The Obama Watch

2012: The End of the World As We Know It

Next year, Middle America will rise up and end the madness, once and for all.

By 7.20.11

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Like a replicating amoeba, America is pulling apart into two separate cultures. One is strongly committed to the birth of an even more robust, pro-growth, entrepreneurial capitalism. The other thinks Che Guevara and Karl Marx had important social insights relevant to America today, and wants to follow the path of Juan Peron's Argentina, if not Hugo Chavez's Venezuela. This is the stark choice facing the American people in 2012.

This is also why the vast majority of the American heartland feels more cultural affinity with the people of New Zealand and Australia than with the people of San Francisco and Seattle, at least as reflected by the majority of those two benighted cities. But the replicating amoeba analogy is not apt, because amoebas split into two equal new entities. What the American people are about to demonstrate in 2012 is that the heartland's vision of a booming economy restoring America's traditional world-leading prosperity and superpower might is shared by far more citizens than you might think, and that the long outdated socialist vision of the "progressive" American Left, for whom that traditional American prosperity and superpower status is a moral embarrassment, is fading into oblivion.

A House Divided

These separating cultures are reflected in the American media. Committed "progressives" can remain safely untouched by reality in the party-controlled cocoon of the New York Times, the Washington Post, CNN, and the three copycat networks. There America faces no debt crisis, taxes are lower than they have been in decades, the "rich" pay no taxes, life on the planet faces extinction due to global warming unless we repent for the industrial revolution, and there are no foreign threats to our national security.

To the heartland, those media institutions seem like a foreign press without even the cultural competence to report on America accurately. That is why these media institutions are all veering into bankruptcy. These media can shelter their audiences from knowledge of reality, but not the consequences of it.

But the heartland majority has already gravitated to the rising, robust American media, which prospers even in the Obama depression -- the Wall Street Journal, Fox News, talk radio, and the newly rising national media reflected in the New York Post, Investor's Business Daily, The American Spectator, and National Review. Unlike the party-controlled press, this media reflects the full spectrum of opinion. Through the crucible of debate, reality breaks through -- government spending, deficits and debt are rocketing through historical records, with taxes slated to follow, the top couple of percent of income earners pay most of the taxes (especially income taxes), global warming is an orchestrated fairy tale, and on its current course America is headed towards catastrophic, history-shattering, military defeat.

This cultural separation is why America can't even maintain a reasoned discussion of the issues. While even before Obama was elected, the top 1% of income earners paid more in federal income taxes than the bottom 95% combined, President Obama and his Democrats tell the party-controlled media that still more tax increases are necessary so that "the rich" (crass Marxist pirate terminology) can "pay their fair share."  While even Communist China maintains a 25% corporate tax rate (with the socialist EU lower than 25% on average), and liberal Canada heading to a 15% rate, President Obama's Amerika maintains a nearly 40% rate with no end in sight. Proven, liberating, pro-growth entitlement reform is adopted even in Latin America and Sweden. Yet if entitlement reforms are even raised in America, the infantile Che Guevara Left runs ads showing responsible political leaders throwing grandmas in wheelchairs off cliffs.

A Failed Presidency   

In 2012, the American people will decisively resolve the clash of these two increasingly separated cultures by fully replacing America's hopelessly stubborn, outdated and backward-looking establishment elite (reminiscent of the French Bourbon aristocracy) with a new generation of leaders. The American people will not tolerate the decline, and ultimately the fall, of America.

Freedom of speech, and of the press, and of peaceable assembly remains in America. The party-controlled media cannot prevent us from recognizing the harsh reality of Obama's failed Presidency. Even the Communist Party-controlled media in totalitarian states could not prevent the people from seeing the truth and rising up to force an historic change of course.

Based on the historical record, the American economy should be in the second year of a booming economic recovery by now. Yet 3 ½ years after the latest recession started, unemployment is still rising. With the specter of another downturn, discussed further below, this extended stagnation is playing out into a depression scenario.

Millions of Americans are already suffering a depression, with African-American unemployment at 16.2% persisting for two years, and Hispanic unemployment nearly the same. Teenager unemployment persists at nearly 25%, with black teenagers at 40%. With 25 million Americans unemployed or underemployed, real wages for American workers keep falling, in the third year of the Obama regime. The Census Bureau reports the number of Americans in poverty at its highest level in the 51 years it has been keeping records. A record 44 million Americans are on food stamps.

This economic disaster cannot be blamed on Bush, if for no other reason than that, historically, the deeper the downturn the stronger the recovery. Under President Obama, that recovery is now two years overdue. As former Senator Phil Gramm explained in the Wall Street Journal on April 15, "Had the U.S. economy recovered from the current recession the way it bounced back from the other 10 recessions since World War II, our per capita gross domestic product (GDP) would be $3,553 higher than it is today, and 11.9 million more Americans would be employed." For progressive "intellects," that means $3,553 per person.

Gramm further explained, "On average, three years after the four deepest previous recessions started, real GDP was 7.6% higher than the pre-recession level. During the Obama recovery, real GDP is up only 0.1%.  Forty months after the start of the 1953, 1957, 1973 and 1981 recessions, total employment was on average 4.7% higher than the pre-recession peaks, while total employment today is still down 4.7% -- that's a total employment gap of 13.9 million jobs."

