Despite some modest improvements in the jobs picture with the release of Friday’s Labor Department report, I would guard against any irrational overexuberance that problems with employment or the economy are being solved.

A smaller-than-expected 80,000 gain in nonfarm payrolls was bolstered by upward revisions in the prior two months, amounting to 102,000 additional jobs. So over the past three months the establishment survey has averaged 114,000. It’s really nothing to write home about.

A 2 percent economy is simply way too slow to generate the kind of 300,000 per month job gains the country needs. Economic growth at 5 percent would be more like it.

And this should be a warning to members of Congress who are flirting with higher tax rates as part of the supercommittee deficit deliberations. There’s loose talk about raising the top Bush tax rates and adding to that a surcharge on millionaire tax rates. That would be a big negative for future growth.

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From The Washington Post:

The latest Obama plan “doesn’t produce any more in realistic savings than the plan they offered in April,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. “They’ve filled in details, repackaged it and replaced one gimmick with another. They don’t even stabilize the debt. This is just not enough.”

The most disheartening development, MacGuineas and others said, is Obama’s decision to count $1.1 trillion in savings from the drawdown of troops in Iraq and Afghanistan toward his debt-reduction total. Because Obama has no intention of continuing war spending at last year’s elevated levels, that $1.1 trillion would never have been spent.

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The past is not always a prologue to the future. But looking at some of the big winners and losers of 2010 does provide some strong hints of a positive 2011.

The biggest winner last year was the Tea Party, which shellacked President Obama in the election. Mr. Obama becomes the biggest loser. And the economy and stock market will be the beneficiaries.

The elections were the first major step toward restoring free-market capitalism and rolling back big-government controls, planning, and spending. This is a money-politics issue. Stocks roared 20 percent during the second half of last year, as markets sniffed out the huge political change. Post-election, stocks also had a big move, finishing the year at better than two-year highs — going all the way back to pre-Lehman Brothers.

Sure, there were important economic factors involved. Europe didn’t fall apart. The dollar didn’t collapse. And better U.S. economic numbers started coming in. (Double-dip bears also were big losers last year.) But rising political confidence helped, too.

The emergence of Tea Party free-market populism — what I call Reaganomics 2.0 — is hugely bullish for stocks and the economy in 2011.

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Inside the Beltway, Democrats are touting the achievements of the outgoing Congress.  Historian Alan Brinkley asserted that this is the most productive Congress since the Great Society.  These congratulatory assessments stand in stark contrast to the fact that Democrats, for all their labors, suffered a defeat of such historic proportions that it gave rise to a new word: “refudiation.”  What explains this paradox?

First, much of the legislation passed in the 111^th Congress is not really legislation at all.  For all of its verbosity, and for all the outrage surrounding provisions like the individual mandate, the health care legislation enacted in 2010 makes precious few decisions.  Instead, vast discretionary authority is vested in dozens of different agencies and officials, in particular the Secretary of Health and Human Services.

When confronted with tough decisions, Congress prefers to let someone else make laws.  Congressmen can then claim credit for providing Americans with health care, while evading blame for increased costs and premiums, poorer quality of care, rationing, massive uncertainty, and higher wait times.  The rules that led to those unfortunate consequences were made by regulators, who will give shape to legislation, and who would bear the brunt of public ire.

Second, Washington insiders tend to subscribe to the belief that what Americans expect of Congress is that it produce a certain quantity of legislation.  Outgoing House Rules Committee chairman Louise Slaughter (D-N.Y.) captured this belief when she lamented that “what we did was work, and our reward was, ‘Get out of here.’”  The volume of legislation produced by the Democratic 111^th Congress should have been reason enough for voters to sustain Democrats in office.

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At the very start of the “Reagan revolution,” David Stockman exposed the myth that Ronald Reagan and the modern Republican Party are dedicated to small government.

In 1981, the 35-year-old Stockman gave up his Michigan seat in Congress to become Reagan’s budget director. A vocal critic of what he continues to call the “welfare-warfare state,” Stockman had signed on because he believed in the limited government rhetoric that Reagan espoused. Once inside the White House, Stockman quickly became disenchanted, and gave an interview to journalist William Greider that became the basis for an explosive Atlantic Monthly article in which Stockman admitted that Reagan’s spending cuts had been a “Trojan horse” used to justify tax cuts. In his 1985 memoir, The Triumph of Politics, Stockman chronicled Reagan’s reluctance to fulfill his campaign promise of shrinking the size and scope of government and balancing the budget. The result? The gross federal debt tripled while Reagan was in office.

