Is It Within Bounds To Ask: Is Obama a Socialist?

As campaign rhetoric heats up, pundits and talking-point guys and gals debate what is on or off limits. Can or should the Democrats talk about 16-year-old “bully” Romney or about his “weirdness” (a veiled reference I guess to his Mormon faith)? Can or should the Republicans revive Reverend Wright’s black liberation rants, the Bill Ayers connection, or the President’s youthful drug use, which apparently was prolific.

One such pundit on the democrat side (who and where I forget) referred to “crazies” who call Obama a “socialist.” Such statements are beyond the pale, he declared in disgust. They are on a par with the “birther” claims.

Despite such dismissals, there is strong and legitimate interest in whether President Obama is a socialist. My Forbes piece Is President Obama Truly a Socialist continues to attract many readers three months after it was posted. It showed the remarkable overlap between Obama’s electoral platform and the Party of European Socialists, which represents leftist and socialist parties in the European parliament. My French Socialists Test Drive Obama’s Electoral Platform showed that French socialist Francois Hollande’s and Obama’s platforms are virtual carbon copies, and Hollande is quite open about and proud of being a socialist.

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Putin Leaves No Doubt, But What Did We expect?

After Putin’s close calls at the polls, naïve pundits speculated about the “compromises” he must make with democratic forces. They do not know Putin. For him, any compromise is a sign of weakness. He truly hates anyone who dares to oppose him and will do whatever he feels necessary to eliminate them.

Putin’s has made his intentions clear. He has appointed as “Presidential envoy to the Urals” an unknown shop foreman who volunteered to defend stability “with his own boys” if the police cannot handle the protesters themselves. Putin accepted his proposed method of dealing with what he called “good-for-nothing loudmouths.” Putin’s party is in the process of ramming through a reluctant parliament huge fines for protests, some in the range of a year’s salary. In those Moscow districts which elected non-Putin majorities to their city councils, Putin’s thugs prevent quorums in meetings that intend to authorize sit-ins and other forms of protesters.

Putin will not budge an inch. Let’s see what his opponents will do. The internet will not stay quiet. The protesters are developing new ways to engage in protests, such as walking around town in groups or just hanging out in parks that make the police look ridiculous when they try to arrest the “non protesters.”

We are in for an interesting time this summer.

If You Want to Understand Germany Think of Texas and California

As Greece’s exit from the Euro appears more likely, the draconic and heartless Germans are being raked over the coals throughout Europe. Germany’s stingy Merkel refuses to lend a helping hand to a drowning neighbor. Merkel and her austere Germans are not  real “Europeans.” Were it not for the Germans, Greece would have its stimulus, which it would promise to pay back when it is out of danger – sometime far down the road.

If you really want to understand the Germans, think of Texas and California. Texas must constitutionally balance its budget. A state official estimates forthcoming revenue, and the legislature must trim spending accordingly. Texas makes minimal use of gimmicks; it makes real cuts when cuts are necessary. California also must balance its budget, but it does not. It uses extreme gimmicks to overstate anticipated revenue and spending cuts that will not take place.

Compared to Texas, California is a spendthrift, spending fifty percent more per capita than Texas. Despite much lower state spending, Texas seems to do quite well. It attracts the jobs California is losing.

Imagine the reaction if some higher authority told Texas to pay for the shortfall in California’s budget? This is exactly what the Californias of Europe and  European Union bureaucrats are demanding of Germany. Germany’s reaction is exactly that of Texans to bailing out California.

Thanks but no thanks.

Should the New York Times Investigate Wal-Mart or Carlos Slim?

The  New York Times’s Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle suggests that Wal-Mart violated the Foreign Corrupt Practices Act. The smoking gun: Seven years ago, Wal-Mart de Mexico hired two outside lawyers for $8.5 million to “facilitate” store permits. The lawyers were effective:  “Legal and bureaucratic obstacles melted away after payments were made to minor officials who could thwart Wal-Mart’s growth.” Wal-Mart executives, the  article charges, did not take appropriate action after an internal investigation.

