Saturday, January 23, 2010

Thoughts on Obama post-Massachusetts

Here is an update of my charts of the polling results from the folks at Rasmussen. Obama's popularity continues to trend down, and the stock market this past week cast a big negative vote on where he is likely headed. Apparently he has decided that the Democrats lost Massachusetts because the electorate is still mad at Bush. His ego is so big that he can't allow himself to even think that it was a vote against him and his cherished healthcare reform. Now he wants to distract everyone's attention from the fiasco by pulling a standard populist ploy and beating up on the banks. When will this guy ever learn? As Charles Krauthammer notes, "You would think lefties could discern a proletarian vanguard when they see one."

If I could paraphrase the late Jude Wanniski, the job of a politician is not to lead the people, it is to figure out where the people want to go and then help them get there.

Obama's headed in the wrong direction, but that doesn't mean all is lost. On the contrary. The electorate is jumping up and down and waving its arms, and not all politicians are deaf or blind to the message. There's a new politics afoot, and what is happening on the political margin is not Democrats vs. Republicans. It's now about more government programs vs. fewer; government bureaucrats making decisions vs. individuals making decisions about what's in their best interest;  more spending vs. less; free markets vs. mandates; more income redistribution vs. less; higher taxes vs. lower taxes; and more individual freedom vs. less. It's no longer about abortion or same-sex marriage or gay rights or welfare. Our fiscal situation demands that we put aside the social issues for now and focus on the role of government in our lives.

Obama needs to refocus and perhaps triangulate as Bill Clinton did following the Democrats' trouncing in the 1994 elections. If he doesn't, his party and the electorate will rise up against him, and the Massachusetts massacre will be repeated. Sooner or later he will need new advisors, and he will need to focus on the economy and drop healthcare. More spending programs and populist attacks on banks and big business won't work anymore. He won't be able to push his former agenda any further—he's got to find a new one, and it has to be more palatable to those who want less government and more individual freedom. At the worst we will end up with gridlock, and if we're lucky we may see Obama & Co. moving in Clintonesque fashion to the center, where things can get done. Whatever the case, it's a huge improvement considering where we've come from.

Optimism is still the order of the day.

To close, here are some timely quotes from Ronald Reagan that are worth repeating:

"Socialism only works in two places: Heaven where they don't need it and hell where they already have it."

"Here's my strategy on the Cold War: We win, they lose."

'The most terrifying words in the English language are: I'm from the government and I'm here to help."

'The trouble with our liberal friends is not that they're ignorant; it's just that they know so much that isn't so."

"Of the four wars in my lifetime, none came about because the  U.S. was too strong."
"Government is like a baby: An alimentary canal with a big appetite at one end and no sense of responsibility at the other."

'The nearest thing to eternal life we will ever see on this earth is a government program."

"It has been said that politics is the second oldest profession. I have learned that it bears a striking resemblance to the first."

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

"Politics is not a bad profession. If you succeed, there are many rewards; if you disgrace yourself, you can always write a book."
HT: Don T.


Benjamin Cole said...

Like I always say: Let's start with the Agriculture Department. Why crop subsidies, and production regulations? More than 80 years after the Dust Bowl, and free enterprise dares not show its face in rural America?
It is the most socialized and regulated sector of the economy.
Rural America enjoys subsidized roads, power systems, water system, phone systems, airports and train service.
When I see the R-Party deep-six the Ag Department, and declare an end to all rural subsidies, then I know we are semi-serious.
Interestingly enough, it was a young Lyndon Johnson, then a Congressman from Austin TX, who pioneered rural pork in the mid-1930s, working with FDR.
At least back then, one might say rural people suffered true hardships. No more--but the subsidies get bigger every year.
I am optimistic, and enjoy Scott G's optimism--but the Republican Party will not balance the federal budget. See 2000-2006.

brodero said...

The contradictions within the American voting populace never cease to amaze me....a majority of the
voters for Scott Brown were for a
public option....but then again 8%
of the populace believe Elvis is still alive.

W.E. Heasley said...

Mr. Grannis:

Excellent points.

Obama’s political capital has set sail, the tide is out, and his polling will further erode as the political anger factor will continue to accelerate fueled by the +10% published unemployment rate (17.3% real unemployment rate).

Clinton moved back to the center after the 1994 elections as Clinton was/is a politician. Obama is an ideologue first and foremost; the politics is viewed as merely an unfortunate obstacle to further his ideology. It’s very likely the ideology trumps the politics and he remains way left of center and even doubles down as he has in the last week.

Thomas Sowell in his book Intellectuals and Society pin points the Obama’s of the world. Those self appointed intellectuals with “notions” of what is best for society with no regards for the political-economy nor regard for the mundane knowledge of the masses continue down their ideological path using their supposed “special knowledge”.

Bill said...


Do you think it makes sense to prohibit regulated and insured banks from trading on their own account? While reinstituting Glass-Steagal may not be necessary, it didn't seem to hurt growth in the '80s and '90s. The Wall Street Journal seems to think at least part of the plan makes sense if the details can be worked out.

alstry said...


Right now Obama is on track to run a MASSIVE $2 Trillion dollar deficit.

This funds Medicare, Food Stamps, Welfare and our entire war effort, not to mention the millions of Federal Employees.

