What's Wrong With Stocks?

The 4th quarter GDP came in gangbusters this morning, at 5.7 percent. So what's the matter with stocks? They've been in a swoon for a couple of weeks, and yawned this morning at the GDP numbers.

The answer can only be that the market doesn't see the gangbuster improvement continuing for much longer. What's the problem?

Maybe it's as simple as one word: Taxes. David Malpass looks at the outlook for small business, the engine of growth and, especially, employment growth.

The fortunes of small businesses — perhaps more than any other commercial sector — are tied to rates of taxation on the individual. And individual income-tax rates are set to jump sharply at year-end when the Bush tax cuts of 2003 expire. Put another way, on January 1, 2011, the world’s biggest tax increase ever will arrive on the doorsteps of U.S. small businesses (and a great many others).

President Obama, on Wednesday night, was congratulating himself on high-speed rail in Florida and green jobs. That sort of thing may impress the mainstream media but it doesn't impress the markets. Fancy government infrastructure projects and technology subsidies don't necessarily translate into economic growth. They are, after all, money spent on special interest goodies. If they were such a good idea, then surely business would be right out there doing it without government subsidy.

So you can be pretty sure that government hasn't a clue when it comes to selecting projects that will get the economy going.

No, the likely cause of the market's swoon is taxes, and the radical uncertainty about taxes in the future. The Bush tax cuts are scheduled to expire at the end of 2010. But who really believes that Congress will really let them expire in total? With the prospect of total wipeout in November 2010 I would expect that the Democrats in Congress will suddenly discover that they really believe in the importance of small businesses, and that Joe the Plumber is a real cool guy after all.

Don't forget Joe the Plumber. He is important. Here was a guy who, on the face of it, was a loser. He was a guy that hoped one day to buy a small plumbing business. Sociologists call his type: aspirational. And Joe the Plumber reckoned that President Obama's tax plans were going to hurt him in the business he hoped to buy.

Would Joe Plumbing actually have been hit by Obama's tax plans? Who knows? But he thinks he would get hit, and that is what matters in politics.

Back in the mid to late 2000s the Democrats did a fine job of marginalizing Republicans as bigoted fundamentalists that wanted to subject the US to Biblical morality. Many secular business owners felt embarrassed at being associated with such knuckle-draggers.

But mild embarrassment is a small price to pay when they are raising your taxes by a record amount. Why, you can even get to feeling that those crazy Christians aren't so bad after all.

Anyway, the Massachusetts Miracle was not built upon the votes of fundamentalist Christians. It was built upon independents moving strongly from the Democratic column to the Republican column, and increased enthusiasm among regular Republican voters.

No doubt something will be done to sweeten the pot for businessmen this year. But meanwhile business owners all across America are confused. They don't know what to plan for.

And that is not good news for the economy.

There is no Plan B

A week ago conservatives were all in a tizzy that President Obama would do "pivot" and start triangulating, just like President Clinton did when he got into trouble in his first term.

But my takeaway from the president's first State of the Union speech is that there is no pivot. It may not be full steam ahead with the liberal agenda, but there is no turning back. Not yet.

I listened to Glenn Beck for a moment this morning, and he marveled at the ratings he was getting. Over 3 million real viewers, at 5pm Eastern, 2pm Pacific! Not prime time, not close to prime time. People are searching my stuff out, he exulted. They must be looking for what I'm selling.

And that's the point. America is in transition right now; it might look like a proverbial Chinese fire drill to liberals and the MSM. But we conservatives know what is happening. Pretty soon even liberals will be seeing a pattern.

Let's change the metaphor. We are seeing a bunch of small formations marching about the political battlefield right now. What is going on? What is the battle plan? That's the way it always looks before a major battle. And then one day the guns start to roar, and it all makes sense.

Based on his speech, President Obama doesn't see the need to change his battle plan, except to propose a derisive spending freeze that doesn't begin to roll back the huge increases in spending already in the can. That's fine, for his opponents. It means that when the deployment of forces becomes clear in September and October it will be too late to make a big change.

So the president still wants one last Big Push on health care. He still wants a push on clean energy and green jobs. He wants to throw more subsidies at the grossly oversubsidized college sector. No change. Full speed ahead.

I've written before that the welfare state will never get reformed. It will end when it hits the buffers at the end of the line, when it hits the wall.

What, you may ask, happens then? We have a recent example that gives us a clue. It happened after the fall of the Soviet Union. A Polish acquaintance told me it was sad: So many old people "eating the paint off the walls."

That's probably what will happen here when the government runs out of money. The failed government will just walk away from the old and the sick. That wouldn't matter for them if family and fraternal ties were strong. But the whole point of the welfare state is to loosen those ties, to let people neglect the hard work of family obligation and rely instead on the government dole.

So the people that will flourish after the fall will be people that didn't listen to and didn't believe the governing class's promises.

All government promises are worthless. They are made to win elections. That is all.

It was troubling that President Obama also seemed to go out of his way to insult Republicans, even in a speech that exalted the virtues of unity. And the dig at the Supreme Court's decision on Citizens United was clumsy.

In the coming months and years President Obama will have to be fast on his feet. For pretty soon Obama will be saying, as Claudius said in Hamlet:

When sorrows come, they come not single spies But in battalions.

The speech occurs after the death of Polonius when Ophelia had gone mad.

But President Obama doesn't seem to see any single spies yet, let along whole battalions. He is just going on as the liberal scion, born and educated in the "educated class," as David Brooks call our liberal elite, doing the things that liberals do. The trouble with well-born scions is that they don't have the street smarts to navigate through the confusion and fear of troubled times.

That is the way that all dynasties fall. And the liberal dynasty of the educated class is no different.

