Yes, we can......until folks wake up.

Can the White House double the national debt in less than a year, while making meaningless comments about the need for fiscal discipline? Yes, we can...............

Can we quadruple the annual federal budget deficit after criticizing the previous Administration for running a budget deficit? Yes, we can.........

Can we increase the federal budget that goes just to pay the interest due on government indebtedness from a third of all revenue to half of all revenue? Yes, we can.....

Can we do all of this with no clear plan for how this spending will help the economy? Yes, we can....

Can we use the coercive power of government to force spending on projects that benefit our special interest group friends, political cronies, relatives, and those that we promised to give handouts to in exchange for their votes? Yes, we can....

Can we claim that this massive increase in spending and borrowing will create a net number of jobs, despite all the studies that have shown this has never happened before? Yes, we can....

Can we claim that this stimulus package will hold unemployment down to 8% and then blame the previous Administration when it hits 10% after the stimulus? Yes, we can....

Can we pretend that making negative comments about America will help us win friends among foreign leaders and governments that have been critical of the United States? Yes, we can....

Can we celebrate the fruits of victory in Iraq, won by military efforts that we consistently opposed? Yes, we can.....

Can we bail out auto companies by using government funds to subsidize grossly unproductive work practices in order to help our union friends that provide millions of dollars of political support to us every election cycle? Yes, we can.....

Can we frustrate labor reform and workplace democracy by supporting the end of secret union elections, since an overwhelming number of union elections in recent years, have voted down letting in the union bosses that we politically count on? Yes, we can.....

Can we suppress scientific opinion that challenges the assumption of a major human role in climate change, while claiming to put scientific inquiry back into a decisive role in decision-making? Yes, we can.....

Can we claim greater government openness and transparency, while we see that any Inspector Generals in government that find out bad things about our cronies get fired? Yes, we can.....

Can we make up stories about the health care problems, lie about how much it will cost for our plan, bait and switch on taxing employees private insurance benefits? Yes, we can.....

Can we do all of this without getting significant media criticism and having the major news outlets all over the Administration with negative stories? Yes, we can.....

Can we keep this up for more than a year before someone figures out the giant scam? No, we can't..... someone woke up!

Can we keep voters, who say that they are conservative twice as often as they say they are liberal, believing that we are not liberal hacks with an extreme Left agenda? No, we can't.... someone woke up!

Can we ignore the fact that our "stimulus" package has had no impact on jobs and will make things worse and worse over time as the bills have to be paid? No, we can't....someone woke up!

Can we keep a lid on criticism in the press by stage-managing press conferences, daily "talking points," and running 24/7 in campaign mode? No, we can't...someone woke up!

Can we keep a President in office for a second-term who can never displayed any leadership skills, balanced judgment, or maturity in decision-making? No, we can't.....

Can we keep a party in power that is only united around the notion of buying people's votes by offering them handouts paid for with other people's money? No, we can't.....


"You can fool all of the people some of the time and some of the people all of the time, but you can't fool all of the people all of the time." P.T. Barnum

Over-extension: How Obama Ended Up on Thin Ice

Merriam-Webster's Dictionary defined over-extended as "to extend or expand beyond a safe or reasonable point." The definition applies precisely and accurately to where Barrack Obama is now and the position into which he has financially put the country. Sustainability is ironically a favorite word of the President and many liberals, while the shelf life on their ascendancy to power seems to be starting to show an expire date.

Very basic parts of the Obama Presidency are distinctly minority positions, i.e. massive deficit spending, higher taxes, governmnet-sponsored health care, more cash for corporate bail-outs and take-overs, and the apologetic and tepid foreign policy. This is no surprise to many folks, including me, who have noted that Americans are consistently more conservative than liberal and have not embraced any "new majority" for a Leftist agenda. Gallup reiterated this point this month with a new poll showing the same ideological split. See also Pew Center , "Winds of Political Change Haven’t Shifted Public’s Ideology Balance" (November 2008 wrap-up polling).

