Inspector General

Nobel Prize Winning Economist Says Obama Policies Delaying Economic Recovery

by Hans Bader on January 8, 2010 · 3 comments

in Deregulate to Stimulate, Economy, Employment, Energy, Environment, Global Warming, Health and Illness, Healthcare, Insurance, International, Labor, Politics as Usual, Precaution & Risk, Regulation, Sanctimony, Stimulus to Nowhere, Trade

In the Wall Street Journal, Nobel Prize-winning economist Gary Becker and others explain how President Obama’s policies are delaying and retarding the inevitable economic recovery, keeping unemployment high even though the recession Obama inherited was similar to others in the past that gave way to rapid recoveries:

In terms of U.S. output contractions, the so-called Great Recession was not much more severe than the recessions in 1973-75 and 1981-82. Yet recovery from the latest recession has started out much more slowly. For example, real GDP expanded by 7.7% in 1983 after unemployment peaked at 10.8% in December 1982, whereas GDP grew at an unimpressive annual rate of 2.2% in the third quarter of 2009. Although the fourth quarter is likely to show better numbers–probably much better–there are no signs of an explosive take off from the recession. …

In terms of discouraging a rapid recovery, other government proposals created greater uncertainty and risk for businesses and investors. These include plans to increase greatly marginal tax rates for higher incomes. In addition, discussions at the Copenhagen conference and by the president to impose high taxes on carbon dioxide emissions must surely discourage investments in refineries, power plants, factories and other businesses that are big emitters of greenhouse gases.

Congressional ‘reforms’ of the American health delivery system have gone through dozens of versions. The separate bills passed by the House and Senate worry small businesses, in particular. They fear their labor costs will increase because of mandates to spend much more on health insurance for their employees. The resulting reluctance of small businesses to invest, expand and hire harms households as well, because it slows the creation of new jobs and the growth of labor incomes. …

Even though some of the proposed antibusiness policies might never be implemented, they generate considerable uncertainty for businesses and households. Faced with a highly uncertain policy environment, the prudent course is to set aside or delay costly commitments that are hard to reverse. The result is reluctance by banks to increase lending–despite their huge excess reserves–reluctance by businesses to undertake new capital expenditures or expand work forces, and decisions by households to postpone major purchases.

Several pieces of evidence point to extreme caution by businesses and households. A regular survey by the National Federation of Independent Businesses (NFIB) shows that recent capital expenditures and near-term plans for new capital investments remain stuck at 35-year lows. The same survey reveals that only 7% of small businesses see the next few months as a good time to expand. Only 8% of small businesses report job openings, as compared to 14%-24% in 2008, depending on month, and 19%-26% in 2007.

Obama’s $800 billion stimulus package, which failed to cut unemployment, is now pressuring states to raise taxes, thanks to costly requirements it imposed on states at the behest of powerful public-employee unions.

Obama claimed the stimulus package was needed to prevent the economy from suffering from “irreversible decline,” but the Congressional Budget Office admitted that the stimulus package actually would shrink the economy “in the long run.”  Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.  The Obama Administration claims credit for creating imaginary jobs in non-existent Congressional districts.

As the Examiner notes, “If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent this year. The reality is that it passed 10.3 percent in October. So now the stimulus books are being cooked to mollify an anxious public worried that real-world jobs continue to disappear and angry that Obama has thrown almost $1 trillion down the stimulus rathole.”

The stimulus package actually destroyed thousands of real world jobs by triggering trade wars with Canada and Mexico that killed jobs in America’s export sector (the stimulus package barred a measley 97 Mexican truckers from U.S. roads, a minor NAFTA violation that led to massive Mexican retaliation against U.S. exports of 40 farm products and kitchen goods worth $2.4 billion).  It also is wiping out jobs by inflicting costly mandates on state governments (such as repealing welfare reform, and imposing costly “prevailing wage” regulations and expensive racial set-asides).

The stimulus package has since spawned countless examples of government waste and corruption.  Recently, Obama fired an inspector general, Gerald Walpin, who uncovered millions of dollars of waste and fraud in the AmeriCorps program, including by a prominent Obama supporter, endangering the Obama supporter’s ability to administer federal stimulus spending in Sacramento.  Obama’s alleged justification for firing the inspector general turned out to be false.