Freezing What Mr. President?

You can tell that President Obama has been knocked onto his back foot. He's proposing a spending freeze. It will amount, apparently to $250 billion over 10 years.

Politicians always propose spending freezes when they get into a jam. It sounds good in a speech. But the key thing, of course, is "details to follow later."

Columnist Robert Samuelson isn't fooled. The spending freeze is "peanuts," a "rounding error." That's because federal spending in the next few years is estimated at about $3.5 trillion per year. A $35 billion spending cut per year would be one percent. And President Obama is proposing less than that.

Our good friends at usgovernmentspending.com show why this is derisive.

Take a look at the pie chart. The big chunks in the budget are Pensions, Health Care,and Defense. President Obama has taken these off the table. Welfare isn't going to go down, not until the economy picks up. So that means that the cuts are going to come from only 19 percent of the federal budget.

The real facts are that, in the long run, we've got to cut the "mandatory" entitlement programs. That's what President Obama was trying to do in a sneaky way with ObamaCare. He was trying to introduce rationing for Medicare. But the American people blew him away. They don't want rationing. Not yet.

But that's where the money is. Social Security and Medicare. And they will still be there next year. They will still be there in 2013 when the next president is unaugurated.

Anyone want to be president?

Obama's Bubble Politics

Politicians and pundits have had a grand old time recently, criticizing bankers and consumers for their reckless lending and borrowing. Just as they had a grand old time tarring all businessmen with the brush of Enron back in the tech bust of 2000-01.

Remember Enron? Seems like a faraway time from the trillion dollar deficits of 2010.

But now that we are seeing the Obama myth in free fall, after the year the locusts ate, it is time for knowing analysts to give their heads a knowing shake about the Obama political bubble.

As with credit bubbles, the Democrats did it to themselves.

The US is a center-right country. You can tell that from Gallup's poll of political orientation. Right now, the US is 40 percent conservative, 21 percent liberal, and the rest moderate. So for Democrats to get into power they need a meltdown like 2008. And they need to dissemble, to represent themselves as not really as liberal as they are.

Let's face it. The Democrats are masters at the art of appearing not quite as liberal as they really are. They field good conservative candidates to run in Republican districts. They have the mainstream media to pretend that liberals are really moderate. They have the schools to fill heads full of lefty mush. And at election time they can conjure up the votes to push the odd toss-up into the Dem column. Think Maria Cantwell (D-WA), Al Franken (D-MN), and the October surprise prosecution of Ted Stevens (R-AK).

But there's a problem with being too clever by half. You end up with a president and a Congress that don't represent America. You create a political bubble that, just like the Fannie Freddie credit bubble, is going to pop some day.

With Obama and the Democrats, that day is here.

The Dems did a fantastic job of contesting the legitimacy of the 2000 election. Then they did a fantastic job of harrying President Bush over Iraq. Then they did a fantastic job of critiquing the tired and corrupt Republicans in 2005-06. Then they did a fantastic job of getting conservative candidates to run for Congress in 2006 and 2008. Then they did a fantastic job, backed up by the MSM, of selling the left-liberal Obama as a moderate.

Now look what they've done. They've given the US a president and Congress way off the center-right center of gravity.

We all know what happens when you gun the housing market with cheap credit to unsustainable heights. You get a nasty collapse, much worse than you would have got without the preceding bubble. Housing prices go into the toilet.

Same thing in political bubbles. Now all the cunning poliltical leverage that the Democrats worked into the system over the last decade is unwinding. And that means that the defeats that the Democrats will suffer in 2010 will be worse than the normal mid-term correction. Maybe much worse.

Politicians are competitive chaps, and they fight hard to win their glittering prizes. But what the American people need is a government that reflects their mood. If they want some nice new programs, as they did in the 1998-2000 period, they should get them. If they want deficits cut and spending cut, as they do right now, they should get it.

Thinking long term, it does no good to game the system. What you need to do is persuade the American people, not just in a slick election campaign, but year in, year out, on the basics of what American stands for and what the government should do and not do.

Democrats are going to pay a frightful price for their bubble politics, and you ain't seen nothing yet.

Is Obama Serious?

The White House line after Massachusetts seems to be full speed ahead. That seems to be the usual Obama way, from the campaign through the first year. No change for the fiscal meltdown. No change to fight the recession. Just stay with the game plan.

Now, after three losses in a row, in states that voted for Obama in 2008, the Obama White House is again signaling no change in the agenda.

For Republicans and conservatives, the word is: Go ahead, make my day. Give us a Republican Congress in 2010.

As Mark Steyn wrote over the weekend, Obama ran for president "as something he’s not, and never has been: a post-partisan, centrist, transformative healer." But let's give him credit. He's governed as something he really is: a left-liberal big-government partisan.

That's fine. But the American people have just said, at the voting booth, that they don't like the real Obama one bit. The real Obama is not what independents voted for, not at all. They thought they were voting for the candidate that was presented to them: a post-partisan, post-racist, centrist.

In a way, you can understand that Obama could feel that he might as well stay true to his beliefs. Whatever he can get done, he gets done, and he nails it up on the barn wall as a win. Nothing ventured, nothing gained.

But there's a problem with that strategy. The ordinary Democratic officeholder that is facing reelection in November isn't going to go along. He or she is facing wipeout, and probably isn't going to want to go quietly.

That adds up to a split in the Democratic Party. And that is not going to be good for the president's agenda.

Of course, all the talk of fighting and staying the course may be bravado to keep the media busy while the president's team plans a pivot.

Or the president may be serious. The truth is that all his options are bad options, right now. The president faces an annus horribilis with nothing but bad news. Maybe the best thing to do is to hunker down and sweat it out.