Obama got elected by obscuring this point, labeling himself a "progressive" or even asserting that the old labels do not fit anymore. The media indulged this fiction, since most of the liberals involved have always said that the only problem with the low popularity of liberalism was the weakness of its messengers. They finally felt they have a cover-person for liberalism, albeit sub rosa. A good part of the public was simply confused and so eager for a glib and "hipper" leader that they suppressed the little voice telling them that this was a real Leftie. Many conservative minded voters who were concerned about deficit spending, for example, voted for Obama. [Hard to visualize now, but Democrats had essentially drawn even with Republicans in pre-election polling for who would hold down taxes].

Of course, this fantasy world of alternate reality has to have a shelf life. We are now seeing moderate conservatives and independents backing off the Obama agenda in very large numbers. Among "likely voters" (an increasingly important polling demographic going into 2010) Obama now has a net disapproval rating. The June 2009 polls that consistently show disapproval of his policies are not evidence of any new shift in the public on the issues. Rather they are the emergence of the basic policies preferences that were obscured by the Democrats with the more than willing help of the media.

The slickness of the campaign of Barrack Obama and the media savvy is continues to display will also be recorded in history as its fundamental weakness in my opinion. Self-criticism and deeper policy reflection gave way from the beginning to sound-bites and imagery. Shockingly upon coming into office, it now appears that there was absolutely no stimulus plan in the Obama campaign and transition team.... the critical issue of the period was "out-sourced" to party hacks on Capitol Hill, whose "stimulus" was more like a pay-off to local constituents and special interest groups to attempt to cement long-term support. This point was dramatically illustrated in a TV interview of Steny Hoyer, House Whip, who when pressed on why the stimulus bill would really create jobs, just said that "we had to do something" and that "we hope it works." [If public works spending was a ticket to economic growth, FDR would have got us out of the depression before the war started, Japan in the 1990s would have recovered five years earlier, and North Korea and Belarus would be the economic giants in the world].

The long delays in getting serious financial proposals together, the insane number of speeches and press conferences, the TV celebrity infatuation, the aggressive use of political muscle on opponents (Chrysler, Walpin, etc.).... all these points are elements of the triumph of the pursuit of power over the pursuit of effective policy. The systemic lack of a functioning intra-Democratic mechanism to clear proposals, run traps, and fashion effective policy is coupled with a complete unwillingness to let the normal pluralistic system do that job. Compromise is only done where it may be necessary to get the result sought, not due to any innate need to adjust policies to reflect substantive changes warranted on the merits.

Similarly, the lack of real independent press criticism from the mainstream media has allowed very foolish and superficial items to pass through the process, i.e. stimulus bill, GM bail-out, and others. The asset in the campaign, the co-option of the press, actually has become a liability, since it removes another protection of the Administration from its own excesses and mistakes.

The above factors have taken us to the moment of truth for the Obama Administration. The counter-productive big-spending plans are now even described by the Associated Press as "turning out to have the opposite effect." [AP, June 6, 2009, describing the housing market]. The Congressional Budget Office pointed out before the Congressional vote that the stimulus would have a long-term negative impact on GDP. So, if there is a modest recovery occurring, it is doing so despite the Government's efforts. It is unlikely that the unemployment situation which is a lagging indicator, will hit much positive territory until after the 2010 election. It is also clear that additional taxes of some sort will be required to keep up the spending and borrowing pace (since we are hitting the limits of the bond market to take federal paper). Both will be a disaster for Democrats in 2010 (especially since the public never voted for the deficit spending and other liberal policy initatives). This is not a case of public-supported policies going bad and opinion shifting, but more like massive failure exposing a fundamental breach of public trust.