Last fall, Stockman was the GOP-defector du jour once more, arguing against extending George W. Bush’s tax rates in the New York Times, on 60 Minutes, the Colbert Report, Parker-Spitzer, ABC, NPR, and MSNBC. Stockman’s argument – that it’s irresponsible to cut taxes when cumulative U.S. debt is steadily mounting as a percentage of GDP – is based on the simple principle that balanced budgets come only when revenues actually meet expenditures. If we’re not willing to actually shrink government spending, he says, then we should pay full freight now, rather than forcing our children and grandchildren to foot the bill down the line.

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From Michael Barone’s in the Washington Examiner:

It is a source of continuing fascination for me to watch the interaction between public opinion, as measured in polls and election results, and the actions of members of Congress, elected in one political environment and looking in most cases to be re-elected in one that may be quite different.

Eleven months ago, after the Massachusetts Senate election, I was convinced that Democrats could not jam their health care bill through because voters had so clearly demanded they not do so. But Pelosi proved more determined and resourceful than I had imagined, and found enough House Democrats who were willing to risk electoral defeat to achieve what Democrats proclaimed was an historic accomplishment.

Pelosi and Obama predicted that Obamacare would become more popular as voters learned more about it. Those predictions were based on the theory that in times of economic distress Americans would be more supportive of or amenable to big government policies.

That theory has been disproved about as conclusively as any theory can be in the real world, and most of the Democrats who provided the key votes for Obamacare were defeated on Election Day.

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From the Associated Press:

President Barack Obama signed into law a huge, holiday-season tax bill extending cuts for all Americans on Friday, saluting a new spirit of political compromise as Republicans applauded and liberals seethed. The benefits range from tax cuts for millionaires and the middle class to longer-term help for the jobless.

The most significant tax legislation in nearly a decade will avert big increases that would have hit millions of people starting in two weeks on New Year’s Day. Declared Obama: “We are here with some good news for the American people this holiday season.”

“This is progress and that’s what they sent us here to achieve,” Obama said as a rare bipartisan assembly of lawmakers looked on at the White House.

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From the Associated Press:

The Senate Wednesday overwhelmingly passed a sweeping tax package that would save millions of Americans thousands of dollars in higher taxes while also reducing their Social Security taxes and extending jobless benefits.

President Barack Obama swiftly urged the House to pass the $858 billion bill without changes, a slap at Democratic liberals eager to toughen a part of the measure that permits up to $10 million to pass to heirs estate tax-free.

A wide array of tax cuts enacted under President George W. Bush is scheduled to expire on Jan. 1—just two weeks away—affecting taxpayers at every income level. The bill passed by the Senate, 81-19, would extend those cuts for two years.

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From Stuart Rothenburg in Roll Call:

On one level, it’s entirely reasonable for liberal Democrats to oppose the [tax cut extension] compromise. Those Democrats have different priorities and values than Republicans, and many of them represent very liberal constituents who also oppose the compromise.

Nobody — nobody — is saying that those House liberals should change their views. If they want to vote against the package that the president negotiated with Congressional Republicans, that’s their right.

But the outrage by House liberals, many of whom were responsible for the party’s legislative agenda and for Congress’ earlier inaction on the tax cuts, is more than a little hard to take.

Congressional Democrats had two years to address the Bush tax cuts. They certainly could have dealt with them one way or the other between late April 2009 and mid-January 2010, when the party had a 60-seat majority in the Senate and a huge majority in the House.

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Nothing changes so much as it stays the same. The Democrats continue to be relentless in their determination to expand all levels of government, and Republicans, despite just coming off an historic electoral victory nationwide, still don’t get it.

It would be impossible, under normal circumstances, to imagine that Democrats in Congress, having gone through what they have for the past two years, do not yet have their facts straight. They still are mired in the rhetoric of the past, and apparently are determined to remain there.

Following the Republican “deal” with President Obama on the expiring Bush tax cuts, socialist Senator Bernie Sanders (the only Democrat politician honest enough to identify his true political ideology) said:

Republican colleagues want huge tax breaks for the richest people in this country, but the reality is that the top one percent already — today — owns more wealth than the bottom 90 percent,” he said. “How much more do they want? When is enough enough? You want it all?

Just for the record, let’s put the facts on the table and burn them into the consciousness of every single Republican in Congress.

1. Nobody, but nobody is getting a tax cut by extending current law. We are simply maintaining the current tax structure. It gets us nothing and costs us nothing. Obama has referred to tax cuts, Republicans have referred to tax cuts, and Sanders, cited above, has referred to tax cuts, as have many other Democrats. How is it that Republicans so easily fall into the Democrats’ lexicon trap? Nobody is getting a tax cut by extending Bush-era tax law!
2. Those of us who pay taxes already pay way too much. The gaffe-prone Vice President, demanded that the “rich” be “patriotic…be part of the deal.” The top 1 percent of income earners pay about 40 percent of all income taxes. That is almost half of all income taxes collected in the US, Mr. Biden! Exactly how patriotic do they need to be?

