Supreme Confidence

In a 5 - 4 decision, the Supreme Court of the United States (SCOTUS) allowed Obamacare to stand with a few provisos. John Roberts joined the liberal wing of the court to affirm that Obamacare is indeed constitutional. The decision was a good one for reasons that I'll outline at bit later.

The five justices correctly noted that the President's healthcare legislation is a tax rather than mandate. Since the President's own lawyers made exactly that argument, I suspect that he'll embrace the idea (or maybe he won't, we'll see). Unfortunately, the healthcare tax is very large and is levied primarily on the middle and lower middle class, but no matter, the law stands. In the Presdient's world, "social justice" trumps an increased burden on working people every time. The justices also modified the law's insistence that states take on an increasing burden of medicaid costs.

I believe that the decision was just and appropriate for the following reasons:

• In general, the Court should not negate major legislation unless massive constitutional problems exist. In this case, the Obamacare mandate was unconstitutional, but relabeling it for what it actually was—a tax—solved that problem. The President was dishonest when he tried to sell his legislation, refusing to suggest that it levied a tax on middle and lower middle class people. The Court corrected him.
• Because the liberal wing of the court prevailed, it will be difficult for either the President or his supporters to vilify SCOTUS. This morning, before the ruling was announced, Michael Tomasky wrote this about the court:

  ... they are politicians in robes (with the partial exception of Kennedy); as such, I believe that they will behave here like politicians, and they will render the decision that will inflict the maximum possible political damage on Obama and the Democrats.

  I suspect that hundreds of other Left-leaning pundits effectively had the same words written and ready for publication. Now that the Liberal wing of SCOTUS prevailed, I doubt we'll read much about the court "inflict[ing] the maximum possible political damage on Obama."
• Obamacare is now in play for the 2012 election. The American people must decide whether this legislation is a wonderful accomplishment that will save money, provide quality healthcare to all, and reduce the deficit or (to quote my last post)whether it's "poorly constructed, unclear, exorbitantly expensive, and as partisan as any major legislation passed in the last 70 years." This decision will occur at the polling place—as it should.

SCOTUS got it exactly right today. It's now up to the electorate to determine whether Obamacare will survive. A vote for Barack Obama will ensure that outcome. A vote for Mitt Romney will result in repeal of Obamacare and its replacement by a more modest but considerably more cost-effective and appropriate set of healthcare solutions.

SCOTUS

Extremists of both the Right and the Left hate the Supreme Court (SCOTUS) when it rules positively on an issue they disagree with, and love SCOTUS when it upholds an issue that they embrace. That's how ideology warps perception. On Thursday, ideologically warped perception will be in full swing as SCOTUS rules on the constitutionality of major provisions within Obamacare.

In 2009-10, the President and his supporters created and then rammed through a health care plan that was poorly constructed, unclear, exorbitantly expensive, and as partisan as any major legislation passed in the last 70 years. But that is not what SCOTUS is looking at. Its focus is narrow are well-defined—does the so-called "mandate" violate the commerce clause of the constitution?

If SCOTUS rules against Obamacare, heads on the political Left will explode. You'll hear accusations of right wing bias and strident laments of the "right-wing political activism" on the Roberts' court.

Jonathan Adler comments on the activism of the Roberts court:

The problem with these characterizations of the court is that if by “judicial activism” one means a willingness to overturn precedents and invalidate federal laws, the Roberts Court is the least activist court of the post-war period. As a recent NYT analysis showed, thus far the Roberts Court has overturned prior precedents and invalidates federal at a significantly lower rate than its predecessors. Further, many of the Court’s most “activist” decisions, so-defined, have moved the law in a more liberal direction (see, e.g., Boumediene, Kennedy v.Louisiana) or were broadly supported First Amendment decisions (e.g. Stevens). This does not mean the Roberts Court’s decisions are correct and there are exceptions to every rule. Nor does the court’s past conduct necessarily predict the future. It does, however, mean that when one looks at the Court’s overall behavior (and not at a single case) it is inaccurate to say that this Court is particularly “activist” in moving the law in a conservative direction by overturning precedents and invalidating federal laws.

Every supreme court interprets the constitution in a reasoned fashion. Although each of us may not agree with every decision, I think the court's rulings (whether from a liberal court like Earl Warren's, or a conservative court like John Roberts') are made with in good faith.

