I’m going to take a quick detour from economics, to talk about, the economy. Too often we forget about our past. We can learn a lot just by looking back.

During the ’80s, President Reagan was spending lots of money building up our military. And a democratically controlled Congress was spending lots of money on everything else. By the early ’90s we were drowning in debt, deficits, a struggling economy, and unemployment was pushing 8%. Sound familiar?

Much of the 1992 presidential election campaigns were focused on these issues. As then Governor Bill Clinton so eloquently described, “It’s the economy, stupid.” And who can forget Ross Perot and his famous charts? As a third party candidate and founder of the Reform Party, Perot garnered almost 19% of the popular vote with his simple themes. For Perot, the math was simple. To get out from under the deficits and debts, we must increase taxes, and decrease spending. He also talked about tax reform, and entitlement reform, as necessary steps for fixing our economy.

In ’92 we elected Bill Clinton, who came into office having won only 43% of the popular vote. Dick Morris has often told the story about how Clinton wanted to work with the republicans to pass bipartisan legislation. But the democrats in Congress told him no. That this was their chance to pass their agenda. After two years, the people were fed up, and voted in a new Congress filled with the likes of Newt Gingrich and his fiscal conservatives.

It was the fiscal conservatives in Congress and Bill Clinton who created the prosperity of the late ’90s. How did they do it? They constrained government growth. They passed pro-business legislation. And they tackled entitlement reform — in this case, welfare reform.

The result? Unemployment dropped to its lowest rates since the ’60s. And budget deficits became budget surpluses for the first time since the ’60s.

So how does this compare to today? We have surpassed $14 trillion in national debt. We have a projected budget deficit this year alone of more than $1.6 trillion. And unemployment remains well above 8%.

The president says that he’s concerned about our debt and our deficits. He went so far as to put together a bipartisan debt commission headed up by Alan Simpson and Erskine Bowles. Much like Ross Perot in the ’90s, the debt commission has recommended budget cuts, tax increases, tax reform and entitlement reform.

President Obama has completely ignored the recommendations of his own commission. He has provided us with a long-term budget plan that will double our national debt. And today, Congress can’t agree on a few billion in cuts. We’re still negotiating over the 2011 budget because the democrats never bothered to pass a budget LAST year when they controlled both houses in Congress and the White House!

So how do we fix our problems? Constrain government growth (cut spending). Develop pro-business legislation, which should include repealing ObamaCare. Entitlement reform. And tax reform. Sound familiar? It’s worked before.

Enter the Paul Ryan budget plan. I have not read it yet, and am not endorsing it. But he is on the right path from what I have seen.

Much like the left did during the ’90s over welfare reform, liberals will demonize the right over entitlement reform. A member of Bill Clinton’s staff, Peter Edelman, resigned under protest over welfare reform, decrying that it would throw a million children into poverty. On the contrary, within five years, child poverty declined by more than 2.5 million. Welfare reform is now championed by the left as a great accomplishment under Clinton.

Similarly, expect the left to accuse Ryan of throwing the poor and elderly under the bus with his “extreme” budget cuts and entitlement reform. It’s already started. It will get loud. It will get messy. But entitlement reform is necessary if we want to fix our short-term and our long-term economic problems. We can’t cut enough “discretionary” spending to dent the deficits. We need smart, long-term solutions. And we need them now.

Today let’s discuss the stimulus package, and the predictions made by the CBO. And in particular, how supporters of the stimulus bill continue to cite the CBO for writing that the legislation created millions of jobs. This will all tie into Eldridge Economics. Eventually.

First let’s go back to the beginning. In late 2008 during the election, the economy was stumbling. We were headed into a recession. Politicians from the left and the right agreed that something needed to be done. The President developed his economic stimulus plan. It was originally estimated that the bill would cost $787 billion. Two of the President’s key economic advisers, Christina Romer and Jared Bernstein, famously predicted that the stimulus bill would keep the unemployment rate below 8%. There were critics of the bill.

Hardcore Keynesians: There were those on the far left, including the New York Time’s chief economist and columnist Paul Krugman, who advocated for a $2 trillion stimulus package. Remember, according to Keynesian Economics, the more money the government spends, the more the GDP will grow, and the more jobs are created.

Free Market Economists: There was a group on the right, like some of  the economists at the Wall Street Journal and Investor’s Business Daily, who warned that the stimulus package would hurt the economy and make things worse. That we would be better off doing nothing than passing the President’s bill. Critics also explained that the bill was more about big government spending than economic stimulus. Here’s one example from the WSJ.

The CBO: And then there was the CBO somewhat in the middle. Using their Keynesian model, they predicted that the stimulus bill would indeed create millions of jobs. But they ALSO warned that by the end of 2011, there would be little NET job growth. In other words, we were going to spend nearly $1 trillion to end up at the same place a year and a half later.

