Tuesday, February 24, 2009

The Failing Messiah

By Phil Fraietta

Secretary of State Hillary Clinton said it best, when talking about President Obama’s image during the campaign season, "The sky will open. The lights will come down. Celestial choirs will be singing and everyone will know we should do the right thing and the world will be perfect!"

The President was able to convince the American public he was the man to save the nation, and the liberal media quickly gave President Obama a Messiah-like image during the 2008 campaign season. But, as President Obama is starting to find out, words of “hope” and “change” may mean something to the American public, but they mean very little to investors.

The Dow Jones Industrial Average and the S&P 500 both hit their lowest marks since 1997 on Monday. This coming just six days after the President signed into law his stimulus bill that was supposed to be the immediate fix to the economy.

Now it is certainly true that fiscal stimulus is not an overnight thing, and the stock market is never the best way to evaluate an economy, but with that said, the collapsing market is a sign that investors are not fooled by President Obama’s rhetoric and are fearful his stimulus package will fail.

Much to the surprise of President Obama, his speeches have been unable to provide confidence for investors. What the President must realize is that investors aren’t your average everyday Americans, amazed at the concept of “hope” and “change,” but rather, they are professionals. They are people with high-level degrees who understand the economy and what it means for the financial sector.

As I’ve said over and over again, if the President wants to turn around the trend on Wall Street, the most effective way to do so would be a cut in the capital gains tax. This would entice investors to put their money into a poor market with the prospect of seeing high returns at a very low taxation rate.

What we can all agree on is the key to turning around this recession is to increase consumer confidence and to do so by correcting the tailspin the stock market has seen over the past few months. What we disagree on, however, is how we can do that. President Obama seems to think he can simply speak and fool investors into believing the Savior will take care of things. In reality, however, investors want to see a sound economic plan, one that includes capital gains tax cuts, rather than more leftist rhetoric.

Sunday, February 22, 2009

The Other Surge, Part II

By Douglas Kohn

(Publisher's note: This is the second part in a two part series. The first part can be found below.)

In 2001, after September 11th, America began special forces and air operations to support an offensive by the Northern Alliance to remove the Taliban from power. Intervention in Afghanistan was nothing short of a matter of national honor. Notice, we sent in very few ground troops in the beginning. The Taliban was removed from power faster than any regime by an outside force in history. The people of Afghanistan, no matter what the press may tell you, greeted us as liberators. Every poll showed overwhelming support for the United States intervention and for the removal of the Taliban. America had successfully defended her honor after such a disgraceful and cowardly attack. America then failed to win the peace.

We set up a democratic government led by an inept technocrat named Hamid Karzai, we underfunded the Afghan army and recruited our allies to help with the occupation. Our erstwhile allies, NATO, had for the first time in its history invoked Article 5 of NATO’s charter, stating that an attack on one nation in the alliance was an attack on all. However, our ungrateful and disloyal allies, with few exceptions, refused to give their soldiers in Afghanistan rules of engagement allowing them to actually fight. They were only allowed to engage in nation building operations and defensive operations. The offensive operations in Helmand Province and across the border in Pakistan were undertaken by the United States, Great Britain, Canada, Poland, Denmark and Turkey, the only countries who had given their troops permission to engage in combat. I find this disgusting and came to the realization that even in a difficult moment, America mostly has fair weather friends.

After the American invasion of Iraq, that country became a massive strategic distraction for America. Troops, money and resources were diverted to Iraq to try to pacify it. I had, at first, greatly supported the United States invasion of Iraq. I did not support the surge. I did not think it would work and that our soldiers would simply be eaten alive. I was completely and totally mistaken in this position. Under the brilliant leadership of General David Petraeus, America, for the most part, prevailed in Iraq and is now withdrawing responsibly. The optimism must be cautious however, as there are many counterproductive forces in Iraq.

During this time, the situation in Afghanistan greatly deteriorated. American, Allied and Afghan casualties were piling up and lawlessness was everywhere. General Petraeus, after his successful handling of Iraq, is now in charge of Afghanistan.

