Archive for the ‘cap and trade legislation’ Category

Obama at the bat

April 18, 2012

For those of you who have not yet viewed the four minute video referenced below I am sure that you will enjoy. It is satire at its best. It was created following the 2010 mid-term U.S. elections. It parodies a famous nineteenth century music hall  baseball poem: Casey at the Bat.  It captures the moment perfectly:

Jobs will not return while Obama retains the presidency

September 3, 2011

President Obama has placed himself on the economic rack as the 2012 presidential elections loom ever closer.  His militant socialism during the first two years of his presidency – manifested in a verbal onslaught against free-market capitalism, his support for unheard of increases in federal spending, his nationalization of a large sector of the automobile industry, his socialization of healthcare, his support for green environmentalist policies, his support for trade union power, his misuse of regulatory authority, and his unwillingness to lead on debt reduction policies – now hangs over him and the U.S. market economy like a dead hand. 

By his words and by his actions, indeed by his very body language, President Obama has induced a capital investment and a labor-hiring strike across the United States.  Whatever he now says or does, this image has become unshakeable in the minds of those responsible for product innovation, for  job creation, and for payroll expansion in the private sector of the United States economy.

The very best message that President Obama could deliver to an increasingly anxious nation, when he makes his much-heralded jobs speech on September 7, 2011, would be a statement that he is resigning from the office of the presidency in order to provide the nation with a fresh start and a new hope of a Reaganite recovery.

It would take a great statesman to make such a personal sacrifice for the wellbeing of the People. I have zero expectation that such a sacrifice will be forthcoming.

Failed retread: Alan Kreuger returns to Obama economics team

August 30, 2011

President Obama clearly has closed his mind to any radical change of direction  over the duration of his term of office in the White House.  By replacing Austan Goolsbee with Alan Kreuger as chairman of the Council of Economic Advisers, the President has brought back into his administration a Princeton economist who served an entirely undistinguished term as chief economist at the Treasury Department, advising  Treasury Secretary Timothy Geithner thoughout the first two years of the Obama administration.

Alan Kreuger is a left- of- center mainstream economist much in the same mould as Larry Summers, motivated by progresssive ideology to push economic policy in the direction of state capitalism. He is more focused on the numbers than Summers, but typically – though not always – finds the numbers to be supportive of bigger rather than smaller government. As a left-leaning specialist on labor market economics, Kreuger constitutes a real threat to Obama’s re-election prospects; and for that, those of us who are not already out of work  must be truly thankful.

Kreuger’s policy contributions at Treasury were simply dreadful:

He was the architect of the $3 billion subsidy designed to permanently boost auto sales by  removing auto clunkers from the road in return for new vehicle sales. Designed to bail-out Government Motors and Chrysler – the two nationalized automobile corporations – the subsidy served beautifully to advance car sales by one quarter, in return for  a next quarter’s equivalent decline!  He was also the architect of  a program of tax credits for employers who took on extra staff during the recession.  This program also had no net impact, as employers laid off workers in order to rehire them at a reduced cost.  In both cases, taxpayer monies were flushed down the Obama administration’s toilet. Rational expectations economists come back, all is forgiven!

Hey! Princeton Department of Economics, have you thought recently about hiring Robert Barro or John P. Taylor to your distinguished faculty? Your intellectually-under-nourished  students would clearly benefit enormously from a rational expectations enlightenment!

Sometimes the numbers have led Alan Kreuger in the right direction, but not when serving in a left-of-center administration. For example, in 2002 and in 2008,  Kreuger determined that paying people more not to work increases the incentive not to work, thus increasing the time that the unemployed spend out of work. Any chance of bringing that result to President Obama?  Not a snowflakes chance in Hell!  Kreuger will rerun the numbers and discover that increasing/extending  unemployment benefit in 2011 will drive the unemployed more quickly back into the workforce. For, times they are a changin’.