President Obama said that the stimulus was the right bill at the right time. It was necessary, and must be passed immediately. Congress obliged and passed the bill.

So what happened? Things got worse. Unemployment escalated towards 10%, and has continued to hover around 9.5% for months.

The President and the White House did what all politicians do. They engaged in revisionist history. They had to admit they were wrong to prove that they were right. How were they wrong? Because the economy was worse than they thought. How were they right? Because their stimulus plan created millions of jobs and kept us from a depression.

How can they do this with a straight face? Because Keynesian Economics says that government spending creates jobs. And to admit that it did not would be to admit the Keynesian Economics is wrong.

But the CBO Says That It Created Millions of Jobs!
Defenders of the White House continue to quote the CBO who wrote as late as this last November that the stimulus bill “Increased the number of full-time-equivalent jobs by 2.0 million to 5.2 million compared with what would have occurred otherwise.” The quote is from this CBO report.

The problem with citing the CBO? They don’t research and attempt to determine whether or not the bill actually created these jobs. So how did they come to their conclusion? Because they continue to plug the numbers into the same Keynesian formula. The CBO uses multipliers to predict how government spending increases GDP. They have different multipliers for different ways the money is spent. Brian Riedl from The Heritage Foundation (a rightwing organization) has explained this in detail. Here’s a link to one of his articles.

With the CBO’s most recent report they adjusted their predicted cost for the bill to be $814 billion. They plug the government’s expenditures into their model. And they predict the growth in GDP, and predict how many jobs are created FROM the growth in GDP.

So in other words, the stimulus bill lives in a vacuum. If the model predicts that the bill will create two million jobs, and the economy loses four million jobs, then their conclusion is that without the bill the economy would have lost six million jobs. Or if the economy creates five million jobs, their conclusion is that the economy would have only created three million jobs without the stimulus bill. So no matter what happens in real life, they continue to predict that the stimulus bill creates jobs.

If you read the entire report, they explain their methodolgy: “The Congressional Budget Office (CBO) based its estimates of the economic effects of the American Recovery and Reinvestment Act of 2009 (ARRA) on information from various sources: macroeconometric forecasting models, general-equilibrium models, and direct extrapolations of past data.”

They go on to explain, “However, the reported number of jobs funded is not a comprehensive measure of ARRA’s effect on overall employment, or even of those provisions of ARRA for which recipients’ reports are required. The actual impact could, in principle, be significantly larger or smaller than the number of jobs reported.”

So who was right? The economists from the WSJ and IBD made the most accurate predictions, though this doesn’t inherently prove that the stimulus bill was bad, or that it made things worse. The economy does not exist in a vacuum. You cannot plug the same numbers into the same formulas and expect the same results when the economic environment is constantly changing. And there are times that government spending will NOT grow the GDP and create jobs, despite what Keynesians would like you to believe.

Next we’ll discuss the role of government in our economy.

While Wisconsin politics and union protests dominate the news, there’s still an underlying and equally important story. The economy is struggling. Nothing new about that, but a few stories have recently caught my attention.

1. Supporters of the White House continue to insist that the stimulus bill was effective. Why? Because the CBO says that the bill created millions of jobs. But that’s not really what the CBO said. We’ll come back to this later.

2. New stories have been warning us that budget cuts (from the GOP) will hurt the economy and could send us into another recession.

3. And a twist on this same story, that a government shutdown will hurt the economy. And that hurting a fragile economy could have dire consequences.

All of these stories have a common component — the belief in Keynesian Economics. And whenever you point out the problems with Keynesian Economics, you get blasted as a lover of Trickle Down Economics. Here’s a quote from a conversation I had with some friends on Facebook yesterday: “That trickle you feel is Boehner pissing on your leg and tell(ing) you it’s raining.”

It will take me more than one post to get through some thoughts on the economy. I’m not proclaiming to be an economist. More of an econo-hobbyist. Here’s part one.

Keynesian Economics
I will try not to bore you too much, and keep this as simple as possible. Keynesian Economics advocates a mixed economy, predominantly private sector, but with a large role of government and public sector. And for the most part, the theory is pretty simple. You can read more about it here on Wikipedia.

What we’ll focus on today is what Keynes viewed as the primary reason for a recession, and his recommendations for getting out of a recession. Keynes viewed a recession as a result of shaken consumer confidence that causes consumers to save instead of spend. Excessive savings (beyond typical savings during a normal economy) from consumers slows the exchange of money thus creating the recession.

Keynesian theory recommends stimulating the economy through government spending and/or adjusting the money supply (printing money and/or lowering interest rates). Our federal government has been engaging in increased government spending and expanding the money supply. Keynes was one of the first economists to advocate deficit spending as part of a fiscal policy to cure an economic contraction.

