Campaign-Promises.com

By Dr. Paul Kengor

FrontPageMagazine.com | Wednesday, April 08, 2009

President Obama says the economy is the worst since the Great Depression. Actually, it is the worst since the Reagan recession of 1982-83. Further, the 2009 market crash is not the worst since 1929 but since 1987—also on Ronald Reagan’s watch.

What did Reagan do—or, more importantly, didn’t do—in response to these “crises?” How was Ronald Reagan’s response different from what Barack Obama is doing?

In both cases, Reagan did the exact opposite of Obama’s massive government spending infusions. In fact, it’s worth noting that Bill Clinton—listen up, Democrats—didn’t invoke Obama’s method when he faced recessions at the very start and end of his presidency. (That’s another article for another time.)

As for the Reagan recession, the president waited extremely patiently—to the point where he drove his advisers nearly nuts—for his huge 1981 tax cuts to take effect. He didn’t spend money because he believed spending had been out-of-control, particularly since FDR’s New Deal and LBJ’s Great Society, which created systemic deficits. Reagan felt that high spending, high regulation, and high taxes had sapped the American economy of its vitality, and particularly its ability to rebound from recession. The economy needed to be freed in order to perform.

Reagan’s prescription rested on four pillars: tax cuts, deregulation, reductions in the rate of government spending, and a stable, carefully managed growth of the money supply. The federal income tax reduction was the centerpiece: Reagan secured a 25 percent across-the-board reduction over a three-year period, beginning in October 1981. The upper income marginal tax rate was dropped from 70 percent, which Reagan believed was punitive and stifling, to 28 percent.

By 1983, America had begun its longest peacetime economic expansion in history, cruising right through the 1987 market plunge.

What did Reagan do about the October 1987 crash? Basically nothing—certainly nothing like a massive government “stimulus.”

“Some people are talking of panic,” Reagan calmly confided to his diary. “Chrmn. of Stock Exchange is acting very upset.”

Those are Reagan’s only diary references to the financial crisis. With the economy freed, he was confident it would bounce back. Reagan let the economy correct itself.

Okay, but Reaganomics created huge deficits, right?

That’s the big criticism. It isn’t accurate. It needs to be understood—now more than ever.

First off, know these crucial facts: The deficit under Ronald Reagan increased 35 percent, from an inherited deficit (from President Jimmy Carter) of $104 billion in 1980 to a final deficit of $141 billion in 1989. The deficit peaked at $236 billion in 1983, particularly because of the plummet in tax revenue during the recession. It began dropping steadily in 1986, continuing through the 1987 crash. (Source: Congressional Budget Office figures, “Historical Tables.”)

Compare that to what’s happening now, where the direct opposite of Reaganomics is being pursued by the liberal Democratic president and Congressional leadership:

President Obama inherited a record Bush deficit of $400 billion, but is generating a far worse $1.8-trillion deficit in his first year. (Source: Congressional Budget Office, March 20, 2009.) We’ve never seen anything like this. This unthinkable explosion is a direct result of the stunning government spending unleashed by Obama and the Democratic leadership in just eight weeks—an unheard of development in 233 years of American history.

So, think about this:

Ronald Reagan increased the deficit by 35 percent in eight years, whereas Barack Obama has increased the deficit by 450 percent in eight weeks. Reagan created an extra $37 billion in annual deficit. Obama has already created an extra $1.4 trillion in annual deficit.

But what, exactly, caused the Reagan deficits? There were several factors: the recession of 1982-83, the Reagan defense spending—implemented to turn the screws on the Soviets—the domestic social spending by the Democratic Congress, and more. Some reasons were Reagan’s fault; others were Congress’ doing—both share blame in differing degrees.

Importantly, and despite what you’ve heard, Reagan’s tax cuts didn’t create the deficit. Tax revenues actually boomed from roughly $600 billion in 1981 to $1 trillion in 1989.

The primary cause of the deficit was recession and spending, mainly spending—as is always the case. It is especially the case right now under Obama, with the spending component utterly out-of-control.

The crucial lesson for today is that the best “stimulus” is one that relies on the tried-and-true American way: letting free individuals and entrepreneurs stimulate the economy through their own earnings and economic activity. Wealth confiscation and redistribution by government collectivists and central planners never works; unfortunately, it is that failed, extremely destructive method that Americans elected in November 2008.