The whole nature of the Obama over-extension seems to foreshadow a very precipitous drop in polling numbers which has started in the last 60 days and is reflected in "likely voter" polls. The media has not, of course, given up, and there will be more New York Times, CBS and LA Times polls of the general public (with very dubious demographic weighting) intended to keep the bubble from breaking. Some liberals have also laid the groundwork for their post-mortem excuses by announcing that Obama is trying to do too much as once. This is, of course, delusional as well: it is more accurate to say that he is trying to do too much that the public never agreed with.

If the United States really went to a European-type system with a "head of state" that was a figurehead and real power in another leader (normally the Prime Minister) who did the heavy-lifting, Barrack Obama would be America's choice right now for a figurehead. But the President must govern, must make decisions, react to a hostile world, and submit budgets.

In some sense, Barrack Obama is not the first black United States President. Morgan Freeman was a U.S. President several times before Obama was elected....although he does seem to have more "gravitas."

Reality Bites...

During the campaign some of us said that Obama was a con artist, pretending to be post-partisan, but a thoroughly doctrinaire Democratic liberal. A guy who never bucked his party on a single issue. Now it appears he has no stomach at all to stand up to Democrats in Congress who have rushed through giant pork barrel spending bills one after the other in the name of economic recovery (without ever, yet addressing problems in banking and housing, where the crisis started).

We questioned his maturity and experience to be the leader of the free world. Remember when the President of France, Mr. Sarkozy,, suggested that Obama's position on Iran was too weak for the French to accept? Sarkozy described Obama's views as ‘utterly immature’ and comprised of ‘formulations empty of all content.’” Now the President of the United States stumbles on the protocol of a meeting with the Prime Miniser of the UK, looking like the state senator he was but a few years ago.

Remember when Obama promised to change our positions on terrorist detainees? Pull out of Iraq? Now it appears that he is not much different than Bush on the Iraq timetable and - while wanting to close Gitmo, his Administration has not abandoned a signel assertion of government powwer in terrorism cases. Not surprising, since the "Bush" positions were the traditional views of past Presidents from both parties.

Remember the criticism over the Republcians and the growing national debt? Now this guys have doubled it in 90 days, while ignoring the Congressional Buget Office analysis that this will depress not grow GDP over time.

Their credo is to never waste a good crisis and their actions seemed to be destined to prolong it.

But the reality of the situation remains. The stock market and financial centers have not responded well to any of the jive from Washington. The Democrats used their goodwill and political dominance to push through a bunch of junk spending without addressing seriously any economic issues. The enemies of our country are still out there and feeling a bit empowered as we start to reduce defense spending and seem destined to become the Jimmy Carter sequel.

The brillant public speaker appears to have been exposed by his continual reliance on a teleprompter for staff support on tough questions. Although is answers the questions seem almost flippant after-the-fact (i.e.the stock market going up and down).

The hard core radicial agenda of Obama's crwis emerging in the budget and the attack on busniess and the wealthy. His campaign remark about wanting to spread the wealth around seems to have been one of the only honest sound bites from him in the election.

The disorganized, infighting Republican Party seems, neverthless, destined to pick up a major number of Congressional seats and some governorships in 2010. No one seriously expects the economic news to have improved enough to avoid major second thoughts about this novice, extremist Chicago politician that finessed his way into the White House.

The fact that Obama seems to be in peterpetual campaign mode and uncomfortable with governing, not to mention appearing increasingly inept, should make everyone whovoted for him think twice.

SOMEONE PULLED THE CURTAIN BACK

In the Wizard of Oz, the visit to the Emerald City found Dorothy, her dog Toto, and other companions before the Mighty, All-Powerful Oz. The uncooperative little dog pulled back the curtain from near the huge stage to reveal an elderly man running the mechanical controls to create the illusion of the intimidating Oz.

Just days into office, the curtain seems to have been pulled on Barrack Obama. An unlikely candidate for President, with just 120 days in the US Senate as experience, thrust into an electoral lead by economic events caused by his own party (CRI and federal buy-ups of mortgage paper), Obama has made his first policy push to be the "stimulus package." This package largely came from Obama's party in Congress, eager to start public hand-outs to improve their own political fortunes with constituencies ready for more pork. To those that follow it, what was missing was a really detailed analysis of where stimulus might be effective in the short run and how much it would cost in the long-term. Democrats at all levels saw an opportunity to resurrect spending plans rejected ore postponed in the past by labeling them "stimuli."

