The American Spectator

Matthew Vadum| 4.27.09 @ 12:49PM

Bruce Bartlett's latest op-ed is whine fest. He showed his true colors when he was one in a chorus of Chicken Littles demanding that the TARP program be instituted. His argument was based on little more than the "fear " he claimed he could see in the eyes of Henry Paulson and Ben Bernanke.
(http://www.nypost.com/seven/09272008/postopinion/opedcolumnists/why_the_bailout__130927.htm?page=0)
He was wrong about the fall bailout and he's wrong now. The market collapsed anyway and the current bear market rally will be over soon enough as investors are disabused of their desperate optimism. The various bailouts are not working now and will not work.
The recent tea party protests were not just aimed at protesting the current tax burden but the future tax burden as the bills come due for the government's profligate spending.

Matthew Vadum| 4.27.09 @ 12:52PM

A whine fest, I meant.

Bob| 4.27.09 @ 12:54PM

Antle, the devil is in the details. Once the tea party people realize that the only way to significantly cut the budget is to cut social security and medicare, you will not hear from them anymore. Remember that 53% of the budget is entitlements, 20% is military, and now about 10% is interest on the debt. That only leaves 17% for everything else. Cutting the budget is a nice concept, but no one, even the tea party people, will want their entitlements cut.

Let's face it, the tea party people were mostly an anti-Obama crowd (although you could also see some Ron Paul influence). It was more about losing the election than about taxes.

Regarding the upward pressure on taxes, that will all depend on the rate of growth of GDP. The annual rate estimates range from 1% to about 4% over the next decade. From a pure economics standpoint, there has been a lot of data over the past few months that sales have been outpacing production and thus inventories have been declining. As with all economic cycles, this will provide a relatively high growth rate next year even if the underlying long term demand is lower. So I do think Obama will hit is numbers next year. However, I just don't see how those numbers can hold up over the longer term.

The Republican plan of a spending "freeze" is just dumb as many parts of the budget are based on demographic changes. Our only hope is a massive overhaul of entitlements (cutting them back) and reducing health care costs significantly as that is the major component of medicare/medicaid. Trying to cut the non-military discretionary budget is akin to pissing in the ocean to raise the tide because it is small in relation to the rest of the budget.

Now the question is who is in a better position to cut entitlements. If Republicans promote cutting entitlements, the party will disappear (which is why you don't see any Republicans talking about it much). The Democrats have a better chance of doing it because of their history and leadership. Will they do it? I hope so, but I'm not holding my breath.

So your conclusion that there will be a dramatic upward pressure on taxes is both obvious and correct no matter which party is in charge. Remember that prior to Obama, the two largest contributors to the national debt were Reagan and Bush.

.... and like I said, the tea party people will disappear into oblivion because once they realize what the tax cuts mean for them, they will shut up...

Bob| 4.27.09 @ 1:12PM

Vadum, I'd suggest learning a little about economics. The current bear market rally will not collapse but it will go sideways for a while. Talk to someone who is a real economist (not Ferrara), and he/she will tell you that sales are now outpacing production which is the first sign of an economic upturn. This will not occur for several months, but high quality investors know this and will dollar cost average into this market holding it up. Furthermore, you cannot make the case that the TARP didn't help. If you think you can tie the two together, you don't know much about markets and economics. First, you don't know if the market would have been worse otherwise, or the downturn longer. None of us know that. It is only a fool that says they do. Secondly, any infusion of capital into a market will take months to have an effect.

Now, I was against the TARP for other reasons. First, I didn't see a real plan for the funds. And secondly, managing a fund that large is tremendously inefficient. Furthermore, I see no reason to believe the current public/private partnerships are very workable since they really amount to options for the "private" part. Given the low levels of the market, investors would be better off finding value segments.

That said, one of the things we do know is that whatever the cause, credit is flowing again even though it is not as "easy" as it was before. We won't know if the TARP actually worked for a couple of years.

I wish you would rail against the real cause of this debacle -- unregulated entities that were over leveraged and loan originators that had no "skin in the game". Our economy is based on the proposition that you can take risks and get rewarded for them or lose your shirt. We let the unregulated financial entities take risks and then get rid of the risk with securitization so that there was no downside to giving loans to people who could not pay them back. Once you take the downside risk out of our system of capitalism, it is no longer true capitalism.

Bill Bailey| 4.27.09 @ 1:23PM

Bob, so so cynical, are we? What makes you think the protesters won't want entitlements cut? With enough actuaries, Social Security could be privatized or eliminated and those who have paid into it could be fairly compensated. Such a proposal could be sold to the public. It is not impossible. To not reform SS and other entitlements is to sell our children and grandchildren into slavery. Absent reform, in a few years the middle class will reach a breaking point in terms of taxation and there will be real civil unrest. And their anger and their pitchforks will be directed at people like you, Bob, who scowl at people trying to do something about the problem.

BobIsATroll| 4.27.09 @ 1:28PM

Such wanky sophistry from Bob. Banks have not yet unloaded their bad debts. They are just piling up right now being warehoused. When they do, the market will tank. And then just wait for the inflation. My God, it is going to be incredible.
If by "unregulated entities" you mean Fannie and Freddie you are correct but somehow I suspect you are not referring to them.

Zaidy| 4.27.09 @ 2:40PM

All Bob offers are insults. I don't believe him when he says he was againtst TARP. This is just clever troll positioning from him. He concedes part of the argument to us and then moves ahead with his real point. This, in his mind, makes him seem reasonable. Do not be fooled.

