The Corpse is Sitting Up

After applying the paddles of $trillions of bailouts, stimulus spending, and backstops, the preliminary report of Q4 GDP comes in at 5.7%, but is already more like 2.3% after deducting 3.39 points for falling inventories. Who knows what the final number will look like after the customary revisions. But one thing is already clear: 2009 overall marked the worst year of economic contraction since 1946. And the doctors, the taxpayers, aren't likely to stay in the ER indefinitely.

The story is from Reuters:

The U.S. economy grew at a faster-than-expected 5.7 percent pace in the fourth quarter, the quickest in more than six years, as businesses made less-aggressive cuts to inventories and stepped up spending.

The Commerce Department said on Friday its first estimate put fourth-quarter gross domestic product growth at its fastest pace since the third quarter of 2003. The economy expanded at a 2.2 percent annual rate in the third quarter. . . .

Business inventories fell only $33.5 billion in fourth quarter after dropping $139.2 billion in the July-September period. The change in inventories alone added 3.39 percentage points to GDP in the last quarter. This was the biggest percentage contribution since the fourth quarter of 1987.

For the whole of 2009, the economy contracted 2.4 percent, the biggest decline since 1946, the first year after the end of World War II.

Go here for the whole thing.

Of Politicians and Potato Chips

George Will spanks some babies while discussing the recent Supreme Court activism in defense of The Bill of Rights:

Even if it were Congress' business to decide that there is "too much" money in politics, that decision would be odd: In the 2007-08 election cycle, spending in all campaigns, for city council members up to the presidency, was $8.6 billion, about what Americans spend annually on potato chips.

Read more here.

2010 = 1994

First healthcare reform, now gays in the military.

Talk about leading with your chin, just like Bill Clinton in 1993. Amateurs.

These people can't help themselves.

Of Course Obama Was For The Public Option

Lanny Davis was interviewed on the Laura Ingraham Show this morning, denying Obama ever ran on the public option, in response to Howard Dean's recent assertion that the people of Massachusetts voted for Republican Scott Brown to send a message to Obama for backtracking on it.

Lanny obviously got the talking points memo: "deny we ever ran on the public option."

As for Howard Dean, Scott Brown ran promising three things: to be the 41st vote against healthcare in the Senate, to treat terrorists like enemy combatants instead of criminals, and to cut spending and taxes. This enraged Bay State liberals so much they ran right out and voted for it.

Do we really need to review the evidence on the public option? For video go here. But remember: "JUST WORDS!"

A Countryman Speaks Out About Spending

In "Federal Spending for Dummies" by Tom Quiner for The Des Moines Register, the author lays out the historical record for out of control government spending (is there any other kind?) and concludes that it has grown per citizen by about 80% since 1980.

Believing that this growth in spending is unsustainable, he suggests that a new era of restraint is in order and must begin now before it is too late.

In this he is most certainly correct.

Read his argument by following the link above.

Libertarianism Has No Moral Compass

Do you think it is ethically permissible to call a senator and urge him or her to vote against Ben Bernanke or to vote against healthcare and to lie about being a resident of their state? I don't, but the libertarian's remarks appearing below advocate just that.

Think about this the next time someone asks you to contribute to a political campaign outside of your congressional district, or in another state. How would you feel if someone else's money gave you representation which turned out not to represent you?

The rot which runs through American politics is not restricted to the politicians or "the system." It runs through every human heart, which is why the Founders frequently resorted to the principle of the separation of powers, to put checks and balances on the evil they knew was in every man. And it is also why they spoke favorably of the role played by religion, because they knew it was an indispensable support for the morality without which even simple honesty would not be possible.

Conservatism in a nutshell.

How You Can Help!

Whether they are in your state or not, please call all 5 undecided senators.

Concentrate on the senate. The house has no say on this.

What To Say: Make it simple so as to not tie up the lines ... "I am opposed to the reappointment of Bernanke [give your personal reason] and I think we should start all over on health care [or whatever you think about that issue]."

Be prepared to name your city and give a zipcode. Here is the Zip-Code Database.

Next call your senators with the same message.

Look up the phone numbers in the Online Directory For The 111th Congress .

Send A Message

Remember it takes 60 votes for confirmation. All it takes to send Bernanke flying is a change in a handful of undecided senators!

Call Now!

Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com

1962: The Year Everything in the American Political System Changed

Dan Henninger describes the origin, rise and tyranny of the new managerial revolution, the public employee unions:

In 1962, President John F. Kennedy planted the seeds that grew the modern Democratic Party. That year, JFK signed executive order 10988 allowing the unionization of the federal work force. This changed everything in the American political system. Kennedy's order swung open the door for the inexorable rise of a unionized public work force in many states and cities.

This in turn led to the fantastic growth in membership of the public employee unions—The American Federation of State, County and Municipal Employees (AFSCME), the Service Employees International Union (SEIU) and the teachers' National Education Association.