Keynesians believe that if you increase government spending during a recession, what you’re really doing is taking the consumer’s money that they were saving (and not spending due to shaken consumer confidence) and injecting it into the economy. And that every dollar spent in the economy is subject to the “multiplier effect”. Basically, that when a dollar is spent by either the public or private sector, it increases total spending by a multiple of that increase. So when the government spends a dollar, it increases GDP (gross domestic product) by MORE than a dollar. And increases in GDP lead to increases in employment. (This will be important when we discuss the CBO’s statements on the stimulus bill.)

And reversely, if you cut government spending through budget cuts or closing the government, you are reducing GDP, and ultimately reducing employment (increasing unemployment).

Theory vs Reality
I’m not in complete disagreement with Keynes. But more in it’s application. So let’s start with a simple example. Let’s say the multiplier is 2.5 times. So if the government spends $1, we add $2.50 to GDP. If the government spends $800 billion, we add $2 trillion to GDP (that’s $800 billions x 2.5).

So if you subscribe to this theory, you get the same outcome from the stimulus no matter what else is happening in the economy. Does the country have $1 trillion or $14 trillion of debt? Doesn’t matter. Is the federal government imposing thousands of new regulations on the business community or streamlining regulations for business? Is the government viewed as anti-business or pro-business? Doesn’t matter. Do we have strong exports or decades of trade imbalance? Nope, doesn’t matter. Are we importing billions of barrels of oil at $100 per barrel or are we energy independent? Still doesn’t matter.

This theory doesn’t account for the decrease in GDP when an extra dollar is taken out of the private sector. And this theory doesn’t account for the repercussions of borrowing money.

Nothing matters but the multiplier and how much additional money the government injects into the economy.

The problem is that the economy doesn’t exist in a vacuum. There are forces, including other government policies, that are impacting the economy simultaneously. I think it’s entirely possible that in a different economic climate, that the outcome of the stimulus bill could have been considerably different. Or at least viewed differently.

But that will have to wait. Still more topics to cover, and we’ll try to cover them soon. The CBO’s projections. Understanding the deficits. The stimulus package. And what role the government should play in the economy.

Until next time.

This last week I exchanged a series of emails with a friend of mine. He is a proponent of a single payer, government run health care system. He also thinks the right is crazy for their talk of death panels, rationing, and how ObamaCare takes us down the road to a single payer system. I attempted to explain how virtually everything in ObamaCare leads to higher prices and higher premiums, and that it’s all done on purpose. They purposefully ignored ideas like tort reform and competition across state lines that could help to control prices. Premiums will rise. Businesses will drop their coverage. Millions will become uninsured. And my prediction all along has been that within ten years we’ll be faced with a much bigger crisis than we face today, and the only “solution” will become government run health care. It’s already playing out right in front of us.

This really isn’t new news. Many on the right have warned us about this eventuality. Many on the left have bragged how ObamaCare will eventually create a single payer system (though the media largely ignores them).

But this is not the purpose of today’s post.

During this exchange we also discussed rationing and death panels. Those on the left have criticized the right for fear mongering about death panels. They say they’re not real. Decisions will remain between patients and their doctors. I’ve criticized the right for the use of the phrase death panels as being overly dramatic. But here’s my point.

In a free market system, insurance companies decide what they will pay for and what they won’t. They ration care. But if you don’t like the offerings from one insurance company, you’re free to choose another. Competition forces insurance companies to provide care, even when some may judge the care as less beneficial or too expensive.

In today’s world, the government makes these same decisions in regards to Medicare and Medicaid without competition.

With ObamaCare, the government has taken a much bigger role in the decision of what insurance companies will pay for and what they won’t. The bigger problem is down the road with a government run system. I attempted to explain that the rationing of care will now be dictated by the federal government, and that in particular the elderly will have their care rationed because of the cost (which is high) and the perceived benefit (which is low). The government will have no competition. And if you don’t like where they decide to limit or ration care, you’ll have no alternative.

It appears that leftist economist and columnist Paul Krugman agrees with me. And to Krugman, this is good news. On ABC’s This Week, Krugman said:

Some years down the pike, we’re going to get the real solution, which is going to be a combination of death panels and sales taxes.

Medicare is going to have to decide what it’s going to pay for. And at least for starters, it’s going to have to decide which medical procedures are not effective at all and should not be paid for at all. In other words, (the deficit commission) should have endorsed the panel that was part of the health care reform.

And in case this wasn’t clear enough, Krugman wrote this on the New York Times website:

I said something deliberately provocative on This Week, so I think I’d better clarify what I meant (which I did on the show, but it can’t hurt to say it again.)