On one famous occasion, Alan Kreuger has been accused of  fudging the numbers. In 1992, New Jersey hiked its minimum wage by 18 per cent while its neighbor, Pennsylvania, left its minimum wage untouched. Standard economic theory suggests that unemployment should have advanced in New Jersey relative to Pennsylvania.  Alan Kreuger and David Card gathered information on fast food restaurants in the two states, using an employer questionnaire methodology, and determined that, by hiking the minimum wage, New Jersey had actually increased employment in New Jersey fast food restaurants, both absolutely and  relative to those in Pennsylvania.

The paper garnered quite a response, with a number of eminent economists- -including Gary Becker and James Buchanan –  suggesting that the result was more a reflection of fast fingers than of the hiring practices of  fast food restaurants.  A major issue of concern was that no one could replicate the Card/Kreuger empirical results.  Another was that the results of the  paper ran counter to a large number of other studies on the minimum wage, and, yet, contained no theory to explain why low-skilled New Jersey labor might exhibit a backward-sloping supply curve in 1992.

James Buchanan (Nobel Laureate in Economic Sciences 1986) leveled a devastating charge against the two alleged sharpsters:

“no self-respecting economist would claim that increases in the minimum wage increase employment.  Such a claim, if seriously advanced, becomes equivalent, to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests.  Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.”   James M. Buchanan, ‘Minimum wage addendum’, The Wall Street Journal April 25, 1996.

It may well be that the bevy of camp-following whores has expanded significantly in the 15 years since James Buchanan threw down that scientific gauntlet. In any event, it is likely to do so now, since one of its alleged founding fathers is about to serve right inside President Obama’s White House.

The Financial Times shows its (red) colors

June 28, 2011

“In the ‘yes we can’ days after Barack Obama’s election in 2008, the all-star team of economists gathered round the new president seemed one reason for optimism…On taking office Mr. Obama made Harvard’s Larry Summers head of the National Economic Council and Christina Romer, a leading economic historian, head of the Council of Economic Advisers.  Other first-rate advisers included Austan Goolsbie, a young star from the University of Chicago, and Paul Volcker, elder statesman of unsurpassed eminence….Now though, Mr. Obama has no choice but to take a more prominent role in economic policy.  He will do so with a weaker team.  Mr Summers has gone back to Harvard, Ms. Romer to the University of California, Berkeley, Mr. Goolsbee is returning to Chicago.  Mr. Volcker’s role, always vague, appears defunct.  Mr Obama is not bereft of good economic advice and has competent people at hand, but the intellectual firepower is reduced.” Editorial, ‘Barack Obama’s economists’, Financial Times, June 28, 2011

The Financial Times simply does not understand what happened, most probably because the Editor of the newspaper shares President Obama’s progressive socialist ideology.

President Obama did not choose his first economic team because of its academic distinction but because it shared his own predilections for progressive socialism and for the destruction of laisser-faire capitalism.  In truth, none of the three above-mentioned economists is so distinguished.

Larry Summers has had a checkered academic career as he has glided in and out of government positions over many years. Almost all his scholarly papers are co-authored. As an economist of great initial promise, he has significantly under-performed. However, Larry Summers is a committed advocate for progressive socialism including the massive redistribution of income and wealth through highly progressive taxation.

Christina Romer’s reputation is almost completely dependent on co-authoring scholarly papers with her truly distinguished husband, David Romer. She was completely outclassed intellectually by Summers and did not possess the stature to confront him and stand him down. So she played the role of White House nonentity until she fled the President’s team barely 18 months into his presidency.

Austan Goolsbee is a long-time sycophant to President Obama, writing  policy papers for him  throughout his time in Illinois. His resume is truly thin. He would not have made tenure at any middle-ranked economics department in the United States. One supposes that the University had other reasons for retaining his services, just at it had other reasons for retaining a grossly under-performing, non-publishing  Barack Obama on its law school  faculty for a period of ten years.

The glue that held that economic team temporarily together was progressive socialism, not high quality economics. As progressive socialist economic policies failed to lift the economy out of its recession, so the team disintegrated, hopefully before the full blame would fall upon their shoulders.

