Left Behind

Now I know why the pundits call it a landslide.

Having swept through Congress and the White House, the Democrats are hurdling downhill faster and more recklessly than a runaway freight train whose Republican brakes have failed.

While I choose to ignore the entreaties of my devoted readers and preserve the sanctity of the secret ballot I cast in the Presidential election, is there any doubt that my worst nightmare has come true: unitary government, in which one party controls both the legislative and executive branches, thereby nullifying the enduring system of checks and balances elegantly crafted by our Founding Fathers?

There was a time when I might have rejoiced at the prospect of a Democratic hegemony. After all, for as far back as I can remember, I have found the principles and positions of its candidates more representative of my own, and have consistently voted for them in federal, state, and local elections -- the occasional exceptions occurring when a Republican was running unopposed or when I could not stomach either major-party Presidential contender and protested by voting for an Independent.

Whether my Democratic roots are hereditary (seeded by my parents), genetic (nourished by my Judaism), self-implanted, or some grafting of the three, their firm entrenchment in my native Virginia soil implies an historical schizophrenia. When John Kennedy reached out to Martin Luther King in 1960, his Party split like a firelog cleaved by an axe. Northern liberal Democrats, heirs of Franklin Roosevelt, embraced the Civil Rights movement; in Virginia and other Southern states, their conservative confederates, descendants of the post-bellum Redeemers, massively resisted any challenge to the status quo. It was an era when, wherever one lighted in the political spectrum, he could justify a Democratic vote.

The bifurcation persisted for a generation. While Lyndon Johnson -- the last Democrat (until the most recent one) to carry Virginia in a Presidential election -- steered the Party to the left with his War on Poverty (and ultimately to defeat with his War in Vietnam), and Barry Goldwater (and his protege, Ronald Reagan) launched the modern Republican Conservative movement, Virginia Democrats clung to power advocating policies mostly at odds with their national leadership.

The dysfunctional situation was unsustainable, of course. In time, newly-enfranchised blacks, recognizing the Federal Government as protector of their rights and freedoms, forged a coalition with moderate and liberal white voters to engineer a realignment of the state Democratic Party. Conservative stalwarts, left behind by the new order, turned to the resurgent Republicans, who rushed to fill the void, preaching a populist message of lower taxes, smaller government, and traditional family values.

Suddenly, those staunch Democrats who formerly were able to straddle both sides of the political fence were forced to choose between two sharply diverging agendas.

I believe my personal die was cast as early as 1968 when I was a junior at Washington and Lee University. With the country deeply divided by the Vietnam War, stunned by the abdication of Lyndon Johnson, rocked by violence in the streets, and reeling from the assassinations of Robert Kennedy and Martin Luther King, Johnson's successor-by-default, the voluble, liberal diehard, Hubert Humphrey, locked horns with the resourceful Richard Nixon, who had resurrected his career as the standard-bearer of law and order.

In my fraternity house, each had a champion. Tom N. echoed the sentiments of his father, a cigar-maker in Tampa, Florida, and disparaged Humphrey as a loudmouthed buffoon. Bernie F., the idealistic son of a Birmingham, Alabama, newspaper reporter, recalled the courageous battles fought in his hometown against segregation and oppression and brooked no argument. His sincerity, passion, and empathy made the more compelling case. Mindful of my own father's respectful treatment of his black employees and customers, I threw in my lot with the underdogs -- and the Democrats.

In spite of its imperfections and a painful evolution, the American system offers its citizens greater opportunities for prosperity and self-fulfillment than any other ever devised by mankind. This is still a country where inherited privilege neither guarantees nor is a prerequisite for success, where, with a dose of intelligence, some practical skills, a bold vision, and a little luck, a Latin American native can earn an exorbitant salary playing the child's game he loves, a fourth-generation Jewish businessman can achieve prominence in a small community, and, in perhaps the grandest triumph of all, the wandering mixed-race son of a broken marriage can become President of the United States.

With that said, it must be acknowledged that not all men are created equal, that individual, cultural, social, and economic disparities will effectively deny to many the promise of America, that those so denied will struggle in vain to overcome the obstacles strewn in their path -- poor parenting, negative peer influences, discrimination, mental incapacity, stagnant incomes -- and that, for the common good, society is charged with weaving a safety net beneath the most disadvantaged of its citizens. And, since that 1968 epiphany, I have always believed that Democrats have been more liberal and more progressive -- so to speak -- in advancing that responsibility than their counterparts.