But maybe, by hunkering down, he will lead the Democrats in Congress into an historic meltdown comparable to the 1938 mid-term elections when the Dems lost 80 seats in the House.

Noonan: Nuts vs. Creeps

It sounds like gang warfare, but Peggy Noonan has redefined the political arena. It's not the Dems vs. the Reps, she says, but the Nuts versus the Creeps.

Back in 2006 and 2008 the Democrats succeeded in persuading the voters that they were not so Nutty as the Creeps were creepy.

In 2008, the voters went for Mr. Obama thinking he was not a Nut but a cool and sober moderate of the center-left sort. In 2009 and 2010, they looked at his general governing attitudes as reflected in his preoccupations—health care, cap and trade—and their hidden, potential and obvious costs, and thought, "Uh-oh, he's a Nut!"

Enter Bob McDonnell, Chris Christie and Scott Brown.

But the Republican candidates in Virginia and New Jersey, and now Scott Brown in Massachusetts, did something amazing. They played the part of the Creep very badly!

They ran, if you like, as practical, pragmatic moderates, concerned about taxing and spending. Oh, and debt. I read someone this week who reminded me that ordinary Americans have had a terrible personal lesson on debt in the last couple of years. Naturally, they are concerned that the government hasn't learned the lessons they learned.

Personally, I think that the Creep image is unfair (but then, probably so is the Nut image.) The reason we had so much spending in the last decade was that, after the budget got balanced in 1998, American voters felt it was time for a little party. That's why Candidate Bush ran as a compassionate conservative in 2000. Green-eyeshade conservatism wasn't going to sell.

But the truth is that there is no such thing as a compassionate government. There is just taxing and spending. The core functions of government, as articulated by Britain's Norman Tebbit, are simple and have nothing to do with compassion.

It must provide not only external but internal security, allowing its citizens to go about their lawful businees freely, and criminal and civil justice systems as well as a currency and the regulatory and legislative infrastructure needed for agriculture, industry and trade.

But that is it. Everything else, from health care to education to infrastructure, is not a Must-have; it is a Nice-to-have.

In the Twenty Teens it is going to be back to basics: Cut taxes, cut spending, cut, cut, and cut again.

And over everything else will be this overarching question. Why do government employees earn 30, 40, even 50 percent more than comparable workers in the private sector?

When you ask that question, the political struggle ceases to be a question of the Nuts vs. the Creeps. It becomes the Makers vs. the Takers. That's a book, by the way, by Peter Schweizer: Makers and Takers: Why conservatives work harder, feel happier, have closer families, take fewer drugs, give more generously, value honesty more, are less materialistic and... Well, you get the picture.

Will They, Can They Change?

If you are a teabagging conservative, it seems obvious that the Democrats must change. The American people have taken a look at the Obama agenda and have decided that they don't want any part of it.

So, obviously, the Democrats will change, right?

Maybe not. Maybe they can't change. Maybe they are welded to their high-taxing, high-spending administrative state, and nothing can change them short of political Armageddon. For, as Daniel Henninger reminds us, the Democratic Party is nothing if not the political committee of the public sector as a whole.

It all started in 1962, according to Henninger.

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.

That political act set up the current public sector in which public employee unions feed money to Democratic politicians in return for favors.

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.

If you've wondered why public sector employees earn something like 40 percent more than private sector employees, now you know.

On this political model it makes complete sense for the Democrats to propose a vast increase in the administrative supervision of health care. It will create more public sector jobs up and down the food chain, from academicians serving on comparative effectiveness committees to nurse's aides doing hospital donkey work.

Yes, you say, but all this saddles the American people with swingeing taxes and suffocating regulation and, in the end, doesn't really deliver much health care. Why would anyone do that?

So? What's the problem? It increases the number of public sector workers, and the number of votes for Democrats. And anyway, it's too late for the Democrats to stop now.

The great fear, for any independent or Republican, is that Democrats will trim their sails enough to convince the American people that they have heard their message. Yes, the president will say. We get it. And ordinary people, who just want to get on with their lives, will keep their Democratic congressman, and vote to give President Obama a second term.

But the president and his administration probably won't get it. Maybe they can't. To understand why, read the comments responding to David Brooks's New York Times article on "The Great Leviathan," where he argues that President Obama must stop acting the Hobbesian absolute monarch, and be a proper American leader. Says Brooks:

If I were President Obama, I would spend the next year showing how government can serve a humble, helpful and supportive role to the central institutions of American life. Even in blue states like Massachusetts, voters want a government that is energetic but limited — a servant, not a leviathan.

But the top commenters will have none of it. Things are such a mess after Bush that top-down dirigisme is essential, they say. You are a nice chap, says one commenter, but "your expression of respect for the American people at present is not justified."

See the mindset here? The American people cannot be trusted; they must be directed to do the right thing. Not coincidentally, it will be New York Times readers that will do most of the directing.

Leadership, they say, is mostly about selecting good people. Government comes down to staffing. And we know that the people Obama has appointed to executive positions in the federal government think and act like the Brooks article commenters. Just as the old landed aristocracy believed in "blood" our educated progressive class believes in intelligence and rational administration. Every problem needs a rational administrative solution. Every hammer needs a nail.

So the bad news, that the Obamis probably won't do their "pivot," is also the good news. Democrats won't really change. Not until it is too late.

As Lenin said: you can't make an omelette without breaking eggs. You won't get political change until the old regime hits the wall.

And maybe that's the best way to understand our liberal friends today. They are like the French aristocracy in the last years of the ancien regime. Even those that know that something is wrong just don't have a clue what to do about it.