Of the original team, only Paul Volcker wore the right-sized shoes.  But a Fed Chairman who had  squeezed stagflation out of the United States by the wise use of monetary constraint, under the presidential leadership of Ronald Reagan, was never going to influence a president whose dream was to emulate Lyndon Johnson’s Great Society Program. So Paul Volcker was sidelined from the outset, though certainly not over-awed by Larry Summers.

The advantages that President Obama now possesses are twofold. First, he has learned first-hand that progressive socialism does not work, indeed that its continued pursuit will terminate his presidency in 2012. Secondly, he has a Republican House majority that will not allow him to force bad policy into law. That is why his economic policy will improve during the second-half of his first term.  The supposed reputations of his economic advisers are not relevant to this change of direction; not relevant at all.

Bill Daley replaces Rahm Emanuel

January 13, 2011

“Mr. Obama’s best chance of success 22 months from now rests on reclaiming his image as a reasonable, bipartisan and unifying figure.  It won’t be easy, given his track record as president.  That can’t be airbrushed from history.  But the selection of Mr. Daley as chief of staff indicates that Mr. Obama is willing to give it a try.  It makes sense.  After all, what he was doing nearly wrecked his party and has imperiled his presidency.” Karl Rove, ‘Why Obama Chose Bill Daley’, The Wall Street Journal , January 13, 2011

President Obama’s worst mistake following the November 2008 elections was to hire a foul-mouthed, progressive congressman by the name of Rahm Emanuel to be his right-hand man in the White House. From the outset of his Presidency, Obama thus placed himself under the spell of an offensive piece of trash floating around not only the White House but also Capitol Hill.

Of course, the progressive media loved Rahm Emanuel, hanging onto his every filthy word, most especially when it was leveled through Obama’s mouth as class warfare targeted against the capitalist system: leeches, robber barons, vultures. No wonder the business sector imposed a capital strike on the Obama-Emanuel vision of America.  Ironically, the President who had campaigned as a cool-headed analytic turned out to be a hot-headed plunger, responding to the dangerous rhetoric of a seriously unbalanced mind. ‘ go for it, Mr. President!’     ‘Done, Mr Emanuel!’ was the psychology of this negatively-focused relationship.

Well, November 2, 2010 put an end to all that.  President Obama is now scrambling for political survival, courting the Republicans more than the Democrats, and prostrating himself before the so-called independent voters who shattered his progressive forces and put his presidency to the sword. 

So, the President is now cleaning house, forcing out of the White House dysfunctional progressives such as Rahm Emanuel, Larry Summers, Christina Romer, and Robert Gibbs. And, crucially, bringing in a pragmatic, centrist role model as the  center-piece of a newly-fashioned administration.   Hence, Obama’s selection of Bill Daley, President Clinton’s well-liked Commerce Secretary, as Emanuel’s replacement as chief of staff.

As Karl Rove correctly observes, big changes are in store for the Obama administration. No longer will Presidential policy be enunciated by individuals who are language-challenged or who are afflicted by autistic arrogance. No longer will Republicans be banned from all discourse with the White House.  No longer will legislation be outsourced  to congressional staffers while the President nurses his handicap on the golf courses surrounding the nation’s capital.

Bill Daley will impose his pragmatic judgment on all messages that emanate from 1600, Pennsylvania Avenue.  He will streamline the West Wing’s unwieldy deciosion-making structure, while expanding the range of opinions that reach the presidential ears.  There will be fewer senior aides, with the worst disappearing into the many progressive lobbying offices that line K Street, NW.

The $64,000 question, however, is just how far Bill Daley will be able to force his centrist policies down the throat of a progressive socialist President. Remember that Bill Daley helped President Clinton to enact the North America Free Trade Agreement. Remember that he told the New York Times that President Obama had ‘miscalculated’ on health care.  Remember that he actively opposed this administration’s financial regulation bill.  None of this endears him to the ‘card-check’ union bosses, to the ‘Obamacare-loving’ AARP, to the global warming ‘cap and trade’ lobbyists, or to the tort-law-loving  trial lawyers: the very money-raisers who coasted Obama into the White House in November 2008.

