Tag: obama

As Congress Prepares for Vote, Syria’s Inflation Hits 257%

As prospects of a U.S.-led military intervention in Syria hang in limbo, the foreign exchange black market for the Syrian pound (SYP) has become increasingly volatile. In countries with troubled currencies, such as Syria, black-market exchange rates provide a reliable gauge of economic expectations. Judging by the erratic performance of the black-market Syrian pound/U.S. dollar (USD) exchange rate, the Syrian people’s expectations have been on quite the roller coaster ride, as the U.S. Congress prepares for what will likely be a very close vote on a Use of Force resolution.

  • Following Secretary of State John Kerry’s initial call for military intervention in Syria, on August 26th, the SYP experienced a one-day drop of 24%—reflecting Syrians’ heightened fears of U.S. military conflict.  
  • On August 29th, two events occurred that reversed this slide. In Damascus, the Syrian government renewed its attempts to crack down on black-market currency trading. And, over 4,000 miles away in London, the British Parliament voted down a motion authorizing military action in Syria. In consequence, the SYP rebounded by a whopping 26% over the course of two days.
  • The U.S. Senate Foreign Relations Committee’s consideration of a use of force resolution seems to have once again raised Syrians’ expectations of a U.S. military strike, as it set the SYP on another slide. Since September 3rd, the pound has lost 10% of its value.

For some perspective on how the West’s march to war has affected Syria’s currency, and ultimately inflation, let’s take a look at how things have changed over the course of the past month: On August 6th, the black-market SYP/USD exchange rate was 205, yielding an implied annual inflation rate of 191%. As of September 6th, the black-market SYP/USD exchange rate sits at 250, yielding an implied annual inflation rate for Syria of 257%.

For more on the Syrian pound, see the Troubled Currencies Project.

A Microeconomic Look at Regulatory Overkill

In this new paper, I argue that an overly burdensome U.S. regulatory state is partly responsible for the downward trend in domestic and foreign investment in U.S. factories, professional services operations, distribution centers, and research and development facilities. EPA mandates, Obamacare’s costly, complicated new health care directives, and the slowly emerging financial services restrictions stemming from Dodd Frank, are just some of the new regulations that have thickened the Federal Register to more than 80,000 pages per year and added 16,500 new pages to the Code of Federal Regulations during the Obama presidency, undoubtedly deflecting and chasing investment and business creation to foreign shores.

Oddly, this massive expansion of federal rules has evolved as President Obama has simultaneously expressed concerns about the impacts of both declining investment and regulatory overkill on economic growth. In 2011, the president issued Executive Order 13563 under the heading “Improving Regulation and Regulatory Review.” Section 1 states:

Our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness and job creation. It must be based on the best available science. It must allow for public participation and an open exchange of ideas. It must promote predictability and reduce uncertainty. It must identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends. It must take into account benefits and costs, both quantitative and qualitative. It must ensure that regulations are accessible, consistent, written in plain language, and easy to understand. It must measure, and seek to improve, the actual results of regulatory requirements.

The president issued this EO in the wake of his party’s mid-term election rebuke, perhaps to indicate that he understood the concerns of business. He even required that his agencies formulate plans for undertaking systematic, retrospective reviews of their rules and regulations with an eye toward making them less imposing on society:

Sec. 6. Retrospective Analyses of Existing Rules. (a) To facilitate the periodic review of existing significant regulations, agencies shall consider how best to promote retrospective analysis for rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned…

In the words of a former chief economist at the Council of Economic Advisers:

The single greatest problem with the current system is that most regulations are subject to a cost-benefit analysis only in advance of their implementation. That is the point when the least is known and any analysis must rest on many unverifiable and potentially controversial assumptions.

Obama to Control the Price of Ivy?

Superabundant federal student aid has done a huge amount to get us into our bankrupting college mess. To get us out, today President Obama will propose, essentially, “soft” price controls. But they will likely leave the root problem intact while, if anything, adding new kinds of woe.

