Quote of the Day

Bernie Schaeffer, of Schaeffer Research, had the quote of the day commenting on Chairman Bernake's performance before the House Budget Committee:

"If he could bring himself up to the level of useless, it would be a vast improvement."

Another Confused Democrat - Poor Representative Kaptur

Marcy Kaptur, (D) Ohio, provided the one amusing moment during Chairman Bernake's testimony to the House Budget Committee today. One of her many questions related to the culpability of Wall Street investment firms in creating the housing credit mess. She said that since Chairman Bernake's previous job was as the former CEO of Goldman Sachs she would appreciate his views.

Aides and Chairman Bernake were quick to point out that the former CEO of Goldman Sachs was Treasury Secretary, Hank Paulson. Representative Kaptur looked confused for a moment and then said something to effect of "Oh, you're the other one". I'm pretty sure she has absolutely no idea who Ben Bernake is or what his responsibility is.

Chairman Bernake wryly said that his former job was "CEO of the Princeton Economic Department". Marcy Kaptur may have a bright future one day as Democratic Speaker of the House.

Viva Las Vegas

Last March the Democratic Party of Nevada set the schedule and rules for this weekend's Nevada Democratic caucus. In an effort to enable more individuals to vote, the Party set up special "at large" precincts that would allow casino workers to vote at a number of major casinos.

Six individuals and the Nevada teacher's union have filed suit to block voters working on "the strip" from voting in the special at large precincts. They argue that the way the Party defined the at large precincts and how the delegates will be allocated, the at large precincts will have a disproportionately large say in delegates to the state convention. I won't take you through all the math. Here is a link to the lawsuit.

http://graphics.nytimes.com/packages/pdf/politics/20080112_nevada_lawsuit.pdf

If what is described in the lawsuit is correct, then it certainly does seem unfair. But the timing of the lawsuit is curious. It was filed just 2 days after the Nevada Culinary Union chose to endorse Barack Obama. This is the largest block of voter in the state that belong to a unified group. And yes, most of them work in and around the casinos on the strip.

These new rules have been in place since last March. Did someone really just figure out that the rules were screwy? It certainly seems like the at large precincts were OK when it would benefit the candidate supported by the Democratic Party machine - Hillary Clinton. Now, suddenly, there is a race to block it before it can benefit Senator Obama.

A local television reporter asked Bill Clinton about the lawsuit and its curious timing. Bill Clinton bullied the reporter, and in his best "I did not have sex with that woman, Ms. Lewinsky" tone, angrily denied that he had anything to do with the lawsuit. But then he proceeded to articulate the points in the lawsuit and defend the suit as valid and important.

The Democratic Party is going to enforce an ID check at these at large precincts to make sure that only people that work within 2 1/2 miles of the strip will vote in these special precincts. This is only days after liberals, with the passionate support of the Democratic Party, argued before the U.S. Supreme Court that voter ID laws would disenfranchise voters and was fundamentally un-American. The honor system is OK for elections but not for the Democratic primaries? That's rich.

Postscript: since publishing this entry the court has ruled ruled against the lawsuit. The casino "at large" precincts will go on as the Democratic Party originally specified.

Larry, Moe & Curly - Which One is Chairman Bernake?

Ben Stein wrote an excellent article in this Sunday's New York Times. He compares the Federal Reserve to the 3 Stooges. They just don't get it and keep hitting the wrong person in the head.

http://www.nytimes.com/2008/01/13/business/13every.html?_r=1&scp=1&sq=ben+stein&oref=slogin

Mr. Stein argues that the Federal Reserve has been reluctant to cut rates deeply and quickly enough due to worries about oil-fueled inflation. But he correctly points out that none of the reasons that oil, and as a corollary, food prices due to the ethanol boondoggle, are in the control of the Federal Reserve.

They cannot affect these elements of inflation. But they can provide the credit the economy needs to reaccelerate. The Fed can do more to convince the banking system that they "have their back" so the banks can lend with confidence.