For those who place the well-being of the U.S. economy above partisan politics, however, let us hope that Bill Daley works some of his centrist magic on Obama’s White House. The probabilities are small that he will succeed. For Barack Obama is no Bill Clinton.  At least, if Barack Obama ultimately chooses to fall on his presidential sword in unmitigated pursuit of progressive socialism, he will do so over the powerful frame of Bill Daley. And for that alone, classical liberals should be truly thankful.

Never Let A Good Crisis Go To Waste

October 19, 2010

 Never Let A Good Crisis Go To Waste

Readers who have been following my daily weblogs may be interested in my new book: Charles K. Rowley, Never Let A Good Crisis Go To WasteThis book is published today by The Locke Institute. It  contains the best of my columns, carefully edited and organized by themes, in a 250 page paperback book.  The book sells at $10 plus postage from and (by check only at $12.50 inclusive of postage ) from The Locke Institute, 5188 Dungannon Road, Fairfax, Virginia 22030, USA.

The book consists of 93 columns presented under the following themes: Part One – Political Philosophy, Part Two, – Public Choice, Part Three – The Long Shadow of John Maynard Keynes, Part Four –  The Burden of the Public Debt, Part Five – Valley of the Dolls: Stimulants and Depressants, Part Six – Money Mischief, Part Seven – Dry Rot in the United States Housing Market, Part Eight – Hot Air Creates Global Warming, Part Nine – U.S. Health Care in the I.C.U. and Part Ten – Progressive Socialism in the United States.

Readers will note that the Front Cover portrays the Three Villains who publicly agreed to take advantage of the recent Economic Crisis : President Barack ObamaChief of Staff,  Rahm Emanuel and Secretary of State,  Hillary Clinton.

Government Motors lobbies Washington with bail-out dollar bills

October 4, 2010

” As for GM, which has placed a burden on all Americans through the greed of its unions and the ineptitude of its managers, it should show some contrition by shutting down both its PAC and its lobbying operation until the company is no longer a ward of the Obama White House.” ‘Get Government Motors out of politics’, The Washington Examiner, October 3, 2010

The United States federal government owns 61 percent of Government Motors.  An additional 12 percent is owned by the Canadian government and by the Province of Ontario.  This socialist beast is unlikely to change in the foreseable future. Even as GM struggles to make an initial offering of stock to the public, this involves no more than 20 percent of its shares. As the manufacturer of second-rate motor vehicles, with its newest ‘green’ models destined for the dustbin of a none -cap-and-trade world, its future is as dim as its recent past.

So why should we be at all surprised to discover that Government Motors is now blowing  taxpayers’ precious dollar bills down the corridors of the Capitol, in an attempt to buy yet greater bail-outs for its future incompetence?  Surely this is a predictable implication of replacing laissez-faire with state capitalism? We do not need to re-read Ayn Rand to know that this is the essence of  a socialist Hell.

Since receiving billions of dollars in taxpayer support, GM has hired in excess of 20 lobbying firms to carry its begging bowls into the inner sanctum of Congress.  Since June 2009, GM has spent $11.3 million lobbying the federal government for new favors.  It has dished out $90,000 to 51 supportive politicians to assist them in their re-election campaigns.  As those politicians stuff unmarked GM dollar bills into their trouser pockets, so the U.S. taxpayer is ripped off with his own money.

Fool me once, shame on you!  Fool me twice, shame on me!  Let us hope that American taxpayers vote all recipients of GM campaign funding, left or right, out of office in November 2010. Let us hope, when next time comes round,  as it surely will, that a bankrupt GM will be brutally taken down by market forces, not sustained by progressive socialism

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.

New Yorker punches below the belt

August 31, 2010

“Of course, Democrats give money too.  Their most prominent donor, the financier George Soros, runs a foundation, the Open Society Institute, that has spent as much as a hundred million dollars a year in America.  Soros has also made generous private contributions to various Democratic campaigns, including Obama’s.  But Michael Vachon, his spokesman, argued that Soros’s giving is transparent, and that ‘none of his contributions are in the service of his own economic interests.” Jane Mayer, ‘Covert Operations’, The New Yorker, August 30, 2010.