So, what I said is that the eventual resolution of the deficit problem both will and should rely on “death panels and sales taxes”. What I meant is that

(a) health care costs will have to be controlled, which will surely require having Medicare and Medicaid decide what they’re willing to pay for — not really death panels, of course, but consideration of medical effectiveness and, at some point, how much we’re willing to spend for extreme care

(b) we’ll need more revenue — several percent of GDP — which might most plausibly come from a value-added tax

And if we do those two things, we’re most of the way toward a sustainable budget.

It’s always interesting to me that reducing expenditures is never part of Krugman’s solutions. And on a related note from IBD:

Sharing Krugman’s belief that such a system is just fine is Dr. Donald Berwick, President Obama’s choice to head the Centers for Medicaid and Medicare Services. Berwick has said: “NICE is extremely effective and a conscientious, valuable and — importantly — knowledge-building system.” No, NICE is a system of rationing through a bureaucratic formula defining “cost-effectiveness” that has rushed untold numbers of Britons to an early grave. (Note from Lee: NICE is explained earlier in the piece from IBD. Read the full article if interested.)

“The decision is not whether or not we will ration care — the decision is whether we will ration with our eyes open,” is what Dr. Berwick told a National Institutes of Health publication when he was just president and CEO of the Institute for Health Care Improvement.

The Obama administration’s health care reform is all about cost and little about care. Dr. Berwick has opined: “We can make a sensible social decision and say, ‘Well, at this point, to have access to a particular additional benefit (new drug or medical intervention) is so expensive that our taxpayers have better use for those funds.’ ” In other words, the government will decide whether treating you and extending your life is worth it.

Sounding more and more like rationed care and death panels to me.

I’ve spent years reading about economics. Call me a nerd but I enjoy understanding how the economy works. But monetary policy? It’s pretty much voodoo to me. I’ve been doing a lot of reading to try to understand why the Fed is doing what it’s doing. Either I’m failing to understand it, or the Fed has put us on a collision course with high inflation and a worthless dollar.

Monopoly Money
The administration and the Fed have been printing money like it’s going out of style. They believe that injecting cash into the economy will help stimulate it. Many experts disagree with this approach to stimulate the economy. And there’s risk with this policy. The more money you print, the less it’s worth. The dollar becomes devalued. And eventually, inflation sets in.

Inflation
What happens when the dollar is devalued? Lots of things. One in particular that we need to pay attention to is the price of commodities. They’re on the rise. Have you noticed grocery prices lately? They’re going up. And they’ll likely to go up a lot more. Cereal prices are going up. The price of milk is going up. It’s all going up.

In the last year, the cost of manufacturing has risen tremendously. The price of the materials used to create products has risen substantially. This has not yet been apparent in retail prices. Companies have held their pricing as long as they can. Who wants to raise their prices during a down economy? But it can’t last. Companies cannot continue to eat these losses and survive. In our industry, dramatic rises in the price of cotton are leading to significant increases in the prices of apparel. It’s coming folks. It’s coming.

Monetizing Debt
When the fed buys toxic assets (like mortgages from Freddie and Fannie), we’re monetizing our debt. This week when the fed announced that we’re going to buy $600 billion in bonds from ourselves, this is monetizing our debt. This has been referred to as QE2. Like printing money, this devalues the dollar. It’s been estimated that within a couple of years, that the dollar will be worth 20% less. Do you have $1000 in the bank? Well guess what. In a couple years, that $1000 is only worth $800 in today’s money. Are you watching the stock market rise this week? It’s up. Seems like that would be good news. But all it means is that we’re treading water because the dollar is worth less.

QE2
The QE of QE2 stands for quantitative easing. The Wall Street Journal explains QE this way:

It’s the electronic equivalent of starting up the Fed’s printing presses to create money for buying financial assets in the market – in this case long-term U.S. Treasury bonds. Buying bonds pushes down their yields, and the interest rates across the debt markets that are closely tied to U.S. Treasury rates.

What are the possible ramifications of QE2? Again from the WSJ:

Printing more money tends to push down the value of the dollar. While that would tend to help U.S. exports, it also risks pushing up the price of oil and other commodities, threatening an inflation surge that could be difficult to stop if the economy picks up. The dollar already has fallen substantially, and the resulting flood of money to emerging markets with higher interest rates and more robust growth is pushing up their currencies more than some of their governments want. That has led some countries to intervene to resist the rise in their currencies, sparking tensions between the U.S. and emerging markets and talk of “a currency war.”

Why the 2? Because we’ve already tried quantitative easing once to help the economy to the tune of about $1.7 trillion. You should read this article from the Wall Street Journal.

