When jobs hemorrhaged to the point that the unemployment figure sailed to 10.2 percent in October 2009, Team Obama was forced to back off from making up how many jobs were “created or saved.” By December 2009, they were shamed into abandoning their Alice in Wonderland formula, sending out a spokesman from the very FDR-sounding “Recovery Board” to put the final nail in the coffin: “Since the Office of Management and Budget is not going to use ‘jobs created or saved’ anymore, we’re not going to use it either.” And by the fall of 2011, Team Obama had bailed on the entire charade, referring only to “jobs supported.”
The leftists sold the “stimulus” as a way to generate confidence that the government was large and in charge, and that, in turn, was supposed to spark economic confidence and growth. In reality, the “stimulus” was meant to be a nearly trillion-dollar redistribution of income. In practice, it was a redistributive mess. Job creation, when any jobs were created at all, fell far short of what is required just to absorb new entrants into the job market alone, and unemployment mostly stayed in the 9 percent range for the next two years.
GDP growth has also remained anemic, with quarterly growth either paltry or nonexistent. By comparison, during the tax cut–driven Reagan recovery of 1983–1984, quarterly growth rates soared to 7 and 8 percent, while on average between 300,000 and 500,000 new jobs were created each month. During the three summer months of 1983, 1.7 million new jobs were created and the unemployment rate fell a full percentage point. That was a real Recovery Summer!, unlike the bogus Recovery Summers! Team Obama kept telling us to expect (note the emphatic exclamation point, also put to good use by the ’80s pop duo Wham!). Indeed, Recovery Summer! was akin to a slasher flick in which nobody survives. The proof is in the payout pudding: the “stimulus” was signed on February 17, 2009. Through August 5, 2011, $668 billion of the “stimulus” money was paid out. That equates to $743 million spent per day and $30 million spent per hour. On nothing, for nothing, except to fulfill the kooks’ redistributionist fantasy. On that score, it succeeded wildly.
As a huge political slush fund, the “stimulus” followed in the grand tradition of the bailouts. Bailouts are perhaps the most odious concept in capitalism. The free market guarantees opportunity. It does not guarantee outcomes. According to the kooks, that’s capitalism’s fatal flaw. Government should be in the business of guaranteeing outcomes in order to enforce “fairness” and “equality.” For the banks, the kooks—when they’re not regulating them to death—are good for business. Banks do well with big-government spending because they get major fees in debt issuance, so they’re inclined to work with the kooks. Bigger government spending, bigger fees for them.
When the financial crisis hit in the autumn of 2008, the panic was so widespread and the problems so grave that even the Bush administration agreed to TARP, a $700 billion fund approved by Congress, to stabilize the shaky banks and unfreeze lending, which had seized up. Half of the designated amount, $350 billion, went out under President Bush. That first half was pushed onto Congress by Bush’s Treasury secretary, Henry Paulson, a humanoid who resembles the tall, thin alien at the end of Close Encounters of the Third Kind. Individual members of Congress still have panic attacks and nightmares about Paulson’s powers of mind persuasion, which he used to get their TARP vote. Some have even claimed that Paulson took them up into his mother ship and gave them an anal probe. Having his own misgivings about the bailout, Bush reserved the balance for use at the new president’s discretion. Obama then released the remainder. On February 5, 2009, the new Treasury secretary, Timothy Geithner, reminded the bankers that they were now wards of the state. “Public assistance,” he pointedly told them, “is a privilege, not a right.”
They joined the insurance giant American International Group (AIG) and Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) largely responsible for the housing collapse, and other financial institutions of all sizes, in government welfare-dom. In 2008 alone there were over 740 separate bailouts totaling hundreds of billions of taxpayer dollars.