From Bad to Worse

The market free fall continues. This morning the retail numbers were terrible. Citigroup's results and announcements accelerated the decline. Citi had an opportunity to throw in the kitchen sink this morning but it does not appear to have done so. Citi announced an additional $18B in write-downs and slashed the dividend by 41%. Citi also stated that it would have a reduction in force of 4,500.

None of these moves was sufficient. Citi had an opportunity to really be aggressive and it seems that they were not. The Street believes that more write-downs are likely. When a new CEO comes in it is a chance to make a clean sweep, however ugly, and then beginning to build his own legacy. The Street thinks that the layoffs should have gone deeper and that the dividend cut should have been more aggressive.

Two themes appear to be in play. First, the failure to throw in the kitchen sink may be a function of promoting from within. I had previously written that it was a mistake to promote a new CEO from within. This limits the transformational power of the new CEO. I also suspect that the dividend not being reduced further may have been due to a negotiation with Citi's Middle East major investor - an investor that can not be too happy these days.

After the bell tonight Intel announced earnings that did not meet analyst expectations. The stock, which was already down substantially, took a 16% hit. That is when you know things are bad. When a slight miss by a bellweather makes a move down like that it means that the bottom is not here yet.

Will the Fed make an aggressive move before their scheduled meeting on the 30th? It would be interesting if the Fed cut rates by 50 basis points on Friday morning, blowing the shorts out of the water on January options expiration.

The Clintons Hit Obama Hard

I find it quite amusing that all of the sudden the Democrats and their mainstream media find themselves in the very uncomfortable position of arguing about race. And the Clintons are gearing up for a bare knuckles brawl to take down Obama.

Hillary Clinton sat placidly by while her surrogate, Bob Johnson, founder and owner of BET Entertainment, drove the attack. Mr. Johnson made thinly veiled references to Barack Obama's youthful drug use. Then he dropped the hammer and suggested that Senator Obama was acting like Sidney Poitier, a clear insinuation that Obama is not "black enough".

It was not unlike when Hillary stood by smiling while the wife of Yasser Arafat spewed the most vile anti-Israel venom. Hillary's explanation that time was that was that she does not understand Arabic and so she did not realize what was being said. I don't think that explanation will work with Bob Johnson's comments. He made them in English, which I believe Hillary understands.

Now the Clinton and Obama camps have declared a truce - for now. Truce or no, it certainly makes for an entertaining spectator sport. The mainstream media may be giving Obama a pass but the Clintons clearly are not. Senator Obama makes the Democratic machine uncomfortable. He is a young, successful, black politician that is not beholden to the Democratic machine like other black Democratic leaders such as Charlie Rangel and John Lewis who owe their careers and power to the party.

Is the Risk of Recession Overblown?

The economy has slowed down. Are we headed for a soft landing or are we going to have a recession? On one front there is no question that the financial sector and the housing sector have fallen on hard times. While the core banking system is going to be fine (albeit with substantial write-offs) the extended financial sector that was exuberantly fueled by Greenspan's flood of liquidity and credit has been devastated. The housing sector clearly got ahead of itself and will take years to fully recover.

However, I find it highly unlikely that housing prices are going to experience a net decrease in value across our country of up to 30% like some are calling for. In cities like Atlanta, where I live, the valuations were never wildly inflated and should not experience the correction that will be occur in frothier markets like Florida.

Valuations for the financial sector have come down about 50% from the peak. This is about where the bottom occurred in the financial sector meltdown in 1990. There are signs that a bottom is forming.

Citigroup is expected to dramatically slash its dividend tomorrow. This is actually a positive sign that the new CEO is taking the right actions to shore up the firm and I will be surprised if the stock takes a major hit tomorrow as a result of this decision. Bank of America (BAC) buying out the remainder of Countrywide will ultimately propel BAC to further dominate retail banking in the United States.