They broke the public's bank. More than that, they entrenched a system of taking money from members' dues and spending it on political campaigns. Over time, this transformed the Democratic Party into a public-sector dependency.

Read more here.

Risk-Taking in Capital Markets is Incompatible with a Taxpayer Guarantee

The Wall Street Journal weighs in on Obama's idea for banking reform:

Phony populism aside, yesterday Mr. Obama introduced his first serious idea into the debate on reforming the financial system. In calling for an end to proprietary trading at firms with a federal safety net, the President showed that he now understands an important principle: Risk-taking in the capital markets is incompatible with a taxpayer guarantee.

To read more, go here.

From The Makes Too Much Sense Department

"Rather than granting amnesty to criminal invaders, enforce the . . . law by deporting each and every last one of the despicable outlaws. By simply enforcing laws currently on the books, 10-20 million uninsured would be removed from the population and hundreds of billions of dollars now wasted on criminals would be saved . . . To reduce the ranks of the uninsured . . . enforce the . . . law!"

-- John W. Lillpop

House Healthcare Bill Nullifies 3rd, 4th and 5th Amendments

The Truth About the Health Care Act

Michael Connelly, Constitutional Law Attorney

(See http://michaelconnelly.viviti.com/ for a bio on Michael Connelly)

Well, I've done it! I have read the entire text of proposed House Bill 3200: The Affordable Health Care Choices Act of 2009. I studied it with particular emphasis from my area of expertise, constitutional law. I was frankly concerned that parts of the proposed law might be unconstitutional. What I found was far worse than what I had heard or expected.

To begin with, much of what has been said about the law and its implications is in fact true, despite what the Democrats and the media are saying. The law does provide for rationing of health care, particularly where senior citizens and other classes of citizens are involved, free health care for illegal immigrants, free abortion services, and probably forced participation in abortions by members of the medical profession.

The Bill will also eventually force private insurance companies out of business, and put everyone into a government run system. All decisions about personal health care will ultimately be made by federal bureaucrats, and most of them will not be health care professionals. Hospital admissions, payments to physicians, and allocations of necessary medical devices will be strictly controlled by the government.

However, as scary as all of that is, it just scratches the surface. In fact, I have concluded that this legislation really has no intention of providing affordable health care choices. Instead it is a convenient cover for the most massive transfer of power to the Executive Branch of government that has ever occurred, or even been contemplated. If this law or a similar one is adopted, major portions of the Constitution of the United States will effectively have been destroyed.

The first thing to go will be the masterfully crafted balance of power between the Executive, Legislative, and Judicial branches of the U.S. Government. The Congress will be transferring to the Obama Administration authority in a number of different areas over the lives of the American people, and the businesses they own.

The irony is that the Congress doesn't have any authority to legislate in most of those areas to begin with! I defy anyone to read the text of the U.S. Constitution and find any authority granted to the members of Congress to regulate health care.

This legislation also provides for access, by the appointees of the Obama administration, to all of your personal healthcare and financial information, and personal information from your employer, physician and hospital: a direct violation of the specific provisions of the 4th Amendment to the Constitution, which provides protection against unreasonable searches and seizures. You can also forget about the right to privacy. That will have been legislated into oblivion regardless of what the 3rd and 4th Amendments may provide.

If you decide not to have healthcare insurance or if you have private insurance that is not deemed acceptable to the Health Choices Administrator appointed by Obama, there will be a tax imposed on you. It is called a tax instead of a fine because of the intent to avoid application of the due process clause of the 5th Amendment. There is nothing in the Health Care Bill that allows you to contest or appeal the imposition of the tax; which deprives us of property without the due process of law.

Three amendments out of the original ten in the Bill of Rights, are effectively nullified by this Health Care Act. Under the provisions of this piece of Congressional handiwork neither the people nor the states are going to have any rights or powers at all in many areas that once were theirs to control.

I could write many more pages about this legislation, but I think you get the idea. This is not about health care; it is about seizing power and limiting rights. Article 6 of the Constitution requires the members of both houses of Congress to "be bound by oath or affirmation to support the Constitution." If I was a member of Congress I would not be able to vote for this legislation or anything like it without feeling I was violating that sacred oath or affirmation. If I voted for it anyway, I would hope the American people would hold me accountable.

For those who might doubt the nature of this threat, I suggest they consult the source, the US Constitution and the Bill of Rights. There you can see exactly what we are about to have taken from us.

Michael Connelly, Retired Attorney

Constitutional Law Attorney

Carrollton, Texas

That Was My Line, says Barry Ritholtz

"Two items are noteworthy (besides his lifting my 'If you want less of something, tax it.' line)."

