Obama the Wizard of Washington - A Master Illusionist

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Since Obama just came to the realization that while he pursues the agenda of Wall Street payoffs, of international adulation, and of institutional socialism, the people of America now know he is totally out of touch with Main Street. A year after being elected he finally realized that jobs, the economy and the deficit are the people's priorities if not his.

This week he made a feeble effort to show his concern for the economy but before the week had ended he showed his true colors when was off to Oslo to pick up the Nobel Peace Prize then off to Copenhagen to commit America to global warming initiatives designed more to pad liberal pockets than benefit the people.

Obama is the first person in history to win the Peace Prize the same time he was ordering a massive expansion in the War in Afghanistan. This is the same president who consistently blasted former President Bush for the war in Iraq, then Obama declared Iraq stabilized and withdrew American troops from the front lines. This week over 131 people were killed in five bombings within the supposedly secure Bagdad capitol.

Since the Obama troop withdraw from populated areas ordered by Obama on June 30 the Iraqi people have been faced with a bloodbath. In the entire war 94,500 Iraqi citizens have been killed, over 1243 in Bagdad alone this year. The US military has suffered about 4,367 total deaths in Iraq. As of this writing there are still about 124,000 troops in Iraq.



That it a precursor of the illusion being proffered by the Obama gang to bury the truth in a fog making it impossible to know what is really being done. When it comes to the economy and jobs, the truth is far more limited and self-serving than one might expect of the president of all the people.

Several types of people seem to dominate the Obama White House and work for the Chicago gang. There are the academic intellectuals, the social activists, the special interests and the Wall Street protectors. In terms of experience and understanding of the economy, those that do understand it have an agenda far removed from the public interest. The activists and special interests, on the other hand, seem only concerned with expanding their base, power and control of resources at the expense of everyone else.

Take for example his team of economic advisors. They have several decades of experience manipulating the American economy and regulation of the economy to benefit the banks and bank executives, using the environmental "green" advocates not because of the benefits to humanity but because they represent the most lucrative market for return on investment, the labor unions who have already benefitted from multiple Obama executive orders to force labor wages on all government work at the federal and state levels, and the socialists who often hate the very institution (US government) paying their inflated salaries.

No small businessmen, people with experience creating jobs in the public and private sector, nor people who believe we are spending ourselves into a cycle of self-destruction are part of the Obama team. They would be a roadblock to the socialist agenda of the Obama gang.



Yesterday Obama said he would take a couple of hundred billion dollars not being used in the TARP program and spend it on his new jobs initiatives. At the same time he pledged to attack the problem of reducing the spiraling deficit.

Okay, the TARP money is all deficit financed. If he takes the money paid back by the banks and applies it to the deficit that is nice. If he takes the money not spent yet and uses it to finance the feeble jobs program that is not saving money, it is still adding to the deficit.



The economic logic of the White House seems very similar to the logic of the Nobel Peace Prize committee in awarding Obama's huge troop build up in Afghanistan with the Peace prize. It is the Wizard at work with his illusionist routine but it might as well be Alice in Wonderland where nothing is as it seems.

Here is some basic logic that does work. First, infrastructure projects can only create temporary jobs and even then the labor cost of infrastructure projects is generally a very small percent of the total cost. Since Obama already signed executive orders that will increase the labor costs significantly to union wage levels when many projects were going to be non-union, even fewer jobs can be created. These projects never meet timetables because of the permit process, the public bidding process, extensive environmental regulations and other requirements.

Green jobs are also nonsense as there is not yet a market for the often over-priced green products and services. Obama must be too young to remember the oil crises in the 1970's and 1980's, back when he was a community organizer, self-avowed pot smoker and before he graduated from Harvard in 1991. If he was paying attention he would know oil prices spiraled, gas shortages were prevalent, and "green" technology was supposed to lead us out of the dark.



Alternative fuel, solar heating and cooling and energy conservation were all seen as saviors from the global crisis. We are now 20-30 years later and they still have not saved us from anything. The only element of a rapidly expanding green industry at this time that would be a direct benefit to people would be energy conservation, which was the most successful initiative back in the oil crisis days. However, it was paid for by the utilities, not the federal government.