Under the rules of boxing, brawlers who punch their opponents below the belt routinely are disqualified. Repeated episodes of such unprofessional behavior may lead to permanent bans from entering the ring. In Jane Mayer’s lengthy column entitled Covert Operations, August 30, 2010, The New Yorker sets out on just an unprofessional course in its unrelenting attack on Charles and David Koch and their philanthropic and other non-profit programs.

Let me say at the outset that I am no fan of Charles and David Koch and I do not write this as an exercise in hagiography. But  I am a great fan in unbiased reporting and I accuse (J’accuse) Jane Mayer and the progressive political rag on whose behalf she writes her columns, of gross prejudice and bias in singling out the Kochs for condemnation and George Soros for a whitewash. Talk about hanging their watermelons (green on the outside, red on the  inside) out to dry!

So this column will attempt to redress the balance just a little, by looking more closely at George Soros and the Hungarian influence on U.S. politics. Let me see if I can floor Jane Mayer with a left jab to the chin, followed by a right cross  to the jaw, both entirely professional responses as compared with her low blow in Round One.

George Soros may just be the biggest political fat cat of all time. An 80 year old Hungarian Jew, Soros emigrated to England in 1947 and graduated from the London School of Economics in 1952.  In 1956, he moved again to New York City, where he worked as an arbitrage trader and analyst.  In 1970, he co-founded the Quantum Fund, which created the bulk of the Soros fortune.  In 2007, the Quantum Fund netted Soros $2.9 billion.

In 1988, Soros bought shares in the French bank, Societe Generale. French authorities began an investigation of these purchases in 1989 and in 2002 a French court ruled that Soros had engaged in insider trading, fining him $2.3 million. Punitive damages were not imposed because of the delay in bringing the case to trial.

On September 16, 1992 – known as Black Wednesday in Britain – Soros’s fund sold short more than $10 billion worth of pounds sterling, profiting from the reluctance of the Bank of England either to raise interest rates or to float its currency. As a consequence, the Bank of England withdrew the currency from the European Exchange Rate Mechanism, devaluing the pound sterling and earning Soros $1.1 billion.  Black Wednesday cost the British Treasury 3.4 billion pounds. Talk about biting the hand that saved him from the anti-Semitism of the Evil Empire. A man of honor, George Soros most surely is not.

In 1997, during the Asian financial crisis, Soros punished ASEAN for welcoming Myanmur as a member, driving down the nominal US dollar GDP of ASEAN by $9.2 billion in 1997 and by $218.2 billion (31.7 percent) in 1998.

In an interview with The Washington Post on November 11, 2003, Soros stated that removing President George W. Bush from office was the ‘central focus of my life’ and  ‘a matter of life and death’.  Soros gave $3 million to the Center for American Progress, $5 million to, and $10 million to America Coming Together.  These groups worked to support Democrats in the 2004 election.  Overall, during the 2003-2004 election cycle, Soros donated $23,581,000 to various 527 groups dedicated to defeating President Bush.  527 groups are tax-exempt organizations. Note that tax exempt organisations are not ‘allowed’ to engage in political activities.

Since 2004, Soros has thrown vast sums of campaign moneys behind Barack Obama. Although much of this support was provided through seemingly independent organizations, Soros is recognized as the major funder of the Obama campaign and of his administration.  Like the Merchant of Venice, Soros extracts his pound of flesh for this support. He is heavily invested in green energy, most especially in wind and solar power,  and eagerly awaits the passage of cap and trade legislation. He is the prime beneficiary of the Obama-imposed moratorium on oil-drilling, holding millions of common shares in Petrobas, the Brazilian  company now likely to become the leading company in offshore oil production in the Americas.

