I’ve had a variation of this discussion at least a dozen times in the last year. Can President Obama be reelected? Absolutely. My response has basically been this: If unemployment remains above 8.5%, he’ll have a very difficult time getting reelected or convincing voters that the economy is improving under his stewardship. If unemployment falls below 8%, he has a good chance of being reelected. He can make the argument that things are getting better, just more slowly than we had hoped.

I’m sure you’ve already heard a variation of this from the White House many times.

The new jobs report came out this week and unemployment has fallen to 8.3%. From CNN: “Employers added 243,000 jobs in January, the Labor Department reported Friday, marking a pick-up in hiring from December, when the economy added 203,000 jobs. Meanwhile, the unemployment rate fell to 8.3%. That is the lowest since February 2009.”

On the surface, these look like good numbers for the economy, and great news for President Obama’s reelection campaign.

Unfortunately, this only tells part of the story.

When you see the number of jobs created, keep in mind that we need a monthly increase in the total number of jobs of about 100,000 just to keep pace with the growing population. And for instance, if 20,000 jobs are eliminated, then we need an increase of 120,000 new jobs just to keep the status quo. That’s more than one million new jobs per year.

(NOTE: I’ve seen many variations of these numbers over the years, and I’m unsure what the exact number of new jobs are that we need to create on a monthly basis. I’ve seen estimates anywhere from 85,000 to 150,000 new jobs needed per month. For today’s post, the exact number is not the point. We must create a lot of jobs just to MAINTAIN the current unemployment rate due to the growing population.)

But how does the unemployment rate drop from 8.5% to 8.3% when the economy creates 243,000 jobs? It can’t. The math doesn’t work. Unless the size of the workforce decreases. This may be one of the most important and least reported employment numbers by the media.

And this is one of the most significant problems we face today.

(Click on image to enlarge.)

The labor force expands in two ways. One, the population grows. And two, the percentage of Americans who consider themselves part of the workforce increases. This graph shows the labor force participation rate in the United States. In the ’80s and ’90s, the percentage of the population who considered themselves part of the workforce increased. For the last ten years we’ve seen these numbers continue to decline other than a short period preceding this most recent recession. Over the last couple of years, these numbers have been plummeting.

Americans are fleeing the workforce in droves. President Obama only needs a few million more people to leave the workforce to get his unemployment numbers under 8%.

Reagan Recession vs Obama Recession
Unemployment is a trailing indicator of the economy. The economy gets bad, and months later you see unemployment numbers rising. The economy gets better, and months later you see unemployment numbers going down. At least, this is what typically happens.

Following the Reagan recession, unemployment topped out at 10.8% late in 1982. Following the Obama recession, unemployment topped out at 10.2% in early 2011. The duration and depth of these two recessions are very similar. In each case, the recession was officially over months earlier. It takes several months to get to the peak unemployment numbers following a recession.

Keep in mind the chart above where labor force participation was increasing in the ’80s compared to what we see today. And here’s where we start to see some significant differences in the numbers behind the numbers.

From IBD: “To get a better sense of how bad Obama’s recovery is, consider this: Under Obama, real GDP has climbed a total of just 6% in the two-and-a-half years since the recession ended in June 2009. By comparison, real GDP had grown 16% by this point in the Reagan recovery, after the very deep and painful 1981-82 recession. Had Obama’s recovery been as powerful as Reagan’s, the economic pie would be $1.2 trillion bigger today. And had job growth under Obama kept pace with job growth during the Reagan recovery, there would be 10 million — yes 10 million — more people with jobs today.” (I added the bold.)

So during the Reagan recovery, the unemployment rate dropped despite the fact that the workforce increased by millions of workers.

And during the Obama recover, the unemployment rate has dropped because millions of workers have left the workforce.

IBD goes on to explain:

So what’s different? The presidents’ policies.

Reagan enacted sweeping and permanent tax cuts, aggressively eliminated or reduced regulations, reined in domestic spending, and championed the private sector.

Obama’s approach has been the opposite — a huge increase in regulations; meager, targeted and temporary tax cuts; a massive increase in size and scope of the federal government; and a barrage of invective against businessmen and the wealthy. Obama has bashed Reagan’s approach, saying that cutting taxes and regulations “has never worked” to spur growth.

The article in IBD was written before the new unemployment numbers came out. But here’s a recent article by one of my favorite writers, James Pethokoukis. Here’s the meat of his post:

1. If the size of the U.S. labor force as a share of the total population was the same as it was when Barack Obama took office—65.7 percent then vs. 63.7 percent today—the U-3 unemployment rate would be 11.0 percent.

2. But let’s not go all the way back to January 2009. In January 2011, the unemployment rate was 9.1 percent with a participation rate of 64.2 percent. If that were the participation rate today, the unemployment rate would be 8.9 percent, instead of 8.3 percent. As an analysis from Hamilton Place Strategies concludes, “Most of the shift of the past year is due not to the improvement in the labor market, but the continued drop in participation in the labor force.”