No believer in free enterprise should excuse or make light of violations of laws by Wal-Mart or any other private company. We hope that Wal-Mart moves forcefully to put this business behind it.

In its anti-Wal-Mart fervor, the Times inflates the $8.5 million into an “orchestrated campaign of bribery to win market dominance” that erected Wal-Marts on “virtually every corner of the country.”  No mention of the possibility – if not  probability – that local officials could not pass up a once in a lifetime opportunity to extort Wal-Mart.  A Wal-Mart success story explained by its “everyday low prices”  does not fit the Times’ political agenda. Greasing the palms of local officials with a few dollars is a more convenient explanation.

A few blocks away from 620 Eighth Avenue, Carlos Slim, the Times’ second largest shareholder behind the Sulzbergers, oversees his sprawling Telmex and Latin American telecommunications empires from atop Rockefeller Center. Slim is a welcome guest at the most exclusive of Manhattan cocktail parties.  Wal-Mart’s hillbilly executives from Bentonville, Arkansas would simply not fit in.

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Camp David: G-8 Platitudes Don't Solve Anything

As pundits parse words like austerity and growth, it becomes increasingly clear that Camp David platitudes mean nothing and make no difference. Headlines speak of bold agreements: “G-8 Leaders Agree to Mix Growth, Cuts” that closer reading reveals to be hot air. When German chancellor Angela Merkel injects the word “growth” into her remarks, the press breathlessly reports a weakening of her austerity stance. Barack Obama’s insistence on both growth and “fiscal discipline” resembles calls for motherhood and apple pie. The new French President Francois Hollande pushes a financial transactions tax and mutes his election rhetoric for stimulus. His post election briefings probably convinced him that he cannot spook the bond vigilantes more than he already has. British Premier David Cameron nixes Hollande’s transaction tax post haste. Newly-inaugurated President Vladimir Putin boycotts the G-8 in a huff, sending instead his stooge Prime Minister Medvedev.  There is no more idle talk of a Russian bailout contribution. Russia is doing well to manage its own crises.

The EU crisis resembles mountain climbers, tied together by ropes, scaling a rocky cliff.  One (Greece) is balanced on a thin ledge. A few others teeter perilously (Portugal, Spain, and Ireland). They know that if one falls, others could be pulled along. One the climbers (Germany) has a knife either to cut himself free or to sever the rope of climbers about to fall. The knife-wielder fears he could end up alone on the cliff.

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Student With Federal Loans: Uncle Sam Can Take 15%!

The New York Times launched a new distraction in its two and a half page expose of the student loan racket entitled A Generation Hobbled by the Soaring Cost of College. The Times deplores that college students and their parents have been duped into taking on debt like naïve home buyers, that tightfisted Republican legislatures are to blame, and that we could have avoided the problem with another stimulus. The Times does not mention that student loans are not protected by personal bankruptcy and that the federal government can garnish 15% of scofflaw wages. The real villain is Uncle Sam!

 

In typical Times fashion, the story begins with a victim, who has been taken the the cleaners:

Kelsey Griffith graduates on Sunday from Ohio Northern University. To start paying off her $120,000 in student debt, she is already working two restaurant jobs and will soon give up her apartment here to live with her parents. Her mother, who co-signed on the loans, is taking out a life insurance policy on her daughter.  “If anything ever happened, God forbid, that is my debt also,” said Ms. Griffith’s mother, Marlene Griffith. “As an 18-year-old, it sounded like a good fit to me, and the school really sold it,” said Ms. Griffith, a marketing major. “I knew a private school would cost a lot of money. But when I graduate, I’m going to owe like $900 a month. No one told me that.”

