Debate is Over: Obamanomics Did Not Succeed

Memo to the establishment media: The jobs crisis is not over.

After six dispiriting years the political-media establishment is campaigning furiously to improve public perception of President Obama’s progressive, big government economic theories.  The President even invented a new slogan, “middle class economics.”  The campaign assertions are that the economy in general and employment specifically have come back, proving that the President’s progressive theories, re-branded as middle class economics “worked.” Arc-of-participation-to-Jan-15

Our previous article used the government’s own GDP statistics to debunk the economy part of the ObamaNomics-worked myth.  Today, we look at the unemployment rate, down from a peak of 10% to 5.7%, and continuously offered up as proof of Obama and Democrat party success. 

Each month the Labor Department compiles and publishes six statistics:

  1. Total working age population
  2. Total employed
  3. Total unemployed.  Jobless people are not classified as “unemployed” unless they are actively searching for jobs.
  4. Labor Force: the sum of employed and unemployed.  Jobless people who have not actively sought employment in recent weeks are not counted as unemployed and thus not included in the labor force total.
  5. Unemployment rate: Percentage of the labor force that is unemployed
  6. Labor force participation rate: percentage of the working age population that is counted as in the labor force.

In every previous post-recession recovery of the past 70 years the unemployment rate has declined when when people who had lost jobs due to recession became reemployed.  But the Obama post-recession recovery is radically different.  For the first time since government began publishing the above statistics:

  • The labor force participation rate has declined continuously for four years, and
  • The unemployment rate has declined not because unemployed people found jobs, but because millions who are discouraged and don’t look for work very often have been reclassified from unemployed to “out of the labor force.”

President Obama roared into office in 2009 with commanding Democratic majorities in both the House and Senate.  The first order of business was a record shattering increase in government borrowing and spending called “stimulus.” 

The promises made to gain public support for the stimulus were clear and extravagant.  By funding “shovel ready jobs” the government would, in the President’s words, “immediately jumpstart job creation and long term growth.”  That “jumpstart” was to happen immediately, not six years later.  President Bush and the Republicans would be blamed for the recession, President Obama would get the credit for a bounce back to full employment, and Democrats would reign for a thousand years.

Since all recessions end, with or without government intervention, predicting an end to “the Bush recession” didn’t require any particular economic insight.  June 2009 turned out to be the last month of the recession.  The labor force participation rate was 65.7% and the unemployment rate was 9.5%. 

But the predicted resurgence of prosperity and full employment did not happen.  Since June 2009 the working age population has grown by just over 14 million.  But the labor force has grown by only 2.5 million or 17.5%.

If today’s labor force participation rate were still the same as when the recession ended 66 months ago the January 2015 unemployment rate would have been 9.7%.  The jobs crisis is not over.  It has only been masked by deceptive statistics.

 

Progressive Pitchmen Hawk Imaginary Recovery

President Obama, the Democrats and their faithful, media cheer leaders have recently begun a virtual victory parade, claiming that the American economy has come back, and therefore their economic theories, implemented by the Administration, have been validated and vindicated. They hope to rehabilitate what has been the decaying reputation ObamaNomics.  But an objective review of the results finds ObamaNomics a spectacular failure.

Most Americans remember when the President  roared into office in 2009 with commanding majorities in both the Senate and the House.  We remember that he used that power to enact a massive spending increase called the “stimulus” – on top of a more modest spending increase already begun under President Bush – that he promised would “jumpstart job creation and economic growth.” 

The media excoriated Republicans as “wrong on the economy” for not joining the Democrat majority in voting for the stimulus.  The chart below compares the spending surge during the first two years of the 2008-09 recession with spending increases and decreases during each previous recession since World War II.  Spending-increases-10-recessions

The second chart shows what this record shattering surge in spending – entirely with borrowed money – bought, besides a stunning increase in government debt.GDP-to-2014-Q4

In 2009 the President and his supporters insisted that they “KNEW” that a spending surge would bring immediate results, that there were thousands of “shovel ready projects,” that America would quickly rebound from the recession into a new era of prosperity. 

They did not tell us to expect the weakest recovery ever recorded since the government began issuing quarterly GDP reports at the end of World War II.   The charts above show there is absolutely no correlation between an increase in government spending and subsequent economic growth.  If anything there is a negative correlation, evidence that increased spending retards growth.

Yet Democrats and media now claim the marginal improvement of the past few months is the big “comeback” we were promised.  This PR drive coincides with a modest upswing in Presidential opinion polls, probably due to increased oil production and the resulting drop in gasoline prices that he campaigned against and tried to prevent.

But Polls also show most Americans believe the economy is still unacceptably weak even though the recession ended sixty six months ago.  The Commerce Department just released it’s “advance estimate” of economic growth during the fourth quarter, ended December 31.  It confirms once again that Americans are justified in being skeptical.

Gross Domestic Product (GDP) grew at an annualized rate of 2.6% in the fourth quarter, about average for the past five years and not nearly enough to restore pre-recession employment and prosperity.

The American economy, while the most resilient in human history, struggles under the weight of decades of accumulated government intervention in the form of excessive regulation, taxation, and bureaucratic mandates, the most recent being Obamacare and the massive, Dodd-Frank financial regulation law.  These government intrusions into the private sector and the generally anti-business, anti-investment inclination of the Obama Administration discourage and deter entrepreneurs and investors, resulting in fewer of the business start-ups and expansions that create jobs and grow the economy.

America’s corporate tax code, the most confiscatory in the world, drives investment capital, the source of jobs and economic growth overseas.   Indeed, some American companies have had to “invert” or turn themselves into foreign corporations in order to facilitate investment in America!

Defenders of big government economic intervention say the current recovery is the weakest on record because the 2008-09 recession was deepest/worst on record.  But that isn’t consistent with the historical data.  The last time we suffered an exceptionally severe recession was 1981 when, like President Obama, President Reagan inherited an economy in crisis due primarily to huge losses and retrenchment in the financial sector.