And from Investors Business Daily:

…starting in 2009, the Fed embarked on what it called quantitative easing — a fancy term for creating money out of thin air. Over a little more than a year, it bought more than $1.7 trillion in assets, mainly U.S. Treasury and agency debt.

Today, U.S. bank reserves are close to $1 trillion — an enormous amount compared with the normal $4 billion to $8 billion.

On Tuesday, with the economy struggling and many Fed officials still worried about the specter of deflation, the Fed embarked on a second round of quantitative easing, dubbed QE2. The plan is to spend $600 billion to buy even more government debt, hoping to push down long-term interest rates to boost consumer spending, home sales and business investment.

We appreciate the Fed’s dilemma. Interest rates are already at zero, so there’s nothing left to cut. That leaves gimmicks such as quantitative easing as the only tool. But we’re also concerned about the unprecedented amount of money that’s being created — funds that won’t be easily taken out of the banking system once inflation takes off.

With its latest bout of quantitative easing, the Fed will have created $2.5 trillion out of the blue. Yet we’ve had no job growth since it began. So calling it “stimulus,” as some do, is simply false.

IBD goes on to explain:

What the Fed calls quantitative easing used to be called monetizing the debt — printing money to cover a profligate government’s debts. It was anathema to a generation of economists. But not today. Given our 9.6% unemployment and a fear of deflation, lots of smart people think QE2′s the right thing to do.

But how real is the deflation threat? Not very. Reuters quotes a San Francisco Fed study that puts the threat of actual deflation over the next three years at 5% or less. Others are in the 20% to 22% range.

As for inflation, it’s already here. The dollar has plunged in value, raising prices on everything we buy overseas. Commodity spot prices hit an all-time high in September and continue to rise. Gold? Also at record highs. Oil? It has doubled in a year to $83 a barrel.

Other common goods — from rubber to sugar to copper to rare earths — are surging, with some near all-time highs.

It’s only a matter of time before these prices are felt in the cost of consumer goods. At present, home prices are distorting inflation figures. Year over year, housing costs have fallen 15 straight months.

The risk? Once the economy takes off, inflation may spike. And once inflation gets imbedded in the economy, it’s tough to get rid of. If you don’t think so, go back and review the history of the 1970s.

Bernanke is as smart as they come. But adding another $600 billion to the $1 trillion the Fed has already stuffed into the banks does nothing to boost economic activity.

And if inflation returns with a vengeance to decimate the economy as it did in the 1970s, he’ll come in for tough questioning by a new GOP-led Congress that isn’t as enthusiastic about quantitative easing as the Democrats.

China
The world is concerned about our monetary policy. China is warning us that we’re heading down the wrong road. Why? Let’s say your friend loans you $100. But the value of the dollar drops by 20% from the time your friend loans you the money, and you pay him back. The repayment is now only worth $80 comparatively.

China and other countries have been loaning us a TON of money. And we’re going to be paying them back with a devalued dollar. How long do you think they’ll continue to loan us money? And if they do, what rate do you think they’re going to be charging us for the loan? What happens when they cut off the flow of their money?

Conclusion
Don’t you find it interesting that the Fed announced QE2 the day after the midterm elections? I do. You only hide announcements like this behind the “big news” when you’re hoping that it will get buried on page 44 of the newspaper.

What does it mean that the Fed wanted to bury this news as much as possible? I’m not sure.

But here’s what I do know. We must get our financial house in order. Devaluing the dollar is not a good long-term strategy to economic growth. Deficit spending and the national debt are much bigger risks to our nation right now than unemployment and a sluggish economy. And the only way we’ll turn around this economy, and create jobs, is to fix our financial problems.

I am ready for today to be over, mostly so I don’t have to watch all the stupid political commercials. For political junkies, here are a few things to watch for tonight.

Enthusiasm
Voter enthusiasm will dictate what happens tonight. I’m going to mention Dick Morris a few times in this post. He was the first person I saw who predicted significant gains by the Republicans. Keep in mind that Morris is backing the Republicans, and has been a loud opponent to the left’s agenda in Washington. But Morris understands the polls well. He’s been pointing out that the pollsters are using the wrong model to predict “likely voters”. He has said that if you see a Republican candidate up by three points in the polls, they’re probably really up by six or seven.

Is Morris right? We’ll know tonight. None of the polls have been predicting the types of numbers that Morris has been predicting. Until yesterday. Gallup came out with their updated results for what is typically called the “Generic Ballot”, and they now show the Republicans with a 15 point advantage. And Rasmussen Reports have the Republicans with a 12 point advantage in their Generic Congressional Ballot. These are unprecedented numbers, and much larger than the numbers prior to the 1994 midterm election when Republicans took control of the House and the Senate for the first time in many years.

