Archive for September, 2010

Lies, damned lies, and Elizabeth Warren

September 30, 2010

“By appointing another White House czar to avoid Senate confirmation, the administration politicized the powerful new bureaucracy from its birth.  And by appointing an individual with a track record of using questionable research to advance policy ends, it has jeopardized the second goal as well.” Todd Zywicki, ‘In Elizabeth Warren We Trust?”, The Wall Street Journal, September 30, 2010

Elizabeth Warren is an American attorney and Harvard law professor who has just been appointed by President Obama as Special Advisor for the Consumer Financial Protection Bureau. At 60 years of age, Ms. Warren is yet another in that large legion of Harvard professors who look out over the Charles River, but dream of the Potomac. As with numerous others, she had to await the arrival in office of a Democratic President in order to achieve her dream. And also like numerous others, she had to slide into office by the side-door to the White House, in order to evade potentially damaging Senatorial scrutiny. Almost certainly, she would not have achieved consent, even from a Senate as unusually stacked as this one in favor of  Democrats.

As with numerous others, she has worked her way through left-wing media productions to political recognition, appearing in the movie, Maxed Out, and in Michael Moore’s bow to his American heritage, Capitalism: A Love Story, as well as being a regular feature on such television soap operas as  Dr. Phil, The Jim Lehrer Show, the Charlie Rose Talk Show, and The Daily Show.

An important reason why propogandists against capitalism establish a good footing within the left-wing media is their willingness to stretch the truth in order to make sensationalist claims that appeal to the one-minute sound-bite audience. It is always saddening to see a supposed scholar slide down that slippery but tempting slope into the left-wing hall of fame. Elizabeth Warren is just one more victim of a loss of enthusiasm for the life of scholarship.

My George Mason University colleague, Todd Zywicki, selectivily exposes Elizabeth Warren’s long-standing  lack of care with the truth in the above-cited column. In her widely cited book, The Two-Income trap: Why Middle-Class Mothers and Fathers are Going Broke (co-authored with her daughter), Warren claims that a fully-employed worker today earns less inflation-adjusted income than a fully employed worker did 30 years ago. On this basis, she explains why two income earners no longer save, but rather accumulate greater and greater debt.  As Zywicki notes, the co-authors willfully ignore the role of rising taxes as a source of middle-income woes. I would add that they also ignore the role of excessive consumption, as many two-income American families splurge on luxury good after luxury good, without saving for such items in advance. There are virtually no lay-aways in 21st century America; yet this was a common feature of the durable consumption market 30 years ago. As a one-time divorcee herself, Warren should also understand that the increasing fragility of marriage – a choice variable within the marriage market –  poses an enormous burden on household finances.

In similar fashion, as Chairman of the Congressional Oversight Panel of the Troubled Asset Relief Program, Elizabeth Warren uniformly treated home foreclosures as the result of bank fraud and the bullying of helpless homeowners. Her Panel routinely ignored the fecklessness of many mortgagees, who walked away from under-water mortgages, and the unsuitability of many low-income households to own rather than to rent properties.

In a sequence of studies purportedly linking personal bankruptcies to health problems and medical expenses, Warren systematically exaggerated the relationship, claiming first that some 46 percent of all such bankruptcies were health-care cost related, and more recently, when Obamacare was up for the vote, that 62 per cent were so caused.  In contrast, a battery of studies by the Department of Justices’, Office of of the United States Trustee – which oversees the administration of bankruptcy cases – has clearly established that fewer than 20 percent  of  personal bankruptcies are caused by health problems or medical expenses.

So, President Obama has appointed a sensationalist progressive socialist , without Senate scrutiny, to one of the most important regulatory positions in the United States. She will work without any Congressional budget constraint, drawing down her budget as a percentage of the annual revenues of The Federal Reserve Board.  No wonder the private sector is not bounding with enthusiasm to create new jobs in such a uniquely pessimistic regulatory environment.

David and Ed Miliband fatefully re-enact Genesis, Chapter 27

September 29, 2010

“And Rebekah took goodly raiment of her eldest son Esau, which were with her in the house,  and put them upon Jacob her younger son. 

 And she put the skins of the kids of the goats upon his hands, and upon the smooth of his neck.  And she gave the savoury meat and the bread, which she had prepared, into the hands of her son, Jacob. 

And he came unto his father, and said, My father: and he said, Here am I; who art thou, my son?

And Jacob said unto his father, I am Esau thy firstborn; I have done according as thou badest me: arise, I pray thee, sit and eat of my venison, that thy soul may bless me.

