lynnux notes that government regulation establishes the rules by which banks operate and even creates their opportunities for profits, but these vital economic realities come into being in the first place through the agency of politicians, people like Barney Frank, whose expertise (such as it is), and interests and concerns have no connection to economic realities or markets.

Politicians seem such busy-beavers today, “doing things” “for” us. Why such whirling dervishes, generating laws in bulk? In its broadest outlines, law is mostly static. Politicians seek to appear to the public to be men of action “doing something.” This leads them to make too many economic and personal choices that they are not supposed to be making “for” us at all, picking winners and losers. It is now to the point where, famously, they no longer even read the laws they promulgate upon the body politic. Their process is finger in the wind (test the zeitgeist for what buzz evokes positives), then claim to be acting in name of the democratic will of the people—who, like banks to regulators, can later be blamed, should anything go wrong. As a republic, not a direct democracy, our representatives are supposed to be doing the right thing, in their best judgment. We rely on their decency, wisdom, and intelligence and vision for the long term. They have no way of knowing anything about their constituency anyway, because to pollsters, people only express self-interest, not the public interest. The public interest can only be assessed at a remove, which is the representative’s job. Pollsters get whatever they fish for. Responders also like to echo conventional wisdom. Implementing conventional wisdom is not politicians’ job. ...

Politicians wrapped in soundbites simply may not be qualified to make all the rules they seek to impose on us in their show of “caring” for us. This, I think, is what Richard Posner is getting at when he speaks of The Crisis of Capitalist Democracy. We need systems engineers today who really do understand the system. Politicians are mostly not this, but marketing specialists. They dissolve always into futile calls for infinitely ethical global governmental forces (themselves) to abolish investment uncertainty in a complicated utopian merger with perfect empirical risk analysis, forgetting that the past is no divining rod of the future (nor of truth. ...

The law is being asked to make business judgments law simply should not be making at all. Law is static. Markets are not. The market will adjust to any fixed rule, changing the “new normal.” Positive feedback loops (“positive” does not imply good) can ensue, at many unexpected levels. The media’s celebrity focus on political figure summiteering, however, follows an old trope, of suggesting to the public that our pseudo-gods and deities, through law, can command markets. These heroes then arrogantly begin to believe their press releases and to act accordingly.

Lawyers often go to law school precisely because they don’t like math or statistics. The type can quite easily ignore economic reality as they proceed to plug old forms and numbers into new contexts.

Read the whole thing.

Conrad Black observes the liberal media redirecting its fire from Herman Cain in the direction of Newt Gingrich, and shrugs indifferently. It is already obvious to any intelligent observer (like Mr. Black) that Barack Obama (absent divine intervention) has no real hope of being re-elected and that the election of 2012 is destined to be a genuinely transformative election, sweeping all of the consequences of the election of 2008 onto the ash-pile of history.

For me to achieve a degree of optimism from this procession of accident-prone Republican candidates might seem aberrant or a worrisome sign of cabin fever, but it isn’t. The grace of revelation came in two mighty flashes of celestial light, a few seconds apart, thunder to follow closer to next November. Whatever obloquy may be rained down on the well-tended topknots of the Republican hopefuls, it will not excuse or reelect the administration described by one commentator a few weeks ago as “the worst since before the invention of electricity.”

This administration will have produced $5 trillion of deficits, which will have the economic consequences of a 500 percent increase in the money supply in four years, without any serious effort to suggest how it is going to close the spigot, much less repay any of the accumulated debt. Only someone more familiar than I with the most fantastic realms of fiction could find adequately recondite metaphors for this level of fiscal irresponsibility. There has not been a hint of entitlement reform; no interest in a reforming budget or in changing the actuarial assumptions or vesting conditions of Social Security; no comprehensive analysis of municipal, county, or state debt, as Harrisburg, Pa., and Jefferson County, Ala. ($3 billion) went down in the last two weeks like tenpins; nor an effort to tackle the $1 trillion student-loan debt bomb. The administration continues its glazed pall of official prevarication in a reassuring monotone.

There has been no serious effort even to make the 10 percent token reduction in the projected decade of deficits required by the outcome of the debt-ceiling fiasco. The president clings to his arithmetic of the 99 percent and cozies up to the infantilists of Occupy Wall Street (even as he continues his dalliance with the stragglers among his limousine-borne Wall Street groupies). And Treasury Secretary Geithner, having been struck dumb like Zechariah in the temple for the last two years, recovered his voice to exhort the impecunious Europeans to join America in the St. Vitus’s Dance of spending confected trillions of virtual electronic dollars/euros. ...

At least Herbert Hoover acknowledged that a depression was in progress, and Jimmy Carter spoke of a malaise (of which his presence in the White House was the principal symptom). The president and other administration spokesmen seem supremely confident that all they have to do to retain immersion rights in the public trough for another four years is hammer the piñata about the 99 percent and incant the name of the preceding president.

As long as there is an alternative that can speak and tie up its shoelaces in the morning, I do not believe that this administration can be reelected. It is so unrelievedly incompetent that its fecklessness is more a matter of sadness and embarrassment than of the rage that engulfed George W. Bush. This, I surmise, is why the liberal establishment, the Times editorial writers and columnists, the Hollywood groupies, the rich fundraisers, don’t detect that the ship is sinking, and still squeal with delight as the Republican challengers fail to generate more than tentative or reluctant enthusiasm. But they are reading the wrong dials; there will be a Republican nominee. The country will not reelect this mockery of an administration, and whoever the Republican is will be elected and inaugurated, even if he has operated an open-air dog kennel on the wings of an airborne aircraft while groping relays of stewardesses.

And the other illuminated revelation, which came swiftly after the first: The voters will not only be disposing of a failed administration; they will be approving the Republican platform, which will call for radical tax simplification and reduction, entitlement reform, serious health-care reform, real spending reductions, incentives to increased domestic oil production and natural-gas use, and an absolute commitment to preventing Iran from becoming a nuclear military power.

It will be a drastic reform program that will signal that the United States is awakening like Brünnhilde, however unlikely the Siegfried, finally resuming world leadership, acting on its budget and current-account deficits, and behaving like a Great Power and a textbook case in self-government for the first time since President Bush Senior. The effect of the change will be electrifying. ...