3. Now, to be fair, some of the decline in the participation rate is aging Baby Boomers dropping out of the labor force. But taking that into account still doesn’t get us very far, as HPS notes: “Demographic projections expect that participation rate to be at 65.3 percent. If that full participation rate is the goal, our economy is “missing” 3.8 million workers, up from the 3.4 million we noted in the white paper. The unemployment rate in that context has not budged at 10.4 percent.”

4. Then there’s the broader, U-6 measure of unemployment which includes the discouraged plus part-timers who wish they had full time work. That unemployment rate is still a sky-high 15.1 percent.

5. If the participation rate does level off at its current rate, according to HPS, the economy would need to generate 231,000 jobs per month to get below 8 percent unemployment by Election Day.

One more comment and we’ll move on. When the economy does actually begin to make some real improvement, disenfranchised workers will again start looking for jobs. It’s possible that a stronger economy will actually begin to drive up the unemployment numbers because of a higher percentage of people engaged in the workforce. Not much good news in any of these numbers.

There are few things in this world that I hate. I hate pickles. I hate discrimination. And I hate our tax code.

People are talking about taxes. And specifically talking about Mitt Romney’s tax rate. There’s a lot of misunderstanding and misinformation out there about taxes. Take this graphic for example:

Mitt Romney finally released his tax returns this week, and we found out that he paid an effective tax rate of 13.9%. The Internet and the media have been buzzing. I was watching MSNBC and the anchors were gleefully discussing the unfairness of Romney paying only about 15% of his earnings in taxes. After all, teachers and others in the middle class have to pay more than this!

But do they really?

I did a quick Google and it appears the average teacher’s salary in Kansas is somewhere around $40,000. That does indeed put the teacher in the 25% tax bracket as the image above shows. So the teacher must be paying $10,000 in income taxes! (For the mathematically challenged, that’s 25% of $40,000.)

But no. That’s not how income taxes are computed.

First of all, income tax rates are really marginal tax rates. We currently have six tax brackets (see Wikipedia). Income tax is computed for your income through each tax bracket up to your last dollar earned. It’s confusing. Here’s an example:

For this example, we’re going to assume the teacher is single and without children. Under today’s rates, a tax payer who makes $40,000 pays 10% of their first $8,500 of income (the first bracket), plus 15% of the next $26,000 (the second bracket), and then 25% of the remaining $5,500 (the third bracket). Well that’s still $6,125 in taxes — an effective income tax rate of 15.3%! That’s still higher than what Romney is paying!

Except the teacher isn’t paying $6,125 either. At this income level, the teacher automatically takes a $5,800 “standard deduction” and a $3,700 “personal exemption”. This takes the teacher’s taxable income down to $30,500. Go through the math and the teacher is not paying $4,150 in income taxes — an effective tax rate of 10.375%. That’s assuming no other deductions or credits.

Hhhmm. That’s now lower than Romney’s effective tax rate.

But wait! Great news! The teacher has a baby! Yay! (For my math I’m going to assume the teacher is still single. Don’t judge.)

As the head of the household, the teacher’s “standard deduction” jumps from $5,800 to $8,500. (I think I’m understanding this correctly, but if I’m wrong on the standard deduction, shoot the IRS, not me.) Plus the mom now receives a $1,000 child tax credit. Tax credits are much better than tax deductions. Tax deductions reduce your taxable income. But tax credits actually reduce the total taxes owed.

So the teacher’s taxable income is now $27,800. Do the math and you end up with $3,745 in taxes minus the $1,000 child tax credit equals $2,745 in income taxes — an effective tax rate of 6.8%.

Does the teacher own a home? Deduct the mortgage interest. Make some charitable donations? Deduct that too. And there’s more.

I hope you get my point. When Romney pays a tax rate of 13.9%, he’s paying a higher tax rate than most of us. According to the Tax Policy Center, the average effective income tax rates of U.S. households is 8.2% (as of 2010). Nearly half of all U.S. households pay no income tax at all.

But we do pay taxes. Payroll taxes. Gas taxes. Sin taxes. Property taxes… We can talk about tax burden another time.

But Mitt Pays Less Than Other Rich People!
Yes he does. And there are reasons for this. I’m not defending the tax code, only explaining it.

Capital gains are taxed differently than regular income for several reasons.

Rich people have options for what to do with their money. And what we’ve found is that as we lower the capital gains tax rate, rich people engage in MORE activity that is subject to the capital gains tax. When the capital gains tax rate was lowered (first under Clinton from 28% to 20%, then under Bush from 20% to 15%), it created an increase in activity each time that actually generated MORE tax revenue for the federal government. When the capital gains rate was increased in 1980, tax receipts decreased.

Some people, including President Obama, believe that the capital gains tax rate should be increased to be more fair. But keep in mind, this will decrease tax revenues, and enlarge our deficits. That means less money to spend on education, the environment, shovel-ready jobs, whatever. (I discussed this in a previous post here.) All in the name of the rich paying their fair share.