MA Voters Send Obama an Anniversary Present

OK. So I missed on my prediction. Scott Brown won "the people's seat" from Massachusetts in the US Senate by a five percent margin, not the six percent that I predicted. But hey, it's better to be an optimist!

On to the Wednesday morning quarterbacking. What does this present from the voters to President Obama on the anniversary of his inauguration mean? Fred Barnes has a five point analysis that I think hits all the bases. But the key, I think, is his point 2: "Independents are lost to Democrats," at least for now, and most probably until they get fed up with the next Republican administration.

Yeah. I'll say. The big success for Democrats in the 2006 and 2008 election cycles was in persuading moderates and independents to vote for them. They did it by fielding moderate-to-conservative candidates in Republican-leaning districts. OK. Good tactics. Then they blew it by tacking hard left after Obama was elected. And so they have lost independents and moderates for the next ten years.

Because all a Republican candidate has to say when some moderate-to-conservative Democrat is running against him is "Remember ObamaCare!"

What the Dems coulda, shoulda done was spend a couple of years doing comforting moderate things, like tinkering with health care, tinkering with global warming, and getting the economy on track. Then they could have tried the liberal stuff, after building a relationship with their new moderate recruits.

Instead they went for broke, figuring that they would get their Moby-Dick energy taxes and government takeover of health care through before the voters could stop them. So the moderates pretty quickly understood that they were a one-night-stand, and that they were being used.

Another thing on the moderate/independent front. Scott Brown picked up the support of the Tea Party movement people. So now it looks as though the Tea Party movement is not going to split the Republican vote as everyone was predicting. Now it looks as thought the Tea Party movement will be a benefit to Republican candidate. The Tea Party movement may be composed of people that are disconnected from the Republican Party. But they are obviously people of conservative temperament.

I'd suggest to by liberal friends that it's about time to stop with the "teabagger" pejoratives. All you chaps are doing is driving the Tea Party folks into the arms of the Republican Party.

Palin Watch:

Sarah Palin weighs in on her Facebook page, and the main point is a suggestion to Democrats that they come up with a better plan on health care.

Scrap your current health care bill and start from scratch... We need common sense solutions like reforming malpractice laws, allowing people to purchase insurance across state lines, giving individual purchasers the same tax benefits as those who get coverage through their employers, and letting small businesses pool together to provide insurance for their employees.

"Common sense solutions." As Pat Buchanan says, that lady sure knows how to frame an issue.

Conservatism in One Paragraph

Norman Tebbit's claim to fame was that he was Margaret Thatcher's rottweiler. Her enforcer, if you like. In fact, he was a skilled politician who just missed being Prime Minister. Now he's Lord Tebbit and sits in the House of Lords.

But in the run-up to the British General Election, which must take place before June, Lord Tebbit is blogging for the Daily Telegraph. In a recent blog he set down in one paragraph a succinct political philosophy about the powers of government which could be embraced by all conservatives.

A state must have a territory over which it is sovereign, and a people who owe it allegience. It must have the capacity (and the will) to defend its territorial boundaries and its people from aggressors. It must provide not only external but internal security, allowing its citizens to go about their lawful businees freely, and criminal and civil justice systems as well as a currency and the regulatory and legislative infrastructure needed for agriculture, industry and trade. Nothing else has to be provided only by the state. Health and education provision and physical infrastructure may be provided by or precipitated by the state or others, but they are not core functions of the state.

It really doesn't get any simpler than that. Let's do again, with bullets.

• A state must have a territory over which it is sovereign, and a people who owe it allegience.
• It must have the capacity (and the will) to defend its territorial boundaries and its people from aggressors.
• It must provide not only external but internal security, allowing its citizens to go about their lawful businees freely, and criminal and civil justice systems as well as a currency and the regulatory and legislative infrastructure needed for agriculture, industry and trade.
• Nothing else has to be provided only by the state.
• Health and education provision and physical infrastructure may be provided by or precipitated by the state or others, but they are not core functions of the state.

I think that this needs to be put up in lights. Certainly it will be soon put up in the roadtothemiddleclass.com tags.

Let's Count Some Chickens

Nobody knows what will happen in the special Senate election in Massachusetts Tuesday. Will the enthusiasm of Scott Brown supporters get him Ted Kennedy's seat? Will the Massachusetts Democratic machine put Coakley over the finish line by fair means or foul?

Nobody knows. So let's count our chickens and imagine the effect a Sen. Scott Brown (R-MA) would have.

1. It would make it really difficult to pass ObamaCare. Dems are coming up with all kinds of ways to shove it through, from delaying the certification of Brown's election to passing the Senate bill in the House and avoiding another vote in the Senate. But the answer to all such shenanigans is: Make My Day.
2. It would stiffen the backs of the other Republican senators in New England. There are the gentle ladies from Maine, Sen. Olympia Snowe and Sen. Susan Collins. They might be less inclined to buy into Democrat adminsitrative bureaucratic expansions if they had a Scott Brown next door. There is Sen. Judd Gregg (R-NH). Right now he is sponsoring the dreadful Obama deficit reduction commission. After we Dems have trashed the budget let's set up a figleaf commission to force us to make tough choices. With a Scott Brown next door, Gregg might think twice about pulling Democratic chestnuts out of the fire.

You can see the benefit of a Scott Brown. It would be substantial. But first we need to get him elected. I predict Scott Brown by six points.

MLK and BHO

On August 28, 1963, Martin Luther King said this to a multitude of Americans in Washington, DC. He said:

I have a dream that my four children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character.

A little over a year ago, Barack Obama was elected to be President of the United States based upon the color of his skin. His performance as president will be judged by the content of his character.

