• If you are having problems logging in please use the Contact Us in the lower right hand corner of the forum page for assistance.

‘Manchurian Candidate’ Starts War on Business: Kevin Hassett

hypocritexposer

Well-known member
March 9 (Bloomberg) -- Back in the 1960s, Lyndon Johnson gave us the War on Poverty. In the 1970s, Richard Nixon launched the War on Drugs. Now that we have seen President Barack Obama’s first-year legislative agenda, we know what kind of a war he intends to wage.

It is no wonder that markets are imploding around us. Obama is giving us the War on Business.

Imagine that some hypothetical enemy state spent years preparing a “Manchurian Candidate” to destroy the U.S. economy once elected. What policies might that leader pursue?

He might discourage private capital from entering the financial sector by instructing his Treasury secretary to repeatedly promise a brilliant rescue plan, but never actually have one. Private firms, spooked by the thought of what government might do, would shy away from transactions altogether. If the secretary were smooth and played rope-a-dope long enough, the whole financial sector would be gone before voters could demand action.

Another diabolical idea would be to significantly increase taxes on whatever firms are still standing. That would require subterfuge, since increasing tax rates would be too obvious. Our Manchurian Candidate would have plenty of sophisticated ideas on changing the rules to get more revenue without increasing rates, such as auctioning off “permits.”

These steps would create near-term distress. If our Manchurian Candidate leader really wanted to knock the country down for good, he would have to provide insurance against any long-run recovery.

There are two steps to accomplish that.

Discourage Innovation

First, one way the economy might finally take off is for some entrepreneur to invent an amazing new product that launches something on the scale of the dot-com boom. If you want to destroy an economy, you have to persuade those innovators not even to try.

Second, you need to initiate entitlement programs that are difficult to change once enacted. These programs should transfer assets away from productive areas of the economy as efficiently as possible. Ideally, the government will have no choice but to increase taxes sharply in the future to pay for new entitlements.

A leader who pulled off all that might be able to finish off the country.

Let’s see how Obama’s plan compares with our nightmare scenario.

Treasury Secretary Timothy Geithner has been so slow to act that even liberal economist and commentator Paul Krugman is criticizing the administration for “dithering.” It has gotten so bad that the Intrade prediction market now has a future on whether Geithner is gone by year’s end. It currently puts the chance of that at about 20 percent.

No More Deferral

On the tax hike, Obama’s proposed 2010 budget quite ominously signaled that he intends to end or significantly amend the U.S. practice of allowing U.S. multinationals to defer U.S. taxes on income that they earn abroad.

Currently, the U.S. has the second-highest corporate tax on Earth. U.S. firms can compete in Europe by opening a subsidiary in a low-tax country and locating the profits there. Since the high U.S. tax applies only when the money is mailed home, and firms can let the money sit abroad for as long as they want, the big disadvantage of the high rate is muted significantly.

End that deferral opportunity and U.S. firms will no longer be able to compete, given their huge tax disadvantage. With foreign tax rates so low now, it is even possible that the end of deferral could lead to the extinction of the U.S. corporation.

If any firms are to remain, they will be festooned with massive carbon-permit expenses because of Obama’s new cap-and- trade program.

Importing Drugs

Obama’s attack on intellectual property is evident in his aggressive stance against U.S. pharmaceutical companies in the budget. He would force drug companies to pay higher “rebate” fees to Medicaid, and he included wording that suggests Americans will soon be able to import drugs from foreign countries. The stock prices of drug companies, predictably, tanked when his budget plan was released.

Obama will allow cheap and potentially counterfeit substitutes into the country and will set the U.S. price for drugs equal to the lowest price that any foreign government is able to coerce from our drugmakers.

Given this, why would anyone invest money in a risky new cancer trial, or bother inventing some other new thing that the government could expropriate as soon as it decides to?

Finally, Obama has set aside $634 billion to establish a health-reform reserve fund, a major first step in creating a universal health-care system. If you want to have health care for everyone, you have to give it to many people for free. Once we start doing that, we will never stop, at least until the government runs out of money.

It’s clear that President Obama wants the best for our country. That makes it all the more puzzling that he would legislate like a Manchurian Candidate.

(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He was an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election. The opinions expressed are his own.)

To contact the writer of this column: Kevin Hassett at [email protected]

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_hassett&sid=amhpOT5rlR1Y
 
A

Anonymous

Guest
What is comical- is if you look back at history and read about the Administration of Teddy Roosevelt- the corporate and business world said the same thing about him...How dare he tell Big Business what they could or could not do :???: How dare he break up the monopolies that got too big to fail- and were profiteering off raping the public :???: How dare he put in rules on how they treat their employees :???: How dare he make rules that were good for the benefit of the public over the profiteering of the Corporate world :???: How dare he require them to produce and sell a legitimate quality safe product :???:
 
A

Anonymous

Guest
hypocritexposer said:
OT, can you tell me how the European banks failed?

The European financial regulations and oversight are more strict, are they not?

Not sure-- but I know a whole lot were invested in/tied into our junk trading schemes...
Canada's banks and economy has been rated by the Worlds banks as the most sound- and their reasoning was because of Canada's much more stringent rules and regulation...
 
A

Anonymous

Guest
hypocritexposer said:
Are those Canadian rules and regulations government enforced or self enforced by industry?

Industry standards would be voluntary, would they not?

Government...Industry standards- what a joke :roll: ....We just tried that- turned industry lose on a self regulation role the last 8 years- and they failed miserably-- and proved they are like little kids finding the cookie jar...They can't just eat one- in putting their greed and gluttony over ethics- they eat them all and then break the cookie jar.....
 
A

Anonymous

Guest
hypocritexposer said:
So how did it turn out so well in Canada? What seems to be the difference?

:roll: The Banking raters noted it was because of stricter banking rules and regulations (which they apparently enforced)....
Walk across the street and ask your Canuck banker.... :wink:
 

Mike

Well-known member
Oldtimer said:
hypocritexposer said:
So how did it turn out so well in Canada? What seems to be the difference?

:roll: The Banking raters noted it was because of stricter banking rules and regulations (which they apparently enforced)....
Walk across the street and ask your Canuck banker.... :wink:
Since Canada’s financial services sector was deregulated in 1987, permitting the banks to buy brokerage houses, they have enjoyed vast earnings power because of their diverse businesses and operations. And in contrast to the recent shotgun marriages at bargain prices between ailing Wall Street brokerages and American banks, Canadian banks paid top dollar decades ago for profitable, blue-chip investment firms.

Canadian banks are known to be risk-averse, and this has served them well. While their American counterparts were loading up their books with risky mortgages, Canadian banks maintained their lending requirements, largely avoiding subprime mortgages. The buttoned-down banks in Canada also tended to keep these types of securities on their books, rather than packaging them and selling them to investors. This meant that the exposures they did have to weak mortgages were more visible to the marketplace.

The big five Canadian banks — Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Bank of Montreal — survived the recent turmoil relatively unscathed. Their balance sheets remain intact and their capital ratios are comfortably above requirements. Yes, Prime Minister Stephen Harper’s government may buy as much as 125 billion Canadian dollars (about $100 billion) worth of mortgages, increasing banks’ capacity to lend. But this is small change compared with the scale of Washington’s bailout.
 
Top