This is the right thing to do. America, for the sake of national honor, must at the very least, look like we have not lost in Afghanistan. If there is a general anywhere or from anytime in history who may be able to turn the country around, it is David Petraeus. But the situation must be held in perspective. Democracy be damned if need be in Afghanistan. We face a clear and present danger from Afghanistan, Pakistan and Iran, three areas that are closely linked. I agree with President Obama on the necessity of at least having a stalemate in Afghanistan.

But let us look at the great hypocrisy here. Obama, the peace candidate, on the very same day of signing the stimulus into law, ordered the troop increase. Does any Liberal out there remember Vietnam? Please someone show me a Liberal who knows or understands history. I have never met one. Not a single Liberal I know understands history.

Let us recall Lyndon Johnson and the Gulf of Tonkin Resolution. Upon being elected, Johnson had three major policy objectives. The first was the extension of civil rights to minorities in the southern United States. The second was the expansion of economic opportunity and the creation of a welfare state. The third was to contain Communism and limit the influence and power of the Soviet Union.

When a magician performs a trick, they generally use optical illusion and distraction. A magician will wave his hand to get the attention of the audience and then do something behind a curtain with his other hand resulting in a ‘magic’ trick. Lyndon Johnson, in May 1964, announced the Great Society, an economic program that has had very mixed results. That is a matter for another post, not this discussion. While making a huge deal about how the Great Society would save our country and bring justice and opportunity for all, Johnson, three months later, made the Gulf of Tonkin Resolution, announcing a massive escalation of the Vietnam War. Notice the illusion and distraction here. Johnson, while signing an economic bill of near unprecedented proportions, took a back door to announcing the Gulf of Tonkin Resolution and committed America to an extended war.

Now think of today. On the VERY SAME DAY Obama announced the economic stimulus bill, he announced the drastic escalation of the war in Afghanistan. The stimulus, the corrupt pork laden bill that is going to ‘save us from economic collapse.’ Spend with one hand, escalate with the other. Right out of the LBJ playbook. There is no clearer historical parallel I can think of. But where is the left? Why are they not screaming about this? If anyone bothered to read a whole newspaper, they would know that the Afghanistan story was at the very back end of every newspaper in the country while the stimulus bill was on the front page. The reason is that they do not know history. Obama is their messiah. He can do no wrong. Afghanistan is now Obama’s war, if he breaks it he owns it. But according to the leftists who denounced Bush as a war monger, this one gets a free pass because it is a Democrat’s war. Because it is Obama’s war now. Where are the people whose parents were hippy flower children that screamed “Hey hey, LBJ, how many kids ya kill today?!” They are everywhere and they are nowhere.

In short, the forces of history are colliding on America in a way that has not been known in quite a while. It remains to be seen if we still have the will to weather them.

Saturday, February 21, 2009

The Other Surge, Part I

By Douglas Kohn

(Publisher's note: This is the first part in a two part series on the matter of Afghanistan. The second part will be published tomorrow.)

President Obama has just ordered 17,000 troops into Afghanistan to combat the resurgent Taliban and hopefully capture Osama bin Laden. This is the right thing to do but it is riddled with hypocrisy.

Let us think of history for a moment. Three great empires were humbled in Afghanistan. After Alexander the Great defeated the Persian Empire in less than ten years in 3 battles, his soldiers poured over from Persia (Iran) and into Afghanistan on their way to India. It was fighting in Afghanistan and Pakistan (then considered India) that eventually forced Alexander to give up his dreams of conquest. The resistance of the Afghani people and the Indians (basically today’s Pakistanis) beyond was so fierce that his brave soldiers could no longer take it and forced Alexander to turn around after the Battle of the Hydapses River in 325 BC. Alexander later died in Babylon in 323 BC.