Depending on which statistics one considers most important 1981 was either the worst or second worst recession on record.  Unlike Obama, Reagan faced historically high interest rates.  In 1982 Mortgage interest hit 15% compared to about 4.5% today. The prime rate, paid by the most credit worthy corporations was also in the teens, compared to about 3% today.  The unemployment rate spiked up to an even higher level in 1981 than in 2009.

Reagan’s approach was directly opposite Obama’s.  Instead of raising taxes and intensifying government interference in the private sector, Reagan deregulated and cut taxes. The chart above shows that at month 66 the Reagan economy had grown 30% vs 13% for the Obama economy.

Why Mitt Romney Never Quite Gets It Right

Apparently, Mitt Romney is testing the Presidential waters, considering a third run for the White House.  The media herd has stampeded to speculate on his chances and are largely supportive. The media always support so-called “moderate” Republicans – but only until they win the nomination.

Mitt Romney is a decent, generous human being and a successful investor and executive who built businesses and created thousands of jobs. 

But as a politician and especially as a candidate, his history is mixed at best. 

Romney ran for President in 2012 and suffered a humiliating loss of what should have been a winnable election.  President Obama’s much trumpeted “stimulus” and other economic interventions had utterly failed to keep his promise to “jumpstart job creation,” and had made the economy worse

  • The unemployment rate on election day was 7.7%, very high by historical standards;
  • Quarterly GDP reports marked the weakest post-recession recovery ever recorded;
  • Failure was expensive!  Eight days before the election the final report for the government’s 2012 fiscal year showed the Obama Administration’s fourth trillion dollar deficit.
  • The President’s major accomplishment, Obamacare, was (and still is) deeply unpopular.

How did Mitt Romney lose this election?  Two ways:

  • Lack of ideological clarity
  • Stupid campaign strategies that failed to inspire potential voters.

Consider his speech at CPAC six months before he won the GOP nomination, where he unveiled talking points he would repeat over and over on the campaign trail.  He began well enough, with stirring references to the Constitution and Declaration of Independence.  Here’s a sample:

Now is the time to reaffirm what it means to be Conservative.  The very heart of American Conservatism is the conviction that the principles embodied in the Constitution and the Declaration of Independence are uniquely powerful foundational and defining…

Good start.  Public education has abandoned serious instruction in the Constitution and Declaration of Independence, but millions of Americans have recently become familiar with them and are shocked by the gulf separating the government of limited powers chartered by the Constitution and the government of nearly unlimited power wielded by Barack Obama.

Eighteen minutes into a 26 minute speech Mr. Romney finally began to talk about his policy goals:

Today we borrow 40¢ of every dollar we spend.  This is unconscionable, immoral, and it will end in my Presidency.  I will approach every spending decision, every budget item with these questions: Can we afford it and if not is it really worth borrowing money from China to pay for it.

Romney hoped for emotional appeal with what seemed like bold and decisive criteria for sorting worthy from unworthy spending.   Unfortunately it was a trick.  It’s the same trick President Obama used in 2008 to win the support of millions of voters who are now appalled by his Presidency.

In the prologue to his second book Barack Obama wrote what would become the conceptual foundation of his Presidential campaign:

“…I am new enough on the national political scene that I serve as a blank screen on which people of vastly different political stripes project their own views.”

Candidate Obama went on to exploit his blank screen concept with promises of unspecified “change!”  Thus, Millions projected their own views onto his blank screen and then voted for those views without realizing Obama had not disclosed his views or his plans for controlling our lives from Washington.

The Romney version of the trick was intended to pick up votes from people who didn’t realize their list of government spending programs to cut came not from Romney, but from inside their own heads.

Romney’s criteria, if actually applied, was meaningless and would have maintained the spending status quo.  Each of the hundreds of federal programs has a lobbyist, a constituency of dependents, and friends in Congress who will summon up compelling, emotion-driven reasons why it’s critical to our nation’s future.

Since he began his speech referring to the The Founders vision, as expressed in the Declaration of Independence and the Constitution, he could have proposed a fundamental shift from continuously growing government to continuously shrinking government.  His spending criteria should have been, “is this authorized by the Constitution?”

The campaign strategy deficit was revealed by a surreptitiously recorded video of Mitt Romney addressing a private dinner meeting of high-end donors that was made public 45 days before the election.  It was big news for a couple of weeks, with segments getting millions of hits on YouTube and played over and over on TV news.  Our commentary starts at a portion of the video where Mr. Romney sought to assure the donors that his campaign was competent:

I can tell you I have a very good team of extraordinarily experienced, highly successful consultants. A couple of people in particular who’ve done races around the world…So they do his races and see which ads work and which processes work best and, uh, we have ideas about what well do over the course of the campaign.

Campaign consultants with similar qualifications also worked for every GOP candidate who lost in recent years, including John McCain in 2008 and Bob Dole in 1996.

The troubling reality, supported by this video, has always been that Mitt Romney sees himself not as a reformer, with fire in his belly, on a mission to shrink government and expand liberty but as the CEO of a company of campaign technicians.

The section of the video that was most replayed in the media begins with this question from one of the donors:

For the last three years, all everybody’s been told is, “Don’t worry, we’ll take care of you.” How are you going to do it, in two months before the elections, to convince everybody you’ve got to take care of yourself?

Romney’s answer:

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it.

And they will vote for this president no matter what.  And this President starts off with 48 – 49, he starts off with a huge number.  These are people who pay no income tax.  47% of Americans pay no income tax.

Predictably, sanctimonious indignation thundered from the Obama campaign and the establishment media, accusing Romney of arrogant contempt for half the population.  And for once they seemed to be right!  Apparently, Romney’s brilliant consultants had convinced him that 47% of voters were non-taxpaying freeloaders who would vote only for the candidate who promised more government goodies.

But Romney’s assertions were preposterous!  Consider exit polling results from the 2008, Obama Vs McCain election:

  • 52% of voters who earned more than $200,000 and thus paid substantial income tax had voted for Obama;
  • 32% of voters who earned less than $30,000 and thus paid very little or no income tax had voted for McCain;
  • 53% of seniors, the largest group receiving government subsidies, had voted for McCain.