-- Barry Ritholtz, January 20th, 2010, referring to former Reagan Administration Office of Management and Budget Director, David Stockman, in The New York Times

The famous maxim, "If you want more of something, subsidize it. If you want less of something, tax it," has been circulating since before the time when Barry Ritholtz was perplexed in college, trying to figure out whether he was preparing to graduate or matriculate. The meanings of things elude him still, for which he supplies the appropriate expletives in proportion to the want of knowledge. At any rate, he's no more the author of it than he is of "It was the best of times, it was the worst of times."

This is an annoying sort of narcissism which usually emanates from New York intellectuals at The Times, but that's obviously not the case here. David Stockman is from Michigan, of course, just as Rush Limbaugh is from Missouri, whom Michael Savage routinely accuses of stealing lines. Must be something in the water, there in New York, that creates visions of grandeur from an early age.

The maxim, for what it's worth, is variously attributed to either Milton Friedman, Jack Kemp, or Ronald Reagan, but without chapter and verse. A little tough to nail down. I suspect it may predate them all. Ronald Reagan expresses the ideas explicitly in his farewell speech of 1989, but not in the identical language. Stockman, of course, knows the lines from that era, not from The Big Picture blog.

It just goes to show that the free for all of the internet is no substitute for publications vetted by the knowledgeable.

Nancy Pelosi Hates The People of Massachusetts

As reported by Politico:

"Massachusetts has health care and so the rest of the country would like to have that too," Pelosi said, referring to the state’s health care program. "So we don't [think] a state that already has health care should determine whether the rest of the country should."

On the Dangers Posed by Libertarians

Consider this popular and influential enthusiast for Ron Paul.

He appears to favor a single payer system of federalized healthcare, an enormous interference in the personal liberties of individual Americans, many of whom freely eschew health insurance, from students in their twenties to the rich and successful like Rush Limbaugh. This from the same guy who wants to end the Federal Reserve because of its role in debasing the currency. It should bother him that he would swap debased healthcare for debased currency, but it doesn't.

He realizes, quite rightly, that a single payer system implies rationing of health care. But he's all for that, which means government will most certainly deny services when you desperately need them:

The press seemed concerned with a fear of rationed health care. Some republicans have raised the issue as well.

Mr. President I am concerned there will be no rationing of health care. . . .

Mr. President, unless something is done to rein in costs taxpayers will be footing the bill for a lot of things they shouldn't. In every country that has a single payer system, there is some degree of rationing.

Somehow you have us believe benefits will not be reduced, everything will be covered for everyone, there will be no rationing and somehow health care will cost less because of reduced paperwork. Mr. President, no one believes that, not even the nonpartisan Congressional Budget Office.

Mr. President, to prevent costs from spiraling out of control rationing is mandatory. Unfortunately, you do not have the courage to admit it. Yet until you do, it can't happen.

(Mike Shedlock, 7/23/09)

Then fast forward a few months and he considers it a flaw in the Senate version of the bill that abortions will not be covered (which happens not to be true). Sounds like rationing to me. Yet he's clearly upset abortion will not be paid for:

The bill does allow states to opt out of paying for abortions. This is folly given the huge ongoing costs of unwanted births.

(Mike Shedlock, 12/26/09)

Suddenly the advocate for personal liberty is transformed into a statist potentially as dangerous to life, liberty and the pursuit of happiness as the crew of clowns now infesting Washington, D.C.

My Stand? I am all in favor of the right to die.

(Mike Shedlock, 12/31/09)

Liberty is not all. When it is, it becomes license, not liberty, and exposes one and all to the whims of the powerful, who make it all up as they go. In our time its young victims already approach 50 million since 1973. Now ask yourself how many elderly and infirm are in the gun sights of the rationers of today?

No, law and order must exist before there can be any semblance of liberty, and the sources of our law are too deep, ancient, and complex to be sacrificed to the caprices of the simplifiers of our age.

The Bank Bailouts Are a Fact, But They Are Still Wrong

From Jeffrey A. Miron at Investors.com:

The U.S. made a huge mistake in bailing out the financial industry. Bankruptcy would have been the right way to punish the financial sector for its excesses. High profits and large bonuses are perfectly fine — they are the reward for risk-taking — but only if those reaping the rewards in good times actually pay the piper in bad times.

Absent the bailout, many financial institutions would have failed or suffered serious losses, driving down profits and bonuses. This is the way capitalism is supposed to work.

The bailout short-circuited this process, protecting the financial sector from much of the risk it assumed in the pursuit of high profits. Advocates believe the bailout was necessary to prevent a financial meltdown, but even if they are right — which is highly debatable — the bailout let Wall Street off the hook. And by rewarding excessive risk-taking, the bailout planted the seeds of the next crisis.

For the rest, go here.

How Did The Greatest Generation Pare Down Debt? It Didn't

John Waggoner at USA TODAY reminds us that war is the father of everything:

The last time the nation's debt was this big compared with gross domestic product — 70.4% of GDP — was immediately following World War II.