Beginning the 19th Century, the fierce Afghani people began to cause serious security problems for the British and Russian Empires. The British had set up a massive colony in India known as the British Raj. It was considered a model of imperial domination because the number of British it took to rule India was so small compared with the size, geographically and demographically, of India. There were two objectives Britain had in its interventions in Afghanistan. One was part of an imperial competition known as the Great Game between the Empires of Britain and Russia in Central and South Asia. Britain had a key interest in ensuring that the Russians could never completely overrun Afghanistan and threaten their prized possession, India. The other security concern was the Afghani people themselves. Warlords in Afghanistan had regularly raided into British India and disrupted trade. From the point of view of the British Empire, this was an unacceptable state of affairs.

Britain then fought three wars in Afghanistan, each one bloodier than the last. But the Brits were not stupid and knew they could never come to dominate Afghanistan. They knew the fate of Alexander. They setup a friendly king who held some authority but could never really control the country. They made alliances with local warlords to keep the peace. Rudyard Kipling once remarked, “When you're wounded and left on Afghanistan's plains, and the women come out to cut up what remains, jest roll to your rifle and blow out your brains and go to your gawd like a soldier.” Afghanistan is turf unfriendly to civilized people.

Lastly, there was the intervention in Afghanistan of the Soviet Union. The Soviet Union, though it was never as economically powerful as it seemed, was still the greatest enemy that ever faced the United States and a nation whose ideology enslaved nearly half of humanity in the second half of the Twentieth Century. In 1979, its treasury swelled by a huge increase in the price of oil, the Soviet Union flexed its muscles and invaded Afghanistan, throwing all of its military might into the venture. This was an ill fated attempt. A colorful covert alliance began to supply and train Afghani guerillas for resistance against the Soviet-backed communist government and Russian soldiers installed in Afghanistan. With American, Pakistani, Israeli, Egyptian, Saudi, British and Chinese backing, the Afghani guerillas were turned into one of the most formidable fighting forces in the history of mankind, with brutality to match their skill. The Soviets received such a crushing, overwhelming and humiliating defeat in Afghanistan that they were never to recover, and two years later the Soviet Union collapsed.

In the interim, a massive civil war began in Afghanistan. There were no good guys. Every side in the civil war committed acts of barbarity matched only by the previous Russian invaders. Eventually, in 1996, the Taliban was in control of most of the country, with the exception of the Northern Alliance. The Taliban presided over a totalitarian regime committed to a hateful Islamofascist ideology no less barbaric than Communism or Nazism, only less powerful.

These events were the incubator of Osama bin Laden’s now infamous terrorist group, al Qaeda. Given shelter by the Taliban, he was able to carry out attacks on America, our interests and our allies all over the world, particularly in the Middle East.

Monday, February 16, 2009

The Chicagoization of America

By Douglas Kohn

Corruption and greed are every bit as real in the Obama Administration as it has been in every other administration. Obama- Mr. Squeaky Clean- has appointed no less than 17 lobbyists to his government. So much for Obama being allergic to lobbyists.

All this stems from where he learned politics. America’s great cosmopolitan cities are exciting and productive places to live and work in, but one should not want to be a politician in them. Chicago and New York both have the most dysfunctional political systems in the country, dominated by Democratic Party machines with no significant opposition.

Machine politics is nothing new to America but it has bred relatively few presidents. New York and Chicago are constantly riddled by unrelenting political scandal as evidenced by Eliot Spitzer, Rod Blagojevich, the Richard Daley machine, the David Dinkins fiasco with a list of others ranging back to the days of Tammany Hall.

The politics of neither of these cities or the states they are in are something we should like to see on a national scale. But it would seem that the Democratic Party, led by the Chicago machine of Barack Obama and his hatchet man Rahm Emmanuel are intent on turning American politics into Chicago politics.

Rahm Emmanuel has been granted permission by President Obama to take on direct oversight of the Census Bureau. This is a travesty and has not been given nearly the attention by the American media it should have been. A backgrounder follows.