The new president may have an imperfect CV and too-perfect hair; Speaker Boehner may surpass Mr. Obama’s historic favorite, Iran’s Mohammed Mossadegh, in his proclivity to burst publicly into tears; the White House may be as boring and banal as it was under George W. Bush (though that is unlikely, especially in syntactical matters); but America will lead in policy terms, if not in the personality of its leader. Problems will be addressed and the mere anarchy of abdication compounded by smug official sophistry will no longer be loosed upon the world. Mr. Churchill’s bust may come back to the Oval Office, and FDR’s address at D-Day, including the godly references that the Bureau of Land Management feels disrupt the spirit “of the elegant memorial,” may yet be displayed there. The night will end and glorious will be the dawn, in Washington. I have seen the future, and in it, people work.

Read the whole thing.

Megan McArdle, Business and Economics editor at the Atlantic, was attending her tenth B-school reunion at Chicago and ran into econometrics specialist Steven Kaplan who had updated the Thomas Piketty and Emmanuel Saez data on top incomes through 2009.

The numbers show that income inequality fell sharply as the economy declined.

Isn’t that wonderful? Occupy demonstrators can clearly now pack up their tents and drums and go home.

Income inequality is clearly easy to cure. Simply adopt left-wing policies, ruin the economy, and sit back and watch all the boats sink, with the upper boats descending to levels much closer to their neighbors than before.

Joseph Fouche first quotes Lex’s reaction to the Occupy* protests:

My hatred of the Boomers, who have brainwashed and wasted these kids is boundless. There is nothing wrong with them. They have just never been taught anything but bullshit. They have been betrayed by their parents and their teachers. It is very depressing. The country has been shamefully dumbed down.

Reading all this with just a little partisan bias, I’d say that he then blames left-wing Baby Boomers for both the intellectual vacuity of their young epigones and for the country’s inability to reform its policies and effectively address the current crisis.

They say they want a revolution. To have a revolution, you must have a secular social catechism that accumulates the sort of strategic effects that will trigger a fatal split in our current set of societal elites. In the crisis so far, we’ve only seen dusty formulas trotted out by ancient and creaky Boomers yearning re-fight the glorious battles of youth.

Again.

And again.

Here’s an unintended side-effect of extended human lifespans: ideological stasis. To butcher Max Planck: a political notion does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die and a new generation grows up that is familiar with it. Boomers, given unnaturally long biological life by historical developments they barely comprehend, give unnaturally long life to their foolishly destructive notions. Society may stagnate in some areas while progressing in others with unforeseen effects. This may make the process of sorting out of what’s needed to grapple with our current predicament prolonged, painful, and prone to triggering frustration and outbreaks of corrective violence.

Go tell the Boomers that, in the words of Oliver Cromwell and Leo Amery:

You have sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go!

So, drop dead, liberal Boomers!

Hat tip to Bird Dog.

Older and more respectable (i.e. employed) lefties weren’t occupying Wall Street. Instead, they were smiling happily and fantasizing about the Revolution, or at least another great big wave of punitive regulation and taxation, as the young, the dumb, and the Bohemian took to the streets in Lower Manhattan to protest against Wall Street and the bankers.

Somebody gave those protesters the wrong address.

If they want to wave signs and shout slogans at the people really responsible for our economic problems, they ought to be protesting in front of the offices of their own educators, the same people who overcharged them and left them quite commonly without either wisdom or marketable skills, but buried in student loans.

Those protestors are typically college graduates, and there they are on the streets, bearing allegiance to political sentiments and theories alien to their own country’s fundamental values and traditions. They are overloaded with fashionable poses and slogans, but are perfectly innocent of serious political philosophy. They don’t like their own country’s political and economic system, institutions, and history, but they might think very differently if they had ever actually been informed accurately what any of those things are.

If those protestors knew enough of history and economics to associate the material prosperity and technological progress that they are accustomed to with the free economic system that produced them, if they even had been given enough of an adult understanding of the world that they could understand that business corporations, like Wall Street banks, are not, and cannot possibly be, charities, they would not be protesting where they are.

Wall Street did not cause the recession. Government caused the recession (by following the same left-wing philosophy that those protestors and the people who educated them embrace) by inadvertently grossly inflating home real estate prices, as the product of efforts to make long-term mortgage financing ever more widely and easily available. Government has worsened, and prolonged the recession, by dramatically meddling in the economy in the area of health care, by adding to the regulatory burden, and by generally increasing uncertainty. All of the damage was done on the basis of precisely the same ideas and philosophy that those demonstrators are trying to advance.

If all those kids, drop outs, poets, and Bohemians had the benefit of a decent education; if they actually understood history, economics, and political philosophy; if they understood how the world actually works and what banks do; none of them would be where they are doing what they are doing.

——————————
The failed recovery is obviously our fault, not this administration’s. We all know that Barack Obama is a higher being, who could have delivered Hope and Change; who could have “ended a war and secured our nation and restored our image as the last, best hope on earth;” who could have made the rise of the oceans begin to slow and the earth begin to heal; if only we had been worthy of his magnificent leadership.

These considerations cause Frank Fleming to engage in some serious introspection.

Obama was elected on the promise of hope and change; he was going to make everything better by fixing the economy, ending all wars, and making every rainbow a double rainbow. As smart and capable as we all knew he was, he should have succeeded beyond our wildest imaginations. But instead, we’re even worse off than before — I don’t remember the last time I even saw a single rainbow. The only explanation is that somehow we’ve angered Obama and caused him to turn against us. It’s just that I’m not sure how.

Now, we could go to a town hall and ask Obama, “What have we done to make you want to destroy this country?” I think that is a horrible idea, though, as Obama will only glare at us and become even angrier. Obviously what we’ve done is extremely bad based on the way Obama is treating us, and it would only be worse if he knew we were ignorant of our exact slight against him.

We just need to accept the fact that we’re a bad country, and that’s why Obama is not following through on the hope and change he promised. So now what we need to do is try to figure out how to become a better country so Obama will like us and decide that he doesn’t need to destroy us. So I’ve done my best to study Obama and figure out some ideas to make us a country he considers worth saving.

Read the whole thing.

Mark Steyn looks at the pre-2012 political jockeying taking place in America these days and the European economic mess and feels in the mood for a little doom and gloom.

