The mammoth US economy is sputtering along. Its fiscal and monetary imbalances while not yet as acute as Greece’s, are unsustainable. But America is not Greece. An anemic US economy is a drag on world growth. Another crash would be catastrophic.

With the ballyhooed New Year’s Day fiscal-cliff deal, pundits and Wall Street breathed a sigh of relief. However, while it eased uncertainty, the deal wasn’t pro-growth and didn’t even put an installment on solving America’s pressing fiscal issues.

Lurching into 2013 America remains mired in the economic doldrums, with unsustainable trillion-dollar-plus deficits as far as the eye can see, improving but lackluster GDP growth, and a December 58.6% employment-to-civilian-population ratio stuck stubbornly near its thirty-year low. While US population increased 11.4 million since November, 2007, soberingly, there are 3.3 million fewer jobs.

Human action determines economic growth. Decisions to work an hour more, invest, start a business, hire, or go on the dole, are driven by incentives. The average 5th grader but not necessarily Washington mandarins understands you get more of what’s rewarded and less of what’s punished.

Medieval English friar and philosopher William of Ockham posited when trying to understand phenomena the hypothesis requiring the fewest assumptions was preferred. The test came to be known as Occam’s razor. Applying it to predicting President Obama and Senate Majority Leader Reid’s positions, they are consistently on the side of the issue putting a damper on growth, diminishing economic freedom and increasing the state’s role.

Thirteen fiscal-cliff-deal and Obamacare tax increases batter America effective New Year’s Day, including: (1) a 48% increase in the 4.2% payroll tax in place since 2011, (2) for high-income earners marginal income-tax rates rising from 35% to 39.6%, capital gains and dividends taxes from 15% to 20%, a 3.8% surtax on investment income, and a .9% hike in the hospital-insurance portion of the payroll tax, (3) boosting the death tax from 35% to 40%, and (4) a 2.3% excise tax on medical devices, all of which suppress growth.

The deal also provides billions of dollars of tax-credit subsidies for political cronies including rum producers, Nascar track owners, Hollywood and
fashionable but uneconomic bio and algae-based fuels and wind-power, indirectly rewarding rent seekers such as GE and Siemens.

It extended yet again unemployment insurance. When unemployed receive benefits for almost 2 years it’s European-long-term dependency, not insurance, sapping initiative and prolonging unemployment.

Since 1870 US-production growth averaged 3% annually. From 1981 through 2008, real-US-GDP growth averaged 3%. Under Presidents Reagan and Clinton annual-real-GDP growth averaged 3.54% and 3.88% respectively. The American way has been to grow the pie. From 1870 through 2010 real per capita income increased twelvefold.

Since 2007 however the US growth trajectory declined from its century plus trend.

After WW2 Europe was catching up to the US, but in the seventies with the advent of its massive welfare and regulatory state, growth stagnated. Nobel-prize winning economist Robert Lucas Jr. attributes this to Europe’s labor, welfare and tax policies and worries by embracing similar policies the US condemns itself to sclerotic, EuroSocialist growth.

Apologists for America’s economic malaise suggest tepid 2% growth or worse is the “new normal.” Excepting the Great Depression and Great Recession, the economy normally roars out of recessions, the deeper trough the more robust the recovery. The Reagan recovery crested at 7.2% real-GDP growth in 1984. After 2009’s 3.1% real-GDP decline, growth should have been well above average.
Senator Phil Gramm said America’s problem was too many people in the wagon and not enough pulling it. Nobody however, argues America doesn’t need or can’t afford a safety net. It ought to be easy to get on, but hard to stay on, and stigma should attach. Washington however turns this timeless wisdom on its head, encouraging individual and corporate welfare and punishing enterprise and wealth creation.

A whopping 47.5 million Americans receive food stamps, up 68% from 2008 and 176% from 2000. Houston, we have a problem. A record 8.8 million Americans collect disability. In the last four years disability recipients increased four times faster than new jobs. In a market where most employment opportunities are not stevedore or UFC-cage-fighting jobs, that suggests an increasingly loose notion of disabled.

Energy is a cost of everything consumed and produced. A fracking revolution on private land spurred a boom in US gas and oil production, heralding to the dismay of Energy Secretary Steve Chu pining for $10 dollar a gallon gas, the prospect of falling gas and electricity prices. International Energy Agency economist Fatih Birol forecasts the US will surpass Russia in 2015 and Saudi Arabia in 2017 as the world’s largest gas and oil producer respectively, assuming the EPA doesn’t put a kibosh on it.

The fracking miracle happened because of heroic entrepreneurs operating on private land and it wasn’t on anti-growth Greens’ radar. Tellingly, on Federal lands and offshore production has declined and new leases and permits have plummeted.

Obamacare generated a firestorm of protest. The president’s other landmark legislation the 2300-page Dodd-Frank Act is every bit as harmful crowding out the private sector. A healthy financial services sector allocating capital from savers to consumers and investors and providing payment services is vital for economic growth. Dodd-Frank converts financial services into a public utility, suppressing innovation and value creation.

The president, Treasury Secretary designee Jack Lew and Fed Chairman Bernanke continue supporting a reckless zero-interest-rate-weak-dollar policy. Money matters. It’s a store of value, a medium of exchange and unit of account. Interest rates – the price of present versus future investment and consumption, are the economy’s most important prices.

The Fed’s balance sheet mushroomed from $900 million in 2007 to $2.9 trillion, including $1.7 trillion in government securities partially monetizing the national debt. Bernanke’s $2 trillion haven’t ignited explosive inflation yet because in the current climate banks are sitting on record excess reserves. While popular with borrowers, keeping interest rates artificially low punishes savers, distorts consumption and investment decision making, and fuels the next bubble(s).
Growth improves Americans’ standard of living, and makes addressing the politically-difficult exploding deficit and entitlement crises easier. Robust US growth would be a shot of adrenaline for the global economy. Anemic growth is a choice America doesn’t need to make.