The Census Bureau is a division of the United States Department of Commerce. After Governor Bill Richardson was taken down in a corruption scandal of his own, he withdrew from the offer of being Secretary of Commerce. President Obama then offered the job to a Republican senator from New Hampshire, Judd Gregg. Gregg accepted on the condition that the Democratic governor of New Hampshire appoint a Republican to replace him on his seat. Rahm Emmanuel was then given control of the Census Bureau.

The Bush Administration had been criticized for its ill fated attempt to create permanent conservative leaning government. Now it seems Rahm Emmanuel, architect of the Democratic victory in 2006, is bent on doing the same for his party. The Census Bureau is responsible for assigning electoral weight to each district and each state. Every ten years, a census is taken and based on shifts in populations, states and districts gain or lose electoral votes. Having a rabid partisan such as Emmanuel in control bodes ill for American Democracy. Combined with the possibility of giving illegal aliens permanent resident status, it seems that if the Democrats do not usher in a period of permanent control they will be ushering in a period of prolonged control.

The last real bastion of Conservative resistance is on the radio. Rush Limbaugh and Michael Savage are continuing their fiery rhetoric trying to save American nationalism. Nancy Pelosi is going to try to impose her fairness doctrine on the American media. Sound like freedom? That’s because it is not. The Democrats are going to roll back freedom in this country to an extent we have not seen since the Civil War. Do not write it off thinking they cannot do it, it has been done before.

Remember 2004? The Bush Administration was feeling righteous over the ‘wardrobe malfunction’ of Janet Jackson in the Superbowl. Who did they take it out on? Talk radio. Howard Stern was brought under new pressure by the FCC’s Michael Powell. They began to put the clamp on his show because of ‘decency’ issues. Meanwhile, Howard Stern’s most important staffer, Robin Quivers, is a black woman who voted for George Bush in 2000. Howard does not usually take up politics on his show but has consistently been libertarian and right leaning. He was a proponent of the Iraq War. He regularly talks of his respect and admiration for Ronald Reagan. He supported Giuliani and then John McCain.

What is happening now is scarier, as the Obama Administration begins to talk in earnest about the “fairness” doctrine. What is the need for fairness? There is mostly liberal media with Conservatives on talk radio. What happened to freedom? Why fairness? This is more terrifying because this is a liberal assault on talk radio for their political views and ideas, not some notion of decency. The Bush Administration began it by hurting one of their supporters, but the Democrats are going to destroy freedom of speech in this country.

Monday, February 9, 2009

The New European Politics

By Douglas Kohn

In stark contrast to America, it seems that Old Europe is taking a different turn politically.

After years of lagging behind the United States both in economic growth and in the ability to assimilate immigrants, ordinary Europeans are bringing center right governments to power all over the continent, lead by the charge of the nativists.

Europe’s inability to assimilate its mostly Islamic immigrants stands in stark contrast to the US. In America, in every poll Americans are overwhelmingly open to legal immigration, but paranoid of the illegal kind which threatens our cultural integrity and is a drain on our resources.

It started with Germany, when in 2005 Angela Merkel led Germany’s Christian Democrat Union to electoral victory over Gerhard Shroder’s Social Democrat Union. Germany has gradually begun to tackle some of its long term problems such as a social safety net that is unsustainable with a low birth rate.

Next was France, where Nicholas Sarkozy has proven himself quite a dynamic leader by Continental European Standards and has also begun to implement reforms and is thoroughly resisting the pressure of massive strikes to free up markets.

Now comes our old mother country, the United Kingdom. The Conservative Party has generally been the favored party in British elections and is now staged for a massive comeback. The Labour Party coalition was largely held together by the force of Tony Blair’s remarkable political ability, charm and no nonsense leadership that embraced markets, an Atlanticist foreign policy and led years of sustained economic growth and shared prosperity in the Island.

Gordon Brown, his successor, while a competent politician, has none of the charisma and agreeableness of his predecessor. Polls show a significant lead for the Conservatives under their young leader, David Cameron. This is particularly interesting because it shoots a hole in the notion that politics in Britain and America follow similar trends.