George Soros is a progressive socialist who knows how to profit from state capitalism and who controls the central levers of U.S. economic policy under the Obama administration. Outsiders may well ask why this evil, convicted  criminal,  insider- trader and political manipulator was whitewashed by Jane Mayer in her one-sided column.  Readers of this column will know full well the answer to that question.

An Austrian economist’s explanation of recession in the United States

August 22, 2010

“our lingering crisis and economic weakness was brought on not by a Keynesian failure of effective demand, but by a Hayekian asset boom and bust.”  Gerald P. O’Driscoll Jr. ‘The Fed Can’t Solve Our Economic Woes’, The Wall Street Journal, August 16, 2010

In that succinct passage, Gerald O’Driscoll sums up a great deal of what is mis-directed in President Obama’s economic policies. Helpless, as a non-economist, in the hands of hydraulic Keynesian economic advisers, the President has been led by (an albeit extremely willing)  nose down a veritable garden-path of error and fatal conceit.

The immediate cause of the financial crisis and economic contraction in the United States was the housing boom and bust.  This boom and bust was a classic asset bubble, such as occurred frequently during the 18th and 19th centuries.  The root cause of any such bubble is easy money, working its way through cheap credit, that makes long-term investments appear to be more valuable than otherwise would have been the case.

Under normal conditions, investment expands industries characterized by sound fundamentals.  Sustainable economic growth builds on such investments.  When cheap credit flows  freely, however, fundamentals frequently are forgotten, and the process evolves into a mania.  What cannot be sustained will not be sustained; and so the boom terminates in a crisis.All this is the meat and potatoes of Austrian economics.  Unfortunately, hydraulic Keynesians tend to be ignorant of the scholarship of Ludwig von  Mises and Friedrich von Hayek, and do not begin to understand the nature of a boom and bust contraction.

When a major asset bubble bursts, the collapse of aggregate demand is a consequence, not the cause, of the bust.  When housing prices peaked and then turned down  in the United States, repercussions echoed throughout the financial system.  Mortgage-related securities collapsed in value, impacting adversely on the balance sheets of the institutions that foolishly were holding them.  Credit dried up and the economy collapsed.  A more general collapse in the stock market ensued.  What occurred was a classic balance-sheet recession. 

However relevant Keynesian economics may be for other kinds of recession – and I shall not debate this further here – it is clearly inappropriate in the case of a balance sheet recession.  The Obama policy of pumping up the money supply and pouring fiscal stimulus packages into the economy is designed as a response to economic weakness brought on by deficient aggregate demand.  Low interest rates are supposed to stimulate investment and to lower saving, thus encouraging aggregate spending through the multiplier process.  These policies do not address the root problems of a balance sheet recession.  For, until balance sheets – corporate and household – are restored, increased aggregate spending is simply non-sustainable and will not be sustained.

The solution to a balance sheet recession lies in the restoration of balance sheets: for financial firms that implies the raising of capital; for households and businesses alike, it implies saving more out of their reduced incomes. Until these goals have been achieved government spending will never create the conditions for sustainable recovery.

The appropriate monetary and fiscal responses to a balance sheet recession are the opposite of those pursued by the Obama administration.  Monetary policy should be designed to increase interest rates as a means of encouraging household saving and corporate responsibility. If house prices have not yet reached market clearing levels, then the more quickly they do so,  the better for long term recovery.  Fiscal policy should be designed to encourage households to save and not to binge on excessive consumption, and to encourage productive investment, and not further financial speculation.  This implies a reduction in the size of the public sector, and in the magnitude of budget deficits, by expenditure cuts, not by tax hikes.  Costly initiatives such as health care reform, cap and trade, card check legislation and increased financial regulation should be avoided at all cost as job-destructive interventions.

The lesson from Austrian economics is that markets are resilient, but that their recovery can be impeded by bad policies.  As Gerald O’Driscoll  forcefully reminds us, at present,  both monetary and fiscal policies are on the wrong track.  President Obama has simply hired the wrong advisers,  partly because he is blinded by progressive socialist ideology, and partly because he is blind to economic science.