We know that, for African Americans, the election of Barack Obama as president was indeed a dream that they thought could never happen. The open weeping in the streets that we witnessed on the night of his election is testimony enough to that.

But for our liberal friends, I soon discovered, Obama's election was another triumphant "first," America's First Black President.

I confess that I was taken aback by that. That's because, over the years, I've become jaded by the constant liberal yammering about First Black This and First Woman That. To me, the actual election of a black man or appointment of a woman is ephemeral. What matters is not the "first," but the principles, the culture that provides a level societal playing field upon which people can be judged upon the content of their character.

People can and will overcome light-to-moderate discrimination. It is the heavy-duty discrimination enshrined in law and backed by the full force of the state that breaks men's hearts. America no longer has frank, state-enforced discrimination. Not unless you include the "conservatives need not apply" signs at the nation's universities. Sooner or later, an African American would become president.

But now President Obama has to govern. Governing is not a question of skin color. It is a question of character. And it is no startling thing to say that his first year in office has been troubling on the character front for a number of reasons.

There was first of all the pivot to partisanship from a man that ran on healing the divisions. You could say that the election of a filibuster-proof Senate changed the game. But politicians have learned down the decades that they need to keep, more-or-less, to their promises.

• There was the failure to pivot from the campaign agenda to fixing the economy. In good times the American people, a generous people, are willing to spend money of the pet projects of earnest activists. We did quite a bit of that in the prosperous Nineties and Noughties. But when the economy is in the tank they expect their leaders to get with the program. It's a question of character.
• There is the cram-down on health care against the will of the American people. Let us rehearse just how extraordinary this is. Back in 1940 and 1941 President Roosevelt famously dithered about entering World War II. He understood that he didn't have the support of the American people. Not until that famous "day which will live in infamy." Back in 2005 President Bush wanted to reform Social Security, but he found that he could not persuade the American people to folow him. He wanted to reform immigration, and had a cram-down all ready, but he found that the American people would not follow him. So he and the leaders of Congress backed off. It's a question of character.
• There is the pivot on the war against terror. All through the campaign and through the first half of 2009 Obama was playing to the liberal gallery about Bush's war, about negotiations, apologizing for America's sins, and treating terrorists as criminals rather than enemy combatants. Now, after the deterioration in Afghanistan and the multiple terror attacks, he has changed his policy and is reverting towards the policy desired by the broad American people, but opposed by his liberal base. Only when confronted by the brute facts of reality has he changed his policy. It raises a question of character.

There seems to be a fundamental misunderstanding in the liberal mind about the nature of government. Liberals believe that it is their destiny to create a new society based upon the liberal values of caring, compassion, and social justice. Maybe it is. But that is not a program for government. It is a religious vision of a world saved from sin.

Government is a mundane thing. It is informed by culture and religion, but it is still government. It is the sector of force, and force being an anti-social thing, it is better to limit its scope as much as possible. That is why the United States advertises in the Declaration of Independence that governments derive "their just powers from the consent of the governed." It follows that any power of the government not derived from the consent of the governed is unjust.

The extraordinary thing about President Obama in his first year of government is the extent to which he is governing against the consent of the governed. It is not partisan or mean-spirited to say that this is shocking and unprecedented. That President Obama and his advisors do not seem to appreciate this is frightening. It raises a question of character in the president and those that advise him.

Obama's Tame Professor

So now we know how all the rosy predictions of bending the cost curve on health care got put together. The Obamis had a bribed apologist of a college professor feeding them the objective, unbiased truth. His name? Jonathan Gruber, MIT economist.

The Wall Street Journal edit page reports.

The press corps is agonizing, or claims to be agonizing, over the news of Jonathan Gruber's conflict of interest: The MIT economist has been among the foremost promoters of ObamaCare—even as he had nearly $400,000 in consulting contracts with the Administration that weren't disclosed in the many stories in which he was cited as an independent authority.

Why is this not surprising? It is just what we would expect the Obama administration to do.

The disclosure of the Gruber non-disclosure ties in with David Brooks's oped last week about the disconnect between the Tea Party movement and the educated class. This week Michael Barone weighed in on Brooks's theme. He discussed how the Tea Party people are right on the substance of the issues, and the educated class is wrong.

Gun control? More citizens with guns means less crime. Climate? Educated-class scientists have been cooking the books.

On these issues the educated class is faith-based and the ordinary Americans who increasingly reject their views are fact-based, just as the Obama enthusiasts are motivated by style and the tea partiers by substance.

Actually, I think that Michael Barone is being too kind to the educated class of Obama enthusiasts. He equates the educated class and the Tea Party movement as if they are equals. This, of course, is wrong.

The educated class is the power elite in America today. The Tea Party is a grass-roots movement with no power except its enthusiasm and its numbers. What the educated class believes in is its power. The Tea Party movement believes in limited government. It believes in limiting the power of the elite, educated or otherwise.

I know which side I am on.

Bank Crisis Inquiry: Where's Fannie?

Today our noble and self-sacrificing solons are grilling the eevil bonus-begotten bankers. The ones that nearly crashed the credit system in fall 2008 with their greed, according to the MSM narrative. Write Daniel Wagner and Jum Kuhnhenn of AP:

Four of Wall Street's most powerful leaders — Goldman Sachs Group Inc. Chairman-CEO Lloyd Blankfein, JPMorgan Chase & Co. CEO James Dimon, Morgan Stanley Chairman John Mack and Bank of American Corp. CEO-President Brian Moynihan — were to give sworn testimony before the Financial Crisis Inquiry Commission, which was holding its first session Wednesday.