Italy, while recently moving to the right is so corrupt that it is aptly named the new sick man of Europe. Silvio Berlusconi is a man many Conservatives should like to be able to agree with but his personal corruption bodes ill for the sunny peninsula.

The Czech Republic is an interesting case, although it is a small country. Its leader, Vaclav Klaus, is widely regarded as a grumpy old man. It is important to mention them because the Czech Republic is now holding the rotating EU presidency. Klaus has referred to Al Gore as ‘an apostle of arrogance,’ denied global warming, affirmed the right of countries (Israel specifically) to defend themselves from terror, opposed government intervention in the economy to try to re-inflate bubbles that have long since burst and promotes economic prudence everywhere.

The holdout of major powers on the Continent seems to be Spain. In 2003, Jose Maria Aznar was the Conservative Prime Minister but his views on just about everything were significantly to the right of the Spanish public. He sent Spanish troops to Iraq when 90% of Spaniards were opposed to cooperation with the United States. After Spain was attacked by Al Qaeda in 2004, the new Prime Minister, Zapatero immediately pulled Spain out of Iraq, which in my opinion was a show of weakness even though Iraq may not have been necessary.

Now, a far left attitude prevails all over Spain combined with ignorant policies. Spain recently granted basic human rights to apes. The population is unwilling to change governments because they rightly view the financial crisis and housing bust as not being Zapatero’s fault. But it would seem the country at large has fallen into a cultural ignorance that will greatly harm its future.

It seems that the left is taking a time out in Europe. This is the first time in the Post War histories of most European countries that the left has not fared better in the polls during recession.

Saturday, February 7, 2009

Obama vs. Limbaugh

By Douglas Kohn

President Obama is letting his inexperience and partisanship show through. For all his talk of post partisanship he is still partisan. This stimulus bill was an egregious abuse of power. I think Peggy Noonan put it best when she said ‘President Obama made news by meeting with GOP leaders, but he would have made history if he had listened to them.’

Furthermore, Obama made a gigantic mistake by picking a fight with Rush Limbaugh. The way Limbaugh phrased his opposition to Obama’s socialist leanings is despicable. One should never hope for a President to fail, but should oppose individual policies without hesitation.

If you look at past President’s statements, not one has ever mentioned their opponents in the media by name. Presidents Bush and Clinton had more than their fair share of outrageous critics in the media but never made the mistake of mentioning them by name. By mentioning Rush Limbaugh by name, Obama gave him recognition he could never have hoped for in the past. He will bring new listeners who, even if they may have disagreed with everything Rush said in the past, will find themselves in agreement with him once he goes down the checklist of the outrageous pork and useless spending in the bailout.

Limbaugh gets paid $30 million a year and has a massive audience. If Obama continues to pick a fight with him, Limbaugh will win. There is an old saying, “never pick a fight with a medium that buys ink by the gallon.”

I had thought 2008 might prove to be a year of political realignment, but now I have my doubts if this administration continues to screw up.

Friday, February 6, 2009

A new New Deal?

By Douglas Kohn

One of the most egregious media perversions I have seen in the last few months is that of President Obama’s face replacing Franklin Roosevelt’s in a famous picture on the cover of Time Magazine. The article inside was calling for a ‘New New Deal.’

Put simply, the New Deal did not work. It has been the most overhyped government program in our history. What the New Deal did do, was provide a little temporary relief for very desperate people but it was World War II that finally ended the Great Depression.

In 1940, President Roosevelt passed the Lease Lend Act, allowing the United States to supply the British Empire with armament when it had to face the storm of Hitler alone. This was when real economic output began to pick up. Massive government orders of armament to factories allowed for renewed economic activity which created jobs and as people earned money, allowed them to consume again.

After the Great Depression, John Maynard Keynes became the Economic giant of his time. He believed that massive government stimulus could prevent a repeat of the Great Depression. A running competition between Keynesians and Supply Siders has been the great debate of politicians and economists ever since.