The classic definition of a recession is negative GDP growth for two consecutive quarters. By this definition we are nowhere close to a recession. GDP numbers for the previous two quarters were very impressive. Excluding the financial sector corporate profits will be up substantially in the forth quarter. There is no question that there has be a slowdown and that the GDP numbers for the next two quarters will be much less robust. But the Federal Reserve is currently not predicting a recession, just a slowdown.

In addition to the "classic" definition there are four more detailed indicators that are monitored to determine whether we are in a recession.

1. Industrial Production: industrial production has declined from the peak, after steady gains for a long time.
2. Employment: payroll numbers continue to be strong, but household survey numbers show a decline of 1M jobs. Last Friday jobs reports was decidedly soft. But I expect that number to be revised upwards. There has been positive job creation for 52 straight months, an unprecedented record.
3. Personal Incomes: personal income continues to exhibit strong growth. Real wages (net of inflation) continue to grow at an impressive 2%.
4. Manufacturing & Trade: manufacturing and trade continues to be quite strong.

The bottom line is that two out of the four indicators are showing weakness while the other two continue to exhibit strength. In particular, the employment number bears close monitoring. While jobs and income are strong, a recession will be much less likely.

Disclosure: at the time of this posting the author was long BAC.

Debunking the Liberal Argument Against Voter ID's

A number of states have enacted laws requiring a government issued ID to vote. Indiana's voter identification law is now being argued before the Supreme Court. Cynthia Tucker, head of the editorial board for the Atlanta Journal-Constitution ("AJC"), made the liberal argument against voter ID laws in today's AJC. Since most liberal positions don't stand up to facts or logic let's take a look at her statements and arguments and see if they hold up.

AJC - If the U.S. Supreme Court upholds Indiana's harsh voter ID law, as it seems poised to do, hundreds of thousands of [minorities] should march in protest...should convene the biggest political demonstration since the historic March on Washington in 1963.

This must mean that this is the most important issue that has faced American minorities since the systemic and institutional discrimination that plagued our country for generations. While much progress has been made, I find it hard to believe that with all the challenges still faced by minorities that the Supreme Court's decision on voter ID laws should trigger the largest political protest in 45 years. But let's look at the key points of her argument and see if it is so.

AJC - "There has never — never — been a single documented case of "voter impersonation" at the ballot box..."

John Fund, author of the book "Stealing Elections: How Voter Fraud Threatens Our Democracy", points out a number of examples that contradict Cynthia Tucker's assertion. In the 1980's the District Attorney of Brooklyn detailed a massive, 14 year conspiracy that recruited people to place votes as fraudulently registered voters, dead voters, or voters that had moved.

Mr. Fund also documents that in the hotly contested Washington state governor's race that was decided by 129 votes ineligible felons voted and votes were cast in the name of people that were dead but were still on the voter rolls. In Milwaukee, Wisconsin, in a very close 2004 presidential vote more than 200 felons illegally voted and 100 people voted twice. A New York Daily News investigation found that between 400 and 1,000 people in New York and Florida voted twice in recent elections. In Florida, where the disputed 2000 presidential election was decided by 547 votes, there are still 65,000 dead people listed on the voter rolls - no opportunity for voter fraud there!

In addition, it is widely acknowledged today by presidential scholars and historians that John F. Kennedy would not have won the presidency if it had not been for massive voter fraud in Chicago (compliments of Mayor Daley) and in Texas (home state of Vice Presidential candidate Lyndon Johnson). Richard Nixon had a legitimate case to challenge the election. But in those less litigious times he decided that it would undermine the country to do so.

AJC - "...absentee ballots [are] where most voter fraud occurs. But because absentee voters tend to vote Republican, many GOP-dominated legislatures have made absentee balloting rules less stringent..."

Most of the people that need to use the absentee process are business people that travel extensively and the military. It is true that both successful people in business and the defenders of our country vote for Republicans over Democrats. There have been problems documented regarding absentee ballets, and I have no problem with increasing the stringency of the absentee process. An oft-cited example of absentee voter fraud is the 2003 East Chicago, Indiana case. Unfortunately for Cynthia Tucker and the left, this was a Democratic primary and the fraud was perpetrated by Democrats, not the GOP.