To stand up to the Democrats' worst instincts and to work on a consensus to get Republican votes, Obama would have needed to display his hyped "post-partisanship" and to demonstrate that he could stand up to his own party loyalists. Since he has never done either thing in his entire, short career, it is not surprising that we failed to see this skill and determination "in the pinch." Americans instead have seen a "dandy" with no vision to solve the nation's problems other than some cliches and the vain belief in his own near-divinity.

The more the public learns of the stimulus package, the more opposition there is. If the vote is delayed longer, the support seems destined to erode into a island of hard-core big government support from the folks in big cities and their politicians, the last islands of Liberalism in America.

The truly unsettling part of these developments is that this problem was no surprise. It was not a sudden event that may have overtaken an Administration still getting organized. The economic crisis elected Obama and months have passed while he soothed voters with cliches, while apparently doing little behind the scenes to assess the problem or solutions. Two sectors obviously leading the downturn are housing and banking, which - of course- seemed to be ignored entirely in the "stimulus package."

Like Herbert Hoover, whose first reaction to the Depression was to dramatically increase public works spending, Barrack Obama decided that the solution was to unlease his Democratic colleagues "wish-list" for government pork and spending programs and wrap the package in a ribbon that said "economic stimulus." The result is not amenable to cure by amendment, like a lower fat diet of more government spending supported by unsustainable levels of public debt. Congress needs to start with the Republican bill and work out a compromise. Politically, this would require a skilled bipartisan leader experienced in legislative realities backed by a top team of experts with a handle on the solutions required. Unfortunately, neither element seems to be present in Washington right now.

Like the Wizard of Oz, Barrack Obama is getting exposed very early in office as the manipulative and artificial self-promoter that he is. Speeches filled with cliches, skillfully delivered via teleprompter, will not fix what ails us. The man that he pretended to be on television might have a chance, but we did not elect that guy...he does not really exist.

Republicans Figure It Out! No to big government boondoggle!

To my surprise, Republicans in the House found their voice....finally. They united with some Democrats who flipped to oppose the trillion dollar boondoggle bill.

Last year, before the financial woes, pork barrel was a bad name....now it is the answer to all of our problems if you believe the Left. Uh...excuse me the "post-partisan progressives" as they now want to be called.

The Heritage Foundation has an excellent article echoing my arguments of the futility of using public works spending to create jobs and economic growth. http://www.heritage.org/research/budget/bg2208.cfm

It might be helpful to remember that Hoover's first response to the Great Depression was to enormously increase federal public works spending. FDR picked this up with a fervor and nothing worked to reverse the problems for more than a decade. Good arguments can be made that economic polices of that era lengthened the depression.

Let's go to work creating new investment in long-term better paying jobs and real growth. Bring U.S. business taxes into line with the rest of the industrialized nations (we are the second highest taxer) and watch the private sector surge. It's the advice that the US (even the UN-UNCTAD) gives to emerging economies, which the Dems just cannot seem to apply at home.

INCREASING GOVERNMENT SPENDING ON INFRASTRUCTURE WILL NOT FIX THE ECONOMY

Randy M. Mott

To allay concerns that they are “tax and spend” liberals, for several years the American Left has referred to government spending on infrastructure or education as an “investment.” In a philosophical sense this is accurate, but it does not change the character or effects of such spending. The Obama Administration coming into office promising to create a massive number of new jobs by government spending programs. Historical data overwhelmingly supports the opposite conclusion, the net effect of government spending is neutral at best and more frequently negatively correlated to employment. While we can “hope” that this broad body of empirical research is wrong, that is unlikely to “change” the results for future spending plans. Another corollary to the liberal creed is that anything stimulating business investment is a “trickle-down” theory that does not work for the poor and middle class: a notion equally at odds with all empirical data. These twin myths remain part of the American liberal’s articles of faith and are evident in the incoming Administration’s pronouncements to date.(1)