If Obamacare's provisions are struck down, I suspect that the President's strategy will be to change the subject. Rather than recognizing the he and his supporters over-reached, and as a consequence, created major legislation that was constitutionally sloppy, he'll do what he does best—change the subject. Instead of having the grace to accept SCOTUS's decision (should they rule against him) and reach out to his opposition to create a more acceptable health car law, Barack Obama and his surrogates will campaign against the court.

In my view, calling the court's ethics and intent into question is unbecoming of a President who promised a different kind of politics. It is despicable and divisive, but it will come as no surprise.

Locally Grown

We've heard so much talk about "fair share" from our President, I'd like to examine the subject once more, but from an entirely different perspective. Do local communities get their fair share of the tax dollars that flow into the federal government?

Is it fair that spending that affects local institutions—e.g., schools, emergency responders, social welfare programs) is controlled by a far away bureaucracy? Is it fair that local citizens and politicians, who have the best handle on the specific needs and requirements of a town or city, become slaves to the largess (or lack thereof) of a federal government that is thousands of miles away awith priorities that often do not match the priorities of a local community? Is it far that decision making is so far removed (culturally and economically) from the needs of the local community? Is it fair that national lobby groups have so much control over both legislation and spending that affects small towns and cities that have any political clout?

Maybe it's time for communities to tax and spend their fair share before those dollars are extracted from their citizens by the feds.

Over the past one hundred years, the distribution of government spending has changed dramatically.

Leo Linbeck illustrates with the following bar graph:

It's time for local communities to regain control of the dollars that flow out of them and into the cesspool that is Washington politics. Federal bureaucrats and politicians extract "vigorish" from every tax dollar they collect. They redistribute your money to their pet projects. They spend inefficiently. They waste money in mind-boggling ways before returning a small percentage of those dollars to your community.

The Left is fond of promoting "locally grown" food. Maybe it's time for them to stop their support of big government and promote locally grown spending for those priorities that are locally required. Tax locally, spend locally while at the same time shrinking federal spending by a commensurate amount. It will save money. It will allow communities to control their own destiny. It has a nice ring to it.

Very Bad Outcomes

The Obama White House was very, very quick to publicly condemn Israel when it approved (but did not yet build) an apartment complex in East Jerusalem, a suburb of the country's capital city. The foreign policy amateurs at the White House made a naive effort to appear even-handed, when in fact, they dissed our only ally in the Middle East. SOP for a President who now makes the fatuous claims (in an election year) that he has been the most pro-Israel executive ever.

Today, the The Times of Israel reports:

Gaza-based terrorists fired 25 rockets into southern Israel on Saturday, causing damage to a school and factory. The latest attacks bring the total number of rockets and other projectiles fired from the Strip to approximately 150 over the past six days.

And the President's response? Crickets ... not a word of condemnation for Hamas.

At the same time, those on the left who waxed poetic about the Twitter-organized, Facebook-driven change that was Egypt's "liberal, secular revolution," now face the harsh reality that those of us who were a bit more cynical about the "Arab Spring" predicted. Aljeezera reports:

The Muslim Brotherhood's Mohammed Morsi has officially won Egypt's presidential election and will be the country's next president, the electoral commission has announced.

Morsi picked up 13.2 million votes out of just over 26 million, giving him about 51 per cent of the vote. His competitor, Ahmed Shafiq, the final prime minister under Hosni Mubarak, received 12.3 million. More than 800,000 ballots were invalidated.

Morsi has already begun his violent anti-Israel rhetoric, suggesting that the 30 year peace treaty bettween Egypt and Israel is in tatters.

Presdient Obama was quick to suggest that Hozni Mubarrak, Egypt's pro-American dictator, should go, but he never seemed to consider the consequences. Typical for the foreign policy amateurs at the White House.

Caroline Glick provides background:

The Brotherhood kept a very low profile in the mass demonstrations in Tahrir Square in January and February 2011 that led to the overthrow of then-president Hosni Mubarak. The Brotherhood's absence from Tahrir Square at that time is what enabled Westerners to fall in love with the Egyptian revolution.