Who are the villains who duped the helpless Griffith, her parents, and others like her into taking on this unreasonable debt burden? For-profit schools, private schools with slick brochures promising ready-made financing, anti-tax republicans, and rising tuition in state schools, where Republican legislatures have cut back on higher education funding:

There is an ideological and political tug of war as well. State Representative John Patrick Carney, a Democrat, said if legislators were serious about financing higher education they could find a way, like eliminating tax breaks for corporations. He noted that even as funds for higher education were being reduced, Mr. Kasich and the Republican-controlled Legislature eliminated the state’s estate tax, which will cost the state an estimated $72 million a year.

 The subliminal message: If only Obama had gotten a second stimulus, the states would be awash in money.

The Times let slip that “federal mandates and court orders have compelled lawmakers to spend more money on Medicaid and primary education, too.”

Never one to bad mouth a federal handout program, the Times rushes to assure its readers that a wholesale default “would be unlikely to ripple through the economy with the same devastating impact as the mortgage crash. Though now larger than credit card and other consumer debt, the student loan balance remains smaller than the mortgage market, and most student loans are issued by the federal government, meaning banks wouldn’t be affected as much.”

In other words: If students don’t repay, the taxpayer will, but who worries about the taxpayer?

The Times fails to identify the real Simon Legree of the student loan program – the federal government itself. According to the Debt Collection Improvement Act (passed under Bill Clinton):

The US Department of Education (ED) is authorized to garnish 15 % percent of the erstwhile student's disposable income in lieu of unpaid student loans. The organization, that employs the student after graduating/dropping out of school, is expected to comply with rules regarding garnishment even in the event of filing bankruptcy.

As Congress debates how to pay for continued subsidization of interest rates on college loans, the Feds’ power to take 15 percent goes unnoticed.

Dr. Gregory's latest book can be found at Amazon.com.

Look to Sweden! Obama’s High-Tax Gurus

Peter Diamond and Emmanuel Saez (Wall Street Journal High Tax Rates Won't Slow Growth) offer a beguiling Leftist narrative: The 1% will cough up incremental tax revenue up to a 70 percent rate without cutting the things they do to generate economic growth. We can then use their money to fund “higher-return public investments” (such as Solyndra and the public-education black hole?) without cutting back the entitlement state.

Although Diamond’s Nobel Prize and Saez’s J. B Clark Award make them eminently credentialed, Alan Reynolds (Of Course 70% Tax Rates Are Counterproductive) exposes the convoluted contortions behind their counter-intuitive finding that a tax that leaves you 30 cents on every extra dollar does not affect your decisions to start a new business, assume extra risks, or take on new clients. That’s a hard sell for anyone who thinks about it.

Note that tax guru, Saez, sings a less confident tune when he writes for fellow economists that: “There are no convincing estimates of long-run elasticities of taxable income and marginal tax rates.”  My translation: “We really do not know how taxable income responds to high marginal rates, but we are guessing we can go up to 70 percent.” It pays to read the fine print before making the purchase.

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A Disturbing Message from a Noted Former Soviet Dissident

I received this message from noted Soviet-era dissident, Yuri Yarim-Agaev. It illustrates the current "party line" of Putin's KGB state. I cite it below with Yuri's permission:. I and Yuri would appreciate comments.

Gentlemen,

I recently watched two movies, which you may find interesting. One is an eight part documentary СССР, крушение (The Collapse of the USSR). Another one, Товарищ Сталин (Comrade Stalin) is a four-part fiction, with a claim to historical truth. (Links attached). Both are very biased and promote the current position of the KGB that it was the guardian of the State, rather than of Communism. The positive characters in the second movie, Stalin and Beria, are “protectors of the state” (государственники); the negative characters, Suslov and Khrushchev, are party ideologues.

There are very disturbing episodes concerning Andrei Sakharov in both of these series. At the end of the second part of СССР, крушение, Philip Bobkov, the former head of the 5th Directorate of the KGB, who was responsible for persecuting dissidents, states that they did not exile Sakharov to Gorky, and that it was Sakharov’s own decision to move there. There are several other outrageous lies in the same episode, none of them challenged by the narrator or rebutted by any other participant.

