Predictions For The Next Two Years

Here's a bold, against the grain prediction for the next 2 years. Barack Obama will NOT push the extreme liberal agenda many in Congress want, and supporters will demand.


Like it or not, and many on the left will be in the NOT category, Obama has a couple of problems with pushing the repressed liberal agenda through to law. It's another case of reality meeting rhetoric.


The first is the economy, stupid. He can't afford a bunch of new social spending when he's already looking at a TWO TRILLION dollar deficit for next year. That's a big number, but with the bailout, and another looming economic stimulus, and a Detroit Bailout there just isn't the money. He knows he can only raise taxes on so many, so far, and not finish killing the economy.


Second, history. In the last 32 years the Democrats have controlled both houses of congress, and 1600 Pennsylvania for a total of 6 years. They lost 2 of 3 in 1980, finally got them all back in 1992; and then lost the House in 1994, and the Senate a few years later. All of the losses are easily attributable to pushing to big a social agenda too fast and coming up with economically horrible game plans; 1994 being the best case in point of it.


If you look at the choice of John Podesta as transition coordinator; and probably senior cabinet member; and Rahm Emanuel as Chief of Staff Obama has grabbed a couple of Clinton advisers that not only know what was done right in those 8 years, but what was done wrong. They'll probably both work towards a somewhat moderate agenda until after the mid term elections. It's entirely possible they'll work on him, and congress, to push a close to centrist agenda until 2012, to ensure a second term and continuing majorities.


Third, it's still the economy, stupid. Some of the pet projects of Democrats are going to get held off on until the economy recovers. One of the surprises in the first 100 days will be that the union backed "card check" legislation won't get signed into law, it may not make it in the first two years.


Obama and his advisers are smart enough to know that increasing labor costs when the job pool is shrinking isn't a great idea. So it will be brought up to placate the union bosses who supported him. But then will die because of a GOP threatened filibuster in the Senate.


So what will liberals get to keep them happy? They'll see a reimportation bill pass, to allow buying drugs from Canada. They may even get some modest price controls on drug bought through medicare with a "negoiated price" on many popular drugs.


SCHIP will expand to higher income levels. It will be hard to demonize childrens health care when the unemployment rate is going up. The GOP may be able to push through a timeframe on the expansion though, or economic milestones that bring it back to the current level.


The Bush tax cuts that took 30 million off the tax rolls will get extended, and some of them will be allowed to expire, specifically say "Welcome Back!" to the death tax and marriage penalty. Capital gains may end up off the table for a while, but increasing withholding for Social Security, in some form, for incomes over $200,000 will probably happen.


Liberals will also get a "security agreement" with Iraq that will bring everyone home in a relatively short amount of time. They'll also claim any problems after they leave aren't their problem because of such an agreement. Anyone looking for a long term basing agreement such as we have with Kuwait and Bahrain will be sorely disappointed.

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Obama Disturbed by McCain Ads

Barack Obama's campaign is getting a little rattled by the latest round of John McCain ads, including the one I posted here a few days ago, and the "Celebrity" ad that came out shortly before.

Over the next few months you'll see more ads that attack the substance of Obama from the McCain camp, and that's what Obama fears, and why they scream so hard everytime a new ad comes out. He's got a voting record that's ripe for ads attacking his no votes, and his present votes when he wanted to skirt a tough issue.

The other part that the Obama folks don't like is that the substance of the ads can be backed up. They can call them negative, but the fact is they are all based on the his stated positions. Obama's called for higher taxes, and until he flip-flopped on offshore drilling this week, wanted that kept off limits.

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Good for the GOP

The Republicans in the US Senate today blocked the Democrat's windfall profits gimmick, oops, tax from getting a vote on the floor. The bill needed 60 votes to get past a GOP filibuster, and only got 51, signalling it's death, for now.

While Barack Obama and others have claimed the GOP sold out the working class, that's simply class warfare rhetoric that wouldn't pass a basic economics test. How exactly does increasing taxes on oil companies help the working class? For those who failed to take, or just plain failed Econ in their sophomore year of High School, here's a hint, it wouldn't lower prices, it would raise them. Raising costs on producers has never lowered prices to consumers.