The general consensus among economists seems to be that while government spending should increase in a recession, stimulus should be in the form of tax cuts rather than freewheeling government spending. Spending on infrastructure is always appropriate and should be increased during recessions, but the rest of the stimulus should come in the form of massive tax cuts. Many of these tax cuts should be targeted.

The stimulus bill that has passed the House and is now working its way to the Senate is an embarrassment. It includes nonsensical appropriations such as $335 million for birth control.

The root of this problem is still the crisis in housing. Existing homes inventory is still too high to allow for sustained economic recovery. Giving workers an extra few hundred dollars a piece is not going to entice consumers to renew their spendthrift ways. Therefore, the most important part of any stimulus package should be a tax cut or credit for people buying existing homes. Building new homes will create some jobs but is only going to make the problem worse because it will increase supply without liquidating excess inventory.

Some of the conditions relating to 1929 are similar. After the crisis, people had been buying on credit for so long that companies had greatly overproduced relative to demand. After the crash, it becomes necessary to dispose of excess inventory otherwise a nearly unstoppable deflationary spiral will ensue. We are not yet in a deflationary cycle. Due to high oil prices inflation in the second quarter of 2008 was running at nearly 5%, whereas in the 4th quarter inflation was running at 1% (if you believe government statistics). This means deflation has not yet occurred but the drastic decrease in inflation suggests that it will in the first half of 2009.

Wednesday, February 4, 2009

Surprise! The Stimulus Bill Includes Protectionism

By Phil Fraietta

It should come to no surprise to most people that when it comes to economics, Democrats, have no clue. It was first reported late Thursday afternoon that the version of the stimulus bill passed by the House includes a “Buy American” proposition. The proposition requires all iron and steel used in the bill’s infrastructure projects to be purchased by American companies. And, it is now expected that when the Senate produces its own version of the bill, the “Buy American” proposition will expand beyond just iron and steel to include all materials used.

Trade is a topic of heated debate amongst politicians, but amongst economists there is no debate—protectionism fails. But of course Democrats are not concerned nor educated when it comes to economics so this should come as no surprise.

The central idea behind protectionism is that by requiring all materials to be purchased from United States companies, these companies will employ more people to meet their increased demand; thus creating jobs. While this may be true, the protectionists fail to see the wider scope of the argument.

First, there is no evidence that protectionist policies create jobs on a macro level. Of course, requiring all steel to be purchased by domestic companies will create jobs in the steel industry, but what about the jobs lost in the import industry, and other industries dependant on free trade?

This brings me to my second point. If we impose strict anti-trade laws on neighboring nations, why would they not be enticed to do the same? Chances are they would be enticed to do the same and they most likely would. This can have disastrous effects on domestic companies. Take a company like General Electric, which receives nearly half of its revenue from overseas. If foreign nations were to increase their import restrictions, GE would suffer huge losses causing them to cut back on costs, most likely by cutting labor. When you take into account the fact that we live in a global economy, this same process is likely to be repeated by thousands of companies, meaning thousands of lost jobs.

Finally, we have yet to consider the effects of protectionist policies on the price of goods. As anybody who has taken an Econ 101 class would know, when supply is limited prices rise. By limiting the supply of products such as steel and iron, we can expect prices to rise in the near future, which will have catastrophic consequences. When dealing with government purchases, prices with contractors are set ahead of time in contractual form. But the prices offered by the contractor will of course be based on steel prices at the time the contract is signed. Once the price of steel rises, however, the costs increase for the contractor. Because the price was agreed upon in a contract, the contractor could not ask for more money from the government to cover the increased costs, and would be forced to cut costs. As stated earlier, when businesses cut costs they normally do so by cutting labor costs. This means fewer jobs.

For those who doubt that protectionist policy can really affect prices that much, take this example. The Bush Administration was faced with the problem of low steel demand in 2001 and again in 2003. Both times the Administration implemented tariffs to try and protect US steel factories from closing. This of course led to foreign steel makers finding other markets, namely China. Once the steel market recovered, and US steel demand rose again, in 2004, steel prices rose a staggering 48% that year according to the Labor Department.