AJC - "[Mary Jo Criswell's] ballot was thrown out when she showed up at her Indiana polling place expecting to use the same forms of ID, including a bank card with a photo, that she had used in the past. She has epilepsy, she says, so she has never had a driver's license."

In fact no one, including Mary Jo Criswell, had their ballots thrown out. The 34 people that did not have the proper ID were allowed to cast provisional ballots. They had the option of returning within 10 days to provide the proper identification. In a very close election additional steps could be taken to validate these provisional ballots. No one was disenfranchised. In both Indiana and states such as Georgia a free government ID will be provided if an individual does not have a driver's license or other acceptable identification.

AJC - "With so many elections decided by a margin of a few hundred votes, Republicans figure they can stay in power by blocking just a few Democratic ballots."

An honor system only works if all involved have honor. The political history of our country offers plenty of cautionary tales why the most important constitutional duty we have a citizens, to vote, is best not left to an honor system. In 2005 a bipartisan commission led by James Baker and President Jimmy Carter recommended voter ID laws more stringent than Indiana's. The commission correctly pointed out that more than 100 democracies around the world have voter ID laws without disenfranchising anyone.

The lady who cuts my hair has to have a state license to legally do so. A driver's license is required to drive a car. A government issued ID is required in today's dangerous world to enter a federal building or to cash a check. Are any of these examples more important than making sure that we take all measures to ensure that we protect the most fundamental foundation of our Republic: one person, one vote?

In fact the reason the liberals object to voter ID laws is because most voter fraud is perpetrated to the benefit of Democrats. As one example a major election cycle never goes by without voter registration shenanigans by Acorn, a liberal activist group. The GOP has just never been as good at the type of bare knuckles, win at all costs, the end justifies the means tactics that the Democrats excel in. Just "Google" voter fraud and see what comes up.

Clowns to the Left of Me, Jokers to the Right

With apologies to Bob Dylan, I am struck by the lyrics of his song, Stuck In the Middle with You, when evaluating our politicians' and Federal Reserve's responses to our current economic predicament. An excerpt of the lyrics includes:

Clowns to the left of me!
Jokers to the right!
Here I am stuck in the middle with you.

Yes I'm stuck in the middle with you,
and I'm wondering what it is I should do.
Its so hard to keep this smile from my face.
Losing control yeah I'm all over the place.

Clowns to the left of me!
Jokers to the right!
Here I am stuck in the middle with you.

On the left, Hillary Clinton has proposed a $70B self-described stimulus package. I say "self-described" because is a proposal that has no stimulus and in fact may have the opposite effect. It includes $30B of money for people in danger of foreclosure, $20B to pay for people's heating bills, and $10B for additional unemployment benefits. These may or may not be good things things to do, but there is nothing stimulative about them. When you take money away from people that are productive and from people who have the ability to create jobs, and give it to people that are not productive and do not create jobs, it is the opposite of stimulative. The non-producers are enabled and the producers are disincented.

I expect these types of policy oxymorons from the left. But what is even more frustrating is that President Bush and other Republicans are talking up some of the same type of demand side Keynesian nonsense. President Bush is discussing a tax "pre-bate" which would give money to to middle and lower income families. None of this is stimulative. It is just the government writing checks to redistribute income.

Let's extend the liberal demand side argument to its ultimate conclusion. What would happen if the government took all the money from the entrepreneurs, investors, capital creators, and producers and gave it to everyone else? Well, then there would be no economy. Stimulus incentivizes capital creation, investments, risk-taking and therefore productivity and job creation.

For starters the Federal Reserve needs to quit treating this an academic exercise and aggressively cut the target federal funds rate. Continuing to insist on a target rate that is inverted to the T-Bill rates is nuts. This effectively imposes a tax on member banks. The bond market is telling the Fed the correct target rate.

