Obama wants the Rich and the Poor to Fight amongst Themselves

‘Divide and conquer’ seems to be the way to go for a president that, in just one term, has managed to fail on everything.

NationalJournal.com
June 29, 2011

Kids versus corporate jets.

If President Obama’s news conference accomplished anything on Wednesday afternoon, it underscored, in striking tones, his strategy for winning the debt ceiling fight with Republicans: Make it a clash of classes.

  • Rich versus Poor.
  • Us versus Them.
  • Those who support children, food safety, medical research and, presumably, puppies and apple pie versus the rich fat cats who don’t.

In Obama’s world, Democrats are for kids and Republicans are for corporate jets. That is a sharp distinction that could help put the GOP on defensive, but it may not be enough to persuade Republicans to change their posture on the debt-ceiling talks.

The deceiver in chief will blame everyone else before assuming responsibility himself. -The Real Agenda

Republicans have cast Obama as a tax-raiser and a Big-Government spender. This was his jujitsu move to turn their arguments against them. With a hint of disdain, Obama even dredged up the death of Osama bin Laden to score a political point.

“I’ve been doing Afghanistan, bin Laden and the Greek crisis,” Obama said, jabbing Congress for being out of session so much. “You stay here. Let’s get it done.”

(WATCH: Obama’s Frustration with Congress on Display at Press Conference)

In his first full-scale news conference since March, the president insisted that Democrats had compromised in private talks by agreeing to billions of dollars in budget cuts that would hurt their voters. But, he said, Republicans were refusing to bend by not agreeing to eliminate tax breaks to owners of corporate jets and profit-rich oil companies. If Republicans get their way, Obama said, the end result would be unbalanced deal that lifts the debt limit but forces the government to make deeper-than-necessary cuts.

“If we do not have revenues, that means there are a bunch of kids out there who do not have college scholarships,” Obama said. “[It] might compromise the National Weather Services. It means we might not be funding critical medical research. It means food inspection might be compromised. I’ve said to Republican leaders, ‘You go talk to your constituents and ask them, “Are you willing to compromise your kids’ safety so some corporate-jet owner can get a tax break?” ‘ ”

Just in case any viewer missed his class-clashing message, Obama referred to corporate-jet owners at least three more times before he took his second question.

This was not the first time Obama has spoken in grim terms about the consequences of cutting too deeply in order to strike a bargain that wins enough votes to raise the debt ceiling. But his rhetoric was sharper, even harsher, than in the past — and it threatens to anger Republican leaders just as he’s supposedly reaching out to them in compromise.

(RELATED: Obama Comes Close to Endorsing Gay Marriage)

Obama is gambling that public pressure will force Republicans to bow to his demand. But Republicans face pressures of their own; the influential tea party movement won’t accept any tax increases and wants draconian budget cuts. Obama’s rhetoric may only back them into a corner.

Normally, the constitutionally pragmatic Obama seeks a middle road in his rhetoric, keeping his options open and burnishing his image as somebody always willing to find a bipartisan solution. Look at his response in the same news conference to a New York law allowing for gay marriages. With liberal activists demanding that he support the measure and make gay marriage a cause of his presidency, Obama demurred. It’s a states-rights issue, he said.

“Each community is going to be different,” Obama said. “Each state is going to be different.”

Obama and GOP leaders in Washington must soon come to grips with the fact that the nation’s sluggish economy will almost certainly take a major hit if Congress doesn’t soon increase the amount of money the U.S. can borrow. Raising the debt limit was once a routine affair, but it’s been caught in the increasingly partisan Washington maw. Republicans are demanding steep budget cuts and no tax increases as the price for a few votes in favor of raising the limit. Obama hopes to save face, as well as some government programs.

“The question now is, are we going to step up and get this done?” Obama said. He knows the answer is yes, and the only question is how.

“Call me naive,” Obama said, “but my expectation is leaders are going to lead.” Obama is naive only if he thinks a single news conference is going to change the political paradigm.

 

Obama Stimulus Made Economic Crisis Worse

Bernanke dares to disagree and says the FED and the government acted and save the world from ‘global meltdown’.