The problem with doctrinaire Conservatives (and Republicans) is that they have short memories. While every political generation operates within its own context, Conservatives too easily forget that the controversial, revolutionary causes that once drew their wrath are now accepted as commonplace institutions. One-hundred-and-fifty years ago Conservatives -- they were called Democrats then -- fought a bloody Civil War to perpetuate slavery. More recently, they have opposed Social Security, Medicare, Civil Rights, the minimum wage, and labor legislation.

Republican friends often ask me why a capitalist entrepreneur would lend his blessing to social welfare programs -- and to the taxes necessary to fund them. My answer is not wholly altruistic.

The customers of my retail furniture stores are persons of modest means. In order for my business to thrive, they must have disposable income, even if some of it is in the form of a government subsidy, or if it means that I must pay my fair share of taxes in order that my customers pay less. Ultimately, I will benefit when low and middle wage earners have more money in their pockets.

While no one likes taxes, I also believe they are the price we pay to government for establishing and maintaining the foundation, infrastructure, and protections that allow us freely to exercise our talents, to realize our human potential, and to enjoy the fruits of our labor.

As a matter of fact, I did not approve of the Bush tax cuts, even though I was a beneficiary. When reductions in capital gains and dividend taxes are factored in, those in higher tax brackets saved thousands more than those in lower brackets, widening the gap between rich and poor. But beyond that, Bush did not link his tax cuts to any rational spending policies.

He spent billions on intrusive and problematic internal security measures, launched a trillion-dollar preemptive war that required no one to sacrifice other than the soldiers in the field, and signed on to a huge prescription drug entitlement with no funding mechanism. With a compliant Congress, he squandered Bill Clinton's budget surplus, compromised Republican principles of fiscal responsibility, and ushered in a new age of crony capitalism.

The man who promised smaller government presided over a Texas-size expansion; his last months culminated with the embarrassing injection of public capital into the private banking sector and of a term into the vernacular heretofore reserved for rare and desperate situations: bailout.

While George Bush is an easy target for all our frustrations, there is no dearth of villains in the current economic tragedy: Congressmen (mostly Democrats) who lobbied for affordable housing and unleashed the GSE's, Fannie Mae and Freddie Mac, to facilitate it; the Federal Reserve, which kept interest rates irrationally low; predatory mortgage brokers who, taking advantage of lax lending standards, put homebuyers in houses they couldn't afford and mortgages they didn't understand; investment and commercial bankers who crafted ever more complex financial instruments to package, market, and insure these mortgages, and then leveraged themselves thirty-to-one to trade them; borrowers who bet on escalating values and their own rising incomes to strip their homes of all equity in pursuit of luxurious lifestyles; and regulators and deregulators who turned a blind eye to all of the above.

It was a house of cards, and when it imploded, it brought down with it trust in the system, the credit markets, asset prices, Fortune 500 companies, and lots of jobs.

With George Bush shouldering the blame, his putative successor, John McCain, burdened by the incumbent and his own impetuosity, and the American people -- at least 53% of them -- hungry for change, the stars were aligned for Barack Obama -- youthful, eloquent, charismatic, a lightning rod for the hopes and dreams of all who yearn for a better life -- and his Democratic cohorts to storm the rubble and claim the prize.

And leave this disillusioned Democrat behind.

Maybe I'm just old-fashioned, but their wild-eyed orgy of spending terrifies me.

Since September, Congress and the President have authorized, committed, or disbursed the following:

* $700 billion to bail out troubled financial institutions through the purchase of toxic assets or preferred stock;

* $787 billion for a two-year stimulus package which includes federal spending for job creation, tax credits and refunds, and aid to states;

* $410 billion in omnibus spending to cover government operations for the remainder of the budget year;

* $275 billion pledged to combat home foreclosures; and

* $17.4 billion loaned to Chrysler and General Motors.

(All of which doesn't include $170 billion to bail out Bear Stearns and AIG, which may have come from the Federal Reserve rather than the Treasury.)