Simply Medicare, medicaid and Food Stamps provide most of the financial resources to our heatlh care industry and a material portion of WalMart's and other drug stores revenues.....and now seeping into Costco.

If you think about it, if Obama did run the massive deficit, WalMart's, the entire drug industry and drug stores, and our grocery industry would be a fraction of its current size.

Further, our military footprint would have to contract massively and we would have to layoff millions of government workers in a job environment where it's very difficult to get a job.

Has anyone ever done the calculation determining what percentage of government tax receipts is simply the consequence of government spending?

For example, how much tax receipts do the 22,000,000 million employees working for government generate?

How about the profits from drug comapnies derived from medicare and medicaid spending and the insurance proceeds of government workers?

Or the profits of WalMart and others generated from the 40,000,000 receiving food stamps?

It would be an interesting exercise, don't you think?

Could you imagine this headline....


Douglas said...

Scott, what does this mean: "Apparently he has decided that the Democrats lost Massachusetts because they are still mad at Bush"? As a resident of Mass it seems to me that Obama and the Democrats, and truly speaking, Mitt Romney, who created this boondogle of a health insurance fiasco, are really to blame. But Coakley blew it pretty well all on her own with a vapid and sometimes ridiculous campaign, and might not have needed much help.

I am always amused by people who think of Obama and even Clinton as being leftists. This is an absurd notion, proving, I suppose just how far right the right-wing has pushed the political discourse of the country. It is possible that even my late lifelong-Republican banker father would be thought to be on the left side of the political spectrum, as would Dwight Eisenhower.

I think that if some of the commenters here really got what they wished for they would be pretty shocked at what a mess it would be. Of course it is easy to suggest things that one will never have to face the consequences of, because they are so unlikely as to come into being. Very convenient in the realm of political discourse, except that it doesn't really contribute anything.

Scott Grannis said...

Doug: You should be my editor. What I meant to say was "because the electorate is still mad at Bush." I've just fixed the post. Apologies to all for the confusion this might have caused.

I'm with you on Romney; he is one of my least favorite Republican politicians. But if Obama is not a leftist then I don't know who is. I define "leftist" as someone who believes the government should play a huge role in the economy. Obama is the biggest leftist to occupy the White House since FDR.

Scott Grannis said...

Bill: Perhaps there are parts of the plan that make sense. But bear in mind that virtually all of the big Wall Street firms are now banks. To prohibit them from proprietary trading would be to drastically curtail the market's liquidity, and this would likely have negative consequences for everyone. In any event, since I don't think the deregulation of banks and brokerages was responsible for the financial crisis (it was government intervention that was the real culprit), I don't see how re-regulating the banks is going to help.

Bill said...


Do you really believe that Govt. intervention was the sole cause of the crisis? You don't think that AIG's credit default swap obligations that exceeded the value of the underlying assets contributed to the panic when those CDSs were called? Should we have just let all the banks and AIG simply collapse under the weight of the CDS obligations? I guess we could have taken that chance but it could have lead to the Depression scenario. I don't like the Govt. intervention either, but I do think saving AIG was necessary to thwart a full scale collapse of the financial system (although I do think Goldman got a better deal because of Paulson, which was unfair to AIG).

W.E. Heasley said...


In regards to Mr. Grannis’s comments and your question about government intervention , AIG, and CDS’s and the entire spectrum of components of the financial crisis….Grannis is merely employing the concept of “follow the money” back to the root cause .

The root cause was cheap money created by the Fed in 2002-2004 (aka government intervention). The cheap money set the stage for the remaining components. No cheap money and no stage is set for financial shenanigans. Create cheap money, the players will run with the ball and shenanigans ensue.

Take a look at John B. Taylor’s book Getting Off Track. The book is only 100 pages long and clearly and concisely explains the resulting behavior that occurs when cheap money is created.

Scott Grannis said...

Bill: I do believe that the root cause of the crisis was government intervention in markets: all the subsidies for housing, FNMA, FHLMC, CRA, etc. Freddie and Fannie bought over $1 trillion of subprime mortgages; that market never would have gotten so big and so dangerous without their help. AIG was collateral damage.

Benjamin Cole said...


Then how to explain the bust in CMBS and commercial property values? These were issued freely, and bought freely, by sophisticated investors, and rated by the rating agencies paid for by issuers).

Commercial office buildings in OC selling for half-price now, and 20 percent vacant. I think it is bottom, but it could get worse. "Lend, extend and pretend"--buzzwords for OC commercial property lenders.

Most residential MBS bought by private-sector, in free transactions, rated by ratings agencies.

And no mention of the mortgage interest tax deduction? Who buys a house without that in mind?

I think there was a general overinvestment in property, largely on the institutional side. They bought huge amounts of MBS and CMBS--so lenders kept lending, pooling and selling.

It got to the point where a buyer with a good story could get 100 percent financing on a nice-looking commercial transaction. Liar loans were common in residential. No government pressure needed--money was being made on the transactions.

There is a global capital glut.

Given that capital will cheap for another generation or two, I do think it is time for the federal government to get out of housing, and eliminate FNMA, GNMA and the mortgage interest tax deduction.

That will happen about the time we get out of the agriculture sector.

We may have a long wait.