“How ACORN Destroyed the Housing Market”

by Hans Bader on November 16, 2009

in Bailout Watch, Economy, Legal, Personal Liberty, Politics as Usual, Precaution & Risk, Sanctimony

Federal affordable-housing mandates were a major factor in the mortgage crisis, fueling the housing bubble and the subsequent collapse of the housing and financial markets, which helped bring down the economy.  Even the liberal Village Voice has admitted that.  Who drafted those awful mandates?  ACORN, reports the Washington Examiner, in “How ACORN Destroyed the Housing Market.”

How did ACORN cause the “housing bubble” and “financial collapse”?  ACORN lobbyists drafted “affordable-housing” mandates to pressure the mortgage giants to buy up more risky loans and mortgages from low-income communities, loans that banks in turn were pressured to make by the Community Reinvestment Act, explains The Wall Street Journal.

ACORN also helped spawn the mortgage crisis by promoting “liar loans.”   It has a long history of  financial fraud, vote fraud, tax evasion, waste, and mismanagement.

Lawmakers and the Obama administration have studiously ignored ACORN’s role in spawning the financial crisis, because many liberal lawmakers have long had close ties to ACORN.  ACORN is a left-wing group that launched Obama’s career as a community organizer.  (ACORN stands for Association of Community Organizations for Reform Now.)  Obama has long-standing ties to ACORN, and an ACORN affiliate received received $800,000 from Obama’s campaign.

In recent months, lawmakers distanced themselves from ACORN, and cut off its federal housing funds, after it was caught on videotape in a child prostitution promotion scandal.  (ACORN is now suing the federal government in court, to force it to resume funding ACORN.  Earlier, it sued the private citizens who exposed its role in the scandal for $2 million).

However, in the long run, ACORN is likely to continue to benefit from its close ties to liberal lawmakers and the administration.  Entities related to ACORN stand to reap millions from Obama’s financial regulation proposals and health-care reform proposals.

Meanwhile, the Obama administration is busy promoting the junky, risky mortgages that fueled the housing bubble, showing that it has learned nothing from history.  One result is that the Federal Housing Administration, which is making many such loans, has gone into a “nose dive” and may need a multibillion-dollar taxpayer bailout, reports the Washington Post.

Obama wants to create a bureaucracy called the Consumer Financial Protection Agency. “The agency would be in charge of enforcing the Community Reinvestment Act, a law that prods banks to make loans in low-income communities.” The Community Reinvestment Act was a key contributor to the financial crisis.  Yet Obama’s plan would empower the CFPA to enforce the Community Reinvestment Act without regard for banks’ financial safety and soundness.

The mortgage crisis was also caused by the reckless government-sponsored mortgage giants (”GSEs”) Fannie Mae and Freddie Mac, and by federal affordable-housing mandates.

But Obama’s proposed financial rules overhaul does absolutely nothing about Fannie Mae and Freddie Mac, admits Obama’s Treasury Secretary, tax cheat Timothy Geithner, even though he admits that “Fannie and Freddie were a core part of what went wrong in our system.”

Worse, Obama’s plan is “largely the product of extensive conversations” with two lawmakers responsible for the corrupt status quo, Chris Dodd and Barney Frank, and it expands the reach of regulations that have been used by left-wing groups to extort pay-offs from banks.

Recently, the administration got rid of the inspector general for Fannie Mae and Freddie Mac, after making Freddie Mac run up $30 billion in losses from the Obama administration’s mortgage bailouts, which bailed out even high-income borrowers who irresponsibly mismanaged their finances.  Earlier, Obama fired an inspector general, Gerald Walpin, who uncovered misuse of funds by a prominent Obama backer, smearing the inspector general with allegations that turned out to be false.

Senator seeks to cover up report showing Honduras acted legally in removing authoritarian ex-president

by Hans Bader on October 29, 2009

in Features, International, Legal, Personal Liberty, Politics as Usual, Sanctimony, Zeitgeist

The Obama administration and congressional allies like Senator John Kerry (D-Mass.) are seeking to silence government lawyers who point out their mistakes and misinterpretations of the law:

“A month ago, the Law Library of Congress reviewed the removal of Manuel Zelaya from his post as President of Honduras, an act that the Obama administration called a ‘coup’ and demanded reversed for its illegality.  To the embarrassment of the White House and State Department, the Congressional body determined that Honduras acted lawfully in removing Zelaya for his crimes against their constitution, although they determined that his exile broke Honduran law.  Now John Kerry wants the Law Library to retract its findings, apparently trying to rewrite history to hide the facts of the case.”