The total spending in the current 2009 budget year is now calculated at $3.9 trillion, a mere $300 billion more than Obama's proposed $3.6 trillion 2010 budget.

Speaking from the hometown of the Peanut Corporation of America, I wish we were discussing peanuts. But we're not.

On paper $1 trillion looks like this: $1,000,000,000,000, a meaningless string of zeroes. Let me try to put that number in perspective. If I sell $100,000,000 worth of furniture in one year (which I do), it will take me 10,000 years to sell $1 trillion. If I stack a pile of $1 bills a trillion high, and, beginning with the dawn of civilization, about 6000 years ago, spend $1 per second until now, I will still have 80% ($800 billion) left. If, being a good Jew, I start a business on the day Jesus was born and contrive to lose $1 million a day, 365 days a year, it will take me until 2737 to lose $1 trillion.

If the numbers are desensitizing, the attitude of our elected officials is, at best, disconcerting, at worst, infuriating. Whether the money goes to pay for individual entitlements, for social services, research, education, or defense, for a favored project in one's home state, for the placation of a special interest group, or for bureaucratic excess, the dispensers of largesse seem to overlook the fact that it's not their money. It's yours and mine -- either our hard-earned tax dollars or crushing debt imposed on us and our children -- words I hesitate to use because they roll so glibly off the tongues of our posturing politicians. (If they cared so much about future generations, why can't they think beyond the next election cycle?)

We all know how easy it is to spend other people's money; it's instant gratification, without truth or consequences.

This hubris is pathetically evident in the ongoing farce known as TARP. In a marriage of strange bedfellows, Secretary of the Treasury Hank Paulson and President George W. Bush -- doing their best impersonation of Chicken Little -- convinced enough Congressional Democrats that indeed the sky was falling, and that it was necessary to appropriate $700 billion -- in two $350 billion tranches -- for the Treasury to allocate at its discretion to capital-starved banks. In fact, it required serious arm-twisting to convince some banks that they really needed TARP money.

The consensus today is that the first $350 billion tranche -- released with no government oversight -- did not accomplish its objective: to free up the credit markets. Instead, claim the accusers, banks stashed the proceeds in lockboxes, or used it to buy other banks or to fund operations, including employee and customer junkets.

Congressional Democrats and the new President are outraged at such behavior, and with typical self-righteousness have managed to turn a gullible public -- hungry for scapegoats -- against these miscreant executives. But who gave them our money in the first place -- and with no strings attached? It's futile and self-indulgent to jerk on the reins after the horse has slipped the bit. And who's throwing stones anyway? How many billions of our money do these grandstanders mismanage and waste every year? If anyone is guilty of fiduciary irresponsibility, it's the holders of the purse strings.

To add insult to injury, President Obama and his Treasury Secretary, Timothy Geithner, upon installation, couldn't wait to get their greedy hands on the second tranche, never mind that no one had yet figured out just what to do with the money. They immediately rammed a bill through Congress ratifying TARP II, claiming, of course, that this time things would be different.

But that was just the beginning.

It amuses me how President Obama, the Congressional Democrats, and their admirers in the press lauded the passage of the Stimulus Bill (actually the American Recovery and Reinvestment Act) as a tremendous victory.

First of all, only a visitor from a small planet could ever think that such a monstrosity could be cobbled together in a matter of weeks; obviously, lawmakers had their pork simmering on backburners for months, even years, waiting for the opportune moment to wave it under a ravenous President's nose. Secondly, since Democrats owned a firm majority in the House and needed to lure only two or three spineless Republicans from their Senate caucus, passage was a foregone conclusion. And finally, I ask, what courage, discipline, or statesmanship is required to write a check for $800 billion that someone else will have to repay, some day?

To infuse this shadow play with some credibility, to seduce the public into swallowing this distasteful stew, the President constructed the proverbial Straw Man, leading us to the brink of ruin so that he could don the armor of a white knight and ride to our rescue. Yes, we are in a serious recession, but to compare the current state of affairs to the Great Depression is disingenuous, even for a pessimist like me.

The Stock Market has fallen 50% from its 2007 high, but during the Depression it fell 90%; does anybody think the Dow is going to 1400? The most recently announced unemployment rate is 7.6%; even if it should increase to 9, 10, or 12%, it would be less than one-half of what it was in the 1930's. And today, unlike eighty years ago, federal, state, and local governments underwrite a litany of social programs -- Social Security, Medicaid, unemployment insurance, food stamps, welfare -- to cushion the effects of hard times.