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For once, top Obama economic advisor Larry Summers got it right. Warning opponents of the big tax-cut deal, Summers told reporters, “Failure to pass this bill in the next couple weeks would materially increase the risk that the economy would stall out and we would have a double-dip recession.”

Too bad Mr. Summers didn’t advise the president to cut taxes across-the-board two years ago, rather than push for the misbegotten $800 billion government-spending package. That policy dismally failed to ignite a real economic recovery or to lower the unemployment rate.

But it’s never too late to promote good policy. And echoing Summers, in recent months any number of demand- and supply-side economists warned of a double-dip (or nearly so) unless the Bush 2003 tax cuts were extended. The economy would be demoralized from a rollback of incentives to work, invest, and take risks. Plus, roughly $600 billion of cash (including the alternative minimum tax) would be drained from the private sector.

Whether Obama is really changing his stripes and abandoning class-warfare, big-government spending remains to be seen. But at least he is out there defending the huge tax-cut package, which is pro-growth, along with a South Korean free-trade deal, which also is pro-growth. Certainly it’s a turn for the better for the White House.

In the wake of the tax-cut announcement, a number of Wall Street forecasters are upping their growth estimates for 2011 and beyond. The consensus seems to have lifted real GDP by nearly a full percentage point. And if the economy can grow by 3.5 to 4 percent, the likelihood of a sizable decline in unemployment literally grows stronger.

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Rep. Keith Ellison (D-MN) is upset that Obama’s compromise to win an extension of unemployment benefits also means that no Americans will face a tax increase next year.

He appeared on Minnesota public radio and suggested that Democrats should create a ‘crisis’ around the holidays so the GOP will extend the benefits and allow taxes to increase next year. Or, something like that.

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Will the real hostage taker please stand up.

Democratic Representative Dan Boren (D-OK) blamed democrats, and Speaker Nancy Pelosi by name, for holding the tax cuts hostage and not bringing the bipartisan package to the House floor for a vote.

That was gutsy. Speaker Pelosi won’t like to hear that. She won’t like it one bit.
Boren better bring a bodyguard to the next caucus meeting.

Via On the Record:

Greta Van Susteren: Why isn’t it being brought to the floor? Who’s not bringing it to the floor?

Rep. Boren: The Speaker.

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From Roll Call:

The frustration with President Barack Obama over his tax cut compromise was palpable and even profane at Thursday’s House Democratic Caucus meeting.

One unidentified lawmaker went so far as to mutter “f— the president” while Rep. Shelley Berkley was defending the package the president negotiated with Republicans. Berkley confirmed the incident, although she declined to name the specific lawmaker.

“It wasn’t loud,” the Nevada Democrat said. “It was just expressing frustration from a very frustrated Member.”

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From the Associated Press:

House Democrats voted Thursday to reject President Barack Obama’s tax deal with Republicans in its current form, but it was unclear how significantly the package might need to be changed.

By voice vote in a closed caucus meeting, Democrats passed a resolution saying the tax package should not come to the House floor for consideration as written, even though no formal House bill has been drafted. Rep. Peter DeFazio, D-Ore., introduced the resolution.

Said Rep. Lloyd Doggett, D-Texas: “If it’s take it or leave it, we’ll leave it.”

The vote will at least temporarily stall what had seemed to be a grudging Democratic movement toward the tax package.

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The municipal bond market is having a tough time today largely in part of looming rumors concerning the expiration of the Build America Bond or ‘BAB’ program.  After all, this program was omitted from Obama’s tax deal with Republicans.

As a part of Obama’s Recovery and Reinvestment Act, BABs allow state and local governments to issue debt to fund basic infrastructure projects at a 35 percent discount on the bond’s interest costs, handing that bill to the federal government.

CNBC reports that the BAB program accounts for nearly 26 percent of today’s municipal bond market- with October being reported as the biggest month for the program, as issuers increasingly position themselves to reap the benefits of the program which is set to expire on the 1^st of January next year.

What will happen when municipal bond issuers are not able to borrow more cheaply?  Well, heaven forbid, they would be forced to pay market rates for debt.  If they can’t afford these rates, then they’ll have to cut spending and re-gear their budgets to enter the credit market.  The 2010 election results at the state level may indeed have changed things.   With a sweeping conservative, Republican wave in state and local governments this past election (the GOP took over a dozen state legislatures), it is almost certain that such cuts will now be possible.