And Isaac said unto his son, How is it that thou hast found it so quickly, my son?  And he said, Because the LORD thy God brought it to me.

And Isaac said unto Jacob, Come near, I pray thee, that I may feel thee, my son, whether thou be my very son Esau or not.

And Jacob went near unto Isaac his father; and he felt him and said, The voice is Jacob’s voice, but the hands are the hands of Esau.

And he discerned him not, because his hands were hairy, as his brother Esau’s  hands: so he blessed him.

Genesis, Chapter 27, verses 15-23

N.B.  David Miliband’s two sons are named Isaac and Jacob!

Valerie Jarrett: shadow behind Obama’s throne

September 29, 2010

“The capital is abuzz this week over who would be the new White House chief of staff if Rahm Emanuel goes home to Chicago to pursue his mayoral dream.  While that’s an interesting question…it doesn’t tell you where the real power would be in the West Wing.  It would reside upstairs from the Oval Office, in the second-floor quarters of Valerie Jarrett….Jarrett laughed when asked by Barbara Walters whether she would become chief of staff.  ‘I love my job’, Jarrett protested. ‘I would like to do just what I’m doing.’  So she wouldn’t take the job if offered it?  ‘I want to do what I’m doing,’ she said.  ‘I don’t want to change jobs.’  And who can blame her?  Power without responsibility is a heady thing.” Dana Milbank, ‘The center of Obama’s inner circle’, The Washington Post, September 29. 2010

Valerie Bowman Jarrett is a Senior Advisor and Assistant to the President  for Public Engagement and Governmental Affairs.  She is also a Chicago lawyer, businesswoman, and civil leader. She served as co-chairman of the Obama-Biden Transition Project. She is well-acquainted with Chicago machine-politics, starting in 1987 as Deputy Corporation Counsel for Finance and Development under Mayor Harold Washington and continuing as Deputy Chief of Staff for Mayor Richard Daley. In that latter capacity, she hired Michelle Robinson (nee Obama) away from a private law firm.

Jarrett took the Obamas under her wing, introducing them to a wealthier and better-connected Chicago than their own, thus setting the stage for their transition into Chicago politics.  A lawyer with a background in real estate, Jarrett worked in in city government for nearly a decade before moving to The Habitat Company – a for-profit company that controls much of Chicago’s low-income housing – and serving as a board member for several organizations that provided funding and support for Chicago housing projects, operated by real estate developer, Obama financial supporter, and convicted felon, Antoin ‘Tony’ Rezko.

Jarrett does not appear to have a clean pair of  hands in these operations.  As Chief Executive Officer of  Habitat she managed a controversial housing project located in Obama’s former state senate district called Grove Parc Plaza. According to the Boston Globe, this complex was considered to be uninhabitable on the basis of unfixed problems, such as collapsed roofs and fire damage. In 2006, federal inspectors graded the complex at 11 on a 100 point scale, and recommended it for demolition.  The Chicago Sun Times reported that one Rezko project was riddled with problems, including squalid living conditions, lack of heat, squatters and drug dealers.

‘Like Barack Obama, Valerie Jarrett is a product of the corrupt Chicago political machine.  And it is no stretch to say that she was a slumlord’ , said Judicial Watch President Tom Fitton.  ‘We have real concerns about Jarrett’s ethics.  Washington already has plenty of corruption.  We don’t need to import more of it from Chicago.’

She is so close to the President that Obama describes her as a ‘sibling’.  ‘Valerie is one of my oldest friends.  Over time, I think our relationship evolved to the point where she’s like a sibling to me.  I trust her completely.’

President Obama may put his wholehearted  trust in Valerie Jarrett. But what about the rest of the nation?  Let us all hope that she does not decide to treat the West Wing like the Grove Parc Plaza . It would be a shame to have to call in the demolition experts to take down 1600 Pennsylvania Avenue.

President Obama campaigns in the gutter

September 28, 2010

When low-ranked politicians have clearly failed their constituents and confront election challenges without any credible message for the future, they almost always deflect their campaigns from issues of salience ( policy positions in relevant political space)  to issues of valence ( character assassination).   In essence, they campaign in the gutter with stream after stream of negative advertisements.

True statesmen always, and United States presidents for the most part, avoid such gutter campaigns,  especially when they know that they must work subsequently with those  whom they unsuccessfully besmirch, on behalf of the Nation as a whole that they supposedly represent.  President Obama is  the exception that proves the rule, as he abandons the policy arena, to mud wrestle with Republican candidates who threaten to displace his Congressional majorities.