France’s economy is stalled. Europe’s second largest economy had zero growth in the second quarter. With a sluggish economy the government reduced its 2011-growth forecast to an anemic but nonetheless still unlikely to be achieved 1.75%. 

Growth matters enormously. Growing the pie means life isn’t a zero-sum game. It improves people’s standard of living, and creates jobs and tax revenue. Growth is driven by billions of individual decisions to work, produce, hire, invest, sell and buy, or not, all of which are critically affected by the tax and regulatory burden. 

President Sarkozy however appears to have abandoned his idea of reconciling France with the idea of success and incentivizing investment and work. 

Faced with a stagnant economy and burgeoning budget deficit, Sarkozy and Prime Minister François Fillon propose growth-suppressing tax hikes. Their austerity program is austerity for the citizenry not the bloated state.  Instead of putting a hatchet to government spending, most of their projected €12 billion in budget deficit reduction stems from increased taxes. 

Government consumes a whopping 56.2% of GDP in France, more than every major Western economy. If French politicians need an aspirational benchmark, why not Switzerland where government consumes 38.3% of GDP, or better yet Hong Kong where it’s only 18.6%? Does anybody even a committed French étatiste – whether Socialist or notionally Conservative, seriously believe politicians and fonctionnaires are better stewards of his resources than he is?

France’s super-rich provided Sarkozy and Fillon with political cover. L’Oreal heiress and billionaire Liliane Bettencourt and 15 of her kindred guilt-ridden buffetistes français wrote an open letter calling for higher taxes on France’s most affluent. Publicis Chairman and CEO Maurice Levy said it was “only fair that the most privileged members of our society should take up a heavier share of this national burden” and “… right now this is important and just.” Au contraire! there is no worse time to increase taxes than in a an economic downturn. France’s affluent have caught the same guilt bug that’s infected the sage of Omaha multibillionaire Warren Buffet who’s been sanctimoniously clamoring for higher taxes on America’s rich. If Madame Bettencourt and her peers want to assuage their guilt they could write the government a check. They would however do more good investing the money in wealth-producing activities in the private sector.

Given a 2011 budget deficit of €96 billion, the government’s plan delivering only €12 billion in putative savings in 2012 is not serious deficit reduction. 

Sarkozy and Fillon’s plan is anti-growth. Channeling America’s chief job destroyer President Barack Obama they’ve announced they want to increase marginal personal income tax rates 3% for those earning over €500,000, to hike certain capital gains taxes to 13.5% from 12.3%, and to cap tax exemptions for overtime pay. They also seek to increase taxes on tobacco, soft drinks, liquor and amusement parks, as well as eliminating a variety of deductions. 

Whatever you tax you get less of and whatever you subsidize you get more of. France subsidizes indolence and taxes wealth, work and wealth creation. Raising capital gains and personal income taxes on the rich is exactly the wrong policy in an economic downturn. The dastardly rich create jobs. Reducing marginal personal and corporate income taxes would spur growth. Capital gains taxes are harmful. They tax wealth creation and inhibit capital mobility. Eliminating them would give the French economy a testosterone booster shot.   

The Heritage Institute’s 2011 Index of Economic Freedom ranked France as the world’s 64^th freest national economy , as only “moderately free.” That’s less free than every major EU economy except Italy and less free than such worthies as Georgia, Uruguay, Oman, Armenia, Jordan, Saudi Arabia, Jamaica, Bulgaria and Romania.   

While given the huge number of Frenchmen who are employees or wards of the state correcting course would be politically difficult, great leaders lead. Sarkozy and Fillon should sell their countrymen on and adopt pro-growth economic-freedom-enhancing policies. Making France a high-growth free economy would be an historic accomplishment, benefiting the Gauls, Europe and indeed the world.

Europe and the U.S. continue to be mired in the economic doldrums. In the second quarter Europe’s GDP grew a paltry .2% over the prior quarter. Euroland’s economic locomotive Germany stalled at an anemic .1% growth.  Across the pond the U.S. eked out .3% GDP growth.  June U.S. and European unemployment rates were a stubbornly high 9.2% and 9.4% respectively.  A truly alarming 45.7% of Spaniards under 25 are unemployed.  

To date misbegotten fiscal and monetary efforts to spur economic growth have had limited success.

Trade matters and enriches both parties. The EU accounts for 17.6% of total US trade in goods, with Germany, the U.K., the Netherlands, France and Italy being 5 of America’s top 15 trading partners.

While transatlantic tariffs are relatively low, they could be lower. In “Zero Tariffs Across the Atlantic” the U.S. Chamber of Commerce’s Peter Rashish contends eliminating transatlantic tariffs would boost GDP and the competitiveness of American and European firms. Roughly a third of transatlantic trade is between branches of the same firm. Eliminating tariffs would boost their competitiveness, and also that of any transatlantic firm using inputs imported from across the Atlantic.  In “A Transatlantic Zero Agreement: Estimating the Gains from Transatlantic Free Trade in Goods” ECIPE’s Fredrik Erixon and Mathias Bauer forecast in five years total US and European GDP would be increased by from $181 to $250 billion.

While one can quibble with Erixon and Bauer’s assumptions and the magnitude of the benefits, it is unassailable eliminating tariffs would increase trade, GDP and the competitiveness of many American and European businesses.

Why hasn’t it happened?

