Ravengate
Partners - Stock market, economic and political commentary by Patricia Chadwick

President Obama promised CHANGE in his campaign for President, and after 100 days in office, it is easy to give him a grade of A++ on keeping that promise. I must leave it to historians to gauge whether or not his first 100 days will take the top prize in terms of changes instituted in this country, but for sure he will get honorable mention.

It seems to me that the President’s popular appeal is in part based upon his keeping that promise to change things. That is the scary part. And what scares me even more, are all the other changes that the President wants to implement over the next 100 days and the 100 days beyond that. I think they are bad for the economy, bad for profits, bad for growth and all that adds up to bad for the American people.

In the last 100 days we have seen a virtual takeover of the U.S. banking system by the Government. Granted there was a necessary infusion of emergency capital – a lot of that took place in the last administration. But now we are facing the unwillingness of the Government to let private enterprise work on its own. When the management of a major bank has to come begging to the Secretary of the Treasury, who in turn most likely has to check with his boss, the President of the United States, in order to pay enough to retain his best people, something is wrong. The last time a big Government managed industry, that Government was called the USSR. It was an unmitigated failure and it eventually collapsed.

The Government now de facto manages the mortgage business – it has established the guidelines for who gets a mortgage and how much they get.

The automobile industry too has fallen under the management of the new administration. That is change for sure. And still both Chrysler and GM may go bankrupt. In an article I wrote last fall, I recommended that both companies be allowed to declare bankruptcy at that time. If it had happened back then, the Government would not have had to waste so much taxpayer money paying bloated labor costs and keeping open obsolete plants. American industry has undergone the most astounding change when it falls to the US Government to fire the CEO of an automobile company.

And lest one think that the President believes he has fully complied with his promise for change, he is far from it. His plans for more and more change will take him through the next 100 days and the 100 days after that and probably beyond then. Changes in energy policy will cost already hard-hit consumers even more. Uneconomic energy projects – windmills where there is little wind, as a good example – hit the consumer directly, resulting in higher utility rates.

But the proposed change that scares me most is the Government’s intention of providing some sort of universal health care. I say some sort because I don’t think it even knows what form it will take, how much it will cost or how it will be implemented. Health care comprises over 15% of the GDP of the country, a huge piece of the economy to fall under the aegis of the Government. Understandably this change is highly popular with the vast
majority of the population. But what is scary is how little people truly understand about what it will mean to their pocketbooks and what happens when the Government decides what health care is appropriate for them. People will be shocked when they discover how much the premiums will cost them. In my own surveys, most people feel that health insurance costs too much today, and they are of the belief that when the Government steps in the prices will come down. How wrong they are!

Perhaps the most scary part about the impending Government virtual takeover of the health care system in this country is that rather than allow for an open debate, which might educate the public about the important issues impacting the current cost of health care in this country – litigation, technology, liability insurance costs for doctors, lack of synchronization of drug approval with other countries, paperwork, and on and on – the Administration wants to slip a massive health care plan into the Reconciliation bill. And lo and behold, one morning it will have been achieved and the Government will be the almighty boss of one more giant sector of the economy. And then will come the popular cries because then the public will find out how much it will cost them.

If it could be proven that Government intervention in the private sector were good for the economy, good for jobs and good for profits, it would be hard to counter all this change. But there is a long and valid history that proves without a doubt that economic growth is decidedly diminished when it is managed by Government. That should not come as any surprise – Government’s revenues come from the people, so it has no right to create profits. But without profits, there is no motivation for capital formation, for innovation and for the growth and profits they provide. Government ownership of the means of production is socialism. The changes that President Obama has embraced and implemented and the ones that he is espousing have put the nose of the socialist camel under the tent of the U.S. economy.

That is change for sure and that is scary for me. It should be for you too.

Tags: economics, government, Politics

This entry was posted on Wednesday, April 29th, 2009 at 9:17 am. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.