The assumption of the Left that government spending can provide an alternative to private sector growth is largely a delusion. Government expenditures are all at the bottom of the list in terms of economic stimulation. Even labor intensive highway building has a dubious net effect on jobs. The money to do the government stuff has to come from the economy- parts of it actually profitable in fact. The overall benefit is negligible and often negative in terms of general economic effects. Even deficit spending must be funded by government bonds, which compete with private capital formation and divert money from the private sector.

“The insidious notion persists that government job creation actually generates an increase in employment. According to this view, if construction companies increase employment by 100,000 jobs due to a $3 billion government spending program to finance highway construction, then employment is 100,000 jobs ahead of what it might be in the absence of the program.” Why Government Can’t Create Jobs October 1993 by Mark Ahlseen, Associate Professor of Economics at King College. He points out that this view ignores the impact of taking the money from somewhere else to fund the highway building. [“Interestingly, from 1960 to 1988 there has been a positive, and statistically significant, correlation between public aid (as a percentage of GNP) and the unemployment rate. Conventional wisdom would have the public believe that as government “invests” in people the unemployment rate decreases.”]

Empirical studies generally find negligible or negative correlations between public works spending and employment. The Congressional Budget Office in 1998 reviewed multiple studies and found no significant job creation effects from Federal Government infrastructure spending in the numerous studies:

“This paper finds that increased federal spending on investment in infrastructure, education and training, and R&D is unlikely to have a perceptible positive effect on economic growth. That conclusion rests in part on the observation that many federal investments have little net economic benefit—either because they are selected for political or other noneconomic reasons or because they displace private-sector or state and local investments. Federal spending can also reduce growth under the following circumstances: when it displaces investment that is more productive; when it leads others to defer investments in the hope of getting federal funds; or when its full costs (including opportunity costs) exceed its benefits. Even federal investments that appear to be economically justified generally have moderate returns, and the supply of those productive investments is limited.” (2)

A 2003 economic study found no substantial positive impact on employment by increased public spending:

“...we studied the impact of public capital on employment in a variety of sectors including agriculture, manufacturing, mining, construction, transportation, wholesale trade, retail trade, finance, and services. In general, we found that public capital either has a negative effect on employment, or no effect at all under the preferred method of estimation that accounted for stationarity problems and simultaneity bias.... Our results indicate that there is no overwhelming evidence that supports the contention that public capital projects reduce the unemployment rate or increase employment for most of the sectors we studied...” (3)


The GAO study released in 1986 on an earlier highway spending “stimulus package” showed very limited net employment gains.(4) Most reports claiming “new jobs” created do not include an assessment of the net effect of the program:

“[T]here is substantial crowding out of private spending by government spending.…[P]ermanent changes in government spending lead to a negative wealth effect.” Shaghil Ahmed, “Temporary and Permanent Government Spending in an Open Economy,” Journal of Monetary Economics, Vol. 17, No. 2 (March 1986), pp. 197–224.

Public expenditures become increasingly ineffective macroeconomic tools after a percent of GDP is already reached: “This analysis validates the classical supply-side paradigm and shows that maximum productivity growth occurs when government expenditures represent about 20% of GDP.” E. A. Peden , “Productivity in the United States and Its Relationship to Government Activity: An Analysis of 57 Years, 1929–1986,” Public Choice, Vol. 69 (1991), pp. 153–173.