First many free traders are invested in promoting global multinational trade liberalization through the glacial Doha trade-negotiation round of the WTO. To the contrary, material bilateral deals benefit the parties and spur action by those fearing being left out.

Additionally, somebody has to take the political lead. Ideally the leader of the Free World and world’s largest economy would step up to the plate. If, and it’s an heroic if, President Barack Obama were to invest political capital in eliminating transatlantic tariffs a majority of Congressional Republicans and enough Democrats would support it to ensure passage.  But notwithstanding squirrely rhetoric supporting free-trade, Obama’s record is one of hostility to free trade. He opposed free trade deals when he was in the Senate and is still stonewalling negotiated agreements with Colombia, Korea and Panama, each of which if given a vote, with a majority of Republicans and enough Democrats would pass. Obama blocked trade agreements to appease his union allies, hurting an already battered economy, consumers and US allies.

Perhaps given continued bleak economic performance Obama will have a Damascene conversion on trade and champion a transatlantic free-trade zone. Optimism breathes eternal.

The world’s largest economy remains mired in the deepest recession since the Great Depression. The Bureau of Economic Analysis reported the US economy grew at an anemic 1.3% in the second-quarter growth and revised first-quarter growth downward to a paltry .4%.  The American economic malaise is a drag on and danger to Europe and indeed the rest of the world.

Stubbornly high headline unemployment of 9.1% in July grossly understates the depth of the malaise. The 58.1% employment-to-population ratio is a truer gauge. It hasn’t been this low since 1983. Near the end of President Clinton’s second term it was 64.7%.  Translation: America is missing 16 million jobs. That’s 16 million people who aren’t creating wealth and paying taxes, many of whom have become discouraged, left the labor force and are losing the habits of work.

While President Obama did not cause the Great Recession his policies have prolonged and deepened it.

Obama has his boot on the throat of the naturally resilient American economy. If one or two of his policies were anti-growth one might write it off. Even President Reagan wasn’t 100%. But Obama’s entire policy suite is anti-private sector and anti-growth.

The administration sold its mammoth $821 billion stimulus package as a silver bullet to end the recession. Council of Economic Advisors Chairman Christina Romer warned without it unemployment would hit 8.8% in the 4^th quarter, 2010 but assured the country with their Keynesian binge it would be 7%. Lo in December, 2010 unemployment was 9.4%. The much ballyhooed stimulus package bled the wealth-producing private sector to spend on a smorgasbord of political “investments,” but didn’t resuscitate the moribund economy.

The cash-for-clunkers program vividly illustrates Obama’s imperviousness to economic reality. It was based on the preposterous notion subsidizing destroying cars and new-auto purchases creates wealth. By perverse Obamanomics burning down and rebuilding houses would enrich America.

The president’s signature Obamacare batters the economy with 18 new taxes, including a 40% excise tax on “Cadillac” insurance plans with exemptions for his union allies, a .9% payroll tax increase, a 3.8% tax on capital gains, dividends, rents and royalties, and a 2.3% excise tax on medical devices. It’s a job killer and ultimately will and is intended to crowd out private insurance.

Only 24% of teens have jobs this summer. In 2007 Senator Obama voted for the Fair Minimum Wage Act increasing the minimum wage in 3 steps to $7.25 per hour in 2009, pricing millions of teenagers out of the labor market. Did the man who vowed to make jobs his number one priority gave them a moment’s thought?

In another bout of false compassion, Obama extended unemployment insurance to 99 weeks, with his advisors Christina Romer and Larry Summers and most recently press secretary Jay Carney spuriously contending paying people not to work creates jobs. The WSJ’s Steve Moore rightly brands this economic bimboism. Europe’s generous unemployment safety net and large pool of chronically unemployed testify when you pay people not to work fewer people work. It’s not rocket science.

Pro-growth policies would boost labor and capital mobility.

The partisan National Labor Relations Board (NLRB) is pulling out the stops to facilitate unionization. Unions reduce labor market flexibility and consequently inhibit job creation. The president has also sought thus far unsuccessfully to end secret-union-organizing ballots enabling intimidating workers to vote to unionize.

And NLRB commissars are preventing export powerhouse Boeing from building a new plant in South Carolina rather than Washington because it’s a right to work state.

Barriers to investing and selling goods and services across international and domestic boundaries hurt job and wealth creation.

Opening foreign markets to U.S. exports creates jobs. However, to appease his union allies Obama is stonewalling free-trade agreements with Colombia, Panama and Korea. Domestically Obama opposes free trade of healthcare insurance across state lines, which would increase consumer access and choice.

Energy is vital to economic growth. It is an input of everything produced and consumed. Americans are painfully aware of energy costs every time they fill up at the pump. Energy abundance makes producers more competitive, enriches consumers, and spurs wealth and job creation.

Gas prices are double the day Obama took office. Obama’s Green Jacobins have systematically increased rather than decreased energy costs, stifled production of oil, gas, coal and nuclear, blocked the Alberta pipeline, supported tariffs on Brazilian ethanol, and subsidized uneconomic photovoltaic and wind-mill power. The EPA is conducting a jihad on fossil fuels.

Doing a 180, vigorously supporting off and onshore oil drilling, shale oil and gas, eliminate ethanol tariffs, a nuclear-power-plant construction blitz and ending Jimmy Carter’s ban on nuclear fuel reprocessing would be pro-growth. While Energy Secretary Steven Chu doesn’t want or understand the stimulus one dollar a gallon gasoline and 5 cents per kilowatt hour electricity instead of 9.7 cents would bring, millions of businesses and consumers would.

Money matters enormously. A strong dollar, market interest rates and a healthy and competitive financial services sector are critical for sustainable economic growth. Obama, Treasury Secretary Geithner and Fed Chairman Bernanke have continued President Bush’s destructive weak-dollar and easy-money policies, and put the financial services industry in a regulatory straight jacket.

