Economy

It's the most ominous headline ever seen on a plain vanilla Associated Press news article: "Everything Seemingly Is Spinning Out Of Control."

A terrifying litany of economic, social, political and environmental collapse, the AP story ties together such horrors as the flooding of the entire U.S. Midwest, the awful failure of the "War On Terror" in Afghanistan and Iraq, the skyrocketing gasoline prices that are literally crippling America in a matter of weeks, the melting of the Earth's polar ice caps, the dramatic sudden failure of our nation's infrastructure, the hundreds of thousands of dead or missing after the Sichuan earthquake and Myanmar cyclone, and the U.S. real estate collapse which has violently stripped away the only real wealth of more than half of all homeowners -- and it's all only getting worse.

Beaten, debt-ridden and baffled by everything, many Americans have been obsessed by this long presidential primary and election season, at least on the Democratic side, where people voted in record numbers for either a return to the relative peace and prosperity of the 1990s, or gamble on someone stained by neither side of the Bush/Clinton regime. But what hellish skeleton of the American Dream will remain when we finally drag ourselves to the polling place on November 4?

The Chinese government announced today that it is cutting subsides on gas and diesel in the world's most populous nation, raising fuel prices between 16 and 18 percent overnight. The decision by the communist regime is intended to slow China's growing demand for oil and ease economic pressure on the central government, which like other world governments, was struggling to maintain the oil subsidies in the face of record prices, record demand, and growing consumption. The world price for a barrel of crude immediately dropped $4 on news of the move.

The Bush Administration had joined other countries in calling for the drop in Chinese subsidies. Treasury Secretary Hank Paulson met with Chinese officials last week in Annapolis, Maryland and raised the issue of subsidies. In a speech that same week, Paulson said that fuel subsidies lead to, "persistent gasoline and diesel shortages," as demand for the artificially cheap fuel outstrips supply. He also blamed the subsides in part for widespread power outages in China from record snowstorms this past winter.

The oil price drop due to China's action underscores the fact that oil prices are determined on a worldwide scale and can be affected by a range of factors. The Bush Administration called last week for increased exploration for oil in the United States as a means of increasing supply and decreasing prices. But it may have struck a more immediate blow for lower prices by successfully getting China, the world's second leading consumer of oil, to curb its demand through higher prices. If other governments follow suit, the price of oil could be coming down quicker than anyone expects.

Larry Kudlow on Oil

But here's an eye opener. Recent polling data from Gallup show the percentage of voters blaming oil companies for skyrocketing gasoline prices has dropped from 34 percent to 20 percent over the past year. At the same time, support for more drilling in U.S. coastal and wilderness areas has increased to 57 percent from 41 percent.
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Obama continues to lambaste oil companies while congressional Democrats push for cap-and-trade. They're missing the point, big time. The public wants more energy and more fuel to cut high prices and spur economic growth. But the costly cap-and-trade plan would produce less fuel and less growth. It would only raise gas pump prices while mounting a Gosplan-type taxing, spending, and regulating program that would be the moral equivalent of Hillarycare on nationalized medicine.
Sen. McCain has an opening here. Yet he, like Obama, would have voted for cap-and-trade, which went down to defeat in last week's Senate vote. And while Mr. McCain favors some off-shore production and has been strong on nuclear development, he is against drilling in ANWR Alaska.

Hold that thought.... there does appear to be some movement on that issue, at least according to Lindsey Graham on Sunday:

On ABC's "This Week -with George Stephanopoulos," Sen. Lindsey Graham (R-S.C), a McCain friend and supporter, said the Arizona Republican would be open to talking about looking for oil and gas "in our own backyard."

"John McCain would allow offshore explorations, if the states consent," Graham said Sunday.

Graham's statement echoed the position McCain took in response to a survey conducted by the League of Conservation Voters last year. The League questioned all the 2008 presidential candidates about whether they supported maintaining current moratoriums on new offshore oil and natural gas drilling.