Much of this income has already been taxed, and many economists believe it shouldn’t be taxed at all. I’m going to borrow this next bit from James Pethokoukis. He explains it well:

The capital gains tax is a double tax. For instance, corporate profits are taxed first as income and then a second time when they are distributed to shareholders as dividends. And capital gains from investments are not inflation adjusted, so taxes are often paid on illusory profits.

We shouldn’t tax what we want more of. And the real problem with the capital gains tax isn’t the rate or how it is structured, but what is taxed: gains on investments, which are savings put to work. Economists of all stripes have been saying Americans have consumed too much and invested too little over the past decade. So why would we want to tax investment even heavier, as the Obamacrats want to do?

Indeed, we shouldn’t want to tax capital at all. As an AEI study on consumption taxes explains: “The income tax’s penalty on saving is an undesirable distortion of consumer choice. It also causes less capital to be accumulated in the United States. The reduction in capital accumulation reduces labor productivity and lowers real wages throughout the economy, depressing the standard of living of future generations. Some studies have found that a switch to consumption taxation would increase the size of the U.S. economy by as much as 9 percent in the long run, although other studies estimate smaller gains.”

So the main reason people want to keep taxing capital—or even tax it more heavily—is one of theology rather than sound economics. As the Concise Encyclopedia of Economics puts it: “Strange as it may sound, most economists would agree that having zero taxes on capital income is theoretically the best thing to do. But many reject putting this theory into practice because they think that too much of the benefit would go to the ‘wrong’ people, namely high-income households and the wealthy.” That’s right, the desire to make sure the wealthy like Romney “pay their fair share” is desired by class warriors even if it make everyone poorer than they otherwise would be.

Take it away, JFK (in his Special Message to the Congress on Tax Reduction and Reform from Jan. 24, 1963): “The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital from static to more dynamic situations, the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential growth of the economy.”

Bottom line: Americans should pay taxes on their wages only, not on any income from saving. The right capital gains tax rate is zero, for everybody. Might a few rich people like Romney pay less in taxes? Maybe. But the result would be a stronger economy, more jobs, and higher incomes for all Americans.

I’m not advocating lower rates for capital gains. That’s not my point. Just trying to put a little reason behind the madness. A little fact behind the fiction.

I had written a post in June advising that we shouldn’t jump to conclusions too early during the presidential primaries. In 2007-08, the lead among the primary candidates changed often. Now that we’re a year out, you’d think we’d be getting closer to knowing whom the GOP will choose as its candidate. But do you remember who was leading the polls in November of 2007? Me neither. So I did a little Googling. (Though you’ve probably already figured it out from the picture.)

As somebody who tracks polls, I’ve always liked how Real Clear Politics averages the results across multiple polls. As of November 11th, 2007, candidate Rudy Giuliani was leading the Republican field. And not just be a little. According to the RCP average, Giuliani held a 12.4 point lead with 29.4% of those polled favoring him for the GOP nomination. Here were the top six candidates four years ago this month:

Giuliani: 29.4%
Thompson: 17%
McCain: 15%
Romney: 12.4%
Huckabee: 9%
Paul: 3.8%

That’s five candidates with at least 9% of the vote. Thompson disappeared quickly leaving the GOP with four vying for the party’s nomination.

And if you look at the Democrats in November of 2007, Hillary had a huge lead over Obama. According to Gallup, Clinton held a 27 point lead with 48% favoring her for the party nomination compared to 21% for Obama. Here’s the Democratic field according to Gallup on November 16th, 2007:

Clinton: 48%
Obama: 21%
Edwards: 12%
Kucinich: 4%
Biden: 2%
Richardson: 2%

The moral of the story? There’s nothing new about what’s going on in the Republican party as they weed through their candidates. Primaries are a messy process. The newest CBS poll has a virtual three-way tie between Cain, Romney and Gingrich:

Cain: 18%
Romney: 15%
Gingrich: 15%
Perry: 8%
Paul: 5%
Bachmann: 4%
Santorum: 2%
Huntsman: 1%

Conclusion: Perry is still positioned well enough despite his many stumbles to make this a four horse race. It’s hard to imagine Paul, Bachmann, Santorum or Huntsman making a run at this point. And like 2008, I don’t think we’ll know for sure until Super Tuesday, which was the day that basically anointed John McCain as the GOP nominee four years ago.

Prediction: I still think it’s Romney’s race to lose. But he could sure lose it.

Click here to see the 2012 Primary Schedule.

In economics, austerity is a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided. Austerity policies are often used by governments to reduce their deficit spending while sometimes coupled with increases in taxes to pay back creditors to reduce debt. “Austerity” was named the word of the year by Merriam-Webster in 2010. — from Wikipedia

Countries across Europe have been facing harsh austerity measures. After years of big government spending, Greece, Portugal and others have found themselves in such an economic crisis, and with so much debt, that they’re having to make huge cuts in spending and reductions in services to get their fiscal houses in order.