In Товарищ Сталин, also coincidentaly, at the end of the second part, Beria, who at that time headed the A-bomb project, comes to Stalin. Stalin tells him that he received information that the young scientist Sakharov asked to send him 15,000 political prisoners to complete his experiment, and Beria had not provided them yet. Beria complains that he cannot keep up with Sakharov’s ongoing requests for political prisoners whom he disposes like flies in his experiments.

These two episodes are good reminders that the KGB/FSB hasn’t changed much and continues to pursue its propaganda and active measures. The latter includes disseminating false facts, fabricating documents, and embedding their agents in our ranks. 

Have we forgotten that? Sometimes it seems to me that we have become too complacent and lost our scruples when we give too much validity to the archives only because they come from Soviet secret vaults, when we grant too much credulity to testimonies of former Soviet officials only because they occupied high positions, and when we embrace as our peers people from Russia of very questionable background and views. 

 I do not suggest ignoring documents or testimonies. They can provide us with many important facts--as long as we remember their origin and view them in a more general context.

Questioning China's Economic Model: One Spark?

The New York Times’ As Growth Slows, China’s Economic Model is Questioned sets a tone in marked contrast with its enthusiastic accounts of China’s prowess. One of its most respected columnists, Thomas Friedman, has been singing the praises of  Chinese infrastructure for years. In New York City, Friedman sees potholes. In China, gleaming highways. Friedman never met a cement mixer he does not like. China has plenty. We have too few because the Republicans won’t authorize an infrastructure bank. We have political stalemate, while China is run by wise technocrats dressed in muted business suits who decide what is best for the country and are not hobbled by the rule of law, property rights, and other small things that get in the way of progress.

The Times piece raises an uncomfortable question for those who regard the Chinese model as the way of the future. Could it be that China is a house of cards, ripped apart by political infighting over political power and spoils, that is kept alive only by embattled  private enterprise?  Could it be that the polite men in dark business suits, who are feted in Washington as our equals, rob state enterprises for their personal benefit, suppress dissent because they know that one spark can destroy their party monopoly, and compete among themselves to see who can waste public savings the fastest by pouring concrete faster than their regional competitors.

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To WSJ: Get the Headline Right: “Europe [Does Not] Delay Bailout Payment"

The WSJ headline reads: “Europe Delays Bailout Payment.” If you read the article, it says that the Eurozone lenders  released only 4.2 billion Euro instead of the agreed-upon 5.2 billion. The remainder, Eurozone governments threaten, will not be paid unless Greece forms a coalition government that will honor its austerity pact.  Remarkably the 4.3 billion covers the 3.3 billion Greece must pay next week. The slow drip-drip torture continues.

There is no way Greece can form a government that will adhere to its austerity agreements. The Eurozone leaders might as well bite the bullet now and save a few billion Euros.

It is time to recognize that the heart patient is terminal. There is nothing to be done short of a heart transplant of a blank check.

Buy Shares of Russian State Companies: This Time We’ll Behave

Russia’s advertising supplement in the New York Times carries an amusing headline: “New Russian Government to Back Privatization Effort.” Apparently the new Russian government wants to sell minority shares in ten state companies, including Sberbank, United Grain, and Novorosiisk Port. The article immediately below it is entitled “Moscow Welcomes Foreign Business.” The red carpet is out for foreign investors, so it seems.

The lead article explains that First Deputy Prime Minister Shuvalov is prepared to go ahead with the sale but that “influential” Deputy Prime Minister Sechin wants to wait until the prices are higher. I think Sechin would have to wait quite a while.

Sechin might be asked why share prices of Russian state companies are so low?  Gazprom, for example, has more reserves than ExxonMobil but sells for a tiny fraction. Why? Everyone knows how corruptly and incompetently Russian state companies are run. Gazprom is among the worst. Now the new Russian government expects naïve foreign investors to forget that there are no real audits of the companies to be sold, that the true owners are masked, and that these companies are run in the interests of the insider shareholders from Putin’s inner circle. Do not forget the past history of dilution and other cavalier treatment of minority shareholders. But the new Russian government is promising that this time will be different. Let’s wait and see.