As convoluted as that statement is, it's still more coherent than most liberal Democrats on the subject of high fuel prices. The link is just one sample but sadly typical and refers finally to the attempt by the Democrats to pass a windfall profits tax on oil companies. Oil prices are bad, therefore we should tax the profits of the oil companies, which will make us all feel better, because everyone will get shafted equally... Huh? How about actually doing something that will affect the price of oil. I could almost see it if the windfall profits were to be distributed as rebates at the pump, but no, not exactly, they were planning to keep the money.

The bottom line is that the first presidential candidate to convince the public that he has a serious credible plan to reduce oil prices will go into the general election with a serious tailwind. John McCain, by simply not having to align with the environmental lobby, is at a structural advantage, but he needs to seize the opportunity

Few people have a better track record at picking winners on Wall Street than Berkshire Hathaway Chairman Warren Buffett. So when he says that he expects a, "long, deep recession," it is noteworthy. Buffett made those comments in an interview with the German magazine Der Spiegel published yesterday. While the economy actually grew in the first quarter of the year, albeit at the anemically small rate of 0.6%, Buffet said that the economy is "already in recession." Failing to demonstrate the textbook definition of two consecutive quarters of negative economic growth, Buffet employed the Democrats' new favorite definition of recession.

"Perhaps not in the sense that economists would define it. But the people are already feeling the effects. It will be deeper and last longer than many think."

The emphasis on feelings rather than statistics in both the media and among elected officials and denizens of the left seems awfully convenient with an election coming up in six months. Still, Buffet was not entirely sour on the economy. Asked if he would curtail his own investing habits as a result of his diagnosis of the state of the U.S. economy, Buffet said, "If the world were falling apart I'd still invest in companies."

The housing market claimed another victim recently when California Congresswoman Laura Richardson's Sacramento home was foreclosed upon by her mortgage lender and resold at auction to another mortgage banker. Richardson (D) won election to Congress last August in a special election to fill the seat of the deceased Los Angeles area congresswoman Juanita Millender-McDonald. Although she is from suburban Los Angeles, Richardson purchased the home in Sacramento after she was elected to the California State Assembly in November 2006.

Richardson disputes the foreclosure sale, claiming that she had renegotiated the terms of her loan and planned to pay it off in full. She says that the home was sold at auction without her knowledge and in violation of the terms of the renegotiation. Her mortgage lender, Washington Mutual, said in a default notice in March that Richardson owed $578,384 on the home she purchased for $535,000. As a member of Congress, Richardson earns a $170,000 salary. Washington Mutual sold the property to James York, owner of Red Rock Mortgage Inc. of Sacramento, for $388,000. In addition to the loan delinquency, Richardson is also in arrears for $9,000 in local property taxes. Richardson blames in part her status as a lawmaker for her financial troubles. She told the Associated Press that lawmakers like herself are required to maintain two residences instead of one.

In what is likely to prove an academic exercise, President Bush followed through on a threat and vetoed the recently passed 2008 Farm Bill. The $307 billion bill, officially titled the "Food, Conservation, and Energy Act of 2008," extends many of the incentive and subsidy programs established in the 2002 Farm Bill in an era of rising food prices and farming incomes. The president cited both in his veto message to Congress.

At a time of high food prices and record farm income, this bill lacks program reform and fiscal discipline. It continues subsidies for the wealthy and increases farm bill spending by more than $20 billion, while using budget gimmicks to hide much of the increase. It is inconsistent with our objectives in international trade negotiations, which include securing greater market access for American farmers and ranchers. It would needlessly expand the size and scope of government. Americans sent us to Washington to achieve results and be good stewards of their hard-earned taxpayer dollars. This bill violates that fundamental commitment. [...]

