January 17, 2010

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Jennifer Rubin blogs about Martha Coakley and Tuesday’s vote in Mass.

Just as I suggested this week, Democrats are now attempting, according to Byron York, to Creigh Deeds-ize Martha Coakley. If she is in fact tanking, now is the time to write her off as a damaged and enfeebled candidate, lest anyone suspect that this is a reflection on Democrats’ political liabilities. York suggests that Coakley’s own polls show her trailing by 5 points. So the buzzards are circling:

“This is a Creigh Deeds situation,” the Democrat says. “I don’t think it says that the Obama agenda is a problem. I think it says, 1) that she’s a terrible candidate, 2) that she ran a terrible campaign, 3) that the climate is difficult but she should have been able to overcome it, and 4) that Democrats beware — you better run good campaigns, or you’re going to lose.”

… Coakley may simply be in over her head, a woman of flawed judgment and limited political skills. In any other year, that might not be a barrier to election for a Democrat in a deep Blue State. But this is no ordinary year.

David Goldman, (AKA – Spengler) shows how small business economic indicators are still down in the recovery that isn’t. There is an excellent three dimensional graph here that shows the net job creation by firms in terms of age and size. The engine of job growth is the small start-up. Precisely the type of effort least likely to be encouraged by Obama’s hyper-government.

A month ago, when I debated Deutsche Bank’s chief economist on Larry Kudlow’s CNBC show, the consensus held that a rapid recovery in employment would ensue during 2010. This expectation crashed and burned with last Friday’s employment report for December, showing that more than 600,000 “discouraged workers” had left the labor force. Today we have an unexpected rise in initial claims for December on top of an unexpected drop in December retail sales. …

…A website called Shadow Government Statistics does a public service by un-adjusting the government’s data, for example, to include “discouraged” as well as “long-term discouraged” workers in the unemployment rolls. By that measure US unemployment is at 22 percent, an astonishing number. …

…What’s happening to small business today?

As I noted, the Discover Small Business Watch collapsed in November to an index level of 76 from 88, with 52% of respondents reporting cash flow constraints. Every other available measure of small business performance looks utterly miserable. …

In Forbes, Amity Schlaes describes government actions that prolonged the Great Depression.

…In researching the 1930s I found another picture. To be sure, the monetary problem, deflation, was a big hurdle, but there were three other factors postponing recovery.

–Taxation. President Hoover raised the top income tax rate from 25% to more than 60%. FDR increased taxes on the poor with levies on liquor and slammed the highest earners by moving the top income tax rate above 70% and eventually above 90%.

–Labor costs. Proto-Keynesians, the New Dealers told themselves that there was only an upside to higher wages: more purchasing power for the worker. The New Deal’s National Recovery Administration in 1933 and the Wagner Act of 1935 pushed wages up above the trend–for the century. The high price of labor meant that those who had jobs did well, which is what we’ve always heard about the period. But many people couldn’t get a job at all. As the 1937 Gershwin song put it: “Nice work if you can get it.”

–Executive discretion. FDR’s rule of “bold, persistent experimentation” gave him license to change the rules all the time, which he sometimes did on a daily basis. Since Roosevelt always thought in terms of politics–he was a political master–instead of economics, his discretionary moves did not always make economic sense.

The result was what came to be known as a “capital strike.” In 1937 William O’Neil, founder of General Tire & Rubber Co., described the supply side’s stoppage: “[The large capitalist] will not risk financing new ventures if the government’s take is greater than that of the average gambling house, and he knows he will never get it back. The small-time capitalist, who has stayed away from Wall Street and corporation finance, is on strike, too. He will not build the house that he needs.” …

We have Charles Krauthammer’s commentary on the effect of the Obami overreach.

…The health-care drive is the most important reason Obama has sunk to 46 percent. But this reflects something larger. In the end, what matters is not the persona but the agenda. In a country where politics is fought between the 40-yard lines, Obama has insisted on pushing hard for the 30. And the American people — disorganized and unled but nonetheless agitated and mobilized — have put up a stout defense somewhere just left of midfield. …

…Perhaps Obama thought he’d been sent to the White House to do just that. If so, he vastly over-read his mandate. His own electoral success — twinned with handy victories and large majorities in both houses of Congress — was a referendum on his predecessor’s governance and the post-Lehman financial collapse. It was not an endorsement of European-style social democracy.

Hence the resistance. Hence the fall. The system may not always work, but it does take its revenge.

In the Washington Examiner, Michael Barone contrasts the Tea partiers with the “educated” class.

…The educated class thinks that gun control can reduce crime. But over the last 15 years, crime rates have plummeted thanks to Giuliani-type police tactics and while 40 states have laws permitting law-abiding citizens to get licenses to carry concealed weapons.