Income tax obligation is the dumbest of all the dumb ways campaign consultants slice and dice the electorate into identity groups.  Abandoning millions of voters who don’t currently have an income tax obligation is a campaign strategy guaranteed to fail.  Consider two hypothetical, female voters, both with the same income:

  1. An unmarried woman with no children, earning $75,000, living in Los Angeles, who does not attend church.  Polling data indicated Obama was almost certain to get her vote.  She would pay approximately $12,000 in income tax.
  2. A married woman with four children.  She and her husband earn $75,000, live in a home with a mortgage and tithe to their church.  According to polling data her profile was that of a solid GOP loyalist, virtually certain to pull the lever for Romney if she voted.  She and her husband would pay zero income tax.

Less than two minutes before his 47% rant Romney had said:

And then I quote Marco Rubio in my speeches…Senator Rubio says that when he grew up poor, that they looked at people that had a lot of wealth, and his parents never said, “We need some of what they have, they should give us some.” Instead they said that you work hard and go to school, someday we might be able to have enough.

One wonders then, what did Romney actually believe?  If he believed there are more people like Rubio’s parents why would he pursue a campaign strategy that intentionally ignores and insults them?

Romney concluded the 47% rant:

So our message of low taxes doesn’t connect and [Obama will] be out there talking about tax cuts for the rich. That’s what they sell every four years.   And so my job is is not to worry about those peopleI’ll never convince them that they should take personal responsibility and care for their lives.

This is just astounding!  A candidate who says his job is to START by writing off 47% of voters!  Successful Republican candidates, Ronald Reagan for example, unite voters of all ethnic and socioeconomic groups, behind one powerful message of liberty and free enterprise. 

Democrats try to win by segmenting the population into identity groups based on ethnicity, income or perceived social class.  Then they “target” some of those groups with customized, not necessarily sincere messages that seem to confirm whatever perceptions the groups already hold. 

Romney’s dismissal of 47% as deadbeats is not only offensive, it contradicts what should be the fundamental premise of a Republican campaign, especially in 2016, that tens of millions of diligent Americans are held back by a faltering economy that results from too much government, to much cronyism and too little liberty.  These folks are aching for an opportunity to work and be responsible.

The Bottom Line

The 2016 election is too important to lose due to the same failed campaign.

President’s Amnesty Program Includes a Generous Cash Bonus

President Obama recently announced a new program granting amnesty in the form of “deferred deportation” status, including work permits, to millions of illegal immigrants who are parents.

Some of the President’s remarks were to the illegal immigrant population directly, including:

If you register, pass a criminal background check and you’re willing to pay your fair share of taxes, you’ll be able to apply to stay in this country… [emphasis added]

cash-bonus-table-2

This was probably intended to mislead the rest of us.  For most of the people eligible for deferred deportation, “fair share of taxes” will actually mean receiving FROM the IRS a lump sum of cash, provided by the American taxpayers. 

In selling this scheme Obama emphasized the hope that illegal immigrants will “emerge from the shadows” of the underground economy, “pay taxes” and file tax returns.  To this end they’ll be issued Social Security numbers, enabling them to work on the books for legitimate employers, and making them eligible to receive two substantial cash subsidies, delivered to them by the IRS.

To millions of low to moderate income Americans the IRS is not the scary tax collector and our annual tax season is not a time of anxiety and stress.  Instead, the IRS is a benefactor, distributing cash every spring via a system of misleadingly named, “refundable tax credits.”

Several  mechanisms reduce one’s income tax bill: exemptions, deductions, credits and refundable credits.

  • Exemptions  of $3,900 for each taxpayer and each dependent, and deductions such as charitable donations, lower one’s tax bill by reducing the portion of income that is taxed.
  • Tax credits are more valuable because they directly reduce the amount of tax that would otherwise be owed after taxable  income is reduced by exemptions and deductions.
  • Refundable tax credits, are the most valuable of all.  They are, in effect, reverse taxation.  Refundable credits are payments from the IRS to the “taxpayer” that exceed his/her tax obligation. People who meet IRS eligibility criteria receive these payments even if they have no tax obligation at all, even if no income tax withholding was deducted from their paychecks.  If income tax was withheld from their paychecks and their tax obligation turns out to be zero that withheld money is refunded back to them along with the refundable tax credits.

Low to moderate income people who are parents with children are eligible for the two largest refundable credits, the earned income credit or EIC and the child tax credit.

Under IRS rules parents of dependent children, either single or married are eligible for the EIC and the child tax credit.  These can add up to thousands each year.  In 2012, the latest year for which IRS has published statistics, $28 billion in child tax credits was distributed and $62 billion in EIC payments went to 21 million parents with children.  (These statistics do not include taxpayers without dependent children, who qualified for a much smaller version of the EIC, at most $496.)

President Obama’s deferred deportation program promises millions of illegal immigrants that they will not be deported for three years.  His eligibility criteria is the same as for the EIC and child tax credit: they must be parents.

There is no citizenship requirement for refundable tax credits.  To qualify, parents who are not citizens must:

  1. have a Social Security number, which will be provided to all of those who are granted Obama’s deferred deportation status;
  2. be “resident aliens.” Anyone who has been “physically present” in the US for all or most of the past 3-4 years qualifies, by IRS regulation, as a resident alien;
  3. earn some income.

So, how much are these tax credits worth to the millions of people who will be granted Obama’s “deferred deportation” status?  It depends on how much they earn and how many children they have.  The table above shows some examples.

Obamacare Could Still Crash in Supreme Court

The Supreme Court announced that it would review and determine the legality of a key Obamacare regulation, written by the IRS. 

Through this regulation the IRS empowered itself to give subsidies in the form of tax credits to people who buy ObamaCare health insurance policies from healthcare.gov, the federal government’s health insurance exchange.ObamaCare4

Back in July a three judge panel of the D.C. Court of Appeals ruled, in Halbig Vs Burwell, that the regulation from the IRS violates the letter of the law.   The court found that Obamacare or the Affordable Care Act (ACA) authorizes those tax credit subsidies to be issued only to customers of exchanges that are built and operated by states.

The Halbig ruling was an earthquake.  If upheld by the Supreme Court it means that roughly two-thirds of Americans, who live in the 36 states that did not set up their own exchanges, will be ineligible for subsidies. 

