May 29, 2010
How to Cripple the Free Economy
The socialist policies implemented by the Obama administration and the Democrat leadership undermine America's economic prosperity and prolong the misery for millions of companies and workers. Despite passing multi-trillion dollar government tax and spend initiatives, numerous bailouts of failed businesses, and repeated extensions of government benefits, Americans are suffering and the economy is languishing. Nationwide the unemployment rate has risen to 9.9%, while mortgage defaults and foreclosure rates have surged to record numbers.
Even with the tens of billions of dollars Congress has spent on preventing consumer mortgage defaults and home foreclosures, things have not improved much. How could they? Such government bailout measures are temporary band-aids that fail to address the structural problems our economy faces. They only delay the inevitable and push the problem further down the road. It doesn't matter that house payments are now lower and the government has picked up the tab for a few months. If Americans cannot find a job or raise the capital to start a business they won't have the money to pay even reduced mortgage payments.
The situation is grim for millions of American homeowners. The foreclosure crisis that the administration hoped to address via its "prevention program" is far from being over. In fact the situation may be getting worse. The Mortgage Bankers Association reports that during the January to March period of this year more than 10% of homeowners missed making at least one mortgage payment. This is an increase from the 9.1% that missed home payments in 2009. Right now approximately 4.3 million Americans are either in foreclosure or have missed at least three months of mortgage payments. Nationally, more than 4.6% of all homeowners are in foreclosure, a new record for the country.
New home buyers with good credit have now become the fastest growing group of homeowners facing foreclosure. Poor economic conditions and high unemployment rates have contributed to the latest rise in homeowner foreclosure rates. Even homeowners with solid credit, who signed up for conventional loans with fixed-rates, are now being affected by the weak economy. These borrowers account for almost 37% of the new foreclosures in 2010, significantly higher than the 29% last year.
The Obama administration's $75 billion program aimed at foreclosure prevention has barely made a difference. Since the program started in March of 2009, roughly 1.2 million owners signed up, but as of April 2010 only 299,000 homeowners have qualified for permanent loan modification. Another 277,000 borrowers, about 23% of the total enrolled, have since dropped out of the program. Not quite the success story the Obama administration proclaimed.
Back in 2009, the White House insisted that the $800 billion government "stimulus" plan, otherwise known as "The American Recovery and Reinvestment Act" (ARRA), was desperately needed to "save" our economy. President Obama promised that the money would go out the door "immediately" and "go directly to job creation, generating or saving 3-4 million new jobs." He claimed that without such massive government spending the US unemployment rate would rise above 8%; implying, that with the ARRA, unemployment would be maintained at or below the 8% rate. Unfortunately, none of the claims Obama and the Democrats made were accurate.
Following the passage of the "stimulus" spending bill the country's unemployment situation got progressively worse. In August 2009 it reached 9.7% and by October 2009 it skyrocketed to 10.1%, the highest number in 27 years. By January 2010, almost a year after the passage of the ARRA, the national unemployment settled around 9.7%. As of April of this year, the rate climbed back up to 9.9%, even with the tens of thousands of temporary workers, 66,000 of them, hired by the government Census Bureau.
These results were predictable given the anti-business policies that Obama embraced early on in his presidency. As I wrote back in July of 2009, there are at least five specific promises and initiatives from the current administration that threaten the future competitiveness and success of American businesses and the prosperity of individuals. These threats were and continue to be:
- 1. Higher Income Taxes (coming in Jan. 2011)
- 2. Higher Capital Gains Taxes (coming in Jan. 2011)
- 3. Government-Run Health Care/Socialized Medicine (passed in 2010)
- 4. Cap and Trade, Significantly Higher Energy Prices (still being considered by Obama and the Democrats)
- 5. Runaway Government Spending, High Inflation and Weakened Dollar (continued in 2009 and 2010)
Since 2009, the Obama administration has pushed for additional government tax schemes and increased levels of regulations. The White House now hints at a national Value Added Tax on all purchases and wants additional taxes and regulations on banks, oil companies, and energy companies. The socialist agenda marches on.
Company owners, entrepreneurs, and businesses remain in defensive mode. They see the dangers ahead and are not hiring. Can anyone blame them? If America stays on this road, they know what's coming: higher costs, lower revenues, reduced profits, and high inflation. They're taking the right steps to deal with an oppressive government that's becoming increasingly hostile to free-market economics and profitable ventures.
The millions of jobs lost since Obama took office will take a long time to recreate, even assuming that Congress will suspend its assault on businesses and corporations. Congressman Eric Cantor (R-VA) puts the unemployment situation in perspective:
Even if the economy added 250,000 jobs every month, it would take nearly five years to get back to full employment. Five years is too long. It doesn't help matters that job creators have already indicated that the new health care law will substantially increase their costs causing workers to lose their jobs.
The numbers don't lie. They prove, yet again, that wasteful programs, inefficient "bailouts", and out-of-control spending do not create real, long-term prosperity, stimulate economic activity, or lead to any significant new jobs creation. Just look at the deteriorating situation in Greece, Spain, and Portugal! They are reaping the consequences of the same socialist policies America is now rapidly embracing.
History has taught us that governments are ill-suited and unable to create any real value in an economy. Governments only appropriate value and wealth from those who produce and create it and then redistribute it to others. The money politicians don't have they borrow from others against the future productivity and wealth creation potential of all workers and businesses.
Only the private sector, relying on free-market ethical capitalism, can deliver the jobs, the value, and the money politicians need to help the poor, the sick, and the elderly. It's the people who must risk, invest, build, work, invent, and produce, in order to create any real wealth; that governments can then tax and spend. We are collectively the only Golden Goose that produces the golden eggs (real wealth) that Washington relies on. Obama and his cohorts are making it harder and harder for this Golden Goose to create the wealth needed to run these businesses, create new jobs, start new ventures, and generate the taxes needed to finance the government's out-of-control budgets.
While large sections of our economy continue to suffer and America's unemployment rate hovers around 10%, the current administration persists in its reckless policies of punishing success and rewarding failure. Washington's long-terms plans of high taxation and punitive regulations are a dangerous assault on this country's economic prosperity. They're undermining the country's economic health and financial stability. It's a recipe for disaster. The sooner we stop this insanity and reverse course, the better. The longer we wait, the more like Greece and Spain we will become.