For three decades now, the minority of Americans who make up the hard Left have been trashing Reaganomics. Well, on November 4, 2008, for the first time in American history, they convinced enough voters to join them in electing the extreme opposite. At long last, they will pay for the economic consequences of their ideology, as will their children and grandchildren.

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Paul Kengor is author of God and George W. Bush (HarperCollins, 2004), professor of political science, and executive director of the Center for Vision & Values at Grove City College. His latest book is The Judge: William P. Clark, Ronald Reagan’s Top Hand (Ignatius Press, 2007).

Popularity: 54% [?]

Broken Promise #2

Popularity: 73% [?]

President’s foreclosure prevention plan includes tough guidelines so many will not qualify, but Obama says it will help some struggling homeowners by providing them with direct government subsidies of interest payments, among a menu of measures.

By Peter Barnes, FOX Business Network

President Obama’s foreclosure prevention plan, to be announced Wednesday in Phoenix, will help some struggling homeowners by providing them with direct government subsidies of interest payments, among a menu of measures, financial industry sources said Tuesday.

“The interest rate buydown program [is] emerging as a central component of the administration’s battle plan to stabilize the housing market,” said former HUD official Howard Glaser, of the Glaser Group in Washington D.C.

He said the government could require mortgage lenders and private mortgage investors to match any federal mortgage interest subsidies. But the matches could be less costly to them than foreclosures, sources said.

Despite the fanfare around the announcement, sources said applicants for assistance will have to meet tough government guidelines to receive it. The standards are intended to discourage financially-healthier homeowners from purposely withholding mortgage payments to try to qualify for government help.

The administration’s plan will assist the people most in need, a source told Fox Business. But some families in danger of losing their homes — such as families in which one spouse has lost a job, thus cutting the family’s income significantly — will not be able to qualify because they just wont earn enough income to pay even lower mortgage payments, sources said.

Sources were waiting for details of the plan to determine if it would provide enough incentives for lenders and private investors who hold billions in untraditional mortgages — so-called subprime, Alt-A and Option ARM loans — to participate in the program.

Sources said that even with the new plan, private mortgage investors and mortgage servicers are likely to seek Washington’s support for additional steps, such as changes in federal mortgage law and certain accounting rules, to make it more attractive for hedge funds, investment funds and other private holders to modify mortgages.

“Part of what we may have to do is to make some changes in the law that make it easier for the servicers — the people who take your check every day and are managing these portfolio of mortgages on behalf of a bunch of people who own bits and pieces of the mortgage — to make it easier for them to engage in these negotiations in an efficient way,” the president said at a town hall meeting in Florida last week. “There are a couple of wrinkles in order for us to accomplish this.”

For families that do qualify for mortgage modifications, the cornerstone of the plan will be government subsidies on interest charges on their loans, sources said. The subsidies will be paid from up to $50 billion of funds in the Troubled Asset Relief Program, or TARP.

Glaser provided this example of how the program could work-and how it could be cheaper for the government than other foreclosure prevention proposals:

For a $250,000 mortgage at 7.5% interest, the borrower is currently making a payment of $1,750 per month. If the rate is bought down to 5%, the new payment would be $1,350 per month — a savings of $400 per month. The cost to the federal government, assuming a 50% match by the servicer: $200. For $1 million, the federal government could reduce the rate for 50,000 borrowers. By comparison, the same $1 million might purchase a handful of mortgages, or guarantee a few hundred.

Other remedies in the plan could include incentives for lenders and investors to reduce the principal on a mortgage — though homeowners could be required to repay the reduction or interest rate subsidies, if that is the form of assistance — at the end of the term of the loan or when they sell their home, one source familiar with the plan said. In theory, the back-end payments would be covered by a rise in the homes value over time.

“The borrower is going to have to probably, if they get some assistance, agree to give up some equity once housing prices recover, so that both sides are giving a little bit,” the president said at the town hall meeting in Florida last week. “But you avert the foreclosure.”

Regardless of the options, the goal of the plan would be to make mortgages more affordable for qualifying homeowners. The plan would seek to cut monthly mortgage payments to no more than 31% of a familys pretax income, sources said.