Those demonstrations led to the impression, widespread in the US, that Mubarak's successors would be secular Facebook democrats. The role that Google's young Egyptian executive Wael Gonim played in organizing the demonstrations was reported expansively. His participation in the anti-regime protests - as well as his brief incarceration - was seen as proof that the next Egyptian regime would be indistinguishable from Generation X and Y Americans and Europeans.

The President's naive support of the revolution never seemed to consider a bad outcome. That is what has come to pass. A very, bad outcome.
But then again, the President's incompetent foreign policy in the Middle East seems to be designed to lead to very bad outcomes. Sad, and dangerous.

Re-Frame

As the Presidential election grinds on, the Obama campaign tries desperately to follow the advice of a good defense attorney—when your client is guilty, change the subject. Over the past two months the President and his supporters have desperately tried to "frame" the election in terms of Mitt Romney's character—he's "out of touch," he's too "rich," he can't fix the economy, his private sector experience is no indication of his leadership ability (as if a background as a community organizer was a key indicator of a successful presidency). In still another attempt at framing, the President plays the victim. His abject failure to address key economic issues isn't his fault, he's the victim of circumstance, of foreign "head winds," of the meany GOP who won't let him get anything done, of ... well, anything that will absolve him of responsibility. Polls indicate that neither of these "frames" have worked particularly well.

You'd think that the President would try to re-frame his own position, suggesting a restructuring of entitlements, serious modifications and simplifications of the tax code, a significant real reduction in government spending. You'd think he'd propose a budget that was not voted down 99-0 by a Democrat-controlled senate. But no — Barack Obama is an ideologue, incapable of modifying an ineffective strategy and unwilling to learn from his own mistakes. He continues to suggest that we need to tax more and spend more — a clear recipe for disaster.

Investor's Business Daily looks at the efficacy of the President's economic recipe from a historical perspective. They quote from a study recently published by the National Bureau of Economic Research. The study examines "26 episodes in advanced economies since the early 1800s where gross public debt levels exceeded 90% of GDP for at least five years." Here's what they found:

When countries run debt levels that high, average growth rate is significantly below low-debt years — 2.3% on average vs. 3.5%.

Worse, the study also found that once countries run debt up to that level, it can take years, if not decades, to bring it back down. In fact, 20 of those high-debt episodes lasted more than a decade, and the average duration was 23 years.

Combine the two, and what you get is "a massive cumulative output loss," according to the study's authors.

Where does that leave the U.S.? Thanks to Obama's fiscal policies, the U.S. gross public debt is now more than 100% of GDP. And, according to the Congressional Budget Office, under current policies there's no end in sight.

The President and his supporters would prefer to emphasize the fact that Ann Romney rides a horse or that Mitt Romney is uncool.

The President can run, but at the end of the day, he can't hide from his own abysmal economic record. He can try to re-frame the discussion, but he will fail. The economy and the country's economic health are on the line, and nobody gives a damn about whether his opponent's wife rides a horse.

Shared Misery

A common phrase among President Obama's spokespeople is that "there's no need to relitigate the past" but rather look "forward" to the future. They follow that comment by suggesting (as Bill Clinton did yesterday) that Mitt Romney's fiscally conservative approach to government spending would be "calamitous" for the country. That begs two questions.

First, if future austerity measures will be calamitous, how should we describe the profligate spending (by both Democrats and Republicans) over the past five decades? Government spending, coupled with loose control over financial institutions and unintended side effects associated with the desire for everyone to own a home lead to the worst financial crash since the Great Depression. Following the crash, feckless attempts by the Obama administration to properly establish mechanisms for creating jobs in the private sector, led to the worst economic recovery in history. I think that "calamitous" might properly be applied to President Obama's record.

Second, why is it that the President's record over the past 3.5 years doesn't matter? Investors Business Daily provides a sad litany of the results of what they call "Obamanomics:"

• The share of Americans who've been out of work a long time — now at 42% of the unemployed — is the highest since the Great Depression (source: Labor Department).

• The proportion of the civilian working-age population actually working, at 58%, is the smallest since the Carter era (Labor Department).

• Growth in nonfarm payroll jobs since the recovery began in June 2009 is the slowest of any comparable recovery since World War II (Hoover Institution).

• The rate of new business startups — the engine of job growth — has plunged to an all-time low of 7.87% of all businesses (Census Bureau).