Obama reappointed dove Ben Bernanke Fed Chairman. Bernanke’s debasing the dollar and easy credit fuel inflation, punish saving and distort economic decision making.

The Fed’s negative real interest rate policy under maestro Alan Greenspan with consigliore Ben Bernanke at his side, along with government systematically weakening mortgage credit standards, to increase home ownership caused the housing bubble, mortgage implosion, financial crisis and consequent Great Recession.

Obama sold the most extensive financial regulatory overhaul in history the Dodd-Frank Act as preventing the next financial crisis. While it imposes a huge regulatory burden on the financial services industry, it doesn’t address the crisis’ fundamental causes. It sets up a corporatist regime under which all aspects of business are politicized, where Washington mandarins rather than markets pick winners and losers and too-big-to-fail is enshrined.

Obama put Bush’s “compassionate” government expansion on steroids. The Federal Leviathan now consumes more than 25% of GDP, versus the 19.6% post-WW2 norm. In a second term unchecked by any need to appeal to voters to the right of MoveOn.org  and MSNBC for reelection, Obama would continue on all cylinders on the path to freedom-suffocating Euro-statist levels of government.

The President demonizes the productive and in the name of “social justice” demands higher capital gains and personal income taxes – red meat for his base but decidedly anti-growth. Eliminating capital gains and corporate taxes and cutting marginal personal rates would be a powerful testosterone booster shot for the economy, firing investors’, businesses’ and workers’ animal spirits.

In recession voters normally fire incumbent presidents. When Reagan won reelection in 1984 unemployment was 7.2% – down from its 10.8% peak in December, 1982.  His supporters could point to a roaring recovery and revived optimism and say the Gipper’s policies worked. In 2012 brass-ring Obamaists will be left with an increasingly lame blaming Bush.

The president is betting fear and the ever increasing percent of Americans dependent on government will carry him to a second term. A whopping 50.5 million Americans receive Medicaid, 46.5 million Medicare, 52 million Social Security, 5 million SSI, 7.5 million unemployment insurance, 44.6 million food stamps and 24 million “earned income tax credits” (constructively welfare). Obama may be right. While his numbers are deteriorating, a July Washington Post/ABC poll showed an astonishing 29% of Americans believe he’s making the economy  better and 32% believe he’s having no effect.

Obama’s economic nuclear winter has destroyed millions of jobs and brought misery to and smothered the dreams of millions of his countrymen. His supporters profess compassion for the un and underemployed. Robust economic recovery is impossible with Obama occupying the White House. Real compassion would be firing him.

Congress created America’s current central bank the Federal Reserve System in 1913. As with all central banks its role ultimately is determined by the political process.

The Fed is tasked with more than simply issuing and maintaining the value of the dollar: the world’s reserve currency. Under the 1978 the Humphrey-Hawkins Full Employment and Balanced Growth Act it Fed must promote price stability and maximum employment. It also regulates banks, polices against systematic risk in the financial system and provides services to banks including check, ACH and wire transfer processing.

When men control the money supply there is a danger they will run the printing presses, creating more money to meet the political and economic exigencies of the moment.

Money matters enormously. It serves as a medium of exchange, a store of value and a unit of account. When central banks debase money they undermine each of its functions.

Since 1971 when President Nixon severed the final link between the dollar and gold, the U.S. hasn’t had even a fig leaf of having more than a fiat currency.

Fed Chairman Ben Bernanke is obsessed with the possibility of deflation. In a 2002 speech “Deflation: Making Sure “It” Doesn’t Happen Here” citing Milton Friedman’s famous “helicopter drop” of money, he vowed to rain money on the economy in the event of a liquidity freeze, earning the sobriquet “Helicopter” Ben.

President Obama too favors easy credit and a weaker dollar. His Fed appointments have been doves. He reappointed Chairman Bernanke, and appointed San Francisco Fed president Janet Yellen as Bernanke’s number two and regulator Sarah Raskin to the Fed board.

Under Bernanke the Fed is attempting to revive a stagnant economy, rather than simply being the guardian of the dollar.

The Fed’s balance sheet mushroomed from $939 billion to $2.375 trillion Since August, 2008. Creating $1.4 trillion diminishes the value of existing dollars, punishing saving and creditors, foreign and domestic.

The Fed has pursued a policy of “quantitative easing” meaning it prints money to buy assets. In Bernanke’s first round of “quantitative easing” (QE1), the Fed purchased debt from Fannie Mae and Freddie Mac, U.S. Treasurys and mortgage-backed securities.

Attempting to stimulate a still moribund economy, the Fed is embarked on a second round of “quantitative easing” buying $600 billion in U.S. Treasurys, creating money and monetizing government debt, which is a stealth tax on everyone holding dollars.

The central bank has kept the Fed funds rate – the interest rate at which banks loan deposits at the Fed to other banks, between 0 and .25%, meaning the real interest rate is negative, since January, 2008.

Printing dollars and suppressing short-term interest rates weakens the dollar. Since January, 2009 the St. Louis Fed’s trade-weighted dollar-value index against a broad group of U.S. trading partners declined 10%. Against gold the dollar depreciated 54%.

Lo, China is buying gold instead of US Treasurys. It imported 209.7 metric tons of gold in the first 10 months of 2010, a 500% yoy increase.

The ability to debase the world’s reserve currency at will makes Bernanke one of the most dangerous men on earth.