On his college bus tour, President Obama will propose that Washington start publishing ratings of schools based on such measures as average tuition, graduation rates, debt and earnings of graduates, and the percentage of a college’s students who are low-income. The ratings would also “compare colleges with similar missions.” Ultimately, the president will propose that the availability of aid be partly conditioned on the new ratings.

Let’s be clear: The price of college is almost certainly far higher than it should be, fueled largely by federal aid that essentially tells colleges “charge whatever you want – we’ll give students the money.” That’s a major reason that average, inflation-adjusted prices have more than doubled in the last 30 years. And it is good that the president, and many others, are essentially acknowledging the inflationary reality of aid. But will price controls help or hurt?

Four Charts Showing How Obama’s Statist Agenda Is Hurting Jobs and Growth

President Obama made a much-hyped pivot-to-the-economy speech yesterday in Chattanooga, Tennessee.

I already explained, immediately following the speech, why his “grand bargain” on corporate taxes was not a good deal because of all the hidden taxes on new investment and international competitiveness.

But I also had a chance to dissect the President’s overall track record on the economy for today’s Chattanooga Times Free Press.

Here’s some of what I wrote.

…he didn’t say anything new or different. His audience was treated to the same tax-spend-and-regulate boilerplate that the President has been dispensing ever since he entered political life. …with Obamanomics, not only has America failed to enjoy the traditional period of four-to-five percent growth at the start of a recovery, the economy hasn’t even gotten close to the long-run average of 3 percent. That’s a damning indictment. But it gets worse. The data on employment is downright depressing. A look at the numbers reveals that the nation is suffering from the worst period of job creation since the Great Depression. Most startling, we still haven’t recovered the jobs we lost during the recession.

That’s some strong rhetoric, but there are plenty of numbers to back up my assertions.

Let’s take a look at the interactive website maintained by the Minneapolis Federal Reserve Bank. This site allows users to compare all business cycles since World War II.

Let’s start by comparing the current business cycle to what happened under Reaganomics.

AFP Reagan v Obama GDP

As you can see, we’ve had a very sluggish recovery compared to the boom we enjoyed in the 1980s.

Not all of this is Obama’s fault, by the way. Here’s some more of what I wrote for the Chattanooga Times Free Press.

…all of these problems started before President Obama ever got to the White House. President Bush also was guilty of too much spending and excessive regulation, and his policies helped push the economy into a ditch. Unfortunately, even though he promised “change,” President Obama has been adding to Bush’s mistakes — and also raising taxes.

Some people may be wondering whether it’s fair to compare Reaganomics to Obamanomics. Maybe I’m cherry-picking data to make Obama (and Bush) look bad.

Pre-K Poll Vaulting

Just as President Obama has vowed to regain the initiative and push forward with his economic and education policy agenda, an organization called The First Five Years Fund has released a new poll asking the public about Pre-K policy. According to the poll, Americans know what they want (More federally funded Pre-K!), and know when they want it (NOW!).

Encouraging as this must be for supporters of a larger federal role in early education, opinion polling is not a good way to design policy—any more than it is a good way to design bridges. There is an aspect of bridge construction in which public opinion does properly figure: assessing demand. But when it comes to actually designing the structure that will carry living, breathing people across a gorge, public opinion plays little role. The reason is obvious: most people lack the time, skills, and knowledge to design bridges. They know what they ultimately want out of civil engineering projects, but they don’t know how best to achieve their goals.

It’s the same with education policy, and indeed with policy generally. Contrary to the apparent assumption of these early education advocates, it is not inherently obvious that increased federal Pre-K spending will ensure that children get a strong start in life. As it happens, there is a great deal of evidence that past and current federal Pre-K programs have proven expensive failures and have even, in some cases, done harm. Nor is the advocates’ currently favored policy–federally subsidized state Pre-K programs–an obviously good idea. Some states with universal Pre-K programs have actually seen their 4th grade test scores decline relative to the national average. There is no clear pattern of success.