I mentioned in this space a few weeks ago the IMF’s calculation that China will become the planet’s leading economic power by the year 2016. And I added that, if that proves correct, it means the fellow elected next November will be the last president of the United States to preside over the world’s dominant economy. I thought that line might catch on. After all, we’re always told that every election is the most critical consequential watershed election of all time, but this one actually would be: For the first time since Grover Cleveland’s first term, America would be electing a global also-ran. But there’s not a lot of sense of America’s looming date with destiny in these presidential debates. I don’t mean so much from the candidates as from their media interrogators — which is more revealing of where the meter on our political conversation is likely to be during the general election. On Thursday night, there was a question on gays in the military but none on the accelerating European debt crisis. It is certainly important to establish whether a would-be president is sufficiently non-homophobic to authorize a crack team of lesbian paratroopers to rappel into the Chinese treasury, break the safe, and burn all our IOUs. But the curious complacency about the bigger questions is disturbing. ...

In a perfect snapshot of this administration’s witless banality, the president traveled last week to the Brent Spence Bridge across the Ohio River and claimed that, despite the fact that the structure connects the home states of the Republican House leader and the Republican Senate leader, the meanspirited GOP is going to kill the jobs bill and thus all prospects for a new bridge between their two states.

The bridge has nothing to do with the jobs bill. Work on a new bridge is not scheduled to begin for four years and wouldn’t be completed until 2022 at the earliest. Because in the Republic at twilight you can run up another seven-and-a-half-trillion dollars of new debt in less time than it takes to put up a bridge. Even as cheap political showboating the president’s photo op was a pathetic joke, with the laugh on you.

If this is the best America can do, there won’t be a 2022, not for the United States, or anything that would be recognizable as such.

Read the whole thing.

Jeffrey Tucker points out that the Austrian economists Hayek and von Mises explained long ago in the 1930s why the Keynesian policies of credit expansion being used today to try to bring about recovery would not be effective in restoring prosperity then or now.

Did you ever have the feeling that we’ve been through this before?

Think of it. Those in charge have only recently sworn — yet again! — that if we keep interest rates at zero, keep battling the symptoms of recession and unemployment with spending and jobs programs, clobber the speculators with regulations, and otherwise keep trying to revive moribund industries, all will be well. Just don’t cut government spending or let interest rates rise!

So where have we heard it all before? It was the 1930s, when the battle between F.A. Hayek and J.M. Keynes raged in the English-speaking world, not only in the academic journals but in the newspapers in London and the United States.

Hayek gave a series of lectures based on his previous works in German that tried to explain that the ruling elite and their theoretical apparatus had it all wrong.

In a thousand different ways he said the same thing: “To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about.”

Further, “because we are suffering from a misdirection of production, we want to create further misdirection — a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end.”...

Ludwig von Mises wrote in 1931:

Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth and market conditions. It causes production to pursue paths which it would not follow unless the economy were to acquire an increase in material goods. As a result, the upswing lacks a solid base. It is not real prosperity. It is illusory prosperity. It did not develop from an increase in economic wealth. Rather, it arose because the credit expansion created the illusion of such an increase. Sooner or later it must become apparent that this economic situation is built on sand.

Bloomberg News is getting lots of attention this morning with its headline shouting Wall Street Aristocracy Got $1.2 Trillion in Secret Loans.

Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

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Doctor Housing Bubble today looks at a home in the Bel-Air section of LA, whose declining price he describes as “chasing the market into the bottom.”

Why is this poor house’s market value tanking so horrifically? Doctor HB notes that the same trillions of federal loans to “a very familiar list of lenders… WaMu, IndyMac, JP Morgan, Wells Fargo, and Bank of America” have allowed a shadow market of 56 homes in the unprocessed foreclosure pipeline to loom over the 23 homes actually offered for sale on the local MLS. Your tax dollars at work.

Last week the California unemployment rate shot back up to 12 percent. Couple this with the underperformance of revenue for the state and we have heavy headwinds ahead. It will be a herculean effort for home prices to remain inflated in bubble markets as the economy and incomes slump. Part of what has held up the housing market in many areas is the building up of shadow inventory to control supply and try to increase home prices. This has been a dramatic failure and has cost the U.S. taxpayer trillions of dollars simply to keep the too big to fail banks afloat with financial swindles. There is no reason for this policy to continue unless we want to have another lost decade for our economy (this seems to be the path we are embarking on). Even prime locations are having a tougher time in this market. Today we will take a look at a home in the Bel-Air neighborhood of Los Angeles that is chasing the market into the bottom. ...

Of the 23 homes listed on the MLS for Bel-Air 3 are short sales and one home is listed as a foreclosure. Yet this does not tell us the entire story and this is the continuing saga of problems that we will be facing for years to come.

56 homes are in the shadow inventory for Bel-Air yet only 1 foreclosure has made it to the MLS! What is even more disturbing is that many of these homes in the shadow inventory were purchased right at the peak.

Ah yes, a very familiar list of lenders we see here. WaMu, IndyMac, JP Morgan, Wells Fargo, and Bank of America. Look at when the loan was recorded. Many of these shadow inventory properties were purchased during the mania in 2006 and 2007. This is only a sample of the 56 homes in the foreclosure pipeline. The shadow inventory is a big issue although the media wants to make it seem that it is only occurring in poor neighborhoods. Of course they don’t want to focus on neighborhoods where many of their executives live.

Why is the recession continuing? A large part of the answer is that failed mortgage loans have not been liquidated and resolved, the real estate market has been artificially kept in an unconstructive state of stasis by federal assistance. The large lenders received massive federal loan subsidies, allowing both them and their unfortunate insolvent borrowers to continue to reside in a financially comatose condition essentially on federal life support.

But the housing market and the economy cannot recover until the loans destined to die are really dead, the houses destined to be foreclosed are really foreclosed and resold, until the bad inventory is all sold at distress prices and the whole mess cleared off the national books.

In essence, the dégringolade produced by federal interventions in the home mortgage industry was so painful that government, Wall Street, and many home mortgage borrowers have all preferred to drag out the agony rather than take their medicine. That preference on every part is natural and understandable, but it is a major economic policy mistake, and the whole country is paying for it in both the literal and the figurative sense.

Hat tip to Glenn Reynolds for the Doctor HB story.

John Hinderaker shrewdly diagnoses the source of recent liberal paralysis of will in Washington.