The House
So what does this mean? Pollsters and pundits have been predicting that the Republicans will take control of the House and are likely to pickup 40 seats. Maybe 50 seats if everything goes their way. Morris has been predicting that the Republicans will pickup 60-80 seats, and more is possible. But as I said, he’s really been the lone wolf with his predictions until yesterday.

Here’s what Gallup had to say yesterday about this margin and how it affects the House face:

Taking Gallup’s final survey’s margin of error into account, the historical model predicts that the Republicans could gain anywhere from 60 seats on up, with gains well beyond that possible. It should be noted, however, that this year’s 15-point gap in favor of the Republican candidates among likely voters is unprecedented in Gallup polling and could result in the largest Republican margin in House voting in several generations. This means that seat projections have moved into uncharted territory, in which past relationships between the national two-party vote and the number of seats won may not be maintained.

The Senate
The common thought about the Senate is that the Republicans will pickup a half dozen or so seats, but not enough to control the Senate. Remember that the Republicans need 51 seats to control the Senate, where the Democrats only need 50 seats with Vice President Biden added to the mix. Rasmussen currently shows seven seats in play.

Right now I’ve got the Republicans at 49, and the Democrats at 48 (including independents who caucus with the Democrats), with three elections that will determine the balance of power in Congress. The key elections to watch tonight are Washington (Murray and Rossi are in a virtual dead heat), California (Boxer is up by about 3 over Fiorina) and West Virginia (Manchin is up by about 4 over Raese). It could easily end up 50-50.

If Morris is right and there’s a huge Republican tsunami tonight, then it’s possible that a couple more seats could come into play. Morris still holds out hope that Connecticut and Delaware could turn Republican. I don’t see it.

The Democrats’ Response
For months the Democrats have belittled the opposition. The President has referred to the opposition as their “enemies”. Democrats have called the voters fearful, uninformed, misinformed and misled. Some on the left have gone so far as to label the opposition as stupid and racists. Their conclusion is that no reasonable voter could oppose their vision for our country.

What have they accomplished? All they’ve done is galvanize the opposition.

Do you remember what ABC’s Peter Jennings said following the 1994 midterm elections?

Some thoughts on those angry voters. Ask parents of any two-year-old and they can tell you about those temper tantrums: the stomping feet, the rolling eyes, the screaming. It’s clear that the anger controls the child and not the other way around. It’s the job of the parent to teach the child to control the anger and channel it in a positive way. Imagine a nation full of uncontrolled two-year-old rage. The voters had a temper tantrum last week….Parenting and governing don’t have to be dirty words: the nation can’t be run by an angry two-year-old.

The response from Democrats will be telling. And it may take weeks or even months for it to completely unfold. I expect many on the left to explain this as ONLY about the economy and jobs. Some may even believe it.

As most of you know by now, I enjoy watching the polls. I’m a frequent visitor to sites such as Rasmussen Reports, Gallup and Real Clear Politics. There are a couple polls I want to share with you today.

Center Right?
Republicans have claimed for years that we’re a “center-right” country. They do so because that’s what the numbers show. For the last couple of decades, polls typically show that around 40% of people describe their political views as conservative, 40% as moderate, and 20% as liberal. (See this historical summary at Gallup.) Personally, I suspect these polls are misleading. It’s been my experience that conservatives are proud to be conservatives, and are willing to describe themselves as such. I’m not sure that the same holds true for some liberals. Over the years I’ve met people who I would describe as liberals, yet they describe themselves as moderates. And I think there are some numbers that would backup this conclusion.

Here are two recent polls on Rasmussen Reports that I believe demonstrate this to be true. In my opinion, we have a leftist President, and a leftist Congress, passing leftist legislation. The size of our federal government has grown dramatically over the last four years while the left has controlled Congress. But according to Rasmussen, 32% of likely U.S. voters say we’re headed in the right direction (read more here), and 25% of likely voters prefer more services and higher taxes from our government (read more here). These numbers suggest to me that while 20% of the people describe themselves as liberals, certainly more than 20% of them seem to share a liberal view of the role of our government.

I believe that it’s more likely that 25-30% of people hold liberal views. So while the Republicans are correct that we’re a center-right country, I believe that the percentage of liberals is understated in these polls.

Smaller Government
There are a number of polls out there that indicate the mood of America right now. To me the most telling is that 65% of likely voters say they prefer a government with fewer services and lower taxes rather than one with more services and higher taxes. And according to Rasmussen, 64% of voters say that the country is headed down the wrong track. When you dive into this a little deeper, Rasmussen has an interesting subset of these numbers. They divide out the “Political Class” from “Mainstream Voters”. According to Rasmussen: “Seventy-six percent (76%) of the Political Class believe the United States is generally heading in the right direction, while 81% of Mainstream voters think the country is going down the wrong track.” It is incredible to me that the Political Class is so out of touch with Mainstream voters.