There were dozens of other bailouts that took place after September 2009, and many of the banks and other financial entities that took or were forced to take bailout money repaid it with interest. At the time, the argument prevailed that only the government was big enough and flush enough to pump enough capital into the banks, many of which were designated “too big to fail.” In other words, if those financial institutions were allowed to collapse, much of the financial system as well as those around the world would also collapse, creating a global economic catastrophe. But the banks were given money through TARP to lend and instead sat on it. The Federal Reserve paid them interest to hold the money, thus defeating the purpose of the capital infusion to unfreeze lending.
Despite that stated rationale of preventing an economic Armageddon, many Americans viewed as corrupt the bailouts of banks that had made risky bets. The countervailing argument was that if market forces were allowed to play out, the faltering banks would have gone under and the pain associated with their collapse would have been acute. But the market would have shaken out the failures, the toxic assets, and the bad loans, the system would have flushed through, and in the end the financial sector would have been healthier. This was the same argument against massive government intervention in the housing sector, which has also prevented that market from clearing itself out. Government intervention prevents sharp pain in the near term but ends up prolonging the pain over a longer period of time. It staves off the inevitable but never fully avoids it.
For the kooks, the bailouts served another purpose: to get the financial institutions under the wing of the government, from which it would be exceedingly difficult to extricate themselves. As Geithner told them, the banks (as well as every other industry that either needed or was forced to take federal money) were turned into welfare children. And the leftists’ objective was to keep them so for as long as possible. On September 14, 2009, one year after the initial financial panic, the New York Times ran a piece titled “U.S. Is Finding Its Role in Business Hard to Unwind,” in which they wrote, “Mr. Obama plans to argue, his aides say, that these government intrusions will be temporary. At the same time, however, he will push hard for an increased government role in overseeing the financial system to prevent a repeat of the excesses that caused the crises.” And so he did: when TARP ran its course, the Obama administration sought and got a major financial regulatory overhaul, the twenty-three-hundred-page Wall Street Reform and Consumer Protection Act, also known as Dodd-Frank (named for those two paragons of congressional financial oversight, Senator Christopher Dodd and Representative Barney Frank), which enshrined in law the concept of “too big to fail” and, with it, the rationale for a perpetual government presence. One form of dependency ended and was replaced by another. Like a drug addict looking for a higher thrill, eventually marijuana just doesn’t do it, and you have to move on to the harder stuff like cocaine and heroin. By the look of the Hill staff who wrote the Dodd-Frank bill, they must have been sampling the product.
Joining the banks in Bailoutville were General Motors and Chrysler, which became poster children for why government should not inject itself in the private sector. In the autumn of 2009, the two automobile companies faced a collapse that would assuredly lead to their ultimate end as viable businesses and the loss of tens of thousands of jobs. Lost in the chaos was the fact that a third American car company, Ford, had seen the difficulties approaching, realigned its business operations, made cars that consumers actually wanted to buy, and did not require or ask for taxpayer money. That’s what companies are supposed to do in a market system. Sadly, most of the government’s and media’s attention was focused on the companies that had failed to adapt to the market—and got rewarded for it.
President Bush began the auto bailout ball rolling, and Obama picked it up with relish. Obama saw not only an opportunity to partially nationalize the auto industry but a chance to pay back some of his most devoted suppo
rters. The auto bailouts were a systematic redistribution of great amounts of ownership from existing shareholders and creditors to the auto unions. Like the “stimulus,” the auto bailouts were a political act, not an economic one. If GM and Chrysler had been allowed to go into standard bankruptcy without the government bailout, restructuring would have taken place, an individual or company (U.S. or foreign) would have come in and paid the value, and the companies would have moved on. The unions, however, would not have fared as well. Thus, the Obama intervention.
