work that changed America from a mediocre group of colonies into an economic powerhouse in the 20st century. Prosperity is s fruit of faithful, moral character. This was the secret to America’s greatness in past generations.
And economic liberty leads to national security, which is military freedom. It was America’s rebirth of faith, morality, and economic vitality in the 1980s that defeated the Soviet Union and caused the fall of communism on a global scale. It is “right that makes might” as Abraham Lincoln once told us.
I am concerned for my nation in all of these arenas–faith, morality, economics, and national security. Freedom in our nation is on its last legs–and it may not take much to lurch us off the cliff.
And something is coming in less than six months that could just be the nail in the coffin.
Author and radio host Ken Talbott, of TheWalkShow.com has alerted me to the following possible death blows to American freedom. In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:
First Wave: Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families. These will all expire on January 1, 2011:
Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:
– The 10% bracket rises to an expanded 15%
– The 25% bracket rises to 28%
– The 28% bracket rises to 31%
– The 33% bracket rises to 36%
– The 35% bracket rises to 39.6%
Higher taxes on marriage and family. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income. The child tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to the single level. The dependent care and adoption tax credits will be cut.
The return of the Death Tax. This year, there is no death tax. For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.
Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.
Second Wave: Obamacare
There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:
The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).
The “Special Needs Kids Tax” This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.
The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.
Third Wave: The Alternative Minimum Tax and Employer Tax Hikes
When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired. The major items include:
The AMT (Alternative Minimum Tax) will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.
Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be “depreciated.”
Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.
Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.
Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there. (PDF Version. Read more: http://www.atr.org/sixmonths.html?content=5171#ixzz0skDBRGLz.)
These areas describe the economic bondage that will take an exponential jump next year. I personally believe they are the result of the first two–increasing unbelief and elimination of God from the public arena, and a dizzying array of immorality in personal lives and families.
But I am not giving in. Freedom can be reborn and it must begin with me.
Let’s re-kindle the passion and power of Patrick Henry’s famous speech delivered at St. John’s Church in 1775. His remarks are famous for the line, “Give me liberty or give me death!” But the speech in its entirety says so much more about the cause for freedom. Here is Henry’s call to every American in every generation:
“There is no longer any room for hope. If we wish to be free- if we mean to preserve inviolate those inestimable privileges for which we have been so long contending-if we mean not basely to abandon the noble struggle in which we have been so long engaged, and which we have pledged ourselves never to abandon until the glorious object of our contest shall be obtained-we must fight! I repeat it, sir, we must fight! An appeal to arms and to the God of hosts is all that is left us!”
Is this the last year of American liberty? Over my dead body! While I’m alive, I will confess my sins, pray to God, look to Christ, live morally, work hard, vote and work for change in November, and put my trust in a mighty Redeemer.
“Oh say does that star-spangled banner yet wave over the land of the free and the home of the brave?”