International studies in dozens of countries have shown a negative correlation between government expenditures and GDP growth.(5) Marcelo Soto, “Capital Flows and Growth in Developing Countries: Recent Empirical Evidence,” OECD Technical Paper 160, Paris July 2000. An empirical study of data from 44 developing nations for the period 1986-1997 showed higher government consumption has reduced GNP growth. Some government spending in emerging economies may enhance growth to a point, but the level is only what is needed for basic services, roads, schools, etc. Many studies showed that a curve exists where a point is reached that government spending increases actually cause major negative economic impacts. The Japanese experiment in massive infrastructure government spending in the 1990s helped to cause a slippage in GDP, as should have been expected from the previous economic studies at the time. Similarly, the American economy remained depressed for years under FDR despite massive new public works spending.(6) We certainly cannot claim ignorance of the data at this point.

When the United States and other industrial nations advise emerging economies with bloated public sectors and high tax rates, they always advise to reduce government spending and lower taxes to create sustainable growth. We are advising others, we understand implicitly the value of capital formation and business investment.(7) Many of us just seem to lose objectivity when it is our own businesses that we are talking about. If public works spending created wealth and prosperity, then Belarus, North Korea and Cuba would be the leading world economies.

The old Keynesian idea that "demand" simulation via public transfer payments was an effective tool for long-term economic growth has been soundly refuted. Even Keynes at the time argued it was only a temporary solution for periods of economic downturns. But now we know that the basic math is wrong. (8)

While the United States continues to have the second highest effective tax rates on business in the industrialized world, the Liberal reaction to the crisis is to increase business taxes to pay for more handouts and bail-outs of unprofitable businesses. Thankfully, Obama may have “rendered inoperative” his campaign pledges to increase business taxes, but the idea of reducing those taxes to create investment and new jobs is still not on the plate. There are a legion of studies from all over the world that point to lowering business taxes as a successful and effective route to job creation and sustained growth. This is heresy to the Left and, despite all of the post-partisan charades, there do not appear to be any visible advocates of true growth and recovery policies in the incoming Administration.

So we will get massive pork-barrel spending that will cost the taxpayers hundreds of billions over the future years as we pay off the debt for this knee-jerk, ideological impulse. A year ago, politicians were making points in public by blasting at the same type of pork barrel projects. As the 2003 study concluded: “... we found that public capital projects either raise the unemployment rate in most cases [or have no net effect] ....” (9) The only thing that has changed is the public perception.... a year ago everyone wanted to cut pork barrel spending, now it is applauded as necessary by the Democrats. A more effective policy would be to assess where the economy can prudently get the most sustainable short-term stimulus at the lowest long-term costs, and that answer is not to increase public works spending.

______________________________________________________________
Footnotes:

1 On December 6th, the President-elect announced his plans for "the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s" as well as "the most sweeping effort to modernize and upgrade school buildings that this country has ever seen." Michael Lind writing in Salon capsulizes this liberal mantra: “public investment aimed at accelerating U.S. economic growth should be domestic reform priority No. 1.” This view is virtually unanimous among the liberals. Louis Uchitelle, “A Trap in Obama’s Spending Plan,” NYT, December 21, 2008: “Mr. Obama’s expenditures will no doubt generate jobs and wages in the construction phase.”

2 Congressional Budget Office, The Economic Effects of Federal Spending on Infrastructure and Other Investments, June 1998, at www.cbo.gov/ftpdocs/6xx/doc601/fedspend.pdf (March 26, 2008).

3 Raymond G. Batina (Professor, Washington State University), Dr. James Feehan (Professor, Memorial University), Dr. Christopher N. Annala (Assistant Professor, State University of New York - Geneseo). "The Impact of Public Inputs on the Private Economy" 2003.

4 U.S. General Accounting Office, Emergency Jobs Act of 1983: Funds Spent Slowly, Few Jobs Created, GAO/HRD–87–1, December 1986, at http://archive.gao.gov/f0102/132063.pdf (March 26, 2008)[GAO emphasizes the delay in the spending, but the net effect was in the end small].