In the U.S., we’re facing many of the same problems. Our debt to GDP ratio has reached 100%, a very bad number to reach. Tax revenues are down. The economy is possibly headed towards another recession. We’ve now run three consecutive deficits of more than $1 trillion per year. Austerity has been the talk of Washington and in the press. The Republicans in 2010 ran on a platform of reduced spending, and were swept into office in historic numbers. The left pines to spend more money to “fix” the economy, and whines about the austerity measures imposed by the Republicans.

Here are just a few examples (borrowed from IBD):

A July article in USA Today, for example, claimed that “Already in 2011, softer government spending has sapped growth.”

Jared Bernstein, former chief economic adviser to Vice President Biden, wrote over the summer that “government spending cutbacks have been a large drag on growth in recent quarters and have led to sharp losses in state and local employment.”

Economist and New York Times columnist Paul Krugman argued in September that “the turn toward austerity (is) a major factor in our growth slowdown.”

So how much spending has been cut to make these people react in such a way? Also from IBD:

In fact, in the first nine months of this year, federal spending was $120 billion higher than in the same period in 2010, the data show. That’s an increase of almost 5%. And deficits during this time were $23.5 billion higher.

If government spending is related to growth, as these and others claim, then the economy presumably should be growing faster, not slower, given the current higher rates of federal outlays.

But what about at the state level?

Meanwhile, the claim that state and local government jobs have been severely cut is, at the very least, open to some debate.

“We know that the biggest problem that we’ve had in terms of unemployment over the last several months has not been in the private sector,” President Obama said at a recent press briefing. “It’s actually been layoffs of teachers and cops and firefighters.”

Monthly data from the Bureau of Labor Statistics do show that from December 2007 — when the recession officially started — until the end of 2010, state and local governments shed 221,000 jobs. And they’ve cut another 234,000 jobs so far this year.

But a separate annual survey from the Census Bureau shows that “full-time-equivalent” state and local employment climbed 200,000 between 2007 and 2010 (the latest year for which these census data are available.) The differences come from the methodologies used.

In any case, even using BLS data, the number of state and local government jobs has fallen just 2.3% since December 2007. That compares with a decline of 5.4% for private-sector jobs.

Austerity in the U.S.? Not so much.

I have typically kept my political writing aimed at the economy and related issues. But today I feel compelled to discuss a story that has been very slow to break. Operation Fast and Furious. I had come to the conclusion long ago that Attorney General Eric Holder and President Obama were aware of this program from the start. I had also come to the conclusion that the mainstream media were going to sweep this story under the rug. That’s all beginning to change due to CBS reporter Sharyl Attkisson.

If you haven’t followed this story, I don’t blame you. You’ve probably seen the headlines about the death of border patrol agent Brian Terry who had been killed by guns that had been allowed to walk as part of the ATF’s Fast and Furious operation. Let’s start with a little background and  a few terms.

ATF: The ATF is the Bureau of Alcohol, Tobacco, Firearms and Explosives. In 2003 it was transferred under the Homeland Security bill to the Department of Justice. The DoJ is lead by attorney general Eric Holder. (You can read the ATF’s mission here.)

Project Gunrunner: You’ll see comments about this project in the news. This is the ATF’s program dating back to 2005. The program is intended to stem the flow of firearms into Mexico, in an attempt to deprive the Mexican drug cartels of weapons. (Read more on Wikipedia or directly from the ATF.)

Operation Fast and Furious: A sting operation run by the ATF beginning in 2009 as part of Project Gunrunner. The stated purpose of the operation was to permit otherwise-suspected straw purchasers to complete the weapon’s purchase and transit to Mexico, in order to build a bigger case against Mexican criminal organizations suspected of being the ultimate buyer. (Read more on Wikipedia.)

Straw Purchase: A straw purchase is any purchase wherein the purchaser knowingly acquires an item or service for someone who is, for whatever reason, unable to purchase the item or service himself. This term can be applied to any such purchase, but it is most widely used in relation to the sale of firearms, especially in United States federal gun laws.

Gun Walking: Allowing guns to be transferred to suspected arms traffickers. This is the most controversial part of Fast and Furious.

It is the stated position of the DoJ that they do not allow guns to walk, despite testimony from ATF agents to the contrary. Here is testimony from former ATF Special Agent William Newell where he continues to deny that it was policy to allow guns to walk into Mexico:

Here’s testimony from ATF agent John Dodson who says that it was the policy under Fast and Furious to allow guns to walk:

And from CBS News:

Surveillance video obtained by CBS News shows suspected drug cartel suppliers carrying boxes of weapons to their cars at a Phoenix gun shop. The long boxes shown in the video being loaded in were AK-47-type assault rifles.

So it turns out ATF not only allowed it – they videotaped it.