Florida’s Senate Race
Out of all the House and Senate races, the poll that caught my eye this morning was the poll for Florida’s senatorial race. For those who have not followed this race, it’s been pretty entertaining. In the Republican primary, the Tea Party-backed Marco Rubio defeated governor Charlie Crist. Crist decided to run as an independent, so there’s a three way race between Rubio (R), Crist (I) and Kendrick Meek (D). Earlier this week the polls showed Rubio at 43%, Crist at 32%, and Meek at 20%.

But then the Democratic Party got involved. The Democrats sent Bill Clinton to Florida to convince Meek to drop out of the race, and throw his support behind Crist. Crist has said that he’s willing to caucus with the Democrats. He’s also said that he’s had conversations with Clinton’s people, as well as the White House, and that at one point Meek had agreed to drop out of the race. It appears that this strategy has doubly backfired on the Democrats. Not only did Meek change his mind and decide to remain in the race, it appears that Rubio has picked up seven points in the polls this week. The newest poll from Rasmussen has Rubio at 50%, Crist at 30%, and Meek at 16%. I think that the voters are tired of politics-as-usual.

Here’s a recent quote from President Obama while speaking on the Hispanic Radio station Univision: “If Latinos sit out the election instead of saying, ‘We’re gonna punish our enemies and we’re gonna reward our friends who stand with us on issues that are important to us,’ if they don’t see that kind of upsurge in voting in this election, then I think it’s gonna be harder and that’s why I think it’s so important that people focus on voting on November 2.”

Who are “our enemies”? This is the post-racial president who was supposed to unite our country?

And here’s a quote from Jon Stewart during an interview with Terry Gross from NPR: “I would imagine, you know, Beck and Palin are easier punching bags, and we can think of it as, oh my God, I’m so scared if they take over. And you know what? We’ll be fine. You know, we had a civil war. Just – we’re not that fragile, and I think we always have to remember that people can be opponents, but not enemies. And there are enemies in the world. We just need the news media to help us delineate. And I think that’s where the failing is, that the culture of corruption that exists in the media doesn’t allow us to delineate between enemies and opponents. And that’s where we sort of fall into trouble.”

Can we elect Jon Stewart instead?

The fallout continues for NPR and Vivian Schiller over the firing of Juan Williams.

In telephone interviews with Fox News this week, general managers of several stations affiliated with NPR spoke sharply about Schiller’s performance in the episode. Janet Campbell, general manager at Kansas station KANU, said she did not believe Williams should have been fired at all, and that she “absolutely” saw a double standard at work in the network’s treatment of Williams and Totenberg.

“I think it had to do with the network he was on,” said Campbell, who has served as KANU’s general manager for fifteen years. “I thought it was a knee-jerk reaction. And I was extremely disappointed at [Schiller's] remarks in Atlanta. I thought that was very childish. Someone in charge of such a large organization should know better.”

Speaking at a newsmakers’ luncheon at the Atlanta Press Club on Thursday, when controversy over Williams’s firing was still fresh and reaching a feverish peak in news media circles, Schiller said Williams’s feelings about Muslim airlines passengers should be between him and his “psychiatrist or him and his publicist, take your pick.” Schiller apologized to Williams later that afternoon, calling her remark hasty and “thoughtless.”

“I feel a little bit like the street sweeper at the elephant parade,” said KANU’s Campbell. “I’m getting twenty to forty calls…a lot of people asking me for my budget information. That’s all I’ve done for three days. By the time I got in Monday morning – while I appreciated her apology – I thought it was a little late.”

Campbell was not the only one to speak out. Read the full story here.

BTW — For clarification, Schiller did not apologize to Williams. She made a public apology for how she handled the firing. But as far as I’ve seen, she’s never apologized to, or spoken with Williams, since he was fired. Or before for that matter.

Lots of subjects to touch on today, so let’s jump right in.

Don’t Ask Don’t Tell
The majority of Americans want Washington to repeal Don’t Ask Don’t Tell. I think the administration has the right approach on this one. They would prefer we settle this in Congress than in the courts. I’ve been a longtime supporter of gay rights, and hope that we’ll do the right thing by repealing Don’t Ask Don’t Tell. But doing so through legislation in the Congress is a much better course of action than allowing our courts to make this decision for us. Now if only Congress would do the right thing.

Thoughts on Juan Williams and NPR
I’m a fan of NPR. I think in many respects they do a tremendous job with their reporting. I’ve listened to their morning broadcast on KPR literally thousands of times — almost every weekday morning for the last 15 years. As a former employer and business owner myself, I have had to hire and fire a lot of people over the years. Let me tell you, firing people sucks. I will defend NPR’s right to fire people all day long. But I want to make a couple points.

