The U.S. Debt Bubble Will Make Sub-Prime Mortgages Look Like a Picnic

Can you say "sea of red ink"?

From Rep. Paul Ryan's budget proposal - click to enlarge

Just how bad is the U.S. debt problem? Jim Manzi spells it out at The Corner:

… we are sitting on the mother of all bubbles. Many, probably most, Americans anticipate a stream of consumption that will be provided for them into old age by the government (i.e., other taxpayers). Unfortunately, most American taxpayers do not anticipate the kind of enormous increase in taxes that would be required to pay for this stream of benefits. One or both of these expectations will not be met. Americans as a whole are simply less wealthy, in the most useful sense of rationally anticipatable future material consumption, than they think they are. And the size of this disconnect is vastly greater than, for example, the size of the housing-price bubble that just popped.

…the combination of the debt we have just put on our balance sheet, plus the deficits that are scheduled to be created by these programs over the next 10 to 20 years, means that we need to confront this problem soon. We have increased public debt from about 40 percent of GDP in 2005 to about 70 percent of GDP by the end of this year; and we are projected to exceed the historical peak debt of about 100 percent of GDP (achieved at the close of World War II) within the next 15 years; thereupon we enter uncharted territory.

The borrowing capacity of the U.S. government is vast, but it is not limitless. At some point that nobody can predict, we will not be able to borrow enough to continue spending n the manner that current law assumes without extremely large negative effects. This is the way the bubble will very likely pop, if we let it come to that: a funding crisis for the U.S. government.  This is very unlikely in 2011, or 2012 or 2013; but over 20 years, we are playing with fire. In essence, we don’t need to care that much about the projections for 2080, because long, long before that, we’re going hit the wall, unless we somehow address the problem.

The GOP budget proposal makes clear that “the last Congress” — you know, the one dominated by Democrats — was responsible for the pork-laden stimulus bill.

At a time when the free-market foundations of the American economy were in desperate need of restoration and repair, the last Congress took actions that further undermined them. The President and his party’s leaders embarked on a stimulus spending spree that added hundreds of billions of dollars to the debt, yet failed to deliver on its promises to create jobs. Acute economic hardship was exploited to enact unprecedented expansions of government power.

This did not sit well with the American people. Citizens stood up and demanded that their leaders reacquaint themselves with America’s founding ideals of liberty, limited government, and equality under the rule of law.

Porkulus” was so extreme that it failed to attract a single Republican vote in the House, and only three in the Senate — the two liberal ladies from Maine and Arlen Specter, who soon switched parties on his way toward losing the Democratic primary in a bid to salvage his job.  But the Republican budget document doesn’t let the GOP off the hook:

In recent years, both political parties have squandered the public’s trust. The American people ended a unified Republican majority in 2006, just as they ended a unified Democratic majority last fall. Americans reject leaders who focus on the pursuit of power at the expense of principle. They reject empty promises from a government that cannot live within its means. They deserve the truth about the nation’s fiscal and economic challenges. They deserve – and demand – honest leaders willing to stand for solutions.

The GOP has a lot of profligate spending to answer for, but at least the party now is putting forth a serious plan, albeit one that will not survive President Obama’s veto power.  The question is whether we can get Obama voted out of office before our Chinese creditors cut off the flow of money.

A Scary Road Ahead for the U.S. Economy

Bond investor Bill Gross

In the midst of the coverage this past week of the various pathologies of Muammar Gaddafi, the Wisconsin legislature and Charlie Sheen, some of the most ominous news was largely overlooked.

  • Pacific Investment Management Co. (Pimco) confirmed that billionaire Bill Gross, manager of the world’s largest bond fund, had completely eliminated U.S. Treasury Bonds from his flagship portfolio.
  • About the same time, the bipartisan co-chairs of President Obama’s deficit reduction commission were telling a Senate Budget Committee hearing that the United States faces “the most predictable economic crisis in history” within just one to two years, unless drastic steps are taken to bring the government’s spending in line with its revenues.