More from Sharyl Attkisson and CBS in a moment.

Who Knew What and When?

The investigation from Congress has been lead by Darrell Issa (R), the chairman of the House Oversight and Government Reform Committee. You may have seen this exchange where he asks attorney general Eric Holder when he first learned about Fast and Furious, and Holder’s response that he “…probably heard about Fast and Furious for the first time over the last few weeks.”

But now that new documents have surfaced revealing that Holder had been continually briefed on Fast and Furious, the administration now says that Holder misunderstood the question. If you watch the video (above), it’s difficult to believe that he misunderstood the question. And in the video below, we see top DoJ officials discussing gun walking. Here’s more from CBS News and the released documents:

At the beginning of this post, I mentioned that I had come to the conclusion long ago that Holder and Obama were aware of this program from the start. Though they never mention it by name, they have talked around the edges of this program.

In 2009, the President explains how he has asked Holder to do a “complete review” of current gun enforcement operations during a joint press conference with Mexico’s President Calderon. He even mentions gun tracing, a key element of Fast and Furious, in this video:

Here is Deputy Attorney General David Ogden in March of 2009, who talks about new efforts from the ATF and gun tracing. This is right around the time that Operation Fast and Furious was launched:

It’s not proof, but it’s common sense. This was a big and important operation to the ATF, the DoJ and the White House. They all were talking about this “new” operation. They just never mentioned it by name.

Bullying the Media

In an interesting twist this week, Sharyl Attkisson was on the Laura Ingraham Show, and revealed that she had been “yelled” at by DoJ spokeswoman Tracy Schmaler and that White House associate communications director Eric Schultz “literally screamed at me” over her reporting on Fast and Furious. She was told that she’s not reasonable like other members of the media such as the New York Times, the Washington Post and the LA Times. She explains that she was told that she’s “the only one who thinks this is a story, and they think I’m unfair and biased by pursuing it.” This is about ten minutes long, but very interesting:

Bush Did It Too!

We are also starting to learn that under Bush’s DoJ that a program called Operation Wide Receiver may also have allowed guns to walk into Mexico.

This is a legitimate story despite claims from Team Obama to the contrary. It appears that the Attorney General has lied to Congress. Thousands of guns have been allowed to walk into Mexico. And it will be interesting to see who takes the fall as more information is exposed. It sounds like CBS and Attkisson have even more information to come, provided that CBS doesn’t shut down the investigation first. They wouldn’t want to be seen as unreasonable by the administration, would they? Stay tuned.

UPDATE (9:40 am, 10-7-11): I had meant to include this earlier. In April of 2009, Eric Holder visited Mexico and spoke about operations to limit gun trafficking to Mexico (see full text here):

The topic that has been addressed over the past two days could not be more important – the development of an arms trafficking prosecution and enforcement strategy on both sides of the border.

I would like to thank the Mexican and U.S. experts who have worked so hard on this issue. On our side, Secretary Napolitano and I are committed to putting the resources in place to increase our attack on arms trafficking into Mexico.

Last week, our administration launched a major new effort to break the backs of the cartels. My department is committing 100 new ATF personnel to the Southwest border in the next 100 days to supplement our ongoing Project Gunrunner, DEA is adding 16 new positions on the border, as well as mobile enforcement teams, and the FBI is creating a new intelligence group focusing on kidnapping and extortion. DHS is making similar commitments, as Secretary Napolitano will detail.

Does this sound like an attorney general who would not have been briefed about Operation Fast and Furious, which coincidentally, had just been launched by the ATF? That would be difficult to believe. (Note: I added the bold for emphasis.)

Today is going to be a rant. My apologies.

I’m not a hater, but what I deeply dislike is when politicians offer solutions that have little to do with the problems at hand. You see, I’m a problem solver. You should study a problem, and develop a solution that fixes the problem. Then implement the solution. It’s really not as tough as it sounds. And when you explain it like this, it doesn’t even sound very tough.

Example 1: In 2000, candidate George W. Bush ran on a platform of tax cuts. Why? Because at the time the federal government was running a surplus (though the surplus was created by social security payments, a topic we’ll get around to soon). Bush wanted to give this money back to the people who had earned it. Then to pull us out of recession, President Bush pushed through these very seem tax cuts and tax reforms in an effort to stimulate the economy.

Did the Bush administration study the recession and develop a solution for the problem? No. For the right, tax cuts are always the solution.

Example 2: Most liberals in this country want a single-payer, government run health care system. Is the cost of health care going up? Are people struggling to afford it? Are there problems with the current system? Then we need universal health care.

Did the Democrats in Congress and the Obama administration study the problems with our health care system and develop a strategy to fix the problems? No. For the left, universal health care is always the solution. And since they couldn’t get universal health care, we got ObamaCare. A system designed to push us towards universal health care in the future.

So here we are today. Unemployment remains above 9%. Economic growth is stagnant at best. The economy appears headed towards a double dip recession. But the President has a plan. Stimulus four! Or is this stimulus five? Six? I’ve lost count.

