January 11, 2010

“We Are…Fundamentally Transforming America” — and He Means It!

by Hal Gershowitz

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Pardon the space-saving ellipses (…) in the headline above. What President-elect Obama actually said the week before the 2008 election was, “We are five days away from fundamentally transforming America. And as noted above, he meant it, and, as his actions have shown since he assumed office, he intends to do just that; fundamentally change America.

Let’s give the President partial credit for telling the nation what he intended to do, i.e. fundamentally change America, now that we can really scrutinize the early fundamental changes that have ensued with clarity unencumbered by the fog of campaign rhetoric. However we would like to pose the question of whether or not this is really change we can believe in (as the Obama campaign promised) or, more to the point, change we would ever want to believe in.

To start, we need to review exactly what transformation or change is taking place. As we have observed in prior essays, America is being transformed into a European-style statist nation. To be fair, we would be the first to acknowledge that other presidents have led significant statist government legislation during their watch, especially since FDR and his New Deal. Social Security is certainly the lasting legacy of that period, Medicare the legacy of Lyndon Johnson’s Great Society and Medicare Part D the legacy of George W. Bush’s substantial (and irresponsibly unfunded) expansion of Medicare into Prescription Drug entitlements.

Statist initiatives are not Barack Obama invention. Flirtations with statist policies have been commonplace. What we would argue, however, is that President Obama is proving to be the nation’s first truly statist President (although some would argue that FDR deserves that dubious distinction). Obama’s objective is not to have a major statist piece of legislation in place, but rather fundamentally to alter and expand the role of government in our economy and daily private lives and substitute the judgment of appointed bureaucrats for our own, so to leave a statist nation in place as his lasting legacy. And, we believe, that is not what America bargained for when it voted for the change his campaign promised, “that we could believe in.”

To be sure, there is some inherent statism in the very concept of government. The word “statism” is a derivative of the word “state.” Government should supply what individuals cannot, e.g. the common defense, rules for the orderly and enforceable conduct of private contracts between individuals and sensible tax policy to fund the activities assigned to it. There is, however, also a tipping point beyond which the role of government unduly restricts the freedom of choice and ordered liberty of individual law-abiding citizens that has powered this nation to greatness and instead burdens our economy and our lives to no common good. We believe we are in the process of passing that threshold. That is fundamental transformation for which Americans didn’t bargain, but it is the transformation President Obama had in mind, and which he, and his like-minded Congressional majority, is delivering.

America is being aggressively directed into a European-style statist society. That is not what America was intended to be, at least not by that incredible generation that staked their well-being, their fortune and their very lives on establishing a new and remarkably enduring system of governance based on a paradigm of maximum individual liberty and minimal government intrusion into the lives of its citizens.

The chasm between the governance philosophy of our founding fathers and that of the current administration is so wide that it cannot be rationally bridged. Government as an intruder in almost every facet of the lives of citizens is not the vision of Washington, Adams, Jefferson or Madison. Instead, today’s statist philosophy jettisons that vision altogether. That explains why Barack Obama, some years before he became President Obama, complained that the Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society. “To that extent,” he lamented in a broadcast interview, “the Warren Court…didn’t break free from the essential constraints that were placed by the founding fathers in the Constitution…that generally the Constitution is a charter of negative liberties — says what the states can’t do to you — says what the Federal government can’t do to you, but doesn’t say what the Federal government or State government must do on your behalf (emphasis added).” Well, he got that right. And, all indications are, he wants to change that.

The hints of things to come came early. The very first thing a president must do is assemble his team with people who will advise him and, more importantly, implement his decisions and transform his vision for the nation into the policies and rules and regulations by which we, as a society, will live. First, of course, come the cabinet appointments, usually high-profile men and women who will administer huge federal departments and become the official spokespersons for the Administration with respect to their various areas of responsibility. They will spend a great deal of time delivering public addresses and attending state ceremonial functions.