Also back in the Reagan days there were excess profit taxes, price controls and other legislative actions that saved billions of dollars in consumer costs. The money recovered from oil company overcharges went directly to the states who faced the same budget deficits then they face today. Again, the federal government was not the source of the money but the source of the action that generated the money.



Why doesn't Obama suggest excess profit taxes on Wall Street? How about oil price controls? How about prosecuting some corporate offenders for misuse of our financial system? Billions of dollars in fines should be paid by the white collar crooks for the economic catastrophe they caused.

When evaluating jobs program options one must decide if they are to be temporary or permanent. So far the Obama stimulus program jobs being created are costing over $500,000 each. We would be better off paying the entire cost of a college education for anyone in their last two years of undergraduate and graduate programs in fields leading to professional employment.

I say wait until the last two years so they have demonstrated a commitment to getting the education. Besides, we would be keeping college age people, 20-26, out of the labor force freeing up jobs to reduce the unemployment rolls while lowering the cost of unemployment benefits. At the same time we would be helping the cash strapped colleges and universities while upgrading the quality of the future labor pool in America so we can compete with the Chinese and Indians of the world.

Fields of math, engineering and medical would all be preparing our future labor pool for competition or meeting top priorities such as the need for health industry professionals. If health care were expanded to all Americans tomorrow there are not enough health care people to meet the huge increase in demand. We would be well advised to help train doctors, nurses and specialists for the upcoming surge in health care enrollment.

As for the "green" jobs, I already mentioned the energy conservation (weatherization) was already a huge success through the utility companies. Let the existing utilities generate the jobs where possible and finance the program from utility companies. That way the people benefiting from the program pay for it. Until alternative energy options are viable and thoroughly tested, we need a combination program of conventional and alternative energy.



Natural gas is cleaner than coal and oil heating systems. Oil and coal plants can be much more efficient with reduced carbon emissions so we should adopt the energy independence initiative and drill for domestic, Canadian and Mexican (the North American Independence Initiative) oil and gas reserves that will significantly reduce our foreign oil dependence. I believe a production tax on new oil and gas reserves should be used to finance the completion of alternative energy technologies and the testing and production engineering necessary to make them a viable long term source of energy.

Likewise, a couple of cents per gallon tax on gasoline could be used to finance fleets of electric cars for the government which would help with development of new battery technologies, help auto companies to offset the development costs of these vehicles, and hopefully help reduce the cost of true alternative energy cars to affordable prices which they are not achieving now.



So far none of my proposals costs the federal government anything. However, there are some costs that must be incurred. Infrastructure projects, which Congress and the President like, probably because they reward the labor unions more than anyone, need to have some parameters.

For example, projects that are labor intensive (where more than 50% of the cost is labor) would be given first funding priority. Second priority would be given to projects with 25-50% labor costs. Major infrastructure projects should be funded through a multi-billion dollar government bond program thus avoiding adding to the deficit. Right now the banks are not loaning money nor helping the consumer. Require the banks receiving money from the Federal Reserve or other sources to contribute a significant part of their money to the bond program since they will not loan to small business or people.

As for the private sector, a multi-tiered program should be launched. Small businesses prepared to add to their employment base (perhaps businesses up to 2500 employees) would be given a substantial tax credit for three years for every new employee hired as long as the position is retained during the three years.



Anyone wanting to establish or expand manufacturing capacity in America would be given free use of surplus government facilities, i.e. military bases, airports, warehouses, etc. for as long as they remain in business and retain the jobs. A loan fund at minimum interest would be made available to them to make improvements to the facilities with the facility serving as the collateral for the loans. In addition they would be eligible for tax credits for new positions created for the facility.

A substantial effort will be made to find private companies to produce government developed materials for commercial use. This public-private partnership has been attempted in the past but was dominated by the engineering and research fields when marketing and production engineering resources were needed to make it successful. There are hundreds if not thousands of products developed by the military, NASA, the intelligence agencies and other government bodies that are no longer classified but would be of great value in the marketplace. Companies offering the full range of resource staff would be given preferred treatment.



