After suffering major electoral and legislative defeats last month, President Barack Obama took to the campaign trail in Nashua, New Hampshire, pitching his administration’s latest new plan to lower our nation’s double digit unemployment rate. This time, the President hopes to do for small businesses what Fannie Mae and Freddie Mac did for home mortgages. Specifically, he wants to create a new $30 billion “Small Business Lending Fund” which will loan money to banks with assets under $10 billion at favorable new rates, as long as they comply with a slew of new regulations designed to incentivize them to loan that money to small businesses. Never mind that a recent poll of small business owners by the National Federation of Independent Businesses ranked “Finance and Interest Rates” as the second to last most important problem facing their business.
And just where does the President plan to get this new $30 billion? The President explained yesterday: “This proposal takes the money that was repaid by Wall Street banks to provide capital for community banks on Main Street.” In other words, TARP – the $700 billion Troubled Asset Relief Program first signed into law by President George Bush, and then used by Treasury Secretary Hank Paulson to force many financial firms into taking taxpayer money they never wanted in the first place. But if Wall Street banks are paying-back their TARP funds, then how can President Obama say the following when justifying his Financial Crisis Responsibility Fee:
We want our money back, and we’re going to get it. And that’s why I’m proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street. If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers. Now, our estimate is that the TARP program will end up costing taxpayers around $117 billion — obviously a lot less than the $700 billion that people had feared, but still a lot of money.
So which is it? Are Wall Street banks repaying their TARP obligations in full so that the President can afford to spend $30 billion on his new Small Business Lending Fund? Or is TARP going to lose $117 billion? The answer is both. In reality, the major financial firms that took TARP money – many against their will – are paying-back those funds, and American taxpayers will get every single dime they are owed. But TARP has long since devolved from a one-time emergency action into a crony-capitalist political slush fund. TARP will lose money. But those losses will come almost entirely from the bailouts of union-backed firms General Motors and Chrysler, as well as AIG. Of course, GM and Chrysler are exempted from President Obama’s Crisis Tax, as are the government firms at the core of the housing bubble – Fannie Mae and Freddie Mac. The President’s Crisis Tax has nothing to do with recovering unpaid taxpayer TARP money and everything to do with finding a new source of revenue to help cover up the Obama administration’s massive new spending increases.
And unfortunately, more government spending and more government regulation are this administration’s answer to every economic problem. But more debt and more regulation will not create new jobs. According to a new Gallup poll, 57% of Americans are worried that there will be too much government regulation of business, half say the government should become less involved in regulating and controlling business, and only 24% say the government should become more involved in regulating and controlling business, which is exactly what the President’s new “Small Business Lending Fund” does. And remember that NFIB poll that showed borrowing costs as the next to last problem small businesses face? Well, that same poll also identified taxes as their second biggest problem and government regulation and red tape as the third. Americans and America’s small businesses know what will create new jobs, and it ain’t taxpayer campaign giveaways from the White House.
Quick Hits:
- Due to a debt burden that will climb to 97.5% of gross domestic product, Moody’s Investors Service said the United States will “test the Aaa boundaries” of their top debt rating.
- House Majority Leader Steny Hoyer (D-MD) said Tuesday that the White House is reassessing a plan to move Guantanamo detainees to a prison in northwest Illinois.
- The Obama administration’s top intelligence officials on Tuesday described it as “certain” that al-Qaeda or its allies will try to attack the United States in the next six months, and they called for new flexibility in how U.S. officials detain and question terrorist suspects.
- Iran test-fired a new satellite rocket and unveiled three new telecommunications satellites and a new satellite-carrier engine.
- MSNBC’s Keith Olbermann has lost 44% of his audience since President Barack Obama was sworn into office and is now third in the ratings behind Nancy Grace.
In a recent poll by the Wall Street Journal and NBC news, a majority of Americans expressed their frustration with the approach our government has taken in response to the financial crisis and economic slowdown. Just 43 percent of the respondents expressed satisfaction with how President Obama has handled the economy, a decline of 13 percentage points from a year ago. The disapproval vividly reflects disappointment toward economic policy decisions and management over the past year.
As the downward-trending poll numbers suggest, a majority of our fellow citizens are not comfortable with the “dramatic change” we have witnessed. The quest to enlarge and mobilize government in the name of rescuing and rebuilding our economy has created both economic uncertainty and a considerable degree of anxiety about our economic future.
There has always been tension between the state and the free market. The genius of the American economy has been its ability to balance the two, with policies that preserve stability while promoting innovation. However, as shown in the 2010 Index of Economic Freedom that was released last week, the battle has tilted decidedly toward big government. The magnitude of the recent loss of economic freedom has been alarmingly high, with considerable negative implications for our economic future. While many countries around the world continue on the path of economic liberalization, the United States is, in many respects, moving in the opposite direction, simultaneously burdening its economy with increasing government spending, uncompetitive tax rates, and barriers to trade and investment that stifle entrepreneurship and dynamic growth.
By burdening our economy with even bigger government and stifling it with less economic freedom, we are creating a dangerous economic environment where opportunities are missed, and lingering uncertainty undermines our economic potential.
In one of his many inspiring speeches, President Obama in fact talked about the importance of innovation:
“[There is] an important role that we can play, laying the ground rules to spur innovation. That’s the role of government — to provide investment that spurs innovation and also to set up common-sense ground rules to ensure that there’s a level playing field for all comers who seek to contribute their innovations.”
As a matter of fact, the proven path to stimulating economic growth is to advance economic freedom by promoting policies that generate a virtuous cycle of innovation, vibrant economic expansion, and more opportunities for people. Economic freedom is strongly linked to innovation and business initiatives that cumulatively lead to greater economic vitality for all.
As the findings of the 2010 Index demonstrate empirically, today’s successful economies are not necessarily geographically large or richly blessed with natural resources. Many economies have managed to expand opportunities for their citizens by enhancing their innovation capacities that are among the chief engines of economic prosperity.
Unfortunately, our economy’s dynamic innovative pulse is slowing in the presence of ever more bloated government.
No doubt that the vigor of our ongoing recovery depends on private businesses that will flourish with greater economic freedom. However, many small and large firms are currently postponing spending decisions and projects until they see more clearly government’s latest intentions. Others are put off by anti-business rhetoric that demonizes those whose profit-seeking is the very foundation of investment and job creation.
It is time to put back our country onto the right course. In preparing for his second State of the Union address this Wednesday, President Obama should be reminded of how to best spur innovation, not throttle it. The tool of choice—economic freedom—requires only an understanding that the people, expressing their wishes freely in the market-places of America, know better than any central planner or government bureaucrat what they need to get moving again.