President Obama has demonstrably failed the nation during his first two years in office. By inappropriate economic policies, his administration has throttled the recovery of the United States economy, locking in unemployment at 9.6 percent, not least by creating a climate of pessimistic expectations. In forcing health care ‘reform’ down the throats of a reluctant majority, he has  damaged the United States Constitution.  By rewarding the UAW at the expense of preferred bondholders in the Chrysler bankruptcy farce, he has overturned the rule of law. By showing the White Flag to Iran, North Korea and  Hamas,  he has rendered his country vulnerable to nuclear devastation and to Middle Eastern instability. By deferring systematically to Islam, over Christianity and Judaism, he has threatened the future of Western civilization, on which the United States critically depends.

For these acts, he is now known, as his Vice-President, Joe Biden has recently acknowledged:  “They (the voters) should be angry with us.  If we make this a referendum on the current state of affairs, we lose, and so that’s why we’ve got to make this a choice.”  In a Politico poll published on September 27, only 38 percent of those polled said that President Obama should be re-elected in 2012.  According to the Real Clear  Politics average of polls, the GOP is up almost 4.5 percent on the generic congressional ballot, by a majority of 46.9 percent to 42,5 percent. 

So down into the gutter goes the President, his sleeves rolled up to avoid scuffing his starched cuffs and scarring his  expensive cufflinks. As he begins his four-state swing that includes a rally in Wisconsin, expect President Obama to morph into Candidate Slingmud, as he directs personal attacks against individual GOP candidates, and as he attempts to smear the opposition with terms such as ‘fat-cats’ , ‘capitalist vultures’, and  ‘Islam-haters’.

History advises that such valence-smearing will not turn a tide that is so demonstrably on the ebb for his Party, and on the flow for the Opposition.  So he will lose this battle and will weaken the progressive cause for the remainder of his single term in office.  For that singular blessing, let us be truly thankful.

Hat Tip: Kara Rowland, The Washington Times, September 28, 2010

The high burden of regulation on the economy of the United States

September 27, 2010

“The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008, a 3% real increase over five years, to about 14% of U.S. national income.  This cost is in addition to the federal tax burden of 21%, for a combined cost of 35% of national income.  One out of every three dollars earned in the U.S. goes to pay for or comply with federal laws and regulations, and new policies enacted in 2010 for health care and financial services will increase this burden.”  Nicole V. Crain and W. Mark Crain, ‘The Regulation Tax Keeps Growing’, The Wall Street Journal, September 27, 2010

In this column, two respected Virginia Political economy scholars finger the largely unseen advance of state capitalism in the United States.  They also deftly identify a primary political impulse that drives the growth of  federal regulations. Voters increasingly are aware of and resistant to the tax increase appetites of progressive politicians. They are much less attuned to the high cost of the regulatory appetites of those same monsters. So this is a timely contribution.

Politicians broker policies in response to competitive lobbying in political markets. If regulations expand one may be fairly sure that those who demand their expansion are out-spending those who are opposed. To a considerable extent, this lobbying battle takes place within the business community. Large corporations, not infrequently, turn out to be regulation demanders while small businesses fight a largely losing battle to stem the tide. The relative burden of regulation on various segments of the business community, as outlined in a recent report by the Office of Advocacy of the U.S. Small Business Administration, clearly articulates this sorry tale.

The initial incidence of the  cost of federal regulations on businesses overall in 2008 was $8,086 per employee. But these costs were not borne equally by businesses of all sizes. The regulatory cost per employee for businesses with fewer than 20 employees was $10,585, compared with $7,454  for medium sized firms (employing between 20 and 499 employees), and $7,755 for large firms.  In manufacturing, this cost differential was much more marked.  Given that larger firms typically are more able  than smaller firms to pass on the incidence to customers, the competitive advantage provided to the former over the latter is incentive enough for large corporations to lobby in favor of federal regulations. At the margin, such regulations throttle new entry at its source, and preserve, for floundering behemoths, a continuing domination of  the U.S. market-place.

U.S. households should not ignore these regulatory burdens, since ultimately they bear their full cost. Crain and Crain indicate that for 2008 the combined average federal burden of regulation and taxes was a remarkable  $37,962 per household.  Quite a drain on economic incentives, one might well think. View it as one part of the opportunity cost of abandoning laissez-faire capitalism.

The British Labour Party pulls down the final curtain: on itself!

