On this day last year, I posted two charts that I developed using the Minneapolis Federal Reserve Bank’s interactive website.

Those two charts showed that the current recovery was very weak compared to the boom of the early 1980s.

But perhaps that was an unfair comparison. Maybe the Reagan recovery started strong and then hit a wall. Or maybe the Obama recovery was the economic equivalent of a late bloomer.

So let’s look at the same charts, but add an extra year of data. Does it make a difference?

Meh…not so much.

Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed.  Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.

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Venezuela’s Hugo Chavez recently called Barack Obama “a clown and an embarrassment.” Chavez may hold a similar opinion of Mitt Romney – for good reason. Along with siding with the Left, as recently as 2005, then Governor Mitt Romney undermined Bush and American interests abroad, while empowering one of its enemies.

When Chavez, aided by the American Left, offered low cost heating oil to America as a political move intended to undermine then Republican President George Bush, Mitt Romney joined with the Left in praising the deal. And Romney didn’t stop there. Emphasis mine.

Joseph P. Kennedy II, chairman of the nonprofit Citizens Energy, which is helping to administer the discounted oil, said it was unfair to criticize Chávez’s motives when other oil-providing nations had given no aid. … In Venezuela, “you have a country led by somebody who cares for the poor.”

Governor Mitt Romney yesterday hailed the accord, though he declined to discuss Chávez. “I’m delighted to hear we’ll be able to purchase oil at a lower price than the market for our citizens,” he said.

This via page 84 of a recently leaked McCain oppo research file on Romney from 2008.

“Gov. Mitt Romney, a Republican like President Bush, cheered the agreement during a Statehouse news conference, saying, ‘I want to say thanks to Congressman Delahunt and all of those around the world working to get lower-priced energy to us.’” (Mark Jewell, “Venezuela To Provide Discounted Heating Oil To Massachusetts,” The Associated Press, 11/22/05)

Independent analysts pronounced it a political move to hurt Bush and also help to empower Chavez to take control of a significant number of oil fields down the road.

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For college football fans, the Rose Bowl in Pasadena, CA is sacred ground. “The Granddady” of the college football tournament games, it has been played every year since 1902.

The accompanying parade, the Rose Parade, predates the game, dating way back to 1890. It’s a tradition that normally goes off without a hitch–that is, until this year, when “Occupy the Rose Parade” has decided to disrupt the festivities.

Peter Thottam, right

Led by Peter Thottam, who we will return to in a moment, the Occupy the Rose Parade activists will follow the long parade with their own demonstration. It won’t be the first time that Thottam has tried to disrupt the parade.

In 2008, he–along with supporters from the Los Angeles National Impeachment Center–worked with Cindy Sheehan, Code Pink, and Iraq Veterans Against the War to try to make a statement about impeaching Bush and Cheney.

But this year, Thottam obtained approval for a protest to follow the parade. At the parade’s conclusion, his group plans to pilot an “Octupy Octupus,” a puppet made from recycled plastic bags and bamboo that takes 40 people to operate. The organizers say that the puppet symbolizes Wall Street’s tentacles, strangling American politics.

To prepare for the Occupiers, who will include Sheehan and filmmaker Michael Moore, the City of Pasadena had to double its police presence to deal with the supposedly peaceful protestors.

Thottam makes clear that his beef is with the parade, not the game. “A total of nine floats are underwritten by banks. We believe the parade has not only been corporatized but militarized,” Thottam told the local press. (more…)

Something amazing happened at the Occupy LA rally the other night.  Who knew a capitalist would confront the people at the Occupy LA Rally.

Also funny to see that so many of the Occupy LA crowd would support Herman Cain for president. The even chanted “9-9-9!” Looks like Cain has crossover appeal that the GOP establishment has overlooked.

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We have some good news and bad news on jobs.

The good news is that an AFP news story says the unemployment rate has dropped to 3.2 percent.

The bad news (from the U.S. perspective) is that the article was about Hong Kong, which continues to enjoy strong economic growth while America stagnates.

One reason for the divergence is found in the just-released 2011 edition of Economic Freedom of the World, published by Canada’s Fraser Institute in cooperation with groups like the Cato Institute.