Erm. Why aren't the CEOs of Fannie Mae and Freddie Mac on that list, Senator? Last I heard the big banks on Wall Street had paid back their TARP loans. But not Fannie and Freddie. The US government has put $400 billion into Fannie and Freddie since the crash. You know things are really serious because the Treasury announcement about the $400 billion was made on Christmas Eve. Here's Bloomberg's Betty Liu and Matt Leising:

Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute. “The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said.

Hmm. Let's get the details.

The Treasury said on Dec. 24 it would provide an unlimited amount of assistance to the companies as needed for the next three years to alleviate market concern that the government lifeline for Fannie Mae and Freddie Mac, the largest source of money for U.S. home loans, could lapse or be exhausted.

Let's get this straight. The bankers have paid back all the money and they are now making record profits. So the banks are no longer a problem.

Meanwhile Fannie and Freddie are bleeding billions and are still losing money. They are going to cost the taxpayers $400 billion at least, and very likely more.

So what does Congress do? It calls up the CEOs of the profitable banks so that it can hector them about their bonuses. They are the problem, apparently.

Can anyone say: Three Card Monte?

"It's the Peoples' Seat"

How much do you think that Scott Brown paid to have David Gergen ask that question about "the Kennedy seat" at the debate last night? Probably nothing.

But I imagine that Scott Brown was waiting for a question, any question with a thoughtless reference to the Kennedy seat, and he had the answer ready. Because if you are Scott Brown and his campaign staff running for the United States Senate seat held since 1962 (!) by the late Sen. Edward M. Kennedy (D-MA) you are probably seething over the presumption that the seat is a Kennedy seat and that a Kennedy and a Democrat has a right to sit in it. For ever. So you have the response ready.

"With all due respect, it’s not the Kennedy seat and it’s not the Democrats’ seat, it’s the people’s seat."

Yeah. There's a lot of presumption among our liberal friends that they own certain things in American life. They own idealism. They own the "little people." They are the compassionate people. They are the evolved people. They are the intelligent people.

These are the beliefs of a governing elite already past its peak. They are the notions of an arrogant upper class already rotted by bad apples, a product already past its sell-by date.

So we ask the good voters of Massachusetts. Are you ready to send a message to Washington DC that you will not be patronized by the mainstream media and the political establishment? Are you willing to send a message to President Obama and Senator Reid on their desperately flawed health reform bill?

Tell you what, Bay Staters. You can always chuck Scott Brown out at the next election, and elect a host of Democrats and Kennedeys to every seat in the state.

But, this one time, why not send a message to Washington, and teach the politicians a lesson?

Arguing About Monetary Policy

What do you know? Economist John B. Taylor is in a spat with Federal Reserve Chairman Ben Bernanke about monetary policy.

Taylor is the author of a rule that specifies the interest rate that the Fed ought to use to guide its monetary policy. According to the Taylor Rule, the Fed's policy was too loose in 2002-2005. Helicopter Ben gave a speech explaining, as Taylor writes in the Wall Street Journal, that things were OK after all:

In his speech, Mr. Bernanke's main response to this critique was to propose alternatives to the standard Taylor rule—and then to use the alternatives to rationalize the Fed's policy in 2002-2005.

Well maybe Ben has a point. Or maybe not. Id be a lot happier if the Fed chairman were a real banker, and the Fed were a completely private organization that didn't owe a dime to the government.

The fact is that ever since 1913 the Federal Reserve has been an obvious stooge of the US government. You can say that, in wartime, that's the right stance. But in peacetime the Fed spends far too much time pulling the politicians' chestnuts out of the fire. The result has been that the dollar has declined in a single century from $20.75 per ounce of gold to $1,100. It's worked out real good for the nation's biggest debtor, Uncle Fed, but not so good for widows and orphans.

The big problem with the Fed is that it is always trying to rush recovery from recessions, as right now. In doing so, no matter what the rules it tries to follow, it always delays too long the change from stimulative policy (printing money) to a restrictive policy.

What we need to do is take the Fed out of the policy mix for stimulating the economy. It should maintain the value of the dollar at a fixed gold price (or other price if it can find a better one) and stand by to rescue the credit system if it seizes up.

Of course, even if it did this one small thing, it still wouldn't solve the Fannie Freddie problem. But at least it's a start.

Educating Barry

I've said all along that we needed to elect a Democrat in 2008 because we needed to put the Democrats in charge of the war on terror.

As long as Bush and the evil Republicans were in charge, Democrats could say that Bush provoked the terrorists, that his cowboy diplomacy wrecked all efforts at peace, that the war in Iraq was the wrong war, that Bush was "stubborn," and so on.

That sort of thing is just politics. But it also arises honorably from the liberal belief system. Liberals adhere to a belief system that says that conflict arises out of social injustice and oppression. Remove the injustice and you remove the violence. That is the meaning of Reverend Al Sharpton's war cry: "No justice, no peace."

Liberals apply this doctrine to everything except their culture war with conservatives. But of course, that conflict is the fault of conservatives for being racists, sexists, and homophobes.

So the United States needs to educate its governing elite, liberals, to reality from time to time. Or as Smokoe Joe, the charcoal-burner in the boy's adventure story Brendon Chase said: We need to "larn 'em."

Just as President Carter entered office complaining of our "inordinate fear of communism," so President Obama entered office promising a "reset" of US foreign policy, an emphasis on "soft power" over crude neo-con "hard power."

The problem is that the American people expect its government to defend against enemies foreign and domestic. Whatever a Democratic president may enter office thinking, he finds sooner or later that reality and public opinion force him to fight communism or Islamic terrorism, or whatever the anti-American threat may be. So now President Obama has been forced to up the ante in Afghanistan and now, after the Christmas pantybomber, declare that:

"We are at war. We are at war against al Qaeda."

