Holman W. Jenkins, Jr., in the Journal, notes just how well the Obama Administration has done in turning the economy around.

Banks continue to fail at an alarming rate, the dollar is under assault, and Washington is looking at a future of trillion-dollar deficits. One might have guessed it would take a decade of Obamanomics to produce European welfare state levels of youth unemployment, but at 18.5% we’re there.

About the only positive sign is the price surge in normally uncorrelated assets—stocks, bonds, commodities, gold—as fund managers use cheap credit to play the carry-trade opportunity.

All this might be defensible if time were being bought to clean up an accumulation of past excesses. Instead, the president is creating a new one. It’s no exaggeration to say the Senate health-care bill taking shape is the equivalent of climbing aboard a train about to plunge into a canyon and deciding what it really needs is a bomb on board.

Judy Shelton, in yesterday’s Wall Street Journal, explains just how dramatically the National Debt has been recently expanded.

Unprecedented spending, unending fiscal deficits, unconscionable accumulations of government debt: These are the trends that are shaping America’s financial future. And since loose monetary policy and a weak U.S. dollar are part of the mix, apparently, it’s no wonder people around the world are searching for an alternative form of money in which to calculate and preserve their own wealth.

It may be too soon to dismiss the dollar as an utterly debauched currency. It still is the most used for international transactions and constitutes over 60% of other countries’ official foreign-exchange reserves. But the reputation of our nation’s money is being severely compromised. …

Even with the optimistic economic assumptions implicit in the Obama administration’s budget, it’s a mathematical impossibility to reduce debt if you continue to spend more than you take in. …

By the end of 2019, according to the administration’s budget numbers, our federal debt will reach $23.3 trillion—as compared to $11.9 trillion today. To put it in perspective: U.S. federal debt was equal to 61.4% of GDP in 1999; it grew to 70.2% of GDP in 2008 (under the Bush administration); it will climb to an estimated 90.4% this year and touch the 100% mark in 2011, after which the projected federal debt will continue to equal or exceed our nation’s entire annual economic output through 2019.

The U.S. is thus slated to enter the ranks of those countries—Zimbabwe, Japan, Lebanon, Singapore, Jamaica, Italy—with the highest government debt-to-GDP ratio (which measures the debt burden against a nation’s capacity to generate sufficient wealth to repay its creditors). In 2008, the U.S. ranked 23rd on the list—crossing the 100% threshold vaults our nation into seventh place.

If you were a foreign government, would you want to increase your holdings of Treasury securities knowing the U.S. government has no plans to balance its budget during the next decade, let alone achieve a surplus?

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Borrowing money from foreign competitors, even friendly competitors, carries serious risks, as Jeffrey Karabell explained in Tuesday’s Wall Street Journal.

Eventually, when your creditor has you over a barrel, the next loan may require surrendering the role of leading economic power as part of the deal.

Most people are now aware that China is the largest creditor to a heavily indebted U.S. government. It holds close to a trillion dollars of U.S. Treasurys and has invested hundreds of billions more in private enterprises in America. Even though these facts are plainly acknowledged, policy makers and experts continue to underestimate the full ramifications of this relationship.

Consider what happened in 1946, when a cash-strapped Great Britain turned to the U.S. for a loan. For 30 years or more, the British had been consumed by the threat of a rising Germany. Two wars had been fought, millions of lives had been lost, and the British treasury was dramatically depleted in the process. Britain survived, but the costs were substantial.

In spite of its global empire, a powerful military, and an enviable position at the center of world-wide commerce, in early 1946 the British government faced a serious risk of defaulting on its financial obligations. So it did what it had done at various points over the previous decade and turned to its closest ally for assistance. It asked the U.S. for a loan of $5 billion at zero-interest repayable over 50 years. As generous as those terms seem today, such financing had been almost routine in years prior. To the surprise and shock of the British, Washington refused.

Unable to take no for answer, Britain explained that unless it received funds the government would be insolvent. The Americans came back with a series of conditions. They would lend Britain $3.7 billion at 2% interest, and the British government would have to abide by the 1944 Bretton Woods plan, which made the dollar rather than the pound sterling the reference point for global exchange rates and required Britain to make the pound freely convertible. Even more significantly, Britain had to end its system of imperial preferences, which meant no more tariffs and duties on goods to and from colonies such as India. These were not mere financial penalties: Taken together, they meant the end of the British Empire.