It’s hard to overstate the iconic status of U.S. Treasury Bonds as a safe haven for investors.  For generations, the Treasury’s 30-year “long bond” was the talisman of the debt markets, although that role in recent years has been taken over by 10-year Treasurys.  Think of Treasurys as the debt-market equivalent of the Dow, only more so.

In National Review’s The Corner, where I first saw these two events linked, Cornerite Andrew Stiles explains the danger:

If fewer people are willing to lend us money, the more we’ll have to shell out in higher interest payments. And if bond buyers lose confidence in our ability to make good on that debt, things could get really ugly, really fast. Much more on this from Kevin Williamson here.

As Sen. Tom Coburn (R., Okla.), who served on the deficit commission and supported its recommendations, pointed out at a press conference this week, the United States has, historically, paid an average of 6 percent interest on its debt. It currently pays about 2 percent. If rates were to return simply to that historical average, it would involve an increase to our overall interest bill of $640 billion — to be paid immediately. “An impossible situation,” in Coburn’s words.

He quotes Gross on CNBC:

“We’ve moved into Brazil and Mexico and moved money, yes, at the margin into Spain, which has a better balance sheet than the United States,” Gross told CNBC. [emphasis added]

We’re quickly moving toward a situation where the combination of net interest payments and spending on entitlements (Medicare, Medicaid, Social Security, etc.) will absorb all of the government’s revenue.  The Ponzi scheme known as Social Security probably is the easiest part of the equation to solve.  But the Obama Administration, which made the problem much worse with its bloated and dishonest “Porkulus” legislation,  has made clear that it does not think Social Security has a problem.

In the early days of the Clinton Administration, Clintonista James Carville famously said, “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”  I fear a new generation of politicians is going to have to learn the hard way that the intimidation is appropriate.

Financial Services “Reform” to Complete Obama’s Tragic Trifecta

USA Today, an early pioneer of soundbite journalism in written form, is admirably concise in setting the stage for elections soon to come:

Obama will likely trumpet a new financial regulation bill — the biggest overhaul of the system since the Great Depression — as one of his major first-term accomplishments, along with health care and the stimulus plan.

Republicans will likely argue that all three bills threaten prospects for economic recovery.

Ya think?

ObamaCare is such a train wreck that Americans support repealing it by a 2-1 margin.  Don’t even get me started on the wasteful and dishonest Porkulus fiasco, which will continue to increase deficits for years after the “need” for financial stimulus has passed.

And now comes yet another 2,000-plus page bill, a financial services “reform” measure that does a lot of things — but fails to address the actual causes of the financial meltdown that began nearly two years ago and has us staggering still. Here’s blogger (and Nobel-prize-winning economist) Gary Becker on the bill’s shortcomings (H/T: Freakanomics):

One of the most serious omissions is that the bill essentially says nothing about Freddie Mac or Fannie Mae. [KP Note: !?!?!?!?] In 2008 these organizations were placed into conservatorship of the Federal Housing Finance Agency. During the run up to the crisis, Barney Frank and others in Congress encouraged Freddie and Fannie to absorb most of the subprime mortgages. In 2008 they held over half of all mortgages, and almost all the subprimes. They have absorbed even a larger fraction of the relatively few mortgages written after 2008. Freddie and Fannie deserve a considerable share of the blame for the crisis, but they continue to have strong political support. I would like to see both of them eventually dissolved, but that is unlikely to happen. Instead we are promised that they will be dealt with in future legislation, but I am skeptical that anything will be done to terminate either organization, or even improve their functioning.

Many proposals in the bill will have highly uncertain impacts on the economy. These include, among many other provisions, the requirement that originators of mortgages and other assets retain at least 5% of the assets they originate, that many derivatives go on organized exchanges (may be an improvement but far from certain), that hedge funds become more closely regulated, and that consumer be “protected” from their financial decisions.

Most of these and other changes in the bill are not based on a serious analysis of what contributed to the financial crisis, but rather are the result of political and emotional reactions to the crisis. Usually, such reactions do more harm than good. That is likely to be the fate of the great majority of the provisions of the Dodd-Frank bill.