An estimated $80 billion in taxpayer dollars were poured into GM and Chrysler. In the bailouts, GM gave the United Auto Workers (UAW) union 17.5 percent of its common stock, $6.5 billion of preferred shares, and a $2.5 billion note to fund a trust that will take over retiree health care costs. In the Chrysler bankruptcy, the UAW owned 55 percent of the stock in the restructured company. Here’s the deal. If GM and Chrysler want to be Government Motors, that’s fine. But from now on, I want all cars that come from those two companies to say so. I want them covered in images of the Obama administration, just like the advertisers covering NASCAR vehicles. I want side view mirrors shaped like Obama’s ears, I want the front bumper to resemble Janet Napolitano’s triple chin and I want a tailpipe shaped like Biden’s finger. Those sweetheart union deals pale in comparison to another one the UAW got in, of all places, ObamaCare. Bloomberg News uncovered an even bigger bailout to the UAW buried deep in the health care “reform” bill, which included $10 billion to pay for some of the most expensive medical costs for millions of autoworkers, steelworkers, teachers, and other early retirees with coverage. This move helped to offset health care concessions made by the UAW as part of the taxpayer rescue of GM and Chrysler. In other words, the union ended up giving up nothing. This was a classic case of Barry Three-Card Monte, where the chief confidence man in the White House makes a mark out of the taxpayers by taking sweet UAW deals out of one bill and dropping them into another. It’s simple: create a fake UAW stooge willing to make concessions who says he’s on the side of the American people, while he’s really on the same side as the card dealer the whole time.
Meanwhile, GM’s bondholders got screwed. GM had $27.2 billion in unsecured bonds owned by the public. These were owned by mutual funds, pension funds, hedge funds, and retail investors who bought them directly through their brokers. Under the restructuring deal, they were forced to exchange their $27.2 billion in bonds for 10 percent of the stock of the new GM. This amounted to less than five cents on the dollar. If you were one of the bondholders, too bad for you. Your wealth just got redistributed to the unions.
GM was quickly reminded that Obama literally owned it. In an extraordinary and unprecedented exercise of power, the chief executive of the United States forced the resignation of the chief executive officer of a major American company. One day, Rick Wagoner was the CEO of GM. The next, he was escorted out of his position by the president, who also demanded that the companies close hundreds of dealerships. Obama repeatedly said, “I have no interest in running the car companies,” and yet he seemed to be relishing doing exactly that.
Since it was your money GM accepted, you might want to know how the company has spent some of it: tens of millions of taxpayer dollars went into weatherization projects in Maine and to “offset its carbon footprint.”
Most hilariously, GM was working on a reality television show about their electric flop, the Chevy Volt. It was to feature all ten people in America who actually own one, four of whom needed loaner cars after their Volts burst into flames.
Meanwhile, after the big transfusion of taxpayer money into Chrysler, over 58 percent of that American icon went to an Italian company, Fiat. Another rousing bailout success.
Did, however, the $80 billion “save” American jobs? According to Paul Gregory, research fellow at the Hoover Institution, on the day it filed for its taxpayer-funded bailout, GM had 92,000 employees. After bankruptcy, it had 77,000 workers, a 16 percent loss. Gregory projects that had GM gone through a regular bankruptcy, it would have experienced roughly the same job loss—and the taxpayers would not have been on the hook. The bailouts did not save “millions” of jobs, as Obama, Biden, and the leftist gang promised. In fact, they probably only saved about 4,000.
And the cost to taxpayers? Obama’s own Treasury Department estimates that you and I will take it on the chin by $23.6 billion, despite GM turning a big profit. But hey, at least Obama took care of one of his biggest political constituencies and forced Detroit to make drivable toaster ovens.
No worries, though. All of this spending was being done in the name of economic “justice.” What could go wrong?
In January 2011, after having presented two $3.5 trillion–plus budgets and while preparing a new $3.8 trillion one, Obama made a big show in his State of the Union address of proposing a five-year budget “freeze” of nondefense discretionary spending. How meaningless and destructive was it? Let us count the ways.
First, when it comes to actually shrinking government, Obama is just not that into it. When Senator John McCain proposed exactly this kind of budget freeze during the 2008 campaign, Obama dismissed the idea out of hand, calling it a budgetary “hatchet” when what was needed was a “scalpel.”