Some features of the bill sounded good, as campaign year sound bites but also fail the basic econ test. For instance, the idea that part of that tax could be abated by investing the money in refinery expansion. The problem, there is nothing in the bill to reduce the regulatory and legal hurdles that keep refinery expansion from happening quickly. It takes years to get approval, and past the judges, to do such expansion. Since the taxes aren't abated until the money is spent, it doesn't seem like a "win win" for the refiners.

Second, the idea that congress can somehow help lower the price of oil by "curbing speculation" is a folly. The solution was to require more collateral for oil trading on the market, and regulating US investments in energy in foreign mercantile exchanges. The first would just drive trading out of the US. The second would likely lead to a pull of foreign money from our markets, as other countries "regulated" their people trading across borders. Then suddenly this wouldn't look like such a good idea.

The final folly of the bill was the reduction of tax breaks to oil companies. Now, I'm not necessarily in favor of them. But let's think about this logically. The 10 billion or so they are talking about are tax breaks given to oil companies who invest in domestic production, and alternative fuels. Congress would like to take those breaks back, and give them to other people to............ find ways to produce more domestic energy, and look at alternative fuels! ARGHHHH!

Here's a few things to keep in mind about the profits of energy companies. The numbers are big, but the percentage isn't that great. For example, Exxon Mobile and Chevron had profit margins of 10.85% and 8.61% respectively according to Capital IQ. Bank of America on the other hand, had a 21.03% margin, Baxter Health Care, 15.12%, Apple Computer 15.13%, Yahoo!, 14.89%.
Will Congress decide that the profit margins of Apple and Yahoo, being 33% higher than Exxon have to have a "windfall" tax on them, also?

Good for the GOP, it takes balls to stand up in an election year, with high fuel prices, to the demagoguery of the Democrats. If you are one of the (evidently) millions of stooges who think anything in Congress's bill would have actually lowered your price at the pump, I've got a Lake in Central Wisconsin for sale, come see me.

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Time For A Carbon Tax?

Vox Pop (a Chicago Tribune blog) has an article up claiming it's time for a carbon tax in the US to reduce global warming, and discourage the use of carbon based fuels, and help ease oil consumption.

First, the writer ignores (nearly completely) the fact that any carbon tax will be passed on to consumers. Wake up, that's how it works, it becomes a "cost" and prices are adjusted to deal with it.

The other problems are three fold, as we've seen lately more scientific groups are questioning the underlying premises of global warming. Secondly, we have no coherent energy policy in place to reduce carbon based fuels use. Finally, we are no longer the driving force behind energy prices going up. Former third world countries like China and India are driving up the price of oil as their consumption grows.

On the first point, even if global warming is a hoax, development of altnerative, cleaner burning fuels isn't a bad idea. Forcing it through taxation, which is really forcing the choice of staying in the US and moving to China or India or Mexico, without a carbon tax is not great for staying competitive.

As far as energy policy, we need a system that lets energy companies get off of carbon based fuels without the litigation/NIMBY runaround they have now. Why are we building coal fired plants when nuclear are more efficient and less costly over their life? Because it costs less in litigation, and takes less time to get them on line.

States like Wisconsin have mandated 10-15% of electricity sold in the state come from "renewables" in the next decade or so. But the state is also a tort hell, and everytime someone wants to build a windmill the protectors of bats and geese show up to stall them. And let's face it, the north ain't a great place for solar farms.

We also need a policy that encourages domestic production of oil (as pointed out by Vox Pop), instead of hampering it at every turn.

On the final point, our increased taxes will have no effect on the increased use in newly emerging economies in Asia and Eastern Europe. In fact, if behavioral patterns of business hold up, a US Carbon Tax would probably INCREASE use in those countries, as companies expanded or moved to them, expanding their economies.

The biggest problem with the carbon tax debate is that the US editorials and environmental elitists don't get that it's not 1950 anymore. We aren't the only engine in the world economy like we were then. There are places other than the US and Western Europe who are also helping to drive oil prices, and polute the world. Those places will benefit from bad US energy policy, just like the Middle East and Hugo Chavez do today.

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