The law states that the individual mandate, the requirement that every person have health insurance is enforceable only if insurance is “affordable,” a word that is defined by the law.  But insurance that meets all the requirements of ACA is expensive and for most individuals it’s not “affordable” without the subsidies. Therefore if the Halbig ruling stands it renders the individual mandate unenforceable in 36 states.

Employer Mandate will also fall

ACA also imposes an employer mandate that is partially to blame for America’s continuing job market weakness.  Companies are required to provide pricey insurance if they have fifty or more full time employees.  The fine for not providing insurance is $2,000 per year per employee.  The event that triggers the fine is one or more of a company’s employees receiving a subsidy.  But if employees are not eligible for a subsidy because their state didn’t set up an exchange there is no trigger and the employer can not be fined.

Thus, if the Supreme Court agrees with the lower court, that subsidies can not be given through the federal exchange, BOTH the individual and employer mandates will become unenforceable in 36 states.

Obamacare defenders immediately attacked the Halbig ruling.  Typical was Vox.com’s Ezra Klein who  declared the Halbig decision “plainly ridiculous,” adding that “the point of Obamacare is to subsidize insurance…”  The New Republic pronounced it “absurd.”  On MSNBC’s Hard Ball with Chris Matthews,” Jonathan Gruber, MIT Professor, White House adviser and one of the principle architects of the ACA legislation bellowed:gruber

Chris, it is unambiguous this is a typo. Literally every single person involved in the crafting of this law has said that it’s a typo, that they had no intention of excluding the federal states.  And why would they?

Professor Gruber burst into the headlines recently when recordings of him surfaced.  He calls voters stupid and explains some of the deceptions in the law.  Stay with us to find out why Professor Gruber was forced to admit the “typo” story is absurd.

Most of the media went along with the typo story, without bothering to read, comprehend or explain the Court’s reasoning.  Once again Liberty Works steps in where the establishment media have failed.  Here’s how the court reached it’s conclusion

The court identified three relevant sections in the massive, 2,500 page Affordable Care Act (ACA):

  • ACA Section 1311 grants authority to the states to set up exchanges.  But the law does not require state exchanges.  Such a requirement would be Unconstitutional.
  • ACA Section 1321 grants the federal Department of Health and Human Services (HHS) the authority to set up a federal exchange for the residents of states that do not set up their own.
  • ACA section 1401 authorizes the IRS to grant subsidies called “Premium Assistance Coverage” in the form of tax credits to individuals of low to medium income.  Under the heading “Premium Assistance Coverage Amount”  section 1401 says:
The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of (A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer and which were enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act
The biased media quoted only the words “established by the state,” planting the perception that it’s the only relevant phrase in the entire 2,500 page law, that it appears only once, and therefore, that it could be a typo.  But that perception is wrong.  The underlined text above establishes TWO requirements an exchange must meet for its customers to be eligible for tax credit subsidies:
  1. It must established by the State – not federal government and,
  2. Must be established under section 1311, which authorizes only state exchanges.  Again, a separate section, 1321, authorizes the federal exchange.

The same two requirements appear again several paragraphs later under the definition of “coverage month:”

The term “coverage month” means…any month…the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer is covered by a qualified health plan described in subsection (b)(2)(A) that was enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act

Later on, the dual requirements are emphasized twice more in paragraphs that set forth ways to compute the tax credit subsidy.

Obviously, four deliberate repetitions of two requirements would rule out any possibility of a “typo.”

With the typo idea discredited the more sophisticated (or imaginative) ACA supporters have indicated they will shift to a different tactic.  They will ask that the court to disregard the text of the law and instead conjure “Congressional intent,” which they claim was to issue tax credits in the federal exchange. 

But seeking to discern “Congressional intent” is like chasing the wind and tends to make one even more cynical about Congress.  As courts have noted in previous rulings, passing a law requires the votes of hundreds of individual Representatives and Senators.  Individual Senators and Representatives who vote in favor of a bill have a wide range of intentions.  A YES vote can mean that the representative:

  • approves of a bill in its entirety, including in this case, restricting tax credits to customers in states that set up their own exchanges;
  • approves of only parts of a bill but is willing to compromise and accept other parts he/she doesn’t necessarily like. (Did she like or dislike restricting the subsidies to state exchanges?)
  • intends his vote only to please a lobbyist or pressure group whose support he values;
  • intends to exchange his vote for a promise from his party’s leadership, perhaps a desirable committee assignment or campaign finance help;
  • intends to exchange his vote for a subsidy or special consideration for an unrelated project or business interest back home.  This is usually a side deal, with the inducement tucked into a different bill.

In the case of Obamacare/ACA there was yet another reality because almost no Senator or Representative who voted YES had read or understood the bill:

  • intent to demonstrate loyalty to the President and the Democratic party by voting yes without reading the bill, based on utopian promises from the President. (Such as “If you like your insurance you can keep it, period,” or “the typical family will save $2,500 a year.”)

The Halbig transcript reveals that the government’s lawyers were unable to show the court a single word in the Congressional Record to support their claim that “Congressional intent” contradicts the plain language of the law.

ACA was written largely by Senate staffers and outside consultants including Professor Gruber (mentioned above).  It became law only after extraordinarily intense political arm-twisting and horse trading for votes.  Provisions were added hastily without due diligence.  Only through strenuous parliamentary maneuvering and rule bending by Democratic leaders was a Senate vote that would have killed the law avoided.  ACA passed the House by only seven votes, 219-212 with all Republicans and 35 Democrats voting NO.

Thus, “Congressional intent” is so elusive and intangible that to  mention it is an insult to the court.

Why does the law include the language quoted above that denies subsidies to customers of the federal exchange? 

The answer is found in the context of the Progressive ideology that drives President Obama and Congressional Democrats.

Because concentrations of political power are always abused by the elite, to the detriment of The People, the authors of the US Constitution brilliantly dispersed governing authority among the states while limiting the federal government to a few, specified, or “enumerated” powers.  Under the Constitution Congress may not require state legislatures to pass laws or create programs, such as an online health insurance exchange.