In contrast to Hillary's non-stimulus stimulus proposal the government can quickly add true stimulus to the economy. One simple way is to allow companies to temporarily accelerate depreciation. This will increase the velocity of new investments and will stimulate the economy. On a longer term structural basis the Congress needs to cut the corporate income tax rate so that the United States is more competitive with the rest of the world. This could also be done quickly and would be hugely stimulative to the economy.

Incentives matter. Risk taking and entrepreneurship matters. The continuing worldwide economic boom is a direct result of countries throughout the world adopting capitalist and supply side principles. Almost all of Eastern Europe has now adopted a flat tax. Growth in India, China and Eastern Europe is exploding as a result of these reforms. Meanwhile both the clowns to the left and the jokers to the right drift toward a Keynesian demand side funk that ignores incentives and will not stimulate the economy.

Which Candidates Are Still Viable?

First, time for some eliminations in the current Presidential campaign. For the Democrats, Chris Dodd and Joe Bidden have dropped out. Neither ever had a chance and would have served the American people better by actually getting something done in the Senate where they are both committee chairmen. Bill Richardson continues to hang on but he is running more for Vice President than President. Dennis Kucinich is just there for comic relief.

For the Republicans, Ron Paul is entertaining, but not a serious candidate. I did enjoy his rant at Chairman Ben Bernake the last time the Chairman testified before Congress. Is Duncan Hunter still in the race? Who knows. Fred Thompson is the only true conservative in the GOP race but is not mounting a serious campaign. His wife seems more inspiring then Fred.

I'm sure I've forgotten some candidates. But if I have, then they are not relevant anyway. Who remains? The survivors are Hillary Clinton, Barack Obama John Edwards for the Democrats and Mike Huckabee, Mitt Romney, John McCain and Rudy Giuliani for the Republicans.

I will be very surprised if John Edwards increases his position from distant third. His angry populist rhetoric will be drowned out by Obama's polished populist rhetoric and the Clinton political machine.

Barack Obama almost beat Hillary Clinton in New Hampshire, a state where the demographics are almost all white. As the campaign moves into states where there is a higher percentage of black voters, like South Carolina (one third of Democratic voters are black), he could post very strong results. Barack won the younger vote in New Hampshire by a factor of 3 to 1. Barack's positions are very, very liberal. But he is rarely challenged by the press. NBC's correspondent assigned to cover him was caught on video saying he was so caught up in Obama that he could not be objective. The media is giving Obama a pass. I'll be surprised if the Clinton machine doesn't put a full court press on getting negative stories run in the press.

Hillary Clinton's campaign continues to waver between the professional machine we've come to expect from the Clinton's and surprisingly stupid gaffs. The latest inexplicable stumble was in a recent New Hampshire rally. The rally was held in an auditorium with an overflow room set up nearby. The rally was not particularly well attended and there was plenty of room in the auditorium. But the Clinton campaign split the attendees, put a bunch in the overflow room, making them very disappointed and angry not to be able to see Hillary Clinton live. I guess the Clinton campaign wanted the press to report that they had to use the overflow room. Very silly.

But Hillary Clinton being able to take down her guard and be human certainly helped her with her female base. She will continue to be a formidable candidate with the biggest "machine" and a strong national ground game. In fact, I believe that the Clinton's ability to execute a superior ground game was the difference in Hillary Clinton besting Obama in New Hampshire when the polls predicted an Obama landslide.

Rudy Giuliani got off to a fast start but has faded. He has not done well in either Iowa or New Hampshire. He has much stronger positions in later state primaries, but I wonder how many losses he can absorb and still execute a "late state" strategy. Mike Huckabee dominated Iowa but was a distant third in New Hampshire. I believe the Mike Huckabee will struggle to establish himself as a national candidate. He is an excellent debater and extemporaneous speaker. But his record in Arkansas will ultimately be his downfall. He doesn't have a machine but Christian groups and homeschoolers have self-organized to Huckabee's benefit. I suppose if Jimmy Carter could do it maybe Governor Huckabee can too.