An overvalued dollar and insufficient liquidity are not what ail the US and global economies. Notwithstanding easy Fed credit and more than a trillion in unused bank reserves, the U.S. economy continues to languish in the doldrums. In November the headline unemployment rate was 9.8%. The U-6 rate was 17%. The best measure however of the employment situation is the employment-to-civilian-population ratio which hit a 25 year low at 58.2%. It’s been in free fall since 2008.

Another binge of printing dollars is not the answer. The Fed should stick to maintaining a strong dollar.

Fiscal policy is the problem. Cutting marginal tax rates, ideally eliminating the capital gains and corporate taxes, rolling back punitive regulation, vigorously promoting cheap and reliable energy, championing free trade, promoting free labor markets rather than unionization, and steadfastly upholding the rule of law rather than the politicization of law enforcement, would trigger robust economic growth. President Obama has been on the growth-suppressing side of every one of these issues.

Bernanke is mulling yet another round of quantitative easing (QE3). The Fed could buy more mortgage-backed securities, US Treasurys or even state bonds. All would further debase the dollar. Buying state bonds however would be uncharted territory, and profoundly dangerous.

Many U.S. states are de facto bankrupt. Total unfunded pension liabilities are over $3 trillion and $574 billion respectively for state and local governments. On top of the current year gimmicked $6 billion budget hole, California faces a projected $19.3 billion gap for the 2011-12 fiscal year, according to the Legislative Analyst’s Office, meaning the looming deficit is probably at least $25 billion. With $500 billion in unfunded pension liabilities and $88 billion outstanding debt the erstwhile Golden State is on the brink of fiscal Armageddon.

In 2011 it’s likely California and perhaps Illinois and New York will go to Washington hat in hand. While Obama might be inclined to bail out profligate blue states, it is unlikely Congress would go along. The Fed however is another matter.

California’s $1.85 trillion economy is the world’s 8th largest. The central bank could decide the largest state in the union’s woes posed a systematic risk and buy its bonds.

If the Fed bailed out improvident spendthrift California, it would create a nationwide nuclear moral hazard. Fiscal discipline, such as it is, at the state level, would be gutted.

Bankruptcy is the only thing that will jolt California to reform. University of Pennsylvania law professor David Skeel argues Congress should enact of new bankruptcy chapter for states. California’s principal creditors are its bondholders and unionized employees. Bankruptcy would force California to scale back its bloated government and public-sector employees’ rich compensation and pension packages. The state’s bondholders took a risk. They should take a haircut.

The political discourse on monetary policy is changing.

World Bank president Robert Zoellick weighed in in favor of a new international monetary regime compassing the dollar, euro, pound, yen and renminbi, and, importantly, considering gold as a reference point.

Populist conservative Sarah Palin channeling economist Larry Kudlow sounded a clarion alarm over Bernanke’s “QE2.”

Former Fed Chairman Alan Greenspan criticized Bernanke noting “(Gold is) the canary in the coal mine to keep an eye on. It is a signal there is a problem with respect currency markets globally.” Gold has appreciated a whopping 391% against the dollar since January, 2000.

St. Louis Fed president James Bullard said he would be “okay” with Congress eliminating the Fed’s dual mandate

The Fed’s underpricing credit from 2001 to 2005 was a principal cause of the housing bubble, overextension of credit and subsequent crash. Bernanke’s prescription of more easy credit and dollar creation are sowing the seeds of another crisis. It is high time Congress reined in the Fed.

On November 16th Congressman Mike Pence introduced H.R. 6406 which would strip the Fed of its mandate to promote maximum employment, restricting it to maintaining price stability. Senator Bob Corker promises a companion bill in the Senate.

Congress should also prohibit the Fed from bailing out state and local governments and link the dollar to gold or, at a minimum, mandate the Fed use gold and perhaps other commodities as an inflation reference.

President Obama is a soft-money man. Whether Obama would sign legislation circumscribing the Fed’s role is doubtful. Nonetheless, it’s worth a fight.

A sound dollar and market interest rates are vital to sustainable growth and the health of the US and global economies.

“While America Slept” is a worthwhile and timely piece by English author and Americanphile Andrew Roberts. He like Winston Churchill believes given will and self belief Americans can accomplish virtually anything.  In his classic The Clash of Civilizations and the Remaking of World Order Sam Huntington echoed this sentiment arguing if America’s elites retain confidence in the superiority of America, in American and Western values, the 21^st century will be America’s and the West’s, that an ambitious, striving China and surging Islam can be met and contained. But it is abundantly clear today a great many of America’s elites including her Commander in Chief, not only no longer have confidence in their country’s  righteousness and exceptionalism, but actively root and work for, and take pleasure enfeebling America.  

Bill Clinton’s Secretary of State Madeleine Albright described America as “the indispensable nation.” She was more right than she knew and probably believed. A world in which America leading English-speaking and like-minded democracies is not globally ascendant would be a decidedly more dangerous, less free and less prosperous place – an increasingly Hobbesian world in which brutish despotisms and tyrannical ideologies cow and run roughshod over much of the planet.  

Who would feel safer and be emboldened in such a world? Freedom’s enemies: Russian capo Vlad Putin, North Korean despot Kim Jong Il, militant Islamists, Venezuelan strongman Hugo Chaves and Somali pirates.

Many not-so-very-long-ago liberated Eastern European countries would again find themselves in thrall to the Russian bear. Putiniste Russia’s invasion of Georgia, its shutting off gas to the Ukraine and much of Europe, and suspicion it attempted to murder Orange presidential candidate Viktor Yushchenko by dioxin poisoning  provided a foretaste. Would the prospect of a protest letter from EU foreign minister Catherine Ashton give a Moscow contemplating sending tanks to Tiblisi or Riga, or seizing the Crimea, pause?

Confronted with a nuclear North Korea which has already threatened to turn it into “a sea of fire” and an unchecked China, Japan would go nuclear.

