Obama Like Kaiser Bill

President Obama's clumsiness reminds me of another late dynasty figure: Kaiser Wilhelm II, the lightweight figurehead of state of Imperial Germany.

You'll remember that the Kaiser got his rising country embroiled in a silly European war by frightening the pants off everyone with his reckless rhetoric. He could talk the talk, but when it came to understanding how to lead Germany as it took its place at the head of Europe after half a millennium of French hegemony... Well, he was clueless, he couldn't walk the walk.

I can't help feeling that we have another case of cluelessness in President Obams.

Oh, don't get me wrong. I think that President Obama is smart enough. And I believe he has been great at reading the liberal script. Getting ObamaCare passed was a stunning achievement even if it ends up dragging Democrats into a generation in the wilderness. The problem is that everything the Democrats want to do is bad for America, and President Obama has dug an awfully deep Democratic hole for his party and his country.

First of all, foreign policy. It was great fun to rag on President Bush right through the 2000s. But we now understand that, right or wrong, Bush and his team did some serious thinking about how to respond to the movement of resistance to western hegemony that we call Al Qaeda. There's plenty wrong with democratic capitalism, but Islamic extremism isn't the wave of the future. As President Obama is finding out, the natural role of the United States is to put a stop to movements like Al Qaeda and to keep your average thug dictatorship in a box. So the real "reset" on foreign policy is the reset on all the silly things that Democrats said and did in opposition to President Bush. Unfortunately, President Obama is probably not the right chap to do that.

Second, domestic policy. For the last 75 years Democrats have successfully run a two-speed domestic policy. In the good times, you implement lots of wasteful government spending and build electoral support at the ballot box from the clients of that spending. When things turn south you wail about extremism and budget cuts. But suppose the game has changed? Suppose the Tea Party represents a new center of gravity in American politics that puts the sweet spot at a policy of spending restraint and skepticism about government? Then President Obama, a full-on pedal to the metal spender is not the right chap to lead the Democratic Party into an age of limits.

I like to read about successful leaders and that usually means successful generals. All of them seem to develop a kind of sixth sense about the battlefield and the correlation of forces. I feel that President Obama is good at reading the battlefield of Democratic politics. He proved that by beating Hillary Clinton. But I don't think he really understands moderate Americans like Jay Cost's in-laws.

My father-in-law is a retired steelworker and lifelong (soft) Republican; my mother-in-law is a teacher’s assistant and lifelong (soft) Democrat. They were both partial to Hillary Clinton, and were very uncertain of Obama, right up to Election Day. Even so, they voted for him because, as they told my wife, “It’s time for a change.”

I just don't think that Obama will have anything to say to Jay Cost's in-laws in 2012. I just don't think he understands people like that.

As the president slides into confusion, the question becomes: Who will be his Ludendorff, the chap who takes over when the head of state can't cut the mustard? And what will Democrats do in the spring of 2012 if it start to appear that Obama is in real electoral trouble?

Business: Friend or Foe

Popular progressive author Joe Bageant just died, and Alternet had this to say about his oeuvre.

The recipient of high praise from luminaries such as Studs Terkel and Howard Zinn, Bageant was one of AlterNet's most popular essayists for his work on the corporate takeover of American democracy, the destruction of the middle-class over the past four decades and the plight of Redneck America.

But here is noted capitalist Richard Branson urging folk to start a business, yes, right here in the middle of recession when asset prices are low and talented people are available. Says he:

Start-ups and small firms are the engine of the economy and account for nearly 60pc of private sector jobs. To allow them to flourish, we must ensure we create an economy where it is easier for new companies and innovations to develop.

And then Branson goes on to give would-be entrepreneurs a few tips and tricks for business success.

[Business] is a risky game where one needs to be brave, focused and sometimes lucky. Throughout my career I have made decisions using my instinct, but I have also worked hard at making decisions work. As I look back, a few key patterns keep re-emerging.