But the ideology and schemes of the leftis,t progressive movement cannot be implemented without concentrating power in the central government.  So progressives contrived a way around Constitutional checks and balances: Offering state governments financial incentives to comply with federal government programs.

The financial incentives are sometimes indirect but always a variation on the same idea: If a state submits to the will of Washington’s elite, the federal government will provide “free money” to the state and/or it’s citizens.

Tax credit subsidies to customers who buy insurance from a state exchange are the free money in ObamaCare that was supposed to ensure that all states obeyed and set up exchanges.  In fact the authors of Obamacare were so sure this financial incentive would coerce each and every state into setting up an exchange, they budgeted no funds to build a federal web site.  Thus, healthcare.gov got a late start, contributing to its disastrous rollout, because funds had to be scrounged from other programs.

Obamacare is a horrendously complex scheme with hundreds of interrelated functions, all made operational by regulations written by hordes of bureaucrats.  Complicated government schemes never turn out as promised and always generate undesirable results, usually called “unintended consequences” to deflect blame away from accountable politicians.

When IRS bureaucrats realized that most of the states would not build their own exchanges, even though subsidies would be denied, they wrote a regulation to grant subsidies through the federal exchange, contradicting the plain language of the law.  But in the Halbig case their regulation lost a court challenge. Now, the Supreme Court will rule.

Back to Professor Gruber’s claim quoted above, that the state exchange requirement is a typo.  A few days after the Halbig ruling, some enterprising reporters and bloggers  turned up YouTube recordings of remarks by Professor Gruber in 2012.  In those recordings here and here he states, unequivocally, that the intent of the law to deny tax credits to citizens of states that do not set up their own exchanges.

Only by contriving absurdly tortured arguments could the Supreme Court overcome what is actually written in the law, four times, and allow the IRS to empower itself to give tax credit subsidies to Healthcare.gov customers.

 

President Reagan’s Inspiring Speech to Honor Heroic Veterans

On June 6, 1984, the 40th anniversary of the World War II, D Day invasion, President Ronald Reagan honored the memory of brave American soldiers with a speech at the U.S. Ranger Monument, Pointe du Hoc, France.

Watch the video or read the text below

We’re here to mark that day in history when the Allied armies joined in battle to reclaim this continent to liberty. For four long years, much of Europe had been under a terrible shadow. Free nations had fallen, Jews cried out in the camps, millions cried out for liberation. Europe was enslaved, and the world prayed for its rescue. Here in Normandy the rescue began. Here the Allies stood and fought against tyranny in a giant undertaking unparalleled in human history.

We stand on a lonely, windswept point on the northern shore of France. The air is soft, but 40 years ago at this moment, the air was dense with smoke and the cries of men, and the air was filled with the crack of rifle fire and the roar of cannon. At dawn, on the morning of the 6th of June, 1944, 225 American Rangers jumped off the British landing craft and ran to the bottom of these cliffs. Their mission was one of the most difficult and daring of the invasion: to climb these sheer and desolate cliffs and take out the enemy guns. The Allies had been told that some of the mightiest of these guns were here and they would be trained on the beaches to stop the Allied advance.

The Rangers looked up and saw the enemy soldiers on the edge of the cliffs shooting down at them with machine guns and throwing grenades. And the American Rangers began to climb. They shot rope ladders over the face of these cliffs and began to pull themselves up. When one Ranger fell, another would take his place. When one rope was cut, a Ranger would grab another and begin his climb again. They climbed, shot back, and held their footing. Soon, one by one, the Rangers pulled themselves over the top, and in seizing the firm land at the top of these cliffs, they began to seize back the continent of Europe. Two hundred and twenty-five came here. After two days of fighting, only 90 could still bear arms.

Behind me is a memorial that symbolizes the Ranger daggers that were thrust into the top of these cliffs. And before me are the men who put them there.

These are the boys of Pointe du Hoc. These are the men who took the cliffs. These are the champions who helped free a continent. These are the heroes who helped end a war.

Gentlemen, I look at you and I think of the words of Stephen Spender’s poem. You are men who in your “lives fought for life . . . and left the vivid air signed with your honor.”

I think I know what you may be thinking right now — thinking “we were just part of a bigger effort; everyone was brave that day.” Well, everyone was.

Forty summers have passed since the battle that you fought here. You were young the day you took these cliffs; some of you were hardly more than boys, with the deepest joys of life before you. Yet, you risked everything here. Why? Why did you do it? What impelled you to put aside the instinct for self-preservation and risk your lives to take these cliffs? What inspired all the men of the armies that met here? We look at you, and somehow we know the answer. It was faith and belief; it was loyalty and love.

The men of Normandy had faith that what they were doing was right, faith that they fought for all humanity, faith that a just God would grant them mercy on this beachhead or on the next. It was the deep knowledge — and pray God we have not lost it — that there is a profound, moral difference between the use of force for liberation and the use of force for conquest. You were here to liberate, not to conquer, and so you and those others did not doubt your cause. And you were right not to doubt.

You all knew that some things are worth dying for. One’s country is worth dying for, and democracy is worth dying for, because it’s the most deeply honorable form of government ever devised by man. All of you loved liberty. All of you were willing to fight tyranny, and you knew the people of your countries were behind you.

The Americans who fought here that morning knew word of the invasion was spreading through the darkness back home. They fought — or felt in their hearts, though they couldn’t know in fact, that in Georgia they were filling the churches at 4 a.m., in Kansas they were kneeling on their porches and praying, and in Philadelphia they were ringing the Liberty Bell.

Something else helped the men of D-day: their rockhard belief that Providence would have a great hand in the events that would unfold here; that God was an ally in this great cause. And so, the night before the invasion, when Colonel Wolverton asked his parachute troops to kneel with him in prayer he told them: Do not bow your heads, but look up so you can see God and ask His blessing in what we’re about to do. Also that night, General Matthew Ridgway on his cot, listening in the darkness for the promise God made to Joshua: “I will not fail thee nor forsake thee.”

These are the things that impelled them; these are the things that shaped the unity of the Allies.