Many liberals believe that government policies have little impact on the economy. A number have expressed that view to me privately. They think that the private sector will produce wealth regardless of what happens in Washington, and the only question is how to split it up. I think that is what President Obama and his advisers believed when he took office. The country was in economic turmoil from which it inevitably would recover, as it always does. When it did, Obama would get the credit.

In the meantime, the administration’s mantra was “never let a crisis go to waste.” Obama saw economic decline as an opportunity to pave the way for socialized medicine, to enact a near-trillion-dollar payoff to public sector unions in the guise of “stimulus,” and to extend the government’s control over various sectors of industry.

I think Obama and his advisers were genuinely surprised, not that their policies didn’t bring about economic recovery–they couldn’t have expected that–but that recovery didn’t happen of its own accord. That is why they are so nonplussed today.

I think John is perfectly correct.

Barack Obama and the democrats in general thought the Panic of 2008 was just a bump in the economic highway, contrived by smiling liberal Fates intending to deliver them into power. A panicked public would accept the leadership of the left during a momentary crisis and find themselves soon after living in a European-style welfare state. The New Deal’s march in the direction of socialism would be completed. President Obama would join the pantheon of progressive builders of grand collective entitlements, going down in history beside Franklin Roosevelt and Lyndon Johnson. The economy would fix itself; it always does. And President Obama would receive the credit for both the recovery and for Obamacare.

But, then, the economy did not heal itself.

There comes a point in Ayn Rand’s Atlas Shrugged, after the announcement of Directive 10-289, when the efforts of capitalist heroes Dagny Taggart and Hank Rearden to keep the railway system operating and steel mills in production begin to fail.

Somebody like James Taggart, one of the leftist supporters of the regime, begs Dagny or Hank to keep the failing system afloat. The hero assures the collectivist that the burden of regulations and redistribution has made it impossible. But we want it, insists the second-hander looting collectivist. It’s your responsibility to make it work for us.

Barack Obama is no more able to understand than James Taggart the incompatibility of limitless liberal demands and a viable economy.

James Pethokoukis suggests that the lights burned late on Friday at the White House and loud sounds of weeping could be heard by anyone nearby.

[Friday] night in a new report, Democrat-friendly Goldman Sachs dropped an economic bomb on President Obama’s chances for reelection (bold is mine):

Following another week of weak economic data, we have cut our estimates for real GDP growth in the second and third quarter of 2011 to 1.5% and 2.5%, respectively, from 2% and 3.25%. Our forecasts for Q4 and 2012 are under review, but even excluding any further changes we now expect the unemployment rate to come down only modestly to 8¾% at the end of 2012.

The main reason for the downgrade is that the high-frequency information on overall economic activity has continued to fall substantially short of our expectations. … Some of this weakness is undoubtedly related to the disruptions to the supply chain—specifically in the auto sector—following the East Japan earthquake. By our estimates, this disruption has subtracted around ½ percentage point from second-quarter GDP growth. We expect this hit to reverse fully in the next couple of months, and this could add ½ point to third-quarter GDP growth. Moreover, some of the hit from higher energy costs is probably also temporary, as crude prices are down on net over the past three months. But the slowdown of recent months goes well beyond what can be explained with these temporary effects. … final demand growth has slowed to a pace that is typically only seen in recessions. .. Moreover, if the economy returns to recession—not our forecast, but clearly a possibility given the recent numbers …

Alarms bells must be ringing all over Obamaland today. Unemployment on Election Day about where it is right now? Sputtering — if not stalling — economic growth? To many Americans that would sound like the car is back in the ditch — if it was ever out.

[T]he two political parties are diametrically opposed on recession-fighting policy. The Republican recipe to “boost growth” is to lower tax rates and regulation, and the Democratic recipe is to “invest” in stimulus spending. For Republicans, “structural economic policy changes” means reform Social Security and Medicare; for Democrats it means raise taxes.

There is no “agreement.” There is only a game of chicken to see who blinks first before August 2.

But we are conservatives. We do not just want to “win;” we want to do the right thing. How do we get out of the recession?

The best way to understand a recession is this: It is a period of adjustment during which the malinvestments of the previous boom are liquidated. Usually, in our era, booms are ignited by cheap money injected into the credit system by government. Cheap money seduces people into borrowing too much.

In the 2000s boom the malinvestments were the homes that millions of people bought with cheap credit, courtesy of Fannie, Freddie and CRA. Homebuilders expanded and sucked a ton of workers and capital goods into homebuilding. Everything looked good until interests rates rose and home prices started to decline.

You know what happened next. “Malinvestment” became nightmare investment, as the greedy bankers foreclosed on millions of homes, and home prices cratered.

But at some point the foreclosures will ease up, bottom-feeders will buy up the flood of houses, and home construction will resume.

The logic of Democratic “stimulus” is that if government shovels out enough money it will tide the economy over the crater. Home prices will recover, businesses will revive, and growth will resume. But what if home prices don’t recover before the stimulus runs out?

Back in 2009, the Obama administration made a judgment, implicit or explicit, that the housing crisis would be over in a couple of years, and that cheap money (QE1 and QE2) and a trillion dollar stimulus program would tide the economy over till then. But they were wrong. The housing market still hasn’t bottomed out, and the economy hasn’t snapped back, as this chart demonstrates.

The Obama mistake was bad enough but the Obamis made a second error. Assuming that the economy would revive in accordance with Baldrick’s cunning plan, they went ahead with their plans for expanding government spending and regulation, spraying money at their deserving supporters. They thought that the economy would soon be strong enough to increase the weight of government. With ObamaCare they increased the weight of government in health care. With regulation, spending, and subsidies pushing green energy they increased the weight of government in energy production.

That’s where the slick assumptions in Cohn’s “increase short-term deficits in ways that boost growth” kicks in. Suppose your “short-term deficit” doesn’t boost growth? Suppose it is just another wasteful government program that increases the weight of government, and postpones the day when happy days are here again?

That’s where the Obamis are sitting right now. They have shot their bolt with cheap money and stimulus spending and cranked up the National Debt by 40 percent. But here we are in Summer 2011 and there is still no light at the end of the tunnel.

To fix things the Obamis would have to adopt the Republican agenda and reduce the weight of government. They would have to repeal ObamaCare, reverse their green energy boondoggle, lower tax rates, and cut wasteful government spending.

You can see the problem. For the last 40 years, ever since the “unexpected” success of Reaganomics, liberals have been telling themselves and everyone else that supply-side economics is a mirage. Now they have to admit that everything they believe is wrong.

