I was puzzled about the low turnout for Reagan/Carter, the popular vote for Bush/Gore and the number of "undecideds" in this election. Moreover, I thought that the "undecideds" and the number who said they were not going to vote - and who didn't - spoke volumes. Census shows that historically 60 percent of the eligible population registers to vote and 80 percent of that number votes meaning that 25 percent of the eligible population has always determined elections in this country. Now lets analyze why anyone would vote for these democrats. Why would poor whites? Middle class whites? Upper class whites? Minorities? Women? Jews? Even Catholics? As to minorities, it speaks volumes that in the south, the democratic party is basically black with the southern congressional delegation being 50 percent black. It is also interesting that the first democratic Cuban American was elected to congress from Florida meaning that younger cuban Americans are trending democrat. Yes all those minorities have strong beliefs that are aligned with republicans and not democrats. However, each one votes democrat because they feel that the republicans are hostile to them - not to their beliefs - but to them. Laissez-faire does not appeal to them because laissez-faire and states rights have historically meant that white majorities have trampled the rights of minorities. I would have not gone to Georgia without federal intervention. Yes what Georgia was doing was unconstitutional and the federal government must impose obedience of the constitution upon the states. However, it is difficult for the historically discriminated against to be for a smaller less intrusive federal government because left to their own devices, the majority have ruled in their own self interest to the detriment of the rest of us.
Who did David Patreus think he was ? Bill Clinton?
Just in case you missed it, one of the best observers of America is the Economist. Read the following and you wonder why they endorsed Obama. But their observations are on point. I am certain I wasn’t the only one to wonder how the republicans could blow the senate races – every single one of them. http://www.economist.com/news/leaders/21565955-budget-deal-makes-sense-re-elected-president-his-opponents-his-country-and?fsrc=scn/tw/te/hugarepublican
If Obama repeats himself we are going to be into difficult times. However, if he embraces Simpson-Bowles, oks the Keystone pipeline, does not raise taxes on small businesses and exempts them from some onerous regs, then there is a likelihood that we may get through the next 4 years intact as a country. Given the voting patterns, if Obama remains stubborn and arrogant then there is a strong possibility of a serious movement toward secession with the rest of the states jettisoning the cities along with the west coast and the northeast. There is no logical reason why this country should remain unscathed from geographic reorganization. At least I live in two states aligned with my political views. However, I will miss Ohio and (most of) Virginia.
I was wrong. Barack Obama is not a one term president and was rewarded by the American voter for four more years. Go figure. No leadership on any issue. Disastrous foreign and domestic policies. Hostility toward business. High gas prices. High unemployment. Class warfare. Running on a platform of increased taxes. Amnesty for illegals. Benghazi. Fast and Furious. You name it. Not a single accomplishment. Yet all the so-called battleground states: Virginia, Iowa, Colorado, New Hampshire, Paul Ryan's Wisconsin, Ohio and Pennsylvania (with its beleaguered coal industry) voted for Obama. He is also leading in Florida despite cutting medicare benefits. Also Mia Love lost in Utah. The senate will be more liberal with Elizabeth Warren beating Scott Brown in Massachusetts, Tammy Baldwin beating Tommy Thompson in Wisconsin and Tim Kaine beating George Allen in Virginia. Moreover, the democrats won senate seats in Missouri and Indiana where the republicans both decided to commit political suicide with dumb comments on rape. So Obamacare will come fully on board, the EPA will run roughshod on energy producers and will backdoor cap and trade, Eric Holder is still at "Justice", the debt will run up to $20 trillion, get ready for the fiscal cliff - which Obama actually wants, the Fed will continue to devalue the dollar and tempt the inflation gods. If there is any bright spot it is that given time American business will figure out how to deal with this environment and will adapt. However that will likely mean high levels of unemployment as less labor will be utilized. All in all it is clear that the country will be fundamentally different going forward. For Barack Obama this is mission accomplished. As for me, I am going to take a break and go deer hunting until the season ends in January.