The only reason to consider buying shares of Russian state companies is to wager that the corruption and mismanagement have been more than fully discounted. Investors cannot invest for value considerations.

If any one doubts what I am saying go to Alexei Navalny’s publication on his web site of the official audit commission report that shows that the management of the state pipeline company stole $5 billion. Navalny is not citing secret documents, but publicly available documents. This news did not seem to turn any heads. This is business as usual in Russia.

Consider United Grain and Novorosiisk Port. Both engage in activities that invite corruption and embezzlement by management. Tales of the corruption of Novorosiisk port have been floating around for a decade.

We’ll see how many foreign investors will walk down Russia’s new red carpet.

Dr. Gregory's latest book can be found at Amazon.com.

Swiss Try to Shut the Flood Gates for French Capital Flight

A well-informed colleague related to me that he had spoken with Swiss banking authorities trying to stem the flow of French capital into Switzerland. Wealthy French families have been spooked by the election of a socialist president threatening them with 75 percent tax rates. They cannot park their money inside the Euro zone; so they are flooding  Switzerland and England with capital flight.  The Swiss will likely impose a "parking fee" on incoming capital high enough to keep it within manageable proportions. If not, Swiss tourism and exports will be priced out of the market and the Swiss economy will take a nose dive. New York City realtors are also reporting French purchases of high end real estate.

Capital flight is the last thing France needs given its pressing borrowing constraints.

Dr. Gregory's latest book can be found at Amazon.com.

Lost in the Crowd: Putin’s Business-As-Usual Inauguration

Were it not for the French, Greece, and Schleswig-Holstein elections on Sunday, Putin’s inauguration for his third term would have been the top news.

The ceremony included a tepid speech by outgoing “President” Medvedev (“Putin was elected by a majority of voters”), comic-opera marching soldiers, inspiring Tchaikovsky, marches, and the singing of the revamped Soviet national hymn. Putin marched alone down the red carpet of the Kremlin Palace in his characteristic swagger and administered the oath to himself, after which the chairman of the constitutional court, clad in mortarboard and black academic robes, declared Putin president of the Russian Federation. The Ceremony ended, Putin re-transversed the red carpet, pausing at the end to greet well wishers.

Putin’s address made no reference to reforms. Nor did it offer any conciliatory words for those who oppose him, although tens of thousands of protesters had demonstrated angrily on Moscow streets the day before. The beatings and mass arrests Putin’s forces delivered to the demonstrators spoke volumes about his intentions towards any one who stands in his way.

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U.S. Democracy Versus Putin's Democracy

Left caption: Obama inauguration

Right caption: Putin's inauguration

Marco Rubio on Fox News Sunday with Chris Wallace

Chris Wallace devoted a half hour to an interview with Marco Rubio yesterday. This was the first time I have really seen him in action. Rubio is articulate, knows the issues, has ideas of his own, and is a good debater.

If he has no major skeletons in his closet, Romney should sign him on ASAP to get him into the campaign conversation.

My overall reaction:  WOW!

Dr. Gregory's latest book can be found at Amazon.com.

The Handling of Chen Is a Shame. Romney is Correct

The Sunday talk shows and the New York Times are attacking Romney for calling the handling of the Chen case a "shame for America." Romney, they say, spoke too soon. Hillary has worked out a good deal that will bring Chen and his family to the U.S. to "study."

Romney should hold his ground. The Chen case was badly fumbled and must be called a cave in to the Chinese.

When Chen left the U.S. Embassy, we lost all leverage. His family would have been as safe as possible with him in the embassy. We could have begun negotiations without undue haste to arrange a reasonable solution for Chen, his family, and for those who helped him. Once we delivered Chen to the Chinese authorities, we lost all leverage.