You need to surround yourself with trusted and talented people. Setting up businesses takes an enormous amount of time and energy. It is easier to make the big commitments when you are surrounded by people you trust and like. Keeping my many good chief executives and managing directors happy – and finding new ones to start the next ventures – is one of my full-time jobs.

So, on the one hand, we have the progressives telling us that the corporations are ruining America and killing the middle class. On the other hand we have successful entrepreneur Branson telling us that business is all about trust and talent and hard work. Who are we to believe?

There is an answer to this, and it illuminates the fundamental error at the center of the progressive world view. Let us look at the idea of the "corporate takeover of American democracy." Now why would that be possible? It is only possible if government has the power to play winners and losers with corporations. It is only possible if the political system allows corporations to buy influence from politicians.

Back in the old days of mercantilism, the common sense notion was that the government had its work cut out to make business strong. Monopolies and tariffs protected business and the nation from piratical raids. Then the classical economists came along and showed that the mercantilist model was wrong. Mercantilism was a system of thievery, what we now call a crony capitalism that favored the well-connected and prevented new entrants from starting up new businesses and competing with the established firms. The best thing for government to do was to stay out of subsidies and penalties for corporations large and small because they would always end up favoring the best-connected.

But then came the progressives. They wanted to take money from the corporations and give it to the workers. But that meant that government arrogated to itself the power to meddle with corporations, and that meant that politicians could buy votes with subsidies and privileges. So now we have General Electric paying zero corporate income taxes. And now we have automobile companies in receivership, bankrupted by the "benefits" they were forced to pay to their employees.

When the progressives worry about the destruction of the middle class in the last 40 years, they are speaking in code. They are telling us that the union-boosted workers in the private sector reached a peak in prosperity back in 1970, and haven't been able to squeeze anything more out of the system since. After all, the population of union-strong Metro Detroit reached 4 million in the 1970 census and hasn't changed since.

It's understandable that the progressives should be angry. Their vision of the way the world works is in the process of smashing to smithereens. It is built on the ancient way of force and feud, bullying the weak and grabbing tribute to hand out to your supporters. Real business, real prosperity comes from refusing the temptations of power and forming economic relationships of trust and friendship, rewarding the talented, and serving the consumer, just like Richard Branson says.

But before we get to the Branson economy, we are going to have to fight out of the tangled mess of privilege and subsidy left over from the progressive years. Many people will suffer as this unjust system unravels.

The Rampage of "Educated Youth," Again

I just so happens that as we experience the street theater of Wisconsin and now London over "cuts" I am reading the lefty manifesto Multitude from Hardt and Negri.

Hardt and Negri realize that the lefty lexicon needs a bit of a brush-up. It's a bit of a dis-joint to talk about the working classes or the masses as if this is 1848 or the 1930s. The old working class is now comfortably ensconced in their own homes and have union pensions and benefits coming out the wazoo--as long as the money holds out.

But our lefty friends still want to practice "resistance" and "liberation," so they have come up with another word for the oppressed chaps. Their new name is "multitude." You can see the advantage of it. It can cover all the new oppressed groups of the multicultural diversity age, and even the knowledge workers in the new post-industrial economy. Leading the "multitude" of course, are the lefties themselves, first the anarchists of the 1999 Seattle WTO riots, then the ageing lefties getting arrested in Madison singing "Solidarity Forever," and now the breakaway groups that trashed the marquee stores like TopShop and Fortnum and Mason in London's West End.

Hardt and Negri argue that the "multitude" is resisting the permanent state of global war that Empire needs to maintain its state of emergency and deny genuinely participative democracy. Thus Iraq, Afghanistan, and now Libya are faked-up emergencies that keep the attention of the multitude away from the oppression of corporate power back home.

I am slowly coming to realize that the left-wing agenda is an constantly adapting apology for mayhem by the class of "educated youth," young men studying not law, medicine, engineering, or science, but social sciences and politics that first emerged in the 1840s. Like young men everywhere, this "educated youth" is ready for a rumble, and does not require much of a fig-leaf to justify its violence.