Bloomberg

U.S. President Barack Obama and his administration weakened the country’s economy by seeking to foster growth instead of paying down the federal debt, said Nassim Nicholas Taleb, author of “The Black Swan.”

Nassim Nicholas Taleb

“Obama did exactly the opposite of what should have been done,” Taleb said yesterday in Montreal in a speech as part of Canada’s Salon Speakers series. “He surrounded himself with people who exacerbated the problem. You have a person who has cancer and instead of removing the cancer, you give him tranquilizers. When you give tranquilizers to a cancer patient, they feel better but the cancer gets worse.”

Today, Taleb said, “total debt is higher than it was in 2008 and unemployment is worse.”

Obama this month proposed a package of $180 billion in business tax breaks and infrastructure outlays to boost spending and job growth. That would come on top of the $814 billion stimulus measure enacted last year. The U.S. government’s total outstanding debt is about $13.5 trillion, according to U.S. Treasury Department figures.

Obama, 49, inherited what the National Bureau of Economic Research said this week was the deepest U.S. recession since the Great Depression. Even after the stimulus measure and other government actions, the U.S. unemployment rate is 9.6 percent.

Governments globally need to cut debt and avoid bailing out struggling companies because that’s the only way they can shield their economies from the negative consequences of erroneous budget forecasts, Taleb said.

Errant Forecasts

“Today there is a dependency on people who have never been able to forecast anything,” Taleb said. “What kind of system is insulated from forecasting errors? A system where debts are low and companies are allowed to die young when they are fragile. Companies always end up dying one day anyway.”

Taleb, a native of Lebanon who gave his speech in French to an audience of Quebec business people, said Canada’s fiscal situation makes the country a safer investment than its southern neighbor.

Canada has the lowest ratio of net debt to gross domestic product among the Group of Seven industrialized countries and will keep that distinction until at least 2014, the country’s finance department said in March. Canada’s ratio, 24 percent in 2007, will rise to about 30 percent by 2014. The U.S. ratio, now above 40 percent, will top 80 percent in four years, the department said, citing IMF data.

“I am bullish on Canada,” he told the audience. “I prefer Canada to the U.S. or even Europe.”

Mortgage Interest

Canada’s economy also benefits from the fact that homeowners, unlike their U.S. neighbors, can’t take mortgage interest as a tax deduction, Taleb said. That removes the incentive to take on too much debt, he said.

“The first thing to do if you want to solve the mortgage problem in the U.S. is to stop making these interest payments deductible,” he said. “Has someone dared to talk about this in Washington? No, because the U.S. homebuilders’ lobby is hyperactive and doesn’t want people to talk about this.”

Taleb also criticized banks and securities firms, saying they don’t adequately warn clients of the risks they run when they invest their retirement savings in the stock market.

‘Have Fun’

“People should use financial markets to have fun, but not as a depository of value,” Taleb said. “Investors have been deceived. People were told that markets go up regularly, but if you look at the last 10 years that’s not been the case. The risks are always greater than what people are told.”

Asked by an audience member if returns such as those posted by Berkshire Hathaway Inc. Chief Executive Officer Warren Buffett — who amassed the world’s third-biggest personal fortune through decades of stock picks and takeovers — are the product of luck or talent, Taleb said both played a part.

If given a choice between investing with Buffett and billionaire investor George Soros, Taleb also said he would probably pick the latter.

“I am not saying Buffett isn’t as good as Soros,” he said. “I am saying that the probability Soros’s returns come from randomness is much smaller because he did almost everything: he bought currencies, he sold currencies, he did arbitrages. He made a lot more decisions. Buffett followed a strategy to buy companies that had a certain earnings profile, and it worked for him. There is a lot more luck involved in this strategy.”

Soros gained fame in the 1990s when he reportedly made $1 billion correctly betting against the British pound.

Taleb’s 2007 best-seller, “The Black Swan: The Impact of the Highly Improbable,” argues that history is littered with rare, high-impact events. The black-swan theory stems from the ancient misconception that all swans were white.

A former trader, Taleb teaches risk engineering at New York University and advises Universa Investments LP, a Santa Monica, California-based fund that bets on extreme market moves.