5 “Beginning in 1991-1992, Japan adopted the spending approach now advocated by many in the U.S. Congress when it embarked on a massive nationwide program of infrastructure investment. Between 1992 and 2000, Japan implemented 10 separate spending stimulus packages in which public infrastructure investment was a major component.” Ronald D. Utt, Ph.D. Heritage Foundation, “Learning from Japan: Infrastructure Spending Won't Boost the Economy,” December 16, 2008. The effects in Japan were the opposite of their intentions: “the relative prosper­ity of the Japanese has been on the decline as gov­ernment spending has advanced. After peaking at 86 percent of U.S. income in 1991 and 1992, Japanese income continually fell behind the U.S.” Id. Keiichiro Kobayashi, with the Japanese Research Institute for Economy, Trade & Industry, noted: “Fiscal policies [in Japan] are based on Keynesian economics. When goods do not sell because of recession, the harmful influence of the recession can be eased if the government buys goods by increasing public works. In addition, if the government's purchases are very large, they can "prime the pump" and invigorate the private-sector economy. Such was the way of thinking that formed the foundation of Japan's measures for dealing with recession. Based on this "pump-priming" theory, fiscal expenditures should have brought about sufficient results after just one or two stimulus packages. In fact, policymakers who were in charge of economic stimulus steps immediately after the collapse of the bubble also said they thought, "Only one or two injections of fiscal outlays would be needed. However, in reality, we saw time and again that once the effects of the fiscal stimulus had worn off, the economy swiftly decelerated. In the end, the government had no choice but to continue providing fiscal stimulus practically every year. Such a situation clearly runs counter to the assumptions of Keynesian economics. Under the textbook assumptions, the economy should recover on its own once the pump is primed.” This did not happened, he notes. www.rieti.go.jp/en/papers/contribution/kobayashi/08.html

6 “Nearly a decade of then-unprecedented increases in federal spending on public relief and public works projects never managed during the Depression to lower the unemployment rate into single digits or restore our gross domestic product to the level it had achieved in 1929.” William F. Shughart II, prof. of economics, University of Mississippi, “'New New Deal' likely ineffective, wasteful,” Honolulu Advertiser, January 4, 2009.

7 As the Tax Foundation web site argues: “Recent research has focused on the lower corporate tax rates enacted by OECD nations over the past two decades to explore the link between corporate taxes and wages. This research has found that wage rates have gone up the most in countries with the largest reduction in corporate taxes. This finding is important because is tells a story whereby the corporate tax is borne by workers, through lower real wages, rather than by owners of capital. The intuition is simple: a tax will generally be borne by the input that is the least mobile. In today's world economy, capital flows freely across borders, while labor does. Thus, the corporate tax lowers workers' real wages relative to where they would be set otherwise.”

8 Increases in federal spending were the initial reaction of the Hoover Administration to the Great Depression and they did not work: “After the stock market collapse in 1929, the Hoover Administration increased federal spending by 47 percent over the following three years. As a result, federal spending increased from 3.4 percent of GDP in 1930 to 6.9 percent in 1932 and reached 9.8 percent by 1940.” Ronald D. Utt, Ph.D. Heritage Foundation, “Learning from Japan: Infrastructure Spending Won't Boost the Economy,” December 16, 2008.

9 Batina et al., supra, "The Impact of Public Inputs on the Private Economy" 2003.

The 2008 Election moves into Familiar Territory

If you ever fired an M-16 you can see that Governor Palin seems to know what shes doing by the picture alone. See her leading arm flexed and tight pulling the weapon into her shoulder and her right arm relaxed on the trigger. This is not just a poise for the photographers, the woman knows how to shoot. Her history verifies this.

Governor Palin's authenicity on this and other issues is the mark of someone who has had a real life outside of politics. Senator McCain similarly has had an heroic life before politics.

Our forefathers envisioned that our political leaders would be citizens first and politicians second. James Madison assumed that Representatives would be "called for the most part from pursuits of a private nature and continued in appointment for a short period of office." David Walker, Comptroller General (head of GAO), observed correctly in a speech in 2006:

          ...the founders didn't believe in full-time politicians.
     After all, our first elected officials were citizen legislators who
     viewed elected office as a form of public service rather than a
     professional job or career. Most of them earned a living as farmers or
    businessmen. Today, many elected officials consider themselves
   "professional politicians," a concept that most of our founders and a
    number of Americans today would consider to be an "oxymoron."