1. If you listen to the entire exchange between Juan Williams and Bill O’Reilly, it’s very clear (at least to me) that Williams is not an “islamophob”. He certainly said something that can easily be taken out of context without hearing the full exchange. And he said something that’s not “politically correct”. It made me cringe the first time I heard it. But I’ve seen enough of Williams over the years to be confident that he’s not prejudice against Muslims.

2. NPR did not fire Williams because he expressed an opinion (and technically, this was not an opinion, but a personal feeling). NPR has long allowed their reporters to express opinions in the media. CEO Vivian Schiller never bothered to speak with Williams directly before making her decision, or after.

3. Schiller’s public comments were reprehensible. Did you see her quote? Schiller told an audience in Atlanta on Thursday that Williams should have kept his comments about Muslims between “himself and his psychiatrist.” The feedback against Schiller and NPR has been substantial. Schiller later apologized for her comments, but never apologized to Williams directly. (This is called “cover your ass” in legalese.) As a former employer myself, I can tell you that this is complete incompetence. You should NEVER make a comment like this about a former employee.

4. So why was Williams fired? NPR has long disliked Williams’ association with Fox News. Williams, an admitted liberal, does not neatly fit into NPR’s perception of what a liberal should be. I suspect that NPR has long considered firing Williams, and was waiting for the right opportunity. And they quickly pounced on Williams’ “politically incorrect” statement.

5. People will argue that Williams is an islamophob and deserved to be fired for his comments. But when I see such broad support for Williams, I wonder who was really offended by his comments? I’ve seen support on the left from people such as Whoopi Goldberg and Bob Beckel. I’ve seen support on the right from people like Karl Rove. I’ve seen support from moderate Muslims. From Republicans and Democrats alike. And if the reactions among NPR’s own audience is any indication, then NPR has a big problem on their hands.

6. I’ve long believed that we should eliminate public funding for the media. We’ll see if this becomes the triggering point for defunding NPR and all publicly funded media.

Midterm Elections
I’ve been following the polls, but find it difficult to predict what the outcome will be in the upcoming election. So I’m not going to try. The general consensus is that Republicans stand a good chance of taking back the House, and a much slimmer chance of taking back the Senate. The polls attempt to determine “likely voters”, but with a midterm election, that’s a tough thing to determine. Dick Morris generally has a pretty keen insight into the polls and voter behavior. He predicted months ago that the Republicans would win huge gains this election cycle, and take back both the House and the Senate. We’ll see. That might prove to be hopeful thinking on his part. Morris has become a very outspoken critic of the left.

I wrote a post back in January about how Scott Brown’s win in Massachusetts could help President Obama win a second term. My comments still seem relevant given the likelihood that Republicans will make gains in Congress. If you missed it the first time, you can read it here.

European Socialism
Are you watching the meltdown in Europe? This has been building for months. In France, the government wants to raise the retirement age from 60 to 62. And the unions are rioting in the streets. But it’s not just France. Several countries in Europe have all come to the same conclusion — that an entitlement society is financially unsustainable. Countries across Europe are enacting huge cuts in benefits and spending, and are eliminating hundreds (if not thousands) of government programs.

I’ve long considered writing a post explaining that socialism is a failed economic model, but just haven’t gotten around to it. It’s the road that the President and Congress have been taking us down these last two years. Though technically, state capitalism is a better description of what we’re becoming than socialism.

The same thing could happen here if Congress ever decides to restore fiscal discipline.

The Federal Budget
I find it incredibly irresponsible that Congress has failed to pass a budget for 2011. And it’s not just that they failed to pass a budget. They didn’t even attempt to pass a budget. Many have predicted that the Democrats will pass a budget after the midterm elections when they return in December. The thought being that passing a budget before the elections would only hurt the Democrats at the voter booth.

My take? I don’t expect them to pass a budget in December either.

Why? Because they don’t want to be on the hook for what comes next. Once a budget is passed, then we’ll compute the upcoming budget deficit for 2011. There is no way to avoid a budget deficit next year. As our national debt increases, we will soon be approaching our national debt ceiling again. (Last January I wrote about Congress raising the debt ceiling by $2 trillion in order to push that next increase beyond the 2010 midterm elections. I was right.)

So what happens next? Call my cynical, but I think this has been the plan all year. Let’s assume that the Republicans take back the House and the Senate. One of the first things they’ll have to do is pass a budget for 2011. And unless their initial budget includes SIGNIFICANT spending cuts (which the President will never sign), then Congress will soon be faced with another vote on the debt ceiling. There will be no way around raising the debt ceiling again.

The Democrats will then scream “See, they’re the same old Republicans”.

What comes next? Have you been watching Europe?