Simple math suggests that throwing $800 billion at our problem is an extravagant way to "save or create" four million jobs and keep that rate in single digits. It equates to $200,000 per job, and even $100,000 per job if one backs out the tax credits and refunds. There are about 12,000,000 unemployed people (seeking work) in the United States right now; for $800 billion, the government could send every one a check for $66,000, surely enough to tide them over until they find a job.

Our fearless legislators are much too fair, balanced, and sensible to consider such a ridiculous proposition.

No, instead, they will enable governors and mayors to massage their own hemorrhaging budgets and bloated bureaucracies and divvy up $80 billion among preferred contractors to build roads, bridges, and schools.

They will spend $8 billion on high-speed rail, $7 billion on modernizing federal office buildings, $600 million on new cars for federal employees, $2 billion on child-care subsidies, $8.5 billion on research at the National Institute of Health, $2.4 billion on carbon-capture demonstration projects, and $54 billion on federal programs already cited by the OMB and the GAO as ineffective or unable to pass financial audits.

They will discourage job-seeking by increasing and extending unemployment benefits and impose higher costs on employer-funded health insurance by subsidizing COBRA payments for laid-off workers.

They will encourage colleges and universities to escalate their fierce war for students by sending them $6 billion to erect elaborate libraries, palatial student centers, and grandiose athletic facilities.

They will promote inefficiencies and cost-shifting in the health care system by boosting Medicaid payments $87 billion.

They will enlarge the welfare rolls -- and reverse fifteen years of reform -- by altering the ratio states must maintain between their welfare caseloads and the number of persons who, while receiving TALF (Temporary Assistance for Needy Families), are required to work or look for work.

And, finally, once again, they will demonstrate that they do not know the definition of insanity -- doing the same thing repeatedly and expecting a different result -- by rebating taxpayers $200 billion (in this case, crediting their payroll taxes) in hopes they will spend it (or, following the government's lead, go into debt).

Will it work? Who knows. Two hundred economists from the Cato Institute who signed a full-page ad in the Wall Street Journal don't think so.

They argue that Keynesian spending policies during the Great Depression and Japan's Lost Decade had little effect. They argue that the shift of investment and venture capital into government bonds diverts resources from more innovative and fruitful activities. They argue that an oversupply of labor creates opportunities for rising businesses to hire low-cost workers and motivates those who fear for their jobs to work harder and more productively. They argue that increases in government spending will have to be paid for by higher present or future taxes or by inflation. They argue that depending on China, Japan, and the Saudis to fund our national debt during a global crisis is courting disaster.

Two outcomes are certain. When this recession ends, which it will eventually, those who campaigned for the Stimulus will line up to take credit. And, since it's impossible to believe Congress will cut back any of the new programs, this allegedly emergency spending will become a permanent addition to federal outlays.

But an $800 billion mainliner wasn't enough for these addicts. Within a matter of days, Congress passed a $410 Omnibus Spending Bill -- representing an 8.7% increase from 2008 and laden with 8500 earmarks (which I thought were taboo) -- and the President ponied up $275 billion for mortgage relief.

On February 20th, Lawrence Kudlow wrote that "Obama's massive mortgage bailout plan is nothing more than a thinly-disguised entitlement program that redistributes income from the 92% of home-owning mortgage holders who pay their bills on time to the irresponsible defaulters who bought more than they could ever afford."

The plan allows Freddie Mac and Fannie Mae to refinance loans in excess of 100% of the value of the house -- even for borrowers who have no equity at stake. Secondly, it directs the two GSE's to buy more mortgages with the hope of driving rates down -- never mind that both were insolvent before last fall's effective nationalization. Third, the plan makes $75 billion in taxpayer money available to lenders to push mortgage payments (through reduced rates) down to 31% of the borrower's pre-tax income -- and to pay small bribes to mortgage servicers and borrowers for every assisted borrower who does not repeat default. But to keep costs from ballooning beyond $75 billion -- as mortgage holders line up at the feeding trough -- arbitrary decisions will have to be made as to who is most deserving of a taxpayer-supported mortgage -- a form of rationing likely to provoke resentment over how winners and losers are picked.