September 25, 2010

On September 25, 2010, the Electoral College of  the British Labour Party announced the outcome of its leadership election, following the resignation of Gordon Brown in the wake of humiliating defeat in the May 2010 General  Election. “Red Ed” Miliband was elected to the Party’s Leadership position by the barest majority of 50.65 percent to 49.35 percent over his brother David Miliband.

Ed Miliband was not the first preference of Labour Members of Parliament. He was not the first preference of Labour Party members. But, he was the first preference of  labour unions infuriated by what they perceived as their betrayal by Tony Blair’s New Labour. He won the elimination contest by picking up a majority of second preference votes as other left-wing candidates were successively eliminated from consideration.

David and Ed Miliband were the progeny of Ralph Miliband, a Polish Jew, whose parents had fled Westwards to escape anti-Semitism in continental Europe. Ralph Miliband was a committed Marxist who, in 1940, had sworn an oath of allegeiance to Karl Marx and his philosophy at the foot of his London grave, and who, under the mentorship of Harold Laski,  dedicated his entire life and scholarship to Marxist-Leninist political science. 

David Miliband broke away and saw the beckoning capitalist lights, as he joined Tony Blair in the New Labour venture that kept the Party in power throughout the period 1997-2010.  His younger brother, Ed. lurked in the lower  levels of the Party, much more in his father’s intellectual shadow, staking his career on the fortunes of the Scottish Cyclops, Gordon Brown, and enjoying watermelon (green outside, red inside) cabinet status as Energy and  Climate Change Secretary. Ed’s leadership campaign focused on returning Labour to its socialist roots, focusing policy on the  ‘unshakable principles’ of economic equality and of reinstating the traditional powers of the labour unions.

So we now know where the Labour Party is headed: leftwards into political oblivion, if  postwar history remains in any way relevant, and as long as the Conservative-Liberal coalition government does not lose its nerve.  This is a remarkably generous gift by the Labour Electoral College to the economic advancement of the United Kingdom. Rarely do we witness such an unselfish act of seppuku outside the confines of  Samurai warriors in the Land of the Rising Sun. Rare as this process of self- disembowelling may be, the British people should ring the bells across the nation to give thanks to Divine Providence for effecting  this remarkable political  sacrifice.

Taking back the United States

September 25, 2010

Some very promising green shoots are appearing at this time for those of us who would like to return the United States to the vision of its Founding Fathers: the pursuit of life, liberty and property through strictly limited government and the rule of law.  The emergence of the  Tea Party as a significant political and social force, under the exceptional entrepreneurial leadership of Sarah Palin, has seriously disturbed the duopoly control over the political process exercised by the Democratic and the Republican Parties. The fact that the current political establishment reacts with a mixture of incredulity and mockery at this manifestation of resistance demonstrates the threat that it poses to those who live off the fruits of progressiveness.

Let us suppose that Tea Party candidates out-perform expectations in the November 2010 elections and establish a significant toehold within the Republican Party.  Further suppose that the GOP acknowledges this invasion, and determines to refocus its behavior from that of engrossing to that of reducing the size and the role of the federal government.  From the perspective of public choice how, most effectively, might it proceed over the period 2010-2012?

Let us suppose that the GOP secures a small majority in the House of Representatives, while narrowing the gap in the Senate to a differential of 52: 48 in favor of the Democrats. In my judgment, this is the most likely outcome. It is also the perfect outcome for a reconstituted GOP that has decided to roll back the state.  Let me explain.

While President Obama remains in office, the GOP most effectively will choose to play Defense, marshalling their efforts as determinedly as possible to encourage the progressive instincts of  the left, while systematically thwarting their policy initiatives. To this end, they will forbear from logrolling, either in the House of in the Senate, save only where their own House majority threatens to slip away. They will send out a clear signal that cap and trade, card check,  new trade protection, new regulations etc. will be blocked by a House firewall.  They will hope that an increasingly frustrated President will vent his wrath by appointing ever- harder-leftist advisers and nominating ever- harder-leftist judges, all of  which they will block through the Senate filibuster. They will know that a dis-functional President eventually will crack and expose his dark side.

If the GOP is successful in playing Defense, it might use the two years of interregnum to formulate a fully articulated, honest and transparent fiscal policy, designed to reform the federal tax system, and to reduce the size of the public sector, so as to rein in the federal government to no more than 20 percent of gross domestic product, operating under a balanced-budget rule.  Such a policy manifesto would then launch its 2012 campaign to reshape fundamentally the political landscape of the United States.