Iran, Pakistan and Saudi Arabia are major sponsors of supremacist political Islam. In Defeating Political Islam: The New Cold War Moorthy Muthuswamy calls them  the Axis of Jihad. Although to date America and the West have done little if anything to acknowledge, much less to meaningfully check their export of political Islam and terror would increase. 

Israel would/will preemptively destroy Islamist Iran’s nuclear program or the mullahs would menace the entire Middle East and trigger nuclear proliferation in a gallery of unsavory regimes. 

Nuclear Pakistan which since independence has constructively cleansed the country of Hindus and Christians, could be expected to further attempt to undermine India.

Saudi Arabia’s most important export isn’t oil but rather Wahhabism. Its funding of mosques and madrassas in North America, Europe, Africa and South Asia has been largely unchallenged by the West.

Freedom of the high seas and secure worldwide shipping have been guaranteed in turn by a confident and globally dominant British Royal Navy and the U.S. Navy. They could no longer be taken for granted.

Castroite Hugo Chaves has already heaped praise upon and supported the Revolutionary Armed Forces of Colombia (FARC), narco-terrorists who have been battling the government for decades. He could be relied up to step up his efforts to sow trouble throughout Latin America.

Historian Bernard Lewis warned a nation can make few mistakes worse than being “harmless as an enemy and treacherous as a friend.” On September 17^th President Barack Obama confirmed lest there had been any doubt, he has taken America there.

On the 70^th anniversary to the day of the Soviet Union’s invasion of Poland Barack Obama stiffed Poland. Couched in doublespeak about strengthening Europe’s missile defense Obama announced he was abandoning America’s commitment to putting an anti-ballistic missile system in Poland and the Czech Republic. The timing was creepy. The belief system behind the decision and signal it sends to America’s friends and adversaries are chilling.

The Obama administration’s explanations for the move are risible.

It trumpeted “new” intelligence suggesting the Iranian missile threat to the immediate region is greater and more imminent than the long range missile threat and said therefore America will invest in the sea-based theater missile defense system.

Intelligence is imperfect. The US was surprised by North Korea, India, Pakistan and Israel going nuclear.

Iran launched a satellite. The necessary technology is almost identical with that require for an ICBM armed with a nuclear, chemical or conventional payload.

The Administration has said it wants to save money. Who knew? This preposterous rationale comes from an administration that will incur an almost $2 trillion deficit in its first year, with deficits likely to exceed $13 trillion over the next decade. Obama is happy, indeed keen, to expand spending on all fronts except the military.

Obama has always been viscerally against missile defense and, notwithstanding his pledge during the 2008 presidential debates to not permit Iran to go nuclear, never willing to do anything meaningful to stop the mullahs.

Expanding the Aegis system, which is constrained by the number of suitable destroyers, and deploying interceptors in Poland could be done in parallel. The West would be safer for it.

In dealing with a malevolent foe on a path to acquiring nuclear arms such as Iran, it would be better to eliminate or defend against the threat too soon rather than rationalizing procrastinating.

Russia’s contention interceptors in Poland would threaten them was patently absurd. The system was defensive. Moreover, 10 interceptors in Poland and a radar system in the Czech Republic would have been next to useless against Russia’s enormous fleet of missiles. Russia objected to a tangible American military presence in and commitment to defend Eastern Europe.

The putative leader of the Free World Barack Obama believes disarmament and appeasing Freedom’s enemies are the path to peace, love and brotherhood among men. He hopes if the world’s rogues like him America will be safer. To the contrary, to the extent America is overwhelmingly preeminent in arms, steel willed, and feared by them, the world is safer.

The Poles and Czechs have been good American allies. Speaking in San Francisco on August 5th Poland’s foreign minister Radoslaw Sikorski reminded his audience that notwithstanding Poland’s not being one hundred percent in sync on the war’s rationale Poland sent troops to Iraq. And alluding to some Western European NATO members’ restrictions on troops committed to Afghanistan said, he who contributes without caveats gives double. Moreover, though it is an infidel capital, it’s hard to imagine Warsaw is on the top of the mullahs’ target list. That said, with a view to staying free, it is in the interest of both Poland and the Czech Republic to encourage America to stay engaged in Eastern Europe.

While Obama’s betrayal stings, he is not the first American leader to give the Eastern Europeans short shrift.

FDR’s willful blindness during WW2 to the nature of Stalin and the Soviet Union, his rolling over at Yalta, and Harry Truman’s acquiescence led to Eastern Europe’s enslavement by the Soviets for almost half a century.

Today Truman is cited by Republicans as a tough Democratic president. Set against Jimmy Carter or Barack Obama, he was a lion, a veritable Churchill. But recall at the end of WW2 the US enjoyed an atomic monopoly, the most powerful air force and navy ever, and accounted for the lion’s share of the world’s economic production.

Obama’s betrayal leaves free countries in mauling reach of the Russian bear in a lurch. If the Russians overran Estonia or seized the Crimea, the most vigorous response from Western Europe might be dispatching French president Nicholas Sarkozy to broker a ceasefire certifying the facts on the ground. Eastern European states now face the prospect of Finlandization or worse.

Obama’s move also heightens the danger elsewhere.

The price for Obama’s preemptive appeasement will be paid worldwide in blood and diminished freedom. While bad actors whether militant Islamist Iranian mullahs, rapacious Russians, Dear Leader Kim Jong Il or Castroite Hugo Chaves bear primary responsibility for their actions, there will also be blood on Obama’s hands. His weakness is provocative and emboldens freedom’s enemies worldwide.

As long as the Prince of Appeasement Barack Obama is in the White House America cannot be relied upon to support freedom and the liberal world order. Worse is to come.