Within two years, Britain had left India and was on its way to decolonizing throughout Asia and Africa. Unable to compete with the United States economically and no longer able to reap the benefits of colonial trade, Britain’s military shrank and its commerce contracted. It quickly receded from its dominant global position and entered several decades of economic malaise. In the 1980s, Britain finally emerged as a prosperous country, but it was a shadow of what it had been in its heyday.

Ezra Pound at St. Elizabeth’s

Politicians gloated as ground was broken and a great river of federal dollars began flowing for the construction of the home of yet another massive federal bureaucracy on the 176 acre hilltop site of what used to be Washington, D.C.’s insane asylum.

What could be more appropriate? The next directive requiring the confiscation of pocket combs and cavity searches of blue-haired grannies can be written in the same location that not so long ago used to be a padded cell.

The federal government locked Ezra Pound away in the same asylum in lieu of prosecuting him for treason for siding with Benito Mussolini during WWII. Perhaps the unruly spirit of the modernist poet will continue to preside over Homeland Security’s new cubicles, resulting in the Canto replacing the memorandum and translations from the Chinese or Occitan filling out the press releases.

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Washington Post:

Councilman Marion Barry was late, and Mayor Adrian Fenty even later, but both arrived in time to grab a golden shovel and turn a little earth on the lush green lawn of St. Elizabeths Hospital. And with that, ground was officially broken for the $3.4 billion headquarters of the Department of Homeland Security, a vast new federal complex that will be built on the quiet hilltop with spectacular views where once stood the city’s main hospital for the mentally ill. …

Barry thanked Sen. Joe Lieberman, the Connecticut independent who helped create the grab-bag department of security-related agencies after the attacks of Sept. 11, 2001. …

Lieberman hailed the largest federal project built in the region since the Pentagon. And Homeland Security Secretary Janet Napolitano said the new campus, which will be home to 14,000 employees when finished in 2016, will help her fledgling agency grow into a more cohesive entity with a unified culture.

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Doug Powers puts the cost into perspective.

It wasn’t long ago that the Department of Homeland Security was just a fascist glimmer in George W. Bush’s eye that subsequently went on to become a symbol of one rogue and illegitimate administration’s gross abuse of civil liberties.

But now a new sheriff is in town, and a new enemy is in the cross-hairs that needs to be aggressively confronted, so it’s worth an even heavier investment of taxpayer dollars.

That and they needed the meeting space.

Assuming Napolitano holds a meeting every single weekday over the next 10 years, this new complex is only costing $1.3 million per meeting. Not bad by government standards — but we’ll round that up to $2 million per meeting on the assumption that they’ll buy bagels.

The left commentariat has been burbling happily about the “success” of the democrat Cash for Clunkers program. It turned out Americans with an active interest in a new car, who happened to have an eligible, low value trade-in on hand, were happy to take some free money to do perhaps slightly more rapidly what they were going to do anyway.

Bruce Yandle points out that the relevance of Cash for Clunkers to one of the best known economic fallacies.

University of California-Berkley economist Christopher Knittel has developed a rigorous assessment of the implied cost of carbon emissions under the clunker program. (“The Implied Cost of Carbon Dioxide Under the Cash for Clunkers Program” [pdf], Center for the Study of Energy Markets, Berkeley, The University of California Energy Institute.) Knittel made plausible assumptions about the average life remaining in vehicles removed from the road, the average fuel economy associated with those vehicles, and the resulting levels of carbon emission that would have survived in the absence of clunkers. Eventually, of course, the clunkers would have died a natural but less dramatic death. Knittel then estimated the carbon reduction gained when the large fleet of clunkers was replaced by a new fuel-efficient fleet. When he ran the numbers, Knittel found the cost per ton of carbon reduced could reach $500 under a set of normal values for critical variables. The cost estimate was $237 per ton under best case conditions. And what does this tell us? The much celebrated Waxman-Markey cap-and-trade carbon-emission control legislation estimates the cost of reducing a ton of carbon to be $28 when done across U.S. industries. Yes, we are getting carbon-emission reductions by way of clunker reduction, but we are paying a pretty penny for it.

Frédéric Bastiat’s brilliant parable of the broken window reminds us that a street hoodlum throwing a brick through a window generates a series of job-generating transactions that might raise GDP by a trivial amount, if it could be measured. Indeed, the idea seems so compelling that people today often speak of the silver lining found in the clouds that create hurricanes. Think of the roofers that become employed. But Bastiat’s key lesson is that a window has been destroyed—and it had value. Before touting the total benefits of clunkers, we must take account of the destroyed vehicles and engines that represented part of the wealth of the nation. As Tony Liller, vice president for Goodwill, put it: “They’re crushing these cars, and they’re perfectly good. These are cars the poor need to buy.”

