James Pethokoukis

Politics and policy from inside Washington


Areas hardest hit appear to be the “rust belt” and high population states. Could it be that pro-free market policies accepted on faith over the last 30 years have not produced wealth for the nation. The Honda Accord came out in 1980 and US Auto Management has not been able to beat it. I guess you could say Reaganomics and the Honda Accord were too much for American Business to negotiate. National planning is needed to balance business’s short term planning problem. Hiring more MBAs will not fix this threat to national security.

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An economic double whammy

Oct 4, 2010 16:38 UTC

My pal Don Luskin  gets it just right in the WSJ today: America is wrong on both taxes and trade.

All else being equal, if the Bush tax cuts don’t get extended, that’s a 2.3% hit to 2011 GDP. That means instant double-dip recession, starting at midnight, Dec. 31. … Now to protectionism. Last week the House passed the Currency Reform for Fair Trade Act. … The bill, if passed by the Senate and signed by the president, would mandate that the Department of Commerce take a foreign country’s currency interventions into account in determining whether its trading practices are unfair. In the case of China—the target at which this bill is aimed—Commerce would determine that the amount by which the yuan is allegedly undervalued.  … Surely China would retaliate. That makes the bill a nuclear threat of mutual assured economic destruction. If carried out, it would crush trade between China and the United States, which are huge export markets for each other.

As Luskin also points out,  a rising yuan is no silver bullet — there’s lots of risk with little potential reward. Along with the tax increases, Washington is amazingly anti-growth right now. Instead, they need to make growth the new government initiative.


Perhaps, perhaps not. Is it possible Team Obama is spending all its spare time reading polls and predictions for the mid-terms? Trying to figure out how to get the Democratic Party back on the rails, and letting policy slide in the meantime?

With respect to Mr. Luskin’s excellent points, it’s not like anybody in the White House a) understands what Mr. Luskin is saying or b) cares. Everything is about appealing to the LCD blue-collar union vote. Watch for more class warfare rhetoric. So sad. Mr. Obama is facing being just a half-term president.

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TARP reconsidered

Oct 4, 2010 16:28 UTC

Interesting piece by former FDIC head Bill Isaac on the bank bailout:

In truth, customers of money market funds had already been calmed when Treasury issued a 100% guarantee of their money – before TARP was enacted.  The FDIC had the authority to reassure depositors under existing law, as was in fact done shortly after the TARP was enacted.

Two weeks after the TARP was enacted, Paulson abandoned the toxic asset plan and announced that the money would instead be used to shore up the capital of banks.  I had argued against the TARP in part because I believed capital infusions would support much more new lending than would the purchase of toxic assets.  Moreover, I believed capital infusions would be far less costly to taxpayers.

However, the TARP was not needed for capital infusions because the FDIC had existing authority to provide capital to banks.  I preferred strongly that the FDIC manage a capital infusion program rather than the highly politicized program Treasury implemented.

Treasury made two egregious mistakes on the capital program and many smaller ones.  The first blunder was to order nine large financial institutions – CitiGroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Bank of America, Bank of New York/Mellon, Merrill Lynch, Morgan Stanley and State Street – to accept $125 billion of taxpayer money that most of them did not need or want.

To some extent he adopts the John Taylor theory that it was the chaotic nature of the TARP roll-out that destabilized markets. Yet he also says he was in favor of capital injections.


“Now let us look at Wal-Mart again; you buy a product there, 6% goes to the employees, 10-18% is profit to the company, 25% goes to other costs and 50% goes to re-stock or the cost of goods sold. Of the 50% about 20-25% goes to China, a guess, but you get the point. Now then, how long will it take at 433 Billion dollars at year for China to have all of our money, leaving no money flow for us to circulate? At a 17 Trillion dollar economy less than 40-years minus the 1/6 they buy from us. Some say that if we keep putting money into our economy, it would take forever, but if we do not then eventually all the money flow will go. If China buys our debt then eventually they own us, no need to worry about a war, they are buying America, due in part to our own mismanaged trade, so whose fault is that? Not necessarily China, as they are doing what’s in the best interests, and we should make sure that trade is not only free, but fair too.”

http://www.worldthinktank.net/pdfs/TheFl owofTrade.pdf

on Wal*Mart’s China web page!

“Walmart China firmly believes in local sourcing. We have established partnerships with nearly 20,000 suppliers in China. Over 95% of the merchandise in our stores in China is sourced locally. Meanwhile, Walmart is committed to local talent development and diversity, especially the cultivation and full utilization of female staff and executives. 99.9% of Walmart China associates are Chinese nationals. All our stores in China are managed by Chinese local talent. 43% of leaders at senior manager level and above are female. In 2009, the company established the “Walmart China Women’s Leadership Development Commission” for driving women’s career development.”

http://www.wal-martchina.com/english/wal mart/index.htm

Now, with a six to one trade deficit with China….when was the last time you seen a George Washington..!!!!

Retail makes NOTHING…

Governments only make MORE DEBT…

It’s time for less of those two and for America to get back to what it does best….MAKE STUFF..

cause George Washington on that dollar can’t help anyone in the United States of America if he is being held in a foreign hand.

Made In America is the only way out of this mess cause foreign made put US here.

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