In simple terms, the primary enabler of the financial meltdown was the fact that financial institutions had incentives to take huge risks, knowing that any catastrophe would be socialized by a government that would have no choice.  WSJ columnist Holman Jenkins today cites new academic research in arguing that the bill doesn’t change that:

What was obvious to common sense, the naked eye and the open ear is now systematically upheld in the research of finance professors. To wit, shareholders of large, publicly traded banks have a higher appetite for risk than is compatible with our regulatory system.

Down this path lies the beginning of wisdom on how we can live with banks, which alone among businesses have the potential to bring down entire economies. Too bad such wisdom is absent from the financial regulation bill now before Congress. …

Let us be realistic about one thing, since most of us aren’t running for office: “Bailout” has become a curse word in populist diction, but “too big to fail” isn’t going away just because regulators pretend next time they would fold their arms and let the system blow up.

The government will and should continue to come to the rescue in a panic. We need better incentives to avoid creating such situations in the first place. But that discipline won’t come from shareholders, who will happily create the next 100-to-1 leveraged financial institution if the potential rewards are great enough. Bank depositors and other leverage suppliers are the ones who must be mobilized to make the system safer.

“… banks, which alone among businesses have the potential to bring down entire economies.” There in a nutshell is why I favored the “bank bailout” (on which the taxpayers are making a profit, btw) while staunchly opposing the auto industry bailout.

Becker and Jenkins both describe an opportunity lost that actually would have led to a better alignment of risk and reward.  Jenkins is the better writer, let him tell it:

Perhaps the best idea, though, is to require financial firms to fund themselves partly with a special kind of debt that would automatically be converted to equity when a bank’s capital or liquidity are imperiled. These debtholders then would have an incentive to monitor not just the amount of leverage, but the quality of the risks a bank is pursuing.

Bingo.  But instead we get another mammoth bill, chock full of unintended consequences, that increases the size of government to no good end, while failing to fulfill its primary purpose.  Add to this the public anger over the gulf oil blowout — although I think on that count, criticism of Obama is unfair — and you can see why Peter Wehner says “it’s getting ugly for the Democrats.”

A Disgraceful Vote for “Reform” in the Middle of the Night

slow_d16I was up with a touch of insomnia last night — this morning, technically — and realized the time was approaching for the Senate’s “historic” 1 a.m. vote to expand government control of the health care system.  So I tuned in to C-SPAN and caught the tail end of the run-up to the 60-40 vote that everyone knew was coming.

Clad in my jammies after a long full day of morning church, afternoon snow shoveling and evening blogging, I watched Senators in their suits and neckties make their post-midnight pitches, and I was impressed once again by Senate Minority Leader Mitch McConnell of Kentucky.  Here are some excerpts, laboriously transcribed by moi (McConnell’s remarks begin about 39 minutes into the video):

The bill we’re voting on tonight will impact every American.  It will shape the future of our country. It will determine whether our children can afford the nation they will inherit.  It is one of the most consequential votes any of us will ever take, and none of us take it lightly.

But make no mistake – if the people who wrote this bill were proud of it, they wouldn’t be forcing this vote in the dead of night.

He touched on the “cheap deals” that were cut to win the crucial 60th vote from Sen. Ben Nelson of Nebraska:

One state out of 50 – one state out of 50 – gets to expand Medicaid at no cost to itself,  while taxpayers in the other 49 states pick up the tab.  The same Senator that cut that deal secured another one that benefits a single insurance company – just one insurance company, in his state.

He reviewed the long history of bipartisan support for groundbreaking social welfare acts — Social Security, Medicare, Americans with Disabilities Act, all passed with large majorities.

“Americans believe that on issues of this importance, one party should never be allowed to force its will on the other half of the nation.  The proponents of this bill felt differently.  In a departure from history, Democratic leaders put together a bill so heavy with tax hikes, Medicare cuts and government intrusion, that in the end their biggest problem wasn’t convincing Republicans to support it, it was convincing the Democrats.

In the end, the price of passing this bill wasn’t achieving the reforms Americans were promised.  It was a blind call to make history, even if it was a historical mistake.  Which is exactly what this bill will be if it is passed.  Because in the end, this debate isn’t about differences between two parties.  It’s about a $2.3 trillion dollar, 2,733-page health care reform bill that does not reform health care, and in fact makes the price of it go up.