Human Cost of ObamaNomics in One Chart

There is a real cost to concentrating economic power in the central government.  That cost is born by millions of men and women whose economic opportunity has been restricted for no reason, in exchange for no benefit.

The Commerce Department just released it’s “advance estimate” of economic growth during the third quarter, ended September 30.  It confirms once again that even though the recession ended 64 months ago the US economy has not yet begun an acceptable recovery.  Polls show more than half of Americans believe we’re still in recession.

Gross Domestic Product (GDP) grew at an annualized rate of 3.5% in the third quarter. (This estimate will be revised twice and the final number, due in about sixty days, could be significantly different.)Obama's GDP VS previous Administrations

While 3.5% is a bit of an improvement over the average for the past five years, it’s not nearly enough to restore pre-recession employment levels and prosperity.  As the chart shows we’re still suffering through the weakest post-recession recovery since the government began issuing quarterly GDP reports in 1947.

The American economy, while the most resilient in human history, struggles under the weight of decades of accumulated government intervention in the form of excessive regulation, taxation, and bureaucratic mandates, the most recent being Obamacare and the massive, Dodd-Frank financial regulation law.  These government intrusions into the private sector and the generally anti-business, anti-investment inclination of the Obama Administration discourages and deters entrepreneurs and investors, resulting in fewer of the business start-ups and expansions that create jobs and expand the economy.

America’s corporate tax code, the most confiscatory in the world, drives investment capital, the source of jobs and economic growth overseas.   Indeed, some American companies have had to “invert” or turn themselves into foreign corporations in order to facilitate investment in America!

Defenders of big government economic intervention say the current recovery is the weakest on record because the 2008-09 recession was deepest/worst on record.  But that isn’t consistent with the historical data.  The last time we suffered an exceptionally severe recession was 1981. Depending on which statistics one considers most important 1981 was either the worst or second worst recession on record.

Like President Obama, President Reagan inherited a an economy in crisis due primarily to huge losses and retrenchment in the financial sector.  Unlike Obama, Reagan faced historically high interest rates.  In 1982 Mortgage interest hit 15% compared to about 4.5% today. The prime rate, paid by the largest, most credit worthy corporations was also in the teens, compared to 3.25% today.  The unemployment rate spiked up to an even higher level in 1981 than in 2009.

Reagan’s approach was directly opposite Obama’s.  Instead of raising taxes and intensifying government interference in the private sector, Reagan deregulated and cut taxes.

Perhaps a Republican victory next week will mark a turning point.  Perhaps the Republicans will enact a solid tax reform package and send it to President Obama, who claims to support tax reform.  President Obama could emulate President Clinton.  He could, like Clinton, cooperate with a new Republican majority in Congress to diminish government’s foot print and then take credit for the resulting economic growth.

Obama’s Audacious Economic Experiment Failed

Record shattering deficits and debt have not delivered the promised prosperity

President Obama made an astounding claim in his recent pivot-to-the-economy speech at Northwestern University 

The deficits have come down at almost a record pace, and they’re now manageable.

The government’s fiscal year ended September 30 and the Treasury Department issued it’s final report for the fiscal year last week.  The 2014 deficit was “only” $483,350,000,000.  A time traveler from past decades would be shocked to learn that this figure is an improvement from the Obama Administration’s first five years.top-ten-deficitsAs the chart shows, the 2014 deficit can be seen as good news only after the Obama Administration deliberately ran the five largest annual deficits in all of the US Government’s 223 year history.

During Obama’s first Presidential campaign he characterized the Bush deficits as “irresponsible” and “unpatriotic.”  But now he calls the 2014 deficit, larger than all but one of Bush’s (and only 5% less than that one) “manageable.”  Apparently he hopes we’ll be persuaded that concern about deficits is now behind us and it’s time to crank up the spending machine again.

Is a $483 Billion deficit “manageable”?  One wonders what that word means in this context.  The government has “managed” this deficit as it has all previous deficits:  It borrowed more.

Treasury Secretary Jacob (Jack) Lew issued a more enthusiastic statement, hoping to divert attention from ISIS  and Ebola to some “good news.”

The President’s policies and a strengthening U.S. economy have resulted in a reduction of the U.S. budget deficit of approximately two-thirds — the fastest sustained deficit reduction since World War II.

Yes, the deficit has fallen 66% in five years.  But that’s not even close to the fastest deficit reduction since World War II.  Some examples of more rapid deficit reduction:

  • in one year, from 1953 to 1954 the deficit fell 82%
  • In two years, from 1972 to 1974 the deficit fell 74%
  • In four years from 1993 to 1997 the deficit fell by 91%
  • In three years, from 1962 to 1965 the deficit declined at the rate of 80%.

Before the Obama Administration, the all time deficit high water mark was World War II.  But that huge increase in debt was to pay for the largest war mobilization in human history.   Thirteen percent of the US population served in the military, compared to less than one percent today.  Most of America’s manufacturing plants and employees were diverted from  cars and consumer goods to guns, tanks, aircraft and other war supplies, all paid for by the government.

But, as soon as the war ended Congress cut spending by more than two thirds.

The Obama deficits weren’t for war.  They were sold as the road to economic recovery, job creation and prosperity, based on a theory known as Keynesian economics, that government deficits “stimulate” the economy.  Did the Obama deficit surge validate the theory?  To answer, we just happen to have another chart.Spending-VS-GDP-5yearsPresident Bush began and Obama completed a 24% spending increase, six times the average over the past 60 years. 

What did this massive spending and borrowing surge buy?  The weakest post-recession economy since the government began issuing quarterly GDP reports in 1947. 

How do Keynesian theorists such as New York Times columnist Paul Krugman explain this seeming contradiction between theory and results?  Astoundingly, they say Obama’s mistake was that he didn’t borrow and spend enough!

Then there’s the Keynesian claim that deficits generate more jobs.  We don’t have a chart for that but here’s a back-of-the-envelop analysis:

The recession officially ended in June, 2009.  Since then the total federal debt (sum of all deficits for 220 years) has increased by $6.3 trillion.  Over the same period employers report jobs increased by 8.5 million.   What if we give Keynesian deficit spending credit for EVERY new job?  In that case government debt has gone up $741,000 for each additional job.  If Keynesian theorists claim deficit spending created half the new jobs the debt increase would be almost $1.5 million for each job!

