Category Archives: Henninger

A Year of Living on the Brink

These are the smart people on the Left we’re talking about…
History will mark down 2014 as the year predicted 49 years ago by Martha and the Vandellas. In 1965 the group recorded a Motown classic, “Nowhere to Run, Nowhere to Hide.” We’re there, at the brink.

Liberia, ISIS, Ukraine, Hong Kong, a hospital fighting Ebola infections in Dallas, the year’s stock-market gains obliterated, and I almost forgot—just last week Secretary of State John Kerry warned that climate change could end life as we know it.

Then this week the clouds parted and the year’s best news arrived: Led by Europe’s sinking economies, global economic growth is falling, taking stocks and bonds with it, and the world’s central bankers say they have run out of ideas on doing anything about it.

How this is good news requires explanation.

The annual meetings of the International Monetary Fund concluded in Washington last weekend. This gathering of the world’s finance ministers, central bankers and international financial organizations sets the tone for the direction of the world’s economic prospects.

As the meetings ended Sunday, a headline summarized the consensus: “Governments, central bankers have fewer tools left to revive economies after years of sluggish growth.” European officials are now talking about a “lost decade.” The IMF calls the economic policies in the years after the 2008 financial crisis a succession of “serial disappointments.”

Let’s begin with the first and most significant policy disappointment. The central economic event of the past six years, both as policy and symbol, was the Obama administration’s $834 billion stimulus bill in 2009, the American Recovery and Reinvestment Act. Its explicit purpose was to revive the U.S. economy. How was nearly $1 trillion of additional federal spending supposed to do that?

Proponents of the stimulus bill’s theoretical underpinnings, which date to the 1930s and a famous economist with three names, have argued for 80 years that by injecting large quantities of money into a weak economy (public spending), the population will use the unexpected money to make purchases, and this stimulated consumption in turn will cause private companies to hire more workers to produce goods to meet—the key idea—demand.

Beyond this textbook, Depression-based effort at economic stimulus, the only other significant initiative taken by the Obama presidency (not counting the indirect effects of Dodd-Frank, ObamaCare, shutting down power plants, putting bankers under house arrest and whatnot) has been to transfer responsibility for economic growth to the Federal Reserve Bank. The Fed produced three rounds of quantitative easing, a monetary policy that created so-called zero-bound interest rates in the U.S. from late 2008 until now. The Bank of England followed. Early last month, the European Central Bank adopted its own version of quantitative easing. It’s been the greatest monetary experiment since the creation of coins around 700 B.C.

It is essentially the prescriptive promise of this 2009 to 2014 policy mix that was repudiated by officials at the IMF meetings in Washington the past week. Recognizing the real need, IMF Managing Director Christine Lagarde said, “There is too little economic risk-taking, and too much financial risk-taking.”

The U.S. and Europe have paid a high price for six years of stimulus that didn’t stimulate, programmed consumption that fell short, regulatory expansion that froze private producers, and high tax-rate regimes that benefited the public-spending class and beggared everyone else, especially young people and the working poor scrambling for jobs.

No one should underestimate the political dangers of persisting with a Keynesian economic model that looks depleted.

Several months ago this newspaper described how younger Europeans who are unemployed or underemployed have become bitter at their parents’ generation for wallowing in a system whose labor protections suppress the creation of new jobs. Economic anxiety in turn has fueled the rise of extremist political movements in France, Germany, England, Hungary and elsewhere.

Sustained, seemingly irreversible, weak economic growth in Europe or the U.S. is a political risk to national stability.

There is an alternative economic policy set to this failure. It would be based on the best policies that produced strong growth and jobs in major, formerly moribund Western economics.

Those successes include the German labor-market reforms initiated by Chancellor Gerhard Schröder in 2003; the structural public-spending reductions begun in Canada in 1995 by Liberal Finance Minister Paul Martin and sustained by current Conservative Prime Minister Stephen Harper (Harvard economist Alberto Alesina has documented the pro-growth payoff from permanent spending reductions); Poland’s remarkable post-Soviet revival from the 1989-91 pro-market reforms of Leszek Balcerowicz ; and of course the primary model—the U.S.’s tax-rate reductions and regulatory reforms in Ronald Reagan ’s presidency.

The key element in reviving the West isn’t economics, though that matters. It is political courage. [Like going it alone w/out Congress…?]  Each example of high-growth success required a political leader willing to stand against finance ministries and a financial media that will ride demonstrably failed models off another cliff.

Given the admission of generalized policy collapse at the IMF meetings, what we are talking about is the courage of one leader: the next American president.