America once dominated the world in terms of manufacturing and product innovation and there is no reason it cannot do this again. Two things are necessary to move us in the right direction. Innovative companies are hampered by the lack of capital but small business loans should alleviate that problem. The tremendous increase in the cost of testing and patent work has become a barrier to innovation for small businesses.

The Small Business Administration should develop the necessary resources to offer free product testing and patent work to anyone attempting to develop and market innovative ideas in America. This will offset two of the greatest barriers to innovation by small business and individuals and SBA will be in a position to finance the product implementation once the testing and patent work is complete.

These are just the ideas of one person on how to address the jobs needs of America without bankrupting the nation in the process. Ideas such as these also protect us from committing billions of dollars that will not generate meaningful numbers of jobs and will not contribute significantly to the deficit. Okay President Obama, you said you would listen to ideas from anyone on how to create more jobs. Are you really listening?

Deflation - An Economist's Illusion or the Real Deal?

Okay, so the Obama administration says we are in a period of deflation as opposed to the typical inflation we normally see. Deflation, a rather pathetic word that reminds me of a flat tire. But deflation should be great because it means prices are going down, not up. But there is one problem, some major price categories seem to be going up to me.

To understand what people are talking about let us take a look at the Ask.com definition of the term "deflation" and what it really means.

Question: What Is Deflation?

Answer: The definition of deflation is when asset and consumer prices continue to fall. This may seem like a great thing to consumers, except that the cause for deflation is a long-term drop in demand.

Unfortunately, a drop in demand means that a recession is already underway, with job losses, declining wages, and an ongoing decline in the value of your home and your stock portfolio. Deflation is a result of businesses dropping prices in a desperate attempt to get people to buy their products.

Officially, deflation is measured by a decrease in the Consumer Price Index. However, the CPI does not measure stock prices, which retirees use to fund purchases, and businesses use to fund growth. It also does not measure housing prices, instead using rental equivalent. This often lags home price declines, and underestimates deflation in the CPI.

To combat deflation, the Federal Reserve executes an expansionary monetary policy. It reduces interest rates, and increases the money supply in an attempt to jump-start economic growth. In addition, the government can offset deflation with expansionary fiscal policy. It can put more money into circulation by lowering taxes, increasing government spending, and incurring a temporary deficit to do so. Of course, if the deficit is already at record levels, that tool may no longer be available.

Like inflation, deflation is very difficult to combat once it is entrenched. As businesses and people feel less wealthy, they spend less, reducing demand further. Prices drop in response, giving businesses less profit.

I don't know about you but it seems to me gas has started rising again. In fact the price per barrel of crude oil, which impacts on many supplemental products from transportation to fertilizer, has increased 90% since the beginning of this year alone and now stands at about $62.00 a barrel. No wonder OPEC did not reduce the amount of oil produced this week when the price now is above the 2007 prices in place before the outrageous price spiral.

Taxes are certainly up, especially state and local taxes, and you can bet the aftermath of the incredible federal spending will be substantial future price increases. Obama has already set a new record for the annual federal deficit and the stimulus and bailout programs are just starting to spend money with multi-billion dollar bailouts waiting in the wings for a bankrupt Chrysler and General Motors and a teetering AIG insurance giant.

A lot of food prices are up or they have cleverly repackaged items so we are paying the same for less goods, thus really increasing the price. Organic foods are not dropping either even though there has been a push to be healthy and sales are up.

Certainly restaurant prices do not seem to be falling. In fact with the addition of designer coffee in McDonald's some prices are actually going up as well. When there are "specials" it usually means you get a silver dollar sized hamburger instead of the meat eaters delight we've grown to love.

Medical and health insurance rates continue to spiral in spite of the Obama efforts to overhaul the health care industry. After a decade of double digit annual price increases this year prices are expected to drop down to just a 7% increase. Only in our nation's capitol could a 7% increase be treated as a drop in prices.