Covering data through 2009, the new edition of EFW shows that Hong Kong retains its status as the world’s freest economy. On the other hand, the same report provides damning evidence of the negative impact of the Bush-Obama policies of bigger government and more intervention.

Here’s a relevant passage from the Executive Summary.

The world’s largest economy, the United States, has suffered one of the largest declines in economic freedom over the last 10 years, pushing it into tenth place. Much of this decline is a result of higher government spending and borrowing and lower scores for the legal structure and property rights components. Over the longer term, the summary chain-linked ratings of Venezuela, Zimbabwe, United States, and Malaysia fell by eight-tenths of a point or more between 1990 and 2009, causing their rankings to slip.

This chart (click to enlarge), taken directly from the book, shows how the United States has been of the world’s five-worst performers over the past decade, putting America in a very unfortunate category.

And here’s a chart I created (click to enlarge) showing how the United States has declined relative to other nations. Simply stated, America is on the verge of falling out of the top 10, after being the 3rd-freest economy in the world at the end of the Clinton Administration.

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It was a strange experience to read the comments and emails generated by yesterday’s post on the “Obama downgrade.”

Democrats and liberals were upset that I blamed Obama for the downgrade, as you might expect. Republicans and conservatives, however, were agitated that my first sentence pointed out that Bush bore significant responsibility for the spending binge that created the fiscal crisis.

This got me thinking about the underlying causes of America’s long-term fiscal problems and whether it might be possible to come up with some sort of reasonable estimate on which Presidents are most responsible for fiscal crisis.

So I decided to look at the most recent long-run forecast from the Congressional Budget Office. As you might suspect, entitlement programs are THE reason why the United States is in deep trouble.

What does this allow us to say about various presidents? Well, it turns out that Social Security is a relatively minor part of the problem, so even though President Roosevelt’s policies exacerbated and extended the Great Depression, the program he created is only responsible for a small share of the fiscal crisis. To give the illusion of scientific exactitude, let’s assign FDR 13.2 percent of the blame.

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Here’s a question: Why is repealing the Bush tax cuts such a constant obsession for the Democratic Party? Especially the top rates for the most successful earners and small business entrepreneurs?

It seems this is the Democratic answer for every single issue, every problem, every debate.

This, of course, saddens me enormously.

And so, always ready to help, I am recommending a 12-Step program to help them overcome their anger, resentment, and obsession over the Bush tax cuts. Democrats really need a Higher Power on this.

First, when tax rates were lowered across-the-board in mid-2003, the incentive effect kicked in to jump-start the economy immediately. Over the next four and a half years, before the financial meltdown slammed the economy– and that was a credit event, not a fiscal one—8.2 million jobs were created.

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There’s an interesting debate in the blogosphere about whether President George W. Bush was a conservative (here’s a good summary of the discussion, along with lots of links, though I especially like this analysis since it cites my work.).

I’ve already explained that Bush was a statist rather than a conservative, and you can find additional commentary from me here, here, here, and here.

Simply stated, any President who doubles the burden of federal spending in just eight years is disqualified from being a conservative – unless the term is stripped of any meaning and conservatives no longer care about limited government and constitutional constraints on Washington.

But if you don’t want to read the blog posts I linked above, this chart should make clear that Bush was a big spender, not only when compared to Reagan, but also compared to Clinton. Moreover, we’re only looking at overall domestic spending, so this doesn’t include Iraq, Afghanistan, and other defense expenditures. And these are inflation-adjusted dollars, so we’re comparing apples to apples.

But let’s also examine the burden of domestic spending as a share of GDP. As you can see, there actually was progress during the Clinton years, and significant progress during the Reagan years. But all that was completely wiped out during the Bush presidency.

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In the past 10 years, the burden of federal spending has skyrocketed, more than doubling from$1.86 trillion in 2001 to an estimated $3.82 trillion this year.

President Bush deserves a lot of the blame thanks to the no-bureaucrat-left-behind bill that bloated the Department of Education, the corrupt farm bills, the pork-filled transportation bills, the new prescription drug entitlement, and bailouts for banks and auto companies.