At a time when net farm income is projected to increase by more than $28 billion in 1 year, the American taxpayer should not be forced to subsidize that group of farmers who have adjusted gross incomes of up to $1.5 million. When commodity prices are at record highs, it is irresponsible to increase government subsidy rates for 15 crops, subsidize additional crops, and provide payments that further distort markets.

But farm bills are politically popular, especially in election years, and this year's bill passed both Houses of Congress by veto-proof margins. Congress is expected to override the president's veto almost as soon as it receives the president's message.

The RNC has a new ad out comparing Senator Obama to President Carter based on his proposal for a windfall profits tax on oil, though I daresay there have been other reasons to think of Carter and Obama together recently.

The White House issued a statement late today saying that President Bush has decided to veto the 2008 Farm Bill if it makes it to his desk in its current form and recommended that Congress pass a one-year extension of current farm policy to bridge the gap until the next Congress and Administration can consider another bill. Almost at the same, the White House said that the president would withdraw his threat to veto an bill containing a provision that would stop the government from filling the nation's Strategic Petroleum Reserve in a bid to increase oil supply on the world market and lower prices. Mr. Bush had earlier said that the provision would have no impact on gas prices.

On the Farm Bill, the president said that he was "deeply disappointed" in the compromise legislation reached by the House and Senate. He cited high food prices and increasing farming incomes as his reasons for rejecting the package of incentives and subsidies for the nation's family and commercial farmers.

Today's farm economy is very strong and that is something to celebrate. It is also an appropriate time to better target subsidies and put forth real reform. Farm income is expected to exceed the 10-year average by fifty percent this year, yet Congress' bill asks American taxpayers to subsidize the incomes of married farmers who earn $1.5 million per year. I believe doing so at a time of record farm income is irresponsible and jeopardizes America's support for necessary farm programs.

But any farm bill is popular legislation in Congress, more so in an election year, and the president's veto would seem to be an exercise in futility. Congress will almost certainly vote to override the president quickly.

With oil at a mind-blowing $120 a barrel, the Senate overwhelming approved a measure 97-1, that would stop the shipment of oil to the government's emergency reserve. President Bush opposes letting the reserve, which is 97% full, drop below full capacity.

Democratic Senator Byron Dorgan of North Dakota said, "We are buying the most expensive crude oil in the history of the world and storing it. When American consumers are burning at the stake by high energy prices, the government ought not be carrying the wood." Dorgan acknowledged that this is not the solution to the problem of high gas prices.

The only opposition came from Republican Senator Wayne Allard of Colorado. A House vote on the issue should come later today.

First they took away the green-back, providing we hard-working Americans with a paper currency more reminiscent of "Monopoly" money than the enduring bills-of-olde upon which our great nation was built. Then they tried to usurp the hallowed dollar with a $1 coin, confusing red-blooded American values with the effete preferences of a European coinage class. And now, shame of shames, they are trying to take the copper out of our pennies.

Hath Congress no shame? Might as well they take the bullets from our soldiers' guns. The penny is a foundational, iconic symbol of American purity. It is the alpha of our mighty financial empire. It dates back to the "pfennings" of Charlemagne, showers fortune upon its finder when heads-up and supplies a litany of poetic idioms - penny for your thoughts, I don't have two pennies to rub together, and I need to spend a penny (British parlance meaning, a need to urinate). Since the centennial of his birth, the penny's front has featured the profile of President Abraham Lincoln, while its reverse has born the image of Lincoln Memorial since the sesquicentennial of that great American's birth.

What infernal lure has so seduced Congress that they should entertain such blasphemies as the desecration of the perfect penny?

$100,000 million / year.

Pennies presently cost 1.26 cents to manufacture. By minting steel pennies with a copper plating, the cost would be reduced to .7 cents. The same applies to 7.7 cent-to-mint nickels. Why, being rid of the penny altogether would save the mint billions in material, production and distribution costs.

And yet, we are sentimental about our dear pennies, aren't we? To be, or not to be, thou dear copper penny? That is the question.