For the second time in some of our lifetimes, the American voting public has been treated to a full-scale, practical test of left-wing, Keynesian economics in operation. We saw all this before in the latter half of the 1970s.

Barack Obama’s great leap forward to the shiny new American European-style welfare state has turned a political version of Bernard Law Montgomery’s WWII Operation Market Garden, Obamacare being the “Bridge Too Far.” But the economics of the world of reality is actually a less forgiving, and much more formidable adversary, than the Germany Army in the Fall of 1944. The Allies went on to win WWII. Obama will be going to join Jimmy Carter in the ashbin of history and will soon be Carter’s rival for the title of worst president anyone can remember.

Twenty-five years ago, Geraldo Rivera hosted a greatly hyped TV special called “The Mystery of Al Capone’s Vaults.” It still stands as one of the highest-rated programs in television history.

On the ballyhooed night, cameras crept through the tunnel to the vault. There, on live TV, workers pulled down the concrete wall. The dust settled, and the cameras peered inside. And what did spellbound viewers behold? A pile of dirt, a few empty gin bottles and a discarded stop sign. Such were the treasures in Al Capone’s vault.

A quarter-century later, this serves as a wonderful metaphor for the grand project of progressivism. Since the dawn of the 20th century, progressives have foretold the blessings they would deliver. Ordinary citizens lack the wits to govern themselves, they said, so let’s put an elite cadre of progressive managers on the case. Give them power, and they soon would have things humming – a chicken in every pot, a Chevy in every garage.

When progressives gained power, they served us the New Deal and Social Security, followed by helpings of the Great Society and Medicare/Medicaid. Now they’re jamming the Obama smorgasbord down our throats – Obamacare, bailouts, stimulus packages, Government Motors and “quantitative easing,” a.k.a. printing money.

That isn’t all. Far from it. For decades, public-sector labor unions harnessed progressivism’s spread-the-wealth creed to extract lavish contracts from government. Workers won guarantees of lifetime health care and generous pensions, often without having to contribute a penny from their own above-market wages.

But instead of simmering in their progressive pots, the chickens are flocking home to roost. Social Security, Medicare and Medicaid are going broke and, if not reformed, will soon devour the entire federal budget, chickens and all.

Read the whole thing.

June 21, 2011

“Over the last 15 months we’ve created over 2.1 million private sector jobs. (Laughter.)”
—President Obama, in an official transcript of a fundraising speech this week. The transcript was later corrected by replacing “Laughter” with “Applause”.

President Hoover brought some convictions with him to office about how the economy worked, how government worked, and what his role as President should be. As the Depression deepened, he did the best he could within those limits, but nothing seems to have made him reconsider the mix of progressive ideas that he brought with him to the White House. As months of failure and disappointment grew into years, he doesn’t seem to have questioned those core ideas or to think about ways in which the economic emergency might require steps that in normal times would not be taken. He not only failed to end the Depression; he failed to give people a sense that he understood what was happening. Over-optimistic forecasts issued in part to build confidence came back to haunt him. To the public he seemed fuddled and doctrinaire, endlessly recycling stale platitudes in the face of radically new economic problems.

That’s beginning to sound a little like the current President’s predicament. Unless Lady Luck should emerge from retirement to sprinkle some growth dust on the economy, the President could find himself looking more Hooveresque by the day. Worse, President Obama faces problems that Hoover did not have — notably the five shooting wars on his hands in Afghanistan, tribal Pakistan, Iraq, Libya and now, apparently, Yemen.

Via Theo.
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Supposed Christian group that won headlines attacking Paul Ryan’s budget funded by the very secular-minded George Soros.

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Jim DeMint: Your tax dollars at work: $2 million grant to build a “culinary amphitheater,” wine tasting room, and gift shop in Richland, Washington. That makes sense, with the federal deficit where it is, everyone needs a drink.

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Cedar Falls, Iowa wants keys to residents’ homes. It’s for their safety.
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Kayleigh via Jose Guardia: Keynesianism is the equivalent of pouring your can of soda into a glass and trying to claim that, because the soda is now in the glass, you have more soda than if you had not poured it into the glass.
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Michelle Malkin: Woe is Weiner: No skillz to pay the billz. But don’t worry, he has a job offer with a higher salary. And he has a pension.
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Leopold Bloom resigns after erotic letters leak.

Barack Obama, Today show, February, 2009 (around 4:27): “Look, I’m at the start of my administration. One nice thing about the situation I find myself in is that I will be held accountable. I’ve got four years. ... A year from now, I think, people are going to see that we are starting to make some progress. There’s still going to be some pain out there. If I don’t have this done on three years, then there’s going to be a one term proposition.”

Hat tip to Aplusplusplus via Ace via Allahpundit.

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Pam Geller quotes Muslim woman (throwing a backpack onto the DC Red Line train and exiting): “Praise Allah. I’m going to kill the world.”
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Jeff Dunetz: Obama’s Israel Policy: “F*** The Jews, They Will Vote For Us Anyway!”
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Mark Steyn (reporting on last night’s NH debate): “John King makes Tim Pawlenty look like Lady Gaga.”
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Barack Obama: “I wish I could tell you there was a quick fix to our economic problems. But the truth is, we didn’t get into this mess overnight, and we won’t get out of it overnight. It’s going to take time.”

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Iowahawk: “The world is not a high school regional moderated debate & clarinet competition. It’s a high school parking lot gang fight.”

A little patience, and we shall see the reign of witches pass over, their spells dissolve, and the people, recovering their true sight, restore their government to its true principles. It is true that in the meantime we are suffering deeply in spirit, and incurring the horrors of a war and long oppressions of enormous public debt. If the game runs sometimes against us at home we must have patience till luck turns, and then we shall have an opportunity of winning back the principles we have lost, for this is a game where principles are at stake.
—From a letter to John Taylor of Caroline (June 1798)

Walter Russell Mead (who has recently been on a roll, producing a series of very intelligent articles) argues that the imminent end of the entitlement era marks as profound a change in the American way of life as the century ago passing of the family farm and the transition to majority employment in towns and cities.

The death of the family farm didn’t kill the American republic for several reasons. First, to some degree Jefferson was wrong and Hamilton was right. A strong manufacturing and financial sector can strengthen democracy under the right conditions; ancient, slave-holding Rome was less like modern capitalist New York and London than Thomas Jefferson thought.

