Columnist.
All this chatter about a so-called global currency war is utter nonsense. All that is happening is the Japanese are wisely taking steps to increase liquidity and depreciate their vastly overpriced yen. They are doing this in order to avoid deeper and deeper deflation. That deflation will sink the Japanese economy for years to come if remedial actions are not taken. Among all the big economies, none needs quantitative easing more than Japan's. All the Japanese have done so far is make cheap loans to banks, but with no concerted QE. But QE *is* coming this spring, when Prime Minster Abe appoints a new Bank of Japan head man. Mostly through jawboning, the Abe government has lowered the yen in round numbers from about 77 to the dollar to roughly 93 to the dollar. It's about a 20 percent change. Long overdue. My guess is the yen will wind up around 120 to the dollar as the year progresses.
Yesterday's report of a 0.1 percent gross domestic product decline for the fourth quarter came as a surprise to most forecasters. But it actually masks considerable strength in the *private* economy. Namely, housing investment in the fourth quarter jumped 15.3 percent annually, business equipment and software spiked 12.4 percent, and real private final sales rose 2.6 percent. All in all, the domestic private sector of the economy increased 3.4 percent annually -- a very respectable gain. And here's one for the record books: Working ahead of year-end tax hikes, individuals shifted so much money to the fourth quarter at the 35 percent top rate that personal income grew by 7.9 percent annually -- a huge number. And there's more: In order to beat the taxman, dividend income rose *85.2 percent annually.* You think tax incentives don't matter? Guess again.
One of the least remarked upon aspects of President Obama's inaugural speech was his attempt to co-opt the Founding Fathers' Declaration of Independence to bolster his liberal-left agenda. '...[F]idelity to our founding principles requires new responses to new challenges; that preserving our individual freedom ultimately requires collective action." ... The "collective" is a socialist idea, not a free-market capitalist thought. And the story of the last quarter of the 20th century was of the absolute breakdown and end of the collectivist model. Collectivism was thrown into the dustbin of history by the weight of its own failure.
OK, it's official. According to the Treasury Department, the U.S. debt jumped to $16.1 trillion in 2012 from $14.8 trillion in 2011. That's a $1.3 trillion deficit for the last year. *Remarkable.* During President Obama's first term, the federal debt rose by roughly $6 trillion. Now, if they are bold, House Republicans will take advantage of these dismal numbers. Bold means bold spending cuts, as in cut spending like there's no tomorrow. Bold means implementing the $1.2 trillion spending sequester. Bold means an absolute rock-solid commitment to spending cuts. A new Rasmussen survey shows that 62 percent of Americans favor across-the-board spending cuts. That includes *every* program of the federal government, according to the survey.
The worst part of the Jack Lew nomination for treasury secretary is not simply that he has no qualifications, standing or experience in the financial world or international sphere (think G20 and European debt crisis). Nor is it simply that he doesn't have any seasoned currency opinions (under Obama, the greenback has dropped 10 percent, while gold has doubled). Yes, these are big disqualifiers. But the real problem is that Lew is a left-liberal Obama spear-carrier, whose very appointment signals a sharp confrontation with the Republican House over key issues such as the debt ceiling, the spending sequester, next year's budgets and taxes. From all the way back when Lew was staff advisor to Tip O'Neill, he has been a man of the left. So as treasury secretary, I expect the former Obama budget director to push for trillions of dollars in new tax hikes, absolutely minimal spending restraint and no serious entitlement reform.
One cheer out of a potential three is all anyone can logically give the fiscal-cliff deal. On the day after the bargain was clinched, the stock market gave a 300-point cheer. So be it. In the short run, extending tax cuts up to $450,000 probably saved us from a recession. If all the tax cuts *had* expired, we'd have a $500 billion tax hike, plus marginal rate increases, and that would have sunk the economy. So I'm going to bet that the big stock rally was a sign of *relief* that the final deal wasn't worse. The final product was sort of a least-bad tax scenario. The top tax threshold got to $450,000. Capital gains and dividends were capped at 20 percent. And even the estate tax did better than feared, with a 40 percent rate off a $5 million exemption. Plus, all the tax rates were made permanent -- including the rate for the alternative minimum tax (AMT).
When you lose an election, you get frustrated. When you're sitting in a subpar 2 percent economy, and are faced with tax hikes rather than marginal rate reductions, you get even more frustrated. And when you're staring at $47 trillion in spending over the next 10 years, and $8.6 trillion in deficits, your frustration levels climb even higher. These are among the frustrations that led a number of House Republicans to pull back from Speaker John Boehner's so-called Plan B.
Despite all the media hullabaloo about the fiscal cliff and a potential recession if none of the Bush tax cuts are extended, stock markets have behaved calmly throughout this whole period. I'm going to guess that stocks, in their wisdom, are correctly sniffing that there will be no calamitous falling off the cliff. By that I mean there will be no $500 billion tax hike, which would be an economy killer. Instead, after speaking with prominent Republican House and Senate members, I have come to believe the following: The GOP knows that Obama has the upper hand in this post-election battle. Therefore, they are preparing a strategic retreat.
Republicans are divided. President Obama won't budge. And more and more, it looks like the fiscal-cliff deadline of Dec. 31 will be missed. It's now clear that Team Obama wants higher tax rates *and* revenue-raising tax-deduction caps to meet their $1.6 trillion revenue target. Spending cuts and entitlement reforms are vague to nonexistent. In fact, it could be that Obama not only rejects the across-the-board budget sequester, but that he actively seeks to *raise* spending, not cut it.