The impact of this vote will long outlive this long, frantic, snowy weekend in Washington.  Mark my words, this legislation will reshape our nation.  And Americans have already issued their verdict – they don’t want it! They don’t like this bill!  And they don’t like lawmakers playing games with their health care to obtain the votes they need to pass it.

Majority Leader Harry Reid followed McConnell, and on the theory that people will believe a lie if it is repeated often enough, stated “Everyone knows we’re here at one in the morning because of my friends on the other side of the aisle.”  Byron York stayed up late after the vote to debunk that:

But the fact is, there is no reason the Reid Amendment vote could not have been held at a more reasonable hour. One a.m. Monday was the earliest moment that Senate rules allowed a vote, but there is no rule keeping the Senate from voting at some time after 1 a.m. If Reid had scheduled the vote for, say, 11 a.m. Monday, that would have been fine. If he scheduled it for 4 p.m. Monday, or 10 a.m. Tuesday, that would have been fine, too. But Reid is determined to pass the national health care bill by Christmas, and to do so he has to get the cloture vote on his amendment done at the earliest moment. The timeline is Reid’s and Reid’s alone.

The final vote is now scheduled for 7 p.m. on Christmas Eve, when the Web Goddess and I will be dining with friends at their home and preparing for church.  As with Porkulus, the Democrats are pushing for action now now now now now because they know that the more people learn about the bill, the less popular it will be.

Democrats will likely pay a heavy price in the 2010 election — Harry Reid is particularly vulnerable. Why would they choose that reality to pass a highly unpopular health care bill?  Kim Strassel had the answer the other day:

So why the stubborn insistence on passing health reform? Think big. The liberal wing of the party—the Barney Franks, the David Obeys—are focused beyond November 2010, to the long-term political prize. They want a health-care program that inevitably leads to a value-added tax and a permanent welfare state. Big government then becomes fact, and another Ronald Reagan becomes impossible. See Continental Europe.

The entitlement crazes of the 1930s and 1960s also caused a backlash, but liberal Democrats know the programs of those periods survived. They are more than happy to sacrifice a few Blue Dogs, a Blanche Lincoln, a Michael Bennet, if they can expand government so that in the long run it benefits the party of government.

Revisiting Cash for Clunkers

CashForClunkers-narrowThe Wall Street Journal has just labeled the Cash for Clunkers program “one of Washington’s all-time dumb ideas.”  (Hyperbole, of course — no program costing a “mere” $3 billion could possibly qualify for the all-time dumb list.)  Here’s their reasoning:

Last week U.S. automakers reported that new car sales for September, the first month since the clunker program expired, sank by 25% from a year earlier. Sales at GM and Chrysler fell by 45% and 42%, respectively. Ford was down about 5%. Some 700,000 cars were sold in the summer under the program as buyers received up to $4,500 to buy a new car they would probably have purchased anyway, so all the program seems to have done is steal those sales from the future. Exactly as critics predicted.

Okay.  I’d want to see a few more months of statistics before concluding that most C4C buyers bought cars “they would probably have purchased anyway,” although that’s undoubtedly true in many cases.  Also, how does the September report compare with year-ago comparisons for the months just before C4C went into effect?  (I spent a frustrating 10 minutes looking for raw statistics before realizing I just didn’t care enough to spend 11 minutes.  But why don’t news reports provide links to data sources the way blog posts do?) Since September marked the start of the financial meltdown I suspect that might have been the last relatively strong month for car sales, which would skew the year-earlier comparison.

I’m still largely opposed to the very idea of artificial spending programs in the name of stimulating the economy, and I’m ferociously opposed to the wasteful and dishonest porkulus bill.  But if there was going to be a fiscal stimulus plan — and the political realities of the spring left no doubt about that — then I still think C4C was as good a stimulus as any.  And Larry Kudlow agrees with me!

Is Pro-Obama News Coverage Hurting ObamaCare?