For the President, he has two solutions looking for problems. How convenient.

One, the President wants to spend more money on creating jobs. He refuses to call it economic stimulus because that wouldn’t be politically popular. This time he wants to spend approximately $450 billion. How will he spend it? Sending money to the states to help pay for teachers. More infrastructure investment — though this time he wouldn’t call them shovel ready jobs. Extend unemployment benefits and the temporary payroll tax reductions. And some targeted tax cuts and tax credits for small businesses that will do little to create jobs.

How will he pay for it? That’s easy. Another solution looking for a problem. Tax increases. The administration has proposed that we’ll raise the $450 billion in tax revenues by cutting oil subsidies, and closing loopholes so that the rich “pay their fair share”.

Spend now and raise taxes later to pay for it. Solutions looking for problems.

The President has repeatedly said that his bill should be passed “now” because these are ideas that Democrats and Republicans have agreed upon in the past. And if the bill is not passed, it’s because the GOP is putting party before the economy.

He’s partially right. These are ideas that politicians have agreed upon and tried before. That doesn’t make them the right thing to do. Matter of fact, we have already tried most of these recommendations before. It was supposed to prevent us from exceeding 8% unemployment. It didn’t work then, and it won’t work now. We had the first stimulus of more than $800 billion. We’ve printed money with QE1 and QE2 to the tune of about $2.3 trillion. The President and Congress have already passed cuts in payroll taxes and extensions to unemployment. Through tax cuts, stimulus spending and monetary policy, we have injected trillions into the economy. It hasn’t worked. Keynesian economics has failed.

Why? Because it doesn’t fix the problems at hand.

We have long-term systemic problems that the President has failed to offer solutions to fix. And many of his own policies have actually exasperated these problems.

We badly need tax reform in this country. The President has discussed cutting loopholes on corporate taxes and lowering the corporate tax rate which is among the highest in the world, but has never actually submitted a plan that does this. His own deficit commission recommended this same approach for corporate AND personal incomes taxes — closing loopholes and lowering tax rates. The President won’t do it. Why? Because you can’t play the class warfare card if you fix the tax system.

We badly need entitlement reform in this country. The President has discussed that Medicare is a long-term financial problem that needs to be fixed. It’s unsustainable in its current form. He’s right. But where is his plan? I can’t find it. And he won’t even discuss fixing social security which is every bit as unsustainable as Medicare.

We badly need regulation reform in this country. The President has said that he agrees, even writing an op-ed in the Wall Street Journal discussing his plan to cut needless regulations. He named Cass Sunstein as his regulation czar, spent months evaluating government departments, and has come up with $10 billion in savings over the next five years. It has been estimated that government rules and regulations cost the economy approximately $1.75 trillion per year. Not to mention the mountains of new regulations being written by the EPA, and implemented by ObamaCare and the Dodd-Frank banking reform legislation.

We badly need a balanced budget in this country. It’s not all Obama’s fault, but in the last few years our national debt has jumped by trillions of dollars, and our debt-to-GDP ratio has jumped to almost 100%. This is a bad number. Really bad. When you see the economies failing in Europe, that’s because their debt-to-GDP ratios have exceeded 100%. Spending is on an unsustainable path. The credit ratings agencies have warned that we must stabilize our debt-to-GDP, and that a $4 trillion deficit reduction plan is only a “good down payment”. Where is the administration’s plan to stabilize debt-to-GDP? I can’t find it.

Well, I’ll take that one back. The President’s debt commission put together a plan to stabilize debt-to-GDP. The administration just ignored it.

It has been estimated that big business has somewhere between $2-3 trillion sitting on the sidelines, much of it kept overseas. How do we get this money back in play in our own economy? By fixing our long-term systemic problems. Only then will this money be invested into our economy. And only then, will we once again be headed in the right direction.

In recent weeks the President has been outlining a number of proposals that he says can be enacted now that will stimulate the economy. Patent reform has been among these proposals, and figures to be a key component of the President’s upcoming jobs plan.

The U.S. Patent and Trademark office has a backlog of 700,000 applications. In 1990 it took approximately 18 months to process an application. Today it takes nearly three years to process an application. Clearly the system needs to be fixed. But will fixing the system really create jobs? Some experts think so. From IBD:

Sen. Patrick Leahy, co-sponsor of a reform bill, says it will create 200,000 jobs. Obama’s patent office head, David Kappos, told lawmakers “millions of jobs are lying in wait” for “a job creation engine (to be) turned loose.”

But no one knows for sure how many new jobs, if any, the reforms passed by the Senate and the House this year will create.

Leahy’s office could not give a source for the 200,000 number. And a White House backgrounder on patent reform only said it is “key to winning the future.”

Business economist Everett Ehrlich, in a 2009 analysis, found the reform could create 100,000 jobs over five years. Economists say the U.S. needs about 100,000 new jobs a month just to keep up with labor force growth.