Obama then came to office promising hope and change, but he simply grabbed the baton and continued the spending spree, adding more TARP bailouts, and then giving us the boondoggles of a fake stimulus and government-run healthcare.

Taxpayers finally said enough is enough last November and there’s a new Congress with marching orders to stop Washington’s spending orgy.

But Barack Obama and Harry Reid are saying no. They want us to believe that the House spending cuts are too severe.

What does this mean?

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America faces a fiscal crisis. The burden of federal spending has doubled during the Bush-Obama years, a $2 trillion increase in just 10 years. But that’s just the tip of the proverbial iceberg. Because of demographic changes and poorly designed entitlement programs, the federal budget is going to consume larger and larger shares of America’s economic output in coming decades.

For all intents and purposes, the United States appears doomed to become a bankrupt welfare state like Greece.

But we can save ourselves. A previous video showed how both Ronald Reagan and Bill Clinton achieved positive fiscal changes by limiting the growth of federal spending, with particular emphasis on reductions in the burden of domestic spending. This new video from the Center for Freedom and Prosperity provides examples from other nations to show that good fiscal policy is possible if politicians simply limit the growth of government.

These success stories from Canada, Ireland, Slovakia, and New Zealand share one common characteristic. By freezing or sharply constraining the growth of government outlays, nations were able to rapidly shrinking the economic burden of government, as measured by comparing the size of the budget to overall economic output.

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President Obama unveiled his fiscal year 2012 budget today, and there’s good news and bad news. The good news is that there’s no major initiative such as the so-called stimulus scheme or the government-run healthcare proposal. The bad news, though, is that government is far too big and Obama’s budget does nothing to address this problem.

But perhaps the folks on Capitol Hill will be more responsible and actually try to save America from becoming a big-government, European-style welfare state. The solution may not be easy, but it is simple. Lawmakers merely need to restrain the growth of government spending so that it grows slower than the private economy.

Actual spending cuts would be the best option, of course, but limiting the growth of spending is all that’s needed to slowly shrink the burden of government spending relative to gross domestic product.

Fortunately, we have two role models from recent history that show it is possible to control the federal budget. This video from the Center for Freedom and Prosperity uses data from the Historical Tables of the Budget to demonstrate the fiscal policy achievements of both Ronald Reagan and Bill Clinton.

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The president’s problem is largely a mess of his own making. Deficit spending did not begin when Mr. Obama took office. But he and his Democratic allies have supported, proposed, passed or signed and then spent every dime that’s gone out the door since Jan. 20, 2009. Voters know it is Mr. Obama and Democratic leaders who approved a $410 billion supplemental (complete with 8,500 earmarks) in the middle of the last fiscal year, and then passed a record-spending budget for this one. Mr. Obama and Democrats approved an $862 billion stimulus and a $1 trillion health-care overhaul, and they now are trying to add $266 billion in “temporary” stimulus spending to permanently raise the budget baseline. It is the president and Congressional allies who refuse to return the $447 billion unspent stimulus dollars and want to use repayments of TARP loans for more spending rather than reducing the deficit. It is the president who gave Fannie and Freddie carte blanche to draw hundreds of billions from the Treasury. It is the Democrats’ profligacy that raised the share of the GDP taken by the federal government to 24% this fiscal year. This is indeed the road to fiscal hell, and it’s been paved by the president and his party.

President Bush was a big spender, but President Obama is taking profligacy to the next level. In his first year in office, Obama pushed through a pork-filled “stimulus” that was supposed to increase jobs and prosperity (at least according to the discredited Keynesian theory). Instead, the economy has been weak and unemployment increased. In his second year in office, Obama rammed through a giant new healthcare entitlement, in part based on the absurd claim that bigger government would reduce red ink (the Congressional Budget Office should be abolished for aiding and abetting that fraud). Now we just witnessed the amazing spectacle of Obama actually getting to the left of Europe’s socialist leaders and arguing with them at the G-20 summit that government spending should be even higher.

Unfortunately for taxpayers, government already is too big, and that is true on both sides of the Atlantic Ocean. This new Center for Freedom and Prosperity video explains that there is a spending version of the Laffer Curve, and that it shows that government is much larger than the “growth-maximizing” level. As shown in the mini-documentary, academic research reveals that government spending should consume only 20 percent of gross domestic product. Thanks to the Bush-Obama spending spree, however, total government spending in America now amounts to about 40 percent of economic output.