“We must stem the spread of foreclosures and falling home values for all Americans and do everything we can to help responsible homeowners stay in their homes,” the president said Tuesday in Denver, where he signed the new $787 billion economic stimulus plan.

To pave the way for more mortgage modifications, the administration will also announce a new national template for restructuring them, sources said. The template will provide a formula for modifying mortgages held by Fannie Mae, Freddie Mac and other government entities, as well as for lenders and private mortgage investors that may adopt it.

Sources said that in announcing the plan, the administration could also address:

–modifying mortgages for homeowners with loans that exceed the current market value of the property (underwater loans).

–proposals in Congress to change bankruptcy laws to allow judges to modify mortgages in court.

–preventing re-defaults on mortgages even after they are restructured to cut monthly payments-to date, nearly half of all struggling homeowners who nave received mortgage modifications from their lenders have fallen back into the foreclosure process, according to government reports.

Administration spokespersons did not respond to request for comment.

Popularity: 66% [?]

Obama: “…5 Days To Look At Every Bill…”

Popularity: 76% [?]

By ANDREW TAYLOR
Associated Press

WASHINGTON – Senate Majority Leader Harry Reid said Friday that Congress is nearly finished with a massive, $790 billion economic stimulus plan giving President Barack Obama a big victory, but not everything he wanted.

The Nevada Democrat said as debate resumed that the Senate would likely vote on the package of spending and tax cuts later in the day and that both the Senate and House would do the work necessary to quickly get the emergency legislation to Obama’s desk.

Obama said the heart of the emerging plan is “to create jobs.”

“Not just any jobs, but jobs doing the work America needs done: repairing our infrastructure, modernizing our schools and hospitals, and promoting the clean, alternative energy sources that will help us finally declare independence from foreign oil,” the president said.

The 1,071 page bill, eight inches thick, bill was posted on an overburdened congressional Web site late Thursday, giving lawmakers just a few overnight hours to read it before debate resumed in both the House and Senate Friday morning. Just on Tuesday, the House voted unanimously to recommend that lawmakers and the public have at least 48 hours to read the legislation before a vote.

Rep. James Oberstar, D-Minn., chairman of the Transportation and Infrastructure panel, said that just the $64 billion in key transportation investments and other infrastructure programs under his panel’s jurisdiction would “create or sustain 1.8 million jobs. Real jobs, construction jobs ….They’ll get a day’s wage and pay taxes on it.”

“Right now, we have a once in a generation chance to act boldly, to turn adversity into opportunity, and use this crisis as a chance to transform our economy for the 21st century,” Obama had said Thursday. “That is the driving purpose of the recovery and reinvestment plan.”

The plan is the signature initiative of the fledgling Obama administration, which is betting that combining tax cuts of just a few dollars a week for most workers with an infusion of hundreds of billions of dollars of government spending over the next few years will arrest the economy’s fall.

But the inclusion of a $70 billion tax break to make sure middle- to upper-income taxpayers won’t get hit by the alternative minimum tax forced a reduction of Obama’s signature tax break for 95 percent of workers.

Republicans pointed out a bevy of questionable spending items that made the final cut in House-Senate negotiations, including money to replace computers at federal agencies, inspect canals, and issue coupons for convertor boxes to help people watch TV when the changeover to digital signals occurs this summer.

“This measure is not bipartisan. It contains much that is not stimulative,” said Sen. John McCain, R-Ariz., Obama’s rival for the White House. “And is nothing short ‚Äî nothing short ‚Äî of generational theft” since it burdens future generations with so much debt, he added.

Larry Summers, a former Clinton administration Treasury secretary and now head of Obama’s White House-based economics council, was asked Friday how far the bill will go toward reviving the economy.

“It is the biggest fiscal expansion in our country’s history,” he replied in an appearance on NBC’s “Today” show.

But Summers cautioned against raising expectations too high.

“I think this is a key part of what’s gong to be a multipart strategy to contain this decline,” he said. But Summers added that the problems “weren’t made in a week, a month, a year. It’s going to take time to fix.”

He said it should not be considered a “silver bullet,” or panacea for deeply rooted business woes.