We are currently in the midst of the worse recession this country has seen since the early 1980’s. Protectionism is a policy that is not advocated by any school of economic thought, yet the Democrats have decided to implement it in this stimulus bill. Not only should trade never be limited, doing so in the midst of a recession is plain stupidity. Unfortunately, economics is not an area in which Democrats are caring or educated. The American economy will recover from this recession, but with the Democrats in control it may take a little longer than we thought.

Sunday, February 1, 2009

The Truth Behind the Economic Stimulus Bill

By Phil Fraietta

We are just a little over a week into the Obama Presidency and already the President has begun to show his true socialist colors. On Wednesday, by a vote of 244-188, the United States House of Representatives passed President Obama’s proposed $819 billion stimulus bill.

Before analyzing exactly how the bill is supposed to stimulate the economy, be sure to note that a total of zero Republicans voted in favor of it—there’s that bipartisan spirit President Obama promised to bring to Washington.

Now as far as the bill itself goes, upon further analysis it is easy to see why zero Republicans voted for it, and even easier to see why it is far from a stimulus.

The Democrats have argued for the bill on the principles of Keynesian economics. Keynesian economics, named after its founder John Maynard Keynes, is centered on the idea that the government can stimulate the economy by increasing spending. The validity of this claim is something that economists have debated for over 80 years, but nevertheless, the idea that increases in government spending can stimulate the economy is one that most economists agree upon. That is, when the money is spent on infrastructure. And, when you think about it, this line of thought makes sense. If the government spends money to build a new highway, that money will be given to a construction company who will then employ workers to build the highway, thereby creating jobs.

So then in good Keynesian spirit we would expect that majority of this $819 billion to be spent for infrastructural purposes, right? Wrong. The stimulus bill actually only allots $322 billion to infrastructure.

So then where is the other $497 billion going? Being that this is a stimulus bill, and there are only two universally accepted ways in which the government can stimulate the economy, we would assume the other $497 billion is going to option number two—a tax cut.

The bill certainly does contain a tax cut, just like President Obama promised. But the size of the tax cut isn’t nearly $497 billion; in fact the tax cut only amounts to $145 billion for individuals (many of whom already pay nothing in taxes) and $22 billion for businesses. Given the fact that GDP statistics for 2008 are expected to show the lowest GDP for the United States sine 1982, a tax cut this size isn’t nearly enough.

Now that we have accounted for the tax cuts, we are still only at $489 billion, leaving us $330 billion short of the $819 billion the bill allots. So then where does this $330 billion go? Some of the money goes to safety net programs such as Food Stamps and Unemployment Benefits, (genius idea to pay people to be out of work at a time where unemployment continues to rise), some to pork spending (like every other bill run through Congress) and roughly $127 billion to healthcare.

I’m sure your initial reaction was much like mine when I saw just how much money was being spent on health-care—shocked! It is a widely held view that healthcare expenditure by the government takes up far too large of a portion of United States GDP. Yet, this stimulus bill makes sure to allot $127 billion towards it. So then how is this $127 billion broken down? $87 billion to Medicaid, $39 billion to COBRA, and $1 billion to creating a new bureaucracy called the Federal Coordinating Council for Comparative Effectiveness Research.

It has become clear what the real purpose of this stimulus bill is—to begin the transition to government run healthcare.

If the President were truly interested in rescuing the economy from recession, he would’ve had all $819 billion allotted towards infrastructure spending and tax cuts. He would’ve eliminated the capital gains tax for at least one year, cut the corporate tax rate in half, and made the tax cuts for individuals large enough that they will be noticed.

Unfortunately, this was not the case. I am afraid that President Obama has gone back on his word. With this bill he is fleeing from the politics of hope and reverting to the politics of fear. The President is using the current recession as a means of justifying quick action. But those of us who do not view President Obama as a Messiah who can do no wrong, can see the truth behind this bill. President Obama is beginning his quest to socialize the United States healthcare system.