In summer of 2008, House Speaker Nancy Pelosi, presidential candidate Barack Obama, and Senate majority leader Harry Reid aren’t merely talking the economy down; they’re taking it down.
They have created what I am calling the POR (Pelosi-Obama-Reid) economy. Businesses and investors are responding to their total lack of seriousness by battening down the hatches and preparing for the worst.
Businesspeople now face ugly realities. Their full ugliness has only come to the fore in the past month or so, as energy prices have reached record highs, and as the clamor for Washington to act has grown.
The POR response to the clamor has been shockingly out of touch:
- Pelosi continues to insist that “we can’t drill our way out of our problems” — so the U.S. shouldn’t expand drilling at all, while other countries continue to drill merrily away.
- Reid claims that we have to get away from using coal and oil as soon as possible because they’re “making us sick.” It seems that if Harry had his way, we wouldn’t drill at all, or, for that matter, even dig at all.
- Obama thinks it’s okay that energy prices are at record highs; he just wishes that the increases had been more gradual. What a guy.
- Obama also wants a windfall profits tax on the energy sector, which in the real world would redirect money to the government that would largely have been used for exploration and expanding production.
- The courts also pitched in. Expanding the scope of a 2007 Supreme Court ruling that forced the Environmental Protection Agency to regulate CO2 emitted by cars as a pollutant, a Georgia court stopped a coal-fired plant from being built. Gleeful environmentalists are demanding “an end to conventional coal.” Expecting Pelosi or Reid to stop this madness is a pipe dream.
Each and every one of the above is a callous, “let them eat cake” response to a serious problem. We can debate from here to eternity when and whether alternative fuels and energy sources will ever become viable, but right now you can’t power most existing cars, trucks, or fleets with any of them. If fuel and energy become prohibitively expensive for businesses, it will be that much harder for them to be profitable, perhaps even to remain viable. Who would have thought that the three stewards of the POR economy would be so indifferent to the further suffering they have inflicted on their party’s union base at Detroit’s already-struggling Big Three?
Who can be surprised that businesses are reluctant to hire more people or to replace them when they leave?
Pelosi-Obama-Reid’s energy irresponsibility has been a major contributor to the stock market’s recent swoon. The Dow Jones Industrial Average posted its worst June performance since 1930. Earnings estimates are being lowered en masse.
Investors also face the real prospect of brutal tax increases:
- Beginning in 2009, the Bush tax cuts will begin to expire unless Congress acts to extend them. Obama has stated that he will “only” impose pre-Bush tax rates on the highest earners, thereby sucking about $160 billion a year out of the economy. Republican presidential candidate John McCain supports extending the Bush cuts; how he would get them through the Democratic Congress it seems he will face is not known.
- Obama further wants to siphon even more money from the economy ($40 billion or so) by imposing the Social Security payroll tax of 12.4% on all wage and self-employment income above $250,000.
Make no mistake: Harry Reid, Nancy Pelosi, and Barack Obama are the people who are making the economy sick. I don’t see how anyone can push this off on George Bush; the economy was picking up some steam, despite the housing industry and mortgage credit problems, until the Pelosi-Obama-Reid triumvirate made clear its intentions to put an energy chokehold on the economy.
These three and their party appear not to care one whit about the damage ever-higher energy prices and the prospect of punitive taxes are doing, right now, to both the economy and the stock market. They have set and reached a new low in legislative negligence, one that I believe took businesses and investors by surprise.
The only things that could mitigate the negative growth that I’m afraid has begun are whatever juice is left in President Bush’s supply-side tax cuts and the positive impact of the economic stimulus checks. I believe that they will, at best, keep growth barely positive. I don’t see them doing much for employment.
This POR economy is an advance demonstration of what an Obama administration would be like. Democrats hope that they can lay the blame for the sputtering economy on George Bush and John “McSame.” Will enough voters recognize this cynical gambit and reject it at the polls?