Then we have the second tier of appointments who often fly under the radar, and while they invariably will be of lower profile then the cabinet secretaries, their power is awesome. Their job is to get the President’s agenda rolling and to put his mark, as indelibly as possible, on the great American landscape. They are the real implementers of the President’s agenda, and as such, provide the best insight into what the President wants the country to look like by the time he leaves office. Most of these people are working as presidential staff and are not subject to the Congressional scrutiny provided by the confirmation process. If Congress wants to delve into their activities, presidents invariably invoke the concept of Executive Privilege to thwart an investigation. These appointees, aptly referred to as “Czars” (derived, quite aptly, from “Caesar”) are confirmed by no one and report to no one other than the President or his cabinet-level appointees. The appointment of these all-powerful Czars is not unique to President Obama. Such presidential appointments have been commonplace since Teddy Roosevelt’s era, although the constitutionality of these unconfirmed appointments has long been questioned, but never seriously challenged.

The speed with which President Obama announced his Czar appointments and the number he announced (over 30 during his first six months in office) is impressive and certainly suggests that considerable thought went into these appointments well before he assumed office. Most of his appointments to these critical positions have one thing in common with the President: no private sector or business experience whatsoever. Most have never managed anything.

Even FDR and President Truman drew half of their high level appointees from the private sector. So has every other president since Eisenhower. President Obama has looked to the private sector for less than 10% of these highest-level officials. Most of these critical appointees come to Washington with new and untested theories but little, if any, practical experience in the real world. No one, therefore, should be surprised that in his first year in office President Obama has increased discretionary domestic spending a whopping 24% over President Bush’s last full year budget and that doesn’t include the more than three-quarters-of-a-trillion dollar stimulus program of which 70% remains undistributed.

A basic premise of our founding fathers was that government should raise no more revenue than was needed to administer the government and that as much as possible of what the people earn should be left with the people. That is what made America unique among the nations of the world, that is what produced the most productive society in human history and that is what lifted tens of millions out of poverty here and abroad with a speed also unprecedented in history. The founders were wary of creating a government with an ever-increasing appetite for whatever wealth might be accumulated by the labor and creativity of the people. Not so with this Administration. They invariably believe that government should take as much as government can get away with taking in order to fund all manner of programs that they decide are in the people’s interest. The current, extraordinarily expensive, healthcare bill that the vast majority of Americans clearly do not want is a perfect example of such statist thinking. As Democrat after Democrat has, in effect said, “trust us, sooner or later, you’ll come to like our healthcare bill.” One could have added, “Once it’s law and we wade through the thicket of its nearly 3,000 pages we might find a nugget we actually like.”

Other steps taken during President Obama’s first year in office abound with additional examples of the government overreach we can now expect. We now have a Diversity Czar, Mark Lloyd, at the Federal Communications Commission. No one seems to know exactly what his responsibilities are, but we do know he has been outspoken about having the government promote, if not force, “more political balance” in the media. He seems clearly perturbed by the popularity of conservative talk radio and appears unimpressed with the idea that listening audiences should determine what they like or do not like to hear. This is quite consistent with a White House that, in effect, blacklisted Fox News because of the network’s conservative tilt. It is also consistent with the urging of members of the Congressional Black Caucus to have the Treasury Department subsidize minority- owned broadcast properties in order to promote diversity. We believe diversity should be promoted too, but not as a function of government muscularity. Programming that appeals to enough people will find an audience. We have an Automotive Czar who has no automotive experience. We have a Regulatory Czar, Cass Sunstein, who is a high-powered and well-respected intellectual theorist from academia whose writing suggests that he believes all individual rights are indulgences granted by government. And, of course, we had the Green Jobs guru, Van Jones, but let’s not even go there.

