28 January 2010

Mr. President, you have it all wrong

Mr. President,

In last night's speech, all of the vaguely proposed items were more government distortions of the economy to attempt to correct for grievous errors created by other government distortions. Let me make a few distinct points;
First, if you were serious about creating productive jobs in the United States, you would instruct the FTC to stop punitive and pecuniary actions against the most successful companies in the country. These companies provide tens of thousands of high paying jobs and export billions of dollars worth of goods every year. Your tariff proposals will, in the end, hurt American companies more than they will help. The economic distortions caused by tariffs have been well documented throughout history.
Second, you assert that ninety five percent of Americans received tax cuts. While this may be true, you fail to recognize that the remaining five percent pay seventy five percent of the personal income tax in this country to begin with. If you are truly interested in allowing Americans to make a better life for themselves and their children, you would demand a restructuring of the tax code that did not punish people who have toiled their entire lives to "get ahead" only to have the fruits of their labor expropriated by the government.
Third, the government "initiatives" for green energy are no more than hand-outs for pet projects. Corn based ethanol is the direct result of government incentives in the energy market. It consumes more energy than it produces while depleting arable land. Ask any farmer what happens if they plant corn in the same area year after year. They end up having to fertilize heavier every year and most of those fertilizers are made from the petroleum that you find so distasteful. If you are truly concerned with making this country world class, instruct the NRC to give the green light to nuclear power plants. Your own appointee, Stephen Chu, stated that nuclear energy is the only viable alternative for electricity production for the next ten or twenty years. And while you are at it, tell Harry Reid that Yuccca Mountain is a completely viable and logical storage facility for nuclear waste.
While I am on the subject of government initiatives, where in the Constitution does it allow for tax money from all over the country to be funneled into a single, high electoral count, state for a train? A train for the East Coast should be paid for by the states that it is going to service. Better yet, let the market determine if it is financially viable and build it if it is. The most successful railroad in history was built with private capital, not government handouts.
Fourth, while it is popular to blame Wall Street for all of the speculation that led to the housing bubble, the root cause of this issue was The Federal Reserve monetary policy and the mortgage market distortions caused by Fannie Mae and Freddie Mac. A majority of distressed mortgages in this country are due to people buying more house than they could afford, or more houses than they could afford. The speculation that I am referring to is the homes purchased by individuals as rental properties, which as the market starts dropping start becoming a burden as opposed to a source of income. These people walk away from these home creating a deflation in home prices. Yes, home prices are down a distinct amount in most markets, yet a little historical analysis will show that they were over-inflated and this is simply a market correction. If you buy a house to provide shelter for your family, the deflation hurts, but you get on with your life understanding that you are still providing shelter. When an individual buys a house purely as an investment, or better yet buys the bigger house with the twisted mortgage to show their friends how well off they are, and that investment goes sour, it is like any other investment, it comes with the territory. I didn't see big government handouts flying about when the dot com bubble burst. It's fundamentally the same thing.
Fifth and finally, if you want to see the greatness of this country in action, take steps to significantly reduce the size of the Federal Government. Greatness will only be recovered through the productive use of capital in a free society. While you claim that economists on both sides of the aisle agreed that the bailout was the right thing to do, you are looking at the wrong aisle. Your promotion of Keynesian economics will not recover this economy, it will only make things worse over the long term. You are currently setting up for another round of "stagflation" that was seen during President Carter's administration. That will hurt the American people significantly more than a bubble bursting. The only way to get this country on a long term healthy road to recovery is by embracing the Austrian economic principles.
When the political class in this country realizes that they have done more harm than good over the last hundred years, we will finally be on the road to real recovery. Honest, hard working Americans are not looking for a handout or some magical government program, they simply want to live their lives free of interference.

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