07 March 2009

Fairy-Tale Land

Here's the latest news from Fairy-Tale-Land (sometimes known as Washington):

Treasury Secretary Tim Taxes-Are-For-Everyone-Else Geithner, Ben Bernanke and Peter Orszag all testified at Capitol Hill this week, defending the now $3.6 trillion omnibus spending bill, otherwise called a budget. Forbes writes:

According to the Treasury chief, the tax increases, which help offset the tax cuts contained in the stimulus bill, are motivated by more than just balancing the budget. Geithner says the administration feels a "moral imperative to make our society more just." It's good economic policy too, he adds: "It will mean there is again a fairer, more equitably shared tax burden on the vast majority of Americans."

Sounds like redistribution to me, with a tax cheat at the helm. (Not that there's anything wrong with tax cheats in Fairy-Tale Land. In fact, it's becoming a job requirement. The new nominese for US Trade Rep meets the basic requirement of failing to pay taxes). The article goes on:

Upon its release last week, the budget was criticized for its optimistic outlook on the economy. Christina Romer, chair of the Council of Economic Advisers, says projections about future government spending and tax revenues are based on an assumption that the economy will shrink by 1.2% in 2009 but return to strong growth of 3.2% in 2010.

That's noticeably sunnier than recent forecasts from the Federal Reserve and Congressional Budget Office. But even Bernanke (who before being appointed Fed Chairman by Bush was the chair of his Council of Economic Advisers) defended the forecasts.

"It's true the administration's forecast is a little more optimistic than the Fed and [Congressional Budget Office's] forecasts," he said. "It's important to understand these forecasts are not precise. Although they are on the optimistic side, they are within the range of uncertainty all of us face."

So the budget is based on a fairy-tale made up number that falls within the 'range of uncertainty.' Huh? This is absolutely the first time I've ever heard of a budget being based on the 'optimistic side' of a 'range of uncertainty.' I'm sure that prior budgets have also had a fair bit of magical tweaking, but when we're in the middle of the deepest recession since the late 70's and early 80's, optimistic projection in order to justify both spending and heavier taxation is ludicrous. I like my fairy tales to remain in the world of fiction. They're pretty inconvenient in the real world.

Meanwhile in Fairy-Tale-Land, the President sent a private letter (allowed to leak to the media), to Russia's President Medvedev, which President Obama says did not offer a quid-pro-quo on a missile shield in exchange for help with Iran. Instead, the president corrected himself:

The president said that his recent letter to Moscow expressed his stance that reducing the threat of a nuclear Iran in turn reduces the need for a missile defense shield in Eastern Europe.

Senior U.S. administration officials previously suggested there was a trade-off in the letter, which they said hinted that plans for the defense shield could be unnecessary if Russian President Dmitry Medvedev helped in blocking Iran's progress toward building long-range missiles.

But Obama walked that claim back in a session with reporters following his meeting Tuesday with British Prime Minister Gordon Brown.

"It was simply a statement of fact that I've made previously," he said, stressing that the defense shield would be aimed at Iran, not Russia.

This is ridiculous on so many levels. Even if one truly thinks this would be a fair trade, and in the long-term interests of our country (and it may very well be given the system's frequent test failures), one doesn't announce to the world that we're willing to trade away a piece of our defense network. Nor does a good trade get made by putting all the cards on the table up front. It seems likely that this was essentially a quid-pro-quo offer when Secretary Clinton emphasized that the shield is only for defense against Iran. We certainly need something to deal with Iran, which is now thought to have enough material for nuclear weapon's development, but which may or may not be close to development of an actual weapon.

While kow-towing to Russia and the most liberal, anti-business elements of Fairy-Tale-Land, President Obama managed to diss our nation's closest ally by abruptly canceling a joint-news conference with Prime Minister Gordon Brown. Apparently the White House didn't let Brown's staff know of the change until the last minute.

And finally, the magic of Fairy-Tale-Land has wreaked havoc once again on the stock markets. Almost every time someone on the president's Council of Economic Advisors (or apparently the president himself) opens his mouth on the 'recovery plans,' the markets tank. The DOW plunged below 7000 for the first time since the tech. bubble burst in the late 90's, from its all-time high in 2007 (note to Congress and the President: 2007 is before you got your hands on everything - it might be a sign), and the president now has his very own bear market. But all of this OK in Fairy-Tale-Land since according to the White House, the stock market is no longer a good indicator of economic trends.

Does anyone know the way out of Fairy-Tale Land?

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