Finally, over the eons, human communities have contrived all kinds of devices to transmit critical survival skills and compatible behavioral norms. One of these has to do with conservation of wealth. “Waste not, want not,” we are told. “A penny saved, is a penny earned,” we are reminded. Using politics to pay people who destroy valuable vehicles, or to hold crops off the market, or to produce ethanol that may use more energy in production than it adds when burned, teaches a lesson of anti-matter and wealth destruction. When all these considerations are made, Cash for Clunkers sounds like a sorry idea that should not be the model for future policy.

Let’s stop Cash for Refrigerators before the idea spreads further.

Thomas F. Cooley and Peter Rupert discuss, in Forbes, the recent triumphant claims heard widely on the left that “the stimulus is working.”

The bloviators of the blogosphere have been in full roar the past few weeks over the claimed success of the economic stimulus program. Much of this was ignited by Christina Romer, chair of the President’s Council of Economic Advisors, in a speech addressing the question of whether the stimulus was working–and concluding that it was, “absolutely.” …

The recent economic news has been encouraging. The pace of contraction of output and the rate of job losses has declined. This is evidence enough for many people to conclude that the stimulus is working. Writing in The New York Times, Robert H. Frank concludes that the stimulus is working, and that we need more of it. It is perfectly reasonable to have that as an opinion but it isn’t supported by either facts or reasoning.

Now understand that, no matter what point of view you start from–whether you believe stimulus is effective or that it is the voodoo economics of the new millennium–the Economic Recovery Act is a grand fiscal experiment. It is a bit like throwing the baby in the swimming pool to see if it swims.

At some future time, after careful parsing of the data and studying people’s decisions, we may have a much better estimate of the effectiveness of debt-financed government spending of this sort. One should keep in mind, however, that the effectiveness (or ineffectiveness) of the programs to combat the Great Depression in the 1930s is still a matter of great debate. Of course it would be a lot easier if the stimulus programs were better designed and more focused.

To claim, however, that the evidence suggests it is working–and that we need more of it–is nonsense for two reasons. The first, which ought to be obvious, is that we only get one observation on events. To draw a causal connection between the stimulus and the fact that we haven’t plunged into another Great Depression seems bold, to say the least. Since we don’t have a parallel universe in which to play out events without the stimulus, we can’t refute it. …

The other reason why it is illogical to claim a boost from the stimulus is that, for the most part, it hasn’t gone out the door yet. …

Doug Elmendorf, director of the Congressional Budget Office… estimates that by the end of fiscal year 2009, which falls on Sept. 30, just a month from now, 32% of the income transfers for things such as food stamps and extended unemployment benefits will have been spent and 31% of the tax cuts will have been disbursed. And by the end of fiscal year 2010 just 73% of the money allocated to these programs will have been spent.

Even Christina Romer concedes that this part of the stimulus hasn’t done much. …

..the most important stuff–the discretionary spending on infrastructure–has hardly started. By the end of the fiscal year, only 11% of the budgeted discretionary spending on highways, mass transit, energy efficiency and medical infrastructure will have gone out the door. …

There has been remarkably expansionary monetary policy in place for the last year. And there is the promise of massive spending, most of it in the future. If you, the reader, had to pick one as the key fact, would you pick the one that has already occurred and that clearly re-capitalized the banking system and restored liquidity, or the one that hasn’t hit yet?

There is nothing like data to kill a good story.

With or without stimuli, economies do recover from recessions, even great ones.

Warren Buffett spouts conventional pieties in the New York Times, but in the middle of Warren’s bromidal call for fiscal responsibility, the astute reader will find a shrewd assessment of what is really going to happen.

With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.

Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes. In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

George Santayana observed that those who cannot learn from history are condemned to repeat it. The above editorial cartoon, published April 21, 1934, shows that government pouring money into massive federal spending programs to try to improve the economy was tried before. The Great Depression continued up until WWII.

Accuracy in Media examines the scale of Barack Obama’s personal spin machine. It is larger than Bush’s, much more new media focused, and vastly more controlling.

Barack Obama’s White House is spending more than $80,000 a week to staff its old and new media offices. Add the price of speechwriters and the White House communications tab reaches nearly $100,000 a week, or nearly $5 million a year-and that is for salaries alone.

Based on the coverage the President has garnered so far, it is money well spent.