At Commentary Magazine‘s Contentions blog, Jennifer Rubin argues that the news media has done Obama a disservice by not being more skeptical on health care:

140px-CaduceusMoreover, while the press often has acted as an early-warning sign for troubled presidential initiatives, the press corp did not perk up until the public was in open rebellion. Only the most tepid questions were raised, and few hard questions about rationing and costs were posed before August. As a result, the White House was largely caught unprepared for the storm of anger and protest that greeted congressional Democrats this month.

She then provides the most succinct explanation I’ve seen of the reasons why ObamaCare is foundering (although “threatening to consume the presidency” is a little over the top):

slow_d16None of this is to diminish the responsibility that the president and his advisers bear for the debacle now threatening to consume the presidency. They made the decision to delegate draftsmanship to Congress. They decided to reinvent a health-care system that serves a large majority of Americans very well. They chose to conceal the costs of their plan until the CBO blew the whistle. And Obama personally and repeatedly spun nonsense (e.g., red/blue pills, bending the cost curve by spending more money, a guarantee that Americans could keep their plan while pushing a government option that would chase private insurers from the market). So the fault is the president’s. But his devoted fans in the media certainly helped.

The thing I find most appalling is that the administration was intent on passing health care “reform” before the August Congressional recess… even while taking a hands-off attitude toward what should actually be in the legislation.  Watching Congress pass the porkulus bill without even reading it made people nervous, but hey, the whole idea was to throw money at the economy as quickly as possible.  (Ooops, they didn’t achieve even that.)  Now that the focus has moved on to health care — which people passionately care about — the public appetite for radical change at breakneck speed has evaporated.

Kudlow Supports A.T.I.N. on Clunkers

kudlow_Bio.standard

Kudlow's with me!

For days after conveying the coveted All That Is Necessary Seal of Approval on the Cash for Clunkers program, I’ve watched a parade of conservative commentators weigh in against it.  Some of the critics were straining too hard to find a way to bash a Democratic initiative, but there were enough substantive concerns that I began to worry about having my conservative decoder ring revoked.

So I was relieved when prominent conservative economist and columnist Lawrence Kudlow came out in support of my position.  (Disclaimer: Kudlow did not actually consult with me, and may not have been aware that he was backing my play.)

At this moment in history, if we’re going to use fiscal stimulus as Washington insists, I favor extending the cash-for-clunkers car-rebate program.

In virtually no time, the clunker program has become a national pastime. It has captured the public’s imagination in a way that no other federal stimulus has. Everyone is talking about it. And I truly believe that consumer spirits have been buoyed by the prospect of going out and buying a new car — even with federal assistance, and even under the duress of federal mileage standards.

Note that Larry and I are not advocating government giveaways to stimulate the economy.  (I call him Larry ’cause he agrees with me.)  We’re just saying that IF the government is going to dump tax money into a stimulus scheme, Cash for Clunkers is a particularly good way to do it.  It’s an artificial and ultimately unsustainable feel-good program — but if that’s what Dr. Congress has prescribed, at least it takes advantage of the fact that economic recovery and improved consumer sentiment go hand in hand.

“Porkulus” Was a Travesty, but “Cash for Clunkers” is Kosher

CashForClunkersI wasn’t aware of the “Cash for Clunkers” program until today, when they started talking about ending it prematurely because it was running out of money.  I’m not in a position to take advantage of the program  personally, but I’m glad that it looks like Congress will add more money to it.  I think the concept is brilliant — if the rest of the bloated and dishonest “stimulus” legislation had been more like this, I’d stop calling it the Porkulus bill.

Many conservatives argue that there should not have been a stimulus bill at all.  I tend to agree, and I certainly respect the principles on which that argument is made.  However, the simple political reality is that there was zero chance that the government would refrain from using stimulus spending in an attempt to revitalize the economy.

But while I think any stimulus spending may have been misguided, I’d be done talking about it if the legislation had been a pure stimulus package.  The thing I find infuriating is the uncontestable fact that much of the money will not be spent until 2011 or later.  It is fundamentally dishonest to pretend that the purpose of such spending is to stimulate the economy now.