It is quite likely, by the way, that the real growth-maximizing level of government spending is much lower than 20 percent of GDP. As noted in the video, the academic research is constrained by a lack of data for nations with small government. Free-market jurisdictions such as Hong Kong and Singapore enjoy the fastest growth, and they both have public sectors that consume about 20 percent of economic output,  so it should come as no surprise that scholars conclude that growth is maximized when government is about that size.

But what if there were nations with smaller levels of government? Indeed, the video shows that most nations in North America and Western Europe did have very small governments in the 1800s and early 1900s – often amounting to less than 10 percent of GDP. Does anyone actually think that the United States would have grown faster 100 years ago if the burden of government spending was doubled?

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Even though the Obama Administration claimed that squandering $800 billion on so-called stimulus would  keep the joblessness rate below 8 percent, the unemployment rate today is almost 10 percent. There are many reasons for the economy’s tepid performance, including a larger burden of government spending and the dampening effect of future tax rate increases (tax rates will jump significantly on January 1, 2011, when the 2003 tax cuts expire).

A closer look at the unemployment data, though , suggests that minimum wage laws also deserve a big share of the blame. In this Center for Freedom and Prosperity video, a former intern of mine at the Cato Institute (continuing a great tradition) explains that politicians destroyed jobs when they increased the minimum wage by more than 40 percent over a three-year period.

Mr. Divounguy is correct when he says businesses are not charities and that they only create jobs when they think a worker will generate net revenue. Higher minimum wages, needless to say, are especially destructive for people with poor work skills and limited work experience. This is why young people and minorities tend to suffer most – which is exactly what we see in the government data, with the teenage unemployment rates now at an astounding (and depressing) 26 percent level and blacks suffering from a joblessness rate of more than 15 percent.

Since the video is focused on economics, it does not examine why politicians would enact legislation that destroys jobs.

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If you want to get depressed or angry, the New York Times has an article celebrating the effort by politicians at all levels of government to lure more people into the food stamp program. New York City is running ads in foreign languagues asking people to stick their snouts in the public trough. The City is even signing up prisoners when they get out of jail. The state of New York, meanwhile, actually set up quotas for enrolling new recipients. And on the federal level, there apparently is a program that gives states “bonuses” for putting more people on the dole. No wonder one out of every eight Americans is receiving food stamps.

By the way, this is not just the fault of Democrats. The ranking Republican on the Agriculture Committee is a big defender of the program, in part because of the sordid pact among urban and rural politicians to support each other’s handouts. And President George W. Bush’s food stamp administrator actually had the gall to assert “food stamps is not welfare.” No wonder the burden of federal spending skyrocketed during the reign of so-called compassionate conservatism.

The correct policy, of course, is to get the federal government out of the welfare business. If Mayor Bloomberg thinks it is a “civic duty” to expand food stamps, he should see whether New York City voters agree with him – and want to foot the bill.

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The  Office of Management and Budget has released the President’s FY2011 budget and the Congressional Budget Office has released its semi-annual Budget and Economic Outlook. Much of the coverage of these documents has focused on deficit numbers. This is not a trivial concern, particularly since the Bush-Obama policies of bigger government have dramatically boosted red ink.

But the most important numbers in the budget documents are the estimates of what is happening to government spending. The good news is that burden of government spending is projected to decline over the next few years from about 25 percent of GDP to less than 23 percent of GDP.

That’s the good news.

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On conservative talk shows, defenders of President Obama have frequently asserted that it is too soon into the term of the new administration to fairly judge the policies and performance of our President.  Well, nearly a full year has elapsed since the Obama administration took office and we’ve now all had plenty of chance to “give Obama a chance.”  The oft-repeated mantras that “It’s too soon to tell” and “It’s all George Bush’s fault” won’t hold beer any longer.   If his plummeting poll numbers are any indication, many who fell for Obama’s neatly packaged utopian vapors of hope, change, and transformation are finally starting to emerge from their media-induced slumber.  And, while many of us could easily predict that the shallowness residing at the core of Barack Obama would soon lead to a precipitous disillusionment, the speed with which that is taking place is actually quite breathtaking.