According to Blackrock’s December 2010 Municipal Bond Market Report entitled State of the States and Local Governments, “[State and local governments] have accelerated spending cuts to reduce operating deficits.”  This incoming class at the state and local government level will only advance cost cutting and budget balancing.   They are being mandated to do so by their constituents.  Such a mandate may be just what will protect the American taxpayer from another Obama bailout.  Congressman Frank Wolf (R-VA) has most recently called for an audit on the $5.2 billion Dulles Rail project, which is already looking like it’s over budget.  Such oversight is exactly the attitude we can expect from the incoming class of elected officials at the state and local level.

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When a bad plumber or electrician comes to your house you might pay a lot of money for an incomplete and potentially dangerous fix of the problem.

But a band aide on a bad pipe just means that a potentially disastrous leak is still very much in your future and that the money you just paid has been wasted. That’s what the debate about the Bush tax cuts sounds like to me.

Of course it’s a bad idea to raise taxes when the economy is still struggling and while almost ten percent of the workforce can’t find a job. Of course it’s a bad idea to further punish our citizens when so many have seen their home values plummet beneath the loan amount.

But underneath this debate is this leaky and destructive pipe: the income tax system is a monstrosity that only continues because Washington insiders make so much money off it and because Congress—both parties—love the power over the citizenry that comes with plum assignments to the tax committees.

There is a huge lucrative culture in Washingtonthat has grown up around the income tax code that turns a blind eye to the destructive effects and almost comical complexity of the 68,000 pages of regulations in the tax code. They love the system and we hate it.

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While President Obama’s eyes are set on a Christmas vacation in Hawaii, the American people’s minds are fixed on the largest tax increases in American history that are looming on the horizon.  Every American taxpayer will be hit hard by the Obama tax hikes.  At a time of economic strife, and today’s reports of unemployment rising to 9.8 percent, President Obama’s thoughts should be on creating jobs for the American people but raising taxes will only hurt small businesses and job creation.

On the first of the new year, personal income taxes will be hiked, and the marriage penalty tax will rear its ugly head again.  In fact, even the child tax credit will be cut by $500 for every child.  With the economy still struggling, American families will have to make even tougher decisions in 2011 if Congress does not halt these tax increases.

President Obama knew almost two years ago when he was sworn into office that these tax hikes would go into effect on January 1, 2011.  It is a failure of leadership that he has waited until the 11^th hour to act.  I hope as President Obama dreams of his Hawaiian Christmas vacation, he reflects on those American families that will soon suffer under his historic tax increases.

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Unemployment jumped to 9.8 percent in a very disappointing November jobs report. Nonfarm payrolls increased by only 39,000 and private jobs expanded by just 50,000. This is way below what the economy needs. Most discouraging, the smaller-business household employment number fell for the second time in a row, down 173,000 in November after a 330,000 drop in October. This is the nineteenth straight month with unemployment above 9 percent.

Now, after the severe financial panic of two years ago, it seems clear that too many tax and regulatory obstacles are blocking satisfactory job creation. And it also seems clear that a number of fresh new incentives will be necessary to spur the kind of prosperity that Americans desire. Following the deep recession, we need shock-therapy, pro-growth, tax-cut and deregulatory incentives.

Post-election, is the Washington war on business really over? Has the war on successful earners and investors truly ended? Is the class war against capital still being waged by the White House?

Will Obama bring senior business people into his inner circle? Are we going to get pro-growth tax reform for individuals and corporations? Are we truly going to limit government spending in order to reduce the onerous budget deficit? Is King Dollar currency stability on the table?

These are all key questions for the economy’s future and the murky unemployment outlook.

Perhaps the only saving grace from the poor jobs report is that it will spur a quick resolution to extend all the Bush tax cuts.

Democrats keep shilly-shallying with all these silly class-warfare amendments, like a $250,000 limit, or a $1 million limit. This has everything to do with left-wing redistributionist social policy and nothing to do with economic growth. The fact is, passing the bill to freeze the tax rates will help business confidence. Why don’t Democrats understand this?

But there’s more.

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From AFP:

With the US Congress hurtling toward a deadline on expiring tax cuts, a growing number of wealthy people are calling for higher taxes on the rich to help restore America’s fiscal health.

One effort gathered over 45 millionaires who signed an open petition calling for the end of the tax cuts adopted since 2001 on those with annual incomes exceeding one million dollars.

Tax breaks for the wealthy should expire “for the fiscal health of our nation and the well-being of our fellow citizens,” the letter said. It was signed by Ben & Jerry’s ice cream founder Ben Cohen, hedge fund manager Michael Steinhardt and others.

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