November 4, 2012
Regardless of who wins the presidency it is rumored that when his term as Fed chairman expires in 2014, Ben Bernanke will not be reappointed. This is no surprise if Romney wins. However, it is somewhat of a surprise if Obama is re-elected. This is because Bernanke has been the most accommodating Fed chairman in history. Under Bernanke, the Fed has purchased billions in Treasurys allowing the administration to spend without a budget constraint. One would think that Obama would welcome the continuation of what has been - to him - a wonderful relationship. On the other hand, Romney would certainly be delighted if Bernanke decided to exit even earlier, say January 2013. However, regardless of what Bernanke decides, a President Romney would be left with a Federal Reserve Board comprised of governors all appointed by President Obama. Even though the chairman gets the majority of the publicity, all the governors sit on the Open Market Committee that makes the decisions regarding monetary policy. This Board of Governors has been unanimous in its support of Bernanke in keeping long term interest rates artificially low. Thus, a Romney appointed chairman may encounter a recalcitrant group of fellow governors and find it difficult to reach a consensus if a change in policy were desired. Nonetheless, Fed policy even under Bernanke has been a contradiction. Through the expansion of its balance sheet by purchasing Treasurys in QE1 and QE2 and the purchase of mortgage backed securities in QE3, the Fed has dramatically increased the amount of excess reserves held in the banking system. Normally, these reserves would be loaned out, creating money. The result would be highly inflationary. That the banks are not lending the reserves and not creating money are a product of two disparate forces. The first is the Fed is paying 0.25 percent interest on the excess reserves. That amount is about what a two year Treasury earns, so the banks can hold the reserves and earn interest without incurring any default risk. Bernanke has indicated that this is how the Fed can ward off inflation. By manipulating the interest it pays on reserves it can induce the banks not to lend. However, by paying interest on reserves, the Fed is acting counter to its own stated policy - that of stimulating economic growth. Indeed, if you take out the increase in the government sector, overall economic growth during the Obama years has been negative. Coupled with the Fed seemingly driving the economy with its foot on both the accelerator and the brake are the actions of the Fed, the FDIC and the Comptroller of the Currency as bank regulators. All are still smarting over being accused of lax regulatory oversight precipitating the financial crisis. As a result all are now being heavy handed resulting in a tightening of loan standards drying up funding to businesses and individuals. So while the Fed is saying that it is pursuing expansionary monetary policy through its purchases of long term securities it is also not allowing the economy to expand. It would be a welcomed change to see a coherent Federal Reserve policy. Therefore, it will be a welcomed sight to see Bernanke leave.
I had never watched ESPNs 30 for 30 but watched the one “Ghosts of Ole Miss.” It told the story of the only undefeated Ole Miss team of 1962 juxtaposed with the integration of the school by James Meredith. It was a powerful story only marred by its telling. Too much time was spent on the story teller than on the story itself – but perhaps this is the style of the series. One lasting impression is the strength and courage of Meredith especially in light of the demonic evilness of the students interviewed. I enrolled in Georgia the exact same quarter that Meredith went to Ole Miss. I actually sent him a note telling him to stay strong. I never got an answer but he may have never gotten it. I remember growing up and hearing “you think Georgia is bad? You should be thankful you are not in Mississippi.” So true. The film revisited the deaths of Emmitt Till and Chaney, Goodman and Schwerner. The whites interviewed said “They deserved it.” No remorse there. Compared to Meredith, we seven blacks at Georgia had a walk in the park. Yes. Thank goodness we were not in Mississippi. The story then told of ridding the Ole Miss football games of all the confederate paraphernalia. Curiously it told of the first black cheerleader who in 1982 refused to carry the confederate flag but it neglected to mention the first black football player. I know all about this experience much too well. When I went to Georgia, the cheerleaders carried confederate flags as did most of the fans. The band was call the Dixie Red Coat Marching Band and played Dixie after the national anthem. We sat down and were pelted with stuff and yelled at until the dean of students showed up and started collecting IDs. Unlike Meredith, we went to every game and at every game we were called every name imaginable. Today no vestiges of the confederacy remains at UGA games – even the flags are gone from the tailgate. I wonder if the same is true at Ole Miss. The film also talked about the tribute to the 1962 team 50 years later and mentioned that Meredith was in the chancellor’s box. But it did not mention if any tribute was paid to Meredith. Curiously, there was a scene in which there was shown a statue of Meredith on the Ole Miss campus but not a word about it. Lastly, the best part of the film was the interview with Meredith himself. Clad in all white, he looked the part of a gentleman planter. He was still full of confidence and self assurance. Perhaps few people in history has had so great an impact on fundamentally changing a culture, a way of life and introducing so many in an entire state to the human race.
