The papers are so full of claptrap and humbug this morning…we don’t know what to laugh at first.
There is Hillary’s proposal for a ‘Gas Tax Holiday,’ for example. The initiative is so absurd that even trained economists can see through it. Alice Rivlin, Bill Clinton’s former budget director said she was “appalled” at what “looked like pandering.” One hundred economists signed an open letter criticizing the proposal – pointing out the obvious, that it would increase driving and divert money now going to the U.S. government to the governments of Arab oil exporters.
Obama has an advantage; Paul Volcker is advising him. So, we can expect a little better. But little better is what we get. Obama proposes a cut in the payroll tax (which finances Social Security) – up to $1,000 – to help families “offset the cost not only of gas, but of food.”
As we have said many times, we never met a tax cut we didn’t like. But what troubles us is: where are the cuts on the other side of the ledger? If Social Security has less money, how will it keep up with baby boomer retirements?
The weekend press tells us that people are beginning to worry about whether they’ll be able to retire at all. The middle class counted on rising house prices. But now house prices are going down. What are they going to do?
They’re going to start saving, is the answer. “Consumers to the sidelines,” says a Wall Street Journal headline. “Americans cutting back for Mothers’ Day,” says a headline in the Los Angeles Times.
You will recall why stocks were certain to go to the moon, dear reader. It was “Dow 36,000” for sure – because the baby boomers had to put money in stocks so they could retire. When that mirage disappeared, they turned to residential real estate. People figured that they could buy an extra house at the beach. They would enjoy it on weekends and holidays…and then, when the time came to retire…they could sell the main house and live off the proceeds. That strategy too was fine – as long as prices were rising.
And now the boomers find them themselves with no easy way to finance their golden years. (They should have bought gold when we first suggested it!) What can they do? They have to resort to the old-fashioned, tried and true method – thrift and savings.
Here, we will spell it out:
You take the total amount of income, after tax. Then, you subtract the total amount you spend. If the result is a positive number, at least you are headed in the right direction. If it is a negative number, we suggest you apply for a job in government…maybe with the Council of Economic Advisors or the Congressional Budget Office. Besides, the federal retirement system is the most generous one around – outside of Wall Street.
Yes, dear faithful reader…the U.S. economy is getting a nip on the derriere. The consumers who spent what they didn’t have are now forced to save the little they do have. Result: the consumer economy is slowing down. The bubble has sprung a leak…and the feds desperately try to keep pumping it up. (More below…)
But forget the math…forget the ledgers…there’s an election to be won…and faint humbug n’er won fair voter. No, the way to win is to go all out…tell the biggest lie possible…promise the moon…and pretend to be something you are completely and emphatically not.
George W. Bush, for example – son of a CIA Chief, Vice President and then U.S. president, educated at Andover, Yale and Harvard, from one of America’s richest, most elite New England families – passed himself off as a straight-talking yahoo in a cowboy hat. Now, both Obama and Hillary are trying to pretend that they feel the working classes’ pain. Hillary appeals to the redneck instinct for toughness; she will “obliterate” Iran if it lays a hand on Israel, she says.
(Why the yahoos from Kentucky should care what goes on between Israel and Iran has never been fully clarified…but in the final days of imperial grandeur no sparrow can fall anywhere in the world without setting off sensors in the Pentagon…and eliciting a rapid response from the military/industrial/political complex!)
Obama, meanwhile, can pretend to be a man of the people too. He drinks beer, when the occasion calls for it… and shoots hoops with the locals. Of course, neither politician would probably give the blue collar workers the time of day were it not for the fact the yahoos are likely to vote tomorrow.
Yes, dear reader, tomorrow is now the big day…the showdown between the two democratic candidates. If Obama wins big…he can say goodbye to Hillary. If the Clintons win big, they could still win the nomination…and probably, the election. At least, that’s what the pundits say…
And so we see how democracy really works…by flimflam and bamboozle.
Markets and Money