So that's all right. That has "larned" President Obama and taken care of our liberals friends on defense for the next generation.

Now we need to deal with our liberal friends on all the other things they know that aren't so.

I am thinking of health care, "affordable housing," education, regulation, environment, welfare, finance, monetary policy, public-private partnerships, excessive government pay, and so on.

Hey, we can't solve everything in one year.

Dems to Link GOP to Palin and Tea Party

Yes. You read it right. According to Patrik Jonsson the Democrats are planning to campaign against the GOP by linking candidates to Sarah Palin and the Tea Party movement.

Democrats are aiming to vilify the rising Tea Party movement as woefully old-school and out of touch. “Labeling their GOP candidates as being part of the Sarah Palin or Tea Party wing of the GOP will be the key element” of Democratic attacks in 2010, writes John Fund in The Wall Street Journal.

Old school? Out of touch? Democrats are planning to say that a brand-new grass-roots populist movement is old and out of touch? What are they smoking? Sounds like it's the Democrats that are out of touch, calling plays out of a 30-year-old playbook.

Here's more:

“The Republican Party is trapped by their base, which is going increasingly conservative,” says Mr. Abramowitz [, political scientist from Emory University, Atlanta].

Actually, the Republican Party has to do some pretty fancy footwork to keep its base at home and also capitalize on the Tea Party movement. But you don't need me to tell you that.

The big problem for the Republican Tea Party is to turn around folks like Larry Elder's dentist. Larry took his 94-year-old dad to the dentist, and all of a sudden, the dentist wanted to talk politics.

"Sarah Palin, do you guys really like her?"

My dad's doctor asked me this a couple of weeks ago. His smile seemed to shout, "Are you guys crazy?" I had taken my 94-year-old Republican father to see him several times, but politics never came up.

Larry took the dentist through a long dialog in which he challenged all the Democratic talking points: that Palin's stupid, not prepared. And on through Joe Biden being on the wrong side of every issue for thirty year. And then to Bush actually being smarter than Al Gore and John Kerry according to their test scores.

Basically, the dentist was a Democrat and liked Democratic policy and politicians. Until it came to ObamaCare.

Dad's doctor suddenly turned into Mr. Hyde. He teed off on the government dictating how he should practice medicine. He predicted that costs would go up, not down. He predicted that quality would go down, not up. He talked about the importance of the profit incentive.

"Sarah Palin feels the same way you do."

Well, now. Do tell.

Roiling Political Currents

Are we having fun yet? This is a week when Democrat officeholders have been taking a look at the political winds and deciding not to run. As in Sen. Dodd (D-CT), Sen. Dorgan (D-ND), and Gov. Ritter (D-CO).

Then there are Dick Morris and Eileen McGann writing that the center-right Democrats are finished. Back in the Nineties it was the center-left Republicans that got wiped out. They voted with the center right and their constituents decided that they wanted real Democrats, not fake ones. Of course, some of the liberal Republicans, like Sen. Chafee of Rhode Island and Jeffords of Vermont, switched parties. But now it's the turn of center-right Democrats to face the music or switch.

Now that Ben Nelson, Blanche Lincoln, Mary Landrieu and Byron Dorgan in the Senate and the likes of Marion Berry, Tom Perriello and John Spratt Jr. in the House have shown how easily they fold under pressure and how thin their conservatism really is, their states and districts will no longer be deceived into re-electing them. They will be replaced by real Republicans.

The question is, of course, should the switchers go all the way and become Tea Pary members? David Brooks notes how the American people are turning against the "educated class."

Americans are moving away from the administration, not toward it...

The public is not only shifting from left to right. Every single idea associated with the educated class has grown more unpopular over the past year.

As in health care, cap-and-trade, abortion, gun control. You could call it the "tea party tendency." Of course, Brooks assures us, "I’m not a fan of this movement." No, darling, not really recherché enough.

Yep, things are on the march, but we don't know where they are heading.

This is exactly why I wanted Barack Obama to become president. I felt that once the American people got a taste of real Democratic government they would upchuck on the spot, just like they did in the Nineties when they got a taste of Bill Clinton in 1993-94.

The problem for the Democrats and the educated class is that they have been around running things for over half a century. Inevitably, over a period like that, a political elite gets really corrupt. And I don't just mean in a flagrant Chicago-politics way. I mean in a lazy self-dealing way.

Eventually, despite all the pretty words and the goodies given to them, the people turn against an entrenched elite, and the tea party movement looks like it symbolizes that turning for us in the 2010s.

How about a Republican Tea Party? Any takers?

Democrats Help the Rich

Although the Obama stimulus package was advertised as a way to keep unemployment under 8 percent it is pretty clear that, from the start, it was designed as a mammoth earmark program. Writes Mona Charen:

[U]nemployment has continued to climb since passage. That's not surprising when you consider that the overwhelming majority of funds (116,625 grants) have gone to governments, not the private sector (13,080 grants).

And, of course, Democratic districts have been getting twice the stimulus money that Republican districts have gotten.

But wait a minute. We've been getting reports recently that government workers earn more than private sector workers, on average, Federal workers are earning about 40 percent more than private sectors, and state and local workers are earning about 37 percent more.

So doesn't that mean that this government-centric stimulus is going to the rich?

Somewhere in these United States there is a politician that is planning to ride to victory on the injustice of government workers earning more than private sector workers. Just wait.

Obama's Grass Roots

Whatever happened to President Obama's grass-roots supporters? Weren't they supposed to be transforming politics? That's what Micah F. Shifry wonders at techPresident.com.

The answer is not what he wanted. The grass roots were never more than a means of ascent for the Obama campaign, to be used in the primaries and for fundraising, but not to be encouraged as an independent force in politics. Now that Obama's president the grass roots are nothing more than a nuisance, making it difficult for Obama to pivot towards the center.

