Friday, January 29, 2010

State of the Onion

Permit me to be among the slowest to analyze Obama’s 75 minute first State of the Union address. As a rational conservative, I will not dwell on “the best moments” or whether a Supreme Court Justice shook his head and muttered when Obama misquoted the law. My concern is entirely with content, manifest intent, and this administration’s current direction.

An accomplished speaker, the President spaced out the very sparse real content of his speech with a large dose of good sounding rhetoric devoid of any definitive statements. For example, he pointed out that the House had passed bills for regulating banks, energy policy, health care reform and trade without ever mentioning that these bills were seriously flawed. He gave the impression that passing a bill of any sort was perfectly acceptable, and that any opposition was based on ideological obstruction, presumably by Republicans. Does he really believe the public is that naive?

Obama stated that in spite of the heavily controversial nature of Cap and Trade, it must still be pursued from the point of view that we, as responsible caretakers of the planet, must find alternative energy resources. I agree with the sentiment, but why does that require the US to pay $100 million in “reparations” to the biggest and third biggest CO2 emitters on the planet, China and India? And if CO2 is no longer implied as an imminent environmental disaster, why create another inflationary fiat currency such as CO2 certificates to control it? What is wrong with simply stimulating scientifically viable alternative energy sources with tax incentives as part of a broader economic stimulus, which we need anyway? As I’ve previously stated, the effects of Cap & Trade on the environment are meager, probably unmeasurable, but the effects on the economy will be extreme and in the wrong direction. It makes sense to use stimulus moneys to create long-term incentives for solar energy, wind power, geothermal and ground source heat, for better window insulation technology, for a real third-generation nuclear reactor design, and for development of the Baaken crude under the Rockies. Deep water drilling offshore is the exclusive domain of the oil majors,and Obama made a concession to them.

As the Republican governor form Virginia pointed out, we all want to reform our current flawed and expensive health insurance system. We spend twice as much of our GDP on health care as the U.K. with inferior health results. The first and obvious thing to fix is tort reform, but neither Reid nor Pelosi made any substantial fixes to this problem. That alone would bring the cost curve down sharp and fast. Instead we have an overbearing Federal bureaucracy, an mandate for individuals to BUY insurance or go to jail, and no local control in the system anywhere. Your doctor becomes a utility worker for the state in ten years under this plan, and your taxes go way up. In the U.K. every one has 11% of his or her pay withheld for the NHS. It covers everything but a nominal “shilling” prescription fee, and the administration is done by local NHS boards. It is simple and it works. Those that can afford a Harley Street doctor are free to engage one without fear of a penalty tax. France is roughly the same, and Sweden and Switzerland are better. However, Obama seems fairly pleased with the bills as they are and offered only comments about the super majority rule in the Senate as an impediment to their passing.

Much of the speech was devoted to a jobs stimulus targeting small business. It was apparent that Obama knows nothing about business, large or small, and less about the business economy. The planning horizon for hiring in any real business is longer than the whims of the current administration. It takes a long term commitment to creating and maintaining a favorable environment to cause a business owner to invest in recruiting, hiring, training and retaining a new employee. The business environment has many factors, such as the availability of loans for working capital, availability of trained personnel, prospects of competitive taxes with foreign industry over the long term, ability to start, run and grow a business with minimum government intervention, and the infrastructure for entrepreneurship and shareholder investment.

No business is going to invest in capital equipment unless there is a reasonable expectation of increased business, and a tax incentive for this one aspect will do nothing except accelerate purchasing for those who have already made that decision in the first place, followed by a crash when the incentive expires. Instead, re-instate the Section 38 Investment Credit for Research and Development to incentivize new products, give people looking for work a training grant to help them qualify for new jobs and make training a deductible expense for employees whether or not they need it for a new position or to keep their existing job. Make unsecured loans available to companies that make a profit so they can finance the raw materials and labor to expand. Stop putting punitive taxes on LLC’s and Subchapter 11 companies, so the founders and small investors have an alternative to working for the Too Big Too Fail corporations. Get rid of Sorbanes Oxley for companies with less than 1000 shareholders. Those folks know each other and inserting a million dollar auditor into the SEC filing does nothing for their transparency.

With similar lack of detail and a fondness for executive power at the Federal level, Obama is now planning a foray into education. God help us!

When he discussed the Massachusetts reversal and the election of Senator Brown, Obama showed a singular lack of understanding of his constituency. He blamed the intervention of Republicans and the insurance companies, and such “disinformation” as the death panels and the staggering deficit. In fact, it was the vote of self-motivated independents who defeated Ms. Coakley. They fear big government, they do not want the intervention of a Federal bureaucracy, with the track history of such organizations, to control their lives and certainly not their health. Most of us can read, and even a 2000 page bill put together like a rag quilt will not stop them from discerning the essence over the rhetoric. And when such a piece of junk legislation gets put together in a dark closet and voted on after midnight on Christmas Eve, after buying out the holdout Senators with illegal bribes, the stink wafts everywhere. Insurance companies that opposed the bill (most did not) probably did a dance on the boardroom table.

How could any President be so out of touch with the people?

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