But under American conditions there was something else: the end of the family farm did not mean the rise of a propertyless proletariat in the United States. Bankers like A.P. Giannini made the argument that the thirty year mortgage was a weapon against Marx: if the average American family no longer owned a farm, it could still own a house.

Thanks to home ownership, post-agricultural America remained a land of mass property ownership and that experience continued to inform American political and social values. American neighborhoods are still schools of political engagement; it’s clear who keeps up their property, who takes the lead in community activities, who leads the PTA and who coaches the youth league. Property ownership continues to serve as a political tutor; American voters want better municipal services, and they don’t like high property taxes. They have to think about the relationship between the two in every election, and their experience in local affairs continues to inform their ideas about national policy.

At the same time, the fact that most Americans buy their homes through mortgages, and that they have to keep those payments up or lose the old homestead, teaches responsibility and steady habits. If the farmer didn’t get up at dawn to plow the north forty, there was nothing to eat in the winter. If the suburbanite doesn’t get in the car and head onto the freeway every morning, the bank balance sinks and the repo men will come and take the house away. Home ownership also teaches people about investments and compound interest (although lately it has been giving us a painful introduction to bubbles and downturns).

Both versions of the American Dream had this in common: the farm in the valley and the box in the burbs helped the American people develop the skills and the values necessary for successful republican government.

From this standpoint, suburban America looks like a watered down but still potent blend of the original American farmer’s republic. The inherited values and culture coming to us from the old days plus the still potent force of mass home ownership have kept the United States from retracing the steps of older democracies on their slow decline. So far.

But our consumer republic is clearly in trouble. Economically, as I wrote earlier this week, the model is breaking down. The consumer republic is based on debt and depends on high consumption. We are nearing the limits of that kind of economy. The country’s external debt, the explosive growth of federal debt and the weak balance sheets of consumer households are all pointing in the same direction.

The cultural and social weaknesses of the consumer state are if anything more troubling. While suburbia is not the kind of alienating horror show that Marxist critics make it out to be, it is a less effective school for citizenship and character than the family farm. Daniel Bell wrote about the cultural contradictions of capitalism more than thirty years ago; life in a consumer society does not support the virtues and ideas that a healthy society requires.

More broadly, Huck Finn was right and the Widow Douglass was wrong: a holistic life in which family, work, education, leisure and production are all blended and mixed is healthier than an existence in which every sphere of life is rigidly set off from the others. it is not good for children to work long hours in textile mills; it is also not good for them to grow up without participating in and learning about the productive labor that is such a big part of what it means to be human. Family bonds are weaker now that husbands and wives spend so much less time together and mostly cooperate to spend money rather than working together to make it. The family is less of a unit because the real business of each member of the family takes place in some other environment be it the office, the factory or the school.

The special shape of modern and suburban family life is part of the blue social model I’ve been posting about on this blog and the hollowing out of blue society is increasingly felt within as well as around the contemporary American family. The suburban consumption based nuclear family is increasingly under stress; family budgets and time are increasingly on the edge.

More, the very entitlements most under pressure economically are those that have allowed the multigenerational family to yield to the suburban nuclear idyll. Defined benefit pensions, Social Security, home equity and Medicare allowed older Americans to live independent lives and reduced the need for solidarity between the generations. The generations, like the widow’s vittles, were all cooking in their separate pots. ...

The one thing I do know is that change is on its way — more fundamental, more challenging, and also perhaps more exhilarating than many of us are ready for. The health of the American economy is going to require us to move away from the credit card economics of the consumer republic. The health of American society and democracy require that we move beyond the life of the last eighty years.

Read the whole thing.

The recession which began in 2008, however, seems possibly to represent a fundamental change. Economic activity has not resumed growth. We have not returned to our customary trend line.

Instead, policies adopted by the Obama Administration and the democrat party congress elected in 2008 may have systematically reduced the American rate of economic growth to levels comparable to those of major European countries.

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You or I read all this and shudder at the terrible news, but the progressive Matthew Yglesias basically accepts Lucas’s analysis and sees this as cause for awarding Obama laurels.

[A]ccording to Lucas, is that Obama’s policies have caused us to deviate permanently to a lower, European-style growth path. The initiation of Social Security didn’t do that. Nor did its expansion in the 1950s. Nor did the creation of Medicare, Medicaid, Title I federal aid to schools or the War On Poverty. The Clean Air Act didn’t do it. Nor did the Clean Water Act or the Americans With Disabilities Act. George W Bush’s expansion of Medicare didn’t do it. Nothing about the growth of the welfare state in postwar America was able to jar America off the American-style growth path and put it on the European path. And then along came Barack Obama, the Affordable Care Act and a few other bills, and like magic we’re Sweden. Forget the economic implications of this. Think about the history! Think about all the unfair knocks Obama’s gotten from the left. A leading economic scholar thinks Obama’s domestic agenda has been far-and-away the most consequential in American history. It’s kind of a big deal.

In other words, when we look around at the ruins of the US economy, the devastated housing market, massive unemployment, a crisis forcing Americans to reduce their life-styles and expectations, a shrinking economy, the financial industry departing overseas, the possible end of the US dollar as reserve currency, and a forced American retreat from military investment and commitments, as most of America despairs, we find the American left rejoicing over the fulfillment of their hopes and dreams.

If there was ever any question as to what the left’s agenda was ultimately directed, as to exactly what its goal really was, well, now you know.

The Fiscal Times reports that the United States is experiencing a level of dependency on government unknown since the depth of the Great Depression.

For the first time since the Great Depression, households are receiving more income from the government than they are paying the government in taxes. The combination of more cash from various programs, called transfer payments, and lower taxes has been a double-barreled boost to consumers’ buying power, while also blowing a hole in the deficit. The 1930s offer a cautionary tale: The only other time government income support exceeded taxes paid was from 1931 to 1936. That trend reversed in 1936, after a recovery was underway, and the economy fell back into a second leg of recession during 1937 and 1938.

Hot Air Pundit: U.S. Debt Jumped $72 Billion Same Day The U.S. House Voted to Cut Spending $6 Billion.

MH summarizes and discusses the hypotheses advanced in a highly provocative paper on Economic Warfare written in 2009 by Kevin D. Freeman via the DOD contracting system for the Department of Defense Irregular Warfare Support Program (IWSP).