In what might, perhaps, be the greatest usurpation of power by bureaucrats we need look no further than the recent actions of EPA. Just as we were pondering recently released data that, for the first time, confirms from data-collection points all over the globe that the earth has been in a ten-year cooling trend, the Obama administration’s EPA has announced that it is going to regulate carbon dioxide as a pollutant to fight global warming (now more frequently called climate change). The rush into this intrusive and outrageously costly regulatory absurdity is about to be imposed on American industry and American consumers because the Administration knows pushing for-cap-and-trade legislation is pushing more than America would or should tolerate. Equating carbon dioxide with pollution and constructing an enormous fee or tax structure for its emission is statism on speed…government run amok. Furthermore, using this regulatory work around amounts to little more than a legislative by-pass in order to extract trillions from the economy to fund an enormously speculative fix to climate change that may well be a naturally occurring phenomenon over which humans may have little if any control.

Then there is the current recession. In addition to the trillions earmarked for stimulating the economy, the financial crisis has also given the Administration great license to overhaul regulation of the financial industry. Besides the substantial cost this is certain to impose on the industry, we can anticipate a new growing bureaucracy to correct the failings of an existing, well-intentioned but seriously misguided bureaucracy. There has been a continuous pontifical litany of how Wall Street greed and lax regulation by the Bush administration nearly upended our entire economy, and, indeed, there is plenty of room for criticism there.

Nonetheless, deafening is the absolute silence regarding the role government played in meticulously and deliberately encouraging, constructing and enforcing policy to direct a substantial portion of the nation’s financing capacity into the hands of very high-risk borrowers so they could purchase and own homes. A worthy goal, at least at first blush. This was, however, a classic attempt to centrally plan (government direct) the allocation of resources into segments of the economy in which the market itself would have never deployed so great of an investment. Banks were directed, and essentially forced, to provide credit to borrowers with no credit history or even to borrowers who, by any rational judgment, would be unable to get credit at Rocky’s Pawn Shop. And while Administration acolytes are quick to chastise the prior Administration for lax regulation and even deregulation, nary a word is uttered about the repeal of the depression-era Glass-Steagall Act at the urging of Secretary of the Treasury Robert Rubin and (of all people) Larry Summers, both of whom were key advisors to President Clinton when he signed the repeal bill. We hear nothing from the Administration about the failure of the House and Senate banking oversight committees under the chairmanships of Senator Chris Dodd and Representative Barney Frank or about the foolish and frantic policies of the government sponsored enterprises, Fannie Mae and Freddie Mac. Nothing.

The government provided the federal policy, the federal backing and the federal inducement and the absurdly cheap money to pour into properties that now swell the home foreclosure rolls. And yes, many institutions in the private sector constructed creative institutional means to channel that cheap federal money with that absurd federal mandate into newly concocted, securitized instruments, many of which turned out not to be worth much more than the paper on which they were printed. We hear about private greed and, indeed, we should, but long-standing government policy, government mandates and the availability of cheap money to encourage the extension of credit to people who were simply not creditworthy constituted the stuff of which this bubble was made.

And what is the Administration’s answer to this farce? More federal cheap money, removal of borrowing limits from Fannie and Freddie, and a new generation of regulatory reform. How much simpler it would be to just enforce existing banking regulations that were deliberately ignored by the bank regulators in the service of unrealistic and misguided mandates to extend home ownership to those who could not afford it, and to acknowledge the absolutely phony values on the balance sheets of Fannie Mae and Freddie Mac. But that would be, in the words of White House Chief of Staff Rahm Emanuel, letting a crisis go to waste.

Today’s statists look at the founding fathers, their philosophy of governance and the constitution they crafted consistent with that philosophy as quaint relics of a by-gone age and of little relevance. They are wrong…and, we believe, most Americans know they are wrong now that they have come face to face with the kind of change and transformation candidate, now President, Obama had in mind. Shame on us. We should have read the small print.

All comments regarding these essays, whether they express agreement, disagreement, or an alternate view, are appreciated and welcome. Comments that do not pertain to the subject of the essay or which are ad hominem references to other commenters are not acceptable and will be deleted.

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