Second, Obama spent his first two years increasing budgetary outlays by almost 25 percent. That means that the current baseline—at which he wants to freeze—is nearly 25 percent higher than it was when McCain originally proposed the idea. No wonder Obama didn’t mind suggesting a freeze. (He would continue spiking the spending baseline.)
Third, the so-called freeze did not apply to the big budget busters: Social Security, Medicare, and Medicaid, nor did it include things like the interest payments on the national debt. In fact, his “freeze” only covered about one-seventh of the budget. The other six-sevenths of the budget would continue to explode out of control.
Fourth, suggesting a “freeze” at such steeply high levels was insulting to our intelligence and destructive to our dire fiscal situation. Annual deficits are over $1 trillion, the national debt is careening toward $17 trillion, and Obama suggested grabbing more cookies out of the cookie jar. The jar is empty, and he’s still grasping.
Finally, most Americans have indicated repeatedly and emphatically that they want the federal government not to freeze astronomical spending levels, but to cut spending—drastically. Obama simply wouldn’t—couldn’t—do it. If anyone were wondering if Obama would moderate after the 2010 election, his disingenuous spending freeze should have erased all uncertainty. He blew a few kisses in the direction of so-called centrism, but where it counted—on the size, scope, and spending of government—he showed us that he hadn’t changed one iota. His circumstances had changed; he had to deal with a Republican House. But he has not had a change of ideological heart, nor has he moved to the much-ballyhooed center. He had to pretend he liked Republicans and was willing to embrace some of their ideas. In reality, he loathes those ideas and the GOP majority pushing them. And he loathes having to compromise, which is why he always does so little of it.
His appeasement fake-out didn’t work. Nobody was buying the “freeze” even as he was proposing it, for in that same speech, he also proposed boosting spending by an additional $20 billion, which he proudly claimed was $50 billion less than the additional spending he proposed in his 2010 State of the Union.
From that point on, Obama went for broke—quite literally. His next budget was so huge—$3.8 trillion—that it was rejected unanimously by the Senate, 97–0. Not even one kook senator could muster the political courage to back it.
Did that stop the Obama Spendthrift Express? No. In August 2011, he proposed $109 billion more for a new infrastructure bank and hundreds of billions of dollars more in government loans and loan guarantees for union-exclusive construction and green jobs boondoggles. Obama’s desire to spend other people’s money hit a crescendo of madness when he surprise-attacked John Boehner in the congressional cafeteria so he could steal his cigarettes and l
unch money.
Even a few Democrats were taken aback by Obama’s full-steam-ahead spending approach. After his party got creamed in November 2010, House Minority Whip Steny Hoyer said, “Now that we’re at $14 trillion in debt, I think the answer is—responsibly—we’re not going to get there [a balanced budget] in ten years, but we have to be on a very considered path to get there.... We’ve dug such a deep hole.”
Pardon me? Where was Hoyer during the bailouts, the “stimulus,” and the ObamaCare debate? He supported every spending proposal. If we ran our households the way the Democrats ran the national budget, we would be in jail for writing bad checks and fraud, sharing a cell with Bernie Madoff and making license plates.
Not that the early budgetary deals of this new age were any great shakes. The first real fiscal test came several months after the Republican congressional near sweep in November 2010. In April 2011, it dawned on members on both sides that their last temporary Band-Aid on the budget, a continuing resolution, was about to expire. Democrats and Republicans ran around with their hair on fire, trying to get a new spending deal in place to carry the nation through the beginning of the next fiscal year, starting October 1, 2011. Apocalyptic visions of national park closures and other unthinkable events associated with a government shutdown were unfurled. Members rushed to the microphones to assure the American people that a shutdown would be avoided at all costs. After all, who among them wanted to be blamed for denying little Sally and Jimmy a chance to visit the Lincoln Memorial?
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