But what the lefties experience as "resistance" by the masses or the new multitude is better understood as the strain of social revolution, the movement from country to city. Where do you see resistance and revolution? You see it in cultures on the cusp of revolution from traditional agriculture to industrial economy. You see riots in Britain in the 1780 Gordon Riots and 1819 Peterloo Massacre, but by the 1840s you have the peaceable Chartist movement. In Europe you have the revolutions of 1830 and 1848. In Russia the Revolution of 1917; in China the collapse of the imperial dynasty in 1911. In each of these cases, you had the educated youth in the vanguard of the violence egging on the workers and peasants disoriented by the new world and its new culture. Did the "resistance" do any good? Probably not, because what the masses were doing at the time was jobs, and jobs happen when capitalists and entrepreneurs are creating jobs in an unhampered economy. Want jobs? "Educated youth" knows nothing of job creation. That's what their daddies do; they are above all that.

The problem for "educated youth" is that the society of democratic capitalism has no place for the discourse of resistance and liberation led by a militant "educated youth." Once a group has made the journey from country to city, and has learned the ways of the city, and has got the basic skills you need to find a place in the city economy, well, there's no need for street action.

No street action? What about us, asks "educated youth?"

Sorry, Charlie. In the capitalist economy we are looking for folks that can lead in new forms of economic cooperation not cooperate in new forms of political leadership.

Now you understand why "educated youth" talk endlessly about alienation. You'd feel alienated too if you were all gussied up for "protest" and nobody but a couple of long-haired lefties came.

The point is that the world is not in a state of permanent war, as Hardt and Negri assert. There is only war on the Islamic margins where pre-industrial political and economic and social relations obtain. There is not egregious exploitation by multinational corporations; there is only exploitation by thug dictators stealing their country's mineral wealth on the one hand and political elites stealing up to 40 percent of national income in welfare state redistribution programs on the other.

To right the wrongs of the modern era we need less of "educated youth" and their eternal dream of rampaging street action and more of peaceable reformers with a vision of limited and separate powers, political, economic, and moral/cultural.

Why Liberals Go On About Inequality

Here's a cute little item in The Atlantic. It's a map about inequality, The 12 States of America, showing the change in per-capita income in the United States between 1980 and 2010. It takes the US county by county and shows which have experienced increasing real per-capita income and which have been experiencing declining real per-capita income. The counties are divided into twelve categories, such as "Immigration Nation," primarily Hispanic, where real per-capita income has gone down, and "Monied Burbs" where income has gone up.

The subtext is obvious. The rise in income inequality is unjust and requires a political response.

This is, of course, the classic view of the "unconstrained vision" discussed by Thomas Sowell in A Conflict of Visions. If there is inequality, say our liberal friends, then the presumption is that it is unjust and that political means must be deployed to correct the imbalance. Thus it is unjust that the counties in "Immigrant Nation" show a declining real per-capita income from $42,800 in 1980 to $38,900 in 2010.

Conservatives, who generally believe in a "constrained vision," and worry more about the fairness of the process than the results, would take a different line. We would say: well, of course the new immigrant counties are going to show reduced per-capita income. Immigrants from Latin America typically show low skills and thus cannot command high-paying jobs. The question is whether the process allows the immigrants to better themselves and create a better life for their children.

Since per-capita income has increased across the board from about $2-3 per capita per day in 1800 to $100 per capita per day in 2010 it would seem that inequality is not a bar to opportunity. Nearly everyone has running water, TV, and indoor heat today, and the poor are fatter than the rich.

The question for the future is whether it is the political system that creates inequality. Let us make a "constrained" vision argument on inequality. Chances are, says the conservative, that if there is persisting inequality then it is a product of the political system, that some people are denied fair access to the economic system. For instance, people on welfare are encouraged by the political system to divest themselves of jobs and spouses because you need to do that to qualify for benefits. But studies show that unmarried, jobless people are typically more likely to be poor than married people with jobs. To what extent, then, does the welfare state create inequality rather than fight it?