As the election now enters the serious period where voters made the final decision, the 2008 campaign may mark a bold return to the anti-careerist theme of our founders. Both Barrack Obama and Joe Biden are professional politicians who have done almost nothing else in their lives. Obama's community organizing days with ACORN are now exposed as political activities for a radical organization in the main stream news mainly for its felonies. [Googel ACORN and felony!]. Professional politicians look for a issue or a byline that attracts voters, having already made a commitment to seek office they look for plausible justifications. Ted Kennedy likely never became President because in 1980 he could not answer an interviewer's question of why he wanted to be President. Often we see political themes developed soley for media impact, i.e. "hope" and "change" in the Obama campaign will go down as classic buzzwords devoid of content that allowed disaffected voters a chance to identify early-on with a campaign to elect an virtual unknown, until he was exposed as a very traditional liberal.

The "change" that most people want in 2008 is lower taxes, lower energy prices, and more economic growth. All of this being done in a country that can protect us and our allies around the world against new threats to our security. The feeling that politicians betrayed us is no where larger than in the Republican Party, where conservatives have been alienated by the big spending ways of the party that got into office on a smaller government theme. The Gingrich revolution of 1994 turned into the complacency of the last eight years. Republicans tolerated more spending to buy votes (the old Democratic formula) and were blind to abuses of their peers, not wanting to rock the boat. In 2008, it was impossible to find an establishment Republican that could draw voters to the ticket. The establishment had been discredited.

But simultaneous with this development, the underlying politics of the United States had not changed all that much. Self-identified conservatives still out-number self-identified liberals by two to one. All major polling groups verifiy this condition. TheDemocratic candidats themselves also implicitly acknowdge it when they refused to be labelled as a "liberal," knowing that it is a the kiss of death in an election. Now they use the code word "progressive" to try to signal to their base that they are okay and attempt to hide from other voters.

So two facts existed for Republicans in 2008. They needed to run as anti-establishment and they needed to mobilize the "base" - not just in the party, but among voters who identified more with conservative themes and rejected traditional American big government liberalism. It is clear - especially with hindsight - that Sarah Palin's selection on the ticket fit these two themes perfectly. The campaign for Republicans has bee revitalized by drawing on the basic strengths of Republicans, tapping the right-of-center nature of the electorate and runing against government as usual. In many ways, this is a return to the politics of Ronald Reagan, which were founded on the premise that politial leaders were temporary custodians of power facing a permanent government structure that needed reorganization to protect the rights of the public.

When I met one of the McCain campaign principals in the spring, I argued that we should not be so despondent about the election, that we only needed to reorient it to the left-right axis to make it competitive. That was not the prevalent theme of the McCain campaign at the time, when most talk was about how to get independents on board. The fundamental fact is that Republicans win when they remain true to the small government/strong defense/economic growth/good government formula. Democrats win when they obscure their liberalism for the Bill Clinton "third way" for example or the Obama "change" theme.

The outcome this year is still uncertain. But the return to the conservative ideals and government reform themes of our Reagan roots has created an opportunity for victory where none existed before. That victory will be won if we successfully align the election on the classic left/right axis and do not let "progressives" get by with voters as anything but the old "liberals" with the same agenda. We are winning the debate on national security and the need for a strong America in a hostile world. Our candidate was right on Iraq when most others were wrong (including Bush and Rumsfeld trying to win "on the cheap"). With the strongest economy in the G-7 and the highest recent GDP growth in the G-7, we are faring better than most to the spike in energy prices. And more importantly, it should be made clear that our biggest economic woe is energy prices and that the solution is "all of the above" not the liberal's knee jerk ideological answers.