It is undeniable that if the collapse of the financial system was deliberately engineered by calculated attacks aimed at perceived vulnerabilities, those attacks were tremendously successful and resulted in enormous economic losses.

The hypothesis discussed in this paper suggests the very real possibility that financial terrorism may have cost the global economy as much as $50 trillion, roughly 1000 times greater than Bernie Madoff’s fund and equal to nearly four years of American productive output.

[A]n estimated $50 trillion of global wealth virtually vanished. At least $15 trillion of that loss was experienced by Americans, as measured by the combined declines in the value of stocks, bonds, real estate, and other assets.

The hypothesis under consideration is that a three-phased attack is underway with two of those phases completed to date.

The first phase was a speculative run-up in oil prices that generated as much as $2 trillion of excess wealth for oil-producing nations, filling the coffers of Sovereign Wealth Funds, especially those that follow Shariah Compliant Finance. This phase appears to have begun in 2007 and lasted through June 2008.

The rapid run-up in oil prices made the value of OPEC oil in the ground roughly$137 trillion (based on $125/barrel oil) virtually equal to the value of all other world financial assets, including every share of stock, every bond, every private
company, all government and corporate debt, and the entire world‘s bank deposits. That means that the proven OPEC reserves were valued at almost three times the total market capitalization of every company on the planet traded in all 27 global stock markets.

The second phase appears to have begun in 2008 with a series of bear raids targeting U.S. financial services firms that appeared to be systemically significant.

An initial bear raid against Bear Stearns was successful in forcing the firm to near bankruptcy. It was acquired by JP Morgan Chase and the systemic risk was averted briefly. Similar bear raids were conducted against various other firms during the summer, each ending in an acquisition. The attacks continued until the outright failure of Lehman Brothers in mid-September. This created a system-wide crisis, caused the collapse of the credit markets, and nearly collapsed the global financial system. The bear raids were perpetrated by naked short selling and manipulation of credit default swaps, both of which were virtually unregulated. The short selling was actually enhanced by recent regulatory changes including rescission of the uptick
rule and loopholes such as ―the Madoff exemption.

While substantial, unusual trading activity can be identified, the source of the bear raids has not been traceable to date due to serious transparency gaps for hedge funds, trading pools, sponsored access, and sovereign wealth funds. What can be demonstrated, however, is that two relatively small broker dealers emerged virtually overnight to trade ―trillions of dollars worth of U.S. blue chip companies. They are the number one traders in all financial companies that collapsed or are now financially supported by the U.S. government. Trading by the firms has grown exponentially while the markets have lost trillions of dollars in value.

The risk of a Phase Three has quickly emerged, suggesting a potential direct economic attack on the U.S. Treasury and U.S. dollar.

Such an event has already been discussed by finance ministers in major emerging market nations such as China and Russia as well as Iran and the Arab states. A focused effort to collapse the dollar by dumping Treasury bonds has grave implications including the possibility of a downgrading of U.S. debt forcing rapidly rising interest rates and a collapse of the American economy. In short, a bear raid against the U.S.financial system remains possible and may even be likely. Phase Two may have concluded with the brief market rebound that was supported by an emerging regulatory response calling for greater transparency across the board.

Freeman observes: “[W]e remain left with the critical unanswered questions of who and how?”

One important clue must be the bizarre and confusing story of the seizure of $134.5 billion of apparently counterfeit US Treasury bearer bonds being smuggled across the border from Italy into Switzerland in June of 2009 by two Japanese nationals.

St. Louis Adjusted Monetary Base (BASE)

Freeman says that incident “may be as significant as the Japanese radio intercepts were before December 1941.” A hundred and thirty four billion dollars worth of counterfeit treasury bonds here and a hundred and thirty four billion dollars worth of counterfeit treasury bonds there adds up to a lot of money very quickly. The Obama Administration’s expansion of the US Monetary Base already threatens major inflation and jeopardizes the role of the dollar as reserve currency, additional counterfeit-based inflation could easily constitute a tipping-point factor changing our worst fears into reality.

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Freeman refers to, and quotes points made in, an anonymous, non-publicly-available 65-page paper titled Red Flags of Market Manipulation Causing a Collapse of the U.S. Economy, distributed to law enforcement agencies, members of Congress, and regulators.

This report discusses extensive research that shows significant red flags‘ of danger to the world‘s economy from what appears to be market manipulation in the global financial markets, which includes trading in common stocks, options,futures, commodities, currencies, oil, and bonds.

Two companies…are at the heart of this trading and they consistently work in concert. These firms became, virtually overnight, the largest traders in the U.S. financial markets. These companies provide a one-stop-shop for trade execution, back office clearing and bookkeeping that cater to hedge funds and small broker dealers. To give perspective, the amount of trading executed by these two firms in October 2008 exceeded the trading of securities firms Goldman Sachs, JP Morgan and Merrill Lynch combined in the NASDAQ market participant reports.

Key points

1) The firms have traded trillions of dollars worth of U.S. blue chip companies. They are the number one traders in all financial companies that collapsed or are now financially supported by the U.S. government. Trading by the firms has grown exponentially while the markets have lost trillions of dollars in value.

2) These firms appear to own few or no shares of blue chip companies they are number one traders in. There is no doubt that the magnitude of their trading impacted the marketplace. Since the direction of the market place has been in a severe downward trend, the impact from the firms has been and remains, negative to the marketplace.

Some other starling findings in the report, based almost exclusively on reviewing basic trading data, include:

The two previously small broker dealers mentioned in the report are market makers for every major financial services firm under attack.

These firms have a combined 76 different symbols under which they act as market maker (by contrast a major firm such as Citigroup has just 6).

Both firms offer sponsored access.

Both firms offer access to dark pools.

From June through September 2008, the two firms appeared to concentrate on Lehman Brothers, trading 1.04 billion shares while the stock price collapsed from $33.83 to $0.21 on 15 September. This pattern seemed to repeat in every other major financial stock.

The report estimates that the two firms completed as many as 641,000 trades per hour in October 2008 (based on market participation statistics and average trade size from the last available data).

Total trading volume by month in the financial sector listed for these two firms grew from approximately 350,000 shares (less than 1% of all market participant trading) in September 2006 to approximately 600,000 shares in the sector (about 6% of all market participant trading) in September 2007, to over 8 billion shares in the sector (about 19% of all market participant trading) by September 2008. That‘s an increase of 2.4 million percent in two years.