In simple terms, let us look at the situation of Hispanic immigrants who by all measures are less wealthy than native-born Americans. All people, presumably, would agree that we want to help them become part of America. The question is, shall we help them by working on the process, observing how the economic and political system helps them or hurts them? For instance, many Hispanics work off the books, because of illegal immigration status, or because of high payroll taxes. Or should we provide Hispanics with government benefits: welfare and health benefits to boost up their incomes directly?

Conservatives need to be very clear about these issues, because the crisis in government finances will permit a nation conversation on the efficiency and the justice of the pervasive welfare state programs. We've spent a century trying to solve inequality by direct subsidy and providing benefits to the low income community. Now we have an opportunity to change the conversation and work on the economic process and remove the unjust taxes and regulations that make working in the formal sector difficult for the low paid. It helps, of course, that there is no more money for more government programs.

On the level of rhetoric, of course, it's OK to accuse the liberals of using inequality to increase their political power. Bigger government benefits to low-income families increases liberal political power whereas process improvements don't benefit anyone except ordinary unorganized Americans.

What Happens After QE2?

The current money printing operation at the Federal Reserve is supposed to end in June. 2011. But what happens then? Does the Federal Reserve truly stop monetizing federal debt and bravely start raising interest rates, and actually selling federal debt to the public again? Peter Ferrara writes about the possible downward spiral in the government finances.

The Fed's policy today is known as QE2, meaning the second round of "quantitative easing" (printing money) under the Obama Administration. That basically involves using the printed money to buy 70% of the Federal bonds issued to finance the deficit, a classic prescription for inflation...

QE2 is scheduled to continue through June, at which time most commentators expect the Fed to end this reckless policy. But if the Fed suddenly stops this "quantitative easing," who is going to step in to buy the bonds to finance the 70% of the remaining federal deficit of $1.645 trillion for this fiscal year, and the $1.4 trillion deficit the CBO projects for the next fiscal year? Finding real buyers for those bonds is going to require paying soaring interest rates on them, which will only further increase the deficit. And that will cause soaring interest rates across the credit markets as well.

And that will mean another recession about a year later. Which would be in the middle of 2012. Which is why that is not going to happen. Which is why QE2 will be followed by QE3, QE4, and quite possibly QE5, just to make sure no recession or ominous economic clouds darken President Obama's door during his glorious 2012 re-coronation tour[.]

This is a pretty dark picture, but the question is: what to do about it?

The big question for me is what the government does when it gets to default. Broadly, it will renege on the debt, probably cutting interest rates on its long-term bonds. It's been done before. It will renege on the entitlements. I'd guess that it will fudge on Medicare and Medicaid, not by cutting benefits but by cutting payments to providers and thus causing them to cut back on Medicare services. Then the government will take over Medicare, nationalize it, demonizing the doctors to great acclaim, with glorious promises to do the right thing by seniors. But then the rationing will begin.

My big question is whether the government will actually stage asset seizures. The government in Hungary already did the equivalent of seizing peoples' 401(k) private pension accounts in exchange for a government pension. You could call it nationalizing private pensions. Then, what about gold ETFs? Suppose that the $56 billion GLD SPDR Gold ETF is up to $1 trillion in a couple of years. The Obama administration might try to do a swap in devalued dollars for gold. You don't think so? Think again. That's what the federal government did in the 1930s. The feds called in gold coins at $20.75 an ounce and then devalued the dollar to $35 per ounce.

In other words, given that the government is behind the 8-ball and will continue its money printing after the end of QE2, and at some point will have to face the music, how does an honest citizen protect himself from the thieves and the robbers from the government?

The Humanitarian Intervention Gambit

In NRO Stanley Kurtz, author of Radical in Chief, argues that President Obama's Libyan efforts are a product of a doctrine advanced by academician Samantha Power, "a powerful member of Obama's foreign policy team." Power believes in a doctrine call "humanitarian intervention." This doctrine is described in the lefty Multitude by Michael Hardt and Antonio Negri.

In the view of Hardt and Negri the human-rights doctrine represents an effort to undermine the legitimation of nation-state violence both outside and within nation states. Thus,

The majority human rights position now advocates violence in the service of human rights, legitimated on its moral foundation and conducted by the blue helmets of the UN military.

