Thinly Disguised Bribery Proposed by the President

In Obama Seeks More Payouts, the WSJ reports that the President, upset at the lack of price increases, proposes to have Congress print or borrow $13 B more for 57 million Americans, allegedly to be nice to them so that they can have a cost of living (equivalent) increase of 2%. Thus the other 250 million Americans will lose the same amount of money.

There is no economic point to this "payout". This is the equivalent of bribery to get votes, as the recipients will notice the money whereas the mass of Americans won't know the difference. There is also no fairness to this bribery, as it will presumably go to wealthy seniors but not to struggling non-seniors. Seniors are already the wealthiest Americans . . . but they vote the most.

The President is the leader of a Party that went wild when President G W Bush tried (and succeeded) to pass legislation with at least the argument that a permanent (or, semi-permanent) reduction in tax rates for all taxpayers would help the economy grow. Bill Clinton had a deficit-reduction public argument for his 1993 tax increase (and a private one, which was to fund healthcare reform in 1994). Likewise, G H W Bush and Ronald Reagan had arguments for their tax increases and tax cuts, respectively.

Just as the recent President Bush had a weak argument for his tax cut of spring 2008 and no good argument for an almost open-ended TARP and lots of other examples of him and Gentle Ben throwing other money at large complex financial institutions, the current President is just throwing money around.

I would like to be out of my gold holdings. I enjoyed being bearish on gold year after year from 1980 to 2001; rooting it down, as it were. But the politicians and Big Finance make it hard to regain my prior enthusiasm for conventional assets.

It's time to do things the old-fashioned way. Spock could have said the following.

"Work hard and prosper."

Payouts which are just handouts are symptomatic of the much larger handouts to the financial class. Favored groups get the fruits of the labor of others. Not fair. And not the way to retain world financial dominance.

Copyright (C) Long Lake LLC 2009