John McCain is the tortoise to Rudy's hare. His steady, straight-talking style has won over a lot of voters. His position that we must win in Iraq hurt him early but is looking prescient now. He has cleaned up some of his positions that were hurting him with the GOP base. He came across in New Hampshire as the "grown up" in a field of kids.

Mitt Romney is the manufactured candidate for the GOP, much as Hillary Clinton is the same for the Democrats. But he is smart, articulate and brings the joint credentials of success in business and in government. Governor Romney's positions are right in the sweet spot of the GOP base, but there are doubts about the strength of his convictions. Hillary Clinton has no convictions or policy principles - only the ambition to win at any cost.

As an aside, Mitt Romney has the best web site by far. It is well designed. It is easy to review the candidate's positions. It is easy to see what Governor Romney has said about critical subjects. Hillary Clinton's web site is a close second, but does not do as good a job at making her positions and policies crystal clear. John McCain's web site is uninspiring. Barack Obama's site overwhelms you with the sheer number of policy proposals. It is almost like Obama got together with MoveOn.org and brainstormed as many liberal items as they could come up with. In a word, it is less focused. John Edwards' site is long-winded, just like the candidate.

Unfortunately, I do not believe that Nicolas Sarcozy is eligible to run for President of the United States.

Postscript: as I wrote this blog entry, Bill Richardson dropped out of the race.

What Does Barack Obama Really Stand For?

Barack Obama is an engaging and charismatic candidate for President and is without question one of the best public speakers in a generation. Some wonder if Senator Barack has the government and life experiences to truly be President of the United States. Even John F. Kennedy served full terms in both the House of Representatives and the Senate before becoming President.

But all that aside, what does Barack Obama really believe in? What are his answers for the challenges facing America? It is difficult to draw any conclusions from Senator Obama's stump speeches on the campaign trail. They are full of populist platitudes but short on specifics. Barack Obama does certainly get the award for using the word "change" the most.

There was a day when candidates for president put out thick books on their proposed policies. Today that has been replaced with the Internet, but often with less specifics. Nevertheless, I have taken the time to review Senator Obama's web site (http://www.barackobama.com/) to see what can be gleaned. Unfortunately the details on how exactly certain policies would be enacted is absent. But some conclusions can be made. There are too many topics to cover but a sample.

There is one part of the Obama campaign I find particularly amusing. A central theme of his stump speeches is that he will bring a new era of non-partisanship to Washington, D.C. But the policies advocated on his web site are highly partisan with a strong focus on populism and class warfare.

The "Issues" section of the web site is organized into a number of topics such as "Economy", "Fiscal", "Education", etc. Each of these topics has "The Problem" followed by "Barack Obama's Plan". The following are some highlights of Senator Obama's platform.

"Economy" is always a good place to start in understanding a candidate. The problem section states that wages are stagnant and that the Bush tax cuts favored the wealthy at the expense of the middle class. Neither of these statements are true. Real wages are increasing at a strong rate - much faster than inflation. Jobs have been created every month for 52 months - an unprecedented record. The Bush tax cuts benefited all Americans, wealthy and middle class.

Barack Obama's plan for the economy is to raise taxes on the wealthy and provide a tax cut to the middle class. When you raise taxes on one group and cut taxes for another group, that is not tax relief, it is a government mandated transfer of wealth.

There are another 35 proposals in the "Economy" section, almost all of which are on the far left side of the Democratic Party and either impose increased regulation and centralized government control of industries or are government mandated transfers of wealth. For example, regarding trade, Senator Obama advocates "fair trade" rather than "free trade". Of course this is liberal code for opposing free trade agreements - something almost every economist will tell you is a dumb idea.

Regarding labor, Senator Obama proudly highlights his co-sponsorship of the "Employee Free Choice Act". This is the bill that would eliminate the secret ballot for union organizing and replace it with signing a union card, or not, in front of the union boss and his goons. The secret ballot is a fundamental pillar of our democracy. What do you think is truly the best way to determine whether someone wants to join a union or not - secret ballot or not? The Democrats are pushing for this because unions, who are strong supporters of the Democrat Party, have lost much of their relevancy, and membership. Eliminating the secret ballot gives unions the upper hand to strong-arm prospective members to voting to organize.