That’s why I love the Cash for Clunkers program.  People commit to spending money right now, then they wait for the rebate.  It gives a boost to the auto industry (and remember, you and I now OWN a significant chunk of that industry).  It gets older, less efficient vehicles off the road in favor of more fuel-efficient models.  Perhaps best of all, it lets individual citizens decide whether they personally want to participate in the program. Win, win, win, win.

Of course, some conservatives see it differently.  On Planet Gore, National Review Online’s anti-environmentalist blog, Henry Payne weighs in:

Worse, Democratic demands that the guzzlers be permanently shredded means that already hurting used-car and -parts businesses will suffer. By insisting that the cars not only be crushed — but also that their engines be disabled — Congress’s decree will penalize the industry at time when a dozen U.S. parts suppliers have filed for bankruptcy this year. [...]

The victims will be lower-income Americans who typically buy only used parts and vehicles. “Now you’re removing cars people could afford, and they’re not available anymore,” says Norm Wright, a Denver recycler. “There will be fewer cars to pull from, so the price of parts will go up.

Pish and tosh.  This strikes me as Obama Derangement Syndrome, or maybe Government Derangement Syndrome — the idea that any initiative by one’s political “enemies” must be not just opposed, but also attacked and belittled.  Once it becomes inevitable that there is going to be an attempt to stimulate through government spending, Cash for Clunkers is about as good as it gets.

The original program included  “only” $1 billion for rebates.  Now the House has voted to add $2 billion.  Those amounts alone have no meaningful stimulative effect.  But surely other sensible stimulative initiatives could have been devised.

At the risk of sounding like a Republican,  the most effective way to stimulate the economy would have been… wait for it… a tax cut.  No, not a “tax cut for the rich” — a tax cut aimed directly at middle-class and lower-middle-class wage earners and business owners.  I’m talking about cutting Social Security taxes — the most regressive form of taxation there is.

I don’t recall where I first heard this idea — probably one of the political podcasts I listen to on the treadmill.  But the more I think through the implications, the more I like the concept.  The Social Security portion of FICA — currently 6.2% on the first $106,800 of annual wages earned — is more regressive even than the sales tax, because there’s no cap on the sales tax.

slow_d16It’s too late now — the Democrats already rammed through their Christmas-tree porkulus package, and the president put the lie to the idea that it had to be passed now now now now now by waiting days to sign it.  But if the main point is to pump money into the economy, why not temporarily reduce that tax by, say, 1 point?  Sure that creates a greater Social Security deficit in the future… but Porkulus increases a different deficit, and it’s not as efficient in creating short-term spending.

A Social Security tax cut could have become effective as quickly as employers could adjust their payroll calculations.  Because of the very nature of the tax, it benefits lower-income people more than it benefits the “rich.”  If the only way to get Democratic support to pass such a bill were to make sure none of the filthy, immoral, $106,801-earning Plutocrats got a single dime of benefit, you could even phase out the temporary tax cut at higher income levels.  Of course, you could also couple such a tax cut with a much smaller, better designed spending program.

Would some people undermine the stimulation by saving the extra bucks rather than spending them?  Sure.  But a LOT of the money would get spent… and the part that is “wasted” by being saved would at least be going into the savings accounts of individuals, who could make their own eventual decisions on how to spend it.

I’m not recommending this now — I’m opposed with every fiber of my being to any additional “stimulus” effort before what we’ve already done has a chance to filter through the economy.

But am I missing something?  Why would this not have been a better idea?

(Illustration by the Web Goddess)

Time May Have Expired for Obama’s “Crisis=Opportunity” Tactics

rasmussen_index_july_20_2009A few weeks after the November election, incoming White House Chief of Staff Rahm Emanuel famously said “You never want a serious crisis to go to waste.  And what I mean by that is, an opportunity to do things that you think you could not do before.”

Things like ramming through a mammoth “stimulus” bill now now now now now — never mind that nobody except the bill’s authors had even read it.  It was an opportunity to throw huge sums of money at various Democratic priorities — even though much of the money will not be spent until 2011 or later, and thus will have no current “stimulating” effect.