Deborah D| 4.27.09 @ 2:52PM

The tea parties were and are about out of control government and the effects that will have on our children. Not just the bills they'll be left paying but the loss of freedom that is happening daily in this Democrat Congress and Obama administration.

This is the fight for the country as the Democrats as a whole push it off the cliff. I don't want my children to pay the bills for out of control spending whether it was done on Bush's watch or Obama's.

Get government out of the way and this country would be on track. That won't happen because this administration believes in "not letting a crisis go to waste." And not only that, they believe in creating more (the "torture memos" and swine flu). They'll use everything they can to keep Americans worrying about other things while they kill the country with cap and trade BS and taking over the health care industry. Who knew they could come up with so many ways to destroy the country in this short a period of time?

And we haven't even gotten to the disaster of foreign policy. Read Mark Steyn for an accurate portrayal of the world's future as America becomes a third-rate country. Thanks to all of you who voted for these wackos.

http://www.ocregister.com/articles/world-american-obama-2375027-exceptionalism-post

Truth to Power| 4.27.09 @ 3:01PM

I am happy that Bob's tactics are obvious to others. I sense DM is more authentic but they are both very shallow and tedious individuals. When you get away from their emphasis they both follow the same simple-minded formula. I know that there is a troll school somewhere and I am sure Bob was at the bottom of his class.

Bob| 4.27.09 @ 4:04PM

Bill -- after this market collapse and the significant loss in the value of 401k's, do you really believe a majority of people will want to change social security? And if people make lousy investment decisions with their retirements, who in our society will help them food and housing when they get older? Think about this, Bill. Go and talk with some people about taking their money out of social security and putting it into private investments.

Troll -- the problem with the current derivatives is that there is no market for them and that's why they are undervalued. That's why many of us call of some easing of the mark-to-market rules. Remember, these are slices of securitized tranches and include a broad range of mortgage backed securities. Most people still have jobs and are paying their mortgages and they are part of these derivatives. Most financial institutions don't want to sell these derivatives because they believe they are undervalued right now. That is why liquidity is tight. Understand??????

Truth (and I use that name loosely) -- you and others don't bring any information or logic to the table. That is the textbook definition of "simple-minded". Good luck... You'll need it....

Ran| 4.27.09 @ 8:08PM

Per Deborah's comments, the Tea Partiers in my area are all of them limited government types. It's about shrinking Federal and State entitlements, even eliminating some. It's about shelving whole Departments and putting those people back into the economy in a productive fashion. It's about sunset laws and term limits. It's only partly about taxes as such, though that's just one effect of too-large too-powerful government. Our concern is to reduce the size and powers of all government and thus improve individual rights and responsibilities.

Bartlett is right to dismiss us - from his perspective. We are the embarrassing fact of a new, emerging section - perhaps even a majority - that has no time for either major Party or big-government tolerant weenies. "New Majority" indeed! Imagine starting a New! Majority! venture only to have a bunch of rabble-rousing grass-rooters totally ignoring sage advice...

Interested Conservative| 4.27.09 @ 11:58PM

Bob - two simple questions:

1 - why should anyone invest in equities under the current administration? (My point being can their policies (Tax/Tarp/budget/etc.) be trusted to assure a fair to good return, or are they simply inflating their way into massive intervention?)

2 - Why should anyone (I'm thinking my of my kids) join any public service beyond the local police force - as in can the current administration be trusted with national security policy?

I could make it briefer by simply asking what policies in these first few months indicate any confidence in any non-government actions?

Should I move my savings and investments to Canada and the Caribbean?

Deborah D| 4.28.09 @ 4:20AM

China is buying gold by the tons and they no longer want to buy our debt (no faith in our dollar--what a surprise). When the communists (like Putin) tell you socialism is a disaster waiting to happen, the U.S. really should listen. Here's China shouting it from the roof tops.

http://blogs.dailymail.com/donsurber/2009/04/24/china-buys-gold-on-dollar-fears/

Bob| 4.28.09 @ 8:50AM

IC -- Stop taking a political view of the market and take a business view. There are always winners and losers. If Obama is going to start his health care plan, look for businesses that currently support things like medicare -- their stock will rise. While it is too late to invest in green companies, there will be some parts of Obama's energy policies that will grow specific energy types. You may also know about industries that will be damaged by his policies -- you can always go short on those industries. With that said, the market growth of companies has more to do with the companies themselves than who is in power. If you believe an administrations policies have a large effect on the success of companies then you don't know much about business.

For example, did you know that the GDP grew almost as fast under Carter as under Reagan? Did you know that the GDP grew faster under Clinton than either Reagan or Bush? Always be careful of markets where you see extra fast growth as they may be bubbles.

Regarding national security policy, overall there is not that big a difference. Yes, there is the torture thing, but that is really small in the overall scheme of things. Obama will actually spend MORE on defense than Bush and Gates is targeting threats better now than under Bush as he is taking money from big weapons programs and putting it against terrorists. What is wrong with that?

If you are worried about the inflation effect on the dollar, just make sure you have a significant portion of your investment portfolio in international and/or multinational companies. There is no need to move savings anywhere as you can hedge the effect. This is why a balanced portfolio is important. The U.S. is still, by far, one of the safest places to put your money. And that will not change in the Obama administration.