Because of that fact, this is precisely not the sort of policy that should be expensively promoted at the federal level. If states wish to gamble that they can succeed where others have failed, then their residents should be the ones who put their money on the line. That approach has the merit that state politicians can be more easily held accountable than federal ones—voters have fewer issues on which to decide whom to support or oppose at the state level.

Well-meaning as the First Five Years Fund and its philanthropic backers no doubt are, their effort to design policy based on public opinion polling is badly misguided. It is little better than a schoolyard taunt that “everyone else wants to do it.” Serious people, people who actually want to achieve their stated goals and not simply win a political contest, can do better.

Moral of the Story: Tax Havens Are Okay if You’re a Politically Connnected Statist

Earlier this year, I had some fun when it was revealed that the president’s new Treasury Secretary had a lot of money in the Cayman Islands.

After all, leftists want us to believe tax havens are rogue regimes that should be eliminated. Some of them even want military intervention against these low-tax jurisdictions!

Much to my amusement, Mr. Lew even pretended he was financially illiterate to justify making sensible decisions to invest via the Cayman Islands.

And unlike the president’s first Treasury Secretary, Mr. Lew didn’t break the law and cheat on his tax return.

You probably won’t be surprised to learn that Secretary Lew wasn’t the first Democrat to utilize tax havens. Lawmakers such as John Kerry, Bill Clinton, John Edwards, and others on the left also have utilized tax havens to boost their own personal finances.

And it appears that Mr. Lew won’t be the last Democrat to be caught with his hands in the cookie jar.

Here’s some of what’s being reported by the New York Times in regard to the president’s nominee to be U.S. Trade Representative:

Michael Froman, a longtime White House economic aide nominated to be President Obama’s trade representative, has nearly half a million dollars in a fund based in the Cayman Islands, according to financial documents provided to the Senate Finance Committee. …White House officials said Mr. Froman played no role in creating, managing or operating the investment funds and had done nothing wrong. “Mike Froman has paid every penny of his taxes and reported all of the income, gains and losses from the investment on his tax returns,” Mr. Whithorne said.

I don’t remember that compliance with the tax law mattered when Obama and the media were going after Romney in 2012 for legally investing in the Cayman Islands.

Could it be that tax havens are okay, but only if you support big government?

It’s Obvious Student Aid Is Driven by Politics. But Not This Obvious

Federal aid for college students, it’s really no secret, is driven by what works politically, not what’s best for students. While logic and evidence strongly suggest that aid mainly enables colleges to raise their prices at breakneck speeds, politicians talk nonstop about aid making college “affordable.” Financial reality simply does not trump appearing to “care.” But on Friday, the Obama administration appears poised to take aid exploitation to a new level.

Tomorrow, the President will host what sounds like will be a textbook, campaign-style event featuring lots of no doubt somber – but oh-so-grateful-to-the-President – looking college students. With the photo-op thus set up, Mr. Obama will demand that Congress do something to stop the impending doubling of interest rates on subsidized federal loans from 3.4 percent to 6.8 percent.

But the GOP-led House has done something, and it is largely along the lines of what the President has called for. Last week, the House passed legislation that would peg student loan interest rates to 10-year Treasury bills, and would even cap rates at 8.5 percent or 10.5 percent, depending on the type of loan. It’s not exactly what the President wants – rates will vary over the life of the loan rather than being set at the origination rate, and the add-on to T-bill rates is higher – but the plans are still pretty close.

At this point, you’d think the President would be negotiating, not grandstanding. But then you wouldn’t understand federal student aid (or, really, almost anything government does). It is first and foremost about politicians – who are normal, self-interested people – getting what they need: political support, not sane college prices. And you get a lot of that support by appearing to want to “help people” more than the other guys.

If ever there will be a blatant, inescapable demonstration of what really drives federal aid policy, it will be the event we are likely to witness tomorrow. Let’s hope the public will get the right message: Politicians aren’t primarily driven by a desire to make college affordable. They’re driven by a desire for political gain. And that’s why we need them to get out of the student aid business.