“We don’t have a viable alternative,” he said. “We’re going to have starts and stops.”

Much of the spending won’t be delivered this year or even next, and Republicans pointed to studies by the Congressional Budget Office that say that adding so much to the national debt would cost the economy by the end of the decade.

The $790 billion plan combines $286 billion in tax cuts with $311 billion in programs funded by the appropriations committees and about $193 billion in spending for benefit programs such as unemployment assistance, $250 payments or millions of people receiving Social Security benefits, and extra money for states to help with the Medicaid health program for the poor and disabled.

Obama’s “Making Work Pay” tax cut would be scaled back from $500 for most workers to $400, with couples getting $800 instead of $1,000.

Republicans, lined up to vote against the bill, piled on the scorn. “This is not the smart approach,” said Sen. Mitch McConnell of Kentucky, the Republican leader. “The taxpayers of today and tomorrow will be left to clean up the mess.”

It was clear that the measure was the result of old-fashioned sausage-making. Pet provisions were coming to light that had not been included in the original bills that passed the House or Senate ‚Äî or that differed markedly from earlier versions. Some appeared to brush up against claims of the bill’s supporters that no pet projects known as “earmarks” were included.

One last-minute addition was a $3.2 billion tax break for General Motors Corp. that would allow the ailing auto giant to use current losses to claim refunds for taxes paid when times were good. GM got a $13.4 billion federal bailout late last year — and is expected to receive more in 2009 — and argued that without the provision, its government-financed turnaround plan could force the company to pay higher taxes.

Then there was $8 billion for high-speed rail projects, a priority for both Obama and Reid, who’s up for re-election and is a GOP target. While not explicitly named, a Los Angeles to Las Vegas rail project that Reid’s been backing for years stands to win funding as does a project in Obama’s home state of Illinois.

Popularity: 75% [?]

By Jack Cafferty
CNN

NEW YORK (CNN) — Well, that didn’t take long. Three weeks into the new administration and the Democrats are squandering their advantage and threatening to snatch defeat from the jaws of victory.

Credit House Speaker Nancy Pelosi for getting the ball rolling. Under her leadership, House Democrats excluded Republicans from having any voice in crafting the stimulus package.

Acting like children who hadn’t seen Santa Claus for eight years, House Democrats busily loaded up the bill with stuff they had been unable to get for eight years. It was payback time.

Contraception, funding for the arts, restoration of the national mall, stop-smoking programs. All while Americans lose their homes, their jobs, and their savings. It was both childish and disgraceful.

Apparently tone deaf to the disgust and disappointment of Americans with the bailout package for Wall Street and the banks last year, as well as the voters’ strongly stated desire for change as represented by the election of Barack Obama, House Democrats set the table for failure — again.

Not a single Republican in the House voted for the bill, despite efforts by our new president to reach out to the other side. Nancy Pelosi strikes again.

When asked if the lack of Republican support was at least partly her fault, she gave some snotty answer about not being partisan but working for the American people. Right.

My guess is President Obama is busy these days sticking pins in his Nancy Pelosi doll. To his credit, Obama argued against a lot of the pork while stressing that time is our enemy. Pelosi could care less.

As the legislation headed for the Senate amid cries for more stimulus and less pork, the Republicans pounced. Sensing yet another Democratic miscalculation, the Republicans seized the advantage in the debate.

They want more tax cuts and more real stimulus — stuff that will create jobs now. Not some pie in the sky proposal that may pay dividends years down the road. And they’re right.

The real game starts if and when the Senate passes a bill devoid of a bunch of the garbage the House Democrats stuffed into it. Then it goes to a conference committee where the drama will be whether, in a grand twist of irony, President Obama and the Republicans wind up aligned against members of the Democratic Party in an effort to get something realistic on the table before the economy simply slides the rest of the way into a deep crevasse.

Meanwhile, angry voters are jamming Capitol Hill phone lines screaming about the politics as usual that is so far the hallmark of the new administration. Welcome to Washington, Mr. Obama.

When it comes to the Democrats under Nancy Pelosi, what was it Pogo used to say? “We have met the enemy and it is us.”

The opinions expressed in this commentary are solely those of Jack Cafferty.

Popularity: 79% [?]