Everyone agrees--or at least everyone left of center--that the nation state is a problem. So the human rights doctrine of violence legitimation represents an effort to do an end run around the legitimacy of nation states.

Hardt and Negri aren't happy with the new concept because, they notice, it only gets applied to the weak. If Libya is a human rights problem you can send in the US Air Force. But if the US is a human rights problem you can do... nothing.

It seems clear that, contra the conservative notion of President Obama as a ditherer, the president is acting consistent with his principles, that of a somewhat lefty multinational elitist. That's why his intervention has not provoked the opposition that President Bush's actions provoked. The international elite of the educated class is the entity that has advanced the human-rights doctrine of violence legitimation, so on that view President Obama seems to be doing the right thing in a difficult situation.

The problem is that our liberal friends have never dared to involve the American people in the development of this doctrine. In fact the president has been circumspect about the advertising of all his principles. That's because, as Rush Limbaugh says, liberals can't admit who they really are. If they did, the American people would kick them out of power.

Going forward, the president has two problems. The first is whether his vision will actually work. In the conservative view his domestic policy will fail because the administrative model of governance with its administratively controlled benefits and eligibilities and deliveries simply does not work. His foreign policy will fail because it fails to understand that foreign policy, whether conducted under the banner of a nation state or a supranational authority is still a contest of power. The idea of supranational authority is still a concept rather than a reality. There are no sovereign supranational authorities. Not yet, anyway.

The second problem is that our liberal friends have not persuaded, not even attempted to persuade, the American people to follow their policies. They imposed ObamaCare by legislative trickery and profoundly misleading rhetoric. They imposed their human-rights-based foreign policy over a people that thinks in terms of America as the exceptional nation state.

No good can come of governance without persuasion. Which is why I think that we ain't seen nothing yet when it comes to the decline and fall of liberalism.

Perfect Storm Forecast

The big, the only question for President Obama and his administration is: can they get past November 2012 before the roof falls in? The whole point of the Federal Reserve's QE2 is to keep the benefits going for the president's supporters until he is safely reelected.

After that? Apres moi, le deluge.

But the big question, looming larger and larger, is whether the administration will get to the election before the deluge. Here's a report from the financial front from Jim Lacey that suggests that time is running out.

When the Fed’s $600 billion QE2 buying spree ends, there will not be enough buyers left to purchase the $1.4 trillion in debt the administration has built into this year’s budget, at least not at current interest rates.

The Fed is not only looking to stop buying new debt, it also wants to get rid of the nearly $1.3 trillion currently on its balance sheet. Absorbing $1.4 trillion in new debt, rolling over maturing debt, and simultaneously purchasing debt the Fed bought during its quantitative-easing forays is a lot to ask of the market.

So what this chap is saying is that interest rates are going to have to go up a lot if the federal government is going to get the market to buy its debt. And that will increase interest expense, and that will create a need to float more debt, and that...

What you get at the end of all that is a sovereign debt crisis, when the government starts reneging on all its promises.

Here's a bellwether. The Democratic Congressional Campaign Committee is already going after Rep. Paul Ryan's (R-IL) FY2012 budget, anchored by a website called stopbenefitcuts.com.

Well, of course they are. If we are going to do anything about spending, then we are going to have to do something about those trillions in benefits going out every year to Democratic voters. Want to know how much is at stake. As always, usgovernmentspending.com has the numbers.

There it is. Government pensions: $1.0 trillion. Government health care: $1.1 trillion. Government education $0.9 trillion. Government welfare: $0.6 trillion. National defense, by the way, is another $1.0 trillion.

You tell me. When the bond market starts to shy away from Treasuries, and the government has to cut spending in order to get "confidence" back into the financial markets, where are they gonna cut?

Let's start with $200 billion in "Pentagon waste." Oh good. That means that all the rest of the cuts have to come from Democratic supporters and their benefits.

You can see why the Democrats are already taking to the streets.

Stop. Benefit. Cuts. Dot com.

Yes, senator. Right away, senator.