President Obama’s inaugural speech received praise from the left and trepidation from the right. Former Obama czar and admitted communist Van Jones wrote a piece for CNN entitled the “Anti-government Era is Over”. Van Jones and his liberal cohorts are ecstatic that Obama finally had the courage to be who they knew him to truly be – an unapologetic liberal.
Conservatives had been listening on with concern to prominent party figures like Charles Krauthammer who called Obama’s speech “a direct response to Ronald Reagan”. Krauthammer of course was referring to the speech thirty plus years ago when Reagan famously labeled “government the problem, not the solution.”
Charles is right about the purpose of the speech. It was an unequivocal defense of liberalism. Obama put the nail in the coffin for any hope to achieve meaningful entitlement reform or any other proposal to steer us off the course towards the debt crisis that awaits us. The speech fulfilled all the hopes of the progressive movement and justified all the fears conservatives had regarding Obama’s true intentions. Although we hear from the White House that he will give a sentence or two towards the deficit, I fully expect him to repeat the liberal rhetoric we all enjoyed so much last month.
And guess what? I am not worried one single bit. And do you know why? I am conservative and I know big government doesn’t work. History has a way of repeating itself and it will do so again. Before Reagan’s landslide defeat, there was over 50 years of progressive dominance in American politics. It was destroying the country and people flocked to Reagan to show them a better way. Progressivism, liberalism, socialism, or whatever new name for collectivism by force, it is all the same thing and it ends the same way sooner or later. If you want something to take solace in, it looks like sooner rather than later.
The workforce participation rate is the lowest it has been in over 30 years. Sustaining the current growth rate of GDP, it will take 24 months before we return to pre-recession raw employment tallies. That is assuming we continue to see 1.5 – 2 percent growth considering the economy shrank last quarter. Since President Obama took office, almost 9 million fewer Americans are working. By the end of 2015, when we have recovered the 9 million positions we lost, 9 million more new voting eligible citizens will have entered the workforce unable to obtain work.
Our national debt has exceeded the entire economy’s Gross Domestic Product. The work of economists Carmen Reinhart and Kenneth Rogoff is not challenge by any serious economic analyst including one who is not – Paul Krugman. Their study of 44 countries over 200 years is clear. This economy is permanent until the debt to GDP ratio is corrected. Obama of course has no intention of tackling that problem so here is where his inaction is taking us.
Over the 75 years, excluding Obamacare spending, entitlements will run up $87 trillion dollars of new debt. Of course nobody in their right mind thinks our economy will ever get that far. Either interest rates, which are bound to go up, will cause that figure to mushroom, or we will simply not find anyone willing to sit at the bond auction.
The Dodd-Frank legislation did nothing to fix the underlying causes of the housing crisis. The recent study from the The National Bureau of Economic Research correctly identifies the lending practices outlined in the Community Reinvestment Act (CRA) by HUD, Fannie Mae, Freddie Mac, and FHA caused the financial collapse. IBD analysis of the recent study stated, “the federal government caused the problem and continues to distort the market by encouraging those who can’t afford homes to buy them and forcing banks to make loans that aren’t sound to low-income borrowers.” In December, sales of US new single family homes still plunged 7.8% despite the fed’s artificially low interest rates.
Our entire economy, approximately 70% of which is consumption, is running on cheap money. Chairman Bernanke or his successor at the Fed does not have as much control over interests rates as common perceptions would have everyone believe. The action taken by the Fed to pump unlimited rounds of stimulus monthly into the economy can assure us of two things. They are out of ideas and the purchasing power of the dollar is falling and will collapse if this strategy continues. The current level of the Dow hovering at 14,000 is nothing more than the reflection of future inflation.
Put into context, I am not worried about the political survival of our ideology. This house of cards is coming down. The only fear I have, is how many members of my community, friends, and family will be hurt in the process. There is of course the matter of having two small children to worry about. We have to remain vigilant today and stand ready for tomorrow with solutions when the American people need them. The political pendulum will swing back to the right. Until then, patience is a virtue.