Which means, of course that the wonders of the Obama grass roots were all along a media mirage. And what else could they be? The Obama phenomenon was always a personal campaign. The Obama grass roots mobilized to elect Obama. They were inspired from the top down by his vaporous agenda of hope and change, youthfulness and energy that was intended to contrast with the tired administration of Bush and its reincarnation in the aged John McCain.

But Obama was always an establishment candidate, never an insurgent. Remember? He came to national attention when he was invited to give a speech at the Democratic National Convention in 2004.

If you want a true insurgency, look no further than the Tea Party movement. It came out of nowhere, unbidden and unattached to any candidate.

In fact the Tea Party movement dramatizes the utter fatuity of the "community organizer" notion so popular on the left. The Tea Party is real people organizing themselves at the grass roots and reaching out to find others out there doing the same thing. It is messy and contentious. Nobody knows whether it will fold into the Republican Party or split the conservative vote by trying to organize as a third party.

The "community organizer" concept is a top-down wheeze of the left. It imagines communities of the oppressed waiting around to be organized by left-wing cadres and fashioned into a force for progressive politics. Think astroturf.

The point is, of course, that the Tea Party people are middle-class voters that are capable of self-organizing. They have the can-do skills and the middle-class culture that amazed Tocqueville back in the 1830s. Americans have always formed associations when they wanted to achieve a community purpose. The Obama grass roots are just unorganized liberals that were energized by the charisma of Obama and the Obama campaign to help Obama get elected.

If the Obama people did organize their grass roots into a political force, the new organization would probably do more harm than good. The problem that liberals have is that they are really different from the average moderate or independent and, as Rush Limbaugh says, they have to keep that quiet. The natural home of most independents is probably in the Republican Party. They can only be enticed into voting for Democrats if they are fed up with the Republicans and if you present them with a candidate that looks like a conservative.

Right now independents and moderates are finding out that voting for a moderate Democrat doesn't mean that you get moderate policies. When the chips are down those nice moderate Democrats vote the Pelosi or the Reid line. Voting for a Democrat, any Democrat, means voting for liberal policies.

Why would the Obama people try to flood the streets with energized liberals? When you are trying to persuade the American people that your liberal policies are really moderate, you want to keep your liberal grass roots quiet. They might let the cat out of the bag.

Repeal the Deal

There is still time, some say, to kill the health bill that has now passed the House and the Senate and needs to go through a conference process before passing out as a final bill for the president's signature.

But I wonder if that is the right strategy.

It seems that Democrats didn't get the right message from the failure of HillaryCare back in 1994. Back then we killed the bill and dealt the Democrats a severe defeat in the 1994 elections, and so President Clinton retreated to a policy of incremental change on health care. No longer would he propose the Democratic dream of universal health care run by the administrative state. Instead he would do it by inches.

But Democratic policy analysts went to work to come up with a new way of selling universal health care to the American people. ObamaCare is the result.

Democrats clearly believe that if they can just get something, anything past the finish line then they will have succeeded in passing landmark social welfare thata can never be repealed. That was how the Democrats understood their victory on Social Security, and that is how they understand their victory on Medicare. They believe that once they pass an act to put health care under the administrative control of government, there is no turning back.

The only way to change their minds is to do the unthinkable. We must mount a campaign to repeal a major piece of social legislation and carry it through to victory.

Let us understand what this means. It means that we must declare ObamaCare unjust and illegal. We must mount a campaign to repeal it. We must persuade the American people of the justice of our cause. We must elect legislators sworn to repeal ObamaCare, and then we must press our case until a Congress is elected that repeals ObamaCare and a president is elected who will sign the repeal.

There must be a decisive battle sooner or later on social welfare. The battle is necessary to decide the larger war, which is: Shall the United States achieve social cohesion by means of administrative government programs? Or shall it reject this model and try another model?

The history of the past century and a half has been the history of the growth of government programs to deliver social services like education, health care, pensions, and charity. The prime movers of these programs were not the working classes. All they ever wanted was more money. No. The driving force behind social legislation has been the progressive educated class.

The progressive educated class arose in the mid-19th century and by the turn of 20 century has coalesced around a program of government expansion. They believed that an unregulated private sector could not deliver the education and the protection from poverty that the people needed. They proposed a legislative program to deliver these services with government programs that they would lead and control.

Obviously this program of government expansion will continue until it is stopped. Obviously it will eventually stop. It cannot take over the whole economy, for it requires a healthy private sector to deliver the goods and services to finance its programs. At some point the expansion of government will end.

Either the era of government expansion will end in meltdown, or it will end in a decisive battle in which the ordinary people tell the progressive educated class that they don't want their administrative state.

Michael Barone wrote recently about a similar decisive battle that occurred in the past. It was the Kansas-Nebraska Act that Sen. Stephen Douglas (D-IL) shepherded through the Senate in 1854. He thought that his plan of deciding the issue of slavery state by state through "popular sovereignty" was a sensible plan that would end the conflict over slavery.

But he was wrong. The Kansas-Nebraska Act ignited a firestorm of rage in the North, and the Democrats lost 73 seats in the House in the 1854 elections (That would be like 140 seats lost today). Seven years later the states were at war.

Without the Kansas-Nebraska Act the anti-slavery North would not have been roused to political rage, and the Republican Party might not have been created to fight slavery. Perhaps there would have been no civil war.

Without the passage of ObamaCare we may not get the political rage that is needed to turn the tide of government expansion back and return once more to a nation of limited government.

We can only hope that the campaign to take back America from the progressive educated class does not end in civil war.