Regarding housing, Senator Obama proposes allowing bankruptcy courts to unilaterally alter mortgage payment terms for borrowers. As I have previously stated, allowing the government to bust legal contracts between private parties is a frightening position. Barack Obama further advocates a whole series of proposals to punish so-called predatory lending practices. Again, per my previous posts, these "predators" were so clever that they loaned money to people with no money down who could not pay them back. Now the predators are going out of business and the borrowers are simply walking away from what was essentially a "rental".

Regarding health care, Barack Obama would imposed price controls on health insurance companies. His web site states the following:

"Barack Obama will prevent companies from abusing their monopoly power through unjustified price increases. His plan will force insurers to pay out a reasonable share of their premiums for patient care instead of keeping exorbitant amounts for profits and administration."

One of the largest insurers is United Healthcare (UNH). UNH has a profit margin of 6.16%. Cigna (CI) has a profit margin of 6.21%. Not exactly what I would call exorbitant profits. Scale in the health care industry lowers administrative costs. General Electric has a profit margin of 12.71%. Microsoft has a profit margin of 27.51%. The Coca-Cola Company has a profit margin of 19.83%. Should the government confiscate the profits of these company's too? If the health insurers are making exorbitant profits what about everyone else?

As President, according to his web site, Barack Obama would advocate the creation of dozens of new government entitlements. The proposals listed under the "Work/Family Balance" section offers some insight. Two thirds of these proposals create new entitlements or expand existing entitlements. All cost money.

Regarding foreign policy, Barack Obama would immediately begin removing troops from Iraq and would withdraw all troops within 16 months. Senator Obama does not acknowledge the success of the "surge" or the remarkable progress now being made in Iraq.

There are hundreds of proposals outlined in the "Issues" section of Barack Obama's web site. Most involve one of the following:

1. Imposing increased government control over the economy or society.


2. Transferring wealth between classes.


3. Increase government intervention and spending.


4. Create new government entitlements.

Barack Obama's self-described Presidency would be one of high taxes, anti-economic growth, increased spending and class warfare. He may be glib, he may promote "change", but his policies would hurt our country and our economy and move us further in the direction of socialism.

Disclosure: at the time of this posting the author was long UNH and MSFT.

The Rise of Populism

No Presidential race in many, many years has seen the explosion in populist rhetoric and candidates than this one. Nor is this rush to populism confined to its usual party, the Democrats. In fact, many of Republican Mike Huckabee's positions, and clearly his record as Governor of Arkansas, are decidedly populist and liberal.

Populist positions most often target economic and business issues. The best case for the economy at this moment is that we are in a mid-cycle slowdown that will re-accelerate at some point. The worst case is that we will have a recession. Some are arguing that we are already in one.

When the economy is balanced on the edge of a knife is when populist policies are most dangerous. That is because economic populism further damages the economy in exchange for protecting a relatively small number of people. But when people are faced with economic uncertainty, the rhetoric of populism is at its most alluring. But while the rhetoric appeals to fear the policies are devastating.

Populist policies call for the restriction of free trade, government imposed price and wage controls, increased regulation on business, and retaliatory trade practices against our trading partners. The facts are rarely on the side of the populists. In fact, these policies either slow the economy further, and make recovery much slower, or in fact accomplish exactly the opposite of what they are meant to achieve.

The most virulent populist on the campaign trail is John Edwards. Barak Obama is close behind him. Hillary Clinton's obsession with seizing government control of the health care industry is well known. Mike Huckabee is a Republican Jimmy Carter - a folksy populist governor with a strong religious belief system from a southern state.

It has been 31 years since Jimmy Carter was inaugurated, and passed on to Ronald Reagan an economy that was in shambles and a military that was gutted. Hopefully next January will not be the inauguration of the next Jimmy Carter.