In today’s Wall Street Journal, Fred Barnes does a great job of tying a lot of pieces together.  In the process he helps make it clear why Obama has moved firmly into negative territory in the Rasmussen daily tracking poll. It would be worth your time to read the whole thing on the WSJ site, but you probably won’t, so here’s an excerpt:

It usually doesn’t happen this quickly in Washington. But President Barack Obama and congressional Democrats are finding that the old maxim that what goes around, comes around applies to them, too. Less than six months into his term, Mr. Obama’s top initiatives — health-care reform and “cap and trade” energy legislation — are in serious jeopardy and he has himself and his congressional allies to blame.

Their high-pressure tactics in promoting and passing legislation, most notably the economic “stimulus” enacted in February, have backfired. Those tactics include unbridled partisanship, procedural short cuts, demands for swift passage of bills, and promises of quick results.

With large majorities in Congress and an obsequious press corps, Mr. Obama was smitten with the idea of emulating President Franklin Roosevelt’s First 100 Days of legislative success in 1933. Like FDR, Mr. Obama tried to push as many liberal bills through Congress in as brief a time as possible.

He made a rookie mistake early on. He let congressional Democrats draft the bills. They’re as partisan as any group that has ever controlled Congress, and as impatient. They have little interest in the compromises needed to attract Republican support. As a consequence, what they passed — especially the $787 billion stimulus — belongs to Democrats alone. They own the stimulus outright.

The candidate who marketed himself as being above politics has, as president, descended into the arena. I have a special fondness for this theme, as it was the subject of my very first substantive post on this blog, “I Prefer the Chicago Politician to the Obamessiah“:

From a character standpoint, my biggest concern with Obama was the very thing that endeared him to many others — the idea that he was “not a politician,” or was “a new kind of politician.” I never believed that to be the case… but enough people believed it that I had to consider the possibility. The idea of a president who is not a politician is scary. It’s like the idea of a Supreme Court justice who’s not a lawyer. There’s no law against it, and it might even work out OK. But it makes no more sense to put a non-politician in the country’s top political job than it would to put a non-lawyer in the top legal job.

But it turns out Obama is a politician. After winning the Democratic nomination by appealing to the young, the idealists, the activists and the pacifists, he’s swerved right so fast that many of his supporters have whiplash.

slow_d16As the country increasingly recognizes that Obama is so a politician, Democrats in GOP-leaning districts increasingly will look ahead to the 2010 election.  They’ll start to distance themselves from the President, and they’ll scour the internet in search of any vaguely negative comment they made about the size of the porkulus bill.  The administration’s ability to steamroll Congress will, thankfully, decline.

As Barnes concludes:

Mr. Obama’s health-care and energy initiatives, the core of his far-reaching agenda, were bound to face serious opposition in Congress in any case. Hardball tactics and false promises have only made the hill he has to climb steeper. Now he may lose on both. The president and his congressional allies should have known better.

It Didn’t Work the First Time, So Now: Porkulus II

At The American, the Journal of the American Enterprise Institute, Phil Levy writes:

slow_d16As unemployment rises ominously toward 10 percent and the economy continues to appear listless, leading economic voices have begun to call for a second fiscal stimulus. The first stimulus was controversial among economists; it seemed to discard a great deal of what had been learned about macroeconomics in recent decades. The calls for a second stimulus seem to discard logic altogether.

Keep in mind that the first time around, we were told that the porkulus bill had to be passed now now now now now — not a day to spare if we want to ward off catastrophe.  So Congress passed a pork-laden bill that included hundreds of billions of dollars that will not be spent until 2011 or later, and thus have no stimulative effect now.  And after  the bill was rushed through so quickly that there was no time for legislators to even read it, let alone have a thorough debate — the President waited four days to sign it.

Levy’s conclusion:

And this is exactly the logical problem with a second stimulus. If we accept the premise that the Democrats did the best that could be done and exhausted all stimulative spending possibilities for 2009 and 2010 on their first try, then there’s nothing left to be done in a second stimulus. Additional spending would just pour uselessly into the out-years. If there are still good near-term options available to be funded by a second stimulus, that just speaks to the poor design of the initial stimulus package that passed them over in favor of ineffectual spending years later.

Neither of those possibilities argues for opening up the public coffers for hundreds of billions of dollars more.