Should the GOP be sufficiently lucky and sufficiently wise as to secure a 21st century Barry Goldwater or Ronald Reagan as its Presidential candidate, it might find itself, in January 2013, revelling in a new Morning in America.  And we can rest assured that every Founding Father will then be rejoicing in his grave!

The Federal Reserve creates a market in stagflation

September 24, 2010

“Measures of underlying inflation are currently at levels somewhat below those the committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability.”  The Federal Reserve Board, September 22, 2010.

Dangerous words such as these must be interpreted with caution, against the background of existing economic conditions, as interpreted from relevant economic theory. Let me explain.

The United States economy, at this point in time does not confront any significant risk of price deflation.  Conventional measures of consumer and wholesale price inflation are all positive, within the 1 percent annual range and plus, as compared with the Federal Reserve’s usual goal of between 1 and 2 per cent per annum. The dollar is falling in value against all major currencies, and this places upward pressure on the dollar value of imports, injecting additional inflation into the system. Commodity prices are rising, and these will also filter into inflationary pressure, in a loose monetary environment.  The monetary envionment is so loose that gold prices have surged to an historical high of $1,300 per ounce.

Recent and projected quantitative easing on the part of the Federal Reserve is not simply a process of pumping high-powered money into the economy. It is a mechanism for driving short and long-term Treasury security yields down to historic lows, without any evidence of a liquidity trap.  Put bluntly, this is the road to hyper-inflation once high-powered money translates itself into leveraged  money supply increases as defined by M1 or M2 criteria.  Out-of-control government spending is being financed by the printing press, the classical pre- condition for such a disaster.

Let us suppose that Ben Bernanke has not lost all his little grey cells, and does not want to go down in history as ‘hyper-inflation’ as well as ‘helicopter’ Ben. If we take hyper-inflation off the table, we are left with stagflation as the most likely outcome of this episode in economic policy adventurism. Let me explain in terms of the relevant economic model: Milton Friedman’s monetary theory of adaptive expectations. 

According to this theory, which has not been refuted by empirical analysis, the demand for money, under near-normal times, is a stable function of several variables. The nature of the relationship is such that, over time, any additional injection of high-powered money will augment the money supply M.  This augmented M will elevate V (the income velocity of circulation of money) on its route to PY (the price level times real output) on the right-hand-side of the equation. Initially, the impact may locate itself somewhat on Y (real output). With long and variable lags, however, it will impact primarily on P (the price level).  The transmission route will take place through adaptive (not strictly rational) expectations driven by decreasing money illusion in the labour markets as contracts are reworked in an inflation-expectations environment.

Just as the inflationary-expectations are slow to manifest themselves, offering short-term benefits to employment as real wages fall, so they will be excruciatingly slow to retreat once (if) strong monetary medicine is applied. As real wages rise, so employment will fall. In an employment environment as bleak as the present, this process will be as painful as it will be unnecesaary.

Add to this the adverse impact of rising public expenditure and an increasing debt burden  upon the rate of private investment – the crowding out hypothesis – and the lowered productivity that such increasing socialism inevitably implies, and the witches’ cauldron of stagflation will boil and it will bubble until all the poisons of the earth spill out.

Hat Tip to Maggie

General Petraeus out-muscles President Obama in Afghanistan

September 23, 2010

“America’s top general in Afghanistan has dampened expectations of plans for troop withdrawal starting next year and described a major policy review ordered by President Obama as ‘little more than a mid-course assessment’.  General David Petraeus told The Times that Mr. Obama’s deadline of July 2011 for the start of a drawdown would in fact be ‘the start of a process’, and he reserved the right to set his own timetable based on conditions on the ground: ‘It is not a date when we rush to the exit and reach for the light switch to turn it out before leaving the room,’ he said in Kabul yesterday.” Deborah Haynes and Giles Whittell, ‘Petraeus: I won’t be rushed out of Afghanistan’, The Times, September 22, 2010

“If President Obama and his top generals spent half the effort on fighting the war in Afghanistan that they have in attempting to slaughter each other, they would be faring better. Bob Woodward’s latest tome, Obama’s Wars, reveals nothing that was not already known about who dislikes whom in the top layers of the Administration.  The rate at which the team is shedding top officials and advisers is a clue too obvious to miss.” The Times, September 23, 2010

President Obama owed his primary victory in 2008 largely to the left-wing of a Democratic Party that correctly sensed that Barack Obama was a naive progressive socialist by upbringing and instinct, whereas the much more experienced Hillary Clinton was more closely attuned to median voter preferences. Throughout the first two years of Obama’s Presidency, this fact has rendered White House policies incoherent.