A New York Times Op-Ed last year said cutting the patent office backlog could yield “at least 675,000 and as many as 2.25 million jobs,” but called this a guess.

“It’s hard to calculate the job effects of this reform,” said Philip Johnson, Johnson & Johnson’s chief intellectual property counsel and a reform backer. “Jobs related to patents are pervasive and there are a lot of ripple effects.”

But not everybody likes the proposed reforms:

But more patents don’t always mean more jobs. In the last three years, the U.S. has granted more than 620,000 patents, almost as many as in the booming 1980s.

“Will it help small businesses that create the most jobs? I think we would question that,” said Molly Brogan of the National Small Business Association.

Currently, the first person or firm to invent something is the rightful patent owner, even if someone else files for protection first. Under the reforms, the first person to file wins the patent.

Advocates say the reforms will remove uncertainties that undermine R&D efforts. The reforms also aim to cut the patent office backlog by protecting patent fees from congressional raids.

Critics say the “first to file” switch risks skewing patent awards toward large companies that tend not to be big job creators. They point to a 2009 study by the National Bureau of Economic Research, which found Canada’s 1989 switch to “first to file” shifted “the ownership structure of patented inventions towards large corporations.”

Kappos says these concerns are unfounded. Of 3 million applications over seven years, he said, “Only one independent inventor’s filing would have received a different outcome under the first-inventor-to-file system.”

The Irony of Reform
While I certainly support the concept of speeding up and streamlining the patent process, I suspect these job projections are exaggerated. Patents are getting processed, and it’s hard to imagine that processing them faster will create millions of jobs that would not have existed otherwise. What I find ironic in this conversation is that many have complained that burdensome and unnecessary government regulations are one of the many things holding back our economy. And in this case, the administration appears to agree that streamlining the regulatory process would be a boon to the economy. It’s too bad they’re not willing to apply this approach across all government rules and regulations.

I had written several posts last year discussing a lack of leadership from President Obama. In particular I had been critical of his handling of the BP oil spill, but truth be told, I think we’ve seen a lack of leadership on just about every issue facing our country. The President is capable of delivering a great speech. He’s championed a number of causes that send a thrill up the leg of liberals like Chris Matthews. He’s very likable. But that doesn’t make him a leader.

Now we’re starting to see Democrats discuss this as well. The far left has been critical for some time that the President hasn’t been liberal enough, though I’m not exactly sure what they expected. I think like many, including myself, they had misinterpreted what type of liberal the President would be. But that’s a discussion for another day.

Yesterday in the Wall Street Journal, Mortimer Zuckerman published a strong article on the President’s lack of leadership. Zuckerman is chairman and editor in chief of U.S. News & World Report, a publication that is largely considered left of center by those of us who follow media bias. I don’t know enough about Zuckerman to tell you if he’s a moderate or a liberal, but he supported the election of President Obama, and has given thousands to Democrats over the years. His op-ed is worth the read. Here are a few key parts of his article.

Zuckerman discusses the President’s position during the recent debt ceiling debate:

Since the president is the one who represents all of America and all Americans, the buck stops with him rather than with the Congress. It is the president’s job to offer a coherent program for the twin threats of a static economy and an unsustainable explosion of our debts and deficits. But the only core issue on which he took a clear position in the recent debt-ceiling negotiations was that it would have to include new taxes on the wealthy—and he didn’t even hold to that.

He made the politically tested and calculated statement that if you raise taxes on billionaires and millionaires you could solve the problem. This is not so. Even for those who support higher taxes on the wealthy, as I do, we must remember that we have an income tax system in which fully half the “taxpayers” pay no tax at all, and in which the variety of loopholes cries out for a real reform of the tax code. Even if the government instituted a 100% tax on both corporate profits and personal incomes above $250,000 per year, it would yield enough revenue to run the government for only six months. Why? Because under Mr. Obama’s presidency, government spending has swelled to 24% of GDP from 18%.

I have made similar arguments in the past about the need for significant tax reform, not just closing a few loopholes here and there as the President has recommended. Zuckerman continues to discuss the President’s lack of leadership in developing a plan to tackle our country’s problems:

Erskine Bowles, co-chair of the bipartisan Simpson-Bowles commission appointed by the president in 2010 to devise a plan for dealing with the fiscal crisis, put it well: “It is one that is completely predictable and from which there is no escape.” The president said he would stand by his commission, but as of today he’s remained silent on its many proposals, seemingly unable to speak honestly on the subject.

Zuckerman also discusses the disillusionment from the President’s supporters:

The president appears to consider himself immune from error and asserts the fault always lies elsewhere—be it in the opposition in Congress or the Japanese tsunami or in the failure of his audience to fully understand the wisdom and benefits of his proposals. But in politics, the failure of communication is invariably the fault of the communicator.