The plan's most ill-advised aspect -- now on a fast track for Congressional approval -- will permit bankruptcy judges to renegotiate -- or cram down -- mortgage interest rates and principals, and thus open up a Pandora's box of unintended consequences. More financially-strapped families and individuals will suddenly find it expedient to declare bankruptcy -- leading to a rise in credit card and car loan write-offs, further impairment of already distressed lenders, and tighter credit standards. Abrogating private contracts and the rule of law will inject systemic risk into the mortgage-backed securities market and make mortgages harder to get and more expensive. Instead of supporting home prices, this law will lead to further deterioration.

The problem with home ownership is that for too long the media, real estate salesmen, and mortgage brokers have been espousing the spurious doctrine that a house is an investment, an appreciating asset, and an ATM cash machine. It is time to reassert the traditional paradigm that a home is a place to live, to allow overly inflated prices to fall to an affordable level, and to acknowledge that the last thing this inefficient industry needs -- besides the generous tax incentives and subsidized interest rates it already receives -- is more taxpayer money.

While this disaffected Democrat was staggering from this flurry of body blows, President Obama delivered the knockout punch: a decade of mind-boggling budgets, including two years of trillion-dollar (Remember that number?) deficits, the first of which, naturally, he blamed on George Bush -- conveniently omitting any Congressional complicity. Actually, he faked me out, previewing his budget revelations with a "summit on fiscal responsibility," which, employing a marvelous sleight-of-hand, he now defines as reducing by one-half a deficit he has tripled. Talk about audacity.

As Mona Charen wrote on February 27th, such sophistry exemplifies Obama's habit of denying what he is saying. In his speech to Congress, he said he asked for the Stimulus Bill "not because I believe in big government -- I don't." He said he will eliminate all wasteful spending -- after signing a 1000-page bill that no Congressman, administrator, or citizen had time to read and review. He said some priorities will have to be sacrificed; only he meant others', not his. He said, speaking for his fellow Americans, "We don't do what's easy" -- except spend money we don't have.

He said that his mortgage bailout plan would not provide relief to "speculators" or those "who bought more home than they could afford." But go back four paragraphs and read the large print.

And, in perhaps his most audacious claim of all, he said that "95% of working families will not see their taxes rise by a single dime." Technically, that may be true, but Mr. Obama should tell his constituents that when his cap-and-trade fees -- enough to raise $78.7 billion in 2012 -- are imposed on carbon producers, the costs will be passed on to all consumers of fuel and energy.

He should tell them that his admirable goal of guaranteeing a college education to every aspiring student portends a vast new entitlement program.

He should tell them that his magical mystery tour of deficit reductions assumes the rosy scenario of an economy growing at 3.2% in 2010 and at 4% a year thereafter.

He should tell them that his 2009 deficit of 12.3% of GDP has never been exceeded in peacetime and that under Presidents Hoover, Franklin Roosevelt, Reagan, and George W. Bush, in spite of recessions and tax cuts, the deficit never exceeded 6% of GDP. And he should tell them that his budget does not account for further bailouts, hurricanes, earthquakes, terrorist attacks, wars, or the looming insolvency of Social Security and Medicare.

He should tell them that higher punitive taxes on the wealthy will not begin to pay for universal health care, towards which he has started down a slippery slope by reserving $643 billion in future budgets.

And, instead of maligning the wealthy and inciting the masses to class envy and class warfare, he should tell them that this country needs rich people, lots of them, to invest, to create jobs, and to pay the taxes to finance his huge government programs. And he should remember that, for two hundred years, the working man has never begrudged privilege and wealth, because he believes that in America they are never beyond his grasp.

I am no longer a Democrat because I am apprehensive about the Party's impending attempt to transform our society. In the words of Charles Krautheimer, President Obama's manifesto signals a revolution in health care -- by taking one giant leap towards a single-payer system -- in education -- by leaving no child behind, from pre-school through college -- and in energy -- by establishing a federalized green sector that will restructure American industry. Government spending will grow to 40% of GDP, only seven percentage points behind the European Union, Obama's model for social democracy.

And when it comes, sadly, this "regulation-bound, economically-sclerotic, socially stagnant nanny state" will have left me behind.