Dan Henninger: A Year of Living on the Brink – WSJ – WSJ.


Obama’s Troublesome Congress

Will no one rid me of this troublesome priest?—King Henry II
Why work with the Presidency when the man in office thinks he can simply change lawfully enacted legislation at a whim?

The President of the United States went to Minneapolis the other day, where he gave a speech complaining about Republicans in Congress who stand in the way of what he wants to do. This excerpt is from the White House website:

“And, now, some of you may have read—so we take these actions and then now Republicans are mad at me for taking these actions. They’re not doing anything, and then they’re mad that I’m doing something. I’m not sure which of the things I’ve done they find most offensive, but they’ve decided they’re going to sue me for doing my job. I mean, I might have said in the heat of the moment during one of these debates, ‘I want to raise the minimum wage, so sue me when I do’.” (Laughter.) “But I didn’t think they were going to take it literally.”

With profound apologies to William Shakespeare, Barack Obama seems to have entered a Lear-on-the-heath phase of his presidency, raving at his enemies. Or perhaps it’s underappreciated Coriolanus

“They don’t do anything except block me,” the impatient president went on to the citizens of Minneapolis. “And call me names. It can’t be that much fun.” (Laughter.)

Mr. Obama is right about that. His presidency hasn’t been much fun. Not for Republicans, not for a lot of congressional Democrats. Or for the Washington press or even comedians.

Mr. Obama doesn’t do Washington politics, either because he doesn’t know how or he disdains people who do. At a Cabinet meeting in January, Mr. Obama said: “I’ve got a pen and I’ve got a phone.” Thus was born Mr. Obama’s theory of presidential authority.

The pen-and-phone presidency is generally attributed to current White House cardinal John Podesta and a 2010 paper, “The Power of the President,” published by the Center for American Progress. In its forward, Mr. Podesta, then CAP president, wrote: “The U.S. Constitution and the laws of our nation grant the president significant authority to make and implement policy.” Despite references to executive administrative authority, that is the last time the phrase “U.S. Constitution” appears in the Podesta paper.

But someone in the White House legal shop soon may have to stay late writing a Constitutional argument more compelling than Mr. Obama’s bland assertion this week that he only does these things when “Congress chooses to do nothing.”

The lawsuit Mr. Obama laughingly referred to in Minneapolis is the one House Speaker John Boehner plans to file, reasserting Congress’s role in the Constitution’s separation of powers provisions. Its target is Mr. Obama’s more than 30 unilateral alterations of the Affordable Care Act’s provisions, plus routine revisions, with no congressional approval, to other laws, such as No Child Left Behind.

Several times this week, the president heaped ridicule on the Boehner lawsuit. He did so with the ink barely dry on the Supreme Court’s remarkable 9-0 decision in NLRB v. Noel Canning striking down Mr. Obama’s theory of recess-appointment authority.

One wonders what amusements the courts will find when they compare the pen-and-phone presidency with the text of the Constitution to which Mr. Podesta alluded.

Everyone knows the Constitution’s first sentence: “We the people” and all that. What follows immediately in the text is this: “All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.”

You don’t have to be a Scalian to know why the Founders thought the locus of legislative authority should be Article 1, Section 1. Mr. Obama reduces these matters to mockery. “Instead of trying to mess with me,” the 44th president said in Minneapolis, Congress should be passing his bills. “I’m happy to share the credit.”

More and more, Mr. Obama’s speeches reflect the progressives’ impatience with politics of any sort and their preference for policy by imposition. Mr. Obama, though, goes further. He seems unable to admit the very idea of political disagreement with him, as he so often puts it.

In 2010, the Obama cap-and-trade legislation to limit carbon emissions failed in the Senate because Democratic senators from the coal-reliant Midwest and South refused to support it. They cited the hardship it would impose on their states.

Those Democrats opposed cap-and-trade because they represent constituencies—voters—who oppose the economics of Mr. Obama’s carbon policy. This political tension, inherent to the American political system, is inconvenient to Mr. Obama. So in June the Obama EPA announced a 30% reduction in carbon from U.S. power plants. West Virginia’s miners can eat their coal.

If congressional Republicans had even minimal institutional trust in the president, Mr. Obama would be able to assemble a majority to pass immigration reform. He can’t, or won’t, and so he rants. More than a few Americans watching parades pass by this weekend will recall that one man’s whim as the way we make laws has no support in the U.S. Not now, not ever.

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Henninger: Obama's Troublesome Congress – WSJ.