Many voters who supported him are no longer elated by the historic novelty of his candidacy and presidency. They hoped for a president who would be effective. Remember “Yes We Can”? Now many of his sharpest critics are his former supporters. Witness Bill Broyles, a one-time admirer who recently wrote in Newsweek that “Americans aren’t inspired by well-meaning weakness.” The president who first inspired with great speeches on red and blue America now seems to lack the ability to communicate any sense of resolve for a program, or any realization of the urgency of what might befall us. The teleprompter he almost always uses symbolizes and compounds his emotional distance from his audience.

We lack a coherent and muscular economic strategy, as Mr. Obama and his staff seem almost completely focused on his re-election. He should be spending most of his time on the nitty-gritty of the job instead of on fund raisers, bus tours and visits to diners, which essentially are in service of his political interests. Increasingly his solutions seem to boil down to Vote for Me.

Clearly the president will have to raise his game to win a second term, especially if the Republicans find a real candidate. Will voters be willing to give him another four years? Like many Americans who supported him, I long for a triple-A president to run a triple-A country.

Well written Mr. Zuckerman. You can read his entire op-ed here.

This comes under the heading “You Can’t Make This Stuff Up”!

I have to admit that I often agree with Candidate Obama more than I agree with President Obama. Then Candidate Obama called President Bush “unpatriotic” and “irresponsible” for adding $4 trillion in debt during his eight years in office. I wouldn’t have called Bush unpatriotic, but agree that it was irresponsible. (On a side note, most of that deficit spending happened during Bush’s last two years in office while the Congress was controlled by the Democrats, and we were heading into the recession.)

And in case you’re not paying attention, the budget proposed by the White House earlier this year would have added nearly $10 trillion to the national debt over the next ten years (read this from The Hill).

And from CBS News:

The latest posting by the Treasury Department shows the national debt has now increased $4 trillion on President Obama’s watch.

The debt was $10.626 trillion on the day Mr. Obama took office. The latest calculation from Treasury shows the debt has now hit $14.639 trillion.

It’s the most rapid increase in the debt under any U.S. president.

The national debt increased $4.9 trillion during the eight-year presidency of George W. Bush. The debt now is rising at a pace to surpass that amount during Mr. Obama’s four-year term.

But of course, none of this is President Obama’s fault. He continues to blame Bush. He blames the Republicans. He blames the Tea Party. He blames business. He blames the economy. He blames the banks. He blames the tsunami in Japan. He blames the Arab Spring. He blames the collapsing economies in Europe. Did I miss anyone?

I keep thinking back to the early Reagan years. He too inherited a mess from his predecessor. In November of 1982, unemployment stood at 10.8%. By the time the election rolled around just two years later, unemployment had dropped to 7.2%. Why? Because Reagan had a pro-business plan to grow the economy. And grow the economy he did.

I’ve been planning to write a post about government regulations for some time. And this isn’t it. But here are a few tidbits to chew on until we have time to talk about this in-depth. Earlier this year, President Obama in an op-ed in the Wall Street Journal made a pledge to help businesses by eliminating red tape.

We’re also getting rid of absurd and unnecessary paperwork requirements that waste time and money. We’re looking at the system as a whole to make sure we avoid excessive, inconsistent and redundant regulation. And finally, today I am directing federal agencies to do more to account for—and reduce—the burdens regulations may place on small businesses. Small firms drive growth and create most new jobs in this country. We need to make sure nothing stands in their way.

You can read his op-ed from January in the Wall Street Journal here.

Another more recent quote from President Obama:

What I have done — and this is unprecedented … is I’ve said to each agency … “look at regulations that are already on the books and if they don’t make sense, let’s get rid of them.”

This week the administration has announced its plan to update government rules and regulations. You can read this post on the White House’s website from Cass Sunstein, the Administrator of the Office of Information and Regulatory Affairs. According to Sunstein, “Over the next five years, the monetized savings from just a fraction of the reforms announced today are likely to exceed $10 billion.”

Now a few facts to put this into perspective. From Investors.com in an unrelated article from June:

Government regulations come with costs. Compliance is a heavy burden. During a news conference in which Hartzler spoke of “horror stories” caused by rules, she referred to a Small Business Administration estimate that says government regulations cost the economy more than $1.75 trillion a year, about 12% to 14% of GDP and half of what Washington is now spending — $3.456 trillion — in a year.

The Competitive Enterprise Institute, which has been keeping up with federal regulation for years through its yearly “Ten Thousand Commandments” reports, believes the cost is closer to $1.8 trillion because agencies spend an estimated “$55.4 billion (on budget) to administer and police the regulatory enterprise.”

Let’s see, we make changes to save businesses $10 billion over the next five years, compared to the $8.75 trillion that will be spent on compliance. And that does not include the thousands of new rules and regulations that are still being written from ObamaCare and the Dodd-Frank banking reforms.

And on a side note, PolitiFact gave the President a “Pants on Fire” for his claim that his approach to cutting red tape was “unprecedented”.