As the definition said, two of the most important cost factors missing from the deflation figure are stock prices and housing prices. No one will question that these two have dropped with stocks, and your retirement funds, still about 40% less in value than a year ago.

Housing prices have also gone down, a lot in some areas. But the national market tends to be local market driven so one area may have no loss in value over the recent years (2006 - 2009) while a neighboring area could have substantial loss of value.

Take, for example, the case of Coltons Point. The Washington, DC metro area including Northern Virginia and Maryland has suffered an overall loss of value of about 24% the past year. However, a Washington Post survey of all home sales in the metro area the past year shows there are a few locations where prices have actually increased. One of these unique areas is the riverside resort of Coltons Point where values have increased by over 3% the past year.

Still nationwide stock and housing prices have dropped but neither is even factored into the deflation model which makes me wonder just what value is the economic news on deflation? It is distorted since it missed two of the biggest cost factors. The Consumer Price Index which is the basis for determining inflation or deflation is often a lagging indicator of economic performance much like unemployment figures. Conversely the stock market is a forward indicator of economic growth having already factored in jobs reports before they are even released.

The Labor Department figures on new unemployment claims this week dropped well below analysts expectations for the 2nd time in three weeks yet the unemployment rate climbed to 8.9% and the lagging figure could reach 10% later this year even if the economy is in a full recovery cycle as the Coltons Point Times and more recently other financial news services are beginning to predict.

In light of all this conflicting information and simultaneous upward and downward economic pressure my advice is for you to ignore deflation and inflation reports and the endless speculation about them as it is something the Federal Reserve must manage and we the people have no role in what the Federal Reserve does with our money anyway.

The Truth - Manufacturing in America

As part of our commitment to set the record straight we want to address a topic very much in the news which is the loss of manufacturing jobs in America. If you believed the media just about all the jobs have moved to China except the auto workers.

For the record there are 154.4 million Americans in the work force and 143.3 million employed as of the end of December, 2008. Manufacturing in America peaked in 1979 with 19.5 million jobs. Today, after the devastating impact of the global recession manufacturing jobs total about 13 million. However, the loss of jobs started long before the China factor as there were 16.8 million jobs when Congress passed and Clinton signed the NAFTA (North Atlantic Free Trade Agreement) on December 8, 1993, nearly 3 million less than in 1979.

That was the Free Trade Agreement Ross Perot opposed but Clinton and Gore slammed through Congress. I should know because I worked with Perot at the time including the fateful debate between Gore and Perot on the Larry King Show. More on Ross later. He warned us of the long term impact of NAFTA and his warning rings true today as the new Administration is studying ways to limit the scope of the original agreement.

From 2000 to 2008 we lost 4 million more manufacturing jobs yet at the same time we had an increase in worker productivity of eleven times meaning the 13 million remaining workers in 2008 were able to produce far more product (11 times as much) than the 17 million in 2000.

Contrary to media myth, China did not take all our jobs as Asia provides far less goods to America today than ten years ago. In fact most technology related jobs went to India while the Japanese were moving manufacturing facilities to the USA. Even Mexico, who benefited greatly after NAFTA, has lost jobs in the past few years because of growth around the world.

As for the Chinese goods that have been subject to many recalls, don't forget that the Chinese were building to the specs provided by the American corporations ordering the goods, corporations who thought they could lower costs with cheap labor overseas. It was the responsibility of the American companies to provide detailed specifications and to assure quality control and they seemed to have failed in both tasks.

Meanwhile with all the disproportionate attention on China India quietly took over the high tech computer jobs including the service, technical and customer support positions. Both India and China have been hurt bad by the global recession and the reduced spending by Americans.

We lost 791,000 manufacturing jobs in 2008 which was probably quite remarkable considering the economic catastrophe we faced but we still have over 13 million jobs in that sector. When we come out of the recession we should be in the best manufacturing position since 1979. Made in America will always stand for superior quality. As consumers, make sure you look for products that support our jobs as well as insure the highest quality.