Once again, President Obama dodged the key fiscal-cliff issues at a campaign rally/press conference Wednesday morning. Campaign-style, he argued that the middle-class tax cuts (below $250,000) must be renewed in order to prevent a $2,200 average tax hike from hitting middle-class folks. He added that a middle-class tax hike would cost consumers $200 billion in spending power. OK, fine. But no one wants to raise middle-class taxes. That's not the issue. And even if those numbers are right, they dodge one of the key points in the dialogue between President Obama and House Speaker John Boehner -- namely, what to do about top income-tax rates, which include capital gains, dividends and inheritance taxes.
In the fierce headline debate over the so-called fiscal cliff, our newly re-elected president argues that "a majority of Americans agree with (his) approach." That approach, according to the president, is "to combine spending cuts with revenue -- and that means asking the wealthiest Americans to pay a little more in taxes." Well, that's not exactly what the exit polls said. To the question "Should taxes be raised to help cut the budget deficit?" only 33 percent answered "yes," while 63 percent responded "no." Isn't that interesting? But nobody's talking about this exit-poll nugget.
Under pressure from Mitt Romney, President Obama has finally released his own policy vision for a second term. And, yes, it's the same old, same old. Some are calling it a second first term. There isn't a single true economic-growth incentive in this scant plan. There's no serious spending, deficit and debt reduction, and no attempt to solve the Social Security and health-entitlement problems, which are moving us toward bankruptcy. Nothing. Nada. But before getting into the details of this little plan, my basic conclusion is this: Mr. Obama wants to slash defense spending, raise all other spending and hike taxes to finance the largest government size he can possibly get.
With the unprecedented budget explosion of means-tested, welfare-related entitlements, does Team Obama think it can buy the election? It's a cynical question. But I wouldn't put it past that cynical bunch.
The irony of ironies: The Biden-Ryan debate was more about foreign policy than the economy and jobs. And yet another irony: Paul Ryan, an expert on all things fiscal, revealed a much better knowledge base of foreign policy than anyone thought existed. Shows how smart and well-rounded he really is. In fact, Ryan's Benghazi slam, right out of the chute, won him the debate. This terrorist attack is going to be a huge presidential-race issue. Americans are *furious* at the Obama-Biden-Clinton stupidity and mismanagement surrounding the tragic Benghazi deaths. They are enraged at the Benghazi cover-up. Ryan accused Biden of malfeasance in every aspect of this tragedy. It was a tremendous body slam right from the start.
Mitt Romney politely cleaned Barack Obama's clock last night. A lethargic and at times tired looking President Obama was out-hustled, out-facted, out-energized and out-informed by former Gov. Mitt Romney. Completely unlike Romney's convention speech, tonight he focused on strong economic issues, developed his philosophy of limited government and convinced me beyond a shadow of a doubt that he is in fact a pro-growth tax reformer who wants to lower the rate and broaden the base in a revenue-neutral fashion that will actually create jobs and spur the economy.
One of the reasons Mitt Romney and the GOP failed to get a convention bounce was their inability to talk tax cuts, economic growth and jobs. In his 45-minute convention speech, Romney spent 200 words on the economy, with no mention of tax cuts. It was the same for his running mate, Paul Ryan: no mention of tax cuts at the convention. In fact, Romney and Ryan didn't talk tax cuts leading up to the convention, and they didn't in the weeks that followed. This has hurt them in the polls. They haven't connected the dots between President Obama's anemic economy and the Romney-Ryan solution to improve it. *But,* all of a sudden, there may have been an "aha" moment. In a "60 Minutes" interview this past Sunday, Romney *did* mention tax cuts, and take-home pay, too. *Whoa.*
About 30 years ago, Paul Volcker launched a monumental monetary effort to bring down inflation. As Fed chairman, he sold bonds, removed cash from the economy and cared not one wit about rising interest rates. And it worked. Gold plunged, King Dollar soared, and the drop-off in bank reserves and money extinguished high inflation -- and actually launched a multi-decade period of very low inflation. This week, current Fed chairman Ben Bernanke embarked on an absolute reversal of Volcker's policy. He is launching a monumental effort to buy bonds and inject new money into the economy in order to reignite economic growth and job creation. It's like history is repeating itself, but in reverse. Gold is soaring, the dollar is falling. Something's wrong with this picture.
Perhaps the reason for President Obama's flat and energy-less speech Thursday night -- TV cameras panning the convention floor actually showed delegates falling asleep -- was that he already knew Friday's jobs numbers were going to be a disaster. The August unemployment report completely punctured his argument that if you just give him four more years, his policies will solve the economy. Of course, reading through the speech, I didn't see the word "jobs" mentioned once. In fact, though I could be wrong, I didn't see the word "growth" mentioned once.
Did Mitt Romney make the economic sale at the Republican National Convention? Did he convince people who are living at the margin or unemployed and discouraged that he has the answers to the economy? Frankly, I don't think so. I do not understand why he did not talk about his 20 percent across-the-board personal tax cut plan that would help the middle class enormously. He never mentioned it, and he went into no detail on the business tax cut plan. This plan is terrific for competition and global investment. He talked about a jobs tour. I frankly have no idea what a "jobs tour" is. *I do know that 23 million Americans need jobs.* I don't know that they need a president on a jobs tour to inspect them.
In front of a spirited crowd that packed the Tampa Times Forum, Chris Christie gave a solid speech that echoed Mitt Romney's programs, consisting of substantial budget cuts, tax cuts and entitlement reform. Christie pressed on the notion of what he called "principled compromise," which is exactly how I think Mitt Romney is going to proceed if he wins the election. In a very sharp dig at President Obama, Christie emphasized true leadership, and not just governing in accordance with how the polls went. His line of the "Second American Century"-- which is a Marco Rubio line -- is a fabulous line. Basically, he means we are not going into decline.