• 3 in 10 young adults can't find jobs and live with their parents, highest since the 1950s (Pew Research).

• 54% of bachelor's degree-holders under the age of 25 are jobless or underemployed, the highest share in decades (Northeastern University).

• Black teen unemployment, now at 37%, is near Depression-era highs (Labor Department).

• Almost 1 in 6 Americans are now poor — the highest ratio in 30 years — and the total number of poor, at 49.1 million, is the largest on record (Census).

• The share of Hispanics in poverty has topped that of blacks for the first time, 28.2% to 25.4% (Census).

• The number of Americans on food stamps — 45 million recipients, or 1 in 7 residents — also is the highest on record (Congressional Budget Office).

• Total government dependency — defined as the share of Americans receiving one or more federal benefit payments — is now at 47%, highest ever (Hoover).

• The share of Americans paying no income tax, at 49.5%, is the highest ever (Heritage Foundation, IRS).

• The national homeownership rate, now at 65.4%, is the lowest in 15 years (Census).

• The 30-point gap between black and white Americans who own their own homes is the widest in two decades and one of the widest on record (Census).

• Federal spending, now at 23.4% of GDP, is the highest since WWII (CBO).

• Excluding defense and interest payments, spending is the highest in American history, at 17.6% of the economy (First Trust Economics).

• The federal debt, at 69% of GDP, is the highest since just after WWII (CBO).

• The U.S. budget deficit, now at 9.5% of the economy, is the highest since WWII (CBO).

• U.S. Treasury debt has been downgraded for the first time in history, meaning the U.S. government no longer ranks among risk-free borrowers (S&P).

The President and his supporters vilify "trick down economics" and argue that "the rich" should pay their fair share. Maybe. But as the editors of Investor's Business Daily note, what we're actually seeing as Obama's first term comes to an end is "... Fiscal promiscuity. Trickle-up poverty. [and] Shared misery."

Diversify

The first rule of investing is to diversify—invest your hard earned dollars across industry sectors (e.g., retail, healthcare, technology) and across a number of investment instruments—stocks, bonds, mutual funds, etc. In actuality, diversifying is just another way of saying that by placing investment bets on a number of different sectors, you reduce your risk substantially.

As I watch the Obama campaign's flailing attempts to demonize Mitt Romney for his leadership of Bain Capital, I can't help but think of the word diversify. First, criticism of the President's attacks on Romney have been diversified across local, state, and federal levels. More surprisingly, much of this diversified criticism has come from leading Democrats. Cory Booker, the Democratic Mayor of Newark, NJ gained national attention when he suggested that Obama's attacks on Bain were wrong-headed. Deval Patrick, Democratic Governor of Massachusetts, praised Bain's work. And just yesterday, William Jefferson Clinton, Democratic past-President of the United States said: ""I don't think we ought to get into a position where we say this [Bain's investments] is bad work,This is good work." He also called Romney's leadership "sterling."

That's an interesting diversification of criticism—all coming from prominent Democrats.

But there's also diversification at a more technical level. David H. Horiwitz comments:

Bain diversified itself by risking capital in a variety of industries and not going all in for any one sector. That way, its eggs are not all in one industry basket and it looks more like the overall economy.

In contrast, the administration’s attempts to invest in “green” technology, no matter what one’s views are about the efficacy of “green” technology, are a fool’s bet. Even were it able to discern winners from losers, the inevitability of bad investing in one sector should be apparent to all.

The problems for The One’s are threefold. First, he has made near-universally bad bets. Second, public entity investing possesses fundamental flaws. And third, the opportunity to make investments with politically connected business ventures has led to charges of corruption and cronyism.

Look around. Can anyone name a successful entity in which this administration has risked billions of dollars of taxpayer money? From Solyndra to LightSquared. All taxpayer money, none of it confined to only one failure and in technology whose merits none of us have any interest, expertise, and time to debate, other than for me to make the observation that Steven Chu’s fervent hope and desire that oil prices climbing much, much higher would be the first necessity for this business model to work in the real world without needing to be propped up by the government.

Barack Obama is blinded by his firm belief that big government can solve all problems. But worse, within this belief, his complete lack of experience in the private sector, coupled with his selection of advisors who share his inexperience and his ideology, have lead to numbingly bad decision-making. That's a conversation that we should all encourage as the campaign progresses.