Speech to the Tennessee Bankers Association Meeting
October 24, 2012
The Economic Outlook
I do not need to tell you that the economy stinks. How bad is it? Absent the government sector, negative real economic growth of -0.3 percent. That means that this is the first president other than Hoover with negative growth during his first four years. Yes, the president has a point when he says that he inherited a bad economy. With George Bush the economy grew 6.6 percent. But the president’s policies made it worse. His antibusiness agenda, refusal to compromise by adopting Simpson-Bowles and the Keystone pipeline along with his desire for tax increases and health care are only the tip of the iceberg. Federal spending is now 24% of GDP and growing. Traditionally it is 20 percent. Middle class incomes have fallen by $4,520. Health care premiums increased by $3,000. Only a blind party loyalist would want four more years of this.
Regardless of who gets elected, there is the so-called "fiscal cliff” looming where we have tax hikes and spending cuts of nearly $600 billion of tax hikes and spending cuts set to take effect at the end of the year.
• Payroll tax cut benefiting 160 million workers is scheduled to expire at the end of the year (taking away $1,000 for the average family)
• increase in the taxes of $1.7 trillion under Obamacare
• A typical middle-income family making $40,000 to $64,000 a year could see its taxes go up by $2,000 next year if lawmakers fail to renew a lengthy roster of tax cuts set to expire at the end of the year, according to a new report.
• Taxpayers across the income spectrum would be hit with large tax hikes, the Tax Policy Center said in its study Monday, with households in the top 1 percent income range seeing an average tax increase of more than $120,000, while a family making between $110,000 to $140,000 could see a tax hike in the $6,000 range.
• The increases would total more than $500 billion -- a more than 20 percent increase -- with nine out of 10 households being affected by the expiration of tax cuts.
• Taxes would rise by more than $500 billion in 2013 -- an average of almost $3,500 per household.
• $109 billion in automatic spending cuts scheduled to take effect in January
Cumulatively, the country would see a 5 percentage point jump in its average tax rate, which works out to taxes on the top 1 percent jumping by more than 7 percentage points and about 4 percentage points for most people earning below $100,000 a year.
Put another way, people in the $40,000-$64,000 income range would see their average federal tax rate jump from 14 percent to 17.8 percent -- or an increase in their overall federal bill of 27 percent.
All told, almost 90 percent of all households would face a tax increase, though the top 20 percent of earners would bear 60 percent of the overall cost. Across all households the tax increases would average almost $3,500.
The new top rate of 39.6 percent would kick in for income over $397,000. The current top rate is 35 percent rate.
What will this portend for the economy? The Congressional Budget Office said in August that this would cause a 0.5 percent contraction in gross domestic product next year, triggering a recession.
If postponed the consensus of business economists is that the U.S. economy will likely expand 2.4 percent next year, up from projected growth of 1.9 percent in 2012.
The Federal Reserve analysts projected that the unemployment rate would stay near 8 percent through 2014 having downgraded its forecast.
Federal Reserve Chairman Ben Bernanke said "I suspect that the fiscal issues may be part of that."
I suspect that he may be right in the short run. But in the longer run, the irresponsible disregard of the Fed for the value of the dollar may be more significant.
Regardless, if Romney is elected - sell your gold.
Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com