While both firms have been around for several decades, their rapid growth began in 2006 for one and 2007 for the other.

Both firms seem to specialize in the same stocks at the same time, appearing to work in concert.

Combined, the two firms traded 203 billion shares, mostly concentrated in major financial services companies. This compares to a total of 427 billion shares outstanding of all issues on the New York Stock Exchange.

The report estimates trading of at least $5 trillion over the 25-month period ending in November 2008.

The trading appears to represent new money to the marketplace by new participants.

From July 2008 through September 2008, the two firms ―traded more shares of Fannie and Freddie than were issued even as the share prices were collapsing.

The firms were also the largest traders of the UltraShort funds as well as the financial spider (symbol ―XLF) during the reporting period.

The firms also became the largest traders of energy stocks.

The two firms did not and do not hold major equity positions on their books.

The names of these two firms have been purposely withheld in this report because trading data alone is insufficient to consider any accusations against them. But, this trading data is specifically the type of red flag that should prompt further investigation. In addition, even in the event that trades were entered with the purpose of manipulating markets,there is no evidence to suggest that either of the brokerage firms discussed had any knowledge of, or in any way participated in any wrongdoing. They simply could have been conduits through which orders were placed as the laws and regulatory authorities currently allow. Nevertheless, this trading activity does lead to numerous questions:

Who had the capital to effect $5 trillion worth of trades in such a short period?

Who are the clients behind the trades? Are they foreign or domestic?

Why would two long-standing but relatively minor broker dealers be selected for such massive trading rather than the major firms? Did they have more permissive rules for sponsored access?

Why was trading concentrated in the financial firms that failed (Lehman, AIG, Bear Stearns, Fannie, Freddie) or were under threat of failing (Citigroup, Bank of America, Merrill Lynch, and Wachovia)?

There is obviously no definitive evidence here that the Financial Collapse of 2008 was the result of a deliberate strategic plan to bring down the US economy carried out by hostile foreign agencies, but many of the details noted, particularly the scale of bear raids on major US financial institutions, certainly do provoke suspicion. The US Government is hardly about to share what it knows, so the rest of us can only file all this away for future reference, and keep an eye out for further related coverage.

[H]ere’s the one chart you need to see to understand why the US is screwed.

This is the “income statement” of the United States in 2010. “Revenue” is on the left. “Expenses” are on the right.

Note a few things…

First, “Revenue” is tiny relative to “Expenses.”

Second, most of the expense is entitlement programs, not defense, education, or any of the other line items that most budget crusaders normally howl about.

Third, as horrifying as these charts are, they don’t even show the trends of these two pies: The “expense” pie is growing like gangbusters, driven by the explosive growth of the entitlement programs that no one in government even has the balls to talk about. “Revenue” is barely growing at all.

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I’d put it another way.

I’d say that Liberalism and the post-New Deal American Welfare State is screwed.

The accident of the chickens finally coming home to roost from decades-old federal housing policies during the waning weeks of an increasingly unpopular Republican Administration delivered both elected branches of government into the hands of left-wing democrats eager to expand the empire of statism.

Those kinds of democrats do not understand economics and are not prudent and responsible managers. Their response to the economic crisis was to apply traditional liberal pump-priming excuses to enact a massive Stimulus package and to nationalize some automakers and bail out more banks, while driving full steam ahead on creating another new cyclopean entitlement system.

The result is a kind of show-and-tell demonstration, in front of God and everybody, making it perfectly clear to everyone whose intellect is not paralyzed by ideology that what conservatives had been saying all along is perfectly true. Social Security is a Ponzi scheme, and was always destined to fail one fine day when demographics failed to cooperate. That there are limits to the percentage of the national economy which can be taxed and redistributed without drastic costs in growth and prosperity. That there are limits to how much government you can have, how much government can do, how many departments and programs you can create, and how many bureaucrats you can hire.

The music has stopped. The era of the expansion of socialism, regulation, and federal authority is over. We have run out of money. National bankruptcy is within sight. The end of government’s capacity to pay for the entitlement system existing prior to Obamacare is at hand. Obamacare is a dream and a delusion which we could never afford. Our domestic experiment in social welfarism has failed.

The American people are gradually awakening from a troubled sleep. A political avalanche is building which is going to sweep Barack Obama, Harry Reid, and Nancy Pelosi, liberalism and the America left, and the whole New Deal/Great Society philosophy from the national political landscape onto the rubbish heap of history.

[Y]ou heard it in the surrealistically repurposed Sputnik Moment, which became in Obama’s hands a way to get older Americans to imagine that the reliable, stable world of their past was actually a cavalcade of personal reinvention and societal reeducation.

Young Americans? To the extent that we heard anything, we heard that our future is cut and dried: science and math education, because that’s what they do in China; a career as a scientist, an engineer, or a science and math teacher, because in South Korea those people are celebrated as “nation builders;” a lifetime of work spent in an economy propped up by spending, subsidies, and a perpetual partnership between big government and big business.

Cheer up, kids. You’re the ones you’ve been waiting for. Remember?

Which generation’s Sputnik moment is this, again? If we’re fated to work with metaphors from the middle of the twentieth century, let’s at least choose one that resonates with people who are coming of age in the twenty-first.

Say, perhaps, the Hitler Finds Out metaphor. From the vantage of the young, for the President—and, indeed, virtually the entire leadership class of the United States of America—this is their Stalingrad moment: the moment at which the vast armies they continue to maneuver around the gigantic battle map turn out to be gone, destroyed, never to return again. The bold challenges, the arbitrary and random numerical goalposts (80% more of these, 100,000 more of those)—it all gave off the disconnected feel of denial-driven fantasy. It’s not that the emperor has no clothes. It’s that he has no divisions.

Young Americans already face a future defined by an inescapable reckoning. They already tend to look at our grand entitlements as phantoms, as dead entitlements walking. They already know the problem isn’t that we have too few college graduates, but that we—like Tunisia and (gasp!) China, to mention a few—have too many for the market to absorb. And they already know that all the science and math in the world can’t serve to nourish our personal and cultural convictions about the purpose and character of American life in transformed times.

When will Obama’s generation reckon with that?

The young people who are going to get to pay the check for Barack Obama’s socialist free lunch are feeling a bit dyspeptic.

Via Theo.