Faced with Islamist Iran developing nuclear weapons, America’s political leaders have turned Teddy Roosevelt’s maxim speak softly and carry a big stick on its head.

In the first presidential debate Senator Obama declared “We cannot tolerate a nuclear Iran.”  In the second debate he reaffirmed “We cannot allow Iran to get a nuclear weapon.”  In this he, President Bush, Senator Clinton and Senator McCain appear to agree. It is hard however to imagine Iran’s Supreme Leader Ayatollah Khamenei and President Ahmadinejad view their declarations as equally credible.

Curbing radical Islam is the transcendent challenge of our time. A nuclear Iran will be an existential threat to Israel, its neighbors, and indeed the entire civilized world.  It is the world’s leading sponsor of terror, wants to commit a second Holocaust, and with nukes will have the means. Iran also calls for a world without America.

The Iranian theocracy has been waging a low-tech war against the West and its neighbors since 1979. It has committed or sponsored terrorism in Argentina, Europe, Pakistan, Saudi Arabia, Lebanon and Iraq. When the mullahs have nuclear weapons, missiles that can reach Europe and irregular delivery systems such as Hezbollah and potentially Al Qaeda, they will be far less constrained, our weak-kneed European allies will be even more appeasement minded, and other Middle Eastern states will seek atomic arms.

What has the West done? Having branded it a member of the Axis of Evil, Bush’s feckless policy to prevent Iran from obtaining atomic weaponry accomplished nothing.  Our British, French and German allies conducted three years of utterly fruitless negotiations with Iran, giving the mullahs time, and, forestalling US military action when Bush had the political capital and possibly the will to act, which for some Europeans’ was the exercise’s purpose.

Outside of the much acclaimed Iraq surge Bush’s second term has been characterized by abject weakness on the foreign policy front. Now he has embraced carrot-heavy diplomacy with nuclear North Korea, the third member of the Axis of Evil. The US will remove it from the list of terrorism sponsors in return for yet another empty promise.

It is in the Iranian regime’s interest to have nukes. Absent a credible military threat or punishing economic sanctions vigorously supported by Europe, Russia and China and a blockade, diplomacy to persuade it to give up that ambition was never going work. The mullahs are unpopular. Regime change may have been possible if it had been vigorously supported by the West. But it’s too late to bank on.

The civilized world thus far has rationalized not taking decisive action.

Reasonable people can argue how close Iran is. Many urge more futile diplomacy suggesting there’s always time for the military option. However, intelligence is not perfect.  Pakistan’s, India’s, North Korea’s and Israel’s going nuclear surprised us. Better to act before we think absolutely necessary than to risk waiting until it is too late.

America has the power to prevent Iran from going nuclear.  Retired Air Force Lt. General Tom McInerney outlined how comprehensive precision air strikes could destroy its nuclear weapons facilities and military command and control infrastructure.

Nobody likes military force, but at this juncture it is the only assured means of preventing Iran becoming a nuclear power.

Bombing would prevent a pariah state and supremacist Islamists from obtaining and using nukes, preserve options for curbing Iran’s sponsorship of terrorism, and deter bad actors worldwide. Recall Bush’s unheralded first-term success persuading Libya to abandon its nuclear weapons program. After the American-led coalition toppled Saddam Hussein, Libyan strongman Qaddafi worried he might be next and decided his nuclear program wasn’t worth the risk.

But surely America shouldn’t act alone.

The U.N. and our European allies will never beseech the U.S. to act.  The principal help America’s allies could offer would be to provide a US administration with domestic political cover. But the British, French and Germans aren’t even willing to go that far. The world’s most beneficent superpower in history will have to decide to act, or not, on its own, in its and the civilized world’s interest.  Or the “little Satan” Israel may have to strike.

Whether America has the will however is very much in doubt. The mullahs believe it doesn’t.  They also have a stake in America’s presidential election. Notwithstanding Obama’s proclamations Iran doesn’t take him any more seriously than Bush. Why should it? McCain may be another matter.

Regardless of who wins the White House, if America permits Iran to go nuclear the world will pay a terrible price.

Western weakness spurred Russia’s invasion of Georgia.

The image of the leader of the free world grinning watching Olympic volleyball and basketball while Russian tanks penetrated deep into Georgia captured the moment.

What did KGB alumnus and strongman Vladimir Putin see when he surveyed the world scene while baiting his trap for the Georgians?

President George Bush had dithered and not dealt forcefully with Iran’s nuclear weapons program, reinforcing the impression America was otherwise distracted and irresolute. In May Germany and France blocked fast-tracking Georgia and the Ukraine into NATO, which, lest Putin had doubts, was a green light to act. That said, the estimable Victor Davis Hanson rightly notes had Georgia been in NATO Russia’s overrunning it would have exposed the alliance as hollow. If NATO is only a call option on American troops, it is indeed a shell of the alliance that once held the Soviets at bay. Estonia, Latvia and Lithuania are in NATO now.

What if Russian tanks rolled to Vilnius, Riga and Tallinn? Who seriously believes France’s and Germany’s political classes would put their troops in harm’s way to protect the Baltic States, the Ukraine or even Poland?

The West’s response to Russia’s invasion of Georgia, a sovereign democratic proWest state has been pathetic.

Bush’s condemnation and dispatching humanitarian aid and Condi to Tbilisi was tepid. NATO issued an even-handed, utterly toothless statement and cancelled the next NATO-Russia Council meeting.

EU and French president Nicholas Sarkozy had his Munich moment, racing to Moscow broker a cease fire, which ratified the facts on the ground and did not mention Georgia’s territorial integrity.