“The educated class believes in global warming,” Brooks notes. But ordinary Americans have been noticing that temperatures have not been rising in the last decade as climate scientists’ models predicted, and they may have noticed those Climategate e-mails that show how climate scientists have been jiggering the statistics and suppressing opposing views.

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. …

Mark Steyn comments on the anti-Left political climate and Tuesday’s election in Massachusetts.

…”People once thought Obama could sound eloquent reading the phone book,” wrote Michael Gerson in The Washington Post last week. “Now, whatever the topic, it often sounds as though he is.” …

…For the most part, that’s just the ratchet effect of Big Government, growing, expanding, remorselessly, under cover of darkness. What happened this past year is that Obama and the Democratic Congress made it explicit, and did it in daylight. And, while Barack may be cool and stellar if you’re as gullible as “the educated class,” Nancy Pelosi and Ben Nelson most certainly aren’t: There’s no klieg light of celebrity to dazzle you from the very obvious reality that they’re spending your money way faster than you can afford and with no inclination to stop. …

…As Michael Barone observed, “the educated class” was dazzled by style, the knuckledragging morons are talking about substance. Just before the Senate’s health care vote, Obama, the silver-tongued orator, declared that we were “on the precipice” of historic reform. Indeed. On Tuesday, we’ll find out whether even Massachusetts is willing to follow him off the cliff.

In the WSJ, Patrick Caddell and Douglas E. Schoen are pollsters who have worked for Democrat presidents. They note Scott Rasmussen’s excellent record, and criticize the Obami attacks.

…The attacks on Rasmussen and Gallup follow an effort by the White House to wage war on Fox News and to brand it, as former White House Director of Communications Anita Dunn did, as “not a real news organization.” The move backfired; in time, other news organizations rallied around Fox News. But the message was clear: criticize the White House at your peril.

As pollsters for two Democratic presidents who served before Barack Obama, we view this unprecedented attempt to silence the media and to attack the credibility of unpopular polling as chilling to the free exercise of democracy.

This is more than just inside baseball. As practicing political consultants, both of us have seen that the established parties try to stifle dissent among their political advisers and consultants. The parties go out of their way to try to determine in advance what questions will be asked and what answers will be obtained to reinforce existing party messages. The thing most feared is independence, which is what Mr. Rasmussen brings. …

In Contentions, Abe Greenwald blogs about China’s response to Google’s decision to no longer participate in the Great Firewall of China. Greenwald has fun pointing to Tom Freidman’s obsequious odes to China.

Beijing is ready to say good-bye to Google. Wang Chen, China’s State Council Information Office minister, has responded to Google’s principled threat to pull out of China:

“Our country is at a crucial stage of reform and development, and this is a period of marked social conflicts … Properly guiding Internet opinion is a major measure for protecting Internet information security. Internet media must always make nurturing positive, progressive mainstream opinion an important duty. Currently, the Internet gives space for spreading rumours and issuing false information and other actions that diminish confidence, and this is causing serious damage to society and the public interest.”

…The truth is that Wang Chen’s statement tells you everything you need to know about China’s supposedly inevitable rise. Beijing doesn’t enjoy enough legitimacy to allow its citizens to hear dissenting opinions. Without the free flow of ideas, China’s citizens will, in turn, remain insufficient to the task of true innovation. Instead, government-backed quasi-corporations will continue to tinker with gadgets from the disco era — bullet trains and solar power. The world’s Tom Friedmans will continue to swoon. Important technological innovation will come, inevitably, in a form few if any have predicted — let alone ranted about for years in the New York Times. And when it comes, it will come from a part of the world where disagreement and tension give birth to genius, not information blockades.

The Streetwise Professor discusses the unsustainable growth in the Chinese economy.

Infamous short-seller and sometime SWP follower Jim Chanos is very bearish on China (H/T MJ).  Sayeth Chanos:

Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.

As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like “Dubai times 1,000 — or worse,” he frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.

“Bubbles are best identified by credit excesses, not valuation excesses,” he said in a recent appearance on CNBC. “And there’s no bigger credit excess than in China.” He is planning a speech later this month at the University of Oxford to drive home his point.

…What I find hard to understand is why so many investors and commentators seem to have bought into the China growth story hook, line, and sinker.  I don’t expect everybody to be as skeptical as I am, or as Chanos is.  But one would think that in the aftermath of a major economic contraction which plausibly resulted from an overly expansive monetary policy and various institutional factors that directed most of the ballooning credit to the real estate sector, the China boosters would at least pause to ask whether the same might be occurring in China.  Or to question the reported growth, that always miraculously hits official targets, much in the same way as Enron’s earnings always miraculously came in as expected, with metronomic regularity. …

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