Interest on this additional debt is now costing taxpayers about $22,000 per year per job.  Every year.  Eighty to ninety percent of the new jobs pay less than $40,000 per year meaning they generate less than $6,000 per year in payroll tax and less than $3,000 per year in federal income tax. 

In a rational world the failure of this experiment in deficit spending would relegate Keynesian theory to history’s dustbin.  Let’s hope the election of GOP Congressional majorities marked the beginning of a house cleaning, to rid us once and for all of politicians who enact laws, prohibitions and mandates based upon this loony economic theory.

Obama’s Job Statistics Vs Main Street Reality

President Obama defines jobs “success” in a unique new way.

President Obama has “pivoted to the economy” once again, in an appearance on Sixty Minutes, followed by Speech at Northwestern University.  Here’s an excerpt from Sixty Minutes:

Question: Right now public opinion polls show a majority of Americans disapprove of your handling of foreign policy and the economy. You’ve got midterm elections coming up…What are you going to tell the American people?

President Obama: Here’s what I’m going to tell the American people. When I came into office, our economy was in crisis…businesses were laying off 800,000 Americans a month…We had unemployment up at 10 percent. It’s now down to 6.1..

Note that the President does not compare his economic record with previous administrations, or with historic averages.  Instead he compares a gradually declining, post recession unemployment rate with the highest rate reached during the recession.  On this basis he claims success.

LPR-through-Sept-14

Obama  hopes we’ll see this comparison as appropriate because, as reminds us often, he took office during of a severe, inherited recession and he takes credit for it coming to an end in June 2009.

There have been 33 recessions over the past 157 years and they all ended with little or no government intervention in the economy.  But Obama apparently would have us believe that 2008-09 would have been the first ever permanent, unending recession were it not for his Presidency.

A week after the Sixty Minutes interview excerpted above, the Labor Department published its monthly jobs report indicating the unemployment rate had ticked down from 6.1% to 5.9%.  The President and his supporters were euphoric.  But, it turns out that the falling unemployment rate is a deceptive indicator.

The labor force participation rate is the percentage of the working age population counted as “in the labor force” either because they have a job or because they qualify by government criteria to be counted as “unemployed.”  The unemployment rate is the percentage of the labor force who are counted as unemployed.

People who have been jobless for a long time become discouraged and don’t actively look for work often enough to meet arbitrary, government criteria for inclusion in the ranks of “unemployed” even though they are still jobless and still want to work. 

The unemployment rate dropped from 6.1% in August  to 5.9% in September only because 315,000 jobless people were reclassified from “unemployed” to “not in the labor force.”

If the labor force participation rate were the same now as it was in June 2009 when the recession ended the current unemployment rate would be just over 10%, not 5.9%.

The chart above shows that the nearly all the decline in labor force participation rate has been, since the end of the recession.  This five year decline is the deepest ever recorded since monthly reports began 67 years ago. The second worst was less than half as deep and started during a recession, not after the end of a recession.

Later in the Sixty Minutes interview we heard this exchange:

President Obama: Ronald Reagan used to ask the question, “Are you better off than you were four years ago?” In this case, are you better off than you were in six? And the answer is, the country is definitely better off than we were when I came into office.

Question: Do you think people will feel that?

President Obama: They don’t feel it. And the reason they don’t feel it is because incomes and wages are not going up.

This is not complicated.  Wages, like prices result from the market forces of supply and demand.   Since the beginning of the recession in 2008 the working age population – supply – has increased 10.4 million.  But as of September only 222 thousand more people are employed than when the recession began.  This is the first time since the current system of monthly statistics began in 1948 that job creation has lagged so far population growth.  In fact, throughout the 1970s and 1980s job creation outpaced population growth, accommodating a larger percentage of women in the labor force than in past decades.  Today, wages are down because the supply of potential employees has increased while the demand for employees is static. 

The President also hyped 55 months of uninterrupted private sector job growth which he claims is a record.  It is true that there is no previous 55 month period without a single negative month.  But it is far from the best 55 months on record.  There have been dozens of 55 month periods with stronger job growth, in spite of a few negative month interruptions.

The grim reality is job creation is down and wages are down because of Obama’s implementation of myriad progressive schemes, including tax increases, dramatic increases in regulation and Obamacare, a major barrier to hiring.

The People will “feel” prosperous when the federal footprint has been reduced, freeing entrepreneurs and investors to do what they always do if not impeded by centralized government control: create new products and services and build new businesses raising the demand for employees.  Only then will there be wage increases.

How Progressives Subvert the Constitution

ObamaCare is a textbook example of how the Progressive Movement has subverted and nullified Constitutional limits on the power, authority, scope and cost of the federal government and how elected Senators and Congressmen routinely violate their oath of office.

While most Americans celebrate and revere the Constitution, many of our most powerful political leaders see it as an unnecessary, obsolete impediment.  When I joined the Army I swore an oath to “support and defend the Constitution…without any mental reservation or purpose of evasion.”   Later I learned that the oath of office sworn by Senators and Congressmen includes the same language.

House-oath-of-office

So how is it that the federal government has been able to take on so much power that is not authorized by the Constitution? 

Consider ObamaCare.  Not only does it require citizens to pay private companies for insurance, it also dictates what that insurance may and may not cover and under what terms.  It establishes some 51 new bureaucracies that are empowered to regulate doctors, hospitals and insurance companies in thousands of new ways.

Back in October 2009 a reporter asked then House Speaker Nancy Pelosi to cite the clause in the Constitution that authorized the government to force people to buy health insurance.  She dismissed the question, sneering:

“Are you serious?”

A day later Pelosi issued a press release titled, “Health Insurance Reform Daily Mythbuster: Constitutionality of Health Insurance Reform.” It was typical of The Left’s abuse of the Constitution:

Reform opponents continue to spread myths about components of the [Health Care Bill]  including the nonsensical claim that the federal government has no constitutionally valid role in reforming our health care system—apparently ignoring the validity of Medicare and other popular federal health reforms…As with Medicare and Medicaid, the federal government has the Constitutional power to reform our health care system.