Earlier, the Obama administration overruled career justice department lawyers in voting rights and voter intimidation cases, to give a green light to unconstitutional legislation, and protect an Obama poll-watcher and Democratic Party official from being held accountable for wrongdoing.  Obama also fired an inspector general for uncovering wrongdoing by a prominent Obama supporter.

Contrary to what Senator Kerry claims, there are many legal commentators who say that Honduras’s removal of ex-president Manuel Zelaya was legal — and thus, not a coup.

The ex-president’s removal was perfectly constitutional, say many lawyers and foreign policy experts, including attorneys Octavio Sanchez, Miguel Estrada, and Dan Miller, former Assistant Secretary of State Kim Holmes, Stanford’s William Ratliff, and The Wall Street Journal’s Mary Anastasia O’Grady.

Former Secretary of State James A. Baker III, a lawyer, says that Honduras’s removal of Zelaya from office was legal, although its exiling of him was not.

Honduras removed ex-president Zelaya after he systematically abused his powers: he sought to circumvent constitutional term limits, used mobs to intimidate his critics, threatened public employees with termination if they refused to help him violate the Constitution, engaged in massive corruption, illegally cut off public funds to local governments whose leaders refused to back his quest for more power, denied basic government services to his critics, refused to enforce dozens of laws passed by Congress, and spent the country into virtual bankruptcy, refusing to submit a budget so that he could illegally spend public funds on his cronies.

Journalists nonsensically refer to Honduras’s removal of its ex-president as a “coup” even while admitting that it was approved by the country’s supreme court. But if it was legal, by definition, it cannot be a coup, since a coup is defined as “the unconstitutional overthrow of a legitimate government by a small group.”

Moreover, the ex-president’s removal was not a “coup” because it was not committed by a “small group,” as the definition of “coup” requires. The removal of Honduras’s president was supported by the entire Honduran Supreme Court, an almost unanimous Honduran Congress, and much of Honduran society. Honduras did not lose its government, but merely replaced one illegitimate part of it: its overbearing president. And his removal from office (as opposed to his subsequent exile) was clearly legally justified.

Law professors like James Lindgren, Jonathan Adler, Glenn Reynolds, and William Jacobson have also criticized the administration’s position on Honduras.

By levying sanctions on Honduras, and refusing to recognize its current government, the Obama administration has destabilized the country, one of the poorest in Latin America, resulting in mass layoffs leading to 65% unemployment among workers at small and medium-size enterprises in Honduras.  Vulnerable social groups in Honduras, like orphans, have suffered especially acutely, and malnutrition has risen.

While attacking Honduras’ democratically-elected Congress and Supreme Court for their role in removing and replacing the country’s ex-president and would-be dictator, the Obama administration has paid little attention to human-rights abuses in countries ruled by dictatorships.  Those countries include Guinea, where troops recently committed mass rapes against women in broad daylight; Niger, where the president recently turned himself into a dictator; Iran, where vast numbers of pro-democracy demonstrators have been tortured or killed; and Nicaragua, right next door to Honduras, where the unpopular president, who routinely engages in vote fraud, is busy trampling on constitutional term limits in order to turn himself into a president-for-life.

More Government Waste, Corruption, and Corporate Welfare, Thanks to the Obama Administration

by Hans Bader on June 14, 2009

in Odds & Ends

Rapidly-rising Medicare spending already threatens “to crush the federal budget,” and much Medicare spending is wasteful, yet the Obama Administration claims it can somehow save money by creating Medicare-like programs to cover all Americans. In the New York Times, economics professor Tyler Cowan calls it “the new voodoo economics.” Washington Post columnist Robert Samuelson concludes that Obama’s health-care plan “is naive, hypocritical or simply dishonest. Probably all three.”

Obama is firing an inspector general who exposed wrongdoing by one of his supporters, and previously uncovered millions of dollars in waste and fraud in the troubled AmeriCorps program, whose budget is being dramatically increased by the Obama Administration. Inspector General Gerald Walpin was fired after he uncovered misuse of Americorps funds and sought to keep the wrongdoer from accessing federal “stimulus money.” The recently-passed stimulus package repealed welfare reform, and it subsidizes waste and corruption.

Congress is moving towards passing a “cash for clunkers” bill that would give people tax credits, but only if they own an old gas-guzzler that they are trading in for a new car. So if you bought a fuel-efficient car in the past, your tax dollars will be used for welfare for people who bought inefficient cars (cars with less than 18 MPG). The bill will increase the national debt (and thus future taxes) by billions of dollars. As Mike Budnick notes in the Wall Street Journal, “This type of legislation rewards people who have made poor decisions and penalizes only people who have already made good choices. Not the kind of incentive that we should propagate. Let the market work.”