The contrast with the Reagan recovery is stark. During the first seven quarters of the Reagan recovery, real economic growth soared an average of 7.1%. During the first seven quarters of the Obama recovery, real growth was less than half that at 2.8%, with the last quarter at a pitiful 1.8% real growth. Gramm adds, "In 1982, unemployment reached 10.8% as the Federal Reserve tightened monetary policy in order to put the brakes on inflation...If we had matched the 1982 recovery rate, today annual per-capita income would be $4,154 higher than before the recession -- that's an extra $16,600 for a family of four -- and some 15.7 million more Americans would have jobs."

Internationally, while President Obama is decidedly allowing America's nuclear program to decay into obsolescence, Russia and China are racing ahead with nuclear modernization. The emerging nuclear Iran will spawn a nuclear arms race spreading to Saudi Arabia and Turkey, if not elsewhere in the Islamic world. China is developing and even testing the technology for a first strike to take out America's military satellites, central to modern American military technology, and for a Cyberspace attack disabling America's military computers, while the Obama Administration does nothing effective. Instead, it increasingly disables the missile defense programs that could take out a rogue missile launch, and leaves America vulnerable to an EMP attack that would take America's standard of living back to the 18th century.

Debt Limit Dishonesty

President Obama has displayed perverse misleadership on the most obvious threat to the nation: the overwhelming swirl of federal spending, deficits, and debt. With over a hundred trillion in unfunded entitlement liabilities, he still forces Obamacare through Congress, with the adoption of new entitlements and further expansion of existing ones.

Senate Democrat majority lawbreakers failed to adopt a budget or even appropriations bills for this fiscal year, or the last. In the spring, as authorization for continued federal spending ran out, President Obama threatened to cut off paychecks for families of American servicemen on the battlefield and veto Republican bills to extend their funding unless Republicans agreed to finance his ongoing wild spending spree.

Now he holds debt limit "talks" in the White House where he offers $2 billion in spending cuts -- which amounts to 1 cent for every 20 dollars of federal spending this year. He demands further tax increases to continue funding his spending spree. If Republicans don't give him what he wants, he threatens American seniors with a cutoff of their Social Security checks, falsely claiming a lack of funds.

But the Social Security trust funds hold $2.7 trillion in federal bonds backed by the full faith and credit of the United States, 20 times what is needed to cover the Social Security cash flow deficit for this year. While those bonds are expressly non-transferable (which means they cannot be sold to the general public), the federal government can sell new bonds to the public to pay off those Social Security bonds, without exceeding the current national debt limit. That limit does not prevent rolling over existing debt that is due by issuing new debt to pay it, as that would not increase the total outstanding debt.

President Obama is constitutionally obligated to pay the interest and principal of these Social Security bonds when due -- just as with the rest of the federal debt. Failure to do so would violate his constitutional duty to take care that the laws be faithfully executed. In other words, failing to pay Social Security benefits as required by law would be an impeachable offense.

Is this any way for a President of the United States to treat the American people?

The Coming Crash of 2013

Already scheduled in current law for 2013: the new Obamacare taxes, and the expiration of the Bush tax cuts at a minimum for the nation's small businesses, job creators and investors. This will involve sharp increases in the top tax rates for virtually every major federal tax, on top of the intractable 40% corporate tax burden. Art Laffer predicted the coming crash of 2011 on the basis of the expiration of the Bush tax cuts alone. What Obama is brewing up for 2013 is far worse.

Besides those tax increases, Obama's regulatory burdens will be building to a crescendo in 2013. That includes the EPA's implementation of the cap and trade tax, ultimately imposing trillions in additional costs on the economy. It includes the regulatory burdens of Obamacare, with the employer mandate requiring employers to buy the most expensive health insurance for their workers. It includes the regulatory restrictions on American energy production. It includes the Dodd-Frank regulatory burdens threatening essential credit for American businesses and consumers.

What the markets are also telling us today is that the Fed, unannounced, has begun QE3, as the economy turned down after the end of the monetary crack of QE2 in June. The Fed will now continue to run the printing presses through November 2012. With the deficit already at $1.6 trillion today, where will it be after another recession? With our financial vulnerability effectively inviting a military strike against us, will the Chinese lend us the money to fight it?

Maximizing the Victory

Republicans and conservatives must run candidates in districts that traditionally seem hopelessly Democratic -- including limousine liberal districts, where the stale thinking of the 1960s may finally be going out of style, and poor districts, where the people have suffered the most under Obamanomics.

For President, we must look to run a Reagan, not a Ford. An articulate, principled nominee will do better in the heat of battle than a moderate, tongue-tied squish. Republicans tried one of those last time. No, now we need principled, articulate leadership.

Republicans and conservatives must also prepare to respond to personal attacks with personal attacks against the attackers. Expose the silliness of high school dropout clowns (literally) mocking the highly effective Governor of Alaska. Expose the records of anchors on vanity TV and the writers of fever-swamp websites. Turnabout is fair play. Those who don't have the stomach for this need to adhere to that age-old injunction: lead, follow, or get out of the way.

We must also organize the grassroots, not just for the election, but for maximum pressure afterwards. Organizations like Americans for Prosperity, Americans for Tax Reform, and Freedom Works should be maximally supported.

Can the Democratic Party even be saved at this point? Why would anybody want to?  

Barack Obama in 2012 will end up following the precedent of Lyndon Johnson in 1968. Johnson may have lost Cronkite, but Obama has already lost Middle America.

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About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.