Not to be outdone, Great Britain’s foreign secretary David Mililband weighed in with his own invertebrate response, recommending the invasion be addressed by the United Nations, where Russia has a veto, and the powerless Organization for Security and Cooperation. Putin must be quaking in his boots.

And from West’s legions of self-styled human rights and peace activists there’s been nary a peep. In stark contrast, massive crowds filled Western Europe’s streets to protest the liberation of Iraq and in the eighties to object to America’s installing Pershing missiles to defend them from the Soviet Union.

The only responses to Russian aggression of any consequence came from those well within the bear’s reach. The presidents of the Baltic States, Poland and the Ukraine flew to Tbilisi to signal support. Poland approved installing a missile defense system. The Ukraine offered the West a satellite tracking facility to incorporate within a broader European missile defense system and imposed new restrictions on the Russian fleet operating out of Sevastopol.

What now?

If there is anything positive in this war, it is that Russian tanks crushing a weak democratic neighbor may reinvigorate NATO, dispel Euro “soft power” delusions, and wake up a somnolent American electorate that the world remains a dangerous place.

Former US UN ambassador John Bolton warns the vacuum between Russia and NATO increases the likelihood of Russian aggression. New Europeans can afford and need to spend more on defense, much more. The US should furnish arms.

The US is the most benign superpower in history. Today the world’s problem is not that the US is not sufficiently loved or deferential to the United Nations or Brussels bienpensants, but rather that the US is not sufficiently feared by the world’s bad actors.

Russia’s aggression is a clarion call for American leadership.

Russian savagery must be roundly condemned. It should be expelled from the G8 and blocked from joining the WTO. It’s high time to reconstitute NATO, within Europe where it seems almost moribund, and beyond, where it would fill a void. Ukraine and Georgia should forthwith be invited to join a revamped NATO.

The militaries of the Baltic States, Poland, the Ukraine and Georgia should be fortified and supplemented with Western troops. If, however, NATO members are not prepared to move troops east then moving NATO’s perimeter east would be a mistake. And if some Western European NATO members are not committed to the alliance, perhaps it’s time to end the charade and invite them to leave.

But for its massive nuclear arsenal, Russia is weak. Russia’s Russian population is declining. Its economy is largely dependent on oil and gas. There are more than 1.3 billion resource-hungry Chinese next to vast, empty, resource-rich Siberia. Additionally there are hundreds of millions of Muslims along Russia’s southern border and its growing Muslim population is increasingly likely to define itself as Muslim rather than Russian.

Yet, Russia arms Islamist regimes and China, foments trouble in the Middle East, and seeks to cow or reabsorb much of its near abroad and former satellite states.

Weakness whether lack of will in the United States or lack of will and means in the case of Western Europe, invites further Russian aggression.

Two years ago Dutch and French voters rejected the European Constitution, which was to have ceded substantial remaining national sovereignty, perhaps irretrievably, to a European superstate. Dutch and French citizenry can be forgiven for thinking their votes were dispositive, that the absorption and destruction of the EU’s 27 member states’ had gone far enough. The EU’s political elites simply repackaged their political manifesto under the Lisbon Treaty, which Valery Giscard d’Estaing acknowledged was virtually the same as the rejected constitution.

EU political Brahmins hold their electorates in contempt and wherever possible have avoided letting the people vote on a momentous ceding of sovereignty. They would have bypassed a referendum in Ireland too, but the Irish constitution inconveniently required a vote and vote the Irish did. With the entire Irish political establishment and Brussels Eurocrats supporting the Lisbon Treaty, Irish voters said “stop!” They said stop for Ireland and for voters in all the other EU nation states who would have said no if they had been permitted a vote.

What now?

The great champion of liberty Czech President Vaclav Klaus said the EU must abide by its own rules, that the Lisbon Treaty must be ratified by every EU member in order to come into force. Ireland rejected it therefore it cannot come into force. Klaus may be unduly optimistic. Brussels’ political elites have been only too happy to ignore their own rules when it suits.

The preferred path for Brussels and Ireland’s political establishments will be to have the Irish vote again and again and again on cosmetically touched up treaties, until they get it right, at which point there will be no more votes.

However, what’s in their interest? Would the Irish gain greater freedom, prosperity and security by ceding yet more sovereignty and falling deeper into the maw of Brussels?

From Ireland’s standpoint the status quo would appear eminently satisfactory.

The Celtic Tiger’s economic performance over the last several decades has been stupendous relative to sclerotic Belgium, France, Germany and the rest of Old Europe. Ireland lowered taxes and along with New Zealand is one of only a few counties to have reduced government as a percent of GDP.

The Heritage Institute’s Freedom Index ranks Ireland the third freest economy in the world after Hong Kong and Singapore. France ranks a dismal 48th, Italy 64th and Greece 80th.

There is another at first blush more radical option. Ireland could turn westward and petition to join the United States. In “Why Britain should join America” historian Paul Johnson argued Britain should join the United States “leaving behind the stagnancy and depressing statism of Europe.” Johnson argued that Britain was more compatible culturally, economically and politically with America and that its prospects would be better off as part of an expanded English-speaking Republic than in thrall to a continental regulatory yoke. Much of his case obtains for Ireland as well.

Moreover, Americans of all political stripes romanticize and have enormous affection for the Irish, notwithstanding that Ireland has not always been a stalwart ally like other English-speaking nations such as Britain and Australia. Congress would stampede to welcome the first new state since 1959. Ten thousand Irishmen parachuted into Boston or New York would fit quite comfortably, far better than in Frankfurt, Rome or Athens.

If it joined the US Ireland might also lay the basis for a genuine North Atlantic free trade area, which would have huge benefit for North America and Europe.