Accuracy In Media gathered the data from the White House’s annual salary report to Congress, which was released last week. AIM identified a total of 66 staffers with some connection to Obama’s messaging machine-press secretaries and assistants, communications directors, new media specialists, speechwriters, and the staff of the new Office of Public Engagement.

The latter group, which employs 13 people at a cost of $1,090,200 a year, organizes events like last week’s online healthcare forum in Virginia to take the White House’s message directly to the public. …

Obama’s Office of Public Engagement replaced the more traditional Office of Public Liaison. The mission is the same-to connect the public with the White House-but the techniques are different. Obama’s team has incorporated online video, blogs and other interactive elements, including tightly managed town halls, into the outreach mix.

Obama also quadrupled the size of the public liaison staff. According to the last Bush administration staff salary report, President Bush employed three people in his liaison office at a cost of $335,500. …

Bush’s dedicated new media team appears to have consisted of two people-a specialty media director who earned $84,000 a year and a website assistant who earned $34,000.

By contrast, Obama has the 11 employees in the Office of Public Engagement and another nine aides with titles such as new media director, new media creative director, deputy director of video and e-mail content/design lead. Those nine earn nearly $700,000 a year combined.

The White House irritated the press corps earlier this year when it prevented reporters from covering the President’s photo op with the national championship women’s basketball team from the University of Connecticut. Instead, Obama’s own media team produced a professional-style video report and released it several days after the event.

ABC News White House reporter Jake Tapper wondered, “Do Obama White House officials think their media coverage isn’t flattering enough?”

Poor little Susie Madrak, at leftie Crooks and Liars, is shocked to learn that our noble democrat legislators helped Captain Morgan open the US Treasury’s vault, aided the renowned bucananeer (who sails out of London town) to load his dinghy right up to the gunwales with $2.7 billion of US taxpayers’ gold dubloons, and then waved happily as the pirate rowed away.

I’m getting so tired of these stories. I mean, what’s the point? Americans are perfectly happy to stay home and watch TV while our elected officials rob us blind and we struggle along without needed health care:

June 26 (Bloomberg) — In June 2008, U.S. Virgin Islands Governor John deJongh Jr. agreed to give London-based Diageo Plc billions of dollars in tax incentives to move its production of Captain Morgan rum from one U.S. island — Puerto Rico — to another, namely St. Croix.

DeJongh says he had no idea his deal would help make the world’s largest liquor distiller the most unlikely beneficiary of the emergency Troubled Asset Relief Program approved by Congress just four months later.

Today, as two 56-foot-high (17-meter-high) tanks for holding fermenting molasses will soon rise from the ground on the Caribbean island of St. Croix, the extent to which dozens of nonbank companies benefited from last October’s emergency financial rescue plan is just beginning to come to light.

The hurried legislation adopted by a Congress voting under the threat of sudden global economic collapse led to hidden tax breaks for firms in dozens of industries. They included builders of Nascar auto-racing tracks, restaurant chains such as Burger King Holdings Inc., movie and television producers — and London’s Diageo.

“It’s kind of like the magician’s sleight of hand,” says former House Ways and Means Committee Chairman William Thomas, a California Republican who ran the committee from 2001 to 2007 and oversaw all tax legislation. “They snuck these things in a bill that was focused on other things.”

Wasn’t there an old music hall song about this sort of thing?

It’s the same the whole world over
Governments are all the same
It’s the poor who pays the taxes
It’s the rich what gets the TARP funds
Ain’t it all a bloomin’ shame?

These charts from Policy Watch demonstrate “the change” in action.

This time it’s Megan McArdle.

Having defended Obama’s candidacy largely on his economic team, I’m having serious buyer’s remorse. …

[H]e… promised to be non-partisan and accountable, and the size and composition stimulus package looks like just one more attempt to ram through his ideological agenda without much scrutiny, with the heaviest focus on programs that will be especially hard to cut.

The budget numbers are just one more blow to the credibility he worked hard to establish during the election. Back then, people like me handed him kudoes for using numbers that were really much less mendacious than the general run of candidate program promises. Now, he’s building a budget on the promise that this recession will be milder than average, with growth merely dipping to 1.2% this year and returning to trend in 2010. Isn’t there anyone at BLS who could have filled him in on the unemployment figures, or at Treasury who could have explained what a disproportionate impact finance salaries have on tax revenue? These numbers . . . well, I can’t really fully describe them on a family blog. But he has now raced passed Bush in the Delusional Budget Math olympics.