Despite what European Socialists may think of us, Americans are not entirely stupid.  While the well-oiled hype machine of the Left-biased news media and the air headed Hollywood crowd helped to induce the large scale brain freeze that got Obama elected, as his serious failures of policy have mounted and the significant impact of those failures is felt, no amount of propaganda will suffice to resurrect the messianic fervor that once surrounded the heady days of Obama’s campaign.  Daily some new facet of the administration’s incompetence (at best) and fecklessness (at worst) is displayed, and increasing numbers of those who initially fell under his thrall are awakening to the profound danger Obama’s Presidency poses to both world peace and our American way of life. (more…)

As Congress recklessly moves to enact evermore programs in the face of ever larger deficits, it is only a matter of time before they take up the revenue side of deficit equation: Spending – Tax Revenue = the Deficit.  Of course, in response to rising deficits, the Media and the Democrats will reflexively demand tax increases. Republicans, for their part, simply must be able to articulate why higher taxes will actually result in larger deficits not smaller.

I offer this common sense guide for the great battle to come.

At the outset, it must be noted that, in practice, politicians don’t actually raise taxes so much as they pass laws to increase tax “rates,” i.e. income rates, sales tax rates, etc.  They do in an ill-founded pursuit of more tax revenue.

It is ill-founded because tax rate increases, over time, yield less revenue than tax rate cuts.  For instance, when the economy was bad in the early 1990’s, the California legislature raised tax rates and over a 3 year period, revenues actually dropped.  By 1999, Bill Clinton’s tax rate increase resulted in the highest overall tax burden in our history – a recession naturally followed which led to declining revenues.

These common sense points explain why tax rate cuts, over time, will raise for more money than tax rate increases.

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Barack Hussein Obama has advised us not to rush to judgment about the massacre at Fort Hood. “We don’t know all the answers yet. And I would caution against jumping to conclusions until we have all the facts,” said the President in a statement he delivered from the Rose Garden (while George W. Bush was in Fort Hood).

Obama doesn’t want us to jump to the conclusion that the shootings at Fort Hood were a terrorist attack by an Islamic jihadist, Major Nidal Hasan. Obama would rather we forgot that Nidal Hasan screamed “Allah akbar” before he mowed down scores of patriotic Americans and gave away Qurans with his business card before his act of jihad. Hasan also gave his landlord two week’s notice – showing that he planned this for a long time. He didn’t just snap.

Obama wants us to ignore that Hasan went to a mosque where a jihadist imam preached hatred of America. The same imam was “spiritual adviser” for three of the 9/11 hijackers who attacked America on Sept 11, 2001. Obama would rather we didn’t know that when Hasan was asked his nationality, he didn’t identify himself as an American, but as a Palestinian. Obama doesn’t want us to rush to judgment about how Hasan spoke approvingly of the shooting death by an Islamic jihad terrorist of a Little Rock Army recruiter in June. Obama doesn’t us to draw any conclusions from how Hasan reportedly was heard saying, “maybe people should strap bombs on themselves and go to Times Square.”

But Obama says, don’t rush to judgment.

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From an email to Newsweek:

“The Nobel gang just suicide bombed themselves. Gore, Carter, Obama, soon Bill Clinton. See a pattern here? They are all leftist sell-outs. George Bush liberates 50 million Muslims in Iraq, Reagan liberates hundreds of millions of Europeans and saves parts of Latin America. Any awards?… Obama gives speeches trashing his own country and for that gets a prize, which is now worth as much as whatever prizes they are putting in Cracker Jacks these days.”

“This fully exposes the illusion that is Barack Obama. It is a greater embarrassment than losing the Olympics bid. And with this ‘award’ the elites of the world are urging Obama, THE MAN OF PEACE, to not do the surge in Afghanistan, not take action against Iran and its nuclear program and to basically continue his intentions to emasculate the United States. They love a weakened, neutered U.S and this is their way of promoting that concept.  I think God has a great sense of  humor, too.” (more…)