While Pelosi hoped most of us are stupid enough to be hypnotized by this language, Constitutional challenges from many sources, including Liberty Works, are not objections to “reform,” a term that could mean almost anything, but to specific provisions of the Obamacare legislation.

In the Next paragraph Pelosi recites The Left’s standard version of Constitutionality:

The 10th amendment to the U.S. Constitution states that the powers not delegated to the federal government by the Constitution, nor prohibited by it to the states, are reserved to the states … or to the people.  But the Constitution gives Congress broad power to regulate activities that have an effect on interstate commerce.  Congress has used this authority to regulate many aspects of American life, from labor relations to education to health care to agricultural production. Since virtually every aspect of the heath care system has an effect on interstate commerce, the power of Congress to regulate health care is essentially unlimited.

To anyone familiar with the history and language of the Constitution, this defiant declaration by the Speaker of the House was and is deeply disturbing.  Unlimited government power was abhorrent to The Founders, who wrote the Constitution.  A Congress with unlimited power over any industry or sector was exactly the outcome they were determined to prevent.

Tragically, over the past century politicians and judges and Supreme Court Justices have brazenly violated the language of the Constitution and turned the vision of The Founders on its head, usually through deliberate misinterpretation of what is known as the commerce clause:

“The Congress shall have Power To…regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;”

This is the clause Speaker Pelosi referenced above when she claimed “broad power to regulate activities that have an effect on interstate commerce.  A review of the Federalist Papers and other contemporary writings makes clear that the unlimited power interpretation of this clause, as cited by Speaker Pelosi, simply is not what the original text means.

In the Founders era, as now, the term “Commerce” meant buying and selling, in this case across state lines.  “Commerce” was not and is not a synonym for manufacturing or for growing crops or for providing services, including medical treatments.

The purpose of this clause was not to grant Congress “unlimited” power over anything.  It was to prevent unnecessary barriers to buying or selling across state lines.   James Madison wrote in Federalist Paper #22 of problems that occurred while the union operated under the preConstitution, Articles of Confederation:

The interfering and unneighborly regulations of some States, contrary to the true spirit of the Union, have, in different instances, given just cause of umbrage and complaint to others, and it is to be feared that examples of this nature, if not restrained by a national control, would be multiplied and extended till they became not less serious sources of animosity and discord than injurious impediments to the intcrcourse between the different parts of the Confederacy.

Madison cited as another negative example the German empire that similar to America, was an association of independent states:

The commerce of the German empire is in continual trammels from the multiplicity of the duties which the several princes and states exact upon the merchandises passing through their territories, by means of which the fine streams and navigable rivers with which Germany is so happily watered are rendered almost useless.  Though the genius of the people of this country might never permit this description to be strictly applicable to us, yet we may reasonably expect, from the gradual conflicts of State regulations, that the citizens of each would at length come to be considered and treated by the others in no better light than that of foreigners and aliens.

Nowhere in the Constitution or any contemporary documents is there any notion of federal control of activities because they “have an effect on interstate commerce.”  So what was the basis of Ms. Pelosi’s arrogant claim of unlimited power?  

It was the Supreme Court’s decision in Wickard v. Filburn, 317 U.S. 111 (1942).  During the Great Depression Congress had imposed limits on crop production, in an effort to help farming businesses at the expense of everyone else by artificially reducing food supply, which would cause food prices to rise.

Mr. Filburn was fined by the government for violating the limit by growing “too much” wheat.  He argued that his entire wheat crop was consumed on his own farm, mostly as chicken feed, and was not sold to anyone and therefore could not be considered interstate commerce.  Thus, he concluded the federal government had no Constitutional authority to regulate his wheat production.

But the government argued that Filburn affected interstate commerce by growing his own wheat rather than buying it on the open, interstate market.  The court took the government’s side and the rest is history.

Pelosi and her political allies now hold that any idea a politician can conceive is Constitutional as long as it can be said to have an “effect” on interstate commerce.  It’s hard to identify any human activity that can’t possibly have, however remotely, an effect on interstate commerce.  Even that intimate activity that popped into your mind diverts the participants from shopping or watching ads on TV.

The Progressive lie is that The Founders meant for Congress to have unlimited power to intervene and, as Ms. Pelosi’s proudly claimed above, “regulate many aspects of American life.”

The Founders came together from thirteen separate, sovereign states.  Their mission was to guarantee individual liberty and prevent government management of The People’s affairs.  But they recognized that some, legitimate, governmental functions were necessary to protect and maintain individual liberty.  They wanted most of those functions to be the responsibility of the states.  But they agreed that a limited few could be handled more effectively by a federal government that acted for all of the states at once.

The goal of the founders was to create a federal government with just barely enough power to handle that limited list of functions, but without enough power to intervene in the lives of individuals or challenge the authority of state governments.  They viewed the new federal government being chartered by the Constitution as the servant, not the master of the states.  They even added the Tenth Amendment, that Pelosi quoted above, to make sure there was no misunderstanding about their intended strict limits on Federal power.

But Pelosi’s progressive interpretation of the commerce clause as empowering the federal government to regulate or control virtually anything, makes the tenth amendment a cruel joke.  A progressive like Nancy Pelosi citing the Tenth Amendment is like a husband who calls home from his girl friend’s apartment to promise unshakable love and fidelity to his wife.

Barack Obama, Nancy Pelosi, Harry Reid and most of Congress believe an elite few, backed by unlimited government power, can and should make us better than we will make ourselves if we are allowed to live our own lives, free of their supervision.  They believe unlimited government power and reduced individual freedom is justified by the “good” they can achieve through the use of force against The People.

The Bottom Line

The Constitution prohibits Congress from enacting authoritarian ideas, like government management  and control of health care.   So, those who hold authoritarian ideas have corrupted the Supreme Court in order to nullify the Constitution.  The only way to undo this damage is to elect people to Congress who will be faithful to their oath of office and obey the Constitution, even though the Supreme Court has ruled that they are no longer required to. 

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