Hillary, who claims that negotiations are proceeding well with respect to visas for Chen and his family, is totally at the mercy of her Chinese interlocutors. She holds no cards. Chen's colleagues, who aided his escape, are left out in the cold.

Romney is right. We shamefully caved in to the Chinese either through ineptitude or self interest.

Dr. Gregory's latest book can be purchased at Amazon.com.

Hollande Wins and Europe Descends into No-Man’s Land

Socialist candidate Hollande has won the French election as expected. His high-tax, pro-stimulus, welfare-state-protection platform, in effect, scuttles the Eurozone rescue program engineered by Merkel and a reluctant Sarkozy.

Hollande’s election leaves the European Union with three stark choices, none of which are good: 1) Germany and the European Central Bank cave and bail out any and all debtor countries under the cover of some fictitious future fiscal discipline, or 2) The Eurozone countries muddle along from one band-aid fix to the next as the bond vigilantes breathe down their necks while they hope to catch a break, or 3) Germany and the Nordic states withdraw from the Eurozone to their own currency. The rest of the Eurozone can stay on the devalued Euro or revert to their own currencies.

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Chen Guangcheng: A Day of Shame for the U.S.

We only know that blind dissident Chen Guangcheng is in a Chinese hospital out of the range of American protection. According to preliminary reports, Chen was pressured by U.S. officials to leave the embassy. Chen, knowing the consequences, would have left American protection only to save his family. During his house arrest, Chen’s wife had been severely beaten. Unconfirmed but believable reports suggest Chinese authorities threatened to beat her to death. His escape and appearance at the U.S. embassy so outraged and unnerved Chinese officials that Chen knew that they would not hesitate to carry out their threat.
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Medical Costs Slowing Down? Obama Care Will Take Care of That

The New York Times’ In Hopeful Sign, Health Spending is Flattening Out cheerfully announced the slowing of health spending growth in the past few years. The article is featured as the top page one new story. The author, Anita Lowry, ponders whether we might be able to dispense with austerity now that one of our main fiscal problems is solving itself.

Lowry’s readers discover that the recession has been the major cause of the slowdown in health-care spending. Unless recession becomes permanent, we cannot count on it to “bend the medical cost curve downwards” (one of the most awful examples of Washington bureaucratize). But Lowry assures us that there are  other factors “changing the behavior by consumers and health care providers” in the right direction:

“Many experts — and the Medicare and Medicaid center itself — point to the explosion of high-deductible plans, in which consumers have lower premiums but pay more out of pocket, as one main factor. The share of employees enrolled in high-deductible plans surged to 13 percent in 2011 from 3 percent in 2006, according to Mercer Consulting.That means thousands of consumers with an incentive to think twice about heading to the doctor.  RAND Corporation found that health spending among people who shifted into a high-deductible plan dropped [a huge] 14 percent — though the study also found that enrollees cut back on some care that tended to save money in the long run, like vaccinations.”

What Lowry has discovered is that when we use the market to allocate medical care, remarkably “consumers think twice.” They run to the doctor less, they demand generic drugs. Maybe they take better care of themselves.  Well, Lowry grumbles a little about using markets. People might make the wrong decisions. They may forego vaccinations!  But maybe it is worth it because slowing the growth of health spending offers “some fuel for optimism about the federal government’s long-term fiscal performance.” Foolish people may die of the flu, but we can have our infrastructure bank.

It turns out we will not have to worry about the downward-bending health-care cost curve if and when Obama Care goes into effect. In its ObamaCare Rule May Bar HSAs, Low-Cost Health Plans, the Investors Business Daily points out that so-called Bronze health care plans (the high deductible plans of which Lowry writes) will be phased out. They may lower health care costs, but they will not be around. They do not pass the muster of Obama Care’s bureaucrats.

Under ObamaCare, non-partisan technocrats decide which medical services should be expanded and which cut back. Such decisions are not to be left to families who have to “think twice” about how they spend their money.

Dr. Gregory's latest book can be found at Amazon.com.