Taxpayers are being ripped off to the tune of hundreds of billions of dollars to enrich wealthy buyers of so-called “toxic assets.” Meanwhile, the Obama Administration’s $787 billion stimulus package is actually killing jobs and shrinking the economy.

Congress passed an FDA tobacco regulation bill, but not without adding insidious provisions that will reduce competition in the tobacco industry, and actually make it harder to introduce products that reduce the harms and health risks of tobacco, notes the Wall Street Journal. We earlier described the bill’s pitfalls and counterproductive provisions. Obama has said he will sign the bill into law.

Billions of tax dollars are being spent on bailing out carmakers, but the primary beneficiaries of this corporate welfare are not the car companies themselves, which could have survived without federal bailouts by simply abrogating their collective bargaining agreements and dealer-contracts in a standard bankruptcy-court reorganization, but the United Auto Workers Union, which spent millions electing Obama and is now calling the shots. Taxpayers and pension funds are being ripped off to enrich the UAW, which enjoys wages much higher than the average American.

A similar government bailout of the auto industry actually backfired in England in the 1970s, destroying its carmakers by leaving them with excessive wages, inefficiency, and political meddling in car design.

Now, even liberal commentators are questioning whether the mushrooming auto bailouts pass constitutional muster, such as Charles Lane in today’s Washington Post. (Lane is so liberal and pro-government that in a front page article in 2003, he characterized the Supreme Court’s 2003 decisions as collectively being great for “civil liberties,” even though he admitted that the Supreme Court had rejected free speech claims in 7 out of its 8 First Amendment cases that term, largely because Lane approved of its decision upholding the University of Michigan Law School’s race-based affirmative action plan — even though legally permissible affirmative-action plans are a discretionary government function, not an individual right or civil-liberty).

Conservative columnist George Will also has a column today criticizing the auto bailouts. He points out that the Administration’s current claim that it can use TARP bank-bailout money for an auto bailout is at odds with the Treasury Department’s past admissions to the contrary: “Last September, Treasury Secretary Henry Paulson testified to the Senate that TARP money was necessary for ailing ‘financial institutions.’ Nowhere in the bill’s 169 pages was there any reference to government funding of ‘automobile’ or ‘manufacturing’ companies. In November, Paulson told a House committee: ‘I’ve said to you very clearly that I believe that the auto companies fall outside of [TARP's] purpose.’”

Earlier, commentators like the Heritage Foundation, Clinton Administration Labor Secretary Robert Reich, and liberal journalist Andrew Sullivan all agreed that the auto bailouts are illegal or unconstitutional.

In Cover-Up, Obama Fires Inspector General to Shield Crony and Waste Taxpayer Money

by Hans Bader on June 12, 2009 · 1 comment

in Employment, Legal, Politics as Usual

Obama is firing an inspector general, Gerald Walpin, who uncovered wrongdoing by a prominent Obama supporter and opposed letting him off the hook.

Ironically, when Obama recently nominated a liberal judge to the Supreme Court, his Administration trumpeted Walpin’s support for her.

Walpin is the Inspector General for the Americorps program, which is riddled with waste, fraud, and ideological misuse of taxpayer funds. Walpin “has been doing a good job” and he has “identified millions of dollars in AmeriCorps funds that were wasted or misspent,” notes Senator Grassley.

But when Walpin recently exposed wrongdoing by a prominent Obama supporter, Kevin Johnson, Obama moved to fire Walpin. Walpin protested the Administration’s failure to hold Johnson, a liberal mayor, accountable for using taxpayer money to pay for “political activities” and pay volunteers to run “personal errands for” Johnson “and even wash his car.”

Obama staffers and supporters are now falsely claiming that Walpin, whom the Obama Administration recently quoted as an authority (given his stature as a highly-respected former federal prosecutor and big-name law firm partner with clients across the political spectrum), is a right-wing nut (a ridiculous claim).

Walpin notes that although he uncovered massive wrongdoing by Johnson, it has led only to a sham settlement: $350,000 that is supposed to be paid back to the taxpayers never will be, since the entity that Johnson used to receive taxpayer money and spend it on himself now “is insolvent,” and its “settlement agreement was carefully drafted so that no obligation is imposed on” Johnson for that money, only the defunct entity he controlled. That’s so even though it was Johnson who used Americorps money to pay volunteers to “wash his car” and run “personal errands” for him.