In economic policy, the judgment is now in. The White House instinctively desired to run the United States economy on Cuban or Venezuelan lines, with insufficient popular support to carry through.  The left-wing of the Democratic Party represents only  a small, widely despised rump of the American electorate. As a consequence, the economy is in ruins, and all but one of President Obama’s hydraulic Keynesian  economic rats have now jumped ship or been washed overboard.

In military policy, a similar outcome threatens. President Obama appears to share with the far- left a visceral hatred of the military, and a naive belief that diplomacy alone can be effective in protecting his nation’s interests in a dangerous world.  Median voters are less naive, and the President ignores them at his peril. So the President has fiddled while Rome burns, and his generals see no alternative but to muscle him off the stage. President Obama unwisely fired his favored General, Stanley McChrystal, for airing what needed to be said.  He replaced McChrystal with America’s darling, General David Petraeus. In so doing, he sacrificed Commander-in-Chief status with respect to Afghanistan.

General David Petraeus now owns American policy in Afghanistan, and as any successful general must, he has taken full measure of his President. He sees in President Obama a politician who resembles a battle-worn prize-fighter, on the ropes, face battered into a pulp, eyes barely open, body bruised and sagging, gloves down, and chin exposed for a final knock-out punch. Unlike Stanley McChrystal, this General will not go for the K.O.. For General Petraeus understands that, by dragging out this uneven match to its full 12 rounds, his policy will rule in Afghanistan, whatever the far-left of the Democratic Party may wish.

Obama’s Wars, by the journalist Bob Woodward, gives the most detailed picture yet of Mr. Obama’s traumatic apprenticeship as Commander-in-Chief as he has struggled to take control of a floundering campaign in Afghanistan and his most senior men in uniform.  One of them, General David Petraeus, felt so affronted by White House demands for an exit strategy at all costs that he told aides: ‘They’re f***ing with the wrong guy.” Giles Whittell, ‘How Obama fell out with the military over the future of the Afghan campaign’, The Times, September 22, 2010

This time, Mr President, it may be politically prudent to listen carefully to those words. As Emperor Napoleon Bonaparte sagely noted, when asked how the Vatican might react to an invasion of Rome:  ‘How many divisions has the Pope?’  You may well echo that wisdom by asking for yourself:  ‘How many Electoral College votes can the left-wing of my Party deliver in November 2012?’

President Obama fires Lawrence Summers

September 22, 2010

At the 11th hour, or beyond, President Obama has pulled his head wearily from the sand, blinked around, and removed one heavy millstone from around his neck. Lawrence Summers, surely one of the worst ever economic advisers to any President, has been discarded as from November 2010.

The liberal wing of the Democratic Party, inevitably, is confused. For them, Lawrence  (we’ve -gotta- pick- a- pocket -or -two- boys) Summers is insufficiently far to the left. After all he is not a card-carrying member of the Communist Party.  Being a throw-back 1960s  hydraulic Keynesian and a progressive liberal is insufficient for those who want to destroy all remnants of the capitalist system.

It is interesting that when socialist policies fail – as they inevitably  do- their proponents always fail to draw the relevant lesson. They instinctively believe that the policies fail because they are insufficiently far to the left. That is a fortunate reaction for those who believe in individual liberty and private property, because it consigns such failed policies to lengthy periods in the political wilderness.

At this point in time, of course, we cannot be sure that the desert sand is entirely out of President Obama’s eyes. We shall know shortly whether he was blind but now can see, or whether he is afflicted with some form of mascular degeneration. His choice of successor will tell us everything.

Should President Obama chose a successor from the ranks of the yet further left – for example Paul Krugman or Joseph Stiglitz – who are baying for yet more Keynesian fiscal stimuli and for yet more nationalization within the financial sector – then we shall know for sure that he is incapable of improving his sorry position.

 If President Obama elects to hire a business leader from a successful corporation, demonstrably capable of thriving in a competitive free market environment – not from some failed financial institution like Bank of America, Citigroup, or Goldman Sachs  that is propped up by government subsidies – then we should breathe a collective sigh of relief that a Manchurian Candidate has not somehow infiltrated his way into the highest office in the United States. 

Good riddance to Lawrence Summers. Good riddance to the hydraulic Keynesian doctrine that is miring the United States economy in stagnation, and that threatens  future stagflation. Now just bring back Paul Volcker to chair the Federal Reserve Board, replace Timothy Geithner at Treasury, and once again it may be Morning in America.