How did the Greatest Generation pare it down? It didn't.

It grew the economy faster than the debt, pushing down the debt-to-GDP ratio and making debt payments easier to manage. ...

The citizens of the U.S. owe $12.3 trillion in Treasury debt to banks, individuals and foreigners. That's about $40,000 per person living in the U.S., and it's not counting the amount our states owe — or, for that matter, what we owe to our individual creditors. ...

How did the government repay the war debt? It didn't, really. Much of it was rolled over when it matured, but new borrowing was limited. "During the early postwar years, the federal government ran either small surpluses or small deficits," says Anthony O'Brien, professor of economics at Lehigh University. The federal debt was $260.1 billion in 1945 and $274.4 billion 10 years later in 1955.

But the economy grew faster than the deficit did. GDP was $221.4 billion in 1945, and $394.6 billion in 1955 — despite high tax rates, which persisted. Because of economic growth, the ratio of debt to GDP fell nearly every year from 1947 to 1981. As the nation's debt became a smaller part of GDP, the debt became much less burdensome, much as a fixed mortgage payment becomes more affordable as your income grows.

For the entire story, go here.

Foreclosure Tsunami Continues

As reported by the Associated Press today:

A record 2.8 million households were threatened with foreclosure last year, and that number is expected to rise this year as more unemployed and cash-strapped homeowners fall behind on their mortgages. . . .

The number of households that received a foreclosure-related notice rose 21 percent from 2008, RealtyTrac Inc. reported Thursday. . . .

Home prices have stabilized in some cities, but are still down 30 percent nationally from mid-2006. . . .

The foreclosure crisis isn't letting up. Between 3 and 3.5 million homes are expected to enter some phase of foreclosure this year, said Rick Sharga, senior vice president of Irvine, Calif.-based RealtyTrac, which began tracking the data five years ago.

To read the entire entry, go here.

Declare a Tax and Penalty Exemption on IRA or 401K Withdrawals in 2010

This was interesting to read on January 8 over at Jesse's Cafe Americain:

Here's a modest proposal. Raise the amount of losses from investments that can be deducted from income in one year from $3,000 to $20,000 for individuals and $40,000 filing jointly so mom and pop can clean up their balance sheets. And if they really want to jump start the economy, declare a tax and penalty exemption on the first $150,000 that an individual can withdraw from their IRA or 401K in 2010.

The latter idea I proposed myself a year ago in a letter to Democrat Senator Debbie Stabenow of Michigan (rhymes with Stab Me Now). Except I didn't propose the tax exemption, just the penalty exemption. I pitched it as a wonderful way to help people make good on their debts, and generate some much needed revenue for the government. No reply, of course.

She probably didn't understand the significance of the idea, having been a public school teacher.

In the interim it's become quite clear that doing something helpful for the American people is about the last thing on their minds, except for the meagre scraps they gather and throw in our direction come election time. The dogs go for these every time. No wonder the contempt they have for the popular will on healthcare.

Sarah's Done

In my department, this move removes Sarah Palin from my list of serious candidates for president in 2012. It wouldn't matter what news organization she joined, either. One does not pursue statesmanship by lowering oneself in this way.

And perhaps that's what she is trying to tell everyone: that she's packing it in.

Jim Rutenberg for The New York Times breaks the story "Sarah Palin to Contribute to Fox News":

Former Gov. Sarah Palin of Alaska has signed on as a contributor to the Fox News Channel.

The network confirmed that Ms. Palin would appear on the network’s programming on a regular basis as part of a multiyear deal. Financial terms were not disclosed.

Ms. Palin will not have her own regular program, one person with knowledge of the deal said, though she will host a series that will run on the network from time to time.

More at the link.

Depression Caliber Statistics

From Ambrose Evans-Pritchard at The UK Telegraph:

The broad U6 category of unemployment rose to 17.3pc. . . .

Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year. . . .

The fuse has yet to detonate on the next mortgage bomb, $134bn (£83bn) of "option ARM" contracts due to reset violently upwards this year and next. . . .

David Rosenberg from Gluskin Sheff said it is remarkable how little traction has been achieved by zero rates and the greatest fiscal blitz of all time. The US economy grew at a 2.2pc rate in the third quarter (entirely due to Obama stimulus). This compares to an average of 7.3pc in the first quarter of every recovery since the Second World War. . . .

For the record, manufacturing capacity use at 67.2pc, and "auto-buying intentions" are the lowest ever. . . .

The Fed's own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc. . . .

To read the whole thing, go here.

Obama: A Deceiver and Practitioner of Fraud

Hope springs eternal in the heart of one Jay Ambrose, who nevertheless calls Obama "a political deceiver who preaches idealism and practices a kind of fraud."

I'd say we're making progress.