03.31.2010 0

60 Percent

  • On: 04/01/2010 10:02:50
  • In: Economy
  • By Robert Romano

    “Immediately after I become President, I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity.”Barack Obama, November 7th, 2008.

    60.35 percent. That’s the percent of the total economy the federal, state and local governments will control — either through direct ownership or indirect regulatory nationalization — should Barack Obama get all that he wants.

    If one combines the Bureau of Economic Analysis’ estimated 2009 Gross Domestic Product of $14.256 trillion with the remainder of the 2010 federal budget excluded from that estimate, the total economy equals $16.942 trillion.

    Of that, government will control $10.225 trillion under the Obama regime, leaving just $6.717 trillion in the hands of the private sector, or 39.65 percent. This inherent structural deficit is unsustainable, and will leave it to the minority to sustain the majority.

    Except that’s impossible.

    And yet, that’s exactly what the Obama Administration is proposing to do, under the careful guise of government interventionism. The above estimates assumes the following not-so-far-fetched events: 1) the federal government retains control of GM and Chrysler (with their combined current 26 percent of U.S. market share); 2) the Waxman-Markey energy cap and tax is enacted; 3) Fannie Mae and Freddie Mac are retained by the government; 4) ObamaCare withstands efforts to repeal it or find it unconstitutional; 5) the government takeover of the financial system is enacted; and 6) governments at all levels do nothing to cut spending.

    These are not such unreasonable assumptions. To date, the government already owns GM, Chrysler, Fannie, and Freddie, encompassing a good chunk of the U.S. domestic auto industry and about three-quarters of the mortgage industry. It’s well under way to assuming control of the nation’s health care system. And it’s two respective votes in the Senate away from taking over the energy sector and financial system.

    Take the financial takeover bill, which starts in exactly the wrong place: it seeks to micromanage the financial system while accepting the premises of loose credit and easy money. This amounts to dealing with the symptoms of a government-created problem, rather than addressing the root causes.

    A brief history lesson reminder: Fannie and Freddie bought up about three-quarters of U.S. mortgages on the secondary market and sold mortgage-backed securities all over the world. The Federal Reserve accommodated mortgage lending, the secondary market, and the disastrous derivatives trade with lower-than justified interest rates and easy money. When the housing bubble popped and foreclosures hit, AIG could not cover its derivatives insurance policies on the failure of mortgage-backed securities.

    Then, rather than let everyone who made bad bets fail, Congress instituted TARP, which then became a bank recapitalization fund, and next the Fed took the reins to purchase the so-called “troubled assets” behind the scenes.

    So, rather than reining in and eliminating, respectively, the Fed, Fannie, and Freddie that fundamentally caused the crisis, Congress’ prescription is to now take over the rest of the financial system to cope with some of the bad behaviors that resulted from the easy money and loose credit policies the Fed, Fannie, and Freddie were responsible for.

    How? What the bill does is give an unelected Council of “Financial Stability” Overseers the power to put into receivership any financial institution it deems “too risky.”

    Then, depending on how broadly they define “financial institution,” the provision allowing the Council to essentially take over “systemically risky” firms could be the de facto power to seize and redistribute wealth on a scale never seen. The bill also creates at least a $50 billion revolving TARP-like fund. The bigger the current and next crises, the more Congress will pour into it.

    So, the $828 billion financial services and insurance sector? Under Obama’s schemes, it’s got a great big bullseye painted on it.

    Next, consider ObamaCare. As ALG News has previously reported, by raising the Medicaid eligibility to 133 percent of the poverty level, mandating the purchase of health insurance, and increasing the costs of premiums to unaffordable levels, the American people will eventually be forced onto government-run health care.

    Waxman-Markey. That legislation, H.R. 2454, would force carbon-emitting industries coal, oil, gasoline, and natural gas to purchase carbon permits. The bill aims to reduce industrial emissions of carbon dioxide and other greenhouse gases by 17 percent by 2020 and 83 percent by 2050. The effect is to in essence create an immense tax on carbon emissions, and force the conversion to solar, wind, and other “green” energies. That is a de facto takeover of the energy industry through sheer force.

    After that there’s hardly anything left. Except for the incredible shrinking private sector that will have to find a way to sustain the ever-expanding government Leviathan that consumes all that it sees.

    In short, the Obama Administration is threatening to turn the nation into a command-and-control economy. And before it’s too late, the American people need to take back their country from those who seek to enslave them.

    Robert Romano is the Senior Editor of ALG News Bureau.

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